<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
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)
One Liberty Lane
Hampton, New Hampshire 03842
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (603) 929-2606
-------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, par value $.01 per share New York 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 (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 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 the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /x/
The aggregate market value of the voting stock held by nonaffiliates of
the registrant as of March 1, 2000, was approximately $15,495,338.
The number of outstanding shares of the Registrant's Common Stock and
Class B Common Stock as of March 1, 2000 was 16,857,817 and 3,958,421,
respectively.
Documents Incorporated by Reference:
The Registrant's Proxy Statement for the Annual Meeting of Stockholders to
be held on May 9, 2000 is incorporated by reference into Part III.
===============================================================================
<PAGE>
PART I
Item 1. Business
General
The General Chemical Group Inc. (the "Company" or "General Chemical
Group" or "GCG"), is a leading producer of soda ash and calcium chloride in
North America with manufacturing facilities in the United States and Canada.
The Company, whose predecessor companies date back to 1899, was
organized in 1988 as a Delaware corporation. The Company's principal operating
subsidiaries were transferred in 1986 by AlliedSignal, Inc. ("AlliedSignal") to
a predecessor of the Company, at which time new operating management was
installed. On May 15, 1996, the Company completed an initial public offering of
Common Stock.
On April 30, 1999, General Chemical Group completed the separation of
its Manufacturing and Performance Products businesses from its soda ash and
calcium chloride business through a distribution of stock of GenTek Inc.
("GenTek") to stockholders of GCG (the "Spinoff"). As a result of the Spinoff,
GenTek became a separate, publicly-traded company on the New York Stock Exchange
("NYSE"). GCG continues to trade on the NYSE using the GCG symbol. See "Item 5 -
Market for Registrant's Common Equity and Related Stockholder Matters" for
discussion of our continued listing on the NYSE.
The Company produces natural soda ash through General Chemical (Soda
Ash) Partners ("GCSAP"), a partnership of which General Chemical Group owns a 51
percent equity interest and is the managing partner. The other partners of GCSAP
are subsidiaries of ACI International Limited, which is wholly-owned by
Owens-Illinois, Inc. ("Owens-Illinois"), and TOSOH Corporation ("TOSOH"). The
Company, through GCSAP, produces natural soda ash by refining mined trona
deposits at its plant in Green River, Wyoming. The Green River basin, where all
but one of the U.S. producers of natural soda ash are located, contains the
largest known, economically recoverable trona deposits in the world.
The Company also produces synthetic soda ash and calcium chloride
using the Solvay process at its plant in Amherstburg, Ontario. The Solvay
process produces low-density light soda ash, which is preferred in certain
detergent and chemical processes. This production process, which is energy and
labor intensive, is considerably more costly than refining natural soda ash.
The Soda Ash and Calcium Chloride Businesses
Soda Ash
Soda ash is used in the manufacture of glass, sodium-based chemicals,
and detergents. It is also used in water treatment, pulp and paper and other
industrial end-use applications. Approximately one-half of the global soda ash
industry demand is attributable to glass production. The glass production market
is comprised of manufacturers of bottles and other containers, commercial,
residential and automobile windows, mirrors, fiberglass, television tubes,
lighting ware, tableware, glassware and laboratory ware.
The following table sets forth estimated global end-market soda ash
consumption, by volume(1):
Glass ........................................................ 54%
Chemicals..................................................... 24%
Detergents.................................................... 7%
Water treatment and other..................................... 15%
(1) Developed from industry sources.
2
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Total industry production of soda ash in the U.S. and Canada during
1999 was approximately 11.7 million tons with U.S. producers estimated to have
exported approximately 4.5 million tons. The total annual world market for soda
ash currently is estimated at 35 million tons.
Exports. Almost all of the soda ash produced outside the United States
is synthetic soda ash, which involves significantly more energy, labor and raw
materials than the natural refining process used in the United States and, as a
result, is more costly. The production cost differential between natural and
synthetic soda ash is generally sufficient to offset the costs of transporting
U.S.-produced soda ash into export markets. As a result, the U.S. producers of
natural soda ash successfully compete in most geographic regions with local
sources of synthetically produced soda ash.
The Company, along with the other four U.S. producers of natural soda
ash, is a member of American Natural Soda Ash Company ("ANSAC"), a soda ash
export cooperative organized in 1984 under an exemption from U.S. antitrust laws
provided under the Webb-Pommerene Act. Through this cooperative, all five U.S.
producers export soda ash to all parts of the world except Canada and the
European Union member countries. The primary export markets served by this
cooperative are Asia and Latin America and to a lesser extent the Middle East,
Africa and Eastern Europe. Each individual member's allocation of this
cooperative's volume is based on the member's total nameplate capacity, with any
member's expansion phased-in over a multi-year period for allocation purposes.
ANSAC is the exclusive distributor of the soda ash of its members; however,
members can distribute soda ash directly to their international affiliates for
their own consumption, subject to certain limitations. Certain countries have
from time to time considered limiting or prohibiting sales of products through
export cooperatives such as ANSAC on grounds that they are anti-competitive,
though the Company is not aware of any pending or threatened activity in this
regard that would be material to its business.
Soda Ash Pricing and Capacity Utilization. The Company's principal
product is soda ash, and the profitability of its operations is affected by the
market price of soda ash more than any other factor. The price of soda ash has
fluctuated in recent years and is affected by numerous factors beyond the
Company's control, such as increases in industry capacity, decreases in demand
for soda ash in either the U.S. or the export market (or its end-use products
such as glass, sodium-based chemicals and detergents) and the change in price
and/or availability of substitute products. U.S. domestic demand for soda ash
has been subject to fluctuations based on, among other factors, global economic
conditions, the rate of economic growth in developing regions such as Asia and
Latin America and currency fluctuations.
From 1989 to 1991, industry soda ash prices increased from $77 to $84
per ton, mainly due to the surge in exports. From 1991, soda ash prices declined
to a low of $70 per ton in 1994 because of a number of capacity expansions
before again increasing to $83 per ton in 1996 on the continued growth of
exports. Since 1996, industry soda ash prices have fallen to $69 per ton in
1999, primarily due to capacity expansions from late 1996 to late 1998 of
approximately 2.0 million tons, including a 700,000 ton expansion by FMC
Corporation, and an 800,000 ton expansion by OCI, combined with the
reduced export demand resulting from the Asian crisis.
The following chart indicates the average industry price of U.S. soda
ash per ton and global capacity utilized during the period from 1989 to 1999.
3
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Average Price Global Capacity
Year Per Ton (1) Utilization (2)
---- ----------- ---------------
1989.................................. $77 97
1990.................................. 83 97
1991.................................. 84 91
1992.................................. 81 90
1993.................................. 74 88
1994.................................. 70 91
1995.................................. 74 90
1996.................................. 83 89
1997.................................. 77 91
1998.................................. 75 87
1999.................................. 69 87(3)
- -------------
(1) Based on data from the U.S. Geological Survey (not adjusted for inflation),
FOB production facility.
(2) Based on 95 percent of nameplate capacity as
reported by industry sources.
(3) Company estimate.
Soda Ash Capacity Expansions. Since 1982, no new natural soda ash plants
have been built in North America. During this period, capacity expansion in the
United States has been achieved by expansion of existing facilities and improved
operating efficiencies with such new natural soda ash capacity generally being
offset by the closure of older, higher-cost synthetic soda ash plants outside
the United States. American Soda, a joint venture between American Alkali and
The Williams Companies, has announced its intention to solution mine nahcolite
reserves in White River, Colorado, for processing into soda ash and sodium
bicarbonate. American Soda's management has estimated that the capacity of this
facility will be one million tons of soda ash per year. American Soda has
announced that it expects this facility to become operational in the fourth
quarter of 2000.
Regarding existing soda ash producers, in late 1998, Oriental Chemical
completed an 800,000 ton expansion of its Green River facility. Upon completion
of the expansion, due to current soda ash market conditions, Oriental Chemical
"mothballed" 900,000 tons of previously constructed capacity at the facility. In
addition, Solvay Minerals announced the delay of its previously planned 400,000
ton U.S. expansion, originally scheduled for completion in late 1998, until the
fourth quarter of 2000. During the fourth quarter of 1999, FMC announced it was
reducing capacity at its Granger, Green River facility by 650,000 tons.
Additionally, in January 2000, IMC closed its 300,000 ton Matthes & Weber
facility in Duisburg, Germany.
Calcium Chloride
In addition to soda ash, the Company produces calcium chloride, which
is sold predominantly into the highway and road maintenance and the oil field
services markets. Calcium chloride, a co-product of the synthetic soda ash
process utilized by the Company's Amherstburg plant, is used primarily on
Canada's extensive network of unpaved roads for dust control and roadbed
stabilization during the summer and on U.S. highways and roads for melting ice
during the winter. Other applications include retail ice control, concrete
additives, water treatment, newsprint recycling and food processing.
4
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Competition
Soda Ash
The worldwide soda ash industry is comprised of a number of domestic
and international producers, some of which produce large volumes of soda ash in
multiple geographic regions. Solvay S.A., with natural soda ash operations in
the U.S. and multiple synthetic facilities in Eastern and Western Europe, is the
world's single largest producer of soda ash, with total estimated capacity of
approximately 8.6 million tons. FMC Corporation's 1999 acquisition of Tg Soda
Ash, Inc. increased FMC Corporation's combined total capacity to more than 4.8
million tons, of which 0.6 million tons are currently mothballed.
Given the global nature of the soda ash industry and major soda ash
consumers, we compete with both international and North American soda ash
producers. The international soda ash producers include Brunner Mond plc.,
Penrice Soda Ash Products Pty Ltd. (currently owned by IMC Global), Solvay S.A.
and various Eastern European and Asian producers.
Soda Ash capacity outside of North America is as follows:
Capacity in
Region Thousands of Tons (1)
------ ---------------------
Eastern Europe................................... 6,900
Western Europe................................... 7,600
China ........................................... 8,500
Other Asian Countries............................ 4,600
Rest of World.................................... 2,000
------
Total capacity outside North America............. 29,600
======
-----------------
(1) Estimated in 1998 annual nameplate capacity; derived from industry
sources.
The Company's North American soda ash competitors are listed below:
1999 Annual
Nameplate Capacity
Owner/Managing Partner Location in Tons (1)
---------------------- -------- ------------------
The General Chemical Group.............. Wyoming 2,800
Amherstburg 500
------
3,300
FMC Corporation......................... Wyoming 4,200(2)
Oriental Chemical Co.................... Wyoming 2,200(3)
Solvay Minerals, Inc. .................. Wyoming 2,300
IMC Global(4) .......................... California 1,500
------
Total North American Capacity 13,500
======
-------------
(1) Estimated 1999 annual nameplate capacity; derived from industry
sources.
(2) Excludes 650,000 tons of mothballed capacity.
(3) Excludes 900,000 tons of mothballed capacity, but includes 800,000
tons of new capacity.
(4) Currently held by IMC Global through its wholly-owned subsidiary,
North American Chemical Company.
5
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Calcium Chloride
The Company is the largest producer of calcium chloride in Canada and
the second largest producer of calcium chloride in North America with 450,000
tons of capacity. Major competitors are The Dow Chemical Company, TETRA
Technologies, Inc., Ambar, Inc. and various local producers in Canada. In the
United States, we are the third largest distributor of calcium chloride behind
Dow Chemical and TETRA Technologies. It is estimated that Dow Chemical has
700,000 tons of capacity. The next largest U.S. producer is TETRA Technologies,
which operates four plants with estimated total capacity of 350,000 tons. Ambar,
Inc. an oil services company, converted an existing salt evaporation facility in
Michigan to calcium chloride production. This Michigan facility came onstream
with announced capacity of 300,000 tons.
In certain markets, calcium chloride competes with a number of
substitute products. For example, in the highway ice control market, calcium
chloride competes with alternative de-icers such as rock salt and magnesium
chloride. As such, the Company also competes with the producers of these
substitute products.
Reserves and Control of Resources
The Company mines trona ore under leases with the United States
government, the State of Wyoming and the Union Pacific Resources Corporation.
