-----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, R7xcFwqqcP4YQkrHb0B/Q9K3YVfXko2aq0jhLgy3uMGTWE/mfnfsgzJTTBSoZbvX 0kh/XePHlalby+VTj5/MqQ== 0000832815-98-000001.txt : 19980401 0000832815-98-000001.hdr.sgml : 19980401 ACCESSION NUMBER: 0000832815-98-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYBRON CHEMICALS INC CENTRAL INDEX KEY: 0000832815 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS CHEMICAL PRODUCTS [2890] IRS NUMBER: 510301280 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-12263 FILM NUMBER: 98582077 BUSINESS ADDRESS: STREET 1: BIRMINGHAM RD STREET 2: PO BOX 66 CITY: BIRMINGHAM STATE: NJ ZIP: 08011 BUSINESS PHONE: 6098931100 MAIL ADDRESS: STREET 1: P O BOX 66 BIRMINGHAM ROAD CITY: BIRMINGHAM STATE: NJ ZIP: 08011 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ FORM 10-K (MARK ONE) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the fiscal year ended December 31, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from _______ to _______ Commission File No. 0-19983 SYBRON CHEMICALS INC. (Exact name of registrant as specified in its charter) Delaware 51-0301280 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) Birmingham Rd., P.O. Box 66, Birmingham, NJ 08011 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (609) 893-1100 ------------------------------- Securities registered pursuant to Section 12(b) of the Act: Title of each Class Name of exchange on which registered Common Stock, par value $0.01 per share American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports 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 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] The aggregate market value of the voting stock held by non-affiliates of the Registrant based upon the closing sale price of the Common Stock on March 13, 1998 as reported on the American Stock Exchange, was approximately $59,220,000. Shares of Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. At March 13, 1998, there were 5,680,048 shares of the Registrant's Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Certain portions of the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held May 29, 1998 are incorporated by reference into Part III of this Annual Report. SYBRON CHEMICALS INC. SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward- looking statements. This Annual Report contains information that is forward-looking, such as information relating to future capital expenditures and environmental cleanup costs as well as the effects of future regulation and competition. Such forward-looking information involves important risks and uncertainties that could significantly affect expected results in the future from those expressed in any forward-looking statements made by, or on behalf of, the Company. These risks and uncertainties include, but are not limited to, uncertainties relating to economic conditions, fluctuations in exchange rates of various foreign currencies, and other risks associated with foreign operations, changes in governmental and regulatory policies including environmental regulations, the pricing of raw materials, the ability of the Company to make and successfully integrate corporate acquisitions, technological developments and changes in the competitive environment in which the Company operates. TABLE OF CONTENTS Item Page PART I 1 Business...................................... 1 2 Properties.................................... 14 3 Legal Proceedings............................. 15 4 Submission of Matters to a Vote of Security Holders...................................... 16 PART II 5 Market for the Registrant's Common Stock and Related Stockholder Matters.................. 16 6 Selected Financial Data....................... 17 7 Management's Discussion and Analysis of Financial Condition and Results of Operations. 19 8 Financial Statements and Supplementary Data... 26 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....... 26 PART III 10 Directors and Executive Officers of the Registrant................................... 27 11 Executive Compensation........................ 29 12 Security Ownership of Certain Beneficial Owners and Management........................ 29 13 Certain Relationships and Related Transactions................................. 29 PART IV 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K...................... 29 Signatures.................................... 32 (i) PART 1 ITEM 1. BUSINESS General Sybron Chemicals Inc. (the "Company") is an international developer, producer and marketer of specialty chemicals used primarily in the textile wet processing and environmental markets. The Company's two operating segments, Textile Chemical Specialties and Environmental Products and Services, accounted for 70.7% and 29.3%, respectively, of total sales for 1997. The Company's Textile Chemical Specialties segment products are used in the wet processing of fabrics made from natural and synthetic fibers to enhance the aesthetic and physical characteristics of such fabrics. This segment also includes a line of proprietary and custom manufactured organic chemicals, some of which are also used as components in the Company's textile chemicals products. The Company's Environmental Products and Services segment products include ion exchange resins for use in home water softening/conditioning and industrial water treatment; biochemicals for treating industrial municipal and sanitary waste, and contaminated soil and groundwater; and specialty polymers, primarily for use as binders in toners for photocopy machines and laser printers. The Company offers over 1,600 products which are sold to over 6,000 active customers worldwide. The Company possesses numerous customized and proprietary formulations with unique performance characteristics designed to address specific customer needs. The top 10 customers accounted for approximately 12.9%, 13.3% and 14.7% of sales in 1997, 1996 and 1995, respectively. The largest customer in each such year accounted for less than 5% of consolidated sales. The Company, a Delaware corporation formerly known as Sybron Chemical Industries Inc., is the successor to a business established in the 1920's. That business became a specialty chemical company (the "Sybron Chemical Group") in the 1960's under the ownership of Sybron Corporation. The Company acquired the Sybron Chemical Group from Sybron Corporation in 1987. -1- The Company uses proprietary technology to provide value added solutions to customer problems through innovative, high quality products and intensive customer service. Management believes that the Company's products provide critical performance attributes which enhance the value of its customers' products while representing only a small portion of the customers' total product costs. The Company's extensive field sales force and marketing representatives, most of whom have had direct working experience in the industries which they service, function as applications engineers. They work in conjunction with the Company's research groups and customers to develop and sell products and applications know-how to meet customers' individual needs. On July 29, 1997, the Company acquired certain operating assets, not including manufacturing facilities, of the textile and garment processing chemicals business of Ivax Industries, Inc. and its affiliates for $14,476,000 (the "Ivax") Acquisition"). As part of the Ivax Acquisition, the Company obtained leading patents and formulations developed by Ivax for the use of enzymes to impart a "stone-washed" finish to denim. The Company intends to continue to support such product lines utilizing its existing manufacturing and distribution facilities in Wellford, South Carolina and other locations around the world. Management believes that the Ivax Acquisition will enhance the Company's position in the fast-growing garment processing segment of the textile industry. See Note 3 to the Consolidated Financial Statements. On August 26, 1997, the Company entered into a ten-year supply agreement with Dow Chemical Company ("Dow") pursuant to which Dow will provide the Company with substantially all of the Company's anion exchange resin requirements. Prior to this agreement, the Company independently manufactured its anion exchange resin requirements. Pursuant to the agreement, Dow will also supply other anion resin products that will be additions or improvements to the Company's product line. During the three months ended September 30, 1997, the Company commenced manufacture of a raw material that it had previously purchased for use in one of the products in its Environmental Products and Services segment. -2- On December 15, 1997, the Company sold the reverse osmosis membrane business of its subsidiary, Purification Products Company, formerly part of its Environmental Products and Services segment, for $1.5 million in cash. The following table sets forth the Company's sales, operating income and operating income as a percentage of sales by segment for the periods indicated: ================================================================================ Year ended December 31, (in thousands, except percentages) 1997 1996 1995 -------- -------- ------ Sales Textile Chemical Specialties $133,452 $120,301 $112,838 Environmental Products and Services 55,362 54,045 54,969 -------- -------- -------- Total $188,814 $174,346 $167,807 ======== ======== ======== Operating Income Textile Chemical Specialties $ 18,066 $ 13,480 $ 10,947 Environmental Products and Services 5,370 4,142 4,030 -------- -------- -------- Total $ 23,436 $ 17,622 $ 14,977 ======== ======== ======== Operating Income as a Percentage of Sales Textile Chemical Specialties 13.5% 11.2% 9.7% Environmental Products and Services 9.7% 7.7% 7.3% Total 12.4% 10.1% 8.9% All other financial information about business segments and foreign operations is included in Items 7 and 8 to this Annual Report on Form 10-K and is incorporated herein by reference. Unless noted otherwise, market share estimates contained in this Annual Report have been developed by the Company from internal sources and no assurances can be given regarding the accuracy of such estimates. Textile Chemical Specialties Segment The Company's textile chemical specialty products business consists of textile chemicals and related organic products. The following table sets forth net sales by product line for the years indicated: Years ended December 31, Product Line 1997 1996 1995 ---- ---- ---- (in thousands) Textile Chemicals - America & Asia(1) $ 69,157 $ 59,438 $ 57,924 - Europe(2) 57,394 55,503 48,859 Organics 6,901 5,360 6,055 -------- -------- -------- $133,452 $120,301 $112,838 ======== ======== ======== -3- (1) Includes the Company's U.S., Mexico and Asia business units as well as sales to Canada and Latin America. (2) Includes the Company's European business units as well as sales to the Middle East and Africa. Textile Chemicals. Chemical usage in the worldwide textile industry is divided among the fiber and yarn forming, fabric forming and wet processing industry segments. The Company participates in the largest segment, wet processing, which is divided into four major types: fabric preparation (scouring and bleaching), printing, dyeing and finishing. Constant developments in textile fibers, fashions, manufacturing processes and regulatory requirements create a continuing need for new chemicals. The Company capitalizes on these business opportunities through an ongoing process of product development. As part of this process, the Company's research and applications chemists respond to field requirements identified by sales and marketing personnel who maintain close contact with the Company's customers. In addition, management conducts research brainstorming sessions with both sales personnel and customers to identify product development needs. The Company markets its dyehouse products in the United States and Europe under the brand name TANATEX(R). The Company markets its fabric finishing products primarily in the United States under various names. In Europe, the Company has also developed proprietary technology and substantial market share in high-quality fabric and carpet printing applications. U.S. textile mills purchase their preparation and dyeing chemical requirements from large dyestuff suppliers and many small companies. The Company estimates the market segments for the preparation and dyeing chemicals in which it competes in the United States to be in excess of $650 million. The Company's major competitors in these segments include American Emulsions Company, Apollo Chemical Company, Ciba Specialty Chemicals, Henkel Corp., High Point Chemical Company, Piedmont Chemical Industries Inc. and Virkler Chemical Company. Products sold by the Company to these market areas include surfactants for wetting and removal of impurities, stabilizers and detergents for use in bleaching, enzymes, agents to increase dye yield and provide smooth level shades, pH control agents and materials that prevent dye from washing out or degrading. The Company also services the Canadian and Mexican markets through its own local organizations in these countries, and uses various agents and licensees to access other Latin American markets. In November 1996, the Company opened a new manufacturing facility in Ocoyoacac, Mexico, which replaces a leased facility the Company occupied in Mexico City. The new facility enhances the Company's ability to supply the fast-growing Mexican and Latin American textile industry. The Company serves the growing Asian textile chemical market from its Taiwanese manufacturing facility. During the latter part of 1995, the Company set up a subsidiary in Seoul, Korea in order to service the Korean textile market. The results of the Korean -4- subsidiary during 1996 far exceeded the Company's first year expectations and continued into 1997. However, the financial crisis that hit the southeast Asian economy during the latter half of 1997 and early 1998 adversely affected the Korean subsidiary primarily as a result of currency losses on foreign obligations. The Company continues to be optimistic about opportunities available in that market. The Company accesses the Asian market through a number of agents and distributors in the region. The U.S. fabric finishing market segment is dominated by a few large suppliers of commodity products such as glyoxal resins, acrylic polymers and melamine resins. The Company has chosen to participate in this segment as a supplier to selected specialty niches. The Company's product line includes specialty permanent press resins, hand modifiers (for products such as acetate linings, nylon jacket fabric and lace), fabric softeners for industrial use and flame retardants (used on industrial fabrics, drapes, wall coverings and curtains). Recognizing the inherent growth limitations in the North America textile industry, the Company focused its efforts in 1997 on increasing market share and improving profitability. Also, the Company expanded its sales coverage in areas such as Southern Georgia, Alabama, Tennessee, California, the Mid-West, the garment processing industry along the Texas/ Mexico border, as well as Western Canada. These marketing efforts enabled the Company to generate new business at improved margins. The Company also streamlined its product line and production to reduce costs and better serve its 800 customers. In July, 1997, as part of the Ivax acquisition, the Company obtained leading patents and formulations developed by Ivax for the use of enzymes to impart a "stone-washed" finish to denim. The Company intends to continue to support such product lines utilizing its existing manufacturing and distribution facilities in Wellford, South Carolina and other locations around the world. Management believes that the Ivax acquisition will enhance the Company's global position in the growing garment processing segment of the textile industry. See Item 1 of this Annual Report and Note 3 to the Consolidated Financial Statements. The Company has an important position in the high quality and technically oriented wet-end processing segment of the European textile industry. Management estimates the market segments for wet-end processing in which the Company competes in Europe to be in excess of $800 million. The textile manufacturing industry in Europe tends to be characterized by producers that are smaller and more oriented to fashion and quality than the producers in the United States. European customers rely to a large extent on the expertise and product development capabilities of their suppliers of dyehouse products. The Company believes that its technological capabilities and customer support services have enabled it to grow and gain a significant share of the dyehouse products market in Europe. The introduction of new products and technology played a very important role in the Company's growth. The introduction of new Cellolube(R) softeners and Protorez(R) resins for the finishing of textile products and new Plexene(R) and Tannex(R) products for the preparation of textile fabrics supported growth in 1997. Sales of environmentally friendly products meeting the severe European ecological requirements also continued to grow. These new product developments and qualitative customer support services are vital for the Company's ongoing growth. -5- Some of the major chemical and dye companies in Europe, such as BASF, Bayer A.G., Ciba Specialty Chemicals, Clariant Ltd. and ICI are major competitors of the Company, as are some larger specialty chemical manufacturers such as Bohme, CHT, Lamberti and Rudolf. The