-----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, Do6+GBwwiBfcwyOBkBQbWpZeJRcs4b8ROEIJGi0/O/ViMVw4gkiJ5XAEH4uWpuoZ FR5EMNa2809MviGgYYde2w== 0000891554-95-000057.txt : 19950516 0000891554-95-000057.hdr.sgml : 19950516 ACCESSION NUMBER: 0000891554-95-000057 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WITCO CORP CENTRAL INDEX KEY: 0000107889 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [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: 95538800 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 CORP. 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 MARCH 31, 1995 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 April 30, 1995 ----- ----------------------------- Common Stock - $5 par value 56,211,565 WITCO CORPORATION FORM 10-Q March 31, 1995 CONTENTS PAGE -------- ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed consolidated balance sheets at March 31, 1995 and December 31, 1994 2 Condensed consolidated statements of income for the three months ended March 31, 1995 and 1994 3 Condensed consolidated statements of cash flows for the three months ended March 31, 1995 and 1994 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 11 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 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)
March 31, December 31, 1995 1994 (a) ---------------- ----------------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 214,991 $ 197,173 Accounts and notes receivable-net 439,183 395,547 Inventories Raw materials and supplies $ 97,160 $ 96,939 Finished goods 166,122 263,282 161,433 258,372 ---------- ---------- Prepaid and other current assets 44,024 45,737 ------------ ---------- TOTAL CURRENT ASSETS 961,480 896,829 ------------ ---------- PROPERTY, PLANT, AND EQUIPMENT - less accumulated depreciation of $720,274 and $696,043 727,746 719,966 INTANGIBLE ASSETS - less accumulated amortization of $47,912 and $43,760 203,473 191,422 OTHER ASSETS 102,504 111,128 ------------ ---------- TOTAL ASSETS $ 1,995,203 $ 1,919,345 ============ ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes and loans payable $ 1,565 $ 1,795 Accounts payable and other current liabilities 342,884 343,414 ------------ ---------- TOTAL CURRENT LIABILITIES 344,449 345,209 ------------ ---------- LONG-TERM DEBT 351,847 346,545 DEFERRED FEDERAL AND FOREIGN INCOME TAXES 81,812 81,354 DEFERRED CREDITS AND OTHER LIABILITIES 231,907 206,231 SHAREHOLDERS' EQUITY $2.65 Cumulative Convertible Preferred Stock, par value $1 per share Authorized - 14 shares Issued and outstanding - 7 shares 7 7 Common Stock, par value $5 per share Authorized - 100,000 shares Issued - 56,312 shares 281,561 281,561 Capital in excess of par value 127,953 127,643 Equity adjustments: Foreign currency translation 28,454 (1,481) Pensions (2,446) (2,446) Retained earnings 551,240 537,199 Less cost of 106 and 165 shares of common stock in treasury (1,581) (2,477) ------------ ---------- TOTAL SHAREHOLDERS' EQUITY 985,188 940,006 ------------ ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,995,203 $ 1,919,345 ============ ==========
(a) The balance sheet at December 31, 1994, 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 March 31, ---------------------------- 1995 1994 --------- ----------- (In Thousands Except Per Share Data) REVENUES Net sales $ 602,451 $ 553,417 Interest 2,922 2,224 ---------- ----------- 605,373 555,641 ---------- ----------- COSTS AND EXPENSES Cost of goods sold (exclusive of depreciation and amortization) 468,937 426,560 Selling and administrative expenses 61,808 60,886 Depreciation and amortization 28,476 26,541 Interest 8,450 8,314 Other income-net (8,460) (570) ---------- ----------- 559,211 521,731 ---------- ----------- INCOME BEFORE FEDERAL AND FOREIGN INCOME TAXES 46,162 33,910 FEDERAL AND FOREIGN INCOME TAXES 16,387 11,869 ---------- ----------- NET INCOME $ 29,775 $ 22,041 ========== =========== PER COMMON SHARE: Net Income $ .53 $ .41 Net Income - assuming full dilution $ .53 $ .41 Dividends declared $ .28 $ .25 Weighted average number of common shares and equivalents - primary 56,356 56,432 ========== ===========
See accompanying notes. 3 WITCO CORPORATION AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, ------------------------------------ 1995 1994 --------------- --------------- (In Thousands) NET CASH PROVIDED BY OPERATING ACTIVITIES $ 23,084 $ 22,874 ------------ ------------ INVESTING ACTIVITIES Expenditures for property, plant, and equipment (23,881) (23,945) Proceeds from dispositions 24,090 - Other investing activities (1,836) 373 ------------ ------------ Net Cash Used in Investing Activities (1,627) (23,572) ------------ ------------ FINANCING ACTIVITIES Dividends paid (15,725) (12,630) Other financing activities 538 (1,619) --- ------- Net Cash Used in Financing Activities (15,187) (14,249) ------------ ------------ Effects of Exchange Rate Changes on Cash and Cash Equivalents 11,548 1,669 ------------ ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 17,818 (13,278) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 197,173 183,050 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 214,991 $ 169,772 ============ ============
