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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-K/A
Amendment No. 1

ý    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

OR

o    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 1-6450

GREAT LAKES CHEMICAL CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE
(State or other jurisdiction of
incorporation or organization) 95-1765035
(IRS Employer
Identification No.)

500 EAST 96TH STREET, SUITE 500
INDIANAPOLIS, INDIANA 46240
(Address of principal executive offices)    (Zip Code)

Registrant's telephone number, including area code 317-715-3000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common stock, $1.00 par value Name of each exchange on which registered
New York Stock Exchange
Pacific Stock Exchange

Securities registered pursuant to Section 12 (g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to the filing requirements for the past 90 days.    Yes    ý    No    o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes    ý    No    o

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.    o

As of June 28, 2002, the aggregate market value of the voting stock held by non-affiliates of the registrant was $1,329,445,286 based on the last reported sales price on the New York Stock Exchange.

As of March 3, 2003, 50,200,485 shares of the registrant's stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Registrant's Annual Meeting of Shareholders to be held on May 1, 2003 are incorporated by reference into Part III.

Explanatory Note

This report is an amendment to the Great Lakes Chemical Corporation Form 10-K for the year ended December 31, 2002. Item 8 is being amended to file a signed copy of the opinion of the Company's independent auditors, Ernst & Young LLP, which was inadvertently omitted, and to correct typographical errors in the opinion and in Note 18 to the Consolidated Financial Statements related to years of rent expense disclosed.

2

ITEM 8.    Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Consolidated Statements of Operations for the years ended December 31, 2002, 2001 and 2000	31
Consolidated Balance Sheets at December 31, 2002 and 2001	32
Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000	33
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2002, 2001 and 2000	34
Notes to Consolidated Financial Statements	35

30

CONSOLIDATED STATEMENTS OF OPERATIONS

(millions, except per share data) Year Ended December 31			2002			2001			2000
Net Sales			$	1,401.5		$	1,352.8		$	1,449.8
Operating Expenses
	Cost of products sold			1,070.2			1,121.1			1,033.2
	Selling, general and administrative expenses			215.0			224.5			216.1
	Special charges			5.1			148.6			54.3
				1,290.3			1,494.2			1,303.6
Operating Income (Loss)				111.2			(141.4	)		146.2
Interest Income (Expense) - net				(27.6	)		(32.8	)		(31.6	)
Other Income (Expense) - net				(14.9	)		(46.8	)		2.8
Income (Loss) from Continuing Operations before Income Taxes				68.7			(221.0	)		117.4
Income Taxes (Credit)				21.3			(39.8	)		36.6
Income (Loss) from Continuing Operations			$	47.4		$	(181.2	)	$	80.8
Discontinued Operations
Income (Loss) from Discontinued Operations Before Minority Interest and Income Taxes			$	121.6		$	(131.4	)	$	49.8
Minority Interest				5.5			(4.5	)		(2.3	)
Income Taxes (Credit)				49.5			(27.6	)		1.3
Income (Loss) from Discontinued Operations			$	77.6		$	(108.3	)	$	46.2
Net Income (Loss)			$	125.0		$	(289.5	)	$	127.0
Earnings (Loss) per Share:
	Basic and Diluted
		Continuing Operations	$	0.94		$	(3.60	)	$	1.54
		Discontinued Operations		1.54			(2.16	)		0.88
Net Income (Loss)			$	2.48		$	(5.76	)	$	2.42
Cash Dividends Declared per Share			$	0.33		$	0.32		$	0.32

See Notes to Consolidated Financial Statements.

31

CONSOLIDATED BALANCE SHEETS

(millions) December 31		2002			2001
Assets
Current Assets
	Cash and cash equivalents	$	259.1		$	55.5
	Accounts and notes receivable, less allowances of $4.7 and $5.8, respectively		262.2			253.4
	Inventories		252.2			227.5
	Prepaid expenses		33.2			20.4
	Deferred income taxes		6.4			1.3
	Current assets held for sale from discontinued operations		34.0			123.3
Total current assets			847.1			681.4
Plant and Equipment, Net			621.6			623.1
Goodwill			143.6			133.2
Intangible Assets			33.0			29.5
Investments in and Advances to Unconsolidated Affiliates			27.2			27.1
Other Assets			21.6			39.0
Deferred Income Taxes			3.5			65.3
Non-Current Assets Held for Sale from Discontinued Operations			20.1			90.4
Total Assets		$	1,717.7		$	1,689.0
Liabilities and Stockholders' Equity
Current Liabilities
	Accounts payable	$	165.9		$	151.4
	Accrued expenses		117.0			131.4
	Income taxes payable		108.3			88.7
	Dividends payable		4.5			4.0
	Notes payable and current portion of long-term debt		8.0			10.9
	Current liabilities held for sale from discontinued operations		14.5			43.7
Total current liabilities			418.2			430.1
Long-Term Debt, less Current Portion			432.6			500.8
Other Noncurrent Liabilities			103.1			67.9
Non-Current Liabilities Held for Sale from Discontinued Operations			12.1			34.6
Minority Interest
	Continuing Operations		6.0			5.3
	Discontinued Operations		—			36.8
Stockholders' Equity
	Common Stock, $1 par value, authorized 200.0 shares; issued 73.0 shares in 2002 and 2001		73.0			73.0
	Additional paid-in capital		133.7			133.3
	Retained earnings		1,682.7			1,574.2
	Treasury stock, at cost; 22.8 shares in 2002 and 2001		(1,054.5	)		(1,054.5	)
	Accumulated other comprehensive loss		(89.2	)		(112.5	)
Total stockholders' equity			745.7			613.5
Total Liabilities and Stockholders' Equity		$	1,717.7		$	1,689.0

See Notes to Consolidated Financial Statements.

32

CONSOLIDATED STATEMENTS OF CASH FLOWS

(millions) Year Ended December 31				2002			2001			2000
Operating Activities
	Income (loss) from continuing operations			$	47.4		$	(181.2	)	$	80.8
	Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities - continuing operations:
		Depreciation and depletion			76.7			70.9			71.7
		Amortization of intangible assets			3.4			9.2			8.7
		Provision for inventory write-downs			—			33.4			—
		Deferred income taxes			(2.8	)		(96.7	)		11.5
		Net (unremitted) earnings of affiliates			2.3			(0.7	)		(5.6	)
		Loss on disposition of assets			5.5			10.2			0.2
		Special charges			5.1			148.6			54.3
		Other			13.4			8.4			9.0
		Changes in operating assets and liabilities, net of effects from business combinations:
			Accounts receivable		9.4			71.3			(43.6	)
			Inventories		(10.4	)		35.8			(41.8	)
			Other current assets		(2.3	)		(3.3	)		5.6
			Accounts payable and accrued expenses		(12.0	)		(5.9	)		33.1
			Income taxes and other current liabilities		11.5			5.9			45.5
			Other noncurrent liabilities		5.1			22.7			2.0
Net Cash Provided by Operating Activities - Continuing Operations					152.3			128.6			231.4
	Income (loss) from Discontinued Operations				77.6			(108.3	)		46.2
	Net operating activities - Discontinued Operations				(85.1	)		166.8			(71.8	)
Net Cash (Used for) Provided by Operating Activities - Discontinued Operations					(7.5	)		58.5			(25.6	)
Net Cash Provided by Operating Activities					144.8			187.1			205.8
Investing Activities
	Plant and equipment additions				(64.8	)		(131.2	)		(132.9	)
	Business combinations, net of cash acquired				(11.1	)		(30.4	)		(40.7	)
	Proceeds from sale of assets				0.4			1.5			(5.3	)
	Other				(1.8	)		(1.5	)		(4.4	)
Net Cash Used for Investing Activities - Continuing Operations					(77.3	)		(161.6	)		(183.3	)
Net Cash Provided by (Used for) Investing Activities - Discontinued Operations					221.3			(12.3	)		76.1
Net Cash Provided by (Used for) Investing Activities					144.0			(173.9	)		(107.2	)
Financing Activities
	Net (repayments) borrowings under short-term credit lines				(1.1	)		5.2			3.0
	Net repayments of commercial paper and other long-term obligations				(80.5	)		(156.8	)		(228.7	)
	Proceeds from stock options exercised				—			0.2			2.6
	Cash dividends paid				(16.5	)		(15.9	)		(16.6	)
	Repurchase of common stock				—			(2.2	)		(135.1	)
	Other				(3.8	)		1.9			(0.7	)
Net Cash Used for Financing Activities - Continuing Operations					(101.9	)		(167.6	)		(375.5	)
Net Cash (Used for) Provided by Financing Activities - Discontinued Operations					(0.3	)		(4.0	)		30.7
Net Cash Used for Financing Activities					(102.2	)		(171.6	)		(344.8	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents					9.7			7.3			(9.4	)
Increase (Decrease) in Cash and Cash Equivalents					196.3			(151.1	)		(255.6	)
Change in Cash and Cash Equivalents - Discontinued Operations					7.3			(12.0	)		5.9
Cash and Cash Equivalents at Beginning of Year					55.5			218.6			468.3
Cash and Cash Equivalents at End of Year				$	259.1		$	55.5		$	218.6

See Notes to Consolidated Financial Statements.

33

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(millions)			Shares		2002 Amount			Shares		2001 Amount			Shares		2000 Amount
Common Stock
	Balance at January 1		73.0		$	73.0		73.0		$	73.0		72.9		$	72.9
	Exercise of stock options net of shares exchanged		—			—		—			—		0.1			0.1
	Balance at December 31		73.0			73.0		73.0			73.0		73.0			73.0
Additional Paid-In Capital
	Balance at January 1					133.3					132.5					132.0
	Exercise of stock options net of shares exchanged					—					0.1					1.6
	Tax benefits of early disposition of stock by optionees					—					—					0.2
	Restricted stock activity					0.9					0.7					1.0
	Termination of shareholder's rights plan					(0.5	)				—					—
	Employee stock plan activity					—					—					(2.3	)
	Balance at December 31					133.7					133.3					132.5
Retained Earnings
	Balance at January 1					1,574.2					1,879.6					1,769.2
	Net income					125.0					(289.5	)				127.0
	Dividends					(16.5	)				(15.9	)				(16.6	)
	Balance at December 31					1,682.7					1,574.2					1,879.6
Treasury Stock
	Balance at January 1		(22.8	)		(1,054.5	)	(22.7	)		(1,052.3	)	(18.4	)		(923.5	)
	Shares repurchased		—			—		(0.1	)		(2.2	)	(4.5	)		(135.1	)
	Employee stock plan activity		—			—		—			—		0.2			6.3
	Balance at December 31		(22.8	)		(1,054.5	)	(22.8	)		(1,054.5	)	(22.7	)		(1,052.3	)
Accumulated Other Comprehensive Income (Loss)
	Cumulative Translation Adjustment
		Balance at January 1				(109.4	)				(82.0	)				(55.5	)
		Translation adjustment				54.1					(27.4	)				(26.4	)
		Other				—					—					(0.1	)
		Balance at December 31				(55.3	)				(109.4	)				(82.0	)
	Minimum Pension Liability
		Balance at January 1				(1.8	)				(1.1	)				(1.0	)
		Minimum pension liability adjustment [net of taxes (credit) of $(15.0), $(0.4) and $(0.1)]				(32.1	)				(0.7	)				(0.1	)
		Balance at December 31				(33.9	)				(1.8	)				(1.1	)
	Unrealized gain (loss) on derivative instruments
		Balance at January 1				(1.3	)				—					—
		Derivative activity [net of taxes (credit) of $0.7 and $(0.7)]				1.3					(1.3	)				—
		Balance at December 31				—					(1.3	)				—
	Total Balance at December 31					(89.2	)				(112.5	)				(83.1	)
Total Stockholders' Equity			50.2		$	745.7		50.2		$	613.5		50.3		$	949.7
Comprehensive Income (Loss)
	Net income (loss)				$	125.0				$	(289.5	)			$	127.0
	Translation adjustment					54.1					(27.4	)				(26.4	)
	Minimum pension liability adjustment					(32.1	)				(0.7	)				(0.1	)
	Unrealized gain (loss) on derivative instruments					1.3					(1.3	)				—
Total Comprehensive Income (Loss)					$	148.3				$	(318.9	)			$	100.5

See Notes to Consolidated Financial Statements.

