-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ADAnOE/63QExFwK3OirqNzLNUmQstuMQY0AnmwD2x5JAJMLSKflWq+dHh/icxwiU XBnWedMKtzRV+qIhrm/gXg== 0000891554-94-000064.txt : 19941117 0000891554-94-000064.hdr.sgml : 19941117 ACCESSION NUMBER: 0000891554-94-000064 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WITCO CORP CENTRAL INDEX KEY: 0000107889 STANDARD INDUSTRIAL CLASSIFICATION: 2860 IRS NUMBER: 131870000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04654 FILM NUMBER: 94559559 BUSINESS ADDRESS: STREET 1: 520 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022-4236 BUSINESS PHONE: 2126053800 FORMER COMPANY: FORMER CONFORMED NAME: WITCO CHEMICAL CORP DATE OF NAME CHANGE: 19851117 FORMER COMPANY: FORMER CONFORMED NAME: WITCO CHEMICAL CO INC DATE OF NAME CHANGE: 19681203 10-Q 1 FORM 10-Q FOR WITCO CORPORATION SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1994 Commission File Number 1-4654 WITCO CORPORATION - - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-1870000 - - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One American Lane, Greenwich, Connecticut 06831-2559 - - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (203) 552-2000 - - ------------------------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ---- ---- The number of shares of common stock outstanding is as follows: Class Outstanding at October 31, 1994 ----- ------------------------------- Common Stock - $5 par value 56,142,789 WITCO CORPORATION FORM 10-Q September 30, 1994 CONTENTS PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed consolidated balance sheets at September 30, 1994 and December 31, 1993 2 Condensed consolidated statements of income for the three and nine months ended September 30, 1994 and 1993 3 Condensed consolidated statements of cash flows for the nine months ended September 30, 1994 and 1993 4 Notes to condensed consolidated financial statements 5 Independent accountants' report on review of interim financial information 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings 12 Item 6. Exhibits and Reports on Form 8-K 13 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WITCO CORPORATION AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands Except Per Share Data)
September December 30, 31, 1994 1993 (a) ------------- ------------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 182,318 $ 183,050 Accounts and notes receivable-net 421,034 340,850 Inventories Raw materials and supplies $ 97,713 $ 81,440 Finished goods 152,054 249,767 146,029 227,469 ------- -------- Prepaid and other current assets 46,694 41,204 --------- --------- TOTAL CURRENT ASSETS 899,813 792,573 --------- --------- PROPERTY, PLANT AND EQUIPMENT - less accumulated depreciation of $683,407 and $621,684 721,365 696,462 INTANGIBLE ASSETS - less accumulated amortization of $49,341 and $38,612 194,525 217,032 OTHER ASSETS 103,837 132,931 --------- --------- TOTAL ASSETS $ 1,919,540 $ 1,838,998 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes and loans payable $ 3,174 $ 4,194 Accounts payable and other current liabilities 348,524 337,144 --------- --------- TOTAL CURRENT LIABILITIES 351,698 341,338 --------- --------- LONG-TERM DEBT 349,074 496,266 DEFERRED FEDERAL AND FOREIGN INCOME TAXES 70,475 74,612 DEFERRED CREDITS AND OTHER LIABILITIES 218,476 213,367 SHAREHOLDERS' EQUITY $2.65 Cumulative Convertible Preferred Stock, par value $1 per share Authorized - 14 shares Issued and outstanding - 7 and 9 shares 7 9 Common Stock, par value $5 per share Authorized - 100,000 shares Issued - 56,312 and 50,818 shares 281,561 254,089 Capital in excess of par value 127,499 6,123 Equity adjustments: Foreign currency translation 2,868 (23,723) Pensions (6,548) (6,548) Retained earnings 527,279 488,241 Less cost of 190 and 318 shares of common stock in treasury (2,849) (4,776) --------- --------- TOTAL SHAREHOLDERS' EQUITY 929,817 713,415 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,919,540 $ 1,838,998 ========= ========= (a) The balance sheet at December 31, 1993, has been derived from the audited financial statements at that date.
