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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission file number 1-6450
GREAT LAKES CHEMICAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-1765035
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
ONE GREAT LAKES BOULEVARD
P. O. BOX 2200
WEST LAFAYETTE, INDIANA 47906
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 317-497-6100
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
Common stock, $1.00 par value New York Stock Exchange
Pacific Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
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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, and (2) has been subject to the filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
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As of March 4, 1996, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $4,619,556,000.
As of March 4, 1996, 64,499,617 shares of the registrant's stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1995 Annual Report to Stockholders are incorporated by
reference into Parts I, II and IV. Portions of the annual proxy statement dated
March 29, 1996 are incorporated by reference into Part III.
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PART I
Item 1. BUSINESS
GENERAL
Great Lakes Chemical Corporation is a Delaware corporation incorporated in
1933, having its principal executive offices in West Lafayette, Indiana. The
Company's operations consist of one dominant industry segment - chemicals and
allied products. Within this segment the Company is well diversified focusing
on performance chemicals, water treatment chemicals, petroleum additives and
specialized services and manufacturing. The corporate Profile on page 3 and
the Review of Operations on pages 14 through 19 of the 1995 Annual Report to
Stockholders are incorporated herein by reference.
The term "Great Lakes" as used herein means Great Lakes Chemical Corporation
and its Subsidiaries unless the context indicates otherwise.
Net sales by Business Unit are set forth in the following table (dollars in
millions):
Year ended December 31 1995 1994 1993
---- ---- ----
Flame Retardants $ 300 $ 265 $ 240
Intermediates and Fine Chemicals 302 262 240
Petroleum Additives 656 610 576
Polymer Stabilizers 224 162 81
Specialized Services and Manufacturing 460 383 294
Water Treatment 419 383 361
------- ------- -------
Total Net Sales $ 2,361 $ 2,065 $ 1,792
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PRODUCTS AND SERVICES
The following is a list of the principal products and services provided by
Great Lakes:
FLAME RETARDANTS
Plants & Major Raw
Products & Services Principal Markets Facilities Materials
- ------------------- ----------------- ---------- ---------
Brominated and Computer and ElDorado, AR Bromine
intumescent flame Business Equipment, Newport, TN Bisphenol A
retardants Consumer Electronics, Aycliffe, U.K. Diphenyl Oxide
Textiles, Urethanes and
Construction, Materials
POLYMER STABILIZERS
Antioxidants, UV Computer and Business Persan, France Alkylated
absorbers and Light Equipment, Consumer Catenoy, France Phenols,
Stabilizers Electronics, Packaging Waldkraiburg, Methyl Acrylate,
Textiles, Building and Germany Phosphorus
Construction, Transportation Pedrengo, Italy Trichloride
Ravenna, Italy
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INTERMEDIATES AND FINE CHEMICALS
Plants & Major Raw
Products & Services Principal Markets Facilities Materials
- ------------------- ------------------ ---------- ---------
Bromine, Bromine derivatives Foundry Industry, Lube Oil ElDorado, AR Bromine,
and Bromine-based specialty Refining, Pharmaceutical Marysville, AR Agricultural
chemicals, Furfural, Furfural Industry, Agrochemical Memphis, TN By-Products
derivatives and Furfural-based Industry, Electronics, Soil Omaha, NE Chlorine
specialty chemicals, including Crop and Structural Pest Belle Glade, FL
furfuryl alcohol , Control, Production of Geel, Belgium
POLYMEG(R) Polyols and Photographic Papers and Halebank, U.K.
