-----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, I9lxOc57Q/ZOWC+ytOc6RVmxewvey36lL6t3jKPZOVY+FrH7g4F21AwaDy9UAhxb v2/nMd0ZWmutprlQ8P48pg== 0000060751-95-000005.txt : 19951118 0000060751-95-000005.hdr.sgml : 19951118 ACCESSION NUMBER: 0000060751-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951109 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LUBRIZOL CORP CENTRAL INDEX KEY: 0000060751 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS CHEMICAL PRODUCTS [2890] IRS NUMBER: 340367600 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05263 FILM NUMBER: 95588866 BUSINESS ADDRESS: STREET 1: 29400 LAKELAND BLVD CITY: WICKLIFFE STATE: OH ZIP: 44092 BUSINESS PHONE: 2169434200 MAIL ADDRESS: STREET 1: 29400 LAKELAND BLVD CITY: WICKLIFFE STATE: OH ZIP: 44092 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ..... to ..... Commission File Number 1-5263 THE LUBRIZOL CORPORATION (Exact name of registrant as specified in its charter) Ohio 34-0367600 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 29400 Lakeland Boulevard Wickliffe, Ohio 44092-2298 (Address of principal executive offices) (Zip Code) (216) 943-4200 (Registrant's telephone number, including area code) 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 and 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 [ ] Number of the registrant's common shares, without par value, outstanding, as of October 31, 1995: 63,226,167 PART I. FINANCIAL INFORMATION THE LUBRIZOL CORPORATION CONSOLIDATED BALANCE SHEETS
September 30 December 31 (In Thousands of Dollars) 1995 1994 ------------ ----------- ASSETS Cash and short-term investments....................... $ 28,818 $ 36,379 Receivables........................................... 272,299 250,392 Inventories: Finished products................................... 99,049 102,605 Products in process................................. 91,284 98,105 Raw materials and supplies.......................... 115,232 97,621 ---------- ---------- 305,565 298,331 ---------- ---------- Other current assets.................................. 42,882 39,286 ---------- ---------- Total current assets............... 649,564 624,388 Property and equipment - net.......................... 661,025 558,744 Investments in nonconsolidated companies.............. 102,003 138,013 Intangible and other assets........................... 76,243 73,219 ---------- ---------- TOTAL.......................... $1,488,835 $1,394,364 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Short-term debt....................................... $ 13,779 $ 53,700 Accounts payable...................................... 111,921 114,244 Income taxes and other current liabilities............ 115,781 85,589 ---------- ---------- Total current liabilities........... 241,481 253,533 Long-term debt........................................ 196,366 114,161 Postretirement health care obligation................. 100,973 98,453 Noncurrent liabilities................................ 69,459 68,799 Deferred income taxes................................. 16,088 27,379 ---------- ---------- Total liabilities................... 624,367 562,325 ---------- ---------- Contingencies and commitments Shareholders' equity: Preferred stock without par value - authorized and unissued: Serial Preferred Stock - 2,000,000 shares Serial Preference Shares - 25,000,000 shares Common Shares without par value: Authorized 120,000,000 shares Outstanding - 63,297,216 shares as of September 30, 1995 after deducting 22,898,678 treasury shares, 64,844,560 shares as of December 31, 1994 after deducting 21,351,334 treasury shares........ 83,657 84,059 Retained earnings................................... 774,124 734,533 Unrealized gain on marketable securities............ 23,169 Accumulated translation adjustment.................. 6,687 (9,722) ---------- ---------- Total shareholders' equity......... 864,468 832,039 ---------- ---------- TOTAL.......................... $1,488,835 $1,394,364 ========== ==========
Amounts shown are unaudited. THE LUBRIZOL CORPORATION CONSOLIDATED STATEMENTS OF INCOME
Third Quarter Nine Months Ended September 30 Ended September 30 ------------------- ---------------------- (In Thousands Except Per Share Data) 1995 1994 1995 1994 -------- -------- ---------- ---------- Net sales........................... $412,428 $396,478 $1,264,133 $1,201,457 Royalties and other revenues........ 1,296 1,377 4,776 4,595 -------- -------- ---------- ---------- Total revenues............ 413,724 397,855 1,268,909 1,206,052 Cost of sales....................... 282,443 261,877 847,908 806,925 Selling and administrative expenses. 39,862 38,626 122,952 117,657 Research, testing and development expenses.......................... 46,421 41,893 132,599 120,683 -------- -------- ---------- ---------- Total cost and expenses... 368,726 342,396 1,103,459 1,045,265 Gain on sale of investments......... 12,019 38,459 35,406 Other income (expense) - net........ (2,905) 1,904 5,570 8,385 Interest income..................... 1,035 952 3,611 2,862 Interest expense.................... (2,278) (494) (6,386) (1,988) -------- -------- ---------- ---------- Income before income taxes.......... 40,850 69,840 206,704 205,452 Provision for income taxes.......... 12,908 21,907 68,409 65,106 -------- -------- ---------- ---------- Net income.......................... $ 27,942 $ 47,933 $ 138,295 $ 140,346 ======== ======== ========== ========== Net income per share................ $ .44 $ .73 $2.16 $2.13 ===== ===== ===== ===== Dividends per share................. $ .23 $ .22 $ .69 $ .66 ===== ===== ===== ===== Average number of shares outstanding 63,460 65,486 64,083 65,982