The Company's trona reserves and mines are located in the Green River, Wyoming
area. In the Green River basin, the Green River formation was deposited in a
lake that began in the early Eocene geologic period (approximately 35 million
years ago) as a large body of fresh water, shrank in size and became saline,
expanded and then became fresh water again. In general, the sediments deposited
during the saline phase of this lake, which included the trona deposits, are
called the Wilkins Peak Member, and the overlying and underlying fresh water
deposits are called the Laney Shale Member and Tipton Shale Member,
respectively.
The Company's estimated proven reserves within bed No. 17, which it is
currently mining, consist of approximately 81 million tons of extractable ore.
At the 1999 operating rate of 2.4 million tons of soda ash per year (4.3 million
tons of trona ore), there is approximately a 19-year supply within bed No. 17.
For the three years ended December 31, 1999, annual production of trona ore
averaged approximately 4.3 million tons. In addition, the Company's estimated
recoverable reserves contain three other major mineable trona beds containing
approximately 324 million tons of extractable ore. These beds, which may require
significant capital to access, will provide more than 79 years of added reserves
based on current operating rates.
At the Company's synthetic soda ash plant in Amherstburg, Ontario,
Canada, the Company uses salt and limestone as its raw materials. Based on
current production levels, the Company has approximately 28 years of salt
reserves. Limestone reserves owned by the Company total approximately 15 years,
with an option on an additional six years of reserves. However, the Company is
not currently utilizing its limestone reserves and is instead purchasing all of
its limestone requirements under a long-term contract with a major limestone
producer due to the economic benefit of using purchased limestone.
General Chemical (Soda Ash) Partners
Since 1986, the Green River plant has been owned by GCSAP, a
partnership of which the Company is the managing partner. The Company owns a 51
percent equity interest and ACI International Limited and TOSOH Corporation,
through wholly owned subsidiaries, respectively, own 25 percent and 24 percent
of the partnership's equity interests. ACI International Limited, a major world
producer of container glass and a customer of GCSAP, was acquired in April 1998
by Owens-Illinois, a worldwide producer of packaging materials. Management
believes that Owens-Illinois and ACI International Limited as a combined entity
is one of the largest single purchasers of soda ash with annual domestic and
international requirements of approximately 2 million tons. TOSOH Corporation is
a leading chemical company and distributor of soda ash in the Japanese market
whose operations previously included a 300,000 ton synthetic soda ash facility
in Nanyo, Japan. In 1997, TOSOH Corporation closed its synthetic soda ash
facility and began purchasing soda ash through ANSAC.
6
<PAGE>
The Company has been the managing partner of GCSAP since 1986, when the
partnership was formed. As managing partner, the Company has had and will
continue to have overall responsibility for management of the partnership,
including with respect to all operational, sales, marketing and financial
matters. However, certain significant actions of the partnership must be
approved by a majority, or in certain instances, all of the partners. The
partnership shall terminate on December 31, 2011, unless extended for an
additional five years or unless the partners decide to terminate it at any time.
The partnership agreement requires the partnership to make quarterly
cash distributions to each of the three partners. The partnership agreement also
prohibits the partners from transferring their equity interests or withdrawing
from the partnership without the consent of the other partners. The obligations
of each partner are guaranteed by its parent. Pursuant to a guaranty agreement,
each parent company has agreed to certain restrictions on its ability to sell
the stock of its partner subsidiary. If the parent company of any partner
proposes to transfer ownership of its partner subsidiary, the non-transferring
parent companies may either:
(1) acquire the transferred partner, or its partnership interest,
pursuant to a right of first refusal;
or
(2) require the transferring parent company, or the proposed purchaser,
to acquire the partnership interest held by their own partner
subsidiaries.
Partnership with Church & Dwight
GCSAP and Church & Dwight are partners in a partnership that owns trona
reserves. Church & Dwight is a leading producer of sodium bicarbonate, commonly
known as baking soda, sold under the Arm & Hammer(R) brand. The trona is mined
and processed by GCSAP under a tolling agreement and all of the soda ash
produced is purchased by Church & Dwight under a sales contract.
Seasonality and Backlogs
Sales of soda ash are generally not seasonal, except for sales to the
glass container industry, which increase significantly in the summer due to
stronger beverage demand. Sales of calcium chloride are concentrated in late
spring and summer for dust control and late fall and winter for de-icing. As a
result, sales are generally lowest in the first quarter and highest in the
second quarter.
Due to the nature of our business, there are no significant backlogs.
Environmental Matters
The Company's mining and production operations, which have been
conducted at its Green River and Amherstburg sites for many years, are subject
to numerous laws and regulations relating to the protection of human health and
the environment in the U.S. and Canada. The Company has an established program
to ensure that its facilities comply with environmental laws and regulations.
However, as a result of its operations, the Company is involved from time to
time in administrative and judicial proceedings and inquiries relating to
environmental matters. In addition, modifications or changes in enforcement of
existing laws and regulations or the adoption of new laws and regulations in the
future, particularly with respect to environmental and safety standards, or the
discovery of additional or unknown environmental contamination could require
expenditures which might be material to the Company's results of operations or
financial condition. For further discussion of the Company's efforts to comply
with the environmental laws and regulations to which its operations are subject,
as well as a discussion of potential liabilities known to the Company under such
laws and regulations, see "Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations Environmental Matters".
7
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The Company, as the former parent of GenTek, may under certain
circumstances be found liable for obligations of GenTek related to the use or
transport of hazardous substances or environmental contamination at facilities
of GenTek for periods prior to the Spinoff. Although GenTek has agreed to
indemnify and hold the Company harmless with respect to all such liabilities and
to bear all of the Company expenses for defending any claims related to these
matters, the Company's results of operations or financial condition could be
materially adversely affected in the event GenTek is unable or unwilling to
perform its indemnification obligations.
Employees/Labor Relations
As of December 31, 1999, the Company had 1,041 employees, 310 of whom
were full-time salaried employees, 719 were full-time hourly employees and 12
were hourly employees working in nonunion facilities.
Three union contracts, covering 730 employees at the Green River,
Wyoming and Amherstburg, Ontario facilities, have durations of three years and
were renewed during 1999.
Set forth below is information with respect to each of the Company's
executive officers and/or key employees.
John M. Kehoe, Jr., 66, is the President and Chief Executive Officer
and a Director of the Company. Since June 1999, Mr. Kehoe has served as the
Chairman of Wheelabrator Technologies Inc., a provider of waste management
services that is part of Waste Management. Mr. Kehoe was the President and Chief
Executive Officer of Wheelabrator Technologies, Inc. from January 1993 to June
1999.
DeLyle W. Bloomquist, 41, is Vice President and Chief Operating Officer
of the Company. Mr. Bloomquist was from 1996 until the Spinoff the Vice
President and General Manager, Industrial Chemicals of General Chemical
Corporation. Mr. Bloomquist was the Director of General Chemical Corporation's
Corporate Distribution Department between 1995 and 1996. Between 1993 and 1995,
he served as Controller, Industrial Chemicals of General Chemical Corporation.
David S. Graziosi, 34, is Vice President - Finance of the Company. Mr.
Graziosi was the Director of Finance for GenTek, Inc. from August 1999 to
February 2000. Mr. Graziosi held several financial management positions in Sun
Chemical Group B.V. from August 1996 to August 1999. Between September 1994 and
July 1996, he served as an Assistant Finance Director of Colgate-Palmolive
Company in both the U.S. and South Africa.
Item 2. Properties
The Company's headquarters is located in Hampton, New Hampshire. The
locations and uses of major properties of the Company are as follows:
Location Use
-------- ---
United States
Green River, Wyoming Trona Mine and Manufacturing
Facility
* Hampton, New Hampshire Headquarters
* Parsippany, New Jersey Offices
Canada
Amherstburg, Ontario Manufacturing Facility
* Mississauga, Ontario Offices
Brook, Ontario Calcium Chloride Brine Fields
--------------
* Leased
8
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Item 3. Legal Proceedings
The Company is involved in claims, litigation, administrative
proceedings and investigations relative to environmental matters. Although the
amount of any liability that could arise with respect to these actions cannot be
accurately predicted, the opinion of management based upon currently-available
information is that any such liability not covered by insurance will have no
material adverse effect on the Company's results of operations or financial
condition. See also "Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations - Environmental Matters".
Item 4. Submission of Matters to a Vote of Security Holders
No items were submitted to a vote of security holders of the Company,
through the solicitation of proxies or otherwise, during the fourth quarter of
fiscal 1999.
9
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Market Information
The Company's Common Stock is traded on the New York Stock Exchange
(the "NYSE") under the symbol "GCG." The Spinoff, which occurred on April 30,
1999, resulted in the separation of GenTek, which owned and operated a
significant portion of the Company's businesses, from the Company. As a result
of the Spinoff, GenTek became a separate publicly traded company on the NYSE.
The following table shows the high and low recorded trading prices of the
Company's Common Stock, as reported on the NYSE composite tape for each of the
quarterly periods listed:
Year Ended December 31, 1998
- ----------------------------
High Low
---- ---
First Quarter ....................... $30.75(1) $25.00(1)
Second Quarter ...................... 29.00(1) 21.08(1)
Third Quarter ....................... 28.75(1) 17.38(1)
Fourth Quarter ...................... 18.50(1) 13.19(1)
Year Ended December 31, 1999
- ----------------------------
First Quarter........................ $16.25(1) $13.05(1)
Second Quarter....................... 5.38 3.13
Third Quarter........................ 4.44 2.63
Fourth Quarter....................... 3.38 2.06
(1) Trading prices for periods prior to the Spinoff.
In September 1999, the NYSE modified its continued listing criteria to
require, among other things, that a listed company have a market capitalization
of not less than $50 million and total shareholder equity of not less than $50
million. On February 28, 2000, the Company received notice from the NYSE that it
is no longer in compliance with either of these criteria. In order to maintain
the continued listing of its Common Stock on the NYSE, the Company is following
the Exchange's rules and procedures applicable to listed companies which fail to
meet these criteria. In the event that the NYSE accepts to maintain the
Company's listing, the Company will be subject to monitoring by the NYSE for
compliance through September 2001. At this time, the Company cannot give any
assurances that the NYSE will accept to maintain the Company's listing for this
period. If the NYSE accepts to maintain the listing and the Company continues to
fail to meet the continued listing criteria (i.e. each of its market
capitalization and shareholders' equity not being less than $50 million) after
September 2001, the Company's Common Stock could be delisted from the NYSE. In
the event the Company is delisted, the Company will seek to list or have quoted
its Common Stock on another securities exchange or national quotation system.
As of March 1, 2000, there were 162 stockholders of record of the
Company's Common Stock and 6 stockholders of record of the Company's Class B
Common Stock.
10
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Dividends
In each of the five quarters immediately preceding the Spinoff, the
Company paid a regular quarterly cash dividend of $.05 per share of Common
Stock. Subsequent to the Spinoff, the Company did not pay a cash dividend during
the final three quarters of 1999 and does not expect that cash dividends will be
paid to holders of its Common Stock in the foreseeable future. In addition,
certain restrictions in the Company's credit facility limit the ability of the
Company to pay dividends.
Item 6. Selected Financial Data
The following selected consolidated financial data of the Company have
been derived from and should be read in conjunction with the Company's
Consolidated Financial Statements.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues.................................. $ 265,333 $ 298,945 $ 289,700 $ 261,469 $ 256,793
Operating profit.............................. 62,296 77,924 (1) 68,281 41,049 (2) 30,607 (3)
Minority interest............................. 19,458 31,635 24,253 16,666 12,787
Income before interest and income taxes....... 44,224 46,963 (1) 44,587 24,342 (2) 19,159 (3)
Net income.................................... $ 20,957 $ 24,280 (1) $ 22,264 $ 9,424 (2) $ 4,985 (3)
Per Share Data:
Net income-basic.............................. $ 1.06 $ 1.14 (1) $ 1.04 $ 45 (2) $ .24 (3)
Net income-diluted............................ 1.06 1.11 (1) .99 .43 (2) .23 (3)
Other Data:
Capital expenditures.......................... $ 9,251 $ 34,934 $ 30,468 $ 18,498 $ 24,061
Depreciation and amortization................. 14,157 15,646 16,798 16,999 17,801
Balance Sheet Data (at end of period):.............