34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except as indicated)

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

The Company is a diversified specialty chemical company. Primary manufacturing operations are located in the United States, Europe and Asia. The Company manages its business and reports segment information based on the nature of its products and services. The Company's segments include Polymer Additives, Performance Chemicals and Water Treatment. The Company's products are sold globally. The principal markets include: computer and business equipment, consumer electronics, data processing, construction materials, telecommunications, pharmaceuticals and pool and spa dealers and distributors.

In May 2002, the Company sold its remaining ownership in OSCA, Inc. (OSCA), formerly the Energy Services and Products business unit. The results of the Energy Services and Products business through May 2002 are reported as discontinued operations for all periods presented.

During the second quarter of 2002, the Company committed to a plan to divest the Fine Chemicals portion of the Performance Chemicals segment. As a result of these actions, the Company has reflected the Fine Chemicals business as discontinued operations for all periods presented.

Further information on the Company's segments is included in Note 15 to the Consolidated Financial Statements.

Principles of Consolidation

The consolidated financial statements include all significant majority-owned subsidiaries of the Company. All material intercompany accounts and transactions are eliminated in consolidation.

Investments

Investments in less than majority-owned entities (20% to 50% ownership) in which the Company does not have the ability to exercise significant influence over operating and financial policies of the investees are accounted for by the equity method, which is cost, plus equity in their undistributed earnings since acquisition. All other investments are carried at their fair values or at cost, as appropriate.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition

Revenue from sales of products, including amounts billed to customers for shipping and handling costs, is recognized at the time (1) ownership and all risks of loss have been transferred to the buyer, which is generally upon shipment, (2) the price is fixed and determinable and (3) collectibility is reasonably assured. Provisions for discounts and rebates and returns and other adjustments are provided for in the period the related sales are recorded. Revenue from services is recognized when the services are rendered.

Shipping and Handling Costs

Shipping and handling costs, including certain warehousing costs, are included in cost of products sold.

35

Cash Equivalents

Investment securities with maturities of three months or less when purchased are considered to be cash equivalents.

Inventories

The Company values its inventories at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method.

Plant and Equipment

Plant and equipment are stated at cost. Depreciation of buildings and equipment is provided over the estimated useful lives of the assets using the straight-line method. The estimated useful lives for purposes of computing depreciation are: buildings, 10-40 years; manufacturing equipment, 7-20 years; and office equipment, 3-5 years.

Goodwill

Effective January 1, 2002, goodwill, the excess of investment over fair value of net assets acquired, is tested annually, or when events occur or circumstances change that would reduce the fair value of a reporting unit below its carrying value. In prior years, goodwill was amortized over periods of 8 years to 40 years using the straight-line method. As of December 31, 2002 and 2001, accumulated goodwill amortization was $28.5 million and $26.7 million, respectively.

Impairment of Long-Lived Assets and Intangible Assets

When events or circumstances indicate that the carrying amount of long-lived assets to be held and used or intangible assets might not be recoverable, the expected future undiscounted cash flows from the assets is estimated and compared with the carrying amount of the assets. Intangible assets are stated on the basis of cost and are being amortized by the straight-line method over the estimated future periods to be benefited. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the assets, an impairment loss is recorded. The impairment loss is measured by comparing the fair value of the assets with their carrying amounts. Fair value is determined based on discounted cash flow or appraised values, as appropriate. Long-lived assets that are held for sale are reported at the lower of the assets' carrying amount or fair value less costs related to the assets' disposition.

Environmental Costs

The Company participates in environmental assessments and remediation efforts at operating facilities, previously owned or operated facilities, or other waste sites. Costs related to these efforts are accrued when it is probable that a liability has been incurred and the amount of that liability can be reasonably estimated. Liabilities for estimated remediation costs are recorded at undiscounted amounts, are based on experience and are regularly evaluated as efforts proceed.

Income Taxes

Current income taxes are provided on income reported for financial statement purposes adjusted for transactions that do not enter into the computation of income taxes payable. Deferred income tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Income taxes are provided on the portion of the income of foreign affiliates that is expected to be remitted to the parent company and be taxable. Unremitted earnings of foreign affiliates where income taxes have not been provided are immaterial.

36

Treasury Stock

Shares of common stock repurchased under the Company's stock repurchase plans are recorded at cost as treasury stock. When the treasury shares are reissued, the Company uses a weighted-average method for determining cost. The difference between the cost of the shares and the reissuance price is included in additional paid-in capital.

Stock-Based Compensation

Statement of Financial Accounting Standards (SFAS) 123, "Accounting for Stock-Based Compensation," as amended by SFAS 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As provided for under SFAS 123, the Company accounts for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion 25, "Accounting for Stock Issued to Employees." Compensation cost for stock options, if any, is measured as the excess of the quoted market price of the Company's stock at the date of grant over the amount an employee must pay to acquire the stock. Compensation cost for restricted stock awards is recorded over the requisite vesting periods based on the market value on the date of grant. The compensation expense incurred in 2002, 2001 and 2000 related to restricted stock awards totaled $0.9 million, $0.7 million and $1.0 million, respectively.

The following is a reconciliation of reported income (loss) from continuing operations and earnings per share to income (loss) from continuing operations and related earnings per share as if the Company used the fair value method of accounting for stock-based compensation.

		2002			2001			2000
Income (loss) - continuing operations		$	47.4		$	(181.2	)	$	80.8
Stock-based employee compensation expense included in reported income, net of tax			0.6			0.5			0.1
Total stock-based employee compensation expense determined under fair value-based method, for all awards, net of tax			(4.6	)		(3.4	)		(3.9	)
Pro forma income (loss) - continuing operations		$	43.4		$	(184.1	)	$	77.0
Earnings per share - continuing operations
As reported:
	Basic	$	0.94		$	(3.60	)	$	1.54
	Diluted	$	0.94		$	(3.60	)	$	1.54
Pro forma:
	Basic	$	0.86		$	(3.66	)	$	1.47
	Diluted	$	0.86		$	(3.66	)	$	1.47

Foreign Currency Translation

Assets and liabilities of most foreign subsidiaries are translated at exchange rates in effect at the balance sheet date, and the statements of operations are translated at the average monthly exchange rates for the period. Translation gains and losses are recorded as a component of accumulated other comprehensive (loss) income in stockholders' equity until the foreign entity is sold or liquidated. Foreign currency transaction gains and losses are included in net income.

Derivative Financial Instruments

The Company uses various derivative instruments including swaps, forward contracts and options to manage certain foreign currency, interest rate and natural gas price exposures. These instruments are entered into under the Company's corporate financial risk management policy to manage market

37

risk exposures and are not used for trading purposes. Management routinely reviews the effectiveness of the use of derivative instruments.

Derivatives used for hedging purposes must be designated as, and effective as, a hedge of the identified risk exposure at the designation of the contract. Accordingly, changes in the market value of the derivative contract must be highly correlated with changes in the market value of the underlying hedged item at inception of the hedge and over the life of the hedge contract. Any derivative instrument terminated, designated but no longer effective as a hedge or initially not effective as a hedge would be recorded at market value and the related gains and losses would be recognized in earnings. Derivatives not designated as hedges are adjusted to fair value through the consolidated statement of operations.

The Company recognizes all derivative instruments as either assets or liabilities in the consolidated balance sheets at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, the Company designates the hedging instrument, based upon the exposure being hedged, as a fair value, cash flow or a hedge of a net investment in a foreign operation.

The Company classifies its derivative financial instruments as held or issued for purposes other than trading. Gains and losses on hedges of existing assets and liabilities are included in other income (expense) - net. Gains and losses from hedges of anticipated transactions are classified in the statement of operations consistent with the accounting treatment of the items being hedged.

Reclassifications

Certain amounts in the prior year financial statements and related notes have been reclassified to conform to the current year presentation.

New Accounting Standards

In December 2002, the Financial Accounting Standards Board (FASB) issued SFAS 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." The statement amends SFAS 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition to SFAS 123's fair value method of accounting for stock-based employee compensation. In addition, SFAS 148 requires disclosure in the Summary of Significant Accounting Policies of the effects of the Company's accounting policy with respect to stock-based employee compensation on net income and earnings per share in annual and interim financial statements accounted for using the intrinsic value method prescribed by Accounting Principles Board Opinon (APB) 25, "Accounting for Stock Issued to Employees." The Company has adopted the disclosure provision of this statement as of December 31, 2002.

In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS 146 requires that a liability for costs associated with exit or disposal activities be recognized when the liability is incurred rather than when an entity commits to an exit plan. SFAS 146 also provides that the liability be initially measured at fair value. The statement is effective for the Company beginning January 1, 2003. Management expects the new standard to have an impact on the timing of recognition of any future restructuring charges.

Effective January 1, 2002, the Company adopted SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations for a Disposal

38

of a Segment of a Business." OSCA and the Fine Chemicals portion of the Performance Chemicals business unit are reported as discontinued operations (see Note 3 to the Consolidated Financial Statements). As a result, the Company restated its consolidated financial position, results of operations and cash flows for all periods presented.

