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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
December 20, 1995
(Date of earliest event reported)
WITCO CORPORATION
(Exact name or registrant as specified in its charter)
Delaware 1-4654 13-1870000
(State or other (Commission (I.R.S. Employer
jurisdiction or File Identification
organization) Number) Number)
One American Lane
Greenwich, Connecticut 06831
(Address of principal executive offices) (Zip Code)
(203) 552-2000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or address, if changed since last report.)
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Item 5. Other Events
In accordance with the announcement by Witco Corporation ("Witco") on
September 11, 1995 that it intends to divest its Lubricants Group, Witco has
restated its financial statements and related management's discussion and
analysis of financial condition and results of operations that were included in
Witco's Annual Report on Form 10-K for the year ended December 31, 1994 in order
to reflect the Lubricants Group as a discontinued operation. The financial
statements included in Witco's Quarterly Report on Form 10-Q for the nine-month
period ended September 30, 1995 already reflected the Lubricants Group as a
discontinued operation.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
c. Exhibits
23 Consent of Ernst & Young LLP
99(a) Management's Discussion and Analysis of
Financial Condition and Results of Operations
99(b) Quarterly Financial Data from Continuing
Operations (unaudited)
99(c) Consolidated Financial Statements and
Schedule
99(d) Computation of Per Share Earnings
99(e) Selected Financial Data for the five years
ended December 31, 1994
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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 hereunto duly authorized.
WITCO CORPORATION,
by
/s/ Dustan E. McCoy
-------------------------------
Name: Dustan E. McCoy
Title: Vice President, General
Counsel and Secretary
Date: December 20, 1995
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EXHIBIT INDEX
Exhibit Sequentially
Number Exhibit Numbered Page
23 Consent of Ernst & Young LLP 5
99(a) Management's Discussion and 6
Analysis of Financial
Condition and Results of
Operations
99(b) Quarterly Financial Data from 20
Continuing Operations (unaudited)
99(c) Consolidated Financial Statements 21
and Schedule
99(d) Computation of Per Share Earnings 60
99(e) Selected Financial Data for 61
the five years ended
December 31, 1994
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EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the
Registration Statement (Form S-3, No. 33-45865) and the
Post-effective Amendment No. 2 to the Registration Statement
(Form S-3, No. 33-58066), each pertaining to the issuance of
debentures, the Post-effective Amendment No. 1 to the
Registration Statement (Form S-3, No. 33-58120), pertaining
to the issuance of common stock, the Post-effective
Amendment No. 2 to the Registration Statement (Form S-8, No.
33-10715), Post-effective Amendment No. 1 to the
Registration Statements (Form S-8, Nos. 33-30995 and
33-45194), each pertaining to stock option plans of Witco
Corporation, the Registration Statement (Form S-8, No.
33-48806), pertaining to an employee benefit plan of Witco
Corporation, and the Registration Statement (Form S-8,
No. 33-60755), pertaining to the 1995 Stock Option Plan for
Employees of Witco and its Subsidiaries, of our report dated
January 26, 1995 (except for Note 16, as to which the date is
December 20, 1995), with respect to the consolidated
financial statements and schedule of Witco Corporation and
Subsidiary Companies for the year ended December 31, 1994
included in this Current Report (Form 8-K).
ERNST & YOUNG LLP
Stamford, Connecticut
December 20, 1995
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EXHIBIT 99(a)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Financial Resources
Liquidity refers to the ability to generate adequate amounts of cash to
satisfy the financial needs of an enterprise. Cash flow from operations, a major
source of the Company's liquidity, provided funds of $466.3 million over the
past three years. The generation of cash through operations during this time
period was sufficient to fund working capital requirements, support the
Company's internal capital investment program, and sustain an increasing rate of
dividends paid. Additional details regarding operating, investing, and financing
activities can be found in the Consolidated Statements of Cash Flows. It is the
Company's belief that cash flow from operations will be sufficient to fund, for
the foreseeable future, capital investments, dividend payments, commitments on
environmental remediation projects, and operating requirements.
Early in the year the Company redeemed its $150 million outstanding 5-1/2%
Convertible Subordinated Debentures due 2012, of which $149.9 million was
converted into the Company's common stock. The redemption was called to provide
greater financial flexibility as the Company continues its efforts to expand
product lines and marketing capabilities of its core businesses. As a result of
its strong balance sheet, the Company has the financial capacity needed should
an acquisition opportunity present itself.
Further progress has been made in divesting noncore businesses. During the
second quarter of 1994, the Company sold its metal finishing and metal working
businesses for $24.2 million in cash. The Company completed the divestiture of
its Diversified Products segment during the second quarter of 1995 with the sale
of its battery parts and carbon black operations in March and June,
respectively, for approximately $140 million in cash. The resulting cash flow
from these divestitures will be used to further strengthen the Company's core
businesses of specialty chemical and petroleum products.
Currently, the Company's primary international operations are based in
Western Europe and Canada. Although there are certain risks inherent in carrying
on international business, including currency devaluations and controls, export
and import restrictions, product supply,
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and economic controls, the Company does not believe these factors will
significantly affect its operations.
As the Company continues to focus on global expansion, it has, through
certain of its international subsidiaries, arrangements with various banks for
lines of credit. At December 31, 1994, these lines of credit aggregated $36.7
million, of which $36.4 million was unused at year-end. The Company has also
entered into certain long-term hedging arrangements to protect against possible
adverse currency exchange and interest rate fluctuations (see Note 13 of the
Notes to Financial Statements for additional details).
During the fourth quarter of 1995, the Company acquired OSi Specialties
Holding Company ("Holding") and its wholly owned subsidiary OSi Specialties,
Inc. ("OSi Specialties", and collectively with Holding, "OSi") in a cash
transaction for $486 million. The acquisition was financed with cash on hand and
short-term bank loans of $375 million under a credit agreement totaling $675
million with a consortium of banks.
The Company subsequently purchased for cash all of Holding's 11-1/2% Senior
Secured Discount Debentures due 2004 for $137.6 million and more than 99% of OSi
Specialties' 9-1/4% Senior Subordinated Notes due 2003 for $140.1 million. The
Company funded the acquisition of the Debentures and Notes with additional
short-term bank loans available under the $675 million credit agreement.