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 three month period ended March 31, 1995, are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. 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, 1994. The condensed consolidated financial statements at March 31, 1995, and for the three month periods ended March 31, 1995 and 1994, 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 - Accounting Change Effective January 1, 1995, the company changed its method of inventory valuation under dollar value LIFO from LIFO double extension to LIFO link chain. Management believes that the LIFO link chain method is preferable because it is the predominate method used in the industry and will mitigate the impact of volume fluctuations on results of operations. The change in accounting method had no material effect on income for the three month period ended March 31, 1995. It is not possible to determine the effect of the change on retained earnings as of January 1, 1995 or income as previously reported for the three month period ended March 31, 1994. NOTE C - Shareholder Rights Plan On March 2, 1995, the Board of Directors unanimously approved a Shareholder Rights Plan. The Plan has been implemented by the issuance of one preferred stock purchase right for each share of common stock outstanding at the close of business on March 2, 1995, or issued thereafter until the rights become exercisable. Each right will entitle the holder in certain events to purchase one-one thousandth of a share of participating preferred stock at a purchase price of $110. Each one-one thousandth of a share of participating preferred stock is intended to represent the economic equivalent of one share of common stock. Under the Shareholder Rights Plan, 300,000 shares of Series A participating cumulative preferred stock without par value have been authorized. The rights currently are not exercisable. If a person or group acquires more than 15% of the outstanding common stock, or at the Board's election if a tender offer for more than 15% of the outstanding common stock is commenced, or if such person or group acquires the company in a merger or other business combination, each right (other than those held by the acquiring person) will entitle the holder to purchase stock of the company or stock or other property of the acquiring person having a value of twice the purchase price. The rights will expire on March 2, 2005, unless earlier redeemed by the company in whole, but not in part, at a price of $.01 per right. NOTE D - Other Matters The statement of income for the three month period ended March 31, 1995, includes a gain of $6,196,000, or $.11 per common share, from the sale of the company's Battery Parts business. The pre-tax gain of $9,532,000 is included in the caption "Other income - net." 5 NOTE E - Litigation and Environmental 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 March 31, 1995, the company had been identified as a PRP in connection with 41 sites which are subject to the federal Superfund Program under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"). The company has also been identified as a PRP in connection with 21 sites where state agencies have taken the lead role in overseeing site cleanup. With 11 exceptions, all the CERCLA and state controlled 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, changes in environmental regulations, widely varying costs of alternative cleanup methods, 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 March 31, 1995, the company's reserves for environmental remediation and compliance costs amounted to $94,565,000, 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 a defendant in two 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, and pending in Superior Court for the County of San Mateo and City of Santa Maria v. Shell Oil Co., et al., filed in May 1994, and pending in Superior Court for the County of San Luis Obispo. In addition, two actions, City of Morgan Hill v. Mobil Oil Co., et al., filed in December 1987, which was pending in Superior Court of the County of Santa Clara and City of Redding v. Mobil Oil Co., et al., filed in July 1993, and pending in Superior Court for the County of Tehama, have been dismissed by the court, but the company expects the plaintiff in the actions to appeal the dismissals. The actions generally allege that the company and several other defendants negligently misrepresented the performance of polybutylene pipe and fittings installed in water distribution systems. Other allegations include breach of warranty, fraud, strict liability, and breach of the California Unfair Practices Act. 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 March 31, 1995, and the related condensed consolidated statements of income and cash flow for the three-month periods ended March 31, 1995 and 1994. 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, 1994, 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 26, 1995, 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, 1994, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ Ernst & Young LLP ERNST & YOUNG LLP Stamford, Connecticut May 10, 1995 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND FINANCIAL RESOURCES Cash and cash equivalents have increased since year-end primarily due to the sale in March of the Battery Parts business for approximately $24.1 million and to favorable exchange rate fluctuations, which added $11.5 million. Record sales contributed to an increase of $35.5 million in the other components of working capital primarily due to increased accounts receivable. 