Securities and Exchange Commission, Washington, D.C. 20549
Annual Report on Form 10-K for the year ended December 31, 1995.
Filed pursuant to Section 13 of the Securities Exchange Act of 1934.
Commission file number 1-1463
Union Carbide Corporation
1995 10-K
Union Carbide Corporation Tel. (203) 794-2000
39 Old Ridgebury Road State of incorporation: New York
Danbury, Connecticut 06817-0001 IRS identification number: 13-1421730
Securities registered pursuant to Section 12(b) of the Act:
Class of security: Registered on:
Common Stock ($1 par value) New York Stock Exchange
Chicago Stock Exchange, Incorporated
The Pacific Stock Exchange Incorporated
Share Purchase Rights Plan New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
At February 29, 1996, 134,453,586 shares of common stock were outstanding.
Non-affiliates held 133,670,038 of those shares, of which the aggregate market
value was $6.015 billion.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 ("the Act") during the preceding 12 months, 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
Documents incorporated by reference:
Annual report to stockholders for the year ended December 31, 1995 (Parts I
and II)
Proxy statement for the annual meeting of stockholders to be held on April 24,
1996 (Part III)
Table of Contents
Part I
Item 1: Business 1
Item 2: Properties 3
Item 3: Legal Proceedings 4
Item 4: Submission of Matters to a Vote of Security Holders 4
Part II
Item 5: Market for Registrant's Common Equity and Related
Stockholder Matters 5
Item 6: Selected Financial Data 5
Item 7: Management's Discussion and Analysis of Financial Condition
and Results of Operations 5
Item 8: Financial Statements and Supplementary Data 5
Item 9: Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 5
Part III
Item 10: Directors and Executive Officers of the Registrant 6
Item 11: Executive Compensation 8
Item 12: Security Ownership of Certain Beneficial Owners
and Management 8
Item 13: Certain Relationships and Related Transactions 8
Part IV
Item 14: Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 9
Signatures 12
Exhibit Index 13
Cautionary statement for the purposes of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995: All statements in this Form
10-K report that do not reflect historical information are forward looking
statements. These include statements incorporated herein by reference to the
1995 annual report to stockholders. Important factors that could cause actual
results to differ materially from those discussed in such forward looking
statements include: the supply/demand balance for the corporation's products,
customer inventory levels, competitive pricing pressures, feedstock costs,
changes in industry production capacities and operating rates, competitive
technology positions and failure to achieve the corporation's cost reduction
targets or complete construction projects on schedule. Some of these factors
are discussed further in Part I, Item 1: Business.
Definition of terms: See the inside back cover page of the 1995 annual report
to stockholders. Terms defined there are used herein.
Printed on Recycled, Recyclable Paper
Part I
Item 1. Business
General-Union Carbide operates in two business segments of the chemicals and
plastics industry, Specialties & Intermediates and Basic Chemicals & Polymers.
Specialties & Intermediates converts basic and intermediate chemicals into a
diverse portfolio of chemicals and polymers serving industrial customers in
many markets. This segment also provides technology services, including
licensing, to the oil and gas and petrochemicals industries. The Basic
Chemicals & Polymers segment converts hydrocarbon feedstocks, principally
liquefied petroleum gas and naphtha, into polyethylene, polypropylene and
ethylene oxide/glycol for sale to third-party customers, as well as propylene,
ethylene and ethylene oxide for consumption by the Specialties & Intermediates
segment. The profitability of the Basic Chemicals & Polymers segment of the
chemicals and plastics industry is highly cyclical, whereas that of the
Specialties & Intermediates segment is less cyclical. Consequently, Union
Carbide's results are subject to the swings of the cycle in the basic
chemicals and polymers segment. See inside front cover, pages 6 through 8, and
"Summary and Outlook" on pages 10 through 12 of the 1995 annual report to
stockholders for further information about Union Carbide's businesses, and
Note 3 on pages 26 through 27 of the 1995 annual report to stockholders for
financial information about Union Carbide's business segments.
Union Carbide does not produce against a backlog of firm orders; production is
geared primarily to the level of incoming orders and to projections of future
demand. Inventories of finished products, work in process and raw materials
are maintained to meet delivery requirements of customers and Union Carbide's
production schedules.
At year-end 1995, 11,521 people were employed worldwide in manufacturing
facilities, laboratories and offices around the world.
Raw Materials, Products and Markets-See information herein and in the 1995
annual report to stockholders on pages 6 through 8. Unless otherwise
indicated, the products of Union Carbide are sold principally by its own sales
force, directly to customers.
Union Carbide believes it has contracts or commitments for, or readily
available sources of, hydrocarbon feedstocks and fuel supplies to meet its
anticipated needs in all major product areas. The corporation's operations are
dependent upon the availability of hydrocarbon feedstocks and fuels which are
purchased from diverse domestic and international sources, including
independent oil and gas producers as well as integrated oil companies.
The availability and price of hydrocarbon feedstocks, energy and finished
products are subject to plant interruptions and outages and to market and
political conditions in the U.S. and elsewhere. Operations and products at
times may be adversely affected by legislation, government regulations,
shortages, or international or domestic events.
The business segments of Union Carbide are not dependent to a significant
extent upon a single customer or a few customers.
Patents; Trademarks; Research and Development-Union Carbide owns a large
number of United States and foreign patents that relate to a wide variety of
products and processes, has pending a substantial number of patent
applications throughout the world, and is licensed under a number of patents.
These patents expire at various times over the next 20 years. Such patents and
patent applications in the aggregate are material to Union Carbide's
competitive position. No one patent is considered to be material; however, the
patent portfolio relating to the UNIPOL process technology is, in the
aggregate, considered to be material. Union Carbide also has a large number
of trademarks. The UNION CARBIDE, UCAR and UNIPOL trademarks are material;
no other single trademark is material.
Part I (Cont.)
Essentially all of Union Carbide's research and development activities are
company-sponsored. The principal research and development facilities of Union
Carbide are indicated in the discussion of Properties (Item 2) of this Form
10-K report. In addition to the facilities specifically indicated there,
product development and process technology laboratories are maintained at some
plants. Union Carbide spent $144 million in 1995, $136 million in 1994, and
$139 million in 1993 on company-sponsored research activities to develop new
products, processes, or services, or to improve existing ones.
Environment-See Costs Relating to Protection of the Environment on pages 13
through 14 of the 1995 annual report to stockholders and Note 16 on pages 36
through 37 thereof.
Insurance-Union Carbide's policy is to obtain public liability insurance
coverage at terms and conditions and a price that management considers fair
and reasonable. Union Carbide's management believes Union Carbide has public
liability insurance in an amount sufficient to meet its current needs in light
of pending, threatened, and future litigation and claims. There is no
assurance, however, that Union Carbide will not incur losses beyond the
limits, or outside the coverage, of its insurance. Such insurance is subject
to substantial deductibles.
Competition-Each of the major product and service areas in which Union Carbide
participates is highly competitive. In some instances competition comes from
manufacturers of the same products as those produced by Union Carbide and in
other cases from manufacturers of different products which may serve the same
markets as those served by Union Carbide's products. Some of Union Carbide's
competitors, such as companies principally engaged in petroleum operations,
have more direct access to hydrocarbon feedstocks, and some have greater
financial resources than Union Carbide.
The Specialties & Intermediates segment is characterized by differentiated
products and is less subject to external changes in supply/demand
relationships than the Basic Chemicals & Polymers segment. In this segment,
competition is based on product functionality and quality, and prices are a
function of demand for the product, with the more unique products commanding
significant premiums.
The Basic Chemicals & Polymers segment is characterized by large volume
commodity products and is subject to external changes in supply/demand
relationships, including changes in the strength of the overall economy,
customer inventory levels, industry manufacturing capacity and operating rates
and raw material feedstock costs. Participants in this segment compete for
business primarily on the basis of price and efficient delivery systems.
See pages 6 through 8 of the 1995 annual report to stockholders for
information about each segment's principal products, competitive position and
major competitors.
Union Carbide is a major marketer of petrochemical products throughout the
world. Products that the corporation markets are largely produced in the
United States, while products marketed by the corporation's joint ventures are
principally produced outside the United States. Competitive products are
produced throughout the world. In 1995, the corporation made significant
investments in acquisitions and joint ventures outside the United States.
During 1996, the corporation expects to continue making investments in
acquisitions and joint ventures.
Union Carbide's international operations face competition from local producers
and global competitors and a number of other risks inherent in carrying on
business outside the United States, including risks of nationalization,
expropriation, restrictive action by local governments and changes in currency
exchange rates.
Part I (Cont.)
Item 2. Properties
In management's opinion, current facilities, together with planned expansions,
will provide adequate production capacity to meet Union Carbide's planned
business activities. Capital expenditures are discussed on pages 16 and 17 of
the 1995 annual report to stockholders.
Listed below are the principal manufacturing facilities operated by Union
Carbide worldwide. Research and engineering facilities are noted. Most of the
domestic properties are owned in fee. Union Carbide maintains numerous
domestic sales offices and warehouses, substantially all of which are leased
premises under relatively short-term leases. All principal international
manufacturing properties are owned or held under long-term leases.
International administrative offices, technical service laboratories, sales
offices and warehouses are owned in some instances and held under relatively
short-term leases in other instances. The corporation's headquarters are
located in Danbury, Connecticut, and are leased.
Principal domestic manufacturing facilities and the principal products
manufactured there are as follows:
Location City Principal Product(s)
Specialties & Intermediates Segment
California Torrance Latexes
Georgia Tucker Latexes
Illinois Alsip Latexes
Louisiana Greensburg Hydroxyethyl cellulose derivatives
Louisiana Taft Acrolein and derivatives, acrylic monomers,
caprolactone, UV-cured coatings,
cycloaliphatic epoxides, glycol ethers,
ethyleneamines, oxo alcohols
New Jersey Bound Brook Polyols, polyethylene compounding
New Jersey Edison Lanolin derivatives
New Jersey Somerset Latexes
New York Mamaroneck Lanolin derivatives
Puerto Rico Bayamon Latexes
Texas Garland Latexes
Texas Seadrift Ethanolamines, glycol ethers, surfactants,
polyethylene compounding
Texas Texas City Organic acids and esters, alcohols,
surfactants, vinyl acetate, solution vinyl
resins, heat transfer fluids
West Virginia Institute Caprolactone derivatives, polyethylene
glycol, hydroxyethyl cellulose,
polyethylene oxide, surfactants,
ethylidene norbornene, glutaraldehyde,
acetone and derivatives
West Virginia South Charleston Alkyl alkanolamines, brake fluids,
miscellaneous specialty products,
polyalkylene glycols, surfactants,
specialty ketones, polyvinyl acetate
resins, heat transfer fluids
Basic Chemicals & Polymers Segment
Louisiana Norco Polypropylene
Louisiana Taft Ethylene oxide and glycol, olefins
Louisiana Taft (Star Plant) Polyethylene
New Jersey Bound Brook Recycled plastics
Texas Seadrift Ethylene oxide and glycol, olefins,
polyethylene, polypropylene
Texas Texas City Olefins
Part I (Cont.)
Research and development for the Specialties & Intermediates segment is
carried on at technical centers in Bound Brook, Edison and Somerset, New
Jersey; Tarrytown, New York; Cary, North Carolina; and South Charleston, West
Virginia. Research and development for the Basic Chemicals & Polymers segment
is carried on at technical centers in Bound Brook and Somerset, New Jersey;
and South Charleston, West Virginia. Process and design engineering for both
segments is conducted at a technical center in South Charleston, West
Virginia, in support of domestic and foreign projects.
Principal international manufacturing facilities and the principal products
manufactured there are as follows:
Country City Principal Product(s)
Specialties & Intermediates Segment
Belgium Antwerp Hydroxyethyl cellulose
Belgium Vilvoorde Lanolin derivatives
Brazil Aratu Hydroxyethyl cellulose
Brazil Cubatao Polyethylene compounding
Dubai, UAE Jebel Ali Free Trade Zone Latex
Ecuador Guayaquil Latex
France Chocques Glycol ethers, brake fluid
Indonesia Jakarta Latex
Malaysia Seremban Latex
People's Republic
of China Guangdong Province Latex
Philippines Batangas Latex
Sri Lanka Ekala Latex
Thailand Nonthaburi Latex
United Kingdom Wilton Glycol ethers, ethanolamines
Basic Chemicals & Polymers Segment
Canada Boucherville Molded polyethylene products
Canada Prentiss Ethylene glycol
United Kingdom Wilton Ethylene oxide and glycol
Research and development for the Specialties & Intermediates segment is
carried on at international facilities in Antwerp, Belgium; Cubatao, Brazil;
Montreal East, Canada; Jurong, Singapore; Meyrin (Geneva), Switzerland; and
Wilton, United Kingdom. Research and development for the Basic Chemicals &
Polymers segment is carried on at international facilities in Montreal East,
Canada.
Item 3. Legal Proceedings
See Note 16 of Notes to Financial Statements on pages 36 through 37 of the
1995 annual report to stockholders.
In June 1991 Union Carbide Corporation, on behalf of certain affiliates,
registered with the U.S. Environmental Protection Agency to participate in
a compliance audit program to determine compliance with a provision of the
Toxic Substances Control Act. Stipulated penalties under the program are
anticipated to be $1 million.
Item 4. Submission of Matters to a Vote of Security Holders
The corporation did not submit any matters to a stockholder vote during the
last quarter of 1995.
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Market and dividend information for the corporation's common stock is
contained on pages 18 and 19 of the 1995 annual report to stockholders.
Information about the stock exchanges where the stock is traded in the United
States is listed on page 39 of the 1995 annual report to stockholders. The
declaration of dividends is a business decision made from time to time by the
Board of Directors based on the corporation's earnings and financial condition
and other factors the Board considers relevant.
The number of stockholders of record of the corporation's common stock is
contained on page 1 of the 1995 annual report to stockholders.
Item 6. Selected Financial Data
Information pertaining to consolidated operations is included under the
captions "From the Income Statement," and "From the Balance Sheet (At Year-
End)", and dividend information is included under the caption "Other Data" in
the Selected Financial Data on page 19 of the 1995 annual report to
stockholders.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
See the information covered in the 1995 annual report to stockholders on pages
10 through 17.
Item 8. Financial Statements and Supplementary Data
The consolidated balance sheet of Union Carbide Corporation and subsidiaries
at December 31, 1995 and 1994, and the consolidated statements of income,
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1995, together with the report thereon of KPMG Peat
Marwick LLP dated January 19, 1996, are contained on pages 20 through 38 of
the 1995 annual report to stockholders.
Quarterly income statement data is contained on page 18 of the 1995 annual
report to stockholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Union Carbide has not had any disagreements covered by this item with KPMG
Peat Marwick LLP, its independent auditors.
Part III
Item 10. Directors and Executive Officers of the Registrant
For background information on the Directors of Union Carbide Corporation whose
terms are expected to continue after the annual meeting of stockholders and
persons nominated to become Directors, see pages 7 through 10 of the proxy
statement for the annual meeting of stockholders to be held on April 24, 1996.
James M. Hester, age 71, who has been a director of the corporation since
1963, will not stand for reelection at the annual meeting of stockholders and
will cease to be a director at that time.
The principal executive officers of the corporation are as follows. Data is as
of March 22, 1996.
Name Age Position Year
First
Elected
William H. Joyce 60 Chairman of the Board, President
and Chief Executive Officer 1993
Joseph S. Byck 54 Vice-President 1991
James F. Flynn 53 Vice-President 1993
Joseph E. Geoghan 58 Vice-President, General Counsel
and Secretary 1987
Thomas D. Jones 61 Vice-President and Treasurer 1993
Malcolm A. Kessinger 52 Vice-President 1991
Lee P. McMaster 53 Vice-President 1993
Joseph C. Soviero 57 Vice-President 1993
Roger B. Staub 61 Vice-President 1993
Ronald Van Mynen 58 Vice-President, Health, Safety
and Environment 1992
Philip T. Wright 64 Vice-President 1995
John K. Wulff 47 Vice-President, Chief Financial Officer
and Controller 1988
There are no family relationships between any officers or directors of the
corporation. There is no arrangement or understanding between any officer and
any other person pursuant to which the officer was elected an officer. An
officer is elected by the Board of Directors to serve until the next annual
meeting of stockholders and until his successor is elected and qualified.
The table on the next page gives a summary of the positions held during at
least the past five years by each officer. Each of the officers has been
employed by the corporation or a subsidiary of the corporation for the past
five years.
Part III (Cont.)
Name Position Years Held
William H. Joyce Chairman of the Board, President and
Chief Executive Officer 1996 to present
President and Chief Executive Officer 1995 to 1995
President and Chief Operating Officer 1993 to 1995
President, Union Carbide Chemicals
and Plastics Company Inc. 1993 to 1994
Executive Vice-President 1991 to 1993
Executive Vice-President, Union Carbide
Chemicals and Plastics Company Inc. 1990 to 1993
Vice-President 1990 to 1991
Joseph S. Byck Vice-President 1991 to present
Vice-President, Union Carbide Chemicals
and Plastics Company Inc. 1991 to 1994
Vice-President, Business Development
and Planning, Union Carbide Chemicals
and Plastics Company Inc. 1989 to 1991
James F. Flynn Vice-President 1993 to present
Vice-President, General Manager
Solvents & Coatings Materials
Division 1989 to 1993
Joseph E. Geoghan Vice-President, General Counsel
and Secretary 1990 to present
Thomas D. Jones Vice-President and Treasurer 1993 to present
Vice-President, Treasurer and
Principal Financial Officer,
Union Carbide Chemicals and
Plastics Company Inc. 1992 to 1994
Associate Treasurer 1992 to 1993
Assistant Treasurer 1987 to 1992
Malcolm A. Kessinger Vice-President 1991 to present
Vice-President, Human Resources,
Union Carbide Chemicals and Plastics
Company Inc. 1990 to 1994
Lee P. McMaster Vice-President 1993 to present
President, Industrial Chemicals
Division 1992 to 1993
Vice-President, General Manager,
Polyolefins Division 1989 to 1992
Part III (Cont.)
Joseph C. Soviero Vice-President 1993 to present
President, Specialty Chemicals
Division 1983 to 1993
Roger B. Staub Vice-President 1993 to present
President, Polyolefins Division 1990 to 1993
Ronald Van Mynen Vice-President, Health, Safety
and Environment 1992 to present
Vice-President, Health, Safety
and Environmental Affairs
Union Carbide Chemicals and
Plastics Company Inc. 1985 to 1994
Philip T. Wright Vice-President 1995 to present
Group Vice-President, Union Carbide
Chemicals and Plastics Company Inc. 1990 to 1994
John K. Wulff Vice-President, Chief Financial Officer
and Controller 1996 to present
Vice-President, Controller and
Principal Accounting Officer 1989 to 1996
Item 11. Executive Compensation
See pages 20 through 22 of the proxy statement for the annual meeting of
stockholders to be held on April 24, 1996.
Item 12. Security Ownership of Certain Beneficial Owners and Management
See pages 23 and 24 of the proxy statement for the annual meeting of
stockholders to be held on April 24, 1996.
Item 13. Certain Relationships and Related Transactions
No reportable transactions in 1995.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
UNION CARBIDE CORPORATION
(a) The following documents are filed as part of this report:
1. The consolidated financial statements set forth on pages 20
through 37 and the Independent Auditors' Report set forth on page
38 of the 1995 annual report to stockholders are incorporated by
reference in this Form 10-K Annual Report.
2. The Report on Schedule of KPMG Peat Marwick LLP appears on page 10
of this Form 10-K Annual Report.
3. The following schedule should be read in conjunction with the
consolidated financial statements incorporated by reference in
Item 8 of this Form 10-K Annual Report. Schedules other than
those listed have been omitted because they are not applicable.
Page in this
Form 10-K Report
Valuation and Qualifying Accounts (Schedule II),
three years ended December 31, 1995 11
(b) No reports on Form 8-K were filed for the three months ended
December 31, 1995.
(c) Exhibits-See Exhibit Index on pages 13 through 17 for exhibits
filed with this Annual Report on Form 10-K.
UOP
(d) Audited financial statements of UOP, with Report of Independent
Accountants thereon, appearing on pages 17 through 39 of the
Corporation's 1993 Form 10-K, have been filed pursuant to Regulation
S-X, Rule 3.09 and are incorporated by reference herein. UOP is a
general partnership between EM Sector Holdings Inc. and Catalysts,
Adsorbents and Process Systems, Inc., wholly owned subsidiaries of
AlliedSignal Inc. and the corporation, respectively.
Part IV (Cont.)
Report of Independent Auditors
The Board of Directors
Union Carbide Corporation
Under date of January 19, 1996, we reported on the consolidated balance sheets
of Union Carbide Corporation and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the years in the three-year period ended December
31, 1995, as contained on pages 20 through 37 in the 1995 annual report to
stockholders. These consolidated financial statements and our report thereon
are incorporated by reference in the annual report on Form 10-K for the year
1995. In connection with our audits of the aforementioned consolidated
financial statements, we also have audited the related financial statement
schedule as listed in Item 14(a)3. This financial statement schedule is the
responsibility of the company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, in 1993 the
company changed its method of accounting for postemployment benefits.
KPMG Peat Marwick LLP
Stamford, Conn.
January 19, 1996
Part IV (Cont.)
Schedule II-Valuation and Qualifying Accounts
Union Carbide Corporation and Consolidated Subsidiaries
Deductions
Items determined
to be uncollectible,
Additions less recovery
Balance at Charged to of amounts Balance at
beginning costs and previously end of
of period expenses written off period
Millions of dollars, year ended December 31, 1995
Allowance for
doubtful accounts $11 $5 $5 $11
Millions of dollars, year ended December 31, 1994
Allowance for
doubtful accounts $12 $2 $3 $11
Millions of dollars, year ended December 31, 1993
Allowance for
doubtful accounts $ 9 $5 $2 $12
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the corporation has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Union Carbide Corporation
March 22, 1996
/s/John K. Wulff
by: John K. Wulff
Vice-President, Chief Financial Officer
and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
corporation and in the capacities indicated on March 22, 1996.
/s/William H. Joyce /s/John J. Creedon /s/Robert D. Kennedy
William H. Joyce John J. Creedon Robert D. Kennedy
Director, Chairman of the Board, Director Director
President and Chief Executive
Officer
/s/Joseph E. Geoghan /s/C. Fred Fetterolf /s/Ronald L. Kuehn, Jr.
Joseph E. Geoghan C. Fred Fetterolf Ronald L. Kuehn, Jr.
Director, Vice-President, Director Director
General Counsel and Secretary
/s/John K. Wulff /s/Rainer E. Gut /s/Rozanne L. Ridgway
John K. Wulff Rainer E. Gut Rozanne L. Ridgway
Vice-President, Chief Financial Director Director
Officer and Controller
/s/James M. Hester /s/William S. Sneath
James M. Hester William S. Sneath
Director Director
/s/Vernon E. Jordan, Jr.
Vernon E. Jordan, Jr.
Director
Exhibit Index
Exhibit No.
3.1 Restated Certificate of Incorporation as filed May 2, 1994 (See
Exhibit 3.1 of the Corporation's 1994 Form 10-K).
3.2 By-Laws of the Corporation as adopted April 26, 1994 (See Exhibit
3.2 of the Corporation's 1994 Form 10-K).
4.1 Indenture dated as of August 1, 1992, among Union Carbide
Chemicals and Plastics Company Inc. ("UCC&P"), Union Carbide
Corporation and Chemical Bank, Trustee, for debt securities (See
Exhibit 4.1.1 of the Corporation's Form S-3 filed December 9,
1992, File No. 33-55560).
4.2 The Corporation will furnish to the Commission upon request any
other debt instrument referred to in item 601(b)(4)(iii)(A) of
Regulation S-K.
4.3 Rights Agreement, dated as of July 26, 1989, as amended and
restated as of May 27, 1992, between the Corporation and
Chemical Bank (successor to Manufacturers Hanover Trust Company),
as Rights Agent (See Exhibit 4(a) of the Corporation's Form 8
filed June 1, 1992).
10.1.1 Credit Agreement dated as of November 4, 1994, among the
Corporation, the banks listed therein, the co-agents listed
therein, Morgan Guaranty Trust Company of New York, as
documentation agent, and Chemical Bank, as administrative agent
and auction agent (See Exhibit 10.1.1 of the Corporation's 1994
Form 10-K).
10.1.2 Amendment to Credit Agreement dated as of October 27, 1995, among
the Corporation, the banks listed therein, the co-agents listed
therein, Morgan Guaranty Trust Company of New York, as
documentation agent, and Chemical Bank, as administrative agent
and auction agent.
10.2 Indemnity Agreement dated as of July 25, 1986, between the
Corporation and Robert D. Kennedy. The Indemnity Agreement filed
with the Commission is substantially identical in all material
respects, except as to the parties thereto and dates thereof, with
Indemnity Agreements between the Corporation and each other person
who is a director or officer of the Corporation (See Exhibit 10.2
of the Corporation's 1992 Form 10-K).
10.3 Agreement, dated as of October 2, 1986, among UCC&P, GAF
Corporation, GAF Chemicals Corporation, Jay & Company, Inc.,
Mayfair Investments, Inc. and Samuel J. Heyman (See Exhibit 10.3
of the Corporation's 1992 Form 10-K).
10.4 Transfer Agreement dated as of January 1, 1989, between UCC&P and
Praxair, Inc. ("Praxair") (formerly named "Union Carbide
Industrial Gases Inc."), as amended (See Exhibits 10.06, 10.07,
10.08 and 10.09 of Praxair's Form 10 dated March 10, 1992, as
amended by Form 8s dated May 22, 1992, June 9, 1992 and June 12,
1992 ("Praxair Form 10")).
10.5 Transfer Agreement dated as of January 1, 1989, between UCC&P and
Union Carbide Coatings Service Corporation ("UCCS"), as amended
(See Exhibits 10.14, 10.15 and 10.16 of Praxair Form 10).
10.6 Amended and Restated Realignment Indemnification Agreement dated
as of June 4, 1992, among the Corporation, UCC&P, Praxair, UCAR
Carbon Company Inc. ("UCAR") and UCCS (See Exhibit 10.23 of
Praxair Form 10).
10.7 Environmental Management, Services and Liabilities Allocation
Agreement dated as of January 1, 1990, among the Corporation,
UCC&P, UCAR, Praxair, and UCCS, as amended (See Exhibits 10.13 and
10.22 of Praxair Form 10).
10.8.1 Danbury Lease Agreements dated as of January 1, 1989, between
UCC&P and Praxair, as amended (See Exhibit 10.26 of Praxair
Form 10).
Exhibit Index (Cont.)
Exhibit No.
10.8.2 Fourth Amendment to Carbide Center Lease between UCC&P and Praxair
dated July 1, 1992 (See Exhibit 10.14b of Praxair's 1993
Form 10-K).
10.8.3 Fifth Amendment to Carbide Center Lease between the Corporation
and Praxair dated June 30, 1994 (See Exhibit 10.8.3 of the
Corporation's 1994 Form 10-K).
10.8.4 Second Amendment to Linde Data Center Lease between UCC&P and
Praxair dated July 2, 1992 (See Exhibit 10.14a of Praxair's 1993
Form 10K).
