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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
----- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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)
LIBERTY LANE
HAMPTON, NEW HAMPSHIRE 03842
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (603) 929-2606
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
----- -----
The number of shares of Common Stock outstanding at August 2, 1999 was
16,860,940
The number of shares of Class B Common Stock outstanding at August 2, 1999 was
3,958,421
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THE GENERAL CHEMICAL GROUP INC.
FORM 10-Q
QUARTERLY PERIOD ENDED JUNE 30, 1999
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Statements of Operations - Three Months
And Six Months Ended June 30, 1998 and 1999..................... 1
Consolidated Balance Sheets - December 31, 1998 and
June 30, 1999................................................... 2
Consolidated Statements of Cash Flows - Six Months
Ended June 30, 1998 and 1999.................................... 3
Consolidated Statement of Changes in Equity - Six Months
Ended June 30, 1999............................................. 4
Notes to Consolidated Financial Statements....................... 5-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 9-10
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders......... 11
Item 6. Exhibits and Reports on Form 8-K............................ 11
SIGNATURES........................................................... 12
EXHIBIT INDEX........................................................ 13
EXHIBITS ........................................................... 14
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- -------------------
1998 1999 1998 1999
---- ---- ---- ----
Net revenues.............................................. $71,041 $69,165 $133,384 $130,637
Cost of sales............................................. 53,770 53,922 102,904 105,226
Selling, general and administrative expense............... 4,142 6,242 8,070 10,257
------- ------- -------- --------
Operating profit.......................................... 13,129 9,001 22,410 15,154
Interest expense.......................................... 2,953 3,433 5,869 6,102
Interest income........................................... 158 284 315 581
Foreign currency transaction (gains) losses............... 290 (36) 154 (141)
Other (income) expense, net............................... 161 2 161 (8)
------- ------- -------- --------
Income before income taxes and minority interest.......... 9,883 5,886 16,541 9,782
Minority interest......................................... 3,690 2,920 8,127 5,507
------- ------- -------- --------
Income before income taxes................................ 6,193 2,966 8,414 4,275
Income tax provision...................................... 2,152 671 2,475 1,001
------- ------- -------- --------
Net income..................................... $4,041 $2,295 $5,939 $3,274
======= ======= ======== ========
Earnings per common share:
Basic.......................................... $ .19 $ .11 $ .28 $ .16
===== ===== ===== =====
Assuming dilution.............................. $ .18 $ .11 $ .27 $ .15
===== ===== ===== =====
Dividends declared per share.............................. $ .05 $ - $ .10 $ .05
===== ====== ===== =====
See the accompanying notes to consolidated financial statements.
-1-
THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
DECEMBER 31, JUNE 30,
1998 1999
---- ----
(UNAUDITED)
Current assets:
Cash and cash equivalents.............................................. $ 1,127 $ 26,563
Receivables, net....................................................... 58,601 66,115
Inventories............................................................ 25,508 21,386
Deferred income taxes.................................................. 4,392 5,340
Other current assets................................................... 1,659 5,784
--------- ---------
Total current assets................................................ 91,287 125,188
Property, plant and equipment, net............................................ 141,808 143,945
Other assets 15,619 22,271
--------- ---------
Total assets........................................................ $ 248,714 $ 291,404
========= =========
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable........................................................ $ 24,298 $ 30,003
Accrued liabilities..................................................... 25,146 30,009
Income taxes payable.................................................... 1,988 --
--------- ---------
Total current liabilities........................................... 51,432 60,012
Long-term debt................................................................ -- 150,098
Other liabilities............................................................. 78,561 80,988
--------- ---------
Total liabilities................................................... 129,993 291,098
Minority interest............................................................. 43,429 39,993
--------- ---------
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 June 30, 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 June 30, 1999, respectively........... 97 39
Capital deficit......................................................... (51,675) (169,529)
Accumulated other comprehensive income.................................. (2,840) (2,795)
Retained earnings....................................................... 162,378 165,652
Treasury stock, at cost: 1,641,166 and 1,696,374 shares at
December 31, 1998 and June 30, 1999, respectively..................... (32,795) (33,240)
--------- ---------
Total equity (deficit).................................................. 75,292 (39,687)
--------- ---------
Total liabilities and equity (deficit).............................. $ 248,714 $ 291,404
========= =========
See the accompanying notes to consolidated financial statements.