Cash, cash equivalents and short-term
investments.................................. $ 928 $ 1,609 $ 1,352 $ 1,127 $ 26,630
Total assets.................................. 212,493 241,086 262,175 248,714 291,748
Long-term debt................................ - - - - 150,919
Total equity (deficit)........................ 53,354 62,795 85,505 75,292 (46,893)
<FN>
- -----------------
(1) Includes a one-time charge of $5.7 million ($3.5 million after tax or $.16
per diluted share) due primarily to awards made under the restricted unit
plan.
(2) Includes incremental accruals of $2.3 million ($1.4 million after tax or
$.07 per diluted share) principally related to cost of sales ($.9 million)
for the reclamation of brine wells and selling, general and administrative
expense ($1.4 million) primarily due to product delivery litigation.
(3) Includes a one-time charge of $1.9 million ($1.2 million after tax or $.06
per diluted share) related to the Spinoff.
</FN>
</TABLE>
11
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company is a leading global producer of soda ash and North American
producer of calcium chloride. The Company produces natural soda ash at its
facility in Green River, Wyoming, and synthetic soda ash and calcium chloride at
its facility in Amherstburg, Ontario. The Company's principal product is soda
ash, and the profitability of its operations is affected by the market price of
soda ash more than any other factor. The price of soda ash has fluctuated in
recent years due to numerous factors, such as changes in industry capacity and
global demand for soda ash, and the change in price and/or availability of
substitutes for end-products using soda ash. In 1997, 1998 and 1999, due in
part to unfavorable soda ash prices, we experienced decreases in profits
compared to prior year levels. In 1999 soda ash prices for U.S. producers were
$69 per ton, approximately $6 per ton below the 1998 level. For a discussion
of factors affecting the prices of and demand for soda ash, see "Item 1 -
Business - The Soda Ash and Calcium Chloride Businesses - Soda Ash - Soda Ash
Pricing and Capacity Utilization".
The Company's Green River facility, including the plants and leases for
mining trona ore, are owned and operated through General Chemical (Soda Ash)
Partners, a partnership in which GCG owns a 51 percent partnership interest and
of which GCG is the managing partner. See "Item 1 - Business - General Chemical
(Soda Ash) Partners".
On April 30, 1999, GCG completed the separation of its Manufacturing
and Performance Products businesses from its soda ash and calcium chloride
business through a distribution of stock of GenTek to stockholders of GCG.
Pursuant to the Spinoff, GCG transferred the Manufacturing and Performance
Products businesses to a wholly-owned subsidiary, GenTek, and distributed the
stock of GenTek to shareholders of GCG. As a result of the Spinoff, GenTek
became a separate, publicly traded company on the New York Stock Exchange. GCG
continues to trade using the GCG symbol. GCG owns and operates the soda ash and
calcium chloride business, and GenTek owns and operates the segments comprising
the Manufacturing and Performance Products businesses.
Prior to April 30, 1999, the soda ash and calcium chloride business
had not been operated as a separate, stand-alone business and had shared with
the GenTek business various financial, administrative and managerial expertise
relevant to operating as an independent public company. After the Spinoff, as a
separate, stand-alone business, the soda ash and calcium chloride business'
results and profits may not be comparable to those before the Spinoff.
The Financial Statements of the Company for periods prior to April 30,
1999 include an allocation of certain assets, liabilities and expenses from
GenTek. In the opinion of management, expenses have been allocated to the soda
ash and calcium chloride business on a reasonable and consistent basis using
management's estimate of services provided to the Company. However, such
allocations are not necessarily indicative of the level of expenses which might
have been incurred had the Company been operated as a separate, stand-alone
entity during the periods presented or incurred after the Spinoff. For further
information on the basis of presentation of the historical financial data of the
Company, see "Item 8 - Financial Statements and Supplementary Data - Summary of
Significant Accounting Policies".
This discussion should be read in conjunction with the Company's
Consolidated Financial Statements and the respective notes thereto included in
Item 8.
12
<PAGE>
Results of Operations
The following table sets forth statement of operations data for each of
the three years ended December 31, 1997, 1998 and 1999 and the corresponding
percentage of the net revenues for the relevant periods presented.
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------
1997 1998 1999
---- ---- ----
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Net revenues....................................... $289.7 100% $261.5 100% $256.8 100%
Gross profit....................................... 84.9 29 59.1(1) 23 49.7 19
Selling, general and administrative expense........ 16.7 6 18.1(1) 7 19.0(2) 7
Operating profit................................... 68.3 23 41.0(1) 16 30.6(2) 12
Interest expense................................... 12.7 4 11.7 4 13.7 5
Minority interest.................................. 24.3 8 16.7 6 12.8 5
Net income......................................... 22.3 8 9.4(1) 4 5.0(2) 2
<FN>
- ----------------
Note: May not add due to rounding
(1) Includes incremental accruals of $2.3 million ($1.4 million after tax)
principally related to environmental spending and litigation.
(2) Includes a one-time charge of $1.9 million ($1.2 million after tax)
principally related to the Spinoff.
</FN>
</TABLE>
1999 as compared with 1998
Net revenues for 1999 were $256.8 million, which was $4.7 million, or 2
percent below the prior year level. This decrease reflects lower soda ash
pricing ($18.8 million) partially offset by higher volumes of both soda ash and
calcium chloride ($14.1 million).
Gross profit for 1999 was $49.7 million compared with $59.1 million in
the same period of 1998. Gross profit as a percentage of sales decreased to 19
percent in 1999 from 23 percent in 1998. These decreases were primarily related
to the above-mentioned lower pricing and increases in energy costs.
Selling, general and administrative expense as a percentage of net
revenues was unchanged from 1998 at 7 percent.
Minority interest in 1999 was $12.8 million compared with $16.7 million
for 1998, reflecting lower earnings due to weaker soda ash pricing and higher
energy cost.
Interest expense for 1999 was $13.7 million, $2.0 million higher than
the comparable year level due to higher borrowing rates.
Provision for income taxes for 1999 was $.4 million compared with $3.2
million for 1998, due to a comparable level of depletion deductions for each
year combined with lower earnings in 1999.
1998 as compared with 1997
Net revenues for 1998 were $261.5 million, which was $28.2 million, or
10 percent, below the prior year level. This decrease reflects lower volumes for
soda ash ($21.0 million), particularly exports to Asia, as well as lower pricing
for soda ash and calcium chloride ($7.2 million).
13
<PAGE>
Gross profit for 1998 was $59.1 million, compared with $84.9 million in
the same period in 1997. Gross profit as a percentage of sales for 1998
decreased to 23 percent from 29 percent in 1997. These decreases were primarily
due to the above-mentioned lower soda ash volumes and unfavorable pricing.
Selling, general and administrative expense as a percentage of net
revenues increased to 7 percent in 1998 from 6 percent in 1997 primarily due to
the lower sales volume.
Minority interest for 1998 was $16.7 million compared with $24.3
million for 1997, reflecting lower earnings due to lower export volumes and
weaker soda ash pricing.
Interest expense for 1998 of $11.7 million was $1.0 million lower than
the comparable prior year level due to lower borrowing rates.
Liquidity and Capital Resources
Cash and cash equivalents were $26.6 million at December 31, 1999
compared with $1.1 million at December 31, 1998. During 1999 the Company
generated cash flow from operating activities of $32.0 million and received
proceeds from debt of $144.8 million, used cash of $24.1 million for capital
expenditures and transferred $127.0 million to GenTek for repayment of
pre-Spinoff debt.
The Company had working capital of $61.4 million at December 31, 1999
as compared with $39.9 million at December 31, 1998. The increase in working
capital principally reflects higher cash balances due to the proceeds from debt
partially offset by the transfer to GenTek for repayment of pre-Spinoff debt.
Prior to the Spinoff, the Company's primary sources of liquidity were
cash generated from operations and borrowings under GCG's credit facility.
Following the Spinoff, the Company's liquidity needs arise primarily from
working capital requirements, capital expenditures and interest and principal
payment obligations. The Company's ability to satisfy its capital requirements
will be dependent upon future financial performance, which in turn will be
subject to general economic conditions and to financial, business and other
factors, including factors beyond the Company's control. The Company believes
that its existing capital resources, cash flow generated from future operations
and drawings under its credit facility will enable the Company to maintain
planned operating, capital expenditure and debt service requirements for the
foreseeable future.
On April 30, 1999, the Company completed the offering of $100 million
10-5/8% Senior Subordinated Notes. Approximately $80 million of the net proceeds
was used to fund a distribution to GenTek prior to the Spinoff and the balance
for general corporate purposes. In addition, concurrent with the Spinoff, the
Company entered into an $85 million credit facility, of which up to $60 million
is available for borrowing by the Company's Canadian subsidiary in U.S. Dollars
or the Canadian dollar equivalent. The net proceeds under the credit facility
were used to repay existing third-party indebtedness. As of December 31, 1999,
$34 million was available for future borrowings under the credit facility and
$26.6 million of cash was on hand.
The Company is significantly leveraged. Outstanding indebtedness
consists of the notes and $51 million outstanding under the credit facility. The
Company's leverage and debt service requirements resulting from the notes and
credit facility increases its vulnerability to economic downturns, may adversely
affect its ability to obtain additional financing in the future and may place
the Company at a competitive disadvantage because the Company may be more highly
leveraged than certain competitors. The Company's indenture and credit facility
impose operating and financial restrictions on the Company. These covenants
could adversely affect the Company's ability to finance its future operations,
potential acquisitions, capital needs or to engage in business activities
that may be in the interest of shareholders.
14
<PAGE>
Environmental Matters
The Company's mining and production operations, which have been
conducted at its Green River and Amherstburg sites for many years, are subject
to numerous laws and regulations relating to the protection of human health and
the environment in the U.S. and Canada. The Company has an established program
to ensure that its facilities comply with environmental laws and regulations.
However, as a result of its operations, the Company is involved from time to
time in administrative and judicial proceedings and inquiries relating to
environmental matters. In addition, modifications or changes in enforcement of
existing laws and regulations or the adoption of new laws and regulations in the
future, particularly with respect to environmental and safety standards, or the
discovery of additional or unknown environmental contamination could require
expenditures which might be material to the Company's results of operations or
financial condition.
On March 13, 2000, the Company's Canadian subsidiary received a letter
from Environment Canada ("EC"). The letter informed the Company that it faces an
alleged violation of the Canadian Fisheries Act, R.S.C., as amended, with
respect to effluent discharges at its Amherstburg, Ontario facility. According
to EC, the Company's chloride level of its effluent discharged to the Detroit
River exceed permitted levels. The Company is currently evaluating various
projects designed to improve the quality of the effluent and intends to propose
a plan to EC with respect to the scope and extent of any corrective action.
Because the evaluation of the projects to be implemented, if any, and the
outcome of the Company's discussions with EC have not yet been completed, the
Company does not have sufficient information to estimate the costs which may be
incurred in connection with this matter. However, depending on the outcome of
these issues, the Company could incur additional expenses and/or capital
expenditures which might be material to the Company's results of operations
and/or financial condition.
Accounting Pronouncement
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 Statement, as amended, is effective
for fiscal years beginning after June 15, 2000. GCG is required to adopt this
standard, as amended, in the fiscal year ending December 31, 2001. Management
does not expect that the adoption of FAS 133 will have a material effect on the
Company's results of operations, financial condition or cash flows.
Year 2000 Issue
Year 2000 issues exist when dates in computer systems are recorded
using two digits (rather than four) and are then used for arithmetic operations,
comparisons or sorting. A two-digit date recording may recognize a date using
"00" as 1900 rather than 2000, which could cause the Company's computer systems
to perform inaccurate computations.
During 1998 and 1999, the Company completed a detailed assessment of
its information systems and other hardware and software. Based upon this
assessment, non-compliant software or hardware were either upgraded to Year 2000
versions, remediated to become Year 2000 compliant or replaced by other hardware
or software which provided Year 2000 compliance and other benefits. As a result
of the Company's Year 2000 readiness efforts, the Company's mission critical
systems successfully distinguished between the year 1900 and 2000 without any
critical system failures. In addition, the Company has not experienced an
adverse impact due to Year 2000 issues at any of its significant suppliers. The
Company will continue to monitor its mission critical applications and equipment
through the normal course of its business operations to ensure that any Year
2000 matters that do arise are addressed promptly.