See accompanying notes. 2 WITCO CORPORATION AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, -------------------------- -------------------------- 1994 1993 1994 1993 ----------- ----------- ----------- ----------- (In Thousands Except Per Share Data) REVENUES Net sales $ 564,174 $ 540,603 $ 1,683,188 $ 1,643,226 Interest 2,500 1,995 7,149 6,091 ----------- ----------- ----------- ----------- 566,674 542,598 1,690,337 1,649,317 ----------- ----------- ----------- ----------- COSTS AND EXPENSES Cost of goods sold (exclusive of depreciation and amortization) 439,353 414,892 1,295,129 1,272,025 Selling and administrative expenses 58,738 56,843 179,963 175,617 Depreciation and amortization 25,622 26,894 79,127 80,163 Interest 7,125 9,251 21,965 26,520 Other expense (income)-net (4,161) 11,330 (9,571) 20,224 ----------- ----------- ----------- ----------- 526,677 519,210 1,566,613 1,574,549 ----------- ----------- ----------- ----------- INCOME BEFORE FEDERAL AND FOREIGN INCOME TAXES 39,997 23,388 123,724 74,768 FEDERAL AND FOREIGN INCOME TAXES 12,999 9,763 42,303 27,438 ----------- ----------- ----------- ----------- NET INCOME $ 26,998 $ 13,625 $ 81,421 $ 47,330 =========== =========== =========== =========== PER COMMON SHARE: Net Income $ .48 $ .27 $ 1.46 $ .94 Net Income - assuming full dilution $ .48 $ .26 $ 1.46 $ .94 Dividends declared $ .28 $ .25 $ .78 $ .71 Weighted average number of common shares and equivalents - primary 56,383 56,258 56,389 54,364 =========== =========== =========== ===========
See accompanying notes. 3 WITCO CORPORATION AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, ------------------------- 1994 1993 ------- --------- (In Thousands) NET CASH PROVIDED BY OPERATING ACTIVITIES $ 87,052 $116,397 ------- --------- INVESTING ACTIVITIES Expenditures for property, plant and equipment (82,653) (71,971) Proceeds from dispositions 24,194 - Other investing activities 2,384 (5,928) ------- --------- Net Cash Used in Investing Activities (56,075) (77,899) ------- --------- FINANCING ACTIVITIES Proceeds from common stock offering - 142,169 Proceeds from borrowings 657 366,192 Payments on borrowings (3,892) (489,044) Dividends paid (39,294) (32,060) Other financing activities 2,155 1,519 ------- --------- Net Cash Used in Financing Activities (40,374) (11,224) ------- --------- Effects of Exchange Rate Changes on Cash and Cash Equivalents 8,665 (2,077) ------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (732) 25,197 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 183,050 134,447 ------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $182,318 $159,644 ======= ========= See accompanying notes. 4 WITCO CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - Basis of Preparation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. Operating results for the nine month period ended September 30, 1994, are not necessarily indicative of the results that may be expected for the year ending December 31, 1994. For further information, refer to the consolidated financial statements and footnotes thereto included in the company's annual report on Form 10-K for the year ended December 31, 1993. The condensed consolidated financial statements at September 30, 1994, and for the nine month periods ended September 30, 1994 and 1993, have been reviewed in accordance with standards established by the American Institute of Certified Public Accountants, by independent accountants, Ernst & Young LLP, and their report is included herein. NOTE B - Common Stock Split On September 2, 1993, the Board of Directors of the company authorized a two for one common stock split in the form of a 100% stock distribution issuable to shareholders of record as of September 16, 1993. The distribution was made on October 5, 1993. All common stock share and per share data for the periods presented reflect the split. NOTE C - Redemption of 5 1/2% Convertible Debentures In March 1994, the company called for redemption all of its $150,000,000 outstanding 5 1/2% Convertible Subordinated Debentures due 2012. $149,890,000 of the principal was converted into approximately 5,495,000 shares of common stock at a conversion price of $27.28 per share and $110,000 of the principal was redeemed for cash at a premium of 1.65%. Since the shares underlying the debentures had been previously included as common stock equivalents, the shares converted have no effect on the net income per common share calculations. NOTE D - Other Matters The statement of income for the nine month period ended September 30, 1994, includes a gain of $3,133,000, or $.06 per common share, from the sale of the metal finishing and metal working businesses of the company's Allied-Kelite subsidiary. The pre-tax gain of $4,820,000 is included in the caption "Other expense (income) - net." Statements of income for the three and nine month periods ended September 30, 1993, include a charge of $1,718,000, or $.03 per common share, as a result of the increase in the U.S. federal tax rate. The