-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BmzplOxgGRkncQQ9Yw//MdNP4xhQNUuggiZLgK07KcEWC/WfF/3J9mLIOEfRxJDa tZAD38PZyZL6KbtvUckpEg== 0000950117-96-000229.txt : 19960321 0000950117-96-000229.hdr.sgml : 19960321 ACCESSION NUMBER: 0000950117-96-000229 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960320 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WITCO CORP CENTRAL INDEX KEY: 0000107889 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 131870000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-04654 FILM NUMBER: 96536652 BUSINESS ADDRESS: STREET 1: ONE AMERICAN WAY CITY: GREENWICH STATE: CT ZIP: 06831 BUSINESS PHONE: 2126053800 MAIL ADDRESS: STREET 1: ONE AMERICAN LANE CITY: GREENWICH STATE: CT ZIP: 06831 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-K405 1 WITCO CORPORATION FORM 10-K405 ________________________________________________________________________________ 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, 1995 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) ONE AMERICAN LANE 06831-2559 GREENWICH, CONNECTICUT (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 552-2000 ------------------------ 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 Rights to Purchase Series A Participating New York Stock Exchange Cumulative Preferred Stock
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 March 1, 1996, the aggregate market value of the voting stock held by non-affiliates of the Registrant, based on the closing price on March 1, 1996, on the New York Stock Exchange for the Registrant's Common Stock, was $1.82 billion. There were 56,489,369 shares of the Registrant's Common Stock outstanding on March 1, 1996. DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's definitive Proxy Statement for its April 24, 1996, 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. Established in 1920, at December 31, 1995, the Company had 8,053 employees worldwide. The Company's operations are divided between three business segments: Chemical, OSi Specialties and Petroleum which are described in Section (c) below. In 1992, the Company completed the acquisition of the Industrial Chemicals and Natural Substances divisions of Schering AG Berlin (the 'Schering Acquisition'). 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 and Italy. On October 19, 1995, Witco completed the acquisition of OSi Specialties Holding Company ('OSi Specialties' or 'OSi'), an entity engaged in the manufacture of silicone surfactants, amine catalysts, organofunctional silanes and specialty fluids and the operation of manufacturing and blending facilities in West Virginia, Europe, South America and Asia. In 1995, the Company completed the disposition of its Battery Parts and Carbon Black operations. These dispositions completed the Company's previously announced plan to dispose of all of the businesses of the Company's Diversified Products segment. In September 1995, the Company announced its intention to dispose of all of the businesses in the Lubricants portion of its Petroleum segment. The Company anticipates completing this disposition by mid-1996. 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 One American Lane, Greenwich, Connecticut 06831-2559, telephone (203) 552-2000. (B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS Reference is made to Note 15 of 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 between three business segments: Chemical, OSi Specialties and Petroleum 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 on a global basis. 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 complement those offered by the Petroleum Specialties Group of the Company's Petroleum 1 Products segment in this area. 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 Company is a worldwide producer of cationic and amphoteric surfactant products. These materials are major ingredients in fabric softener, hair conditioner and other personal care products. Polymer Additives Witco is a worldwide supplier of additives and catalysts for the polymer industry. It manufactures stabilizers, lubricants, plasticizers, and peroxide catalysts used in the manufacture of polyvinyl chloride (PVC) resin for such applications as pipes, fittings, siding and packaging materials. The Company is also a supplier of lubricants, antioxidants, and peroxide catalysts to polyolefin/polystyrene manufacturers. These resins are used extensively in a broad spectrum of applications ranging from packaging film to small appliance housings. The Company is a 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 marine paints. Resins The Resins Group, based in Germany, serves Witco's diverse global customer base for polyurethane intermediates, coatings, and epoxy resins and hardeners. It encompasses Witco's U.S.-based polyurethane intermediates businesses and epoxy resins, hardeners and polyurethanes manufacturing and marketing operations in the U.K., France, Germany, Italy, and Denmark. Witco has been developing water-based polyurethanes to replace higher volatile organic compound solvent-based systems. This has increased the number of new products and Witco's market share among multi-product customers. Witco is conducting an effort to develop technical applications for these products in new markets. Examples include new water-based textile coatings and a patented dimethyl pyrazol (DMP) polyurethane for anti-corrosive coatings developed in the U.K., polyurethane systems for footwear developed in France for manufacturers in Asia and South America, low-fogging polyesters for the European and Asian markets, water-based epoxy resins and hardeners and polyurethane dispersions worldwide. Worldwide, footwear, adhesives, and coatings are believed to offer significant new business potential for customers with both epoxy resin and polyurethane needs. To meet these needs, Witco is investing in capacity expansions at plants worldwide. Customers The Company markets its specialty chemical products directly through its own sales force and through an organized distribution program to more than 6,000 customers in the United States and more than 80 foreign countries operating 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, 1995, no customer accounted for more than 4 1/2% of Chemical Segment sales, and sales to the ten largest customers accounted for approximately 15% of Chemical Segment sales. Competition Competition in the Company's specialty chemicals business is based primarily on product consistency, quality and performance, customer service, and the technological resources necessary to develop and deliver new products that meet customer needs. Several factors constitute barriers to entry for new participants in many of the Company's markets: the need to make significant capital and research and development expenditures; the need for an extensive distribution network; the high level of expertise needed to solve technical problems for customers; manufacturing and product formulation 2 knowledge; the lengthy product development process and customers' general aversion to contracting with unproven suppliers of specialty chemical products. Competition is fragmented, with no one competitor offering products across all of the Company's chemical product lines. OSi Specialties OSi Specialties, a wholly-owned subsidiary of the Company acquired in October 1995, manufactures and sells over 500 silicone-based chemical intermediate products to manufacturers of fiberglass, reinforced plastics, polyurethane foam, textiles, coatings, automotives, adhesives, rubber, pharmaceuticals, thermoplastics, sealants and agricultural, electrical and personal care products throughout the world. In 1958, OSi invented the use of silicone surfactants in the manufacture of urethane foam. This fundamental technological advance facilitated a lower-cost, continuous manufacturing method, resulting in accelerated growth in the urethane foam industry. OSi was also a pioneer in the silanes industry, and was instrumental in developing key technology for the reinforcement of plastics. Regardless of form, most silicones share a combination of properties, including electrical resistance, ability to maintain performance across a broad range of temperatures, resistance to aging, water repellence, lubricating characteristics and relative chemical and physiological inertness. The versatility of silicone-based intermediates has led to a wide variety of applications across a broad spectrum of industries in all major countries. Examples of OSi's products include catalysts, surfactants, coupling agents, process aids and other silicone-based specialty chemicals. Catalysts promote the process of urethane foam and polymer formation. Surfactants promote the mixing of reactants, control cell size and stabilize urethane foam. Surfactants also serve as wetting agents in a broad spectrum of applications and are used in personal care products (hair conditioning) and coatings (for flow control and leveling). Coupling agents bond inorganic and organic materials and enhance the physical, mechanical and adhesion properties of a variety of products, including fiberglass, sealants, rubber and coatings. Process aides include foam control agents, which inhibit foam formation or reduce foam in such diverse applications as antacid tablets, fountain soda and pulp and paper processing. Raw Materials The principal raw materials for the OSi Specialties Segment's products are trichlorosilane, polyether fluids and dimethyl siloxane hydrolyzate. The Segment purchases, in the aggregate, more than 50% of its raw materials from Dow Corning Corporation and Union Carbide Corporation under various long-term agreements expiring from 1998 to 2000. The Segment purchases other raw materials from a variety of domestic and international suppliers, and these products are readily available from other suppliers. Customers The Company markets its OSi Specialties products through direct distribution using a trained sales force, and through distributor sales in the United States and foreign locations. Since the acquisition, no customer accounted for more than 14.2% of OSi Specialties Segment sales, and sales to the ten largest customers accounted for approximately 38.8% of OSi Specialties Segment sales. Competition The OSi Specialties Segment faces relatively few direct silicone competitors. Competition is based primarily on product consistency, quality and performance, customer service and the technological resources necessary to develop and deliver new products that meet customer needs. Several factors constitute barriers to entry in many of the OSi Specialties Segment's markets: the need to make significant capital and research and development expenditures; the need for an extensive distribution network; the high level of expertise needed to solve technical problems for customers; manufacturing and product formulation knowledge; and the lengthy product development process and customers' general aversion to contracting with unproven suppliers of specialty chemical products. 3 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 specialty road and surface treatment products, which are sold primarily for highway construction and maintenance. In September 1995, Witco announced its intention to divest its Lubricants Group. Results of its Lubricants Group are currently reported as discontinued operations. 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, 1995, no customer accounted for more than 7% of continuing Petroleum Segment sales, and sales to the ten largest customers accounted for approximately 27% of continuing 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, quality and service. 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. International Operations Sales of Witco's continuing non-U.S. operations were $787.6 million, or 40% of total sales for continuing operations, for the year ended December 31, 1995. Witco's manufacturing and producing operations outside the United States are in Belgium, Brazil, Canada, Denmark, England, France, Germany, Hong Kong, Indonesia, Israel, Italy, Korea, Malaysia, Mexico, the Netherlands, Spain and Thailand. 4 Patents and Trademarks The Company owns and controls patents, trade secrets, trademarks, trade names, copyrights and confidential information, which in the aggregate are of material importance to its business. However, the Company is not materially dependent upon any single patent or trademark. The Company's trademarks are registered in the United States and in a number of foreign countries, with terms of registration expiring generally between 1996 and 2006. The Company also has approximately 1,400 patents and applications worldwide related to its continuing operations. The Company intends to renew and maintain in a timely manner those trademarks and patents that are renewable and maintainable and are deemed important to its business. 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 The Company is actively engaged in research and development programs designed to develop new products, manufacturing processes, systems and technologies to enhance existing products and processes. The Company believes its investments in research and development have been an important factor in establishing and maintaining its competitive position. Witco expended approximately $52.9 million in 1995, $40.7 million in 1994 and $40.3 million in 1993 on research and development of new products and services for its continuing operations, and for improvements and new applications of existing products and services for its continuing operations. Environmental Matters The 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 vary significantly from those of its competitors in the chemical and petroleum industries. 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. Environmental reserves related to continuing operations at December 31, 1995 amounted to $83.6 million, which reflects management's assessment of future remediation costs in light of currently available information. Remediation expenditures charged to those reserves were $13.7 million in 1995 and include expenditures currently mandated as well as those not required by any regulatory authority or third party. The Company anticipates 1996 expenditures to approximate $24.0 million. Capital expenditures related to continuing operations for air, water and solid waste control equipment and facilities related to continuing operations amounted to $8.9 million in 1995. The Company estimates that approximately $20.0 million will be expended on similar capital projects in 1996. The Company 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 5 that direct recurring operating costs associated with managing hazardous substances and pollution can be controlled. Such costs related to continuing operations amounted to $28.2 million in 1995. (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 specialty products; subsidiaries in Belgium, Brazil, Canada, Denmark, England, France, Germany, Israel, Italy, Mexico and Spain manufacture chemical products. In early 1996, the Company acquired a resins manufacturing plant in Singapore. 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 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 for its continuing businesses in 51 manufacturing plants and other producing facilities, owned in fee or occupied under lease, of which 21 are in the United States and 30 in other countries. Of these facilities, 33 are utilized for Chemical product manufacturing; 10 are utilized for OSi Specialties product manufacturing; and 8 are utilized for Petroleum product manufacturing. All of the facilities are in good operating condition. 6 PRINCIPAL MANUFACTURING PLANTS AND OTHER IMPORTANT PHYSICAL PROPERTIES RELATED TO CONTINUING OPERATIONS -- LOCATIONS BY INDUSTRY SEGMENT (OWNED IN FEE EXCEPT WHERE PARENTHETICAL DATES REFER TO LEASE EXPIRATION) CHEMICAL SEGMENT FACILITIES United States Santa Fe Springs, California* Blue Island, Illinois Chicago, Illinois Mapleton, Illinois -- 2 Plants Harahan, Louisiana Taft, Louisiana Brainards, New Jersey* Newark, New Jersey* Perth Amboy, New Jersey Brooklyn, New York Memphis, Tennessee Fort Worth, Texas Houston, Texas LaPorte, Texas Marshall, Texas Janesville, Wisconsin International Brantford, Canada Montreal, Canada Oakville, Canada Soro, Denmark (2005) Accrington, England Droitwich, England Flimby, England Elbeuf, France St. Amour, France Bergkamen, Germany (2091) Steinau, Germany Haifa, Israel Gambolo, Italy Cuatitlan, Mexico Singapore Granollers, Spain OSI SPECIALTIES SEGMENT FACILITIES United States Sistersville, West Virginia International Zwijndrecht, Belgium Itatiba, Brazil Termoli, Italy PETROLEUM SEGMENT FACILITIES United States Gretna, Louisiana Petrolia, Pennsylvania Trainer, Pennsylvania International Scarborough, Canada (1996) West Hill, Canada Amsterdam, the Netherlands Haarlem, the Netherlands Koog Aan De Zaan, the Netherlands - ------------ * Manufacturing plants to be closed in 1996 and 1997 as a part of the Company's plant consolidation program. 7 OTHER FACILITIES United States Greenwich, Connecticut (2014) Los Angeles, California (2001) Tarrytown, New York (1997) Oakland, New Jersey Dublin, Ohio Houston, Texas (1996) S. Charleston, West Virginia (1997) Danbury, Connecticut (2000) World Headquarters -- Principal Executive, Administrative and Sales Office Administrative and Sales Office Research Research Research Administrative and Research Administrative and Research Administrative Office International Paris, France (1999) Frankfurt, Germany (1997) Singapore (1999) Meyrin, Switzerland (2007) Administrative and Sales Office Principal European Executive and Administrative Office Administrative and Research Administrative and Research In addition, OSi Specialties operates producing and other facilities in Mexico, Korea, Hong Kong, Malaysia, Thailand and Indonesia. ITEM 3 -- LEGAL PROCEEDINGS The Company has been notified that it is a potentially responsible party ('PRP') or a defendant in a number of governmental (federal, state, and local) and private actions associated with the release, or suspected release, of contaminants into the environment. As a PRP, the Company may be liable for costs associated with the investigation and remediation of environmental contamination, as well as various penalties, and damages to persons, property and natural resources. As of December 31, 1995, the Company was a PRP, or a defendant, in connection with 67 sites at which it is likely to incur costs associated with environmental investigation or remedial actions which have been or will be executed pursuant to the Comprehensive Environmental Response Compensation and Liability Act ('CERCLA'), the Resource Conservation and Recovery Act ('RCRA'), or similar state or local laws. With 22 exceptions, all of these sites involve one or more PRPs, and in most cases, there are numerous other PRPs in addition to the Company. CERCLA, RCRA, and the state counterparts to these federal laws, authorize governments to investigate and remediate actual or suspected damage to the environment caused by the release or suspected release of hazardous substances into the environment, or to order the responsible parties to investigate and/or remediate such environmental damage. The Company evaluates and reviews environmental reserves for future remediation and other costs on a quarterly basis to determine appropriate reserve amounts. Inherent in this process are considerable uncertainties which affect the Company's ability to estimate the ultimate costs of remediation efforts. Such uncertainties include the nature and extent of contamination at each site, evolving governmental standards regarding remediation requirements, changes in environmental regulations, widely varying costs of alternative cleanup methods, the number and financial condition of other potentially responsible parties at multi-party sites, innovations in remediation and restoration technology, and the identification of additional environmental sites. The Company has numerous insurance policies which it believes provide coverage at various levels for environmental liabilities. The Company is currently in litigation with certain of its insurers concerning the applicability and amount of insurance coverage for environmental costs under certain of these policies. Except for amounts reflected in executed settlement agreements, no provision for recovery under any of these policies is included in the Company's financial statements. The Company is a party to a Consent Decree with the United States Environmental Protection Agency ('EPA') and the United States Department of Justice ('DOJ') filed with the District Court, 8 Eastern District of California, on June 7, 1995. The Consent Decree settles certain litigation related to the Company's Oildale, California refinery operated by its Lubricants Group. Pursuant to the Consent Decree, the Company must construct a new wastewater recycling system at the refinery, which system must be operational by June 30, 1998, must operate for 10 years, and must recycle at least 75% of the total annualized process and storm water in the first year of operation, at least 78% in the second year and at least 82% in the third year and thereafter. The Company must also close the deep injection wells at the refinery by June 30, 1998, although the Company may keep one deep injection well operational past this date (but in no event beyond June 30, 2002) under certain circumstances specified in the Consent Decree. The Consent Decree also requires the Company to perform certain groundwater monitoring and site characterization work at the refinery (including some work off-site at the Chevron property adjacent to the refinery) and to submit to EPA Region IX the Company's recommendations for future site characterization and remediation, if any, deemed necessary as a result of the initial site characterization efforts. The Consent Decree also requires the Company to take certain additional actions at the refinery, some of which have previously been completed, and to report semi-annually to EPA and DOJ its progress with respect to design, construction and operation of the wastewater recycling system. The Company is a defendant in three similar actions pending in California state courts, which arise out of the Company's involvement in the polybutylene resin manufacturing business in the 1970's: East Bay Municipal Utility District v. Mobil Oil Co., et al., filed in November 1993, and pending in Superior Court for the County of San Mateo; City of Santa Maria v. Shell Oil Co., et al.; filed in May 1994, and pending in Superior Court for the County of San Luis Obispo; and Nipomo Community Services District v. Shell Oil Co., et al.; filed in May 1995, and pending in Superior Court for the County of San Luis Obispo. The actions generally allege that the Company and several other defendants negligently misrepresented the performance of polybutylene pipe and fittings installed in water distribution systems. Other allegations include breach of warranty, fraud, strict liability and breach of the California Unfair Practices Act. On November 3, 1995, the United States filed suit against the Company in United States District Court for the Central District of Illinois seeking up to $4.5 million in civil penalties for the alleged discharge of pollutants in violation of the Clean Water Act. In this action, the United States alleges that, at various times from 1990 to 1993, the Company discharged pollutants into the Illinois River from its Mapleton, Illinois facility without first obtaining a National Pollutant Discharge Elimination System Permit. 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. However, depending on the amount and timing of an unfavorable resolution of these contingencies, it is possible that the Company's future results of operations could be materially affected in a particular period. 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, 1995. 9 EXECUTIVE OFFICERS OF THE COMPANY The following sets forth information regarding executive officers of the Company as of February 29, 1996, 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 Peter J. Biancotti .......................... 1983 52 Vice President and Controller John M. Bondur .............................. 1995 Managing director, Ward Howell 52 Vice President -- Human Resources International -- 1989 to 1995. Bruce G. Davis .............................. 1995 Vice President Purchasing and Logistics, 47 Vice President -- Purchasing and Logistics Standard Products -- 1993 to 1995. Manager -- Materials, Sourcing and Support Operations, GE Transportation Systems -- 1990 to 1993. Ronald Edelstein ............................ 1995 Vice President -- Information Systems -- April 46 Chief Information Officer, Vice 1992 to December 1995. General President -- Information Systems Manager -- 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 49 Executive Vice President and Chief Administration -- October 1990 to September Financial Officer 1992. Vice President and Treasurer prior to October 1990. Gerald Katz ................................. 1995 Group Vice President -- Senior Managing 58 Senior Vice President -- Corporate Director -- Witco Europe from 1992 to 1994. Development Group Vice President -- Chemical Group prior to 1992. William E. Mahoney .......................... 1994 Vice Chairman and Chief Operating 64 Vice Chairman and Chief Operating Officer Officer -- Chemicals -- September 1992 to August 1994. Executive Vice President -- Chemical Group prior to September 1992. Dustan E. McCoy ............................. 1993 Associate General Counsel, Ashland, Inc, prior 46 Vice President, General Counsel and to April 1993. Corporate Secretary Lawrence B. Nelson .......................... 1990 Group Vice President -- Petroleum Group 65 Group Vice President -- Corporate Technology James M. Rutledge ........................... 1990 Assistant Controller 43 Vice President and Treasurer Carl R. Soderlind ........................... 1993 Group Vice President -- Commercial 62 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 65 Chairman of the Board and Chief Executive Officer -- March 1990 to September 1990. Officer Executive Vice President -- Finance and Administration prior to March 1990.
