SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
Commission File Number 1-4654
WITCO CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-1870000
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One American Lane, Greenwich, Connecticut 06831-2559
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 552-2000
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
The number of shares of common stock outstanding is as follows:
Class Outstanding at April 30, 1995
----- -----------------------------
Common Stock - $5 par value 56,211,565
<PAGE>
WITCO CORPORATION
FORM 10-Q
March 31, 1995
CONTENTS PAGE
-------- ----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheets at March 31, 1995
and December 31, 1994 2
Condensed consolidated statements of income for the three
months ended March 31, 1995 and 1994 3
Condensed consolidated statements of cash flows for the
three months ended March 31, 1995 and 1994 4
Notes to condensed consolidated financial statements 5
Independent accountants' report on review of interim
financial information 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE>
PART I.FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WITCO CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994 (a)
---------------- -----------------
(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 214,991 $ 197,173
Accounts and notes receivable-net 439,183 395,547
Inventories
Raw materials and supplies $ 97,160 $ 96,939
Finished goods 166,122 263,282 161,433 258,372
---------- ----------
Prepaid and other current assets 44,024 45,737
------------ ----------
TOTAL CURRENT ASSETS 961,480 896,829
------------ ----------
PROPERTY, PLANT, AND EQUIPMENT -
less accumulated depreciation
of $720,274 and $696,043 727,746 719,966
INTANGIBLE ASSETS - less accumulated
amortization of $47,912 and $43,760 203,473 191,422
OTHER ASSETS 102,504 111,128
------------ ----------
TOTAL ASSETS $ 1,995,203 $ 1,919,345
============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes and loans payable $ 1,565 $ 1,795
Accounts payable and other current liabilities 342,884 343,414
------------ ----------
TOTAL CURRENT LIABILITIES 344,449 345,209
------------ ----------
LONG-TERM DEBT 351,847 346,545
DEFERRED FEDERAL AND FOREIGN INCOME TAXES 81,812 81,354
DEFERRED CREDITS AND OTHER LIABILITIES 231,907 206,231
SHAREHOLDERS' EQUITY
$2.65 Cumulative Convertible Preferred Stock,
par value $1 per share
Authorized - 14 shares
Issued and outstanding - 7 shares 7 7
Common Stock, par value $5 per share
Authorized - 100,000 shares
Issued - 56,312 shares 281,561 281,561
Capital in excess of par value 127,953 127,643
Equity adjustments:
Foreign currency translation 28,454 (1,481)
Pensions (2,446) (2,446)
Retained earnings 551,240 537,199
Less cost of 106 and 165 shares of common
stock in treasury (1,581) (2,477)
------------ ----------
TOTAL SHAREHOLDERS' EQUITY 985,188 940,006
------------ ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,995,203 $ 1,919,345
============ ==========
</TABLE>
(a) The balance sheet at December 31, 1994, has been derived from the audited
financial statements at that date.
See accompanying notes.
2
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1995 1994
--------- -----------
(In Thousands Except Per Share Data)
<S> <C> <C>
REVENUES
Net sales $ 602,451 $ 553,417
Interest 2,922 2,224
---------- -----------
605,373 555,641
---------- -----------
COSTS AND EXPENSES
Cost of goods sold (exclusive of depreciation
and amortization) 468,937 426,560
Selling and administrative expenses 61,808 60,886
Depreciation and amortization 28,476 26,541
Interest 8,450 8,314
Other income-net (8,460) (570)
---------- -----------
559,211 521,731
---------- -----------
INCOME BEFORE FEDERAL AND FOREIGN
INCOME TAXES 46,162 33,910
FEDERAL AND FOREIGN INCOME TAXES 16,387 11,869
---------- -----------
NET INCOME $ 29,775 $ 22,041
========== ===========
PER COMMON SHARE:
Net Income $ .53 $ .41
Net Income - assuming full dilution $ .53 $ .41
Dividends declared $ .28 $ .25
Weighted average number of common shares
and equivalents - primary 56,356 56,432
========== ===========
</TABLE>
See accompanying notes.