Amounts shown are unaudited. THE LUBRIZOL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30 ------------------------ (In Thousands of Dollars) 1995 1994 ---------- ---------- Cash provided from (used for): Operating activities: Net income................................................... $ 138,295 $ 140,346 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization............................ 54,536 48,122 Deferred income taxes.................................... 1,740 902 Equity earnings, net of distributions.................... (443) (4,078) Gain on sale of investments.............................. (38,459) (35,406) Change in current assets and liabilities: Accounts receivable.................................... (15,199) (19,804) Inventories............................................ (1,262) 13,435 Accounts payable and accrued expenses.................. 22,260 (2,212) Other current assets................................... (4,643) (6,891) Other items - net........................................ (3,660) (3,957) ---------- ---------- Total operating activities......................... 153,165 130,457 Investing activities: Proceeds from sale of investments............................ 40,160 37,713 Capital expenditures......................................... (143,750) (111,479) Acquisition of subsidiary.................................... (3,521) (1,502) Other - net.................................................. 3,170 (366) ---------- ---------- Total investing activities (103,941) (75,634) Financing activities: Short-term borrowing (repayment) - net....................... (44,934) 60,487 Long-term borrowing.......................................... 100,064 102 Long-term debt repayment..................................... (14,313) (2,007) Dividends paid............................................... (44,277) (43,660) Common shares purchased, net of options exercised............ (54,829) (51,495) ---------- ---------- Total financing activities......................... (58,289) (36,573) Effect of exchange rate changes on cash...................... 1,504 3,250 ---------- ---------- Net increase (decrease) in cash and short-term investments... (7,561) 21,500 Cash and short-term investments at the beginning of period... 36,379 24,220 ---------- ---------- Cash and short-term investments at the end of period......... $ 28,818 $ 45,720 ========== ==========
Amounts shown are unaudited. THE LUBRIZOL CORPORATION Notes to Consolidated Financial Statements September 30, 1995 1. The accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of September 30, 1995 and December 31, 1994, and the results of operations and the cash flows for the nine months ended September 30, 1995 and 1994. 2. Certain of the company's marketable equity securities, included in investments in nonconsolidated companies, were classified as available for sale and carried at fair market value. During the first half of 1995, the company sold all of its remaining shares of Genentech common stock realizing proceeds of $40.2 million and a pretax gain of $38.5 million. The company also holds other investments in nonconsolidated companies, including certain investments in marketable securities that are either accounted for on the equity basis or the cost basis due to restrictions placed on the securities. These marketable investments have quoted market values which exceed the book carrying values by $56.7 million at September 30, 1995. 3. On June 26, 1995, the company publicly issued debentures in the aggregate principal amount of $100 million. The debentures are unsecured, senior obligations of the company that mature on June 15, 2025, and bear interest from June 15, 1995 at 7.25% payable semi-annually on June 15 and December 15 of each year. The debentures are not redeemable prior to maturity and are not subject to any sinking fund. 4. The company uses derivative financial instruments only to manage well- defined foreign currency, interest rate and commodity price risk. The company does not use derivative financial instruments for trading purposes. The maximum amount of foreign currency forward contracts outstanding at any one time during the first nine months of 1995 was $15.2 million of which $1.0 is outstanding at September 30, 1995. The company has an interest rate swap agreement that effectively converts floating rate interest payable on $18.4 million of Marine Terminal Refunding Revenue Bonds due July 1, 2000 to a fixed rate of 6.5%. In addition during the first quarter of 1995, the company entered into an interest rate swap agreement that converts $50 million of variable rate borrowings to a fixed rate of 7.6% for up to 10 years. THE LUBRIZOL CORPORATION Notes to Consolidated Financial Statements September 30, 1995 5. On November 18, 1993, a federal court jury in Houston, Texas, awarded Exxon Corporation $48 million in damages in a patent case brought, in 1989, against the company. The damages award