statements of income for the three and nine month periods ended September 30, 1993, include a charge of $7,563,000, or $.14 per common share, as a result of a legal judgment against the company. The pre-tax charge of $11,636,000 is included in the caption "Other expense (income) - net". The statement of income for the nine month period ended September 30, 1993, includes a charge of $6,061,000, or $.11 per common share, for a loss on sublease of office facilities. The pre-tax charge of $9,184,000 is included in the caption "Other expense (income) - net." 5 NOTE E - Litigation and Environmental The company has been notified, or is a named or a potentially responsible party in a number of governmental (federal, state, and local) and private actions associated with environmental matters, such as those relating to hazardous wastes, including certain sites which are on the United States EPA National Priorities List. These actions seek cleanup costs, penalties and/or damages for personal injury or damage to property or natural resources. The company evaluates and reviews environmental reserves for future remediation and compliance costs on a quarterly basis to determine appropriate reserve amounts. Inherent in this process are considerable uncertainties which affect the company's ability to estimate the ultimate costs of remediation efforts. Such uncertainties include the nature and extent of contamination at each site, evolving governmental standards regarding remediation requirements, the number and financial condition of other potentially responsible parties at multi-party sites, innovations in remediation and restoration technology, and the identification of additional environmental sites. At September 30, 1994, the company's reserves for environmental remediation and compliance costs amounted to $96,539,000, reflecting Witco's estimate of the costs which will be incurred over an extended period of time in respect of these matters which are reasonably estimable. The company has numerous insurance policies which it believes provide coverage at various levels for environmental liabilities. The company is currently in litigation with many of its insurers concerning the applicability and amount of insurance coverage for environmental costs under certain of these policies. Except for amounts reflected in executed settlement agreements, no provision for recovery under any of these policies is included in the company's financial statements. The company is not a party to any legal proceedings, including environmental matters, which it believes will have a material adverse effect on its consolidated financial position. 6 Independent Accountants' Review Report The Board of Directors Witco Corporation We have reviewed the accompanying condensed consolidated balance sheet of Witco Corporation and Subsidiary Companies as of September 30, 1994, and the related condensed consolidated statements of income for the three-month and nine-month periods ended September 30, 1994 and 1993, and the condensed consolidated statements of cash flows for the nine-month periods ended September 30, 1994 and 1993. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Witco Corporation and Subsidiary Companies as of December 31, 1993, and the related consolidated statements of income, shareholders' equity, and cash flows for the year then ended (not presented herein) and in our report dated January 27, 1994, except for Note 7, as to which the date is March 11, 1994, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1993, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. ERNST & YOUNG LLP Stamford, Connecticut November 9, 1994 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND FINANCIAL RESOURCES Although cash and cash equivalents have decreased slightly since year-end, record sales have resulted in a $89.9 million increase in other components of working capital. Additional accounts receivable represents $67.1 million of this increase. The company anticipates that cash flow from operations will be sufficient to fund, for the foreseeable future, capital investments, dividend payments, commitments on environmental remediation projects, and operating requirements. Earlier in the year the company completed the redemption of all of its $150 million outstanding 5 1/2% Convertible Subordinated Debentures due 2012. $149.9 million of this debt was converted into the company's common stock. The redemption was called to provide greater financial flexibility as the company continues in its efforts to expand product lines and marketing