-2-
THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-------
1998 1999
---- ----
Cash flows from operating activities:
Net income..................................................... $ 5,939 $ 3,274
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................................ 8,624 8,570
Net loss on disposition of long-term assets.................. 160 --
Decrease (increase) in receivables........................... 4,828 (7,514)
(Increase) decrease in inventories........................... (1,043) 4,122
(Decrease) increase in accounts payable..................... (2,557) 5,705
Increase in accrued liabilities.............................. 6,285 4,863
Decrease in income taxes payable............................. (1,697) (1,988)
Decrease in other liabilities and assets, net................ (369) (5,955)
Increase (decrease) in minority interest..................... 2,210 (3,436)
-------- ---------
Net cash provided by operating activities................ 22,380 7,641
-------- ---------
Cash flows from investing activities:
Capital expenditures........................................... (8,617) (9,346)
-------- ---------
Net cash used for investing activities................... (8,617) (9,346)
-------- ---------
Cash flows from financing activities:
Net transactions with GenTek................................... (13,819) (117,854)
Proceeds from long-term debt................................... -- 145,439
Other financing activities..................................... -- (444)
-------- ---------
Net cash provided by (used for) financing activities..... (13,819) 27,141
-------- ---------
(Decrease) increase in cash and cash equivalents...................... (56) 25,436
Cash and cash equivalents at beginning of period...................... 1,352 1,127
-------- ---------
Cash and cash equivalents at end of period............................ $ 1,296 $ 26,563
======== =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest..................................................... $ -- $ 310
See the accompanying notes to consolidated financial statements.
-3-
THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS)
(UNAUDITED)
ACCUMULATED
CLASS B OTHER
COMMON COMMON TREASURY CAPITAL COMPREHENSIVE RETAINED
STOCK STOCK STOCK DEFICIT INCOME (LOSS) EARNINGS TOTAL
----- ----- ----- ------- ------------ -------- -----
Balance at December 31, 1998....... $ 127 $ 97 $ (32,795) $ (182,057) $ (2,446) $ 162,378 $ (54,696)
Distribution of GenTek Inc....... -- -- -- 130,382 (394) -- 129,988
-------- -------- --------- ----------- --------- ---------- ----------
Balance at December 31, 1998
(as adjusted).................... 127 97 (32,795) (51,675) (2,840) 162,378 75,292
Net Income..................... -- -- -- -- -- 3,274 3,274
Transfers to GenTek Inc............ -- -- -- (117,854) -- -- (117,854)
Comprehensive income............... -- -- -- -- 45 -- 45
Conversion of Class B Common
Stock to Common Stock............ 58 (58) -- -- -- -- --
Restricted unit plan grants,
cancellations, tax benefits and
other............................ 1 -- -- -- -- -- 1
Purchase of Treasury Stock......... -- -- (445) -- -- -- (445)
-------- -------- --------- ----------- ----------- ---------- ----------
Balance at June 30, 1999........... $ 186 $ 39 $(33,240) $ (169,529) $ (2,795) $ 165,652 $ (39,687)
======== ======== ========= =========== =========== ========== ==========
See the accompanying notes to consolidated financial statements.
-4-
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
On April 30, 1999, The General Chemical Group Inc. ("GCG") completed the
separation of its Manufacturing and Performance Products Segments from its
Industrial Chemicals Segment through a distribution of stock of GenTek Inc. to
stockholders of GCG (the "Spinoff"). In connection with the Spinoff, GCG
transferred the Manufacturing and Performance Products Segments to a
wholly-owned subsidiary, GenTek Inc. ("GenTek"), and distributed the stock of
GenTek to shareholders of GCG. On April 30, 1999, GCG and GenTek became
separate, publicly-traded companies on the New York Stock Exchange. GCG
continues to trade using the GCG symbol. GCG owns and operates the Industrial
Chemicals Segment, and GenTek owns and operates the businesses comprising the
Manufacturing and Performance Products Segments.
On March 18, 1999, GCG filed with the Securities and Exchange Commission a
report on Form 8-K with respect to the Spinoff, and on April 15, 1999 GenTek's
Registration Statement on Form 10 regarding the registration of its common stock
under the Securities Exchange Act of 1934 was declared effective by the
Securities and Exchange Commission.
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
Industrial Chemicals Segment. Included in selling, general and administrative
expense in the accompanying consolidated statement of operations are Spinoff
related expenses of $1,900.