Company serves approximately 2,000 customers in the major textile centers in Europe through its direct sales forces in Austria, Community of Independent States, France, Germany, Italy, Netherlands, Portugal, Spain and the United Kingdom; and through exclusive agency and distributor agreements in places such as the Baltic States, Belgium, Bulgaria, Denmark, Egypt, Finland, Greece, Hungary, Ireland, the Middle East, Morocco, Poland, Slovenia and Turkey. The Company also services the South African textile market through its own local sales organization and manufacturing facility near Durban. Organics. The Company markets its production capabilities and process expertise to major chemical companies that require custom synthesis and fine chemicals. The demand for the Company's technology in these areas has allowed its Wellford, South Carolina plant to utilize excess capacity and has enabled the Company to expand its capabilities and increase its overall margins. Clients for these services include some of the largest chemical companies in the United States. The Company plans to continue the marketing and development of its proprietary product line and utilizing excess capacity for custom manufacturing. The organics product line was developed to capitalize on the Company's proprietary manufacturing technology in the areas of quaternization, alkylation and esterification (typical organic synthesis reactions used to make a variety of industrial chemical products). Products produced from these and other types of reactions are now sold for use as phase transfer agents, surfactants and intermediates for textile, cosmetic and various industrial applications. The Company's distillation capabilities enable the products to be purified to the exact specifications demanded by these industries. Many of the chemicals produced and sold by this unit serve as raw materials for the formulations sold by the textile groups. Therefore, the organics product line represents both a vertical integration and a branching out into new markets. Environmental Products and Services Segment The Company's environmental products and services segment consists of ion exchange resins for use in home water softening and conditioning and industrial water treatment; biochemicals for treating industrial and sanitary waste, contaminated soil and groundwater; and specialty polymers. The following table sets forth net sales by product line for the years indicated: -6- Year ended December 31, ----------------------- Product Line 1997 1996 1995 - ------------ ---- ---- ---- (in thousands) Water Treatment $32,644 $32,572 $34,750 Waste Treatment 15,600 14,915 14,119 Specialty Polymers 7,118 6,558 6,100 ------- ------- ------- $55,362 $54,045 $54,969 ======= ======= ======= Ion Exchange Resins. The Company's ion exchange resins, which are used to improve water quality, serve two distinct markets, industrial and household. Ion exchange resins are solid chemical compounds (polymers), generally in bead form, which are used primarily for the softening and demineralization of water and the removal of contaminants from other fluids. The softening and demineralization processes involve the exchange of acceptable ions which are originally chemically bound to the resins for undesirable ions present in water. The process is reversible in that the resins can be regenerated to their original ionic forms permitting continuous reuse. Depending upon the type of resin and application, resins will typically last for between three to ten years before replacement is necessary. Ion exchange resins are either anion exchange resins, which remove negatively charged ions, or cation exchange resins, which remove positively charged ions. Both cation and anion exchange resins are used in equipment for industrial applications, while only cation resins are used in home water softening equipment. The Company's ion exchange products are sold under the IONAC(R) tradename. The industrial ion exchange water treatment market involves the demineralization of incoming water for high pressure boilers and the purification of process water and other fluids. The use of untreated boiler water causes scaling of the heat exchangers which, in turn, leads to loss of efficiency or damage to costly turbine blades. Treatment of water with cation and anion exchange resins is required to reduce such risks. Electrical utilities are the largest industrial resin endusers. Other major industrial endusers include large water users such as paper mills, refineries, and petrochemical plants and those industries requiring a high level of water purity, such as semi-conductor manufacturers and laboratories. A market exists in trailers containing ion exchange equipment that provide temporary on-site water treatment to various industries and utilities. The service deionization business, which provides on-site water treatment to a number of businesses, such as the electronics industry, also continues to grow. During 1997, the Company continued to control and reduce its fixed costs supporting the ion exchange business in response to weakened market conditions and reduced profitability. On August 26, 1997, the Company entered into a ten-year supply agreement Dow pursuant to which Dow will provide the Company with substantially all of the Company's anion exchange requirements. Prior to this agreement, the Company independently manufactured all of its anion exchange resin requirements. -7- Pursuant to the agreement, Dow also will supply other anion resin products that will be additions or improvements to the Company's product line. A three-tiered channel of distribution exists in the U.S. industrial water treatment market. Resins for water treatment are sold directly to endusers by the resin manufacturer for replacement purposes and are sold to original equipment manufacturers ("OEM") for use in new equipment and to both OEM's and distributors for resale to replace resins in existing equipment. The number of major OEM's continued to decline during 1997 due to the acquisition of certain OEM's by companies such as U.S. Filter and Culligan. In early 1998, U.S. Filter announced it was acquiring Culligan. It is not possible to measure what impact, if any, this announced combination might have on the Company. The Company has developed close working relationships with the remaining major OEM's and selected distributors based on strong technical support and customer service. The ion exchange sales force, comprised of chemists and engineers, also maintains an active enduser contact program through which members of the sales force act as advisors on matters related to the various needs for quality water. This key customer service aspect of the Company's marketing strategy has enabled the Company to have its resins specified by numerous endusers. International business, representing approximately 35% of the Company's industrial ion exchange business, is conducted primarily through agents supported by the Company's in-house personnel. This area of the business grew substantially in 1997. The Company's industrial ion exchange resins are sold to approximately 150 customers. Other industrial ion exchange products manufactured and sold by the Company include electrodialysis membranes impregnated with ion exchange resins used primarily in the cleanup of automotive paint baths and in preparation of ultrapure water, and desalting kits used for low volume desalinization of water, which are primarily sold to governments and the air and marine transportation industries for emergency use, and selective ion exchange resins which are higher value added products which selectively remove contaminants from water and wastewater. In addition to the industrial market, the Company provides cation exchange resins to the U.S. household water softening market with a market share in excess of 50%. The Company believes that the market for household water treatment products is positioned for growth in the coming years, as the concern for water quality continues to grow. The Company's main softening resins, including Ionac(R) C-249, are sold directly to water softening equipment manufacturers such as Culligan International Company to whom the Company has been a major supplier for over 30 years. The Company has maintained its leading market position in the United States for years through its strong technical support and customer service to the softener manufacturers and through the introduction of new products with physical characteristics specifically suited for this market segment. Based on industry publications, the Company estimates the total U.S. market for ion exchange resins in 1997 to be approximately $175 million. Dow, Purolite Corporation and Rohm and Haas Co. are the major competitors in this segment. The ion exchange business requires significant investment in production facilities as well as specialized know-how in product synthesis, applications and customer support. As a result, it is difficult for companies not presently manufacturing ion exchange resins to enter this market. -8- Biochemicals. The biochemicals business supplies selectively adapted bacterial strains under the BI-CHEM(R) trademark and appropriate application technology under the trade name Biosystems Engineering. The Company has established a leadership position in the waste degradation field through its development of highly active bacterial strains, as well as through its understanding of the optimal conditions for application of those strains to solve field problems. In the biodegradation process, bacterial strains which are developed under laboratory conditions through a process of natural selection and adaptation, reduce or eliminate specific contaminants by breaking them down into harmless components such as carbon dioxide and water. The Company's biochemical products are used in the treatment of industrial and municipal wastewater; the elimination of hazardous contaminants in soil and ground water caused by spills and leaking underground storage tanks; the operation of household and commercial septic systems; the reduction of fat and grease in places such as household drains, retention ponds and restaurant grease traps; and a variety of biologically based agricultural products to enhance plant growth and disease resistance for turf and row crops. The Company expects these markets to experience high growth due to the increasing emphasis on treating waste problems utilizing environmentally safe methods and minimizing the quantity of waste for disposal. The Company's biochemical products are based on naturally occurring microorganisms already present in the environment. The Company's primary expertise is in isolating, selecting, adapting and growing organisms so they will degrade specific hazardous or toxic organic compounds at a much faster rate than would otherwise occur with indigenous organisms under normal conditions. Highly trained technical service and field sales engineers, supported by skilled laboratory technicians, biologists and environmental engineers, provide the necessary knowledge and experience to identify and solve customers' problems and to develop a growing base of business. For over thirty years, the Company has served the on-site waste treatment market (domestic and institutional septic systems). Over the past few years, the Company has expanded its presence in this market segment through the introduction of biological formulations for additional institutional and household utilization, such as bathroom and carpet deodorizers as well as fat and grease digesters for unclogging drains and pipes in bathrooms, kitchens and fast food restaurants. The Company supplies a biologically active formulation to a major consumer products company for use in their biological drain maintenance product. This product, which eliminates deposit buildup in drain lines and prevents its recurrence, has demonstrated technical superiority since its introduction. In 1995, the Company began supplying a new biologically active formulation designed to enhance septic tank performance. This product is being marketed by the same company that markets the drain maintenance product with the Company's formulation. The Company believes that its septic tank product is superior to other similar products currently sold in the market place and that the growth potential for septic treatment products is significant. Studies indicate that only 10% of households with a septic waste treatment system utilize septic treatment products. -9- The Company's biochemical products are developed and manufactured in a facility located in Salem, Virginia, where up-to-date research, quality control, and product development laboratories are located together with fermentation, blending and packaging operations. There are a few other companies that grow and sell bacterial strains but Management believes that the Company's products have achieved a higher degree of technological and regulatory acceptance than its direct competitors' products. Management also believes that the Company has developed unique application know-how in this area. Specialty Polymers. The specialty polymers business supplies polymer beads for use as binders in dry toners for office copy machines and laser printers and other polymeric materials for use in adhesives and coatings. The Company's products in this segment represent a small portion of the total specialty polymers market. The Company's customers include major laser printer equipment manufacturers, independent toner manufacturers and major adhesive and tape suppliers. During 1997, the Company substantially increased its sales in the rapidly growing toners market through the dedication of additional marketing and research resources to the business, resulting in new products and new customers. Employees and Labor Relations At December 31, 1997, the Company had 738 employees worldwide, of whom 70% were salaried employees and 30% were hourly employees, with 90 employees in management and administration, 230 in sales and marketing, 71 in engineering and research, and 347 in production. The hourly employees at the Company's Birmingham, New Jersey facility are covered by collective bargaining agreements with two unions. These labor agreements will expire on April 11, 1999. Employees at the Ede, Holland facility are all members of national unions, which is customary in Holland. The Company considers its relations with its union and non-union employees to be satisfactory. Risks Attendant to Foreign Operations The Company conducts its business in numerous foreign countries and as a result is subject to risks of fluctuations in exchange rates of various foreign currencies and other political and economic risks associated with international business. The Company's foreign entities report their assets, liabilities and results of operations in the currency in which the foreign entity primarily conducts its business. The foreign currencies are ultimately translated into U.S. dollars for financial reporting purposes. For the fiscal years 1997, 1996, and 1995, approximately 46.0%, 45.4% and 41.9%, respectively, of the Company's net sales were to customers outside the United States, predominantly in Western Europe, with most of the balance in Canada, Mexico and the Far East. -10- For the fiscal years 1997, 1996 and 1995, approximately 73%, 60% and 62%, respectively, of the Company's identifiable assets were in North America. The remainder of the Company's identifiable assets were predominantly in Western Europe although the Company does lease small production facilities in Taiwan and South Africa. For the fiscal years 1997, 1996 and 1995, the Company derived 48%, 44% and 56%, respectively, of its operating income from the America Division. The America Division consists of the Company's subsidiaries in the United States, Canada, Mexico and the Far East. The balance of the Company's operating income was principally derived from the Company's European subsidiaries. Raw Materials The Company purchases various raw materials including caustic soda, sulfuric acid and surface active agents from a number of suppliers and does not rely on a sole source to any material extent. One of the Company's major raw materials is styrene, which is available through a number of suppliers but which the Company obtains from one supplier with which the Company has a favorable supply agreement. The Company does not foresee any significant difficulty in obtaining necessary raw materials or supplies. Research and Development Each of the Company's individual business groups has its own dedicated research and development activities. The Company's research and development in textile chemicals has created several new products in the past year. Products developed include: environmentally friendly dye machine cleaners, EnviroShine for the interior and SurfcleanTM for the exterior; Ultralux, an innovative non-yellowing softener for unique fabric finishing; Astralplush(R) for the bulking of polypropylene and polyester fiber to impart a more luxurious hand; Astralprint(R) which greatly improves dye fastness on pigment printed fabrics; and Tanacid(R) NA, an environmentally friendly replacement for Acetic Acid. The research effort in ion exchange products is dedicated toward improving existing products and processes as well as new product development. During 1997, several new products used to make toners for desk-top laser printers were developed and introduced into the toner/polymer product line. Research efforts in the biochemical business focused on new products in the consumer, agricultural, industrial wastewater and institutional