10.8.5 Third Amendment to Linde Data Center Lease between the Corporation
and Praxair dated June 30, 1994 (See Exhibit 10.8.5 of the
Corporation's 1994 Form 10-K).
10.9.1 Tax Disaffiliation Agreement dated as of June 4, 1992, between the
Corporation and Praxair (See Exhibit 10.20 of Praxair Form 10).
10.9.2 Tax Settlement Agreement dated as of May 31, 1994, between the
Corporation and Praxair (See Exhibit 10.9.2 of the Corporation's
1994 Form 10-K).
10.10.1 Employee Benefits Agreement dated as of June 4, 1992, between the
Corporation and Praxair (See Exhibit 10.25 of Praxair Form 10).
10.10.2 First Amendatory Agreement to the Employee Benefits Agreement
dated May 31, 1994 (See Exhibit 10.10.2 of the Corporation's 1994
Form 10-K).
10.11.1 Danbury Lease-Related Services Agreement dated as of June 4, 1992,
among the Corporation, UCC&P and Praxair (See Exhibit 10.24 of
Praxair Form 10).
10.11.2 First Amendment to Danbury Lease Related Services Agreement dated
June 30, 1994 (See Exhibit 10.11.2 of the Corporation's 1994 Form
10-K).
10.12 Additional Provisions Agreement dated as of June 4, 1992, between
the Corporation, UCC&P, Praxair and UCCS (See Exhibit 10.21 of
Praxair Form 10).
10.13.1 1984 Union Carbide Stock Option Plan (See Exhibit 10.7.1 of the
Corporation's 1991 Form 10-K).
10.13.2 Resolutions adopted by the Board of Directors of the Corporation
on January 22, 1986, with respect to the 1984 Union Carbide
Stock Option Plan (See Exhibit 10.7.2 of the Corporation's 1991
Form 10-K).
10.13.3 Resolutions adopted by the Board of Directors of the Corporation
on April 17, 1986, with respect to the 1984 Union Carbide Stock
Option Plan (See Exhibit 10.7.3 of the Corporation's 1991
Form 10-K).
10.13.4 Amendment to the 1984 Union Carbide Stock Option Plan effective
June 1, 1989 (See Exhibit 10.13.4 of the Corporation's 1994
Form 10-K).
10.14.1 1988 Union Carbide Long-Term Incentive Plan (See Exhibit 10.14.1
of the Corporation's 1993 Form 10-K).
10.14.2 Amendment to the 1988 Union Carbide Long-Term Incentive Plan
effective June 1, 1989 (See Exhibit 10.14.2 of the Corporation's
1994 Form 10-K).
10.14.3 Amendment to the 1988 Union Carbide Long-Term Incentive Plan
effective August 1, 1989 (See Exhibit 10.14.3 of the Corporation's
1994 Form 10-K).
10.14.4 Resolutions adopted by the Board of Directors of the Corporation
on February 26, 1992, with respect to stock options granted under
the 1984 Union Carbide Stock Option Plan and the 1988 Union
Carbide Long-Term Incentive Plan (See Exhibit 10.14.4 of the
Corporation's 1992 Form 10-K).
Exhibit Index (Cont.)
Exhibit No.
10.14.5 Resolutions adopted by the Compensation and Management Development
Committee of the Board of Directors of the Corporation on June 30,
1992, with respect to stock options granted under the 1984 Union
Carbide Stock Option Plan and the 1988 Union Carbide Long-Term
Incentive Plan (See Exhibit 10.14.5 of the Corporation's 1992
Form 10-K).
10.15.1 1983 Union Carbide Bonus Deferral Program (See Exhibit 10.8.1 of
the Corporation's 1991 Form 10-K).
10.15.2 Amendment to the 1983 Union Carbide Bonus Deferral Program
effective January 1, 1992 (See Exhibit 10.15.2 of the
Corporation's 1992 Form 10-K).
10.16.1 1984 Union Carbide Cash Bonus Deferral Program (See Exhibit 10.9.1
of the Corporation's 1991 Form 10-K).
10.16.2 Amendment to the 1984 Union Carbide Cash Bonus Deferral Program
effective January 1, 1986 (See Exhibit 10.9.2 of the Corporation's
1991 Form 10-K).
10.16.3 Amendment to the 1984 Union Carbide Cash Bonus Deferral Program
effective January 1, 1992 (See Exhibit 10.16.3 of the
Corporation's 1992 Form 10-K).
10.17.1 Equalization Benefit Plan for Participants of the Retirement
Program Plan for Employees of Union Carbide Corporation and its
Participating Subsidiary Companies (See Exhibit 10.11 of the
Corporation's 1991 Form 10-K).
10.17.2 Amendment to the Equalization Benefit Plan effective January 1,
1994 (See Exhibit 10.18.2 of the Corporation's 1994 Form 10-K).
10.18.1 Supplemental Retirement Income Plan (See Exhibit 10.12.1 of the
Corporation's 1991 Form 10-K).
10.18.2 Amendment to the Supplemental Retirement Income Plan effective
January 1, 1994 (See Exhibit 10.19.3 of the Corporation's 1994
Form 10-K).
10.18.3 Amendment to the Supplemental Retirement Income Plan effective
January 1, 1995.
10.19.1 1992 Stock Compensation Plan for Non-Employee Directors of Union
Carbide Corporation (See Appendix A of the Corporation's proxy
statement for the annual meeting of the stockholders held on April
22, 1992).
10.19.2 Resolution adopted by the Board of Directors of the Corporation on
June 30, 1992, with respect to the 1992 Stock Compensation Plan
for Non-Employee Directors of Union Carbide Corporation (See
Exhibit 10.20.2 of the Corporation's 1992 Form 10-K).
10.20.1 Severance Compensation Agreement, dated July 21, 1992, between the
Corporation and Ronald Van Mynen. The Severance Compensation
Agreement filed with the Commission is substantially identical in
all material aspects, except as to the parties thereto and dates
thereof, with Agreements between the Corporation and other
officers and employees of the Corporation (See Exhibit 10.21.1 of
the Corporation's 1994 Form 10-K).
10.20.2 Amendment of Severance Compensation Agreement, dated September 24,
1993, between the Corporation and Ronald Van Mynen. Identical
amendments, except as to the parties thereto, were entered into
between the Corporation and other officers and employees of the
Corporation (See Exhibit 10.21.2 of the Corporation's 1994
Form 10-K).
Exhibit Index (Cont.)
Exhibit No.
10.21 Resolution adopted by the Board of Directors of the Corporation on
November 30, 1988, with respect to an executive life insurance
program for officers and certain other employees (See Exhibit
10.22 of the Corporation's 1993 Form 10-K).
10.22 1994 Union Carbide Variable Compensation Plan (See Exhibit 10.23.2
of the Corporation's 1993 Form 10-K).
10.23.1 Union Carbide Corporation Benefits Protection Trust (See Exhibit
10.24.1 of the Corporation's 1994 Form 10-K).
10.23.2 Amendment to the Union Carbide Corporation Benefits Protection
Trust effective October 23, 1991 (See Exhibit 10.18.2 of the
Corporation's 1991 Form 10-K).
10.23.3 Amendment to the Union Carbide Corporation Benefits Protection
Trust effective January 1, 1994 (See Exhibit 10.24.3 of the
Corporation's 1994 Form 10-K).
10.24 Resolutions adopted by the Board of Directors of the Corporation
on February 24, 1988, with respect to the purchase of annuities to
cover liabilities of the Corporation under the Equalization
Benefit Plan for Participants of the Retirement Program Plan for
Employees of Union Carbide Corporation and its Participating
Subsidiary Companies and the Supplemental Retirement Income Plan
(See Exhibit 10.25 of the Corporation's 1994 Form 10-K).
10.25 Resolutions adopted by the Board of Directors of the Corporation
on June 28, 1989, with respect to the purchase of annuities to
cover liabilities of the Corporation under the Supplemental
Retirement Income Plan (See Exhibit 10.26 of the Corporation's
1994 Form 10-K).
10.26 Union Carbide Corporation Non-Employee Directors' Retirement Plan
(See Exhibit 10.27 of the Corporation's 1994 Form 10-K).
10.27 1994 Union Carbide Long-Term Incentive Plan (See Exhibit 10.28 of
the Corporation's 1994 Form 10-K).
10.28 Restated Compensation Deferral Program effective October 1, 1995.
10.29 Excess Long-Term Disability Plan effective January 1, 1994 (See
Exhibit 10.30 of the Corporation's 1994 Form 10-K).
10.30 1995 Union Carbide Performance Incentive Plan (See Appendix A of
the Corporation's proxy statement for the annual meeting of
stockholders held on April 26, 1995).
10.31.1 Recapitalization and Stock Purchase and Sale Agreement dated as of
November 14, 1994 among Union Carbide Corporation, Mitsubishi
Corporation, UCAR International Inc. and UCAR International
Acquisition Inc. (See Exhibit 10.31 of the Corporation's 1994
Form 10-K).
10.31.2 Underwriting Agreement and Subscription Agreement each dated
August 9, 1995 among the Corporation, UCAR and the several
underwriters listed therein (See Exhibits 1.1 and 1.2,
respectively, of UCAR's Amendment No. 2 to Form S-1, filed August
8, 1995, File No. 33-94698).
11 Computation of Earnings per Share For The Five Years Ended
December 31, 1995.
13 The Corporation's 1995 annual report to stockholders (such report,
except for those portions which are expressly referred to in this
Form 10-K, is furnished for the information of the Commission and
is not deemed "filed" as part of the Form 10-K).
21 Subsidiaries of the Corporation.
23.1 Consent of KPMG Peat Marwick LLP.
Exhibit Index (Cont.)
Exhibit No.
23.2 Consent of Price Waterhouse LLP.
27 Financial Data Schedule
99 1993 audited financial statements of UOP, with Report of
Independent Accountants thereon (See pages 17 through 39 of the
Corporation's 1993 Form 10-K).
On May 1, 1994, Union Carbide Corporation was merged into UCC&P and UCC&P
changed its name to "Union Carbide Corporation."
Wherever an exhibit listed above refers to another exhibit or document (e.g.,
"See Exhibit 6 of...."), that exhibit or document is incorporated herein by
such reference.
A copy of any exhibit listed above may be obtained on written request to the
Secretary's Department, Union Carbide Corporation, Section E-4, 39 Old
Ridgebury Road, Danbury, CT 06817-0001. The charge for furnishing any exhibit
is 25 cents per page plus mailing costs.
Exhibit 10.1.2
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT NO. 1 dated as of October 27, 1995 to the
$1,000,000,000 Credit Agreement dated as of November 4, 1994 (the
"Credit Agreement") among UNION CARBIDE CORPORATION (the
"Borrower"), the Banks party thereto, the Co-Agents party
thereto, Morgan Guaranty Trust Company of New York, as
Documentation Agent and Chemical Bank, as Administrative Agent
and Auction Agent.
W I T N E S S E T H:
The parties hereto agree as follows:
SECTION 1. Definitions. Unless otherwise specifically
defined herein, each term used herein which is defined in the
Credit Agreement has the meaning assigned to such term in the
Credit Agreement.
SECTION 2. Amendment of Section 1.01. The definition of
the term "Termination Date" contained in Section 1.01 of the
Credit Agreement is amended by changing the date, "November 3,
1999" to "November 3, 2000."
SECTION 3. Governing Law. THIS AMENDMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
SECTION 4. Counterparts; Effectiveness. This Amendment may
be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Amendment shall
become effective as of the date hereof upon receipt by the
Administrative Agent of counterparts hereof duly executed by the
Borrower, each of the Banks, the Co-Agents, the Documentation
Agent, the Administrative Agent and the Auction Agent (or, in the
case of any party as to which an executed counterpart shall not
have been received, receipt by the Administrative Agent of
telegraphic, telex, telecopy or other written confirmation from
such party of execution of a counterpart hereof by such party).
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized
officers as of the day and year first above written.
UNION CARBIDE CORPORATION
By /s/ Thomas D. Jones
Title: Vice President and Treasurer
39 Old Ridgebury Road
Danbury, CT 06817-0001
Telecopy number: (203) 794-5135
Attention: Vice President and Treasurer
$59,166,666.67 ABN AMRO BANK N.V.,
NEW YORK BRANCH
as a Co-Agent and a Bank
By /s/ David A. Mandell
Title: Vice President
By /s/ David W. Stack
Title: Assistant Vice President
$59,166,666.67 BANK OF AMERICA ILLINOIS,
as a Co-Agent and a Bank
By /s/ Nancy McGaw
Title: Managing Director
$59,166,666.67 THE BANK OF NEW YORK,
as a Co-Agent and a Bank
By /s/ Nancy McEwen
Title: Vice President
$59,166,666.67 THE BANK OF NOVA SCOTIA,
as a Co-Agent and a Bank
By /s/ Terry K. Fryett
Title: Vice President
$59,166,666.67 BANQUE NATIONALE DE PARIS,
as a Co-Agent and a Bank
By /s/ Richard L. Sted
Title: Senior Vice President
By /s/ Thomas N. George
Title: Vice President
$59,166,666.67 CIBC INC.,
as a Co-Agent and a Bank
By /s/ Julia C. Collins
Title: Vice President
$59,166,666.66 CHEMICAL BANK,
as a Bank
By /s/ Scott S. Ward
Title: Vice President
$59,166,666.67 CREDIT SUISSE,
as a Co-Agent and a Bank
By /s/ David W. Kratovil
Title: Member of Senior Management
By /s/ Chris T. Horgen
Title: Associate
$59,166,666.67 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as a Bank
By /s/ James S. Finch
Title: Vice President
$59,166,666.67 NATIONSBANK OF NORTH CAROLINA, N.A.,
as a Co-Agent and a Bank
By /s/ Margaret K. Vandenberg
Title: Senior Vice President
$37,500,000.00 BANCA COMMERCIALE ITALIANA
By /s/ Charles Dougherty
Title: Vice President
By /s/ S. Kim
Title: Assistant Vice President
$37,500,000.00 BARCLAYS BANK PLC
By /s/ J. Onischuk
Title: Associate Director
$37,500,000.00 FUJI BANK LIMITED
By /s/ Yoshihiko Shiotsugu
Title: Vice President & Manager
$37,500,000.00 ROYAL BANK OF CANADA
By /s/ John M. Crawford
Title: Senior Manager
$37,500,000.00 THE SUMITOMO BANK, LIMITED
By /s/ Yoshinori Kawamura
Title: Joint General Manager
$37,500,000.00 SWISS BANK CORPORATION
By /s/ William S. Lutkins
Title: Associate Director,
Credit Risk
By /s/ H. Clark Worthley
Title: Associate Director
$37,500,000.00 TORONTO DOMINION (NEW YORK), INC.
By /s/ R. C. Bingham
Title: Managing Director
$20,833,333.33 COMMERZBANK AG
NEW YORK BRANCH
By /s/ Juergen Boysen
Title: Senior Vice President
By /s/ Michael D. Hintz
Title: Vice President
$20,833,333.33 GENERALE BANK
By /s/ Alain Verschueren
Title: Senior Vice President
By /s/ Carlos Faucon
Title: Senior Vice President
$20,833,333.33 INSTITUTO BANCARIO SAN PAOLO DI
TORINO, S.P.A.
By /s/ Wendell Jones
Title: Vice President
By /s/ Robert Wurster
Title: First Vice President
$20,833,333.33 MARINE MIDLAND BANK
By /s/ William M. Holland
Title: Vice President
$20,833,333.33 MELLON BANK, N.A.
By /s/ Daniel A. Brailer
Title: First Vice President
$20,833,333.33 NATIONAL BANK OF KUWAIT
By /s/ Muhannad Kamal
Title: Executive Manager
By /s/ Stephen A. Larson
Title: Executive Manager
$20,833,333.33 SOCIETE GENERALE
By /s/ Robert Petersen
Title: Vice President
Total Commitments:
$1,000,000,000.00
=================
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Documentation Agent
By /s/ James S. Finch
Title: Vice President
60 Wall Street
New York, New York 10260
Attention: James Finch
Telex number: 177615
Telecopy number: (212) 648-5014
CHEMICAL BANK, as Administrative Agent
By /s/ Scott S. Ward
Title: Vice President
270 Park Avenue
New York, New York 10017-2070
Attention: Scott S. Ward
Telecopy number: (212) 270-3125
CHEMICAL BANK, as Auction Agent
By /s/ Scott S. Ward
Title: Vice President
270 Park Avenue
New York, New York 10017-2070
Attention: Scott S. Ward
Telecopy number: (212) 270-3125
Exhibit 10.18.3
FOURTH AMENDMENT TO THE
UNION CARBIDE CORPORATION
SUPPLEMENTAL RETIREMENT INCOME PLAN
The Union Carbide Corporation Supplemental Retirement Income
Plan (the "Plan") is hereby amended as follows:
1. The third sentence of the General Section of the Plan
is hereby amended in its entirety as follows:
"Specifically, the purpose of this plan is to
provide a retirement benefit, determined
without regard to Code Section 415 or Code
Section 401(a)(17), equal to the excess of
the retirement benefit which would be
provided by (1) the Retirement Program Plan
if (a) average monthly compensation included
(i) deferred cash bonuses awarded under
designated incentive compensation plans and
(ii) base salary deferred under the
Compensation Deferral Program, and (b) all
cash bonuses, whether deferred or not, were
averaged separately from base compensation,
and (2) the Equalization Benefit Plan, over
the retirement benefit actually provided by
the Retirement Program Plan and the
Equalization Benefit Plan."
2. A new Section 3(e) is hereby added to Article II of the
Plan to read as follows:
"(e) For purposes of the calculation under
subpart (c) of this Section 3, "base salary"
shall include any base salary deferred by an
employee pursuant to the terms of the Union
Carbide Compensation Deferral Program, or any
successor plan, in the calendar year in which
it would otherwise have been paid."
3. The amendment set forth herein shall be effective as
of January 1, 1995.
UNION CARBIDE CORPORATION
By:
Exhibit 10.28
UNION CARBIDE COMPENSATION DEFERRAL PROGRAM
(As Amended and Restated October 1, 1995)
UNION CARBIDE COMPENSATION DEFERRAL PROGRAM
ARTICLE I
PURPOSE
1.1 The purpose of this Program is to (i) allow Eligible
Employees under the Variable Compensation Plans to defer a
portion or all of their Variable Compensation, (ii) allow
Eligible Employees to defer a portion of their base salary, (iii)
allow Eligible Employees to defer a portion or all of their lump
sum payments otherwise payable from the SRIP and/or Equalization
Plan, and (iv) restore to Eligible Employees a portion of their
matching contribution under the Savings Program which is limited
by restrictions imposed under Section 401(a)(17) of the Code.
1.2 This Program shall be effective for amounts payable on
or after January 1, 1995.
ARTICLE II
DEFINITIONS
2.1 "Administrative Committee" means the Administrative
Committee of the Retirement Program Plan for Employees of Union
Carbide Corporation and its Participating Subsidiary Companies
and certain Non-Qualified Employee Benefit Plans of Union Carbide
Corporation.
2.2 "Aggregate Compensation" means the sum of a
Participant's Compensation and Deferred Compensation.
2.3 "Annual Plan" means the 1994 Union Carbide Variable
Compensation Plan or such successor plan thereto maintained by
the Corporation.
2.4 "Applicable Equity Investment Fund Rate" means the
difference between the value of each of the applicable investment
funds elected by a Participant under Section 8.2 of this Program:
Fidelity Asset Manager, Fidelity Equity Income Fund, Fidelity
Growth Company Fund, Fidelity Contrafund and Fidelity Overseas
Fund, determined on a fund by fund basis, as of (i) the later of
the Date of Deferral or the effective date of a Participant's
election under Section 8.2(c), and (ii) the relevant valuation
date for determining the amount of earnings of such investment
fund in accordance with Section VIII. Such value shall include
any hypothetical dividends and hypothetical capital gains
distributions paid on such investment fund during the period for
which the Applicable Equity Investment Fund Rate is being
determined, as if such hypothetical dividends or hypothetical
capital gains distributions are reinvested when payable in
additional shares of such fund. The value of a respective
investment fund for purposes of this Section 2.4, shall mean the
net asset value of such investment fund as reported by such fund.
2.5 "Beneficiary" means the person, persons or estate
entitled (as determined under Article VII) to receive payment
under this Program following a Participant's death.
2.6 "Change in Control" means the occurrence of any of
the following:
(1) A change in control of the Corporation would be
required to be reported in response to item 1(a) of the current
Report of Form 8-K, as in effect on the date hereof, pursuant to
Sections 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), whether or not the Corporation is
then subject to such reporting requirement;
(2) there shall be consummated (A) any consolidation or
merger of the Corporation in which the Corporation is not the
continuing or surviving corporation or pursuant to which shares
of the Corporation's common stock would be converted into cash,
securities or other property, other than a merger of the
Corporation in which the holders of the Corporation's common
stock immediately prior to the merger have the same proportion
and ownership of common stock of the surviving corporation
immediately after the merger, or (B) any sale, lease, exchange or
other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the
Corporation, provided, that the divestiture of less than
substantially all of the assets of the Corporation in one
transaction or a series of related transactions, whether effected
by sale, lease, exchange, spin-off, sale of the stock or merger
of a subsidiary or otherwise, shall not constitute a Change in
Control;
(3) any "person" or "group" within the meaning of
Sections 13(d) and 14(d) (2) of the Exchange Act (A) becomes the
"beneficial owner" as defined in Rule 13d-3 under the Exchange
Act of more than 20% of the then outstanding voting securities of
the Corporation, otherwise than through a transaction or
transactions arranged by, or consummated with the prior approval
of, the board of directors of the Corporation, or (B) acquires by
proxy or otherwise the right to vote for the election of
directors, for any merger or consolidation of the Corporation or
for any other matter or question more than 20% of the then
outstanding voting securities of the Corporation, otherwise than
through an arrangement or arrangements consummated with the prior
approval of the board of directors of the Corporation;
(4) during any period of twenty-four consecutive months,
Present Directors and/or New Directors cease for any reason to
constitute a majority of the Board of Directors of the
Corporation. For purposes of this Agreement, "Present Directors"
shall mean individuals who at the beginning of such consecutive
twenty-four month period were members of the Board and "New
Directors" shall mean any director whose election by the Board of
Directors of the Corporation or whose nomination for election by
the Corporation's stockholders was approved by a vote of at least
two-thirds of the Directors then still in office who were Present
Directors or New Directors.
Notwithstanding the foregoing, a Change of Control shall not
be deemed to occur pursuant to subparagraph (2), above, solely
because twenty percent (20%) or more of the combined voting power
of the Corporation's then outstanding securities is acquired by
one or more employee benefit plans maintained by the Corporation.
2.7 "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
2.8 "Compensation Committee" means the Compensation and
Management Development Committee of the Board of Directors of the
Corporation.
2.9 "Compensation" means, solely for purposes of this
Program, a Participant's taxable base salary, taxable Variable
Compensation awarded under a Variable Compensation Plan and any
compensation that is deferred by the Participant to any other
plan maintained by the Corporation which satisfies the
requirements of Code Sections 125 or 401(k).
2.10 "Corporation" means Union Carbide Corporation, a
New York Corporation, any predecessor thereof and any successor
thereof by merger, consolidation or otherwise.
2.11 "Date of Deferral" means (i) with respect to
Variable Compensation, the date on which the Corporation issues
checks for Variable Compensation awards for a given Service Year,
(ii) with respect to base salary deferral, the date on which the
relevant salary would be paid, (iii) with respect to matching
contributions made by the Corporation pursuant to Section 5.4 of
this Program, December 31st and (iv) with respect to amounts
which would otherwise have been paid from the SRIP or
Equalization Plan, the date on which lump sum amounts would have
otherwise been distributed in accordance with the terms of such
Plan.
2.12 "Deferred Compensation" means the amount of
Compensation deferred by a Participant under this Program
pursuant to Section 5.3 of this Program.
2.13 "Disability" means a Participant's total physical
or mental inability to perform any work for compensation or
profit in any occupation for which the Participant is reasonably
qualified by reason of training, education or ability, and which
inability is adjudged to be permanent, as determined by the
Administrative Committee or its designee.
2.14 "Eligible Employee" means (i) an individual who, at
the Date of Deferral, is employed in the United States by the
Corporation, or one of its subsidiaries that is participating in
this Program, and is a participant in the Annual Plan or the Mid-
Management Plan or is otherwise approved for participation in
this Program by the Compensation Committee.
2.15 "Equalization Plan" means the Equalization Benefit
Plan for Participants in the Retirement Program Plan for
Employees of Union Carbide Corporation and its Participating
Subsidiary Companies.
2.16 "Exchange Act" means the Securities Exchange Act of
1934 as amended.
2.17 "Fixed Income Rate" means the rate of interest for
the Fixed Income Fund under the Savings Program, in effect from
time to time.
2.18 "Mid-Management Plan" means the 1994 Union Carbide
Mid-Management Variable Compensation Plan.
2.19 "Participant" means an Eligible Employee who (i)
elects in advance to defer a portion of his or her base salary in
accordance with Section 5.3 of this Program, (ii) elects in
advance to defer a portion or all of his or her variable
compensation for a given Service Year under one of the Variable
Compensation Plans in accordance with Article V.2 of this
Program, if one were to be paid to such Participant for that
year, and who is in fact subsequently awarded Variable
Compensation for that year, payable during the following calendar
year on the Date of Deferral, (iii) elects in advance under this
Program to defer his or her lump sum distribution from the SRIP
or Equalization Plan or (iv) is a participant in the Savings
Program for a given calendar year and receives compensation (as
defined in Section 1.12 of the Savings Program) for such calendar
year in an amount which is in excess of the compensation which
may be considered under Section 1.12 of the Savings Program
because of the limitations imposed by Code Section 401(a)(17).
2.20 "Program" means this Union Carbide Compensation
Deferral Program.
2.21 "Retirement" means (a) for participants in the
Retirement Program, the date on which a Participant attains age
65 or is eligible for a non-actuarially reduced pension benefit
under the Retirement Program and actually retires from employment
with the Corporation and (b) for those employees who are not
participants in the Retirement Program, the date on which a
Participant attains age 65, attains age 62 with at least 10 years
of service or whose age and service totals at least 85 and
actually retires from employment with the Corporation.
2.22 "Retirement Program" means The Retirement Program
Plan for Employees of Union Carbide Corporation and its
Participating Subsidiary Companies.
2.23 "Savings Program" means The Savings Program for
Employees of Union Carbide Corporation and Participating
Subsidiary Companies.
2.24 "Service Year" means one of the calendar years on
and after 1994, as to which an election may be made in accordance
with Article V, and in respect of which Variable Compensation may
be paid during the following calendar year on the Date of
Deferral.
2.25 "SRIP" means the Union Carbide Corporation
Supplemental Retirement Income Plan.
2.26 "UCC Discounted Stock Value Rate" means the UCC
Stock Value Rate except that the value of the Corporation's
common stock as of the Date of Deferral pursuant to which
earnings shall accrue at the UCC Stock Value Rate, shall be
determined as if purchased as a ten percent (10%) discount.
