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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 March 31, 2003
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 001-14789
GENTEK INC.
(Exact name of Registrant as specified in its charter)
Delaware 02-0505547
(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) 929-2264
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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The number of outstanding shares of the Registrant's Common Stock and Class B
Common Stock as of April 30, 2003 was 21,439,310 and 3,896,860, respectively.
================================================================================
GENTEK INC.
FORM 10-Q
QUARTERLY PERIOD ENDED MARCH 31, 2003
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Statements of Operations - Three Months
Ended March 31, 2003 and 2002............................. 1
Consolidated Balance Sheets - March 31, 2003 and
December 31, 2002......................................... 2
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 2003 and 2002............................. 3
Notes to the Consolidated Financial Statements............... 4-20
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 21-27
Item 3. Quantitative and Qualitative Disclosures about Market Risk... 27
Item 4. Controls and Procedures...................................... 28
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings............................................ 28
Item 2. Changes in Securities and Use of Proceeds.................... 28
Item 3. Defaults upon Senior Securities.............................. 29
Item 4. Submission of Matters to a Vote of Security Holders.......... 29
Item 5. Other Information............................................ 29
Item 6. Exhibits and Reports on Form 8-K............................. 29
SIGNATURES................................................................ 30
CERTIFICATIONS............................................................ 31-32
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
GENTEK INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
--------------------
2003 2002
-------- ---------
Net revenues...................................................... $264,636 $ 276,937
Cost of sales..................................................... 217,841 221,629
Selling, general and administrative expense....................... 40,147 42,450
Impairment charges................................................ 24,661 --
-------- ---------
Operating profit (loss)........................................ (18,013) 12,858
Interest expense (contractual interest for 2003 was $17,279)...... 371 17,716
Interest income................................................... 253 429
Reorganization items.............................................. 8,958 --
Other (income) expense, net....................................... (211) 68
-------- ---------
Loss before income taxes and cumulative effect of
change in accounting principle.............................. (26,878) (4,497)
Income tax provision (benefit).................................... 2,031 (1,349)
-------- ---------
Loss before cumulative effect of change in accounting
principle................................................... (28,909) (3,148)
-------- ---------
Cumulative effect of change in accounting principle (net of tax
benefit of $39,760)............................................ -- (161,125)
-------- ---------
Net loss....................................................... $(28,909) $(164,273)
======== =========
Loss per common share - basic:
Loss before cumulative effect of change in accounting principle... $ (1.13) $ (.12)
Cumulative effect of change in accounting principle............... -- (6.33)
-------- ---------
Net loss....................................................... $ (1.13) $ (6.45)
======== =========
Loss per common share - assuming dilution:
Loss before cumulative effect of change in accounting principle... $ (1.13) $ (.12)
Cumulative effect of change in accounting principle............... -- (6.33)
-------- ---------
Net loss....................................................... $ (1.13) $ (6.45)
======== =========
See the accompanying notes to the consolidated financial statements.
1
GENTEK INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except per share data))
March 31, December 31,
2003 2002
----------- ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents ......................................... $ 117,923 $ 133,030
Receivables, net .................................................. 191,051 185,825
Inventories ....................................................... 105,256 104,718
Deferred income taxes ............................................. 3,397 3,328
Other current assets .............................................. 21,518 24,027
---------- ----------
Total current assets ........................................... 439,145 450,928
Property, plant and equipment, net ................................... 283,309 308,825
Goodwill ............................................................. 127,803 127,724
Deferred income taxes ................................................ 45,356 42,789
Other assets ......................................................... 27,304 26,719
---------- ----------
Total assets ................................................... $ 922,917 $ 956,985
========== ==========
LIABILITIES AND DEFICIT
Current liabilities:
Accounts payable .................................................. $ 47,185 $ 50,852
Accrued liabilities ............................................... 133,493 128,714
Current portion of long-term debt ................................. 15,295 15,091
---------- ----------
Total current liabilities ...................................... 195,973 194,657
Long-term debt ....................................................... 2,397 2,452
Liabilities subject to compromise .................................... 1,131,225 1,143,765
Other liabilities .................................................... 129,511 126,432
---------- ----------
Total liabilities .............................................. 1,459,106 1,467,306
---------- ----------
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: 21,589,623 shares at March 31, 2003
and December 31, 2002 .......................................... 216 216
Class B Common Stock, $.01 par value; authorized 40,000,000
shares; issued and outstanding: 3,896,860 shares at March 31,
2003 and December 31, 2002 ..................................... 39 39
Paid in capital ................................................... 3,308 3,305
Accumulated other comprehensive loss .............................. (28,073) (31,111)
Accumulated deficit ............................................... (510,434) (481,525)
Treasury stock, at cost: 150,313 shares at March 31, 2003 and
December 31, 2002 .............................................. (1,245) (1,245)
---------- ----------
Total deficit .................................................. (536,189) (510,321)
---------- ----------
Total liabilities and deficit .................................. $ 922,917 $ 956,985
========== ==========
See the accompanying notes to the consolidated financial statements.
2
GENTEK INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Three Months Ended
March 31,
--------------------
2003 2002
-------- ---------
Cash flows from operating activities:
Net loss ..................................................... $(28,909) $(164,273)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Cumulative effect of change in accounting principle ....... -- 161,125
Depreciation and amortization ............................. 11,847 12,011
Asset impairment charges .................................. 24,661 --
Reorganization items ...................................... 8,958 --
Net loss on disposition of long-term assets ............... 40 252
Long-term incentive plan costs, net ....................... 3 16
(Increase) decrease in receivables ........................ (2,542) 4,233
Decrease in inventories ................................... 564 5,139
(Increase) decrease in deferred tax assets ................ (851) 408
Increase (decrease) in accounts payable ................... (4,055) 29
Decrease in accrued liabilities ........................... (2,348) (13,330)
Increase (decrease) in other liabilities and assets, net .. 1,629 (3,931)
-------- ---------
Net cash provided by operations ........................ 8,997 1,679
-------- ---------
Net cash used for reorganization items .......................... (3,985) --
-------- ---------
Cash flows from investing activities:
Capital expenditures ......................................... (8,533) (10,344)
Proceeds from sales or disposals of long-term assets ......... 113 1,064
Acquisition of businesses net of cash acquired* .............. -- (126)
-------- ---------
Net cash used for investing activities ................. (8,420) (9,406)
-------- ---------
Cash flows from financing activities:
Proceeds from long-term debt ................................. 927 160,366
Repayment of long-term debt .................................. (12,652) (13,196)
Debt issuance costs - reorganization ......................... (606) --
-------- ---------
Net cash provided by (used for) financing activities ... (12,331) 147,170
-------- ---------
Effect of exchange rate changes on cash ......................... 632 131
-------- ---------
Increase (decrease) in cash and cash equivalents ................ (15,107) 139,574
Cash and cash equivalents at beginning of period ................ 133,030 9,205
-------- ---------
Cash and cash equivalents at end of period ...................... $117,923 $ 148,779
======== =========
Supplemental information:
Cash paid (refunded) for income taxes ........................ $ 1,669 $ (12,010)
======== =========
Cash paid for interest ....................................... $ 339 $ 21,979
======== =========
*Acquisition of businesses net of cash acquired:
Working capital, other than cash ............................. $ -- $ 59
Property, plant and equipment ................................ -- (26)
Other assets ................................................. -- (159)
-------- ---------
Cash used to acquire businesses .............................. $ -- $ (126)
======== =========
See the accompanying notes to the consolidated financial statements.
3
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2003
(Dollars in thousands, except per share data)
(unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. 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 three months ended
March 31, 2003 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2003. These statements should be read
in conjunction with the financial statements and the notes thereto included in
the Company's Annual Report on Form 10-K\A for the year ended December 31, 2002.
On October 11, 2002, GenTek and 31 of its direct and indirect subsidiaries,
including its Noma Company subsidiary (collectively, the "Debtors"), filed
voluntary petitions for reorganization relief (the "Filing") under Chapter 11 of
the United States Bankruptcy Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). The
Debtors' cases are being jointly administered as Case No. 02-12986 (MFW). As a
result of the Filing, an automatic stay was imposed against efforts by claimants
to collect amounts due or to proceed against property of the Debtors. The
Debtors have been operating, and will continue to operate, their respective
businesses as "debtors-in-possession" under the jurisdiction of the Bankruptcy
Court and in accordance with the applicable provisions of the Bankruptcy Code
and orders of the Bankruptcy Court. As such, they are permitted to engage in
ordinary course of business transactions without prior approval of the
Bankruptcy Court. Transactions outside of the ordinary course of business,
including certain sales of assets and certain requests for additional
financings, will require approval by the Bankruptcy Court. There is no assurance
that such approvals will be granted if requested.