markets. In the consumer segment, the Company developed new and improved formulations for the improvement of on-site septic systems and drain maintenance. Research and development expenditures for 1997, 1996 and 1995 were $3.7 million, $4.2 million and $3.9 million, respectively. -11- Competition The Company has numerous competitors in its environmental products and services and textile businesses, a number of which have substantially greater financial and other resources than the Company. There can be no assurance that the Company will not encounter increased competition in the future. Environmental Matters The manufacture of the Company's products, and in some cases their storage, transportation and disposal, involve a number of environmental considerations. These activities are subject to federal, state, local and foreign laws and regulations concerning, among other things, solid and hazardous waste disposal, air emissions, waste water discharge, toxic substances and occupational safety. Violations of any of these laws and regulations, uncontrolled releases of toxic or hazardous materials into the environment or third party or government actions relating to environmental matters could expose the Company to significant liability. The Company believes that it has all the necessary permits to operate its plants and that it is in substantial compliance with current regulatory requirements material to the conduct of its business. Periodically, the Company is advised that it may be named as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") or similar state statutes with respect to the transport and disposal of hazardous wastes. At present, the Company is a party in a legal action in the United States regarding a site never occupied by the Company or its predecessors. In addition, the Company has received inquiry letters or notices on seven other hazardous waste sites where it could be named as a potentially responsible party. All of these claims relate to disposition of waste occurring prior to the Company's acquisition of the Sybron Chemical Group. In connection with the acquisition of the Sybron Chemical Group from Sybron Corporation, (a) the Company agreed to assume all liabilities relating to environmental matters arising as a result of the conduct of the business of the Sybron Chemical Group, and (b) Sybron Corporation agreed to make available to the Company insurance coverage of Sybron Corporation that was in force during the time that the Sybron Chemical Group was part of Sybron Corporation. Such insurance covered certain liabilities that were settled in the past relating to the disposition of waste prior to 1984 at third-party sites not occupied by the Company or its predecessor. Although there can be no assurance that the insurance carriers will accept coverage for additional such events that are not already settled, the Company believes that such insurance adequately covers its exposure. The Company does not have any additional insurance covering environmental liabilities as it believes that such insurance is not presently available on commercially reasonable terms. The Company has not reduced its environmental liabilities or recorded any assets related to potential insurance recoveries from any policies previously in force. -12- The Company has identified certain soil and groundwater contamination at its Birmingham, New Jersey facility. The Company has conducted extensive sampling plans for both soil and groundwater and has proposed a remedial action work plan (the "Work Plan") to the New Jersey Department of Environmental Protection (DEP) related to the cleanup of the Birmingham facility. DEP has conditionally approved the Work Plan and the Company has completed most of the cleanup and has performed some additional sampling based on the DEP's conditional approval. The remedial activities pursuant to the Work Plan are continuing and are expected to be completed by the end of 1998. The Company has identified certain soil and groundwater contamination at its facility in Wellford, South Carolina. The Company submitted a proposed sampling and testing program to the South Carolina Department of Health and Environmental Control (DHEC) for its review. The DHEC has approved the Company's proposed action for the next phase of the investigation and remediation of potential groundwater contamination. The remedial activities related to this program are in progress at this time. The Company has completed a number of studies to identify the extent of certain soil and groundwater contamination at its manufacturing facility in Ede, Holland and other facilities owned by third parties which are adjacent thereto (collectively, the "Dutch Facilities"). As a result of these studies, the Company is presently remediating certain contamination at its Ede facility. An environmental consulting firm is performing additional studies and has developed a plan of remediation for the Dutch Facilities. The plan was presented to the local and provincial government officials at the end of 1997. The approval process for this plan is expected to be completed by mid-year 1998. The Company has not identified any sites which may require remediation but which have not been cited specifically by regulatory authorities for noncompliance with environmental rules and regulations. Although there can be no assurance regarding the outcome of environmental proceedings, the Company believes that it has made adequate accruals to cover all cleanup and other related costs with respect to environmental problems of which it is aware. The Company believes that the environmental matters described above, individually or in the aggregate, will not have a material adverse effect on the financial position, capital expenditures, cash flow, operating results or competitive position of the Company. Patents and Trademarks The Company's products are sold under a variety of trademarks and trade names. The Company owns all of the trademarks and trade names that the Company believes to be material to the operation of its business, including the BICHEM(R), IONAC(R), AURALUXTM, TANATEX(R), JERSEY STATETM and BLUE-J(R) trademarks. The Company believes such trademarks have widespread commercial recognition in their respective fields. The Company -13- also owns various patents and considers selected patents related to its textile chemicals and biochemicals to be of commercial significance. The Company does not believe any single patent is material to the operations of its business as a whole. ITEM 2. Properties Facilities The Company's largest production facility in Birmingham, New Jersey, is located on 75 acres of a 500 acre site owned by the Company. This facility is located in a rural area approximately 23 miles from Philadelphia, Pennsylvania where it produces two major product lines: ion exchange resins and specialty polymers. This plant accounted for approximately 19%, 24% and 25% of 1997, 1996 and 1995 total sales, respectively. The Company presently has no plans to sell or to develop its undeveloped real estate in New Jersey. At December 31, 1997, the Company occupied five other U.S. facilities: (i) a 22 acre site owned in Wellford, South Carolina producing textile chemicals and organics, which accounted for approximately 24%, 26% and 28% of 1997, 1996 and 1995 total sales, respectively, (ii) a two-acre owned facility in Salem, Virginia producing biochemicals, (iii) a five-acre owned facility in Salem, Virginia used for packaging and warehousing biochemicals, (iv) a two-acre leased facility in Dalton, Georgia used for warehousing textile chemicals, and (v) a nine-acre site owned in Norwich, Connecticut producing textile chemicals. The Company owns a production center consisting of a five-acre facility in Ede, Holland producing textile chemicals. This plant accounted for approximately 30%, 32% and 29% of 1997, 1996 and 1995 total sales, respectively. The Company also leases small production facilities in South Africa and Taiwan. In 1996 the Company completed a new production facility in Ocoyoacac, Mexico on land owned by the Company. This facility replaces a production facility in Mexico City that was previously leased. The Company has ample manufacturing capacity for most of its product lines for its current level of business including anticipated growth for at least the next two years. With respect to certain ion exchange resins, the Company has supplemented its production capacity when necessary by making purchases from other suppliers to meet peak customer demands. The Company has been able to increase manufacturing capacity as needed in the past without significant capital expenditures through the development of process improvements and modifications. In addition to offices maintained at its production facilities, the Company leases sales office space in (i) Vienna, Austria, (ii) Burlington, Canada, (iii) Oldham, England, (iv) Lyon, France, (v) Krefeld, Germany, (vi) Milan, Italy, (vii) Yokohama, Japan, (viii) Seoul, Korea, (ix) Guimaraes, Portugal, (x) Moscow, Russia, (xi) Barcelona, Spain and (xii) -14- Elmwood Park, New Jersey. The Company's office and warehouse space is currently adequate for its needs. The leases are for total periods of one to five years at commercial rates. Management believes that suitable equivalent facilities could be obtained in each of the cities in which the Company maintains offices. ITEM 3. Legal Proceedings Periodically, the Company is advised that it may be named as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") or similar state statutes with respect to the transport and disposal of hazardous wastes. At present, the Company is a party in a legal action in the United States regarding a site never occupied by the Company or its predecessors. In addition, the Company has received inquiry letters or notices on several other hazardous waste sites where it could be named as a potentially responsible party. All of these claims relate to the disposition of waste occurring prior to the Company's acquisition of the Sybron Chemical Group. In connection with that acquisition, the Company agreed to assume all liabilities relating to environmental matters arising as a result of the prior conduct of the business of the Sybron Chemical Group. The Company has not identified any sites which may require remediation but which have not been cited specifically by regulatory authorities for noncompliance with environmental rules and regulations. There are also pending against the Company several claims and lawsuits arising in the normal course of business. Such claims and lawsuits include allegations of patent infringement, injuries from the inhalation of hazardous chemicals and breach of contract. The Company believes it has adequate insurance to cover any such claims subject to a self-insurance retention of $1,000,000. Similarly, the Company has outstanding several claims and lawsuits arising in the normal course of business against various other parties. In November 1997, the Company was served with a Complaint filed by William Steiner, a stockholder, on behalf of himself and all others similarly situated, against the Company, Messrs. Tomfohrde, Barton, and Schorr (in their capacities as directors of the Company) and Dr. Klein and Mr. Schroeder (in their capacities as directors and officers of the Company) in the Court of Chancery of the State of Delaware in and for New Castle County. The Complaint alleged that the defendant directors and officers breached their fiduciary duties to the public stockholders in connection with the offer made by the Investor Group to the Company to acquire the outstanding shares of Common Stock not already owned by the members of the Investor Group by allegedly failing to solicit and consider competing bids for the Company and by offering an allegedly inadequate price for the publicly held shares. Plaintiff sought as relief an order (i) declaring the suit a proper class action, (ii) ordering the defendants to carry out their fiduciary duties, (iii) ordering the defendants to account to plaintiff and the purported class members for all present and future damages, (iv) awarding attorney fees and costs, including expert fees, and (v) granting such other relief as the court may deem appropriate. The Merger Agreement that ultimately resulted from the Investor Group's offer was terminated on February 11, 1998. A stipulation of dismissal of the Steiner lawsuit was filed with the Court of Chancery by the parties on March 30, 1998. -15- In addition to the lawsuit described above, in October 1997, a similar lawsuit was purportedly filed by Michael Fegan, on behalf of himself and all others similarly situated, against the Company and certain of its officers and directors in the Court of Chancery of the State of Delaware in and for New Castle County. The Company was informed by the purported named plaintiff that the Fegan Complaint had been filed without his knowledge and consent and that he had so informed the law firm that filed the Complaint. On October 28, 1997, attorneys for the plaintiff in the Fegan Complaint filed a Notice of Dismissal dismissing the lawsuit without prejudice, subject to the approval of the Court. The Court so ordered the dismissal on November 5, 1997. The Company believes that the legal proceedings described above, individually or in the aggregate, will not have a material adverse effect on the financial position, cash flow or operating results of the Company. ITEM 4. Submission of Matters to a Vote of Security Holders Not applicable. PART II ITEM 5. Market for the Registrant's Common Stock and Related Stockholder Matters. Since its inception the Company has not paid any dividends on its Common Stock (the "Common Stock"). Under the terms of its existing bank debt agreement, the Company is required to comply with certain debt covenants which require certain levels of cash flow and equity to be maintained. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this Annual Report and Note 7 to the Consolidated Financial Statements also contained herein. The payment of any future dividends will be at the discretion of the Company's Board of Directors and will depend upon, among other factors, the Company's earnings, financial condition, cash flow and the covenants contained in the bank agreement. The Company has no present intention to pay cash dividends on its Common Stock. Based upon record ownership as of February 28, 1998, the approximate number of record holders of the Common Stock is 600. A significant number of shares of the Common Stock is held in street name by various institutions for the benefit of their clients. The Common Stock began trading on The American Stock Exchange ("AMEX") under the symbol "SYC" on October 10, 1996. Prior to October 10, 1996, the Common Stock traded on The Nasdaq National Market under the symbol "SYCM". The following table sets forth the high and low sale prices of the Common Stock as reported by the Nasdaq National Market and the AMEX for each of the quarters indicated. -16- 1996 High Low First Quarter......................... $13 1/2 $10 1/4 Second Quarter........................ 14 1/2 12 1/2 Third Quarter.......................... 15 3/4 13 1/2 Fourth Quarter......................... 16 5/8 13 3/4 1997 High Low First Quarter.......................... $18 1/4 $15 3/4 Second Quarter......................... 19 5/8 16 Third Quarter.......................... 25 5/8 19 1/8 Fourth Quarter......................... 34 1/2 25 ITEM 6. Selected Financial Data The following selected financial data has been derived from the Company's annual financial statements and should be read in conjunction with the consolidated balance sheet at December 31, 1997 and 1996 and the related consolidated statements of income and of cash flows for the three years ended December 31, 1997 and notes thereto. See Item 8, Financial Statements and Supplementary Data, contained in this Annual Report.
Year Ended December 31, 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- (In thousands, except share and per share amounts) Statement of Operations: Net sales $188,814 $174,346 $167,807 $145,726 $135,972 Operating income 23,436 17,622 14,977 15,756 15,281 Income before extraordinary items and cumulative effect of accounting changes 10,640 8,514 6,329 7,638 7,453 Extraordinary items (1) -- -- -- -- (2,197) Cumulative effect of accounting changes (2) -- -- -- -- (9,316) Net income (loss) 10,640 8,514 6,329 7,638 (4,060) Income per share before extraordinary items and cumulative effect of accounting changes $ 1.88 $ 1.51 $ 1.12 $ 1.35 $ 1.32 Extraordinary items (1) -- -- -- -- (.39) Cumulative effect of accounting changes (2) -- -- -- -- (1.65) Net income (loss) per share Basic 1.88 1.51 1.12 1.35 (.72) Diluted 1.84 1.50 1.12 1.35 (.72) Weighted average shares outstanding Basic 5,666,683 5,650,560 5,650,560 5,653,035 5,650,560 Diluted 5,793,770 5,669,893 5,650,560 5,655,481 5,650,562
-17-
Year Ended December 31, 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- (In thousands) Balance Sheet Data: Cash and cash equivalents $ 26,592 $ 14,909 $ 11,284 $ 6,975 $ 9,719 Working capital 43,431 38,667 38,495 35,507 29,535 Total assets 150,233 117,064 111,329 93,934 91,805 Long-term debt 27,390 17,787 22,532 20,366 20,777 - -------------------------------- (1) The extraordinary items represent the loss, net of taxes and other expenses, on the extinguishment of certain long-term debt prior to scheduled maturity. (2) The Company adopted Statement of Financial Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, and Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, on January 1, 1993.