2.27 "UCC Stock Value Rate" means the difference between
the value of the Corporation's common stock as of the later of
(i) the Date of Deferral or the effective date of a Participant's
election under Section 8.2 pursuant to which earnings shall
accrue at the UCC Stock Value Rate and (ii) the relevant date of
determination of the amount of earnings in accordance with
Section 8.2(c) of this Program. Such value shall include the
value of any hypothetical dividends paid on the common stock
during the period for which the UCC Stock Value Rate is being
determined, as if such hypothetical dividends were reinvested
when payable (at a five percent (5%) discount) in additional
shares of the Corporation's common stock as determined on the
later of the Date of Deferral or the effective date of a
Participant's election under Section 8.2(c) pursuant to which
earnings shall accrue at the UCC Stock Value Rate. The value of
the Corporation's common stock for purposes of this Section 2.27,
shall mean the closing price of the stock on the New York Stock
Exchange - Composite Transaction on the relevant date of
determination.
2.28 "Unforeseen Emergency" means an event beyond the
control of the Participant that would result in severe financial
hardship to the Participant if early withdrawal of the
Participant's Variable Compensation deferral were not permitted.
Whether a Participant has an Unforeseen Emergency shall be
determined by the Administrative Committee, except that if a
Participant is subject to Section 16 of the Exchange Act, the
Compensation Committee shall determine if such Participant has an
Unforeseen Emergency.
2.29 "Variable Compensation" means any amounts awarded
in accordance with one of the Variable Compensation Plans.
2.30 "Variable Compensation Plans" means, collectively,
the Annual Plan, the Mid-Management Plan and any other variable
compensation plan authorized by the Compensation Committee to
participate in this Program.
ARTICLE III
ADMINISTRATION
3.1 Except as otherwise indicated, the Compensation
Committee shall supervise the administration and interpretation
of this Program, may establish administrative regulations to
further the purpose of this Program and shall take any other
action necessary to the proper operation of this Program. All
decisions and acts of the Compensation Committee shall be final
and binding upon all Participants, their Beneficiaries and all
other persons.
ARTICLE IV
ELIGIBILITY
4.1 To be eligible to participate in this Program for a
given year, a person must have become an Eligible Employee not
later than the day on or before the date which an Eligible
Employee must make the election provided for in Article V of this
Program for that year and either be employed by the Corporation
on the Date of Deferral for that year, or be eligible to receive
a lump sum payment under the Equalization Plan or SRIP.
ARTICLE V
DEFERRALS
5.1 During each of the years this Program is in effect,
Eligible Employees shall be informed of the opportunity to
participate in this Program. An Eligible Employee choosing to
participate in this Program must make an election to do so on or
before the date designated by the Administrative Committee and
otherwise in accordance with such procedures as may be
established by the Administrative Committee.
5.2 (a) While an election to defer Variable Compensation
under one of the Variable Compensation Plans shall be irrevocable
when made until the next scheduled annual election period,
participation in this Program with respect to Variable
Compensation shall become effective only on the Date of Deferral
and only if, on such date, the Eligible Employee receives an
award under one of the Variable Compensation Plans (or would have
received an award but for an election to defer under this
Program).
Variable Compensation awards, if any, for services
performed in calendar years 1994 and 1995, must be deferred
during the 1994 annual election period. Variable Compensation
awards, if any, for services performed in calendar years 1996 and
beyond, must be deferred during the annual election period
immediately preceding the calendar year in which such services
will be performed. Notwithstanding the foregoing, an Eligible
Employee who becomes eligible to participate in this Program
after January 1, 1995 may elect to defer a Variable Compensation
award during the calendar year in which services will be
performed; provided, however, he or she makes an election to
defer within 31 days after becoming eligible to participate in
this Program.
(b) An Eligible Employee must elect to defer his or her
base salary for services performed in calendar year 1995 during
the 1994 annual election period. Participation in this Program
shall become effective only on the Date of Deferral and only if,
on such date, the Eligible Employee remains employed with the
Corporation. Base salary for services performed in calendar
years 1996, and beyond, must be deferred during the annual
election period immediately preceding the calendar year in which
such services will be performed. A Participant may suspend his
or her election to defer his or her base salary (but may not
otherwise reduce or change an election mid-year) at any time;
provided, however, that such Eligible Employee may not resume
deferrals of base salary until the following calendar year.
Notwithstanding the foregoing, an Eligible Employee who becomes
eligible to participate in this Program after January 1, 1995,
may elect to defer a portion of his or her base salary during the
calendar year in which services will be performed; provided he or
she makes an election to defer within 31 days after becoming
eligible to participate in this Program.
(c) A Participant must elect to defer lump sum payments
that he or she would otherwise receive in accordance with the
terms of the SRIP or Equalization Plan during the annual election
period immediately preceding the calendar year in which such
payments would otherwise be received.
5.3 (a) On or before the date designated by the
Administrative Committee and otherwise in accordance with such
procedures as may be established, a Participant may elect
voluntarily to defer (i) up to 100% of the Participant's award
under the Variable Compensation Plans (in 10% increments),
(ii) up to 25% of his or her base salary (in 5% increments)
and/or (iii) up to 100% of his or her lump sum payment from the
SRIP or Equalization Plan. Effective with elections made with
respect to payments that would otherwise be received in 1996 or
later, (i) only up to 85% of Variable Compensation may be
deferred, and the 10% increments will apply only for the first
80% of such deferrals, and (ii) base salary may be deferred in
increments of 1% up to the first 5% and 5% increments thereafter.
(b) A Participant must elect, during any applicable
calendar year, to defer in the aggregate a minimum of $2,000 of
his base salary, Variable Compensation or lump sum payment from
the SRIP or Equalization Plan in order to participate in this
Program. Notwithstanding any provision in this Program to the
contrary, if a Participant fails to defer at least $2,000 of his
base salary, Variable Compensation or lump sum payment from the
SRIP or Equalization Plan in any calendar year, the
Administrative Committee may, in its sole discretion, require
such Participant to irrevocably elect to defer a minimum of
$2,000 in the calendar year immediately following thereafter in
order to participate in this Program.
5.4 (a) The Corporation shall credit a Participant with an
amount equal to 75% of a Participant's deemed annual contribution
as determined under subsection (b) of this Section 5.4.
(b) A Participant's deemed annual contribution shall equal
A multiplied by B, where A and B are as follow:
A equals that portion of a Participant's
compensation in excess of the limits
contained in Code Section 401(a)(17) (as
defined in Section 1.12 of the Savings
Program without regard to Code Section
401(a)(17), and without regard to any
deferrals under this Program), up to $235,840
which is deferred under this Program. Such
$235,840 shall be adjusted at the same time
and in the same manner as the limitation
described in Code Section 415(d)(3); and
B equals the percentage of such Participant's
compensation (as defined under Section 1.12
of the Savings Program) which has been
contributed to the Savings Program for the
applicable calendar year as a Basic Deduction
pursuant to Section 2.7.2 of the Savings
Program.
(c) The Corporation shall credit each Participant with the
amount determined pursuant to subsection (a) of this Section 5.4,
in arrears, on each Deferral Date; provided that such Participant
remains eligible to participate in this Program and is employed
by the Corporation on the Deferral Date. Notwithstanding the
foregoing, the Corporation shall not credit a Participant with
the amount determined pursuant to subsection (a) of this Section
5.4 (as of the Participant's termination of employment) if the
Participant terminates employment with the Corporation during a
calendar year for any reason, except if the Participant's
employment is terminated by reason of death, Disability,
Retirement or termination by the Corporation other than for
cause.
ARTICLE VI
PAYMENTS TO PARTICIPANTS AND BENEFICIARIES
6.1 Time of Payment. (a) Subject to subsections (b), (c)
and (d) of this Section 6.1, a Participant shall begin to receive
payment of his or her deferrals, and any earnings accruals
credited under Article VIII, during the January next following
his or her date of termination of employment.
(b) (i) Notwithstanding any provision in this Program to
the contrary, a Participant may elect to commence receipt of
payments of any amounts deferred upon a specific future payment
date which is at least five years after the Date of Deferral or
such shorter schedule as the Compensation Committee may
determine. Such payments must begin no later than the calendar
year in which the Participant attains age 70 1/2. A Participant
making such an election shall receive his or her lump sum payment
in the January next following his or her future payment date or,
if applicable, such Participant shall receive installment
payments in accordance with Section 6.2.
(ii) With respect to a Participant who has attained age 55
at the time of the election of his or her deferral, the five year
period described in subsection (i) shall instead be one year with
respect to deferrals of base salary or Variable Compensation.
(iii) A Participant is limited to two future fixed year
payments. The amounts paid out in such fixed year payments (if
prior to termination of employment) may not exceed the sum of a
Participant's deferral of base salary or Variable Compensation
under this Program. Effective for elections made in November,
1995 or later, up to four such fixed payment dates may be
elected.
(c) A Participant who has not yet terminated employment,
but has an Unforeseen Emergency, may receive any or all of his or
her Variable Compensation and base salary deferrals, excluding
any earning accruals credited to him or her pursuant to Article
VIII of this Program; provided that the Participant may not
receive an amount greater than the amount necessary to meet the
Unforeseen Emergency and any amounts necessary to pay federal,
state and local income taxes or penalties reasonably anticipated
to result from a withdrawal under this Section 6.1. Earning
accruals will remain in the Program and continue to accrue
earnings under Article VIII until the payment date or dates
described in Article VI.
(d) Notwithstanding any provision in this Program to the
contrary, a Participant may, on the applicable Date of Deferral
or at any time thereafter prior to a Change in Control, elect to
receive payment of his or her entire account balance under this
Program at such time as the Board of Directors of the Corporation
determines that a Change in Control has occurred. Such payment
shall be made in a lump sum within 45 days after the Change in
Control.
6.2 Form of Payments. (a) A Participant may elect
to receive payments under this Program in annual or quarterly
installments. Such installments must commence as described in
Section 6.1, and must be completed by the calendar year in which
the Participant attains age 85.
(b) A Participant may elect to receive installment
payments either (i) annually during each January or
(ii) quarterly, commencing in the January that payment was
otherwise due in accordance with Section 6.1. If a Participant
does not elect the form of his or her installment payments, such
installment payments shall be made annually during each January.
(c) If a Participant does not elect the form of his or her
payments, such payments shall be made in a lump sum payment.
(d) A Participant may change the form of payment previously
elected only one time and subject to the following restrictions:
(i) such election is made in the calendar
year that the Participant terminates
employment, to be effective no earlier than
the following calendar year;
(ii) the election is subject to the consent
of the Administrative Committee.
(e) 1. If a Participant dies at any time prior to
receiving any portion of his or her account balance under this
Program, payment shall be made to the Participant's Beneficiary
as follows:
(A) If the Participant's Beneficiary is his or her
surviving spouse, such Participant's entire account balance under
this Program shall be paid as follows:
(i) ten annual installments or a shorter
schedule, if so elected by the surviving
spouse, or
(ii) a lump sum payment payable on or about
the January 1st following the Participant's
death.
(B) If the Participant's Beneficiary is someone other
than his or her surviving spouse, such Participant's entire
account balance under this Program shall be paid in a lump sum
payment as soon as practical following the Participant's death.
2. If a Participant dies at any time after payment of
his or her account balance under this Program has begun, such
Participant's Beneficiary shall continue to receive payment of
the Participant's account in the same manner as the Participant
elected, or such shorter payment schedule as elected by the
Beneficiary.
(f) If any lump sum distribution otherwise payable under
this Program would be disallowed in any part as a deduction to
the Corporation in accordance with Section 162(m) (or a successor
Section) of the Internal Revenue Code, the Compensation Committee
may determine to distribute the amount of such benefit in
installments such that the Participant or Beneficiary shall
receive the maximum amount permissible in each installment and
still preserve the Corporation's full tax deduction.
6.3 Amount of Payment (a) If a Participant is
terminated by the Corporation for cause, he or she shall receive
the lesser of (A) any amounts he or she actually deferred under
Article V, less any previous payments made or (B) his or her
account balance under this Program. Such payment shall be made
in a lump sum payment as soon as administratively practical
following the Participant's termination of employment; provided,
however, that such Participant will forfeit all Earnings Accruals
credited to him or her pursuant to Article VIII.
(b) If a Participant voluntarily separates from employment
with the Corporation or retires under the Retirement Program with
an actuarially reduced pension, he or she shall receive, (i) with
respect to deferral elections made before 1995, a lump sum
payment equal to the lesser of (A) any amounts he or she actually
deferred under this Program, plus credits to his or her account
at the Fixed Income Rate from his or her Date of Deferral less
any previous payments made or (B) his or her account balance
under this Program, and (ii) with respect to deferral elections
made in 1995 and later, his or her account balance. Such
payments will be made as soon as administratively practical after
the Participant's termination of employment. Notwithstanding the
foregoing, a Participant who retires under the Retirement Program
with an actuarially reduced pension may elect to receive his or
her payments in any form described in Section 6.2.
(c) If a Participant terminates employment on account of
Retirement, Disability, death, or through action of the
Corporation taken without cause, such Participant (or
Beneficiary) shall be entitled to receive the full amount of his
or her account balance.
6.4 Payment in U.S. Dollars. All payments under this
Program shall be made in U.S. dollars.
6.5 Reduction of Payments. All payments under this
Program shall be reduced by any and all tax payments that the
Corporation is required to withhold pursuant to applicable law.
ARTICLE VII
BENEFICIARIES
7.1 A Participant may at any time, and from time to time,
prior to his or her death designate one or more Beneficiaries to
receive any payments to be made following the Participant's
death. If no such designation is on file with the Corporation at
the time of a Participant's death, the Participant's Beneficiary
shall be the beneficiary or beneficiaries named in the
beneficiary designation most recently filed by the Participant
under the Corporation's Savings Program. If a Participant has
not effectively designated a beneficiary under the Savings
Program, or if no designated beneficiary has survived the
Participant, the Participant's Beneficiary shall be the
Participant's surviving spouse, or, if no spouse has survived the
Participant, the estate of the deceased Participant. If an
individual Beneficiary cannot be located for a period of one year
following the Participant's death, despite mail notification to
the Beneficiary's last known address, and if the Beneficiary has
not made a written claim for benefits within such period to the
Administrative Committee, the Beneficiary shall be treated as
having predeceased the Participant. The Administrative Committee
may require such proof of death and such evidence of the right of
any person to receive all or part of a deceased Participant
account balance, as the Administrative Committee may consider
appropriate. The Administrative Committee may rely upon any
direction by the legal representatives of the estate of a
deceased Participant, without liability to any other person.
ARTICLE VIII
EARNINGS ACCRUALS
8.1 Each Participant's account balance under this Program
shall be credited with earnings from the Date of Deferral through
the date such deferral is paid out or withdrawn pursuant to
Article VI. Earnings under this Section 8.1 shall accrue at the
rate elected in accordance with Section 8.2.
8.2 (a) Earnings accruing in accordance with Section
8.1 shall accrue at (i) the Fixed Income Rate, (ii) the UCC Stock
Value Rate, (iii) the UCC Discounted Stock Value Rate, (iv) the
Applicable Equity Investment Fund Rate or (v) a combination of
the four rates. An election to use the UCC Discounted Stock
Value Rate shall be effective for not less than one (1) year.
Amounts deferred pursuant to Section 5.2(c) cannot accrue at the
UCC Discounted Stock Rate. Notwithstanding the foregoing, if a
Participant has elected under Section 6.1 to receive payment of
his or her account balance upon termination of employment, and
such Participant's employment is terminated by the Corporation
without cause, such Participant may then receive a distribution
based on the UCC Discounted Stock Value Rate even if one (1) year
has not yet passed since the relevant Date of Deferral.
(b) Subject to subparagraph (c), a Participant shall
designate at the time of his or her election to defer any amounts
under this Program which accrual rate or rates shall apply to his
or her deferrals (deferrals of matching contributions made
pursuant to Section 5.4 shall be allocated to the same accrual
rates as those selected for base salary deferrals for the same
year); provided such elections must be in whole percentage
points. Such elections shall be effective as of the Date of
Deferral through the date such deferral is paid out or withdrawn
pursuant to Article VI.
(c) A Participant may, one time each calendar month, elect
to change the accrual rate under this Section 8.2 with respect to
any or all previous deferrals under this Program; provided,
however, that Participants may elect to utilize the UCC
Discounted Stock Value Rate with respect to future deferrals
only, and not for the reallocation of any prior deferrals.
Participants may utilize the UCC Stock Value Rate only for
reallocation of previous deferrals.
ARTICLE IX
GENERAL PROVISIONS
9.1 Prohibition of Assignment of Transfer. Any
assignment, hypothecation, pledge or transfer of a Participant's
or Beneficiary's right to receive payments under this Program
shall be null and void and shall be disregarded, except to the
extent required by law.
9.2 Program Not to Be Funded. The Corporation is not
required, for the purpose of funding this Program, to segregate
any monies from its general funds, create any trusts, or make any
special deposits, and the right of a Participant or Beneficiary
to receive a payment under this Program shall be no greater than
the right of an unsecured general creditor of the Corporation.
9.3 Effect of Participation. Neither selection as a
Participant, nor an election to participate or participation in
this Program, shall entitle a Participant to receive awards under
the Variable Compensation Plans, SRIP or Equalization Plan or a
matching contribution under the Savings Program, or affect the
Corporation's right to discharge a Participant.
9.4 Communications To Be in Writing. All elections,
requests and communications to the Corporation or its designated
agent from Participants and Beneficiaries, and all communications
to such persons from the Corporation, shall be in writing, and in
such form and manner, and within such time, as the Corporation
shall determine. In lieu of the foregoing, the Corporation may
install a telephonic voice response system for such elections,
requests and communications.
9.5 Absence of Liability. No officer, director or
employee of the Corporation shall be personally liable for any
acts or omission to act under this Program or, except in
circumstances involving bad faith, for such officer's, director's
or employee's own act or omission to act.
9.6 Titles for Reference Only. The titles given herein
to sections and subsections are for reference only and are not to
be used to interpret the provisions of this Program.
9.7 New York Law To Govern. All questions pertaining to
the construction, regulation, validity and effect of the
provisions of this Program shall be determined in accordance with
New York law.
9.8 Amendment. The Compensation Committee may amend
this Program at any time, but no amendment may be adopted which
alters the payments due Participants or Beneficiaries, as of the
date of the amendment, or the times at which payments are due,
without the consent of each Participant affected by the amendment
and of each Beneficiary (of a then deceased Participant) affected
by the amendment. In addition, any amendment which does not
increase the Corporation's annual cost of any past or future
benefits under this Program by more than $500,000, change the
eligibility requirements, or impact the ability of officers to
utilize the UCC Discounted Stock Value Rate or the UCC Stock
Value Rate, may be authorized by the Administrative Committee.
9.9 Program Termination. The Compensation Committee may
terminate this Program for any reason and at any time. In the
event of such termination, the accounts of each Participant or
Beneficiary under this Program shall become immediately payable
in accordance with Section 6.1; provided that the Compensation
Committee, in its sole discretion, upon Program termination or at
any time thereafter, may decide to make lump sum payments in lieu
of annual payments.
UNION CARBIDE CORPORATION
By:
<TABLE>
EXHIBIT 11
UNION CARBIDE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE FOR THE FIVE YEARS ENDED DECEMBER 31, 1995
(In millions of dollars except per share amounts)
Year Ended December 31,
1995 1994
<S> <C> <C>
Earnings Per Share - Primary
Income (loss) from continuing operations $ 925 $ 389
Less: Preferred stock dividend 13 13
Net income (loss) from continuing operations
for primary income calculation 912 376
Income from discontinued operations - -
Cumulative effect of accounting changes - -
Net income (loss) - common stockholders $ 912 $ 376
Weighted average number of common
and common equivalent shares applicable
to primary earnings per share calculation
Weighted average number of
shares outstanding 137,219,676 149,904,755
Dilutive effect of stock options 4,443,980 4,270,033
141,663,656 154,174,788
Earnings per share - primary
Income (loss) from continuing operations $ 6.44 $ 2.44
Discontinued operations - -
Cumulative effect of accounting changes - -
Net income (loss) - common stockholders $ 6.44 $ 2.44
Earnings Per Share Assuming Full Dilution
Income (loss) from continuing operations $ 925 $ 389
Plus: Interest on convertible debentures
(net of taxes) - -
Less: Additional ESOP contribution resulting
from assumed conversion of preferred
stock 1 1
Income (loss) from continuing operations
for fully diluted income calculation 924 388
Income from discontinued operations - -
Cumulative effect of accounting changes - -
Net income (loss) for fully diluted
income calculation $ 924 $ 388
Weighted average number of common
and common equivalent shares applicable to
fully diluted earnings per share calculation
Weighted average number of
shares outstanding 137,219,676 149,904,755
Dilutive effect of stock options 4,819,502 4,439,006
Shares issuable upon conversion of UCC
convertible debentures - -
Shares issuable upon conversion of UCC
convertible preferred stock 16,341,367 16,542,644
158,380,545 170,886,405
Per share assuming full dilution
Income (loss) from continuing operations $ 5.83 $ 2.27
Discontinued operations - -
Cumulative effect of accounting changes - -
Net income (loss) $ 5.83 $ 2.27
Year Ended December 31,
1993 1992
<S> <C> <C>
Earnings Per Share - Primary
Income (loss) from continuing operations $ 165 $ 119
Less: Preferred stock dividend 13 17
Net income (loss) from continuing operations
for primary income calculation 152 102
Income from discontinued operations - 67
Cumulative effect of accounting changes (97) (361)
Net income (loss) - common stockholders $ 55 $ (192)
Weighted average number of common
and common equivalent shares applicable
to primary earnings per share calculation
Weighted average number of
shares outstanding 147,821,255 129,723,738
Dilutive effect of stock options 3,549,905 2,625,735
151,371,160 132,349,473
Earnings per share - primary
Income (loss) from continuing operations $ 1.00 $ 0.76
Discontinued operations - 0.51
Cumulative effect of accounting changes (0.64) (2.73)
Net income (loss) - common stockholders $ 0.36 $(1.46)
Earnings Per Share Assuming Full Dilution
Income (loss) from continuing operations $ 165 $ 119
Plus: Interest on convertible debentures
(net of taxes) 4 17
Less: Additional ESOP contribution resulting
from assumed conversion of preferred
stock 1 7
Income (loss) from continuing operations
for fully diluted income calculation 168 129
Income from discontinued operations - 67
Cumulative effect of accounting changes (97) (361)
Net income (loss) for fully diluted
income calculation $ 71 $ (165)
Weighted average number of common
and common equivalent shares applicable to
fully diluted earnings per share calculation
Weighted average number of
shares outstanding 147,821,255 129,723,738
Dilutive effect of stock options 4,244,866 4,038,716
Shares issuable upon conversion of UCC
convertible debentures 4,482,931 15,774,784
Shares issuable upon conversion of UCC
convertible preferred stock 16,796,109 14,655,935
173,345,161 164,193,173
Per share assuming full dilution
Income (loss) from continuing operations $ 0.97 $ 0.78
Discontinued operations - 0.41
Cumulative effect of accounting changes (0.56) (2.20)
Net income (loss) $ 0.41 * $(1.01)*
Year Ended December 31,
1991
<S> <C>
Earnings Per Share - Primary
Income (loss) from continuing operations $ (116)
Less: Preferred stock dividend 19
Net income (loss) from continuing operations
for primary income calculation (135)
Income from discontinued operations 107
Cumulative effect of accounting changes -
Net income (loss) - common stockholders $ (28)
Weighted average number of common
and common equivalent shares applicable
to primary earnings per share calculation
Weighted average number of
shares outstanding 126,449,140
Dilutive effect of stock options 327,068
126,776,208
Earnings per share - primary
Income (loss) from continuing operations $(1.06)
Discontinued operations 0.84
Cumulative effect of accounting changes -
Net income (loss) - common stockholders $(0.22)
Earnings Per Share Assuming Full Dilution
Income (loss) from continuing operations $ (116)
Plus: Interest on convertible debentures
(net of taxes) 17
Less: Additional ESOP contribution resulting
from assumed conversion of preferred
stock 4
Income (loss) from continuing operations
for fully diluted income calculation (103)
Income from discontinued operations 107
Cumulative effect of accounting changes -
Net income (loss) for fully diluted
income calculation $ 4
Weighted average number of common
and common equivalent shares applicable to
fully diluted earnings per share calculation
Weighted average number of
shares outstanding 126,449,140
Dilutive effect of stock options 392,058
Shares issuable upon conversion of UCC
convertible debentures 9,718,310
Shares issuable upon conversion of UCC
convertible preferred stock 15,116,167
151,675,675
Per share assuming full dilution
Income (loss) from continuing operations $(0.68)
Discontinued operations 0.71
Cumulative effect of accounting changes -
Net income (loss) $ 0.03*
* Fully diluted per share amounts are not presented in the consolidated
statements of income where amounts are antidilutive.
</TABLE>
UNION CARBIDE CORPORATION
1995 ANNUAL REPORT
(The cover depicts a hexagon (the Union Carbide logo hexagon) horizontally
split by a stress line. The top half of the hexagon is embossed with
"Specialties & Intermediates", and the bottom half is embossed with "Basic
Chemicals & Polymers". On and around the hexagon appears the reflection of a
chemical manufacturing facility.)
Contents
1 Financial Highlights
Summary comparison of 1995 and 1994 results.
2 Chairman's Letter
Bill Joyce reviews 1995 performance and discusses operations
in the context of strategy and long-term outlook.
6 Specialties & Intermediates/Basic Chemicals & Polymers
Carbide's principal products, services, major manufacturing sites
and competitors.
9 Financial Index
Management's discussion and analysis, financial statements and notes.
39 Corporate Information
Important dates, names, addresses, telephone numbers and other information.
40 Directors and Corporate Officers
Information on directors, corporate officers and other senior corporate staff.
Inside Back Cover A Chemical Glossary, Definition of Terms
Definitions of chemical and nonchemical terms used in this report.
At a Glance
Union Carbide Corporation is a worldwide chemicals and polymers company with
sales of nearly $5.9 billion. The company possesses many of the industry's
most advanced process and catalyst technologies and some of the most cost-
efficient, large-scale production facilities in the world. In addition to its
consolidated operations, the corporation participates in 50 percent-owned
joint ventures whose combined revenues totaled more than $3.5 billion in 1995.
Union Carbide operates two business segments, Specialties & Intermediates
and Basic Chemicals & Polymers.
Specialties & Intermediates converts basic and intermediate chemicals such
as propylene, ethylene and ethylene oxide into thousands of products sold to
industrial customers in many markets, including paints and coatings, wire and
cable, household and personal care products, agriculture, food and oil and
gas. In addition, the Specialties & Intermediates segment licenses olefins-
based technologies and offers other specialized technology licensing and
services. Revenues of the Specialties & Intermediates segment have averaged 73
percent of total consolidated results over the past three years, and sales
volumes 55 percent.
Basic Chemicals & Polymers converts various hydrocarbon feedstocks,
including liquefied petroleum products and naphtha, into the basic building-
block chemicals ethylene and propylene (also known as olefins). The segment
then uses state-of-the-art process technologies to convert manufactured and
purchased olefins into polyethylene (the world's most widely used plastic),
and polypropylene (one of the world's fastest-growing, large-volume plastics).
UCC also converts ethylene into ethylene oxide, which is used to make ethylene
glycol (for polyester fiber, film and resin, and automotive antifreeze) and
many other products. Basic Chemicals & Polymers also provides ethylene,
propylene, and ethylene oxide as raw materials to the Specialties &
Intermediates segment.