On December 10, 2002, Noma Company sought and obtained from the Ontario
Superior Court of Justice, Canada (the "Ontario Court"), an initial order
pursuant to section 18.6 of the Companies' Creditors Arrangement Act, R.S.C.
1985, c. C-36, as amended ("CCAA"), recognizing the Filing and granting Noma
Company, among other things, a stay against claims, proceedings and the exercise
of any contractual rights against it or its property in Canada, and recognizing
various orders granted by the Bankruptcy Court.
The Debtors filed for relief under Chapter 11 as a result of the Company's
inability to obtain an amendment to its senior credit facility. The Company
believes that the protection afforded by Chapter 11 best preserves the Debtors'
ability to continue to serve their customers and preserve the value of their
businesses, while it reorganizes, and develops and implements a new strategic
plan to deleverage the Company's balance sheet and create an improved long-term
capital structure.
Since the Filing, the Company's available cash and continued cash flow from
operations have been adequate to fund ongoing operations and meet anticipated
obligations to customers, vendors and employees in the ordinary course of
business during the Chapter 11 process, and management believes it will continue
to remain adequate. Further, in order to augment its financial flexibility
during the Chapter 11 process, the Company negotiated with certain members of
its pre-petition bank syndicate, and received approval from the Bankruptcy Court
on March 6, 2003, and approval from the Ontario Court on March
4
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months ended March 31, 2003
(Dollars in thousands, except per share data)
(unaudited)
13, 2003, to enter into a debtor-in-possession credit facility. The new facility
will enable the Company to issue up to $50,000 of letters of credit, including
approximately $30,000 of letters of credit issued under the pre-petition credit
facility, to support the Company and its subsidiaries' undertakings (other than
ordinary trade credit) and will provide the Company's Noma Company subsidiary
with a $10,000 revolving credit facility for working capital and other general
corporate purposes of Noma Company. The facility matures on September 30, 2003,
but may be extended to December 31, 2003 by the holders of a majority of the
commitments. To support the payment obligations under the new facility, the
Bankruptcy Court awarded super-priority administrative expense status to such
obligations and granted the lenders senior priming liens (with certain
exceptions) on the Debtors' assets.
At hearings held on October 17, 2002 and November 7, 2002, the Bankruptcy
Court granted the Debtors' "first day" motions for various relief designed to
stabilize their operations and business relationships with their customers,
vendors, employees and other entities, and entered orders granting authority to
the Debtors to, among other things: (1) pay certain pre-petition and
post-petition employee wages, benefits and other employee obligations; (2) honor
customer programs; (3) pay certain pre-petition taxes and fees; (4) pay certain
pre-petition obligations to foreign vendors; (5) pay certain pre-petition
shipping charges; and (6) pay certain pre-petition claims of critical vendors.
The Bankruptcy Court also entered orders authorizing the Debtors to use cash
collateral of their senior lenders, and Noma Company to use GenTek's cash
collateral, on terms specified in such orders. All such orders were also
recognized by the Ontario Court.
As a result of the Filing, pending pre-petition litigation and claims
against the Debtors have been stayed automatically in accordance with Section
362 of the Bankruptcy Code and no party may take any action to seek payment on
its pre-petition claims or to proceed against property of the Debtors' estates
except pursuant to further order of the Bankruptcy Court. The Filing resulted in
an immediate acceleration of the Company's senior credit facility and 11% Senior
Subordinated Notes, subject to the automatic stay.
As a general rule, all of the Debtors' contracts and leases continue in
effect in accordance with their terms notwithstanding the Filing, unless
otherwise ordered by the Bankruptcy Court. The Bankruptcy Court provides the
Debtors with the opportunity to reject any contracts or leases that are
burdensome or assume any contracts or leases that are favorable or otherwise
necessary to their business operations. In the event of a rejection of a
contract or lease by the Debtors, the affected parties may file rejection damage
claims, which are considered to be pre-petition claims. As a condition to
assumption of a contract or lease, the Debtors are required to cure breaches
under such agreements, including, without limitation, payment of any amounts due
and owing.
GenTek and the other Debtors have incurred, and will continue to incur,
significant administrative and reorganization expenses resulting from the Filing
and the continuing Chapter 11 proceedings. The amount of these expenses, which
are being expensed as incurred and reported as reorganization items, are
expected to have a material effect on the Company's results of operations.
The potential adverse publicity associated with the Filing and the
continuing Chapter 11 proceedings, and the resulting uncertainty regarding the
Company's future prospects may hinder the Company's ongoing business activities
and its ability to operate, fund and execute its business plan by:
5
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months ended March 31, 2003
(Dollars in thousands, except per share data)
(unaudited)
impairing relations with existing and potential customers; limiting the
Company's ability to obtain trade credit; impairing present and future
relationships with vendors; and negatively impacting the ability of the Company
to attract, retain and compensate key employees and to retain employees
generally.
The Company anticipates that most liabilities of the Debtors as of the date
of the Filing will be treated in accordance with one or more Chapter 11 plans of
reorganization which will be proposed to be voted on by interested parties and
approved by the Bankruptcy Court in accordance with the provisions of the
Bankruptcy Code. Although the Debtors expect to file a plan that may provide for
its emergence from Chapter 11 during 2003, there can be no assurance that a plan
will be proposed by the Debtors or confirmed by the Bankruptcy Court, or that
any such plan will be consummated. At this time, it is not possible for the
Company to predict the effect of the Chapter 11 reorganization process on the
Company's businesses, various creditors and security holders, or when it may be
possible for the Debtors to emerge from Chapter 11.
The ultimate treatment of and recovery, if any, by creditors and security
holders will not be determined until confirmation of a plan or plans of
reorganization. GenTek and the other Debtors are unable to predict at this time
what the treatment of creditors and equity holders of the respective Debtors
will ultimately be under any plan or plans of reorganization finally confirmed.
Although until a plan is approved there is substantial uncertainty as to the
treatment of creditors and equity holders, based upon information available to
it, the Company currently believes that its proposed reorganization plan will
provide for the cancellation of existing equity interests and for limited
recoveries by holders of debt securities. Accordingly, the Company urges that
appropriate caution be exercised with respect to existing and future investments
in any of these securities.
The consolidated financial statements have been prepared in accordance with
Statement of Position 90-7 ("SOP 90-7"), "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code," and on a going concern basis, which
contemplates continuity of operations, realization of assets and liquidation of
liabilities in the ordinary course of business. However, as a result of the
Filing, such realization of assets and liquidation of liabilities are subject to
uncertainty. While operating as debtors-in-possession under the protection of
Chapter 11 of the Bankruptcy Code and subject to Bankruptcy Court approval or
otherwise as permitted in the normal course of business, the Debtors may sell or
otherwise dispose of assets and liquidate or settle liabilities for amounts
other than those reflected in the consolidated financial statements. Further, a
plan of reorganization could materially change the amounts and classifications
reported in the consolidated financial statements, which do not give effect to
any adjustments to the carrying value of assets or amount of liabilities that
might be necessary as a consequence of a plan of reorganization. Liabilities and
obligations whose treatment and satisfaction is dependent on the outcome of the
Chapter 11 cases have been segregated and classified as liabilities subject to
compromise in the consolidated balance sheets.
Pursuant to the Bankruptcy Code, schedules have been filed by the Debtors
with the Bankruptcy Court setting forth the assets and liabilities of the
Debtors as of the date of Filing. A bar date of April 14, 2003 was set for the
filing of proofs of claim against the Debtors. Differences between amounts
recorded by the Debtors and claims filed by creditors will be investigated and
resolved as part of the proceedings in the Chapter 11 cases. Accordingly, the
ultimate number and allowed amount of such claims are not
6
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months ended March 31, 2003
(Dollars in thousands, except per share data)
(unaudited)
presently known and, because the settlement terms of each such allowed claim is
subject to a confirmed plan of reorganization, the ultimate distribution with
respect to allowed claims is not presently ascertainable.
Note 2 - Summary of Significant Accounting Policies
Compensation cost for stock-based employee compensation plans is recognized
using the intrinsic value method. The following table illustrates the effect on
net loss and loss per share if the Company had applied the fair value based
method to recognize stock-based employee compensation.
Three Months Ended
March 31
--------------------
2003 2002
-------- ---------
Net loss as reported ........................................ $(28,909) $(164,273)
Deduct: Total stock-based employee compensation income
(expense) determined under fair value based method for all
awards, net of related tax effects ....................... 222 (350)
-------- ---------
Pro forma net loss .......................................... $(28,687) $(164,623)
======== =========
Loss per share:
Basic - as reported ...................................... $ (1.13) $ (6.45)
======== =========
Basic - pro forma ........................................ $ (1.12) $ (6.47)
======== =========
Diluted - as reported .................................... $ (1.13) $ (6.45)
======== =========
Diluted - pro forma ...................................... $ (1.12) $ (6.47)
======== =========
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. There
were no grants made in 2002 or 2003.