With regard to financial cost, the Company estimates it incurred $1.0
million on Year 2000 activities through December 31, 1999.
15
<PAGE>
Other Matters
In September 1999, the NYSE modified its continued listing criteria to
require, among other things, that a listed company have a market capitalization
of not less than $50 million and total shareholders' equity of not less than
$50 million. On February 28, 2000, the Company received notice from the NYSE
that it is no longer in compliance with either of these criteria. In order to
maintain the continued listing of its Common Stock on the NYSE, the Company is
following the Exchange's rules and procedures applicable to listed companies
which fail to meet these criteria. In the event the NYSE accepts to maintain
the Company's listing, the Company will be subject to monitoring by the NYSE
for compliance through September 2001. At this time, the Company cannot give
any assurances that the NYSE will accept to maintain the Company's listing for
this period. If the NYSE accepts to maintain the listing and the Company
continues to fail to meet the continued listing criteria (i.e., each of its
market capitalization and shareholders' equity not being less than $50 million)
after September 2001, the Company's Common Stock could be delisted from the
NYSE. In the event the Company is delisted, the Company will seek to list or
have quoted its Common Stock on another securities exchange or national
quotation system.
Forward Looking Statements
This Annual Report on Form 10-K includes forward-looking statements.
All statements other than statements of historical facts included in this Annual
Report on Form 10-K may constitute forward-looking statements. The Company has
based these forward-looking statements on its current expectations and
projections about future events. Although it believes that the assumptions made
in connection with the forward-looking statements are reasonable, there can be
no assurances that its assumptions and expectations will prove to have been
correct. These forward-looking statements are subject to various risks,
uncertainties and assumptions including, among other things:
* fluctuation of world soda ash prices due to changes in supply and demand;
* international economic conditions and U.S. dollar exchange rates;
* reduced soda ash demand from increased use of recycled glass or glass
substitutes;
* a substantial portion of our operations is conducted through a joint
venture which is 51 percent owned by us;
* the effect of the Company's significant leverage on its ability to raise
additional capital or meet its operating, debt service or capital
requirements;
* increases in the cost of energy, transportation or labor;
* unknown environmental contamination at our facilities;
* future modifications to existing environmental, safety and human health
regulations;
* our ability to operate as an independent business as a result of the
Spinoff;
* potential adverse tax consequences of a change of control as a result of
the Spinoff;
* the successful completion of the American Soda project; and
16
<PAGE>
* the outcome of the Company's discussion with EC concerning its effluent
discharges.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this report might not occur.
Item 7A. Qualitative and Quantitative Disclosures about Market Risk
The Company does not expect to enter into financial instruments for
trading purposes. The Company anticipates periodically entering into interest
rate swap agreements to effectively convert all or a portion of floating-rate
debt to fixed-rate debt in order to reduce exposure to movements in interest
rates. Such agreements would involve the exchange of fixed and floating interest
rate payments over the life of the agreement without the exchange of the
underlying principal amounts. The Company also anticipates periodically entering
into currency agreements to partially reduce exposure to movements in currency
exchange rates. Swap and currency agreements will only be entered into with
creditworthy parties.
Item 8. Financial Statements and Supplementary Data
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of THE GENERAL CHEMICAL GROUP INC.:
We have audited the accompanying consolidated balance sheets of The
General Chemical Group Inc. and subsidiaries ("the Company") as of December 31,
1998 and 1999, and the related consolidated statements of operations, changes in
equity (deficit) and cash flows for each of the three years in the period ended
December 31, 1999. Our audits also included the financial statement schedule
listed in the Index at Item 14. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements and the
financial statement schedule 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 consolidated financial statements present fairly,
in all material respects, the financial position of The General Chemical Group
Inc. and subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as whole, presents
fairly in all material respects the information set forth therein.
Deloitte & Touche LLP
Parsippany, New Jersey
February 15, 2000
(March 13, 2000 as to Note 15)
18
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1997 1998 1999
---- ---- ----
(In thousands, except
per share data)
<S> <C> <C> <C>
Net revenues.................................................. $ 289,700 $ 261,469 $ 256,793
Cost of sales................................................. 204,769 202,338 207,139
Selling, general and administrative expense................... 16,650 18,082 19,047
---------- ---------- ----------
Operating profit............................................ 68,281 41,049 30,607
Interest expense.............................................. 12,747 11,747 13,741
Interest income............................................... 1,029 930 1,397
Foreign currency transaction (gains) losses................... 185 447 (109)
Other expense, net............................................ 285 524 167
---------- ---------- ----------
Income before minority interest and income taxes ........... 56,093 29,261 18,205
Minority interest............................................. 24,253 16,666 12,787
---------- ---------- ----------
Income before income taxes.................................. 31,840 12,595 5,418
Income tax provision.......................................... 9,576 3,171 433
---------- ---------- ----------
Net income.......................................... $ 22,264 $ 9,424 $ 4,985
========== ========== ==========
Earnings per common share:
Basic .................................................... $ 1.04 $ .45 $ .24
========== ========== ==========
Diluted ................................................... $ .99 $ .43 $ .23
========== ========== ==========
</TABLE>
See the accompanying notes to consolidated financial statements.
19
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1999
---- ----
(In thousands, except
share data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................. $ 1,127 $ 26,630
Receivables, net.......................................................... 58,601 57,970
Inventories ............................................................. 25,508 25,291
Deferred income taxes..................................................... 4,392 6,089
Other current assets...................................................... 1,659 3,356
------------- -----------
Total current assets................................................. 91,287 119,336
Property, plant and equipment, net............................................. 141,808 150,038
Other assets ................................................................. 15,619 22,374
------------ -----------
Total assets......................................................... $ 248,714 $ 291,748
============ ===========
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................................... $ 24,298 $ 27,625
Accrued liabilities....................................................... 25,146 30,318
Income taxes payable...................................................... 1,988 --
----------- -----------
Total current liabilities............................................ 51,432 57,943
Long-term debt ............................................................. -- 150,919
Other liabilities ............................................................. 78,561 87,700
------------ -----------
Total liabilities.................................................... 129,993 296,562
Minority interest ............................................................. 43,429 42,079
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: 12,654,489 and
18,557,314 shares at December 31, 1998 and
1999, respectively ...................................................... 127 186
Class B Common Stock, $.01 par value;
authorized 40,000,000 shares; issued and outstanding:
9,758,421 and 3,958,421 shares at December 31, 1998
and 1999, respectively................................................... 97 39
Capital (deficit)......................................................... 20,659 (105,060)
Accumulated other comprehensive loss...................................... (2,840) (2,804)
Retained earnings ........................................................ 90,044 93,992
Treasury stock, at cost: 1,641,166 and 1,699,497 shares
at December 31, 1998 and 1999, respectively.............................. (32,795) (33,246)
------------ ------------
Total equity (deficit)............................................... 75,292 (46,893)
------------ ------------
Total liabilities and equity (deficit)............................... $ 248,714 $ 291,748
============ ============
</TABLE>
See the accompanying notes to consolidated financial statements.
20
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1997 1998 1999
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ........................................................ $ 22,264 $ 9,424 $ 4,985
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................................. 16,798 16,999 17,801
Net loss on disposition of long-term assets.................... 696 460 393
(Increase) decrease in receivables............................. (12,085) 12,189 631
(Increase) decrease in inventories............................. (940) (5,754) 217
Increase (decrease) in accounts payable........................ 3,631 (3,460) 3,327
Increase (decrease) in accrued liabilities..................... (5,234) 909 5,172
Decrease in income taxes payable............................... (2,394) (32) (1,988)
Increase in other liabilities and assets, net.................. 2,293 6,946 2,806
Increase (decrease) in minority interest....................... 4,729 128 (1,350)
------------- ----------- ------------
Net cash provided by operating activities................... 29,758 37,809 31,994
------------- ----------- ------------
Cash flows from investing activities:
Capital expenditures.............................................. (30,468) (18,498) (24,061)
Proceeds from sales or disposals of long-term assets............. 7 101 --
------------- ------------ -----------
Net cash used for investing activities...................... (30,461) (18,397) (24,061)
------------- ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.......................... -- -- 144,776
Net transactions with GenTek Inc. ................................ 446 (19,637) (126,955)
Other financing activities........................................ -- -- (251)
------------- ----------- ------------
Net cash provided by (used for) financing activities........ 446 (19,637) 17,570
------------- ----------- ------------
Increase (decrease) in cash and cash equivalents..................... (257) (225) 25,503
Cash and cash equivalents at beginning of period...................... 1,609 1,352 1,127
------------- ------------ ------------
Cash and cash equivalents at end of period............................ $ $1,352 $ 1,127 $ 26,630
============= ============ ============
Supplemental information:
Cash refunded for income taxes, net of payments................................................ $ 653
============
Cash paid for interest......................................................................... $ 8,158
============
</TABLE>
See the accompanying notes to consolidated financial statements.
21
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
For the three years ended December 31, 1999
<TABLE>
<CAPTION>
Accumulated
Class B Other
Common Common Treasury Capital Comprehensive Retained Comprehensive
Stock Stock Stock Deficit Income (Loss) Earnings Total Income
------ ------- -------- ------- ------------- -------- ----- -------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996........ $ 80 $143 (123) $ (185,215) $(1,435) $66,797 $(119,753)
Distribution of GenTek Inc.......... -- -- -- 182,942 (394) -- 182,548
---- ---- -------- ---------- ------- ------- ---------
Balance at December 31, 1996........ -- 143 (123) (2,273) (1,829) 66,797 62,795
Net income....................... -- -- -- -- -- 22,264 22,264 $22,264
Foreign currency translation..... -- -- -- -- (762) -- (762) (762)
-------
Comprehensive income............. -- -- -- -- -- -- -- 21,502
=======
Dividends (Per Share $.20)....... -- -- -- -- -- (4,257) (4,257)
Conversion of Class B Common
Stock to Common Stock.......... 46 (46) -- -- -- -- --
Restricted Unit Plan grants,
cancellations, tax benefits
and other...................... -- -- -- 1,401 -- -- 1,401
Transfer from GenTek Inc......... -- -- -- 31,247 -- -- 31,247
Purchase of Treasury stock....... -- -- (27,183) -- -- -- (27,183)
---- ---- -------- --------- ------- ------- ---------
Balance at December 31, 1997........ 126 97 (27,306) 30,375 (2,591) 84,804 85,505
Net income....................... -- -- -- -- -- 9,424 9,424 $ 9,424
Foreign currency translation..... -- -- -- -- (249) -- (249) (249)
-------
Comprehensive income............. -- -- -- -- -- -- -- 9,175
=======
Dividends (Per Share $.20)....... -- -- -- -- -- (4,184) (4,184)
Restricted Unit Plan grants,
cancellations, tax benefits
and other...................... 1 -- -- 1,757 -- -- 1,758
Transfer to GenTek Inc........... -- -- -- (11,473) -- -- (11,473)
Purchase of Treasury stock....... -- -- (5,489) -- -- -- (5,489)
---- ---- ------- --------- ------- ------- --------
Balance at December 31, 1998........ 127 97 (32,795) 20,659 (2,840) 90,044 75,292
Net income....................... -- -- -- -- -- 4,985 4,985 $ 4,985
Foreign currency translation..... -- -- -- -- 36 -- 36 36
-------
Comprehensive income............. -- -- -- -- -- -- -- 5,021
=======
Dividends (Per Share $.05)....... -- -- -- -- -- (1,037) (1,037)
Conversion of Common Stock to
Class B Common Stock........... 58 (58) -- -- -- -- --
Restricted Unit Plan grants,
cancellations, tax benefits
and other...................... 1 -- -- 199 -- -- 200
Transfer to GenTek Inc........... -- -- -- (125,918) -- -- (125,918)
Purchase of Treasury stock....... -- -- (451) -- -- -- (451)
---- ---- -------- --------- ------- ------- --------
Balance at December 31, 1999........ $186 $ 39 $(33,246) $(105,060) $(2,804) $93,992 $(46,893)
==== ==== ======== ========= ======= ======= ========
</TABLE>
See the accompanying notes to consolidated financial statements.