related to a December 1992 verdict that the company willfully infringed an Exxon patent pertaining to an oil soluble copper additive component. On February 18, 1994, the trial court judge doubled the damages amount and awarded prejudgment interest, court costs and additional attorneys' fees to Exxon. The total amount of the judgment, including previously awarded attorneys' fees, was $129 million. On September 5, 1995, the United States Court of Appeals for the Federal Circuit in Washington, D.C., which has jurisdiction over all patent cases, overturned the jury verdict that the company infringed the Exxon patent and entered judgment in favor of Lubrizol as a matter of law. The ruling also vacated an injunction against the company and the $129 million judgment. Exxon is seeking rehearing with the same court in Washington, D.C. The company has prevailed in a separate case brought in Canada against Exxon's Canadian affiliate, Imperial Oil, Ltd., for infringement of the company's patent pertaining to dispersant, the largest additive component used in motor oils. A 1990 trial court verdict in favor of the company regarding the issue of liability was upheld by the Federal Court of Appeals of Canada in December 1992, and in October 1993, the Supreme Court of Canada dismissed Imperial Oil's appeal of the Court of Appeals decision. The case has returned to the trial court for an assessment of damages. On October 4, 1994, the trial court judge awarded the company $15 million (Canadian) in special penalty damages, plus attorneys' fees, against Imperial Oil for disregarding an earlier injunction for the manufacture or sale of the dispersant which is the subject of this case. Imperial Oil commenced proceedings to appeal the award of penalty damages. The company has not reflected the award of penalty damages within its financial statements pending the outcome of the appeal process. The penalty damages are in addition to compensation damages, as to which no date has been set for a determination. A reasonable estimation of the company's potential recovery for compensation damages cannot be made at this time. THE LUBRIZOL CORPORATION Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Revenues increased by $15.9 million, or 4% in the third quarter of 1995 compared to the third quarter of 1994 and by $62.9 million, or 5% for the nine months ended September 30, 1995 compared to the nine months ended September 30, 1994. On a year-to-year comparable period basis, revenues for the third quarter and first nine months of 1995 were favorably affected by price/mix and by currency and were unfavorably affected by volume. Specifically, price increases implemented in early 1995 and more favorable product mix increased revenues by 2% for the third quarter and by 3% for the first nine months of 1995. In addition, the impact of translating various international currencies into a weakened U.S. dollar increased revenues by 3% for the third quarter and by 4% for the nine month period. Volume was down 1% and 3%, respectively, in the three month and nine month periods ended September 30, 1995. Sequentially, revenues in the third quarter of 1995 were 6% lower than the second quarter. This revenue decline was caused by unfavorable price/product mix (2%), lower volume (3%) and unfavorable currency (1%). The volume decline in the third quarter was in North America, where volumes fell 3% as compared to the third quarter of 1994. Sequentially, volume declined 5% in North America from the second quarter of 1995. Demand for engine oil lubricants in North America has been weak, causing lower additive shipment volumes. For the comparative nine month period, volume in international markets declined 4% and in North America was even compared with the prior year. International volume was lower due to spot business in the Middle East that occurred primarily during the first half of 1994 and that did not recur in 1995. Excluding this spot business from 1994, volume would have increased 2% internationally and 1% overall for the first nine months of 1995. Sales volumes in the future will be affected by a new North American passenger car motor oil specification. The company has developed additive packages that meet this new specification, which will require approximately 10% less additive levels than the existing specification. The new specification, absent changes in market share, is expected to negatively affect annual volume in North America by 4% (1.5% on worldwide volume) due to the lower additive treat rate. The majority of the company's customers are expected to convert to this new specification by the middle of 1996. THE LUBRIZOL CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS (Continued) Gross Profit (sales less cost of sales) decreased 3% to $130 million for the third quarter and increased by 6% to $416.2 million for the first nine months of 1995 as compared to the respective periods of the previous year. Gross profit as a percent of sales declined to 31.5% for the third quarter of 1995 from 33.9% for the third quarter of 1994 as raw material costs increased almost twice as fast as selling prices, including the affects of currency and mix. Sequentially, lower volume and unfavorable mix caused the gross profit percentage to decline from the 34.1% rate achieved in the