In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," which will be effective for the Company January 1, 2003. The statement requires legal obligations associated with retirement of long-lived assets to be recognized at their fair value at the time that the obligations are incurred. Upon initial recognition of a liability, that cost should be capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset. The Company currently has legal obligations to plug bromine supply and disposal wells, as well as waste disposal wells, at the end of the assets useful lives. Upon adoption, the Company will record an increase in plant and equipment, net of $0.6 million and recognize an asset retirement obligation of $5.7 million, resulting in a cumulative effect from a change in accounting principle upon adoption that will reduce net income and stockholders' equity by $3.5 million, net of income taxes.

In June 2001, the FASB issued SFAS 141, "Business Combinations," and SFAS 142, "Goodwill and Other Intangible Assets." The Company adopted these new standards January 1, 2002. Under the new rules, goodwill is no longer amortized but is subject to annual impairment tests in accordance with the statement. Other intangible assets continue to be amortized over their estimated useful lives.

With the adoption of SFAS 142, the Company ceased amortization of goodwill as of January 1, 2002. The following table provides a reconciliation of reported income (loss) from continuing operations, net of income taxes, and the associated earnings (loss) per share to amounts adjusted to reflect the exclusion of goodwill amortization, net of related income taxes.

		2002		2001			2000
Income (loss) - Continuing Operations:
	Reported income (loss) - continuing operations	$	47.4	$	(181.2	)	$	80.8
	Add: Goodwill amortization, net of related income taxes		—		4.5			5.8
	Adjusted income (loss) - continuing operations	$	47.4	$	(176.7	)	$	86.6
Basic and Diluted Earnings per Share:
	Reported income (loss) per share - continuing operations	$	0.94	$	(3.60	)	$	1.54
	Add: Goodwill amortization, net of related income taxes		—		0.09			0.11
	Adjusted income (loss) per share - continuing operations	$	0.94	$	(3.51	)	$	1.65

The Company completed the transitional impairment tests required by SFAS 142 and determined that there was no impairment loss as a result of the adoption. The Company conducted its annual impairment testing during the fourth quarter of 2002 and has determined that the fair values of its reporting units exceed the carrying values of those units.

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The following tables include information regarding the carrying values and related amortization expense of intangible assets as of and for the periods ended December 31, 2002 and 2001.

		2002 Gross Carrying Amount		2002 Accumulated Amortization			2001 Gross Carrying Amount		2001 Accumulated Amortization
Amortized Intangible Assets:
	Non-compete agreements	$	8.4	$	(3.6	)	$	5.5	$	(2.5	)
	Patents, trademarks and licenses		5.0		(3.6	)		4.3		(3.2	)
	Intellectual property		17.0		(2.6	)		15.7		(1.7	)
	Customer-related		11.4		(2.0	)		8.6		(1.6	)
	Other		6.4		(3.4	)		7.4		(3.0	)
	Total	$	48.2	$	(15.2	)	$	41.5	$	(12.0	)

Amortization expense for the year ended December 31, 2002 was $3.4 million. Future amortization expense for the next five years is estimated to be as follows: 2003 - $3.5 million; 2004 - $2.9 million; 2005 - $2.2 million; 2006 - $2.1 million; and 2007 - $2.1 million.

On December 3, 2002, the Company acquired certain assets of Flexsys America's non-staining phenolic antioxidants business. Included in these assets were $6 million of intangibles, which consisted of a $2.7 million non-compete agreement, $0.5 million of intellectual property and $2.8 million of customer-related intangibles. These amounts have been included in the above table.

The changes in the carrying amount of goodwill for the years ended December 31, 2001 and 2002, are as follows:

Goodwill:		Polymer Additives			Water Treatment			Total
Balance as of January 1, 2001		$	109.0		$	75.9		$	184.9
	Goodwill acquired		10.7			—			10.7
	Goodwill impaired		(41.9	)		—			(41.9	)
	Purchase accounting adjustments		(5.9	)		(8.8	)		(14.7	)
	Goodwill amortization expense		(3.3	)		(3.2	)		(6.5	)
	Effects of foreign currency		0.4			0.3			0.7
Balance as of December 31, 2001		$	69.0		$	64.2		$	133.2
	Goodwill acquired		3.1			—			3.1
	Effects of foreign currency		5.3			2.0			7.3
Balance as of December 31, 2002		$	77.4		$	66.2		$	143.6

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NOTE 2: SPECIAL CHARGES

2001 Repositioning Plan

On June 27, 2001, the Company's Board of Directors approved a detailed repositioning plan which provides for a series of cost reduction initiatives which were intended to further streamline operations, strengthen the Company's competitive position and continue to provide a strong platform for future growth. Additionally, on September 15, 2001 and December 6, 2001, the Company's Board of Directors approved an additional series of cost reduction initiatives developed to minimize the effects of the current economic conditions. The major components of these repositioning plans included the consolidation of certain Polymer Additives operations, resulting in two plant closures; elimination of approximately 485 manufacturing, research and development, sales and other management positions; and the impairment of certain underperforming and non-strategic long-lived assets, including goodwill.

The special charges related to this repositioning plan and included in continuing operations totaled $153.6 million, $118.9 million after income taxes, or $2.36 per share, for the year ended December 31, 2001. The special charges consisted of $106.1 million of asset impairments, including $61.3 million for fixed asset impairments and $44.8 million of impaired goodwill, $25.6 million of severance costs, $15.3 million for plant closure and environmental costs and $6.6 million of other costs.

Net special charges for the year ended December 31, 2001 totaled $148.6 million, $115.2 million after income taxes or $2.29 per share. This reflects the $153.6 million of charges recorded in 2001 offset by a reversal of $3.5 million related to changes in estimates in the 2001 special charges and certain reversals of the special charges taken in 2000 totaling $1.5 million, as detailed below. The net effect of the special charge reversals after income taxes was $3.7 million or $0.07 per share. The net of the 2001 special charges and reversals are reflected in the 2001 consolidated statement of operations as a separate component of operating income.

A reconciliation of the reserve balance at December 31, 2002 and the activity (including the effects of foreign exchange) of the reserve in 2002 is as follows:

Description		Reserve Balance at December 31, 2001		Adjustments to Original Reserve Estimates			2002 Activity			Reserve Balance at December 31, 2002
Asset Impairment (non-cash):
	Polymer Additives	$	—	$	6.0		$	(6.0	)	$	—
			—		6.0			(6.0	)		—
Severance Costs:
	Polymer Additives		16.4		(1.6	)		(10.5	)		4.3
	Performance Chemicals		0.2		—			(0.1	)		0.1
	Water Treatment		0.1		—			(0.1	)		—
	Corporate		1.7		—			(1.4	)		0.3
			18.4		(1.6	)		(12.1	)		4.7
Plant Closure and Environmental:
	Polymer Additives		15.4		1.0			(6.1	)		10.3
Other (Corporate)			2.1		(0.3	)		(1.1	)		0.7
		$	35.9	$	5.1		$	(25.3	)	$	15.7

As of December 31, 2002, $15.7 million of the $148.6 million charge remains to be spent. This remaining amount includes the effects of $5.1 million of net special charges recorded in 2002 related

41

to changes in estimates in the special charge reserves recorded in 2001. The major components of this remaining reserve relate to severance and plant closure costs yet to be spent for the two plant closures and the shutdown of two unprofitable product lines. The majority of the severance costs are expected to be paid out by the second quarter of 2003 and the plant closure and environmental costs by 2005.

Also, during 2001 the Company recorded lower of cost or market inventory write-downs totaling $25.7 million. These write-downs were recorded as a component of cost of products sold and resulted primarily from significant declines in forecasted revenue for the Polymer Additives business unit. In addition, the Water Treatment business incurred some lower of cost or market valuation adjustments due to some unsuccessful promotional inventory buys.

Additionally, as part of these repositioning actions, the Company recorded a $24.5 million liability for environmental remediation costs, $7.4 million for plant shutdown operating inefficiencies, a $1.5 million cumulative U.K. pension liability, $0.9 million of accounts receivable write-offs and $1.0 million of contract cancellation costs. These items amounted to $35.3 million and were recorded in the 2001 consolidated statement of operations as follows: $33.9 million to cost of products sold and $1.4 million as a component of selling, general and administrative expenses.

Certain other charges were also recorded during 2001. These charges, which netted to $33.8 million, included $11.6 million related to the write-off of an uncollectible note receivable from the sale of a previously owned business, $10.7 million for losses incurred on fixed asset replacement activities, primarily at one of the Company's U.S. plants, $13.4 million of increases in litigation accruals resulting from estimated settlement amounts on outstanding litigation matters, a $(3.2) million net foreign exchange gain arising from the repatriation of cash from a foreign subsidiary partially offset by a loss from a fair value adjustment on an intercompany loan of a foreign subsidiary and $1.3 million of other costs. All of these charges are reflected in the 2001 consolidated statement of operations as a component of other income (expense) - net.

The following paragraphs provide detailed information relating to the special charges and inventory write-downs that were recorded in 2001. Litigation and environmental liability updates are contained in Note 18 - Commitments and Contingencies.

SPECIAL CHARGES

Asset Impairments

Asset impairment losses in Polymer Additives related to the closure of an underperforming operating site in the U.S. and one site in Europe. These charges included the impairment of fixed assets at each site and $18.4 million of impaired goodwill attributable to the sites. In addition, these losses included the impairment of certain non-strategic bromine and flame retardant production assets at two U.S operating sites and the impairment of $26.4 million of goodwill related to the 1997 acquisition of the antimony products business. The asset impairment charges for Performance Chemicals included the shut-down of two unprofitable product lines at a U.S. manufacturing site.

These impairment losses adjusted the carrying value of these assets to fair value. Fair value was determined using discounted cash flows for goodwill and for fixed assets either discounted cash flows or appraised values as appropriate. Any impaired fixed assets held for disposal were written down to fair value less costs of disposal. The adjusted carrying value of the assets, classified as held for use, are being depreciated or amortized over the estimated remaining lives of the assets.

Severance Costs

Severance costs included the cost of separation payments to certain employees who were terminated. Determinations of the severance costs were negotiated individually with the employee, were based upon the provisions of statutory or contractual severance plans or, for the European

42

locations, were negotiated with their unions and workers' councils. The severance charges included severance costs for the termination of approximately 485 positions. The severance plans include approximately 439 positions for Polymer Additives, four positions for Performance Chemicals and 42 positions for Water Treatment and Corporate.

Plant Closure, Environmental and Other

The plant closure and environmental costs associated with the 2001 special charges related primarily to closure costs such as dismantling, decontamination and remediation that were or will be incurred in conjunction with the closure of the two operating sites discussed previously.

The other costs related primarily to legal and consulting costs associated with the special charge activities, the write-off of certain components of the Company's data processing software proprietary to one of the operating sites being closed, the write-off of certain spare parts inventories associated with the impaired fixed assets and costs resulting from the termination of an equipment lease.