In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible
Assets." SFAS No. 141 requires business combinations initiated after June 30,
2001 to be accounted for using the purchase method of accounting, and broadens
the criteria for recording intangible assets separate from goodwill. SFAS No.
142 requires the use of a nonamortization approach to account for purchased
goodwill and certain intangibles. Under a nonamortization approach, goodwill and
certain intangibles will not be amortized into results of operations, but
instead would be reviewed for impairment and written down and charged to results
of operations only in the periods in which the recorded value of goodwill and
certain intangibles is more than its fair value. The provisions of each
statement which apply to goodwill and intangible assets acquired prior to June
30, 2001 were adopted by the Company on January 1, 2002, and accordingly, the
Company ceased amortizing goodwill. Upon adoption of SFAS No. 142, the Company
recorded a charge of $161,125 (net of a tax benefit of $39,760) as a cumulative
effect of a change in accounting principle.
7
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months ended March 31, 2003
(Dollars in thousands, except per share data)
(unaudited)
Carrying amount of goodwill by segment is as follows:
Performance
Products Manufacturing Consolidated
----------- ------------- ------------
Balance at December 31, 2002 ...... $21,738 $105,986 $127,724
Foreign currency translation ...... -- 79 79
------- -------- --------
Balance at March 31, 2003 ......... $21,738 $106,065 $127,803
======= ======== ========
In July 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement
Obligations," which requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred and
the associated asset retirement costs are capitalized as part of the carrying
amount of the long-lived asset. The Company adopted this standard on January 1,
2003. There was no effect upon adoption on the Company's consolidated financial
statements.
In July 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities," which requires that a liability for costs
associated with an exit or disposal activity be recognized when the liability is
incurred. This differs from prior guidance, which required the liability to be
recognized when a commitment plan was put into place. SFAS No. 146 also
establishes that fair value is the objective for initial measurement of the
liability. This statement is effective for exit or disposal activities that are
initiated after December 31, 2002. The Company adopted this standard on January
1, 2003. There was no effect upon adoption on the Company's consolidated
financial statements.
Note 3 - Debtor Financial Information
The condensed combined financial statements of the Debtors are presented
below. These statements reflect the financial position, results of operations
and cash flows of the Debtors on a combined basis, including certain amounts and
transactions between Debtors and non-debtor subsidiaries of the Company which
are eliminated in the consolidated financial statements.
8
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months ended March 31, 2003
(Dollars in thousands, except per share data)
(unaudited)
Condensed Combined Statement of Operations
Three Months
Ended
March 31, 2003
--------------
Net revenues................................................. $202,303
Cost of Sales................................................ 174,312
Selling, general and administrative expense.................. 24,041
Restructuring and impairment charges......................... 24,661
--------
Operating loss............................................ (20,711)
Interest expense (contractual interest was $16,977).......... 69
Reorganization items......................................... 8,958
Other income, net............................................ (1,833)
--------
Loss before income taxes and cumulative effect of a change
in accounting principle................................ (27,905)
Income tax provision......................................... 2,442
Equity in income from subsidiaries........................... 1,438
--------
Net loss.................................................. $(28,909)
========
9
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months ended March 31, 2003
(Dollars in thousands, except per share data)
(unaudited)
Condensed Combined Balance Sheet
March 31, December 31,
2003 2002
---------- ------------
Current assets:
Cash and cash equivalents........................ $ 78,568 $ 94,708
Receivables, net................................. 137,418 132,089
Inventories...................................... 67,102 66,395
Other current assets............................. 18,533 21,754
---------- ----------
Total current assets.......................... 301,621 314,946
Property, plant and equipment, net.................. 205,294 231,505
Goodwill............................................ 126,563 126,563
Intercompany receivable (payable)................... 14,254 12,653
Investment in subsidiaries.......................... 90,285 96,481
Other assets........................................ 21,867 21,848
---------- ----------
Total assets..................................... $ 759,884 $ 803,996
========== ==========
Current liabilities:
Accounts payable................................. $ 28,018 $ 31,978
Accrued liabilities.............................. 96,405 98,147
Current portion of long-term debt................ 101 101
---------- ----------
Total current liabilities..................... 124,524 130,226
Long-term debt...................................... 570 596
Liabilities subject to compromise................... 1,131,225 1,143,765
Other liabilities................................... 39,754 39,730
---------- ----------
Total liabilities................................ 1,296,073 1,314,317
Deficit ............................................ (536,189) (510,321)
---------- ----------
Total liabilities and deficit.................... $ 759,884 $ 803,996
========== ==========
10
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months ended March 31, 2003
(Dollars in thousands, except per share data)
(unaudited)
Condensed Combined Statement of Cash Flows
Three Months
Ended
March 31, 2003
--------------
Net cash provided by operating activities.......... $ 6,942
--------
Net cash used for reorganization items............. (3,985)
--------
Net cash used for investing activities............. (7,016)
--------
Cash flows from financing activities:
Intercompany cash transfers..................... (157)
Other........................................... (11,924)
--------
Net cash used for financing activities............. (12,081)
--------
Decrease in cash and cash equivalents.............. (16,140)
Cash and cash equivalents at beginning of period... 94,708
--------
Cash and cash equivalents at end of period......... $ 78,568
========
Liabilities subject to compromise in the Consolidated and
Debtor-in-Possession balance sheets consist of the following items:
March 31, December 31,
2003 2002
---------- ------------
Accounts payable.................................... $ 42,272 $ 44,331
Accrued interest payable............................ 17,795 17,795
Accrued liabilities................................. 12,159 12,644
Long-term debt...................................... 910,695 921,986
Long-term liabilities............................... 148,304 147,009
---------- ----------
$1,131,225 $1,143,765
========== ==========
Reorganization items in the Consolidated and Debtor-in-Possession statement
of operations consist of the following for the three months ended March 31,
2003:
Professional fees................................... $6,009
Employee costs...................................... 2,528
Interest income..................................... (294)
Settlement of pre-petition liabilities.............. (912)
Other............................................... 1,627
------
$8,958
======
Note 4 - Comprehensive Loss
Total comprehensive loss is comprised of net loss, foreign currency
translation adjustments and the change in unrealized gains and losses on
marketable securities and derivative financial instruments. Total comprehensive
loss for the three months ended March 31, 2003 and 2002 was $(25,871) and
$(2,237), respectively.
11
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months ended March 31, 2003
(Dollars in thousands, except per share data)
(unaudited)
Note 5 - Earnings Per Share
The computation of basic earnings per share is based on the weighted
average number of common 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 shares outstanding used for basic and diluted earnings per common share
are reconciled as follows:
Three Months Ended
March 31,
-----------------------
2003 2002
---------- ----------
Basic earnings per common share:
Weighted average common shares outstanding......... 25,564,082 25,457,736
========== ==========
Diluted earnings per common share:
Weighted average common shares outstanding......... 25,564,082 25,457,736
Options and restricted units....................... -- --
---------- ----------
Total.............................................. 25,564,082 25,457,736
========== ==========
For the three months ended March 31, 2003 and 2002, 2,812,250 and 3,009,000
options and restricted units, respectively, were not included in the computation
of diluted earnings per common share due to their antidilutive effect.
Note 6 - Inventories
March 31, December 31,
2003 2002
--------- ------------
Raw materials......................................... $ 39,345 $ 41,003
Work in process....................................... 17,964 16,363
Finished products..................................... 42,495 42,077
Supplies and containers............................... 5,452 5,275
-------- --------
$105,256 $104,718
======== ========
Note 7 - Long-Term Debt
March 31, December 31,
Maturities 2003 2002
---------- --------- ------------
Bank term loans - floating rates............ 2003-2007 $456,133 $463,401
Revolving credit facility - floating rate... 2005 260,694 264,718
Senior Subordinated Notes - 11%............. 2009 193,867 193,867
Other debt - floating rates................. 2003-2018 17,693 17,543
-------- --------
Total debt............................... 928,387 939,529
Less: current portion.................... 15,295 15,091
Liabilities subject to compromise........ 910,695 921,986
-------- --------
Net long-term debt....................... $ 2,397 $ 2,452
======== ========
12
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months ended March 31, 2003
(Dollars in thousands, except per share data)
(unaudited)
On October 11, 2002, the Company and 31 of its direct and indirect
subsidiaries filed voluntary petitions for relief under Chapter 11 of the
Bankruptcy Code. The filing of a bankruptcy petition resulted in an immediate
acceleration of the principal amount and accrued and unpaid interest on the
Company's senior credit facility and 11% Senior Subordinated Notes. Outstanding
balances for the senior credit facility and the 11% Senior Subordinated Notes
have been reclassified to liabilities subject to compromise. In connection with
its use of cash collateral under the credit facility, the Company is currently
making adequate protection payments to its senior creditors, based upon interest
rates ranging from 6.3 to 7 percent for its credit facility, which are being
recorded as reductions in principal for accounting purposes. See Note 1 for
further discussion of the Company's bankruptcy.