The leading Union Carbide end markets as a percentage of sales are:
o Paints, coatings and adhesives 23%
o Packaging and consumer plastics 18%
o Wire and cable 13%
o Textile 11%
o Household and personal care 7%
o Automotive, including antifreeze 5%
o Agricultural and food 3%
o Oil and gas 2%
o Industrial cleaners 2%
Financial Highlights
Dollar amounts in millions (except per share figures) 1995 1994
For the Year
Net sales $ 5,888 $ 4,865
Operating profit 1,348 551
Net income - common stockholders 915 379
Per common share - Primary 6.44 2.44
Per common share - Fully diluted 5.83 2.27
Cash dividends 103 113
Per common share 0.75 0.75
Capital expenditures 542 409
At Year-End
Total assets $ 6,256 $ 5,028
Total debt 1,323 946
UCC stockholders' equity 2,045 1,509
Per common share 15.14 10.45
Common shares outstanding (thousands) 135,108 144,412
Common stockholders of record 53,648 55,049
Employees 11,521 12,004
Cautionary statement for the purposes of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995: All statements in this
annual report that do not reflect historical information are forward looking
statements. These include statements about the chemical markets in 1996; cost
reduction targets; return on capital goals; development, production and
acceptance of new products and process technologies; ongoing and planned
capacity additions and expansions; joint ventures; and include Management's
Discussion and Analysis. Important factors that could cause actual results to
differ materially from those discussed in such forward looking statements
include: the supply/demand balance for the corporation's products, customer
inventory levels, competitive pricing pressures, feedstock costs, changes in
industry production capacities and operating rates, competitive technology
positions and failure to achieve the corporation's cost reduction targets or
complete construction projects on schedule.
Growing Stronger in Specialties & Intermediates
(Contained within this section is a picture of William H. Joyce, Chairman,
President and Chief Executive Officer.)
It's a pleasure in my first letter to shareholders as chairman and CEO to
report that Carbide had a banner year in 1995, posting record earnings,
launching joint ventures in key overseas markets, introducing new products and
expanding profitable businesses.
The year just ended was the first full year after completing our four-year
profit improvement program, which eliminated $575 million of costs. The
program produced benefits almost from the start, but our 1995 performance
confirmed the full effect.
Net income of $915 million rose 141 percent compared to the prior year, on
sales of $5.9 billion, up 21 percent compared to 1994. Fully diluted earnings
per share rose 157 percent to $5.83.
Carbide also generated sufficient cash flow to buy back stock, reducing
outstanding shares by 9.3 million during the year (16.9 million since the
beginning of 1993), to fund ambitious growth plans and to do both while
maintaining a comfortably low 39 percent debt-to-capital ratio.
We also sharpened our focus on Carbide's core chemicals and plastics
operations by selling our remaining interest in UCAR International, a
manufacturer of carbon and graphite electrodes, for net proceeds of $542
million.
So when Carbide people talk about unlocking shareholder value, we mean what
we say. Our stock price of $37.50 at year-end 1995 was 28 percent ahead of
where it closed at the end of 1994, and 230 percent ahead of where it was in
mid-1992, when we started operations as a company committed solely to the
chemical industry.
If you owned Carbide stock in January of 1991 and reinvested the dividends
and the July 1992 special distribution, the value of your investment would
have appreciated 563 percent by year-end 1995, an average annualized return of
46 percent.
The remarkable gains of the past several years may be tough to repeat, but
Carbiders everywhere, nearly all of whom are shareholders, will be giving it
all we have.
At this writing there is still a good deal of uncertainty about chemical
markets in 1996. If customers begin rebuilding their depleted inventories, and
if the number and duration of ethylene plant shutdowns is about normal during
the year, we think supplies will be tighter and markets stronger than many
expect. That would mean firmer prices, possibly moving up as 1996 progresses.
We also believe that with our new cost structure and streamlined work
processes, and with our Specialties & Intermediates segment now contributing
more to total sales and income, Carbide can post competitive results in any
1996 scenario.
Indeed, the role of these less cyclical businesses has become so important
to understanding Carbide's prospects that we began in the third quarter of
1995 to report separately the sales, operating profit and other financial data
of our Specialties & Intermediates (S&I) segment and our more cyclical Basic
Chemicals & Polymers (BC&P) segment.
We think there's a lot of room to grow profitably in Basic Chemicals &
Polymers, but our stake in the less cyclical Specialties & Intermediates is
even larger. The S&I segment accounted for 70 percent of our total sales
revenue in 1995 and, excluding special items, 62 percent of our operating
profit. And we supported the segment with $392 million, 72 percent of our 1995
capital program of $542 million.
The S&I segment also demonstrated its growing competitive strength in 1995.
For example:
o Unipol Systems began preparations for an early 1996 commercial-scale trial
of new proprietary metallocene catalyst-based Unipol Process technology.
Successful development will mean that Carbide can continue to offer customers
the widest range of polyethylene products. Manufacturers of film for such
high-volume markets as shrink-wrap and packaging will be the first customers
for the new resins, which offer outstanding toughness and clarity.
o Unipol Systems also added five new licensees during the year for Unipol
Process technology, bringing the worldwide total to 72, and sold three more
licenses to existing licensees for expansions.
o Specialty Polymers and Products increased sales volume by 9.7 percent during
1995 and reduced its cost per pound of product sold by 5.7 percent.
o Specialty Polyolefins' concentration on Asian and other overseas markets for
its wire and cable insulation and jacketing led to 11 percent volume growth in
those markets in the face of weaker U.S. demand.
o Industrial Performance Chemicals (IPC) boosted its share of the U.S. market
for aircraft anti-icing fluids by about 50 percent during the year, to an
estimated 75 percent, with a new fluid that provides longer-lasting anti-icing
protection. IPC also is seeking independent lab certification of a new, dual-
purpose fluid that airline customers can use either for deicing aircraft or as
an anti-icer, to keep ice from forming.
Moreover, continuing cost reductions will benefit both the S&I and BC&P
segments. In October we announced an annual net savings target of $637 million
by year-end 2000 (in then-current dollars) compared to costs in 1993, the
bottom of the last chemical business cycle. Of that total, $96 million of
reductions is targeted for the S&I segment, and $282 million of reductions for
the BC&P segment to help it achieve, before the end of the decade, the goal of
at least break-even performance at the bottom of the chemical business cycle.
Both segments also will benefit from most of the other elements of the cost-
reduction program, including a targeted $156 million of savings from a massive
information technology (IT) program under way throughout the company. The IT
program will integrate and dramatically improve the speed and efficiency of
virtually every business activity that depends on data, from accounting to
order processing to research and development to environmental reporting.
Other major initiatives target savings from new manufacturing efficiencies,
reduced distribution costs and more cost-efficient engineering support and
project installation.
As for 1995, our performance not only made for a great year, but also
reaffirmed our belief in Carbide's long-term growth and profit potential.
For example, our 39.2 percent return on capital (ROC) - profit after-tax but
before interest charges, divided by total invested capital - was well above
the 32 percent that was our goal for the peak of the chemical business cycle.
We also believe that reaching our 1993 to 2000 cost-savings target would
enable Carbide to exceed the 8 percent ROC goal we thought we could earn at
the bottom of the chemical business cycle.
We had said at the start of our profit improvement program that we believed
Carbide should earn an average 15 percent ROC over the full cycle, about
double our ROC over the last full chemical cycle. But our performance in the
1993 bottom, and then in the upturn that began in mid-1994 (but never reached
the peak margins of 1988-89), suggests that we can do even better.
And there were other welcome surprises. Not only have cost reductions
substantially improved the performance and prospects of our larger businesses,
but a number of smaller businesses that had been steady but unremarkable
performers are now posting returns that support investment for growth.
For example, we're investing in new capacity for propionic acid, an integral
part of our oxo chemical business that is recognized as a world leader in
technology. Major markets for propionic acid include feed and food additives,
herbicides and chemical intermediates.
We're also adding capacity at our South Charleston, W.Va., plant for
synthetic base resin for chewing gum, another of our less-cyclical specialty
businesses with new luster. Demand for chewing gum has taken off with the move
to smoke-free workplaces and the rapid growth of Asian and East European
markets.
Whether in our smaller businesses or our largest, we continue to concentrate
efforts and resources where Carbide has a clear competitive advantage.
Our solvents and intermediates business, the leading North American supplier
of these materials to the paint and coatings industry, has just completed a
300 million-pound-capacity butanol expansion at our Taft, La., plant using our
advanced proprietary technologies. We're planning another facility of similar
size at Taft, slated for 1998 start-up.
Our Taft plant will also increase capacity of acrolein by one third over the
next two years. Acrolein is used mainly as an intermediate to produce biocides
and in a product of ours that is sold for use in the production of animal
nutritional supplements - primarily for poultry feed. We are increasing
capacity for this acrolein-based intermediate by 40 percent at Taft.
And Taft is boosting capacity for acrylate esters by 80 million pounds, to
365 million pounds, and adding 50 million pounds of capacity for the acrylic
acid from which the esters are derived. The esters are building-block
chemicals for polymers used in paints and coatings, inks, textiles, adhesives
and plastic products.
Our Texas City, Tex., plant completed a vinyl acetate expansion, boosting
capacity to 720 million pounds. Vinyl acetate is used in adhesives and
architectural coatings and for the emulsion resins in paper coatings and
construction products.
A key competitive advantage in these growing markets stems from Carbide's
low-cost, low-pressure process for making oxo alcohols, the principal raw
materials in the manufacture of esters.
The Unipol II facility at our Star plant in Taft, La., started up at midyear
1995. Although equipment problems will delay production of our new high-
strength, easy-processing, linear low-density polyethylene resins, the plant
has been operating at full capacity, producing other polyethylene film resins.
And we expect our new ethylene propylene rubber business to begin
commercial-scale operations in the fourth quarter of 1996. A 200 million-
pound-capacity reactor nearing completion at our Seadrift, Tex., plant will
supply the new materials. After several years of lab and production line
trials, they are near full qualification for commercial production at some of
the world's largest manufacturers of hose and tubing, construction materials
and automotive trim.
Several joint ventures and acquisitions completed in '95 also reflect
Carbide's strategy of putting our chips on businesses that can benefit from
our technology and other competitive advantages.
Aspell Polymeres, our French joint venture with Elf Atochem, will use Unipol
Process technology and other proprietary Union Carbide technologies to
manufacture polyethylene resins and compounds at very competitive costs for
the European market. Carbide will market all the wire and cable compounds
manufactured by the venture.
Polimeri Europa, the joint venture formed last year with EniChem of Milan, a
major European polyethylene producer, will use Unipol Process technology to
attain a low-cost position in European commodity polyethylene markets. With
2.9 billion pounds of product, the venture is one of Europe's leading
suppliers of these resins.
We also formed a joint venture in Korea with BP Chemicals and Samsung Fine
Chemicals to manufacture vinyl acetate monomer for the Asia-Pacific market.
The new capacity will help us keep abreast of customer needs and also support
the rapid growth of Carbide's latex business in the Asia-Pacific region.
The acquisition in 1995 of certain ethylene oxide derivatives businesses
from Imperial Chemical Industries (ICI) of London greatly strengthens
Carbide's competitive position in the U.K. and continental Europe. It also
strengthens our position as worldwide market leader in ethylene glycol,
ethanolamines and glycol ethers, as well as our solid position in brake
fluids. The former ICI businesses performed well in their first year in the
Carbide fold, setting a slate of production records.
Carbide also signed an agreement to acquire the polypropylene assets and
business of Shell Oil Company. Polypropylene is one of the world's fastest-
growing, large-volume plastics and a natural fit with Carbide's other
polyolefin product lines. We completed the purchase in January 1996.
Carbide's Unipol polypropylene process is among the most widely used in the
world, with 26 licensees accounting for 3.8 billion pounds of world capacity.
The Shell acquisition, combined with our own expansion activities, will bring
Carbide's total polypropylene production capacity to 800 million pounds a
year.
And in July we finalized the agreement with Petrochemical Industries Company
and Boubyan Petrochemical Company of Kuwait to establish Equate Petrochemical
Company, a joint venture that will build and operate a world-scale
petrochemicals complex in Kuwait.
Construction is moving ahead on schedule toward the mid-1997 target date for
completion. We have high hopes for Equate, whose raw material and technology
advantages will make this venture a formidable world-scale competitor in
polyethylene and ethylene glycol markets.
As in any year, no matter how good, there are bound to be disappointments, and
1995 was no exception.
We set an ambitious annual volume growth target that we failed to meet in
1995, mainly due to operating problems that slowed production at some key
units in the first half and to customer inventory destocking of certain
product lines that reduced demand in the second half.
But we used the downtime to replace aging equipment, tighten inspection
routines, beef up training and implement other programs that should result in
marked improvement in equipment reliability. Growth and cost control are the
twin routes to improved productivity, and Carbiders are well aware that we
must do better in 1996.
With respect to our health, safety and environmental performance, we were
gratified that for the fourth year in a row there were no fatalities at any
Carbide location and that our employee injury and illness rates were down by
28 percent compared to 1994. We had no major process incidents in 1995, but we
can do a better job of preventing spills. We are determined to rank with the
best companies in our industry when it comes to preventing spills, and I
believe we are doing what it takes to get there.
(For more information about our environmental performance and the progress
made in implementing the Chemical Manufacturers Association's Responsible Care
codes of management practice - the main drivers of industry performance
improvement - write to Carbide's Public Affairs Department for our Responsible
Care progress report.)
On a personal note, James M. Hester, who has served on Carbide's board with
great distinction since 1963, will not stand for reelection, in accordance
with the board's retirement policy. We will miss his support, experience and
wise counsel.
Finally, I want to use this space to note the debt of gratitude that all of
us at Carbide owe to Bob Kennedy, who retired as chairman at the end of 1995.
It was Bob who championed the separation of Union Carbide into several
sharply focused companies. He could see what others missed - that the parts
would be viable and vibrant on their own, and that their accomplishments as
individual companies would surpass anything they achieved together in what we
now call "the old Carbide."
He also knew that shareholders and employees alike would benefit from the
change. Bob is a gentleman and a friend. He will be sorely missed by all of
us.
William H. Joyce
Feb. 28, 1996
(Within the preceding section, the following three phrases are repeated in
larger type within colored boxes:
- - when Carbide people talk about unlocking shareholder value, we mean what we
say
- - we continue to concentrate efforts and resources where Carbide has a clear
competitive advantage
- - growth and cost control are the twin routes to improved productivity).
Principal Products and Services
Dollar amounts in millions
Customer Sales(a)
1995 1994 1993
($) 4,123 1,765 3,636 1,229 3,487 1,153
(%) 70 30 75 25 75 25
a) After intersegment eliminations. See Note 3 to the financial statements.
Operating Profit (Loss)(b)
1995 1994 1993
($) 709 444 634 (22) 526 (208)
(%) 61 39 104 (4) 165 (65)
b) Excludes Other segment. See Note 3 to the financial statements.
Capital Expenditures
1995 1994 1993
($) 392 150 253 156 240 155
(%) 72 28 62 38 61 39
(Below these three tables is a legend indicating that the left-hand-side
number for every year in every table pertains to the Specialties &
Intermediates Segment, and the right-hand-side number for every year in every
table pertains to the Basic Chemicals & Polymers Segment. Above each of the
three tables is a hexagon (the Union Carbide logo hexagon) depicting via
different colors (blue and gray) each Segment's proportionate share of
customer sales, operating profit (loss) and capital expenditures,
respectively.)
Specialties & Intermediates Segment
Industrial Performance Chemicals
Gordon D. Mounts - VP, General Manager
Union Carbide manufactures a broad range of ethylene oxide derivatives and
formulated glycol products. These include Carbowax polyethylene glycols, with
a wide range of applications in pharmaceutical, personal care, household and
industrial markets; ethanolamines for detergents, personal care products and
in natural gas conditioning and refining; ethyleneamines for many industrial
uses; Tergitol and Triton specialty and commodity surfactants for
institutional and household cleaning products and other industrial
applications; Ucon fluids and lubricants, and alkyl alkanolamines. Formulated
glycol products include Ucar and Ultra deicing and anti-icing fluids for the
aviation industry, Ucartherm and Norkool heat-transfer fluids, and gas-
treating products, including Ucarsol and Selexol solvents.
Manufacturing Sites - Taft, La.; Seadrift and Texas City, Tex.; Institute and
South Charleston, W.Va.; Wilton, U.K.
Major Competitors - BASF; Dow Chemical; Huntsman ; Rhone-Poulenc
Specialty Polyolefins
F. Don Ryan - VP, General Manager
Specialty Polyolefins manufactures and markets worldwide a variety of
performance polyolefin products. Chief among these are polyolefin-based
compounds for sophisticated insulation, semiconductives and jacketing systems
for power distribution, telecommunications and flame-retardant wire and cable
applications. Other specialty polyolefin products are used in adhesives,
flexible tubing and beer- and soda-can six-pack carriers.
Manufacturing Sites - Bound Brook and Somerset, N.J.; Seadrift, Tex.; Antwerp,
Belgium; Cubatao, Brazil; joint ventures at Gonfreville, France, and Kawasaki,
Japan
Major Competitors - AT Plastics; Borealis AS; Mitsui Petrochemical; Quantum
Chemicals; Ube Industries
Unipol Systems
Roger B. Staub - Corporate VP, General Manager
Unipol Systems licenses Unipol Process technology, the most cost-efficient and
versatile method of manufacturing polyethylene and polypropylene, to producers
of these products worldwide. It also develops new process technology for the
manufacture of other olefins-based polymers, such as ethylene propylene
rubber, and sells catalysts to Unipol Process licensees worldwide.
Manufacturing Sites - Norco, La.; Bound Brook, N.J.; Houston and Seadrift,
Tex.; South Charleston, W.Va.
Major Competitors - BASF; British Petroleum; Mitsui Petrochemical; Montell
Polyolefins; Phillips Chemicals
Solvents and Intermediates
James F. Flynn - Corporate VP, General Manager
Solvents and Intermediates supplies one of the industry's broadest product
lines of solvents and intermediates. Its products include aldehydes, acids and
alcohols, including high-quality synthetic and fermentation ethanol; esters;
glycol ethers (Carbitol and Cellosolve solvents); ketones, and monomers (vinyl
acetate and acrylics for polymers and waterborne coatings). Its principal
customers are the paints and coatings industries, and many of its products are
also used widely in cosmetics and personal care preparations, adhesives,
household and institutional products, drugs and pharmaceuticals, fuel and lube
oil additives and agricultural products. The company's Unicarb System is a
pollution-reducing, supercritical fluid technology that can cut costs and
reduce volatile organic compounds in spray-applied coatings by up to 80
percent.
Manufacturing Sites - Taft, La.; Seadrift and Texas City, Tex.; Institute,
W.Va.; Wilton, U.K.
Major Competitors - Eastman Chemical; Hoechst Celanese; BASF; Shell Chemical
Specialty Polymers and Products
Ucar Emulsion Systems
Eugene J. Boros - VP, General Manager
Carbide manufactures and markets numerous specialty products. It targets
sharply defined market segments for many of its technologies. Specialty
Industrial Products produces acrolein derivatives, glutaraldehyde, vinyl
methyl ether, ethylidene norbornene (ENB), specialty ketones and biocides used
to control microorganisms in applications such as sterilants, water treatment,
papermaking, metalworking, oil field operations and industrial preservatives.
Performance Polymers includes Polyox water-soluble resins used in personal
care products, pharmaceuticals, inks and thermoplastics; and polyvinyl acetate
resins used in chewing-gum resins, low-profile additives, Neulon polyester
modifiers, fast-cure additives and pigmentable systems, and Ucure reactive
modifiers. Coating Materials reaches markets for paints, coatings, inks,
substrates and other materials for magnetic tape, food and beverage packaging,
plastics and orthopedic materials. Its products include Cellosize hydroxyethyl
cellulose (HEC); Ucar solution vinyl resins; Tone caprolactone-based
materials, and cycloaliphatic epoxides, including Cyracure ultraviolet-curing
products and Flexol plasticizers. Amerchol Corporation, a Union Carbide
subsidiary, manufactures and sells a wide variety of lanolin-, glucose- and
cellulose-based materials for personal care products.
Manufacturing Sites - Taft and Greensburg, La.; Edison, N.J.; Mamaroneck,
N.Y.; Texas City, Tex.; Institute and South Charleston, W.Va.; Antwerp and
Vilvoorde, Belgium; Aratu, Brazil
Major Competitors - Union Carbide's competitive position varies widely from
one product/market segment to another. Competitors include a number of
domestic and foreign companies, both diversified and specialized.
Ucar Emulsion Systems products, used in exterior and interior house paints,
include Ucar latex products (acrylics and vinyl-acrylics that impart enhanced
staining, weather and scrub resistance to paints) and Polyphobe thickeners.
Manufacturing Sites - Torrance, Calif.; Tucker, Ga.; Alsip, Ill.; Somerset,
N.J.; Bayamon, P.R.; Garland, Tex. ; Guayaquil, Ecuador; Jakarta, Indonesia;
Seremban, Malaysia; Guangdong Province, People's Republic of China; Batangas,
Philippines; Ekala, Sri Lanka; Nonthaburi, Thailand; Jebel Ali Free Trade
Zone, Dubai, United Arab Emirates
Major Competitors - Rohm & Haas; Air Products; Reichhold Chemicals
UOP
Joseph C. Soviero - Corporate VP, Corporate Ventures and Purchasing
UOP, a company owned equally by Carbide and AlliedSignal Inc., is a leading
international supplier of process technologies, catalysts, molecular sieves
and adsorbents to the petrochemical and gas-processing industries.
Manufacturing Sites - Mobile, Ala.; Anaheim and Eldorado Hills, Calif.;
McCook, Ill.; Shreveport, La.; Tonawanda, N.Y.; Shanghai, China; Reggio,
Italy; Brimsdown, U.K.
Major Competitors - UOP's competitve position varies widely from one
product/market segment to another. Competitors include domestic and foreign
companies, both diversified and specialized.
Basic Chemicals & Polymers Segment
Ethylene Oxide/Glycol
Lee P. McMaster - Corporate VP, General Manager
Union Carbide is the world's leading producer of ethylene oxide/glycol.
Ethylene oxide is a chemical intermediate primarily used in the manufacture of
ethylene glycol, polyethylene glycol, glycol ethers, ethanolamines,
surfactants and other performance chemicals and polymers. Ethylene glycol is
used extensively in the production of polyester fiber, resin and film;
automotive antifreeze, and engine coolants. Other ethylene oxide-based glycol
products include di-, tri-, and tetraethylene glycols used as chemical
intermediates and in dehydrating natural gas.
Manufacturing Sites - Taft, La.; Seadrift and Texas City, Tex.; Institute,
W.Va.; Prentiss, Alberta, Canada; Wilton, U.K.; a joint venture at Prentiss,
Alberta, Canada
Major Competitors - Dow Chemical; Huntsman; Occidental Chemical; Saudi Basic
Industries; Shell Chemical
Olefins
Vince F. Villani - VP, General Manager
Union Carbide manufactures about three-quarters of its ethylene requirements
and more than one-half of its propylene requirements. Ethylene and propylene
are the key raw materials for Union Carbide's olefins-chain businesses.
Manufacturing Sites - Taft, La.; Seadrift and Texas City, Tex.; a joint
venture at Montreal, Quebec, Canada
Unipol Polymers
Kevin P. Lynch - VP, General Manager
Union Carbide is a leading manufacturer of polyethylene, the world's most
widely used plastic. Unipol Polymers produces and markets low-, linear low-,
medium- and high-density polyethylenes used in high-volume applications such
as housewares, milk and water bottles, grocery sacks, trash bags, packaging
and water and gas pipes, and Flexomer very low-density resins used as a
polymer modifier in other polyolefins and to produce flexible hose and tubing,
frozen-food bags and stretch wrap. Unipol Polymers also processes and markets
postconsumer recycled polyethylene resins (under the Curbside Blend and Prisma
trademarks) used to produce plastic trash cans and personal care product,
bleach and detergent bottles.
Manufacturing Sites - Taft, La. (Star Plant); Bound Brook, N.J.; Seadrift,
Tex.; Boucherville, Quebec, Canada; a joint venture at Montreal, Quebec,
Canada
Major Competitors - Chevron Chemical; Dow Chemical ; Exxon Chemical; Novacor
Chemical; Quantum Chemicals
See page 15 for additional information on Polimeri Europa and other joint
venture manufacturing sites.
Financial Index
10 Management's Discussion and Analysis
10 Results of Operations
16 Liquidity, Capital Resources and Other Financial Data
18 Quarterly Data
19 Selected Financial Data
20 Consolidated Statement of Income
21 Consolidated Balance Sheet
22 Consolidated Statement of Cash Flows
23 Consolidated Statement of Stockholders' Equity
24 Notes to Financial Statements
24 Note 1 - Summary of Significant Accounting Policies
25 Note 2 - Financial Instruments
26 Note 3 - Business and Geographic Segment Information
28 Note 4 - Other Expense (Income) - Net
28 Note 5 - Acquisitions and Divestitures
29 Note 6 - Income Taxes
30 Note 7 - Supplementary Balance Sheet Detail
31 Note 8 - Interest Expense
31 Note 9 - Partnerships and Corporate Joint Ventures
31 Note 10 - Long-Term Debt
32 Note 11 - Convertible Preferred Stock - ESOP
32 Note 12 - UCC Stockholders' Equity
33 Note 13 - Leases
33 Note 14 - Retirement Programs
35 Note 15 - Incentive Plans
36 Note 16 - Commitments and Contingencies
38 Management's Statement of Responsibility for Financial Statements
38 Independent Auditors' Report
Management's Discussion
and Analysis
RESULTS OF OPERATIONS
Millions of dollars
(except per share figures) 1995 1994 1993
Net sales $5,888 $4,865 $4,640
Operating profit(a) 1,348 551 297
Interest expense 89 80 70
Pre-tax income 1,259 471 227
Net income before cumulative effect of
change in accounting principle(b) 925 389 165
Net income -
common stockholders 915 379 58
Per share, primary: Net income before
cumulative effect of
change in accounting
principle $ 6.44 $ 2.44 $ 1.00
Net Income 6.44 2.44 0.36
Per Share, Fully Diluted(c) 5.83 2.27 -
a) See Note 3 to the financial statements for a discussion of the special
items included in operating profit.
b) Effective Jan. 1, 1993, the corporation adopted Financial Accounting
Standard (FAS) 112, "Employers' Accounting for Postemployment Benefits."
c) Fully diluted per share amounts are not presented where amounts are
antidilutive.