3
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1995 1994
--------------- ---------------
(In Thousands)
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 23,084 $ 22,874
------------ ------------
INVESTING ACTIVITIES
Expenditures for property, plant, and equipment (23,881) (23,945)
Proceeds from dispositions 24,090 -
Other investing activities (1,836) 373
------------ ------------
Net Cash Used in Investing Activities (1,627) (23,572)
------------ ------------
FINANCING ACTIVITIES
Dividends paid (15,725) (12,630)
Other financing activities 538 (1,619)
--- -------
Net Cash Used in Financing Activities (15,187) (14,249)
------------ ------------
Effects of Exchange Rate Changes on Cash and Cash Equivalents 11,548 1,669
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 17,818 (13,278)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 197,173 183,050
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 214,991 $ 169,772
============ ============
</TABLE>
See accompanying notes.
4
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE A - Basis of Preparation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. All such adjustments are
of a normal recurring nature. Operating results for the three month period ended
March 31, 1995, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1995. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
company's annual report on Form 10-K for the year ended December 31, 1994.
The condensed consolidated financial statements at March 31, 1995, and for the
three month periods ended March 31, 1995 and 1994, have been reviewed in
accordance with standards established by the American Institute of Certified
Public Accountants, by independent accountants, Ernst & Young LLP, and their
report is included herein.
NOTE B - Accounting Change
Effective January 1, 1995, the company changed its method of inventory valuation
under dollar value LIFO from LIFO double extension to LIFO link chain.
Management believes that the LIFO link chain method is preferable because it is
the predominate method used in the industry and will mitigate the impact of
volume fluctuations on results of operations. The change in accounting method
had no material effect on income for the three month period ended March 31,
1995. It is not possible to determine the effect of the change on retained
earnings as of January 1, 1995 or income as previously reported for the three
month period ended March 31, 1994.
NOTE C - Shareholder Rights Plan
On March 2, 1995, the Board of Directors unanimously approved a Shareholder
Rights Plan. The Plan has been implemented by the issuance of one preferred
stock purchase right for each share of common stock outstanding at the close of
business on March 2, 1995, or issued thereafter until the rights become
exercisable. Each right will entitle the holder in certain events to purchase
one-one thousandth of a share of participating preferred stock at a purchase
price of $110. Each one-one thousandth of a share of participating preferred
stock is intended to represent the economic equivalent of one share of common
stock. Under the Shareholder Rights Plan, 300,000 shares of Series A
participating cumulative preferred stock without par value have been authorized.
The rights currently are not exercisable. If a person or group acquires more
than 15% of the outstanding common stock, or at the Board's election if a tender
offer for more than 15% of the outstanding common stock is commenced, or if such
person or group acquires the company in a merger or other business combination,
each right (other than those held by the acquiring person) will entitle the
holder to purchase stock of the company or stock or other property of the
acquiring person having a value of twice the purchase price. The rights will
expire on March 2, 2005, unless earlier redeemed by the company in whole, but
not in part, at a price of $.01 per right.
NOTE D - Other Matters
The statement of income for the three month period ended March 31, 1995,
includes a gain of $6,196,000, or $.11 per common share, from the sale of the
company's Battery Parts business. The pre-tax gain of $9,532,000 is included in
the caption "Other income - net."
5
<PAGE>
NOTE E - Litigation and Environmental
The company has been notified, or is named as a potentially responsible party
("PRP") or a defendant in a number of governmental (federal, state, and local)
and private actions associated with environmental matters, such as those
relating to hazardous wastes. These actions seek remediation costs, penalties
and/or damages for personal injury or damage to property or natural resources.
As of March 31, 1995, the company had been identified as a PRP in connection
with 41 sites which are subject to the federal Superfund Program under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"). The company has also been identified as a PRP in connection with 21
sites where state agencies have taken the lead role in overseeing site cleanup.
With 11 exceptions, all the CERCLA and state controlled sites in which the
company is involved are multi-party sites, and, in most cases, there are
numerous other potentially responsible parties in addition to the company.
CERCLA authorizes the federal government to remediate a Superfund site itself
and to assess the costs against the responsible parties, or to order the
responsible parties to remediate the site.
The company evaluates and reviews environmental reserves for future remediation
and other costs on a quarterly basis to determine appropriate reserve amounts.
Inherent in this process are considerable uncertainties which affect the
company's ability to estimate the ultimate costs of remediation efforts. Such
uncertainties include the nature and extent of contamination at each site,
evolving governmental standards regarding remediation requirements, changes in
environmental regulations, widely varying costs of alternative cleanup methods,
the number and financial condition of other potentially responsible parties at
multi-party sites, innovations in remediation and restoration technology, and
the identification of additional environmental sites.