(table continued on next page) 10 (table continued from previous page)
SERVED IN PRESENT POSITION PRIOR BUSINESS EXPERIENCE NAME AND PRESENT TITLE SINCE (WITHIN LAST FIVE YEARS) AGE - --------------------------------------------- --------- ------------------------------------------------ --- CHEMICAL SEGMENT Group Vice Presidents: Nirmal Jain ................................. 1993 Vice President and General Manager -- Argus 58 Polymer Additives Division prior to January 1993. Peter Loewrigkeit ........................... 1995 Group Vice President -- Resins business unit 57 Resins from 1994 to 1995, Vice President -- Polyurethane/Polyesters business unit from 1993 to 1994, Vice President -- Business Manager -- Urethane business unit from 1991 to 1993. Frederick A. Shinners ....................... 1994 Vice President and General Manager -- GE 53 Oleochemicals/Surfactants Silicones from August 1990 to June 1994. President -- GE Plastics, Japan prior to August 1990. OSI SPECIALTIES SEGMENT Group Vice President: David I. Barton ............................. 1995 Chairman of the Board and Chief Executive 57 Officer, OSi Specialties, Inc. -- July 1993 to August 1995. Employed by GAF Chemicals Corporation and its successor, International Specialty Products, Inc. -- March 1988 to October 1992. PETROLEUM SEGMENT Group Vice President: Harvey L. Golubock .......................... 1990 Vice President Supply and Distribution prior to 53 Lubricants September 1990. Vice Presidents: Eric R. Myers ............................... 1993 Vice President and General Manager -- 49 Kendall/Amalie Division from January 1993 to April 1993. Vice President and General Manager -- Richardson Battery Parts Division from May 1991 to December 1992. President and General Manager, Bridgeport -- Piedmont Manufacturing Co. -- Division of Bridge Products, Inc. prior to May 1991. Donald E. Weinberg........................... 1986 60 INTERNATIONAL Group Vice President: Yuan-Hu (Dick) Liu .......................... 1995 President, Du Pont China Holding Co. Ltd., from 58 Asian Operations 1993 - 1995. Group Manager/Director Greater China, Du Pont China Ltd. from 1987 to 1993.
11 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, as reported on such exchange for each quarterly period during the past two years:
1995 1994 ---------------- ---------------- QUARTER HIGH LOW HIGH LOW - --------------------------------------------- ------ ------ ------ ------ First........................................ $29.38 $24.25 $35.00 $30.00 Second....................................... $33.13 $27.25 $32.00 $26.38 Third........................................ $35.63 $31.50 $31.25 $27.38 Fourth....................................... $35.13 $27.50 $28.75 $24.38
The approximate number of holders of record of the Company's Common Stock as of February 29, 1996, was . Dividends on the Common Stock have been declared quarterly during the past two years as follows:
PER SHARE ------------ QUARTER 1995 1994 - ---------------------------------------------------------------------- ---- ---- First................................................................. $.28 $.25 Second................................................................ $.28 $.25 Third................................................................. $.28 $.28 Fourth................................................................ $.28 $.28
ITEM 6 -- SELECTED FINANCIAL DATA The data for this item are 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 are 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. 12 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 3 through 6 of the Proxy Statement to be filed pursuant to Regulation 14A no later than March 31, 1996. (b) Identification of Executive Officers Reference is made to Part I of this Form 10-K. (c) Business Experience Reference is made to pages 3 through 6 of the Proxy Statement to be filed pursuant to Regulation 14A no later than March 31, 1996 and Part I of this Form 10-K. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Reference is made to page 6 of the Proxy Statement to be filed pursuant to Regulation 14A no later than March 31, 1996. 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 15 of the Proxy Statement to be filed pursuant to Regulation 14A no later than March 31, 1996. 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, 1996. 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, 1996. (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 15 of the Proxy Statement to be filed pursuant to Regulation 14A no later than March 31, 1996. 13 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(ii) -- By-laws, as amended.(1) 4 -- Instruments defining the rights of security holders, including indentures. (i) -- Rights Agreement dated as of March 2, 1995, between Witco Corporation and First Chicago Trust Company of New York.(2) (iii) -- 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. (i) -- 1. Agreement and Plan of Merger dated as of September 10, 1995, among Witco Corporation, Witsel Corporation and OSi Specialties Holding Company.(3) -- 2. Amendment dated as of October 18, 1995, to the Agreement and Plan of Merger dated as of September 10, 1995, among Witco Corporation, Witsel Corporation and OSi Specialties Holding Company.(4) (iii)(A) -- Executive Compensation Plans and Arrangements Required to be Filed: -- 1. 1986 Stock Option Plan for Employees, as amended.(5) -- 2. 1989 Stock Option Plan for Employees.(6) -- 3. 1992 Stock Option Plan for Employees.(7) -- 4. Consultancy Agreement Between the Company and William Wishnick.(8) -- 5. Witco Corporation 1994 Deferred Compensation Plan.(9) -- 6. Supplemental Executive Retirement Plan of Witco Corporation as amended and restated effective December 5, 1995. 11 -- Statement re Computation of Per Share Earnings. 21 -- Subsidiaries of the Registrant. 23 -- Consent of Independent Auditors. 24 -- Power of Attorney.(10) 27 -- Financial Data Schedule.
(b) Reports on Form 8-K. (i) A report on Form 8-K dated October 31, 1995, as amended by a report on Form 8-K/A dated December 20, 1995, was filed during the quarter ended December 31, 1995, responding to Items 2 and 5 in connection with the Company's completion of the acquisition of OSi Specialties Holding Company. (ii) A report on Form 8-K dated December 20, 1995, was filed during the quarter ended December 31, 1995, responding to Item 7 filing the historical and pro forma financial statements required by that Item as a result of the Company's acquisition of OSi Specialties Holding Company. (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 quarterly report on Form 10-Q for the quarter ended March 31, 1994, and such Exhibit is hereby incorporated by reference. (footnotes continued on next page) 14 (footnotes continued from previous page) (2) This Exhibit was included as an exhibit to the Registration Statement on Form 8A filed with the Securities and Exchange Commission on March 3, 1995, and such Exhibit is hereby incorporated by reference. (3) This Exhibit was included as Exhibit 2(a) to Form 8-K filed with the Securities and Exchange Commission on September 25, 1995, and such Exhibit is hereby incorporated by reference. (4) This Exhibit was included as Exhibit 2(c) to Form 8-K filed with the Securities and Exchange Commission on October 31, 1995, and such Exhibit is hereby incorporated by reference. (5) The 1986 Stock Option Plan, as amended, was filed as an Exhibit to the 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. (6) The 1989 Stock Option Plan was filed as an Exhibit to the 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. (7) The 1992 Stock Option Plan was filed as an Exhibit to the Registration Statement on Form S-8, registration number 33-48806, effective June 23, 1992, and such Exhibit is hereby incorporated by reference. (8) 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. (9) This Exhibit was included as an exhibit to the annual report on Form 10-K for the fiscal year ended December 31, 1994, and such Exhibit is hereby incorporated by reference. (10) The Power of Attorney appears on the Signature Page. 15 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 20th day of March, 1996. 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, 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 20, 1996 ......................................... Officer WILLIAM R. TOLLER /s/ WILLIAM E. MAHONEY Vice Chairman and Chief Operating Officer March 20, 1996 ......................................... WILLIAM E. MAHONEY PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER: /s/ MICHAEL D. FULLWOOD Executive Vice President and Chief Financial March 20, 1996 ......................................... Officer MICHAEL D. FULLWOOD DIRECTORS: /s/ WILLIAM J. ASHE Director March 20, 1996 ......................................... WILLIAM J. ASHE /s/ SIMEON BRINBERG Director March 20, 1996 ......................................... SIMEON BRINBERG /s/ WILLIAM G. BURNS Director March 20, 1996 ......................................... WILLIAM G. BURNS
16
NAME TITLE DATE - ------------------------------------------ -------------------------------------------- ------------------- /s/ WILLIAM R. GRANT Director March 20, 1996 ......................................... WILLIAM R. GRANT /s/ RICHARD M. HAYDEN Director March 20, 1996 ......................................... RICHARD M. HAYDEN /s/ HARRY G. HOHN Director March 20, 1996 ......................................... HARRY G. HOHN /s/ WILLIAM E. MAHONEY Director March 20, 1996 ......................................... WILLIAM E. MAHONEY /s/ L. JOHN POLITE, JR. Director March 20, 1996 ......................................... L. JOHN POLITE, JR. /s/ DAN J. SAMUEL Director March 20, 1996 ......................................... DAN J. SAMUEL /s/ WILLIAM R. TOLLER Director March 20, 1996 ......................................... WILLIAM R. TOLLER /s/ BRUCE F. WESSON Director March 20, 1996 ......................................... BRUCE F. WESSON /s/ WILLIAM WISHNICK Director March 20, 1996 ......................................... WILLIAM WISHNICK
17 SCHEDULE II WITCO CORPORATION AND SUBSIDIARY COMPANIES VALUATION AND QUALIFYING ACCOUNTS (THOUSANDS OF DOLLARS)
COLUMN C ------------------------ COLUMN E COLUMN B ADDITIONS -------- ---------- ------------------------ BALANCE COLUMN A BALANCE AT CHARGED TO CHARGED TO COLUMN D AT END - -------------------------------------------------- BEGINNING COSTS AND OTHER ---------- OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD - -------------------------------------------------- ---------- ---------- ---------- ---------- -------- Year ended December 31, 1995: Valuation and qualifying accounts deducted from assets to which they apply: Allowances for doubtful receivables-trade..................... $8,863 $2,615 $ (3,197)(a) $1,177(b) $7,104 ---------- ---------- ---------- ---------- -------- ---------- ---------- ---------- ---------- -------- Year ended December 31, 1994: Valuation and qualifying accounts deducted from assets to which they apply: Allowances for doubtful receivables-trade..................... $6,821 $2,209 $ 821 $ 988(b) $8,863 ---------- ---------- ---------- ---------- -------- ---------- ---------- ---------- ---------- -------- 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(b) $6,821 ---------- ---------- ---------- ---------- -------- ---------- ---------- ---------- ---------- --------
- ------------ Notes: (a) Amount principally consists of the allowance for doubtful accounts of $2.2 million from the Lubricants Group, which is reflected on the balance sheet as net assets of discontinued operations. (b) Uncollectible receivables charged against the allowance provided. S-1 EX-10 2 EXHIBIT 10(III)(A)-6 EXHIBIT 10(iii)(A)-6 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN OF WITCO CORPORATION AS AMENDED AND RESTATED EFFECTIVE DECEMBER 5, 1995 PREAMBLE Witco Corporation hereby establishes this Supplemental Executive Retirement Plan of Witco Corporation (the 'Plan') effective January 1, 1994, as amended and restated effective December 5, 1995, 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; 1 (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 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 periods specified below. Average Annual Earnings shall mean the sum of (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 (or, if shorter, the actual months of employment) with an Employer preceding the Participant's termination of employment, divided by 3, and (b) the average of the highest three bonuses awarded under the Witco Corporation Officers' Annual Incentive Plan, the Management Incentive Plan or any other annual cash bonus plan of an Employer during the 60 complete months of employment (or, if shorter, the actual months of employment) with an Employer preceding the Participant's termination of employment; provided, however, that Earnings shall not include salary or bonus awarded by any company acquired by Witco or an Affiliate with respect to any period ending on or prior to the acquisition date. For purposes of this definition, a Participant' employment with an acquired Employer shall not be counted as 'months 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. 2 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. 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. 3 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 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. 3.2.A. Recalculation of Benefit. If, after a Participant retires, (i) the Participant is entitled to a benefit calculated pursuant to Section 3.1 or Section 3.2, (ii) the Participant is awarded a bonus under the Witco Corporation Officers' Annual Incentive Plan (or under any other annual cash bonus plan of an Employer) with respect to the year in which he retires (a 'Retirement Year Bonus'), and (iii) the Retirement Year Bonus awarded to the Participant is greater than one of the three bonuses used in the calculation of Final Average Compensation to determine the Participant's supplemental retirement benefit, the Participant's supplemental retirement benefit shall be recalculated under Section 3.1 or 3.2, as applicable, in the same manner as originally calculated (and without regard to any changed circumstances since the original retirement date) except that Final Average Compensation shall be redetermined by substituting the lowest of the 3 bonuses used in the calculation of Final Average Compensation with the Retirement Year Bonus. The increase in a Participant's supplemental retirement benefit effected by the recalculation shall be made retroactive to the date of the Participant's retirement, and the excess of the Participant's recalculated benefit over the benefit actually received by the Participant prior to the recalculation date shall be paid in one lump sum as soon as practicable following the recalculation date. 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, 4 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 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) 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, 5 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. In addition to the amount payable pursuant to 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, the Participant shall be entitled to receive an amount equal to any (a) excise tax liability imposed by Code Section 4999 plus (b) Federal, state and local income taxes and additional excise taxes imposed by Section 4999 of the Code on the Participant (or his Beneficiary) as a result of the payment of the amounts in clauses (a) and (b) of this sentence. 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. 6 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 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 3 EXHIBIT 11 EXHIBIT 11 WITCO CORPORATION AND SUBSIDIARY COMPANIES COMPUTATION OF PER SHARE EARNINGS (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, ------------------------------- 1995 1994 1993 -------- -------- ------- Primary Income from continuing operations......................................... $100,346 $ 94,420 $25,132 Interest on convertible subordinated debentures (net of tax).............. -- 1,109 5,363 Adjustment for dividend requirements of preferred stock................... (19) (20) (24) -------- -------- ------- 100,327 95,509 30,471 Income (loss) from discontinued operations -- net of income taxes......... 4,099 12,647 (5,369) -------- -------- ------- Total................................................................ $104,426 $108,156 $25,102 -------- -------- ------- -------- -------- ------- Weighted average shares outstanding....................................... 56,312 54,812 49,055 Assumed conversions: Convertible subordinated debentures..................................... -- 1,266 5,500 Stock options........................................................... 237 300 311 -------- -------- ------- Total................................................................ 56,549 56,378 54,866 -------- -------- ------- -------- -------- ------- Net Income Per Common Share: Income from continuing operations....................................... $ 1.78 $ 1.70 $ 0.56 Income (loss) from discontinued operations -- net of income taxes....... 0.07 0.22 (0.10) -------- -------- ------- Net income.............................................................. $ 1.85 $ 1.92 $ 0.46 -------- -------- ------- -------- -------- ------- Fully Diluted Income from continuing operations......................................... $100,346 $ 94,420 $25,132 Interest on dilutive debentures (net of tax).............................. -- 1,109 5,366 -------- -------- ------- 100,346 95,529 30,498 Income (loss) from discontinued operations -- net of income taxes......... 4,099 12,647 (5,369) -------- -------- ------- Total................................................................ $104,445 $108,176 $25,129 -------- -------- ------- -------- -------- ------- Weighted average shares outstanding....................................... 56,312 54,812 49,055 Assumed conversions: Convertible subordinated debentures..................................... -- 1,266 5,519 Stock options........................................................... 237 300 465 Preferred stock......................................................... 117 129 149 -------- -------- ------- Total................................................................ 56,666 56,507 55,188 -------- -------- ------- -------- -------- ------- Net Income Per Common Share: Income from continuing operations....................................... $1.77 $1.69 $ 0.56 Income (loss) from discontinued operations -- net of income taxes....... 0.07 0.22 (0.10) -------- -------- ------- Net income.............................................................. $1.84 $1.91 $0.46 -------- -------- ------- -------- -------- -------
