-----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, qebuNiHvcfdcVM/72rxBMjmIu8Lr3nkcZNG9GmbZYGkwEGcc75B0gyBkEQAGd1LX 3Cp4q4d3SSHJm/v3LRt7NA== 0000950117-94-000070.txt : 19940323 0000950117-94-000070.hdr.sgml : 19940323 ACCESSION NUMBER: 0000950117-94-000070 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940322 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-K SEC ACT: 34 SEC FILE NUMBER: 001-04654 FILM NUMBER: 94517191 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-K 1 WITCO 10-K ________________________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 COMMISSION FILE NO. 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 IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 520 MADISON AVENUE, 10022-4236 NEW YORK, NEW YORK (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 605-3800 ------------------------ SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - ----------------------------------------------------------------------- ------------------------ Common Stock -- $5 Par Value New York Stock Exchange 5 1/2% Convertible Subordinated Debentures due 2012 New York Stock Exchange 7.45% Debentures due 1997 New York Stock Exchange
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 ____ 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. [x] As of February 28, 1994, the aggregate market value of the voting stock held by non-affiliates of the Registrant, based on the closing price on February 28, 1994 on the New York Stock Exchange for the Registrant's Common Stock, was $1.7 billion. There were 50,519,019 shares of the Registrant's Common Stock outstanding at February 28, 1994. DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's definitive Proxy Statement for its April 27, 1994 Annual Meeting of Shareholders are incorporated by reference into Part III. ________________________________________________________________________________ PART I ITEM 1 -- BUSINESS (a) GENERAL DEVELOPMENT OF BUSINESS The Company is a global manufacturer and marketer of specialty chemical and petroleum products for use in a wide variety of industrial and consumer applications. Most of the Company's products are sold to industrial customers for use as additives and intermediates which impart particular characteristics to such customers' end products. The Company provides manufacturing flexibility and a high degree of technical service to create value-added chemical and petroleum products that meet customers' specialized needs. Established in 1920, Witco has ranked among the Fortune 500 largest U.S. industrial firms for many years, ranking 242 for 1992. At December 31, 1993, the Company had 8,161 employees worldwide. The Company's operations are divided among three business segments: Chemical, Petroleum and Diversified Products. Principal products of the Chemical segment include surface active agents, resins, oleochemicals, and polymer additives. Surface active agents (also known as surfactants) are used as emulsifiers in agricultural and food products, and are ingredients in personal care, laundry, and cleaning products; resins are used as adhesion promoters in shoes, coatings, flooring, and construction materials; oleochemicals are used in the production of personal care products, rubber, plastics, paper, and textiles; and polymer additives are used in the production and processing of vinyl, polyethylene, and other polymers. Principal products of the Petroleum segment include white oils, and petrolatums used in cosmetics, pharmaceuticals, and plastics; petroleum sulfonates used as additives in lubricating oils, greases and metalwork fluids; Lubrimatic brand and private label lubricating greases and equipment; asphalt, napthenic oils and road restorative products; and Kendall and Amalie brand motor oils and lubricants. The Diversified Products segment manufactures battery containers and other molded plastics products, as well as carbon black and metal finishing and metalworking products. In 1992 the Company completed the acquisition of the Industrial Chemicals and Natural Substances divisions of Schering AG Berlin (the 'Schering Acquisition') for approximately $440 million. As a result of the acquisition, the Company's international presence expanded with the addition of a large chemical manufacturing base in Germany and operations in Spain, the United Kingdom, France, Italy, and Ecuador. In addition, the Company's specialty businesses in surfactants, polymer additives, and oleochemicals broadened significantly. The Company completed a two-for-one common stock split during the fourth quarter of 1993. In 1993 the Company also disposed of the operations of its Chemprene, Inc. subsidiary, a manufacturer of conveyor belting and other specialized belts. The Company expects to complete the sale of its Allied-Kelite and Battery Parts divisions' businesses in 1994. On March 11, 1994 the Company called for redemption on March 28, 1994 all of its 5 1/2% Convertible Subordinated Debentures due 2012 of which $150 million are outstanding. The debentures are convertible into common stock of the Company at a conversion price of $27.28 per share, which price was below the market price for the Company's common stock on the New York Stock Exchange on March 10, 1994. If all debentures are converted, approximately 5.5 million additional shares of common stock will become issued and outstanding. However, the issuance of additional common stock by reason of conversion of any debentures will have no effect upon the Company's earnings per share calculations as the shares underlying the debentures have been considered as common stock equivalents in such calculations. If all debentures were to be redeemed rather than converted, the total cost to the Company would be $152.8 million. The Company will fund any redemptions through a combination of available cash and short-term borrowings. Witco Corporation was incorporated in 1958 under the laws of Delaware as Witco Chemical Company, Inc., at which time it succeeded by merger to the business of Witco Chemical Company, an Illinois corporation formed in 1920. Its executive offices are located at 520 Madison Avenue, New York, New York 10022-4236, telephone (212) 605-3800. 2 (b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS Reference is made to Note 15 of the Notes to Financial Statements. See Item 8 -- Financial Statements and Supplementary Data following Part IV of this report. (c) NARRATIVE DESCRIPTION OF BUSINESS The Company's operations are divided among three business segments: Chemical, Petroleum and Diversified Products. Chemical Products Oleochemicals/Surfactants Witco offers one of the broadest lines of surfactants and oleochemicals in the chemical industry, providing 'one-stop shopping' for its customers. These products are sold to a range of industries, including cosmetics and pharmaceuticals; personal care, soap and detergent; agricultural; rubber; food; paint and protective coatings; and textile. Surfactants change the surface tension of liquids. They include agricultural emulsifiers, which are used to break up pesticides into small particles, thereby increasing dispersion and improving penetration, and food emulsifiers, which impart particular characteristics (such as consistency) to certain foods. In addition, surfactants are used in personal care products, fabric softeners, and detergents to improve penetration and cleaning capability. These products are marketed in coordination with the Petroleum Specialties Group of the Company's Petroleum Products segment. Oleochemicals are derived from natural fats and oils, and include fatty acids, fatty amines, esters, and glycerines. Oleochemicals modify surfaces either as direct lubricants, or as components of ingredients that modify surfaces. Examples of their diverse applications include acting as lubricants in plastics; imparting mold release features for the rubber industry; and acting as curing systems for rubber. The Schering Acquisition significantly broadened the Company's surfactants product base to include offerings in all significant specialty surfactants product categories and made Witco a leading U.S. and worldwide producer of cationic surfactants. Cationic surfactants are the major ingredient in fabric softeners, hair conditioners, and other personal care products. The acquisition also complements Witco's oleochemical business with additional fatty amines, which are used as chemical intermediates and to make cationic surfactants. Polymer Additives Witco is a worldwide supplier of polymer additives, producing an extensive array of chemicals used as additives in the plastics industry, including stabilizers for use in the manufacture of polyvinyl chloride products (PVC) for such applications as pipes, fittings, siding, and packaging materials. It is an international supplier of lubricant additives to polyolefin and PVC manufacturers. The Company also makes peroxides for use in the polyolefin and PVC industries, epoxy plasticizers, and stearates used as lubricants in the plastics industry. As a result of the Schering Acquisition, the Company is the leading European producer of aluminum alkyls, used as co-catalysts in the production of polyolefins (including polyethylene and polypropylene, which are among the world's largest volume plastics used in packaging, cars, furniture, and appliances) and produces organotin compounds for the production of PVC stabilizers and biocides for the marine paints. Polyurethanes Witco has long been a major supplier of polyesters, coatings, and urethane chemicals to the construction, leather and textile finishing, and paint industries. The Company is a leading producer of saturated polyester polyols which are used in the manufacture of flexible foam that is sold to a wide variety of industries, including textile and automotive. Witco is currently expanding its polyester polyol business for use in non-cellular urethane applications such as coatings, adhesives, cast elastomers, and thermoplastic urethanes. 3 Resins With the Schering Acquisition, the Company added a resins product line augmenting its polyurethane business, broadening the range of products sold to similar industries and adding complementary research and development capabilities. As a result, Witco has a major share of the European market for thermoplastic polyamide and polyester products used by the adhesives, shoe and textile industries, adhesion promoters used in vinyl plastisol production, and amine and polyamide epoxy resin curing agents and epoxy resins used to manufacture industrial floorings and adhesives and as coatings for infrastructure and building purposes. Customers The Company markets its specialty chemical products directly through its own sales force and through an organized distribution program to a large number of customers in a broad range of industries. Its chemical business is not dependent upon any single customer or a few customers. During the year ended December 31, 1993, no customer accounted for more than 5.2% of Chemical Segment sales, and sales to the ten largest customers accounted for approximately 15.8% of Chemical Segment sales. Competition Many of the specialty chemical products produced by the Company are characterized by a need for a high degree of manufacturing competence and technical service, particularly because customer specifications vary considerably and special formulations must be devised to meet customers' needs. Competition is fragmented, with no one competitor offering products across all of the Company's chemical product lines. Competition is primarily on the basis of performance of the Company's products compared with similar products produced by its competitors. Petroleum Products Petroleum Specialties Witco is an important manufacturer and marketer of white mineral oils, petrolatums, refrigeration oils and telecommunication cable filling compounds, as well as natural and synthetic petroleum sulfonates. White mineral oils and petrolatums are extensively refined, high purity petroleum products suitable for food grade, pharmaceutical and cosmetic applications. They are inert and non-reactive, and impart emolliency, moisture resistance, lubrication and insulation properties. These products are marketed in coordination with the Oleochemicals/Surfactants Group of the Company's Chemical Segment. In addition to personal care and food applications, white mineral oils and petrolatums are used in plastics, agriculture, textiles and chemical processing. Petroleum sulfonates are oil soluble, surface active agents derived from both synthetic and natural petroleum feedstocks. They provide properties of emulsification, dispersion, wetting of solids, and rust and corrosion inhibition, and are used in lubricant additives and metalworking fluids. The Company is also a supplier of fully refined, FDA-quality microcrystalline waxes, which are primarily used in paper lamination and packaging applications including cheese coatings. Lubricants The Company produces motor oils and lubricants which it sells under the Kendall and Amalie brand names. Kendall and Amalie brand products are sold worldwide through a network of over 300 warehouse distributors. Kendall and Amalie brand products are also sold directly to large national accounts domestically. In addition, Witco is the largest domestic private label grease manufacturer and markets Lubrimatic brand products and lubricating equipment directly to its customers. Witco is also a supplier of specialty naphthenic oils, which are marketed to the rubber, plastics, ink and agricultural industries, and asphalt and surface treatment products, which are sold primarily for highway construction and maintenance. 4 Customers The Company's petroleum products are marketed directly through its own sales force and through distributors and agents. During the year ended December 31, 1993, no customer accounted for more than 3.0% of Petroleum Segment sales, and sales to the ten largest customers accounted for approximately 17.0% of Petroleum Segment sales. Competition Many of the specialty petroleum products produced by Witco, like its specialty chemical products, are characterized by a need for a high degree of manufacturing competence and technical service. The petroleum products market is highly competitive with the Company's products competing primarily on the basis of pricing and quality. The Company believes its technical expertise, reputation for quality products, and, in the case of consumer products, brand name recognition, give it advantages in the marketplace. Diversified Products Diversified Products include battery containers, covers and parts, metalworking and metal finishing substances, and carbon black. In the U.S., Witco is the leading independent producer of battery containers. Metalworking and metal finishing products are marketed to the aerospace, automotive, electronics, and hardware industries. The Company expects to complete the sale of its Allied-Kelite and Battery Parts divisions' businesses in 1994. Carbon black is sold to the domestic tire and other rubber products industries. The Company is a leading supplier of specialty carbon black for the tire industry. Customers During the year ended December 31, 1993, one customer accounted for approximately 15.9% of this segment's 1993 sales and the ten largest customers for approximately 70.0%. International Operations Sales of Witco's non-U.S. operations were $588.7 million, or 28% of total sales, for the year ended December 31, 1993. Through the Schering Acquisition, Witco added two plants in Germany (surfactants, polymer additives, and resins), one each in Spain (surfactants), the United Kingdom (surfactants), France (resins), Italy (resins), and Ecuador (oleochemicals/surfactants), as well as three in the U.S. which manufacture oleochemicals, surfactants, and polymer additives. With the ten properties acquired from Schering, Witco now operates 64 manufacturing facilities in 12 countries. Patents Witco owns and has been licensed to use a number of patents, some of which are important in connection with particular products but all of which, as a group, are not material to the Company. Backlog The nature of the Company's business is such that customer orders are usually filled within 30 days. Accordingly, backlog is not significant to the Company's business. Research and Development Witco expended approximately $49.5 million in 1993, $29.2 million in 1992 and $27.9 million in 1991 on research and development of new products and services, and for improvements and new applications of existing products and services. General The chemical and petroleum industries in which Witco operates have experienced increased operating costs and capital investments due to statutes and regulations at the federal, state and local levels for the protection of the environment and the health and safety of employees and others. Witco believes that expenditures for compliance with these statutes and regulations will continue to have a 5 significant impact upon the conduct of its business. The trend for greater environmental awareness and more stringent environmental regulations is likely to continue and while Witco cannot accurately predict how this trend will affect future operations and earnings, Witco does not believe its costs will significantly vary from those of its competitors in the chemical and petroleum industries. Witco evaluates and reviews environmental reserves for future remediation and compliance costs on a quarterly basis. To determine the appropriate reserve amounts, management reviews all available facts and evaluates the probability and scope of potential liabilities. Inherent in this process are considerable uncertainties which affect Witco'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. As a result, as remediation efforts proceed at existing sites and new sites are assimilated into the review process, charges against income for environmental reserves could have a material effect on results of operations in a particular quarter or year. However, such charges are not expected to have a material adverse effect on Witco's consolidated financial position, cash flow or liquidity. At December 31, 1993, environmental reserves amounted to $99.6 million, of which $52.8 million was provided for in 1993. These reserves reflect management's assessment of future remediation and compliance costs in light of all available information. Witco expended $15.1 million in 1993 against these reserves and anticipates 1994 expenditures to approximate $29 million. The Company's current construction projects include up-to-date methods and equipment for protecting the environment. In addition, Witco is continuing its program for modification of its facilities to meet current standards for the control of emissions, effluents and solid wastes. Capital expenditures to improve safety and to conform to environmental regulations amounted to approximately $17.6 million in 1993 and $15.6 million in 1992. Witco is continuing its efforts to reduce hazardous waste and emissions generated by its operations. Through improved operating efficiencies, installation of additional environmental control equipment, and utilization of the latest innovations in waste treatment technology, management believes that operating costs associated with managing hazardous substances and pollution can be controlled. Such operating costs amounted to $23.6 million in 1993. (d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES Witco's foreign subsidiaries generally manufacture products similar to the principal products manufactured domestically. Subsidiaries in the Netherlands and Canada manufacture petroleum products; subsidiaries in Canada, Denmark, Ecuador, England, France, Germany, Israel, Italy, Mexico and Spain manufacture chemical products. In accord with normal market conditions, sales made outside the United States are generally made on longer terms of payment than would be normal within the United States. Foreign operations are subject to certain risks inherent in carrying on international business, including currency devaluations and controls, export and import restrictions, inflationary factors, product supply, economic controls, nationalization and expropriation. The likelihood of such occurrences varies from country to country and is not predictable. However, the Company's primary foreign operations are based in Western Europe, Canada, and other stable areas, and, therefore, the Company does not believe these risks will have a significant impact upon the Company. Reference is made to Note 15 of the Notes to Financial Statements. See Item 8 -- Financial Statements and Supplementary Data following Part IV of this report. ITEM 2 -- PROPERTIES Witco currently conducts its manufacturing operations in 64 plants, owned in fee or occupied under lease, of which 42 are in the United States and 22 in other countries. Of these facilities, 34 are utilized for Chemical product manufacturing, 19, including 2 refineries, are utilized for Petroleum product manufacturing and 11 are utilized for the manufacture of Diversified Products. All of the facilities are in good operating condition. 6 PRINCIPAL PLANTS AND OTHER IMPORTANT PHYSICAL PROPERTIES -- LOCATIONS BY INDUSTRY SEGMENT (OWNED IN FEE EXCEPT WHERE PARENTHETICAL DATES REFER TO LEASE EXPIRATION) CHEMICAL SEGMENT FACILITIES United States Santa Fe Springs, California -- 2 Plants Perth Amboy, New Jersey Blue Island, Illinois Brooklyn, New York Chicago, Illinois Memphis, Tennessee Mapleton, Illinois -- 2 Plants Fort Worth, Texas Harahan, Louisiana Houston, Texas Taft, Louisiana LaPorte, Texas Brainards, New Jersey Marshall, Texas Newark, New Jersey Janesville, Wisconsin International Brantford, Canada Elbeuf, France Montreal, Canada St. Amour, France Oakville, Canada Bergkamen, Germany (2091) Soro, Denmark (2005) Steinau, Germany Quito, Ecuador Haifa, Israel Accrington, England Gambolo, Italy Droitwich, England Cuatitlan, Mexico Flimby, England Barcelona, Spain PETROLEUM SEGMENT FACILITIES United States Los Angeles, California Gretna, Louisiana Oildale, California -- Refinery Omaha, Nebraska (1999) Rancho Dominguez, California Bakerstown, Pennsylvania Richmond, California (1994) Bradford, Pennsylvania -- Refinery Jacksonville, Florida Petrolia, Pennsylvania Spencer, Iowa Trainer, Pennsylvania Olathe, Kansas International Scarborough, Canada (1995) Amsterdam, the Netherlands Toronto, Canada Haarlem, the Netherlands West Hill, Canada Koog Aan De Zaan, the Netherlands DIVERSIFIED PRODUCTS SEGMENT FACILITIES United States Phoenix City, Alabama Detroit, Michigan Los Angeles, California Philadelphia, Mississippi Portland, Connecticut Cleveland, Ohio Chicago, Illinois -- 2 Plants Ponca City, Oklahoma Indianapolis, Indiana Sunray, Texas
7 OTHER FACILITIES United States Greenwich, Connecticut (2014) World Headquarters -- Principal Executive, Administrative and Sales Office Los Angeles, California (2001) Administrative and Sales Office Melrose Park, Illinois Administrative and Sales Office New Hudson, Michigan Research Oakland, New Jersey Research Oakland, New Jersey (1994) Administrative, Research and Sales Office Woodcliff Lake, New Jersey (2006) Administrative Office New York, New York (1997) Principal Executive, Administrative and Sales Office Houston, Texas (1995) Administrative, Research and Sales Office International Willowdale, Canada (2002) Administrative Office Paris, France (1995) Administrative and Sales Office Frankfurt, Germany (1997) Principal European Executive and Administrative Office
ITEM 3 -- 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 40 sites which are subject to the federal Superfund Program under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ('CERCLA'). With 2 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. all. 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. No provision for recovery under any of these policies is included in the Company's financial statements. 8 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. ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter ended December 31, 1993. EXECUTIVE OFFICERS OF THE COMPANY The following sets forth information regarding executive officers of the Company as of February 28, 1994, and is included in Part I in accordance with Instruction 3 of Item 401(b) of Regulation S-K.