second quarter of 1995. Gross profit increased in the first nine months of 1995 as compared to 1994, as higher average selling prices, aided by favorable currency and mix, more than offset a 10% increase in average material cost, including currency and mix. Gross profit as a percent of sales improved slightly to 32.9% for the first nine months of 1995 compared to 32.8% for the same period of 1994. Selling and administrative expenses increased 3% for the third quarter and 5% for the nine month period ended September 30, 1995 as compared to the prior year. Research, testing and development expenses (technology expenses) increased 11% for the third quarter and 10% for the nine month period ended September 30, 1995. Technology expenses have increased, as anticipated, over the respective 1994 periods and sequentially quarter to quarter during 1995 as a result of the timing of various testing programs related to product development worldwide and a greater emphasis on longer-term strategic research. The company's manufacturing and organizational realignment initiatives, which began in 1993, have slowed the rate of increase in the company's cost and expenses. When complete, these initiatives will have reduced the number of the company's production units by one-third, and the number of employees will have been reduced by approximately 5% through early retirement programs or attrition. Through September 30, 1995, the company has completed approximately three-fourths of the production unit reductions and employee reductions under these initiatives. The company has also progressed in its efforts to create a more simplified and rationalized line of products. The company's manufacturing expenses increased 4% and selling and administrative expenses increased 5% for the nine month period ended September 30, 1995 as compared to the prior year. However, after excluding the negative impact of currency and an acquisition made in 1995, manufacturing costs declined by 1% and selling and administrative expenses increased 2%. On a year-to-date basis, management is on target with its goal of holding selling, administrative and technology expenses at or below 20% The company sold all of its remaining shares of Genentech, Inc. common stock during the first half of 1995 realizing a pretax gain of $38.5 million (39 cents per share after tax). During 1994, the company had pretax gains on the sale of Genentech common stock of $12.0 million (12 cents per share) for the third quarter and $35.4 million (35 cents per share) for the nine months ended September 30. THE LUBRIZOL CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS (Continued) Other income - net, declined $4.8 million for the third quarter and $2.8 million for the nine months ended September 30, 1995 as compared to the respective 1994 periods. Other income includes the results of the company's investment in Mycogen Corporation and its agribusiness joint venture. Mycogen's earnings are seasonal with the majority of its income recorded in the first half of the calendar year and losses recorded in the second half. Compared to 1994, equity losses from Mycogen were $2.8 million greater in the third quarter and $5.2 million greater in the first nine months of 1995 as a result of higher consolidated losses of Mycogen. In addition, fluctuations in exchange gains (losses) and improved equity earnings from the company's specialty chemical joint ventures contributed to the change in Other income - net between the periods. Interest expense increased $1.8 million for the quarter and $4.4 million for the nine months ended September 30, 1995 as a result of higher average debt outstanding to meet the requirements of the capital expenditure and share repurchase programs. The average daily balance of debt outstanding was $205 million for the nine month period ended September 30, 1995, as compared to $108 million for the same period in 1994. The company transacts business in over 100 countries around the world. As the U.S. dollar strengthens or weakens against other international currencies, the financial results of the company will be affected. During 1995, the U.S. dollar has weakened, primarily against the French franc, German deutsche mark and Japanese yen, as compared to the respective 1994 periods. This resulted in favorable currency effects on operations of 6 cents per share in the third quarter and 19 cents per share for the nine months ended September 30, 1995. However, sequentially, the U.S. dollar strengthened during the third quarter when compared with exchange rates in effect during the second quarter of 1995 which had a slightly negative affect on earnings per share. As a result of the factors discussed above and a higher effective tax rate, net income decreased 42% or $20.0 million for the third quarter, and decreased 1% or $2.1 million for the nine month period ended September 30, 1995, as compared to the respective 1994 periods. Excluding from earnings per share the gains realized from sale of Genentech common stock, third quarter earnings per share declined 28% to 44 cents in 1995 from 61 cents in 1994 and year-to-date earnings per share were $1.77 in 1995 compared with $1.78 in 1994. THE LUBRIZOL CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS (Continued) While management has been successful in