(Included within this section, on pages 10 and 11, are six bar charts which
provide the following data for the Specialties & Intermediates Segment (S&I)
and the Basic Chemicals & Polymers Segment (BC&P):
(1) Average Customer Selling Price (Cents/pound)
S&I BC&P
1995 58.0 30.0
1994 51.3 21.6
1993 54.0 21.0
(2) Variable Margin (Millions of dollars)
S&I BC&P Total
1995 1,906 965 2,871
1994 1,748 480 2,228
1993 1,754 362 2,116
(3) Volume (Millions of pounds)
S&I BC&P Total
1995 7,112 5,878 12,990
1994 7,093 5,680 12,773
1993 6,454 5,502 11,956
(4) Unit Variable Margin (Cents/pound)
S&I BC&P
1995 26.8 16.4
1994 24.6 8.5
1993 27.2 6.6
(5) Fixed Costs (Millions of dollars)
S&I BC&P Total
1995 as reported (a) 1,122 423 1,545
1995 constant 1990 $ (a) 980 369 1,349
1994 as reported 1,067 395 1,462
1994 constant 1990 $ 948 351 1,299
1993 as reported 1,130 414 1,544
1993 constant 1990 $ 1,031 378 1,409
1992 as reported 1,225 424 1,649
1992 constant 1990 $ 1,147 398 1,545
1991 as reported 1,267 456 1,723
1991 constant 1990 $ 1,221 439 1,660
(6) Fixed Costs per Pound (Cents/pound)
S&I BC&P
1995 (a) 15.8 7.2
1994 15.0 7.0
1993 17.5 7.5
1992 19.0 7.7
1991 20.6 9.2
Below the preceding two tables appears the following:
a) Excludes 1995 charge of $68 million for postemployment benefits.
Also included within this section, on page 11, is a bar chart which provides
the following data:
Employee Productivity
Number of Thousand of pounds
employees per employee
1995 11,521 1,128
1994 12,004 1,064
1993 13,051 916
1992 15,075 794
1991 16,705 665 )
Summary and Outlook
Union Carbide operates two business segments, Specialties & Intermediates and
Basic Chemicals & Polymers. Specialties & Intermediates converts basic and
intermediate chemicals into a diverse portfolio of chemicals and polymers
serving industrial customers in many markets. This segment also provides
technology services, including licensing, to the oil and petrochemicals
industries. The Basic Chemicals & Polymers segment converts hydrocarbon
feedstocks, principally liquefied petroleum gas and naphtha, into polyethylene
and ethylene oxide/glycol for sale to third-party customers, as well as
propylene, ethylene and ethylene oxide for consumption by the Specialties &
Intermediates segment. In contrast to those of the Specialties & Intermediates
segment, the revenues and operating profit of Basic Chemicals & Polymers tend
to be more cyclical and very sensitive to a number of external variables,
including overall economic demand, hydrocarbon feedstock costs and plant
operating rates.
In 1995 the corporation's profitability benefited from improved pricing in
virtually all product groups, with particular strength in polyethylene through
midyear and in ethylene oxide/glycol throughout the year. This improvement,
coupled with modest volume increases, lower average feedstock costs, continued
benefits from ongoing productivity improvement programs and strong partnership
earnings, contributed to the year's very strong operating profits in both the
Specialties & Intermediates and Basic Chemicals & Polymers segments. In
addition, net income was enhanced by a nonrecurring after-tax gain associated
with the sales of the corporation's investment in UCAR International Inc.,
only partially offset by a number of nonrecurring after-tax losses. During
most of the preceding two-year period, corporate results were negatively
affected by low margins in ethylene oxide/glycol and polyethylene, leading, in
turn, to operating losses in the Basic Chemicals & Polymers segment.
Specialties & Intermediates reported increased operating profit in each of the
past three years, reflecting the benefits of improved volumes, cost reduction
programs and good partnership results.
Highlights of 1995 included:
o Start-up of a new Unipol II polyethylene facility and a 300 million-
pound-capacity butanol unit at Taft, La.; incremental expansion of
certain Specialties & Intermediates production facilities, and
completion of significant infrastructure projects.
o Acquisition of certain ethylene oxide derivative businesses from
Imperial Chemical Industries of London.
o Commencement of operations of Polimeri Europa, a joint venture with
EniChem of Milan, to develop, manufacture and sell polyethylene resins
in Europe.
o Commencement of operations of Aspell Polymeres, a joint venture with
Elf Atochem of Paris, to manufacture polyethylene resins and compounds
for the European wire and cable industries and other markets.
o Formation of Equate, a joint venture with two Kuwaiti companies,
Petrochemical Industries Company and Boubyan Petrochemical Company, to
design, construct, operate and market products from a world-scale
petrochemicals complex in Kuwait.
o Formation of a joint venture with BP Chemicals and Samsung Fine
Chemicals Company to manufacture vinyl acetate monomer in Korea for the
Asia-Pacific market.
o Announcement of the acquisition of Shell Oil Company's polypropylene
assets. This acquisition was completed in January 1996.
o Sales of the corporation's remaining interest in UCAR International for
net cash proceeds of $542 million.
o Repurchase of 14.1 million common shares, bringing the total number of
shares repurchased since the beginning of 1993 to 29.4 million.
o Announcement of ongoing cost reduction initiatives, with a combined
annual savings target of $637 million by year-end 2000 in then-current
dollars compared to costs in 1993.
Lower average polyethylene pricing is expected to negatively affect Basic
Chemicals & Polymers operating profits, as well as earnings of partnerships
and companies carried at equity, at least through the first half of 1996.
Whether this trend will continue beyond that will depend on the strength of
U.S. and global economies as well as on the availability of ethylene supplies
and customer demand for polyethylene. Specialties & Intermediates should
continue to perform well, although any weakness in the overall economy will
affect its results.
Specialties & Intermediates
Millions of dollars 1995 1994 1993
Sales $4,123 $3,636 $3,487
Operating profit 709 634 526
Depreciation and amortization 194 169 177
Capital expenditures 392 253 240
Identifiable assets 3,527 3,111 2,869
1995 Compared with 1994
Sales revenues of the Specialties & Intermediates segment increased 13.4
percent, almost entirely because of increased average selling prices,
primarily in the solvents and intermediates area. Volumes increased slightly.
Although variable margin (sales revenues less variable manufacturing and
distribution costs) increased by 9 percent from 1994 to 1995, it declined as a
percentage of sales, from 48.1 percent to 46.2 percent, because of increased
raw material costs. Gross margin (variable margin less fixed manufacturing and
distribution costs) as a percentage of sales remained stable at 27.8 percent
in 1995 compared to 27.9 percent in 1994. Fixed manufacturing and distribution
costs rose $23 million, or 3.1 percent, compared to 1994, because of expenses
related to new growth projects, start-up costs related to new manufacturing
facilities and increased profit sharing.
The segment's 1995 selling, administration and other expenses (SA&O)
included a charge of $48 million for postemployment benefits, including
severance. Excluding this charge, SA&O increased by $27 million, or 12.1
percent, reflecting increased profit sharing, as well as the costs of new
ventures and currency effects. Research and development expenditures increased
by $6 million to $114 million.
Operating profit increased in 1995 to $709 million from $634 million in
1994. In addition to the postemployment benefit charge, operating profit in
1995 included an increase in depreciation expense of $12 million representing
the cumulative effect of a reduction in the lives of certain computer
equipment.
1994 Compared with 1993
The segment's sales revenues increased 4.3 percent, as a result of a 9.9
percent increase in volume partially offset by a 5.0 percent decline in
average selling prices. Although variable margin remained stable, it declined
as a percentage of sales from 50.3 percent in 1993 to 48.1 percent in 1994.
Excluding the OrganoSilicon business (OSi), sold in July 1993, the 1993
variable margin would have been 49.9 percent. Gross margin as a percentage of
sales declined to 27.9 percent in 1994 from 29.0 percent in 1993 (28.6 percent
excluding OSi). Fixed manufacturing and distribution costs, excluding OSi,
increased 4.4 percent versus 1993, notwithstanding the even greater year-to-
year increase in volume.
SA&O declined 19.0 percent to $224 million (a 12.7 percent decline
excluding OSi from the 1993 totals) as the segment benefited from the
corporation's ongoing cost reduction/work process improvement programs.
Research and development expenditures remained stable on a year-to-year basis
(increased 8 percent excluding OSi, as a result of new developmental
projects).
Operating profit in 1994 increased to $634 million from $526 million in
1993. Included in 1994 operating profit were nonrecurring gains of $81 million
on the sale of a manufacturing site and distribution terminal in Hong Kong and
$24 million on the sale of the corporation's preferred stock investment in the
segment's former OSi business, and a nonrecurring charge of $68 million for
litigation costs and other costs related to divested operations. The 1993
operating profit included a gain of $54 million from the sale of the OSi
business and a loss of $9 million on the sale of a medical device company.
Basic Chemicals & Polymers
Millions of dollars 1995 1994 1993
Sales $2,080 $1,411 $1,324
Operating profit (loss) 444 (22) (208)
Depreciation and amortization 112 105 99
Capital expenditures 150 156 155
Identifiable assets 2,095 1,511 1,363
1995 Compared with 1994
Sales revenues of the Basic Chemicals & Polymers segment increased 47.4
percent, primarily due to a 38.9 percent increase in average customer selling
prices and 3.5 percent higher volumes. Variable margin as a percentage of
sales rose to 46.4 percent in 1995 from 34.0 percent in 1994. Ethylene
oxide/glycol margins improved through the third quarter of 1995 and remained
stable thereafter, while polyethylene margins improved in the first half of
the year and declined thereafter due to falling prices. Gross margin as a
percentage of sales rose to 30.8 percent in 1995 as compared to 12.7 percent
in 1994. Fixed manufacturing and distribution costs increased by $24 million,
or 8.0 percent, compared to 1994, due to acquired businesses, start-up costs
related to new facilities and profit sharing.
SA&O included a charge of $20 million for postemployment benefits,
including severance. Excluding this charge, SA&O increased by 1.7 percent to
$67 million from 1994 to 1995 after absorbing the cost of increased profit
sharing and acquired businesses. Research and development expenditures
remained stable on a year-to-year basis.
Operating profit in 1995, including the $20 million postemployment benefit
charge, was $444 million, compared to an operating loss of $22 million in
1994.
1994 Compared with 1993
The segment's sales revenues increased 6.6 percent, reflecting a 3.2 percent
increase in volume and a 2.9 percent increase in average customer selling
prices. After falling through midyear, average selling prices rose through the
third and fourth quarters, while raw material feedstock prices declined
slightly from 1993. Variable margin as a percentage of sales was 34.0 percent
in 1994, in comparison to 27.3 percent in 1993. Gross margin as a percentage
of sales rose to 12.7 percent in 1994, as compared to 3.0 percent in 1993.
Fixed manufacturing and distribution costs decreased $21 million, or 6.5
percent, versus 1993, notwithstanding the year-to-year increase in volumes.
SA&O remained relatively stable on a year-to-year basis, as did research
and development expenditures.
Operating losses declined 89.4 percent, to $22 million in 1994 from $208
million in 1993. Included in the 1993 operating loss was a $46 million charge
from the shutdown of an ethylene oxide/glycol manufacturing facility in Canada
and a loss of $9 million on the write-down of a Canadian business.
Other
Millions of dollars 1995 1994 1993
Operating profit (loss) $195 $(61) $(21)
The Other segment includes the operating profit (loss) of noncore
activities and financial transactions. Over the past three years, the
corporation has pursued programs to minimize investments in noncore assets.
With the sales of its remaining interest in UCAR International in 1995, these
programs have been substantially completed. Sale of the UCAR International
investment resulted in a nonrecurring pre-tax gain of $381 million, included
in 1995 operating profit. This gain was partially offset by a $191 million
charge for unused office space at the corporation's headquarters. The 1994
operating loss included a $24 million charge on the write-down and sale of the
corporation's stockholding in Union Carbide India Limited and a $12 million
loss on the sale of interests in a uranium mill and mines. In 1993 the
operating loss included a gain of $8 million from the sale of a corporate
aircraft.
Costs Relating to Protection of the Environment
Worldwide costs relating to environmental protection continue to be
significant, due primarily to stringent laws and regulations and to the
corporation's commitment to industry initiatives such as Responsible Care, as
well as to its own internal standards. In 1995 worldwide expenses of
continuing operations related to environmental protection for compliance with
Federal, state and local laws regulating solid and hazardous wastes and
discharge of materials to air and water, as well as for waste site remedial
activities, totaled $138 million. Expenses in 1994 and 1993 were $153 million
and $149 million, respectively. In addition, worldwide capital expenditures
relating to environmental protection in 1995 totaled $49 million, compared
with $57 million and $51 million in 1994 and 1993, respectively.
The corporation, like other companies in the U.S., periodically receives
notices from the U.S. Environmental Protection Agency and from state
environmental agencies, as well as claims from other companies, alleging that
the corporation is a potentially responsible party (PRP) under the
Comprehensive Environmental Response, Compensation and Liability Act and
equivalent state laws (hereafter referred to collectively as Superfund) for
past and future cleanup costs at hazardous waste sites at which the
corporation is alleged to have disposed of, or arranged for treatment or
disposal of, hazardous substances. The corporation is also undertaking
environmental investigation and remediation projects at hazardous waste sites
located on property currently and formerly owned by the corporation pursuant
to Superfund, as well as to the Resource Conservation and Recovery Act and
equivalent state laws.
There are approximately 136 hazardous waste sites at which management
believes it is probable or reasonably possible that the corporation will incur
liability for investigation and/or remediation costs. The corporation has
established accruals for those hazardous waste sites where it is probable that
a loss has been incurred and the amount of the loss can reasonably be
estimated. The reliability and precision of the loss estimates are affected by
numerous factors, such as the stage of site evaluation, the allocation of
responsibility among PRPs and the assertion of additional claims. The
corporation adjusts its accruals as new remediation requirements are defined,
as information becomes available permitting reasonable estimates to be made,
and to reflect new and changing facts.
At Dec. 31, 1995, the corporation's accruals for environmental
remediation totaled $327 million ($297 million in 1994). Approximately 59
percent of the accrual (54 percent in 1994) pertains to estimated future
expenditures for site investigation and cleanup, and approximately 41 percent
(46 percent in 1994) pertains to estimated expenditures for closure and
postclosure activities. See Note 16 to the financial statements for a
discussion of the environmental sites for which the corporation has
remediation responsibility. In addition, the corporation had environmental
loss contingencies of $163 million at Dec. 31, 1995.
Estimates of future costs of environmental protection are necessarily
imprecise, due to numerous uncertainties. These include the impact of new laws
and regulations, the availability and application of new and diverse
technologies, the identification of new hazardous waste sites at which the
corporation may be a PRP and, in the case of Superfund sites, the ultimate
allocation of costs among PRPs and the final determination of the remedial
requirements. While estimating such future costs is inherently imprecise,
taking into consideration the corporation's experience to date regarding
environmental matters of a similar nature and facts currently known, the
corporation estimates that worldwide expenses related to environmental
protection, expressed in 1995 dollars, should average about $140 million
annually over the next five years.
Worldwide capital expenditures for environmental protection, also
expressed in 1995 dollars, are expected to average about $46 million annually
over the same period. Management anticipates that future annual costs for
environmental protection after 2000 will continue at levels comparable to the
five-year average estimates.
Subject to the inherent imprecision and uncertainties in estimating and
predicting future costs of environmental protection, it is management's
opinion that any future annual costs for environmental protection in excess of
the five-year average estimates stated here, plus those costs anticipated to
continue thereafter, would not have a material adverse effect on the
corporation's consolidated financial position. Such excess costs, if any,
could have a material adverse effect on consolidated results of operations in
a given quarter or year.
Litigation
The corporation and its consolidated subsidiaries are involved in a number of
legal proceedings and claims with both private and governmental parties. These
cover a wide range of matters, including, but not limited to, product
liability; governmental regulatory proceedings; health, safety and
environmental matters; employment; patents; contracts, and taxes. In addition,
the corporation continues to be named as one of a number of defendants in
lawsuits, some of which have more than one plaintiff, involving silicone gel
breast implants. The corporation supplied bulk silicone materials to certain
companies that at various times were involved in the manufacture of breast
implants. These cases are discussed in more detail in the Commitments and
Contingencies note to the financial statements. In some of these legal
proceedings and claims, the cost of remedies that may be sought or damages
claimed is substantial. While it is impossible at this time to determine with
certainty the ultimate outcome of any such legal proceedings and claims,
management believes that adequate provisions have been made for probable
losses with respect thereto and that such ultimate outcome, after provisions
therefor, will not have a material adverse effect on the consolidated
financial position of the corporation but could have a material effect on
consolidated results of operations in a given quarter or year. Should any
losses be sustained in connection with any of such legal proceedings and
claims in excess of provisions therefor, they will be charged to income in the
future.
Partnerships and Corporate Joint Ventures
The corporation has for many years participated in a number of businesses
through 50 percent-owned partnerships and corporate joint ventures. On a
combined basis, the unconsolidated sales of these entities totaled $3.9
billion in 1995, compared to $2.8 billion in 1994. The most significant of
these businesses include:
Partnerships:
UOP - a worldwide supplier of process technology, catalysts, molecular
sieves and adsorbents (see page 8 for manufacturing sites).
Petromont - a Canada-based polyethylene resins producer with a facility at
Montreal, Quebec, Canada.
Union Carbide/Shell Polypropylene - a U.S.-based producer of specialty
polypropylene and licensor of polypropylene technology. In January 1996
the corporation acquired Shell Oil Company's interest in this partnership.
World Ethanol - a U.S.-based supplier of ethanol.
Aspell Polymeres - a French producer of polyolefins, with a facility at
Gonfreville, France.
Corporate Joint Ventures:
Polimeri Europa - a Europe-based producer of ethylene and polyethylene
resins, with facilities at Dunkirk, France; Oberhausen, Germany, and
Brindisi, Ferrara, Gela, Priolo and Ragusa, Italy.
Nippon Unicar - a Japan-based producer of commodity and specialty
polyolefins resins, with a facility at Kawasaki, Japan.
Alberta & Orient Glycol - a Canada-based producer of ethylene glycol, with
a facility at Prentiss, Alberta, Canada.
UCAR International - UCC's interest sold in 1995.
Following is a summary of partnership and corporate joint venture results
for the past three years.
Millions of dollars Partnerships Corporate Joint Ventures
1995 1994 1993 1995 1994 1993
Combined sales $2,146 $1,616 $1,445 $1,731 $1,206 $1,144
UCC share of
partnership income 152 98 67 - - -
UCC share of net
income of corporate
joint ventures - - - 46 55 16
UCC share of dividends
and distributions 90 83 82 7 45 10
Partnership income increased in 1995, primarily due to increased earnings
from UOP and Petromont. In 1994 the increase was largely due to improved
results from Petromont and the polypropylene partnership. The 1995 decline in
the UCC share of net income of corporate joint ventures was due to the sales
of the corporation's interest in UCAR International, partially offset by the
addition of the Polimeri Europa joint venture. UCC share of net income of
corporate joint ventures improved in 1994, largely due to improved results
from UCAR International.
In July 1995 the corporation and two Kuwaiti corporations formed a joint
venture, Equate Petrochemical Company, to design, construct, operate and
market products from a 650,000 metric-tons-per-year ethylene plant, a 450,000
metric-tons-per-year Unipol polyethylene unit and 340,000 metric-tons-per-year
ethylene glycol facility in Shuaiba, Kuwait. The complex is expected to cost
approximately $2 billion, including working capital requirements, by mid-1997,
its planned start-up date. The corporation has obtained insurance for
political risk on its 45 percent equity interest in the venture.
The corporation invested $134 million in Equate in 1995. In January 1996
the corporation severally guaranteed $225 million of Equate debt. The
remaining debt financing for the venture is expected to be in place during the
latter part of 1996. UCC expects its several guarantees of Equate debt to
approximate $600 million during the period of the facility's construction.
These guarantees will end once certain completion tests are met, which is
expected to occur by 2000.
In January 1996 the corporation acquired the polypropylene assets and
business of Shell Oil Company. Included are Shell's polypropylene technology
and manufacturing facilities, as well as polypropylene assets previously held
jointly by Union Carbide and Shell Oil.
Interest Expense
Interest expense rose $9 million to $89 million in 1995 as a result of
increased borrowings, partially offset by increased capitalized interest and
lower interest rates. The 1994 increase of $10 million to $80 million was due
to rising interest rates.
Provision for Income Taxes
The effective tax rate was 30.2 percent in 1995 as compared to 29.1 percent
and 34.4 percent in 1994 and 1993, respectively. In each of these years the
corporation's effective tax rate was reduced as a result of foreign sales
corporation income taxed at a preferential rate and research and development
tax credits. The effective tax rates in 1995 and 1993 were increased as a
result of taxes provided on the sale of businesses (UCAR International in 1995
and OSi in 1993).
Accounting Change
In 1995 the corporation adopted FAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The effect of
the adoption was not material. In 1994 the corporation adopted FAS 115,
"Accounting for Certain Investments in Debt and Equity Securities." The effect
of the adoption was not material. In 1993 the corporation recorded a noncash
after-tax charge of $97 million as a result of adopting FAS 112, "Employers'
Accounting for Postemployment Benefits." The charge represents the cumulative
effect of the accounting standard and is set forth separately in the
Consolidated Statement of Income.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," effective for years beginning after Dec. 15, 1995,
permits companies either to adopt a new method of accounting for employee
stock options and similar equity instruments or to continue following the
historical accounting method with supplemental pro forma disclosures. The
corporation will continue its historical practice, and provide the necessary
pro forma information when it adopts the standard in 1996.
LIQUIDITY, CAPITAL RESOURCES AND OTHER FINANCIAL DATA
Cash Flow from Operations
Cash flow from operations increased by $202 million to $763 million in 1995,
as compared with 1994, due to increased earnings partially offset by an
increase of working capital. Other noncash charges include a $191 million
charge for future minimum lease payments on unused office space. Net gains on
investing transactions include a $381 million gain on the sales of the
corporation's remaining investment in UCAR International.
Cash Flow Used for Investing
Cash flow used for investing includes capital expenditures, investments and
proceeds from the sales of investments and assets.
Capital expenditures increased to $542 million in 1995, from $409 million
in 1994 and $395 million in 1993. Major projects include, within the
Specialties & Intermediates segment, a butanol unit and a cogeneration
facility at Taft, La.; an ethylene propylene rubber project at Seadrift, Tex.,
and an energy systems renewal project at Texas City, Tex., and, within the
Basic Chemicals & Polymers segment, a Unipol II polyethylene facility at Taft,
La. (Star plant). An upgrade to the information technology infrastructure in
preparation for the installation of integrated information technology systems
throughout the company is a major project involving all segments.
Over the past three years 44 percent of capital expenditures was directed
at new capacity, 47 percent to cost reduction and replacement, and 9 percent
to environmental, safety and health facilities. Of these expenditures, 93
percent was in the U.S. and Puerto Rico.
Investments during 1995 included the $216 million acquisition of a 50
percent interest in Polimeri Europa and a $134 million investment in the
Equate joint venture. Investments during 1994, totaling $16 million, included
a $26 million investment in a Brazilian ethylene company and a return of
investment of $30 million from a financing affiliate. Investments during 1993
totaled $39 million, including a $13 million investment in Petromont.
Net proceeds from the sale of investments in 1995 included $542 million
from the sales of the corporation's remaining interest in UCAR International.
In 1994 proceeds from the sale of investments included $86 million from the
sale of the corporation's preferred stock investment in OSi.
The purchase of fixed and other assets in 1995 included the $71 million
purchase of certain ethylene oxide derivative businesses in the U.K. Proceeds
from the sale of fixed and other assets of $138 million in 1994 included $84
million from the sale of a manufacturing facility and distribution terminal in
Hong Kong and $13 million from the divestiture of the corporation's specialty
electronic materials business and its interest in a Zimbabwe mining and
smelting operation. In 1993 proceeds from the sale of fixed and other assets
included $220 million related to the sale of the OSi business and $18 million
from the sale of a corporate aircraft.
At Dec. 31, 1995, the cost of completing authorized construction projects
was estimated to be $921 million, of which $17 million is covered by firm
commitments. Future construction expenditures are anticipated to be sourced
through operating cash flows and borrowings.
During 1996 the corporation expects to continue making investments in
acquisitions and joint ventures. The cost of these investments is expected to
be funded from operating cash flows and borrowings. In January 1996 the
corporation completed the purchase of the polypropylene assets and business of
Shell Oil Company, and in February 1996 the corporation announced its planned
acquisition of a Brazilian vinyl acetate monomer manufacturer.
Cash Flow Used for Financing
Cash flow used for financing includes stockholder dividends and funds used to
buy back common stock and for debt reduction, offset in part by proceeds from
long-term debt and sales of common stock pursuant to the corporation's
dividend reinvestment plan and its employee savings and investment programs.
Cash flow used for financing in 1995 totaled $57 million, compared to $360
million in 1994 and $378 million in 1993. In June 1995 the corporation
completed a $400 million, two-part public offering of debt securities, which
was used in part to refinance existing short-term debt. During 1995, pursuant
to a share repurchase program authorized by the board of directors, the
corporation repurchased 14.1 million shares of its common stock for $425
million, at an average effective price of $30.06 per share, bringing the total
amount repurchased since the beginning of 1993 to 29.4 million shares for $829
million, at an average effective price of $28.18 per share.
In 1995 the corporation extended its 1994 bank credit agreement to Nov. 3,
2000, providing the corporation with $1 billion in credit through that date.
Several options are available to borrow at various rates on a revolving basis.
At Dec. 31, 1995, there were no outstanding borrowings under the credit
agreement.
Debt Ratios
Total debt outstanding at year-end for the past three years was:
Millions of dollars 1995 1994 1993
Domestic $1,254 $862 $895
International 69 84 71
Total $1,323 $946 $966
Year-end ratios of total debt to total capital were:
1995 1994 1993
Debt ratio 39.0% 38.2% 40.3%
Total debt consists of short-term debt, long-term debt and the current
portion of long-term debt. Total capital consists of total debt plus minority
stockholders' equity in consolidated subsidiaries and UCC stockholders'
equity.