The Company intends to replace all or part of the short-term bank loans
with long-term financing in the public markets.
The Company periodically evaluates its liquidity requirements, capital
needs, and availability of external funds. As a result of this process, the
Company has in the past and may in the future seek to restructure indebtedness,
raise additional capital, or take such other steps to increase or manage its
liquidity and financial resources.
Capital Investments and Commitments
In 1994, the Company continued to upgrade existing facilities and to expand
capacity to meet changing market demands. Internal capital expenditures were
$107.4 million, bringing the total for the past three years to
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$283.7 million. The capital investment program in 1995 will continue to focus on
capacity expansion and market share growth and is expected to reach $100
million. Investments in the form of research and development, quality
initiatives, and marketing alliances will also continue in all key product
lines.
The Company is committed to developing business opportunities in Asia and
is currently focusing on both the immediate and longer term actions that are
necessary to expand and leverage new and existing business in this region of the
world. The strategy includes both capital investment and new marketing
initiatives. The Company presently anticipates that initial capital investments
may be in the form of joint ventures. For noncapital initiatives, cooperative
marketing and technical agreements will be pursued.
The acquisition of OSi not only adds strategic research and development
capabilities along with a full line of silicone surfactant, amine catalysts,
organofunctional silanes and specialty fluids, but provides the base for
acceleration of growth of the Company's existing products in Asia, South America
and Eastern Europe. During 1996, the Company will be committed to the successful
integration of this acquisition.
The screening and development of specific businesses will take place
throughout 1996 with the focus on: surfactants for agriculture, personal care,
and laundry products; polyurethane systems for footwear manufacturers; and
lubricants for plastics including polyethylene, polypropylene, and film.
In addition, to effectively service the expanding customer base in Asia,
the Company plans on establishing a local technical support center. This service
center will house lab personnel and technical service representatives whose
function will be to address the specific needs of customers in that part of the
world.
Environmental Matters
The Company operates in an industry subject to extensive regulations
related to the protection of the environment and the health and safety of
employees and others. Domestic operations are subject to a myriad of
environmental statutes and regulations at the Federal,
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state, and local levels. The Company's international production facilities
operate in an environmental regulatory framework in which governmental
authorities typically are granted broad discretionary powers which require
manufacturing facilities to obtain operating permits to continue operations.
The Company believes that expenditures for compliance with these statutes,
regulations, and permits will continue to have a significant impact upon the
conduct of its business. The trend toward greater environmental awareness and
more stringent environmental regulations is likely to continue, and while the
Company cannot accurately predict how this will affect future operations and
earnings, the Company does not believe its costs will significantly vary from
those of its competitors.
Consistent with the Company's concern for the protection and improvement of
the environment worldwide, the Company continually monitors the environmental
impact of past and present operating practices in light of changing
environmental standards. Where remedial action is indicated, the Company
assesses the probability and scope of potential remediation costs. To determine
the appropriate reserve amounts, management reviews, on a quarterly basis,
currently available information pertaining to each environmental site. Inherent
in this process are considerable uncertainties which affect the Company's
ability to estimate the ultimate costs of remediation. Such uncertainties
include the nature and extent of contamination at each site, evolving
governmental standards regarding remediation requirements, changes in
environmental regulations, widely varying costs of alternate cleanup methods,
the number and financial condition of other potentially responsible parties at
multi-party sites, innovations in remediation and restoration technology, and
the identification of additional environmental sites. As a result, as
remediation efforts proceed at existing sites and new sites are assimilated into
the review process, charges against income for environmental reserves could have
a material effect on results of operations in a particular quarter or year.
However, such charges are not expected to have a material adverse effect on the
Company's consolidated financial position, cash flow, or liquidity.
The Company has numerous insurance policies which it believes provide
coverage for certain environmental liabilities. The Company is currently in
litigation with many of its insurers concerning the applicability and amount of
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insurance coverage for environmental costs under these policies. Except for
amounts reflected in executed settlement agreements, no provision for recovery
under any of these policies is included in the December 31, 1994 balance sheet.
Refer to Note 16 to the Consolidated Financial Statements for further
information regarding insurance settlements subsequent to December 31, 1994.
Environmental reserves at December 31, 1994 amounted to $97.4 million,
which reflects management's assessment of future remediation costs in light of
currently available information. Remediation expenditures charged to those
reserves were $11 million in 1994 and include expenditures currently mandated as
well as those not required by any regulatory authority or third party. The
Company anticipates 1995 expenditures to approximate $18 million.
Capital expenditures for air, water, and solid waste control equipment and
facilities amounted to $8 million in 1994, and $30 million for the past three
fiscal years. The Company estimates that from 1995 through 1997, approximately
$46 million will be expended on similar capital projects.
The Company is continuing its efforts to reduce hazardous waste and
emissions generated by its operations. Through improved operating efficiencies,
installation of additional environmental control equipment, and utilization of
the latest innovations in waste treatment technology, management believes that
direct recurring operating costs associated with managing hazardous substances
and pollution can be controlled. Such costs amounted to $21.2 million in 1994
and $20 million in 1993.
Contingencies
The Company has been notified, or is named as a potentially responsible
party 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, including certain sites which are on the United States EPA
National Priorities List. These actions seek cleanup costs, penalties, and/or
damage for personal injury or damage to property or natural resources.
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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.
Discontinued Operation
On September 11, 1995, the Company announced its intention to divest its
Lubricants Group. See Note 16 to the Consolidated Financial Statements for
further information.
Results of Continuing Operations
The Company reported record income from continuing operations in 1994 of
$94.4 million compared to $25.1 million in 1993 and $38.4 million in 1992. The
three year period included several non-recurring items which affect comparison.
The following table shows the effect of these non-recurring items on earnings.
The pre-tax values of these items, except the accounting change which was shown
separately, were included in the "Other expense (income) -- net" caption of the
Consolidated Statements of Income.