capabilities of its core businesses. See Note C to the Financial Statements for further discussion regarding the redemption. The company is moving forward in its efforts to divest non-core businesses. The Allied-Kelite operations were sold in the second quarter for $24.2 million and the sale of the Battery Parts business is expected to be completed by the end of the year. Early in the fourth quarter the company also announced its intention to sell its Concarb operations. Concarb, a producer of carbon black used mostly in the rubber industry for the manufacture of tires, has plants in Ponca City, Oklahoma; Sunray, Texas; and Phenix City, Alabama. It is anticipated that the proceeds from these divestitures will be used to fund an acquisition(s) that will accelerate the global expansion of the company's core businesses. CAPITAL INVESTMENTS AND COMMITMENTS Capital expenditures during the first nine months of 1994 amounted to $82.7 million compared to $72 million during the same period of 1993. Capital expenditures are expected to exceed $110 million in 1994 which would be a record level of capital investment by the company. The company has successfully completed the assimilation of the businesses acquired in late 1992 from Schering AG and is now focusing its efforts on reviewing possible acquisition candidates. The company is seeking an acquisition(s) that will expand its product offerings and market share in its core businesses. An ideal acquisition candidate will be one that will position the company for significant growth in North America, Europe, and the Pacific Rim. CONTINGENCIES The company has been notified, or is a named or a potentially responsible party in a number of governmental (federal, state, and local) and private actions associated with environmental matters, such as those relating to hazardous wastes, including certain sites which are on the United States EPA National Priorities List. These actions seek cleanup costs, penalties and/or damages for personal injury or damage to property or natural resources. The company is not a party to any legal proceedings or environmental matters which it believes will have a material adverse effect on its consolidated financial position. It is possible, however, that future results of operations and cash flows, for any particular quarterly or annual period, could be materially affected by such legal proceedings or environmental matters. However, the company does not expect the results of such proceedings or environmental matters to materially affect its competitive position. 8 RESULTS OF OPERATIONS Reported sales of $564.2 million outpaced sales for the same quarter of 1993 by $23.6 million, or 4 percent. Higher sales volume in both the Chemical and Petroleum Segments led to the increase. Sales in 1994 were affected by the divestitures of the company's Chemprene subsidiary in the fourth quarter of 1993 and Allied-Kelite's operations in the second quarter of 1994. Reported sales for these businesses were $18 million for the third quarter of 1993. Despite an across the board lag in the recovery of higher raw material costs, third quarter 1994 net income of $27 million was achieved. Prior year third quarter reported net income included non-recurring charges of $7.6 million for a legal judgment and $1.7 million attributable to an increase in the U.S. corporate tax rate. Excluding non-recurring items from 1993's results, current year third quarter net income was $4.1 million over the same quarter of 1993. Although shipment volume was up 9 percent during this period, gross profit was unchanged. Higher raw material feedstock costs and lower sales prices in certain Petroleum businesses offset the profit contribution from increased sales volume for the current quarter. Lower interest expense attributable to the redemption of the company's 5 1/2% Convertible Subordinated Debentures during the first quarter of 1994 accounted for approximately one-third of the quarter's increase in net income before non-recurring items. The remainder of the increase was due to favorable fluctuations in other corporate expenses. Reported net sales for the first nine months of 1994 were $1,683.2 million, compared to sales of $1,643.2 million for the same period of 1993. Excluding Chemprene's and Allied-Kelite's decrease of $38 million, sales increased $78 million. Higher sales were attained through a 5 percent increase in volume, principally in the Chemical Segment. The company's reported net income of $81.4 million for the first nine months of 1994 and $47.3 million for the