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. Progress has been made in the first quarter in divesting non-core businesses with the sale of the company's Battery Parts business. The company expects to complete its program to divest all businesses in its Diversified Products Segment during 1995 with the sale of the carbon black operations. CAPITAL INVESTMENTS AND COMMITMENTS Capital expenditures during the first quarter of 1995 amounted to $23.9 million, which is consistent with the same period of 1994. Capital expenditures for the year are expected to approximate $144 million, a 34% increase from the record set in 1994. The capital spending plan for 1995 demonstrates the company's commitment to long term growth. 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 First quarter net sales were $602.5 million, a record for any quarter in the company's 75-year history, and represented a 9 percent increase over sales for the same period of 1994. Sales were up despite the absence of the Allied-Kelite business, sold during the second quarter of 1994, which contributed $11.3 million to first quarter 1994 sales. An increase in selling prices, to recover higher feedstock costs, and a favorable product sales mix accounted for approximately two-thirds of the increase in sales. The remainder of the increase was attributable to a weakening of the U. S. dollar against many international currencies, creating favorable exchange rates, while overall volume rose less than 1 percent. Reported net income of $29.8 million for the first quarter of 1995 included a $6.2 million gain on disposition of the Battery Parts business which was sold on March 24, 1995. Excluding the gain on disposition, net income of $23.6 million was $1.5 million, or 7 percent, ahead of the first quarter of 1994. The increase in net income, before the non-recurring gain, was attributable to a favorable sales product mix, the benefit of which was partially offset by a 1 percent decline in gross profit margin. The lower margin is reflective of the difficulty the company is experiencing in raising sales prices to the level required to recoup raw material feedstock costs. Segment sales and operating income for the first quarter of 1995 and 1994 are set forth in the following table. Income and expenses of a general corporate 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 March 31, ------------------------------- 1995 1994 --------------- ----------- (Unaudited - In Millions) Net Sales Chemical $ 382.4 $ 334.7 Petroleum 188.2 179.6 Diversified products 35.8 43.3 Intersegment elimination (3.9) (4.2) ----------- ---------- Total Net Sales $ 602.5 $ 553.4 =========== ========== Operating Income Chemical $ 34.5 $ 31.6 Petroleum 6.2 12.4 Diversified products 15.6 3.4 ----------- ---------- Total Operating Income $ 56.3 $ 47.4 =========== ========== The contribution of the company's international operations to net sales and net income, excluding non-recurring items, continues to grow. These operations accounted for 33 percent of net sales for the first quarter of 1995, up 3 percent from the first quarter of 1994. In the first quarter of 1995, 43 percent of the company's operating income, before non-recurring items, was derived from international operations, up 5 percent from the same period in 1994. This trend remains the same after adjusting for the favorable effect that current year foreign currency exchange rates had on sales and operating income, before non-recurring items. CHEMICAL SEGMENT Chemical segment 1995 first quarter sales rose $47.7 million compared to the same period of 1994. The 14 percent increase in sales was equally attributable to a 4 percent improvement in volume, higher unit sales prices and favorable foreign currency exchange rates. Operating income rose $2.9 million, or 9 percent, during the current quarter compared to the first quarter of 1994. Each of the segment's three operating groups reported operating earnings that were ahead of the prior year. The segment's newly formed Resins Group, which is responsible for the worldwide marketing of polyurethane intermediates, epoxy resins and hardeners, accounted for approximately 70 percent of the segment's greater earnings. An 11 percent increase in shipment volume, to which all business units 9 CHEMICAL SEGMENT - continued contributed, and the ability of the group's international operations to recoup virtually all of the substantial increase in feedstock costs through higher sales prices, led to the group's favorable operating results. The Oleo/Surfactants and Polymer Additives Groups reported earnings that showed modest improvements over the prior year. Oleo/Surfactants benefited from shipment volume that was 4 percent above the first quarter of 1994, while being adversely affected by rising raw material costs, which due to market conditions have not been fully recovered through higher sales prices. Earnings for the Polymer Additives Group were slightly higher than the previous year. Shipment volume was down 1 percent from the first quarter of 1994 while material margins were unchanged. PETROLEUM SEGMENT Segment net sales for the first quarter of 1995 were 5 percent ahead of those recorded for the first quarter of 1994. Although sales rose $8.6 million due to a 7 percent increase in sales prices, volume was off 2 percent from the first quarter of 1994. The Petroleum Segment's operating earnings for the first three months of 1995 were $6.2 million