22
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
Note 1 - Basis of Presentation
The General Chemical Group Inc. ("GCG" or the "Company") is a leading
North American supplier of soda ash and calcium chloride to a broad range of
industrial and municipal customers. The primary end markets for soda ash include
glass production, sodium-based chemicals, powdered detergents, water treatment
and other industrial end uses. Calcium chloride is mainly used for dust control
and roadbed stabilization during the summer and melting ice during the winter.
On April 30, 1999, GCG completed the separation of its Manufacturing
and Performance Products businesses from its soda ash and calcium chloride
business through a distribution of stock of GenTek Inc. ("GenTek") to
stockholders of GCG (the "Spinoff"). As a result of the Spinoff, GenTek became a
separate, publicly-traded company on the New York Stock Exchange. GCG continues
to trade using the GCG symbol. GCG owns and operates the soda ash and calcium
chloride business, and GenTek owns and operates the businesses comprising the
Manufacturing and Performance Products businesses.
The Spinoff was treated as a reverse spinoff for financial statement
purposes because a greater proportion of GCG's assets and operations are held by
GenTek after the Spinoff. Therefore, the Spinoff has been reflected, for
financial statement presentation, as if GCG is a new company consisting of the
soda ash and calcium chloride business. Included in selling, general and
administrative expense in the accompanying consolidated statement of operations
for the year ended December 31, 1999 are Spinoff-related expenses of $1,900.
The financial statements include an allocation of certain assets,
liabilities and expenses, including allocations of general corporate overhead
expenses of $1,285, $1,448 and $475 for the years 1997, 1998 and 1999,
respectively. Net interest expense was allocated assuming the Company's
allocated share of debt would have been $150,000. In the opinion of management,
expenses have been allocated from the Company in a reasonable and consistent
basis using management's estimate of services provided to the Company. However,
such allocations are not necessarily indicative of the level of expenses which
might have been incurred had the Company been operating as a stand-alone entity
during the periods presented, or expected to be incurred after the Spinoff. The
accompanying financial statements reflect the net effect of transfers to or from
GenTek as a component of equity (deficit).
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Note 2 - Summary of Significant Accounting Policies
The accompanying consolidated financial statements reflect the results
of operations and financial position of the Company, including wholly-owned
subsidiaries and General Chemical (Soda Ash) Partners ("GCSAP") of which the
Company owns 51 percent. Minority interests relate solely to partnerships,
primarily GCSAP, in which the Company has a controlling interest. Intercompany
balances and transactions are eliminated in consolidation.
23
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except share data)
Taxes on income are computed as if the Company were a stand-alone
company prior to the Spinoff. The provision for income taxes for periods prior
to the Spinoff were calculated as if the Company had filed separate tax returns
under its existing structure.
Inventories are valued at the lower of cost or market, using the
last-in, first-out ("LIFO") method for most domestic production inventories and
the first-in, first-out ("FIFO") or average-cost method for all other
inventories. Production inventory costs include material, labor and factory
overhead.
Certain property, plant and equipment are carried at cost and are
depreciated using the straight-line method, using estimated lives which range
from 2 to 30 years. Mines and machinery and equipment of GCSAP are depreciated
using the units-of-production method. Approximately 76 percent of machinery and
equipment and 59 percent of mines and quarries are depreciated using the
units-of-production method.
The Company evaluates the recovery of long-lived assets not held for
sale by measuring the carrying value of these assets against the estimated
future cash flows associated with them. At the time such evaluations indicate
that the future cash flows are not sufficient to recover the carrying value of
such assets, the assets are adjusted to their fair values.
Deferred financing costs associated with various debt issues are being
amortized over the terms of the related debt using the effective interest
method.
The Company provides for the expected costs to be incurred for the
eventual reclamation of mining properties pursuant to local law. Land
reclamation costs are being accrued over the estimated remaining life of the
reserves currently under lease. At December 31, 1998 and 1999, the Company had
accruals of $25,684 and $25,982, respectively, for land reclamation. These
amounts are included in other liabilities on the balance sheet.
The Company recognized deferred tax assets and liabilities based on
differences between financial statement and tax basis of assets and liabilities
using presently enacted tax rates.
The Company does not hold or issue financial instruments for trading
purposes.
All highly liquid instruments purchased with a maturity of three months
or less are considered to be cash equivalents.
The Company recognizes revenue upon shipment of product, net of
freight, with provisions recorded for estimated returns.
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. This Statement, as amended, is effective
for fiscal years beginning after June 15, 2000. The Company is required to adopt
this standard, as amended, in the fiscal year ending December 31, 2001. The
Company does not expect the adoption of FAS 133 to have a material effect on the
Company's results of operations, financial condition or cash flows.
Certain prior-period amounts have been reclassified to conform with the
current presentation.
24
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except share data)
Note 3 - Capital Stock
The Company's authorized capital stock consists of 100,000,000 shares
of Common Stock, par value $.01 per share, of which 11,013,323 and 16,857,817
were outstanding at December 31, 1998 and 1999, respectively, and 40,000,000
shares of Class B Common Stock, par value $.01 per share, which has ten votes
per share, is subject to significant restrictions on transfer and is convertible
at any time into Common Stock on a share-for-share basis, of which 9,758,421 and
3,958,421 were outstanding at December 31, 1998 and 1999, respectively. The
Common Stock and Class B Common Stock are substantially identical, except for
the disparity in voting power, restriction on transfer and conversion
provisions.
The Company's Preferred Stock, par value $.01 per share, consists of
10,000,000 authorized shares, none of which were outstanding at December 31,
1998 and 1999.
During the second quarter of 1999, a stockholder converted 5,800,000
shares of Class B Common Stock into an identical number of shares of Common
Stock.
Note 4 - Earnings Per Share
The computation of basic earnings per share is based on the weighted
average number of common shares and contingently issuable shares outstanding
during the period. The computation of diluted earnings per share assumes the
foregoing and, in addition, the exercise of all stock options and restricted
units, using the treasury stock method.
The components of the denominator for basic earnings per common share
and diluted earnings per common share are reconciled as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Basic earnings per common share:
Weighted average common
shares outstanding.................................. 21,424,401 21,048,240 20,934,713
========== ========== ==========
Diluted earnings per common share:
Weighted average common
shares outstanding.................................. 21,424,401 21,048,240 20,934,713
Options and Restricted Units......................... 1,078,241 807,404 528,608
---------- ---------- ----------
Denominator for diluted earnings per common share............. 22,502,642 21,855,644 21,463,321
========== ========== ==========
</TABLE>
Options to purchase 398,500 and 1,938,800 of common stock at December
31, 1998 and 1999, respectively, were excluded from the computation of diluted
earnings per common share because the option exercise price was greater than the
average market price of the common shares. The options, which expire during
2007, 2008, and 2009 were still outstanding at December 31, 1999.
25
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except share data)
Note 5 - Income Taxes
Income before income taxes is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
United States............................................ $ 18,746 $ 8,141 $ 1,952
Foreign.................................................. 13,094 4,454 3,466
---------- ---------- ----------
Total.................................................. $ 31,840 $ 12,595 $ 5,418
========== ========== ==========
</TABLE>
The components of the income tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
United States:
Current............................................... $ 1,018 $ 3,850 $ 1,527
Deferred.............................................. 2,884 (2,691) (2,352)
Foreign:
Current............................................... 5,073 1,503 (832)
Deferred.............................................. (739) (94) 2,153
State:
Current............................................... 706 1,552 612
Deferred.............................................. 634 (949) (675)
---------- ---------- ----------
Total.......................................... $ 9,576 $ 3,171 $ 433
========== ========== ==========
</TABLE>
A summary of the components of deferred tax assets and liabilities is
as follows:
<TABLE>
<CAPTION>
December 31,
--------------------
1998 1999
---- ----
<S> <C> <C>
Postretirement benefits.................................. $ 12,597 $ 11,375
Nondeductible accruals................................... 13,363 16,082
Foreign operations....................................... 4,291 1,451
Other.................................................... 105 --
---------- -----------
Deferred tax assets................................... 30,356 28,908
---------- -----------
Property, plant and equipment............................ 15,739 16,228
Pensions................................................. 4,733 3,494
Inventory................................................ (681) 285
Other ................................................... 40 1,429
---------- -----------
Deferred tax liabilities.............................. 19,831 21,436
---------- -----------
Valuation allowance...................................... 11,423 7,850
---------- -----------
Net deferred tax liabilities...................... $ 898 $ 378
========== ===========
</TABLE>
The Company has deferred tax assets related to foreign tax credits of
$11,423 and $7,850 at December 31, 1998 and 1999, respectively, against which a
full valuation allowance has been recorded. The Company reversed $4,656, $11 and
$3,573 of previously recorded valuation allowances during 1997, 1998 and 1999,
respectively, primarily related to foreign tax credits that had expired.
26
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except share data)
At December 31, 1999, there was $2,045 of accumulated and undistributed
income of foreign subsidiaries. These earnings are intended by management to be
reinvested abroad indefinitely. Accordingly, no applicable U.S. federal deferred
income taxes have been provided nor is a determination of the amount of
unrecognized U.S. federal deferred income taxes practicable.
The difference between the Company's effective income tax rate and the
United States statutory rate is reconciled below:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
U.S. federal statutory rate................................. 35.0% 35.0% 35.0%
State income taxes, net of federal benefit.................. 2.7 3.1 (0.8)
Tax effect of foreign operations............................ 1.1 2.4 2.0
Depletion................................................... (9.1) (16.6) (31.0)
Other....................................................... 0.4 1.3 2.8
----- ---- -----
Total....................................................... 30.1% 25.2% 8.0%
===== ===== =====
</TABLE>
In connection with the Spinoff, the Company entered into a tax sharing
agreement with GenTek which requires GenTek to indemnify and hold harmless the
Company for consolidated tax liabilities attributable to periods prior to the
Spinoff date.
Note 6 - Pension Plans and Other Postretirement Benefits
The Company maintains several defined benefit pension plans covering
substantially all employees. A participating employee's annual postretirement
pension benefit is determined by the employee's credited service and, in most
plans, final average annual earnings with the Company. Vesting requirements are
five years in the U.S. and two years in Canada. The Company's funding policy is
to annually contribute the statutorily required minimum amount as actuarially
determined. The Company also maintains several plans providing postretirement
benefits covering substantially all hourly and certain salaried employees. The
Company funds these benefits on a pay-as-you-go basis. The long-term portion of
accrued postretirement benefit cost of $37,255 and $37,316 at December 31, 1998
and 1999, respectively, is included in other liabilities on the balance sheet.
The Company's share of the consolidated net periodic benefit cost related to
pension benefits, which has been recorded in the accompanying statement of
operations in 1998 and 1997 was $3,282 and $3,277, respectively. The Company's
share of consolidated net periodic benefit cost related to postretirement
benefits, which has been recorded in the accompanying statement of operations in
1998 and 1997 was $2,118 and $2,103, respectively. The Company's share of the
accrued pension obligation, which has been recorded in the accompanying balance
sheet at December 31, 1998 was $8,873. The Company's share of pension assets as
of December 31, 1998 was $15,312 and is included in other assets on the balance
sheet. The disclosures for GCG's Pension Plans and Other Postretirement Benefits
reflects the combined entities, prior to the Spinoff for 1997 and 1998 with the
Spinoff reflected in 1999.