SERVED IN PRESENT POSITION PRIOR BUSINESS EXPERIENCE NAME AND PRESENT TITLE SINCE (WITHIN LAST FIVE YEARS) AGE - --------------------------------------------- --------- ------------------------------------------------ --- CORPORATE Denis Andreuzzi ............................. 1992 President and Chief Operating Officer -- March 62 Vice Chairman and Chief Operating 1990 to September 1992. Executive Vice Officer -- Petroleum President -- Petroleum Group -- July 1989 to February 1990. Executive Vice President -- Commercial Services prior to July 1989. Peter J. Biancotti .......................... 1983 50 Vice President and Controller Ronald Edelstein ............................ 1992 General Manager -- Information Systems, 44 Vice President -- Information Systems Witco -- October 1991 to April 1992. Vice President -- Systems Development, Revlon Inc. -- February 1991 to September 1991. Group Director -- Systems and Programming, Revlon, Inc. prior to February 1991. Michael D. Fullwood ......................... 1992 Group Vice President -- Finance and 47 Executive Vice President and Chief Administration -- October 1990 to September Financial Officer 1992. Vice President and Treasurer prior to September 1990. William E. Mahoney .......................... 1992 Executive Vice President -- Chemical 62 Vice Chairman and Chief Operating Group -- July 1989 to September 1992. Group Officer -- Chemicals Vice President -- Chemical Group prior to July 1989. Dustan E. McCoy ............................. 1993 Associate General Counsel, Ashland Oil prior to 44 Vice President, General Counsel and April 1993. Corporate Secretary Lawrence B. Nelson .......................... 1990 Group Vice President -- Petroleum Group 63 Group Vice President -- Corporate Technology James M. Rutledge ........................... 1990 Assistant Controller 41 Vice President and Treasurer Carl R. Soderlind ........................... 1993 Group Vice President -- Commercial 60 Senior Vice President -- External Affairs Services -- March 1990 to December 1992. Vice President -- Corporate Development and Investor Relations prior to March 1990. William R. Toller ........................... 1990 Vice Chairman and Chief Financial 63 Chairman of the Board and Chief Executive Officer -- March 1990 to September 1990. Officer Executive Vice President -- Finance and Administration prior to March 1990.
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SERVED IN PRESENT POSITION PRIOR BUSINESS EXPERIENCE NAME AND PRESENT TITLE SINCE (WITHIN LAST FIVE YEARS) AGE - --------------------------------------------- --------- ------------------------------------------------ --- Clark E. Tucker ............................. 1993 General Manager -- Human Resources from August 44 Vice President -- Human Resources 1992 to April 1993. Consultant, Towers, Perrin, Foster and Crosby -- April 1990 to July 1992. Director of Personnel, American Cyanamid Co. -- August 1989 to March 1990. Corporate Director -- Employee Benefits, American Cyanamid Co. -- prior to July 1989. Tom M. Uhoda ................................ 1981 62 Vice President -- Purchasing, Distribution and Traffic CHEMICAL SEGMENT Group Vice Presidents: Seymour Cohen ............................... 1975 62 Oleochemicals/Surfactants Nirmal Jain ................................. 1993 Vice President & General Manager -- Argus 56 Polymer Additives Division prior to January 1993. Gerald Katz ................................. 1986 56 International/Europe PETROLEUM SEGMENT Group Vice Presidents: Harvey L. Golubock .......................... 1990 Vice President Supply and Distribution prior to 51 Lubricants September 1990. Newton E. Brightwell III .................... 1993 Vice President & General Manager -- Sonneborn 45 Petroleum Specialties Division from June 1989 to December 1992. Plant Manager -- Sonneborn Gretna, LA plant prior to June 1989. Vice Presidents: John R. Jury................................. 1978 63 Eric R. Myers ............................... 1993 Vice President & General Manager -- 47 Kendall/Amalie Division from January 1993 to April 1993. Vice President & General Manager -- Richardson Battery Parts Division from May 1991 to December 1992. President & General Manager, Bridgeport -- Piedmont Manufacturing Co. -- Division of Bridge Products, Inc. prior to May 1991. Donald E. Weinberg........................... 1986 58 DIVERSIFIED PRODUCTS SEGMENT Group Vice President: Robert J. Seward............................. 1993 Group Vice President -- Petroleum Group from 61 June 1989 to December 1992. Vice President and General Manager -- Concarb prior to June 1989. Vice President and Division General Manager: Richard W. Gotsch ........................... 1983 62 Allied-Kelite
10 PART II ITEM 5 -- MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS Witco's Common Stock is listed on the New York Stock Exchange. The following table reflects the high and low sales prices, adjusted to give retroactive effect to the 2-for-1 stock split effective October 5, 1993, as reported on such exchange for each quarterly period during the past two years:
1993 1992 ---------------- ---------------- QUARTER HIGH LOW HIGH LOW - --------------------------------------------- ------ ------ ------ ------ First........................................ $26.69 $24.00 $24.69 $20.00 Second....................................... $28.06 $25.88 $24.63 $21.38 Third........................................ $31.38 $26.25 $23.13 $20.56 Fourth....................................... $32.25 $28.63 $25.31 $20.94
The approximate number of holders of record of the Company's Common Stock as of February 28, 1994, was 5,114. Dividends on the Common Stock have been declared quarterly during the past two years as follows:
PER SHARE ------------ QUARTER 1993 1992 - ---------------------------------------------------------------------- ---- ---- First................................................................. $.23 $.23 Second................................................................ $.23 $.23 Third................................................................. $.25 $.23 Fourth................................................................ $.25 $.23 Note: Amounts have been adjusted to give retroactive effect to the 2-for-1 stock split effective October 5, 1993.
ITEM 6 -- SELECTED FINANCIAL DATA The data for this item is submitted as a separate section following Part IV of this report. ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The data for this item is submitted as a separate section following Part IV of this report. ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements and supplementary data of the Company and its subsidiaries are included in a separate section following Part IV of this report. ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 11 PART III ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS (a) Identification of Directors Reference is made to pages 2 through 7 of the Proxy Statement to be filed pursuant to Regulation 14A no later than March 31, 1994. (b) Identification of Executive Officers Reference is made to Part I of this Form 10-K. (c) Business Experience Reference is made to pages 2 through 7 of the Proxy Statement to be filed pursuant to Regulation 14A no later than March 31, 1994 and Part I of this Form 10-K. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT Reference is made to page 8 of the Proxy Statement to be filed pursuant to Regulation 14A no later than March 31, 1994. ITEM 11 -- EXECUTIVE COMPENSATION Reference is made to the information set forth under the captions 'Compensation of Directors' and 'Executive Compensation' on pages 10 through 14 of the Proxy Statement to be filed pursuant to Regulation 14A no later than March 31, 1994. ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT For information with respect to beneficial ownership of the Company's voting securities, and rights thereto, reference is made to the information set forth under the captions 'Ownership of Securities by Directors and Officers' and 'Security Ownership of Certain Beneficial Owners' on pages 7 and 8 of the Proxy Statement to be filed pursuant to Regulation 14A no later than March 31, 1994. ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (a) Transactions with Management and Others Reference is made to the information set forth under the caption 'Compensation of Directors' on page 10 of the Proxy Statement to be filed pursuant to Regulation 14A no later than March 31, 1994. (b) Certain Business Relationships Reference is made to the information set forth under the captions 'Other Transactions' on page 9 and 'Compensation Committee Interlocks and Insider Participation' on page 14 of the Proxy Statement to be filed pursuant to Regulation 14A no later than March 31, 1994. 12 PART IV ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1 and 2 -- The response to this portion of Item 14 is submitted as a separate section of this report. (a) 3 -- Exhibits:
EXHIBIT NO. - ------- 3(i) -- Restated Certificate of Incorporation.(1) 3(i) -- Certificates of Amendment of the Restated Certificate of Incorporation.(2) 3(ii) -- By-laws, as amended. 4 -- Instruments defining the rights of security holders, including indentures. Pursuant to Regulation S-K, Item 601(b)(4)(iii), no debt or other security instrument represents 10% of the total assets of the Registrant, and accordingly such instruments are not filed herewith. Registrant agrees to furnish a copy of any such agreement to the Commission upon request. 10 -- Material Contracts. (iii)(A) -- Executive Compensation Plans and Arrangements Required to be Filed: -- 1. 1986 Stock Option Plan for Employees, as amended.(3) -- 2. 1989 Stock Option Plan for Employees.(4) -- 3. 1992 Stock Option Plan for Employees.(5) -- 4. Consultancy Agreement Between the Company and William Wishnick.(6) -- 5. Supplemental Executive Retirement Plan of Witco Corporation. 11 -- Statement re Computation of Per Share Earnings. 21 -- Subsidiaries of the Registrant. 23 -- Consent of Independent Auditors. 24 -- Power of Attorney.(7)
(b) Reports on Form 8-K. The Company filed a Current Report on Form 8-K, dated January 19, 1994, pertaining to the Company's announcement that it would take a $92.6 million charge ($60.1 million after tax, or $1.10 per common share) against earnings in the fourth quarter which ended December 31, 1993. (c) The Exhibits filed with this report are listed in response to Item 14(a)3. (d) The response to this portion of Item 14 is submitted as a separate section of this report. - ------------ (1) This Exhibit was included as an exhibit to the annual report on Form 10-K for the fiscal year ended December 31, 1980, and such Exhibit is hereby incorporated by reference. (2) These Exhibits were included as exhibits to the quarterly report on Form 10-Q for the quarter ended June 30, 1983, the annual report on Form 10-K for the fiscal year ended December 31, 1985, the quarterly report on Form 10-Q for the quarter ended June 30, 1987, and the quarterly report on Form 10-Q for the quarter ended June 30, 1988, and such Exhibits are hereby incorporated by reference. From time to time, the Company has filed, as a result of the conversion of the Company's outstanding $2.65 Cumulative Convertible Preferred Stock, certificates reducing such authorized Preferred Stock. Such certificates of reduction are not filed as Exhibits. (3) The 1986 Stock Option Plan, as amended, was filed as an Exhibit to Registration Statement on Form S-8, registration number 33-10715, Post-Effective Amendment No. 1 to Form S-8 effective October 3, 1988, and Post-Effective Amendment No. 2 to Form S-8 effective June 23, 1992. Such Exhibit is incorporated herein by reference. (4) The 1989 Stock Option Plan was filed as an Exhibit to Registration Statement on Form S-8, registration number 33-30995 effective October 2, 1989, and Post-Effective Amendment No. 1 to Form S-8 effective June 23, 1992, and such Exhibit is hereby incorporated by reference. (5) The 1992 Stock Option Plan was filed as an Exhibit to Registration Statement on Form S-8, registration number 33-48806, effective June 23, 1992, and such Exhibit is hereby incorporated by reference. (6) This Exhibit was included as an exhibit to the annual report on Form 10-K for the fiscal year ended December 31, 1992, and such Exhibit is hereby incorporated by reference. (7) The Power of Attorney appears on the Signatures Page. 13 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 on the 21st day of March, 1994. WITCO CORPORATION By /s/ WILLIAM R. TOLLER ................................... WILLIAM R. TOLLER CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints WILLIAM R. TOLLER, DENIS ANDREUZZI, WILLIAM E. MAHONEY, MICHAEL D. FULLWOOD, OR DUSTAN E. MCCOY, acting severally, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
NAME TITLE DATE - ------------------------------------------ -------------------------------------------- ------------------- PRINCIPAL EXECUTIVE OFFICERS: /s/ WILLIAM R. TOLLER Chairman of the Board and Chief Executive March 21, 1994 ......................................... Officer WILLIAM R. TOLLER /s/ DENIS ANDREUZZI Vice Chairman and Chief Operating March 21, 1994 ......................................... Officer-Petroleum DENIS ANDREUZZI /s/ WILLIAM E. MAHONEY Vice Chairman and Chief Operating March 21, 1994 ......................................... Officer-Chemicals WILLIAM E. MAHONEY PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER: /s/ MICHAEL D. FULLWOOD Executive Vice President and Chief Financial March 21, 1994 ......................................... Officer MICHAEL D. FULLWOOD DIRECTORS: /s/ DENIS ANDREUZZI Director March 21, 1994 ......................................... DENIS ANDREUZZI /s/ WILLIAM J. ASHE Director March 21, 1994 ......................................... WILLIAM J. ASHE
14
NAME TITLE DATE - ------------------------------------------ -------------------------------------------- ------------------- /s/ SIMEON BRINBERG Director March 21, 1994 ......................................... SIMEON BRINBERG /s/ WILLIAM G. BURNS Director March 21, 1994 ......................................... WILLIAM G. BURNS /s/ WILLIAM R. GRANT Director March 21, 1994 ......................................... WILLIAM R. GRANT /s/ RICHARD M. HAYDEN Director March 21, 1994 ......................................... RICHARD M. HAYDEN /s/ HARRY G. HOHN Director March 21, 1994 ......................................... HARRY G. HOHN /s/ WILLIAM E. MAHONEY Director March 21, 1994 ......................................... WILLIAM E. MAHONEY /s/ L. JOHN POLITE, JR. Director March 21, 1994 ......................................... L. JOHN POLITE, JR. /s/ DAN J. SAMUEL Director March 21, 1994 ......................................... DAN J. SAMUEL /s/ HENRY SONNEBORN III Director March 21, 1994 ......................................... HENRY SONNEBORN III /s/ WILLIAM R. TOLLER Director March 21, 1994 ......................................... WILLIAM R. TOLLER /s/ BRUCE F. WESSON Director March 21, 1994 ......................................... BRUCE F. WESSON /s/ WILLIAM WISHNICK Director March 21, 1994 ......................................... WILLIAM WISHNICK
15 ANNUAL REPORT ON ------------------------ FORM 10-K ITEM 6, ITEM 7, ITEM 8, ITEM 14 (a)(1) AND (2) AND ITEM 14(d) INDEX OF FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1993 ------------------------ WITCO CORPORATION NEW YORK, NEW YORK INDEX ANNUAL REPORT ON FORM 10-K ITEM 6, ITEM 7, ITEM 8, ITEM 14(a)(1) AND (2), AND ITEM 14(d) DECEMBER 31, 1993
PAGE NO. -------- ITEM 6 -- SELECTED FINANCIAL DATA................................................................ 1 ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................................................ 3 ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- SEE ITEM 14(a)(1) AND (2) BELOW. ITEM 14(a)(1) AND (2) AND ITEM 14(d)
The following consolidated financial statements of Witco Corporation and subsidiary companies, for the year ended December 31, 1993, are included in Item 8: Report of Independent Auditors......................................................... F-1 Consolidated Balance Sheets -- December 31, 1993 and 1992.............................. F-2 Consolidated Statements of Income -- Years Ended December 31, 1993, 1992 and 1991...... F-3 Consolidated Statements of Cash Flows -- Years Ended December 31, 1993, 1992 and 1991.............................................................................. F-4 Consolidated Statements of Shareholders' Equity -- Years Ended December 31, 1993, 1992 and 1991.......................................................................... F-5 Notes to Financial Statements.......................................................... F-6 Quarterly Financial Data (unaudited)................................................... F-20
The following consolidated financial statement schedules of Witco Corporation and subsidiary companies are included in Part IV, Item 14(d):
Schedule V -- Property, Plant and Equipment....................................... S-1 Schedule VI -- Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment............................................. S-2 Schedule VIII -- Valuation and Qualifying Accounts................................... S-3 Schedule IX -- Short-Term Borrowings............................................... S-4 Schedule X -- Supplementary Income Statement Information.......................... S-5
All other schedules (Nos. I, II, III, IV, VII, XI, XII, XIII and XIV) for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. Financial statements (and summarized financial information) of 50% or less owned persons accounted for by the equity method have been omitted because they do not, considered individually or in the aggregate, constitute a significant subsidiary. WITCO CORPORATION AND SUBSIDIARY COMPANIES ELEVEN-YEAR FINANCIAL AND STATISTICAL SUMMARY
1993 1992 1991 1990 1989 ---------- ---------- ---------- ---------- ---------- (THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA) Selected Statement of Income Data Net sales...................................... $2,142,555 $1,728,896 $1,630,521 $1,631,481 $1,587,788 Interest....................................... 8,679 9,303 10,529 19,380 21,248 ---------- ---------- ---------- ---------- ---------- Total revenues........................ 2,151,234 1,738,199 1,641,050 1,650,861 1,609,036 ---------- ---------- ---------- ---------- ---------- Cost of goods sold (exclusive of depreciation, depletion, and amortization)................. 1,649,143 1,355,450 1,270,954 1,309,907 1,261,918 Selling and administrative expenses............ 230,722 190,339 178,573 167,686 167,229 Depreciation, depletion, and amortization...... 102,502 76,162 67,622 60,098 56,813 Interest....................................... 34,984 16,448 16,027 16,400 16,289 Other expense (income) -- net.................. 100,552(b) 17,688(c) (1,930) (9,074) 53,368(d) ---------- ---------- ---------- ---------- ---------- Total costs and expenses.............. 2,117,903 1,656,087 1,531,246 1,545,017 1,555,617 ---------- ---------- ---------- ---------- ---------- Income before federal and foreign income taxes and cumulative effect of accounting change... 33,331 82,112 109,804 105,844 53,419 Federal and foreign income taxes............... 13,568 28,247 36,329 37,890 18,410 ---------- ---------- ---------- ---------- ---------- Income before cumulative effect of accounting change....................................... 19,763 53,865 73,475 67,954 35,009 Cumulative effect of accounting change......... -- (14,690) -- -- -- ---------- ---------- ---------- ---------- ---------- Net Income..................................... $ 19,763 $ 39,175 $ 73,475 $ 67,954 $ 35,009 As a percent of net sales.................. .9% 2.3% 4.5% 4.2% 2.2% As a percent of average shareholders' equity................................... 3.0% 6.3% 12.1% 11.7% 6.1% ---------- ---------- ---------- ---------- ---------- Selected Balance Sheet Data Working capital................................ $ 451,235 $ (21,611) $ 320,934 $ 359,091 $ 456,183 Current ratio.................................. 2.32 0.97 2.25 2.76 3.54 Property, plant, and equipment expenditures (including acquisitions)..................... $ 103,689 $ 322,786 $ 74,307 $ 106,650 $ 70,387 Property, plant, and equipment -- net.......... $ 696,462 $ 721,171 $ 474,755 $ 471,026 $ 417,175 Total assets................................... $1,838,998 $1,811,794 $1,198,276 $1,178,885 $1,139,256 Long-term debt................................. $ 496,266 $ 173,086 $ 179,132 $ 230,183 $ 235,510 Total shareholders' equity..................... $ 713,415 $ 614,296 $ 625,700 $ 587,472 $ 571,582 Book value per common share(a)................. $ 14.12 $ 13.80 $ 14.35 $ 13.55 $ 12.67 ---------- ---------- ---------- ---------- ---------- Selected Other Financial Data(a) Number of shareholders -- at year end.......... 5,253 5,262 5,602 5,949 5,635 Weighted average number of common shares outstanding (in thousands)................... 54,866 49,801 49,212 49,703 50,674 Per common share: Net income................................. $ .46 $ .90 $ 1.60 $ 1.48 $ .80 Net income -- assuming full dilution....... $ .46 $ .89 $ 1.59 $ 1.47 $ .79 Dividends declared......................... $ .96 $ .92 $ .91 $ .86 $ .84 Dividends paid per share: Common stock............................... $ .94 $ .92 $ .89 $ .86 $ .81 Preferred stock............................ $ 2.65 $ 2.65 $ 2.65 $ 2.65 $ 2.65 Market price to the nearest dollar, per common share on New York Stock Exchange (high - low)................................. $ 32-24 $ 25-20 $ 22-14 $ 20-11 $ 23-17
- ------------ (a) Common share data have been adjusted to reflect the two-for-one stock split effective October 5, 1993. (b) Includes provisions for environmental remediation and compliance, disposition of a business, work force reduction, and other matters of $92.6 million. (c) Includes a provision for consolidation of offices of $20.1 million. (d) Includes a provision of $59.8 million primarily related to environmental projects and plant shutdowns. 1
1988 1987 1986 1985 1984 1983 ---------- ---------- ---------- ---------- ---------- ---------- (THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA) $1,585,856 $1,427,650 $1,355,018 $1,448,929 $1,495,831 $1,385,744 15,792 12,405 6,595 3,369 6,190 4,555 ---------- ---------- ---------- ---------- ---------- ---------- 1,601,648 1,440,055 1,361,613 1,452,298 1,502,021 1,390,299 ---------- ---------- ---------- ---------- ---------- ---------- 1,240,730 1,121,118 1,039,727 1,166,415 1,208,966 1,114,043 165,364 149,968 149,823 138,130 139,183 134,141 52,867 53,659 54,159 51,536 45,504 43,577 16,394 15,732 12,045 11,343 14,482 14,070 10,776 (578) (2,451) (8,741) 1,541 (5,654) ---------- ---------- ---------- ---------- ---------- ---------- 1,486,131 1,339,899 1,253,303 1,358,683 1,409,676 1,300,177 ---------- ---------- ---------- ---------- ---------- ---------- 115,517 100,156 108,310 93,615 92,345 90,122 43,896 36,863 43,095 36,841 29,743 38,100 ---------- ---------- ---------- ---------- ---------- ---------- 71,621 63,293 65,215 56,774 62,602 52,022 20,289 -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- $ 91,910 $ 63,293 $ 65,215 $ 56,774 $ 62,602 $ 52,022 5.8% 4.4% 4.8% 3.9% 4.2% 3.8% 16.8% 12.9% 14.8% 14.4% 17.6% 16.4% ---------- ---------- ---------- ---------- ---------- ---------- $ 439,250 $ 417,332 $ 246,661 $ 233,554 $ 202,890 $ 202,579 3.24 3.06 2.49 2.34 2.24 2.14 $ 79,509 $ 82,090 $ 60,102 $ 75,606 $ 85,192 $ 54,872 $ 400,996 $ 374,628 $ 367,789 $ 360,950 $ 348,740 $ 313,794 $1,114,575 $1,056,298 $ 819,768 $ 810,292 $ 755,777 $ 732,851 $ 240,709 $ 242,641 $ 95,590 $ 136,020 $ 143,409 $ 146,964 $ 578,341 $ 513,615 $ 465,465 $ 415,410 $ 374,786 $ 336,713 $ 12.89 $ 11.47 $ 10.43 $ 9.39 $ 8.51 $ 7.69 ---------- ---------- ---------- ---------- ---------- ---------- 5,784 5,823 5,965 6,228 6,618 6,782 50,499 49,477 44,538 44,267 43,956 43,426 $ 1.93 $ 1.36 $ 1.47 $ 1.28 $ 1.43 $ 1.20 $ 1.91 $ 1.35 $ 1.44 $ 1.26 $ 1.39 $ 1.16 $ .73 $ .60 $ .55 $ .50 $ .48 $ .43 $ .70 $ .58 $ .53 $ .50 $ .47 $ .42 $ 2.65 $ 2.65 $ 2.65 $ 2.65 $ 2.65 $ 2.65 $ 19-15 $ 24-13 $ 20-13 $ 14-11 $ 13-9 $ 12-6