-18- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth certain information about the Company's two business segments
Year Ended December 31, 1997 1996 1995 -------------------- -------------------- ------------------ % of % of % of Amount Sales Amount Sales Amount Sales ------ ----- ------ ----- ------ ----- (dollar amounts in thousands) Sales: Textile Chemical Specialties $133,452 70.7% $120,301 69.0% $112,838 67.2% Environmental Products and Services 55,362 29.3 54,045 31.0 54,969 32.8 ------- ---- ------- ---- -------- ----- Total $188,814 100.0% $174,346 100.0% $167,807 100.0% ======== ====== ======== ====== ======== ====== Cost of Sales: Textile Chemical Specialties $77,556 58.1% $71,785 59.7% $ 70,393 62.4% Environmental Products and Services 37,624 68.0 38,405 71.1 40,152 73.0 ------ ------ ------ ---- ------- ---- Total $115,180 61.0% $110,190 63.2% $110,545 65.9% ======== ===== ======== ===== ======== ===== Gross Margin: Textile Chemical Specialties $55,896 41.9% $ 48,516 40.3% $ 42,445 37.6% Environmental Products and Services 17,738 32.0 15,640 28.9 14,817 27.0 ------ ------ ------ ---- -------- ---- Total $73,634 39.0% $ 64,156 36.8% $ 57,262 34.1% ======= ===== ======= ===== ======= ===== Operating Expense: Textile Chemical Specialties $37,830 28.4% $ 35,036 29.1% $ 31,498 27.9% Environmental Products and Services 12,368 22.3 11,498 21.3 10,787 19.6 ------ ------ ------ ---- -------- ----- Total $50,198 26.6% $ 46,534 26.7% $ 42,285 25.2% ======= ===== ======= ===== ======= ===== Operating Income: Textile Chemical Specialties $18,066 13.5% $ 13,480 11.2% $ 10,947 9.7% Environmental Products and Services 5,370 9.7 4,142 7.7 4,030 7.3 ------ ------ ------- ---- -------- ---- Total $23,436 12.4% $ 17,622 10.1% $ 14,977 8.9% ======= ===== ======= ===== ======= =====
-19- Overview The Company had a record year in 1997. Sales increased 8.3% to $188.8 million from $174.3 million in 1996. Operating income for the year was $23.4 million, an increase of 33.0% over the $17.6 million recorded the prior year. Net income was $10.6 million or $1.88 per share, compared with $8.5 million or $1.51 per share in 1996, an increase of 25.0%. On a fully diluted basis, net income was $1.84 per share versus $1.50 per share for 1996. The Company acquired the garment processing and textile chemical business from Ivax Industries at the end of July 1997. This business added approximately $8.2 million in sales for the five months it was owned by the Company. The Company also sold its membrane business in mid-December. Sales for this business were $3.1 million in 1997. In October 1997, the Company received a proposal from an investor group comprised primarily of certain executive officers of the Company and Citicorp Venture Capital Ltd. to purchase for cash all outstanding shares not already owned by them. On February 11, 1998, the merger agreement was terminated. The action came after the Company and the investor group were informed by the Special Committee of the Company's Board of Directors that it was withdrawing its support for the transaction. The Company recorded a charge of $1.3 million in the fourth quarter of 1997 for costs associated with the terminated merger agreement. See Item 1. Business - General in this Annual Report. Operations 1997 Compared to 1996 Sales for 1997 improved 8.3% over 1996 led by the Textile Chemical Specialties segment, which grew 10.9%. Sales in the Environmental Products and Services segment increased 2.4% compared with the prior year. The growth in the Textile Chemical Specialties segment resulted primarily from combined North America and Asia textile chemical sales which increased 18.2% over 1996. This was the result of: the initial five months of sales from the acquisition in late July of the garment processing and textile chemical business from Ivax Industries; strong growth in Mexico, Taiwan, Korea and Canada; new product introduction and market expansion in several southern states; and increased custom toll manufacturing in the related organics business. These more than offset the continued weakness in the U.S. textile markets. Sales in Europe improved 2.4%, in terms of U.S. dollars. This resulted from a substantial physical quantity increase of 15.0% due to geographic market expansion and new product sales, which more than overcame an overall 1.3% average selling price decrease and a net negative currency impact of approximately 14% primarily related to the stronger U.S. dollar versus the Dutch guilder. -20- The three major product lines in the Environmental Products and Services segment all showed modest improvements over the prior year. The increase in the ion exchange product line was primarily a result of new and regained customers and an overall volume increase in the household resin market. The full-year impact of the acquisition of Chemical Images in June 1996 and new toner business contributed to the improvement in the specialty polymer product line. The biochemical product line increase was due to: substantial improvements in Europe primarily in consumer, marine, industrial and municipal applications; and increased usage in the treatment of industrial and municipal wastewater in the U.S.; all somewhat offset by a downturn in the consumer product line in the U.S. Overall average selling prices in this segment were relatively flat in 1997 versus the prior year. The gross margin for 1997 was 39.0%, a substantial improvement over the 36.8% experienced the prior year. Gross margins in the Textile Chemicals Specialties segment increased to 41.9% versus last year's rate of 40.3%. Margins in the North America and Asia markets improved to 32.2% in 1997 from last year's 29.4% due to: new product sales which command a higher margin; the elimination of several low margin products in the U.S.; a slight decrease in raw material costs; substantial sales increases in Mexico which carry higher margins; and additional cost controls. In the organics chemical business, margins also improved primarily as the result of the increase in higher margin toll manufacturing. The margins in Europe increased to 55.0% from 53.1% in 1996. This improvement was due to the continued favorable impact of a weaker Dutch guilder as compared with certain other European currencies, coupled with new product sales that carry higher margins. Year-to-year improvements in all the product lines in the Environmental Products and Services segment resulted in a gross margin of 32.0% for this segment, as compared to 28.9% in 1996. Margins in the ion exchange product line were impacted by lower raw material costs, production related efficiencies and improved fixed cost controls. These offset a slight decrease in average selling prices and higher freight costs. Costs for styrene, the major raw material, remained stable. Production efficiencies and improved cost controls helped improve the margins in the specialty polymers product line. Biochemical margins increased over 1996 due to an overall average selling price increase, production efficiencies and a favorable product/customer mix. Operating expenses as a percent of sales were 26.6% in 1997, essentially unchanged from 1996's mark of 26.7%. The Textile Chemical Specialties segment expenses as a percent of sales in 1997 decreased to 28.4% from 29.1% in 1996, primarily the result of favorable impacts from Europe due to the Dutch guilder/dollar exchange rate and lower environmental costs. Operating expenses as a percent of sales in the Environmental Products and Services segment increased to 22.3% from 21.3% last year. This was primarily the result of increased legal accruals (primarily in the ion exchange product line), higher provisions for doubtful accounts in specialty polymers, and overall stepped-up marketing efforts in several of the segment's product lines. The Company's provision for income taxes was computed using applicable prevailing income tax rates. The Company's effective tax rate of 41.1% for 1997 was only slightly higher than last year's rate of 40.9%. -21- Other income (expense) was ($5.4) million for 1997 versus ($3.2) million in last year's comparable period. The increase was primarily due to $1.3 million in costs associated with the terminated merger agreement transaction coupled with $.6 million in foreign exchange losses related to the devaluation of Asian currencies, primarily the Korean won. 1996 Compared to 1995 Total sales increased 3.9% in 1996 as compared to the prior year on the strength of a 6.6% improvement in the Textile Chemical Specialties segment. Sales in the Environmental Products and Services segment declined by 1.7% in 1996 compared to 1995. In the Textile Chemical Specialties segment, sales in the North America, Asia and Europe divisions improved over the prior year. North America and Asia division sales improved by 2.6% over 1995. A substantial increase in textile chemical volume in Mexico, smaller increases in Canada and Taiwan, new product sales in the U.S., and the impact of the first full year of sales in Korea more than offset the continued general weakness in the U.S. textile market, the decline in the related organic chemicals business due to reduced customer toll manufacturing requirements, and a slight drop in average U.S. selling prices. Europe division sales improved 13.6% in terms of U.S. dollars and 16.5% in terms of local currencies. Physical volume increased 11.5% primarily due to the Company's continued success in penetrating newer geographical markets as well as new product introductions. Overall selling prices in terms of Dutch guilders improved versus the prior year. Sales in the Environmental Product and Services segment were favorably impacted by improvement in two product lines. Biochemical sales improved due to increased volume in products for the institutional, consumer and bioremediation markets, combined with a slight selling price increase. Specialty polymers sales improved due to an 8.1% increase in average selling prices and the impact of the mid-year purchase of the specialty polymers business of the Chemical Images Co. More than offsetting these improvements was a substantial decline in membrane sales which resulted from significantly lower export volume and an 8.5% average selling price decrease. Continued weak market conditions in the U.S. and a 2.6% drop in average selling prices resulted in lower sales volume in the ion exchange product line. The overall gross margin for 1996 increased to 36.8% from 34.1% in 1995 as both of the Company's segments showed year-to-year improvements. In the Textile Chemicals Specialties segment, the gross margin increased to 40.3% from the prior year's 37.6%. The gross margin in North America and Asia increased almost 1 percentage point to 29.4% due to reduced freight expenses, production improvements and lower raw material costs. These were partially offset by a slight reduction in selling prices and higher manufacturing expenses. Selling price increases, new products selling at higher margins, lower raw material costs and the continued favorable currency impact of a weaker Dutch guilder as compared with the other European currencies, all combined to increase the gross margin in Europe to 53.1% from 49.6% in 1995. -22- The gross margin in the Environmental Products and Services segment was 28.9% in 1996, an improvement of almost two percent compared to the prior year. Gross margin in the ion exchange product line improved as a result of lower raw material costs, primarily styrene, and production cost controls, partially offset by lower selling prices, increased freight costs, unfavorable manufacturing variances and reduced inventory levels. Gross margin also increased significantly in the specialty polymer product line due to higher overall average selling prices, reduced raw material costs, principally styrene, and the favorable impact of higher margins gained from the June 1996 purchase of the Chemical Images specialty polymer business. Biochemical product line margins showed a small increase due to a slight decrease in raw material costs combined with a slight increase in selling prices. The membrane product line gross margin declined in 1996 as compared with 1995 due to overall average selling price decreases and unfavorable manufacturing inventory variances which were partially offset by lower raw material costs and continued cost controls. Operating expenses as a percent of sales for 1996 increased to 26.7% as compared to 25.2% for 1995. In the Textile Chemical Specialties segment, expenses as a percentage of sales increased as a result of headcount additions in R&D and marketing in North America and increased environmental, compensation and legal costs. Similarly, marketing staff additions, higher legal and compensation costs and the slightly lower overall sales also resulted in an increase in the Environmental Products and Services segment expenses as a percent of sales. The Company's provision for income taxes was computed using applicable prevailing income tax rates. The Company's effective tax rate of 40.9% for 1996 was essentially equal to the applicable rate for 1995. Other income (expense) was ($3.2) million for 1996 versus ($4.3) million in 1995. Lower interest expense related to a reduction in the amount of outstanding debt, lower amortization expense and the absence of a large non-recurring 1995 translation loss on Europe intercompany accounts resulted in over a $1 million favorable year-to-year comparison. Environmental Matters The manufacture of the Company's products, and in some cases their storage, transportation and disposal, involve a number of environmental considerations. See Item 1 Environmental Matters - in this Annual Report and Note 11 - Commitments and Contingencies, to the Company's Consolidated Financial Statements contained in this Annual Report. During 1997, 1996 and 1995 the Company incurred approximately $79,000, $172,000 and $389,000, respectively, of costs in connection with the ongoing review of possible soil and ground-water contamination at its Birmingham, New Jersey facility and approximately $7,000, $26,000 and $10,000, respectively, in measuring the extent of contamination at its Wellford, South Carolina facility. -23- Since July 1987, the Company has incurred approximately $4.7 million in costs in order to identify and remediate certain soil and groundwater contamination at various facilities which it currently or formerly occupied in the State of New Jersey. Approximately $4.2 million of these expenditures were charged against the liability established at the time the Company acquired the Sybron Chemical Group from Sybron Corporation. The remaining expenditures have been treated as land improvements. During 1997, 1996, and 1995 the Company spent approximately $122,000, $66,000 and $70,000, respectively, to identify and remediate certain soil contamination at its facility in Ede, Holland which existed at the time the Company acquired this facility from Sybron Corporation. Approximately $75,000 and $57,000 of the costs incurred in 1997 and 1996, respectively, were charged against amounts previously reserved. The cost of remediating contamination at the Company's existing facilities is not expected to have a material adverse effect on the Company's annual operating results, cash flow or financial condition. At December 31, 1997, the Company has accrued approximately $1,349,000 to offset future environmental assessment and remediation costs. Liquidity and Capital Resources Cash and cash equivalents of $26.6 million as of December 31, 1997 were $11.7 million over the December 31, 1996 balance of $14.9 million, an increase of 78.4%. Net cash flow generated by operating activities totaled $25.6 million for the year versus $17.5 million for the same period in 1996. This increase principally was due to increased net income and higher payable balances, including a $3.8 million tax refund paid in error by the Netherlands government. This refund was returned to the taxing authorities early in 1998. Higher accounts receivable and inventory balances due to increased business activity were the principal uses of operating cash. Net cash used by investing activities totaled $22.3 million for 1997 as compared with $7.5 million for the comparable 1996 period. This increase was the result of the Ivax Acquisition in July 1997, coupled with higher capital expenditures in 1997 due to manufacturing plant upgrades in the U.S. and Mexico. Net cash provided by financing activities for the year was $11.0 million primarily due to funding the Ivax acquisition versus a $5.1 million net cash usage for the year 1996. The Company has a $40 million unsecured multi-currency revolving line of credit with CoreStates Bank, which expires in February 2002. The amount owed under this credit facility was $17.7 million as of December 31, 1997. -24- The Company expects its 1998 capital expenditures for existing operations to be somewhat lower than the 1997 levels. The Company believes that anticipated cash flow from operations, its working capital and amounts available under its revolving credit facility will be sufficient to meet the Company's liquidity and capital requirements through 1998. However, the Company may seek, as required, equity or debt financing to provide capital to fund strategic business opportunities, including possible business acquisitions, which could require substantial capital outlays. The timing and amount of such potential capital requirements cannot be determined at this time and will depend on a number of factors, including the nature and size of strategic business opportunities that the Company may elect to pursue. Foreign Exchange The Company has subsidiaries in Europe, Asia, Africa and the Americas and, for all subsidiaries, except the Company's Mexican subsidiary, the Company has determined the functional currencies are the subsidiaries' local currency. The Company's Mexican subsidiary's functional currency is considered to be the U.S. dollar because of that country's designation as a highly inflationary