corresponding period of 1993 included several non-recurring items. Current year results included a $3.1 million gain on the sale of the Allied-Kelite businesses, while 1993 contained the previously noted third quarter non-recurring items and a $6.1 million provision for loss on sublease of office facilities. Excluding non-recurring items, net income for the first nine months of 1994 was $78.3 million compared to $62.7 million for the same period of 1993. An increase in gross profit margins of approximately 1 percent and a 5 percent increase in shipment volume continue to be the predominate factors leading to the 25 percent increase in net income before non-recurring items. A combination of lower feedstock costs early in the year, favorable sales mix and cost saving initiatives have contributed to improved margins for the current year. Conversely, higher domestic pension costs, attributable to plan amendments and assumption changes, had a $3.9 million adverse effect on net income. Segment net sales and operating income for the third quarter and first nine months of 1994 and 1993 are set forth in the following table. Income and expenses of a general nature are not allocated to industry segments in computing operating income. These include general corporate expenses, interest income and expense, and certain other income and expenses. Three Months Ended Nine Months Ended September 30, September 30, 1994 1993 1994 1993 ----- ----- ------- ------- Net Sales Chemical $ 336.2 $303.3 $1,008.2 $ 948.4 Petroleum 203.1 195.9 579.0 568.6 Diversified products 28.9 45.2 108.3 138.4 Intersegment elimination (4.0) (3.8) (12.3) (12.2) ----- ----- ------- ------- Total Net Sales $ 564.2 $540.6 $1,683.2 $1,643.2 ===== ===== ======= ======= Operating Income Chemical $ 29.0 $ 24.8 $ 95.5 $ 82.9 Petroleum 16.2 8.5 47.3 31.4 Diversified products 1.4 3.0 12.0 7.7 ----- ----- ------- ------- Total Operating Income $ 46.6 $ 36.3 $ 154.8 $ 122.0 ===== ===== ======= ======= Domestic operations accounted for 70 percent of the company's net sales and 68 percent of its operating income for the first nine months of 1994. These amounts were comparable to those of the same period of the prior year. Current year third quarter comparable percentages for both sales and operating income were the same as reported for the first nine months of 1994. However, a comparison of the third quarter 1994 to the third quarter of 1993 shows that the company's domestic operations' contribution to net sales declined 3 percent, while contributing a 5 percent higher amount to net income. 9 CHEMICAL SEGMENT Primarily due to an increase in sales volume, the segment's 1994 third quarter net sales were 11 percent ahead of sales for the same period of 1993. Each of the segment's three operating groups shared in an overall 9 percent increase in shipments. Operating income for the Chemical Segment rose $4.2 million, or 17 percent, during the third quarter of 1994 compared to the same quarter of 1993. The Polymer Additives Group accounted for approximately two-thirds of the segment's higher operating earnings. This strong performance was attributable to increased shipments to PVC manufacturers, domestic manufacturing efficiencies and an upturn in the European economy. Greater sales volume in PVC additives was indicative of a rise in housing starts, greater industrial construction and higher automobile sales. Higher operating earnings were also reported by both the Surfactants and International/Europe Groups. An increase in shipment volume of approximately 10 percent, primarily a reflection of increased global demand for surfactant products, led to improved results. Net sales for the first nine months of 1994 were up 6 percent compared to the first nine months of 1993. Shipment volume rose 7 percent during this period while sales prices were unchanged. Segment operating income for the first nine months of 1994 was 15 percent above the income reported for the corresponding period of the prior year. Approximately half of the segment's improved operating earnings was attributable to the favorable results reported by each of the Polymer Additives Group's business units. As noted for the quarter, increased sales to PVC manufacturers, cost cutting initiatives, and a more robust European economy were the factors which led to the group's higher earnings. The Surfactants and International/Europe Groups also reported earnings that were up during this nine month period. The reported increase for the Surfactants Group resulted from its ability to increase shipment volume by 