Inventory Write-Downs

The Company recorded a lower of cost or market inventory write-down totaling $25.7 million during 2001. These inventory write-downs included $13.0 million related to the Polymer Additives business unit, $3.8 million to Performance Chemicals and $8.9 million to Water Treatment. The Polymer Additives portion of the write-down reflected market adjustments resulting from declines in customer demand, and the Water Treatment portion provided for the revaluation of inventory resulting from some unsuccessful promotional inventory buys. These write-downs were calculated in accordance with the Company's inventory valuation accounting policies.

2000 Repositioning Plan

The major components of the 2000 repositioning plan included the consolidation of the Company's three antimony manufacturing operations, elimination of approximately 309 manufacturing and research and development positions, primarily in the Polymer Additives business unit, and impairment or disposal of certain underperforming and nonstrategic assets. The asset impairments related to four Polymer Additives manufacturing locations, including sites in Europe and the United States, and two Performance Chemicals locations, including sites in the United States and United Kingdom. The special charges related to this repositioning plan and included in continuing operations totaled $56.4 million, $38.9 million after income taxes or $0.77 per share for 2000. The $56.4 million special charge consisted of $38.0 million for asset impairments, $12.2 million for severance costs and $6.2 million for plant closure and environmental costs.

Net special charges for the year ended December 31, 2000 totaled $54.3 million. This reflected the $56.4 million charge offset by reversals of $2.1 million, which related to a change in estimate in the 2000 special charges and certain reversals of special charges taken in 1999 and 1998. The net effect of the special charge reversals after income taxes was $1.5 million or $0.03 per share. The net of the 2000 special charges and reversals are reflected in the 2000 consolidated statement of operations as a separate component of operating income.

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A reconciliation of the reserve balance at December 31, 2002 and the 2002 activity in the reserve is as follows:

Description		Reserve Balance at December 31, 2001		2002 Activity			Reserve Balance at December 31, 2002
Severance Costs:
	Polymer Additives	$	0.2	$	(0.1	)	$	0.1
Plant Closure and Environmental:
	Polymer Additives		4.5		(0.5	)		4.0
		$	4.7	$	(0.6	)	$	4.1

The remaining 2000 reserves consist primarily of plant closure and environmental costs related to the closure of a brine pond in El Dorado, Arkansas.

NOTE 3: DISCONTINUED OPERATIONS

The sale of the Company's Energy Services and Products business unit, OSCA, to BJ Services Company was completed on May 31, 2002. Under the terms of the sale, BJ Services acquired all outstanding shares of OSCA, including the Company's 53.2% holding, for $28.00 per share in cash or $221 million, resulting in a gain of $175.4 million. This transaction provided the Company with net proceeds of approximately $200 million in cash, a part of which was used to reduce the Company's debt position. As a result of this transaction, the Company has reflected OSCA as discontinued operations for all periods presented.

During the second quarter of 2002, management, with the approval of the Board of Directors, committed to a plan to divest the Company's Fine Chemicals business, previously a part of the Performance Chemicals business unit. The Company is now engaged in efforts to sell the net assets of the Fine Chemicals business. As a result of these actions, the Company has reflected the Fine Chemicals business as discontinued operations for all periods presented.

The operating results from discontinued operations presented in the accompanying consolidated statements of operations are as follows:

Year Ended December 31		2002			2001			2000
Net sales
	OSCA	$	58.1		$	175.9		$	131.9
	Fine Chemicals		55.2			66.0			88.7
Special charges - Fine Chemicals			26.7			118.5			9.1
Operating income (loss)
	OSCA		(16.3	)		18.1			13.1
	Fine Chemicals		(33.7	)		(154.0	)		(19.2	)
Gain on sale of subsidiary stock - OSCA			175.4			9.4			60.4
Interest income (expense) - net			(0.4	)		(1.3	)		(1.0	)
Other income (expense) - net			2.1			(8.1	)		(5.8	)
Income (loss) before income taxes		$	127.1		$	(135.9	)	$	47.5
Income taxes (credit)			49.5			(27.6	)		1.3
Income (loss) from discontinued operations		$	77.6		$	(108.3	)	$	46.2

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Included in special charges for the Fine Chemicals business in 2002 are $22.9 million of fixed asset impairment charges and $3.8 million of severance accruals. These charges were recorded in conjunction with the intended sale of the Fine Chemicals business. Fine Chemicals net special charges recorded in 2001 of $118.5 million consisted of $106.0 million of asset impairments, including $22.0 million of fixed asset impairments and $84.0 million of impaired goodwill, $5.8 million of severance accruals, $5.1 million of plant closure and environmental costs and $1.4 million of other costs, as well as adjustments of $0.2 million related to special charges taken in 2000. The 2001 charges were undertaken as a part of a detailed repositioning plan approved by the Company's Board of Directors in 2001. Included in 2000 operating income (loss) in 2000 are net special charges of $9.1 million, which reflect $10 million of charges recorded in 2000 offset by a reversal of $0.8 million related to reversals of certain charges taken in 1999 and 1998. The 2000 charges of $10 million included $5.8 million of asset impairments and $4.2 million of severance accruals.

Also included in 2002 operating income for Fine Chemicals are $3.7 million of inventory write-downs. Fine Chemicals operating income in 2001 included $18.9 million of inventory write-downs recorded as a part of the 2001 repositioning plan.

During 1997, the Board of Directors approved a plan to exit the furfural and derivatives business, Chemol and environmental services businesses. A portion of the Chemol business was sold during 1998, and essentially all remaining operations were concluded. The environmental services business was sold in January 1999, and the furfural and derivatives business was sold in June 1999. Remaining reserves for the 1997 discontinued operations amounted to $1.7 million and $3.4 million at December 31, 2002 and 2001, respectively. Net assets (liabilities) of the 1997 discontinued operations amounting to $(0.3) million and $(1.1) million have been included in other assets in the consolidated balance sheets at December 31, 2002 and 2001, respectively.

Included in the other income (expense) - net above in 2002 are charges of $1.4 million related to the 1997 discontinued operations.

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The assets and liabilities held for sale from discontinued operations related to OSCA and Fine Chemicals presented in the accompanying consolidated balance sheets are comprised of:

December		2002		2001
Current Assets:
Cash and cash equivalents		$	0.3	$	16.2
Accounts receivable			14.0		57.1
Inventories			11.5		47.5
Prepaid expenses and other current assets			8.2		2.5
	Total current assets	$	34.0	$	123.3
Non-Current Assets:
Plant and equipment, net		$	14.2	$	88.5
Goodwill and other assets			5.9		1.9
	Total non-current assets	$	20.1	$	90.4
Current Liabilities:
Accounts payable and accrued expenses		$	14.5	$	43.5
Current portion, long-term debt			—		0.2
	Total current liabilities		14.5		43.7
Non-Current Liabilities:
Long-term debt, less current portion		$	—	$	27.0
Other non-current liabilities			12.1		7.6
	Total non-current liabilities	$	12.1	$	34.6
Minority Interest - OSCA		$	—	$	36.8

As of December 31, 2002, $2.9 million of the $26.7 million of special charges recorded in 2002 and $7.9 million of the $118.3 million of special charges recorded in 2001 remain to be spent. There are no amounts outstanding related to the charges taken in 2000. The major components of the remaining reserves are severance of $1.5 million and plant closure and environmental costs of $6.4 million. Plant closure and environmental costs have been allocated between accrued expenses and non-current liabilities based on the anticipated timing of these expenditures.

NOTE 4: ACQUISITIONS AND SALE OF SUBSIDIARY STOCK

Acquisitions

On December 3, 2002, the Company acquired certain assets of Flexsys America's non-staining phenolic antioxidants business for approximately $11 million. Assets acquired included inventory, other intangibles and the process technology associated with Santonox® TBMC, Santovar® TAHQ and Santowhite® BBMC. Great Lakes will market these products under the Company's established line of Lowinox® non-staining antioxidants. Goodwill resulting from the acquisition amounted to approximately $3 million.

On February 14, 2001, the Company acquired the Optical Monomers business from Akzo Nobel Polymer Chemicals LLC for approximately $30 million in cash. The Optical Monomers business operates at a leased manufacturing site in Pasadena, Texas, and has sales and support networks throughout the United States and Europe. This acquisition was accounted for using the purchase method of accounting with its results of operations included since the date of acquisition. Goodwill resulting from the acquisition amounted to $11.5 million.

On July 14, 2000, the Company acquired Aqua Clear for $40.7 million. Aqua Clear, a manufacturer and distributor of specialty pool chemical products, operated a manufacturing site in Watervliet, New

46

York, which was closed in 2001. Aqua Clear continues to operate distribution sites in St. Louis, Missouri, and Waterford, New York, as well as sales and support networks throughout the United States and Canada. The acquisition of Aqua Clear was accounted for using the purchase method of accounting with its results of operations included since the date of acquisition. Goodwill resulting from the acquisition amounted to $37.8 million.

These acquisitions were funded with available cash and borrowing capacity.

Sale of Subsidiary Stock

On February 20, 2002, the Company announced that its Energy Services and Products business unit, OSCA, entered into a definitive merger agreement with BJ Services Company. The sale of OSCA was completed on May 31, 2002. Under the terms of the sale, BJ Services acquired all outstanding shares of OSCA, including the Company's 53.2% holding, for $28.00 per share in cash, or $221 million, resulting in a gain of $175.4 million. This transaction provided the Company with net proceeds of approximately $200 million in cash, a part of which was used to reduce the Company's debt position. As a result of this transaction, the Company has reflected OSCA as discontinued operations for all periods presented.

In addition, in each of the first and second quarters of 2001, the Company sold 250,000 shares of its OSCA Class B common stock pursuant to Rule 144 under the Securities Act of 1933 for a total of 500,000 shares being sold for the year ended December 31, 2001. The terms of these transactions provided that upon the sale of these Class B shares, the shares were automatically converted to OSCA Class A common stock. Net proceeds were $5.4 million and $6.3 million and the related taxable gains were $4.2 million and $5.2 million for the first and second quarters of 2001, respectively.

Effective June 15, 2000, the Company had sold 40% of its ownership in OSCA through an initial public offering. Net proceeds of approximately $79 million from the initial sale were paid to the Company by OSCA to satisfy indebtedness. The initial sale resulted in a $51.9 million gain to the Company, which was recognized in the second quarter of 2000. Subsequently, on July 13, 2000, the over-allotment option granted to the underwriters was exercised and resulted in an additional $12 million of net proceeds. The over-allotment exercise resulted in an additional gain to the Company of $8.5 million, which was recorded in the third quarter of 2000. The initial sale and the over-allotment option exercise resulted in the Company selling a total of 43.4% of its ownership interest in this subsidiary.