Methyl Bromide Films and Rubber Konstanz, Germany
Compounds Newport, TN
PETROLEUM ADDITIVES
Antiknock octane boosters for Major Oil Refineries and Fuel Ellesmere Port, U.K. Ethylene,
leaded gasoline, Cetane Blenders Worldwide Paimbouef, France Lead, Salt,
number improvers, Multi- Bussi, Italy Electricity
functional gasoline and diesel Newark, DE
fuel additives, Gasoline and
diesel detergents, Petroleum
anti-oxidants, stabilizers, and
corrosion inhibitors
WATER TREATMENT CHEMICALS
RECREATIONAL
Water sanitizers - Pool and Spa Dealers and Adrian, MI BCDMH
BioGuard(R), OMNI(R), Distributors, Mass Market Conyers, GA Chlorinated
Hydrotech(R), Guardex(R), Retailers, Builders Lake Charles, LA Isocyanurates
Pool Time(R), AquaChem(R) Munich, Germany Calcium
Algicides, oxidizers, pH 39 U.S. Distribution hypochlorite
balancers, mineral balancers locations Cyanuric acid
and specialty chemicals,
pool equipment
INDUSTRIAL
BromiCide(R) and LiquiBrom(TM) Industrial Cooling Water Adrian, MI Bromine
Specialty Biocides, Treatment, Industrial and ElDorado, AR Sodium Bromide
Biocide dispensing Municipal Wastewater Treat-
equipment ment, Pulp and Paper and
Food Processing
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SPECIALIZED SERVICES AND MANUFACTURING
Plants & Major Raw
Products & Services Principal Markets Facilities Materials
- ------------------- ------------------ ---------- ---------
ENVIRO-ENERGY PERFORMANCE GROUP
Completion fluids, Sand Worldwide Oil and Gas Lafayette, LA Bromine,
control and filtration, Industry Aberdeen, U.K. Zinc, Sodium,
Reservoir analysis, Stravanger, Norway Calcium
Down-hole tools Anaco, Venezuela
Villahermosa, Mexico
Waste management, Petrochemical Companies, Greensboro, NC
Contamination assessment Waste Management Firms, Raleigh, NC
and remediation, Geotech- Oil Refineries, Forest Baton Rouge, LA
nical engineering, Resource Product Companies, Columbus, OH
recovery and material Government Agencies Houston, TX
handling
TOXICOLOGICAL SERVICES
All phases of nonclinical Pharmaceutical, Chemical, Ashland, OH
toxicological testing and Veterinary, Medical, Agri-
bioanalytical services, cultural, Food and Consumer
Design of specialized Products Industries
toxicological, metabolic and
analytical chemistry programs
ENGINEERED SURFACE TREATMENTS
Dry film lubricants, corrosion Aerospace, Automotive, North Hollywood, Molysulfide,
and abrasion-resistant, chip- Railroad, Machine Tool, CA Various solvents
and scuff-proof coatings, All Manufacturing Fort Worth, TX and resins
Electrically conductive Industries Lombard, IL
coatings Roseville, MI
INTERNATIONAL TRADING
Organic and inorganic Central and Eastern Budapest, Hungary
chemicals, Plastic resins, European Chemical
Finished agrochemicals and Industry
fertilizers
FLUORINE CHEMISTRY
Fire extinguishing agent Data Processing ElDorado, AR Fluorine
FM-200(R), Organofluorine Telecommunications
compounds, Fluorinated Military
intermediates
1995 DEVELOPMENTS
The Corporate Profile on page 3 and the Review of Operations on pages 14
through 19 of the 1995 Annual Report to Stockholders are incorporated herein by
reference.
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Raw Materials
The sources of essential raw materials for bromine are the brine from
company-owned wells in Arkansas and sea water extraction plants in Europe. The
Arkansas properties are located atop the Smackover lime deposits, which
constitute a vast underground sea of bromine-rich brine. The area between
ElDorado and Magnolia, Arkansas, (located about 35 miles west of ElDorado)
provides the best known geological location for bromine production and both
major domestic bromine manufacturers are located there. Based on projected
production rates, the Company's brine reserves are conservatively estimated to
be adequate for the foreseeable future.
Furfural is extracted from agricultural by-products and waste materials such as
corncobs, sugar cane bagasse, rice hulls and oat hulls for which there are few
alternative uses. These raw material sources for furfural production are
expected to remain abundant and relatively inexpensive. Other materials used
in the chemical processes are obtained from outside suppliers through purchase
contracts. Supplies of these materials are believed to be adequate for the
Company's future operations.
International Operations
Great Lakes has a substantial presence in foreign markets. The Company's
investment in foreign countries is principally in Western Europe and represents
$1,312 million or 53 percent of total assets.