The Company entered into a debtor-in-possession credit facility with
certain members of its pre-petition bank syndicate, and received approval of
such facility from the Bankruptcy Court on March 6, 2003, and approval from the
Ontario Court on March 13, 2003. The new facility provides for up to $50,000 of
letters of credit, including approximately $30,000 of letters of credit issued
under the pre-petition credit facility, to support the Company and its
subsidiaries' undertakings (other then ordinary trade credit) and will provide
the Company's Noma Company subsidiary with a $10,000 revolving credit facility
for working capital and other general corporate purposes of Noma Company.
Borrowings under the revolving credit facility will bear interest at variable
rates based on prime plus 2.3 percent or LIBOR plus 3.5 percent. The facility
matures on September 30, 2003, but may be extended to December 31, 2003 by the
holders of a majority of the commitments. To support the payment obligations
under the new facility, the Bankruptcy Court awarded super-priority
administrative expense status to such obligations and granted the lenders senior
priming liens (with certain exceptions) on the Debtors' assets.
Note 8 - Segment Information
Industry segment information is summarized as follows:
Three Months Ended
March 31,
Net Revenues: -------------------
2003 2002
-------- --------
Performance products.................................... $ 81,878 $ 84,906
Manufacturing .......................................... 109,047 123,063
Communications ......................................... 73,711 68,968
-------- --------
Total segments....................................... $264,636 $276,937
======== ========
13
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months ended March 31, 2003
(Dollars in thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
Operating Profit (Loss): --------------------
2003 2002
-------- --------
Performance products ....................................... $(25,209) $ 6,349
Manufacturing .............................................. 8,903 11,817
Communications ............................................. (30) (3,472)
-------- --------
Total segments .......................................... (16,336) 14,694
Eliminations and other corporate expenses .................. (1,677) (1,836)
-------- --------
Consolidated ............................................... (18,013) 12,858
Interest expense ........................................... 371 17,716
Other (income) expense, net ................................ 8,494 (361)
-------- --------
Consolidated income (loss) before income taxes and
cumulative effect of a change in accounting principle ... $(26,878) $ (4,497)
======== ========
Identifiable Assets
March 31, December 31,
2003 2002
--------- ------------
Performance products ................................ $214,910 $249,326
Manufacturing (1) ................................... 366,480 369,415
Communications ...................................... 261,460 258,595
Corporate ........................................... 80,067 79,649
-------- --------
Consolidated ........................................ $922,917 $956,985
======== ========
(1) Includes equity method investments of $18,359 and $18,274, respectively.
Note 9 - Restructuring and Impairment Charges
The Company's 2002 restructuring program consisted of a workforce reduction
in its communications segment. The Company recorded charges of $13,152 related
to employee termination costs for 430 employees and $267 for lease obligations
and other closure costs at three facilities that will no longer be used.
The Company's 2001 restructuring program consisted of a workforce
reduction, several plant closings and the discontinuation of certain product
lines. During the year ended December 31, 2001, the Company recorded
restructuring charges of $37,384 consisting of: $20,160 related to employee
termination costs for approximately 2,000 employees; $11,920 associated with
the write-down of assets resulting from plant closings and product line
discontinuance; and $5,304 related primarily to lease obligations and other
closure costs at facilities that will no longer be used. The employee
terminations impacted all of the Company's business segments, with the
majority of the terminations occurring in the manufacturing and communications
segments.
14
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months ended March 31, 2003
(Dollars in thousands, except per share data)
(unaudited)
As of March 31, 2003, approximately 1,750 employees have been terminated
pursuant to the restructuring programs. The Company expects to substantially
complete implementation of its restructuring programs by the end of 2003.
Management does not expect that its restructuring programs will have a material
impact on the Company's revenues.
The following tables summarize the Company's accruals for restructuring
costs:
Employee
Termination Facility
Costs Exit Costs
----------- ----------
Balance at December 31, 2001 ........................ $11,621 $ 4,628
Provisions .......................................... 13,152 267
Reclassified to liabilities subject to compromise ... (1,338) (2,196)
Amounts paid ........................................ (9,542) (1,547)
------- -------
Balance at December 31, 2002 ........................ 13,893 1,152
Amounts paid ........................................ (3,886) (94)
------- -------
Balance at March 31, 2003 ........................... $10,007 $ 1,058
======= =======
During the first quarter, the Company announced a plan to wind down and
close operations at its facility in Claymont, Delaware which is included in the
performance products segment. Accordingly, the Company assessed the long-lived
assets at this facility for impairment. Based on the results of this assessment,
the Company recorded a non-cash impairment charge of $24,661 to reduce the
carrying value of the fixed assets at this facility to fair value, which was
determined based upon an independent appraisal.
Note 10 - Commitments and Contingencies
On February 28, 2003, the Company announced a plan to wind down and close
operations in Claymont, Delaware at the South Plant of the Delaware Valley Works
complex, an industrial facility owned and operated by the Company. The plan is
subject to approval by the Bankruptcy Court. A motion seeking such approval was
filed on March 4, 2003. If approved by the Bankruptcy Court, the South Plant is
expected to cease production on or about September 30, 2003. Failure of the
Company to achieve such approval could have a material adverse effect on the
Company's results of operations. The South Plant contains sulfuric acid
regeneration and production facilities as well as other operations. The Company
intends to comply fully with all of its environmental obligations in connection
with the decommissioning of the facility including, without limitation, those
relating to any investigation and remediation of the facility required by law.
Depending on the scope of any investigation of any remedial activity required as
a result, additional costs above those currently estimated could be incurred
over a period of the next several years. The Company is currently unable to
estimate the nature and extent of these potential additional costs. As such, it
is possible that the final outcome could have a material adverse effect on the
Company's results of operations, cash flows and financial condition. Operations
at the Delaware Valley Works' other manufacturing areas located in the North
Plant of the facility, including the production of sulfur, fluorine, potassium
and ammonia-based compounds and warehousing, distribution and transportation
operations, will continue.
15
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months ended March 31, 2003
(Dollars in thousands, except per share data)
(unaudited)
To minimize the impact of the South Plant closure on its sulfuric acid
regeneration and merchant acid customers, the Company has made arrangements to
continue offering products and services to these customers through its four
other sulfuric acid facilities, supplemented by agreements with certain
strategic partners. In particular, the Company has negotiated with Rhodia Inc.
to assume responsibility for five of its sulfuric acid regeneration contracts,
and with PVS Chemical Solutions, Inc. to assume responsibility for four other of
its sulfuric acid regeneration contracts, in each case subject to entering into
appropriate modified contracts with the customers. Orders of the Bankruptcy
Court approving the Rhodia Inc. and PVS Chemical Solutions, Inc. transactions
were entered on April 14, 2003.
Note 11 - Summarized Financial Information
The Company's 11% Senior Subordinated Notes due 2009 are fully and
unconditionally guaranteed, on a joint and several basis, by all of the
Company's wholly owned, domestic subsidiaries ("Subsidiary Guarantors"). The
non-guarantor subsidiaries are the Company's foreign subsidiaries.
The following condensed consolidating financial information illustrates the
composition of the combined Subsidiary Guarantors. The Company believes that the
separate, complete financial statements of the respective guarantors would not
provide additional material information which would be useful in assessing the
financial composition of the Subsidiary Guarantors.
Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2003
Non-
Subsidiary Guarantor
Parent Guarantors Subsidiaries Eliminations Consolidated
-------- ---------- ------------ ------------ ------------
Net revenues .................................... $ -- $166,016 $107,145 $(8,525) $264,636
Cost of sales ................................... -- 143,027 83,339 (8,525) 217,841
Selling, general and administrative expense...... 1,542 20,706 17,899 -- 40,147
Impairment charges............................... -- 24,661 -- -- 24,661
-------- -------- -------- ------- --------
Operating profit (loss)....................... (1,542) (22,378) 5,907 -- (18,013)
Interest expense................................. 26 42 542 (239) 371
Other (income) expense, net...................... (1,209) 9,443 21 239 8,494
-------- -------- -------- ------- --------
Income (loss) before income taxes............. (359) (31,863) 5,344 -- (26,878)
Income tax provision (benefit)................... 13,934 (12,418) 515 -- 2,031
Equity in income (loss) from subsidiaries........ (14,616) 4,829 -- 9,787 --
-------- -------- -------- ------- --------
Net income (loss)............................. $(28,909) $(14,616) $ 4,829 $ 9,787 $(28,909)
======== ======== ======== ======= ========
16
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months ended March 31, 2003
(Dollars in thousands, except per share data)
(unaudited)
Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2002
Non-
Subsidiary Guarantor
Parent Guarantors Subsidiaries Eliminations Consolidated
-------- ---------- ------------ ------------ ------------
Net revenues..................................... $ -- $184,118 $104,167 $(11,348) $ 276,937
Cost of sales.................................... -- 151,320 81,657 (11,348) 221,629
Selling, general and administrative
expense....................................... 633 24,453 17,364 -- 42,450
-------- -------- -------- -------- ---------
Operating profit (loss)....................... (633) 8,345 5,146 -- 12,858
Interest expense................................. 14,282 16,584 3,786 (16,936) 17,716
Other (income) expense, net...................... (12,498) (992) (3,807) 16,936 (361)
-------- -------- -------- -------- ---------
Income (loss) before income taxes
and cumulative effect of a change
in accounting principle.................... (2,417) (7,247) 5,167 -- (4,497)
Income tax provision (benefit)................... (725) (2,174) 1,550 -- (1,349)
Cumulative effect of a change in
accounting principle.......................... -- (65,359) (95,766) -- (161,125)
Equity in income (loss) from subsidiaries........ (1,456) 3,617 -- (2,161) --
-------- -------- -------- -------- ---------
Net income (loss)............................. $ (3,148) $(66,815) $(92,149) $ (2,161) $(164,273)
======== ======== ======== ======== =========
17
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months ended March 31,2003
(Dollars in thousands, except per share data)
(unaudited)
Condensed Consolidating Balance Sheet
March 31, 2003
Non-
Subsidiary Guarantor
Parent Guarantors Subsidiaries Eliminations Consolidated
--------- ---------- ------------ ------------ ------------
Current assets:
Cash and cash equivalents .......... $ 64,167 $ 6,248 $ 47,508 $ -- $ 117,923
Receivables, net ................... 8,674 100,771 81,606 -- 191,051
Inventories ........................ -- 50,803 54,453 -- 105,256
Other current assets ............... (29,039) 44,896 9,058 -- 24,915
--------- --------- -------- -------- ----------
Total current assets ............ 43,802 202,718 192,625 -- 439,145
Property, plant and equipment, net .... -- 185,636 97,673 -- 283,309
Goodwill, net ......................... -- 45,005 82,798 -- 127,803
Intercompany receivable (payable) ..... 704,887 (675,813) (29,074) -- --
Investment in subsidiaries ............ (348,144) 80,621 -- 267,523 --
Other assets .......................... (82,917) 89,164 66,413 -- 72,660
--------- --------- -------- -------- ----------
Total assets .................... $ 317,628 $ (72,669) $410,435 $267,523 $ 922,917
========= ========= ======== ======== ==========
Current liabilities:
Accounts payable ................... $ -- $ 22,887 $ 24,298 $ -- $ 47,185
Accrued liabilities ................ 38,845 46,504 48,144 -- 133,493
Current portion of long-term debt .. -- 100 15,195 -- 15,295
--------- --------- -------- -------- ----------
Total current liabilities ....... 38,845 69,491 87,637 -- 195,973
Long-term debt ........................ -- 570 1,827 -- 2,397
Liabilities subject to compromise ..... 812,908 168,950 149,367 -- 1,131,225
Other liabilities ..................... 2,064 36,464 90,983 -- 129,511
--------- --------- -------- -------- ----------
Total liabilities ............... 853,817 275,475 329,814 -- 1,459,106
Equity (deficit) ...................... (536,189) (348,144) 80,621 267,523 (536,189)
--------- --------- -------- -------- ----------
Total liabilities and equity
(deficit) .................... $ 317,628 $ (72,669) $410,435 $267,523 $ 922,917
========= ========= ======== ======== ==========
18
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months ended March 31,2003
(Dollars in thousands, except per share data)
(unaudited)
Condensed Consolidating Balance Sheet
December 31, 2002
Non-
Subsidiary Guarantor
Parent Guarantors Subsidiaries Eliminations Consolidated
--------- ---------- ------------ ------------ ------------
Current assets:
Cash and cash equivalents ............... $ 64,046 $ 22,230 $ 46,754 $ -- $ 133,030
Receivables, net ........................ 8,674 95,978 81,173 -- 185,825
Inventories ............................. -- 51,776 52,942 -- 104,718
Other current assets .................... (29,129) 46,215 10,269 -- 27,355
--------- --------- -------- -------- ----------
Total current assets .................... 43,591 216,199 191,138 -- 450,928
Property, plant and equipment, net ......... -- 211,525 97,300 -- 308,825
Goodwill ................................... -- 45,005 82,719 -- 127,724
Intercompany receivable (payable) .......... 714,357 (696,631) (17,726) -- --
Investment in subsidiaries ................. (335,365) 83,305 -- 252,060 --
Other assets ............................... (83,903) 90,104 63,307 -- 69,508
--------- --------- -------- -------- ----------
Total assets ............................ $ 338,680 $ (50,493) $416,738 $252,060 $ 956,985
========= ========= ======== ======== ==========
Current liabilities:
Accounts payable ........................ $ 6 $ 24,445 $ 26,401 $ -- $ 50,852
Accrued liabilities ..................... 25,036 53,071 50,607 -- 128,714
Current portion of long-term debt ....... -- 101 14,990 -- 15,091
--------- --------- -------- -------- ----------
Total current liabilities ............... 25,042 77,617 91,998 -- 194,657
Long-term debt ............................. -- 596 1,856 -- 2,452
Liabilities subject to compromise .......... 821,895 169,960 151,910 -- 1,143,765
Other liabilities .......................... 2,064 36,699 87,669 -- 126,432
--------- --------- -------- -------- ----------
Total liabilities ....................... 849,001 284,872 333,433 -- 1,467,306
Equity (deficit) ........................... (510,321) (335,365) 83,305 252,060 (510,321)
--------- --------- -------- -------- ----------
Total liabilities and equity (deficit) .. $ 338,680 $ (50,493) $416,738 $252,060 $ 956,985
========= ========= ======== ======== ==========
19
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
For the three months ended March 31, 2003
(Dollars in thousands, except per share data)
(unaudited)
Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2003
Non-
Subsidiary Guarantor
Parent Guarantors Subsidiaries Consolidated
------- ---------- ------------ ------------
Net cash provided by (used for) operating
activities ......................................... $(1,051) $ 1,095 $ 4,968 $ 5,012
------- -------- ------- --------
Net cash used for investing activities ................ -- (6,507) (1,913) (8,420)
------- -------- ------- --------
Cash flows from financing activities:
Intercompany cash transfers ........................ 10,674 (10,544) (130) --
Other .............................................. (9,502) (26) (2,803) (12,331)
------- -------- ------- --------
Net cash provided by (used for) financing activities .. 1,172 (10,570) (2,933) (12,331)
------- -------- ------- --------
Effect of exchange rates on cash ...................... -- -- 632 632
------- -------- ------- --------
Increase (decrease) in cash and cash equivalents ...... 121 (15,982) 754 (15,107)
Cash and cash equivalents at beginning of period ...... 64,046 22,230 46,754 133,030
------- -------- ------- --------
Cash and cash equivalents at end of period ............ $64,167 $ 6,248 $47,508 $117,923
======= ======== ======= ========
Condensed Consolidating Statement of Cash Flows
Three Months ended March 31, 2002
Non-
Subsidiary Guarantor
Parent Guarantors Subsidiaries Consolidated
--------- ---------- ------------ ------------
Net cash provided by (used for) operating
activities ......................................... $ (7,699) $(12,883) $22,261 $ 1,679
--------- -------- ------- --------
Net cash used for investing activities ................ -- (6,204) (3,202) (9,406)
--------- -------- ------- --------
Cash flows from financing activities:
Intercompany cash transfers ........................ (144,926) 153,606 (8,680) --
Other .............................................. 152,625 (4,538) (917) 147,170
--------- -------- ------- --------
Net cash provided by (used for) financing
activities ......................................... 7,699 149,068 (9,597) 147,170
--------- -------- ------- --------
Effect of exchange rates on cash ...................... -- -- 131 131
--------- -------- ------- --------
Increase in cash and cash equivalents ................. -- 129,981 9,593 139,574
Cash and cash equivalents at beginning
of period .......................................... -- 443 8,762 9,205
--------- -------- ------- --------
Cash and cash equivalents at end of period ............ $ -- $130,424 $18,355 $148,779
========= ======== ======= ========
20
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward-looking statements. Certain factors that might
cause such a difference include those discussed in the section entitled,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Forward-Looking Statements" contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 2002.