(Included within this section, on page 17, is a bar chart which provides the
following data:
Shares Repurchased (thousands)
Net of
reissuances Total
1995 9,305 14,127
1994 6,135 11,624
1993 1,413 3,688 )
Quarterly Data
Union Carbide Corporation and Subsidiaries
Millions of dollars 1Q 2Q 3Q 4Q Year
1995
Net sales $1,453 $1,541 $1,495 $1,399 $5,888
Cost of sales 999 1,103 1,038 960 4,100
Gross profit 454 438 457 439 1,788
Depreciation and amortization 83 72 72 79 306
Operating profit 341 308 398 301 1,348
Net income(a) 230 228 277 190 925
Net income - common stockholders 228 225 275 187 915
1994
Net sales $1,126 $1,177 $1,252 $1,310 $4,865
Cost of sales 856 906 953 958 3,673
Gross profit 270 271 299 352 1,192
Depreciation and amortization 67 67 69 71 274
Operating profit 92 106 140 213 551
Net income(a) 63 73 96 157 389
Net income - common stockholders 61 70 94 154 379
Dollars per common share 1Q 2Q 3Q 4Q Year
1995
Primary net income $ 1.57 $ 1.59 $ 1.96 $ 1.33 $ 6.44
Fully diluted net income 1.43 1.44 1.77 1.21 5.83
Cash dividends 0.1875 0.1875 0.1875 0.1875 0.75
Market price - high(b) 32.00 33.63 42.75 41.38 42.75
Market price - low(b) 25.50 28.38 33.00 36.38 25.50
1994
Primary net income $ 0.39 $ 0.44 $ 0.61 $ 1.01 $ 2.44
Fully diluted net income 0.37 0.42 0.57 0.93 2.27
Cash dividends 0.1875 0.1875 0.1875 0.1875 0.75
Market price - high(b) 26.13 28.63 35.88 35.13 35.88
Market price - low(b) 21.75 21.50 26.00 26.38 21.50
a) Net income for the first quarter of 1995 included an after-tax net gain of
$12 million, or $0.07 per share, fully diluted, due to a gain on the sale of a
portion of the corporation's interest in UCAR International Inc.; a charge for
future lease payments on unused office space, primarily at the corporation's
Danbury headquarters, and an increase in depreciation expense related to a
reduction in the depreciable lives of certain computer equipment. Net income
for the third quarter of 1995 included an after-tax net gain of $50 million,
or $0.32 per share, fully diluted, due to a gain on the sale of the
corporation's remaining interest in UCAR International Inc. and a charge for
postemployment benefits. Net income for the first quarter of 1994 included an
after-tax net loss of $8 million, or $0.05 per share, fully diluted, due to a
gain on the sale of a preferred stock investment in the OrganoSilicon
business; a charge from the write-down and sale of the corporation's
stockholding in Union Carbide India Limited, and a loss on the sale of the
corporation's interest in a uranium mill and certain uranium mines. Net income
for the fourth quarter of 1994 included an after-tax net gain of $10 million,
or $0.06 per share, fully diluted, due to a gain on the sale of a
manufacturing facility and distribution terminal in Hong Kong and a charge for
litigation and other costs primarily related to divested operations.
b) Prices are based on New York Stock Exchange Composite Transactions
<TABLE>
Selected Financial Data
Union Carbide Corporation and Subsidiaries
<CAPTION>
Millions of dollars (except per share figures),
year ended December 31, 1995 1994 1993 1992
From the Income Statement
<S> <C> <C> <C> <C>
Net sales $5,888 $4,865 $4,640 $4,872
Cost of sales 4,100 3,673 3,589 3,764
Research and development 144 136 139 155
Selling, administration
and other expenses 387(a) 290 340 383
Depreciation and amortization 306 274 276 293
Interest expense 89 80 70 146
Partnership income (loss) 152 98 67 60
Pre-tax income (loss) from
continuing operations 1,259 471 227 178
Provision (credit) for
income taxes 380 137 78 45
UCC share of net income (loss)
from corporate investments
carried at equity 46 55 16 (14)
Income (loss) from
continuing operations 925 389 165 119
Income from discontinued
operations - - - 67
Cumulative effect of change
in accounting principles - - (97) (361)
Net income (loss) -
common stockholders 915 379 58 (187)
Per common share
Primary
- Income (loss) from
continuing operations $ 6.44 $ 2.44 $ 1.00 $ 0.76
- Net income (loss) 6.44 2.44 0.36 (1.46)
Fully diluted(b)
- Income from
continuing operations 5.83 2.27 - -
- Net income 5.83 2.27 - -
From the Balance Sheet (At Year-End)
Net current assets of continuing
operations $ 858 $ 329 $ 233 $ 66
Total assets 6,256 5,028 4,689 4,941
Long-term debt 1,285 899 931 1,113
Other long-term obligations 834 537 378 277
Total capital 3,392 2,479 2,395 2,710
UCC stockholders' equity 2,045 1,509 1,428 1,238
UCC stockholders' equity per
common share 15.14 10.45 9.49 9.32
Other Data
Cash dividends on common stock $ 103 $ 113 $ 110 $ 114
Cash dividends per common share 0.75 0.75 0.75 0.875
Special distribution per common share - - - 15.875
Market price per common share - high(c) 42.75 35.88 23.13 17.13(d)
Market price per common share - low(c) 25.50 21.50 16.00 10.88(d)
Common shares outstanding (thousands) 135,108 144,412 150,548 132,865
Capital expenditures 542 409 395 359
Employees - continuing operations 11,521 12,004 13,051 15,075
Selected Financial Ratios
Total debt/total capital 39.0% 38.2% 40.3% 54.3%
Return on capital(e) 39.2% 18.0% 7.7% 6.9%
Income from continuing operations/
average UCC stockholders' equity 52.1% 26.5% 12.4% 6.8%
Cash dividends on common stock/income
from continuing operations 11.1% 29.0% 66.7% 95.8%
<CAPTION>
Millions of dollars (except per share figures),
year ended December 31, 1991 1990 1989 1988
From the Income Statement
<S> <C> <C> <C> <C>
Net sales $4,877 $5,238 $5,613 $5,525
Cost of sales 3,787 3,876 3,909 3,696
Research and development 157 157 143 124
Selling, administration
and other expenses 408 466 442 394
Depreciation and amortization 287 278 261 255
Interest expense 228 269 268 172
Partnership income (loss) (22) 70 82 95
Pre-tax income (loss) from
continuing operations (147) 365 780 978
Provision (credit) for
income taxes (50) 130 257 381
UCC share of net income (loss)
from corporate investments
carried at equity (21) (42) 27 33
Income (loss) from
continuing operations (116) 188 530 608
Income from discontinued
operations 107 120 43 54
Cumulative effect of change
in accounting principles - - - -
Net income (loss) -
common stockholders (28) 308 573 662
Per common share
Primary
- Income (loss) from
continuing operations $(1.06) $ 1.34 $ 3.76 $ 4.48
- Net income (loss) (0.22) 2.19 4.07 4.88
Fully diluted(b)
- Income from
continuing operations - 1.34 3.63 4.29
- Net income - 2.13 3.92 4.66
From the Balance Sheet (At Year-End)
Net current assets of continuing
operations $ 209 $ 7 $ 22 $ 14
Total assets 6,826 7,389 7,355 7,327
Long-term debt 1,160 2,058 2,060 2,271
Other long-term obligations 428 357 572 594
Total capital 4,694 5,338 5,319 4,805
UCC stockholders' equity 2,239 2,373 2,383 1,836
UCC stockholders' equity per
common share 17.55 18.88 16.83 13.34
Other Data
Cash dividends on common stock $ 126 $ 138 $ 140 $ 155
Cash dividends per common share 1.00 1.00 1.00 1.15
Special distribution per common share - - - -
Market price per common share - high(c) 22.63 24.88 33.25 28.38
Market price per common share - low(c) 15.13 14.13 22.75 17.00
Common shares outstanding (thousands) 1127,607 125,674 141,578 137,602
Capital expenditures 400 381 483 380
Employees - continuing operations 16,705 17,722 18,032 17,258
Selected Financial Ratios
Total debt/total capital 52.0% 54.0% 49.9% 56.1%
Return on capital(e) - 8.4% 21.2% 24.5%
Income from continuing operations/
average UCC stockholders' equity - 7.9% 25.1% 39.4%
Cash dividends on common stock/income
from continuing operations - 73.4% 26.4% 25.5%
<FN>
a) Selling, administration and other expenses in 1995 include a charge of $68
million for postemployment benefits, including severance.
b) Fully diluted per share amounts are not presented where amounts are
antidilutive.
c) Prices are based on New York Stock Exchange Composite Transactions.
d) In 1992 the corporation spun off Praxair, Inc. The high and low presented
in the table for 1992 represent the value of the common stock after the
spin-off. The high and low for 1992 before the spin-off were $29.63 and
$20.13, respectively.
e) Return on capital is computed by dividing income by beginning of year
capital. Income consists of income from continuing operations, less
preferred dividends, plus after-tax interest cost (net of interest income
received from Praxair), plus income from minority interests. Capital
consists of the components described below, adjusted for the
corporation's Praxair-related assets and the cumulative effect of the
changes in accounting principles. Total debt consists of short-term debt,
long-term debt and current portion of long-term debt. Total capital
consists of total debt plus minority stockholders' equity in consolidated
subsidiaries and UCC stockholders' equity.
</TABLE>
<TABLE>
Consolidated Statement of Income
Union Carbide Corporation and Subsidiaries
<CAPTION>
Millions of dollars (except per share figures),
year ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Net Sales $5,888 $4,865 $4,640
Cost of sales, exclusive of depreciation
and amortization 4,100 3,673 3,589
Research and development 144 136 139
Selling, administration and other expenses 387 290 340
Depreciation and amortization 306 274 276
Interest expense 89 80 70
Partnership income 152 98 67
Other expense (income) - net (245) 39 66
Income Before Provision for Income Taxes 1,259 471 227
Provision for income taxes 380 137 78
Income of Consolidated Companies 879 334 149
Income from corporate investments carried at equity 46 55 16
Net Income Before Cumulative
Effect of Change in Accounting Principle 925 389 165
Cumulative effect of change in accounting principle - - (97)
Net Income 925 389 68
Preferred stock dividends, net of income taxes 10 10 10
Net Income - Common Stockholders $ 915 $ 379 $ 58
Earnings per Common Share
Primary - Net income before cumulative effect
of change in accounting principle $ 6.44 $ 2.44 $ 1.00
- Cumulative effect of change in
accounting principle - - (0.64)
- Net income - common stockholders 6.44 2.44 0.36
Fully diluted(a) 5.83 2.27 -
Cash Dividends Declared per Common Share $ 0.75 $ 0.75 $ 0.75
<FN>
a) Fully diluted per share amounts are not presented where amounts are
antidilutive.
The Notes to Financial Statements on pages 24 through 37 should
be read in conjunction with this statement.
</TABLE>
<TABLE>
Consolidated Balance Sheet
Union Carbide Corporation and Subsidiaries
<CAPTION>
Millions of dollars at December 31, 1995 1994
Assets
<S> <C> <C>
Cash and cash equivalents $ 449 $ 109
Notes and accounts receivable 996 898
Inventories 544 390
Other current assets 207 217
Total Current Assets 2,196 1,614
Property, plant and equipment 6,357 5,889
Less: Accumulated depreciation 3,549 3,347
Net Fixed Assets 2,808 2,542
Companies carried at equity 739 418
Other investments and advances 84 88
Total Investments and Advances 823 506
Other assets 429 366
Total Assets $6,256 $5,028
Liabilities and Stockholders' Equity
Accounts payable $ 316 $ 326
Short-term debt and current portion of long-term debt 38 47
Accrued income and other taxes 259 179
Other accrued liabilities 725 733
Total Current Liabilities 1,338 1,285
Long-term debt 1,285 899
Postretirement benefit obligation 480 488
Other long-term obligations 834 537
Deferred credits 201 242
Minority stockholders' equity in consolidated subsidiaries 24 24
Convertible preferred stock - ESOP 146 148
Unearned employee compensation - ESOP (97) (104)
UCC stockholders' equity
Common stock
Authorized - 500,000,000 shares
Issued - 154,609,669 shares 155 155
Additional paid-in capital 343 369
Translation and other equity adjustments (15) (59)
Retained earnings 2,145 1,333
2,628 1,798
Less: Treasury stock, at cost - 19,501,701 shares
(10,197,367 in 1994) 583 289
Total UCC Stockholders' Equity 2,045 1,509
Total Liabilities and Stockholders' Equity $6,256 $5,028
<FN>
The Notes to Financial Statements on pages 24 through 37 should be read in
conjunction with this statement.
</TABLE>
<TABLE>
Consolidated Statement of Cash Flows
Union Carbide Corporation and Subsidiaries
<CAPTION>
Increase (Decrease) in Cash and Cash Equivalents
Millions of dollars, year ended December 31, 1995 1994 1993
Operations
<S> <C> <C> <C>
Income from continuing operations $ 925 $ 389 $ 165
Noncash charges (credits) to net income
Depreciation and amortization 306 274 276
Deferred income taxes (29) 31 (34)
Other noncash charges 186 88 65
Net gains on investing transactions (379) (100) (52)
Increase in working capital(a) (242) (151) (9)
Long-term assets and liabilities (4) 30 46
Cash Flow From Operations 763 561 457
Investing
Capital expenditures (542) (409) (395)
Investments (360) (16) (39)
Sale of investments 552 87 29
Sale of fixed and other assets 54 138 266
Purchase of fixed and other assets (71) - -
Cash Flow Used for Investing (367) (200) (139)
Financing
Change in short-term debt (3 months or less) (11) 8 (263)
Proceeds from short-term debt 6 43 -
Repayment of short-term debt - (48) (36)
Proceeds from long-term debt 402 18 320
Repayment of long-term debt (22) (36) (262)
Issuance of common stock 116 111 57
Purchase of common stock (425) (337) (70)
Payment of dividends (116) (126) (124)
Other (7) 7 -
Cash Flow Used for Financing (57) (360) (378)
Effect of exchange rate changes on cash
and cash equivalents 1 - (3)
--Change in cash and cash equivalents 340 1 (63)
--Cash and cash equivalents beginning-of-year 109 108 171
Cash and Cash Equivalents End-of-Year $ 449 $ 109 $ 108
Cash Paid for Interest and Income Taxes
Interest (net of amount capitalized) $ 68 $ 89 $ 67
Income taxes 329 74 44
<FN>
a) Net change in working capital by component (excluding cash and cash
equivalents, deferred income taxes and short-term debt):
(Increase) decrease in current assets
Notes and accounts receivable $(111) $(206) $ 5
Inventories (144) (22) 11
Other current assets 8 (19) 16
Increase (decrease) in payables and accruals 5 96 (41)
(Increase) in working capital $(242) $(151) $ (9)
The Notes to Financial Statements on pages 24 through 37 should be read in
conjunction with this statement.
</TABLE>
<TABLE>
Consolidated Statement of Stockholders' Equity
Union Carbide Corporation and Subsidiaries
<CAPTION>
1995
Shares Millions
(in thousands) of dollars
Common Stock
<S> <C> <C>
Balance at January 1 154,610 $ 155
Issued:
For the Dividend Reinvestment
and Stock Purchase Plan -
For employee savings and
incentive plans -
Conversion of debentures -
Balance at December 31 154,610 $ 155
Additional Paid-In Capital
Balance at January 1 $ 369
Proceeds from the sale of put options 2
Reclassification of put option obligations (21)
Issued:
For the Dividend Reinvestment
and Stock Purchase Plan 1
For employee savings and incentive plans (8)
Conversion of debentures -
Balance at December 31 $ 343
Translation and Other Equity Adjustments
Balance at January 1 $ (59)
Translation and other adjustments (11)
Sale of businesses 55
Balance at December 31 $ (15)
Retained Earnings
Balance at January 1 $ 1,333
Net income - common stockholders 915
Cash dividends on common stock (103)
Balance at December 31 $ 2,145
Less: Treasury Stock
Balance at January 1 10,197 $ 289
Common stock repurchase program 14,127 426
Issued:
For the Dividend Reinvestment
and Stock Purchase Plan (322) (9)
For employee savings and
incentive plans (4,500) (123)
Balance at December 31 19,502 $ 583
Total Stockholders' Equity $ 2,045
<CAPTION>
1994
Shares Millions
(in thousands) of dollars
Common Stock
<S> <C> <C>
Balance at January 1 154,610 $ 155
Issued:
For the Dividend Reinvestment
and Stock Purchase Plan -
For employee savings and
incentive plans -
Conversion of debentures -
Balance at December 31 154,610 $ 155
Additional Paid-In Capital
Balance at January 1 $ 366
Proceeds from the sale of put options 3
Reclassification of put option obligation (3)
Issued:
For the Dividend Reinvestment
and Stock Purchase Plan 1
For employee savings and incentive plan 2
Conversion of debentures -
Balance at December 31 $ 369
Translation and Other Equity Adjustments
Balance at January 1 $ (84)
Translation and other adjustments 7
Sale of businesses 18
Balance at December 31 $ (59)
Retained Earnings
Balance at January 1 $ 1,067
Net income - common stockholders 379
Cash dividends on common stock (113)
Balance at December 31 $ 1,333
Less: Treasury Stock
Balance at January 1 4,062 $ 76
Common stock repurchase program 11,624 337
Issued:
For the Dividend Reinvestment
and Stock Purchase Plan (275) (6)
For employee savings and
incentive plans (5,214) (118)
Balance at December 31 10,197 $ 289
Total Stockholders' Equity $ 1,509
<CAPTION>
1993
Shares Millions
(in thousands) of dollars
Common Stock
<S> <C> <C>
Balance at January 1 135,513 $ 136
Issued:
For the Dividend Reinvestment
and Stock Purchase Plan 134 -
For employee savings and
incentive plans 2,463 2
Conversion of debentures 16,500 17
Balance at December 31 154,610 $ 155
Additional Paid-In Capital
Balance at January 1 $ 100
Proceeds from the sale of put options 1
Reclassification of put option obligations (2)
Issued:
For the Dividend Reinvestment
and Stock Purchase Plan 2
For employee savings and incentive plans 19
Conversion of debentures 246
Balance at December 31 $ 366
Translation and Other Equity Adjustments
Balance at January 1 $ (71)
Translation and other adjustments (11)
Sale of businesses (2)
Balance at December 31 $ (84)
Retained Earnings
Balance at January 1 $ 1,119
Net income - common stockholders 58
Cash dividends on common stock (110)
Balance at December 31 $ 1,067
Less: Treasury Stock
Balance at January 1 2,649 $ 46
Common stock repurchase program 3,688 71
Issued:
For the Dividend Reinvestment
and Stock Purchase Plan (322) (6)
For employee savings and
incentive plans (1,953) (35)
Balance at December 31 4,062 $ 76
Total Stockholders' Equity $ 1,428
<FN>
The Notes to Financial Statements on pages 24 through 37 should be read in
conjunction with this statement.
</TABLE>
Notes to Financial Statements
1. Summary of Significant Accounting Policies
Nature of Operations - Union Carbide Corporation is engaged in two segments of
the chemicals and plastics industry, Specialties & Intermediates and Basic
Chemicals & Polymers. See Note 3.
Principles of Consolidation - The consolidated financial statements include
the accounts of all significant subsidiaries. All significant intercompany
transactions have been eliminated in consolidation. Investments in 20 percent-
to 50 percent-owned companies and partnerships are carried at equity in net
assets. Other investments are carried generally at cost.
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles, which require the corporation
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.
Accounting Changes - The corporation adopted Financial Accounting Standard
(FAS) 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of" in 1995. The effect of the adoption of FAS 121
was not material. Effective Jan. 1, 1994, the corporation adopted FAS 115,
"Accounting for Certain Investments in Debt and Equity Securities." The effect
of the adoption of FAS 115 was not material. Effective Jan. 1, 1993, the
corporation adopted FAS 112, "Employers' Accounting for Postemployment
Benefits." The cumulative effect of the change in the method of accounting for
postemployment benefits is reported in the 1993 Consolidated Statement of
Income.
Foreign Currency Translation - Unrealized gains and losses resulting from
translating foreign subsidiaries' assets and liabilities into U.S. dollars
generally are accumulated in an equity account on the balance sheet until such
time as the subsidiary is sold or substantially or completely liquidated.
Translation gains and losses relating to operations located in Latin American
countries, where hyperinflation exists, are included in the income statement.
Financial Instruments - Financial instruments are used to hedge financial risk
caused by fluctuating interest and currency rates. The amounts to be paid or
received on interest rate swap agreements and forward rate agreements (FRAs)
that hedge debt accrue and are recognized over the lives of the agreements.
Gains and losses on foreign currency forward contracts and foreign currency
options used to hedge firm commitments are deferred and recognized as part of
the related foreign currency transactions.
Foreign currency forward contracts and options that are designated to
offset earnings fluctuations from anticipated foreign currency cash flows are
marked to market and the results recognized immediately as other income or
other expense.
Cash Equivalents - The corporation considers as cash equivalents all highly
liquid investments that are readily convertible to known amounts of cash and
are so near their maturity that they present insignificant risk of changes in
value because of changes in interest rates.
Inventories - Inventories are stated at cost or market, whichever is lower.
These amounts do not include depreciation and amortization, the impact of
which is not significant to the financial statements.
Approximately 59 percent of inventory amounts before application of the
LIFO method at Dec. 31, 1995 (65 percent at Dec. 31, 1994) have been valued on
the LIFO basis; the "average cost" method is used for the balance. It is
estimated that if inventories had been valued at current costs, they would
have been approximately $276 million and $275 million higher than reported at
Dec. 31, 1995 and 1994, respectively.
Fixed Assets - Fixed assets are carried at cost. Expenditures for replacements
are capitalized, and the replaced items are retired. Gains and losses from the
sale of property are included in income.
Depreciation is calculated on a straight-line basis. During 1995, the
corporation reduced the depreciable lives of certain computer equipment,
resulting in an increase in depreciation expense of $12 million ($8 million
after-tax). The corporation and its subsidiaries generally use accelerated
depreciation methods for tax purposes where appropriate.
Patents, Trademarks and Goodwill - Amounts paid for purchased patents and
newly acquired businesses in excess of the fair value of the net assets of
such businesses have been charged to patents, trademarks and goodwill. The
portion of such amounts determined to be attributable to patents is amortized
over their remaining lives, while trademarks and goodwill are amortized over
the estimated period of benefit, generally 5 to 20 years.
Research and Development - Research and development costs are charged to
expense as incurred. Depreciation expense applicable to research and
development facilities and equipment is included in Depreciation and
amortization in the Consolidated Statement of Income ($14 million in 1995, $13
million in 1994 and $12 million in 1993).
Income Taxes - Provisions have been made for deferred income taxes based on
differences between financial statement and tax bases of assets and
liabilities using currently enacted tax rates and regulations.
Environmental Costs - Environmental expenditures are expensed or capitalized
as appropriate, depending on their future economic benefit. Expenditures
relating to an existing condition caused by past operations and having no
future economic benefits are expensed. Environmental expenditures include site
investigation, physical remediation, operation and maintenance, and legal and
administrative costs. Environmental accruals are established for sites where
it is probable that a loss has been incurred and the amount of the loss can
reasonably be estimated. Where the estimate is a range and no amount within
the range is a better estimate than any other amount, the corporation accrues
the minimum amount in the range and includes the balance of the range in its
reported contingencies.
Retirement Programs - The cost of pension benefits under the U.S. Retirement
Program is determined by an independent actuarial firm using the projected
unit credit actuarial cost method, with an unrecognized net asset at Jan. 1,
1986, amortized over 15 years. Contributions to this program are made in
accordance with the regulations of the Employee Retirement Income Security Act
of 1974.
The cost of postretirement benefits is recognized on the accrual basis
over the period in which employees become eligible for benefits.
Earnings per Common Share - Primary earnings per common share is computed by
dividing net income - common stockholders, excluding tax benefits related to
unallocated preferred stock dividends, by the weighted average number of
common shares outstanding during the year and common stock equivalents related
to dilutive stock options. Fully diluted earnings per common share is computed
by dividing adjusted net income - common stockholders by the weighted average
number of common shares outstanding, common stock equivalents related to
dilutive stock options and common shares issuable upon conversion of
debentures and convertible preferred stock.
The number of common shares used to compute earnings per share amounts was
as follows:
1995 1994 1993
Primary 141,663,656 154,174,788 151,371,160
Fully diluted 158,380,545 170,886,405 173,345,161
2. Financial Instruments
Fair values of financial instruments are estimated by using a method that
indicates the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation
sale. The fair values of the financial instruments included on the
Consolidated Balance Sheet were estimated as follows:
Cash, Short-Term Receivables and Accounts Payable - At Dec. 31, 1995 and 1994,
the carrying amounts approximate fair value because of the short maturity of
these instruments. The corporation had foreign currency forward contracts of
$32 million at Dec. 31, 1995 ($67 million at Dec. 31, 1994) to hedge
fluctuations in the dollar value of short-term foreign currency receivables
and payables. Deferred gains and losses on these contracts are not material.
Investments - The corporation's investments in equity companies, partnerships
and other businesses generally involve joint ventures for which it is not
practicable to determine fair values.
Long-Term Receivables - The fair values of long-term and insurance recovery
receivables are calculated using current interest rates and consideration of
underlying collateral where appropriate. The fair values approximate the
carrying value of $200 million included in Other assets in the Consolidated
Balance Sheet at Dec. 31, 1995 and 1994.
Debt - The corporation uses various types of financial instruments, including
interest rate swaps and FRAs, to manage exposure to financial market risk
caused by interest rate fluctuations. See Note 10 for a discussion of debt
instruments.
Other Financial Instruments - In the first half of 1994, as the risk of
cyclically higher interest rates increased, the corporation unwound its
positions in interest rate swaps and FRAs designated to offset earnings
fluctuations due to cyclical business conditions, resulting in a before-tax
charge to Other expense (income) - net of $9 million.
Outstanding foreign currency forward contracts and options used as a
means of offsetting earnings fluctuations from anticipated foreign currency
cash flows totaled $173 million at Dec. 31, 1995 ($182 million at Dec. 31,
1994). During 1995 and 1994 their average fair values were nominal. These
contracts resulted in a nominal gain in 1995 ($6 million net loss in 1994).
Carrying and Fair Values - The carrying values and fair values of the
corporation's investments, receivables and debt financial instruments at Dec.
31, 1995 and 1994, are summarized in the table below. Fair values are based on
quoted market values, where available, or discounted cash flows (principally
long-term debt). An interest rate swap held at Dec. 31, 1995 (see Note 10) had
a nominal carrying amount and fair value. Put options on equity securities are
discussed in Note 12.
Millions of dollars
At December 31, 1995 1994
Carrying Fair Carrying Fair
Assets (liabilities) Amount Value Amount Value
Investments and receivables $ 284 $ 286 $ 288 $ 288
Short- and long-term debt (1,323) (1,389) (946) (896)
3. Business and Geographic Segment Information
The company's operations are classified into two business segments,
Specialties & Intermediates and Basic Chemicals & Polymers. The Specialties &
Intermediates segment includes the corporation's specialty chemicals and
polymers product lines, licensing and solvents and chemical intermediates. The
Basic Chemicals & Polymers segment includes the corporation's ethylene and
propylene manufacturing operations as well as the production of first-level
ethylene derivatives - polyethylene and ethylene oxide/glycol. The
corporation's noncore operations and financial transactions are included in
the Other segment.
Millions of dollars 1995 1994 1993
Net Sales
Specialties & Intermediates $4,123 $3,636 $3,487
Basic Chemicals & Polymers 2,080 1,411 1,324
Intersegment eliminations (315) (182) (171)
Total $5,888 $4,865 $4,640
Operating Profit (Loss)
Specialties & Intermediates $ 709 $ 634 $ 526
Basic Chemicals & Polymers 444 (22) (208)
Other 195 (61) (21)
Total $1,348 $ 551 $ 297
Depreciation and Amortization
Specialties & Intermediates $ 194 $ 169 $ 177
Basic Chemicals & Polymers 112 105 99
Total $ 306 $ 274 $ 276
Capital Expenditures
Specialties & Intermediates $ 392 $ 253 $ 240
Basic Chemicals & Polymers 150 156 155
Total $ 542 $ 409 $ 395
Identifiable Assets
Specialties & Intermediates $3,527 $3,111 $2,869
Basic Chemicals & Polymers 2,095 1,511 1,363
Other 634 406 457
Total $6,256 $5,028 $4,689
Sales of the Basic Chemicals & Polymers segment include intersegment sales,
principally ethylene oxide, which are made at the estimated market value of
the products transferred. Operating profit represents income before interest
expense and the provision for income taxes.