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<TABLE>
<CAPTION>
(Millions of dollars except
per share data)
- --------------------------
1994 1993 1992
----------------------------- --------------------------- -----------------------------
Income
Pre-Tax Income Pre-Tax Per Pre-Tax Income
Income Income Per Share Income Income Share Income Income Per Share
------ ------ --------- ------ ------ ----- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income from continuing operations
excluding non-recurring items $140.4 $91.3 $1.64 $110.6 $ 70.1 $1.37 $78.6 $ 51.7 $1.15
Provision for environmental remediation
and compliance - - - (29.1) (18.9) (.34) - - -
Provision for disposition of a business - - - (19.2) (12.4) (.23) - - -
Provision for work force reduction - - - (12.2) (7.9) (.14) - - -
Gain on sale of the operations of
subsidiaries 4.8 3.1 .06 8.8 5.7 .11 - - -
Provision for loss on sublease of office
facilities - - - (9.2) (6.1) (.11) - - -
Other - net - - - (8.4) (5.4) (.10) - - -
Provision for consolidation of offices - - - - - - (20.1) (13.3) (.27)
------ ----- ----- ------ ----- ----- ----- ----- -----
Income from continuing operations $145.2 $94.4 $1.70 $ 41.3 $ 25.1 $ .56 $ 58.5 $ 38.4 $ .88
====== ===== ===== ====== ====== ===== ====== ====== =====
</TABLE>
Included in 1994 results was a $3.1 million gain on the sale of the
Allied-Kelite operations which reflects the Company's continued efforts to
divest its noncore businesses.
Results for 1993 included an $18.9 million environmental provision which
reflected the Company's assessment of the remediation and compliance costs it
will incur to comply with regulatory requirements and standards. Additionally,
the Company established provisions of $12.4 million in 1993 for the planned
divestiture of the Battery Parts Division and $7.9 million for a reduction of
the Company's worldwide work force, as part of its strategy to realign and
reorganize operations to emphasize core businesses. Consistent with this
strategy, during 1993 the Company sold the operations of its Chemprene
subsidiary for a net gain of $5.7 million.
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A loss of $6.1 million, attributable to an agreement to sublease two office
facilities resulting from the Company's commitment to relocate to a new world
headquarters, was also recorded in 1993.
The Company's decision in 1992 to bring certain operating management
together with executive management and administrative functions through the
consolidation of offices into a new world headquarters resulted in recording a
charge of $13.3 million. Additionally, as a result of the Company's adoption of
Statement of Financial Accounting Standards No. 106 for postretirement benefits
other than pensions, the Company recorded a charge of $14.7 million in 1992.
1994 vs. 1993
Excluding non-recurring items, income from continuing operations totaled
$91.3 million in 1994, compared to $70.1 million in 1993. Record sales, which
were 4 percent above the previous year, and higher gross margins were
responsible for approximately 85 percent of the $21.2 million increase in income
from continuing operations, before non-recurring items. Despite the disposition
of certain operations in late 1993 and 1994, sales rose on the strength of a 7
percent increase in shipment volume. Although increases in raw material
feedstock costs caused gross margins to deteriorate during the second half of
1994, cost saving initiatives and lower feedstock costs earlier in the year
enabled full year margins to be 1 percent ahead of 1993. Chiefly the result of
the Company's redemption of its 5-1/2% Convertible Subordinated Debentures,
lower net interest costs also contributed to the higher net earnings. A
comparison of 1993 and 1994 selling and administrative expenses shows an
increase of 2 percent, however, through careful monitoring the Company was able
to reduce these expenses as a percentage of sales.
The Company does not allocate income and expenses that are of a general
corporate nature to industry segments in computing operating income. These
include general corporate expenses, interest income and expense, and certain
other income and expenses.
The Petroleum Segment for all periods presented consists solely of the
Petroleum Specialties Group. This was a result of the Company's decision to sell
the
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Lubricants Group, the operating results of which have been reported as a
discontinued operation.
The Company's 1994 operating income of $182.8 million represents an
increase of $62.6 million over 1993. Comparison of these earnings for each of
the Company's industry segments is affected by non-recurring items. Exclusive of
these items, operating income rose to $178.0 million in 1994 from $159.7 million
in 1993. The contribution of the Company's international operations to net sales
and operating income, exclusive of non-recurring items, increased in 1994.
Continued emphasis on global growth and an overall improvement in the European
economy led to a change in geographic composition. International operations
accounted for 36 percent of the Company's net sales in 1994 compared to 34
percent in 1993 and its contribution to operating income, excluding
non-recurring items, increased 7 percent to a 40 percent share.
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. 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 year ended December 31, 1994. This change is not
expected to have a material effect on 1995 net income.
Chemical Segment
Net sales of $1.3 billion in 1994 were $105 million greater than the
previous year. Each of the segment's business groups participated in an 8
percent increase in shipment volume, while prices remained stable. Growth in all
but a few markets, both domestically and abroad, was achieved in 1994.
Improvements in both the domestic and European economies, and aggressive
marketing translated into higher sales volume.
Operating income for 1993 was adversely affected by a $5.6 million
provision for environmental remediation and compliance. Excluding this
non-recurring charge, operating income rose $11.6 million, or 11 percent, over
1993. The segment's Polymer Additives Group registered the largest increase,
accounting for two-thirds of the segment's
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total improvement. The group benefited from a strong domestic economy, evidenced
by a rise in the construction industry, and a more robust European economy. All
major business units contributed to the group's 23 percent improvement in
operating income. A 9 percent increase in net sales attributable to greater
domestic shipment volume, the introduction of a new antioxidant product and a
favorable European sales product mix led to the group's higher earnings. Process
improvements, the most notable involving the production of amides, also
contributed to the group's strong performance. The International/Europe Group's
operating income rose approximately 15 percent, accounting for the remaining
portion of the segment's favorable operating results. The overall strength of
the European economy led to greater sales and improved earnings for each of the
group's major business units. An increase in shipment volume of approximately 10
percent, a favorable product sales mix in key businesses, cost saving programs,
and plant efficiencies proved to be a successful combination. Although the
Oleo/Surfactants Group increased its shipment volume by 9 percent, its operating
income remained relatively unchanged. Sales growth was achieved through
aggressive marketing, new product introductions in the Oilfield and Laundry
Products business units, and an increase in overseas shipments. However,
significant increases in raw material costs in the second half of 1994, which
the group was unable to fully recover through higher sales prices due to
competitive pricing pressures, offset the increase in sales.