NOTE 5: CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of the following:

December 31	2002		2001
Cash	$	101.2	$	38.6
Cash equivalents		157.9		16.9
	$	259.1	$	55.5

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NOTE 6: INVENTORIES

The major components of inventories are as follows:

December 31	2002		2001
Finished products	$	186.4	$	155.6
Raw materials		33.5		41.6
Supplies		32.3		30.3
	$	252.2	$	227.5

NOTE 7: PLANT AND EQUIPMENT

Plant and equipment consist of the following:

December 31	2002			2001
Land	$	14.3		$	14.6
Buildings		129.6			117.3
Equipment		1,150.0			1,129.1
Construction in progress		31.9			52.4
		1,325.8			1,313.4
Less allowances for depreciation, depletion and amortization		(704.2	)		(690.3	)
	$	621.6		$	623.1

NOTE 8: DEBT

Long-term debt is summarized as follows:

December 31	2002			2001
Notes payable	$	400.0		$	400.0
Commercial paper		—			72.4
Industrial development bonds		12.3			12.3
Other		28.3			27.0
		440.6			511.7
Less current portion		(8.0	)		(10.9	)
	$	432.6		$	500.8

On July 15, 1999, the Company sold $400 million of 7% notes due July 15, 2009. Proceeds from the sale of the notes were used to replace a portion of the commercial paper borrowings. The notes were sold under a shelf registration process. Under this process, the Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission and may sell various unsecured debt securities, common stock or rights or warrants to purchase common stock individually or in combination up to $750 million. The amount of securities remaining to be sold on the registration statement is $350 million.

On October 3, 2002, the Company renewed the 364-day portion of its unsecured revolving credit facility established on October 4, 2001. This 364-day credit facility was originally established along with a facility with a five-year term. Under these combined facilities, the Company may borrow up to $462.5 million. These facilities are used to support the Company's commercial paper program and for general corporate purposes. The facility contains certain covenants that include, among others, requirements to limit the maximum ratio of Debt to EBITDA to 3.5 to 1, as defined in the agreement. Debt to EBITDA, as defined in the agreement, was 1.3 as of December 31, 2002. Interest on

48

borrowings outstanding under the agreement is based upon a variable rate tied to LIBOR. There were no outstanding borrowings on these facilities as of December 31, 2002 and 2001

The interest rate on industrial development bonds was 2.99% at December 31, 2002, and the bonds have maturities through 2025.

Commercial paper financing was classified as a component of long-term debt at December 31, 2001, since the Company had the ability and the intent to refinance these borrowings on a long-term basis either through continued commercial paper borrowings or utilization of available long-term credit facilities. There were no outstanding commercial paper borrowings as of December 31, 2002.

Long-term debt matures as follows: 2003, $8.0 million; 2004, $2.9 million; 2005, $2.7 million; 2006, $1.5 million; 2007, $1.1 million; and thereafter, $424.4 million.

During 2002, 2001 and 2000, interest costs were $32.1 million, $42.3 million and $52.4 million, respectively, which included interest capitalized as additional costs of plant and equipment of $0.6 million in 2002, $1.0 million in 2001 and $1.7 million in 2000. In these years, cash interest payments were $33.9 million, $42.5 million and $52.8 million, respectively.

NOTE 9: INCOME TAXES

The following is a summary of domestic and foreign income from Continuing Operations before income taxes, the components of the provisions for income taxes, a reconciliation of the United States federal income tax rate to the effective income tax rate and the components of deferred tax assets and liabilities.

Income Before Income Taxes:

Year Ended December 31	2002		2001			2000
Domestic	$	28.6	$	(79.0	)	$	59.7
Foreign		40.1		(142.0	)		57.7
	$	68.7	$	(221.0	)	$	117.4

Provisions for Income Taxes:

Year Ended December 31		2002			2001			2000
Current:
	Federal	$	(53.5	)	$	45.8		$	7.1
	State		(1.0	)		(2.5	)		5.0
	Foreign		19.1			6.4			7.5
			(35.4	)		49.7			19.6
Deferred:
	Domestic		69.2			(93.9	)		9.7
	Foreign		(12.5	)		4.4			7.3
			56.7			(89.5	)		17.0
		$	21.3		$	(39.8	)	$	36.6

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Effective Income Tax Rate Reconciliation:

Year Ended December 31		2002		2001		2000
U.S. federal income tax rate		35.0	%	(35.0	)%	35.0	%
Change resulting from:
	State income tax	(0.9	)	(0.7	)	2.7
	Depletion	(3.0	)	(0.8	)	(1.6	)
	Export sales incentive	(2.1	)	(0.4	)	(2.1	)
Tax-exempt interest		—		—		(0.7	)
	Dividends received deduction	—		—		(0.4	)
	Low income housing credit	(4.5	)	(1.5	)	(2.7	)
International operations		1.6		2.4		(0.6	)
	Stock redemption -
	Huntsman	—		—		(0.6	)
	Nondeductible goodwill	—		3.8		0.3
	Change in valuation allowance	6.0		14.9		1.5
	Other	(1.1	)	(0.7	)	0.4
Effective income tax rate		31.0	%	(18.0	)%	31.2	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Components of Deferred Tax Assets and Liabilities:

December 31		2002			2001
Deferred tax assets
	Accrued expenses	$	11.0		$	21.6
	Special charges		3.9			1.2
	Tax credit carryforwards		36.9			29.1
	Net operating loss carryforwards		44.1			119.9
	Other		31.4			31.3
Deferred tax assets			127.3			203.1
	Valuation allowance		(35.7	)		(49.4	)
Deferred tax assets, net of valuation allowance		$	91.6		$	153.7
Deferred tax liabilities
	Depreciation	$	65.1		$	54.1
	Other		16.6			33.0
Deferred tax liabilities		$	81.7		$	87.1
Net deferred tax assets		$	9.9		$	66.6

As of December 31, 2002, the Company had tax credit carryforwards of $36.9 million available. A valuation allowance of $17.7 million has been recorded against the portion of these credit carryforwards for which utilization is uncertain. Of the amount of tax credit carryforwards for which no valuation allowance has been recorded, $0.7 million expire in 2018; $2.6 million expire in 2019; $3.2 million expire in 2020; $3.3 million expire in 2021; $3.2 million expire in 2022; and the remaining $6.2 million have no expiration dates. At December 31, 2002, the Company and certain of its foreign subsidiaries had net operating losses totaling $119.0 million. These carryforwards will be available to offset $44.1 million of future tax liabilities. A valuation allowance of $18.0 million has been recorded against the portion of these net operating loss carryforwards for which utilization is

50

uncertain. Of the amount of net operating loss carryforwards for which no valuation allowance has been recorded, $9.4 million expire in 2021 and the remaining $16.7 million have no expiration dates.

Cash payments for income taxes were $14.0 million, $14.3 million and $11.2 million in 2002, 2001 and 2000, respectively.

NOTE 10: STOCKHOLDERS' EQUITY

The Board of Directors has authorized the Company to purchase shares of the Company's common stock in the open market or in privately negotiated transactions. No share repurchases were made in the current year. The Company purchased approximately 0.1 million shares during 2001 at an average price of $22.19. A total of 2.8 million shares remain available under existing Board authorizations.

Under a Stockholders' Rights Plan adopted in 1999, for each outstanding share of common stock of the Company held by a stockholder, each stockholder had a right, which entitled the holder upon certain triggering events described in the Stockholders' Rights Plan, to acquire at the Right's then current exercise price, the number of shares of common stock of the Company (or, if applicable, an acquiring company) having a market value equal to twice the Right's exercise price.

On February 12, 2002, the Company's Board of Directors redeemed the outstanding Rights under the Stockholders' Rights Plan at a price of $.01 per Right, paid to stockholders of record on April 1, 2002.

NOTE 11: EARNINGS PER SHARE

Basic earnings per share is based on the weighted-average number of common shares outstanding during the period, while diluted earnings per share includes the effect of options and restricted stock that were dilutive and outstanding during the period. The computation of basic and diluted earnings per share is determined using net income or loss as reported as the numerator, and the number of shares included in the denominator is calculated as follows:

Year Ended December 31	2002	2001	2000
Denominator for basic earnings per share (weighted-average shares)	50.2	50.3	52.4
Effect of dilutive securities	0.1	—	0.1
Denominator for diluted earnings per share	50.3	50.3	52.5

Options to purchase shares of common stock of 3.0 million in 2002, 3.3 million in 2001 and 3.1 million in 2000 were outstanding, but were excluded from the computation of diluted earnings per share, because the exercise prices were greater than the average market price of the common shares during those years, and therefore the effect would have been antidilutive.

NOTE 12: STOCK COMPENSATION PLANS

The Company has four plans that provide for the granting of stock awards to officers and key employees. The 2002, 1998 and 1993 Stock Compensation Plans have stock awards available for grant; the fourth plan, the 1984 Stock Compensation Plan, has no stock awards available for grant, but does have options exercisable as of December 31, 2002. The Company is authorized to grant options for up to 7.0 million shares under the 2002, 1998 and 1993 plans, of which 3.5 million have been granted. Options under the plans have been granted at the market value at the date of grant, become exercisable over periods of one to five years and expire 10 years from the date of grant.

51

In addition to the options awarded under the plans, the Company on April 6, 1998 granted the chief executive officer an option to acquire 0.7 million shares of the Company's stock. The options were granted at market value on the date of grant; 0.2 million of the shares became exercisable upon grant with the remaining shares exercisable ratably over four years. The options expire 10 years from the grant date.

The status of the Company's stock options is summarized below:

	Shares Under Option		Weighted- Average Exercise Price
Outstanding at January 1, 2000	3.1		$	43.96
Granted	0.8			30.15
Exercised	(0.1	)		23.10
Terminated	(0.5	)		40.67
Outstanding at December 31, 2000	3.3			41.72
Granted	0.8			32.78
Exercised	0.0			30.10
Terminated	(0.8	)		41.69
Outstanding at December 31, 2001	3.3			39.53
Granted	0.9			22.12
Exercised	0.0			23.44
Terminated	(0.3	)		47.24
Outstanding at December 31, 2002	3.9		$	34.71
Currently Exercisable	2.2		$	40.51

During 2002, 2001 and 2000, the Company awarded restricted stock totaling approximately 20,000, 90,000 and 14,000 shares, respectively, to directors and other key employees. These awards become exercisable over a period of one to 10 years. The Company recognizes compensation expense consistent with the vesting of each award. The compensation expense incurred in 2002, 2001 and 2000 related to these awards totaled $0.9 million, $0.7 million and $1.0 million, respectively.