2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND FINANCIAL RESOURCES Cash flow from operations continues to be a prime source of funds for Witco. Over the past three years, cash provided by operations exceeded $436 million, an amount sufficient to fund working capital requirements, support the Company's internal capital investment program, and sustain an increasing rate of dividends paid. 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. In the fourth quarter Witco sold the operations of a subsidiary, Chemprene, Inc., for $24.2 million in cash. This divestiture is consistent with management's intent to divest assets that do not meet the Company's long-term strategic objectives. Management expects to complete the sale of other non-core businesses in 1994, with the resulting cash flow from these divestitures being used to further strengthen the Company's core businesses of specialty chemical and petroleum products. During 1993 Witco repaid the $440 million short-term indebtedness incurred in connection with the November 1992 acquisition of the Industrial Chemicals and Natural Substances divisions of Schering AG (Schering Acquisition). The funds used to repay this debt were provided by the completion of all phases of the Company's long-term financing strategy, which included a public offering of common stock, issuance of 10 and 30 year notes and debentures, and 5 year German bank loans. Net proceeds from these long-term financings totalled $457.8 million. Additional details regarding the impact of operating, investing, and financing activities on the Company's cash position can be found in the Consolidated Statements of Cash Flows. On March 11, 1994 the Company called for redemption on March 28, 1994 all of its 5 1/2% Convertible Subordinated Debentures due 2012 of which $150 million is outstanding. The debentures are convertible into common stock of the Company at a conversion price of $27.28 per share, which price was below the market price for the Company's common stock on the New York Stock Exchange on March 10, 1994. Therefore, the Company believes most of the debentures will be converted into common stock. If all debentures are converted, approximately 5.5 million additional shares of common stock will become issued and outstanding. However, the issuance of additional common stock by reason of conversion of any of these debentures will have no effect upon the Company's earnings per share calculations as the shares underlying the debentures have been considered as common stock equivalents in such calculations. If all debentures were to be redeemed rather than converted, the total cost to the Company would be $152.8 million. The Company will fund any redemptions through a combination of available cash and short-term borrowings. The Company, through certain of its international subsidiaries, has arrangements with various banks for lines of credit. At December 31, 1993, these lines of credit aggregated $40.2 million, of which $37.4 million was unused at year-end. Witco has also entered into certain long-term hedging arrangements to protect against possible adverse currency exchange and interest rate fluctuations (see Note 8 of the Notes to Financial Statements for additional details). CAPITAL INVESTMENTS AND COMMITMENTS In 1993 the Company continued its program of upgrading existing facilities for efficiencies to best meet changing market demands. Internal capital expenditures in 1993 were $103.7 million, bringing the total for the past three years to $250.6 million. Capital expenditures are expected to approximate $110 million in 1994. The Company's European manufacturing base, which was greatly expanded by the Schering Acquisition, remains a focal point of Witco's capital investment program. In 1993 management authorized capital projects at the Company's European facilities of $44.4 million, reflecting management's commitment to enhancing manufacturing capabilities to better position itself to take advantage of growth opportunities as the European economy stabilizes. 3 In the fourth quarter of 1993 the Board of Directors authorized certain amendments to the domestic salaried pension plans. These improvements, in conjunction with changes to actuarial assumptions relating to the discount rate on pension obligations and the expected long-term rate of return on plan assets, will increase 1994 pension costs by approximately $9.2 million. The Company anticipates that cash flow will not be materially affected by these changes. Also in the fourth quarter, the Company announced its intention to sell its Battery Parts Division, and to effect a reduction of approximately four percent in its worldwide employee population of 8,200. Reserves of $31.4 million have been recorded, principally for severance costs and the anticipated loss on the sale of Battery Parts' net assets. The Company anticipates that cash outlays of $16.9 million relative to these reserves will be made over the next two years and will be funded through cash flow from operations. ENVIRONMENTAL MATTERS The chemical and petroleum industries in which Witco operates have experienced increased operating costs and capital investments due to statutes and regulations at the federal, state, and local levels for the protection of the environment and the health and safety of employees and others. Witco believes that expenditures for compliance with these statutes and regulations will continue to have a significant impact upon the conduct of its business. The trend for greater environmental awareness and more stringent environmental regulations is likely to continue and while Witco cannot accurately predict how this trend will affect future operations and earnings, Witco does not believe its costs will significantly vary from those of its competitors in the chemical and petroleum industries. Witco evaluates and reviews environmental reserves for future remediation and compliance costs on a quarterly basis. To determine the appropriate reserve amounts, management reviews all available facts and evaluates the probability and scope of potential liabilities. Inherent in this process are considerable uncertainties which affect Witco'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. As a result, as remediation efforts proceed at existing sites and new sites are assimilated into the review process, charges against income for environmental reserves could have a material effect on results of operations in a particular quarter or year. However, such charges are not expected to have a material adverse effect on Witco's consolidated financial position, cash flow, or liquidity. At December 31, 1993, environmental reserves amounted to $99.6 million, of which $52.8 million was provided for in 1993. These reserves reflect management's assessment of future remediation and compliance costs in light of all currently available information. Witco expended $15.1 million in 1993 against these reserves and anticipates 1994 expenditures to approximate $29 million. Capital expenditures for environmental control equipment and facilities amounted to $12.3 million in 1993, and $34.1 million for the past three years. The Company estimates that from 1994 through 1996, approximately $45 million will be expended on environmental capital projects. Witco is continuing its efforts to reduce hazardous waste and emissions generated by its operations. Through improved operating efficiencies, installation of additional environmental control equipment, and utilization of the latest innovations in waste treatment technology, management believes that direct recurring operating costs associated with managing hazardous substances and pollution can be controlled. Such costs amounted to $23.6 million in 1993. RESULTS OF OPERATIONS The Company's reported net income of $19.8 million for 1993 and $39.2 million for 1992 included several non-recurring items. Comparisons of net income for the three year period ended December 31, 1993 are affected by these items. The following table shows the effect of these non-recurring items on net income. The pre-tax values of these items, except the accounting change which was shown 4 separately, were included in the 'Other expense (income) -- net' caption of the Consolidated Statements of Income.
1993 1992 1991 --------------------------- --------------------------- ----------------------------- PRE-TAX NET NET INCOME PRE-TAX NET NET INCOME PRE-TAX NET NET INCOME INCOME INCOME PER SHARE INCOME INCOME PER SHARE INCOME INCOME PER SHARE ------- ------ ---------- ------- ------ ---------- ------- ------ --------- (MILLIONS OF DOLLARS EXCEPT PER SHARE DATA) Income excluding non-recurring items......................... $137.9 $87.8 $1.70 $102.2 $67.2 $1.46 $109.8 $73.5 $1.60 Provision for environmental remediation and compliance.... (52.8) (34.3) (.63) -- -- -- -- -- -- Provision for disposition of a business...................... (19.2) (12.4) (.23) -- -- -- -- -- -- Provision for work force reduction..................... (12.2) (7.9) (.14) -- -- -- -- -- -- Gain on sale of the operations of a subsidiary............... 8.8 5.7 .11 -- -- -- -- -- -- Charge for a legal judgment..... (11.6) (7.6) (.14) -- -- -- -- -- -- Provision for loss on sublease of office facilities.......... (9.2) (6.1) (.11) -- -- -- -- -- -- Other -- net.................... (8.4) (5.4) (.10) -- -- -- -- -- -- Provision for consolidation of offices....................... -- -- -- (20.1) (13.3) (.27) -- -- -- ------- ------ ----- ------- ------ ----- ------- ------ ----- Income before cumulative effect of accounting change.......... 33.3 19.8 .46 82.1 53.9 1.19 109.8 73.5 1.60 Accounting change (adoption of SFAS No. 106)................. -- -- -- -- (14.7) (.29) -- -- -- ------- ------ ----- ------- ------ ----- ------- ------ ----- Income as reported.............. $ 33.3 $19.8 $ .46 $ 82.1 $39.2 $ .90 $109.8 $73.5 $1.60 ------- ------ ----- ------- ------ ----- ------- ------ ----- ------- ------ ----- ------- ------ ----- ------- ------ -----
The current year's $34.3 million environmental provision reflected the Company's assessment of the remediation and compliance costs it will incur to comply with regulatory requirements and standards. Additionally, the Company has established provisions of $12.4 million for the planned divestiture of the Battery Parts Division and $7.9 million for the reduction of approximately 4 percent of the Company's worldwide work force, as part of its strategy to realign and reorganize operations to emphasize core businesses. Consistent with this strategy, during 1993 the Company sold the operations of its Chemprene subsidiary for a net gain of $5.7 million. The $7.6 million legal settlement recorded in 1993 resulted from a judgment against the Company in the Lightning Lube litigation. Current year results also included a loss of $6.1 million attributable to an agreement to sublease two office facilities resulting from the Company's commitment to relocate to a new world headquarters. 1992 results included a charge of $13.3 million relating to the Company's decision to bring certain operating management together with executive management and administrative functions through the consolidation of offices into a new world headquarters. An accounting change resulting from the adoption of Statement of Financial Accounting Standards No. 106 for postretirement benefits other than pensions further reduced net income by $14.7 million in 1992. 1993 VS. 1992 Net income, adjusted to exclude non-recurring items, was $87.8 million in 1993, compared to $67.2 million in 1992. The 31 percent increase in net income, before non-recurring items, was primarily attributable to record sales, which rose 24 percent to $2.1 billion, and a 1 percent improvement in gross margins. The acquisition of the Schering businesses accounted for the higher sales and approximately 50 percent of the improved margins. The remaining improvement in margins was attributable to a reduction in key raw material feedstock costs and operating efficiencies in both the Petroleum and Diversified Products Segments. Increases in selling and administrative expenses, depreciation and amortization, and interest, primarily attributable to the Schering Acquisition, partially offset the higher sales and improved margins. The Company does not allocate income and expenses that are of a general corporate nature to industry segments in computing operating income. These include general corporate expenses, interest income and expense, and certain other income and expenses (see Note 15 of the Notes to Financial Statements). 5 Current year's operating income was $114.5 million, compared to $129.7 million in 1992. A comparison of the results of these periods was affected by a net non-recurring charge of $74.8 million recorded in 1993. Excluding non-recurring items, operating income increased $59.6 million to $189.3 million. All segments reported operating earnings, exclusive of non-recurring items, that were appreciably higher than the preceding year (see segment information below). CHEMICAL SEGMENT Chemical net sales of $1.2 billion in 1993 exceeded the previous year by approximately $396 million. The segment was able to sustain sales, excluding those relating to the acquisition, at 1992 levels despite a soft demand due to sluggish domestic and European economies. Sales attributable to the Schering Acquisition accounted for the 47 percent increase. Excluding the segment's $5.6 million of environmental charges recorded in 1993, current year's operating income of $113.8 million increased $39.5 million, or 53 percent, from 1992. Each of the segment's business groups reported 1993 earnings that were substantially higher than the preceding year. The inclusion of the acquired Schering businesses' full year operating results in 1993, compared to two months for 1992, accounted for the higher earnings. The Schering Acquisition contributed $41 million to the segment's 1993 operating earnings, compared to the reported loss of $2.2 million in 1992. International, principally Western Europe, and domestic operations contributed equally to the Schering Acquisition's current year earnings. The favorable earnings were also, in part, attributable to cost saving programs and the consolidation of sales and administrative functions in Europe, which minimized the effect the persistent European recession had on operations. Partially offsetting the positive impact that the Schering Acquisition and cost saving programs had on operations, the Oleochemicals/Surfactants Group was adversely affected by $3 million as a result of an increase in the cost of major commodity raw material feedstocks. Many of the benefits derived from the actions initiated in 1993, particularly cost reduction programs in the acquired Schering businesses, will not be fully realized until 1994 and beyond. PETROLEUM SEGMENT Net sales in 1993 were $746 million, an increase of $11.7 million over the $734.3 million recorded in 1992. Despite a soft global economy and the strengthening of the dollar overseas, both 1993 sales volume and prices were generally comparable to the prior year. The acquisition of the business of IGI Petroleum Specialties, Inc. (PSI) late in 1992 bolstered 1993 sales. This business, which enhanced the segment's white oils and petroleum jellies marketing capabilities, contributed approximately $30 million to sales in 1993, compared to $2 million in 1992. Operating income for 1993 included non-recurring charges of $50.6 million attributable to an environmental provision and legal judgment. 1993 operating income, excluding these charges, was $65.6 million, an increase of $14.1 million, or 27 percent, over 1992. The Petroleum Specialties Group accounted for approximately two-thirds of the segment's higher earnings, excluding non-recurring charges, while the Lubricants Group's results accounted for the remaining improvement. Earnings from the Petroleum Specialties Group's domestic operations rose despite a sluggish economy and a shortage of critical sulfonate feedstocks. The PSI business added approximately $3 million to current year earnings. In addition, the ability to hold down manufacturing expenses and the inclusion of $3.1 million of demolition costs in 1992 contributed to the improved domestic results. The group's Holland operation reported lower earnings attributable to the depressed European economy and a stronger dollar. Lubricants Group's earnings improved approximately 20 percent during 1993. Higher earnings were primarily due to a stronger asphalt market and a 10 percent decline in crude oil feedstock costs at its California refinery. Additionally, the group's lube oil and grease operations reported 1993 earnings that were marginally higher than the previous year's. Lower crude oil and feedstock costs boosted these operations' material margins by 1 percent. 6 DIVERSIFIED PRODUCTS SEGMENT Segment operating earnings for 1993 included a net non-recurring charge of $18.7 million. The charge covered an expected loss on the disposition of the Battery Parts Division and environmental provisions, partially offset by a gain on the sale of the operations of the segment's Chemprene, Inc. subsidiary. Net sales, excluding those attributable to Chemprene, Inc., were $154 million in 1993, an increase of 7 percent above sales for the corresponding operations in 1992. Operating income, excluding the results of Chemprene, Inc. and non-recurring items, increased $7.4 million, from $.4 million in 1992, to $7.8 million in 1993. Higher carbon black sales and earnings more than offset declines from each of the segment's other businesses. The carbon black business benefited from a 12 percent increase in volume, higher sales prices, and manufacturing efficiencies. The divestiture of assets that do not meet the Company's long-term business objectives is an important part of Witco's strategic focus to reorganize and grow core businesses. Hence, two of the segment's three remaining divisions, Battery Parts and Allied-Kelite, are slated for disposition in 1994. The disposition of the Battery Parts Division is expected to result in a loss, which was recognized in 1993. 1992 VS. 1991 Excluding non-recurring charges, net income amounted to $67.2 million in 1992, a decrease of 9 percent compared to net income of $73.5 million in 1991. Included in the $67.2 million was a net loss of $2.8 million related to the Schering Acquisition. 1992 sales, which included $72.3 million from the operations of the acquired Schering businesses, rose 6 percent above 1991 to a record level of $1.7 billion. Despite record sales attributed to a 5 percent increase in volume, earnings declined as a result of increased selling and administrative expenses, higher depreciation and amortization, and an erosion of sales prices. The Schering Acquisition and increased litigation costs accounted for the higher expenses, while competitive pressures, reflective of a soft global economy, resulted in depressed selling prices. Operating income generated by the Company's business segments in 1992 was $129.7 million, a decrease of $6.8 million, or 5 percent, from 1991. CHEMICAL SEGMENT 1992 net sales, which included $72.3 million from the acquired Schering businesses, reached $836.8 million, an increase of 12 percent from 1991. Sales, excluding those credited to the Schering Acquisition, increased $14.7 million, or 2 percent, primarily due to a 4 percent increase in sales volume attributable to the segment's domestic operations. Operating income was $74.3 million in 1992, an increase of $3.7 million, or 5 percent, from 1991. Operating earnings for 1992 contained a $2.2 million operating loss reported by the acquired Schering businesses. These operations were adversely affected by the sharp downturn in the German economy and normal cyclical weaknesses. Income from the segment's domestic operations improved $7.1 million, while international earnings for 1992 were $3.4 million below those reported in 1991. The segment's Oleochemicals/Surfactants Group's domestic operations reported increased operating income as a result of greater shipment volume and higher sales prices, while the Polymer Additives Group's domestic operation's earnings declined due to the recession sensitive nature of its business. The segment's international operating results reflected a loss from the Schering Acquisition and lower sales volume reported by Witco Israel. PETROLEUM SEGMENT Segment net sales increased less than 1 percent from $732.1 million in 1991 to $734.3 million in 1992. The effect of a 5 percent increase in sales volume during this period was offset by a decline in prices. Operating income was $51.5 million for 1992, a decrease of $14 million, or 21 percent, from 1991. 7 The decline in profitability was confined to the segment's domestic operations, which reported a $14.5 million, or 30 percent, decrease in operating income. These results were indicative of a soft economy, as evidenced by a 5 percent decline in sales prices. Material margins were adversely affected by the reduction in sales prices that outpaced a reduction in average material costs. Also contributing to the decline in operating income were significant 1992 charges for litigation and demolition costs. Operating income for the segment's international subsidiaries increased $.5 million, a result of lower material costs and higher sales volume. DIVERSIFIED PRODUCTS SEGMENT Net sales in 1992 were $175.1 million, a $10.1 million, or 6 percent, increase over 1991. Improved sales were attributed to greater volume and higher sales prices. Operating income reported in 1992 of $4 million represented an increase of $3.5 million over 1991. Despite significant losses experienced in carbon black products before industry price increases took hold and volumes increased late in the year, the segment's improved operating performance was reflective of increased sales and a gain from the sale of a former manufacturing facility. OUTLOOK Witco will divest its Allied-Kelite and Battery Parts divisions' businesses in 1994 as a part of its effort to concentrate on its core businesses in the Petroleum and Chemical Segments. Evaluation of possible divestiture of other business units within Witco will continue on the basis of return-on-equity performance, strategic significance, and other factors. Global expansion of core businesses in the Chemical and Petroleum Segments will remain a Company focus in 1994. With the continuation of the European recession, Witco's businesses in Europe may not exceed their 1993 performance levels in 1994. Witco's European operations should benefit from additional operational efficiencies and any future economic recovery in Europe. As the North American recovery slowly grows in 1994, Witco's results from operations for its businesses operating there should continue to improve. The Pacific Rim has been targeted as a growth market for certain of Witco's product lines and implementation of the market entry strategy for that region will continue in 1994. Acquisitions and joint ventures which will enhance existing market positions in core product lines will be evaluated on a case- by-case basis in 1994. 8 REPORT OF INDEPENDENT AUDITORS Board of Directors and Shareholders WITCO CORPORATION We have audited the accompanying consolidated balance sheets of Witco Corporation and Subsidiary Companies as of December 31, 1993 and 1992, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Witco Corporation and Subsidiary Companies at December 31, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note 12 to the financial statements, in 1992, the Company changed its method of accounting for postretirement benefits other than pensions. ERNST & YOUNG Stamford, Connecticut January 27, 1994, except for Note 7, as to which the date is March 11, 1994 F-1 WITCO CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ------------------------ 1993 1992 ---------- ---------- (IN THOUSANDS EXCEPT PER SHARE DATA) ASSETS Current Assets Cash and cash equivalents........................................................ $ 183,050 $ 134,447 Accounts and notes receivable, less allowances of $6,821 and $5,623.............. 340,850 329,160 Inventories...................................................................... 227,469 249,664 Prepaid and other current assets................................................. 41,204 34,074 ---------- ---------- Total Current Assets........................................................ 792,573 747,345 ---------- ---------- Property, Plant and Equipment, less accumulated depreciation of $621,684 and $566,682............................................................................ 696,462 721,171 Intangible Assets, less accumulated amortization of $38,612 and $25,282............... 217,032 249,867 Deferred Costs and Other Assets....................................................... 132,931 93,411 ---------- ---------- Total Assets................................................................ $1,838,998 $1,811,794 ---------- ---------- ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes and loans payable.......................................................... $ 4,194 $ 461,269 Accounts payable and other current liabilities................................... 337,144 307,687 ---------- ---------- Total Current Liabilities................................................... 341,338 768,956 ---------- ---------- Long-term Debt........................................................................ 496,266 173,086 Deferred Federal and Foreign Income Taxes............................................. 74,612 108,248 Deferred Credits and Other Liabilities................................................ 213,367 147,208 Shareholders' Equity $2.65 Cumulative Convertible Preferred Stock, par value $1 per share Authorized -- 14 shares..................................................... Issued and outstanding -- 9 shares.......................................... 9 9 Common stock, par value $5 per share Authorized -- 100,000 shares................................................ Issued -- 50,818 shares and 22,534 shares................................... 254,089 112,670 Capital in excess of par value................................................... 6,123 5,077 Equity adjustments: Foreign currency translation................................................ (23,723) (6,489) Pensions.................................................................... (6,548) (3,344) Retained earnings................................................................ 488,241 515,566 Treasury stock, at cost -- 318 and 306 shares.................................... (4,776) (9,193) ---------- ---------- Total Shareholders' Equity.................................................. 713,415 614,296 ---------- ---------- Total Liabilities and Shareholders' Equity.................................. $1,838,998 $1,811,794 ---------- ---------- ---------- ----------