The accompanying unaudited consolidated financial statements include the
accounts of GCG and its subsidiaries (collectively, the "Company"). These
unaudited financial statements have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission. The financial
statements do not include certain information and footnotes required by
generally accepted accounting principles. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for the six months
ended June 30, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. The Company's financial
statements should be read in conjunction with the financial statements and the
notes thereto for the Industrial Chemicals Business for the year ended December
31, 1998 included in the Form 8-K and the Form 10.
For the purpose of governing certain ongoing relationships between the
Company and GenTek after the Spinoff and to provide mechanisms for an orderly
transition, the Company and GenTek have entered into various agreements.
Management believes that the agreements are comparable to those which would have
been reached in arm's length negotiations with unaffiliated parties.
Certain prior-period amounts have been reclassified to conform with the
current presentation.
-5-
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 2 - COMPREHENSIVE INCOME
Total comprehensive income is comprised of net income and foreign currency
translation gains and losses. Total comprehensive income for the six months
ended June 30, 1998 and 1999 was $5,300 and $3,301, respectively.
NOTE 3 - 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:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------- -------
1998 1999 1998 1999
---- ---- ---- ----
Basic earnings per common share:
Weighted average common shares
Outstanding.............................. 21,103,029 20,917,491 21,076,344 20,882,282
========== ========== ========== ==========
Diluted earnings per common share:
Weighted average common shares
Outstanding.............................. 21,103,029 20,917,491 21,076,344 20,882,282
Options and Restricted Units............. 898,170 493,656 872,333 591,519
---------- ---------- ---------- ----------
Denominator for diluted earnings per
common share............................. 22,001,199 21,411,147 21,948,677 21,473,801
========== ========== ========== ==========
At June 30, 1998 and 1999 options to purchase 60,000 shares and 1,671,700
shares of common stock, respectively, were not included in the computation of
diluted earnings per common share because the 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 June 30, 1999.
-6-
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 4 - ADDITIONAL FINANCIAL INFORMATION
The components of inventories were as follows:
DECEMBER 31, JUNE 30,
1998 1999
---- ----
(UNAUDITED)
Raw materials...................................... $ 3,480 $ 2,204
Work in process.................................... 1,839 2,698
Finished products.................................. 13,297 8,189
Supplies and containers............................ 6,892 8,295
---------- --------
$ 25,508 $ 21,386
========== ========
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31, JUNE 30,
MATURITIES 1998 1999
---------- ---- ----
(UNAUDITED)
$85 Million Revolving Credit
Facility-floating rate............ 2004 $ -- $ 50,098
Senior Subordinated
Notes - 10 5/8%................... 2009 -- 100,000
--------- --------
Total Debt............................. -- 150,098
Less: Current Portion............. -- --
--------- --------
Net Long-Term Debt..................... $ -- $150,098
========= ========
On April 30, 1999, in connection with the Spinoff, the Company's
subsidiary, General Chemical Industrial Products Inc. ("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 Senior Subordinated Notes are unsecured while the $85 million Credit
Facility is secured by 100% of the capital stock of GCIP, 100% of the owned
capital stock of, and guarantees from, the direct and indirect domestic
subsidiaries of the Company, 65% 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
-7-
THE GENERAL CHEMICAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONCLUDED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Subordinated Notes and the Credit Facility contain certain covenants with
respect to additional indebtedness, and 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.
NOTE 6 - DIVIDENDS
On March 10, 1999, GCG's Board of Directors declared a quarterly cash
dividend of $.05 per share, payable April 5, 1999, to shareholders of record on
March 24, 1999. As a consequence of the Spinoff, the Board of Directors of GCG
does not expect to pay dividends in the near future. The dividend policies of
GCG are subject to change and will be based on, among other factors, its
operating results and financial requirements and the restrictions imposed by its
financing facilities.
NOTE 7 - RELATED PARTY TRANSACTIONS
MANAGEMENT AGREEMENT
GCG is party to a management agreement with Latona Associates (which is
controlled by a stockholder of GCG) under which GCG receives corporate
supervisory and administrative services and strategic guidance for a quarterly
fee. In connection with the Spinoff, Latona agreed to provide its services
separately to GCG and GenTek. GCG's share of this management fee is $570 and
$738 for the six months ended June 30, 1998 and 1999, respectively.
TRANSITION SUPPORT AGREEMENT
GCG and GenTek have entered into various transition agreements that provide
mechanisms for an orderly transition after the Spinoff. For the period from
April 30, 1999 to June 30, 1999, GenTek charged GCG $618 related to these
transition agreements.