Petroleum Segment
Segment 1994 sales of $375.6 million were $10.4 million ahead of 1993. The
segment reported an increase in volume of approximately 4 percent which offset
the effect of a 1 percent drop in prices.
Non-recurring charges of $15.2 million for environmental matters severely
affected 1993 operating earnings. Excluding these charges, 1994 operating income
of $43.4 million was $3.6 million greater than 1993. The 9 percent increase in
operating income was primarily due to an improvement in material margins
attributable to a decline in raw material feedstock costs that outpaced a
corresponding decrease in sales prices. A favorable product sales mix, higher
sales volume, and efficiencies in manufacturing techniques also contributed to
the segment's favorable results.
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Diversified Products Segment
The Company completed its divestiture program during the second quarter of
1995 with the sale of its battery parts and carbon black operations. Refer to
Note 16 to the Consolidated Financial Statements for further information.
Reported segment operating income for 1994 included a non-recurring gain of
$4.8 million from the sale of the Allied-Kelite operations, while prior year
earnings included a net charge of $18.7 million covering an expected loss on the
disposition of the Battery Parts business and an environmental remediation and
compliance provision, partially offset by the gain on the sale of the operations
of Chemprene. Sales and operating income for the segment's businesses which were
not sold in 1993 or 1994 (Concarb and Battery Parts) rose $13 million and $7.4
million, respectively. A 15 percent increase in carbon black net sales, spurred
in part by greater automotive market demand in both the tire and nontire
sectors, accounted for approximately 75 percent of the higher sales and
operating earnings. The remaining increase was attributable to an increase in
demand for battery components due to the severe winter of 1994 and understocked
customer inventory levels.
1993 vs. 1992
Income from continuing operations adjusted to exclude non-recurring items,
was $70.1 million in 1993, compared to $51.7 million in 1992. The 36 percent
increase in net income, before non-recurring items, was primarily attributable
to record sales, which rose 31 percent to $1.8 billion, and a 1 percent
improvement in gross margins. The November 1992 acquisition of the Industrial
Chemicals and Natural Substances divisions of Schering AG (the "Schering
Acquisition") accounted for 95 percent of the higher sales and approximately 85
percent of the improved margins. The remaining improvement in margins was
attributable to a reduction in key raw material feedstock costs and operating
efficiencies in both the Petroleum and Diversified Products Segments. Increases
in selling and administrative expenses, depreciation and amortization, and
interest, primarily
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attributable to the Schering Acquisition, partially offset the higher sales
and improved margins.
Operating income in 1993 was $120.2 million, compared to $100.8 million in
1992. A comparison of the results of these periods was affected by a net
non-recurring charge of $39.5 million recorded in 1993. Excluding non-recurring
items, operating income increased $58.9 million to $159.7 million. All segments
reported operating earnings, exclusive of non-recurring items, that were
appreciably higher than the preceding year.
Chemical Segment
Chemical net sales of $1.2 billion in 1993 exceeded the previous year by
approximately $396 million. The segment was able to sustain sales, excluding
those relating to the acquisition, at 1992 levels despite a soft demand due to
sluggish domestic and European economies. Sales attributable to the Schering
Acquisition accounted for the 47 percent increase.
Excluding the segment's $5.6 million of environmental charges recorded in
1993, operating income of $110.6 million in 1993 increased $41.8 million, or 61
percent, from 1992. Each of the segment's business groups reported 1993
operating income that was substantially higher than the preceding year. The
inclusion of the acquired Schering businesses' full year operating results in
1993, compared income to two months for 1992, accounted for the higher operating
income. The Schering Acquisition contributed $41 million to the segment's 1993
operating income, compared to the reported loss of $2.2 million in 1992.
International (principally Western Europe) and domestic operations contributed
equally to the Schering Acquisition's current year operating income. The
favorable operating income was also, in part, attributable to cost saving
programs and the consolidation of sales and administrative functions in Europe,
which minimized the effect the persistent European recession had on operations.
Partially offsetting the positive impact that the Schering Acquisition and cost
saving programs had on operations, the Oleo/Surfactants Group was adversely
affected by a $3 million decrease in operating earnings, the result of an
increase in the cost of major commodity raw material feedstocks.
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Petroleum Segment
Net sales in 1993 were $365.2 million, an increase of $19.3 million over
the $345.9 million recorded in 1992. Despite a soft global economy and the
strengthening of the dollar overseas, 1993 sales volume increased 12 percent
over the prior year. The acquisition of the business of IGI Petroleum
Specialties, Inc. ("PSI") late in 1992 bolstered 1993 sales. This business,
which enhanced the segment's white oils and petroleum jellies marketing
capabilities, contributed approximately $30 million to sales in 1993, compared
to $2 million in 1992.
Operating income for 1993, excluding $15.2 million of non-recurring
charges, was $39.7 million, an increase of $10.9 million, or 38 percent, over
1992. Operating income from the segment's domestic operations rose despite a
sluggish economy and a shortage of critical sulfonate feedstocks. The PSI
business added approximately $3 million to 1993 operating earnings. In addition,
the ability to hold down manufacturing expenses and the inclusion of $3.1
million of demolition costs in 1992 contributed to the improved domestic
results. The segment's Holland operation reported lower operating earnings
attributable to the depressed European economy and a stronger dollar.
Diversified Products Segment
Net sales, excluding those attributable to Chemprene, Inc., were $153.4
million in 1993, an increase of 7 percent above sales for the corresponding
operations in 1992. Operating income, excluding the results of Chemprene and
non-recurring items of $18.7 million, principally for the divestiture of the
battery parts business, increased $7.7 million to $7.4 million in 1993. Higher
carbon black sales and earnings more than offset declines from each of the
segment's other businesses. The carbon black business benefited from a 12
percent increase in volume, higher sales prices, and manufacturing efficiencies.
Outlook
Having completed the divestiture of the businesses in the Diversified
Products Group and the acquisition of OSi Specialties Holding Company in 1995,
the Company will continue to sharpen its focus upon its specialties chemicals
and specialties petroleum businesses. In 1996 the Company
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expects to complete the disposition of its Lubricant Group as a part of this
effort. The Company will also focus upon reducing raw material costs,
eliminating inefficient operations, and increasing margins as part of its
efforts to increase profitability. In addition, the Company will begin to
consolidate its Asian operations with those of OSi as a part of its continuing
efforts to develop a stronger presence in that area of the world.