controlling operating expenses this year, the lower volume and higher material costs have offset the benefits of the company's cost control efforts. In addition, higher agribusiness equity losses and higher interest expense further reduced earnings. The negative factors impacting the company's business in the third quarter will continue to pressure earnings in the fourth quarter. As a result, despite a strong first half of 1995, management's objective of a 10% earnings per share growth in 1995 will not be achieved. Despite disappointing results in the third quarter, the company remains in a strong commercial and financial position. The company believes it has gained market share in a consolidating additive industry at a time when the demand for finished lubricants has been weakening. WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES Cash provided from operating activities was $153.2 million for the nine months ended September 30, 1995, compared to $130.5 million for the same period of 1994. This increase is attributable to changes in working capital requirements. In June 1995, the company publicly issued $100 million of 7.25% debentures due at the end of 30 years. The net proceeds from this debt issuance were used to repay a portion of the commercial paper borrowings outstanding. The total short and long-term debt at September 30, 1995 was $210.1 million compared to $260.1 at June 30, 1995 and $167.9 million at December 31, 1994. The decrease in total debt outstanding from June 30, 1995 was due to the utilization of $26 million of the debt proceeds received in June 1995 to repay commercial paper borrowings maturing after June 30, 1995 and repayment of borrowings from cash flow generated during the third quarter. The percent of debt to total capital was 20% at September 30, 1995, compared to 17% at December 31, 1994. Capital expenditures were $143.8 million during the first nine months of 1995, an increase of 29% over the comparable period of 1994. Capital expenditures in 1995 were $37.8 million in the third quarter, $50.7 million in the second quarter and $55.3 million in the first quarter. This decline in quarterly spending is reflective of the completion of several major projects. Capital expenditures were primarily in the United States and France, of which 70% pertained to capital additions at manufacturing plants to enhance or maintain production capabilities, including maintaining facilities in compliance with environmental and safety regulations, and the remaining 30% was principally for construction of new technical and administrative facilities at the company's headquarters. Capital spending for the year will be approximately $10 million below the company's previously estimated range of $190-$200 million. As a result of the completion of several major projects, management estimates capital spending in 1996 will be below $150 million. THE LUBRIZOL CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES (Continued) The company maintains an active share repurchase program and at September 30, 1995, had 3.4 million shares remaining under its current share repurchase authorizations. The company repurchased 298,000 shares of its common stock during the third quarter of 1995, bringing the total number of shares acquired to 1,635,000 for the nine month period. The aggregate cost of the shares acquired during 1995 has been $56.5 million. Primarily as a result of these activities, and the payment of dividends, cash and short-term investments decreased $7.6 million from December 31, 1994 to $28.8 million at September 30, 1995. The company's ratio of current assets to current liabilities was 2.7 to 1 at September 30, 1995 as compared to 2.5 to 1 at December 31, 1995. This improvement in ratio reflects the replacement of short-term debt with the issuance of $100 million in long-term debentures in June 1995. Management believes the company's credit facilities and internally generated funds will be sufficient to meet its future capital needs. As discussed in Note 5 to the financial statements, the company is involved in patent litigation with Exxon Corporation, in various countries. On September 5, 1995, the United States Court of Appeals for the Federal Circuit in Washington, D.C., overturned a Houston, Texas jury verdict that the company had infringed an Exxon patent pertaining to an oil soluble copper additive component and found that the company had not infringed the Exxon patent. This ruling also overturns a $129 million judgment entered against the company on February 18, 1994. Exxon is seeking a rehearing with the same court in Washington, D.C. In a separate patent case in Canada, liability against Exxon and in favor of the company has been made by the Canadian court. Pending the outcome of the appeals process for the award to the company of $15 million in penalty damages and the determination of the compensation damages by the Canadian courts, a reasonable estimation of the company's potential recovery for damages can not be made at this time. PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is a party in a case brought by Exxon Corporation and its affiliates, Exxon Chemical Patents, Inc. and Exxon Research & Engineering Company, in the Southern District of Texas, Houston Division on September 19, 1989. In December 