8 percent, while maintaining the group's selling, general and administrative expenses at 1993 levels. Greater shipment volume, primarily attributable to a 20 percent growth of the group's Surfactant business, coupled with cost saving initiatives including the consolidation of sales and administrative functions, accounted for the higher International/Europe Group's operating income. PETROLEUM SEGMENT Third quarter 1994 net sales were 4 percent ahead of sales for the third quarter of 1993. A 9 percent increase in sales volume was offset partially by a 5 percent drop in selling prices. Prevailing adverse market conditions for asphalt and industrial products and an unfavorable sales mix of petroleum specialty products caused sales prices to decline. 1993's third quarter earnings were adversely affected by a $11.6 million legal judgment. Excluding this non-recurring charge, third quarter 1994 segment earnings declined $4 million, or 20 percent, from the same period of 1993. Both of the segment's operating groups reported a drop in operating income. The bulk of the decline was a result of higher crude oil costs and lower sales prices reported by the Lubricants Group. Adverse market conditions have had an unfavorable impact on the selling prices of the group's asphalt and industrial products. Earnings for the Petroleum Specialties Group were down as a result of an unfavorable product sales mix and start up costs attributable to the group's Extracted Sulfonic Acid Unit in Gretna, Louisiana, and its Amsterdam, Holland, Calcium Sulfonates Plant. Petroleum segment sales for the first nine months of 1994 were $10.4 million, or 2 percent, greater than sales for the comparable period of 1993. Sales were up as a result of a 4 percent increase in shipment volume, which was partially offset by a 1 percent decline in prices. The segment's reported increase in earnings for the first nine months of 1994 compared to the same period of 1993 was primarily attributable to the previously noted non-recurring legal judgment. Operating income, excluding this charge, rose $4.3 million, or 10 percent. Higher Petroleum Specialties Group earnings accounted for the segment's entire increase in operating income. The increase in the group's profitability was a result of its ability to retain part of the savings gained through lower feedstock costs earlier in the year. These savings are part of the normal cycle in which sales price adjustments lag behind changes in feedstock costs. The group also benefited from a favorable mix of products shipped from its domestic and Canadian operations. Lubricants Group earnings were down from the prior year, primarily due to adverse market conditions for asphalt products. 10 DIVERSIFIED PRODUCTS The company announced its intention to sell its Concarb Division, the largest operation of the Diversified Products Segment. This divestiture is part of Witco's continuing long-term strategy of growing core chemical and petroleum specialty businesses while shedding non-strategic lines. The divestiture program is on schedule; the Chemprene subsidiary was sold in 1993, Allied-Kelite's operations in 1994, and it is expected that the Battery Parts Division will be sold during the fourth quarter of 1994. Sales attributable to the segment's Concarb and Battery Parts Divisions (remaining operations) for the third quarter of 1994 increased approximately $2 million, or 8 percent, compared to the third quarter of the prior year. This increase was mainly the reflection of a greater demand for carbon black products, the result of higher motor vehicle production and improved tire sales. Operating income for the third quarter of 1994 attributable to the segment's remaining operations was comparable to the same period of 1993. Higher carbon black feedstock costs offset the positive effect that greater customer demand had on earnings. The segment's remaining operations reported net sales for the first nine months of 1994 that were 10 percent higher than sales for the same period of 1993. Again, an increased demand for carbon black due to higher new vehicle and tire sales was the major reason for the improved sales. Earnings from the segment's remaining operations for the first nine months of 1994 were up $3.7 million compared to the first nine months of 1993. Approximately two-thirds of this increase was a result of higher carbon black sales, while the remainder was attributable to a favorable product sales mix and a reduction in personnel related to the Battery Parts Division. OUTLOOK The company anticipates that