EX-13 4 EXHIBIT 13 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, 1995
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, 1995, are included in Item 8:
PAGE NO. -------- Report of Independent Auditors.................................................................... F-1 Consolidated Balance Sheets -- December 31, 1995 and 1994......................................... F-2 Consolidated Statements of Income -- Years Ended December 31, 1995, 1994 and 1993................. F-3 Consolidated Statements of Cash Flows -- Years Ended December 31, 1995, 1994 and 1993............. F-4 Consolidated Statements of Shareholders' Equity -- Years Ended December 31, 1995, 1994 and 1993... 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):
PAGE NO. -------- Schedule II -- Valuation and Qualifying Accounts.................................................. S-1
All other schedules (Nos. I, III, IV and V) 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. Eleven-Year Financial and Statistical Summary Witco Corporation and Subsidiary Companies
========================================================================================================================== (thousands of dollars except per share data) 1995 1994 1993 - ----------------------------------------------------------------------- ----------- ----------- ----------- Selected Statement of Income Data(e) Net sales $ 1,985,077 $ 1,841,414 $ 1,763,086 Interest 15,104 10,032 8,679 - ----------------------------------------------------------------------- ----------- ----------- ----------- Total revenues 2,000,181 1,851,446 1,771,765 - ----------------------------------------------------------------------- ----------- ----------- ----------- Cost of goods sold (exclusive of depreciation and amortization) 1,548,943 1,412,079 1,363,246 Selling and administrative expenses 199,452 185,576 181,173 Depreciation and amortization 102,571 88,663 86,480 Interest 43,689 29,674 34,984 Other expense (income) - net (55,278)(a)(b) (9,708) 64,585(c) - ----------------------------------------------------------------------- ----------- ----------- ----------- Total costs and expenses 1,839,377 1,706,284 1,730,468 - ----------------------------------------------------------------------- ----------- ----------- ----------- Income from continuing operations before federal and foreign income taxes 160,804 145,162 41,297 Federal and foreign income taxes 60,458 50,742 16,165 - ----------------------------------------------------------------------- ----------- ----------- ----------- Income from continuing operations 100,346 94,420 25,132 Income (loss) from discontinued operations - net of income taxes 4,099 12,647 (5,369) - ----------------------------------------------------------------------- ----------- ----------- ----------- Income before cumulative effect of accounting change 104,445 107,067 19,763 Cumulative effect of accounting change - - - - ----------------------------------------------------------------------- ----------- ----------- ----------- Net Income $ 104,445 $ 107,067 $ 19,763 - ----------------------------------------------------------------------- ----------- ----------- ----------- Selected Balance Sheet Data Working capital $ 249,580 $ 551,620 $ 451,235 Current ratio 1.36 2.60 2.32 Property, plant, and equipment expenditures (including acquisitions) $ 343,030 $ 107,438 $ 103,689 Property, plant, and equipment - net $ 811,667 $ 719,966 $ 696,462 Total assets $ 2,772,444 $ 1,919,345 $ 1,838,998 Long-term debt $ 683,830 $ 346,545 $ 496,266 Total shareholders' equity $ 1,004,117 $ 940,006 $ 713,415 Book value per common share $ 17.78 $ 16.73 $ 14.12 - ----------------------------------------------------------------------- ----------- ----------- ----------- Selected Other Financial Data Number of shareholders - at year end 4,990 5,194 5,253 Weighted average number of common shares outstanding (in thousands) 56,549 56,378 54,866 Per common share: Income from continuing operations $ 1.78 $ 1.70 $ .56 Net income $ 1.85 $ 1.92 $ .46 Net income - assuming full dilution $ 1.84 $ 1.91 $ .46 Dividends declared $ 1.12 $ 1.06 $ .96 Dividends paid per share: Common stock $ 1.12 $ 1.03 $ .94 Preferred stock $ 2.65 $ 2.65 $ 2.65 Market price to the nearest dollar, per common share on New York Stock Exchange (high-low) $ 36-24 $ 35-24 $ 32-24 ==========================================================================================================================
(a) Includes a provision of $51.9 million related to plant consolidation, environmental remediation and litigation. (b) Includes gains of $52.9 million as a result of settlements with certain of the Company's insurers, net of related legal and other costs and $51.2 million from the disposition of businesses. (c) Includes a provision for environmental remediation and compliance, disposition of a business, work force reduction, and other matters of $68.9 million. (d) Includes a provision for consolidation of offices of $20.1 million. (e) Amounts differ from previously reported amounts due to the presentation of the Lubricants Group as discontinued operations. 1 Witco Corporation and Subsidiary Companies
===================================================================================================== 1992 1991 1990 1989 1988 1987 1986 1985 - ----------- ---------- ---------- ---------- ----------- ----------- -------- ---------- $ 1,342,012 $1,244,949 $1,228,837 $1,219,153 $ 1,220,246 $ 1,050,643 $965,901 $1,010,289 9,303 10,529 19,380 21,248 15,792 12,405 6,595 3,369 - ----------- ---------- ---------- ---------- ----------- ----------- -------- ---------- 1,351,315 1,255,478 1,248,217 1,240,401 1,236,038 1,063,048 972,496 1,013,658 - ----------- ---------- ---------- ---------- ----------- ----------- -------- ---------- 1,055,047 979,902 973,906 962,314 954,669 818,918 747,971 811,058 139,438 135,373 126,297 127,985 129,053 115,750 116,499 107,796 61,130 53,681 47,155 44,871 42,064 41,868 42,779 41,183 16,448 16,027 16,400 16,289 16,394 15,732 12,045 11,343 20,734(d) (1,665) (8,989) 53,666 11,196 116 (786) (6,613) - ----------- ---------- ---------- ---------- ----------- ----------- -------- ---------- 1,292,797 1,183,318 1,154,769 1,205,125 1,153,376 992,384 918,508 964,767 - ----------- ---------- ---------- ---------- ----------- ----------- -------- ---------- 58,518 72,160 93,448 35,276 82,662 70,664 53,988 48,891 20,178 23,492 33,626 11,900 32,554 26,652 24,478 21,357 - ----------- ---------- ---------- ---------- ----------- ----------- -------- ---------- 38,340 48,668 59,822 23,376 50,108 44,012 29,510 27,534 15,525 24,807 8,132 11,633 21,513 19,281 35,705 29,240 - ----------- ---------- ---------- ---------- ----------- ----------- -------- ---------- 53,865 73,475 67,954 35,009 71,621 63,293 65,215 56,774 (14,690) - - - 20,289 - - - - ----------- ---------- ---------- ---------- ----------- ----------- -------- ---------- $ 39,175 $ 73,475 $ 67,954 $ 35,009 $ 91,910 $ 63,293 $ 65,215 $ 56,774 - ----------- ---------- ---------- ---------- ----------- ----------- -------- ---------- $ (21,611) $ 320,934 $ 359,091 $ 456,183 $ 439,250 $ 417,332 $246,661 $ 233,554 .97 2.25 2.76 3.54 3.24 3.06 2.49 2.34 $ 322,786 $ 74,307 $ 106,650 $ 70,387 $ 79,509 $ 82,090 $ 60,102 $ 75,606 $ 721,171 $ 474,755 $ 471,026 $ 417,175 $ 400,996 $ 374,628 $367,789 $ 360,950 $ 1,811,794 $1,198,276 $1,178,885 $1,139,256 $ 1,114,575 $ 1,056,298 $819,768 $ 810,292 $ 173,086 $ 179,132 $ 230,183 $ 235,510 $ 240,709 $ 242,641 $ 95,590 $ 136,020 $ 614,296 $ 625,700 $ 587,472 $ 571,582 $ 578,341 $ 513,615 $465,465 $ 415,410 $ 13.80 $ 14.35 $ 13.55 $ 12.67 $ 12.89 $ 11.47 $ 10.43 $ 9.39 - ----------- ---------- ---------- ---------- ----------- ----------- -------- ---------- 5,262 5,602 5,949 5,635 5,784 5,823 5,965 6,228 49,801 49,212 49,703 50,674 50,499 49,477 44,538 44,267 $ .88 $ 1.10 $ 1.32 $ .57 $ 1.10 $ .97 $ .67 $ .62 $ .90 $ 1.60 $ 1.48 $ .80 $ 1.93 $ 1.36 $ 1.47 $ 1.28 $ .89 $ 1.59 $ 1.47 $ .79 $ 1.91 $ 1.35 $ 1.44 $ 1.26 $ .92 $ .91 $ .86 $ .84 $ .73 $ .60 $ .55 $ .50 $ .92 $ .89 $ .86 $ .81 $ .70 $ .58 $ .53 $ .50 $ 2.65 $ 2.65 $ 2.65 $ 2.65 $ 2.65 $ 2.65 $ 2.65 $ 2.65 $ 25-20 $ 22-14 $ 20-11 $ 23-17 $ 19-15 $ 24-13 $ 20-13 $ 14-11 =====================================================================================================
2 Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Financial Resources Liquidity refers to the ability to generate adequate amounts of cash to satisfy the financial needs of an enterprise. Cash flow from operations, a major source of the Company's liquidity, provided funds of $454.1 million over the past three years. The generation of cash through operations during this time period was sufficient to fund working capital requirements, support the Company's internal capital investment program, and sustain an increasing amount of dividends paid to shareholders. Additional details regarding operating, investing, and financing activities can be found in the Consolidated Statements of Cash Flows. It is the Company's belief 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. During the fourth quarter of 1995, the Company acquired OSi Specialties Holding Company and its wholly owned subsidiary OSi Specialties, Inc. (collectively "OSi Specialties," or "OSi") in a cash transaction for $486 million. The acquisition was financed with cash on hand and short-term bank loans of $375 million under a credit agreement totaling $675 million with a consortium of banks. The Company subsequently purchased for cash all of OSi's 11.50% Senior Secured Discount Debentures due 2004 for $137.6 million and more than 99% of OSi Specialties' 9.25% Senior Subordinated Notes due 2003 for $140.1 million. The Company funded the redemption with short-term bank loans under the $675 million credit agreement. The Company had $605 million of bank loans outstanding under the credit agreement as of December 31, 1995. In February 1996, the Company issued $150 million of 6.125% Notes due 2006 and $150 million of 6.875% Debentures due 2026, netting approximately $297 million. The net proceeds, plus cash on hand, were used to repay $300 million of short-term bank loans under the credit agreement. Immediately thereafter, the availability under the credit agreement, as amended, was reduced to $375 million. The Company plans to repay the remaining $305 million with proceeds from the sale of the Lubricants Group, cash flow from operations or additional long-term financing. As the Company continues to focus on global expansion, it has, through certain of its international subsidiaries, arrangements with various banks for lines of credit. At December 31, 1995, these lines of credit aggregated $50.9 million, of which $47.1 million was unused at year-end. The Company has also entered into certain long-term hedging arrangements to protect against possible adverse currency exchange and interest rate fluctuations (see Note 13 of Notes to Financial Statements for additional details). Further progress has been made in divesting non-core businesses. The Company completed the divestiture of its Diversified Products Segment during the second quarter of 1995 with the sale of its Battery Parts and Carbon Black operations in March and June, respectively, for approximately $146 million in cash. Currently, the Company's primary international operations are based in Western Europe and Canada. Although there are certain risks inherent in carrying on international business, including currency devaluations and controls, export and import restrictions, inflationary factors, product supply, economic controls, and nationalization and appropriation, the Company does not believe these factors will significantly affect its operations. The Company periodically evaluates, and periodically reviews with the Finance Committee of the Board of Directors, its liquidity requirements, capital needs, and availability of external funds. As a result of this process, the Company has in the past and may in the future seek to restructure indebtedness, raise additional capital, or take such other steps to increase or manage its liquidity and financial resources. Capital Investments and Commitments In 1995, the Company continued to upgrade existing facilities and to expand capacity to meet changing market demands. Total capital expenditures for 1995 were $115.8 million. Capital expenditures related to continuing operations were $98.3 million, bringing the total for the past three years to $276 million. The capital investment program in 1996 will continue to focus on capacity expansion and market share growth and is expected to exceed 1995 levels. Investments in the form of research and development, quality initiatives, and marketing alliances will also continue in all key product lines. The acquisition of OSi not only adds strategic research and development capabilities along with a full line of silicone surfactants, amine catalysts, organofunctional silanes and specialty fluids, but provides the base for acceleration of growth of the Company's existing 3 products in Asia, South America and Eastern Europe. During 1996, the Company will be committed to the successful integration of this acquisition. The Company is committed to developing business opportunities in Asia and is currently focusing on both the immediate and longer term actions that are necessary to expand and leverage new and existing business in this region of the world. The strategy includes both capital investment and new marketing initiatives. In early 1996, the Company acquired a resins manufacturing plant in Singapore. The Company presently anticipates that additional capital investments may be in the form of joint ventures. For non-capital initiatives, cooperative marketing and technical agreements will be pursued. In addition, to effectively service the expanding customer base in Asia, the Company plans on establishing a local technical support center. This service center will house lab personnel and technical service representatives whose function will be to address the specific needs of customers in that part of the world. The evaluation and development of specific businesses or opportunities will take place throughout 1996 with the focus on: surfactants for agriculture, personal care, and laundry products; polyurethane systems for footwear manufacturers; and lubricants for plastics including polyethylene, polypropylene, and film. Environmental Matters The Company operates in an industry subject to extensive regulations related to the protection of the environment and the health and safety of employees and others. Domestic operations are subject to a myriad of environmental statutes and regulations at the federal, state, and local levels. The Company's international production facilities operate in an environmental regulatory framework in which governmental authorities typically are granted broad discretionary powers which require manufacturing facilities to obtain operating permits to continue operations. The Company believes that expenditures for compliance with these statutes, regulations, and permits will continue to have a significant impact upon the conduct of its business. The trend toward greater environmental awareness and more stringent environmental regulations is likely to continue, and while the Company cannot accurately predict how this will affect future operations and earnings, the Company does not believe its costs will significantly vary from those of its competitors. Consistent with the Company's concern for the protection and improvement of the environment worldwide, the Company continually monitors the environmental impact of past and present operating practices in light of changing environmental standards. Where remedial action is indicated, the Company assesses the probability and scope of potential remediation costs. To determine the appropriate reserve amounts, management reviews on a quarterly basis, currently available information pertaining to each environmental site. Inherent in this process are considerable uncertainties which affect the Company's ability to estimate the ultimate costs of remediation. Such uncertainties include the nature and extent of contamination at each site, evolving governmental standards regarding remediation requirements, changes in environmental regulations, widely varying costs of alternative cleanup methods, the number and financial condition of other potentially responsible parties at multi-party sites, innovations in remediation and restoration technology, and the identification of additional environmental sites. 