At March 31, 1995, the company's reserves for environmental remediation and
compliance costs amounted to $94,565,000, reflecting Witco's estimate of the
costs which will be incurred over an extended period of time in respect of these
matters which are reasonably estimable.
The company has numerous insurance policies which it believes provide coverage
at various levels for environmental liabilities. The company is currently in
litigation with many of its insurers concerning the applicability and amount of
insurance coverage for environmental costs under certain of these policies.
Except for amounts reflected in executed settlement agreements, no provision for
recovery under any of these policies is included in the company's financial
statements.
The company is a defendant in two similar actions pending in California state
courts, which arise out of the company's involvement in the polybutylene resin
manufacturing business in the 1970's: East Bay Municipal Utility District v.
Mobil Oil Co., et al., filed in November 1993, and pending in Superior Court for
the County of San Mateo and City of Santa Maria v. Shell Oil Co., et al., filed
in May 1994, and pending in Superior Court for the County of San Luis Obispo. In
addition, two actions, City of Morgan Hill v. Mobil Oil Co., et al., filed in
December 1987, which was pending in Superior Court of the County of Santa Clara
and City of Redding v. Mobil Oil Co., et al., filed in July 1993, and pending in
Superior Court for the County of Tehama, have been dismissed by the court, but
the company expects the plaintiff in the actions to appeal the dismissals. The
actions generally allege that the company and several other defendants
negligently misrepresented the performance of polybutylene pipe and fittings
installed in water distribution systems. Other allegations include breach of
warranty, fraud, strict liability, and breach of the California Unfair Practices
Act.
The company is not a party to any legal proceedings, including environmental
matters, which it believes will have a material adverse effect on its
consolidated financial position.
6
<PAGE>
Independent Accountants' Review Report
The Board of Directors
Witco Corporation
We have reviewed the accompanying condensed consolidated balance sheet of Witco
Corporation and Subsidiary Companies as of March 31, 1995, and the related
condensed consolidated statements of income and cash flow for the three-month
periods ended March 31, 1995 and 1994. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Witco Corporation and Subsidiary
Companies as of December 31, 1994, and the related consolidated statements of
income, shareholders' equity, and cash flows for the year then ended (not
presented herein) and in our report dated January 26, 1995, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 1994, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Stamford, Connecticut
May 10, 1995
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND FINANCIAL RESOURCES
Cash and cash equivalents have increased since year-end primarily due to the
sale in March of the Battery Parts business for approximately $24.1 million and
to favorable exchange rate fluctuations, which added $11.5 million. Record sales
contributed to an increase of $35.5 million in the other components of working
capital primarily due to increased accounts receivable. The company anticipates
that cash flow from operations will be sufficient to fund, for the foreseeable
future, capital investments, dividend payments, commitments on environmental
remediation projects, and operating requirements.
Progress has been made in the first quarter in divesting non-core businesses
with the sale of the company's Battery Parts business. The company expects to
complete its program to divest all businesses in its Diversified Products
Segment during 1995 with the sale of the carbon black operations.
CAPITAL INVESTMENTS AND COMMITMENTS
Capital expenditures during the first quarter of 1995 amounted to $23.9 million,
which is consistent with the same period of 1994. Capital expenditures for the
year are expected to approximate $144 million, a 34% increase from the record
set in 1994. The capital spending plan for 1995 demonstrates the company's
commitment to long term growth.
CONTINGENCIES
The company has been notified, or is a named or a potentially responsible party
in a number of governmental (federal, state, and local) and private actions
associated with environmental matters, such as those relating to hazardous
wastes, including certain sites which are on the United States EPA National
Priorities List. These actions seek cleanup costs, penalties and/or damages for
personal injury or damage to property or natural resources.
The company is not a party to any legal proceedings or environmental matters
which it believes will have a material adverse effect on its consolidated
financial position. It is possible, however, that future results of operations
and cash flows, for any particular quarterly or annual period, could be
materially affected by such legal proceedings or environmental matters. However,
the company does not expect the results of such proceedings or environmental
matters to materially affect its competitive position.