On October 11, 2002, GenTek and 31 of its direct and indirect subsidiaries,
including its Noma Company subsidiary (collectively, the "Debtors"), filed
voluntary petitions for reorganization relief (the "Filing") under Chapter 11 of
the United States Bankruptcy Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). The
Debtors' cases are being jointly administered as Case No. 02-12986 (MFW). As a
result of the Filing, an automatic stay was imposed against efforts by claimants
to collect amounts due or to proceed against property of the Debtors. The
Debtors have been operating, and will continue to operate, their respective
businesses as "debtors-in-possession" under the jurisdiction of the Bankruptcy
Court and in accordance with the applicable provisions of the Bankruptcy Code
and orders of the Bankruptcy Court. As such, they are permitted to engage in
ordinary course of business transactions without prior approval of the
Bankruptcy Court. Transactions outside of the ordinary course of business,
including certain sales of assets and certain requests for additional
financings, will require approval by the Bankruptcy Court. There is no assurance
that such approvals will be granted when requested.
On December 10, 2002, Noma Company sought and obtained from the Ontario
Superior Court of Justice, Canada (the "Ontario Court"), an initial order
pursuant to section 18.6 of the Companies' Creditors Arrangement Act, R.S.C.
1985, c. C-36, as amended ("CCAA"), recognizing the Filing and granting Noma
Company, among other things, a stay against claims, proceedings and the exercise
of any contractual rights against it or its property in Canada, and recognizing
various orders granted by the Bankruptcy Court.
The Debtors filed for relief under Chapter 11 as a result of the Company's
inability to obtain an amendment to its senior credit facility. The Company
believes that the protection afforded by Chapter 11 best preserves its ability
to continue to serve its customers and preserve the value of its businesses,
while it reorganizes, and develops and implements a new strategic plan to
deleverage the Company's balance sheet and create an improved long-term capital
structure.
Since the Filing, the Company's available cash and continued cash flow from
operations have been adequate to fund ongoing operations and meet anticipated
obligations to customers, vendors and employees in the ordinary course of
business during the Chapter 11 process, and management believes it will continue
to remain adequate. Further, in order to augment its financial flexibility
during the Chapter 11 process, the Company negotiated with certain members of
its pre-petition bank syndicate, and received approval from the Bankruptcy Court
on March 6, 2003, and approval from the Ontario Court on March 13, 2003, to
enter into a debtor-in-possession credit facility. The new facility will enable
the Company to issue up to $50 million of letters of credit, including
approximately $30 million of letters of credit issued under the pre-petition
credit facility, to support the Company and its subsidiaries' undertakings
(other than ordinary trade credit) and will provide the Company's Noma Company
subsidiary with a $10 million revolving credit facility for working capital and
other general corporate purposes of Noma Company. The facility matures on
September 30, 2003, but may be extended to December 31, 2003 by the holders of a
majority of the commitments. To support the payment obligations under the new
facility, the Bankruptcy Court awarded super-priority administrative expense
status to such obligations and granted the lenders senior priming liens (with
certain exceptions) on the Debtors' assets.
-21-
At hearings held on October 17, 2002 and November 7, 2002, the Bankruptcy
Court granted the Debtors' "first day" motions for various relief designed to
stabilize their operations and business relationships with their customers,
vendors, employees and other entities, and entered orders granting authority to
the Debtors to, among other things: (1) pay certain pre-petition and
post-petition employee wages, benefits and other employee obligations; (2) honor
customer programs; (3) pay certain pre-petition taxes and fees; (4) pay certain
pre-petition obligations to foreign vendors; (5) pay certain pre-petition
shipping charges; and (6) pay certain pre-petition claims of critical vendors.
The Bankruptcy Court also entered orders authorizing the Debtors to use cash
collateral of their senior lenders, and Noma Company to use GenTek's cash
collateral, on terms specified in such orders. All such orders were also
recognized by the Ontario Court.
As previously mentioned, as a result of the Filing, pending pre-petition
litigation and claims against the Debtors have been stayed automatically in
accordance with Section 362 of the Bankruptcy Code and no party may take any
action to seek payment on its pre-petition claims or to proceed against property
of the Debtors' estates except pursuant to further order of the Bankruptcy
Court. The Filing resulted in an immediate acceleration of the Company's senior
credit facility and 11% Senior Subordinated Notes, subject to the automatic
stay.
GenTek and the other Debtors have incurred, and will continue to incur,
significant administrative and reorganization expenses resulting from the Filing
and the continuing Chapter 11 proceedings. The amount of these expenses, which
are being expensed as incurred and reported as reorganization items, are
expected to have a material effect on the Company's results of operations.
The potential adverse publicity associated with the Filing and the
continuing Chapter 11 proceedings, and the resulting uncertainty regarding the
Company's future prospects may hinder the Company's ongoing business activities
and its ability to operate, fund and execute its business plan by: impairing
relations with existing and potential customers; limiting the Company's ability
to obtain trade credit; impairing present and future relationships with vendors;
and negatively impacting the ability of the Company to attract, retain and
compensate key employees and to retain employees generally.
The Company anticipates that most liabilities of the Debtors as of the date
of the Filing will be treated in accordance with one or more Chapter 11 plans of
reorganization which will be proposed to be voted on by interested parties and
approved by the Bankruptcy Court in accordance with the provisions of the
Bankruptcy Code. Although the Debtors expect to file a plan that may provide for
its emergence from Chapter 11 during 2003, there can be no assurance that a plan
will be proposed by the Debtors or confirmed by the Bankruptcy Court, or that
any such plan will be consummated. At this time, it is not possible for the
Company to predict the effect of the Chapter 11 reorganization process on the
Company's businesses, various creditors and security holders, or when it may be
possible for the Debtors to emerge from Chapter 11.
On February 28, 2003, the Company and Esseco S.p.A. announced plans to form
a joint venture, Esseco General Chemical LLC, to supply various sodium and
sulfur-based chemistries to the North American market. Initially, the joint
venture will focus on the supply and distribution of all grades of sodium
metabisulfite, sodium sulfite and sodium thiosulfate. It is anticipated that the
joint venture will be operational early in the second quarter of 2003. The
implementation of the joint venture was subject to certain conditions, including
approval of the Bankruptcy Court in Delaware, which was granted by order entered
on April 4, 2003.
On February 28, 2003, the Company announced a plan to wind down and close
operations in Claymont, Delaware at the South Plant of the Delaware Valley Works
complex, an industrial facility
-22-
owned and operated by the Company. The plan is subject to approval by the
Bankruptcy Court. A motion seeking such approval was filed on March 4, 2003. If
approved by the Bankruptcy Court, the South Plant is expected to cease
production on or about September 30, 2003. Failure of the Company to achieve
such approval could have a material adverse effect on the Company's results of
operations. The Company intends to comply fully with all of its environmental
obligations in connection with the decommissioning of the facility including,
without limitation, those relating to any investigation and remediation of the
facility required by law. Depending on the scope of any investigation and any
remedial activity required as a result, additional costs above those currently
estimated could be incurred over a period of the next several years. The Company
is currently unable to estimate the nature and extent of these potential
additional costs. As such, it is possible that the final outcome could have a
material adverse effect on the Company's results of operations, cash flows and
financial condition. Operations at the Delaware Valley Works' other
manufacturing areas are located in the North Plant of the facility, including
the production of sulfur, fluorine potassium and ammonia-based compounds and
warehousing, distribution and transportation operations, will continue.
To minimize the impact of the South Plant closure on its sulfuric acid
regeneration and merchant acid customers, the Company has made arrangements to
continue offering products and services to these customers through its four
other sulfuric acid facilities, supplemented by agreements with certain
strategic partners. In particular, the Company has negotiated with Rhodia Inc.
to assume responsibility for five of its sulfuric acid regeneration contracts,
and with PVS Chemical Solutions, Inc. to assume responsibility for four other of
its sulfuric acid regeneration contracts, in each case subject to entering into
appropriate modified contracts with the customers. Orders of the Bankruptcy
Court approving the Rhodia Inc. and PVS Chemical Solutions, Inc. transactions
were entered on April 14, 2003.