economy. The Company has a large manufacturing facility in Ede, Holland where chemicals are manufactured and sold either directly to customers or to various subsidiaries, which are principally in Europe. Intercompany balances arise between the Dutch operation and various subsidiaries. Overall, the Company recognized an exchange loss of $0.8 million in the twelve month period ended December 31, 1997 versus currency exchange income of $0.1 million in the similar period in 1996. Year 2000 Based on a preliminary study, the Company expects to spend and expense approximately $.2 million from 1998 through 1999 to modify its computer information systems enabling proper processing of transactions relating to the year 2000 and beyond. The Company continues to evaluate appropriate courses of corrective action, including replacement of certain systems whose associated costs would be recorded as assets and amortized. The Company has initiated a project in Europe to replace existing business and accounting systems. The new system will accommodate the adoption of the Euro currency, and is also Year 2000 compliant. The Company expects to incur capital expenditures of less than $1 million, primarily for computer hardware and software, related to this system implementation project. Such amounts are included in the estimated capital expenditures discussed above. Internal staffing costs and all reengineering costs, if any, associated with this and any other system implementation project will be expensed as incurred. Accordingly, the Company does not expect the amounts required to be expensed over the next two years to have a material effect on its financial position or results of operations nor does it currently anticipate any material disruption in its business operations as a consequence of the Year 2000 issue. -25- Inflations and Trends United States - Average selling prices in the U.S. increased by less than 0.2% during 1997. Overall raw material costs dropped 1.5%. The cost of styrene, one of the major raw materials in the Environmental Products and Services segment, remained relatively flat in 1997 versus the prior year. Europe - Average selling prices in the Europe division's textile chemical product line dropped 1.3% while raw material costs increased slightly. Sales growth in the Textile Chemical Specialties segment for 1998 should be favorably impacted by the full year effect of the Ivax Acquisition. The Company is focusing on increasing market penetration in existing major markets such as the U.S. and Europe and growing developing markets in Latin America, Asia, Eastern Europe and the Middle East. The Company will continue new product development including more environmental friendly alternatives for existing products. Growth opportunities in the Environmental Product and Services segment include: further penetration into the toner and laser printer markets; increased share of the U.S. and export ion exchange markets; and expansion of the biochemical waste treatment and consumer/ institutional business in the U.S. and Europe. In addition, the Company continues to actively pursue niche acquisitions that, together with synergies gained with the existing businesses, would provide both top and bottom line growth and accretive earnings per share. ITEM 8. Financial Statements and Supplementary Data The Consolidated Financial Statements and supplementary data as set forth in Item 14(a)(1) and (2). ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None -26- PART III ITEM 10. Directors and Executive Officers of the Registrant The executive officers and directors of the Company, their ages and their positions are set forth below: Name Age Position Richard M. Klein......... 60 President, Chief Executive Officer and Director Stephen R. Adler......... 48 Vice President, Human Resources Joe J. Belcher........... 56 Vice President-Textile Chemicals, North America Peter de Bruijn.......... 49 Managing Director,Europe Division Albert L. Eilender....... 55 Executive Vice President, Corporate Development Dennis J. Fiore.......... 46 Vice President, Finance and Chief Financial Officer John McPeak.............. 43 Vice President, Biochemicals John H. Schroeder........ 47 Executive Vice President Environmental Products and Services and Director David I. Barton.......... 59 Director Paul C. Schorr IV........ 30 Director Heinn F. Tomfohrde, III.. 64 Director Dr. Klein has been a director of the Company and its President and Chief Executive Officer since its inception in 1987. Since 1969 and until July 1987, Dr. Klein served in various managerial positions with the Sybron Chemical Group, becoming its senior executive officer in 1978. He holds a Ph.D. in Chemistry from the University of Illinois. Dr. Klein currently serves as a director of the Nash Engineering Company and Mannington Mills, Inc. He is a nominee for director at the 1998 Annual Meeting of Stockholders. Mr. Adler has been the Vice President, Human Resources for the Company and the Sybron Chemical Group since 1984. Mr. Belcher has served in various managerial positions within the Company since 1984. In April 1995, he was promoted to Vice President-Textile Chemicals, North America with responsibility for the Company's textile chemical business in North America. From July 1987 through March 1995, he was General Sales Manager-Textile Chemicals. Mr. de Bruijn has served in various managerial positions within the Company and the Sybron Chemical Group since January 1972. In January 1995, he was promoted to Managing Director Europe Division with managerial responsibility for the Company's textile chemical business in Europe. -27- Mr. Eilender joined the Company in May 1996 as Executive Vice President, Corporate Development. Prior to joining the Company, he spent twenty-eight years at Cambrex Corporation and its predecessor company in various managerial positions. Mr. Fiore joined the Company in August 1997 as Vice President, Finance and Chief Financial Officer. He also holds the positions of Treasurer and Corporate Secretary. Prior to joining the Company, he was Vice President, Finance and Chief Financial Officer of InterMetro Industries Corporation. Mr. McPeak has served in various managerial positions within the Company since 1988. Since September 1995 he has had managerial responsibility for the Company's biochemical business. From August 1993 to August 1995, he was the Operations Manager for the Biochemical Division. Mr. Schroeder has served in various managerial positions within the Company since 1983 and became a director of the Company in 1992. He was promoted to Executive Vice President Environmental Products and Services in March 1996 with responsibility for all business activities for the Company's Environmental Products and Services segment. His term as a director will expire in 1999. Mr. Barton has been a director of the Company since July 1996 and served as Chairman, President and Chief Executive Officer of OSi Specialties, Inc. from March 1993 until October 1995. During the previous five years, Mr. Barton was Senior Vice President and General Manager of the Specialty Derivatives business at International Specialty Products, Inc. Mr. Barton currently serves as a director of the University of Connecticut Foundation. His term as a director will expire in 2000. Mr. Schorr has been a director of the Company since February 1997 and has been a Vice President of Citicorp Venture Capital Ltd. since 1996. Prior to joining Citicorp in 1996, Mr. Schorr was a consultant with McKinsey & Company, Inc. Mr. Schorr currently serves as a director of Inland Resources and Fairchild Semiconductor. He is a nominee for director at the 1998 Annual Meeting of Stockholders. Mr. Tomfohrde has been a director of the Company since June 1992 and served as President, Chief Operating Officer and Director of International Specialty Products Inc. and its predecessor company, GAF Chemicals Corporation, from 1987 to 1991. Since 1991, Mr. Tomfohrde has been an independent business consultant and currently serves as a director of Harris Chemical Group, Inc. and McWhorter Technologies Inc. His term as a director will expire in 2000. -28- ITEM 11. Executive Compensation The information required by this Item 11 is incorporated herein by reference to such information included in the Company's Proxy Statement for the 1998 Annual Meeting of Stockholders. ITEM 12. Security Ownership of Certain Beneficial Owners and Management The information required by this Item 12 is incorporated herein by reference to such information included in the Company's Proxy Statement for the 1998 Annual Meeting of Stockholders. ITEM 13. Certain Relationships and Related Transactions The information required by this Item 13 is incorporated herein by reference to such information included in the Company's Proxy Statement for the 1998 Annual Meeting of Stockholders. PART IV ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) (1) Financial Statements Page Report of Independent Accountants....................... F-2 Consolidated Balance Sheets as of December 31, 1997 and 1996.............................................. F-3 Consolidated Statements of Income for the years ended December 31, 1997, 1996 and 1995................ F-4 Consolidated Statement of Stockholders' Equity for the years ended December 31, 1997, 1996 and 1995.......... F-5 Consolidated Statement of Cash Flows for the years ended December 31, 1997, 1996 and 1995................ F-6 Notes to Consolidated Financial Statements.............. F-7 -29- (2) Financial Statement Schedules The following financial statement schedule for the years ended December 31, 1997, 1996 and 1995 is filed as part of this report and should be read in conjunction with the consolidated financial statements set forth in Item 8. Page Schedule VIII - Valuation and Qualifying Accounts....... S-1 Schedules other than that listed above are omitted because they are not applicable or because the required information is given in the consolidated financial statements and notes thereto. (3) Exhibits and Exhibit Index Exhibit No. Description ----------- ----------- 3.1 Form of Restated Certificate of Incorporation of Sybron Chemicals Inc. (1) 3.2 Bylaws of Sybron Chemicals Inc. (1) 3.3 Certificate of Ownership and Merger Merging Sybron Chemicals, Inc. into Sybron Chemical Industries Inc. (2) 3.4 Agreement and Plan of Merger dated January 28, 1993 between Sybron Chemicals Inc. and Sybron Chemical Industries Inc. (2) 10.4* Savings & Thrift Plan, as amended (1) 10.5* 1992 Stock Option Plan (1) 10.6* Share Participation Plan (1) 10.7 Loan Agreement between Sybron Chemicals Inc. and CoreStates Bank, N.A. dated February 18, 1997. (4) 10.8 Note Agreement dated as of August 1, 1992, $17,000,000 8.17% Senior Notes due August 14, 2002 by and among Sybron Chemicals Inc. and The Prudential Insurance Company. (2) 10.8-A First Amendment to Note Agreement dated as of August 1, 1992, by and among Sybron Chemicals Inc. and The Prudential Insurance Company. (2) 10.8-B Amendment and Assumption Agreement No. 2 to Note Agreement dated as of August 1, 1992 by and among Sybron Chemicals Inc. and The Prudential Insurance Company. (2) 10.10* Executive Bonus Plan (2) 10.11* Employment Agreement, dated April 19, 1996, with Albert L. Eilender. (4) 10.12 Asset Purchase Agreement by and among Ivax Corporation, Ivax Industries Inc., Ivax Industries Canada, Inc., Ivax Industries U.K., Ltd. and Sybron Chemicals Inc. dated July 29, 1997. (5) 21 Subsidiaries of the Registrant (6) 24 Powers of attorney of directors of the Registrant. (6) 27 Financial Data Schedule (6) - -------------------- (1) Previously filed as an Exhibit to the Registrant's Registration Statement on Form S-1 (File No. 33-46091) and incorporated herein by reference. (2) Previously filed as an Exhibit to the Registrant's 1992 Form 10-K and incorporated herein by reference. (3) Previously filed as an Exhibit to the Registrant's 1994 Form 10-K and incorporated herein by reference. (4) Previously filed as an Exhibit to the Registrant's 1996 Form 10-K and incorporated herein by reference. (5) Previously filed as an Exhibit to Registrant's Form 8-K filed October 13, 1997 and incorporated herein by reference. (6) Filed herewith. * Denotes management contract required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K. -30- (b) Reports on Form 8-K The following reports on Form 8-K were filed during the quarter ended December 31, 1997. (1) Form 8-K, filed on October 14, 1997, regarding the Company's acquisition of certain of the operating assets of Ivax Industries, Inc., Ivax Industries Canada, Inc. and Ivax Industries U.K. Ltd. (2) Form 8-K, filed on December 16, 1997, regarding the execution of an Agreement and Plan of Merger, dated as of December 11, 1997, by and among the Company, Sybron Holdings, Inc., a Delaware corporation, and Sybron Acquisition Corp., a Delaware corporation (the "Merger Agreement"). (3) Form 8-K, filed on January 8, 1998 for the purpose of filing a press release of the Company, dated January 7, 1998, regarding the rejection by the Company of an unsolicited offer by a third party to acquire all of the Company's stock in a merger transaction. (4) Form 8-K, filed on February 17, 1998, regarding the termination of the Merger Agreement. -31- SIGNATURES AND POWER OF ATTORNEY 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 March 30, 1998. SYBRON CHEMICALS INC. By /s/ RICHARD M. KLEIN ------------------------ RICHARD M. KLEIN Chairman of the Board, President, and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 30, 1998 by the following persons on behalf of the Registrant and in the capacities indicated. Signature Title --------- ----- /s/ RICHARD M. KLEIN Chairman of the Board, President, --------------------- RICHARD M. KLEIN and Chief Executive Officer /s/ DENNIS J. FIORE Vice President, Finance, Chief --------------------- DENNIS J. FIORE Financial Officer, Secretary and Treasurer /s/ * Director ---------------------- DAVID I. BARTON /s/ * Director ----------------------- PAUL C. SCHORR, IV /s/ * Director ----------------------- JOHN H. SCHROEDER /s/ * Director ----------------------------- HEINN F. TOMFOHRDE, III * By: /s/ RICHARD M. KLEIN - ------------------------------------- RICHARD M. KLEIN, Attorney-in-fact -32- Index to Consolidated Financial Statements Sybron Chemicals Inc. Page Report of Independent Accountants.............................. F-2 Consolidated Balance Sheets as of December 31, 1997 and 1996..................................................... F-3 Consolidated Statements of Income for the years ended December 31, 1997, 1996 and 1995....................... F-4 Consolidated Statement of Stockholders' Equity for the years ended December 31, 1997, 1996 and 1995................. F-5 Consolidated Statement of Cash Flows for the years ended December 31, 1997, 1996 and 1995....................... F-6 Notes to Consolidated Financial Statements..................... F-7 F-1 Report of Independent Accountants To the Board of Directors and Stockholders of Sybron Chemicals Inc. In our opinion, the accompanying consolidated balance sheets and related consolidated statements of income, of stockholders' equity and of cash flows present fairly, in all material respects, the financial position of Sybron Chemicals Inc. and its subsidiaries at December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Philadelphia, Pennsylvania 19103 February 24, 1998 F-2 SYBRON CHEMICALS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands except share and per share data) ASSETS December 31, ------------ 1997 1996 ---- ---- Current assets: Cash and cash equivalents $ 26,592 $ 14,909 Accounts receivable, net 37,367 32,863 Inventories, net 28,205 22,125 Prepaid and other current assets 3,019 2,522 Deferred income taxes 140 43 --------- -------- Total current assets 95,323 72,462 Property, plant and equipment, net 34,224 31,533 Intangible assets, net 20,086 12,383 Other assets 600 686 --------- -------- $150,233 $117,064 ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 1,760 $ 778 Current portion of long-term debt 2,429 2,433 Accounts payable 27,653 16,603 Accrued liabilities 16,087 13,184 Income taxes payable 3,951 609 Deferred income taxes 12 188 --------- -------- Total current liabilities 51,892 33,795 Long-term debt 27,390 17,787 Deferred income taxes 2,502 2,926 Postretirement benefits 3,919 3,999 Other 2,119 2,469 --------- -------- Total liabilities 87,822 60,976 --------- -------- Commitments and contingencies (See Note 11) Stockholders' equity: Preferred stock, $.01 par value, 500,000 shares authorized; none issued Common stock - $.01 par value, 20,000,000 shares authorized; issued 5,908,260 and 5,905,000 shares 59 59 Additional paid-in capital 23,580 23,530 Retained earnings 51,989 41,349 Cumulative translation adjustment (8,359) (3,509) -------- -------- 67,269 61,429 Less treasury stock, at cost - 233,648 and 254,440 shares (4,673) (5,089) Less minimum pension liability, net of tax (185) (252) -------- -------- Total stockholders' equity 62,411 56,088 -------- -------- $150,233 $117,064 ========= ========
The accompanying notes are an integral part of the financial statements. F-3 SYBRON CHEMICALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands except per share data)
Year ended December 31, 1997 1996 1995 ---- ---- ---- Net sales $188,814 $174,346 $167,807 --------- --------- -------- Cost of sales 115,180 110,190 110,545 Selling 35,148 31,257 28,597 General and administrative 11,340 11,123 9,765 Research and development 3,710 4,154 3,923 --------- --------- -------- 165,378 156,724 152,830 --------- --------- -------- Operating income 23,436 17,622 14,977 --------- --------- -------- Other income (expense): Interest income 497 400 438 Interest expense (1,968) (1,969) (2,471) Amortization of intangible assets (1,585) (1,316) (1,496) Terminated merger costs (1,270) Other, net (1,048) (343) (725) --------- --------- --------- (5,374) (3,228) (4,254) --------- --------- --------- Income before income taxes 18,062 14,394 10,723 Provision for income taxes 7,422 5,880 4,394 --------- --------- -------- Net income $ 10,640 $ 8,514 $ 6,329 ========= ========= ======== Net income per share: Basic $ 1.88 $ 1.51 $ 1.12 ========= ========= ======== Diluted $ 1.84 $ 1.50 $ 1.12 ========= ========= ========