8
<PAGE>
RESULTS OF OPERATIONS
First quarter net sales were $602.5 million, a record for any quarter in the
company's 75-year history, and represented a 9 percent increase over sales for
the same period of 1994. Sales were up despite the absence of the Allied-Kelite
business, sold during the second quarter of 1994, which contributed $11.3
million to first quarter 1994 sales. An increase in selling prices, to recover
higher feedstock costs, and a favorable product sales mix accounted for
approximately two-thirds of the increase in sales. The remainder of the increase
was attributable to a weakening of the U. S. dollar against many international
currencies, creating favorable exchange rates, while overall volume rose less
than 1 percent.
Reported net income of $29.8 million for the first quarter of 1995 included a
$6.2 million gain on disposition of the Battery Parts business which was sold on
March 24, 1995. Excluding the gain on disposition, net income of $23.6 million
was $1.5 million, or 7 percent, ahead of the first quarter of 1994. The increase
in net income, before the non-recurring gain, was attributable to a favorable
sales product mix, the benefit of which was partially offset by a 1 percent
decline in gross profit margin. The lower margin is reflective of the difficulty
the company is experiencing in raising sales prices to the level required to
recoup raw material feedstock costs.
Segment sales and operating income for the first quarter of 1995 and 1994 are
set forth in the following table. Income and expenses of a general corporate
nature are not allocated to industry segments in computing operating income.
These include general corporate expenses, interest income and expense, and
certain other income and expenses.
Three Months Ended
March 31,
-------------------------------
1995 1994
--------------- -----------
(Unaudited - In Millions)
Net Sales
Chemical $ 382.4 $ 334.7
Petroleum 188.2 179.6
Diversified products 35.8 43.3
Intersegment elimination (3.9) (4.2)
----------- ----------
Total Net Sales $ 602.5 $ 553.4
=========== ==========
Operating Income
Chemical $ 34.5 $ 31.6
Petroleum 6.2 12.4
Diversified products 15.6 3.4
----------- ----------
Total Operating Income $ 56.3 $ 47.4
=========== ==========
The contribution of the company's international operations to net sales and net
income, excluding non-recurring items, continues to grow. These operations
accounted for 33 percent of net sales for the first quarter of 1995, up 3
percent from the first quarter of 1994. In the first quarter of 1995, 43 percent
of the company's operating income, before non-recurring items, was derived from
international operations, up 5 percent from the same period in 1994. This trend
remains the same after adjusting for the favorable effect that current year
foreign currency exchange rates had on sales and operating income, before
non-recurring items.
CHEMICAL SEGMENT
Chemical segment 1995 first quarter sales rose $47.7 million compared to the
same period of 1994. The 14 percent increase in sales was equally attributable
to a 4 percent improvement in volume, higher unit sales prices and favorable
foreign currency exchange rates.
Operating income rose $2.9 million, or 9 percent, during the current quarter
compared to the first quarter of 1994. Each of the segment's three operating
groups reported operating earnings that were ahead of the prior year. The
segment's newly formed Resins Group, which is responsible for the worldwide
marketing of polyurethane intermediates, epoxy resins and hardeners, accounted
for approximately 70 percent of the segment's greater earnings. An 11 percent
increase in shipment volume, to which all business units
9
<PAGE>
CHEMICAL SEGMENT - continued
contributed, and the ability of the group's international operations to recoup
virtually all of the substantial increase in feedstock costs through higher
sales prices, led to the group's favorable operating results. The
Oleo/Surfactants and Polymer Additives Groups reported earnings that showed
modest improvements over the prior year. Oleo/Surfactants benefited from
shipment volume that was 4 percent above the first quarter of 1994, while being
adversely affected by rising raw material costs, which due to market conditions
have not been fully recovered through higher sales prices. Earnings for the
Polymer Additives Group were slightly higher than the previous year. Shipment
volume was down 1 percent from the first quarter of 1994 while material margins
were unchanged.
PETROLEUM SEGMENT
Segment net sales for the first quarter of 1995 were 5 percent ahead of those
recorded for the first quarter of 1994. Although sales rose $8.6 million due to
a 7 percent increase in sales prices, volume was off 2 percent from the first
quarter of 1994.