27
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
Other
Pension Benefits Postretirement Benefits
Years Ended December 31, Years Ended December 31,
-------------------------- -------------------------
United States: 1997 1998 1999 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Components of Net Periodic Benefit Cost:
Service Cost................................ $ 5,217 $ 5,645 $ 2,599 $ 1,575 $ 1,568 $ 846
Interest Cost............................... 13,873 14,935 5,606 3,896 4,046 1,300
Expected Return on Plan Assets.............. (13,466) (15,156) (6,010) -- -- --
Amortization of Net
Prior Service Cost.................... 843 910 813 (1,604) (1,604) (849)
(Gain)/Loss........................... 46 10 17 (587) (628) (239)
-------- -------- ------- ------- ------- -------
Net Periodic Benefit Cost................... $ 6,513 $ 6,344 $ 3,025 $ 3,280 $ 3,382 $ 1,058
======== ======== ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Other
Pension Benefits Postretirement Benefits
December 31, December 31,
----------------- -----------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in Benefit Obligation:
Benefit Obligation at Prior Measurement Date............ $ 203,495 $ 236,901 $ 57,522 $ 59,199
Service Cost............................................ 5,533 2,599 1,568 846
Interest Cost........................................... 14,856 5,606 4,046 1,300
Actuarial (Gain)/Loss................................... 22,332 (10,779) (948) (2,462)
Benefits Paid........................................... (10,649) (6,635) (2,989) (962)
Business Combinations................................... 1,334 -- -- --
Spinoff .............................................. -- (157,369) -- (42,970)
--------- --------- --------- ---------
Benefit Obligation at Measurement Date.................. $ 236,901 $ 70,323 $ 59,199 $ 14,951
========= ========= ========= =========
Change in Plan Assets:
Fair Value of Assets at Prior Measurement Date.......... $ 193,301 $ 203,988 $ -- $ --
Actual Return on Plan Assets............................ 17,124 29,804 -- --
Employer Contributions.................................. 3,065 3,385 2,989 962
Benefits Paid........................................... (10,649) (6,635) (2,989) (962)
Business Combinations................................... 1,147 -- -- --
Spinoff................................................. -- (159,713) -- --
--------- --------- --------- ---------
Fair Value of Assets at Measurement Date................ $ 203,988 $ 70,829 $ -- $ --
========= ========= ========= =========
Reconciliation of Funded Status:
Funded Status........................................... $(32,913) $ 506 $ (59,199) $ (14,951)
Unrecognized Net
Transition Obligation............................. 13 -- -- --
Prior Service Cost................................ 6,178 4,121 (9,500) (4,536)
Gain ............................................ (3,540) (16,213) (8,629) (4,296)
--------- --------- --------- ---------
Net Amount Recognized................................... $ (30,262) $ (11,586) $ (77,328) $ (23,783)
========= ========= ========= =========
</TABLE>
28
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except share data)
The assumptions used in accounting for the plans were as follows:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Discount rate ................................................... 7-1/2% 6-3/4% 7-1/2%
Long-term rate of return on assets............................... 9% 9% 9%
Average rate of increase in employee compensation................ 5% 5% 5%
</TABLE>
The assumption used in accounting for the medical plans in 1999 was a
7.5 percent health care cost trend rate. A one percent increase in the health
care trend rate would increase the accumulated postretirement benefit obligation
by $606 at year-end 1999 and the net periodic cost by $32 for the year. A one
percent decrease in the health care trend rate would decrease the accumulated
postretirement benefit obligation by $675 at year-end 1999 and the net periodic
cost by $36 for the year.
The assumption used in accounting for the plans in 1998 was an 8
percent health care cost trend rate (decreasing to 6-3/4 percent in 2001 and
beyond).
The dates used to measure plan assets and liabilities were October 31,
1998 and 1999 for all plans. Pension plan assets are invested primarily in
stocks, bonds, short-term securities and cash equivalents.
<TABLE>
<CAPTION>
Other
Pension Benefits Postretirement Benefits
Years Ended December 31, Years Ended December 31,
-------------------------- -------------------------
CANADA: 1997 1998 1999 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Components of Net Periodic Benefit Cost:
Service Cost............................. $ 1,352 $ 1,463 $ 1,481 $ 302 $ 332 $ 317
Interest Cost............................ 3,868 3,789 3,728 1,032 1,014 905
Expected Return on Plan Assets........... (4,877) (4,881) (4,980) -- -- --
Amortization of Net
Prior Service Cost.................... 90 84 79 -- -- --
Loss ................................. 432 458 541 -- -- --
-------- -------- ------- ------- ------- -------
Net Periodic Benefit Cost................. $ 865 $ 913 $ 849 $1, 334 $1, 346 $1, 222
======== ======== ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Other
Pension Benefits Postretirement Benefits
December 31, December 31,
----------------- -----------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in Benefit Obligation:
Benefit Obligation at Prior Measurement Date............ $ 55,493 $ 59,605 $ 14,631 $ 13,690
Service Cost............................................ 1,457 1,520 330 324
Interest Cost........................................... 3,773 3,823 1,010 922
Actuarial (Gain)/Loss................................... 5,823 (4,996) (934) (790)
Foreign Currency Translation............................ (3,701) 124 (977) 30
Benefits Paid........................................... (3,240) (3,108) (370) (394)
Spinoff .............................................. -- (4,109) -- (876)
--------- --------- --------- ---------
Benefit Obligation at Measurement Date.................. $ 59,605 $ 52,859 $ 13,690 $ 12,906
========= ========= ========= =========
</TABLE>
29
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
December 31, December 31,
----------------- -----------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in Plan Assets
Fair Value of Assets at Prior Measurement Date........... $ 66,181 $ 62,805 $ -- $ --
Actual Return on Plan Assets............................. 2,633 4,857 -- --
Employer Contributions................................... 1,643 923 370 394
Foreign Currency Translation............................. (4,412) 131 -- --
Benefits Paid .......................................... (3,240) (3,108) (370) (394)
Spinoff.................................................. -- (4,644) -- --
--------- --------- --------- ---------
Fair Value of Assets at Measurement Date................ $ 62,805 $ 60,964 $ -- $ --
========= ========= ========= =========
Reconciliation of Funded Status
Funded Status........................................... $ 3,200 $ 8,105 $ (13,690) $ (12,906)
Unrecognized Net Prior Service Cost..................... 696 582 -- --
Unrecognized Net (Gain)/Loss............................ 13,560 7,635 315 (512)
--------- --------- --------- ---------
Net Amount Recognized................................... $ 17,456 $ 16,322 $ (13,375) $ (13,418)
========= ========= ========= =========
</TABLE>
The prepaid pension cost related to the Canadian plans is included in
other assets on the balance sheet.
The assumptions used in accounting for the plans were as follows:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Estimated discount rate ...................................... 7-1/2% 6-3/4% 7-1/2%
Estimated long-term rate of return on assets.................. 9% 9% 9%
Average rate of increase in employee compensation............. 5-1/4% 5-1/4% 5-1/4%
</TABLE>
The assumption used in accounting for the medical plans in 1999 was an
8.4 percent health care cost trend rate (decreasing to 6 percent in 2003 and
beyond). A one percent increase in the health care trend rate would increase the
accumulated postretirement benefit obligation by $ 2,444 at year-end 1999 and
the net periodic cost by $278 for the year. A one percent decrease in the health
care trend rate would decrease the accumulated postretirement benefit obligation
by $1,935 at year-end 1999 and the net periodic cost by $217 for the year.
The assumption used in accounting for the plans in 1998 was a 8.4
percent health care cost trend rate (decreasing to 6 percent in the year 2003
and beyond).
The dates used to measure plan assets and liabilities were October 31,
1998 and 1999 for all plans. Plan assets are invested primarily in stocks,
bonds, short-term securities and cash equivalents.
30
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except share data)
Note 7 - Commitments and Contingencies
Future minimum rental payments for operating leases (primarily for
transportation equipment, offices and warehouses) having initial or remaining
noncancellable lease terms in excess of one year as of December 31, 1999 are as
follows:
Years Ending December 31,
-------------------------
2000................................................. $13,946
2001................................................. 11,000
2002................................................. 5,165
2003................................................. 3,759
2004 and thereafter.................................. 20,891
-------
$54,761
=======
Rental expense for the years ended December 31, 1997, 1998 and 1999 was
$12,772, $13,913, and $12,408, respectively.
Parent Guaranty and Transfer Agreement. A restated parent guaranty and
transfer agreement between New Hampshire Oak, a wholly-owned subsidiary of GCG
and the parent of General Chemical Industrial Products Inc. ("GCIP"), and ACI
International Limited and TOSOH America, Inc. provides that in the event that
either New Hampshire Oak, ACI International Limited or TOSOH America, Inc. (such
entities being referred to as a "transferring parent" or "nontransferring
parent" as the context requires) proposes to sell or otherwise transfer or cause
to be sold or transferred the voting securities of GCIP, The Andover Group, Inc.
or TOSOH Wyoming, Inc. (the respective subsidiaries constituting the partners of
GCSAP) as the case may be, the nontransferring parents will have the following
options: (1) to purchase the transferring parent's subsidiary's interest in
GCSAP at fair market value; (2) to require the transferring parent to purchase
the nontransferring parents' subsidiaries' interest in GCSAP at fair market
value; (3) to buy the voting securities to be sold by the transferring parent on
the same terms and conditions and at the same price as the transferring parent
proposes to sell or otherwise transfer or cause to be sold or transferred such
voting securities; or (4) to cause the proposed transferee to purchase the
nontransferring parents' subsidiaries' interest in GCSAP for a price reflecting
the price to be paid by the proposed transferee for such voting securities. In
the event that New Hampshire Oak ceases to own at least 51 percent of GCIP while
GCIP is a partner, GCIP shall pay to The Andover Group, Inc. $2,833.
31
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except share data)
The Company is involved in certain claims, litigation, administrative
proceedings and investigations relative to environmental matters. Although the
amount of any ultimate liability which could arise with respect to these matters
cannot be accurately predicted, it is the opinion of management, based upon
currently available information and the accruals established, that any such
liability will have no material adverse effect on the Company's financial
condition, results of operations or cash flows.
Note 8 - Additional Financial Information
The following are summaries of selected balance sheet items:
Receivables
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
---- ----
<S> <C> <C>
Trade......................................................... $ 54,857 $ 54,526
Other......................................................... 6,402 6,123
Allowance for doubtful accounts............................... (2,658) (2,679)
---------- -----------
$ 58,601 $ 57,970
========== ===========
</TABLE>
Inventories
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
---- ----
<S> <C> <C>
Raw materials................................................. $ 3,480 $ 3,603
Work in process............................................... 1,839 1,301
Finished products............................................. 13,297 12,704
Supplies and containers....................................... 6,892 7,683
---------- -----------
$ 25,508 $ 25,291
========== ===========
</TABLE>
Inventories valued at LIFO amounted to $5,632 and $2,883 at December
31, 1998 and 1999, respectively, which were below estimated replacement cost by
$2,011 and $2,193, respectively. The impact of LIFO liquidations in 1998 and
1999 was not significant.
Property, Plant and Equipment
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
---- ----
<S> <C> <C>
Land and improvements......................................... $ 23,162 $ 23,162
Machinery and equipment....................................... 227,649 232,120
Buildings and leasehold improvements.......................... 24,135 28,851
Construction-in-progress...................................... 5,223 19,768
Mines and quarries............................................ 16,415 16,876
----------- -----------
296,584 320,777
Less accumulated depreciation and amortization................ (154,776) (170,739)
------------ -----------
$ 141,808 $ 150,038
=========== ===========
</TABLE>
32
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except share data)
Accrued Liabilities
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
---- ----
<S> <C> <C>
Wages, salaries and benefits.................................. $ 11,064 $ 11,531
Taxes, other than income taxes................................ 7,638 7,866
Interest...................................................... -- 1,787
Other......................................................... 6,444 9,134
----------- -----------
$ 25,146 $ 30,318
=========== ===========
</TABLE>
Note 9 - Related Party Transactions
Management Agreement
The Company is party to a management agreement with Latona Associates
(which is controlled by a stockholder of the Company) under which the Company
receives corporate supervisory and administrative services and strategic
guidance for a quarterly fee of $361, $285 and $371 in 1997, 1998 and 1999,
respectively.
Transition Support Agreement
GCG and GenTek entered into various transition support agreements that
provide mechanisms for an orderly transition after the Spinoff. For the period
from April 30, 1999 to December 31, 1999, GenTek charged GCG $2,474 related to
these transition support agreements.
Other Transaction
GCG supplies soda ash and calcium chloride to GenTek. For the years
ended December 31, 1997, 1998 and 1999, sales to GenTek amounted to $5,240,
$5,336 and $14,696, respectively.