The accompanying notes are an integral part of the financial statements. F-4 SYBRON CHEMICALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY For the Years Ended December 31, 1995, 1996 and 1997 (amounts in thousands)
Additional Cumulative Minimum Total Common stock paid-in translation Retained Treasury stock Pension Stockholders' ------------- -------------- Shares Amount capital adjustment earnings Shares Amount Liability Equity ------ ------ ----------- ----------- -------- ------- ------- --------- ------- Balances at December 31, 1994 5,905 $ 59 $23,530 $(2,306) $26,506 254 $(5,089) $42,700 Net income 6,329 6,329 Translation adjustment 924 924 ----- ----- -------- -------- -------- ---- -------- -------- Balances at December 31, 1995 5,905 59 23,530 (1,382) 32,835 254 (5,089) 49,953 Net income 8,514 8,514 Translation adjustment (2,127) (2,127) Minimum pension liability adjustment $(252) (252) ----- ----- -------- -------- -------- ---- -------- ------ --------- Balances at December 31, 1996 5,905 59 23,530 (3,509) 41,349 254 (5,089) (252) 56,088 Net income 10,640 10,640 Translation adjustment (4,850) (4,850) Minimum pension liability adjustment 67 67 Exercise of stock options 3 47 47 Shares issued under Savings and Incentive Plans 3 (20) 416 419 ------ ----- ------- -------- -------- ----- ------- ----- --------- Balances at December 31, 1997 5,908 $ 59 $23,580 $(8,359) $51,989 234 $(4,673) $(185) $62,411 ====== ==== ======== ======== ======= ===== ======== ====== =======
The accompanying notes are an integral part of the financial statements. F-5 SYBRON CHEMICALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands)
Year ended December 31, ----------------------- 1997 1996 1995 ---- ---- ---- Cash flows from operating activities: Net income $10,640 $ 8,514 $ 6,329 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,524 6,465 6,712 Provision for losses on accounts receivable 709 392 831 Gain on sale of assets (136) Provision (benefit) for deferred taxes (818) (597) 485 Change in assets and liabilities: Accounts receivable (6,119) (3,009) (1,847) Inventory (6,074) 1,829 (2,248) Other current assets (312) (1,217) 279 Accounts payable and accrued expenses 15,874 5,969 2,546 Income taxes payable 3,602 (332) 458 Other assets and liabilities, net 1,676 (519) (401) -------- -------- -------- Net cash provided by operating activities 25,566 17,495 13,144 -------- -------- ------- Cash flows from investing activities: Capital expenditures (9,365) (6,326) (5,731) Purchase of business assets (14,476) (1,275) (8,299) Sale of business assets 1,500 Other, net 52 (27) --------- -------- -------- Net cash used by investing activities (22,341) (7,549) (14,057) -------- -------- -------- Cash flows from financing activities: Repayment of debt (2,429) (2,429) Net (repayments) borrowings under revolving credit facilities 13,335 (2,668) 4,790 Proceeds from the exercise of stock options 47 ------- ------- -------- Net cash (used) provided by financing activities 10,953 (5,097) 4,790 -------- -------- ------- Effect of exchange rate changes on cash (2,495) (1,224) 432 -------- -------- ------- Net increase in cash and cash equivalents 11,683 3,625 4,309 Cash and cash equivalents at beginning of year 14,909 11,284 6,975 -------- -------- ------- Cash and cash equivalents at end of year $26,592 $14,909 $11,284 ======== ======== =======
See Consolidated Statement of Shareholders' Equity for non-cash transaction involving treasury shares issued in 1997 under savings and incentive plans. The accompanying notes are an integral part of the financial statements. F-6 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands except share and per share data) NOTE 1 - THE COMPANY: - --------------------- The Company is an international "specialty" chemical company which serves two main markets: environmental products and services (primarily related to water and waste treatment) and textile chemical specialties products. As used herein, unless otherwise indicated, the "Company" refers to Sybron Chemicals Inc. and its subsidiaries. NOTE 2 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES: - ------------------------------------------------------- Basis of Presentation: - ---------------------- The financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and activity have been eliminated. Accounting Policies: - -------------------- 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents - --------------------------- Cash and cash equivalents include funds invested in liquid short-term investments with a maturity of three months or less. For such investments the carrying amount approximates fair value. At December 31, 1997 and 1996 these investments amounted to $22,687 and $11,915, respectively. Inventories - ------------- Inventories are stated at the lower of cost or market. For U.S. operations, cost is determined using the last-in, first-out (LIFO) method. For foreign operations, cost is determined using the first-in, first-out (FIFO) method. F-7 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 2 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Continued): - ------------------------------------------------------------------- Property, Plant and Equipment - ------------------------------- Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is provided over the estimated useful lives of depreciable assets (generally 10-40 years for buildings and 3-20 years for machinery and equipment) using the straight-line method. Intangible and Other Assets - --------------------------- - Intangible assets (net of accumulated amortization - 1997, $6,382; 1996, $6,705) include the unamortized fair values of trademarks, license agreements, patents, non-compete agreements and goodwill. Intangible assets are amortized on a straight-line basis over estimated useful lives of 5 to 30 years. The Company continually evaluates the reasonableness of its amortization for intangibles. In addition, if it becomes probable that expected future undiscounted cash flows associated with intangible assets are less than their carrying value, the assets will be written down to their fair value. Costs associated with the issuance of long- term debt are amortized on a straight-line basis over the term of the debt. Impairment of Long-Lived Assets - --------------------------------- The Company reviews long-lived assets and certain identifiable intangibles for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Environmental Liabilities and Expenditures - -------------------------------------------- Accrued liabilities and other liabilities include accruals for environmental matters which are established and reflected as operating expenses when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Accrued liabilities are exclusive of claims against third parties and are not discounted. In general, costs related to environmental remediation are charged to expense. Environmental remediation costs are capitalized if the costs increase the value of the property as compared to the state of the property when acquired, or mitigate or prevent contamination from future operations. F-8 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 2 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Continued): - ------------------------------------------------------------------- Revenue Recognition and Related Disclosures - --------------------------------------------- The Company recognizes revenue upon shipment of products. Receivables resulting from these sales approximate fair value. The Company monitors the credit worthiness of its customers. Concentrations of credit risk associated with these trade receivables are considered minimal due to the Company's diverse customer base. The allowance for doubtful accounts at December 31, 1997 and 1996 was $2,058 and $1,820, respectively. Interest Expense - ------------------ Interest expense incurred during the construction of facilities and equipment is capitalized as part of the cost of those assets. Total interest paid by the Company was $1,618 in 1997, $2,054 in 1996 and $2,416 in 1995. Interest capitalized was $33 in 1997, $32 in 1996 and $133 in 1995. Retirement Benefits - --------------------- Pension expense for the Company's domestic and significant international defined benefit pension plans is determined in accordance with Statement of Financial Accounting Standards No. 87 (FAS 87), "Employers' Accounting for Pensions". See Note 8 for further description. In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for a portion of its retired employees which are funded as costs are incurred. Liability for these benefits are recognized in accordance with FAS 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." FAS 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits" is applicable for 1998 and will be adopted by the Company for 1998 reporting. Stock-Based Compensation - -------------------------- Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method described in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and related Interpretations. F-9 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 2 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Continued): - ------------------------------------------------------------------- Income Taxes - -------------- The Company accounts for certain income and expense items differently for financial reporting and income tax purposes. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for operating loss and tax credit carry-forwards. Foreign Currency Translation - ------------------------------ The financial statements and transactions for the majority of the Company's foreign subsidiaries are maintained in their local currencies which are considered to be their functional currencies. The Company's Mexican subsidiary's functional currency is considered to be the U.S. dollar because of that country's designation as a highly inflationary economy. All of these transactions are translated into U.S. dollars in accordance with Statement of Financial Accounting Standards No. 52. Assets and liabilities of foreign subsidiaries are translated into U.S. dollars using current exchange rates and the resulting translation adjustments are recorded to the cumulative translation adjustment component of stockholders' equity, except the Company's Mexican subsidiary which operates in a highly inflationary economy. (Certain assets of the Mexican subsidiary are translated at historical exchange rates and all translation adjustments are reflected in the Consolidated Statements of Income). Revenues and expenses of foreign subsidiaries are translated at weighted average rates of exchange for the respective periods. Foreign exchange gains (losses) for 1997, 1996 and 1995 were approximately ($787), $131 and ($390), respectively. Earnings Per Share - -------------------- Statement of Financial Accounting Standards No. 128, "Earnings Per Share," became effective in the fourth quarter of 1997 and requires two presentations of earnings per share "basic" and "diluted". Basic earnings per share is computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares (the denominator) for the period. The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued. F-10 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 2 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Continued): - ------------------------------------------------------------------- The numerator in calculating both basic and diluted earnings per share for each year is reported net income. The denominator is based on the following weighted-average number of common shares: 1997 1996 1995 ---- ---- ---- Basic 5,666,683 5,650,560 5,650,560 Diluted 5,793,770 5,669,893 5,650,560 The difference between basic and diluted weighted-average common shares results from the assumption that dilutive stock options outstanding were exercised. The following stock options are not included in the diluted earnings per share calculation since in each case the exercise price is greater than the average market price for the year: 1997 1996 1995 ---- ---- ---- Stock options 9,318 136,946 158,260 NOTE 3 - ACQUISITIONS AND MERGERS: - ---------------------------------- Between October 1997 and February 11, 1998, the Company entertained a buyout proposal received from an investor group consisting of certain major shareholders, primarily Citicorp Venture Capital Ltd. and certain members of the Company's management. The Company signed a merger agreement on December 11, 1997, which was terminated on February 11, 1998. The Company recognized expense of $1,270 associated with the terminated merger agreement in the fourth quarter of 1997. On July 29, 1997, the Company acquired certain operating assets, not including manufacturing facilities, of the textile and garment processing businesses (the "Business") of Ivax Industries, Inc., Ivax Industries Canada, Inc. and Ivax Industries U.K. Ltd. for $14,476. The purchase price was financed from the Company's existing revolving credit facility. The Company intends to use the acquired assets to continue the product lines of the Business, which the Company will operate out of its existing facilities in Wellford, South Carolina and other locations around the world. F-11 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 3 - ACQUISITIONS AND MERGERS (Continued): - ---------------------------------------------- The acquisition has been accounted for as a purchase and, accordingly, the operating results of Ivax have been included in the Company's consolidated financial statements since the date of acquisition. The excess of the aggregate purchase price over the fair market value of net assets acquired of approximately $6,246 is being amortized over 30 years. The following unaudited pro forma consolidated results of operations for the years ended December 31, 1997 and 1996 assume the Ivax Acquisition occurred as of January 1, 1996: Pro Forma Information (in thousands, except per share data) 1997 1996 -------- ------ Net sales $199,823 $192,770 Net income (loss) 10,008 *(17,367) Net income (loss) per share $1.77 $(3.07) *At September 30, 1996 management of Ivax Industries reevaluated the carrying value of certain long-lived assets and goodwill related to those assets to be held and used in the Division's operations. Consequently, management reduced the carrying value of certain long-lived assets and goodwill of the Division by approximately $23,396. The Company considers this a one-time charge that will not be a factor in ongoing costs. In June 1996, the Company purchased the specialty resin business of the Chemical Images Co. ("CIC"). CIC develops and markets specialty resins for use in reprographic and laser printer toners. This transaction, which was accounted for as a purchase, did not have a material effect on the Company's 1996 operating results. On January 9, 1995, the Company completed the purchase of all the outstanding stock of the Auralux Corporation ("Auralux"). Auralux, with annual revenues of approximately $10 million at the time of the acquisition, is a manufacturer of textile chemicals used in fabric finishing with product lines including fire retardants, softeners, thermosetting resins and other specialty products. In connection with this acquisition, the Company acquired a nine acre site in Norwich, Connecticut from which Auralux manufactures, distributes and warehouses its products. At December 31, 1995, Auralux was merged into the Company. F-12 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 4 - INVENTORIES: - --------------------- The components of inventories are: December 31, ------------ 1997 1996 ---- ---- Finished goods $21,317 $16,247 Raw materials 7,864 6,751 ------- ------- 29,181 22,998 Less reserves 976 873 ------- ------- $28,205 $22,125 ======= ======= LIFO inventories comprise 64% and 61% of total inventories at December 31, 1997 and 1996, respectively. If the FIFO method of accounting for inventories had been used by the ompany, inventories would have been greater than reported by $155 and $761 at December 31, 1997 and 1996, respectively. NOTE 5 - PROPERTY, PLANT AND EQUIPMENT: - --------------------------------------- The components of property, plant and equipment are: December 31, ------------ 1997 1996 ---- ---- Land $ 2,965 $ 2,961 Buildings 17,967 16,718 Machinery and equipment 47,503 44,816 Construction in progress 4,607 3,521 -------- ------- 73,042 68,016 Accumulated depreciation (38,818) (36,483) -------- -------- $34,224 $31,533 ======== ======= Depreciation expense for the years ended December 31, 1997, 1996 and 1995 was $4,939, $5,149 and $5,072, respectively. Maintenance and repairs expense for the same periods amounted to $2,342, $2,156 and $1,963, respectively. F-13 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 6 - ACCRUED LIABILITIES: - ----------------------------- The components of accrued liabilities are: December 31, ------------ 1997 1996 ---- ---- Accrued compensation $ 6,851 $ 5,371 Accrued selling and marketing expenses 2,450 2,545 Accrued professional fees 1,494 715 Accrued environmental liabilities 1,349 1,717 Other accrued liabilities 3,943 2,836 ------- ------- $16,087 $13,184 ======= ======= NOTE 7 - LONG-TERM DEBT: - ------------------------ The components of long-term debt are: December 31, ------------ 1997 1996 ---- ---- Notes payable bearing interest at 8.17% $ 12,143 $14,572 Revolving credit facility bearing interest at the bank's prime rate less 1.5% or .375% over the LIBOR rate in 1997, and the banks prime rate or 1% over the LIBOR rate in 1996. 