The Petroleum Segment's operating earnings for the first three months of 1995
were $6.2 million below the earnings reported for the corresponding quarter of
1994. The Lubricants Group's operating income declined substantially during this
period accounting for a majority of the segment's shortfall. The group suffered
from a drop in sales volume, primarily in its branded lubricants and grease
businesses, and higher feedstock, additive and packaging costs. Customers'
decisions to bring business in-house affected volume, while an extremely
competitive market prevented sales prices from being raised to the levels needed
to recover higher costs. This resulted in an erosion of margins in each of the
group's business units. Operating income from the segment's Petroleum
Specialties Group was also down from the prior year. The group's lower earnings
were mainly attributable to continued start up costs for the Extracted Sulfonic
Acid Unit in Gretna, Louisiana, and Calcium Sulfonates Plant in Amsterdam,
Holland, and costs associated with the shut down of the Petrolia, Pennsyslvania,
Wax Chilling and Distillation operations.
DIVERSIFIED PRODUCTS
First quarter 1995 operating results include a $9.5 million gain on disposition
of the Battery Parts business which was sold in late March. The segment's
remaining business, the Concarb Division, which manufactures carbon black, is
expected to be sold within the next few months.
Concarb's first quarter 1995 net sales were 28 percent over the division's sales
for the corresponding quarter of 1994. Sales were up as a result of higher
prices and a 7 percent increase in shipment volume. Operating income for the
carbon black business nearly doubled during this period. The operating
performance of this business is reflective of an industry in which the customer
demand for products exceeds production capacity.
OUTLOOK
The company has identified the recovery of increased raw material costs as a
priority. Certain key raw materials costs stabilized during the first quarter
and the company is optimistic that it will be able to pass through past raw
material cost increases and restore product margins to more acceptable levels.
However, if the German mark continues to strengthen against other currencies,
prices for international exports out of Germany may be adversely affected.
The company is continuing to explore acquisition opportunities and will also
continue to evaluate existing businesses as divestiture candidates as a part of
the company's focus on its core businesses.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
The company has been notified, or is named as a potentially
responsible party ("PRP") or a defendant in a number of governmental
(federal, state, and local) and private actions associated with
environmental matters, such as those relating to hazardous wastes.
These actions seek remediation costs, penalties and/or damages for
personal injury or damage to property or natural resources. As of
March 31, 1995, the company had been identified as a PRP in
connection with 41 sites which are subject to the federal Superfund
Program under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA"). The company has also been
identified as a PRP in connection with 21 sites where state agencies
have taken the lead role in overseeing site cleanup. With 11
exceptions, all the CERCLA and state controlled sites in which the
company is involved are multi-party sites, and , in most cases,
there are numerous other potentially responsible parties in addition
to the company. CERCLA authorizes the federal government to
remediate a Superfund site itself and to assess the costs against
the responsible parties, or to order the responsible parties to
remediate the site.
The company evaluates and reviews environmental reserves for future
remediation and other costs on a quarterly basis to determine
appropriate reserve amounts. Inherent in this process are
considerable uncertainties which affect the company's ability to
estimate the ultimate costs of remediation efforts. Such
uncertainties include the nature and extent of contamination at each
site, evolving governmental standards regarding remediation
requirements, changes in environmental regulations, widely varying
costs of alternative cleanup methods, the number and financial
condition of other potentially responsible parties at multi-party
sites, innovations in remediation and restoration technology, and
the identification of additional environmental sites.
The company has numerous insurance policies which it believes
provide coverage at various levels for environmental liabilities.
The company is currently in litigation with many of its insurers
concerning the applicability and amount of insurance coverage for
environmental costs under certain of these policies. Except for
amounts reflected in executed settlement agreements, no provision
for recovery under any of these policies is included in the
company's financial statements.
The company is a defendant in a case filed in October 1992 by the
United States Department of Justice on behalf of the United States
Environmental Protection Agency styled United States v. Witco, et
al. pending in the United States District Court for the Eastern
District of California. The United States alleged that the company
has violated the Clean Air Act, the Safe Water Drinking Act, and the
Resource Conservation and Recovery Act in connection with certain
activities at its Oildale, California, refinery. The company has
executed a consent decree settling this action in which the company
neither admits nor denies liability. The consent decree must be
approved by the court in order to become effective. Under the terms
of the decree, Witco and a third party will jointly pay a civil
penalty of $700,000, and Witco will, among other things: (i) make
certain modifications to existing equipment in the refinery, and
install certain new equipment; (ii) close deep injection wells on an
agreed timetable; (iii) install a storm water and wastewater
treatment facility at the refinery; and, (iv) complete a site
evaluation at the location of the refinery and adjacent properties.