Sales to customers in foreign countries (primarily Europe and the Far East)
amount to 64, 64 and 62 percent of total sales for the years ended December 31,
1995, 1994, and 1993, respectively. Approximately 14, 15, and 15 percent of
these foreign sales, respectively for the three years shown, are products
exported from the U.S., with the balance of the Company's international sales
primarily being products manufactured and sold by the Company's European
subsidiaries and branches. The profitability on foreign sales (including U.S.
exports and foreign manufactured products, except Octel) approximates those for
domestic operations. Because of value-added pricing, Octel's alkyl lead
products have a higher profitability than do most of the Company's other
products.
The geographic segment data contained in the note "Industry Segments and
Foreign Operations" of Notes to Consolidated Financial Statements on page 37 of
the 1995 Annual Report to Stockholders is incorporated herein by reference.
Customers and Distribution
During the last three years, no single customer accounted for more than 10
percent of Great Lakes' total consolidated sales. The Company has no material
contracts or subcontracts with government agencies. A major portion of the
Company's sales are sold to industrial or commercial users for use in the
production of other products. Some products, such as recreational water
treatment chemicals and supplies, are sold to a large number of retail pool
stores, mass merchandizers and distributors. Some export sales are marketed
through distributors and brokers.
The Company's business does not normally reflect any material backlog of orders
at year-end.
Competition
Great Lakes is in competition with businesses producing the same or similar
products as well as businesses producing products intended for similar use.
There is one other major bromine producer in the United States which competes
with the Company in varying degrees, depending on the product involved, with
respect to the sale of bromine and bromine derivatives. There is also one
major overseas manufacturer of bromine and
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brominated products. In addition, there are several small producers in
the U.S. and overseas which are competitors in several individual products.
The Company is the major U.S. producer of furfural and furfuryl alcohol, and it
enjoys a significant market position in every major geographic and product
market in which it competes. The Company is a major producer of alkyl lead.
The Company competes with several manufacturers and distributors of swimming
pool and spa chemicals and equipment. Through its Bio-Lab subsidiary, the
Company operates 39 branch distribution outlets for chemicals and pool and spa
equipment in the U.S. Products are differentiated by brand names to the retail,
wholesale and mass merchandising markets.
Principal methods of competition are price, product quality and purity,
technical services and ability to deliver promptly. The Company is able to
move quickly in providing new products to meet identified market demands, and
believes its production costs are among the lowest in the world. These
factors, combined with high technical skills, allow the Company to compete
effectively. One negative factor in its ability to compete with the major
overseas producer of bromine is the fact that this producer receives
significant subsidies from its government, and enjoys favorable duty advantages
on its exports to certain markets.
Seasonality and Working Capital
The products, which the Company sells to the agricultural and swimming pool
markets, exhibit some seasonality; however, the effect on overall Company sales
and profits is not material. Seasonality results in the need to build
inventories for rapid delivery at certain times of the year. The pool product
season is strongest during the first six months, requiring a build-up of
inventory at the beginning of the year. Except for certain arrangements with
distributors and dealers of swimming pool and spa products, customers are not
permitted to return unsold material at the end of a season. Extended credit
terms are granted only in cases where the Company chooses to do so to meet
competition.
The alkyl lead products have somewhat larger working capital requirements than
do the Company's other major products, because of extended distribution lines
and credit terms for large volume refinery customers.
The effect of the above items on working capital requirements is not material.
Research and Development and Patents
Research and development expenditures are included in the note "Research and
Development Expense" of the Notes to Consolidated Financial Statements on page
37 of the 1995 Annual Report to Stockholders and is incorporated herein by
reference. The Company holds no patents, licenses, franchises or concessions
which are essential to its operations.
Environmental and Toxic Substances Control
The Company recognizes its responsibility for the sound environmental
management of its businesses and operations. In partial fulfillment of this
responsibility, the Company's domestic chemical manufacturing operations
subscribe to the comprehensive environmental stewardship program developed by
the Chemical Manufacturers Association known as Responsible Care.
The Company is in material compliance with all environmental laws and
regulations to which it is subject.
Employees
The Company has approximately 8,000 employees.