below the earnings reported for the corresponding quarter of 1994. The Lubricants Group's operating income declined substantially during this period accounting for a majority of the segment's shortfall. The group suffered from a drop in sales volume, primarily in its branded lubricants and grease businesses, and higher feedstock, additive and packaging costs. Customers' decisions to bring business in-house affected volume, while an extremely competitive market prevented sales prices from being raised to the levels needed to recover higher costs. This resulted in an erosion of margins in each of the group's business units. Operating income from the segment's Petroleum Specialties Group was also down from the prior year. The group's lower earnings were mainly attributable to continued start up costs for the Extracted Sulfonic Acid Unit in Gretna, Louisiana, and Calcium Sulfonates Plant in Amsterdam, Holland, and costs associated with the shut down of the Petrolia, Pennsyslvania, Wax Chilling and Distillation operations. DIVERSIFIED PRODUCTS First quarter 1995 operating results include a $9.5 million gain on disposition of the Battery Parts business which was sold in late March. The segment's remaining business, the Concarb Division, which manufactures carbon black, is expected to be sold within the next few months. Concarb's first quarter 1995 net sales were 28 percent over the division's sales for the corresponding quarter of 1994. Sales were up as a result of higher prices and a 7 percent increase in shipment volume. Operating income for the carbon black business nearly doubled during this period. The operating performance of this business is reflective of an industry in which the customer demand for products exceeds production capacity. OUTLOOK The company has identified the recovery of increased raw material costs as a priority. Certain key raw materials costs stabilized during the first quarter and the company is optimistic that it will be able to pass through past raw material cost increases and restore product margins to more acceptable levels. However, if the German mark continues to strengthen against other currencies, prices for international exports out of Germany may be adversely affected. The company is continuing to explore acquisition opportunities and will also continue to evaluate existing businesses as divestiture candidates as a part of the company's focus on its core businesses. 10 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 March 31, 1995, the company had been identified as a PRP in connection with 41 sites which are subject to the federal Superfund Program under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"). The company has also been identified as a PRP in connection with 21 sites where state agencies have taken the lead role in overseeing site cleanup. With 11 exceptions, all the CERCLA and state controlled 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, changes in environmental regulations, widely varying costs of alternative cleanup methods, 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 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 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 company has executed a consent decree settling this action in which the company neither admits nor denies liability. The consent decree must be approved by the court in order to become effective. Under the terms of the decree, Witco and a third party will jointly pay a civil penalty of $700,000, and Witco will, among other things: (i) make certain modifications to existing equipment in the refinery, and install certain new equipment; (ii) close deep injection wells on an agreed timetable; (iii) install a storm water and wastewater treatment facility at the refinery; and, (iv) complete a site evaluation at the location of the refinery and adjacent properties. The company is a defendant in two 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, and pending in Superior Court for the County of San Mateo and City of Santa Maria v. Shell Oil Co., et al., filed in May 1994, and pending in Superior Court for the County of San Luis Obispo. In addition, two actions, City of Morgan Hill v. Mobil Oil Co., et al., filed in December 1987, which was pending in Superior Court of the County of Santa Clara and City of Redding v. Mobil Oil Co., et al., filed in July 1993, and pending in Superior Court for the County of Tehama, have been dismissed by the court, but the company expects the plaintiff in the actions to appeal the dismissals. The actions generally allege that the company and several other defendants negligently misrepresented the performance of polybutylene pipe and fittings installed in water distribution systems. Other allegations include breach of warranty, fraud, strict liability, and breach of the California Unfair Practices Act. 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. 