The company is a defendant in two similar actions pending in
California state courts, which arise out of the company's
involvement in the polybutylene resin manufacturing business in the
1970's: East Bay Municipal Utility District v. Mobil Oil Co., et
al., filed in November 1993, and pending in Superior Court for the
County of San Mateo and City of Santa Maria v. Shell Oil Co., et
al., filed in May 1994, and pending in Superior Court for the County
of San Luis Obispo. In addition, two actions, City of Morgan Hill v.
Mobil Oil Co., et al., filed in December 1987, which was pending in
Superior Court of the County of Santa Clara and City of Redding v.
Mobil Oil Co., et al., filed in July 1993, and pending in Superior
Court for the County of Tehama, have been dismissed by the court,
but the company expects the plaintiff in the actions to appeal the
dismissals. The actions generally allege that the company and
several other defendants negligently misrepresented the performance
of polybutylene pipe and fittings installed in water distribution
systems. Other allegations include breach of warranty, fraud, strict
liability, and breach of the California Unfair Practices Act.
The company is not a party to any legal proceedings, including
environmental matters, which it believes will have a material
adverse effect on its consolidated financial position.
11
<PAGE>
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) The company's Annual Meeting of Shareholders was held on April
26, 1995, at Witco Corporation, One American Lane, Greenwich,
Connecticut at 2:00 p.m.
(b) The company's shareholders elected five directors at said Annual
Meeting, one for a term expiring in 1996 and four for terms
expiring in 1998, as follows:
VOTES
FOR WITHHELD
--------------- ---------------
William J. Ashe 49,804,570 276,894
William G. Burns 49,882,650 198,814
William E. Mahoney 49,846,700 234,764
L. John Polite, Jr. 49,807,538 273,926
William Wishnick 49,845,114 236,350
As he will be reaching the mandatory retirement age for members
of the Board, Mr. Ashe will be serving a one-year term expiring
in 1996. Messrs. Burns, Mahoney, Polite and Wishnick will be
serving terms expiring in 1998.
Directors who did not stand for election and continue in office
until the 1996 Annual Meeting are: Harry G. Hohn, Dan J. Samuel
and Bruce F. Wesson. Directors who did not stand for election and
continue in office until the 1997 Annual Meeting are: Simeon
Brinberg, William R. Grant, Richard M. Hayden and William R.
Toller.
(c) In addition to the election of five directors, the company's
shareholders:
(i) Approved the adoption of the 1995 Stock Option Plan for
Employees of Witco Corporation and its Subsidiaries.
VOTES
-------------------------------------------------------
FOR AGAINST ABSTAIN
---------------- --------------- ---------------
47,352,258 2,481,326 247,880
(ii) Ratified the appointment of Ernst & Young LLP as the
company's independent auditors for 1995.
VOTES
-------------------------------------------------------
FOR AGAINST ABSTAIN
---------------- --------------- ---------------
49,977,396 52,650 51,418
ITEM 5. Other Information
The Board of Directors of Witco Corporation has requested William R.
Toller to continue as Chairman and Chief Executive Officer beyond his
normal retirement date. Mr. Toller has agreed to an extension through
December 1996.