OTHER TRANSACTIONS
GCG supplies soda ash to General Chemical Corporation ("GCC"), a
wholly-owned subsidiary of The General Chemical Group prior to the Spinoff, and
after the Spinoff, a wholly-owned subsidairy of GenTek. For the six months ended
June 30, 1998 and 1999, sales to GCC amounted to $3,434 and $5,106,
respectively.
NOTE 8 - GEOGRAPHIC INFORMATION
TOTAL REVENUES OPERATING PROFIT
JUNE 30, JUNE 30,
-------- --------
1998 1999 1998 1999
---- ---- ---- ----
United States............................. $ 99,611 $ 93,312 $16,976 $ 9,391
Foreign ................................. 49,546 51,790 5,746 5,838
Elimination .............................. (15,773) (14,465) (312) (75)
-------- -------- ------- -------
$133,384 $130,637 $22,410 $15,154
======== ======== ======= =======
-8-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
June 30, 1999 Compared with December 31, 1998
Financial Condition
Cash and cash equivalents were $26.6 million at June 30, 1999 compared with
$1.1 million at December 31, 1998. During the first six months of 1999, the
Company generated cash flow from operating activities of $7.7 million and
received net proceeds from debt of $145.4 million, and used cash of $9.3 million
for capital expenditures and transferred $117.9 million to GenTek for repayment
of preSpinoff debt.
The Company had working capital of $65.2 million at June 30, 1999 as
compared with $39.9 million at December 31, 1998. This 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 preSpinoff debt.
Results of Operations
Net revenues for the three and six month periods ended June 30, 1999
decreased 3 percent and 2 percent to $69.2 million and $130.6 million,
respectively, from $71.0 million and $133.4 million for the comparable periods
in 1998. This decrease is due to lower soda ash prices partially offset by
higher sales of calcium chloride.
Gross profit for the three month period ended June 30, 1999 decreased $2.0
million to $15.3 million from $17.3 million for the comparable prior year
period. Gross profit as a percentage of net revenues for the three month period
ended June 30, 1999 decreased to 22 percent from 24 percent for the same period
in 1998. Gross profit for the six month period ended June 30, 1999 decreased
$5.1 million to $25.4 million from $30.5 million for the comparable prior year
period. Gross profit as a percentage of net revenues for the six month period
ended June 30, 1999 decreased to 19 percent from 23 percent for the same period
in 1998. These decreases were primarily due to the above-mentioned lower soda
ash prices.
Selling, general and administrative expense increased $2.1 million and $2.2
million for the three and six month periods ended June 30, 1999 as compared to
the prior period principally due to the $1.9 million one-time charge related to
the Spinoff in the second quarter. Selling, general and administrative as a
percentage of net revenues for the three and six month period ended June 30,
1999 and 1998 increased to 9 percent from 6 percent and to 8 percent from 6
percent for the same periods in 1998 primarily due to the above-mentioned
one-time charge.
Interest expense for the three and six month periods ended June 30, 1999
was $3.4 million and $6.1 million, which was $.4 million and $.2 million higher,
respectively, than the comparable prior period level as a result of the issuance
of the Senior Subordinated Notes and borrowings under the Credit Facility.
Interest income for the three and six month periods ended June 30, 1999 was
$.3 million and $.6 million, respectively, versus $.2 million and $.3 million
for the same periods in 1998 as a result of the net proceeds from the issuance
of the Senior Subordinated Notes.
Minority interest for the three and six month periods ended June 30, 1999
was $2.9 million and $5.5 million, respectively, versus $3.7 million and $8.1
million for the same periods in 1998. The decreases in both periods reflect
lower earnings due to weaker soda ash pricing of General Chemical (Soda Ash)
Partners.
Net income was $2.3 million and $3.3 million for the three and six month
periods ended June 30, 1999, respectively, versus $4.0 million and $5.9 million
for the comparable periods in 1998, for the foregoing reasons.
-9-
YEAR 2000 ISSUE
Following the Spinoff, GenTek provides the Company with MIS and
MIS-supported functions, including MIS personnel, hardware and software on a
service contract basis through approximately December 31, 2001. During this
period, GenTek provides to the Company the services related to the remediation
of the Year 2000 problem. A Year 2000 problem will occur where date-sensitive
software uses two digit year date fields, sorting the Year 2000 ("00") before
Year 1999 ("99"). The Year 2000 problem can arise in hardware, software or any
other equipment or process that uses embedded software or other technology. The
failure of such systems to properly recognize dates after December 31, 1999
could result in data corruption and processing errors.