The operating profit of the Specialties & Intermediates segment for 1995
includes a $48 million charge for postemployment benefits and an increase of
$12 million in depreciation expense related to a reduction in the depreciable
lives of certain computer equipment. The operating profit of the Basic
Chemicals & Polymers segment for 1995 includes a $20 million charge for
postemployment benefits. Other operating profit for 1995 includes a gain of
$381 million on the sales of the corporation's interest in UCAR International
Inc. and a charge of $191 million for future lease costs on unused office
space, primarily at the corporation's Danbury headquarters.
The 1994 operating profit of the Specialties & Intermediates segment
includes an $81 million gain on the sale of a manufacturing facility and
distribution terminal in Hong Kong, a $68 million charge for litigation costs
and other costs primarily related to divested operations and a $24 million
gain on the sale of a preferred stock investment in the OrganoSilicon business
(OSi). Other 1994 operating profit includes a $24 million charge from the
write-down and sale of the corporation's stockholding in Union Carbide India
Limited and a $12 million loss on the sale of the corporation's interest in a
uranium mill and certain uranium mines.
The 1993 operating profit of the Specialties & Intermediates segment
includes a $54 million gain from the sale of OSi and a $9 million loss on the
sale of a medical device company. The 1993 operating profit of the Basic
Chemicals & Polymers segment includes a $46 million charge from the shutdown
of a Canadian ethylene oxide/glycol manufacturing facility and a $9 million
loss on the write-down of a Canadian business. Other 1993 operating profit
includes a gain of $8 million on the sale of a corporate aircraft.
Millions of dollars 1995 1994 1993
Net Sales
United States & Puerto Rico(a) $4,071 $3,535 $3,443
Canada 142 136 130
Europe 719 474 454
Latin America 227 218 241
Far East & Other 729 502 372
International operations 1,817 1,330 1,197
Total UCC Consolidated $5,888 $4,865 $4,640
a) Includes export sales of $732 million in 1995 ($532 million in 1994 and
$604 million in 1993).
Operating Profit (Loss)
United States & Puerto Rico $1,228 $ 433 $ 299
Canada 36 14 (53)
Europe 50 12 18
Latin America 12 16 6
Far East & Other 29 74 28
International operations 127 116 (1)
Intersegment eliminations (7) 2 (1)
Total Operating Profit 1,348 551 297
Less: Interest Expense (89) (80) (70)
Income Before Provision
for Income Taxes $1,259 $ 471 $ 227
Identifiable Assets(a)
United States & Puerto Rico $4,433 $3,670 $3,470
Canada 277 244 255
Europe 404 281 245
Latin America 191 190 124
Far East & Other 322 244 166
International operations 1,194 959 790
Intersegment eliminations (5) (7) (28)
Total Identifiable Assets 5,622 4,622 4,232
Other 634 406 457
Total Assets $6,256 $5,028 $4,689
a) 1994 and 1993 reclassified to conform to the 1995 presentation.
4. Other Expense (Income) - Net
The following is an analysis of Other expense (income) - net:
Millions of dollars 1995 1994 1993
(Gains) losses on sales and
disposals of businesses
and other assets(a) $(387) $ (67) $ 14
Foreign currency adjustments 6 16 31
Unused space charge(b) 191 - -
Other(c) (55) 90 21
$(245) $ 39 $ 66
a) Includes for 1995 a $381 million gain from the sales of the corporation's
remaining interest in UCAR International Inc. Includes for 1994 an $81 million
gain on the sale of a manufacturing facility and distribution terminal in Hong
Kong; a $24 million gain on a preferred stock investment in OSi; a $24 million
charge from the write-down and sale of the corporation's stockholding in Union
Carbide India Limited, and a $12 million loss on the sale of the corporation's
interest in a uranium mill and certain uranium mines. Includes for 1993 a $54
million gain from the sale of OSi; a $46 million charge from the shutdown of a
Canadian ethylene oxide/glycol manufacturing facility; a $9 million loss on
the sale of a medical device company; a $9 million loss on the write-down of a
Canadian business, and a gain of $8 million on the sale of a corporate
aircraft.
b) See Note 13.
c) Includes for 1995 $17 million of investment income. Includes for 1994 $68
million for litigation costs and other costs related to divested operations.
Includes income of $5 million and charges of $7 million and $10 million in
1995, 1994 and 1993, respectively, related to discontinued and noncore
businesses.
5. Acquisitions and Divestitures
On Jan. 26, 1995, the corporation and Mitsubishi Corporation concluded the
sale of newly issued common stock of UCAR International Inc. to a new company
formed by Blackstone Capital Partners II Merchant Banking Fund L.P. and a
repurchase of certain shares by UCAR that resulted in Blackstone acquiring a
75 percent interest in UCAR. The corporation received $343 million in net cash
proceeds and retained a 25 percent equity interest in UCAR. This transaction
resulted in a gain of $220 million ($154 million after-tax) and eliminated the
corporation's share of ongoing future earnings from UCAR. On Aug. 9, 1995, the
corporation joined in UCAR's initial public offering to sell its remaining
equity interest in UCAR for net cash proceeds of $199 million. This sale
resulted in a gain of $161 million ($99 million after-tax). If these
transactions had occurred effective Jan. 1, 1995, the corporation's income
from corporate investments carried at equity and net income - common
stockholders for the year ended Dec. 31, 1995, would have been reduced by $4
million, and earnings per share would have decreased $0.03 per share, primary
and fully diluted. If these transactions had occurred effective Jan. 1, 1994,
the corporation's income from corporate investments carried at equity and net
income - common stockholders for the year ended Dec. 31, 1994, would have been
reduced by $54 million, and earnings per share would have decreased $0.35 per
share, primary, or $0.32 per share, fully diluted.
On March 31, 1995, the corporation acquired 50 percent of the equity of
Polimeri Europa S.r.l., from EniChem S.p.A. EniChem retained the other 50
percent. In anticipation of the corporation's acquisition, EniChem had
transferred to Polimeri Europa all of its polyethylene business, excluding its
wire and cable compounds business. The purchase price for the corporation's 50
percent of the joint venture's equity was 323 million German Deutschemarks
($216 million). If this acquisition had occurred effective Jan. 1, 1995, the
corporation's income from corporate investments carried at equity and net
income - common stockholders for the year ended Dec. 31, 1995, would have
increased by $27 million, and earnings per share would have increased $0.19
per share, primary, or $0.17 per share, fully diluted. If this acquisition had
occurred effective Jan. 1, 1994, the corporation's income from corporate
investments carried at equity, net income - common stockholders and earnings
per share for the year ended Dec. 31, 1994, would not have been affected.
If both the Polimeri Europa equity acquisition and the UCAR
recapitalization and sale transactions had occurred effective Jan. 1, 1995,
the corporation's income from corporate investments carried at equity and net
income - common stockholders for the year ended Dec. 31, 1995, would have
increased by $23 million, or $0.16 per share, primary, or $0.14 per share,
fully diluted. If these transactions had occurred effective Jan. 1, 1994, the
corporation's income from corporate investments carried at equity and net
income - common stockholders for the year ended Dec. 31, 1994, would have
decreased by $54 million, or $0.35 per share, primary, or $0.32 per share,
fully diluted. The weighted average number of common shares used for the pro
forma earnings per share calculations for the year ended Dec. 31, 1995 and
1994, is 141,663,656 and 154,174,788 primary, respectively, and 158,380,545
and 170,886,405 fully diluted, respectively.
On Feb. 1, 1995, the corporation purchased certain ethylene oxide
derivative businesses from Imperial Chemical Industries of London for $71
million.
On July 15, 1995, the corporation and two Kuwaiti corporations,
Petrochemical Industries Company and Boubyan Petrochemical Company, formed
Equate Petrochemical Company, their joint venture for development of a world-
scale petrochemicals complex in Kuwait. Construction of the facility is
targeted for a mid-1997 completion date. At Dec. 31, 1995, the corporation had
invested $134 million in Equate. In January 1996 the corporation severally
guaranteed $225 million of Equate debt.
In January 1996 the corporation completed the purchase of the
polypropylene assets and business of Shell Oil Company. The purchased assets,
located in the U.S., comprise Shell's polypropylene technology and
manufacturing facilities and polypropylene assets previously held jointly by
both companies.
6. Income Taxes
The following is a summary of the U.S. and non-U.S. components of Income
before provision for income taxes:
Millions of dollars 1995 1994 1993
Income (loss) before provision
for income taxes:
U.S. $1,137 $362 $235
Non-U.S. 122 109 (8)
$1,259 $471 $227
<TABLE>
The following is an analysis of income tax expense:
<CAPTION>
1995 1994
Millions of dollars Current Deferred Current Deferred
<S> <C> <C> <C> <C> <C> <C>
U.S. Federal income taxes $332 $(24) $ 77 $46
U.S. business and research and
experimentation tax credits (17) - (10) -
U.S. state and local taxes
based on income 47 (7) 4 (2)
Non-U.S. income taxes 47 2 35 (13)
409 (29) 106 31
Provision for Income Taxes $380 $137
<CAPTION>
1993
Millions of dollars Current Deferred
<S> <C> <C> <C>
U.S. Federal income taxes $ 60 $(21)
U.S. business and research and
experimentation tax credits (9) -
U.S. state and local taxes
based on income 19 2
Non-U.S. income taxes 42 (15)
112 (34)
Provision for Income Taxes $78
</TABLE>
<TABLE>
The tax effects of temporary differences that gave rise to significant
portions of the deferred tax assets and deferred tax liabilities are as
follows:
<CAPTION
1995
Deferred Deferred
Millions of dollars Assets Liabilities
<S> <C> <C> <C>
Depreciation and amortization $ - $392
Postretirement benefits other than pensions 213 -
Postemployment benefits and severance costs 36 -
Environmental and litigation 147 -
Sale/leaseback and related deferrals 109 -
Other 153 191
Gross deferred tax assets and liabilities 658 583
Net Deferred Tax Asset $75
<CAPTION
1994
Deferred Deferred
Millions of dollars Assets Liabilities
<S> <C> <C> <C>
Depreciation and amortization $ - $354
Postretirement benefits other than pensions 221 -
Postemployment benefits and severance costs 25 -
Environmental and litigation 147 -
Sale/leaseback and related deferrals 45 -
Other 177 216
Gross deferred tax assets and liabilities 615 570
Net Deferred Tax Asset $45
</TABLE>
Net noncurrent deferred tax liabilities of $62 million ($91 million in
1994) are included in Deferred credits in the Consolidated Balance Sheet. Net
current deferred tax assets of $132 million ($129 million in 1994) are
included in Other current assets. Net noncurrent deferred tax assets of $5
million ($7 million in 1994) are included in Other assets. In 1995 and 1994
there were $6 million in non-U.S. net operating loss carryforwards included in
the deferred tax assets above.
Undistributed earnings of affiliates intended to be reinvested
indefinitely amounted to approximately $393 million at Dec. 31, 1995 ($374
million at Dec. 31, 1994). Determination of deferred taxes related to these
earnings is not practicable.
An analysis of the difference between Provision for income taxes and the
amount computed by applying the statutory Federal income tax rate to Income
before provision for income taxes is as follows:
Percentage of
pre-tax income
1995 1994 1993
Tax at statutory Federal rate 35.0% 35.0% 35.0%
Taxes related to operations
outside the U.S. 0.1 - 3.1
U.S. state and local taxes
based on income 1.0 0.2 5.7
Foreign sales corporation (1.4) (2.8) (4.0)
Business credits (1.4) (2.1) (4.0)
Other, net (3.1) (1.2) (1.4)
Consolidated effective income
tax rate 30.2% 29.1% 34.4%
7. Supplementary Balance Sheet Detail
Millions of dollars at December 31, 1995 1994
Notes and accounts receivable
Trade $ 824 $ 726
Other 183 183
1,007 909
Less: Allowance for doubtful accounts 11 11
$ 996 $ 898
Inventories
Raw materials and supplies $ 117 $ 103
Work in process 46 41
Finished goods 381 246
$ 544 $ 390
Property, plant and equipment
Land and improvements $ 307 $ 296
Buildings 380 351
Machinery and equipment 5,221 4,847
Construction in progress and other 449 395
$ 6,357 $ 5,889
Other assets
Deferred charges $ 163 $ 129
Insurance recovery receivables 145 103
Long-term receivables 55 97
Patents, trademarks and goodwill 66 37
$ 429 $ 366
Other accrued liabilities
Accrued accounts payable $ 241 $ 266
Payrolls 53 61
Severance and relocation costs 14 36
Environmental remediation costs 65 62
Postretirement benefit obligation 28 34
Employee profit sharing 85 49
Other 239 225
$ 725 $ 733
Other long-term obligations
Environmental remediation costs $ 262 $ 235
Product liability costs 180 138
Impairment of unused office space 158 -
Postemployment benefits 87 42
Other 147 122
$ 834 $ 537
Translation and other equity
adjustments
Canada $ (43) $ (48)
Europe 15 (17)
Far East & Other 13 6
$ (15) $ (59)
8. Interest Expense
The following is an analysis of Interest expense:
Millions of dollars 1995 1994 1993
Interest incurred(a) $119 $ 93 $ 84
Less: Interest capitalized
and other adjustments 30 13 14
$ 89 $ 80 $ 70
a) Includes $12 million, $17 million and $17 million in 1995, 1994 and 1993,
respectively, representing the interest component of certain leases.
9. Partnerships and Corporate Joint Ventures
The following are financial summaries of partnerships and 20 percent- to 50
percent-owned corporate investments carried at equity. The corporation's most
significant partnerships include UOP, Petromont and Company Limited
Partnership, Aspell Polymeres SNC, and World Ethanol Company, as well as a
Union Carbide/Shell polypropylene partnership, the balance of which was
acquired in January 1996 (see Note 5).
Partnerships
Millions of dollars 1995 1994 1993
Net sales(a) $2,146 $1,616 $1,445
Cost of sales 1,312 954 863
Depreciation 66 51 50
Partnership income 283 229 199
UCC Share of
Partnership Income $ 152 $ 98 $ 67
Current assets $ 599 $ 494
Noncurrent assets 824 735
Total assets 1,423 1,229
Current liabilities 483 309
Noncurrent liabilities 441 455
Total liabilities 924 764
Net assets 499 465
UCC Equity $ 243 $ 220
a) Includes $177 million net sales to the corporation in 1995 ($209 million
in 1994 and $175 million in 1993).
Corporate investments carried at equity include Polimeri Europa S.r.l.,
Equate Petrochemical Company K.S.C., Nippon Unicar Company Limited, Alberta &
Orient Glycol Company Limited and several smaller entities. See Note 5.
20% - 50%
Corporate Investments
Millions of dollars 1995 1994 1993
Net sales(a) $1,731 $1,206 $1,144
Cost of sales 1,221 817 823
Depreciation 119 58 55
Net income 96 109 36
UCC Share of Net Income $ 46 $ 55 $ 16
Current assets $ 811 $ 622
Noncurrent assets 1,886 920
Total assets 2,697 1,542
Current liabilities 713 457
Noncurrent liabilities 922 676
Total liabilities 1,635 1,133
Net assets 1,062 409
UCC Equity $ 496 $ 198
a) Includes $167 million net sales to the corporation in 1995 ($73 million in
1994 and $46 million in 1993).
Dividends and distributions received from partnerships and corporate joint
ventures aggregated $97 million in 1995 ($128 million in 1994 and $92 million
in 1993).
10. Long-Term Debt
Millions of dollars at December 31, 1995 1994
6.75% Notes due 2003 $ 125 $ 125
6.79% Debentures due 2025 250 -
7.00% Notes due 1999 175 175
7.50% Debentures due 2025 150 -
7.875% Debentures due 2023 175 175
8.75% Debentures due 2022 125 125
Pollution control and other
facility obligations 246 248
Other debt - various maturities and
interest rates 53 70
1,299 918
Less: Payments to be made
within 1 year 14 19
$1,285 $ 899
On June 1, 1995, the corporation completed a $400 million, two-part public
offering of debt securities. It consisted of $150 million principal amount of
7.5 percent 30-year debentures due June 1, 2025, and $250 million principal
amount of 6.79 percent 30-year debentures due June 1, 2025, with a one-time
option for investors to redeem the bonds on June 1, 2005.
The corporation has a credit agreement with a group of banks, providing
the corporation with $1 billion in credit through Nov. 3, 2000. Several
options are available to borrow at floating interest rates based on LIBOR
(London Interbank Offered Rate) or CD (Certificate of Deposit Rate) on a
revolving basis. At Dec. 31, 1995, there were no outstanding borrowings under
the credit agreement.
The credit agreement and other indentures contain covenants, normal for
these types of instruments, that place certain limits on the ability of UCC to
merge with another entity, incur debt or create liens on assets. In addition,
the credit agreement requires the corporation to meet net worth, leverage and
interest coverage tests.
Pollution control and other facility obligations represent state,
commonwealth and local governmental bond financing of pollution control and
other facilities, and are treated for accounting and tax purposes as debt of
the corporation. These tax-exempt obligations mature at various dates from
1996 through 2023 and have an average annual effective rate of 7.3 percent.
At Dec. 31, 1995, the corporation had one open swap position in the
notional amount of $23 million ($48 million at Dec. 31, 1994), for which the
corporation receives a fixed rate and pays a floating rate. The corporation's
exposure to counterparty creditworthiness is not material.
The average and effective interest rates in 1995 on the corporation's
fixed-rate debt, other than pollution control and other facility obligations,
were 7.4 percent. The corporation's weighted average interest rate on short-
term borrowings outstanding as of Dec. 31, 1995, was 4.0 percent (6.2 percent
as of Dec. 31, 1994).
Payments due on long-term debt in the four years following 1996 are: 1997,
$7 million; 1998, $7 million; 1999, $180 million; and 2000, $4 million.
11. Convertible Preferred Stock - ESOP
The Union Carbide Corporation Employee Stock Ownership Plan (ESOP) is an
integral part of the Savings Program for employees. Each share of ESOP stock
is convertible into and has the same voting rights as one share of the
corporation's common stock, and is protected from dilution. The annual
preferred dividend is $0.794 per share.
Substantially all full-time employees in the U.S. are eligible to
participate in the ESOP through the corporation's matching contribution of 75
percent (50 percent in 1994 and 1993) on eligible employee contributions. At
the corporation's option, ESOP shares may be redeemed either in cash or the
corporation's common stock when employees make withdrawals from their
accounts. It has been UCC's policy to redeem ESOP shares with cash.
The cost of the ESOP is recognized as incurred and was $4 million in 1995
($6 million in 1994 and 1993). Reductions in ESOP costs in 1995 were due
primarily to appreciation in the corporation's common stock. At Dec. 31, 1995,
16.2 million preferred shares were outstanding, 5.4 million of which were
credited to employees' accounts, including 0.6 million credited during 1995.
12. UCC Stockholders' Equity
In 1989 the board of directors adopted a stockholder rights plan and declared
a dividend of one Right for each outstanding share of common stock. Each Right
entitles its holder, under certain circumstances, to buy a share of common
stock at a purchase price of $37.67 (subject to adjustment).
The Rights may not be exercised until 10 days after a person or group
acquires 20 percent or more of UCC's common stock, or announces a tender offer
that, if consummated, would result in 20 percent or more ownership of the
common stock.
Until then, separate Rights certificates will not be issued, nor will the
Rights be traded separately from the stock.
Should an acquirer become the beneficial owner of 20 percent of the common
stock, and under certain additional circumstances, Union Carbide Corporation
stockholders (other than the acquirer) would have the right to buy common
stock in Union Carbide Corporation, or in the surviving enterprise if the
corporation is acquired, having a value equal to two times the purchase price
of the Right then in effect.
The Rights will expire on Aug. 31, 1999, unless redeemed prior to that
date. The redemption price is $0.01 per Right. The corporation's independent
directors may redeem the Rights by a majority vote during the 10-day period
following public announcement that a person or group has acquired 20 percent
of UCC's common stock.
On July 26, 1995, the board of directors of the corporation increased the
number of shares that may be repurchased under the existing common stock
repurchase program to 40 million shares. Through Dec. 31, 1995, the
corporation had repurchased 29,439,478 shares since inception of the program
in 1993 (14,127,218 during 1995) at an average effective price of $28.18 per
share. The corporation will continue to acquire additional shares from time to
time at prevailing market prices, at a rate consistent with the combination of
corporate cash flow and market conditions.
In conjunction with the corporation's common stock buyback program, put
options were sold in a series of private placements entitling the holders to
sell 6.4 million shares of common stock to UCC, at specified prices upon
exercise of the options. Since inception of this program through Dec. 31,
1995, options representing 4,563,800 common shares have expired unexercised,
while options representing 1,136,200 shares were exercised for $35 million, or
an average price of $30.86 per share. Options representing 700,000 shares
remain outstanding at Dec. 31, 1995. Premiums received since inception of the
program have reduced the average price of repurchased shares to $28.18 per
share from $28.36.
13. Leases
Leases that meet the criteria for capitalization have been classified and
accounted for as capital leases. For operating leases, primarily involving
facilities and distribution equipment, the future minimum rental payments
under leases with remaining noncancelable terms in excess of one year are:
Year ending Millions of dollars
1996 $ 73
1997 71
1998 56
1999 53
2000 50
Subsequent to 2000 291
Total minimum payments 594
Future sublease rentals 115
Net Minimum Rental Commitments $479
The present value of the net minimum rental payments amounts to $349
million, of which $301 million pertains to the Danbury headquarters lease.
Total lease and rental payments (net of sublease rental of $20 million in
1995, $20 million in 1994 and $10 million in 1993) were $67 million, $65
million and $98 million for 1995, 1994 and 1993, respectively. The corporation
is contingently required to pay certain domestic lease obligations assigned to
Praxair Inc. in the event of Praxair's default, the present value of which
totals $23 million. If such a payment is required, the corporation has a legal
right to set off any such amounts paid against amounts it may owe to Praxair.
During 1995 the corporation recognized a nonrecurring, noncash charge of
$191 million ($134 million after-tax) for future minimum lease payments on
unused office space, primarily at the corporation's Danbury headquarters. The
headquarters charge reflects the pro rata costs of unused office space over
the remaining term of the lease, which runs to 2006, less anticipated net
sublease income. Neither the expected future costs nor expected net sublease
revenues were discounted.
14. Retirement Programs
Pension Benefits
The noncontributory defined benefit retirement program of Union Carbide
Corporation ("U.S. Retirement Program") covers substantially all U.S.
employees and certain employees in other countries. Pension benefits are based
primarily on years of service and compensation levels prior to retirement.
Pension coverage for employees of the corporation's non-U.S. consolidated
subsidiaries is provided through separate plans, to the extent deemed
appropriate. Obligations under such plans are principally provided for by
depositing funds with trustees.
The components of net periodic pension cost for the plans combined are as
follows:
Millions of dollars 1995 1994 1993
Service cost - benefits
earned during the
period $ 44 $ 51 $ 48
Interest cost on
projected benefit
obligation 197 180 182
Return on plan assets
(gain) loss
Actual (904) 154 (430)
Deferred 692 (212) (355) (201) 229 (201)
Amortization of
net gain (6) (9) (9)
Net Periodic
Pension Cost $ 23 $ 21 $ 20
The funded status of the plans combined was as follows:
Millions of dollars at December 31, 1995 1994
Actuarial present value of plan benefits:
Accumulated benefit obligation
Vested $ 2,596 $ 2,037
Nonvested 127 113
2,723 2,150
Projected benefit obligation 2,986 2,398
Fair value of plan assets, primarily
invested in common stocks and
fixed-income securities 3,173 2,414
Plan assets in excess of
projected benefit obligation 187 16
Unamortized net asset at transition (77) (80)
Unamortized prior service cost 22 25
Unrecognized (gains) losses - net (103) 35
Prepaid (Accrued) Pension Cost $ 29 $ (4)
Pension obligations are valued using the 1983 Group Annuity Mortality
Table. The actuarial assumptions used were as follows:
At December 31, 1995 1994
Discount rate for determining projected
benefit obligation 6.75% 8.50%
Rate of increase in compensation levels 4.00% 5.75%
Expected long-term rate of return on
plan assets 8.25% 8.50%
Postretirement Benefits Other Than Pensions
The corporation and certain of its consolidated subsidiaries provide health
care and life insurance benefits for eligible retired employees and their
eligible dependents. These benefits are provided through various insurance
companies and health care providers.
The obligation is determined by application of the terms of health and
life insurance plans, together with relevant actuarial assumptions and health
care cost trends projected to increase annually at rates of 12.50 percent in
1995, 9.75 percent in 1996, 8.75 percent in 1997, falling incrementally to a
5.25 percent annual increase in 2004 and thereafter.
The effect of a 1 percent annual increase in the assumed health care cost
trend rates would increase the accumulated postretirement benefits obligation
at Dec. 31, 1995, by $26 million and the aggregate of service and interest
cost components of net periodic postretirement benefit costs by $2 million.
Measurement of the accumulated postretirement benefit obligation was based on
the same actuarial assumptions used in the pension calculations.
The corporation has funded postretirement benefits for certain retirees
who retired prior to Dec. 31, 1988. The funds are invested primarily in common
stocks and fixed-income securities.
The components of net periodic postretirement benefit cost are as
follows:
Millions of dollars 1995 1994 1993
Service cost - benefits
earned during the
period $ 11 $ 12 $ 12
Interest cost 35 32 32
Return on plan assets
(gain) loss
Actual (8) 1 (5)
Deferred 6 (2) (3) (2) 3 (2)
Amortization of
net gain (21) (21) (21)
Net Periodic
Postretirement
Benefit Cost $ 23 $ 21 $ 21
The funded status of the postretirement benefit obligation was as
follows:
Millions of dollars at December 31, 1995 1994
Accumulated postretirement
benefit obligations:
Retirees $361 $354
Fully eligible active plan participants 75 78
Other active plan participants 26 20
462 452
Fair value of plan assets (21) (19)
Accumulated postretirement benefits
in excess of plan assets 441 433
Unrecognized gains - net 67 89
Accrued Unfunded Postretirement
Benefit Obligations $508 $522
The accumulated postretirement benefit obligation for retirees is net of
$134 million at Dec. 31, 1995 ($130 million at Dec. 31, 1994), which is
reimbursed to the corporation in part by previously owned businesses under
ongoing benefit-sharing agreements.
Deferred Compensation Plan
During 1994 the board of directors approved an unfunded, nonqualified deferred
compensation plan for certain key employees, offering them an election to
defer a portion of their gross pay beginning Jan. 1, 1995. The corporation's
obligation to employees is adjusted to reflect changes in the market values of
employees' investment choices. With limited exceptions, participants' deferred
account balances are scheduled for payment at or after full retirement.
Postemployment Benefits
During 1995 the corporation recorded a charge of $68 million ($49 million
after-tax) for postemployment benefits. The charge includes severance costs
relating to future staff reductions associated with work process
simplification efforts and changes in the corporation's severance benefits.
The cumulative effect of adopting FAS 112 as of Jan. 1, 1993, resulted in
a $97 million after-tax charge to 1993 earnings ($0.64 per common share). FAS
112 requires that postemployment benefits expected to be paid before
retirement, principally severance, be accrued over employees' working lives.
This charge includes postemployment benefits based on normal year-to-year
attrition rates, giving effect to the corporation's cost reduction program as
of Jan. 1, 1993.