17,676 5,648 ------- ------- 29,819 20,220 Less current portion 2,429 2,433 ----- ----- $27,390 $17,787 ======= ======= Notes Payable: - -------------- The unsecured notes payable bear interest at 8.17% and mature in August 2002. Interest is payable quarterly. The notes require payments of $2,429 in August of the years 1998 to 2002, inclusive, together with accrued interest to the payment dates. Optional prepayments may be made by the Company. F-14 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 7 - LONG-TERM DEBT (Continued): - ------------------------------------ Revolving Credit Agreement: - --------------------------- The Revolving Credit Agreement permits the Company and its wholly owned foreign subsidiaries to borrow in Eurodollars or in several foreign currencies, including the Italian lira, Dutch guilder or British pound. The borrowings under this agreement shall not exceed the U.S. dollar equivalent of $40,000 and the agreement expires on February 18, 2002. The Company has the option on U.S. dollar borrowings to incur interest at the bank's prime rate, less up to 150 basis points, or the London Interbank Offered Rate ("LIBOR"), plus up to 125 basis points. The basis point adjustments depend upon the Company's cash flow ratio. All borrowings under this agreement are unsecured. At December 31, 1997 there were $17,676 of outstanding borrowings under the agreement at an average interest rate of 6.22%. The Company has the ability and intent to borrow under the agreement on a long-term basis and accordingly has classified outstanding borrowings at December 31, 1997 as long-term debt. Annual Repayments: - ------------------ The aggregate annual repayments of debt outstanding at December 31, 1997 are as follows: 1998 $ 2,429 1999 2,429 2000 2,429 2001 2,429 2002 20,103 ------- $29,819 ======= Debt Covenants: - --------------- At December 31, 1997, certain of the debt agreements contain conditions and restrictions, such as financial tests relating to interest coverage and cash flow ratios, required amount of net worth, limitations on additional borrowings, limitations on capital expenditures and restrictions relating to asset sales and repayments of existing debt. The Company believes it is in compliance with these covenants and restrictions. F-15 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 7 - LONG-TERM DEBT (Continued): - ------------------------------------ Interest Rate Swap Agreements: - ------------------------------ In February 1994, the Company entered into a 2 year interest rate swap agreement ("Swap") having a total notional principal of $17,000 with a major financial institution. This Swap effectively converted a significant portion of the Company's long-term debt from a fixed to a variable rate based on the 90 day LIBOR rate. On specific 90 day intervals, the 90 day LIBOR rate was compared against the Swap rate (5.03%), and to the extent that the LIBOR rate was higher or lower than the Swap rate, payments were made or received by the Company. At times, the Company entered into interest rate forward agreements (the "Forward") with major financial institutions which effectively converted the Swap's variable interest rate to a fixed rate for respective 90 day intervals. As a result of the Swap and Forward, the Company's effective interest rates during 1995 on the related long-term debt was approximately 9.2%. The Swap was closed out in February 1996. NOTE 8 - INCOME TAXES: - ---------------------- Provisions for income taxes are: Year ended December 31, ----------------------- 1997 1996 1995 ---- ---- ---- Currently payable: Federal $1,973 $1,490 $ 305 State 233 188 120 Foreign 6,034 4,799 3,484 ------ ------ ----- 8,240 6,477 3,909 Deferred taxes: Federal (654) (884) 562 State (96) (131) 2 Foreign (68) 418 (79) ------- ---- ------- $7,422 $5,880 $4,394 ======= ======= ====== F-16 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 8 - INCOME TAXES (Continued): - ---------------------------------- Provisions for income taxes differ from the amount computed by applying the statutory federal rate due to the following: Year ended December 31, ----------------------- 1997 1996 1995 ---- ---- ---- Income tax computed at U.S. Federal statutory tax rates $6,141 $4,894 $3,646 State income taxes, net of federal income tax benefit 233 95 138 Foreign subsidiaries taxed at higher rates 1,063 653 599 Other items, net (15) 238 11 ------- ------ ------ $7,422 $5,880 $4,394 ======= ====== ====== Income taxes paid were $4,379 in 1997, $6,846 in 1996 and $2,981 in 1995. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1997 and 1996 are presented below. December 31, ------------ 1997 1996 ---- ---- Deferred tax assets: Postretirement benefits $ 1,587 $ 1,619 Accrued expenses 1,452 1,324 Other 499 475 -------- ------- Total deferred tax assets 3,538 3,418 ------- ------- Deferred tax liabilities: Depreciation (2,511) (3,036) Inventory (995) (947) Intangibles (968) (1,038) Property (830) (830) Other (596) (626) -------- -------- Total deferred tax liabilities (5,900) (6,477) -------- -------- Net deferred tax liability $(2,362) $(3,059) ======== ======== F-17 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 8 - INCOME TAXES (Continued): - ---------------------------------- The components of income before income taxes are: Year ended December 31, ----------------------- 1997 1996 1995 ---- ---- ---- United States $ 3,632 $ 1,520 $ 2,514 Foreign 14,430 12,874 8,209 ------- ------- ------- $18,062 $14,394 $10,723 ======= ======= ======= Retained earnings of foreign subsidiaries totaling approximately $34,600 at December 31, 1997 are considered to be reinvested indefinitely in these businesses. Accordingly, no provision for income taxes has been made for the repatriation of these earnings. Provision for income taxes have been made for approximately $17,000 of retained earnings of foreign subsidiaries which are not considered to be indefinitely invested. NOTE 9 - PENSION, POSTRETIREMENT AND OTHER EMPLOYEE BENEFITS: - ------------------------------------------------------------- Pension Benefits: - ----------------- The Company has a defined contribution pension plan (the "Plan") for U.S. salaried employees. In accordance with the Plan, the Company contributes a fixed percentage of a salaried employee's annual earnings ranging from 4.0% to 17.9%, based on the employee's age and length of service with the Company. Expenses related to this plan were $517, $653 and $615 for the years ended December 31, 1997, 1996 and 1995, respectively. The Company has defined benefit pension plans covering substantially all U.S. hourly and foreign employees. Plans covering U.S. hourly employees provide benefits based on years of service and applicable contractual agreements. Plans covering foreign employees are generally based on various formulas, the principal factors of which are years of service and compensation. The Company's funding policy is to make the minimum annual contribution required by applicable regulations. F-18 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 9 - PENSION, POSTRETIREMENT AND OTHER EMPLOYEE BENEFITS - ------------------------------------------------------------ (Continued): Significant assumptions used in determining net periodic pension cost of the hourly plans and related pension obligations were: Year ended December 31, ----------------------- 1997 1996 1995 ---- ---- ---- Domestic: Discount rate 7.25% 7.25% 7.25% Expected long-term rate of return 9.0% 9.0% 9.0% Rate of increase in compensation levels 4.0% 4.0% 4.0% Foreign: Discount rate 6.00% 6.25% 7.25% Expected long-term rate of return 6.00% 6.25% 7.25% Rate of increase in compensation levels 3.5% 3.5% 3.5% The components of consolidated net periodic pension cost are: Year ended December 31, ----------------------- 1997 1996 1995 ---- ---- ---- Defined benefit pension plans: Service cost $ 521 $ 561 $ 425 Interest on projected benefit obligations 731 725 681 Return on plan assets (722) (706) (980) Amortization and deferral of unrecognized items 141 143 460 ------- ------- ----- Net periodic pension cost 671 723 586 Other foreign plans, including certain social payments 403 331 293 ------- ------- ----- $1,074 $1,054 $ 879 ======= ======= ===== F-19 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 9 - PENSION, POSTRETIREMENT AND OTHER EMPLOYEE BENEFITS - ------------------------------------------------------------ (Continued): The following table summarizes the funded status of the Company's domestic defined benefit pension plans: December 31, ------------ 1997 1996 ---- ---- Actuarial present value of benefit obligations: Vested benefit obligation ($4,406) ($4,125) ======== ======== Accumulated benefit obligation ($4,662) ($4,367) ======== ======== Projected benefit obligation ($4,662) ($4,367) Fair value of plan assets 4,456 4,083 -------- ------- Plan assets less than projected benefit obligation (206) (284) Unrecognized net obligation arising at transition (78) (57) Unrecognized net loss 205 335 Unrecognized prior service cost 376 291 Additional minimum liability (218) (445) -------- -------- Amount reflected as pension (liability)/asset $ 79 $ (160) ======== ======== F-20 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 9 - PENSION, POSTRETIREMENT AND OTHER EMPLOYEE BENEFITS - ------------------------------------------------------------ (Continued): The following table summarizes the funded status of the Company's significant foreign defined benefit pension plans: December 31, ------------ 1997 1996 ---- ---- Actuarial present value of benefit obligations: Vested benefit obligation ($4,884) ($4,738) ======== ======== Accumulated benefit obligation ($6,296) ($6,169) ======== ======== Projected benefit obligation ($7,449) ($7,467) Fair value of plan assets 6,370 6,455 -------- ------- Plan assets less than projected benefit obligation (1,079) (1,012) Unrecognized net obligation arising at transition 361 490 Unrecognized net loss 881 790 Additional minimum liability (152) (36) -------- -------- Accrued pension asset $ 11 $ 232 ======== ======= Plan assets are held in trust and are composed of investments in cash equivalents, bonds and marketable securities. In accordance with the provisions of Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions", the Company has recorded an additional minimum liability of $884 at December 31, 1997 and $1,030 at December 31, 1996, representing the excess of the accumulated benefit obligation over the fair value of plan assets and accrued pension liability for its pension plans. The additional liability has been offset by an intangible asset of $590 at December 31, 1997 and $619 at December 31, 1996, which is included in Intangible Assets to the extent of previously unrecognized prior service cost. Amounts in excess of previously recognized prior service cost, net of the related deferred tax benefit, of $185 at December 31, 1997 and $252 at December 31, 1996, are reflected as a reduction of stockholders' equity. F-21 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 9 - PENSION, POSTRETIREMENT AND OTHER EMPLOYEE BENEFITS - ------------------------------------------------------------ (Continued): Postretirement Benefits: - ------------------------ In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for a portion of its retired employees which are funded as costs are incurred. These benefits are provided through various insurance companies whose premiums are based on the claims paid during the period. In addition, current retirees contribute varying percentages of equivalent premiums toward the cost of their health care coverage. Retiree contributions are automatically indexed to keep up with health care inflation. The components of net periodic postretirement benefit cost are: Year ended December 31, ----------------------- 1997 1996 1995 ---- ---- ---- Service cost benefits attributed to service during the year $ 1 $ 1 $ 2 Interest cost on accumulated post retirement benefit obligation 175 177 306 Net amortization and deferral (102) (102) (25) ------ ------ ----- Net periodic postretirement benefit cost $ 74 $ 76 $ 283 ====== ====== ===== The following table sets forth the postretirement plans' status as recorded in the Company's consolidated balance sheet: Accumulated postretirement benefit obligation: December 31, ------------ 1997 1996 ---- ---- Retirees $(1,722) $(2,223) Fully eligible participants (217) (262) Participants not fully eligible (10) (10) -------- -------- Accumulated postretirement benefit obligation (1,949) (2,495) Unrecognized prior service cost (1,402) (1,504) Unrecognized net gain (687) (150) --------- -------- Accrued postretirement benefits $(4,038) $(4,149) ======== ======== F-22 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 9 - PENSION, POSTRETIREMENT AND OTHER EMPLOYEE BENEFITS - ------------------------------------------------------------ (Continued): Postretirement Benefits (Continued): - ------------------------------------ The discount rate used in determining the net periodic benefit cost was 7.25% at December 31, 1997 and 1996. The assumed average inflation rate of medical costs over the life of the benefits ranged from 7.5% currently to 5.0% in 2004 and thereafter. An increase of one percentage point in the per capita cost of health care costs would increase the accumulated postretirement benefit obligation as of December 31, 1997 by approximately $110 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost by approximately $9. Other Employee Benefits: - ------------------------ Stock Options- -------------- Effective May 1, 1992, the Company adopted the 1992 Stock Option Plan (the "Option Plan"). The aggregate maximum number of shares of Common Stock available for awards under the Plan is 556,740. Options granted under the Option Plan may be either incentive stock options or non-qualified stock options. The exercise price of each option equals the market price of the Company's stock on the date of the grant and an options maximum term is 10 years. Options generally vest in 20% increments beginning with the first anniversary of the grant. The Company applies APB Opinion 25 and related Interpretations in accounting for its Option Plan. Accordingly, no compensation cost has been recognized for options granted under its Option Plan. Had compensation cost for the Company's Option Plan been determined based on the fair value at the grant dates for awards under the Option Plan consistent with the method of FASB Statement 123, the Company's net income and earnings per share (basic and diluted) would have been reduced by the proforma amounts of: 1997 net income, $334, and earnings per share, $.06; 1996 net income, $277, and earnings per share, $.05; 1995 net income, $32, and earnings per share, $.01. This determination of fair value was based on using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1997, 1996, and 1995: dividend yield of 0%, expected lives of 5 years, expected volatility of 40%, 42% and 42%, respectively, and a risk free interest rate of 5.7%, 6.4% and 6.4%, respectively. F-23 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 9 - PENSION, POST-RETIREMENT AND OTHER EMPLOYEE BENEFITS (Continued): - -------------------------------------------------------------------------- Stock Options- (Continued) -------------------------- A summary of the status of the Option Plan at December 31, 1997, 1996 and 1995 and changes during the years ending on those dates is as follows:
Number Price Weighted Average of shares Per Share Exercise Price --------- --------- -------------- Options outstanding at December 31, 1994... 183,035 $18.75-$25.50 $22.76 Granted.................................. 17,875 $15.50 $15.50 Exercised................................ -- Cancelled and available for reissue...... (42,650) $18.75-$25.50 $22.48 -------- Options outstanding at December 31, 1995... 158,260 $15.50-$25.50 $22.02 Granted.................................. 281,195 $10.75-$13.875 $12.61 Exercised................................ -- Cancelled and available for reissue...... (107,550) $10.75-$25.50 $23.54 --------- Options outstanding at December 31, 1996... 331,905 $10.75-$25.50 $13.54 Granted.................................. 49,250 $16.00-$22.50 $19.43 Exercised................................ (3,260) $10.75-$18.75 $14.35 Cancelled and available for reissue...... (27,730) $10.75-$18.75 $13.87 --------- Options outstanding at December 31, 1997... 350,165 $10.75-$25.50 $14.33 ======= Options exercisable at December 31, 1997... 82,054 $10.75-$25.50 $14.65 ====== Options available for grant at December 31, 1997........................ 206,575 ======= Weighted average remaining life (years) at December 31, 1997 8
The following table summarizes information about the stock options outstanding at December 31, 1997:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE - -------------------------------------------------------------------------------------- Weighted Weighted Weighted Range of Number Average Average Number Average Exercise Outstanding Remaining Exercise Exercisable Exercise Prices 12/31/97 Contractual Life Price 12/31/97 Price - ------ -------- ---------------- ----- -------- ----- $10.75 to $12.50 102,980 8 $11.82 22,320 $11.74 $12.75 72,990 8 $12.75 15,054 $12.75 $13.50 81,375 8 $13.50 16,275 $13.50 $15.50 to $19.50 77,395 8 $18.40 28,230 $18.55 $22.50 to $25.50 15,425 9 $22.53 175 $25.50 - ------------------------------------------------------------------------------------- $10.75 to $25.50 350,165 8 $14.33 82,054 $14.65