See accompanying notes. F-2 WITCO CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------- 1993 1992 1991 ---------- ---------- ---------- (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA) Revenues Net sales........................................................ $2,142,555 $1,728,896 $1,630,521 Interest......................................................... 8,679 9,303 10,529 ---------- ---------- ---------- Total Revenues.............................................. 2,151,234 1,738,199 1,641,050 ---------- ---------- ---------- Costs and Expenses Cost of goods sold (exclusive of depreciation and amortization).................................................. 1,649,143 1,355,450 1,270,954 Selling and administrative expenses.............................. 230,722 190,339 178,573 Depreciation and amortization.................................... 102,502 76,162 67,622 Interest......................................................... 34,984 16,448 16,027 Other expense (income) -- net.................................... 100,552 17,688 (1,930) ---------- ---------- ---------- Total Costs and Expenses.................................... 2,117,903 1,656,087 1,531,246 ---------- ---------- ---------- Income before Federal and Foreign Income Taxes and Cumulative Effect of Accounting Change.................................... 33,331 82,112 109,804 Federal and Foreign Income Taxes...................................... 13,568 28,247 36,329 ---------- ---------- ---------- Income before Cumulative Effect of Accounting Change............. 19,763 53,865 73,475 Cumulative Effect of Accounting Change................................ -- (14,690) -- ---------- ---------- ---------- Net Income.................................................. $ 19,763 $ 39,175 $ 73,475 ---------- ---------- ---------- ---------- ---------- ---------- Net Income Per Common Share: Primary Income before cumulative effect of accounting change............. $.46 $1.19 $1.60 Cumulative effect of accounting change........................... -- (.29) -- ---- ----- ----- Net Income Per Common Share: Primary........................ $.46 $.90 $1.60 ---- ----- ----- ---- ----- ----- Net Income Per Common Share: Fully Diluted Income before cumulative effect of accounting change............. $.46 $1.18 $1.59 Cumulative effect of accounting change........................... -- (.29) -- ---- ----- ----- Net Income Per Common Share: Fully Diluted.................. $.46 $.89 $1.59 ---- ----- ----- ---- ----- -----
See accompanying notes. F-3 WITCO CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, -------------------------------- 1993 1992 1991 -------- -------- -------- (IN THOUSANDS OF DOLLARS) Operating Activities Net income.............................................................. $ 19,763 $ 39,175 $ 73,475 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization...................................... 102,502 76,162 67,622 Provision for environmental remediation and compliance............. 52,810 -- -- Provision for work force reduction and other matters............... 29,784 -- -- Provision (benefit) for deferred income taxes...................... (24,639) (641) 5,017 Provision for disposition of a business............................ 19,200 -- -- Gains on dispositions.............................................. (8,810) (542) (2,988) Pension charge (credit)............................................ 1,221 (6,218) (6,424) Provision for consolidation of offices............................. -- 20,135 -- Cumulative effect of accounting change............................. -- 14,690 -- Changes in operating assets and liabilities: Accounts receivable........................................... (26,101) (3,140) 4,707 Inventories................................................... 13,490 (11,783) 2,162 Prepaid and other current assets.............................. 513 (4,488) 209 Accounts payable and other current liabilities................ (6,908) 24,950 (24,813) Other.............................................................. (1,427) (1,098) (1,547) -------- -------- -------- Net Cash Provided by Operating Activities.......................... 171,398 147,202 117,420 -------- -------- -------- Investing Activities Expenditures for property, plant and equipment.......................... (103,689) (72,594) (74,307) Proceeds from dispositions.............................................. 24,160 4,449 11,326 Acquisitions of businesses, net of cash acquired........................ (3,691) (441,633) (1,060) Other................................................................... (4,568) 2,392 1,542 -------- -------- -------- Net Cash Used in Investing Activities.............................. (87,788) (507,386) (62,499) -------- -------- -------- Financing Activities Payments on borrowings.................................................. (501,972) (58,249) (5,680) Proceeds from borrowings................................................ 374,422 444,880 11,422 Proceeds from issuance of common stock.................................. 141,655 -- -- Dividends paid.......................................................... (44,679) (40,422) (38,680) Proceeds from exercise of stock options................................. 5,236 16,500 1,366 Other................................................................... (3,499) (1,069) -- -------- -------- -------- Net Cash Provided by (Used in) Financing Activities................ (28,837) 361,640 (31,572) -------- -------- -------- Effects of Exchange Rate Changes on Cash and Cash Equivalents................ (6,170) (6,260) (491) -------- -------- -------- Increase (Decrease) in Cash and Cash Equivalents................... 48,603 (4,804) 22,858 -------- -------- -------- Cash and Cash Equivalents at Beginning of Year............................... 134,447 139,251 116,393 -------- -------- -------- Cash and Cash Equivalents at End of Year..................................... $183,050 $134,447 $139,251 -------- -------- -------- -------- -------- --------
See accompanying notes. F-4 WITCO CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (IN THOUSANDS OF DOLLARS)
EQUITY ADJUSTMENTS ----------------------- CAPITAL IN FOREIGN TREASURY PREFERRED COMMON EXCESS OF CURRENCY RETAINED STOCK AT STOCK STOCK PAR VALUE TRANSLATION PENSIONS EARNINGS COST --------- -------- ---------- ----------- -------- --------- -------- Balance at December 31, 1990........ $10 $112,670 $ 1,986 $ 20,423 $ (5,570) $ 484,412 $(26,459) Net Income.......................... 73,475 Cash Dividends Declared: Preferred stock................ (26) Common stock................... (39,361) Common Stock Issued: Employee plans................. (433) 1,799 Conversions.................... (5) (1,058) 1,949 Equity Adjustments.................. (1,735) 3,623 --- -------- ---------- ----------- -------- --------- -------- Balance at December 31, 1991........ 10 112,670 1,981 18,688 (1,947) 517,009 (22,711) Net Income.......................... 39,175 Cash Dividends Declared: Preferred stock................ (24) Common stock................... (40,594) Common Stock Issued: Employee plans................. 3,383 13,117 Conversions.................... (1) (287) 401 Equity Adjustments.................. (25,177) (1,397) --- -------- ---------- ----------- -------- --------- -------- Balance at December 31, 1992........ 9 112,670 5,077 (6,489) (3,344) 515,566 (9,193) Net Income.......................... 19,763 Cash Dividends Declared: Preferred stock................ (24) Common stock................... (47,064) Common Stock Issued: Two-for-one stock split........ 127,045 (127,176) Public offering................ 14,374 127,281 Employee plans................. 1,207 4,029 Conversions.................... (266) 388 Equity Adjustments.................. (17,234) (3,204) --- -------- ---------- ----------- -------- --------- -------- Balance at December 31, 1993........ $ 9 $254,089 $ 6,123 $ (23,723) $ (6,548) $ 488,241 $ (4,776) --- -------- ---------- ----------- -------- --------- -------- --- -------- ---------- ----------- -------- --------- -------- TOTAL -------- Balance at December 31, 1990........ $587,472 Net Income.......................... 73,475 Cash Dividends Declared: Preferred stock................ (26) Common stock................... (39,361) Common Stock Issued: Employee plans................. 1,366 Conversions.................... 886 Equity Adjustments.................. 1,888 -------- Balance at December 31, 1991........ 625,700 Net Income.......................... 39,175 Cash Dividends Declared: Preferred stock................ (24) Common stock................... (40,594) Common Stock Issued: Employee plans................. 16,500 Conversions.................... 113 Equity Adjustments.................. (26,574) -------- Balance at December 31, 1992........ 614,296 Net Income.......................... 19,763 Cash Dividends Declared: Preferred stock................ (24) Common stock................... (47,064) Common Stock Issued: Two-for-one stock split........ (131) Public offering................ 141,655 Employee plans................. 5,236 Conversions.................... 122 Equity Adjustments.................. (20,438) -------- Balance at December 31, 1993........ $713,415 -------- --------
See accompanying notes. F-5 WITCO CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The consolidated financial statements include the accounts of all majority owned subsidiaries after the elimination of inter-company transactions. Cash Equivalents: Cash equivalents consist of highly liquid investments with a maturity of three months or less when purchased. Inventories: Inventories are stated at cost, principally on the Last-In, First-Out (LIFO) basis which is not in excess of market. The balance of inventories is stated at the lower of cost on the First-In, First-Out (FIFO) basis or market. Property, Plant and Equipment: Property, plant and equipment is stated at cost and depreciation is provided principally using the straight-line method based on estimated useful lives. Intangible Assets: Intangible assets primarily include the excess of purchase price paid over the estimated fair value of net assets acquired (goodwill) and other intangibles which are principally being amortized over periods not in excess of forty years. Postemployment Benefits: The Company adopted Statement of Financial Accounting Standards (SFAS) No. 112 'Employers' Accounting for Postemployment Benefits' effective January 1, 1993. SFAS 112 requires employers to accrue the cost of postemployment benefits, such as medical and disability benefits, as employees render services instead of when benefits are paid. The adoption of SFAS 112 did not have a material impact on the Company's financial position, results of operations, or cash flow. Research and Development Costs: The Company's research and development costs are charged to expense as incurred. These charges amounted to $49,494,000 (1993), $29,207,000 (1992), and $27,908,000 (1991). Environmental Remediation Costs: Environmental remediation costs are charged to expense if the remediation is the result of past practices or events and the expenditures are not expected to contribute to future operations. Projected costs are accrued when it is probable that a liability has been incurred and the amount can be reasonably estimated. Income Taxes: The Company elected to adopt SFAS No. 109 'Accounting for Income Taxes' effective January 1, 1992. The Company previously accounted for income taxes under SFAS 96. There was no significant effect on the financial results of the Company as the result of this change in accounting. Common Share Data: 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 percent 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 1993 and prior years, except for prior years' shareholders' equity, have been adjusted to reflect the split. Net income per common share is based upon net income adjusted for interest (net of tax) on the 5 1/2% convertible debentures and the dividend requirements of preferred stock. The weighted average number of common shares outstanding during each year includes common stock equivalents, principally shares issuable in connection with the 5 1/2% convertible debentures and the Company's stock option plans. Fully diluted net income per common share additionally reflects the assumed conversion of the outstanding convertible preferred stock. NOTE 2 -- ACQUISITIONS AND DISPOSITIONS On November 1, 1993, the Company sold the operations of its Chemprene, Inc. subsidiary to CMP Acquisition Corporation for $24,160,000 resulting in a gain of $5,726,000, or $.11 per common share. Chemprene manufactures lightweight belting, coated fabrics, and industrial diaphragms. The operating results of this subsidiary were not significant to the consolidated results of operations. F-6 WITCO CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) In October 1992 the Company acquired the businesses of IGI Petroleum Specialties, Inc. (PSI), a wholly owned subsidiary of The International Group, Inc. (U.S.) and certain associated Canadian assets for $14,500,000. PSI was involved in the manufacturing and selling of white oils, petrolatums, and refrigeration oils. The acquisition was recorded as a purchase and the results since the acquisition have not been significant to the consolidated results of operations. On November 2, 1992, the Company acquired for cash the Industrial Chemicals and Natural Substances divisions of Schering AG. The acquired divisions manufacture and market surfactants, oleochemicals, and polymer additives with operations at ten manufacturing facilities in seven countries. The acquisition was accounted for as a purchase and results of operations have been included in the consolidated financial statements from the acquisition date. The purchase price of approximately $440,000,000 is subject to adjustment based on changes in net worth of the businesses acquired for a defined period to the acquisition date. The amount of any net worth based adjustment is not expected to be material in relation to the purchase price. An allocation of the purchase price resulted in an excess over the estimated fair value of net assets acquired (goodwill) of approximately $119,000,000. This is being amortized on a straight-line basis over forty years. Results for 1993 included net sales of $474,700,000 and net income of $16,200,000, or $.30 per common share, compared to net sales of $72,300,000 and a net loss of $2,800,000, or $.06 per common share, in 1992 as the result of the acquisition, including associated financing costs. The following unaudited pro forma results present the estimated consolidated financial results as if the Schering Acquisition had occurred at the beginning of the years indicated and are not indicative of the results that would have occurred had this acquisition been made on these dates, and are not indicative of future results.
1992 1991 ------------------------------------ ------------------------------------ (IN THOUSANDS EXCEPT PER SHARE DATA) Net sales.......................... $2,194,420 $2,141,486 ------------- ------------- Income before cumulative effect of accounting change................ $ 63,519 $ 65,990 Cumulative effect of accounting change........................... (14,690) -- ------------- ------------- Net income.................... $ 48,829 $ 65,990 ------------- ------------- Net income per common share -- primary Income before cumulative effect of accounting change...................... $ 1.38 $ 1.45 Cumulative effect of accounting change........... (.29) -- ------------- ------------- Net income per common share -- primary............ $ 1.09 $ 1.45 ------------- ------------- ------------- -------------
NOTE 3 -- OTHER EXPENSE (INCOME) -- NET The components of other expense (income) -- net are as follows:
1993 1992 1991 -------- ------- ------- (THOUSANDS OF DOLLARS) Provision for environmental remediation and compliance................ $ 52,810 $ -- $ -- Provision for disposition of a business............................... 19,200 -- -- Provision for work force reduction.................................... 12,200 -- -- Charge for a legal judgment........................................... 11,636 -- -- Provision for loss on sublease of office facilities................... 9,184 -- -- Gain on sale of the operations of a subsidiary........................ (8,810) -- -- Provision for the consolidation of offices............................ -- 20,135 Other -- net.......................................................... 4,332 (2,447) (1,930) -------- ------- ------- $100,552 $17,688 $(1,930) -------- ------- ------- -------- ------- -------
F-7 WITCO CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE 4 -- INVENTORIES Inventories are classified as follows:
1993 1992 -------- -------- (THOUSANDS OF DOLLARS) Raw materials and supplies.................................................... $ 81,440 $ 89,305 Finished goods................................................................ 146,029 160,359 -------- -------- $227,469 $249,664 -------- -------- -------- --------
Work in progress included above is not significant. Inventories valued on a LIFO basis, at December 31, 1993 and 1992, amounted to $143,317,000 and $147,670,000, respectively. Inventories would have been $57,849,000 and $71,023,000 higher than reported at December 31, 1993 and 1992 if the FIFO method (which approximates current cost) had been used by the Company for all inventories. NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT A summary of property, plant and equipment follows:
1993 1992 ---------- ---------- (THOUSANDS OF DOLLARS) Land...................................................................... $ 32,150 $ 29,607 Buildings and improvements................................................ 175,501 186,533 Machinery, fixtures and equipment......................................... 1,055,134 1,028,445 Assets under construction................................................. 55,361 43,268 ---------- ---------- 1,318,146 1,287,853 Less accumulated depreciation............................................. 621,684 566,682 ---------- ---------- $ 696,462 $ 721,171 ---------- ---------- ---------- ----------
NOTE 6 -- INTANGIBLE ASSETS Intangible assets consist of the following:
1993 1992 -------- -------- (THOUSANDS OF DOLLARS) Goodwill...................................................................... $160,091 $178,566 Patents and licenses.......................................................... 37,341 47,778 Other......................................................................... 58,212 48,805 -------- -------- 255,644 275,149 Less accumulated amortization................................................. 38,612 25,282 -------- -------- $217,032 $249,867 -------- -------- -------- --------
NOTE 7 -- INDEBTEDNESS In 1993 the Company repaid the $440,000,000 short-term debt incurred to finance the Schering Acquisition. The funds were provided by net proceeds from a public offering of shares of common stock and the issuance of long-term debt, which included $165,000,000 of 6.60% notes due 2003, $110,000,000 of 7.75% debentures due 2023, and 70,000,000 Deutsche Marks of 7.325% notes from German banks due 1998 ($40,313,000 at December 31, 1993). F-8 WITCO CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Following is a summary of long-term debt:
1993 1992 -------- -------- (THOUSANDS OF DOLLARS) 6.60% Notes due 2003.......................................................... $165,000 $ -- 7.75% Debentures due 2023..................................................... 110,000 -- 7.325% Notes due 1998......................................................... 40,313 -- 5.85% Pollution Control Revenue Bonds due 2023................................ 10,000 -- 8.94% Pollution Control Revenue Bond due 1993................................. -- 10,000 Industrial Development Revenue Bond due 2014.................................. 8,500 8,500 5 1/2% Convertible Subordinated Debentures due 2012 with annual sinking fund payments of $7,500 beginning 1997........................................... 150,000 150,000 Other......................................................................... 14,663 18,304 -------- -------- 498,476 186,804 Less amounts included in notes and loans payable.............................. 2,210 13,718 -------- -------- $496,266 $173,086 -------- -------- -------- --------
The 8.94% Pollution Control Revenue Bond due 1993 in the amount of $10,000,000 was refinanced with the proceeds from the issuance of the 5.85% Pollution Control Revenue Bonds due 2023 for the same amount. The Company's 5 1/2% convertible debentures are convertible into common stock at $27.28 per share and are redeemable at a premium for cash at the option of the Company. On March 11, 1994, the Company announced its intention to redeem these debentures. The Company has arrangements with various banks for lines of credit for its international subsidiaries aggregating $40,190,000 of which $2,823,000 was utilized at December 31, 1993. Principal maturities of long-term debt at December 31, 1993 are $2,210,000 (1994), $2,985,000 (1995), $2,009,000 (1996), $9,539,000 (1997), and $48,627,000 (1998). Following is a summary of interest:
1993 1992 1991 ------- ------- ------- (THOUSANDS OF DOLLARS) Interest expense.................................................... $34,984 $16,448 $16,027 Capitalized interest................................................ 1,923 851 1,164 ------- ------- ------- Total interest incurred................................... $36,907 $17,299 $17,191 ------- ------- ------- ------- ------- ------- Total interest payments................................... $30,098 $18,219 $16,792 ------- ------- ------- ------- ------- -------
NOTE 8 -- FINANCIAL INSTRUMENTS In 1993 and 1992, the Company entered into several foreign currency forward contracts, currency swaps, and other financial market instruments to hedge the effect of foreign currency fluctuations on the financial statements. The foreign exchange contracts are accounted for as hedges of net investments, commitment hedges, and transaction hedges. Gains and losses on hedges of net investments are recognized as a component of shareholders' equity. Generally, gains and losses on the commitment hedges are deferred and included in the basis of the transaction underlying the commitment. Gains and losses on transaction hedges are recognized in income and offset the foreign exchange gains and losses on the related transaction. At December 31, 1993 and 1992, the Company had outstanding contracts to hedge its foreign net investments and other foreign exposures. The aggregate face value of these contracts, with notional amounts of $210,626,000 (1993) and $414,894,000 (1992), also fix the interest rates on approximately $209,326,000 of indebtedness at a weighted average interest rate of approximately 8 percent. The net F-9 WITCO CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) interest rate differentials that are paid or received are reflected currently as adjustments to interest expense. The foreign currency contracts are primarily in German marks and expire at various dates through March 2003. These contracts have been entered into with major international financial institutions. The risk associated with these transactions is the cost of replacing, at current market rates, agreements in the event of default by the counterparties. Management believes the risk of incurring such losses is remote. The following methods and assumptions were used to estimate the fair value of financial instruments as required by Statement of Financial Accounting Standards No. 107, 'Disclosures about Fair Value of Financial Instruments.' Cash and cash equivalents: The carrying amount approximates fair value due to the short maturity of these instruments. Notes receivable: The fair value is estimated by discounting the future cash flows using the interest rates at which similar loans would be made under current conditions. Long-term debt (including short-term portion): The fair value of the 5 1/2% Convertible Subordinated Debentures and the 7.45% Debentures are based on their quoted market price on the New York Stock Exchange. The fair value for the 6.60% Notes and the 7.75% Debentures were based on market values as furnished by investment banking firms. For all other long-term debt which has no quoted market price, the fair value is estimated by discounting projected future cash flows using the Company's incremental borrowing rate. Foreign currency/interest rate swap contracts: The fair value is the amount at which the contracts could be settled based on quotes provided by investment banking firms. Fair Values of Financial Instruments: The following table shows the carrying amounts and estimated fair values of material financial instruments used by the Company in the normal course of its business.