The ultimate treatment of and recovery, if any, by creditors and security
holders will not be determined until confirmation of a plan or plans of
reorganization. GenTek and other Debtors are unable to predict at this time what
the treatment of creditors and equity holders of the respective Debtors will
ultimately be under any plan or plans of reorganization finally confirmed.
Although until a plan is approved there is substantial uncertainty as to the
treatment of creditors and equity holders, based upon information available to
it, the Company currently believes that the Debtors' proposed reorganization
plan or plans will provide for the cancellation of existing equity interests and
for limited recoveries by holders of debt securities. Accordingly, the Company
urges that appropriate caution be exercised with respect to existing and future
investments in any of these securities.
The consolidated financial statements included elsewhere in this report
have been prepared in accordance with Statement of Position 90-7 ("SOP 90-7"),
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code,"
and on a going concern basis, which contemplates continuity of operations,
realization of assets and liquidation of liabilities in the ordinary course of
business. However, as a result of the Filing, such realization of assets and
liquidation of liabilities are subject to uncertainty. While operating as
debtors-in-possession under the protection of Chapter 11 of the Bankruptcy Code
and subject to Bankruptcy Court approval or otherwise as permitted in the normal
course of business, the Debtors may sell or otherwise dispose of assets and
liquidate or settle liabilities for amounts other than those reflected in the
consolidated financial statements. Further, a plan of reorganization could
materially change the amounts and classifications reported in the consolidated
financial statements, which do not give effect to any adjustments to the
carrying value of assets or amount of liabilities that might be necessary as a
consequence of a plan of reorganization. Liabilities and obligations whose
treatment and satisfaction is dependent on the outcome of the Chapter 11 cases
have been segregated and classified as liabilities subject to compromise in the
consolidated balance sheet.
-23-
Pursuant to the Bankruptcy Code, schedules have been filed by the Debtors
with the Bankruptcy Court setting forth the assets and liabilities of the
Debtors as of the date of Filing. A bar date of April 14, 2003 was set for the
filing of proofs of claim against the Debtors. Differences between amounts
recorded by the Debtors and claims filed by creditors will be investigated and
resolved as part of the proceedings in the Chapter 11 cases. Accordingly, the
ultimate number and allowed amount of such claims are not presently known and,
because the settlement terms of each such allowed claim is subject to a
confirmed plan of reorganization, the ultimate distribution with respect to
allowed claims is not presently ascertainable.
Results of Operations
The following table sets forth the Company's net revenues and operating
profit (loss) by segment for the three-month period ended March 31, 2003 (in
millions):
Three Months Ended
March 31,
------------------
2003 2002
------ ------
Net Revenues:
Performance products...................................... $ 81.9 $ 84.9
Manufacturing............................................. 109.0 123.0
Communications............................................ 73.7 69.0
------ ------
Total.................................................. $264.6 $276.9
====== ======
Three Months Ended
March 31,
------------------
2003 2002
------ -----
Operating Profit (Loss):
Performance products...................................... $(25.2)(1) $ 6.4
Manufacturing............................................. 8.9 11.8
Communications............................................ -- (3.5)
Eliminations/other corporate.............................. (1.7) (1.8)
------ -----
Total.................................................. $(18.0) $12.9
====== =====
(1) Includes an impairment charge of $24.7 million.
Net revenues for the three month period ended March 31, 2003 were $265
million or $12 million below the comparable prior year level. This decrease is
principally due to lower sales in the manufacturing and performance products
segments partially offset by higher sales in the communications segment. The
decrease in the manufacturing segment is due to lost volumes with certain major
customers as a result of their resourcing, utilizing their own in-house
production capabilities or outsourcing to competitors in the Far East. The
decrease in sales in the performance product segment is the result of lower
sales in the environmental services, pharmaceutical and personal care and
chemical processing markets. The increase in sales in the communications segment
is principally due to the impact of exchange rate fluctuations on the reported
results of the Company's European subsidiaries.
Gross profit for the three month period ended March 31, 2003 was $47
million as compared to $55 million for the comparable prior year period. This
decrease is principally due to the lower sales volume in the performance
products and manufacturing segments, higher spending in the performance products
segment and a $3 million charge for estimated losses to be incurred to fulfill
contractual commitments at the South Plant of the Delaware Valley Works complex
through its estimated closure
-24-
date of September 30, 2003. These decreases were partially offset by higher
gross profit in the communications segment, which was principally due to the
above-mentioned impact of exchange rate fluctuations.
Selling, general and administrative expense decreased $2 million for the
three month period ended March 31, 2003, reflecting lower spending primarily in
the communications segment partially offset by the above mentioned impact of
exchange rate fluctuations.
Operating loss for the three months ended March 31, 2003 was $18 million as
compared to operating profit of $13 million for the prior year period. This
decrease was principally due to an impairment charge of $25 million and the
above-mentioned changes in gross margin and selling, general and administrative
expense.
Interest expense for the three month period ended March 31, 2003 was $17
million lower than the prior year level. This decrease is principally due to no
interest expense being recorded on the Company's senior credit facility and 11%
Senior Subordinated Notes subsequent to the Company's Chapter 11 filing on
October 11, 2002. The Company is currently making adequate protection payments
to its senior creditors, which are being treated for accounting purposes as
reductions in principal.
Income tax expense for the three month period ended March 31, 2003 was $2
million as compared to a $1 million benefit for the prior year. During the
second quarter of 2002 the Company recorded a valuation allowance reducing the
carrying value of its domestic net deferred tax assets to zero. Accordingly,
income tax expense for the three month period ended March 31, 2003 does not
include a provision for federal income tax benefit on its domestic loss. The
Company will continue to monitor the likelihood of realizing its net deferred
tax assets and future adjustments to the deferred tax asset valuation allowances
will be recorded as necessary.
Restructuring and Impairment Charges
During the first quarter, the Company announced a plan to wind down and
close operations at its facility in Claymont, Delaware which is included in the
performance products segment. Accordingly, the Company assessed the long-lived
assets at this facility for impairment. Based on the results of this assessment,
the Company recorded a non-cash impairment charge of $25 million to reduce the
carrying value of the fixed assets at this facility to fair value, which was
determined based upon an independent appraisal.
The Company expects to substantially complete implementation of its
restructuring programs by the end of 2003. Management does not expect that the
restructuring programs will have a material impact on the Company's revenues.
Cash payments charged against the restructuring liability totaled $3.9 million
for employee termination costs and $0.1 million for facility exit costs in the
three months ended March 31, 2003. While management expects that cash outlays
related to the restructuring programs will be substantially completed by the end
of the 2003, certain facility exit costs, primarily lease obligations, have
payment terms extending beyond 2003. Management intends to fund these cash
outlays from existing cash balances and cash flow generated by operations.
Management expects that the 2001 and 2002 restructuring programs will result in
an estimated annual reduction in employee and facility related expense and cash
flows of approximately $40-$45 million. The Company began to realize these
reductions in the third quarter of fiscal 2001.
-25-
Financial Condition, Liquidity and Capital Resources
Cash and cash equivalents were $118 million at March 31, 2003 compared with
$133 million at December 31, 2002. The decrease in cash is the result of the
repayment of $13 million of long-term debt, capital expenditures of $9 million,
reorganization expenditures of $4 million, offset by cash provided by operations
of $9 million.
The Company had working capital of $243 million at March 31, 2003 as
compared with working capital of $256 million at December 31, 2002. This
decrease in working capital principally reflects lower cash and higher accounts
receivable balances.
As of March 31, 2003, the Company had approximately $118 million in cash on
hand, which management believes will provide sufficient liquidity to fund
ongoing operations and meet anticipated obligations to customers, vendors and
employees in the ordinary course of business during the Chapter 11 process. At
hearings held on October 17 and November 7, 2002, the Bankruptcy Court entered
orders authorizing the Debtors' to use cash collateral of their senior lenders,
and Noma Company to use GenTek's cash collateral, on terms specified in such
orders. In order to augment its financial flexibility during the Chapter 11
process, the Company negotiated with certain members of its pre-petition bank
syndicate, and received approval from the Bankruptcy Court on March 6, 2003, and
approval from the Ontario Court on March 13, 2003, to enter into a
debtor-in-possession credit facility. The new facility will enable the Company
to issue up to $50 million of letters of credit, including approximately $30
million of letters of credit issued under the pre-petition credit facility, to
support the Company and its subsidiaries' undertakings (other than ordinary
trade credit) and will provide the Company's Noma Company subsidiary with a $10
million revolving credit facility for working capital and other general
corporate purposes of Noma Company. The facility matures on September 30, 2003,
but may be extended to December 31, 2003 by the holders of a majority of the
commitments. To support the payment obligations under the new facility, the
Bankruptcy Court awarded super-priority administrative expense status to such
obligations and granted the lenders senior priming liens (with certain
exceptions) on the Debtors' assets.