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 the Company's consolidated financial position, cash flow, or liquidity. The Company has numerous insurance policies which it believes provide coverage for certain environmental liabilities. The Company has settled litigation during 1995 with most of its insurers concerning the applicability and amount of insurance coverage for environmental costs under these policies. The results of continuing operations for 1995 include a pre-tax gain of $52.9 million, as a result of settlements with certain of the Company's insurers, net of related legal and other costs. Additional settlements are expected during 1996. Environmental reserves related to continuing operations at December 31, 1995 amounted to $83.6 million, which reflects management's assessment of future remediation costs in light of currently available information. Reme-diation expenditures charged to those reserves were $13.7 million in 1995 and include expenditures currently mandated as well as those not required by any regulatory authority or third party. The Company anticipates 1996 expenditures to approximate $24 million. Capital expenditures for air, water, and solid waste control equipment and facilities related to continuing operations amounted to $8.9 million in 1995. The Company 4 estimates that approximately $20 million will be expended on similar capital projects in 1996. The Company 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 maintained at current levels. Such costs related to continuing operations amounted to $28.2 million in 1995. Contingencies The Company has been notified that it is a potentially responsible party ("PRP") or a defendant in a number of governmental (federal, state, and local) and private actions associated with the release, or suspected release, of contaminants into the environment. As a PRP, the Company may be liable for costs associated with the investigation and remediation of environmental contamination, as well as various penalties, and damages to persons, property, and natural resources. The Company is not a party to any legal proceedings or environmental matters which it believes will have a material adverse effect on its consolidated financial position. It is possible, however, that future results of operations for any particular quarterly or annual period, could be materially affected by such legal proceedings or environmental matters. However, the Company does not expect the results of such proceedings or environmental matters to materially affect its competitive position. Discontinued Operations On September 11, 1995, the Company announced its intention to divest its Lubricants Group (see Note 16 of Notes to Financial Statements). Results of Continuing Operations The Company reported income from continuing operations in 1995 of $100.3 million compared to $94.4 million in 1994 and $25.1 million in 1993. The three year period included several non-recurring items which affect comparison. The following table shows the effect of these non-recurring items on earnings. The pre-tax amounts of these items were included in the "Other expense (income) - net" caption of the Consolidated Statements of Income. Included in 1995 income from continuing operations were $34.4 million of settlements, net of legal and other costs, with certain of the Company's insurance carriers arising out of litigation concerning coverage for certain environmental expenditures. A $22 million provision for consolidation of plants, which will enable the Company to serve its customers more effectively at larger and more effi-cient facilities, was also recorded in 1995. Additionally, a $9 million provision for environmental remediation and compliance, which reflects the Company's assessment of its costs to comply with regulatory requirements and standards, was recorded in the current year. A provision for litigation of $2.8 million was also included in 1995 results. In 1995, the Company completed the divestiture of its Diversified Products Segment and recorded a $33.3 million gain on the disposition of the Carbon Black and Battery Parts businesses.
==================================================================================================================================== (millions of dollars except per share data) 1995 1994 1993 - -------------------------------------------------- ------------------------- ------------------------- -------------------------- Pre-Tax Income Pre-Tax Income Pre-Tax Income Income Income Per Share Income Income Per Share Income Income Per Share - -------------------------------------------------- ------ ------ --------- ------ ------ --------- ------ ------ ---------- Continuing operations excluding non-recurring items $108.6 $66.4 $1.19 $140.4 $91.3 $1.64 $110.6 $70.1 $1.37 Settlements with certain of the Company's insurers 52.9 34.4 .60 - - - - - - Provision for plant consolidation (33.8) (22.0) (.39) - - - - - - Provision for environmental remediation and compliance (13.8) (9.0) (.16) - - - (29.1) (18.9) (.34) Provision for litigation (4.3) (2.8) (.05) - - - - - - Provision for disposition of a business - - - - - - (19.2) (12.4) (.23) Provision for work force reduction - - - - - - (12.2) (7.9) (.14) Gain on disposition of operations of subsidiaries 51.2 33.3 .59 4.8 3.1 .06 8.8 5.7 .11 Provision for loss on sublease of office facilities - - - - - - (9.2) (6.1) (.11) Other - net - - - - - - (8.4) (5.4) (.10) - ------------------------------------------------------------------------------------------------------------------------------------ Continuing operations $160.8 $100.3 $1.78 $145.2 $94.4 $1.70 $41.3 $25.1 $ .56 ====================================================================================================================================
5 Income from continuing operations for 1994 included a $3.1 million gain on the disposition of the Allied-Kelite operations. Income from continuing operations for 1993 included an $18.9 million environmental provision for remediation and compliance costs the Company expected to incur to comply with regulatory requirements and standards. Following its strategy to emphasize core businesses and divest itself of others, the Company recorded a provision of $12.4 million in 1993 for the planned divestiture of the Battery Parts business. Additionally, the Company established a $7.9 million provision for a reduction in its worldwide workforce to further realign and reorganize operations. Pursuing its divestiture strategy, the Company sold the operations of its Chemprene subsidiary in 1993 for a gain of $5.7 million. 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, was also recorded in 1993. 1995 vs. 1994 Consolidated 1995 net sales from continuing operations rose $143.7 million or 8 percent compared to 1994 levels. The inclusion of OSi's fourth quarter sales of $101.3 million offset an $80.6 million decline in sales resulting from the disposition of the Diversified Products Segment. Of the remaining increase, 55 percent was attributed to higher sales prices and product mix and 40 percent to favorable currency exchange rates, while 5 percent resulted from increased volume. Income from continuing operations, excluding non-recurring charges and gains, was $66.4 million in 1995, compared to $91.3 million in 1994. Although contributing $7.4 million to operating income, OSi, acquired in the fourth quarter of 1995, generated a loss of $3.6 million, net of an income tax benefit, goodwill amortization, and associated financing costs. Excluding OSi Specialties' fourth quarter results, an overall erosion in gross profit margins of 2 percent accounted for approximately 85 percent of the current year's decline in income from continuing operations, excluding non-recurring items. Each of the Company's segments reported 1995 earnings that were below 1994 levels, primarily as a result of the inability to fully recoup higher raw material feedstock costs through increased sales prices. Also adversely affecting 1995 results was a 2.6 percent increase in the effective tax rate principally attributable to a greater proportion of earnings in higher tax jurisdictions and an increase in non-deductible goodwill amortization. Adding to earnings, interest income rose during 1995 as a result of higher interest rates and the investment of additional funds generated from the sale of the Diversified Products businesses. Remaining changes in income and expense categories appearing on the Consolidated Statements of Income were primarily attributable to the OSi Specialties acquisition. Effective January 1, 1995, the Company changed its method of inventory valuation under dollar value LIFO from LIFO double extension to LIFO link chain. Management believes that the LIFO link chain method is preferable because it is the predominate method used in the industry and will mitigate the dollar impact of volume fluctuations on results of operations. It is not possible to determine the effect of the change on retained earnings as of January 1, 1995 or on income as previously reported for the years ended December 31, 1994 or 1993. This change did not have a material effect on 1995 net income. The Company adopted Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," effective January 1, 1995. SFAS No. 121 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. SFAS No. 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The adoption of SFAS No. 121 did not have a material impact on the Company's financial position or results of operations other than its effect on the provision for plant consolidation (see Note 9 of Notes to Financial Statements). Segment Information 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 not directly attributable to a specific segment. The Petroleum Segment for all periods presented consists solely of the Petroleum Specialties Group. This was a result of the Company's decision to sell the Lubricants Group, the operating results of which have been recorded as discontinued operations. A comparison of operating income from continuing operations for 1995 and 1994 is affected by the inclusion of non-recurring items in both periods. Operating income from continuing operations, excluding non-recurring items, declined to $161.9 million in 1995, from $178 6 million in 1994. The Company's international operations accounted for a 4 percent greater share of total net sales and operating income from continuing operations, excluding non-recurring items, in 1995 than in 1994. These operations accounted for 40 percent of net sales and 44 percent of operating income from continuing operations, excluding non-recurring items, in 1995. The acquisition of OSi Specialties and the disposition of the remaining Diversified Products Segment's businesses had the effect of increasing the Company's international operations' percentage share of total net sales, while decreasing their share of operating income from continuing operations, excluding non-recurring items. Chemical Segment Chemical Segment 1995 net sales of $1.4 billion were $105 million, or 8 percent, over the prior year. Higher sales prices accounted for 60 percent of the increase with the balance due to favorable currency translations, while volume was unchanged. Although each of the segment's businesses reported unit sales prices that surpassed 1994 levels, competitive pricing pressures precluded increases sufficient to cover higher raw material feedstock costs. The segment's 1995 operating income included a non-recurring $46 million charge related to plant consolidation, environmental remediation and litigation. Excluding this non-recurring charge, operating income of $107.4 million was $14.7 million, or 12 percent, lower than 1994. Each of the segment's three business groups reported comparable percentage declines in operating earnings. The Oleo/Surfactants Group, the largest contributor to segment sales and operating income, experienced a year in which product margins eroded as a result of the inability to fully recover increased feedstock costs due to competitive pricing restraints. This was most evident in the group's line of products that reach the consumer market, where shipment volume was also down 12 percent from the prior year. Additionally, the Oleo/Surfactants Group's 1995 earnings were adversely affected by the need to purchase intermediate products as a result of equipment renovations. The renovations have been completed and production returned to normal levels during the fourth quarter. An increase in reserves for insurance claims accounted for a substantial portion of the Polymer Additives Group's decline in operating income. The group's earnings were also adversely affected by a downturn in the housing and construction markets, and lower product margins in specific lines of business. Shipment volume was down 4 percent in the Vinyl Business Unit, reflecting fewer housing and construction starts. Tin stabilizer margins were off from the prior year due to higher raw material costs, while the substitution of environmentally friendly barium and zinc based stabilizers for those containing cadmium resulted in a further erosion of margins. The shift was a result of a June 1994 decision to cease domestic production of cadmium based stabilizers and exit the U.S. market. With approximately 80 percent of the Resins Group's business originating in Europe, the slowdown in the European economy experienced during the latter part of the year had a great influence on the group's reported 1995 fourth quarter results. The poor fourth quarter caused full year operating earnings to be below the prior year. A decline in product margins also contributed to the lower earnings. Each of the group's business units reported increases in raw material costs that resulted in margins that were below the prior year. Additionally, increased effluent control costs attributable to a shared, non-owned wastewater treating plant in Germany adversely affected 1995 operating results. OSi Specialties The Company acquired OSi Specialties, a high margin leading global producer of organofunctional silane and other specialty silicone derivative products, on October 19, 1995. The newly acquired business, which traditionally experiences a "soft" fourth quarter, added $101.3 million to sales and $7.4 million to operating income, which included the amortization of intangibles generated by the acquisition (see Note 2 of Notes to Financial Statements for further information on this acquisition). Petroleum Segment Net sales for the Petroleum Segment of $394.8 million in 1995 exceeded the previous year by $19.2 million, or 5 percent. One-half of the increase in sales was attributable to favorable currency rates of exchange, particularly against the Dutch guilder, with the bulk of the balance resulting from higher sales prices and product mix. Rising 1 percent, shipment volume was comparable with the prior year. Petroleum Segment operating income for 1995 was adversely affected by a charge for plant consolidation and environmental remediation of $2.2 million. Operating income, excluding this non-recurring charge, was $35.6 million, a decline of $7.8 million compared to 1994. The segment was impacted by higher feedstock costs throughout 1995 due to periodic shortages and market conditions. The scarcity of key feedstocks created the need to purchase higher priced, sometimes lower 7 yield, alternatives and resulted in lost sales. Lower than anticipated production volume, and additional costs attributable to the start-up of the group's recently completed Extracted Sulfonic Acid Unit in the U.S. and Calcium Sulfonates Plant in Holland, also adversely affected 1995 operating results. Diversified Products Segment The sale of the Carbon Black and Battery Parts businesses during the first half of 1995 completed the divestiture of the Diversified Products Segment. Reported segment operating earnings for 1995 and 1994 included gains of $51.2 million and $4.8 million, respectively, attributable to the sale of the segment's businesses. 1994 vs. 1993 Excluding non-recurring items, income from continuing operations totaled $91.3 million in 1994, compared to $70.1 million in 1993. Record sales, which were 4 percent above the previous year, and higher gross margins were responsible for approximately 85 percent of the $21.2 million increase in income from continuing operations, before non-recurring items. Despite the disposition of certain operations in late 1993 and 1994, sales rose on the strength of a 7 percent increase in shipment volume. Although increases in raw material feedstock costs caused gross margins to deteriorate during the second half of 1994, cost saving initiatives and lower feedstock costs earlier in the year enabled full year margins to be 1 percent ahead of 1993. Chiefly the result of the Company's redemption of its 5.50% Convertible Subordinated Debentures, lower net interest costs also contributed to the higher income. A comparison of 1994 and 1993 selling and administrative expenses shows an increase of 2 percent, however, through careful monitoring the Company was able to reduce these expenses as a percentage of sales. The Company's 1994 operating income of $182.8 million represents an increase of $62.6 million over 1993. Comparison of these earnings for each of the Company's industry segments is affected by non-recurring items. Exclusive of these items, operating income rose to $178 million in 1994 from $159.7 million in 1993. The contribution of the Company's international operations to net sales and operating income, exclusive of non-recurring items, increased in 1994. Continued emphasis on global growth and an overall improvement in the European economy led to a change in geographic composition. International operations accounted for 36 percent of the Company's net sales in 1994 compared to 34 percent in 1993 and its contribution to operating income, excluding non-recurring items, increased 7 percent to a 40 percent share. Chemical Segment Net sales of $1.3 billion in 1994 were $105 million greater than the previous year. Each of the segment's business groups participated in an 8 percent increase in shipment volume, while prices remained stable. Growth in all but a few markets, both domestically and abroad, was achieved in 1994. Improvements in both the domes-tic and European economies, and aggressive marketing translated into higher sales volume. Operating income for 1993 was adversely affected by a $5.6 million provision for environmental remediation and compliance. Excluding this non-recurring charge, 1994 operating income rose $11.6 million, or 11 percent, over 1993. The segment's Polymer Additives Group registered the largest increase, accounting for two-thirds of the segment's total improvement. The group benefited from a strong domestic economy, evidenced by a rise in the construction industry, and a more robust European economy. All major business units contributed to the group's 23 percent improvement in operating income. A 9 percent increase in net sales attributable to greater domestic shipment volume, the introduction of a new antioxidant product and a favorable European sales product mix led to the group's higher earnings. Process improvements, the most notable involving the production of amides, also contributed to the group's strong performance. The International/Europe Group's operating income rose approximately 15 percent, accounting for the remaining portion of the segment's favorable operating results. The overall strength of the European economy led to greater sales and improved earnings for each of the group's major business units. An increase in shipment volume of approximately 10 percent, a favorable product sales mix in key businesses, cost saving programs, and plant efficiencies proved to be a successful combination. Although the Oleo/Surfactants Group increased its shipment volume by 9 percent, its operating income remained relatively unchanged. Sales growth was achieved through aggressive marketing, new product introductions in the Oilfield and Laundry Products business units, and an increase in overseas shipments. However, significant increases in raw material costs in the second half of 1994, which the group was unable to fully recover through higher sales prices due to competitive pricing pressures, offset the increase in sales. 