1992, the trial jury rendered a verdict that the company willfully infringed an Exxon patent pertaining to an oil soluble copper additive component. In early 1993, the court prohibited the company from making or selling any additive packages in the United States that contained this component. In November 1993, a jury awarded Exxon $48 million in damages, and in February 1994, the trial court judge doubled the damages amount and awarded prejudgment interest, court costs and additional attorney's fees. The total amount of the judgment, including attorneys' fees, was $129 million. On September 5, 1995, the United States Court of Appeals for the Federal Circuit in Washington, D.C., which has jurisdiction over all patent cases, overturned the jury verdict that the company had infringed the Exxon patent, and entered judgment in favor of Lubrizol as a matter of law, holding that no reasonable jury could find any of Lubrizol's products to be infringing on the evidence presented. The ruling also vacated the injunction against the company and the $129 million judgment. Exxon is seeking rehearing with the same court in Washington, D.C. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (10) Deferred Compensation Plan for Officers (As Amended September 25, 1995) (11) Computation of Per Share Earnings (27) Financial Data Schedule (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended September 30, 1995. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE LUBRIZOL CORPORATION /s/Gregory P. Lieb -------------------------------- Gregory P. Lieb Chief Accounting Officer and Duly Authorized Signatory of The Lubrizol Corporation Date: November 9, 1995 EX-10 2 EXHIBIT 10 THE LUBRIZOL CORPORATION Deferred Compensation Plan For Officers (As Amended September 25, 1995) 1. PURPOSE. The purpose of this Deferred Compensation Plan For Officers (the "Plan") is to permit an officer (as identified by the Company for Section 16 purposes under the Securities Exchange Act of 1934) (sometimes hereinafter referred to as "officer" or as the "Participant") of The Lubrizol Corporation (the "Company"), who wishes, to defer a portion of such officer's compensation until retirement or other termination of employment all as provided in the Plan. 2. ADMINISTRATION. The Plan shall be administered by the Organization and Compensation Committee of the Board of Directors of the Company (the "Committee"). The Committee's interpretation and construction of all provisions of the Plan shall be binding and conclusive upon all Participants and their heirs and/or successors. 3. RIGHT TO DEFER COMPENSATION. (a) An officer of the Company may, at any time prior to January 1 of a given calendar year, elect, for one or more future successive calendar years, to defer under the Plan a pre-selected amount of such officer's total annual compensation, including bonus, which such officer may thereafter be entitled to receive for services performed during such elected calendar year or years. (b) The election under this Section 3 shall take effect on the first day of the calendar year following the date on which the election is made and such election shall be irrevocable for any elected calendar year after such elected calendar year shall have commenced. (c) The pre-selected amount that an officer may elect to defer shall be one or more of the following: (i) a fixed dollar amount or percentage of the officer's bi- weekly base salary; (ii) a fixed dollar amount or percentage of the officer's quarterly pay; (iii) a fixed dollar amount or percentage of the officer's share in the variable compensation component, if any; (iv) a fixed dollar amount or percentage of the officer's participation in the variable award plan, if any. (d) In addition to the provisions of paragraph (c), an officer may elect to defer that portion or all of the officer's participation, if any, in (i) the variable compensation component and/or (ii) the variable award plan for services rendered during the elected calendar year, to the extent that such amounts would otherwise be non-deductible by the Company pursuant to section 162(m) of the Internal Revenue Code of 1986. The amount of the election under this paragraph (d) shall be determined after taking into account the officer's election, if any, under paragraph (c). (e) Notwithstanding paragraphs (a) and (b), where an officer first becomes eligible to participate in the Plan, the newly eligible officer may make the election under this Section 3 to defer the specified compensation for services to be performed subsequent to the election and for the remainder of the calendar year in which the election under this Section 3 is made provided such election is made within 30 days after the date the officer first becomes eligible. (f) All elections under this Plan shall be made by written notice delivered to the Vice President, Human Resources, of the Company specifying (i) the number of calendar years, one or more, during which the election shall apply, (ii) the portion, if any, determined under paragraph (c), of each category of the Participant's compensation to be deferred for such year or years, as described above, and (iii) the periodic payment schedule selected subject to (x) the installment period limitation and (y) the computation of each installment payment, as provided in