The Filing resulted in an immediate acceleration of the principal amount
and accrued and unpaid interest on the Company's senior credit facility and 11%
Senior Subordinated Notes. Outstanding balances for the senior credit facility
and the 11% Senior Subordinated Notes have been reclassified to liabilities
subject to compromise. In connection with its use of cash collateral under the
credit facility, the Company is currently making adequate protection payments to
its senior creditors, which are being recorded as reductions in principal for
accounting purposes.
GenTek and the other Debtors have incurred, and will continue to incur,
significant administrative and reorganization expenses resulting from the Filing
and the continuing Chapter 11 proceedings. The amount of these expenses, which
are being expensed as incurred and reported as reorganization items, are
expected to have a material effect on the Company's results of operations.
The potential adverse publicity associated with the Filing and the
continuing Chapter 11 proceedings, and the resulting uncertainty regarding the
Company's future prospects may hinder the Company's ongoing business activities
and its ability to operate, fund and execute its business plan by: impairing
relations with existing and potential customers; limiting the Company's ability
to obtain trade credit; impairing present and future relationships with vendors;
and negatively impacting the ability of the Company to attract, retain and
compensate key employees and to retain employees generally.
-26-
Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible
Assets." SFAS No. 141 requires business combinations initiated after June 30,
2001 to be accounted for using the purchase method of accounting, and broadens
the criteria for recording intangible assets separate from goodwill. SFAS No.
142 requires the use of a nonamortization approach to account for purchased
goodwill and certain intangibles. Under a nonamortization approach, goodwill and
certain intangibles will not be amortized into results of operations, but
instead would be reviewed for impairment and written down and charged to results
of operations only in the periods in which the recorded value of goodwill and
certain intangibles is more than its fair value. The provisions of each
statement which apply to goodwill and intangible assets acquired prior to June
30, 2001 were adopted by the Company on January 1, 2002. Accordingly, the
Company ceased amortizing goodwill. Upon adoption of SFAS No. 142, the Company
recorded a charge of $161 million (net of a tax benefit of $40 million) as a
cumulative effect of a change in accounting principle.
In July 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement
Obligations," which requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred and
the associated asset retirement costs are capitalized as part of the carrying
amount of the long-lived asset. The Company adopted this standard on January 1,
2003. There was no effect upon adoption on the Company's consolidated financial
statements.
In July 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities," which requires that a liability for costs
associated with an exit or disposal activity be recognized when the liability is
incurred. This differs from prior guidance, which required the liability to be
recognized when a commitment plan was put into place. SFAS No. 146 also
establishes that fair value is the objective for initial measurement of the
liability. This statement is effective for exit or disposal activities that are
initiated after December 31, 2002. The Company adopted this standard on January
1, 2003. There was no effect upon adoption on the Company's consolidated
financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The Company's cash flows and earnings are subject to fluctuations resulting
from changes in interest rates and changes in foreign currency exchange rates
and the Company selectively uses financial instruments to manage these risks.
The Company's objective in managing its exposure to changes in foreign currency
exchange rates and interest rates is to reduce volatility on earnings and cash
flow associated with such changes. The Company has not entered, and does not
intend to enter, into financial instruments for speculation or trading purposes.
The Company measures the market risk related to its holding of financial
instruments based on changes in interest rates and foreign currency rates using
a sensitivity analysis. The sensitivity analysis measures the potential loss in
fair values, cash flows and earnings based on a hypothetical 10 percent change
in interest and currency exchange rates. The Company used current market rates
on its debt and derivative portfolio to perform the sensitivity analysis. Such
analysis indicates that a hypothetical 10 percent change in interest rates or
foreign currency exchange rates would not have a material impact on the fair
values, cash flows or earnings of the Company.
-27-
Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. The Company's Chief
Executive Officer and Chief Financial Officer have evaluated the effectiveness
of the Company's disclosure controls and procedures (as such term is defined in
Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as
amended) (the "Exchange Act") as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"). Based on such evaluation,
such officers have concluded that, as of the Evaluation Date, the Company's
disclosure controls and procedures are effective in alerting them on a timely
basis to material information relating to the Company required to be included in
the Company's reports filed and submitted under the Exchange Act.
(b) Changes in Internal Controls. Since the Evaluation Date, there have not
been any significant changes in the Company's internal controls or in other
factors that could significantly affect such controls.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On October 11, 2002, GenTek Inc. and 31 of its direct and indirect
subsidiaries, including Noma Company, a Canadian subsidiary, (collectively,
including the Company, the "Debtors") filed voluntary petitions for
reorganization relief (the "Filing") under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court"). The Debtors' cases (the
"Chapter 11 cases") are being jointly administered as Case No. 02-12986 (MFW).
GenTek and the other Debtors will continue to operate their respective
businesses as "debtors-in-possession" under the jurisdiction of the Bankruptcy
Court and in accordance with the applicable provisions of the Bankruptcy Code
and orders of the Bankruptcy Court.
The prosecution against the Debtors of claims and efforts to recover from
the Debtors payments related to litigation existing on October 11, 2002, the
date of filing for protection under Chapter 11 of the Bankruptcy Code, are
automatically stayed in accordance with section 362 of the Bankruptcy Code and
no party may take action to realize its pre-petition claims, except pursuant to
an order of the Bankruptcy Court.
Item 2. Changes in Securities and Use of Proceeds.
NONE
-28-
Item 3. Defaults Upon Senior Securities.
On October 11, 2002, the Company and 31 of its direct and indirect
subsidiaries filed voluntary petitions for relief under Chapter 11 of the
Bankruptcy Code. The filing of a bankruptcy petition resulted in an immediate
acceleration of the principal amount and accrued and unpaid interest on the
Company's senior credit facility and 11% Senior Subordinated Notes, which total
$961 million as of October 11, 2002. In addition, the Company received
termination payment demands from counterparties to the Company's interest rate
swap agreements totaling $13 million, which have not been paid. In connection
with its use of cash collateral under the senior credit facility, the Company is
currently making adequate protection payments to its senior creditors which are
being recorded as reductions in principle for accounting purposes. At this time,
it is not possible for the Company to predict the effect of the Chapter 11
reorganization process on the Company's business, various creditors and
security holders, or when it may be possible to emerge from Chapter 11. The
future results of the Company are dependent upon confirming and implementing,
on a timely basis, a plan of reorganization. The ultimate treatment of and
recovery, if any, by creditors, security holders and/or common shareholders
will not be determined until confirmation of a plan or plans of reorganization.
GenTek and the other Debtors are unable to predict at this time what the
treatment of creditors and equity holders of the respective Debtors will
ultimately be under any plan or plans of reorganization finally confirmed.
Although until a plan is approved there is substantial uncertainty as to the
treatment of creditors and equity holders, based upon information available to
it, the Company currently believes that the Debtor's proposed reorganization
plan or plans will provide for the cancellation of existing equity interests
and for limited recoveries by holders of debt securities.
Item 4. Submission of Matters to a Vote of Security Holders.
NONE
Item 5. Other Information.
NONE
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits;
99.1 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K;
Form 8-K filed with the Securities and Exchange Commission dated
February 28, 2003, attached two press releases issued by General
Chemical Corporation, a subsidiary of the Registrant, announcing that
General Chemical Corporation plans to decommission the sulfuric acid
production operation located at its Delaware Valley facility in
Claymont, Delaware and that General Chemical Corporation and Esseco
S.p.A. have plans to form a joint venture, Esseso General Chemical
LLC, to supply various sodium and sulfur-based chemistries to the
North American market.
-29-
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 there unto duly authorized.
GENTEK INC.
---------------------------
Registrant
Date May 15, 2003 /s/ Richard R. Russell
------------ ------------------------------------------------
Richard R. Russell
President and Chief Executive Officer
(Principal Executive Officer) and Director
Date May 15, 2003 /s/ Matthew R. Friel
------------ ------------------------------------------------
Matthew R. Friel
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
-30-
CERTIFICATIONS
I, Richard R. Russell, certify that:
1. I have reviewed this quarterly report on Form 10-Q of GenTek Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date May 15, 2003 /s/ Richard R. Russell
------------ ----------------------------------------------
Richard R. Russell
President and Chief Executive Officer
-31-
I, Matthew R. Friel, certify that:
1. I have reviewed this quarterly report on Form 10-Q of GenTek Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date May 15, 2003 /s/ Matthew R. Friel
------------ ----------------------------------------------
Matthew R. Friel
Vice President and Chief Financial Officer
-32-
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as............................... 'SS'