15. Incentive Plans
In 1994 stockholders approved the 1994 Union Carbide Long-Term Incentive Plan
for key employees, which replaced the 1988 Union Carbide Long-Term Incentive
Plan. The 1994 plan, effective until the 1997 shareholders' meeting, provides
for granting incentive and nonqualified stock options; stock appreciation
rights; exercise payment rights; grants of stock, including restricted stock,
and performance awards. Holders of options may be granted the right to receive
payments of amounts equal to the regular cash dividends paid to holders of the
corporation's common stock during the period an option is outstanding. The
number of shares granted or subject to options cannot exceed 7.5 million under
the plan. Option prices are equal to the closing price of the corporation's
common stock on the date of the grant, as listed on the New York Stock
Exchange Composite Transactions. Options generally become exercisable two
years after such date. Options may not have a duration of more than 10 years.
Restricted stock award shares are entitled to vote and dividends are credited
to the holder's account, but these shares are generally nontransferable for
three years after the grant date. These restricted stock awards and
accumulated dividends are generally subject to forfeiture if matching
employee-owned stock on deposit with the corporation is withdrawn or if other
conditions are not met. Performance awards may be paid in common stock, cash
or any other form of property. No stock appreciation rights or performance
awards were granted in 1995.
No further awards can be made under either the 1988 or 1984 plan programs.
Options granted under both plans are still outstanding and have terms similar
to nonqualified stock options under the 1994 plan.
Changes during 1995 in outstanding shares under option were as follows:
Thousands of shares
Weighted
1995 Total Average Price
Outstanding at January 1 13,807 $15.702
Granted 1,270 40.375
Exercised (1,667) 11.369
Canceled or expired (60) 27.253
Outstanding at
December 31 13,350 $18.539
Options outstanding at Dec. 31, 1995, ranged in price from $6.699 to
$40.375 per share, of which 10.2 million options were generally exercisable at
prices ranging from $6.699 to $21.625 per share. Options were exercised during
1995 at prices ranging from $1.00 to $21.625 per share.
16. Commitments and Contingencies
Purchase Agreements - The corporation has three major agreements for the
purchase of ethylene-related products and two other purchase agreements in the
U.S. and Canada. The net present value of the fixed and determinable portion
of obligations under these purchase commitments at Dec. 31, 1995 (at current
exchange rates, where applicable), are presented in the following table.
Millions of dollars
1996 $ 72
1997 65
1998 56
1999 49
2000 25
2001 to expiration of contracts 107
Total $374
Environmental - The corporation is subject to loss contingencies resulting
from environmental laws and regulations, which include obligations to remove
or mitigate the effects on the environment of the disposal or release of
certain wastes and substances at various sites. The corporation has
established accruals in current dollars for those hazardous waste sites where
it is probable that a loss has been incurred and the amount of the loss can be
reasonably estimated. The reliability and precision of the loss estimates are
affected by numerous factors, such as different stages of site evaluation, the
allocation of responsibility among potentially responsible parties and the
assertion of additional claims. The corporation adjusts its accruals as new
remediation requirements are defined, as information becomes available
permitting reasonable estimates to be made, and to reflect new and changing
facts.
At Dec. 31, 1995, the corporation had established environmental
remediation accruals in the amount of $327 million ($297 million in 1994), of
which $262 million is classified as Other long-term obligations ($235 million
in 1994). These accruals have two components, estimated future expenditures
for site investigation and cleanup and estimated expenditures for closure and
postclosure activities. In addition, the corporation had environmental loss
contingencies of $163 million at Dec. 31, 1995.
The corporation has sole responsibility for the remediation of
approximately half of its environmental sites for which accruals have been
established. These sites are well advanced in the investigation and cleanup
stage. The corporation's environmental accruals at Dec. 31, 1995, included
$245 million for these sites ($233 million at Dec. 31, 1994), of which $109
million ($97 million at Dec. 31, 1994) was for estimated future expenditures
for site investigation and cleanup and $136 million ($136 million at Dec. 31,
1994) was for estimated future expenditures for closure and postclosure
activities. In addition, $82 million of the corporation's environmental loss
contingencies at Dec. 31, 1995, related to these sites. The site with the
largest total potential cost to the corporation is a nonoperating site. Of the
above accruals, this site accounted for $47 million ($49 million at Dec. 31,
1994), of which $26 million ($26 million at Dec. 31, 1994) was for estimated
future expenditures for site investigation and cleanup and $21 million ($23
million at Dec. 31, 1994) was for estimated future expenditures for closure
and postclosure activities. In addition, $15 million of the above
environmental loss contingencies related to this site.
The corporation does not have sole responsibility at the remainder of its
environmental sites for which accruals have been established. All of these
sites are in the investigation and cleanup stage. The corporation's
environmental accruals at Dec. 31, 1995, included $82 million for estimated
future expenditures for site investigation and cleanup at these sites ($63
million at Dec. 31, 1994). In addition, $81 million of the corporation's
environmental loss contingencies related to these sites. The largest of these
sites is also a nonoperating site. Of the above accruals, this site accounted
for $16 million ($21 million at Dec. 31, 1994) for estimated future
expenditures for site investigation and cleanup. In addition, $6 million of
the above environmental loss contingencies related to this site.
Worldwide expenses of continuing operations related to environmental
protection for compliance with Federal, state and local laws regulating solid
and hazardous wastes and discharge of materials to air and water, as well as
for waste site remedial activities, totaled $138 million in 1995, $153 million
in 1994 and $149 million in 1993.
Other - The corporation sold certain receivables with recourse to various
banks for proceeds of $63 million in 1995 ($101 million in 1994). At Dec. 31,
1995, approximately $7 million remained due ($11 million in 1994). The fair
value of the recourse provisions at Dec. 31, 1995, approximates the carrying
value.
The corporation and its consolidated subsidiaries had additional
contingent obligations at Dec. 31, 1995, totaling $58 million, of which $34
million related to guarantees of debt.
Litigation - The corporation is one of a number of defendants named in
approximately 4,600 lawsuits, some of which have more than one plaintiff,
involving silicone breast implants. The corporation was not a manufacturer of
breast implants but did supply generic bulk silicone materials to certain
manufacturers. Also, the corporation in 1990 acquired and in 1992 divested the
stock of a small specialty silicones company that, among other things,
supplied silicone gel intermediates and silicone dispersions for breast
implants. In 1993 most of the suits that were brought in Federal courts were
consolidated for pretrial purposes in the United States District Court,
Northern District of Alabama. In 1994 the corporation provisionally joined a
multibillion-dollar settlement of the claims consolidated in that court.
Subsequently, the District Court determined that the total amount of
current claims likely to be approved for payment under the original settlement
schedule would substantially exceed the funds available. Consequently, the
defendants and the Plaintiffs' Negotiating Committee, at the request of the
court, initiated negotiations to reconsider the structure and funding of the
settlement. Recently certain defendants, including the corporation, proposed,
and the court approved, a revised settlement program. While the corporation
cannot predict the number of claimants who will participate in the settlement,
based on sample data prepared under supervision of the court, the corporation
estimates that its maximum expenditures under the revised agreement should not
exceed $100 million prior to insurance recovery. Although insurance coverage
is subject to issues as to scope and application of policies, retention
limits, exclusions and policy limits, and the insurers have reserved their
right to deny coverage, the corporation believes that after probable insurance
recoveries neither the settlement nor litigation outside the settlement will
have a material adverse effect on the consolidated financial position of the
corporation.
In addition, the corporation and its consolidated subsidiaries are
involved in a number of legal proceedings and claims with both private and
governmental parties. These cover a wide range of matters, including, but not
limited to: product liability; governmental regulatory proceedings; health,
safety and environmental matters; employment; patents; contracts, and taxes.
In some of these legal proceedings and claims, the cost of remedies that may
be sought or damages claimed is substantial.
The corporation has recorded nonenvironmental litigation accruals of $244
million, and related insurance recovery receivables of $145 million, resulting
in net before-tax charges of $99 million for nonenvironmental litigation. At
December 31, 1995, the corporation had nonenvironmental litigation loss
contingencies of $38 million.
Criminal proceedings continue in India, arising out of the 1984 gas
release from the Bhopal plant of Union Carbide India Limited. The corporation
has not appeared in those proceedings. In the opinion of counsel for the
corporation, under generally recognized legal principles, the criminal
proceedings should not have adverse financial consequences for the corporation
outside of India. The carrying value of the remaining proceeds from sale of
the corporation's stock in Union Carbide India Limited, which remain subject
to the attachment order of the Bhopal criminal court, is zero.
While it is impossible at this time to determine with certainty the
ultimate outcome of any legal proceedings and claims referred to in this note,
management believes that adequate provisions have been made for probable
losses with respect thereto and that such ultimate outcome, after provisions
therefor, will not have a material adverse effect on the consolidated
financial position of the corporation, but could have a material effect on
consolidated results of operations in a given quarter or year. Should any
losses be sustained in connection with any of such legal proceedings and
claims in excess of provisions therefor, they will be charged to income in the
future.
Management's Statement of Responsibility
for Financial Statements
Union Carbide Corporation's financial statements are prepared by management,
which is responsible for their fairness, integrity and objectivity. The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles and, accordingly, include amounts
that are estimates and judgments. All historical financial information in this
annual report is consistent with the accompanying financial statements.
The corporation maintains accounting systems, including internal
accounting controls monitored by a staff of internal auditors, that are
designed to provide reasonable assurance of the reliability of financial
records and the protection of assets. The concept of reasonable assurance is
based on recognition that the cost of a system must not exceed the related
benefits. The effectiveness of those systems depends primarily upon the
careful selection of financial and other managers, clear delegation of
authority and assignment of accountability, inculcation of high business
ethics and conflict-of-interest standards, policies and procedures for
coordinating the management of corporate resources and the leadership and
commitment of top management.
The corporation's financial statements are audited by KPMG Peat Marwick
LLP, independent certified public accountants, in accordance with generally
accepted auditing standards. These standards provide for the auditors to
consider the corporation's internal control structure to the extent they deem
necessary in order to issue their opinion on the financial statements.
The Audit Committee of the board of directors, which consists solely of
nonemployee directors, is responsible for overseeing the functioning of the
accounting system and related controls and the preparation of annual financial
statements. The Audit Committee recommends to the board of directors the
selection of the independent auditors, subject to the approval of
stockholders. The Audit Committee periodically meets with the independent
auditors, management and internal auditors to review and evaluate their
accounting, auditing and financial reporting activities and responsibilities.
The independent and internal auditors have full and free access to the Audit
Committee and meet with the committee, with and without management present.
William H. Joyce John K. Wulff
Chairman, President and Vice-President, Chief Financial
Chief Executive Officer Officer and Controller
Danbury, Conn.
Jan. 19, 1996
Independent Auditors' Report
To the Stockholders and Board of Directors of
Union Carbide Corporation:
We have audited the accompanying consolidated balance sheet of Union Carbide
Corporation and subsidiaries as of Dec. 31, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the years in the three-year period ended Dec. 31, 1995. These
consolidated financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Union
Carbide Corporation and subsidiaries at Dec. 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended Dec. 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1993
the company changed its method of accounting for postemployment benefits.
KPMG Peat Marwick LLP
Stamford, Conn.
Jan. 19, 1996
Corporate Information
1996 Annual Meeting
The 1996 annual meeting of stockholders will be held on Wednesday, April 24,
at the John C. Creasey Health Education Center, 24 Hospital Ave., Danbury, CT
06810, beginning at 10 A.M.
A notice of the annual meeting, a proxy statement and a proxy voting card
are mailed to each stockholder in March, together with a copy of the current
annual report.
General Offices
The general offices of Union Carbide Corporation are located at 39 Old
Ridgebury Road, Danbury, CT 06817-0001 (Telephone: 203-794-2000).
Inquiries from the public about Union Carbide and its products and services
should be directed to the Corporate Information Center, Union Carbide
Corporation, Section N-0, 39 Old Ridgebury Road, Danbury, CT 06817-0001
(Telephone: 203-794-5300).
Stock Exchanges
Union Carbide stock is traded primarily on the New York Stock Exchange (ticker
symbol: UK). The stock is also listed on the Chicago and Pacific Stock
Exchanges in the U.S.
Stockholder Inquiries
Inquiries about stockholder accounts and dividend reinvestment should be
directed to Union Carbide Corporation, William H. Smith, manager, Shareholder
Services Department, Section G-1328, 39 Old Ridgebury Road, Danbury, CT 06817-
0001 (Telephone: 203-794-3350).
Stock Records and Transfer
The corporation acts as its own stock transfer agent through Shareholder
Services, which also maintains stockholder records, transfers stock and
answers questions regarding stockholders' accounts, including dividend
reinvestment accounts. Stockholders wishing to transfer stock to someone else
or to change the name on a stock certificate should contact Shareholder
Services for assistance. The Registrar is Chemical Mellon.
Dividend Reinvestment
Stockholders of record may purchase shares directly through Union Carbide's
Dividend Reinvestment and Stock Purchase Plan. Under the plan, shares may be
purchased from Union Carbide free of commissions and service charges.
Requests for a prospectus that explains the plan in detail should be directed
to Shareholder Services (Telephone: 800-934-3350).
Form 10-K
A Form 10-K report for the year ended Dec. 31, 1995, will be available in
April 1996. A copy without exhibits may be obtained without charge by writing
to Union Carbide Corporation, Joseph E. Geoghan, secretary, 39 Old Ridgebury
Road, Danbury, CT 06817-0001.
Charitable Contributions Booklet
Union Carbide annually publishes a booklet that lists organizations receiving
charitable, educational, cultural or similar grants of $250 or more. The
booklet is available on written request to the secretary.
Responsible Care Progress Report
This report covers health, safety and environmental progress at Union Carbide.
Information includes performance data for U.S. and international locations,
goals and progress toward full implementation of Responsible Care management
practices in the U.S. To obtain a copy, write to Union Carbide Corporation,
Public Affairs Department, Section L-4505, 39 Old Ridgebury Road, Danbury, CT
06817-0001 (Telephone: 800-552-5272).
Inquiries
Institutional investors, financial analysts and portfolio managers should
direct questions about Union Carbide to Union Carbide Corporation, D. Nicholas
Thold, director of investor relations, Investor Relations Department, Section
E-4286, 39 Old Ridgebury Road, Danbury, CT 06817-0001 (Telephone: 203-794-
6440).
Financial journalists should direct questions to Union Carbide Corporation,
Tomm F. Sprick, assistant manager, financial communications, Public Affairs
Department, Section L-4505, 39 Old Ridgebury Road, Danbury, CT 06817-0001
(Telephone: 203-794-6992).
Directors and Corporate Officers
Directors
John J. Creedon is retired president and chief executive officer of
Metropolitan Life Insurance Company. A Carbide director since 1984, he chairs
the Audit Committee and serves on the Compensation & Management Development,
Executive and Health, Safety and Environmental Affairs (HS&EA) Committees.
C. Fred Fetterolf is a retired director, president and chief operating officer
of Aluminum Company of America. A UCC director since 1987, he chairs the HS&EA
Committee and serves on the Audit, Compensation & Management Development and
Nominating Committees.
Joseph E. Geoghan is vice-president, general counsel and secretary of Union
Carbide, and has been a director since 1990. He serves on the Executive and
Public Policy Committees.
Rainer E. Gut is chairman of Credit Suisse and CS Holding, Zurich,
Switzerland. A UCC board member since 1994, he is a member of the Compensation
& Management Development, Finance & Pension and Nominating Committees.
James M. Hester is president of The Harry Frank Guggenheim Foundation. A
director since 1963, he is chairman of the Public Policy Committee and serves
on the Audit, Executive and Nominating Committees.
Vernon E. Jordan, Jr. is a partner with Akin, Gump, Strauss, Hauer & Feld. He
is chairman of the Nominating Committee and a member of the Compensation &
Management Development, Finance & Pension and Public Policy Committees. He has
been a board member since 1987.
William H. Joyce is chairman, president and chief executive officer of Union
Carbide Corporation. A director since 1992, he is chairman of the Executive
Committee.
Robert D. Kennedy is retired chairman and chief executive officer of Union
Carbide Corporation and has been a director since 1985. He serves on the
Executive, Nominating and Public Policy Committees.
Ronald L. Kuehn, Jr. is a director and chairman, president and chief executive
officer of Sonat, Inc. A UCC board member since 1984, he chairs the
Compensation & Management Development Committee and serves on the Finance &
Pension, HS&EA and Nominating Committees.
Rozanne L. Ridgway is co-chair of the Atlantic Council of the United States. A
director since 1990, she is a member of the Audit, HS&EA, Nominating and
Public Policy Committees.
William S. Sneath is a director of various corporations and retired chairman
and chief executive officer of Union Carbide Corporation. He chairs the
Finance & Pension Committee and serves on the Executive, HS&EA and Nominating
Committees. He has been a director since 1969.
In accordance with the board's retirement policy, Dr. Hester, who has served
on the board with distinction for more than 32 years, will not stand for
reelection.
Corporate Officers
William H. Joyce
Chairman of the Board, President and Chief Executive Officer
Joseph S. Byck
Vice-President, Strategic Planning, Investor Relations and Public Affairs
James F. Flynn
Vice-President, General Manager, Solvents and Intermediates
Joseph E. Geoghan
Vice-President, General Counsel and Secretary
Thomas D. Jones
Vice-President and Treasurer
Malcolm A. Kessinger
Vice-President, Human Resources
Lee P. McMaster
Vice-President, General Manager, Ethylene Oxide/Glycol
Joseph C. Soviero
Vice-President, Corporate Ventures and Purchasing
Roger B. Staub
Vice-President, General Manager, Unipol Systems
Ronald Van Mynen
Vice-President, Health, Safety and Environment
Philip T. Wright
Vice-President
John K. Wulff
Vice-President, Chief Financial Officer and Controller
Other Senior Corporate Staff
David L. Brucker
Vice-President, Engineering and Operations
John L. Gigerich
Vice-President, Information Systems
W. William Lindner
Vice-President, Purchasing
Philip F. McGovern
Vice-President, Tax
John P. Yimoyines
Vice-President, Venture Management
A Chemical Glossary
Monomer - a reactive chemical that can be converted into a polymer. For
example, ethylene is a monomer that is made into polyethylene.
Polymer - a chain or network made up of many monomer units, such as ethylene.
All plastics are polymers.
Ethylene - a reactive chemical made from natural gas or crude oil components.
In Carbide's olefins units, ethylene is the starting material from which many
of the company's chemical products are made.
Propylene - a basic chemical made from crude oil and natural gas components.
It is used as a starting material to produce many of Carbide's chemical
products.
Olefins - the generic name for ethylene, propylene and other unsaturated
hydrocarbons made from components of crude oil or natural gas. Olefins are the
starting materials from which most of Union Carbide's chemical products are
made.
Ethylene Oxide - a chemical made from ethylene and oxygen. It combines with
other chemicals to produce a wide range of products, such as ethylene glycol,
and surfactants for detergents and cleaning products.
Ethylene Glycol - a chemical made from ethylene oxide and water. It is used to
make polyester fiber, resin and film, and automotive antifreeze and engine
coolants.
Polyethylene - the world's most widely used plastic, made by reacting ethylene
and other olefins to form polymers. Union Carbide uses its low-pressure Unipol
Process technology to make most of its polyethylene.
Polypropylene - one of the world's fastest-growing, large-volume plastics,
made by reacting propylene with itself or with other olefins to form polymers.
Union Carbide uses its low-pressure Unipol Process and other processes to make
polypropylene.
Solvent - a liquid chemical used to dissolve other chemicals. For example,
butyl alcohol and related solvents are manufactured, starting from propylene,
using Union Carbide's low-pressure Oxo process.
Definition of Terms
Unless the context otherwise requires, the terms below refer to the following:
Union Carbide Corporation, Union Carbide Corporation,
Union Carbide, Carbide, the parent company, and its
the corporation, we, our, consolidated subsidiaries
the company, UCC
Domestic United States and Puerto Rico
Domestic operations Operations of Union Carbide in
this area, including exports
International operations Operations of Union Carbide in
areas of the world other than the
United States and Puerto Rico
The use of these terms is for convenience of reference only. The consolidated
subsidiaries are separate legal entities that are managed by, and accountable
to, their respective boards of directors.
CARBITOL, CARBOWAX, CELLOSIZE, CELLOSOLVE, CURBSIDE BLEND, CYRACURE, FLEXOL,
FLEXOMER, NEULON, NORKOOL, POLYOX, POLYPHOBE, PRISMA, SELEXOL, TERGITOL, TONE,
TRITON, TUFLIN, UCAR, UCARSOL, UCARTHERM, UCON, UCURE, ULTRA, UNICARB, UNIPOL,
and UNION CARBIDE are trademarks of Union Carbide.
RESPONSIBLE CARE is a registered service mark of the Canadian Chemical
Producers Association and the Chemical Manufacturers Association.
Printed on Recycled, Recyclable Paper.
EXHIBIT 21
Percentage
of Voting
State or Securities
Sovereign Owned By
Power of Immediate
Name of Company Incorporation Parent
Union Carbide Corporation (the "Corporation") New York - %
Subsidiaries included in the Consolidated Financial Statements except where
noted otherwise:
Amerchol Corporation Delaware 100.00
Benefit Capital Management Corporation Delaware 100.00
Blue Creek Coal Company, Inc. Delaware 100.00
Calidria Corporation Delaware 100.00
Catalysts, Adsorbents & Process Systems, Inc. Maryland 100.00
Dexter Realty Corporation Delaware 100.00
KTI Chemicals, Inc. Delaware 100.00
Prentiss Glycol Company Delaware 100.00
Seadrift Pipeline Corporation Delaware 100.00
UCAR Emulsion Systems FZE Dubai 100.00
UCAR Emulsion Systems International, Inc. Delaware 100.00
UCAR Louisiana Pipeline Company Delaware 100.00
UCAR Pipeline Inc. Delaware 100.00
UCAR, Polimeros y Quimicos C.A. Ecuador 100.00
UCAR Resinas Caribe Inc. Delaware 100.00
UCAR Vanor (Proprietary) Limited South Africa 100.00
Ucex (U.K.) Limited England 100.00
Umetco Minerals Corporation Delaware 100.00
Union Carbide Argentina S.A.I.C.S. Argentina 100.00
Union Carbide Asia Limited Hong Kong 100.00
Union Carbide Asia Pacific, Inc. Delaware 100.00
Union Carbide Benelux N.V. Belgium (1)
Union Carbide do Brasil S/A Brazil 100.00
Union Carbide Caribe Inc. Delaware 100.00
Union Carbide Canada Inc. Canada 100.00
Union Carbide Chemicals and Plastics
Technology Corporation Delaware 100.00
Union Carbide Chemicals (Australia) Pty. Ltd. Australia 100.00
Union Carbide Chemicals Korea Limited Korea 100.00
Union Carbide Chemicals (Malaysia) Sdn. Bhd. Malaysia 100.00
Union Carbide Comercial, C.A. Venezuela 100.00
Union Carbide Customer Services Pte. Ltd. Singapore 100.00
Union Carbide Engineering and Hydrocarbons
Service Company, Inc. Delaware 100.00
Union Carbide Ethylene Oxide/Glycol Company Delaware 100.00
Union Carbide Eurofinance B.V. Netherlands 100.00
Union Carbide (Europe) S.A. Switzerland 100.00
Union Carbide Foreign Sales Corporation US Virgin Is. 100.00
(1) 99.83% of the voting securities of Union Carbide Benelux N.V. is owned
by Union Carbide Corporation; and 00.17% by Union Carbide (Europe) S.A.
Percentage
of Voting
State or Securities
Sovereign Owned By
Power of Immediate
Name of Company Incorporation Parent
Union Carbide Formosa Co., Ltd. Taiwan 100.00
Union Carbide (Guangdong Zhongshan) Company Limited China 100.00
P.T. Union Carbide Indonesia Indonesia 100.00
Union Carbide Imaging Systems, Inc. Delaware 100.00
Union Carbide Inter-America Inc. Delaware 100.00
Union Carbide Inter-America Inc. New Jersey 100.00
Union Carbide Investimentos e Participacoes S/C Ltda. Brazil 100.00
Union Carbide Japan K.K. Japan 100.00
Union Carbide Limited England 100.00
Union Carbide Pan America, Inc. Delaware 100.00
Union Carbide Philippines (Far East) Inc. Philippines 100.00
Union Carbide Quimicos y Plasticos, S.A. de C.V. Mexico 100.00
Union Carbide Services Eastern Limited Hong Kong 100.00
Union Carbide South Africa (Proprietary) Limited South Africa 100.00
Union Carbide Subsidiary L, Inc. Delaware 100.00
Union Carbide Thailand Limited Thailand 100.00
Union Polymers Sdn. Bhd. Malaysia 60.00
Westbridge Insurance Ltd. Bermuda 100.00
Companies reported in the Consolidated Financial Statements on an Equity in
Net Assets Basis included:
Asian Acetyls Rep. of Korea 33.00
Alberta & Orient Glycol Company Limited Canada 50.00
Aspell Polymeres SNC France 50.00
Commercial Alcohols Limited Canada 50.00
Equate Petrochemical Company K.S.C. Kuwait 45.00
Nippon Unicar Company Limited Japan 50.00
Petromont and Company, Limited Partnership Canada 49.95
Petromont Inc. Canada 50.00
Polimeri Europa S.r.l. Italy 50.00
Seadrift Polypropylene Company Texas 50.00
Shawinigan Pipeline Reg'd. Canada 50.00
Union Carbide Lanka Limited Sri Lanka 49.00
UOP New York 50.00
Union Showa K.K. Japan 50.00
World Ethanol Company Illinois 50.00
* * * * * * * * * * * *
The names of the Corporation's other consolidated subsidiaries and companies
carried on an equity in net assets basis are not listed. These subsidiaries
and companies, if considered in the aggregate as a single subsidiary, would
not constitute a significant subsidiary. In addition, the Corporation has
investments in other subsidiaries and 20-to-50%-owned companies for which
financial statements are not submitted because all such subsidiaries and
companies, considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary.
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Union Carbide Corporation
We consent to the incorporation by reference in each of the
Registration Statements of Union Carbide Corporation on Form S-3
(Nos. 33-26185 and 33-60705), and on Form S-8 (Nos. 2-90419,
33-22125, 33-38714, 33-53573 and 33-58931) of our reports dated
January 19, 1996, relating to the consolidated balance sheets of
Union Carbide Corporation and subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of income,
stockholders' equity and cash flows and related schedule for each
of the years in the three-year period ended December 31, 1995,
appearing and incorporated by reference, in the annual report on
Form 10-K of Union Carbide Corporation for the year ended
December 31, 1995. Our reports refer to a change in accounting
principles as described in Note 1 to the consolidated financial
statements.
KPMG PEAT MARWICK LLP
Stamford, Connecticut
March 20, 1996
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statements on
Form S-3 (Nos. 33-26185 and 33-60705) and the Registration
Statements on Form S-8 (File Nos. 2-90419, 33-22125, 33-38714,
33-53573 and 33-58931) of Union Carbide Corporation of our report
dated January 24, 1994 relating to the consolidated financial
statements of UOP and its subsidiaries appearing on page 17 of
Union Carbide Corporation's Annual Report on Form 10-K for the
year ended December 31, 1993, which is incorporated by reference
in this Annual Report on Form 10-K.
PRICE WATERHOUSE LLP
Chicago, Illinois
March 19, 1996
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNION
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QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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