10-Q 1 a29667.txt GENERAL CHEMICAL INDUSTRIAL PRODUCTS, 10-Q ================================================================================ 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, 2001 OR ----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number 1-13404 GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC. (Exact name of Registrant as specified in its charter) Delaware 22-3649282 (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) Liberty Lane Hampton, New Hampshire 03842 (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (603) 929-2606 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- ================================================================================ GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC. FORM 10-Q QUARTERLY PERIOD ENDED MARCH 31, 2001 INDEX

Part I. Financial Information Item 1. Financial Statements GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands) (unaudited)

See the accompanying notes to consolidated financial statements. -1- GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC. CONSOLIDATED BALANCE SHEETS (In thousands)

See the accompanying notes to consolidated financial statements. -2- GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited)

See the accompanying notes to consolidated financial statements. -3- GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three months ended March 31, 2001 (Dollars in thousands) (unaudited) Note 1 - Basis of Presentation General Chemical Industrial Products Inc. ("GCIP" or the "Company") is a leading North American supplier of soda ash and calcium chloride to a broad range of industrial and municipal customers. The primary end markets for soda ash include glass production, sodium-based chemicals, powdered detergents, water treatment and other industrial end uses. Calcium chloride is mainly used for dust control and roadbed stabilization during the summer and melting ice during the winter. The accompanying unaudited consolidated financial statements include the accounts of GCIP and its subsidiaries (collectively, the "Company"). These unaudited financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements do not include certain information and footnotes required by generally accepted accounting principles. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. The Company's financial statements should be read in conjunction with the financial statements and the notes thereto for the year ended December 31, 2000 included in the Form 10-K. Certain prior-period amounts have been reclassified to conform with the current-year presentation. Note 2 - Comprehensive Loss Total comprehensive loss is comprised of net loss and foreign currency translation gains and (losses). Total comprehensive loss for the three months ended March 31, 2000 and 2001 was ($1,340) and ($5,906), respectively. Note 3 - Additional Financial Information The components of inventories were as follows:

-4- GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) For the three months ended March 31, 2001 (Dollars in thousands) (unaudited) Note 4 - Restructuring In the fourth quarter of 2000, the Company recorded a pretax restructuring charge, including related asset writedowns and workforce reductions, of $59.8 million. The restructuring involves the idling of the Company's synthetic soda ash production capacity in Amherstburg, Ontario, Canada. The balance of the restructuring accrual at December 31, 2000 was $16.1 million. Spending against this accrual was $0.8 million during the three months ended March 31, 2001. Note 5 - Related Party Transactions Management Agreement The Company is party to a management agreement with Latona Associates Inc. (which is controlled by the controlling stockholder of GCG) under which the Company receives corporate supervisory and administrative services and strategic guidance for a quarterly fee. This management fee was $386 and $393 for the three months ended March 31, 2000 and 2001, respectively. Transition Support Agreement The Company and GenTek have entered into various transition agreements that provide mechanisms for an orderly transition after the Spinoff. For the three months ended March 31, 2000 and 2001, the Company paid GenTek $477 and $339 related to these transition agreements. Other Transactions The Company supplies soda ash to GenTek. For the three months ended March 31, 2000 and 2001, sales to GenTek amounted to $1,183 and $959, respectively. Note 6 - Geographic Information