11 ITEM 4. Submission of Matters to a Vote of Security Holders (a) The company's Annual Meeting of Shareholders was held on April 26, 1995, at Witco Corporation, One American Lane, Greenwich, Connecticut at 2:00 p.m. (b) The company's shareholders elected five directors at said Annual Meeting, one for a term expiring in 1996 and four for terms expiring in 1998, as follows: VOTES FOR WITHHELD --------------- --------------- William J. Ashe 49,804,570 276,894 William G. Burns 49,882,650 198,814 William E. Mahoney 49,846,700 234,764 L. John Polite, Jr. 49,807,538 273,926 William Wishnick 49,845,114 236,350 As he will be reaching the mandatory retirement age for members of the Board, Mr. Ashe will be serving a one-year term expiring in 1996. Messrs. Burns, Mahoney, Polite and Wishnick will be serving terms expiring in 1998. Directors who did not stand for election and continue in office until the 1996 Annual Meeting are: Harry G. Hohn, Dan J. Samuel and Bruce F. Wesson. Directors who did not stand for election and continue in office until the 1997 Annual Meeting are: Simeon Brinberg, William R. Grant, Richard M. Hayden and William R. Toller. (c) In addition to the election of five directors, the company's shareholders: (i) Approved the adoption of the 1995 Stock Option Plan for Employees of Witco Corporation and its Subsidiaries. VOTES ------------------------------------------------------- FOR AGAINST ABSTAIN ---------------- --------------- --------------- 47,352,258 2,481,326 247,880 (ii) Ratified the appointment of Ernst & Young LLP as the company's independent auditors for 1995. VOTES ------------------------------------------------------- FOR AGAINST ABSTAIN ---------------- --------------- --------------- 49,977,396 52,650 51,418 ITEM 5. Other Information The Board of Directors of Witco Corporation has requested William R. Toller to continue as Chairman and Chief Executive Officer beyond his normal retirement date. Mr. Toller has agreed to an extension through December 1996. 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 Letter re change in accounting principles 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 March 31, 1995. 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: May 11, 1995 ---------------------------------------------------- Michael D. Fullwood Executive Vice President and Chief Financial Officer /s/ Dustan E. McCoy Date: May 11, 1995 ------------------------------------------------------ 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 March 31, ------------------------------ 1995 1994 ----------- ----------- (In Thousands Except Per Share Data) PRIMARY Net Income - as reported $ 29,775 $ 22,041 Interest on convertible subordinated debentures (net of tax) - 1,109 Dividend requirements of preferred stock (5) (5) --------- ---------- Total $ 29,770 $ 23,145 ========= ========== Weighted average shares outstanding 56,161 50,881 Assumed conversions: Convertible subordinated debentures - 5,133 Stock options 195 418 --------- ---------- Total 56,356 56,432 ========= ========== Per share amount $ 0.53 $ 0.41 ========= ========== FULLY DILUTED Net Income - as reported $ 29,775 $ 22,041 Interest on dilutive debentures (net of tax) - 1,109 --------- ---------- Total $ 29,775 $ 23,150 ========= ========== Weighted average shares outstanding 56,161 50,881 Assumed conversions: Convertible subordinated debentures - 5,133 Stock options 243 418 Preferred stock 122 137 --------- ---------- Total 56,526 56,569 ========= ========== Per share amount $ 0.53 $ 0.41 ========== ========== EX-15 3 LETTER RE: UNAUDITED FINANCIAL INFORMATION EXHIBIT 15 LETTER RE: UNAUDITED FINANCIAL INFORMATION ACKNOWLEDGMENT LETTER May 10, 1995 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 May 10, 1995 relating to the unaudited condensed consolidated interim financial statements of Witco Corporation and Subsidiary Companies which is included in its Form 10-Q for the quarter ended March 31, 1995. 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. /s/ Ernst & Young LLP ERNST & YOUNG LLP Stamford, Connecticut EX-18 4 EXHIBIT 18 EXHIBIT 18 May 10, 1995 Mr. Michael D. Fullwood Executive Vice President and Chief Financial Officer Witco Corporation One American Lane Greenwich, Connecticut Dear Sir: Note B of Notes to the condensed consolidated financial statements of Witco Corporation and Subsidiary Companies included in its Form 10-Q for the three month period ended March 31, 1995 describes a change in the method of accounting used under Dollar Value LIFO from LIFO Double Extension to LIFO Link Chain. You have advised us that you believe that the change is to a preferable method in your circumstances because it is the predominant method used in the industry and will mitigate the impact of volume fluctuations on results of operations. There are no authoritative criteria for determining a "preferable" method of accounting for inventory based upon the particular circumstances; however, we conclude that the change in the method of accounting for inventory is to an acceptable method which, based on your business judgment to make this change for the reasons cited above, is preferable in your circumstances. We have not conducted an audit in accordance with generally accepted auditing standards of any financial statements of the Company as of any date or for any period subsequent to December 31, 1994, and therefore we do not express any opinion on any financial statements of Witco Corporation and Subsidiary Companies subsequent to that date. Very truly yours, /s/ Ernst & Young LLP ERNST & YOUNG LLP Stamford, Connecticut EX-27 5 ART. 5 FDS FOR 1ST QUARTER 10-Q
5 1,000 3-MOS DEC-31-1995 MAR-31-1995 214,991 0 448,405 9,222 263,282 961,480 1,448,020 720,274 1,995,203 344,449 351,847 281,561 0 7 703,620 1,995,203 602,451 605,373 468,937 559,211 0 633 8,450 46,162 16,387 29,775 0 0 0 29,775 .53 .53
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