The following table summarizes information concerning outstanding and exercisable options at December 31, 2002:

Range of Exercise Prices		$22.00-$35.99		$36.00-$50.99		$51.00-$68.99
Options outstanding:
	Weighted-average remaining contractual life		9.0 yrs		6.0 yrs		2.8 yrs
	Weighted-average exercise price	$	28.32	$	41.90	$	61.99
	Options outstanding (millions)		2.4		1.3		0.2
Options exercisable:
	Weighted-average exercise price	$	32.56	$	41.89	$	61.99
	Options exercisable (millions)		0.9		1.1		0.2

The Company accounts for stock compensation costs in accordance with the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Accordingly, no compensation cost has been recognized for its fixed stock option plans. The following table sets forth pro forma information as if compensation cost had been determined based on the fair value at the grant date for awards under the Company's stock plans consistent with the requirements of SFAS No. 123, "Accounting for Stock-Based Compensation." For

52

the purposes of the pro forma disclosure, the estimated compensation costs are amortized to expense over the options' vesting period, principally three years.

While no compensation expense has been recognized for the Company's stock option plans, outstanding options whose exercise prices were less than the average market price of common stock during the period are included in the determination of share dilution for the purposes of calculating diluted earnings per share.

December 31		2002			2001			2000
Weighted-average fair value per share of options granted during the year(1)		$	7.24		$	10.81		$	11.67
Income (loss) from continuing operations:
	As reported		47.4			(181.2	)		80.8
	Pro forma		43.4			(184.1	)		77.0
Diluted earnings per share:
	As reported		0.94			(3.60	)		1.54
	Pro forma		0.86			(3.66	)		1.47
Assumptions:
	Expected volatility		28.9	%		27.8	%		28.3	%
	Expected life in years		6.5			6.5			6.5
	Risk-free interest rate		4.7	%		4.4	%		6.7	%
	Dividend yield		1.5	%		1.1	%		1.1	%

⁽¹⁾

On date of grant using the Black-Scholes option pricing model, a pricing model acceptable under SFAS 123.

NOTE 13: RETIREMENT PLANS

Defined Benefit Pension Plans

The Company sponsors various noncontributory and contributory defined benefit retirement plans covering certain of its U.S. and non-U.S. employees. Retirement benefits are based upon years of service and the employee's compensation levels during this service period. The Company also has unfunded supplemental nonqualified defined benefit plans, which provide pension benefits for certain employees in excess of the tax-qualified plans' limits. The net periodic benefit cost is assessed in accordance with the advice of professionally qualified actuaries.

The Company's funding policy is to make contributions to the extent such contributions are tax deductible as actuarially determined and as permitted by regulatory authorities. The funded amounts reflect actuarial assumptions regarding compensation, interest and other projections. Plan assets are comprised primarily of equity securities, fixed-income securities and short-term investments.

53

The following table provides a progression of the plans' benefit obligations and fair value of plan assets for 2002 and 2001, and reconciles the funded status to the amounts recognized in the consolidated balance sheets for those years.

		U.S. Plans						Non-U.S. Plans
		2002			2001			2002			2001
Changes in benefit obligation:
	Benefit obligation at beginning of year	$	123.5		$	116.2		$	99.7		$	80.6
	Service cost		4.9			4.6			3.7			3.9
	Interest cost		9.0			8.9			6.4			5.0
	Plan participants' contributions		—			—			1.5			1.3
	Net actuarial loss		7.7			2.4			24.6			13.7
	Benefits paid		(4.5	)		(8.6	)		(3.6	)		(3.1	)
	Foreign exchange loss (gain)		—			—			12.8			(1.7	)
	Benefit obligation at end of year	$	140.6		$	123.5		$	145.1		$	99.7
Changes in fair value of plan assets:
	Fair value of plan assets at beginning of year	$	107.2		$	128.6		$	88.7		$	108.5
	Actual return on plan assets		(11.0	)		(17.9	)		(12.0	)		(16.9	)
	Employer contributions		0.8			5.5			3.4			2.3
	Benefits and expenses paid		(4.9	)		(9.0	)		(3.6	)		(3.1	)
	Foreign exchange gain (loss)		—			—			9.9			(2.1	)
	Fair value of plan assets at end of year	$	92.1		$	107.2		$	86.4		$	88.7
Funded status of plans:
	Funded status	$	(48.5	)	$	(16.3	)	$	(58.7	)	$	(11.0	)
	Unrecognized prior service cost		0.4			0.3			—			—
	Unrecognized transition obligation		0.2			0.3			—			—
	Unrecognized net actuarial loss		39.8			11.6			69.3			19.2
	Prepaid (accrued) benefit cost	$	(8.1	)	$	(4.1	)	$	10.6		$	8.2
Amounts recognized in the balance sheets consist of:
	Prepaid benefit costs	$	—		$	0.9		$	10.6		$	8.2
	Accrued benefit liability		(8.4	)		(5.7	)		—			—
	Additional minimum liability		(19.9	)		(2.8	)		(30.0	)		—
	Intangible asset		0.3			0.7			—			—
	Accumulated other comprehensive loss		19.9			2.8			30.0			—
	Prepaid (accrued) benefit cost	$	(8.1	)	$	(4.1	)	$	10.6		$	8.2
Weighted-average assumptions:
	Discount rates		7.0	%		7.5	%		5.5	%		6.25	%
	Expected return on plan assets		9.0	%		9.0	%		7.0	%		7.5	%
	Rate of compensation increases		4.0	%		4.0	%		3.75	%		3.75	%

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The components of net periodic benefit costs are as follows:

	U.S. Plans									Non-U.S. Plans
	2002			2001			2000			2002			2001			2000
Service cost	$	4.9		$	4.8		$	4.8		$	3.7		$	3.7		$	3.4
Interest cost		9.0			8.9			8.4			6.4			5.0			2.6
Expected return on plan assets		(9.5	)		(11.4	)		(10.3	)		(8.1	)		(6.9	)		(3.0	)
Amortization of prior service cost		0.1			0.2			0.1			—			—			—
Amortization of transition obligation		0.2			0.2			0.2			—			—			—
Recognized net actuarial loss/(gain)		0.1			(0.9	)		(0.4	)		—			(0.3	)		0.4
Net periodic benefit cost	$	4.8		$	1.8		$	2.8		$	2.0		$	1.5		$	3.4

The allocation of net periodic benefit cost is as follows:

	U.S. Plans						Non-U.S. Plans
	2002		2001		2000		2002		2001		2000
Continuing Operations	$	4.8	$	1.8	$	2.8	$	1.3	$	1.0	$	2.3
Discontinued Operations		—		—		—		0.7		0.5		1.1
Net periodic benefit cost	$	4.8	$	1.8	$	2.8	$	2.0	$	1.5	$	3.4

Amounts applicable to the Company's U.S. and non-U.S. pension plans with projected benefit obligations in excess of plan assets are summarized as follows as of the October 1 measurement date:

	2002		2001
Projected benefit obligation	$	285.7	$	223.2
Fair value of plan assets		178.5		195.9

Amounts applicable to the Company's U.S. and non-U.S. pension plans with accumulated benefit obligations in excess of plan assets are summarized as follows as of the October 1 measurement date:

	2002		2001
Accumulated benefit obligation	$	226.3	$	8.5
Fair value of plan assets		178.5		—

The Company provides no significant postretirement benefits other than pensions.

Defined Contribution Retirement Plans

Certain Company employees participate in the Great Lakes Savings Plan, which is a defined contribution, 401(k) employee savings plan generally available to all U.S. full-time salaried, non-union hourly employees and certain union hourly employees. The plan is funded by contributions from participants and the Company. Contributions by the Company to the plan approximated $2.7 million, $2.9 million and $3.4 million in 2002, 2001 and 2000, respectively.

The Company also maintains a supplemental savings plan, the Great Lakes Chemical Corporation Supplemental Savings Plan. The plan is nonqualified and restores the employer match that certain employees lose due to IRS limits on eligible compensation under the Great Lakes Savings Plan. Contributions to this plan by the Company approximated $0.04 million, $0.1 million and $0.1 million in 2002, 2001 and 2000, respectively.

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NOTE 14: RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses were approximately $26.0 million, $28.1 million and $25.6 million in 2002, 2001 and 2000, respectively.

NOTE 15: SEGMENT INFORMATION

The Company is organized into three global segments: Polymer Additives, Performance Chemicals and Water Treatment. These segments are strategic business units that offer products and services that are intended to satisfy specific customer requirements. The units are organized and managed to deliver a distinct group of products, technology and services.

The Polymer Additives segment produces bromine-, phosphorus- and antimony-based flame retardants; antioxidants; UV absorbers; light stabilizers; optical monomers; and patented No Dust Blends (NDB™). The segment serves suppliers in a wide variety of industries, including electrical and electronic, construction, automotive and furnishings.

The Performance Chemicals segment produces chemicals to exact specifications or to meet specific applications requirements. The product offering is characterized by technology-based product solutions that benefit specific customers. The businesses included in the segment are: agricultural products; brominated intermediates; fluorine chemicals for use in fire suppression systems, refrigerants and medical and pharmaceutical products; fine chemicals for pharmaceutical and life sciences companies; and toxicological testing services for pharmaceutical, chemicals and biotechnology customers. As a result of the Company's decision in 2002 to sell the Fine Chemicals portion of the Performance Chemicals business, the net assets of Fine Chemicals have been reclassified as assets held for sale and liabilities held for sale, with operating results reported in discontinued operations for all periods presented.

The Water Treatment segment is a producer of water treatment chemicals for the recreational and commercial swimming pool and spa water treatment industry. These products are sold to pool and spa dealers, distributors and mass market retailers. The Water Treatment segment also produces specialty biocides, antiscalants, corrosion inhibitors and other products for use in cooling tower water treatment; wastewater treatment; pulp and paper production; and desalination products.

The Company evaluates business unit performance and allocates resources based on the operating income, which represents net sales less cost of products sold and selling, general and administrative expenses and cash flows of each business unit. Each of the Company's segments uses bromine as a raw material in their production processes. Bromine is transferred at cost to all business segments. Their cost is based upon a bromine supply agreement. In addition, assets used in the production of bromine are allocated to each business unit based on the percentage of production consumed. The accounting policies of the reportable segments are the same as those described in the Summary of Significant Accounting Policies.

Corporate includes the corporate offices and any other activities not associated with a specific segment. Segment assets include primarily accounts receivable, inventory, net plant and equipment and other miscellaneous assets. Assets included in Corporate principally are cash and cash equivalents; deferred income taxes; certain investments and other assets; and certain unallocated plant and equipment, including the Company's ERP software systems. Geographic sales information is reported based on the location that invoices the external customer. Geographic long-lived assets

56

are grouped by the location of the reporting country. Inter-segment sales are insignificant and are eliminated in consolidation.