8 Petroleum Segment Segment 1994 net sales of $375.6 million were $10.4 million ahead of 1993. The segment reported an increase in volume of approximately 4 percent which offset the effect of a 1 percent drop in prices. Non-recurring charges of $15.2 million for environmental matters severely affected 1993 operating income. Excluding these charges, 1994 operating income of $43.4 million was $3.6 million greater than 1993. The 9 percent increase in operating income was primarily due to an improvement in material margins attributable to a decline in raw material feedstock costs that outpaced a corresponding decrease in sales prices. A favorable product sales mix, higher sales volume, and efficiencies in manufacturing techniques also contributed to the segment's favorable results. Diversified Products Segment Reported segment operating income for 1994 included a non-recurring gain of $4.8 million from the sale of the Allied-Kelite operations, while 1993 earnings included a net charge of $18.7 million covering an expected loss on the disposition of the Battery Parts business and an environmental remediation and compliance provision, partially offset by the gain on the sale of the operations of Chemprene. Net sales and operating income for the segment's businesses which were not sold in 1994 or 1993 (Concarb and Battery Parts) rose $13 million and $7.4 million, respectively. A 15 percent increase in carbon black net sales, spurred in part by greater automotive market demand in both the tire and non-tire sectors, accounted for approximately 75 percent of the higher net sales and operating earnings. The remaining increase was attributable to an increase in demand for battery components due to the severe winter of 1994 and understocked customer inventory levels. Outlook The current year has been one of transition in which the Company has refocused its efforts on becoming a leading global specialty chemical company. The Company believes it is well positioned to become more competitive in the global marketplace as a result of the recently announced plant consolidation program, which may be followed by further consolidation in 1997 and 1998; a 1995 reduction of staff and operations personnel, resulting in annual payroll savings of $5 million commencing in 1996; the completion of the divestiture of the Diversified Products Segment in 1995; the announcement of the Company's intention to sell the Lubricants Group, which is expected to be completed in mid-1996; and the fourth quarter 1995 acquisition of OSi Specialties. The Company plans to add to its earnings by leveraging its expanded presence in targeted high growth regions of Europe, South America, and Asia; through improved product margins; and continued cost savings initiatives. Escalating raw material costs weighed heavily on 1995 results. Preliminary indications suggest that relief is forthcoming in 1996 and the Company believes it will realize additional savings in the procurement area through the reduction of carriers and the consolidation of regional purchasing activities. 9 Report of Ernst & Young LLP, 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, 1995 and 1994, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Witco Corporation and Subsidiary Companies at December 31, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in Note 1 to the financial statements, in 1995 the Company changed its method of accounting for inventory valuation under dollar value LIFO from LIFO double extension to LIFO link chain. As discussed in Note 1 to the financial statements, in 1995 the Company adopted the provisions of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." ERNST & YOUNG LLP Stamford, Connecticut January 29, 1996, except for Note 7, as to which the date is February 12, 1996 F-1 Witco Corporation and Subsidiary Companies Consolidated Balance Sheets
(in thousands except per share data) ============================================================================================== December 31 1995 1994 - ------------------------------------------------------------------- ---------- --------- Assets Current Assets Cash and cash equivalents $ 143,994 $ 197,173 Accounts and notes receivable, less allowances of $7,104 and $8,863 406,486 395,547 Inventories 322,898 258,372 Prepaid and other current assets 70,667 45,737 - ------------------------------------------------------------------- ---------- ---------- Total Current Assets 944,045 896,829 - ------------------------------------------------------------------- ---------- ---------- Property, Plant, and Equipment, less accumulated depreciation of $586,595 and $696,043 811,667 719,966 Goodwill and Other Intangible Assets, less accumulated amortization of $62,450 and $43,760 728,124 191,422 Deferred Costs and Other Assets 118,182 111,128 Net Assets of Discontinued Operations 170,426 - - ------------------------------------------------------------------- ---------- ---------- Total Assets $2,772,444 $1,919,345 - ------------------------------------------------------------------- ---------- ----------- - ------------------------------------------------------------------- ---------- ----------- Liabilities and Shareholders' Equity Current Liabilities Notes and loans payable $ 309,171 $ 1,795 Accounts payable and other current liabilities 385,294 343,414 - ------------------------------------------------------------------- ---------- ---------- Total Current Liabilities 694,465 345,209 - ------------------------------------------------------------------- ---------- ---------- Long-term Debt 683,830 346,545 Deferred Federal and Foreign Income Taxes 87,532 81,354 Deferred Credits and Other Liabilities 302,500 206,231 Shareholders' Equity $2.65 Cumulative Convertible Preferred Stock, par value $1 per share Authorized - 14 shares Issued and outstanding - 7 shares 7 7 Common stock, par value $5 per share Authorized - 100,000 shares Issued - 56,435 shares and 56,312 shares 282,173 281,561 Capital in excess of par value 131,076 127,643 Equity adjustments: Foreign currency translation 17,222 (1,481) Pensions (4,898) (2,446) Retained earnings 578,537 537,199 Treasury stock, at cost - 165 shares - (2,477) - ------------------------------------------------------------------- ---------- ---------- Total Shareholders' Equity 1,004,117 940,006 - ------------------------------------------------------------------- ---------- ---------- Total Liabilities and Shareholders' Equity $2,772,444 $1,919,345 =============================================================================================
See accompanying notes. F-2 Witco Corporation and Subsidiary Companies Consolidated Statements of Income
(in thousands of dollars except per share data) ========================================================================================================= For the years ended December 31 1995 1994 1993 - ----------------------------------------------------------------- ---------- ---------- ---------- Revenues Net sales $1,985,077 $1,841,414 $1,763,086 Interest 15,104 10,032 8,679 - ----------------------------------------------------------------- ---------- ---------- ---------- Total Revenues 2,000,181 1,851,446 1,771,765 - ----------------------------------------------------------------- ---------- ---------- ---------- Costs and Expenses Cost of goods sold (exclusive of depreciation and amortization) 1,548,943 1,412,079 1,363,246 Selling and administrative expenses 199,452 185,576 181,173 Depreciation and amortization 102,571 88,663 86,480 Interest 43,689 29,674 34,984 Other expense (income) - net (55,278) (9,708) 64,585 - ----------------------------------------------------------------- ---------- ---------- ---------- Total Costs and Expenses 1,839,377 1,706,284 1,730,468 - ----------------------------------------------------------------- ---------- ---------- ---------- Income from continuing operations before Federal and Foreign Income Taxes 160,804 145,162 41,297 Federal and Foreign Income Taxes 60,458 50,742 16,165 - ----------------------------------------------------------------- ---------- ---------- ---------- Income from continuing operations 100,346 94,420 25,132 Income (loss) from discontinued operations - net of income taxes of $2,610, $6,960, and $(2,597) 4,099 12,647 (5,369) - ----------------------------------------------------------------- ---------- ---------- ---------- Net Income $ 104,445 $ 107,067 $ 19,763 - ----------------------------------------------------------------- ---------- ---------- ---------- - ----------------------------------------------------------------- ---------- ---------- ---------- Net Income Per Common Share: Primary Income from continuing operations $1.78 $1.70 $.56 Income (loss) from discontinued operations - net of income taxes .07 .22 (.10) - ----------------------------------------------------------------- ---------- ---------- ---------- Net Income Per Common Share: Primary $1.85 $1.92 $.46 - ----------------------------------------------------------------- ---------- ---------- ---------- Net Income Per Common Share: Fully Diluted Income from continuing operations $1.77 $1.69 $.56 Income (loss) from discontinued operations - net of income taxes .07 .22 (.10) - ----------------------------------------------------------------- ---------- ---------- ---------- Net Income Per Common Share: Fully Diluted $1.84 $1.91 $.46 ========================================================================================================
See accompanying notes. F-3 Witco Corporation and Subsidiary Companies Consolidated Statements of Cash Flows
(in thousands of dollars) ============================================================================================================================ For the years ended December 31 1995 1994 1993 - ---------------------------------------------------------------------- ---------- ---------- ---------- Operating Activities Net income $ 104,445 $ 107,067 $ 19,763 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 119,571 105,120 102,502 Provision (benefit) for deferred income taxes (6,884) 17,666 (24,639) Pension cost 10,130 12,378 1,752 Gain on disposition of operations of subsidiaries (51,183) (4,820) (8,810) Provision for plant consolidation and other matters 43,342 - - Provision for environmental remediation and compliance 15,348 - 52,810 Provision for work force reduction and other matters - - 29,784 Provision for disposition of a business - - 19,200 Changes in operating assets and liabilities: Accounts and notes receivable (26,609) (51,639) (26,101) Inventories (12,849) (23,750) 13,490 Prepaid and other current assets 9,866 (3,791) 513 Accounts payable and other current liabilities (41,709) (5,492) (6,908) Other (28,548) (5,007) (1,958) - ---------------------------------------------------------------------- ---------- ---------- ---------- Net Cash Provided by Operating Activities 134,920 147,732 171,398 - ---------------------------------------------------------------------- ---------- ---------- ---------- Investing Activities Expenditures for property, plant, and equipment (115,845) (107,438) (103,689) Proceeds from dispositions 146,026 24,194 24,160 Acquisitions of businesses, net of cash acquired (481,431) - (3,691) Other (2,443) 1,732 (4,568) - ---------------------------------------------------------------------- ---------- ---------- ---------- Net Cash Used in Investing Activities (453,693) (81,512) (87,788) - ---------------------------------------------------------------------- ---------- ---------- ---------- Financing Activities Dividends paid (63,026) (55,013) (44,679) Payments on borrowings (367,541) (8,398) Proceeds from exercise of stock options 6,523 2,734 5,236 Proceeds from borrowings 681,551 954 374,422 Proceeds from issuance of common stock - - 141,655 Other - (63) (3,499) - ---------------------------------------------------------------------- ---------- ---------- ---------- Net Cash Provided by (Used in) Financing Activities 257,507 (59,786) (28,837) - ---------------------------------------------------------------------- ---------- ---------- ---------- Effects of Exchange Rate Changes on Cash and Cash Equivalents 8,087 7,689 (6,170) - ---------------------------------------------------------------------- ---------- ---------- ---------- Increase (Decrease) in Cash and Cash Equivalents (53,179) 14,123 48,603 - ---------------------------------------------------------------------- ---------- ---------- ---------- Cash and Cash Equivalents at Beginning of Year 197,173 183,050 134,447 - ---------------------------------------------------------------------- ---------- ---------- ---------- Cash and Cash Equivalents at End of Year $ 143,994 $ 197,173 $ 183,050 ============================================================================================================================
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 Stock Stock Par Value Translation Pensions Earnings at Cost Total - --------------------------- --------- ------ ---------- ----------- -------- -------- -------- ---------- Balance at December 31, 1992 $ 9 $ 112,670 $ 5,077 $ (6,489) $(3,344) $515,566 $ (9,193) $ 614,296 Net Income 19,763 19,763 Cash Dividends Declared: Preferred stock (24) (24) Common stock (47,064) (47,064) Common Stock Issued: Two-for-one stock split 127,045 (127,176) (131) Public offering 14,374 127,281 141,655 Employee plans 1,207 4,029 5,236 Conversions (266) 388 122 Equity Adjustments (17,234) (3,204) (20,438) - --------------------------- --- --------- --------- -------- ------- -------- -------- ---------- Balance at December 31, 1993 9 254,089 6,123 (23,723) (6,548) 488,241 (4,776) 713,415 Net Income 107,067 107,067 Cash Dividends Declared: Preferred stock (20) (20) Common stock (58,089) (58,089) Common Stock Issued: Conversion of convertible debentures 27,472 121,037 148,509 Employee plans 739 1,995 2,734 Conversions (2) (256) 304 46 Equity Adjustments 22,242 4,102 26,344 - --------------------------- --- --------- --------- -------- ------- -------- -------- ---------- Balance at December 31, 1994 7 281,561 127,643 (1,481) (2,446) 537,199 (2,477) 940,006 Net Income 104,445 104,445 Cash Dividends Declared: Preferred stock (18) (18) Common stock (63,089) (63,089) Common Stock Issued: Employee plans 607 3,535 2,380 6,522 Conversions 5 (102) 97 - Equity Adjustments 18,703 (2,452) 16,251 - --------------------------- --- --------- --------- -------- ------- -------- -------- ---------- Balance at December 31, 1995 $ 7 $ 282,173 $ 131,076 $ 17,222 $(4,898) $578,537 $ - $1,004,117 ==========================================================================================================================
See accompanying notes. F-5 Witco Corporation and Subsidiary Companies Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies Organization: Witco Corporation is a worldwide manufacturer of quality specialty chemical, silicone and petroleum products. The Company's products are used primarily as intermediates by other manufacturers in industries such as personal care and household products, agricultural, housing and construction, packaging, food and textiles. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 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. Effective January 1, 1995, the Company changed its method of inventory valuation under dollar value LIFO from LIFO double extension to LIFO link chain. Management believes that the LIFO link chain method is preferable because it is the predominate method used in the industry and will mitigate the impact of volume fluctuations on results of operations. The change in accounting method had no material effect on income for the year ended December 31, 1995. It is not possible to determine the effect of the change on retained earnings as of January 1, 1995 or income as previously reported for the years ended December 31, 1994 or 1993. 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. Impairment of Long-Lived Assets: The Company adopted Statement of Financial Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" effective January 1, 1995. SFAS 121 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. SFAS 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The adoption of SFAS No. 121 did not have a material impact on the Company's financial position or results of operations other than its effect on the provision for plant consolidation (see Note 9 of Notes to Financial Statements). 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 being amortized over periods not in excess of forty years. The Company periodically evaluates the carrying value of intangible assets in relation to the operating performance and future cash flows of the underlying businesses. Impairment losses would be recorded in the event of a significant change in the environment in which the business operates or if the expected future cash flows are less than book value. 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 or results of operations. Research and Development Costs: The Company's research and development costs are charged to expense as incurred. These charges to continuing operations amounted to $52,907,000 (1995), $40,717,000 (1994), and $40,308,000 (1993). 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 benefit future operations. Projected costs are accrued when it is probable that a liability has been incurred and the amount can be reasonably estimated. Accruals are recorded at undiscounted amounts without regard to any third party recoveries, and are regularly adjusted as environmental assessments and remediation efforts proceed. Stock Based Compensation: The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant. The Company accounts for stock option grants in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees," and, F-6 Witco Corporation and Subsidiary Companies Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies (continued) accordingly, recognizes no compensation expense for the stock option grants. Income Taxes: The Company accounts for income taxes under SFAS No. 109 "Accounting for Income Taxes." Common Share Data: Net income per common share is based upon net income adjusted for interest (net of tax) on the 5.50% Convertible Subordinated Debentures through March 1994 and the preferred stock dividend requirements. The weighted average number of common shares outstanding during each year includes common stock equivalents, principally shares issuable in connection with the 5.50% Convertible Subordinated Debentures through March 1994 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 - Acquisition and Dispositions On October 19, 1995, the Company acquired OSi Specialties Holding Company and OSi Specialties, Inc. (collectively "OSi") from an investor group led by DLJ Merchant Banking Partners, L.P. in a cash transaction for approximately $486,000,000. OSi manufactures a full line of silicone surfactants, amine catalysts, organofunctional silanes and specialty fluids at key manufacturing facilities in the United States, Belgium, Italy and Brazil. The acquisition was accounted for as a purchase and results of operations have been included in the consolidated financial statements from the date of acquisition. A preliminary allocation of the purchase price resulted in an excess over the estimated fair value of net assets acquired (goodwill) of approximately $514,000,000. This is being amortized on a straight line basis over forty years. 1995 results included net sales of $101,312,000 and a net loss of approximately $3,600,000, or $.06 per common share, net of an income tax benefit, goodwill amortization, and associated financing costs. The pro forma unaudited results of operations for the years ended December 31, 1995 and 1994, assuming the acquisition of OSi had been consummated as of January 1, 1994, are as follows:
================================================================================ (in thousands except per share data) 1995 1994 - -------------------------------------------------- ---------- ---------- Net sales $2,322,216 $2,235,736 - -------------------------------------------------- ---------- ---------- Income from continuing operations $ 101,119 $ 84,547 Income from discontinued operations 4,099 12,647 - -------------------------------------------------- ---------- ---------- Net income $ 105,218 $ 97,194 - -------------------------------------------------- ---------- ---------- Net income per common share - primary Income from continuing operations $ 1.79 $ 1.52 Income from discontinued operations .07 .22 - -------------------------------------------------- ---------- ---------- Net income per common share - primary $ 1.86 $ 1.74 ================================================================================
On September 11, 1995, the Company announced its intention to divest its Lubricants Group. The Board of Directors has approved a plan of disposal with a target date of mid-1996. These operations are reflected as discontinued operations for all periods presented in the Company's income statements and as net assets of discontinued operations in the December 31, 1995 balance sheet. On June 30, 1995, the Company sold the operations of its Continental Carbon subsidiary to China Synthetic Rubber Corporation for $121,900,000, resulting in a gain of $27,073,000, or $.48 per common share. Continental Carbon manufactures carbon black which is used primarily in the tire and rubber industry. On March 24, 1995, the Company sold the operations of its Battery Parts business to Acro Products, Inc. for $24,100,000, resulting in a gain of $6,196,000, or $.11 per common share. Battery Parts manufactures rubber and plastic battery containers, covers and parts and custom injection molded parts. The operating results individually and in the aggregate of the 1995 dispositions were not significant to the consolidated results of operations. In the second quarter of 1994, the Company sold the operations of the metal finishing and metalworking businesses of its Allied-Kelite subsidiary to MacDermid, Incorporated and Metal Lubricants Company, respectively, for $24,200,000 which resulted in a gain of $3,133,000, or $.06 per common share. Allied-Kelite manufactures plating and surface preparation products. The operating results of this subsidiary were not significant to the consolidated results of operations. F-7 Witco Corporation and Subsidiary Companies Notes to Financial Statements Note 3 - Inventories Inventories are classified as follows:
================================================================================ (thousands of dollars) 1995 1994 - -------------------------------------------------- ---------- ---------- Raw materials and supplies $115,231 $ 96,939 Finished goods 207,667 161,433 - -------------------------------------------------- ---------- ---------- $322,898 $258,372 ================================================================================
Work in progress included above is not significant. Inventories valued on a LIFO basis, at December 31, 1995 and 1994, amounted to $118,774,000 and $158,638,000, respectively. Inventories would have been $41,499,000 and $62,077,000 higher than reported at December 31, 1995 and 1994, respectively, if the FIFO method (which approximates current cost) had been used by the Company for all inventories. Note 4 - Property, Plant, and Equipment A summary of property, plant, and equipment follows:
================================================================================ (thousands of dollars) 1995 1994 - -------------------------------------------------- ---------- ---------- Land $ 35,259 $ 32,970 Buildings and improvements 186,904 178,268 Machinery, fixtures, and equipment 1,114,452 1,140,319 Assets under construction 61,647 64,452 - -------------------------------------------------- ---------- ---------- 1,398,262 1,416,009 Less accumulated depreciation 586,595 696,043 - -------------------------------------------------- ---------- ---------- $ 811,667 $ 719,966 ================================================================================
Depreciation expense, including amortization of assets under capital lease obligations, from continuing operations amounted to $81,838,000 (1995), $71,830,000 (1994), and $67,930,000 (1993). At December 31, 1995, buildings and improvements included approximately $17,000,000 related to an office/laboratory facility under a capital lease. Note 5 - Goodwill and Other Intangible Assets Goodwill and other intangible assets consist of the following:
================================================================================ (thousands of dollars) 1995 1994 - -------------------------------------------------- ---------- ---------- Goodwill $666,880 $147,662 Patents and licenses 58,561 29,798 Other 65,133 57,722 - -------------------------------------------------- ---------- ---------- 790,574 235,182 Less accumulated amortization 62,450 43,760 - -------------------------------------------------- ---------- ---------- $728,124 $191,422 ================================================================================
Amortization expense from continuing operations amounted to $20,733,000 (1995), $16,833,000 (1994), and $18,550,000 (1993). F-8 Witco Corporation and Subsidiary Companies Notes to Financial Statements Note 6 - Accounts Payable and Other Current Liabilities Components of accounts payable and other current liabilities consist of the following:
================================================================================ (thousands of dollars) 1995 1994 - -------------------------------------------------- ---------- ---------- Trade accounts payable $166,688 $139,906 Other accruals 126,099 67,839 Payroll related liabilities 54,015 53,286 Reserves for environmental remediation and compliance 23,597 33,982 Income taxes 12,272 20,448 Reserve for disposition of a business - 19,109 Reserve for consolidation of offices 2,623 8,844 - -------------------------------------------------- ---------- ---------- $385,294 $343,414 ================================================================================
Note 7 - Indebtedness On October 18, 1995, the Company entered into a one year credit agreement totaling $675,000,000 with a consortium of banks for the purpose of financing the OSi acquisition and to repay OSi's 11.50% Senior Secured Discount Debentures due 2004 and OSi Specialties' 9.25% Senior Subordinated Notes due 2003. The Company had $605,000,000 of bank loans outstanding under the credit agreement as of December 31, 1995, of which $305,000,000 is included in the notes and loans payable caption of the Company's balance sheet. The interest rate at December 31, 1995 was approximately 6.1%. The Company plans to repay the short-term portion of the bank loan with proceeds from the sale of the Lubricants Group, cash flow from operations or additional long-term financing. On February 12, 1996, the Company issued $300,000,000 in two equal debt offerings of 6.125% Notes due 2006 and 6.875% Debentures due 2026. These borrowings were used to refinance a portion of the credit agreement utilized by the Company at December 31, 1995. Immediately thereafter, the availability under the credit agreement, as amended, was reduced to $375,000,000. Following is a summary of long-term debt:
================================================================================ (thousands of dollars) 1995 1994 - -------------------------------------------------- ---------- ---------- Short-term bank loan to be refinanced $300,000 $ - 6.60% Notes due 2003 165,000 165,000 7.75% Debentures due 2023 110,000 110,000 7.325% Notes due 1998 49,210 45,171 6.47% Bank Loan due 2000 21,838 - Capital Lease Obligation 17,822 - 5.85% Pollution Control Revenue Bonds due 2023 10,000 10,000 Industrial Development Revenue Bond due 2014 8,500 8,500 Other 3,945 9,559 - -------------------------------------------------- ---------- ---------- 686,315 348,230 Less amounts included in notes and loans payable 2,485 1,685 - -------------------------------------------------- ---------- ---------- $683,830 $346,545 ================================================================================
The Company has arrangements with various banks for lines of credit for its international subsidiaries aggregating $50,872,000 of which $3,773,000 was utilized at December 31, 1995. The weighted average interest rates on international short-term borrowings outstanding were 6.36% (1995) and 6.50% (1994). Principal maturities of long-term debt including capital lease obligations through the year 2000 at December 31, 1995 are $2,485,000 (1996), $1,400,000 (1997), $50,810,000 (1998), $1,700,000 (1999), and $23,838,000 (2000). F-9 Witco Corporation and Subsidiary Companies Notes to Financial Statements Note 7 - Indebtedness (continued) Following is a summary of interest from continuing operations:
================================================================================ (thousands of dollars) 1995 1994 1993 - ------------------------------------------------ ------- ------- ------- Interest expense $43,689 $29,674 $34,984 Capitalized interest 1,429 2,214 1,923 - ------------------------------------------------ ------- ------- ------- Total interest incurred $45,118 $31,888 $36,907 - ------------------------------------------------ ------- ------- ------- Total interest payments $47,016 $34,190 $30,098 ================================================================================
Note 8 - Shareholders' Equity On March 2, 1995, the Board of Directors unanimously approved a Shareholder Rights Plan. The Plan was implemented by the issuance of one preferred stock purchase right for each share of common stock outstanding at the close of business on March 2, 1995, or issued thereafter until the rights become exercisable. Each right will entitle the holder in certain events to purchase one-one thousandth of a share of participating preferred stock at a purchase price of $110. Each one-one thousandth of a share of participating preferred stock is intended to represent the economic equivalent of one share of common stock. Under the Shareholder Rights Plan, 300,000 shares of Series A participating cumulative preferred stock without par value have been authorized. The rights currently are not exercisable. If a person or group acquires more than 15% of the outstanding common stock, or at the Board's election if a tender offer for more than 15% of the outstanding common stock is commenced, or if such person or group acquires the Company in a merger or other business combination, each right (other than those held by the acquiring person) will entitle the holder to purchase stock of the Company or stock or other property of the acquiring person having a value of twice the purchase price. The rights will expire on March 2, 2005, unless redeemed earlier by the Company in whole, but not in part, at a price of $.01 per right. 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, 1995, unissued common stock of the Company was reserved for issuance in accordance with the stock option plans (4,893,000 shares) and the $2.65 Cumulative Convertible Preferred Stock (115,000 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, 1995, expire on various dates through June 2005. At December 31, 1995 and 1994, options for 2,274,000 and 540,000 shares of common stock, respectively, were available for grant. Stock option transactions were as follows:
================================================================================= (thousands of shares) 1995 1994 - -------------------------------- ----------------------- ---------------------- Shares Price Shares Price - -------------------------------- ------ -------------- ------ --------------- Outstanding at beginning of year 2,054 $13.00 - $31.75 1,472 $13.00 - $26.56 Granted 879 $28.00 780 $31.75 Options exercised (300) $13.00 - $26.56 (149) $17.31 - $26.56 Cancelled (14) $26.56 - $31.75 (49) $21.38 - $31.75 - -------------------------------- ------ -------------- ------ --------------- Outstanding at End of Year 2,619 $21.38 - $31.75 2,054 $13.00 - $31.75 - -------------------------------- ------ -------------- ------ --------------- Exercisable at End of Year 808 $21.38 - $31.75 721 $13.00 - $31.75 =================================================================================
F-10 Witco Corporation and Subsidiary Companies Notes to Financial Statements Note 8 - Shareholders' Equity (continued) 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 $1.12 (1995), $1.06 (1994), and $.96 (1993). Common and preferred stock transactions were as follows:
================================================================================ (thousands of shares) 1995 1994 1993 - ------------------------------------------------ ------ ------ ------- Convertible Preferred Stock Outstanding at beginning of year 7 9 9 Conversions - (2) - - ------------------------------------------------ ------ ------ ------- Outstanding at End of Year 7 7 9 - ------------------------------------------------ ------ ------ ------- Common Stock Issued at beginning of year 56,312 50,818 22,534 Net shares issued under employee plans 122 - - Conversions 1 - - Conversion of convertible debentures - 5,494 2,875 Two-for-one stock split - - 25,409 - ------------------------------------------------ ------ ------ ------- Issued at End of Year 56,435 56,312 50,818 - ------------------------------------------------ ------ ------ ------- Treasury Stock In treasury at beginning of year 165 318 306 Net shares issued under employee plans (159) (133) (149) Conversions (6) (20) (22) Two-for-one stock split - - 183 - ------------------------------------------------ ------ ------ ------- In Treasury at End of Year - 165 318 ================================================================================
Note 9 - Other Expense (Income) - Net The components of other expense (income) - net from continuing operations are as follows:
============================================================================================= (thousands of dollars) 1995 1994 1993 - ----------------------------------------------------- -------- ------- -------- Settlements with certain of the company's insurers $(52,887) $ - $ - Gain on disposition of operations of subsidiaries (51,183) - - Provision for plant consolidation 33,842 - - Provision for environmental remediation and compliance 13,800 - 29,110 Provision for disposition of a business - - - 19,200 Provision for work force reduction - - 12,200 Provision for loss on sublease of office facilities - - 9,184 Other - net 1,150 (9,708) (5,109) - ----------------------------------------------------- -------- ------- -------- $(55,278) $(9,708) $64,585 =============================================================================================
The provision for plant consolidation of $33,842,000 is a result of management's decision to consolidate operations at larger and more efficient facilities in order to more effectively service its customers. The shutdown of these facilities (principally within the Chemical Segment) is expected to be completed by 1997. F-11 Witco Corporation and Subsidiary Companies Notes to Financial Statements Note 10 - Federal and Foreign Income Taxes The components of income (loss) from continuing operations before federal and foreign income taxes are:
================================================================================ (thousands of dollars) 1995 1994 1993 - ------------------------------------ -------- -------- -------- Domestic $104,972 $ 86,757 $ (5,813) International 55,832 58,405 47,110 - ------------------------------------ -------- -------- -------- $160,804 $145,162 $ 41,297 ================================================================================