-5- GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Concluded) For the three months ended March 31, 2001 (Dollars in thousands) (unaudited) Note 7 - Subsequent Event On May 14, 2001, GCG issued 13,072,608 shares of Common Stock and 3,056,425 shares of Class B Common Stock in connection with GCG's rights offering. Pursuant to the rights offering, the holders of record of GCG's Common Stock and Class B Common Stock as of April 16, 2001 received, at no cost, 0.77 rights to purchase one share of Common Stock or Class B Common Stock, as appropriate, of GCG for each share of such stock they held as of the record date. Each whole right entitled its holder to purchase one share of Common Stock or Class B Common Stock, as appropriate, for a subscription price of $0.62 per share. The proceeds to GCG from this issuance of Common Stock and Class B Common Stock were approximately $10.0 million and were contributed to GCIP in exchange for additional shares of its common stock. GCIP will use the equity contribution to pay costs related to the idling of the Company's synthetic soda ash production capacity in Amherstburg, Ontario, Canada and for general corporate purposes. -6- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Financial Condition March 31, 2001 Compared with December 31, 2000 Cash and cash equivalents were $21.7 million at March 31, 2001 compared with $18.4 million at December 31, 2000. During the first three months of 2001, the Company generated cash flow from operating activities of $4.7 million, and used cash of $1.4 million for capital expenditures. The Company had working capital of $42.0 million at March 31, 2001 as compared with $46.6 million at December 31, 2000. This decrease in working capital principally reflects lower receivables and other current assets due to the receipt of $4.3 million of income tax refunds, partially offset by higher cash balances and lower accounts payable. On May 14, 2001, GCG issued 13,072,608 shares of Common Stock and 3,056,425 shares of Class B Common Stock in connection with GCG's rights offering. Pursuant to the rights offering, the holders of record of GCG's Common Stock and Class B Common Stock as of April 16, 2001 received, at no cost, 0.7 rights to purchase one share of Common Stock or Class B Common Stock, as appropriate, of GCG for each share of such stock they held as of the record date. Each whole right entitled its holder to purchase one share of Common Stock or Class B Common Stock, as appropriate, for a subscription price of $0.62 per share. The proceeds to GCG from this issuance of Common Stock and Class B Common Stock were approximately $10.0 million and were contributed to GCIP in exchange for additional shares of its common stock. GCIP will use the equity contribution to pay costs related to the idling of the Company's synthetic soda ash production capacity in Amherstburg, Ontario, Canada and for general corporate purposes. The Company is significantly leveraged. At March 31, 2001, outstanding indebtedness consisted of $100 million of Senior Subordinated Notes and $47.0 million outstanding under the Senior Secured Credit Facility. The Company recently finalized several amendments to the financial covenants and other terms of its Senior Secured Credit Facility. These amendments provide for more flexible financial covenants for 2001 and 2002 in exchange for more restrictive covenants regarding restricted payments, investments, incurrence of indebtedness, sales of assets, payment of dividends or other distributions to shareholders and related matters during these two years. In addition, the maximum amount the Company can borrow under its Senior Secured Credit Facility during 2001 and 2002 was reduced from $85 million to $70 million. The Company's leverage and debt service requirements, among other things, (1) impose operating and financial restrictions on the Company, (2) increase its vulnerability to economic downturns, (3) potentially limit the Company's ability to respond to competitive pressures, and (4) may limit the Company's ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, strategic investments or general corporate purposes. Results of Operations March 31, 2001 Compared with March 31, 2000 Net revenues for the three month period ended March 31, 2001 decreased $0.6 million to $65.3 million from $65.9 million in the comparable prior year period. Gross profit for the three month period ended March 31, 2001 decreased $7.2 million to $0.8 million from $8.3 million in the comparable prior year period. Gross profit as a percentage of net revenues for the three month period ended March 31, 2001 decreased to 1 percent from 13 percent for the same period in 2000. These decreases were primarily due to higher energy costs as well as costs incurred to start up operations at our Manistee, Michigan calcium chloride facility. -7- Selling, general and administrative expense as a percentage of net revenues for the three month period ended March 31, 2001 was unchanged from the same period in 2000 at 6 percent. Interest expense for the three month period ended March 31, 2001 increased $0.2 million to $4.1 million, from $3.9 million in the comparable prior year period. The increase is a result of amendments to the Company's Senior Secured Credit Facility. Minority interest for the three month period ended March 31, 2001 decreased $2.2 million to $0.9 million, from $3.1 million in the comparable prior year period. The decrease reflects lower earnings at General Chemical (Soda Ash) Partners primarily due to higher energy costs. Net loss was $8.2 million for the three month period ended March 31, 2001, versus $1.3 million for the comparable period in 2000, for the foregoing reasons. Item 3. Qualitative and Quantitative Disclosures about Market Risk Market risk represents the risk of loss that may impact the consolidated financial position, results of operations or cash flows of the Company. The Company is exposed to market risk in the areas of interest rates. Interest Rates The Company's exposure to market risk for changes in interest rates relates primarily to the Company's debt obligations. The Company has no cash flow exposure due to rate changes on its $100 million in notes as of March 31, 2001 because the notes are at a fixed interest rate. However the Company does have cash flow exposure on its committed and uncommitted bank line of credit as interest is based on a floating rate. At March 31, 2001 the Company had $47.0 million in borrowings under the line of credit that had variable pricing. Accordingly, a 1 percent change in the floating rate will result in interest expense fluctuating annually by approximately $0.5 million. The Company does not expect to enter into financial instruments for trading purposes. The Company anticipates periodically entering into interest rate swap agreements to effectively convert all or a portion of its floating-rate debt to fixed-rate debt in order to reduce its exposure to movements in interest rates. Such agreements would involve the exchange of fixed and floating interest rate payments over the life of the agreement without the exchange of the underlying principal amounts. The Company also anticipates periodically entering into currency agreements to partially reduce its exposure to movements in currency exchange rates. Swap agreements will only be entered into with strong creditworthy parties. -8- Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: None (b) No reports were filed on Form 8-K. -9- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC. ----------------------------------------- Registrant Date May 15, 2001 /s/ Delyle W. Bloomquist ---------------- --------------------------- Delyle W. Bloomquist President and Chief Executive Officer (Principal Executive Officer) and Director Date May 15, 2001 /s/ David S. Graziosi ---------------- --------------------------- David S. Graziosi Vice President and Chief Financial Officer (Principal Financial and Accounting Officer and Director) -10-

GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC 10-Q