Note 10 - Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
Maturities December 31, 1999
---------- -----------------
<S> <C> <C>
$85 Million Revolving Credit
Facility-floating rate................ 2004 $ 50,919
Senior Subordinated
Notes - 10-5/8%....................... 2009 100,000
--------
Total Debt................................. 150,919
--------
Less: Current Portion................. --
--------
Net Long-Term Debt......................... $150,919
========
</TABLE>
33
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except share data)
On April 30, 1999, in connection with the Spinoff, the Company's
subsidiary, GCIP, and GCIP's Canadian subsidiary, General Chemical Canada Ltd.,
entered into an $85,000 revolving credit facility ("Credit Facility") with
certain lenders party thereto; The Chase Manhattan Bank, as Administrative
Agent, The Chase Manhattan Bank of Canada, as Canadian Administrative Agent, The
Bank of Nova Scotia, as Syndication Agent, and The First National Bank of
Chicago as Documentation Agent. Of this amount, up to $60,000 is available for
borrowing by the Canadian subsidiary. In addition, on April 30, 1999, GCIP
issued and sold $100,000 aggregate principal amount of 10-5/8% Senior
Subordinated Notes due 2009.
The Company applied the proceeds of its initial borrowing under the
Credit Facility and a portion of the proceeds of the offering of its Senior
Subordinated Notes to repay approximately $127 million of pre-Spinoff debt. On
November 9, 1999, GCIP completed an exchange offer pursuant to which all of
GCIP's unregistered 10 5/8% Senior Subordinated Notes due 2009 (issued on April
30, 1999) were exchanged for registered 10 5/8% Senior Subordinated Notes due
2009 that are identical to the terms of the unregistered notes. The Securities
and Exchange Commission declared effective GCIP's Registration Statement on Form
S-4 with respect to such registered notes on October 6, 1999.
The Senior Subordinated Notes are unsecured while the $85 million
Credit Facility is secured by 100 percent of the capital stock of GCIP, 100
percent of the owned capital stock of, and guarantees from, the direct and
indirect domestic subsidiaries of the Company, 65 percent of certain owned
foreign subsidiaries of the Company and substantially all of the other assets of
the Company. In addition, the portion of the Credit Facility available to the
Company's Canadian subsidiary is secured by substantially all of the assets of
the Company's Canadian subsidiary. The Senior Subordinated Notes and the Credit
Facility contain certain covenants with respect to additional indebtedness,
preferred stock by subsidiaries, restricted payments, transactions with
affiliates, liens, dividends and other payment instructions affecting
subsidiaries, consolidations, mergers, the sale of assets and financial tests.
Prior to the Spinoff, the Company paid a regular quarterly cash dividend to
holders of its Common Stock. The Company has not paid dividends since the
Spinoff and does not expect to pay cash dividends in the foreseeable future.
Note 11 - Stock Option Plan and Restricted Unit Plan
The Company's 1996 Stock Option and Incentive Plan (the "Plan") provides
for the issuance of up to 2,200,000 shares of Common Stock. The Plan authorizes
the granting of incentive and nonqualified stock options, stock appreciation
rights, restricted and unrestricted stock and performance share awards to
executives, directors and other key persons. Any incentive stock options granted
under the Plan must have an exercise price at least equal to the market value of
the shares on the day the option is granted and a maximum term of 10 years.
34
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except share data)
Information with respect to all stock options is summarized below:
<TABLE>
<CAPTION>
1997 1998 1999
-------------------------- --------------------------- ---------------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning at year 1,271,000 $4.40 1,341,200 $4.49 1,679,500 $ 4.82
Options Granted 100,000 5.65 398,500 5.91 320,000 3.32
Options Exercised -- -- 25,200 4.40 -- --
Options Cancelled 29,800 4.54 35,000 4.54 55,700 6.32
--------- --------- ---------
Outstanding at end of
year 1,341,200 $4.49 1,679,500 $4.82 1,943,800 $ 4.56
========= ========= =========
</TABLE>
The following table summarizes information about stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Outstanding Exercisable
------------------------------------------------ -----------------------------
Weighted Average
Remaining Weighted Weighted
Number of Contractual Average Number of Average
Range of Exercise Prices Options Life Exercise Price Options Exercise Price
------------------------ ------- -------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C>
$2.40 - $3.89 290,000 9.28 $3.26 -- $ --
$3.90 - $5.39 1,349,000 6.72 4.48 342,000 4.61
$5.40 - $6.89 304,800 8.21 6.20 88,650 6.20
----------- ----------
1,943,800 430,650
=========== ==========
</TABLE>
The Company applies APB Opinion No. 25 in accounting for the Plan. Had
compensation cost for this plan been determined under Statement of Financial
Accounting Standards No. 123, the Company's net income for 1997 would have been
reduced to $21,089 with basic earnings per common share of $.98 and diluted
earnings per share of $.94. Net income for 1998 would have been reduced to
$7,574 with basic earnings per common share of $.36 and diluted earnings per
share of $.35. Net income for 1999 would have been reduced to $4,299 with basic
earnings per common share of $.21 and diluted earnings per share of $.20. For
purposes of this calculation, the fair value of each option grant was estimated
on the grant date using the Black-Scholes option-pricing model with the
following assumptions used for 1997, 1998 and 1999, respectively: dividend yield
of 0.7 percent, 1.5 percent and 0.0 percent, respectively; expected volatility
of 41 percent, 42 percent and 49 percent, respectively; weighted average risk
free interest rate of 5.50 percent, 4.65 percent and 6.61percent, respectively;
and, weighted average expected lives of six years. All options granted to date
under the stock option plan have an exercise price equal to the market price of
the Company's stock on the grant date.
The Company's Restricted Unit Plan provides for the issuance of
850,000 units, with each unit representing one share of Common Stock to be
issued to the participant upon the occurrence of certain conditions ("vesting")
unless the participant elects to defer receipt thereof. All awards are subject
to a five-year vesting schedule under which a portion of each participant's
award vests annually over a five-year period. Dividend equivalents on
outstanding units accrue to the benefit of the participants and are paid at the
time dividends are paid to Common Stock shareholders. These units were awarded
during the second quarter of 1996 in replacement of the rights earned by
participants beginning in 1989 under the Phantom Equity Plan and certain other
prior equity programs of the Company which were then terminated.
35
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)
(Dollars in thousands, except share data)
Note 12 - Financial Instruments
Fair Value of Financial Instruments
The estimated fair values of the Company's financial instruments are as
follows:
December 31, 1999
------------------------
Carrying Fair
Amount Value
-------- --------
Long-term debt............................... $150,919 $149,919
The fair values of cash and cash equivalents, receivables and payables
approximate their carrying values due to the short-term nature of the
instruments.
The fair value of the Company's long-term debt was based on quoted
market prices for publicly traded notes and discounted cash flow analyses on its
nontraded debt.
Note 13-Geographic Information
Information regarding geographic areas at December 31, and for each of
the years then ended is as follows:
<TABLE>
<CAPTION>
Long-Lived
Net Revenues Operating Profit Assets(4)
--------------------------- ----------------------------- ----------------
1997 1998 1999 1997 1998 1999 1998 1999
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United States (1) $ 220,525 $ 191,884 $ 185,701 $ 50,847 $ 32,403 $ 23,891 $ 97,866 $ 101,929
Foreign (2)...... 106,052 93,296 100,811 17,434 8,646 6,716 59,561 70,482
Elimination (3).. (36,877) (23,711) (29,719) -- -- -- -- --
--------- --------- --------- --------- -------- --------- --------- ----------
$ 289,700 $ 261,469 $ 256,793 $ 68,281 $ 41,049 $ 30,607 $ 157,427 $ 172,411
========== ========= ========= ========= ======== ========= ========= ==========
<FN>
(1) Includes export sales of $74,032, $60,710 and $62,330 for the years ended
December 31, 1997, 1998 and 1999, respectively.
(2) Principally Canada.
(3) Sales between geographic areas are recorded at prices comparable to market
prices charged to third-party customers and are eliminated in
consolidation.
(4) Represents all noncurrent assets except deferred tax assets and financial
investments.
</FN>
</TABLE>
36
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)
(Dollars in thousands, except share data)
Note 14 - Unaudited Quarterly Information
<TABLE>
<CAPTION>
1998
------------------------------------------------------------
First Second Third Fourth Year
----- ------ ----- ------ ----
<S> <C> <C> <C> <C> <C>
Net revenues.................................. $ 62,343 $ 71,041 $ 64,218 $ 63,867 $ 261,469
Gross profit.................................. 13,209 17,271 14,474 14,177 59,131
Net income ................................... 1,898 4,041 2,885 600 9,424
Earnings per common share:
Basic...................................... .09 .19 .14 .03 .45
Diluted.................................... .09 .18 .13 .03 .43
</TABLE>
<TABLE>
<CAPTION>
1999
------------------------------------------------------------
First Second Third Fourth Year
----- ------ ----- ------ ----
<S> <C> <C> <C> <C> <C>
Net revenues.................................. $ 61,472 $ 69,165 $ 64,117 $ 62,039 $ 256,793
Gross profit.................................. 10,204 15,243 12,402 11,805 49,654
Net income ................................... 979 2,295 1,114 597 4,985
Earnings per common share
Basic...................................... .05 .11 .05 .03 .24
Diluted.................................... .05 .11 .05 .03 .23
</TABLE>
Note 15 - Subsequent Event
On March 13, 2000, the Company's Canadian subsidiary received a letter
from Environment Canada ("EC"). The letter informed the Company that it faces an
alleged violation of the Canadian Fisheries Act, R.S.C., as amended, with
respect to effluent discharges at its Amherstburg, Ontario facility. According
to EC, the Company's chloride level of its effluent discharged to the Detroit
River exceed permitted levels. The Company is currently evaluating various
projects designed to improve the quality of the effluent and intends to propose
a plan to EC with respect to the scope and extent of any corrective action.
Because the evaluation of the projects to be implemented, if any, and the
outcome of the Company's discussions with EC have not yet been completed, the
Company does not have sufficient information to estimate the costs which may be
incurred in connection with this matter. However, depending on the outcome of
these issues, the Company could incur additional expenses and/or capital
expenditures which might be material to the Company's results of operations
and/or financial condition.
37
<PAGE>
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors. For information relating to the Company's Directors, see the
information under the caption "Nomination and Election of Directors" in the
Company's definitive 1999 Proxy Statement (the "Proxy Statement"), which is
hereby incorporated by reference.
Executive Officers. For information relating to the Company's executive
officers, see the information under the caption "Employees/Labor Relations" in
Part I of this report.
Compliance with Section 16(a) of the Exchange Act. For information
relating to the compliance of the directors and officers of the Company, as well
as any holder of ten percent or more of any registered class of the equity
securities of the Company, with Section 16(a) of the Exchange Act, see the
information under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Company's Proxy Statement, which is hereby incorporated by
reference.
Item 11. Executive Compensation
Executive Compensation. For information relating to the compensation of
the Company's executives, see the information under the caption "Compensation of
Directors and Executive Officers" in the Company's Proxy Statement, which is
hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners. For information
relating to the beneficial ownership of more than five percent of the Company's
Common Stock and Class B Common Stock, see the information under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the
Company's Proxy Statement, which is hereby incorporated by reference.
Security Ownership of Management. For information relating to the
beneficial ownership of the Company's Common Stock and Class B Common Stock by
management, see the information under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's Proxy Statement, which is
hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions
Certain Relationships and Related Transactions. For information
relating to certain relationships and related transactions of the Company, see
the information under the caption "Certain Relationships and Transactions" in
the Company's Proxy Statement, which is hereby incorporated by reference.
38
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 10-K.
Exhibit
No. Description
--- -----------
**3.1 --Amended and Restated Certificate of Incorporation of the Company
**3.2 --Amended and Restated By-Laws of the Company
**4.1 --Specimen Certificate for shares of Common Stock, $.01 par value,
of the Company
*10.1 --Agreement dated as of March 15, 1996 between Paul M. Montrone and
the Company
'D'10.4 --Restated Environmental Matters Agreement among Allied-Signal,
Henley, The Wheelabrator Group Inc., New Hampshire Oak, Inc., and
Fisher Scientific Group Inc., dated as of February 26, 1986, as
amended and restated as of July 28, 1989
'D'10.5 --Second Amended and Restated Partnership Agreement of GCSAP dated
June 30, 1992, among General Chemical, The Andover Group, Inc.,
and TOSOH Wyoming, Inc.
'D'10.6 --Amended and Restated Parent Guaranty and Transfer Agreement dated
June 30, 1992, among New Hampshire Oak, Inc., ACI International
Limited and TOSOH America, Inc.