earnings for the remainder of 1994 will remain at reasonable levels. Most operating groups are incurring increased raw material costs, and while each group should reestablish margins over time, it may be difficult in all cases to raise selling prices during the remainder of 1994 in amounts sufficient to recover all increased raw material costs. The company's strategic focus continues to be on the growth of its chemical and petroleum specialty businesses. Reaching its goal of $5 billion in sales by the year 2000 will be accomplished through the divestiture of non-core businesses and through acquisitions which will expand the Company's global offerings and market share. Witco is strongly committed to the expansion of its core businesses in North America, Europe, and the Pacific Rim. 11 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings The company has been notified, or is named as a potentially responsible party ("PRP") or a defendant in a number of governmental (federal, state, and local) and private actions associated with environmental matters, such as those relating to hazardous wastes. These actions seek remediation costs, penalties and/or damages for personal injury or damage to property or natural resources. As of December 31, 1993, the company had been identified as a PRP in connection with forty sites which are subject to the federal Superfund Program under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"). With two exceptions, all the Superfund sites in which the company is involved are multi-party sites, and, in most cases, there are numerous other potentially responsible parties in addition to the company. CERCLA authorizes the federal government to remediate a Superfund site itself and to assess the costs against the responsible parties, or to order the responsible parties to remediate the site. The company evaluates and reviews environmental reserves for future remediation and other costs on a quarterly basis to determine appropriate reserve amounts. Inherent in this process are considerable uncertainties which affect the company's ability to estimate the ultimate costs of remediation efforts. Such uncertainties include the nature and extent of contamination at each site, evolving governmental standards regarding remediation requirements, the number and financial condition of other potentially responsible parties at multi-party sites, innovations in remediation and restoration technology, and the identification of additional environmental sites. The company is a defendant in a case filed in October 1992 by the United States Department of Justice on behalf of the United States Environmental Protection Agency styled United States v. Witco, et al. pending in the United States District Court for the Eastern District of California. The United States alleged that the company has violated the Clean Air Act, the Safe Water Drinking Act, and the Resource Conservation and Recovery Act in connection with certain activities at its Oildale, California, refinery. The United States seeks unspecified civil penalties and certain injunctive relief in this action. The company has numerous insurance policies which it believes provide coverage at various levels for environmental liabilities. The company is currently in litigation with many of its insurers concerning the applicability and amount of insurance coverage for environmental costs under certain of these policies. Except for amounts reflected in executed settlement agreements, no provision for recovery under any of these policies is included in the company's financial statements. The company is a defendant in four similar actions pending in California state courts, which arise out of the company's involvement in the polybutylene resin manufacturing business in the 1970's: East Bay Municipal Utility District v. Mobil Oil Co., et al., filed in November 1993, is pending in Superior Court for the County of Alameda in California. The plaintiff alleges that Witco and several other defendants negligently misrepresented the performance of polybutylene pipe and fittings installed in a water distribution system. Other allegations include breach of warranty, fraud, strict liability and breach of the California Unfair Practices Act; City of Santa Maria v. Shell Oil Co., et al., filed in May 1994, is pending in Superior Court for the County of San Luis Obispo in California; City of Redding v. Mobil Oil Co., et al, filed in July 1993, is pending in Superior Court for the County of Tehama in California; and, City of Morgan Hill v. Mobil Oil Co., et al., filed in December 1987, is presently pending in Superior Court for the County of Santa Clara in California. The company is not a party to any legal proceedings, including environmental matters, which it believes will have a material adverse effect on its consolidated financial position. 