Section 5. (g) A Participant may designate that the election under this Section 3 shall remain in effect until the Participant, on a prospective basis, withdraws the election or changes the amount to be deferred; PROVIDED THAT, if the Participant changes only the amount to be deferred, the periodic payment schedule selected under paragraph (f)(iii) shall continue to apply. Any notice of the withdrawal of the election shall be effective on the first day of the calendar year following the date on which such notice is given to the Company's Vice President, Human Resources; PROVIDED THAT, such notice shall not change, alter or terminate the deferral of the officer's participation in the variable award plan for the year in which such notice of withdrawal is given which, except for the deferral, would be payable in the calendar year following the date on which such notice of withdrawal is given. Notwithstanding paragraph (f) and the first sentence of this paragraph (g), any compensation earned after the end of the first month in which a Participant under this Plan no longer is an officer of the Company, as defined in Section 1, but continues to be employed by the Company, shall not be deferred, PROVIDED HOWEVER, the balance in the Participant's Accounts shall continue to be held and administered pursuant to the Plan. 4. DEFERRED COMPENSATION ACCOUNTS. (a) On the last day of each month during which the compensation deferred under the Plan would have become payable to the Participant in the absence of an election under the Plan to defer payment thereof, the amount of such deferred compensation, reduced by the amount of any applicable federal, state and/or local payroll taxes, shall be credited to a DEFERRED COMPENSATION ACCOUNT (the "Participant's Account") which shall be established and maintained for each Participant in the Company's accounting books and records. To the extent that, at the time amounts are credited to a Participant's Account, any federal, state or local payroll withholding tax applies (e.g., Medicare withholding tax), the Participant shall be responsible for the payment of such amount to the Company and the Company shall promptly remit such amount to the proper taxing authority. (b) Interest shall accrue on the month-end balance in each Participant's Account as of the last day of each month and shall be computed at the Federal Reserve 90-day Composite Rate in effect for the previous calendar quarter. Such interest amount so determined shall be credited monthly to such Participant's Account. 5. PAYMENT OF DEFERRED COMPENSATION. (a) The total amount standing as a credit in a Participant's Account shall, upon termination of employment, be payable to the Participant either in a lump sum or in periodic installments over such period, not exceeding ten years, as the Participant shall have selected pursuant to Section 3(f)(iii). Such periodic payments shall begin or the lump sum payment shall be made, as the case may be, from the Participant's Accounts, at such time, not more than twelve (12) months after the Participant ceases to be an employee of the Company, as the Participant shall have selected pursuant to Section 3 (f)(iii) at the time of entering the Plan. All amounts payable in accordance with this Section 5(a) shall be subject to applicable federal, state and/or local payroll withholding taxes then in effect. (b) The amount of each installment payable to a Participant shall be determined by dividing the balance of such Participant's Account by the number of periodic installments (including the current installment) remaining to be paid. Until a Participant's Account has been completely distributed, the balance thereof remaining, from time to time, shall bear interest on a monthly basis calculated as provided in Section 4(b). (c) In the event a Participant dies prior to receiving payment of the entire amount in that Participant's Account, the unpaid balance shall be paid to such beneficiary as the Participant may have designated in writing to the Vice President, Human Resources, of the Company as the beneficiary to receive any such post-death distribution under the Plan or, in the absence of such written designation, to the Participant's legal representative or to the beneficiary designated in the Participant's last will as the one to receive such distributions. Distributions subsequent to the death of a Participant may be made either in a lump sum or in periodic installments in such amounts and over such period, not exceeding ten years from the date of death, as the Committee may direct and the amount of each installment shall be computed as provided in Section 5(b). 6. ACCELERATION OF PAYMENTS. (a) The Committee may accelerate the distribution of part or all of a Participant's Account for reasons of severe financial hardship. For purposes of the Plan, severe financial hardship shall be deemed to exist in the event the Committee determines that a Participant needs a distribution to meet immediate and heavy financial needs resulting from a sudden or unexpected illness or accident of the Participant or a member of the Participant's family, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstance arising as a result of events beyond the control of the Participant. A distribution based on financial hardship shall not exceed the amount required to meet the immediate financial need created by the hardship. (b) Upon application by a Participant to the Committee, made no later than thirty (30) days prior to the Participant's retirement or other termination of employment (other than as a result of death), nor earlier than ninety (90) days prior thereto, the Participant may request that the Committee accelerate the Participant's distribution schedule under Section 5(a) as previously selected by the Participant, including accelerating to a lump sum payment. The Committee shall have sole and exclusive discretionary authority to grant or deny a Participant's request. 