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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2002

Commission File Number: 333-70011

GEO SPECIALTY CHEMICALS, INC.
(Exact Name of Registrant as Specified in Its Charter)

Ohio
(State or Other Jurisdiction of
Incorporation or Organization)		   34-1708689
(I.R.S. Employer
Identification No.)

GEO Specialty Chemicals, Inc.
3201 Enterprise Parkway, Suite 490
Cleveland, Ohio 44122
(Address, including Zip Code, of Principal Executive Offices)

(216) 464-5564
(Registrant’s Telephone Number, including Area Code)

     Indicate by check mark whether the registrant: (l) has filed all reports required to be filed by Section 13 or l5(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

     Shares of Class A Voting Common Stock, $1.00 par value, as of November 12, 2002: 135.835.

     Shares of Class B Nonvoting Common Stock, $1.00 par value, as of November 12, 2002: none.

PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

CONSOLIDATED BALANCE SHEETS
GEO SPECIALTY CHEMICALS, INC.

  (IN THOUSANDS EXCEPT SHARE DATA)
  SEPTEMBER
30, 2002		   DECEMBER
31, 2001
 
 
  (unaudited)    
ASSETS          
Current assets          
Cash
$
6,254
  
$
19,782
Trade accounts receivable, net of allowance
  
25,194
    
24,292
of $516 and $556 at September 30, 2002 and
          
December 31, 2001, respectively
          
Other receivables
  
293
    
788
Inventory
  
28,736
    
28,921
Prepaid expenses and other current assets
  
2,657
    
1,601
Deferred taxes
  
1,213
    
1,401
 
 
           
Total current assets
  
64,347
    
76,785
           
Property and equipment, net
  
103,427
    
108,522
           
Other assets
          
Intangible assets, net
  
10,613
    
8,671
Goodwill, net
  
86,847
    
90,292
Other accounts receivable
  
1,136
    
92
Deferred taxes
  
3,218
    
449
Other
  
1,743
    
1,692
 
 
           
Total other assets
  
103,557
    
101,196
 
 
           
           
Total assets
$
271,331
  
$
286,503
 
 

  (IN THOUSANDS EXCEPT SHARE DATA)
               
  SEPTEMBER
30, 2002		  

DECEMBER
31, 2001
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY (unaudited)  
               
Current liabilities              
Current portion of long-term debt
$
975
    
$
1,050
  
Accounts payable
  
14,413
      
14,127
  
Other accounts payable
  
68
      
112
  
Income taxes payable
  
270
      
2,927
  
Accrued expenses and other current
              
Liabilities
  
9,052
      
10,856
  
 
 
               
Total current liabilities
  
24,778
      
29,072
  
               
Long-term liabilities
              
Revolving line of credit
  
-
      
-
  
               
Senior subordinated notes
  
120,000
      
120,000
  
Fair value adjustment
  
2,173
      
(4,611
)
 
   
 
Fair value of senior subordinated notes
  
122,173
      
115,389
  
               
Term B facility
  
95,550
      
103,950
  
Other long-term liabilities
  
6,295
      
8,983
  
Other accounts payable
  
-
      
252
  
 
   
 
               
Total long-term liabilities
  
224,018
      
228,574
  
 
 
               
Total liabilities
$
248,796
    
$
257,646
  
               
               
               
Shareholders' Equity
              
Class A Voting Common Stock, $1.00 par value,
              
1,035 shares authorized, 135.835 shares issued and
              
outstanding at September 30, 2002 and
              
December 31, 2001
              
               
Class B Nonvoting Common Stock, $1 par value,
              
215 shares authorized, 0 shares outstanding at
              
September 30, 2002 and December 31, 2001
              
               
Additional paid-in capital
  
20,901
      
20,901
  
Retained earnings
  
4,860
      
8,829
  
               
Accumulated other comprehensive loss
  
(3,226
)
    
(873
)
 
 
               
Total shareholders' equity
$
22,535
    
$
28,857
  
 
 
               
Total liabilities and shareholders' equity
$
271,331
    
$
286,503
  
 
 

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
GEO SPECIALTY CHEMICALS, INC