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Item 2. PROPERTIES
Great Lakes has plants at 32 locations in 13 states and 15 plants in 9 foreign
countries. Most principal plants are owned. Listed under Item 1 above in a
table captioned Products and Services are the principal locations at which
products are manufactured, distributed or marketed.
The Company leases warehouses, distribution centers and space for offices
throughout the world. All of the Company's facilities are in good repair,
suitable for the Company's businesses, and have sufficient space to meet
present marketing demands at an efficient operating level.
Item 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings involving the Company, its
subsidiaries or any of its properties. Furthermore, no director, officer or
affiliate of the Company, or any associate of any director or officer is
involved, or has a material interest in, any proceeding which would have a
material adverse effect on the Company.
Item 103 of Regulation S-K requires disclosure of administrative or judicial
proceedings arising under any federal, state or local provisions dealing with
protection of the environment, if the monetary sanctions might exceed $100,000.
The following proceeding may result in sanctions exceeding $100,000.
On March 21, 1995 a Consent Agreement was entered whereby the Company and the
United States Environmental Protection Agency settled an action brought by the
EPA under Section 15(1)(c) of TOSCA for a payment of $125,000 and the
performance of $2,000,000 of environmentally beneficial capital projects at the
Company's ElDorado, Arkansas, site. The Consent Agreement states that the
Company does not admit the allegations made by the EPA.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the quarter ended
December 31, 1995.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As of March 4, 1996, there were approximately 4,400 registered holders of Great
Lakes Common Stock. Additional information is contained in the 1995 Annual
Report to Stockholders, under the captions "Stock Price Data" and "Cash
Dividends Paid" on page 26 all of which are incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
This information is contained in the 1995 Annual Report to Stockholders, under
the caption "Financial Review" on pages 20 and 21, and is incorporated herein
by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" on pages 22 through 26 of the 1995 Annual Report to Stockholders, is
incorporated herein by reference.
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements together with the report thereon of Ernst
& Young LLP dated January 26, 1996, appearing on pages 27 through 38 and the
"Quarterly Results of Operations" on page 39 of the 1995 Annual Report to
Stockholders, are incorporated herein by reference.
Item 9. DISAGREEMENT OF ACCOUNTING AND FINANCIAL DISCLOSURE
No change of auditors or disagreements on accounting methods have occurred
which would require disclosure hereunder.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers
Served as
Name and Age Office Officer Since
- ------------ ------ -------------
Robert B. McDonald, 59 President and Chief Executive Officer 1981
Robert T. Jeffares, 60 Executive Vice President and Chief Financial Officer 1983
David A. Hall, 51 Senior Vice President 1987
David R. Bouchard, 52 Vice President, Flame Retardants 1990
Steven D. Clark, 50 Vice President, Technology 1995
L. Donald Simpson, 60 Vice President, Intermediate and Fine Chemicals 1992
Lowell C. Horwedel, 63 Vice President 1984
Robert L. Hollier, 53 Vice President 1991
J. Larry Robertson, 47 Vice President, Environment and Engineering 1994
John B. Talpas, 52 Vice President, Manufacturing 1988
Richard R. Ferguson, 44 Vice President, Treasurer and Assistant Secretary 1991
Mary P. McClanahan, 52 Corporate Secretary 1994
David C. Sanders, 52 Associate Vice President, Research and Development 1990
Robert J. Smith, 49 Corporate Controller 1993
Stephen E. Brewer, 46 Assistant Treasurer 1994
John V. Lacci, 44 Assistant Secretary 1994
Information with respect to directors of the Company is contained under the
heading "Proposal One: Election of Directors" in the Great Lakes' Proxy
Statement relating to the 1996 Annual Meeting of Stockholders dated March 29,
1996, which is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
The information under the heading "Executive Compensation and Other
Information" in the 1996 Proxy Statement is incorporated by reference in this
report.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the heading "Security Ownership of Certain Beneficial
Owners and Management" in the 1996 Proxy Statement is incorporated by reference
in this report.