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EXHIBIT 99(b)
Quarterly Financial Data from Continuing Operations Wilco Corporation and
(Unaudited) Subsidiary Companies
<TABLE>
<CAPTION>
(in thousands of dollars except per share data)
- -------------------------------------------------------------------------- --------------------------------------------------------
1994(g) 1993(g)
- -------------------------------------------------------------------------- --------------------------------------------------------
Income
Cost of Goods Income Cost of Goods Income (Loss) Per
Quarter Net Sales Sold(a) Income Per Share Net Sales Sold(a) (Loss) Share(f)
- -------------------------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First ........ $ 465,079 $ 381,302 $19,970 $ .37 $ 466,917 $ 388,699 $15,471 $.34
Second ....... 467,337 377,336 27,142(b) .48(b) 449,878 370,494 11,521(c) .23(c)
Third ........ 457,388 378,643 22,656 .40 436,269 359,888 15,658(d) .31(d)
Fourth ....... 451,610 363,461 24,652 .45 410,022 330,645 (17,518)(e) (.29)(e)
- -------------------------------------------------------------------------- --------------------------------------------------------
$1,841,414 $1,500,742 $94,420 $1.70 $1,763,086 $1,449,726 $25,132 $.56
- -------------------------------------------------------------------------- --------------------------------------------------------
</TABLE>
(a) Includes depreciation and amortization.
(b) Includes a gain of $3,133, or $.06 per common share, from the disposition
of the metal finishing and metal working operations of a subsidiary.
(c) Includes a charge of $6,061, or $.11 per common share, for a provision for
loss on sublease of office facilities.
(d) Includes $1,718, or $.03 per common share, as a result of the increase in
the U.S. federal income tax rate.
(e) Includes a charge of $44,700, or $.81 per common share, for provisions for
environmental remediation and compliance, disposition of a business, work
force reduction, and other matters and a gain of $5,726, or $.11 per common
share, on the sale of the operations of a subsidiary.
(f) 1993 quarterly per share amounts do not add to total for the year as each
quarter and the total year are computed independently.
(g) Amounts differ from previously reported amounts due to the presentation of
the Lubricants Group as a discontinued operation.
Page 20 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
EXHIBIT 99(c)
Consolidated Balance Sheets Witco Corporation and
Subsidiary Companies
<TABLE>
<CAPTION>
(in thousands except per share data)
1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 197,173 $ 183,050
Accounts and notes receivable, less allowances of $8,863
and $6,821 395,547 340,850
Inventories 258,372 227,469
Prepaid and other current assets 45,737 41,204
------------ ------------
Total Current Assets 896,829 792,573
------------ ------------
Property, Plant, and Equipment, less accumulated
depreciation of $696,043 and $621,684 719,966 696,462
Intangible Assets, less accumulated amortization of
$43,760 and $38,612 191,422 217,032
Deferred Costs and Other Assets 111,128 132,931
------------ ------------
Total Assets $ 1,919,345 $ 1,838,998
============ ============
Liabilities and Shareholders' Equity
Current Liabilities
Notes and loans payable $ 1,795 $ 4,194
Accounts payable and other current liabilities 343,414 337,144
------------ ------------
Total Current Liabilities 345,209 341,338
------------ ------------
Long-term Debt 346,545 496,266
Deferred Federal and Foreign Income Taxes 81,354 74,612
Deferred Credits and Other Liabilities 206,231 213,367
Shareholders' Equity
$2.65 Cumulative Convertible Preferred Stock, par value
$1 per share
Authorized -- 14 shares
Issued and outstanding -- 7 shares and 9 shares 7 9
Common stock, par value $5 per share
Authorized -- 100,000 shares
Issued -- 56,312 shares and 50,818 shares 281,561 254,089
Capital in excess of par value 127,643 6,123
Equity adjustments:
Foreign currency translation (1,481) (23,723)
Pensions (2,446) (6,548)
Retained earnings 537,199 488,241
Treasury stock, at cost -- 165 and 318 shares (2,477) (4,776)
------------ ------------
Total Shareholders' Equity 940,006 713,415
------------ ------------
Total Liabilities and Shareholders' Equity $ 1,919,345 $ 1,838,998
============ ============
</TABLE>
See accompanying notes.
Page 21 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Consolidated Statements of Income Witco Corporation and
Subsidiary Companies
<TABLE>
<CAPTION>
(in thousands of dollars except per share data)
For the years ended December 31 1994 1993 1992
---------- ---------- ------------
<S> <C> <C> <C>
Revenues
Net sales $1,841,414 $1,763,086 $1,342,012
Interest 10,032 8,679 9,303
----------- ----------- -----------
Total Revenues 1,851,446 1,771,765 1,351,315
----------- ----------- -----------
Costs and Expenses
Cost of goods sold (exclusive of depreciation and
amortization) 1,412,079 1,363,246 1,055,047
Selling and administrative expenses 185,576 181,173 139,438
Depreciation and amortization 88,663 86,480 61,130
Interest 29,674 34,984 16,448
Other expense (income) -- net (9,708) 64,585 20,734
----------- ----------- -----------
Total Costs and Expenses 1,706,284 1,730,468 1,292,797
----------- ----------- -----------
Income from continuing operations before
Federal and Foreign Income Taxes 145,162 41,297 58,518
Federal and Foreign Income Taxes 50,742 16,165 20,178
----------- ----------- -----------
Income from continuing operations 94,420 25,132 38,340
Income (loss) from discontinued operations -
(net of income taxes of $6,960, $(2,597), and
$8,069) 12,647 (5,369) 15,525
----------- ----------- -----------
Income before Cumulative Effect of Accounting Change 107,067 19,763 53,865
Cumulative Effect of Accounting Change - - (14,690)
----------- ----------- -----------
Net Income $ 107,067 $ 19,763 $ 39,175
=========== =========== ===========
Net Income Per Common Share: Primary
Income from continuing operations $ 1.70 $ 0.56 $ 0.88
Income (loss) from discontinued
operations - net of income taxes 0.22 (0.10) 0.31
Cumulative effect of accounting change - - (0.29)
----------- ----------- -----------
Net Income Per Common Share: Primary $ 1.92 $ 0.46 $ 0.90
=========== =========== ===========
Net Income Per Common Share: Fully Diluted
Income from continuing operations $ 1.69 $ 0.56 $ 0.87
Income (loss) from discontinued
operations - net of income taxes 0.22 (0.10) 0.31
Cumulative effect of accounting change - - $ (0.29)
----------- ----------- -----------
Net Income Per Common Share: Fully Diluted $ 1.91 $ 0.46 $ 0.89
=========== =========== ===========
</TABLE>
See accompanying notes.