Year Ended December 31		2002			2001			2000
Net Sales by Segment to External Customers:
	Polymer Additives	$	618.2		$	581.7		$	690.1
	Performance Chemicals		232.7			250.2			280.5
	Water Treatment		543.0			507.0			474.5
	Total sales of reportable segments		1,393.9			1,338.9			1,445.1
	Corporate		7.6			13.9			4.7
		$	1,401.5		$	1,352.8		$	1,449.8
Segment Profit (Loss):
	Polymer Additives	$	16.4		$	(70.8	)	$	52.4
	Performance Chemicals		52.6			60.9			100.2
	Water Treatment		83.1			54.1			85.0
	Total profits of reportable segments		152.1			44.2			237.6
	Corporate		(35.8	)		(37.0	)		(37.1	)
	Special charges		(5.1	)		(148.6	)		(54.3	)
	Operating income (loss)		111.2			(141.4	)		146.2
Interest income (expense) - net			(27.6	)		(32.8	)		(31.6	)
Other income (expense) - net			(14.9	)		(46.8	)		2.8
Income (loss) before income taxes		$	68.7		$	(221.0	)	$	117.4
Depreciation Expense:
	Polymer Additives	$	43.8		$	39.4		$	35.5
	Performance Chemicals		11.0			7.9			10.4
	Water Treatment		14.6			14.1			13.3
	Corporate		7.3			9.5			12.5
		$	76.7		$	70.9		$	71.7
Segment Assets:
	Polymer Additives	$	792.6		$	711.4		$	813.3
	Performance Chemicals		173.5			178.4			118.3
	Water Treatment		376.5			393.4			396.1
	Corporate		321.3			193.2			362.6
	Net assets of discontinued operations		(0.3	)		(1.1	)		1.1
		$	1,663.6		$	1,475.3		$	1,691.4

57

Year Ended December 31		2002		2001		2000
Investment in Equity Method Investees:
	Polymer Additives	$	13.6	$	11.3	$	19.9
Expenditures for Long-lived Assets:
	Polymer Additives	$	33.4	$	86.5	$	62.2
	Performance Chemicals		8.2		20.0		23.8
	Water Treatment		21.3		18.5		17.4
	Corporate		1.9		6.2		29.5
		$	64.8	$	131.2	$	132.9
Geographic Information
Net Sales to External Customers:
	United States	$	894.5	$	862.6	$	875.6
	United Kingdom		126.0		148.8		204.3
	Switzerland		158.3		121.7		129.9
	Other foreign		222.7		219.7		240.0
		$	1,401.5	$	1,352.8	$	1,449.8
Long-lived Assets:
	United States	$	535.6	$	575.3	$	615.9
	United Kingdom		87.7		74.8		104.5
	Other foreign		202.1		162.8		163.3
		$	825.4	$	812.9	$	883.7

NOTE 16: INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

As of December 31, 2002, the Company's investment in unconsolidated affiliates consisted primarily of a 49% interest in Gulf Stabilizers Industries Limited, a Saudi Arabian manufacturer of antioxidants, and a 50% interest in Tetrabrom Technologies, Ltd., an Israeli manufacturer of tetrabromobisphenol-A. During 2000, the Company sold its remaining preferred stock in Huntsman Chemical Company (HCC). The Company had recognized pretax gains on sales of HCC preferred shares of $3 million in 2000. Preferred stock dividends from HCC amounted to $0.3 million in 2000. The Company is also a limited partner in certain low-income housing investments that generate benefits in the form of tax credits.

The Company's equity in earnings (loss) of unconsolidated affiliates was $(2.1) million, $0.7 million and $5.7 million in 2002, 2001 and 2000, respectively.

NOTE 17: FINANCIAL INSTRUMENTS

Foreign Exchange Risk Management

In the normal course of business, operations of the Company are subject to risks associated with changing foreign exchange rates. These fluctuations can vary the costs of financing, investing and operating activities. Accordingly, the Company hedges certain portions of its exposure to foreign currency fluctuations through the use of options and forward exchange contracts to protect the value of its existing foreign currency asset and liability commitments and anticipated foreign currency revenues.

It is the Company's policy to enter into foreign currency hedging transactions only to the extent considered necessary to achieve the objectives stated above. The Company does not enter into foreign currency transactions for trading purposes. The Company enters into forward contracts to hedge portions of its foreign currency denominated, forecasted sales and subsequent cash flows. The critical terms of the hedges are the same as the underlying forecasted transactions, and the

58

hedges are considered perfectly effective to offset the changes in fair value of cash flows from the hedged transactions. Gains and losses on these instruments are generally recorded in other comprehensive income (loss) until the underlying transaction is recognized in net income.

The Company enters into currency option and forward contracts to hedge anticipated foreign currency transactions during the next 12 months. The principal currency hedged is the Japanese yen.

The Company uses currency swap contracts to hedge a long-term intercompany loan. These contracts hedge the euro against the British pound. The terms of the swap contracts match the loan principal repayment terms. Gains or losses on these contracts are reflected in earnings and are offset by losses or gains on the underlying intercompany loan.

In addition, the Company enters into certain foreign currency forward contracts that are not treated as hedges under SFAS 133 to hedge recognized foreign currency transactions. Gains and losses on these contracts are recorded in net earnings and are substantially offset by the earnings effect of the revaluation of the underlying foreign currency denominated transaction.

Gains and losses arising from the use of the above instruments are recorded in the statement of operations concurrently with gains and losses arising from the underlying hedged transactions. The impact on pretax income of the currency forwards and options used to mitigate gains and losses on foreign exchange was a net (loss) gain of approximately $4.4 million, $9.2 million and $(1.6) million in 2002, 2001 and 2000, respectively.

The Company uses forward foreign exchange contracts to protect the value of its investments in its foreign subsidiaries in Europe. Realized and unrealized gains and losses from these hedges are not included in the income statement, but are shown in the cumulative translation adjustment account in other comprehensive income (loss), with the related amounts due to or from counterparties included in other liabilities or other assets.

During the year ended December 31, 2002, the Company recognized $3.1 million of net losses, included in the cumulative translation adjustment, related to the forward foreign currency exchange contracts.

Interest Rate Risk Management

The Company has employed certain hedging instruments to minimize its exposure to changes in interest rates, including an interest rate swap agreement. In 2000, the Company terminated a swap arrangement and as a result recognized a $2.9 million gain, which is being amortized over the remaining term of the underlying 7% fixed rate notes that are due July 15, 2009. In 2002, the Company entered into a $75 million interest rate swap accounted for as a fair value hedge to manage its exposure to interest rate changes.

Gains and losses arising from the use of such interest rate hedging instruments are recorded in the income statement concurrently with gains and losses arising from the underlying transactions. The impact on pretax income of interest rate risk management activities was a net gain of approximately $2.1 million for 2002.

Natural Gas Price Risk Management

The Company consumes natural gas during the normal course of production. The fluctuations of natural gas prices can vary the costs of production. During the second quarter of 2001, as part of its risk management strategy, the Company entered into fixed price swap and option contracts, including caps and floors, to manage its exposure to changes in natural gas prices. These natural gas contracts obligate the Company to make or receive a payment equal to the net change in the value of the contracts at their maturity. Such contracts are designated as hedges of the Company's

59

forecasted purchases up to November 2003 and are effective in hedging the Company's exposure to changes in natural gas prices during this period.

The natural gas contracts that qualify as cash flow hedges under SFAS 133 are marked to market with unrealized gains and losses deferred and recognized in earnings when realized as an adjustment to cost of products sold. Unrealized changes in fair value of contracts no longer effective as hedges are recognized in cost of products sold from the date that the contracts become ineffective until their expiration. The Company elected to terminate several contracts in 2002 with a supplier due to counterparty risk consideration. The amounts reclassified into earnings were immaterial. The impact on pretax income of natural gas risk management activities were a net (loss) of approximately $(1.1) million in 2002 and approximately $(1.8) million in 2001.

Fair Value of Financial Instruments

For certain of the Company's financial instruments, including cash and cash equivalents; accounts and notes receivable; accounts payable; and accrued expenses, the stated values approximate fair value due to their short-term nature. Consequently, such financial instruments are not included in the following table that provides information about the notional amounts, carrying amounts and estimated fair values of other financial instruments, both on and off the balance sheets:

	2002								2001
	Notional Amount		Carrying Amount			Fair Value			Notional Amount		Carrying Amount			Fair Value
Long-term debt including current portion	$	—	$	440.6		$	487.4		$	—	$	539.0		$	547.4
Interest rate swap agreements		75.0		9.3			9.3			—		—			—
Foreign currency options and forward contracts		140.6		(0.8	)		(0.8	)		102.5		3.4			3.4
Foreign currency swap contracts		36.2		3.3			3.3			22.9		5.2			5.2
Natural gas options and swap contracts		2.5		0.3			0.3			8.7		(2.6	)		(2.6	)

The estimated fair value of long-term debt is based primarily on quoted market prices for the same or similar issues. The fair values of option, forward exchange and swap contracts are based on quoted market prices of comparable instruments.

Concentrations of Credit Risk

The Company sells a broad range of products to a diverse group of customers operating throughout the world. These industries generally are not significantly affected by changes in economic or other factors. Credit limits, ongoing credit evaluation and account-monitoring procedures are utilized to minimize the risk of loss. Collateral is generally not required. Counterparties to the currency swap agreements are major financial institutions. Credit losses from counterparty nonperformance are not anticipated.

NOTE 18: COMMITMENTS AND CONTINGENCIES

The Company has various purchase commitments for raw materials, supplies and plant and equipment incident to the ordinary conduct of business. In the aggregate, such commitments are not at prices in excess of current market. At December 31, 2002, the Company had committed approximately $18 million to complete capital projects.

At December 31, 2002, the Company had guaranteed $22.2 million of debt of an unconsolidated affiliate. The unconsolidated affiliate was in violation of several covenants related to its debt that the Company guarantees. The affiliate is currently negotiating with the respective lenders to amend its loan agreements. The banks have not called the loan, and the Company believes that a waiver or amendment will be received and has not recorded a liability as of December 31, 2002.

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The Company has various operating leases primarily for the use of office space, computer equipment and services. Future minimum lease payments under these non-cancelable operating leases totaled $48.9 million at December 31, 2002, due as follows: 2003 - $10.7 million; 2004 -$7.0 million; 2005 - $7.0 million; 2006 - $6.1 million; 2007 - $5.3 million; 2008 and thereafter, $12.8 million.

Rent expense for all operating leases amounted to $14.8 million, $19.2 million and $15.8 million for 2002, 2001 and 2000, respectively.

The Company is subject to various lawsuits and claims with respect to matters such as governmental regulations, income taxes and other actions arising out of the normal course of business. The Company is also subject to contingencies pursuant to environmental laws and regulations that in the future may require the Company to take action to correct the effects on the environment of prior manufacturing and waste disposal practices.