**10.7 --The General Chemical Group Inc. Deferred Compensation Plan for
Non-Employee Directors
**10.8 --The General Chemical Group Inc. Retirement Plan for Non-Employee
Directors
**10.9 --The General Chemical Group Inc. Restricted Unit Plan for
Non-Employee Directors
**10.10 --The General Chemical Group Inc. 1996 Stock Option and Incentive
Plan
**10.11 --The General Chemical Group Inc. Performance Plan
**10.12 --The General Chemical Group Inc. Restricted Unit Plan
'D''D'10.13 --First Amendment to General Chemical Corporation Equity Program,
effective as of October 1, 1993.
**10.14 --General Chemical Group Dividend Award Program, as amended
December 15, 1995, effective as of October 1, 1993
**10.15 --General Chemical Corporation Supplemental Savings and Retirement
Plan
***10.16 --Employee Benefits Agreement among The General Chemical Group Inc.
and GenTek Inc.
***10.17 --Intellectual Property Agreement among General Chemical Industrial
Products Inc., General Chemical Corporation, GenTek, Inc. and The
General Chemical Group Inc.
***10.18 --Credit Agreement, dated as of April 30, 1999, among General
Chemical Industrial Products Inc., and General Chemical Canada
Ltd. as Borrowers, the several Lenders from time to time parties
thereto, The Chase Manhattan Bank, as Administrative Agent, The
Chase Manhattan Bank of Canada, as Canadian Administrative Agent,
The Bank of Nova Scotia, as Syndication Agent, and The First
National Bank of Chicago as Documentation Agent.
***10.19 --Guarantee and Collateral Agreement, dated as of April 30, 1999,
made by General Chemical Industrial Products Inc., and certain
of its subsidiaries in favor of the Chase Manhattan Bank, as
Collateral Agent. Incorporated by reference to the relevant
exhibit to the GCG First Quarter 1999 10-Q.
***10.20 --Amended and Restated Management Agreement between Latona
Associates Inc. and The General Chemical Group Inc. Incorporated
by reference to the relevant exhibit to The General Chemical
Group Inc.'s 10-Q for the three months ended June 30, 1999 with
the Securities and Exchange Commission on August 16, 1999 (the
"GCG Second Quarter 10-Q").
***10.21 --Tax Sharing Agreement between The General Chemical Group Inc. and
GenTek Inc.
***10.22 --Sublease Agreement between General Chemical Industrial Products
Inc and General Chemical Corporation.
***10.23 --Transition Support Agreement between GenTek Inc. and The General
Chemical Group Inc.
39
<PAGE>
Exhibit
No. Description
--- -----------
11 --Statement regarding computation of per share earnings
***22 --Subsidiaries of the Company
27 --Financial Data Schedule
- ---------------
** Incorporated by reference to the relevant exhibit to the Company's
Registration Statement filed with the Securities and Exchange Commission
(the "SEC") on May 3, 1996, File No. 33-83766.
*** Incorporated by reference to the relevant exhibit to the Registration
statement on Form S-4 of General Chemical Industrial Products Inc. filed
with the SEC on September 30, 1999, File No. 333-81469.
'D' Incorporated by reference to the relevant exhibit to General Chemical
Corporation's Registration Statement filed with the SEC on August 11,
1993, File No. 33-64824.
'D''D' Incorporated by reference to the relevant exhibit to General Chemical
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 filed with the SEC.
Financial Statements
See Item 8, beginning on page 18.
Financial Statement Schedules
See Index to Financial Statement Schedules on page 42.
Reports on Form 8-K
No report on Form 8-K has been filed by the Company during the last
quarter of the period covered by this report.
40
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in Hampton, State of New
Hampshire on the 30th day of March 2000.
THE GENERAL CHEMICAL GROUP INC.
By: /s/ DAVID S. GRAZIOSI
----------------------------
David S. Graziosi
Vice President-Finance
March 30, 2000
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 in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ PAUL M. MONTRONE Chairman of the Board and Director March 30, 2000
---------------------------------
Paul M. Montrone
/s/ JOHN M. KEHOE, JR. President, Chief Executive March 30, 2000
--------------------------------- Officer (Principal Executive
John M. Kehoe, Jr. Officer) and Director
/s/ DAVID S. GRAZIOSI Vice President-Finance March 30, 2000
--------------------------------- (Principal Financial and
David S. Graziosi Accounting Officer)
/s/ PAUL M. MEISTER Director March 30, 2000
---------------------------------
Paul M. Meister
/s/ PHILIP E. BEEKMAN Director March 30, 2000
---------------------------------
Philip E. Beekman
/s/ GERALD J. LEWIS Director March 30, 2000
---------------------------------
Gerald J. Lewis
/s/ JOSEPH VOLPE Director March 30, 2000
---------------------------------
Joseph Volpe
</TABLE>
41
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule II -- Valuation and Qualifying Accounts ........................ 43
Schedules required by Article 12 of Regulation S-X, other than those
listed above, are omitted because of the absence of the conditions under which
they are required or because the required information is included in the
consolidated financial statements or notes thereto.
42
<PAGE>
SCHEDULE II
THE GENERAL CHEMICAL GROUP INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Translation
Balance at Additions Deductions Adjustment Balance at
Beginning Charged to from During End of
of Period Income Reserves Period Period
---------- ---------- ---------- ------------ ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997
Allowance for doubtful accounts........... $ 1,948 $ 768 $ (5) $ (22) $ 2,689
Year ended December 31, 1998
Allowance for doubtful accounts........... $ 2,689 $ 5 $ (5) $ (31) $ 2,658
Year ended December 31, 1999
Allowance for doubtful accounts........... $ 2,658 $ -- $ -- $ 21 $ 2,679
</TABLE>
43
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Page
------- ----------- ----
<S> <C> <C>
**3.1 --Amended and Restated Certificate of Incorporation of the Company............................
**3.2 --Amended and Restated By-Laws of the Company.................................................
**4.1 --Specimen Certificate for shares of Common Stock, $.01 par value, of the Company.............
**10.1 --Agreement dated as of March 15, 1996 between Paul M. Montrone and the Company...............
'D'10.4 --Restated Environmental Matters Agreement among Allied-Signal, Henley, The Wheelabrator
Group Inc., New Hampshire Oak, Inc., and Fisher Scientific Group Inc., dated as of February
26, 1986, as amended and restated as of July 28, 1989.......................................
'D'10.5 --Second Amended and Restated Partnership Agreement of GCSAP dated June 30, 1992, among
General Chemical, The Andover Group, Inc., and TOSOH Wyoming, Inc...........................
'D'10.6 --Amended and Restated Parent Guaranty and Transfer Agreement dated June 30, 1992, among New
Hampshire Oak, Inc., ACI International Limited and TOSOH America, Inc.......................
**10.7 --The General Chemical Group Inc. Deferred Compensation Plan for Non-Employee Directors.......
**10.8 --The General Chemical Group Inc. Retirement Plan for Non-Employee Directors..................
**10.9 --The General Chemical Group Inc. Restricted Unit Plan for Non-Employee Directors.............
**10.10 --The General Chemical Group Inc. 1996 Stock Option and Incentive Plan........................
**10.11 --The General Chemical Group Inc. Performance Plan............................................
**10.12 --The General Chemical Group Inc. Restricted Unit Plan........................................
'D''D'10.13 --First Amendment to General Chemical Corporation Equity Program, effective as of October 1,
1993.
**10.14 --General Chemical Group Dividend Award Program, as amended December 15, 1995, effective as
of October 1, 1993..........................................................................
**10.15 --General Chemical Corporation Supplemental Savings and Retirement Plan.......................
***10.16 --Employee Benefits Agreement among The General Chemical Group Inc., and GenTek Inc...........
***10.17 --Intellectual Property Agreement among General Chemical Industrial Products Inc., General
Chemical Corporation, GenTek, Inc. and The General Chemical Group Inc.......................
***10.18 --Credit Agreement, dated as of April 30, 1999, among General Chemical Industrial Products
Inc., and General Chemical Canada Ltd. as Borrowers, the several Lenders from time to time
parties thereto, The Chase Manhattan Bank, as Administrative Agent, The Chase Manhattan Bank
of Canada, as Canadian Administrative Agent, The Bank of Nova Scotia, as Syndication Agent,
and The First National Bank of Chicago as Documentation Agent................................
***10.19 --Guarantee and Collateral Agreement, dated as of April 30, 1999, made by General Chemical
Industrial Products Inc., and certain of its subsidiaries in favor of the Chase Manhattan
Bank, as Collateral Agent. Incorporated by reference to the relevant exhibit to the GCG First
Quarter 1999 10-Q. ..........................................................................
***10.20 --Amended and Restated Management Agreement between Latona Associates Inc. and The General
Chemical Group Inc. Incorporated by reference to the relevant exhibit to The General Chemical
Group Inc.'s 10-Q for the three months ended June 30, 1999 with the Securities and Exchange
Commission on August 16, 1999 (the "GCG Second Quarter 10-Q")................................
***10.21 --Tax Sharing Agreement between The General Chemical Group Inc. and GenTek Inc. ...............
***10.22 --Sublease Agreement between General Chemical Industrial Products Inc and General Chemical
Corporation. ................................................................................
***10.23 --Transition Support Agreement between GenTek Inc. and General Chemical
[Corporation]................................................................................
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description Page
------- ----------- ----
<S> <C> <C>
11 -- Statement regarding computation of per share earnings...................................... 46
***22 -- Subsidiaries of the Company................................................................
27 -- Financial Data Schedule.................................................................... 47
<FN>
- -------------------------
** Incorporated by reference to the relevant exhibit to the Company's
Registration Statement filed with the Securities and Exchange Commission
(the "SEC") on May 3, 1996, File No. 33-83766.
*** Incorporated by reference to the relevant exhibit to the Registration
Statement on Form S-4 of General Chemical Industrial Products Inc. filed
with the SEC on September 30, 1999, File No. 333-81469.
'D' Incorporated by reference to the relevant exhibit to General Chemical
Corporation's Registration Statement filed with the SEC on August 11,
1993, File No. 33-64824.
'D''D' Incorporated by reference to the relevant exhibit to General Chemical
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 filed with the Securities and Exchange Commission.
</FN>
</TABLE>
45
THE GENERAL CHEMICAL GROUP INC.
COMPUTATION OF PER SHARE EARNINGS
(In Thousands, except Share Data)
(unaudited)
Earnings per share were calculated as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Basic
Total income used for basic
earnings per share.................................... $ 22,264 $ 9,424 $ 4,985
========== ========== ===========
Weighted average common shares
outstanding........................................... 21,424 21,048 20,935
Basic earnings per common share ....................... $ 1.04 $ .45 $ .24
========== ========== ===========
Diluted
Total income used for diluted
earnings per share.................................... $ 22,264 $ 9,424 $ 4,985
========== ========== ===========
Weighted average common shares
outstanding........................................... 21,424 21,048 20,935
Weighted average common
equivalent shares..................................... 1,079 808 528
---------- ---------- -----------
Weighted average common and
common equivalent shares.............................. 22,503 21,856 21,463
========== ========== ===========
Diluted earnings per common share
and common equivalent share........................... $ .99 $ .43 $ .23
========== ========= ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from Form 10-K for the period ended December
31, 1999 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000929697
<NAME> THE GENERAL CHEMICAL GROUP INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 26,630
<SECURITIES> 0
<RECEIVABLES> 60,649
<ALLOWANCES> 2,679
<INVENTORY> 25,291
<CURRENT-ASSETS> 119,336
<PP&E> 320,777
<DEPRECIATION> (170,739)
<TOTAL-ASSETS> 291,748
<CURRENT-LIABILITIES> 57,943
<BONDS> 150,919
0
0
<COMMON> 225
<OTHER-SE> (47,118)
<TOTAL-LIABILITY-AND-EQUITY> 291,748
<SALES> 256,793
<TOTAL-REVENUES> 256,793
<CGS> 207,139
<TOTAL-COSTS> 207,139
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,741
<INCOME-PRETAX> 5,418
<INCOME-TAX> 433
<INCOME-CONTINUING> 4,985
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,985
<EPS-BASIC> .24
<EPS-DILUTED> .23
</TABLE>