Page 22 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Consolidated Statements of Cash Flows Witco Corporation and
Subsidiary Companies
(in thousands of dollars)
<TABLE>
<CAPTION>
For the years ended December 31 1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Operating Activities
Net income $ 107,067 $ 19,763 $ 39,175
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 105,120 102,502 76,162
Provision (benefit) for deferred income taxes 17,666 (24,639) (641)
Pension cost (credit) 11,828 1,221 (6,218)
Gains on dispositions (4,820) (8,810) (542)
Provision for environmental remediation and compliance - 52,810 -
Provision for work force reduction and other matters - 29,784 -
Provision for disposition of a business - 19,200 -
Provision for consolidation of offices - - 20,135
Cumulative effect of accounting change - - 14,690
Changes in operating assets and liabilities:
Accounts and notes receivable (51,639) (26,101) (3,140)
Inventories (23,750) 13,490 (11,783)
Prepaid and other current assets (3,791) 513 (4,488)
Accounts payable and other current liabilities (5,492) (6,908) 24,950
Other (4,457) (1,427) (1,098)
---------- ---------- ----------
Net Cash Provided by Operating Activities 147,732 171,398 147,202
---------- ---------- ----------
Investing Activities
Expenditures for property, plant, and equipment (107,438) (103,689) (72,594)
Proceeds from dispositions 24,194 24,160 4,449
Acquisitions of businesses, net of cash acquired - (3,691) (441,633)
Other 1,732 (4,568) 2,392
---------- ---------- ----------
New Cash Used in Investing Activities (81,512) (87,788) (507,386)
---------- ---------- ----------
Financing Activities
Dividends paid (55,013) (44,679) (40,422)
Payments on borrowings (8,398) (501,972) (58,249)
Proceeds from exercise of stock options 2,734 5,236 16,500
Proceeds from borrowings 954 374,422 444,880
Proceeds from issuance of common stock - 141,655 -
Other (63) (3,499) (1,069)
---------- ---------- ----------
Net Cash Provided by (Used in) Financing Activities (59,786) (28,837) 361,640
---------- ---------- ----------
Effects of Exchange Rate Changes on Cash and
Cash Equivalents 7,689 (6,170) (6,260)
---------- ---------- ----------
Increase (Decrease) in Cash and Cash Equivalents 14,123 48,603 (4,804)
---------- ---------- ----------
Cash and Cash Equivalents at Beginning of Year 183,050 134,447 139,251
---------- ---------- ----------
Cash and Cash Equivalents at End of Year $ 197,173 $ 183,050 $ 134,447
========== ========== ==========
</TABLE>
See accompanying notes.
Page 23 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Consolidated Statements of Shareholders' Equity Witco Corporation and
Subsidiary Companies
(in thousands of dollars)
<TABLE>
<CAPTION>
Equity Adjustments
-------------------------------------------------------------------------------------------
Capital in Foreign Treasury
Preferred Common Excess of Currency Retained Stock
Stock Stock Par Value Translation Pensions Earnings at Cost Total
--------- ------ --------- ----------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991 $10 $112,670 $1,981 $18,688 $(1,947) $517,009 $(22,711) $625,700
Net Income 39,175 39,175
Cash Dividends Declared:
Preferred stock (24) (24)
Common stock (40,594) (40,594)
Common Stock Issued:
Employee plans 3,383 13,117 16,500
Conversions (1) (287) 401 113
Equity Adjustments (25,177) (1,397) (26,574)
- ------------------ ---- --------- ----- ------- ------ ------- ------ -------
Balance at December 31, 1992 9 112,670 5,077 (6,489) (3,344) 515,566 (9,193) 614,296
Net Income 19,763 19,763
Cash Dividends Declared:
Preferred stock (24) (24)
Common stock (47,064) (47,064)
Common Stock Issued:
Two-for-one
stock split 127,045 (127,176) (131)
Public offering 14,374 127,281 141,655
Employee plans 1,207 4,029 5,236
Conversions (266) 388 122
Equity Adjustments (17,234) (3,204) (20,438)
- ------------------ ---- --------- ----- ------- ------ ------- ------ -------
Balance at December 31, 1993 9 254,089 6,123 (23,723) (6,548) 488,241 (4,776) 713,415
Net Income 107,067 107,067
Cash Dividends Declared:
Preferred stock (20) (20)
Common stock (58,089) (58,089)
Common Stock Issued:
Conversion of
convertible
debentures 27,472 121,037 148,509
Employee plans 739 1,995 2,734
Conversions (2) (256) 304 46
Equity Adjustments 22,242 4,102 26,344
- ------------------ ---- --------- ------- ------- ------- -------- ------- --------
Balance at December 31, 1994 $7 $281,561 $127,643 $(1,481) $(2,446) $537,199 $(2,477) $940,006
==== ========= ======== ======= ======= ======== ======= ========
</TABLE>
See accompanying notes.
Page 24 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 1 -- Summary of Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include
the accounts of all majority owned subsidiaries after the elimination of
inter-company transactions. See Note 16.
Cash Equivalents: Cash equivalents consist of highly liquid investments
with a maturity of three months or less when purchased.
Inventories: Inventories are stated at cost, principally on the Last-In,
First-Out (LIFO) basis which is not in excess of market. The balance of
inventories is stated at the lower of cost on the First-In, First-Out (FIFO)
basis or market.
Property, Plant, and Equipment: Property, plant, and equipment is stated at
cost and depreciation is provided principally using the straight-line method
based on estimated useful lives.