12
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2 Not applicable
4 Not applicable
10 Not applicable
11 Statement re computation of per share earnings
15 Letter re unaudited interim financial information
18 Letter re change in accounting principles
19 Not applicable
22 Not applicable
23 Not applicable
24 Not applicable
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K for the three months ended
March 31, 1995.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WITCO CORPORATION
-----------------
(Registrant)
/s/ Michael D. Fullwood
Date: May 11, 1995 ----------------------------------------------------
Michael D. Fullwood
Executive Vice President and Chief Financial Officer
/s/ Dustan E. McCoy
Date: May 11, 1995 ------------------------------------------------------
Dustan E. McCoy
Vice President - General Counsel and Corporate Secretary
EXHIBIT 11
WITCO CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
Three Months Ended
March 31,
------------------------------
1995 1994
----------- -----------
(In Thousands Except Per Share Data)
PRIMARY
Net Income - as reported $ 29,775 $ 22,041
Interest on convertible subordinated
debentures (net of tax) - 1,109
Dividend requirements of preferred stock (5) (5)
--------- ----------
Total $ 29,770 $ 23,145
========= ==========
Weighted average shares outstanding 56,161 50,881
Assumed conversions:
Convertible subordinated debentures - 5,133
Stock options 195 418
--------- ----------
Total 56,356 56,432
========= ==========
Per share amount $ 0.53 $ 0.41
========= ==========
FULLY DILUTED
Net Income - as reported $ 29,775 $ 22,041
Interest on dilutive debentures (net of tax) - 1,109
--------- ----------
Total $ 29,775 $ 23,150
========= ==========
Weighted average shares outstanding 56,161 50,881
Assumed conversions:
Convertible subordinated debentures - 5,133
Stock options 243 418
Preferred stock 122 137
--------- ----------
Total 56,526 56,569
========= ==========
Per share amount $ 0.53 $ 0.41
========== ==========
EXHIBIT 15
LETTER RE: UNAUDITED FINANCIAL INFORMATION
ACKNOWLEDGMENT LETTER
May 10, 1995
The Board of Directors
Witco Corporation
We are aware of the incorporation by reference in the Registration Statement
(Form S-3, No. 33-45865) and the Post-effective Amendment No. 2 to the
Registration Statement (Form S-3, No. 33-58066), each pertaining to the issuance
of debentures, the Post-effective Amendment No. 1 to the Registration Statement
(Form S-3, No. 33-58120) pertaining to the issuance of common stock, the
Post-effective Amendment No. 2 to the Registration Statement (Form S-8, No.
33-10715), Post-effective Amendment No. 1 to the Registration Statements (Form
S-8, Nos. 33-30995 and 33-45194), each pertaining to stock option plans of Witco
Corporation and the Registration Statement (Form S-8, No. 33-48806), pertaining
to an employee benefit plan of Witco Corporation, of our report dated May 10,
1995 relating to the unaudited condensed consolidated interim financial
statements of Witco Corporation and Subsidiary Companies which is included in
its Form 10-Q for the quarter ended March 31, 1995.
Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not part of
the registration statements prepared or certified by accountants within the
meaning of Sections 7 or 11 of the Securities Act of 1933.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Stamford, Connecticut
EXHIBIT 18
May 10, 1995
Mr. Michael D. Fullwood
Executive Vice President and
Chief Financial Officer
Witco Corporation
One American Lane
Greenwich, Connecticut
Dear Sir:
Note B of Notes to the condensed consolidated financial statements of Witco
Corporation and Subsidiary Companies included in its Form 10-Q for the three
month period ended March 31, 1995 describes a change in the method of accounting
used under Dollar Value LIFO from LIFO Double Extension to LIFO Link Chain. You
have advised us that you believe that the change is to a preferable method in
your circumstances because it is the predominant method used in the industry and
will mitigate the impact of volume fluctuations on results of operations.
There are no authoritative criteria for determining a "preferable" method of
accounting for inventory based upon the particular circumstances; however, we
conclude that the change in the method of accounting for inventory is to an
acceptable method which, based on your business judgment to make this change for
the reasons cited above, is preferable in your circumstances. We have not
conducted an audit in accordance with generally accepted auditing standards of
any financial statements of the Company as of any date or for any period
subsequent to December 31, 1994, and therefore we do not express any opinion on
any financial statements of Witco Corporation and Subsidiary Companies
subsequent to that date.
Very truly yours,
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Stamford, Connecticut
<TABLE> <S> <C>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 214,991
<SECURITIES> 0
<RECEIVABLES> 448,405
<ALLOWANCES> 9,222
<INVENTORY> 263,282
<CURRENT-ASSETS> 961,480
<PP&E> 1,448,020
<DEPRECIATION> 720,274
<TOTAL-ASSETS> 1,995,203
<CURRENT-LIABILITIES> 344,449
<BONDS> 351,847
<COMMON> 281,561
0
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<OTHER-SE> 703,620
<TOTAL-LIABILITY-AND-EQUITY> 1,995,203
<SALES> 602,451
<TOTAL-REVENUES> 605,373
<CGS> 468,937
<TOTAL-COSTS> 559,211
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 633
<INTEREST-EXPENSE> 8,450
<INCOME-PRETAX> 46,162
<INCOME-TAX> 16,387
<INCOME-CONTINUING> 29,775
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,775
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
</TABLE>