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Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the heading "Compensation Committee Interlocks and
Insider Participation" in the 1996 Proxy Statement is incorporated by reference
in this report.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following Consolidated Financial Statements of Great Lakes Chemical
Corporation and Subsidiaries and related notes thereto, together with the
report thereon of Ernst & Young LLP dated January 26, 1996, appearing on pages
27 through 38 of the 1995 Annual Report to Stockholders, are incorporated by
reference in Item 8:
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Income and Retained Earnings -
Years ended December 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows -
Years ended December 31, 1995, 1994, and 1993
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
The following additional information is filed as part of this report and should
be read in conjunction with the 1995 financial statements.
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore, have been omitted.
3. Exhibits
13. 1995 Annual Report to Stockholders
21. Subsidiaries - Incorporated herein by reference is the list
of subsidiaries appearing on page 40 of the 1995 Annual
Report to Stockholders
23. Consent of Independent Auditors
(b) Reports on Form 8-K
The Company filed a Form 8-K on December 7, 1995 in connection with certain
amendments to the By-Laws and Shareholder Rights Plan.
(c) Exhibits
The response to this section of Item 14 is submitted as a separate section of
this report.
(d) Financial Statement Schedules
The response to this section of Item 14 is submitted as a separate section of
this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GREAT LAKES CHEMICAL CORPORATION
(Registrant)
Date March 11, 1996 /s/ Robert B. McDonald
--------------- ------------------------------------------------------
Robert B. McDonald, President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Date March 11, 1996 /s/ Robert T. Jeffares
--------------- ------------------------------------------------------
Robert T. Jeffares, Executive Vice President
and Chief Financial Officer
Date March 11, 1996 /s/ Robert J. Smith
--------------- ------------------------------------------------------
Robert J. Smith, Corporate Controller
(Principal Accounting Officer)
William H. Congleton, Director
John S. Day, Director
Thomas M. Fulton, Director
Louis E. Lataif, Director
Richard H. Leet, Director
Martin M. Hale, Director
Date March 11, 1996 /s/ John V. Lacci
--------------- ------------------------------------------------------
John V. Lacci, General Counsel
as attorney in fact for the six Directors listed above
Date March 11, 1996 /s/ Robert B. McDonald
--------------- ------------------------------------------------------
Robert B. McDonald, Director
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SCHEDULE II
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1995
Additions
----------------------------------
Balance at
Beginning Charges to Costs Charged to Balance at
Description of Period and Expenses Other Accounts Deductions End of Period
- ----------- ------------ ---------------- -------------- ---------- ---------
1995:
Reserve deducted from asset:
Allowance for doubtful accounts
receivable $ 7,758,000 $ 410,000 $ -0- $ 509,000 (B) $ 7,659,000
-------------- ------------ ----------- ---------- ------------
Accumulated amortization of excess
of investment over net assets of
subsidiaries acquired $ 63,941,000 $ 22,601,000 $ (686,000) (C) $ 2,547,000 (D) $ 83,309,000
-------------- ------------ ----------- ----------- ------------
1994:
Reserve deducted from asset:
Allowance for doubtful accounts
receivable $ 7,088,000 $ 1,174,000 $ -0- $ 504,000 (B) $ 7,758,000
-------------- ------------ ----------- ----------- ------------
Accumulated amortization of excess
of investment over net assets of
subsidiaries acquired $ 43,242,000 $ 20,699,000 $ -0- $ -0- $ 63,941,000
-------------- ------------ ----------- ----------- ------------
1993:
Reserve deducted from asset:
Allowance for doubtful accounts
receivable $ 4,317,000 $ 2,833,000 $ 2,005,000 (A) $ 2,067,000 (B) $ 7,088,000
-------------- ------------ ----------- ----------- -------------
Accumulated amortization of excess
of investment over net assets of
subsidiaries acquired $ 25,272,000 $ 17,970,000 $ -0- $ -0- $ 43,242,000
-------------- ------------ ------------- ------------ -------------
(A) Reserve balance of Bayrol and Lowi at date of acquisition.
(B) Uncollectible accounts receivable written off, net of recoveries and
foreign currency translation.
(C) Reclassify OSCA and Chemol intangible amortization.
(D) Foreign currency translation.
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