Intangible Assets: Intangible assets primarily include the excess of
purchase price paid over the estimated fair value of net assets acquired
(goodwill) and other intangibles which are being amortized over periods not in
excess of forty years. The Company periodically evaluates the carrying value of
intangible assets in relation to the operating performance and future cash flows
of the underlying businesses. Impairment losses would be recorded in the event
of a significant change in the environment in which the business operates or if
the expected future cash flows are less than book value.
Postemployment Benefits: The Company adopted Statement of Financial
Accounting Standards (SFAS) No. 112 "Employers' Accounting for Postemployment
Benefits" effective January 1, 1993. SFAS 112 requires employers to accrue the
cost of postemployment benefits, such as medical and disability benefits, as
employees render services instead of when benefits are paid. The adoption of
SFAS 112 did not have a material impact on the Company's financial position,
results of operations, or cash flow.
Research and Development Costs: The Company's research and development
costs are charged to expense as
Page 25 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 1 -- Summary of Significant Accounting Policies
(continued)
incurred. These charges from continuing operations amounted to $40,717,000
(1994), $40,308,000 (1993), and $26,834,000 (1992).
Environmental Remediation Costs: Environmental remediation costs are
charged to expense if the remediation is the result of past practices or events
and the expenditures are not expected to benefit future operations. Projected
costs are accrued when it is probable that a liability has been incurred and the
amount can be reasonably estimated. Accruals are recorded at undiscounted
amounts without regard to any third party recoveries, and are regularly adjusted
as environmental assessments and remediation efforts proceed.
Income Taxes: The Company accounts for incomes taxes under SFAS No. 109
"Accounting for Income Taxes".
Common Share Data: Net income per common share is based upon net income
adjusted for interest (net of tax) on the 5 1/2% convertible subordinated
debentures through March 1994 and the preferred stock dividend requirements. The
weighted average number of common shares outstanding during each year includes
common stock equivalents, principally shares issuable in connection with the 5
1/2% convertible subordinated debentures through March 1994 and the Company's
stock option plans. Fully diluted net income per common share additionally
reflects the assumed conversion of the outstanding convertible preferred stock.
Page 26 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 2 -- Dispositions
In the second quarter of 1994, the Company sold the operations of the metal
finishing and metalworking businesses of its Allied-Kelite subsidiary to
MacDermid, Incorporated and Metal Lubricants Company, respectively, for
$24,200,000 which resulted in a gain of $3,133,000, or $.06 per common share.
Allied-Kelite manufactures plating and surface preparation products. The
operating results of this subsidiary were not significant to the consolidated
results of operations.
On November 1, 1993, the Company sold the operations of its Chemprene, Inc.
subsidiary to CMP Acquisition Corporation for $24,160,000 resulting in a gain of
$5,726,000, or $.11 per common share. Chemprene manufactures lightweight
belting, coated fabrics, and industrial diaphragms. The operating results of
this subsidiary were not significant to the consolidated results of operations.
Page 27 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 3 -- Inventories
Inventories are classified as follows:
<TABLE>
<CAPTION>
(thousands of
dollars) 1994 1993
---- ----
<S> <C> <C>
Raw materials and
supplies $ 96,939 $ 81,440
Finished goods 161,433 146,029
-------- --------
$258,372 $227,469
======== ========
</TABLE>
Work in progress included above is not significant.
Inventories valued on a LIFO basis, at December 31, 1994 and 1993, amounted
to $158,638,000 and $143,317,000, respectively. Inventories would have been
$62,077,000 and $57,849,000 higher than reported at December 31, 1994 and 1993
if the FIFO method (which approximates current cost) had been used by the
Company for all inventories.
Page 28 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 4 -- Property, Plant, and Equipment
A summary of property, plant, and equipment follows:
<TABLE>
<CAPTION>
(thousands of dollars) 1994 1993
---- ----
<S> <C> <C>
Land $ 32,970 $ 32,150
Buildings and improvements 178,268 175,501
Machinery, fixtures, and
equipment 1,140,319 1,055,134
Assets under construction 64,452 55,361
---------- ----------
1,416,009 1,318,146
Less accumulated depreciation 696,043 621,684
---------- ----------
$ 719,966 $ 696,462
========== ==========
</TABLE>
Depreciation expense from continuing operations amounted to $71,830,000
(1994), $67,930,000 (1993), and $52,190,000 (1992).
Page 29 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 5 -- Intangible Assets
Intangible assets consist of the following:
<TABLE>
<CAPTION>
(thousands of dollars) 1994 1993
---- ----
<S> <C> <C>
Goodwill $147,662 $160,091
Patents and licenses 29,798 37,341
Other 57,722 58,212
-------- --------
235,182 255,644
Less accumulated amortization 43,760 38,612
-------- --------
$191,422 $217,032
======== ========
</TABLE>
Amortization expense from continuing operations amounted to $16,833,000
(1994), $18,550,000 (1993), and $8,940,000 (1992).
Page 30 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 6 -- Accounts Payable and Other Current Liabilities
Components of accounts payable and other current liabilities consist of the
following:
<TABLE>
<CAPTION>
(thousands of dollars) 1994 1993
---- ----
<S> <C> <C>
Trade accounts payable $139,906 $116,608
Other accruals 67,839 92,787
Payroll related liabilities 53,286 43,588
Reserves for environmental
remediation and compliance 33,982 28,892
Income taxes 20,448 18,845
Reserve for disposition of a
business 19,109 19,200
Reserve for consolidation of
offices 8,844 17,224
-------- --------
$343,414 $337,144
======== ========
</TABLE>
Page 31 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 7 -- Indebtedness
In 1994, the Company called for redemption of all of its $150,000,000
outstanding 5 1/2% Convertible Subordinated Debentures due 2012. $149,890,000 of
the principal was converted into approximately 5,494,000 shares of common stock
at a conversion price of $27.28 per share and $110,000 of the principal was
redeemed for cash at a premium of 1.65%.