F-24 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 9 - PENSION, POST-RETIREMENT AND OTHER EMPLOYEE BENEFITS (Continued): - -------------------------------------------------------------------------- Share Participation Plan- ------------------------- The Company has a Share Participation Plan (the "Share Plan") as a means of rewarding certain employees of the Company for their effort in contributing to an increase in the value of the Company as well as to provide an incentive to continue employment in the Company. The Share Plan covers all full-time employees of the Company, with the exception of executive officers and certain other senior employees of the Company, who have completed at least one full year of service. The Share Plan entitles employees holding shares to receive a pro rata portion of a cash award pool to be established in the event the Company sells a substantial portion of its assets, undergoes a substantial change in beneficial ownership of its equity securities, merges or is consolidated into an unaffiliated third party. The cash award paid is a sum equal to 2% of the net amount of cash and fair market value of any publicly traded securities paid in consideration of a triggering event, less $2.6 million. In the event that an employee receives payment for their shares under the Share Plan, a proportionate percentage of their stock options, if any, in the Option Plan will be subject to cancellation. NOTE 10 - OPERATING LEASES: - --------------------------- The Company leases certain manufacturing, warehouse and office facilities, and equipment. Future minimum lease payments required as of December 31, 1997 under operating leases that have initial non-cancelable lease terms exceeding one year are as follows: Facility Equipment Year Rentals Rentals Total ---- ------- ------- ----- 1998 $ 516 $1,204 $1,720 1999 174 969 1,143 2000 5 587 592 2001 -- 175 175 2002 -- 78 78 Thereafter -- 212 212 -------- ------ ------ $ 695 $3,225 $3,920 ====== ====== ====== Rent expense was approximately $2,941 for 1997, $2,810 for 1996 and $2,932 for 1995. F-25 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 11 - COMMITMENTS AND CONTINGENCIES: - ---------------------------------------- The Company is subject to a variety of environmental and pollution control regulations in the jurisdictions in which it operates. These laws and regulations require the Company to make significant expenditures for remediation, capital improvements and operating environmental protection equipment. Future developments and changes in environmental regulations may require the Company to make additional unforeseen environmental expenditures. The Company's major competitors are confronted by substantially similar environmental risks and regulations. The Company has identified certain soil and groundwater contamination at its Birmingham, New Jersey facility. The Company has conducted extensive sampling plans for both soil and ground- water and has proposed a remedial action work plan (the "Work Plan") to the New Jersey Department of Environmental Protection (the "DEP") related to the clean-up of the Birmingham facility. DEP has conditionally approved the Work Plan and the Company has initiated the clean-up based on DEP's conditional approval. The remedial activities pursuant to the Work Plan are expected to be completed by the end of 1998. The Company has identified certain soil and groundwater contamination at its Wellford, South Carolina facility. The Company submitted a proposed sampling and testing program to the South Carolina Department of Health and Environmental Control (DHEC) for its review. DHEC has approved the Company's proposed action for the next phase of the investigation and remediation of potential groundwater contamination. The remedial activities related to this program are in progress at this time. The Company has completed a number of studies to identify the extent of certain soil and groundwater contamination around its manufacturing facility in Ede, Holland and other facilities owned by third parties which are adjacent thereto (collectively, the "Dutch Facilities"). As a result of these studies, the Company is presently remediating certain contamination at its Ede facility. An environmental consulting firm is performing additional studies and has developed a plan of remediation for the Dutch Facilities. The plan was presented to the local and provincial government officials for their approval at the end of 1997. The approval process for this plan is expected to be completed by mid-year 1998. In addition to sites occupied by the Company, the Company has on occasion been advised that it may be named as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") or similar state statutes with respect to the transport and disposal of hazardous wastes. At present, the Company is a party in a legal action in the United States regarding the clean-up of hazardous waste or chemicals at a site never occupied by the Company or its predecessors. In addition, the Company has received inquiry letters or notices on seven other hazardous waste sites where the Company could be a potentially responsible party. F-26 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued): - ---------------------------------------------------- The Company has not identified any sites which may require remediation but which have not been cited specifically by regulatory authorities for non-compliance with environmental rules and regulations. Although it is difficult to quantify the potential impact of compliance with or liability under environmental protection laws, the Company believes that it has made adequate accruals for all clean-up and other related costs with respect to environmental problems of which it is aware. At December 31, 1997 and 1996, the Company has accrued approximately $1,349 and $1,717, respectively, to offset future environmental assessment and remediation costs. The charge in 1996 included $650 for potential liabilities related to the remediation of the Dutch facilities. The Company has not reduced its environmental liabilities or recorded any assets related to potential insurance recoveries. There are also pending against the Company several claims and lawsuits arising in the normal course of its business. Such claims and lawsuits include allegations of patent infringement and injuries related to the inhalation of hazardous chemicals. The Company believes it has adequate insurance to cover any such claims subject to a self insurance retention of $1,000. Similarly, the Company has several outstanding claims and lawsuits arising in the normal course of business against various other parties. The Company believes that adequate provision has been made for the environmental and legal proceedings described above, and that such proceedings will not have a material adverse effect on the financial position, cash flow or operating results of the Company. NOTE 12 - FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS: - ----------------------------------------------------- Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" ("SFAS 107"), requires that the Company disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company's financial instruments. F-27 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 12 - FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS (Continued): - ----------------------------------------------------------------- The interest rate on the Note Payable (the "Note") is fixed at 8.17% during its entire term. The fair value of the Note as of December 31, 1997 was determined by estimating the interest rate at which the Company could refinance the Note given the same maturity period. The Company assumed a rate of 8% in its calculations. The fair market value approximates the carrying value of $12,143. The interest rate on the Revolving Credit Facility is at market interest rates, therefore, its fair market value approximates its carrying value. NOTE 13 - GEOGRAPHIC AND BUSINESS SEGMENT INFORMATION: - ------------------------------------------------------ The Company operates in the following two business segments - environmental products and services and textile chemical specialty products. Sales and transfers between geographic areas are generally priced to recover cost plus an appropriate markup for profit. Operating income is revenue less related costs and direct and allocated operating expenses, excluding interest and amortization of intangible assets and other income (expense), net. No single customer accounts for more than 10% of revenue in the periods presented. F-28 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands except share and per share data) NOTE 13 - GEOGRAPHIC AND BUSINESS SEGMENT INFORMATION (Continued): - ------------------------------------------------------------------ The following schedule presents information about the Company's operations by geographic location:
Year ended December 31, ------------------------------ 1997 1996 1995 ------ ------ ----- Net sales to unaffiliated customers originated from: America and Asia(1) $128,772 $115,158 $115,620 Europe 60,042 59,188 52,187 -------- -------- -------- Total net sales $188,814 $174,346 $167,807 ======== ======== ======== Intercompany sales between geographic areas originated from: America and Asia $ 2,695 $ 2,462 $ 1,867 Europe 552 468 -- --------- --------- ---------- Total intercompany sales $ 3,247 $ 2,930 $ 1,867 ======== ======== ======== Operating income: America and Asia $ 11,355 $ 7,695 $ 8,458 Europe 12,081 9,927 6,519 -------- -------- -------- Total operating income $ 23,436 $ 17,622 $ 14,977 ======== ======== ======== Identifiable assets: America and Asia $108,109 $ 69,996 $ 68,503 Europe 42,124 47,068 42,826 -------- -------- -------- Total assets $150,233 $117,064 $111,329 ======== ======== ======== (1) Net sales to Asian customers are immaterial.
F-29 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands) NOTE 13 - GEOGRAPHIC AND BUSINESS SEGMENT INFORMATION (Continued): - ------------------------------------------------------------------ The following schedule presents information about the Company's operations by business segment (in thousands):
Year Ended December 31, 1997 1996 1995 ------------------------------- ---------------------------------- -------------------------------- Environmental Textile Environmental Textile Environmental Textile Products and Chemical Products and Chemical Products and Chemical Services Specialties Total Services Specialties Total Services Specialties Total ---------- ----------- ------- ---------- ----------- ------- ---------- ----------- ------ Sales to other segments $ 406 $ 7 $ 413 $ 144 $ 5 $ 149 $ 119 $ 1 $ 120 ======== ======== ======== ======= ======== ======== ======== ======== ======== Sales to unaffiliated customers $55,362 $133,452 $188,814 $54,045 $120,301 $174,346 $54,969 $112,838 $167,807 Cost of sales 37,624 77,556 115,180 38,405 71,785 110,190 40,152 70,393 110,545 ------- -------- -------- ------- -------- -------- -------- -------- -------- Gross margin 17,738 55,896 73,634 15,640 48,516 64,156 14,817 42,445 57,262 Operating expenses 12,368 37,830 50,198 11,498 35,036 46,534 10,787 31,498 42,285 ------- -------- -------- ------- -------- -------- ------- -------- -------- Operating income $ 5,370 $ 18,066 $ 23,436 $ 4,142 $ 13,480 $ 17,622 $ 4,030 $ 10,947 $ 14,977 ======= ======== ======== ======= ======== ======== ======= ======= ======= Identifiable assets $31,934 $118,299 $150,233 $31,961 $ 85,103 $117,064 $30,490 $ 80,839 $111,329 ======= ======== ======== ======= ======== ======== ======= ======= ======= Depreciation and amortization $ 2,286 $ 4,238 $ 6,524 $ 2,443 $ 4,022 $ 6,465 $ 2,865 $ 3,847 $ 6,712 ======= ======== ======== ======== ========= ======== ======= ======= ======== Capital expenditures $ 2,375 $ 6,990 $ 9,365 $ 1,180 $ 5,146 $ 6,326 $ 1,332 $ 4,399 $ 5,731 ======= ======== ======== ======== ========= ========= ======= ======= ========
F-30 SYBRON CHEMICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) (in thousands except share and per share data) NOTE 14 - QUARTERLY FINANCIAL DATA (Unaudited): - ----------------------------------------------- The following is a summary of quarterly financial results for the years ended December 31, 1997 and 1996 (amounts in thousands except per share data):
1997 1996 ------ ----- Three Months Ended Three Months Ended ------------------ ------------------ March 31 June 30 September 30 December 31 March 31 June 30 September 30 December 31 -------- ------- ------------ ----------- -------- ------- ------------ ----------- Net sales $44,709 $47,423 $46,297 $50,385 $43,672 $44,603 $42,036 $44,035 Gross profit 17,309 18,965 17,642 19,718 15,714 16,913 14,675 16,854 Operating income 5,787 7,068 4,670 5,911 4,811 5,344 3,410 4,057 Net income 2,974 3,757 2,119 1,790 2,254 2,749 1,470 2,041 Net income per share: Basic .53 .66 .37 .32 .40 .49 .26 .36 Diluted .52 .65 .36 .31 .40 .48 .26 .36
F-31 SCHEDULE VIII SYBRON CHEMICALS INC. VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the years ended December 31, 1997, 1996 and 1995 (In thousands) Additions Balance at beginning of Charged to costs Charged to Balance at period and expenses other accounts(1) Deductions end of period ------ ------------ ----------------- ---------- ------------- Allowance for Doubtful Accounts For the year ended: December 31, 1997 $1,820 $ 709 $(174) $ (297) $2,058 December 31, 1996 2,048 295 (46) (477) 1,820 December 31, 1995 1,565 831 42 (390) 2,048 Inventory Reserves For the year ended: December 31, 1997 873 1,300 (7) (1,190) 976 December 31, 1996 476 2,175 (1,778) 873 December 31, 1995 384 276 (8) (176) 476 (1)Foreign exchange adjustments
S-1 EX-21 2 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Country of Owned Company Incorporation By 1. Sybron Chemicals Inc. USA-DEL. -- 2. Sybron Chemical Holdings Inc. USA-DEL. 1 3. Sybron Chemicals International Holdings Ltd. UK 2 4. Sybron Chemicals Korea Ltd. KOREA 2 5. Sybron Chemicals (Japan) Ltd. JAPAN 2 6. Sybron Chemical Industries Nederland B.V. HOLLAND 3 7. Sybron Chemicals Canada Ltd. CANADA 2 8. Sybron Quimica S.A. De C.V. MEXICO 2 9. Sybron Chemicals Holdings B.V. HOLLAND 6 10. Sybron Quimica (Iberica) S.A. SPAIN 9 11. Sybron Chemie (Nederland) B.V. HOLLAND 9 12. Sybron Chemie (Deutschland) G.m.b.H. GERMANY 9 13. Sybron Chemicals (SA) Proprietary Limited S. AFRICA 9 14. Sybron Chemicals Handelsgesellschaft G.m.b.H. AUSTRIA 9 15. Sybron Chemicals UK Limited UK 9 16. Sybron Chimica Italia S.p.A. ITALY 9 17. Sybron Chimie France S.A. FRANCE 9 18. BMIC, Inc. USA-DEL. 2 19. Sybron Chemicals Taiwan Ltd. TAIWAN 2 EX-24 3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned, a member of the Board of Directors of Sybron Chemicals Inc., constitutes and appoints Richard M. Klein or Dennis J. Fiore 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 execute Form 10-K, Annual Report on behalf of Sybron Chemicals Inc., for the fiscal year ended December 31, 1997, promulgated by the Securities and Exchange Commission pursuant to Section 13 of the Securities Exchange Act of 1934 and to file the same, and any other documents in connection therewith, from time to time as said attorney-in-fact and agent, or his substitute or substitutes, deems necessary and appropriate, with the Securities and Exchange Commission and such other exchange, self-regulatory organization, or entity to which Sybron Chemicals Inc. may, now or hereafter, be required by applicable regulation to file. Date: March 30, 1998 /s/ David I. Barton David I. Barton POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned, a member of the Board of Directors of Sybron Chemicals Inc., constitutes and appoints Richard M. Klein or Dennis J. Fiore 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 execute Form 10-K, Annual Report on behalf of Sybron Chemicals Inc., for the fiscal year ended December 31, 1997, promulgated by the Securities and Exchange Commission pursuant to Section 13 of the Securities Exchange Act of 1934 and to file the same, and any other documents in connection therewith, from time to time as said attorney-in-fact and agent, or his substitute or substitutes, deems necessary and appropriate, with the Securities and Exchange Commission and such other exchange, self-regulatory organization, or entity to which Sybron Chemicals Inc. may, now or hereafter, be required by applicable regulation to file. Date: March 30, 1998 /s/ John H. Schroeder John H. Schroeder POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned, a member of the Board of Directors of Sybron Chemicals Inc., constitutes and appoints Richard M. Klein or Dennis J. Fiore 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 execute Form 10-K, Annual Report on behalf of Sybron Chemicals Inc., for the fiscal year ended December 31, 1997, promulgated by the Securities and Exchange Commission pursuant to Section 13 of the Securities Exchange Act of 1934 and to file the same, and any other documents in connection therewith, from time to time as said attorney-in-fact and agent, or his substitute or substitutes, deems necessary and appropriate, with the Securities and Exchange Commission and such other exchange, self-regulatory organization, or entity to which Sybron Chemicals Inc. may, now or hereafter, be required by applicable regulation to file. Date: March 30, 1998 /s/ Paul C. Schorr, IV Paul C. Schorr, IV POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned, a member of the Board of Directors of Sybron Chemicals Inc., constitutes and appoints Richard M. Klein or Dennis J. Fiore 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 execute Form 10-K, Annual Report on behalf of Sybron Chemicals Inc., for the fiscal year ended December 31, 1997, promulgated by the Securities and Exchange Commission pursuant to Section 13 of the Securities Exchange Act of 1934 and to file the same, and any other documents in connection therewith, from time to time as said attorney-in-fact and agent, or his substitute or substitutes, deems necessary and appropriate, with the Securities and Exchange Commission and such other exchange, self-regulatory organization, or entity to which Sybron Chemicals Inc. may, now or hereafter, be required by applicable regulation to file. Date: March 30, 1998 /s/ Heinn F. Tomfohrde, III Heinn F. Tomfohrde, III EX-27 4
5 0000832815 SYBRON CHEMICALS INC. YEAR DEC-31-1997 DEC-31-1997 26,592 0 37,367 0 28,205 95,323 34,224 0 150,233 51,892 0 0 0 23,580 38,831 150,233 188,814 188,814 115,180 165,378 3,406 0 1,968 18,062 7,422 10,640 0 0 0 10,640 1.88 1.84
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