The provision for federal and foreign income taxes (exclusive of tax expense (benefit) from discontinued operations) consists of the following:
================================================================================ (thousands of dollars) 1995 1994 1993 - ------------------------------------ -------- -------- -------- Current Domestic $49,675 $25,115 $ 17,173 International 16,004 9,870 16,462 Deferred Domestic (7,161) 7,824 (15,122) International 2,588 8,916 (1,028) Investment tax credit amortization (648) (983) (1,320) - ------------------------------------ -------- -------- -------- $60,458 $50,742 $ 16,165 ===============================================================================
The effective income tax rate from continuing operations varied from the statutory federal income tax rate as follows:
================================================================================= (thousands of dollars) 1995 1994 1993 - ---------------------------------------------------------- ---- ---- ---- Statutory federal income tax rate 35.0% 35.0% 35.0% Non-deductible goodwill amortization 1.1 .3 1.1 Amortization of investment tax credits (.4) (.6) (4.0) Provision for non-deductible civil penalties - - 2.8 Effect of U.S. tax rate increase on deferred tax balances - - 3.8 Other 1.9 .3 .4 - ---------------------------------------------------------- ---- ---- ---- 37.6% 35.0% 39.1% =================================================================================
The components of deferred federal and foreign income taxes are as follows:
================================================================================ (thousands of dollars) 1995 1994 - ------------------------------------------------------ --------- --------- Current Deferred Tax (Assets) Liabilities: Reserve for environmental remediation and compliance $ (12,208) $ (12,028) Accrual items (20,451) (6,900) Inventories 202 5,476 Other - net (15,328) (10,852) - ------------------------------------------------------ --------- --------- $ (47,785) $ (24,304) - ------------------------------------------------------ --------- --------- - ------------------------------------------------------ --------- --------- Noncurrent Deferred Tax (Assets) Liabilities: Depreciation $ 138,381 $ 105,631 Reserve for environmental remediation and compliance (23,548) (22,142) Net operating loss carryforward (36,059) (8,423) Postretirement benefits other than pensions (14,744) (8,288) Other - net 23,502 14,576 - ------------------------------------------------------ --------- --------- $ 87,532 $ 81,354 ================================================================================
F-12 Witco Corporation and Subsidiary Companies Notes to Financial Statements Note 10 - Federal and Foreign Income Taxes (continued) U.S. federal income taxes have not been provided on approximately $228,600,000 of unremitted earnings of the Company's international subsidiaries at December 31, 1995. 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. At December 31, 1995, the Company has federal net operating losses of approximately $68,900,000 which are subject to certain limitations and expire as follows: $21,700,000 (2008), $32,200,000 (2009), and $15,000,000 (2010). The Company has foreign net operating losses of approximately $18,200,000 with no expiration date. Cash payments for federal and foreign income taxes amounted to $53,715,000 (1995), $40,462,000 (1994), and $29,817,000 (1993). 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. 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 primarily 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. Mortality rate tables used for the domestic plans were principally the 1988 GAM. As of December 31, 1995 and 1994, the liability associated with plans not covered by the Pension Benefit Guarantee Corporation totaled $19,630,000 and $14,810,000, respectively. Net periodic pension cost for those plans totaled $3,000,000 and $3,350,000 for the years ended December 31, 1995 and 1994. Net pension cost (credit) includes the following components:
============================================================================================================================= (thousands of dollars) 1995 1994 1993 - -------------------------------------------------- ----------------------- ----------------------- ----------------------- Domestic International Domestic International Domestic International - -------------------------------------------------- -------- ------------- -------- ------------- -------- ------------- Service cost for benefits earned during the period $ 6,561 $ 3,823 $ 8,284 $ 3,722 $ 6,630 $ 2,985 Interest cost on the projected benefit obligation 24,337 6,478 22,652 5,516 20,707 4,763 Actual (return) loss on plan assets (63,453) (7,486) 7,287 (2,576) (34,119) (2,861) Net amortization and deferral 35,206 4,180 (32,743) (314) 3,177 (61) - -------------------------------------------------- -------- ------- -------- ------- -------- ------- Total Pension Cost (Credit) 2,651 6,995 5,480 6,348 (3,605) 4,826 - -------------------------------------------------- -------- ------- -------- ------- -------- ------- Multi-employer plans 411 - 421 - 441 - Other international plans - 73 - 129 - 90 - -------------------------------------------------- -------- ------- -------- ------- -------- ------- Net Pension Cost (Credit) 3,062 7,068 5,901 6,477 (3,164) 4,916 - -------------------------------------------------- -------- ------- -------- ------- -------- ------- Less Pension Cost (Credit) of Discontinued Operations 15 - 1,009 - (614) - - -------------------------------------------------- -------- ------- -------- ------- -------- ------- Net Pension Cost (Credit) from Continuing Operations $ 3,047 $ 7,068 4,892 $ 6,477 $ (2,550) $ 4,916 =============================================================================================================================
F-13 Witco Corporation and Subsidiary Companies Notes to Financial Statements Note 11 - Pension Plans (continued) The weighted average assumptions used to calculate costs were as follows:
============================================================================================================================= (thousands of dollars) 1995 1994 1993 - -------------------------------------------------- ----------------------- ----------------------- ----------------------- Domestic International Domestic International Domestic International - -------------------------------------------------- -------- ------------- -------- ------------- -------- ------------- Discount rate 8.5% 7.1% 7.0% 6.9% 7.9% 7.8% Rate of increase in compensation level 4.5% 4.3% 4.5% 4.3% 5.0% 4.7% Expected long-term rate of return on assets 10.0% 8.0% 10.0% 8.0% 12.0% 8.9% =============================================================================================================================
Effective January 1, 1994, the pension benefit formula of the Retirement Plan of the Company was amended to a "final average pay offset" formula and several plan provisions were revised. Also effective January 1, 1994, the Company modified the benefit formula of the Supplemental Executive Retirement Plan. These amendments, together with the 1994 actuarial assumption changes, increased the 1994 domestic net periodic pension cost by approximately $9,200,000. The funded status and amounts recognized in the Company's Consolidated Balance Sheets at December 31, 1995 and 1994 for the domestic plans were as follows:
=================================================================================================== (thousands of dollars) 1995 1994 - ------------------------------------------------- ------------------------ ---------------------- Plans in which: Plans in which: - ------------------------------------------------- ------------------------ ---------------------- Assets Accumulated Assets Accumulated Exceed Benefits Exceed Benefits Accumulated Exceed Accumulated Exceed Benefits Assets Benefits Assets - ------------------------------------------------- ------------ ----------- ----------- ----------- Actuarial present value of: Vested benefits $(265,472) $(70,936) $(218,596) $(41,773) Nonvested benefits - (2,166) (7,346) (4,470) - ------------------------------------------------- --------- -------- --------- -------- Accumulated Benefit Obligation (265,472) (73,102) (225,942) (46,243) Effect of anticipated future compensation levels (22,489) (20,922) (14,472) (2,364) - ------------------------------------------------- --------- -------- --------- -------- Projected Benefit Obligation (287,961) (94,024) (240,414) (48,607) Plan assets at fair value 291,165 38,225 5,467 24,687 - ------------------------------------------------- --------- -------- --------- -------- Plan Assets in Excess of (Less than) Projected Benefit Obligation 3,204 (55,811) 15,053 (23,920) Unrecognized prior service cost 28,915 6,294 34,062 6,398 Unrecognized net transition (asset) obligation (11,636) 637 (14,638) 1,246 Unrecognized net loss 45,621 12,823 31,506 4,721 Adjustment required to recognize minimum liability - (7,907) - (3,763) - ------------------------------------------------- --------- --------- --------- -------- Noncurrent Pension Asset (Liability) $ 66,104 $(43,964) $ 65,983 $(15,318) ===================================================================================================
The assumptions used to calculate December 31, 1995 and 1994 obligations for domestic plans were as follows:
================================================================================ 1995 1994 - ---------------------------------------------------------- ---- ---- Discount rate 7.0% 8.5% Rate of increase in compensation level 4.5% 4.5% ================================================================================
Effective January 1, 1996, the Company revised the domestic discount rate from 8.5% to 7%. This change resulted in an increase of approximately $46,000,000 and $53,000,000 in the 1995 accumulated benefit obligation and projected benefit obligation, respectively. F-14 Witco Corporation and Subsidiary Companies Notes to Financial Statements Note 11 - Pension Plans (continued) The funded status and amounts recognized in the Company's Consolidated Balance Sheets at December 31, 1995 and 1994 for the international plans were as follows:
=================================================================================================== (thousands of dollars) 1995 1994 - ------------------------------------------------- ------------------------ ---------------------- Plans in which: Plans in which: - ------------------------------------------------- ------------------------ ---------------------- Assets Accumulated Assets Accumulated Exceed Benefits Exceed Benefits Accumulated Exceed Accumulated Exceed Benefits Assets Benefits Assets - ------------------------------------------------- ------------ ----------- ----------- ----------- Actuarial present value of: Vested benefits $(31,122) $(41,227) $(24,243) $(28,034) Nonvested benefits (1,620) (2,483) (1,405) (2,816) - ------------------------------------------------- -------- -------- -------- -------- Accumulated Benefit Obligation (32,742) (43,710) (25,648) (30,850) Effect of anticipated future compensation levels (7,387) (18,497) (8,142) (16,231) - ------------------------------------------------- -------- -------- -------- -------- Projected Benefit Obligation (40,129) (62,207) (33,790) (47,081) Plan assets at fair value 47,567 289 37,268 - - ------------------------------------------------- -------- -------- -------- -------- Plan Assets in Excess of (Less than) Projected Benefit Obligation 7,438 (61,918) 3,478 (47,081) Unrecognized prior service cost 1,597 15 1,718 - Unrecognized net transition (asset) (5,787) (21) (5,978) - Unrecognized net loss (gain) (795) 1,280 2,637 (4,222) - ------------------------------------------------- -------- -------- -------- -------- Noncurrent Pension Asset (Liability) $ 2,453 $(60,644) $ 1,855 $(51,303) ===================================================================================================
The weighted average assumptions used to calculate December 31, 1995 and 1994 obligations for international plans were as follows:
================================================================================ 1995 1994 - ---------------------------------------------------------- ---- ---- Discount rate 7.1% 7.6% Rate of increase in compensation level 4.3% 4.4% ================================================================================
The Company sponsors a defined contribution savings plan, the Witco Corporation Employee Retirement Savings Plan, which is organized under sections 401(k) and 401(a) of the Internal Revenue Code. The Plan allows salary and hourly non-bargaining employees to contribute up to a maximum of 15% of their base pay with the Company providing a matching contribution of 50 cents for each dollar up to 6%. The Plan permits employees to make contributions on both a pre-tax and after-tax basis. Participants are immediately vested in their contributions and become fully vested in the matching contribution upon meeting certain service requirements. Union employees' participation, provisions, contributions, and employer match are based upon terms of their respective collective bargaining agreement. The Company's matching contribution was $3,900,000 (1995), $4,300,000 (1994), and $4,800,000 (1993). F-15 Witco Corporation and Subsidiary Companies Notes to Financial Statements Note 12 - Postretirement Benefits Other Than Pensions The Company provides health and life insurance to certain domestic 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 retiree medical plan is provided by retiree contributions that are adjusted annually to reflect current health costs. For domestic 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. Postretirement benefit obligations at December 31, 1995 and 1994 were as follows:
============================================================================================ (thousands of dollars) 1995 1994 - -------------------------------------------------------------------- ------- ------- Accumulated Postretirement Benefit Obligation: Retirees $29,359 $24,907 Active plan participants fully eligible for benefits 9,535 2,563 Other active plan participants 12,086 4,509 - -------------------------------------------------------------------- ------- ------- Total Accumulated Postretirement Benefit Obligation 50,980 31,979 Unrecognized net gain (loss) (7,010) 685 - -------------------------------------------------------------------- ------- ------- Accrued Postretirement Benefit Liability $43,970 $32,664 ============================================================================================
Net periodic postretirement benefit costs include the following components:
================================================================================ (thousands of dollars) 1995 1994 1993 - ---------------------------------------------------- ------ ------ ------ Service cost of benefits earned $ 486 $ 591 $ 389 Interest cost on accumulated postretirement benefits 2,938 2,634 2,621 Net amortization (747) 275 141 - ---------------------------------------------------- ------ ------ ------ Net Periodic Postretirement Benefit Costs $2,677 $3,500 $3,151 ================================================================================
For measuring the expected postretirement benefit obligation, a 10% annual rate of increase in the per capita claims cost was assumed for both 1995 and 1994. The rate was assumed to decrease by 1% per year to 6% in 1999 and remain at that level thereafter. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7% for 1995 and 8.5% for 1994. A change in the discount rate for valuing the obligations at December 31, 1995 from 8.5% to 7% resulted in an increase of approximately $4,100,000 in the accumulated postretirement benefit obligation. The weighted average discount rates used in determining the net periodic postretirement benefit costs were 8.3% (1995), 7% (1994), and 7.9% (1993). The effect of a 1% increase in the health care cost trend rate would increase the present value of the accumulated postretirement benefit obligation at December 31, 1995 by approximately $4,000,000 and the net periodic postretirement benefit cost for 1995 by approximately $256,000. 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. F-16 Witco Corporation and Subsidiary Companies Notes to Financial Statements Note 13 - Financial Instruments The Company enters into 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 and transaction hedges. Gains and losses on hedges of net investments are recognized as a component of shareholders' equity. 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, 1995 and 1994, the Company had outstanding contracts with aggregate notional amounts of approximately $197,000,000 and $209,000,000, respectively, to hedge its foreign net investments and also to fix the interest rates on the same amount of indebtedness at a weighted average interest rate of approximately 8%. The net 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 in March 2003. At December 31, 1995 and 1994, the Company had outstanding forward contracts with aggregate notional amounts of approximately $164,000,000 and $10,000,000, respectively, to hedge foreign currency risk on accounts receivable and payable. These forward contracts are generally outstanding for 30 days and are primarily denominated in German marks, Italian lire and French francs. All contracts have been entered into with major 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 notes summarize the major methods and assumptions used in estimating the fair values 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 for the 6.60% Notes, the 7.75% Debentures and the short-term bank loan refinanced in February 1996 were based on quoted market values. For all other long-term debt which have 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 presents the carrying amounts and estimated fair values of material financial instruments used by the Company in the normal course of its business.