The Company completed an assessment of its Year 2000 compliance status in
early 1997 and began work on its remediation program immediately thereafter.
GenTek, which is principally responsible for overseeing the MIS functions
through 2001, intends to continue the Year 2000 remediation program for both
GenTek and the Company and is expected to effect all conversion efforts needed
to prevent the potential impact of Year 2000 problems. The Company intends to
work on the separation of MIS functions after resolution of Year 2000 problems.
The Company anticipates that it will recruit its own MIS staff during 2001 and
that by approximately December, 2001 a separation of its MIS functions will be
completed.
The remediation program has been structured to address its Systems. GenTek
has spent approximately $1.0 million to replace or reprogram existing Systems
and complete the Year 2000 compliance program for the MIS functions serving both
GenTek and the Company. All material Systems were Year 2000 compliant as of
March 31, 1999 and substantially all Systems will be Year 2000 compliant by
December 31, 1999. In the event that material Systems are not Year 2000
compliant, the Company may experience reductions or interruptions in operations
which could have a material adverse effect on the Company's results of
operations.
In addition, the Company is working with GenTek to determine the Year 2000
compliance status of its material vendors, suppliers and service providers,
including the railroad and trucking companies used to ship its products. Based
on currently available information, management does not anticipate any material
impact to the Company based on the failure of such third parties to be Year 2000
compliant. However, the process of evaluating the Year 2000 compliance status of
material third parties is continually ongoing and, therefore, no guaranty or
warranty can be made as to such third parties' future compliance status or its
potential effect on the Company. Management believes there exists a sufficient
number of suppliers of raw materials so that alternate sources will be available
if any supplier is unable to deliver raw materials due to the Year 2000 issue.
There can be no assurances, however, that such alternate sources will be able to
supply all the requirements in a timely manner or on terms comparable with those
of its current suppliers. If the railroads or trucking companies that ship the
Company's products fail to be Year 2000 compliant, the Company may not be able
to arrange alternative and timely means to ship its goods, which could lead to
interruptions or slowdowns in its business. The Company is preparing for the
possible use of alternative suppliers and means of transportation, possible
adjustment of raw material and product inventory levels and contingencies with
respect to potential energy source interruptions, all in an effort to minimize
the effects, if any, of Year 2000 related interruptions or slowdowns caused by
suppliers and transporters.
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 its floating-rate debt to
fixed-rate debt in order to reduce its 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 its exposure to movements in currency
exchange rates. Swap agreements will only be entered into with strong
creditworthy parties.
-10-
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 11, 1999, the Company held its Annual Meeting of Stockholders. At
the meeting, Paul M. Montrone, Paul M. Meister, Philip E. Beekman, John M.
Kehoe, Jr., Gerald J. Lewis and Joseph Volpe were each elected as a director of
the Company to serve a one year term which will expire at the 2000 Annual
Meeting of Stockholders and until a successor has been duly elected and
qualified. For Paul M. Montrone, 46,892,613 votes were cast in favor and 80,554
votes were withheld. For Paul M. Meister 46,892,713 votes were cast in favor
and 80,454 votes were withheld. For Philip E. Beekman, 46,916,838 votes were
cast in favor and 56,329 votes were withheld. For John M. Kehoe, Jr., 46,891,838
votes were cast in favor and 81,329 votes were withheld. For Gerald J. Lewis,
46,916,643 votes were cast in favor and 56,229 votes were withheld. For Joseph
Volpe, 46,915,643 votes were cast in favor and 57,524 votes were withheld.
The stockholders also ratified the selection of Deloitte & Touche LLP as
the Company's independent auditors. 46,961,238 votes were cast in favor of the
ratification; 9,841 were voted against; and 2,088 abstained.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.01 Financial Data Schedule
(b) No reports were filed on Form 8-K.
-11-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE GENERAL CHEMICAL GROUP INC.
-----------------------------------
Registrant
Date August 13, 1999 /s/ John M. Kehoe, Jr.
-------------------------------------------
JOHN M. KEHOE, JR.
President and Chief Executive Officer
(Principal Executive Officer) and Director
Date August 13, 1999 /s/ Stewart A. Fisher
-------------------------------------------
STEWART A. FISHER
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
-12-
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
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27 Financial Data Schedule........................................ 14
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