7. NON-ASSIGNABILITY. None of the rights or interests in a Participant's Account shall, at any time prior to actual payment or distribution pursuant to the Plan, be assignable or transferable in whole or in part, either voluntarily or by operation of law or otherwise, and such rights and interest shall not be subject to payment of debts by execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner; provided that, upon the occurrence of any such assignment or transfer or the attempted assignment or transfer, all payments under Section 5 shall be payable in the sole and unrestricted judgment and discretion of the Committee, as to time and amount (including a lump sum amount), and shall be distributable to the person who would have received the payment but for this Section 7 only at such time or times and in such amounts as the Committee, from time to time, and in its sole and unrestricted judgment and discretion, shall determine. Should an event covered by this Section 7 occur prior to the death of a Participant, the balance, if any, in the Participant's Account shall, after such death, be thereafter distributed as provided in Section 5(c) subject to the provisions of this Section 7. 8. PLAN TO BE UNFUNDED. The Company shall be under no obligation to segregate or reserve any funds or other assets for purposes relating to the Plan and, except as set forth in this Plan, no Participant shall have any rights whatsoever in or with respect to any funds or other assets held by the Company for purposes of the Plan or otherwise. Each Participant's Account maintained for purposes of the Plan merely constitutes a bookkeeping entry on records of the Company, constitutes the unsecured promise and obligation of the Company to make payments as provided herein, and shall not constitute any allocation whatsoever of any cash or other assets of the Company or be deemed to create any trust or special deposit with respect to any of the Company's assets. 9. AMENDMENT. The Board of Directors of the Company may, from time to time, amend or terminate the Plan, provided that no such amendment or termination of the Plan shall adversely affect a Participant's Account as it existed immediately before such amendment or termination or the manner of distribution thereof, unless such Participant shall have consented thereto in writing. Any reduction in the quarterly interest rate set forth in Section 4(b), by amendment to the Plan, shall affect only contributions made to the Plan for calendar years subsequent to the adoption of the amendment. The balance in a Participant's Account prior to the effective date of any such interest rate reduction shall continue to bear interest at the rate in effect prior to any such reduction in interest rate. Notice of any amendment or termination of the Plan shall be given promptly to all Participants. 10. PLAN IMPLEMENTATION. This Plan is adopted and effective on the 25th day of July, 1994 as amended on June 17, 1995, effective January 1, 1995, and as further amended on September 25, 1995. -END- EX-11 3 EXHIBIT 11 THE LUBRIZOL CORPORATION Computation of Per Share Earnings Third Quarter 1995 The computation of primary earnings per share and fully diluted earnings per share is as follows: (In Thousands of Shares Except Per Share Data)
Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------ 1995 1994 1995 1994 ------ ------ ------ ------ Average shares outstanding for computation of primary earnings per share 63,460 65,486 64,083 65,982 Add adjustment to treat shares for options exercised as if such shares were outstanding during the entire period 5 5 47 90 Add equivalent shares for unexercised options at end of period* 355 397 404 496 ------ ------ ------ ------ Average shares outstanding for computation of fully diluted earnings per share 63,820 65,888 64,534 66,568 ====== ====== ====== ====== Primary earnings per share $ .44 $ .73 $2.16 $2.13 ===== ===== ===== ===== Fully diluted earnings per share $ .44 $ .73 $2.14 $2.11 ===== ===== ===== =====
*Computed under the "Treasury Stock Method" using the higher of quoted ending or average market price. EX-27 4
5 This schedule contains summary financial information extracted from consolidated balance sheets and consolidated statements of income and is qualified in its entirety by reference to such financial statements. 0000060751 THE LUBRIZOL CORPORATION 1,000 9-MOS DEC-31-1995 SEP-30-1995 28,818 0 238,172 2,209 305,565 649,564 1,426,813 765,788 1,488,835 241,481 196,366 83,657 0 0 780,811 1,488,835 1,264,133 1,268,909 847,908 847,908 0 (592) 6,386 206,704 68,409 138,295 0 0 0 138,295 2.16 2.14
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