The Company has been cooperating with the United States Department of Justice (DOJ) and the European Commission since the spring of 1998 in their respective investigations of the bromine and brominated products industry. Both investigations were initiated after the Company self-reported to those agencies certain business practices that raised questions under antitrust laws. As a result of the Company's cooperation, the Company and its current directors and employees were accepted into the DOJ's amnesty program. Concurrently, the Company sought favorable treatment under a program in the European Union that also rewards self-reporting and cooperation. To the Company's knowledge, no proceedings have ever been instituted in the European Union in connection with the investigation.

The Company believes it has fully complied with all applicable conditions to date and has continued to cooperate with the DOJ in connection with certain follow-up matters arising out of the investigation, all of which are covered by the Company's acceptance into the amnesty program. Although, to the Company's knowledge, there have been no additional matters that have arisen in connection with the investigations, the Company intends to continue to be in full compliance with the DOJ and European Union programs.

There were ten federal purported class action lawsuits and five California purported class actions naming the Company, each claiming treble damages arising out of an alleged conspiracy concerning the pricing of bromine and brominated products. The federal lawsuits were consolidated in the District Court for the Southern District of Indiana, which, over the Company's objections, certified a class of direct purchasers of certain brominated products.

On September 10, 2002, the Company agreed to settle all of the federal class actions. The settlement agreement affects direct purchasers from the Company of brominated diphenyl oxides (decabromodiphenyl oxide, octabromodiphenyl oxide and pentabromodiphenyl oxide) and their blends, tetrabromobisphenol-A and its derivatives and all methyl bromide products and their derivatives in the United States between January 1, 1995 and April 30, 1998. The Company agreed to a $4.1 million cash payment and $2.6 million in vouchers for the future purchase of decabromodiphenyl oxide and/or tetrabromobisphenol-A, to be distributed to class members. The settlement was reflected in the third quarter of 2002 as a reduction to litigation reserves previously recorded in prior periods.

Pursuant to the settlement agreement, the Company remitted the cash portion to an escrow account on November 8, 2002, subject to final approval of the settlement agreement by the federal court. After notice to class members, the federal court gave final approval to the settlement in January 2003. The plaintiffs have submitted a plan of distribution for court approval. The plan included a form of voucher agreed to by the Company.

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The California cases pending in the Superior Court for San Francisco County claim alleged violations of California competition laws and were stayed pending resolution of the federal cases. The cases are not impacted by the federal settlement. The Company has denied that the cases were legitimately filed as class actions, denies all liability and intends to defend the cases vigorously.

OSCA, the interest in which the Company divested to BJ Services Company as of May 31, 2002, is a party to certain pending litigation regarding a blowout of a well in the Gulf of Mexico operated by Newfield Exploration Company. In the lawsuit, the plaintiffs claimed that OSCA and the other defendants breached their contracts to perform work-over operations on the well and were negligent in performing those operations. On April 4, 2002, a jury reached a verdict on those claims, finding OSCA and the other defendants responsible for those claims and determining OSCA's share of the damages. In connection with the lawsuit, the Company asserted claims against its insurers and insurance brokers in support of insurance coverage for this incident. A related trial on these insurance coverage claims was conducted by the submission of legal briefs. Thereafter, the court issued its final judgments on the underlying liability claims and the insurance coverage claims, entering judgment against OSCA for a net amount of approximately $13.3 million plus interest, and finding that such amount was only partially covered by insurance. Pursuant to an indemnification agreement between the Company and BJ Services entered into at the time of the sale of OSCA (see Note 4 to the Consolidated Financial Statements), Great Lakes has agreed to pay BJ Services a certain percentage of any uninsured cash damages in excess of an amount paid by OSCA upon settlement or final determination of this pending litigation. As of December 31, 2002, the Company recorded a $9.0 million reserve in discontinued operations for this indemnification liability. Great Lakes and BJ expect to appeal some or all of the liability and insurance coverage decisions.

On May 28, 2002, Albemarle Corporation filed two complaints against the Company in the United States District Court for the Middle District of Louisiana, one alleging that the Company had infringed on three process patents held by Albemarle Corporation relating to bromine vacuum tower technology, and the other alleging that the Company had infringed or contributed or induced the infringement of a patent relating to the use of decabromodiphenyl ehtane as a flame retardant in thermoplastics. On a motion by the Company and over Albemarle's objection, the cases were consolidated. In addition, the Company has filed a counterclaim with the District Court in the flame retardant cases, alleging, among other things, that the Albemarle patent is invalid or was obtained as a result of inequitable conduct in the United States Patent and Trademark Office.

With respect to the Albemarle case, the Company believes that the allegations of the complaints are without basis factually or legally, and intends to defend the cases vigorously.

Litigation accruals of approximately $16.8 million and $13.2 million have been reflected in the Company's consolidated balance sheet as of December 31, 2002 and 2001, respectively.

The Company is subject to various U.S. and international federal, state and local environmental, health and safety laws and regulations. The Company is also subject to liabilities arising under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), the Resource Conservation and Recovery Act ("RCRA") and similar state and international laws that impose responsibility for remediation of hazardous substances and hazardous waste constituents released into the environment.

The Company provides reserves for environmental liabilities that management considers probable for which a reasonable estimate of the liability can be made. Accordingly, the Company's reserves for environmental liabilities, including reserves associated with restructuring charges, were approximately $45.2 million and $53.7 million at December 31, 2002 and 2001, respectively, with the current portion of these liabilities included in accrued expenses and the long-term portion included in noncurrent liabilities. While it is difficult to predict or determine the outcome of actions brought against the Company or the ultimate cost of environmental matters, management believes that the

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ultimate cost, if any, in excess of the amounts already provided is not likely to have a material adverse effect on its consolidated financial position, consolidated results of operations or liquidity.

NOTE 19: QUARTERLY FINANCIAL DATA (UNAUDITED)

A summary of the quarterly results of operations for the years ended December 31, 2002 and 2001 is as follows:

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

(millions, except per share data) 2002 - Three Months Ended			March 31(1)			June 30			September 30			December 31
Net sales			$	305.0		$	408.5		$	360.6		$	327.4
Operating expenses
	Cost of products sold			237.8			304.1			276.6			251.7
	Selling, general and administrative expenses			50.4			58.6			54.3			51.7
	Special charges			—			1.7			(0.4	)		3.8
Operating income (loss) from Continuing Operations				16.8			44.1			30.1			20.2
Interest income (expense) - net				(8.5	)		(7.1	)		(6.2	)		(5.8	)
Other income (expense) - net				(0.6	)		(5.0	)		(4.3	)		(5.0	)
Income (loss) from Continuing Operations before income taxes				7.7			32.0			19.6			9.4
Income taxes (credit)				2.6			9.9			5.9			2.9
Income (loss) - Continuing Operations				5.1			22.1			13.7			6.5
Income (loss) - Discontinued Operations				(6.6	)		83.8			(0.7	)		1.1
Net income (loss)			$	(1.5	)	$	105.9		$	13.0		$	7.6
Earnings (loss) per share:
	Basic
		Continuing Operations	$	0.10		$	0.44		$	0.27		$	0.13	(2)
		Discontinued Operations	$	(0.13	)	$	1.67		$	(0.02	)	$	0.02
	Diluted
		Continuing Operations	$	0.10		$	0.44		$	0.27		$	0.13	(2)
		Discontinued Operations	$	(0.13	)	$	1.67		$	(0.02	)	$	0.02

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2001 - Three Months Ended		March 31(1)			June 30			September 30			December 31
Net sales		$	342.1		$	406.3		$	321.1		$	283.3
Operating expenses
	Cost of products sold		260.3			316.2			299.6			245.0
	Selling, general and administrative expenses		54.4			59.9			56.5			53.7
	Special charges		—			72.7			71.4			4.5
Operating income (loss) from Continuing Operations			27.4			(42.5	)		(106.4	)		(19.9	)
Gain on sale of subsidiary stock			—			—			—			—
Interest income (expense) - net			(8.7	)		(8.7	)		(7.5	)		(7.9	)
Other income (expense) - net			(0.3	)		(27.1	)		(11.4	)		(8.0	)
Income (loss) from Continuing Operations before income taxes			18.4			(78.3	)		(125.3	)		(35.8	)
Income taxes			6.8			(24.6	)		(27.0	)		5.0
Income (loss) - Continuing Operations		$	11.6		$	(53.7	)	$	(98.3	)	$	(40.8	)
Income (loss) - Discontinued Operations			8.6			(100.0	)		(8.3	)		(8.6	)
Net income (loss)		$	20.2		$	(153.7	)	$	(106.6	)	$	(49.4	)
Earnings per share:
Basic
	Continuing Operations	$	0.23		$	(1.07	)	$	(1.95	)	$	(0.81	)
	Discontinued Operations	$	0.17		$	(1.99	)	$	(0.17	)	$	(0.17	)
Diluted
	Continuing Operations	$	0.23		$	(1.07	)	$	(1.95	)	$	(0.81	)
	Discontinued Operations	$	0.17		$	(1.99	)	$	(0.17	)	$	(0.17	)

⁽¹⁾

Amounts reported for the first quarter of 2002 and 2001 have been restated from the March 31, 2002 Form 10-Q as filed, due to the Fine Chemicals business being reported as discontinued operations in the second quarter of 2002.

⁽²⁾

Earnings per share from continuing operations for 2002 were reduced by $0.01 per share, reflecting adjustments made subsequent to the Company's press release issued January 28, 2003.

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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We have audited the accompanying consolidated balance sheets of Great Lakes Chemical Corporation as of December 31, 2002 and 2001, and the related consolidated statements of operations, cash flows and stockholders' equity for each of the three years in the period ended December 31, 2002. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Great Lakes Chemical Corporation at December 31, 2002 and 2001, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 1 to the Consolidated Financial Statements, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," in 2002.

/s/ ERNST & YOUNG LLP

Indianapolis, Indiana
January 28, 2003

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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 17, 2003 /s/ Mark P. Bulriss Mark P. Bulriss, Chairman, President and Chief Executive Officer
(Principal Executive Officer)

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Certifications

I, Mark P. Bulriss, certify that:

1.

I have reviewed this annual report on Form 10-K of Great Lakes Chemical Corporation;

2.

Based on my knowledge, this annual 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 annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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 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 annual 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 annual report (the "Evaluation Date"); and

c)

presented in this annual 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 annual report whether 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:    March 17, 2003 /s/ Mark P. Bulriss
Mark P. Bulriss, Chief Executive Officer

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I, John J. Gallagher III, certify that:

1.

I have reviewed this annual report on Form 10-K of Great Lakes Chemical Corporation;

2.

Based on my knowledge, this annual 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 annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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 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 annual 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 annual report (the "Evaluation Date"); and

c)

presented in this annual 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 annual report whether 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:    March 17, 2003 /s/ John J. Gallagher III
John J. Gallagher III, Chief Financial Officer

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QuickLinks

Explanatory Note

ITEM 8. Financial Statements and Supplementary Data

SIGNATURES

Certifications