========================================================================================== (thousands of dollars) 1995 1994 - --------------------------------------------- ------------------- -------------------- Carrying Fair Carrying Fair Amount Value Amount Value - --------------------------------------------- -------- --------- -------- ---------- Cash and cash equivalents $143,994 $143,994 $197,173 $197,173 Notes receivable $ 26,387 $ 26,366 $ 1,693 $ 1,679 Long-term debt $686,315 $696,193 $348,230 $315,628 Off-balance sheet financial instruments: Unrealized loss on foreign currency/interest rate swap contracts $ - $(41,895) $ - $(32,736) ==========================================================================================
F-17 Witco Corporation and Subsidiary Companies Notes to Financial Statements Note 14 - Commitments and Contingencies Operating Leases: At December 31, 1995, minimum rental commitments related to continuing operations under noncancelable operating leases amounted to $21,495,000 (1996), $18,590,000 (1997), $11,996,000 (1998), $10,649,000 (1999), $8,380,000 (2000), and $92,973,000 (2001 and thereafter). Aggregate future minimum rentals to be received under noncancelable subleases, the majority of which are subject to barter provisions, amounted to $19,143,000. Rental expenses under operating leases from continuing operations were $16,597,000 (1995), $16,758,000 (1994), and $16,685,000 (1993). Capital Lease: The Company has a capital lease for an office/laboratory facility located in Meyrin, Switzerland. The lease contains purchase options and expires in 2007. Future minimum lease payments at December 31, 1995 are as follows:
================================================================================ (thousands of dollars) - ------------------------------------------------------------------ 1996 $ 2,295 1997 2,295 1998 2,295 1999 2,295 2000 2,295 2001 and thereafter 16,063 - ------------------------------------------------------------------ -------- Total minimum lease payments 27,538 Amounts representing interest (9,716) - ------------------------------------------------------------------ -------- Present value of net minimum lease payments 17,822 Current portion (1,000) - ------------------------------------------------------------------ -------- Long-term obligation $16,822 ================================================================================
The lease contains a sublease agreement for one third of the facility over the length of the lease with the lessee providing a pro rata share of the minimum lease payments. Capital Commitments: At December 31, 1995, the estimated costs to complete authorized projects under construction related to continuing operations amounted to $92,209,000. Litigation, Claims, and Contingencies: The Company has been notified that it is a potentially responsible party ("PRP") or a defendant in a number of governmental (federal, state, and local) and private actions associated with the release, or suspected release, of contaminants into the environment. As a PRP, the Company may be liable for costs associated with the investigation and remediation of environmental contamination, as well as various penalties, and damages to persons, property and natural resources. As of December 31, 1995, the Company was a PRP, or a defendant, in connection with 67 sites at which it is likely to incur costs associated with environmental investigation or remedial actions which have been or will be executed pursuant to the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), the Resource Conservation and Recovery Act ("RCRA"), or similar state or local laws. With 22 exceptions, all of these sites involve one or more PRPs, and in most cases, there are numerous other PRPs in addition to the Company. CERCLA, RCRA, and the state counterparts to these federal laws, authorize governments to investigate and remediate actual or suspected damage to the environment caused by the release or suspected release of hazardous substances into the environment, or to order the responsible parties to investigate and/or remediate such environmental damage. 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 effect the Company's ability to estimate the ultimate costs of remediation efforts. Such uncertainties include the nature and extent of contamination at each site, evolving governmental standards regarding remediation requirements, changes in environmental regulations, widely varying costs of alternative cleanup methods, the number and financial condition of other potentially responsible parties at multi-party sites, innovations in remediation and restoration technology, and the identification of additional environmental sites. At December 31, 1995, the Company's reserves for environmental remediation and compliance costs related to continuing operations amounted to $83,646,000 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 certain of its insurers concerning the applicability and amount of insurance coverage for environmental costs under certain of these policies. Except for amounts reflected in executed settlement agreements, no provision for recovery under any of these policies is included in the Company's financial statements. In 1995, the Company F-18 Witco Corporation and Subsidiary Companies Notes to Financial Statements Note 14 - Commitments and Contingencies (continued) executed settlements with certain of the Company's insurance carriers resulting in income of $52,887,000, net of related legal and other costs. The Company is a defendant in three similar actions pending in California state courts, which arise out of the Company's involvement in the polybutylene resin manufacturing business in the 1970's: East Bay Municipal Utility District v. Mobil Oil Co., et al.; filed in November 1993, and pending in Superior Court for the County of San Mateo; City of Santa Maria v. Shell Oil Co., et al.; filed in May 1994, and pending in Superior Court for the County of San Luis Obispo; and Nipomo Community Services District v. Shell Oil Co., et al.; filed in May 1995, and pending in Superior Court for the County of San Luis Obispo. The actions generally allege that the Company and several other defendants negligently misrepresented the performance of polybutylene pipe and fittings installed in water distribution systems. Other allegations include breach of warranty, fraud, strict liability, and breach of the California Unfair Practices Act. The Company is not a party to any legal proceedings, including environmental matters, which it believes will have a material adverse effect on its consolidated financial position. However, depending on the amount and timing of an unfavorable resolution of these contingencies, it is possible that the Company's future results could be materially affected in a particular period. Note 15 - Operations by Industry Segment and Geographic Area The following is a summary of the Company's operations by industry segment and geographic area:
================================================================================================================ (thousands of dollars) 1995 1994 1993 - ---------------------------------------------------------------------- ----------- ----------- ----------- Net Sales Chemical $1,442,320 $1,336,907 $1,232,116 OSi Specialties 101,312 - - Petroleum 394,822 375,623 365,238 Diversified products 61,412 141,995 178,889 Intersegment elimination (14,789) (13,111) (13,157) - ---------------------------------------------------------------------- ---------- ---------- ---------- Net Sales $1,985,077 $1,841,414 $1,763,086 - ---------------------------------------------------------------------- ---------- ---------- ---------- Operating Income Chemical $ 61,450 $ 122,161 $ 104,992 OSi Specialties 7,385 - - Petroleum 33,415 43,379 24,547 Diversified products 62,689 17,243 (9,311) - ---------------------------------------------------------------------- ---------- ---------- ---------- Operating Income from continuing operations 164,939 182,783 120,228 - ---------------------------------------------------------------------- ---------- ---------- ---------- General corporate expenses - net 24,450 (17,979) (52,626) Interest income (expense) - net (28,585) (19,642) (26,305) - ---------------------------------------------------------------------- ---------- ---------- ---------- Income from continuing operations before Federal and Foreign Income Taxes $ 160,804 $ 145,162 $ 41,297 - ---------------------------------------------------------------------- ---------- ---------- ---------- Assets Chemical $1,111,927 $1,101,519 $1,036,875 OSi Specialties 966,501 - - Petroleum 247,009 507,848 461,073 Diversified products - 107,376 122,930 Net assets of discontinued operations 170,426 - - Corporate (principally cash, cash equivalents, and deferred pension costs) 276,581 202,602 218,120 - ---------------------------------------------------------------------- ---------- ---------- ---------- Assets $2,772,444 $1,919,345 $1,838,998 ================================================================================================================
F-19 Witco Corporation and Subsidiary Companies Notes to Financial Statements Note 15 - Operations by Industry Segment and Geographic Area (continued)
========================================================================================================== (thousands of dollars) 1995 1994 1993 - --------------------------------------------------------------- ---------- ---------- ---------- Depreciation and Amortization Chemical $ 69,917 $ 62,795 $ 58,204 OSi Specialties 9,439 - - Petroleum 16,758 14,568 15,704 Diversified products 3,719 9,351 11,054 Corporate 2,738 1,949 1,518 - --------------------------------------------------------------- ---------- ---------- ---------- Depreciation and Amortization from continuing operations $ 102,571 $ 88,663 $ 86,480 - --------------------------------------------------------------- ---------- ---------- ---------- Capital Expenditures (exclusive of acquisitions) Chemical $ 53,134 $ 44,323 $ 53,831 OSi Specialties 12,400 - - Petroleum 16,755 25,647 24,607 Diversified products 4,388 5,623 5,829 Discontinued operations 17,557 17,502 15,875 Corporate 11,611 14,343 3,547 - --------------------------------------------------------------- ---------- ---------- ---------- Capital Expenditures $ 115,845 $ 107,438 $ 103,689 - --------------------------------------------------------------- ---------- ---------- ---------- Net Sales United States $1,247,287 $1,225,062 $1,201,850 Western Europe 662,099 541,060 487,508 Other International 163,636 137,855 129,195 Inter-area elimination (87,945) (62,563) (55,467) - --------------------------------------------------------------- ---------- ---------- ---------- Net Sales $1,985,077 $1,841,414 $1,763,086 - --------------------------------------------------------------- ---------- ---------- ---------- Operating Income United States $ 95,279 $ 111,415 $ 67,440 Western Europe 55,338 54,184 38,705 Other International 14,322 17,184 14,083 - --------------------------------------------------------------- ---------- ---------- ---------- Operating Income from continuing operations $ 164,939 $ 182,783 $ 120,228 - --------------------------------------------------------------- ---------- ---------- ---------- Assets United States $1,512,278 $1,211,125 $1,177,891 Western Europe 884,139 604,342 565,172 Other International 205,601 103,878 95,935 Net assets of discontinued operations (United States) 170,426 - - - --------------------------------------------------------------- ---------- ---------- ---------- Assets $2,772,444 $1,919,345 $1,838,998 ==========================================================================================================
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. 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 not directly attributable to a specific segment. In 1995, general corporate expenses include income as a result of settlements with certain of the Company's insurers, net of related legal and other costs totaling $52,887,000. In 1993, general corporate expenses include provisions for a work force reduction, loss on sublease of office facilities, and other matters totaling $29,784,000. Foreign currency translation and transaction gains and losses included in net income are not significant. OSi Specialties purchases, in the aggregate, more than 50% of its raw materials from Dow Corning Corporation and Union Carbide Corporation under various long-term agreements expiring from 1998 to 2000. F-20 Witco Corporation and Subsidiary Companies Notes to Financial Statements Note 16 - Discontinued Operations On September 11, 1995, the Company announced its intention to divest its Lubricants Group. The Board of Directors has approved a plan of disposal with a target date of mid-1996. These operations are reflected as discontinued operations for all periods presented in the Company's income statements. Summary operating results of discontinued operations are as follows:
==================================================================================== (thousands of dollars) 1995 1994 1993 - ----------------------------------------------------- -------- -------- -------- Net sales $373,363 $383,255 $379,469 - ----------------------------------------------------- -------- -------- -------- Income (loss) before federal and foreign income taxes $ 6,709 $ 19,607 $ (7,966) Federal and foreign income taxes 2,610 6,960 (2,597) - ----------------------------------------------------- -------- -------- -------- Net income (loss) $ 4,099 $ 12,647 $ (5,369) ====================================================================================
Net assets of discontinued operations at December 31, 1995 have been segregated in the Company's balance sheet. A breakout of the net assets is as follows:
================================================================================ (thousands of dollars) 1995 - ----------------------------------------------------------------- --------- Accounts and notes receivable - net $ 61,633 Inventories 38,378 Property, plant, and equipment - net 112,639 Accounts payable and other current liabilities (39,603) Other assets and liabilities - net (2,621) - ----------------------------------------------------------------- --------- $170,426 ================================================================================
Under generally accepted accounting principles, no loss on discontinued operations has been included based on management's best estimates of the amounts expected to be realized on the sale of its Lubricants Group. While estimates are based on an analysis of the facilities, including appraisals by investment bankers, there have been limited recent sales of comparable properties to consider in preparing such valuations. The amounts the Company will ultimately realize could differ materially in the near term from the amounts assumed in arriving at the gain anticipated on disposal of the discontinued operations. F-21 Witco Corporation and Subsidiary Companies Quarterly Financial Data From Continuing Operations (Unaudited)
(in thousands of dollars except per share data) ============================================================================================================== 1995 1994 - ------- -------------------------------------------------- ----------------------------------------------- Income (loss) Income Income (loss) from Income from Cost of from Continuing Cost of from Continuing Net Goods Continuing Operations Net Goods Continuing Operations Quarter Sales Sold(a) Operations Per Share Sales Sold(a) Operations Per Share - ------- --------- ---------- ----------- ---------- ---------- ---------- ---------- --------- First $ 517,952 $ 425,107 $ 30,270(b) $ .54(b) $ 465,079 $ 381,302 $19,970 $.37 Second 489,231 410,003 69,021(c) 1.22(c) 467,337 377,336 27,142(g) .48(g) Third 441,902 369,965 19,444(d) .34(d) 457,388 378,643 22,656 .40 Fourth 535,992 446,439 (18,389)(e)(f) (.32)(e)(f) 451,610 363,461 24,652 .45 - ------- ---------- ---------- -------- ----- ---------- ---------- ------- ----- $1,985,077 $1,651,514 $100,346 $1.78 $1,841,414 $1,500,742 $94,420 $1.70 ==============================================================================================================
(a) Includes depreciation and amortization. (b) Includes a gain of $6,196, or $.11 per common share, from the disposition of the Company's Battery Parts business. (c) Includes a gain of $27,073, or $.48 per common share, from the disposition of the Company's Carbon Black business, and a gain of $23,032, or $.40 per common share, as a result of settlements with certain of the company's insurers, net of related legal and other costs. (d) Includes a gain of $4,700, or $.08 per common share, as a result of settlements with certain of the company's insurers, net of related legal and other costs. (e) Includes a charge of $33,762, or $.60 per common share, related to plant consolidation, environmental remediation and litigation, and a gain of $6,645, or $.12 per common share, as a result of settlements with certain of the company's insurers, net of related legal and other costs. (f) Includes a loss of approximately $3,600, or $.06 per common share, attributable to the operations of OSi Specialties. This loss is net of an income tax benefit, goodwill amortization, and associated financing costs. (g) Includes a gain of $3,133, or $.06 per common share, from the disposition of the metal finishing and metalworking operations of a subsidiary. F-22 EX-21 5 EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF WITCO CORPORATION(1)(2)(3) AS OF JANUARY 1, 1996
PERCENTAGE OF VOTING SECURITIES OWNED DIRECTLY OR STATE OR INDIRECTLY BY COUNTRY OF WITCO CORPORATION ORGANIZATION ------------------ --------------- Aero Oil Company, Inc................................................... 100.0% Indiana Assured Insurance Company............................................... 100.0 Vermont Baxenden Chemicals Limited.............................................. 53.5 United Kingdom Baxenden Scandinavia AS................................................. 53.5 Denmark Beam Oil Company, Inc................................................... 100.0 Georgia Celette Ltd............................................................. 100.0 Ireland Enenco, Incorporated(4)................................................. 50.0 New York Firma W/K Witco EPA(4).................................................. 50.0 The Netherlands Jonk BV................................................................. 100.0 The Netherlands Nerap Expeditie BV...................................................... 100.0 The Netherlands OSi Specialties Asia Pacific Inc........................................ 100.0 Delaware OSi Specialties Asia Limited............................................ 100.0 Hong Kong OSi Specialties (Australia) Pty Ltd..................................... 100.0 Australia OSi Specialties Benelux NV.............................................. 100.0 Belgium OSi Specialties Canada Inc.............................................. 100.0 Canada OSi Specialties China Limited........................................... 100.0 China OSi Specialties Colombia Limitada....................................... 100.0 Colombia OSi Specialties de Mexico S.A. de C.V................................... 100.0 Mexico OSi Specialties do Brasil Ltda.......................................... 100.0 Brazil OSi Specialties Germany GmbH............................................ 100.0 Germany OSi Specialties Holding Company......................................... 100.0 Delaware OSi Specialties Inc..................................................... 100.0 Delaware OSi Specialties Inc. (Chile) Limitada................................... 100.0 Chile OSi Specialties Italia S.p.A............................................ 100.0 Italy OSi Specialties (Korea) Limited......................................... 100.0 Korea OSi Specialties (Malaysia) Sdn Bhd...................................... 100.0 Malaysia OSi Specialties New Zealand, Inc........................................ 100.0 Delaware OSi Specialties S.A..................................................... 100.0 Switzerland OSi Specialties Singapore PTE Ltd....................................... 100.0 Singapore OSi Specialties Thailand Co. TD......................................... 100.0 Thailand OSi Specialties (U.K.) Ltd.............................................. 100.0 United Kingdom OSi Specialties USA, Inc................................................ 100.0 Delaware PT OSi Specialities..................................................... 100.0 Indonesia Rinol AG(4)............................................................. 10.0 Germany Sherex Chemical Company, Inc............................................ 100.0 Ohio Southwest Petro-Chem, Inc............................................... 100.0 Delaware Witco Asia Pacific PTE Ltd.............................................. 100.0 Singapore Witco Australia Pty Limited............................................. 100.0 Australia Witco BV................................................................ 100.0 The Netherlands Witco Canada Inc........................................................ 100.0 Canada Witco Corporation UK Limited............................................ 100.0 United Kingdom
PERCENTAGE OF VOTING SECURITIES OWNED DIRECTLY OR STATE OR INDIRECTLY BY COUNTRY OF WITCO CORPORATION ORGANIZATION ------------------ --------------- Witco Deutschland GmbH.................................................. 100.0% Germany Witco do Brasil Ltda.................................................... 100.0 Brazil Witco Dominion Financial Services Company, Ltd.......................... 100.0 Canada Witco Ecuador S.A....................................................... 100.0 Ecuador Witco Espana, S.L....................................................... 100.0 Spain Witco Europe Financial Services Co...................................... 100.0 Delaware Witco Europe Investment Partners........................................ 100.0 Delaware Witco Financial Services Co............................................. 100.0 Ireland Witco Foreign Sales Corporation......................................... 100.0 Barbados Witco GmbH.............................................................. 100.0 Germany Witco Grand Banks, Inc.................................................. 100.0 Canada Witco Handels GmbH...................................................... 100.0 Austria Witco International Corporation......................................... 100.0 New Jersey Witco Investment Holdings BV............................................ 100.0 The Netherlands Witco Investments BV.................................................... 100.0 The Netherlands Witco Investments SNC................................................... 100.0 France Witco Italiana SRL...................................................... 100.0 Italy Witco Ltd............................................................... 60.0 Israel Witco Marketing and Distribution Ltd.................................... 60.0 Israel Witco Mexico S.A. de C.V................................................ 100.0 Mexico Witco Polymers and Resins BV............................................ 100.0 The Netherlands Witco S.A............................................................... 100.0 France Witco Solvay Duromer GmbH(4)............................................ 50.0 Germany Witco Specialties PTE Ltd............................................... 100.0 Singapore Witco Surfactants GmbH.................................................. 100.0 Germany Witco Warmtekracht BV................................................... 100.0 The Netherlands
- ------------ 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 these unconsolidated entities. 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 Registration Statement (Form S-3, No. 33-65203) pertaining to the issuance of notes and debentures, 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, the Registration Statement (Form S-8, No. 33-48806), pertaining to an employee benefit plan of Witco Corporation, and the Registration Statement (Form S-8, No. 33-60755), pertaining to the 1995 Stock Option Plan for Employees of Witco and its Subsidiaries, of our report dated January 29, 1996 (except Note 7, as to which the date is February 12, 1996), with respect to the consolidated financial statements and schedule of Witco Corporation and Subsidiary Companies for the year ended December 31, 1995 included in this Annual Report (Form 10-K). ERNST & YOUNG LLP Stamford, Connecticut March 19, 1996 EX-27 7 ART.5 FDS ANNUAL 10-K
5 1,000 12-MOS DEC-31-1995 DEC-31-1995 143,994 0 413,590 7,104 322,898 944,045 1,398,262 586,595 2,772,444 694,465 683,830 282,173 0 7 721,937 2,772,444 1,985,077 2,000,181 1,651,514 1,651,514 0 2,615 43,689 160,804 60,458 100,346 4,099 0 0 104,445 1.85 1.84 -----END PRIVACY-ENHANCED MESSAGE-----