1993 1992 -------------------- -------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE -------- -------- -------- -------- (THOUSANDS OF DOLLARS) Cash and cash equivalents........................................ $183,050 $183,050 $134,447 $134,447 Notes receivable................................................. $ 2,864 $ 2,864 $ 2,850 $ 2,849 Long-term debt................................................... $498,476 $527,704 $186,804 $188,542 Off-balance sheet financial instruments: Unrealized loss on foreign currency/interest rate swap contracts................................................. -- $ (6,268) -- --
NOTE 9 -- SHAREHOLDERS' EQUITY On September 2, 1993, the Board of Directors of the Company declared a two-for-one stock split on the Company's common stock. This was paid in the form of a 100 percent stock distribution of 25,409,000 shares on October 5, 1993, to shareholders of record as of September 16, 1993. Accordingly, all share and per share data, as appropriate, reflect the effects of this split. The par value for the additional shares issued was transferred from capital in excess of par value to common stock. At December 31, 1993, unissued common stock of the Company was reserved for issuance in accordance with the terms of the convertible subordinated debentures (5,500,000 shares), the stock option plans (2,743,000 shares), and the $2.65 Cumulative Convertible Preferred Stock (143,000 shares). The Company has several stock option plans for certain employees. All options are granted at market value as of the date of grant and are exercisable in installments within a period not to exceed ten years from the date of grant. The options outstanding at December 31, 1993 expire on various dates F-10 WITCO CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) through June 2003. At December 31, 1993 and 1992, options for 1,271,000 and 1,964,000 shares of common stock, respectively, were available for grant. Stock option transactions were as follows:
1993 1992 --------------------------- --------------------------- (thousands of shares) SHARES PRICE SHARES PRICE ------ ----------------- ------ ----------------- Outstanding at beginning of year................... 1,112 $ 13.00 - $21.38 1,462 $ 13.00 - $18.19 Granted............................................ 692 $26.56 636 $21.38 Options exercised.................................. (328) $ 13.00 - $21.38 (986) $ 13.00 - $18.19 Cancelled.......................................... (4) $17.31 -- -- ------ ----------------- ------ ----------------- Outstanding at End of Year.................... 1,472 $ 13.00 - $26.56 1,112 $ 13.00 - $21.38 ------ ----------------- ------ ----------------- ------ ----------------- ------ ----------------- Exercisable at End of Year.................... 201 $ 17.31 - $26.56 144 $ 16.88 - $21.38 ------ ----------------- ------ ----------------- ------ ----------------- ------ -----------------
Each share of $2.65 Cumulative Convertible Preferred Stock is entitled to one vote and has a minimum liquidating preference of $66 per share. Each share is subject to redemption at the Company's option at $66 per share and is convertible into 16.8075 shares of the Company's common stock. The Company has authorized 8,300,000 shares of series preferred stock, which, when issued, will have such rights, powers, and preferences as shall be fixed by the Company's Board of Directors. Dividends declared per share on the Company's common stock amounted to $.96 (1993), $.92 (1992), and $.91 (1991). Common and preferred stock transactions were as follows:
1993 1992 1991 ------ ------ ------ (THOUSANDS OF SHARES) Convertible Preferred Stock Outstanding at beginning of year...................................... 9 10 10 Conversions........................................................... -- (1) -- ------ ------ ------ Outstanding at End of Year....................................... 9 9 10 ------ ------ ------ ------ ------ ------ Common Stock Outstanding at beginning of year...................................... 22,534 22,534 22,534 Shares issued through a public offering............................... 2,875 -- -- Two-for-one stock split............................................... 25,409 -- -- ------ ------ ------ Issued at End of Year............................................ 50,818 22,534 22,534 ------ ------ ------ ------ ------ ------ Treasury Stock In treasury at beginning of year...................................... 306 757 882 Two-for-one stock split............................................... 183 -- -- Net shares issued under employee plans................................ (149) (437) (60) Conversions........................................................... (22) (14) (65) ------ ------ ------ In Treasury at End of Year....................................... 318 306 757 ------ ------ ------ ------ ------ ------
F-11 WITCO CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE 10 -- FEDERAL AND FOREIGN INCOME TAXES The components of income (loss) before federal and foreign income taxes and the cumulative effect of accounting change are:
1993 1992 1991 -------- ------- -------- (THOUSANDS OF DOLLARS) Domestic............................................................. $(13,779) $51,551 $ 72,719 International........................................................ 47,110 30,561 37,085 -------- ------- -------- $ 33,331 $82,112 $109,804 -------- ------- -------- -------- ------- --------
The provision for federal and foreign income taxes (exclusive of the tax benefit related to the cumulative effect of an accounting change of $7,567,000 in 1992) consists of the following:
1993 1992 1991 -------- ------- ------- (THOUSANDS OF DOLLARS) Current Domestic......................................................... $ 21,745 $18,330 $17,936 International.................................................... 16,462 10,558 13,376 Deferred Domestic......................................................... (22,291) 1,322 7,170 International.................................................... (1,028) (307) (162) Investment tax credit amortization.................................... (1,320) (1,656) (1,991) -------- ------- ------- $ 13,568 $28,247 $36,329 -------- ------- ------- -------- ------- -------
The effective income tax rate from continuing operations varied from the statutory federal income tax rate as follows:
1993 1992 1991 ---- ---- ---- Statutory federal income tax rate............................................ 35.0% 34.0% 34.0% Provision for non-deductible civil penalties................................. 4.0 -- -- Amortization of investment tax credits....................................... (4.0) (2.0) (1.8) Effect of U.S. tax rate increase on deferred tax balances.................... 3.8 -- -- Other........................................................................ 1.9 2.4 .9 ---- ---- ---- 40.7% 34.4% 33.1% ---- ---- ---- ---- ---- ----
The components of deferred federal and foreign income taxes are as follows:
1993 1992 -------- -------- (THOUSANDS OF DOLLARS) Current Deferred Tax (Assets) Liabilities: Reserve for environmental remediation and compliance....................... $(10,112) $ (7,843) Inventories................................................................ 7,960 7,070 Accrual items.............................................................. (7,774) (7,357) Reserve for disposition of a business...................................... (6,720) -- Reserve for consolidation of offices....................................... (6,028) (6,846) Other -- net............................................................... (2,953) (2,322) -------- -------- $(25,627) $(17,298) -------- -------- -------- --------
F-12 WITCO CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1993 1992 -------- -------- (THOUSANDS OF DOLLARS) Noncurrent Deferred Tax (Assets) Liabilities: Depreciation............................................................... $ 97,291 $117,545 Reserve for environmental remediation and compliance....................... (24,752) (12,433) Hedging instruments........................................................ 16,225 -- Foreign net operating loss carryforward.................................... (14,484) -- Pensions................................................................... 13,854 13,473 Postretirement benefits other than pensions................................ (9,907) (10,139) Reserve for work force reduction........................................... (4,270) -- Other -- net............................................................... 655 (198) -------- -------- $ 74,612 $108,248 -------- -------- -------- --------
U.S. federal income taxes have not been provided on approximately $160,000,000 of unremitted earnings of the Company's international subsidiaries at December 31, 1993. As a result of the availability of foreign tax credits, based on current rates, no significant U.S. federal income taxes would be payable if these earnings were distributed. Provision has been made for foreign withholding taxes due upon remittance of 1993 and 1992 foreign earnings. If unremitted earnings accumulated prior to 1992 were distributed it is estimated the related taxes due on these earnings would not be significant. Cash payments for federal and foreign income taxes amounted to $29,817,000 (1993), $21,811,000 (1992), and $39,879,000 (1991). Unamortized investment tax credits aggregated $2,068,000 at December 31, 1993 and are being amortized over the estimated useful lives of the related assets. NOTE 11 -- PENSION PLANS The Company has various non-contributory defined benefit pension plans covering substantially all of its domestic employees and certain international employees. Benefits are primarily based upon levels of compensation and/or years of service. The Company's funding policy is based upon funding at the minimum annual amounts required by applicable federal laws and regulations plus such additional amounts as the Company may determine to be appropriate from time to time. Plan assets consist of publicly traded securities and investments in commingled funds administered by independent investment advisors. Certain union employees of the Company participate in multi-employer plans and the Company makes contributions primarily based upon hours worked. These plans provide defined benefits to these employees. In November 1992 the Company acquired certain domestic and international operations of Schering AG. The related international plans accounted for approximately $4,800,000 of the 1993 net periodic pension cost. In the years prior to 1993, net periodic pension cost of the international plans was not significant. Employees of international subsidiaries are covered by various pension benefit arrangements, some of which are considered to be defined benefit plans for financial reporting purposes. Assets of the plans are comprised of insurance contracts and equity securities. Benefits under these plans are primarily based upon levels of compensation. Funding policies are based on legal requirements, tax considerations, and local practices. F-13 WITCO CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Net pension charge (credit) includes the following components:
1993 1992 1991 ------------------------- -------- -------- U.S. INTERNATIONAL -------- ------------- (THOUSANDS OF DOLLARS) Service cost for benefits earned during the period.... $ 6,630 $ 2,985 $ 4,834 $ 4,430 Interest cost on the projected benefit obligation..... 20,707 4,763 16,597 14,894 Actual return on plan assets (gain)................... (34,119) (2,861) (17,384) (48,040) Net amortization and deferral......................... 3,177 (61) (10,265) 22,292 -------- ------------- -------- -------- Total Pension Charge (Credit).................... (3,605) 4,826 (6,218) (6,424) -------- ------------- -------- -------- Multi-employer plans.................................. 441 -- 418 815 Other international plans............................. -- 90 738 962 -------- ------------- -------- -------- Net Pension Charge (Credit)...................... $ (3,164) $ 4,916 $ (5,062) $ (4,647) -------- ------------- -------- -------- -------- ------------- -------- --------
Assumptions used to calculate costs were as follows:
1993 1992 1991 ------------------------ -------------- ----- U.S. INTERNATIONAL ---- -------------- Discount rate................................. 7.9% 7.5% - 9.0% 8.2% - 9.0% 8.7% Rate of increase in compensation level........ 5.0% 3.5% - 6.0% 5.0% 5.0% Expected long-term rate of return on assets... 12.0% 8.0% - 12.0% 12.0% 12.0%
The funded status and amounts recognized in the Company's Consolidated Balance Sheets at December 31, 1993 and 1992 for the U.S. plans were as follows:
1993 1992 ------------------------- ------------------------- PLANS IN WHICH: PLANS IN WHICH: ------------------------- ------------------------- ASSETS ACCUMULATED ASSETS ACCUMULATED EXCEED BENEFITS EXCEED BENEFITS ACCUMULATED EXCEED ACCUMULATED EXCEED BENEFITS ASSETS BENEFITS ASSETS ----------- ----------- ----------- ----------- (THOUSANDS OF DOLLARS) Actuarial present value of: Vested benefits......................................... $(241,453) $ (52,555) $(206,091) $ (41,903) Nonvested benefits...................................... (13,996) (2,947) (10,412) (1,915) ----------- ----------- ----------- ----------- Accumulated Benefit Obligation..................... (255,449) (55,502) (216,503) (43,818) Effect of anticipated future compensation levels............. (16,845) (2,456) (12,526) (1,841) ----------- ----------- ----------- ----------- Projected Benefit Obligation....................... (272,294) (57,958) (229,029) (45,659) Plan assets at fair value.................................... 272,360 30,730 246,910 27,014 ----------- ----------- ----------- ----------- Plan Assets in Excess of (Less than) Projected Benefit Obligation............................... 66 (27,228) 17,881 (18,645) Unrecognized prior service cost.............................. 39,294 4,631 26,387 1,423 Unrecognized net transition (asset) obligation............... (17,426) 1,339 (20,477) 1,673 Unrecognized net loss........................................ 46,866 12,468 23,279 15,552 Adjustment required to recognize minimum pension liability... -- (10,074) -- (4,773) ----------- ----------- ----------- ----------- Noncurrent Pension Asset (Liability)............... $ 68,800 $ (18,864) $ 47,070 $ (4,770) ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
F-14 WITCO CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Assumptions used to calculate December 31, 1993 and 1992 obligations for U.S. plans were as follows:
1993 1992 ---- ---- Discount rate........................................................................... 7.0 % 7.9 % Rate of increase in compensation level.................................................. 4.5 % 5.0 %
Effective January 1, 1994, the pension benefit formula of the Retirement Plan of Witco was amended to a 'final average pay offset' formula and several plan provisions were revised. Modifications were also made to the benefit formula and plan provisions of the Supplemental Executive Retirement Plan. These amendments resulted in increases of approximately $11,800,000 and $19,600,000 in the 1993 accumulated benefit obligation and projected benefit obligation, respectively. Also effective January 1, 1994, Witco revised the discount rate, long-term rate of return on plan assets and rate of future compensation levels to 7%, 10%, and 4.5%, respectively. These changes resulted in increases of approximately $28,000,000 and $24,000,000 in the 1993 accumulated benefit obligation and projected benefit obligation, respectively. The plan amendments and assumption changes together are anticipated to increase domestic net periodic pension cost for 1994 by approximately $9,200,000. The funded status and amounts recognized in the Company's Consolidated Balance Sheets at December 31, 1993 and 1992 for the international plans were as follows:
1993 1992 ------------------------- ------------------------- PLANS IN WHICH: PLANS IN WHICH: ------------------------- ------------------------- ASSETS ACCUMULATED ASSETS ACCUMULATED EXCEED BENEFITS EXCEED BENEFITS ACCUMULATED EXCEED ACCUMULATED EXCEED BENEFITS ASSETS BENEFITS ASSETS ----------- ----------- ----------- ----------- (THOUSANDS OF DOLLARS) Actuarial present value of: Vested benefits......................................... $(19,829) $(28,895) $(1,623) $(29,909) Nonvested benefits...................................... (1,094) (2,845) (50) (2,962) ----------- ----------- ----------- ----------- Accumulated Benefit Obligation..................... (20,923) (31,740) (1,673) (32,871) Effect of anticipated future compensation levels............. (5,678) (16,751) (48) (10,914) ----------- ----------- ----------- ----------- Projected Benefit Obligation....................... (26,601) (48,491) (1,721) (43,785) Plan assets at fair value.................................... 31,349 741 1,860 2,764 ----------- ----------- ----------- ----------- Plan Assets in Excess of (Less than) Projected Benefit Obligation............................... 4,748 (47,750) 139 (41,021) Unrecognized prior service cost.............................. 437 -- 208 284 Unrecognized net transition (asset) obligation............... (6,040) (8) 114 (127) Unrecognized net loss (gain)................................. 2,658 6,489 (13) 418 Adjustment required to recognize minimum pension liability... -- -- -- (293) ----------- ----------- ----------- ----------- Noncurrent Pension Asset (Liability)............... $ 1,803 $(41,269) $ 448 $(40,739) ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Assumptions used to calculate December 31, 1993 and 1992 obligations for international plans were as follows:
1993 1992 -------------- -------------- Discount rate............................................................ 7.5% - 9.0% 7.5% - 9.0% Rate of increase in compensation level................................... 3.5% - 6.0% 4.5% - 5.5%
F-15 WITCO CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) The 1993 funded status includes the Netherlands' pension plan. The inclusion of this plan resulted in an increase of approximately $14,000,000, $17,500,000, and $19,800,000, in the accumulated benefit obligation, projected benefit obligation, and plan assets, respectively. NOTE 12 -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Company provides health and life insurance benefits to certain eligible retired employees, most of whom contribute to its cost. Substantially all employees presently become eligible for retiree health benefits after reaching retirement age while working for the Company. The cost of the medical plan is provided by retiree contributions that are adjusted annually to reflect current estimates of health costs. For employees subject to collective bargaining arrangements the cost is shared by the Company in accordance with the bargained agreements. Life insurance benefits for certain retired employees are provided with the Company assuming the cost. The Company's policy is to fund the plans at the discretion of management. In 1992 the Company adopted Financial Accounting Standard No. 106, 'Employers' Accounting for Postretirement Benefits Other Pensions'. This statement requires the accrual of the cost of providing postretirement benefits, including medical and life insurance coverage, during the active service period of the employee. The Company elected to record the effect of this adoption as a cumulative effect of a change in accounting principle and immediately recognize the accumulated liability, measured as of January 1, 1992. This resulted in a one-time after-tax charge of $14,690,000. In accordance with the standard, prior year's costs have not been restated. In November 1992 the Company acquired certain U.S. operations of Schering AG. These operations provided certain retiree medical and life insurance benefits. In 1993 the Company negotiated or revised many of the provisions and assumptions related to these benefits to be in compliance with the Company's other comparable plans. Postretirement benefit obligations at December 31, 1993 and 1992 were as follows:
1993 1992 ------- ------- (THOUSANDS OF DOLLARS) Accumulated Postretirement Benefit Obligation: Retirees..................................................................... $27,445 $25,895 Active plan participants fully eligible for benefits......................... 3,398 2,717 Other active plan participants............................................... 7,373 5,314 ------- ------- Total Accumulated Postretirement Benefit Obligation..................... 38,216 33,926 Unrecognized net loss............................................................. (6,412) (942) ------- ------- Accrued Postretirement Benefit Liability................................ $31,804 $32,984 ------- ------- ------- -------
Net periodic postretirement benefit costs include the following components:
1993 1992 ------ ------ (THOUSANDS OF DOLLARS) Service cost of benefits earned...................................................... $ 389 $ 196 Interest cost on accumulated postretirement benefits................................. 2,621 1,814 Net amortization..................................................................... 141 -- ------ ------ Net Periodic Postretirement Benefit Costs....................................... $3,151 $2,010 ------ ------ ------ ------
Postretirement benefit cost for the year ended December 31, 1991 was approximately $2,300,000. For measuring the expected postretirement benefit obligation, an 11 and 12 percent annual rate of increase in the per capita claims cost was assumed for 1993 and 1992, respectively. The rate was assumed to decrease by 1 percent per year to 6 percent in 1998 and remain at that level thereafter. The F-16 WITCO CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7 percent for 1993 and 7.9 percent for 1992. The weighted average discount rates used in determining the net periodic postretirement benefit costs for 1993 and 1992 were 7.9 and 8.2 percent, respectively. The effect of a one percent increase in the health care cost trend rate would increase the present value of the accumulated postretirement benefit obligation at December 31, 1993 by approximately $4,300,000 and the net periodic postretirement benefit cost for 1993 by approximately $400,000. Certain union employees of the Company participate in multi-employer plans that provide defined postretirement health and life insurance benefits. The net periodic postretirement benefit cost for these employees is not distinguishable. The Company's cost associated with these plans on a cash basis is not significant. Employees in operations in countries outside the U.S. are covered by various postretirement benefit arrangements, none of which are presently considered to be defined benefit plans. NOTE 13 -- ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES Components of accounts payable and other current liabilities consist of the following:
1993 1992 -------- -------- (THOUSANDS OF DOLLARS) Accounts payable and other accruals............................................. $209,395 $209,415 Payroll and related liabilities................................................. 43,588 34,868 Reserves for environmental remediation and compliance........................... 28,892 25,777 Reserve for disposition of a business........................................... 19,200 -- Income taxes.................................................................... 18,845 17,492 Reserve for consolidation of offices............................................ 17,224 20,135 -------- -------- $337,144 $307,687 -------- -------- -------- --------
NOTE 14 -- COMMITMENTS AND CONTINGENCIES Leases: At December 31, 1993, minimum rental commitments under noncancelable operating leases amounted to $14,834,000 (1994), $15,241,000 (1995), $12,693,000 (1996), $9,829,000 (1997), $7,858,000 (1998), and $103,345,000 (1999 and thereafter). Aggregate future minimum rentals to be received under noncancelable subleases, the majority of which are subject to barter provisions, amount to $26,921,000. Rental expenses under operating leases were $19,849,000 (1993), $16,518,000 (1992), and $17,114,000 (1991). Capital Commitments: At December 31, 1993, the estimated costs to complete authorized projects under construction amounted to $100,906,000. Litigation, Claims and 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 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. F-17 WITCO CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 1993, the Company's reserves for environmental remediation and compliance costs amounted to $99,613,000 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. No provision for recovery under any of these policies is included in the Company's financial statements. The Company is also a defendant in certain suits relating to the sale of lubricants to a quick lube oil franchisor. In one of such suits, Lightning Lube, Inc. v. Witco, in the United States District Court of New Jersey, after a trial the plaintiff was awarded $9,500,000 in compensatory damages for breach of contract and tortious interference, and approximately $2,000,000 pre-judgment interest. Both the plaintiff and the Company appealed this result to the Third Circuit Court of Appeals. In an opinion filed on September 10, 1993, the Third Circuit Court of Appeals affirmed the trial court's result. On October 8, 1993, the Company deposited $11,600,000 with the trial court in payment of the total amount of the judgment, together with interest, to discharge its liability in this action. The Company is not a party to any other legal proceedings, including environmental matters and the other suits relating to the sale of lubricants, which it believes will have a material adverse effect on its consolidated financial position. NOTE 15 -- OPERATIONS BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA The Company is an international producer of a wide range of specialty chemical and petroleum products and diversified products for industrial and consumer uses. The following is a summary of the Company's operations by industry segment and geographic area:
(thousands of dollars) 1993 1992 1991 ---------- ---------- ---------- Net Sales Chemical................................................. $1,232,732 $ 836,794 $ 749,810 Petroleum................................................ 746,026 734,330 732,128 Diversified products..................................... 179,466 175,061 164,933 Intersegment elimination................................. (15,669) (17,289) (16,350) ---------- ---------- ---------- Net Sales........................................... $2,142,555 $1,728,896 $1,630,521 ---------- ---------- ---------- ---------- ---------- ---------- Operating Income Chemical................................................. $ 108,215 $ 74,286 $ 70,571 Petroleum................................................ 15,069 51,475 65,467 Diversified products..................................... (8,802) 3,960 437 ---------- ---------- ---------- Operating Income.................................... 114,482 129,721 136,475 ---------- ---------- ---------- General corporate expenses -- net............................. (54,846) (40,464) (21,173) Interest income (expense) -- net.............................. (26,305) (7,145) (5,498) ---------- ---------- ---------- Income before Federal and Foreign Income Taxes and Cumulative Effect of Accounting Change............ $ 33,331 $ 82,112 $ 109,804 ---------- ---------- ---------- ---------- ---------- ---------- Assets Chemical................................................. $1,036,875 $1,079,769 $ 456,394 Petroleum................................................ 461,073 433,807 428,315 Diversified products..................................... 122,930 138,565 142,823 Corporate (principally cash, cash equivalents and deferred pension costs)................................ 218,120 159,653 170,744 ---------- ---------- ---------- Assets.............................................. $1,838,998 $1,811,794 $1,198,276 ---------- ---------- ---------- ---------- ---------- ----------
(table continued on next page) F-18 WITCO CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (table continued from previous page)
(thousands of dollars) 1993 1992 1991 ---------- ---------- ---------- Depreciation and Amortization Chemical................................................. $ 58,204 $ 34,456 $ 26,866 Petroleum................................................ 31,726 28,784 28,154 Diversified products..................................... 11,054 11,304 10,842 Corporate................................................ 1,518 1,618 1,760 ---------- ---------- ---------- Depreciation and Amortization....................... $ 102,502 $ 76,162 $ 67,622 ---------- ---------- ---------- ---------- ---------- ---------- Capital Expenditures (exclusive of acquisitions) Chemical................................................. $ 53,831 $ 34,355 $ 31,657 Petroleum................................................ 40,482 31,218 29,470 Diversified products..................................... 5,829 5,027 10,748 Corporate................................................ 3,547 1,994 2,432 ---------- ---------- ---------- Capital Expenditures................................ $ 103,689 $ 72,594 $ 74,307 ---------- ---------- ---------- ---------- ---------- ---------- Net Sales United States............................................ $1,578,847 $1,393,667 $1,333,822 Western Europe........................................... 487,508 249,618 195,029 Other.................................................... 135,092 133,899 148,831 Inter-area elimination................................... (58,892) (48,288) (47,161) ---------- ---------- ---------- Net Sales........................................... $2,142,555 $1,728,896 $1,630,521 ---------- ---------- ---------- ---------- ---------- ---------- Operating Income United States............................................ $ 61,617 $ 98,899 $ 102,752 Western Europe........................................... 38,444 18,740 19,821 Other.................................................... 14,421 12,082 13,902 ---------- ---------- ---------- Operating Income.................................... $ 114,482 $ 129,721 $ 136,475 ---------- ---------- ---------- ---------- ---------- ---------- Assets United States............................................ $1,177,891 $1,128,016 $ 948,134 Western Europe........................................... 565,172 592,395 160,005 Other.................................................... 95,935 91,383 90,137 ---------- ---------- ---------- Assets.............................................. $1,838,998 $1,811,794 $1,198,276 ---------- ---------- ---------- ---------- ---------- ----------
Intersegment and inter-area sales are accounted for on the same basis used to price sales to similar non-affiliated customers and such sales are eliminated in arriving at consolidated amounts. Income and expenses not allocated to industry segments or geographic areas in computing operating income include general corporate expenses, interest income and expense, and other income and expenses of a general corporate nature. In 1993 general corporate expenses -- net include provisions for a work force reduction, loss on sublease of office facilities, and other matters totalling $29,784,000. General corporate expenses in 1992 include $20,135,000 for the provision for the consolidation of offices. International subsidiaries had liabilities of $211,182,000 in 1993 and $163,058,000 in 1992. Foreign currency translation and transaction gains and losses included in net income are not significant. F-19 QUARTERLY FINANCIAL DATA (UNAUDITED)
1993 1992 ------------------------------------------------ ----------------------------------------------- COST OF NET NET INCOME/ COST OF NET NET INCOME/ GOODS INCOME (LOSS) PER GOODS INCOME (LOSS) PER QUARTER NET SALES SOLD(a) (LOSS) SHARE(b) NET SALES SOLD(a) (LOSS) SHARE(b) - ------------ ---------- ---------- -------- ----------- ---------- ---------- ------- ----------- (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA) First....... $ 553,174 $ 458,549 $ 18,807 $ .40 $ 420,319 $ 343,070 $ 4,238(f) $ .11(f) Second...... 549,449 451,853 14,898(c) .29(c) 426,938 350,177 17,976 .39 Third....... 540,603 441,786 13,625(d) .27(d) 425,157 352,126 18,887 .41 Fourth...... 499,329 399,457 (27,567)(e) (.47)(e) 456,482 386,239 (1,926)(g) (.01)(g) ---------- ---------- -------- ----------- ---------- ---------- ------- ----------- $2,142,555 $1,751,645 $ 19,763 $ .46 $1,728,896 $1,431,612 $39,175 $ .90 ---------- ---------- -------- ----------- ---------- ---------- ------- ----------- ---------- ---------- -------- ----------- ---------- ---------- ------- -----------
- ------------ (a) Includes depreciation and amortization. (b) Per share data for all periods have been adjusted to reflect the two-for-one stock split effective October 5, 1993. 1993 quarterly per share amounts do not add to total for the year as each quarter and the total year are computed independently. (c) Includes a charge of $6,061, or $.11 per common share, for a provision for loss on sublease of office facilities. (d) Includes a charge of $7,563, or $.14 per common share, as a result of a legal judgment against the Company and $1,718, or $.03 per common share, as a result of the increase in the U.S. federal income tax rate. (e) Includes a charge of $60,126, or $1.10 per common share, for provisions for environmental remediation and compliance, disposition of a business, work force reduction, and other matters and a gain of $5,726, or $.11 per common share, on the sale of the operations of a subsidiary. (f) Includes a charge of $14,690, or $.29 per common share, as a result of adopting a change in accounting for postretirement benefits. (g) Includes a charge of $13,289, or $.27 per common share, for a provision for the consolidation of offices. F-20 SCHEDULE V WITCO CORPORATION AND SUBSIDIARY COMPANIES PROPERTY, PLANT AND EQUIPMENT
COLUMN B COLUMN E COLUMN F ---------- COLUMN C ----------- ---------- COLUMN A BALANCE AT --------- COLUMN D OTHER BALANCE - ------------------------------------------- BEGINNING ADDITIONS ----------- CHANGES-ADD AT END CLASSIFICATION OF PERIOD AT COST RETIREMENTS (DEDUCT)(c) OF PERIOD - ------------------------------------------- ---------- --------- ----------- ----------- ---------- (THOUSANDS OF DOLLARS) Year ended December 31, 1993: Land.................................. $ 29,607 $ 175 $ 225 $ 2,593 $ 32,150 Buildings and building improvements... 186,533 5,520 4,576 (11,976) 175,501 Machinery, fixtures and equipment..... 1,028,445 82,472(a) 31,211 (24,572) 1,055,134 Assets under construction............. 43,268 15,522(b) 18 (3,411) 55,361 ---------- --------- ----------- ----------- ---------- $1,287,853 $ 103,689 $36,030 $ (37,366) $1,318,146 ---------- --------- ----------- ----------- ---------- ---------- --------- ----------- ----------- ---------- Year ended December 31, 1992: Land.................................. $ 21,065 $ 1,871 $ 361 $ 7,032 $ 29,607 Buildings and building improvements... 119,820 6,431 2,646 62,928 186,533 Machinery, fixtures and equipment..... 833,983 55,831(a) 14,477 153,108 1,028,445 Assets under construction............. 17,058 8,461(b) -- 17,749 43,268 ---------- --------- ----------- ----------- ---------- $ 991,926 $ 72,594 $17,484 $ 240,817 $1,287,853 ---------- --------- ----------- ----------- ---------- ---------- --------- ----------- ----------- ---------- Year ended December 31, 1991: Land.................................. $ 21,537 $ 233 $ 204 $ (501) $ 21,065 Buildings and building improvements... 116,912 6,612 1,757 (1,947) 119,820 Machinery, fixtures and equipment..... 790,291 86,457(a) 41,750 (1,015) 833,983 Assets under construction............. 36,131 (18,995)(b) -- (78) 17,058 ---------- --------- ----------- ----------- ---------- $ 964,871 $ 74,307 $43,711 $ (3,541) $ 991,926 ---------- --------- ----------- ----------- ---------- ---------- --------- ----------- ----------- ----------
- ------------ Notes: (a) Principally represents new equipment and replacement of retired equipment for existing plants. (b) Net of assets completed and transferred to appropriate property, plant and equipment accounts of $81,688 (1993), $58,121 (1992), and $87,743 (1991). (c) Principally represents assets acquired in connection with the acquisition of the Industrial Chemicals and Natural Substances divisions of Schering AG (1992) and adjustments relating to the finalization of the allocation of the purchase price (1993). Also includes the results of translating the financial statements of foreign subsidiaries in accordance with FASB Statement No. 52. (d) Depreciation is computed principally in accordance with the following estimated useful lives:
YEARS ----- Buildings and building improvements.................................................... 5-45 Machinery, fixtures and equipment...................................................... 3-20
S-1 SCHEDULE VI WITCO CORPORATION AND SUBSIDIARY COMPANIES ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
COLUMN C COLUMN B ---------- COLUMN E COLUMN F ---------- ADDITIONS ------------ --------- COLUMN A BALANCE AT CHARGED TO COLUMN D OTHER BALANCE - -------------------------------------------- BEGINNING COSTS AND ----------- CHARGES- AT END CLASSIFICATION OF PERIOD EXPENSES RETIREMENTS ADD (DEDUCT) OF PERIOD - -------------------------------------------- ---------- ---------- ----------- ------------ --------- (THOUSANDS OF DOLLARS) Year ended December 31, 1993: Buildings and building improvements.... $ 55,914 $ 5,898 $ 2,361 $ 2,917 $ 62,368 Machinery, fixtures and equipment...... 510,768 77,918 25,309 (4,061) 559,316 ---------- ---------- ----------- ------------ --------- $566,682 $ 83,816 $27,670 $ (1,144)(a) $ 621,684 ---------- ---------- ----------- ------------ --------- ---------- ---------- ----------- ------------ --------- Year ended December 31, 1992: Buildings and building improvements.... $ 52,781 $ 4,867 $ 1,184 $ (550) $ 55,914 Machinery, fixtures and equipment...... 464,390 62,184 12,498 (3,308) 510,768 ---------- ---------- ----------- ------------ --------- $517,171 $ 67,051 $13,682 $ (3,858)(a) $ 566,682 ---------- ---------- ----------- ------------ --------- ---------- ---------- ----------- ------------ --------- Year ended December 31, 1991: Buildings and building improvements.... $ 50,456 $ 4,468 $ 1,056 $ (1,087) $ 52,781 Machinery, fixtures and equipment...... 443,389 55,157 33,888 (268) 464,390 ---------- ---------- ----------- ------------ --------- $493,845 $ 59,625 $34,944 $ (1,355)(a) $ 517,171 ---------- ---------- ----------- ------------ --------- ---------- ---------- ----------- ------------ ---------
- ------------ Note: (a) Principally represents the result of the translation of the financial statements of foreign subsidiaries in accordance with FASB Statement No. 52. S-2 SCHEDULE VIII WITCO CORPORATION AND SUBSIDIARY COMPANIES VALUATION AND QUALIFYING ACCOUNTS
COLUMN C ------------------------ COLUMN B ADDITIONS COLUMN E ---------- ------------------------ ---------- COLUMN A BALANCE AT CHARGED TO CHARGED TO COLUMN D BALANCE AT - ------------------------------------------------- BEGINNING COSTS AND OTHER ---------- END DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD - ------------------------------------------------- ---------- ---------- ---------- ---------- ---------- (THOUSANDS OF DOLLARS) Year ended December 31, 1993: Valuation and qualifying accounts deducted from assets to which they apply: Allowances for doubtful receivables -- trade................. $5,623 $2,652 $427 $1,881(a) $6,821 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Year ended December 31, 1992: Valuation and qualifying accounts deducted from assets to which they apply: Allowances for doubtful receivables -- trade................. $4,768 $1,773 $334 $1,252(a) $5,623 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Year ended December 31, 1991: Valuation and qualifying accounts deducted from assets to which they apply: Allowances for doubtful receivables -- trade................. $4,902 $1,784 $ 73 $1,991(a) $4,768 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
- ------------ Note: (a) Uncollectible receivables charged against the allowance provided therefor. S-3 SCHEDULE IX WITCO CORPORATION AND SUBSIDIARY COMPANIES SHORT-TERM BORROWINGS
COLUMN E COLUMN D ----------- COLUMN F COLUMN C ----------- AVERAGE ------------- COLUMN B -------- MAXIMUM AMOUNT WEIGHTED COLUMN A --------- WEIGHTED AMOUNT OUTSTANDING AVERAGE - -------------------------------------- BALANCE AVERAGE OUTSTANDING DURING INTEREST RATE CATEGORY OF AGGREGATE AT END INTEREST DURING THE DURING SHORT-TERM BORROWINGS OF PERIOD RATE THE PERIOD PERIOD(b) THE PERIOD - -------------------------------------- --------- -------- ----------- ----------- ------------- (THOUSANDS OF DOLLARS) Year ended December 31, 1993 Notes payable to banks........... $ 2,823 7.22%(a) $ 7,859 $ 6,468 8.27%(a)(c) Financing arrangement(d)......... -- -- 440,000 282,376 3.99 Year ended December 31, 1992 Notes payable to banks........... 5,304 13.17(a) 8,948 6,494 9.68(a)(c) Financing arrangement(d)......... 440,000 3.79 440,000 440,000 3.79 Year ended December 31, 1991 Notes payable to banks........... 12,055 12.15(a) 12,055 2,849 13.07(a)(c)
- ------------ Notes: (a) The weighted average interest rate was affected by interest rates associated with the utilization of bank lines of credit by the Company's international subsidiaries. (b) The average amount outstanding during the period was computed by dividing the total of daily outstanding principal balances by the total days outstanding. (c) The weighted average interest rate during the period was computed by dividing the actual interest expense by average short-term debt outstanding. (d) To finance the acquisition of the Industrial Chemicals and Natural Substances divisions of Schering AG, the Company entered into a $440 million short-term financing arrangement on October 1, 1992, with a syndicate of banks. This borrowing was repaid during the period from March through May 1993 with a combination of proceeds from public offerings for shares of the Company's common stock, long-term debt securities, and proceeds from international borrowings. S-4 SCHEDULE X WITCO CORPORATION AND SUBSIDIARY COMPANIES SUPPLEMENTARY INCOME STATEMENT INFORMATION
COLUMN B ------------------------------- CHARGED TO COSTS AND EXPENSES ------------------------------- COLUMN A YEAR ENDED DECEMBER 31 - ------------------------------------------------------------------------------ ------------------------------- ITEM 1993 1992 1991 - ------------------------------------------------------------------------------ ------- ------- ------- (THOUSANDS OF DOLLARS) Maintenance and repairs....................................................... $64,443(a) $46,702 $41,659 ------- ------- ------- ------- ------- ------- Depreciation and amortization of intangible assets, pre-operating costs and similar deferrals(b)........................................................ -- -- -- Taxes, other than payroll and income taxes(b)................................. -- -- -- Royalties(b).................................................................. -- -- -- Advertising costs............................................................. $19,045 $19,243 $18,368 ------- ------- ------- ------- ------- -------
- ------------ Notes: (a) The 1993 increase is primarily due to businesses acquired in November 1992. (b) Amount for this caption is not presented as it is less than 1% of total revenues. S-5 EX-3 2 EXHIBIT 3(II) EXHIBIT 3(ii) WITCO CORPORATION * * * * * B Y - L A W S * * * * * Effective Date: January 1, 1994 ARTICLE I OFFICES SECTION 1. The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. SECTION 2. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. All meetings of the stockholders for the election of directors or for any other lawful purpose shall be held at such time and at such place as may be fixed from time to time by the Board of Directors, either within or without the State of Delaware. Such time and place shall be stated in the notice of the meeting. SECTION 2. Annual meetings of stockholders shall be held on the fourth Wednesday in April, if not a legal holiday, and if a legal holiday, then on the next business day following, at 2:00 P.M., or at such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. At such annual meetings, the stockholders shall elect a Board of Directors, and shall transact such other business as may properly be brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) brought before the meeting by or at the direction of the Board of Directors pursuant to a vote of not less than a majority of the entire Board of Directors, or (iii) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given written notice of the proposed business, either by personal delivery or by United States mail, either certified or registered, return receipt requested, to the Secretary of the corporation, such that the Secretary receives such notice at least ninety days prior to the anniversary date of the immediately preceding annual meeting or not later than ten days after notice or public disclosure of the date of the annual meeting is given or made to stockholders, whichever date is earlier. Any such notice shall set forth as to each item of business the stockholder proposes to bring before the annual meeting (i) a brief description of such item of business and the reasons for conducting it at the meeting and, in the event that such item of business includes a proposal to amend either the certificate of incorporation of the corporation or these by-laws, the language of the proposed amendment, (ii) the name and address of the stockholder proposing such item of business, (iii) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting having a market value of at least one thousand dollars and intends to appear in person or by proxy at the meeting to propose such item of business, and (iv) any material interest of the stockholder in such item of business. Only business which has been properly brought before an annual meeting of stockholders in accordance with these by-laws shall be conducted at such meeting, and the Chairman of such meeting may refuse to permit any business to be brought before such meeting which has not been properly brought before it in accordance with these by-laws. SECTION 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than 10 nor more than 60 days before the date of the meeting. SECTION 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, 1 at the place where the meeting is to be held or the office of the Secretary of the corporation. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, shall be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors. SECTION 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. SECTION 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. SECTION 8. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. SECTION 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of applicable statute or of the certificate of incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question. SECTION 10. Unless otherwise provided in the certificate of incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. SECTION 11. Any action required or permitted to be taken by the stockholders of the corporation must be effected at a duly called annual or special meeting of stockholders, and may not be effected by any consent in writing by such stockholders. ARTICLE III DIRECTORS SECTION 1. The number of directors which shall constitute the whole Board shall not be less than twelve (12), nor more than eighteen (18). Within the limits so specified, the number of directors shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors. At the 1983 Annual Meeting of Stockholders, the directors shall be divided into three classes, as nearly equal in number as possible, with the term of office of the first class to expire at the 1984 Annual Meeting of Stockholders, the term of office of the second class to expire at the 1985 Annual Meeting of Stockholders, and the term of office of the third class to expire at the 1986 Annual Meeting of Stockholders. At each annual meeting of stockholders following such initial classification and election, directors elected to succeed those directors whose term expired shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. SECTION 2. Newly created directorships resulting from an increase in the authorized number of directors or any vacancies in the Board of Directors shall be filled by a majority of the directors then in office although less than a quorum, or by a sole remaining director, and directors so chosen shall hold 2 office for a term expiring at the annual meeting of stockholders at which the term of the class to which they have been elected expires. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible. No decrease in the number of directors constituting the Board shall shorten the term of any incumbent director. If there are no directors in office, then an election of directors may be held in the manner provided by statute. SECTION 3. Nominations for the election of Directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of Directors. Any such stockholder may nominate a person or persons for election as a director only if written notice of such stockholder's intention to make such nomination or nominations is given in accordance with the procedures set forth in Article II, Section 2 of these by-laws. Each such notice shall set forth, in addition to any information required to be set forth by Article II, Section 2, (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each person to be nominated and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each person to be nominated as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had such person been nominated, or intended to be nominated, by the Board of Directors; and (e) the consent of each person to be nominated to serve as a director of the corporation if elected at such meeting. The Chairman of any meeting of stockholders, and the Board of Directors, may refuse to recognize the nomination of any person not made in accordance with the foregoing procedures. SECTION 4. The business of the corporation shall be managed by or under the direction of its Board of Directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders. MEETINGS OF THE BOARD OF DIRECTORS SECTION 5. The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. SECTION 6. An annual meeting of the Board of Directors shall be held immediately following the annual meeting of stockholders, or at such other time and place as shall be specified in a written notice signed by all of the directors, or as shall be specified in a notice given pursuant to Article III, Section 8 hereof. SECTION 7. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the board. SECTION 8. Special meetings of the board may be called by the Chairman of the Board on not less than two days' notice to each director, either personally or by mail or by facsimile; special meetings shall be called by the Chairman of the Board or Secretary in like manner and on like notice on the written request of a majority of the entire Board of Directors. The notice of meeting need not specify the purpose of the meeting. SECTION 9. At all meetings of the board, a majority of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present (and not abstaining) at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. SECTION 10. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee 3 thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. SECTION 11. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. COMMITTEES OF DIRECTORS SECTION 12. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority except to the extent that the enabling resolution grants same, in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, amending the by-laws of the corporation, declaring a dividend, authorizing the issuance of stock, or adopting a certificate of ownership and merger. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. SECTION 13. Each committee shall keep regular minutes of its meetings, shall promptly file a transcript thereof with the Secretary, and shall report the same to the Board of Directors when required. COMPENSATION OF DIRECTORS SECTION 14. Unless otherwise restricted by the certificate of incorporation or these by-laws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors and/or a stated annual sum as a director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. ARTICLE IV NOTICES SECTION 1. Whenever, under the provisions of statute or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or stockholder, it shall not be construed to require personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when deposited in the United States mail. Notice to directors may also be given by facsimile. 4 SECTION 2. Whenever any notice is required to be given under the provisions of statute or of the certificate of incorporation or of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE V OFFICERS SECTION 1. The officers of the corporation shall be chosen by the Board of Directors and shall be a Chairman of the Board and a Secretary. The Board of Directors may also choose a President, one or more Vice Chairmen, one or more Vice Presidents, a Controller, a Treasurer, and one or more Assistant Secretaries, Assistant Controllers and Assistant Treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these by-laws otherwise provide. SECTION 2. The Board of Directors at its first meeting after each annual meeting of stockholders shall choose a Chairman of the Board and a Secretary. SECTION 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. SECTION 4. The compensation of all officers of the corporation shall be fixed by the Board of Directors. SECTION 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the corporation may be filled by the Board of Directors at such times as it sees fit. THE CHAIRMAN OF THE BOARD SECTION 6. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors. The Chairman shall be the chief executive officer of the corporation and as such shall have general supervision of the affairs of the corporation and shall perform such other duties as are prescribed by the corporation's by-laws or the Board of Directors. He may sign, with the Secretary or any other proper officer of the corporation thereunto authorized by the Board of Directors, certificates for shares of stock of the corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly otherwise designated by the Board of Directors or by these by-laws, or shall be required by law to be otherwise signed or executed. THE SECRETARY SECTION 7. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept by him for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the Chairman of the Board. He shall have custody of the corporate seal of the corporation and he shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. 5 ARTICLE VI CERTIFICATE OF STOCK SECTION 1. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the Chairman of the Board and the Secretary of the corporation, certifying the number of shares of stock owned by him in the corporation. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificates which the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in the Delaware Corporation Law, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. SECTION 2. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. LOST CERTIFICATES SECTION 3. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. TRANSFER OF STOCK SECTION 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. FIXING RECORD DATE SECTION 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, or the date of the action to be taken, and shall comply with the rules of any national securities exchange on which any securities of the corporation are listed at the time. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 6 REGISTERED STOCKHOLDERS SECTION 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares of stock to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VII GENERAL PROVISIONS DIVIDENDS SECTION 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. SECTION 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the Board of Directors shall think conducive to the interest of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. CHECKS SECTION 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate or authorize. FISCAL YEAR SECTION 4. The fiscal year of the corporation shall be the calendar year ending December 31 and may be changed by resolution of the Board of Directors at any meeting. SEAL SECTION 5. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words 'Corporate Seal, Delaware'. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. INDEMNIFICATION SECTION 6. (a) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. In this connection, the termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not 7 opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue, or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication or liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. (c) To the extent that a director, officer, employee, or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in subsections (a) and (b), or in defense of any claim, issue, or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (d) Any indemnification under subsections (a) and (b) (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee, or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subsections (a) and (b). Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit, or proceeding, or (2) if such a quorum is not obtainable, by independent legal counsel in a written opinion, or (3) by independent legal counsel in a written opinion if a majority of a quorum consisting of directors who were not parties to such action, suit, or proceeding so directs, or (4) by the stockholders. (e) Expenses (including attorney's fees) incurred by an officer or director in defending any civil, criminal, administrative, or investigative action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit, or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorney's fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. (f) The indemnification and advancement of expenses provided by or granted pursuant to the provisions of this section shall not be deemed exclusive of any other rights to which one seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. (g) The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this section. (h) The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such person. 8 (i) A director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for a stock repurchase which is illegal under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law hereafter is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Delaware General Corporation Law. Any repeal or modification of this paragraph by the stockholders of the corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the corporation existing at the time of such repeal or modification. ARTICLE VIII SECTION 1. These by-laws may be altered, amended, or repealed, or new by-laws may be adopted by the Board of Directors at any regular or special meeting of the Board of Directors if notice of such alteration, amendment, repeal, or adoption of new by-laws is contained in the notice of such meeting. The by-laws of the corporation may be altered, amended, or repealed, or new by-laws may be adopted by the stockholders at any regular or special meeting of the stockholders if notice of such alteration, amendment, repeal, or adoption of new by-laws be contained in the notice of such meeting, and if such alteration, amendment, repeal, or adoption is approved by the affirmative vote of the holders of not less than 80% of the voting power of all shares of stock of the corporation entitled to vote in the election of directors. 9 EX-10 3 EXHIBIT 10(III)(A)-5 EXHIBIT 10(iii)(A)-5 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN OF WITCO CORPORATION AS EFFECTIVE JANUARY 1, 1994 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- PREAMBLE.................................................................................................. 1 ARTICLE I DEFINITIONS............................................................................................... 1 1.1. Actuarial Equivalent.......................................................................... 1 1.2. Affiliate..................................................................................... 1 1.3. Beneficiary................................................................................... 1 1.4. Benefit Commencement Date..................................................................... 1 1.5. Board of Directors............................................................................ 1 1.6. Cause......................................................................................... 1 1.7. Change in Control............................................................................. 1 1.8. Code.......................................................................................... 2 1.9. Committee..................................................................................... 2 1.10. Disability.................................................................................... 2 1.11. Employer...................................................................................... 2 1.12. Final Average Compensation.................................................................... 2 1.13. Good Reason................................................................................... 2 1.14. Normal Retirement Date........................................................................ 2 1.15. Normal Supplemental Retirement Benefit........................................................ 2 1.16. Officer....................................................................................... 2 1.17. Participant................................................................................... 2 1.18. Plan.......................................................................................... 2 1.19. Retirement Plan............................................................................... 3 1.20. Social Security Primary Benefit............................................................... 3 1.21. Witco......................................................................................... 3 ARTICLE II PARTICIPATION............................................................................................. 3 2.1. Initial Participation......................................................................... 3 2.2. Termination of Participation.................................................................. 3 ARTICLE III BENEFITS.................................................................................................. 3 3.1. Normal Supplemental Retirement Benefit........................................................ 3 3.2. Early Retirement Benefit...................................................................... 3 3.3. Disability Retirement Benefit................................................................. 4 3.4. Termination Benefit........................................................................... 4 3.5. Form of Pension Payments...................................................................... 4 3.6. Death Benefits................................................................................ 5 ARTICLE IV BENEFITS ON A CHANGE IN CONTROL........................................................................... 5 4.1. Change in Control Benefit..................................................................... 5 4.2. Limitation.................................................................................... 5 ARTICLE V ADMINISTRATION............................................................................................ 6 5.1. Administration................................................................................ 6 5.2. Powers and Duties............................................................................. 6 5.3. Benefit Claim Procedures...................................................................... 6 5.4. Member's Own Participation.................................................................... 6 ARTICLE VI AMENDMENT AND TERMINATION................................................................................. 6
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PAGE ---- ARTICLE VII GENERAL PROVISIONS........................................................................................ 6 7.1. Funding....................................................................................... 6 7.2. No Guarantee of Employment.................................................................... 7 7.3. Payments to Minors and Incompetents........................................................... 7 7.4. Nonalienation of Benefits..................................................................... 7 7.5. Applicable Laws; Severability................................................................. 7
ii SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN OF WITCO CORPORATION AS EFFECTIVE JANUARY 1, 1994 PREAMBLE Witco Corporation hereby establishes this Supplemental Executive Retirement Plan of Witco Corporation (the 'Plan') effective January 1, 1994, in order to provide benefits to selected executives as provided herein. The Plan is intended to replace the individual agreements established between selected key employees and Witco Corporation which were designed to provide 'Additional Benefits' as such term is defined in such agreements. The Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees as described in Section 201(2) of the Employee Retirement Income Security Act of 1974, as amended. ARTICLE I DEFINITIONS 1.1 'Actuarial Equivalent' means an amount or benefit of equivalent value when calculated using the GAM 1988 Mortality Table and an interest rate equal to the average of the market rate for 10-year Treasury notes on the last business day of the fourth, fifth, and sixth months preceding the date on which benefit payments under the Plan commence. 1.2 'Affiliate' means (a) any corporation that is a member of the 'controlled group of corporations' that includes Witco, determined in accordance with Code Section 1563(a) without regard to Code Sections 1563(a)(4) and (e)(3)(C), and (b) any organization that is part of a group of trades or businesses under common control pursuant to Code Section 414(b) that includes Witco. 1.3 'Beneficiary' means the beneficiary or beneficiaries last designated by the Participant in writing. In the absence of an effective designation or if the final surviving designated beneficiary has predeceased the Participant, the Beneficiary shall be the Participant's estate. In the event the Participant is survived by a Beneficiary who dies after payments to him have commenced but before receiving all amounts due him under the Plan, any remaining amounts shall be paid to an alternate beneficiary designated by the Participant or, in the absence of an alternate surviving Beneficiary, to the estate of the last surviving Beneficiary. 1.4 'Benefit Commencement Date' means the first day of the month as of which benefits under the Plan first become payable to a Participant. 1.5 'Board of Directors' means the board of directors of Witco and any committee authorized by such board to act on its behalf with respect to the Plan. 1.6 'Cause' means (a) intentional and continued failure by the Participant to perform his duties for his Employer (other than such failure resulting from mental or physical incapacity) or (b) intentional misconduct including, among other things, theft, embezzlement, dishonesty, criminal conduct or disloyalty. 1.7 'Change in Control' shall be deemed to have occurred if: (a) any 'person', as such term is used in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934 (the 'Exchange Act'), other than an Affiliate or any employee benefit plan sponsored by Witco or an Affiliate becomes a 'beneficial owner', as such term is used in Rule 13d-3 promulgated under the Exchange Act, of 20% or more of the 'Voting Stock' (which means the capital stock of any class or classes of Witco having general voting power under ordinary circumstances, in the absence of contingencies, to elect the directors of such corporation) of Witco; (b) 33 1/3% of the Board of Directors consists of individuals other than the members of the Board of Directors on January 1, 1994 (the 'Incumbent Directors'); provided, however, that any 1 person becoming a director subsequent to such date whose election or nomination for election was approved by two-thirds (but in no event less than two) of the directors who at the time of such election or nomination comprise the Incumbent Directors shall, for purposes of this Plan, be considered an Incumbent Director; (c) Witco adopts any plan of liquidation providing for the distribution of all or substantially all of its assets; (d) Witco combines with another company (whether or not Witco is the surviving corporation) and immediately after the combination, the shareholders of Witco immediately prior to the combination (other than shareholders who, immediately prior to the combination, were 'affiliates' of such other company, as such term is defined in the rules of the Securities and Exchange Commission) do not beneficially own, directly or indirectly, more than 20% of the Voting Stock of the combined company; or (e) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of Witco occurs. 1.8 'Code' means the Internal Revenue Code of 1986, as amended. 1.9 'Committee' means the Organization and Compensation Committee appointed by the Board of Directors (excluding any members of such committee who are current or former employees of Witco or an Affiliate). 1.10 'Disability' means total and permanent disability such that the Participant is eligible to receive payments under the Witco Long-Term Disability Plan. 1.11 'Employer' means Witco and any other Affiliate. 1.12 'Final Average Compensation' means the average annual earnings received by a Participant during the period specified below. Earnings shall include (a) the Participant's base salary (prior to reduction for any contributions that are determined on a salary reduction basis under any plan maintained by Witco or an Affiliate) received during the 36 complete months of employment with an Employer preceding the Participant's termination of employment and (b) annual cash bonuses paid or awarded under the Officers' Annual Incentive Plan or under any other bonus plan of an Employer during the 47 complete months of employment with an Employer preceding the Participant's termination of employment. 1.13 'Good Reason' means (a) following a Change in Control, the assignment to the Officer of any duties inconsistent in any material respect with the Officer's position or any other action by his Employer which results in a material diminution or material adverse change in his position, status, authority, duties or responsibilities as in effect immediately prior to the Change in Control, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied promptly after receipt of notice thereof given by the Officer; (b) a material reduction in the Officer's compensation as in effect immediately prior to the Change in Control without his express written consent; or (c) the relocation of the Officer's office (other than a relocation to Greenwich, Connecticut) in excess of 25 miles from the location where the Officer was based prior to the Change in Control or a requirement that the Officer travel on business of his Employer to an extent materially greater than his business travel obligations prior to the Change in Control. 1.14 'Normal Retirement Date' means the first day of the month coinciding with or next following the Participant's 65th birthday. 1.15 'Normal Supplemental Retirement Benefit' means the benefit computed in accordance with Section 3.1. 1.16 'Officer' means an employee of an Employer who is elected as an officer by the Board of Directors. 1.17 'Participant' means an Officer of an Employer who is designated by the Board of Directors as a Participant under the Plan. 1.18 'Plan' means the Supplemental Executive Retirement Plan of Witco Corporation as set forth in this document, as it may be amended from time to time. 2 1.19 'Retirement Plan' means the Witco Corporation Retirement Plan as it may be amended from time to time. 1.20 'Social Security Primary Benefit' means the annual primary old-age insurance benefit which the Participant would be entitled to receive under the Social Security Act as defined in the Retirement Plan. For purposes of determining a Normal Supplemental Retirement Benefit under Section 3.3, Social Security Primary Benefit shall mean the Participant's disability benefit which he is entitled to receive under the Social Security Act. 1.21 'Witco' means Witco Corporation or any successor thereto. The masculine pronoun, wherever used herein, shall include the feminine pronoun, unless the context clearly indicates a different meaning. ARTICLE II PARTICIPATION 2.1. Initial Participation. The Board of Directors shall designate specified Officers to be Participants in the Plan. In determining whether an Officer shall be designated as a Participant, the Board of Directors may consider the nature of the services rendered by the Officer, his contributions to the success of the Employer, his seniority, remuneration and position and such other factors as the Board of Directors deems relevant. With respect to the participation of Officers as of the Effective Date, an Officer shall become a Participant if he is designated as eligible to become a Participant pursuant to resolutions adopted by the Board of Directors on October 17, 1993, and if he had a prior individual agreement with Witco designed to provide the Officer with 'additional benefits' as defined therein, the Officer agrees in writing to waive all rights under such agreement in a manner prescribed by the Committee. 