12 ITEM 6. Exhibits and Reports on Form 8-K (a)Exhibits 2 Not applicable 4 Not applicable 10 Not applicable 11 Statement re computation of per share earnings 15 Letter re unaudited interim financial information 18 Not applicable 19 Not applicable 22 Not applicable 23 Not applicable 24 Not applicable 27 Financial Data Schedule (b)Reports on Form 8-K There were no reports on Form 8-K for the three months ended September 30, 1994. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WITCO CORPORATION ----------------- (Registrant) /s/ Michael D. Fullwood Date: November 11, 1994 ------------------------------------------- Michael D. Fullwood Executive Vice President and Chief Financial Officer /s/ Dustan E. McCoy Date: November 11, 1994 ------------------------------------------- Dustan E. McCoy Vice President - General Counsel and Corporate Secretary EX-11 2 COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 WITCO CORPORATION AND SUBSIDIARY COMPANIES COMPUTATION OF PER SHARE EARNINGS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ----------------------- ----------------------- 1994 1993 1994 1993 (In Thousands Except Per Share Data) PRIMARY Net Income - as reported $ 26,998 $ 13,625 $ 81,421 $ 47,330 Interest on convertible subordinated debentures (net of tax) -- 1,299 1,109 4,022 Dividend requirements of preferred stock (5) (6) (15) (18) ---------- ---------- ---------- ---------- Total $ 26,993 $ 14,918 $ 82,515 $ 51,334 ========== ========== ========== ========== Weighted average shares outstanding 56,111 50,420 54,363 48,577 Assumed conversions: Convertible subordinated debentures -- 5,500 1,692 5,500 Stock options 272 338 334 287 ---------- ---------- ---------- ---------- Total 56,383 56,258 56,389 54,364 ========== ========== ========== ========== Per share amount $ 0.48 $ 0.27 $ 1.46 $ 0.94 ========== ========== ========== ========== FULLY DILUTED Net Income - as reported $ 26,998 $ 13,626 $ 81,421 $ 47,330 Interest on dilutive debentures (net of tax) -- 1,300 1,109 4,025 ---------- ---------- ---------- ---------- Total $ 26,998 $ 14,926 $ 82,530 $ 51,355 ========== ========== ========== ========== Weighted average shares outstanding 56,111 50,420 54,363 48,577 Assumed conversions: Convertible subordinated debentures -- 5,520 1,692 5,522 Stock options 272 353 334 398 Preferred stock 125 148 131 150 ---------- ---------- ---------- ---------- Total 56,508 56,441 56,520 54,647 ========== ========== ========== ========== Per share amount $ 0.48 $ 0.26 $ 1.46 $ .94 ========== ========== ========== ==========
EX-15 3 ACKNOWLEDGMENT LETTER EXHIBIT 15 LETTER RE: UNAUDITED FINANCIAL INFORMATION ACKNOWLEDGMENT LETTER November 9, 1994 The Board of Directors Witco Corporation We are aware of the incorporation by reference in the Registration Statement (Form S-3, No. 33-45865) and the Post-effective Amendment No. 2 to the Registration Statement (Form S-3, No. 33-58066), each pertaining to the issuance of debentures, the Post-effective Amendment No. 1 to the Registration Statement (Form S-3, No. 33-58120) pertaining to the issuance of common stock, the Post-effective Amendment No. 2 to the Registration Statement (Form S-8, No. 33-10715), Post-effective Amendment No. 1 to the Registration Statements (Form S-8, Nos. 33-30995 and 33-45194), each pertaining to stock option plans of Witco Corporation and the Registration Statement (Form S-8, No. 33-48806), pertaining to an employee benefit plan of Witco Corporation, of our report dated November 9, 1994 relating to the unaudited condensed consolidated interim financial statements of Witco Corporation and Subsidiary Companies which are included in its Form 10-Q for the quarter ended September 30, 1994. Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not part of the registration statements prepared or certified by accountants within the meaning of Sections 7 or 11 of the Securities Act of 1933. ERNST & YOUNG LLP Stamford, Connecticut EX-27 4 ART. 5 FDS FOR 3RD QUARTER 10-Q
5 1,000 9-MOS DEC-31-1994 SEP-30-1994 182,318 0 421,034 0 249,767 899,813 1,404,772 683,407 1,919,540 351,698 349,074 0 7 281,561 648,249 1,919,540 1,683,188 1,690,337 1,295,129 1,566,613 0 0 21,965 123,724 42,303 81,421 0 0 0 81,421 1.46 1.46
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