          (IN THOUSANDS)  
    JULY 1   JULY 1   JAN. 1   JAN. 1
    THROUGH   THROUGH   THROUGH   THROUGH
    SEPT. 30, 2002   SEPT. 30, 2001   SEPT. 30, 2002   SEPT. 30, 2001
   
 
 
 
Net sales   $ 42,155     $ 45,981     $ 126,092     $ 147,292  
Costs of sales     35,288       36,500       103,871       109,764  
 
Gross profit     6,867       9,481       22,221       37,528  
Selling general and administrative                                
expenses     4,393       6,047       13,916       17,657  
Other expenses (income)     -       -       (33 )     -  
 
Income from operations     2,474       3,434       8,338       19,871  
Other expense                                
Net interest expense
     (5,027 )     (5,280 )     (14,517 )     (12,774 )
Foreign currency exchange gain (loss)
     (325 )     20       (781 )     18  
Other
     953       -       953       2,766  
 
Income (loss) before taxes     (1,925 )     (1,826 )     (6,007 )     9,881  
                                 
Provision (benefit) for taxes     (648 )     (1,536 )     (2,038 )     3,404  
 
Net income (loss)   $ (1,277 )   $ (290 )   $ (3,969 )   $ 6,477  
   
 
 
 
Total comprehensive income (loss)   $ 321     $ (771 )   $ (6,322 )   $ 5,996  
   
 
 
 

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
GEO SPECIALTY CHEMICALS, INC.

    (IN THOUSANDS)
    JAN 1   JAN 1
    THROUGH   THROUGH
    SEPT. 30, 2002   SEPT. 30, 2001
   
 
Cash flows from operating activities
                
Net income (loss)
   $ (3,969 )   $ 6,477  
Adjustments to reconcile net income
                
(loss) to net cash from operating
                
activities
                
Depreciation, depletion and
     11,632       12,646  
amortization
                
Gain on sale of Paper business
     -       (2,766 )
Deferred income tax (benefit)
     (2,579 )     (1,699 )
Gain on derivative instruments
     1,159       -  
Change in assets and liabilities
                
Trade accounts receivable
     (2,590 )     (3,609 )
Other accounts receivable
     (549 )     1,357  
Inventories
     184       (2,152 )
Prepaid expense and other assets
     (329 )     (780 )
Accounts payable
     (3,365 )     (323 )
Other liabilities
     (79 )     (536 )
   
 
Net cash from operating activities
     (485 )      8,615  
Cash flows from investing activities
                
Purchases of property, plant and
                
equipment
     (3,743 )     (5,541 )
Proceeds from sale of Paper
                
Business
     -       8,500  
Purchase of GEO Pinjarra from
                
Rhodia Chimie
     (497 )     -  
Project expenditures related to
                
Pinjarra, Australia Capital Project
     -       (1,326 )
Purchase of assets of Peroxy
                
Chemicals business from Hercules,
                
Inc.
     -       (93,137 )
   
 
Net cash flows from investing
                
activities
     (4,240 )     (91,504 )
Cash flows from financing activities
                
Borrowings (repayments) under
                
revolving line of credit (net)
     -       (10,000 )
Payments on Term B notes
     (8,475 )     -  
Borrowings on Term B notes
     -       105,000  
Payments on deferred financing
                
Costs
     (328 )     (4,668 )
   
 
Net cash from financing activities
     (8,803 )     90,332  
   
 
Net change in cash
     (13,528 )     7,443  
Cash at beginning of period
     19,782       7,930  
   
 
Cash at end of period
     6,254       15,373  
   
 
Supplemental disclosure of cash flow
                
Information
                
Cash paid for
                
Interest
   $ 15,005     $ 13,072  
Taxes
     3,485       3,323  

In conjunction with the acquisition of the stock of Rhodia Pinjarra Pty Ltd. from Rhodia Chimie, liabilities were assumed as follows:

 
Fair value of assets acquired
    $
 1,376
  
Cash paid
   
(497
 )
Release of certain receivables due to
   purchaser from seller, net of certain
   liabilities released due to seller
   from purchaser
    
(879 
 )