2.2. Termination of Participation. In the event a Participant is demoted so that he ceases to be an Officer but he continues in the employ of an Employer, his benefit under the Plan shall be frozen at the level in effect as of the date of his change in status and he shall only be entitled to such benefit if he meets the requirements of Sections 3.1, 3.2, 3.3, 3.4 or 3.6 (other than the requirement that he be an active Officer at his date of retirement, Disability, termination of employment, or death). ARTICLE III BENEFITS 3.1. Normal Supplemental Retirement Benefit. Each Participant who retires from the employ of an Employer as an active Officer on or after attaining age 65 shall be entitled to receive a monthly Normal Supplemental Retirement Benefit commencing at his Normal Retirement Date equal to one-twelfth of the annual benefit which is equal to: (a) 50% of the Participant's Final Average Compensation; reduced by (b) the sum of (1), (2) and (3) where (1), (2) and (3) are defined to mean: (1) any amount payable pursuant to the Retirement Plan; (2) any amount payable pursuant to the Excess Benefit and Compensation Cap Plan of Witco Corporation; and (3) an amount equal to 50% of his Social Security Primary Benefit. The Social Security Primary Benefit shall be converted to an annual benefit and shall be adjusted to the amount that would be payable at age 65 if his Social Security retirement age is greater than age 65. The amounts determined under (b)(1) and (b)(2) shall, in the case of a married Participant, be determined as if they were to be paid on a 50% joint and survivor basis; or, in the case of a single Participant or a married Participant whose beneficiary is other than spouse, be determined as if they were to be paid on a 10 year certain and life basis regardless of the actual form of payment. 3.2. Early Retirement Benefit. Each Participant who retires from the employ of an Employer as an active Officer prior to attaining age 65 but on or after attaining age 62 shall be entitled to receive a 3 monthly pension commencing on the first day of the month coinciding with or next following his date of retirement equal to one-twelfth of the annual benefit which is equal to: (a) 50% of the Participant's Final Average Compensation reduced by 5/9ths of 1% for each month that the Participant's Benefit Commencement Date precedes his Normal Retirement Date; provided, however, that at the discretion of the Board of Directors, this reduction may be waived; reduced by (b) the sum of (1), (2) and (3) where (1), (2) and (3) and defined to mean: (1) any amount payable pursuant to the Retirement Plan as of his Benefit Commencement Date; (2) any amount payable pursuant to the Excess Benefit and Compensation Cap Plan of Witco Corporation as of his Benefit Commencement Date; and (3) an amount equal to 50% of his Social Security Primary Benefit. The Social Security Primary Benefit shall be converted to an annual benefit and shall be adjusted to the amount that would be payable at his Benefit Commencement Date. The amounts determined under (b)(1) and (b)(2) shall, in the case of a married Participant, be determined as if they were to be paid on a 50% joint and survivor basis; or, in the case of a single Participant or a married Participant whose beneficiary is other than spouse, be determined as if they were to be paid on a 10 year certain and life basis regardless of the actual form of payment. 3.3. Disability Retirement Benefit. Each Participant whose employment with an Employer is terminated prior to his Normal Retirement Date as a result of Disability shall be entitled to receive his Normal Supplemental Retirement Benefit determined in accordance with the formula in Section 3.1 payable commencing on the first day of the month coinciding with or next following the determination that he has incurred a Disability; provided, however, that in determining the reduction applicable under Section 3.1(b), the reduction shall be determined as of the later of the date of the Participant's Disability or the earliest commencement date of such benefit under the applicable plan or the Social Security Act. In the event that a Participant's Disability retirement benefit commences prior to the date a benefit can be paid under one of such plans or the Social Security Act, the reduction shall only be applied to reduce his benefit under this Plan when reducing benefit is actually available to the Participant. In addition, a Participant's Disability retirement benefit under this Plan shall be reduced by any amounts paid under the Witco Long-Term Disability Plan. In the event the Participant recovers from his Disability before his Normal Retirement Date and does not resume participation in this Plan, he shall only be entitled to a termination benefit as described in Section 3.4 or, if eligible at the time of his Disability, an early retirement benefit as described in Section 3.2. 3.4. Termination Benefit. Except as provided in this Section 3.4, each Participant whose employment with the Employer is terminated prior to his attainment of age 62 other than as a result of Disability or death, shall not be entitled to any benefits under this Article III; provided, however, that in the event his employment is terminated at the option of his Employer for reasons other than Cause, the Board of Directors, in its absolute discretion, may decide to provide him with his Normal Supplemental Retirement Benefit payable commencing on his Normal Retirement Date. In the event of the death prior to his Benefit Commencement Date of such a Participant with respect to whom the Board of Directors has decided to provide a Normal Supplemental Retirement Benefit, his Beneficiary shall be entitled to the death benefit described in Section 3.6. 3.5. Form of Pension Payments. (a) The normal form of payment of benefits payable under this Article III, shall be a monthly pension equal to the amount determined under Sections 3.1, 3.2, 3.3 or 3.4, as the case may be, payable to the Participant for life with no further payments due after the Participant's death. (b) Alternatively, at any time prior to his Benefit Commencement Date, a Participant may elect to receive his pension in one of the following forms: (1) Joint and Survivor Option -- a monthly pension equal to the amount determined under Sections 3.1, 3.2, 3.3 or 3.4, as the case may be, payable to the Participant for life with the provision that after his death, a monthly pension shall continue to his surviving spouse (to whom he is 4 married at his Benefit Commencement Date) for the remainder of the spouse's life in an amount equal to 50% of the Participant's pension. The Participant may elect to receive the Actuarial Equivalent of the joint and 50% survivor option payable as a joint and 75% or 100% survivor option, in which case 75% or 100%, respectively, of the Participant's pension will be continued to his surviving spouse for life. (2) 15-Year Certain and Life Option -- a monthly pension equal to the amount determined under Sections 3.1, 3.2, 3.3 or 3.4, as the case may be, payable to the Participant for life or for 15 years, whichever is longer. If a Participant dies before the expiration of the 15-year period certain, payments shall be continued to the Participant's Beneficiary for the remainder of such period or, in the absence of a surviving Beneficiary, the Actuarial Equivalent of such payments shall be paid in a lump sum to the Participant's estate. (3) Full Cash Refund Option -- a monthly pension equal to the amount determined under Sections 3.1, 3.2, 3.3. or 3.4, as the case may be, payable to the Participant for life and, at his death, any excess of the Actuarial Equivalent value of the pension determined at his Benefit Commencement Date (on a 15-year certain and life basis) over the amount of payments actually received by him shall be paid to the Participant's Beneficiary in a single sum. Each Participant shall elect a form of payment upon becoming a Participant. Such election may be changed at any time prior to his Benefit Commencement Date. 3.6. Death Benefits. In the event of the death prior to his Benefit Commencement Date of a Participant (a) who is an active Officer at the time of his death, (b) who has ceased to be a Participant as a result of a demotion in accordance with Section 2.2 but who is still employed by Witco or an Affiliate at his date of death or (c) whose employment was terminated at the option of his Employer and the Board of Directors elected to provide him with a Normal Supplemental Retirement Benefit in accordance with Section 3.4, his Beneficiary shall receive a death benefit. Such death benefit shall be equal to his Normal Supplemental Retirement Benefit payable commencing on the first day of the month coinciding with or next following the Participant's date of death; provided, however, that in determining the reduction applicable under Section 3.1(b), the reduction shall be determined as of the later of the date of the Participant's death or the earliest commencement date of such benefit under the applicable plan or the Social Security Act. In the event that a death benefit commences hereunder prior to the date a benefit can be paid under one of such plans or the Social Security Act, the reduction shall only be applied to reduce his benefit under this Plan when the reducing benefit is actually available to the Participant. Such benefit shall be paid in the form last selected by the Participant prior to his death, i.e., (i) as an annuity for the life of his spouse equal to 50% of the Participant's Normal Supplemental Retirement Benefit if he elected the joint and survivor option, (ii) over 15 years if he elected the 15-year certain and life option, or (iii) in a lump sum that is the Actuarial Equivalent of the benefit payable on a full cash refund basis if he elected the full cash refund option. ARTICLE IV BENEFITS ON A CHANGE IN CONTROL 4.1. Change in Control Benefit. In addition to any other benefits payable hereunder, in the event of the termination of a Participant's employment within three years after a Change in Control, by an Employer (other than for Cause), or by the Participant for Good Reason, the Participant shall be entitled to receive an amount equal to three times his average annual total compensation received from Witco or any Affiliate for the five calendar years ending before the year in which the Change in Control occurs (determined in accordance with Code Section 280G(b)) less one dollar. Such benefit shall be paid in a lump sum as soon as practicable following the Participant's termination of employment. 4.2. Limitation. Notwithstanding Section 4.1, in the event that any payment received or to be received by the Participant in connection with a Change in Control (whether pursuant to the terms of this Plan or any other plan, arrangement or agreement with Witco or an Affiliate) would be subject to the excise tax imposed by Code Section 4999, then the payments under this Article IV shall be reduced to the extent necessary so that no portion of the total payments payable under this Plan or any other arrangement or agreement with Witco or an Affiliate is subject to such excise tax. 5 ARTICLE V ADMINISTRATION 5.1. Administration. The Plan shall be administered by the Committee which may employ agents and may delegate any of its rights, powers, duties and responsibilities with respect to the operation and administration of the Plan to any other person (whether or not an employee of an Employer) or organization. 5.2. Powers and Duties. In addition to any implied powers and duties that may be needed to carry out the provisions of the Plan, the Committee shall have the following specific powers and duties: (a) to make and enforce such rules and regulations as it shall deem necessary or proper for the efficient administration of the Plan; (b) to interpret the Plan and to decide any and all matters arising under the Plan, including the right to remedy possible ambiguities, inconsistencies or omissions; provided, however, that all such interpretations and decisions shall be applied in a uniform and nondiscriminatory manner to all Officers similarly situated; (c) to compute the amount of benefits that shall be payable to any Participant or Beneficiary in accordance with the provisions of the Plan; (d) to authorize disbursements with respect to the Plan on behalf of Witco; and (e) to allocate, from time to time, to one or more of its members any of its rights, powers, duties and responsibilities with respect to the operation and administration of the Plan. 5.3. Benefit Claim Procedures. Applications for benefits shall be processed in the same manner as applications for benefits under the Retirement Plan. 5.4. Member's Own Participation. No member of the Committee may act, vote or otherwise influence a decision of the Committee specifically relating to his participation under the Plan. ARTICLE VI AMENDMENT AND TERMINATION The Board of Directors may, in its absolute discretion, without notice, at any time and from time to time, modify or amend, in whole or in part, any or all of the provisions of the Plan, or suspend or terminate it entirely, provided, that no such modification, amendment, suspension or termination may apply, without his consent, to or affect the payment or distribution to any Participant or adversely affect the right of any Participant to any benefits provided under the Plan as in effect as of the date on which he first became a Participant. ARTICLE VII GENERAL PROVISIONS 7.1. Funding. Distributions under the Plan shall be made solely from the general assets of Witco. A Participant or Beneficiary shall have only the rights of a general unsecured creditor of Witco with respect to any rights under the Plan. Except as provided in the next sentence, no Participant, Beneficiary or any other person shall have any interest in any fund or in any specific asset or assets of Witco by reason of the right to receive a benefit under the Plan. The Board of Directors shall establish a trust to accumulate funds to provide benefits under the Plan. Such trust shall at all times be subject to the claims of general creditors of Witco and shall comply with such other requirements as the Internal Revenue Service may require for so-called 'rabbi trusts'. Prior to a Change in Control, Witco may, but is not required to, contribute cash or other property to the trust from time to time. Upon a Change in Control, Witco or any successor corporation shall, as soon as possible, but in no event later than 30 days following the Change in Control make an irrevocable contribution to the trust in an amount sufficient to pay each Participant or, in the event of the death of a Participant, his Beneficiary, the benefits to which he would be entitled as of the date on 6 which the Change in Control occurred assuming termination of employment on the date of the Change in Control under circumstances that would entitle the Participant to benefits pursuant to Article IV. 7.2. No Guarantee of Employment. The Plan shall not be deemed to constitute a contract between an Employer and any Participant or to be a consideration for, or an inducement for, the employment of any Participant by an Employer. Nothing contained in the Plan shall be deemed to give any Participant the right to be retained in the service of an Employer or to interfere with the right of the Employer to discharge or to terminate the service of any Participant at any time without regard to the effect such discharge or termination may have on any rights under the Plan. 7.3. Payments to Minors and Incompetents. If a person entitled to receive any payments under the Plan is a minor or is deemed by the Committee or is adjudged to be legally incapable of giving valid receipt and discharge for such payments, the Committee may direct payments to the legal representative of such person, or if none, to a person designated by the Committee for the benefit of such person, or the Committee may direct application of the payment for the benefit of such person in such manner as the Committee considers advisable. Such payment shall, to the extent made, be deemed a complete discharge of any liability for such payment under the Plan. 7.4. Nonalienation of Benefits. To the extent permitted by law, no benefits payable under the Plan will be subject in any manner to anticipation, assignment, garnishment or pledge; and any attempt to anticipate, assign, garnish or pledge the same will be void; no such benefits will be in any manner liable for or subject to the debts, liabilities, engagements or torts of any person entitled to receive such benefits. 7.5. Applicable Laws; Severability. This document shall be construed, administered and governed in all respects under and by the laws of the United States and, to the extent applicable, under and by the laws of the State of New York. If any provision of this document shall be held by a court or governmental agency of competent jurisdiction to be invalid or unenforceable, the remaining provisions of this document shall continue to be fully effective. 7 EX-11 4 EXHIBIT 11 EXHIBIT 11 WITCO CORPORATION AND SUBSIDIARY COMPANIES COMPUTATION OF PER SHARE EARNINGS*
YEAR ENDED DECEMBER 31 ------------------------------ 1993 1992 1991 ------- -------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Primary Income before cumulative effect of accounting change....................... $19,763 $ 53,865 $73,475 Interest on convertible subordinated debentures (net of tax)............... 5,363 5,445 5,445 Adjustment for dividend requirements of preferred stock.................... (24) (24) (26) ------- -------- ------- 25,102 59,286 78,894 Cumulative effect of accounting change..................................... -- (14,690) -- ------- -------- ------- Total............................................................ $25,102 $ 44,596 $78,894 ------- -------- ------- ------- -------- ------- Weighted average shares outstanding........................................ 49,055 44,026 43,478 Assumed conversions: Convertible subordinated debentures................................... 5,500 5,500 5,500 Stock options......................................................... 311 275 234 ------- -------- ------- Total............................................................ 54,866 49,801 49,212 ------- -------- ------- ------- -------- ------- Per share amount: Income before cumulative effect of accounting change.................. $ 0.46 $ 1.19 $ 1.60 Cumulative effect of accounting change................................ -- (0.29) -- ------- -------- ------- Net income............................................................ $ 0.46 $ 0.90 $ 1.60 ------- -------- ------- ------- -------- ------- Fully diluted Income before cumulative effect of accounting change....................... $19,763 $ 53,865 $73,475 Interest on dilutive debentures (net of tax)............................... 5,366 5,450 5,458 ------- -------- ------- 25,129 59,315 78,933 Cumulative effect of accounting change..................................... -- (14,690) -- ------- -------- ------- Total............................................................ $25,129 $ 44,625 $78,933 ------- -------- ------- ------- -------- ------- Weighted average shares outstanding........................................ 49,055 44,026 43,478 Assumed conversions: Convertible subordinated debentures................................... 5,519 5,526 5,562 Stock options......................................................... 465 392 368 Preferred stock....................................................... 149 156 167 ------- -------- ------- Total............................................................ 55,188 50,100 49,575 ------- -------- ------- ------- -------- ------- Per share amount: Income before cumulative effect of accounting change.................. $ 0.46 $ 1.18 $ 1.59 Cumulative effect of accounting change................................ -- (0.29) -- ------- -------- ------- Net income............................................................ $ 0.46 $ 0.89 $ 1.59 ------- -------- ------- ------- -------- -------
- ------------ * All per share data have been adjusted to reflect the two-for-one stock split effective October 5, 1993. EX-21 5 EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF WITCO CORPORATION -- NOTES (1)(2)(3) AS OF DECEMBER 31, 1993
PERCENTAGE OF VOTING SECURITIES OWNED DIRECTLY OR INDIRECTLY STATE OR BY WITCO COUNTRY OF CORPORATION ORGANIZATION ----------------- -------------------------- Aero Oil Company, Inc................................................... 100.0% Indiana Assured Insurance Company............................................... 100.0% Vermont Beam Oil Company, Inc................................................... 100.0% Georgia Continental Carbon Company.............................................. 100.0% Delaware Continental Carbon Australia Pty. Ltd.(4)............................. 49.0% Australia Enenco, Incorporated(4)................................................. 50.0% New York The Richardson Company.................................................. 100.0% Ohio Beltend, Inc.......................................................... 100.0% Delaware Allied-Kelite Company................................................. 100.0% Delaware Sherex Chemical Company, Inc............................................ 100.0% Ohio Southwest Petro-Chem, Inc............................................... 100.0% Delaware Witco Foreign Sales Corporation......................................... 100.0% U.S. Virgin Islands Witco International Corporation......................................... 100.0% New Jersey Surpass Chemicals Limited............................................. 100.0% Canada Witco Dominion Financial Services Company, Ltd.(5)................. 35.0% Province of Ontario, Canada Witco Financial Services Co.(5)............................... 35.0% Ireland Witco Australia Pty. Limited.......................................... 100.0% Australia Witco B.V............................................................. 100.0% the Netherlands Witco Polymers and Resins B.V...................................... 100.0% the Netherlands Witco Warmtekracht B.V............................................. 100.0% the Netherlands Nerap Expeditie B.V................................................ 100.0% the Netherlands Jonk B.V........................................................... 100.0% the Netherlands Witco Canada Inc...................................................... 100.0% Canada Witco Dominion Financial Services Company, Ltd.(5)................. 65.0% Province of Ontario, Canada Witco Financial Services Co.(5)............................... 65.0% Ireland Witco Colombia Ltda................................................... 100.0% Colombia Witco Corporation U.K. Limited........................................ 100.0% England Baxenden Chemicals Limited......................................... 53.5% England Baxenden Scandinavia AS.......................................... 53.5% Denmark Rewo Chemicals Limited............................................. 100.0% England Witco Deutschland GmbH................................................ 100.0% Germany Witco GmbH......................................................... 100.0% Germany Rewo Chemische Werke GmbH.......................................... 100.0% Germany Witco Solvay Duromer GmbH(4)....................................... 50.0% Germany Witco do Brasil Ltda.................................................. 100.0% Brazil Witco Ecuador S.A..................................................... 100.0% Ecuador Witco Espana, S.L..................................................... 100.0% Spain Witco Grand Banks Inc................................................. 100.0% Province of Newfoundland, Canada Witco Handels-GmbH.................................................... 100.0% Austria Witco Italiana S.r.l. ................................................ 100.0% Italy Witco S.A............................................................. 100.0% France Witco Singapore Pte Ltd............................................... 100.0% Republic of Singapore Witco Ltd............................................................... 60.0% Israel Witco Mexico, S.A. de C.V............................................... 100.0% Mexico
See next page. Notes: (1) The Company lists the business entities in which it has investments, for information purposes only. Such listing is not to be deemed an admission that these business entities are under the control of the Company within the meaning of the General Rules and Regulations under the Securities Exchange Act of 1934. (2) With respect to certain subsidiaries, shares in names of nominees and qualifying shares in names of directors are included in the above percentages. (3) With the exception of the companies covered by footnote (4), the companies named are included in the consolidated financial statements. (4) The Company records in the consolidated financial statements its equity in undistributed earnings (losses) of this unconsolidated entity. (5) The Company indirectly owns 100% of these companies through the Company's indirect ownership of Surpass Chemicals Limited and Witco Canada Inc. EX-23 6 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to 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 January 27, 1994, except for Note 7, as to which the date is March 11, 1994, with respect to the consolidated financial statements and schedules of Witco Corporation and Subsidiary Companies included in this Annual Report (Form 10-K) for the year ended December 31, 1993. ERNST & YOUNG Stamford, Connecticut March 18, 1994 -----END PRIVACY-ENHANCED MESSAGE-----