Following is a summary of long-term debt:
<TABLE>
<CAPTION>
(thousands of dollars) 1994 1993
---- ----
<C> <C> <C>
6.60% Notes due 2003 $165,000 $165,000
7.75% Debentures due 2023 110,000 110,000
7.325% Notes due 1998 45,171 40,313
5.85% Pollution Control
Revenue Bonds due 2023 10,000 10,000
Industrial Development 8,500 8,500
Revenue Bond due 2014
5 1/2% Convertible
Subordinated Debentures - 150,000
Other 9,559 14,663
-------- --------
348,230 498,476
Less amounts included in
notes and loans payable 1,685 2,210
-------- --------
$346,545 $496,266
======== ========
</TABLE>
The Company has arrangements with various banks for lines of credit for its
international subsidiaries aggregating $36,654,000 of which $237,000 was
utilized at December 31, 1994. The weighted average interest rates on short-term
borrowings outstanding were 6.50% (1994) and 7.22% (1993).
Page 32 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 7 -- Indebtedness (continued)
Principal maturities of long-term debt at December 31, 1994 are $1,685,000
(1995), $1,710,000 (1996), $1,740,000 (1997), $45,686,000 (1998), and $550,000
(1999).
Following is a summary of interest:
<TABLE>
<CAPTION>
(thousands of dollars) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Interest expense $29,674 $34,984 $16,448
Capitalized interest 2,214 1,923 851
------- ------- -------
Total interest
incurred $31,888 $36,907 $17,299
======= ======= =======
Total interest
payments $34,190 $30,098 $18,219
======= ======= =======
</TABLE>
Page 33 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 8 -- Shareholders' Equity
On September 2, 1993, the Board of Directors of the Company declared a
two-for-one stock split on the Company's common stock. This was paid in the form
of a 100 percent stock distribution of 25,409,000 shares on October 5, 1993, to
shareholders of record as of September 16, 1993. Accordingly, all share and per
share data, as appropriate, reflect the effects of this split. The par value for
the additional shares issued was transferred from capital in excess of par value
to common stock.
At December 31, 1994, unissued common stock of the Company was reserved for
issuance in accordance with the stock option plans (2,594,000 shares) and the
$2.65 Cumulative Convertible Preferred Stock (122,000 shares).
The Company has several stock option plans for certain employees. All
options are granted at market value as of the date of grant and are exercisable
in installments within a period not to exceed ten years from the date of grant.
The options outstanding at December 31, 1994, expire on various dates through
June 2004. At December 31, 1994 and 1993, options for 540,000 and 1,271,000
shares of common stock, respectively, were available for grant.
Stock option transactions were as follows:
<TABLE>
<CAPTION>
1994 1993
-------------------------- --------------------------
Shares Price Shares Price
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
Outstanding at
beginning of
year 1,472 $13.00-$26.56 1,112 $13.00-$21.38
Granted 780 $31.75 692 $26.56
Options exer-
cised (149) $17.31-$26.56 (328) $13.00-$21.38
Cancelled (49) $21.38-$31.75 (4) $17.31
----- ------------- ----- -------------
Outstanding at
End of Year 2,054 $13.00-$31.75 1,472 $13.00-$26.56
----- ------------- ----- -------------
Exercisable at
End of Year 721 $13.00-$31.75 201 $17.31-$26.56
===== ============= ===== =============
</TABLE>
Each share of $2.65 Cumulative Convertible Preferred Stock is entitled to
one vote and has a minimum liquidating preference of $66 per share. Each Share
is subject to redemption at the Company's option at $66 per
Page 34 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 8 -- Shareholders' Equity (continued)
share and is convertible into 16.8075 shares of the Company's common stock.
The Company has authorized 8,300,000 shares of series preferred stock,
which, when issued, will have such rights, powers, and preferences as shall be
fixed by the Company's Board of Directors.
Dividends declared per share on the Company's common stock
amounted to $1.06 (1994), $.96 (1993), and $.92 (1992).
Common and preferred stock transactions were as follows:
<TABLE>
<CAPTION>
(thousands of shares) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Convertible Preferred Stock
Outstanding at beginning of year 9 9 10
Conversions (2) - (1)
------- ------- -------
Outstanding at End of Year 7 9 9
------- ------- -------
Common Stock
Issued at beginning of year 50,818 22,534 22,534
Conversion of convertible
debentures 5,494 2,875 -
Two-for-one stock split - 25,409 -
------- ------- -------
Issued at End of Year 56,312 50,818 22,534
------- ------- -------
Treasury Stock
In treasury at beginning of year 318 306 757
Net shares issued under employee
plans (133) (149) (437)
Conversions (20) (22) (14)
Two-for-one stock split - 183 -
------- ------- -------
In Treasury at End of Year 165 318 306
======= ======= =======
</TABLE>
Page 35 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 9 -- Other Expense (Income) -- Net
The components of other expense (income)--net from continuing operations are as
follows:
<TABLE>
<CAPTION>
(thousands of dollars) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Provision for environmental
remediation and compliance $ -- $ 29,110 $ --
Provision for disposition of a
business -- 19,200 --
Provision for work force
reduction -- 12,200 --
Provision for loss on sublease
of office facilities -- 9,184 --
Provision for the consolidation
of offices -- -- 20,135
Other--net (9,708) (5,109) 599
-------- -------- --------
$(9,708) $ 64,585 $20,734
======== ======== ========
</TABLE>
Page 36 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 10 -- Federal and Foreign Income Taxes
The components of income (loss) from continuing operations before federal and
foreign income taxes and the cumulative effect of accounting change are:
<TABLE>
<CAPTION>
(thousands of dollars) 1994 1993 1992
-------- ------- --------
<S> <C> <C> <C>
Domestic $ 86,757 $ (5,813) $ 27,957
International 58,405 47,110 30,561
-------- -------- --------
$145,162 $ 41,297 $ 58,518
======== ======== ========
</TABLE>
The provision for federal and foreign income taxes (exclusive of tax
expense (benefit) from discontinued operations and the tax benefit related to
the cumulative effect of an accounting change of $7,567,000 in 1992) consists of
the following:
<TABLE>
<CAPTION>
(thousands of dollars) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Current
Domestic $ 25,115 $ 17,173 $ 11,373
International 9,870 16,462 10,558
Deferred
Domestic 7,824 (15,122) 210
International 8,916 (1,028) (307)
Investment tax credit
amortization (983) (1,320) (1,656)
-------- -------- --------
$ 50,742 $ 16,165 $ 20,178
======== ======== ========
</TABLE>
The effective income tax rate from continuing operations varied from the
statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
(thousands of dollars) 1994 1993 1992
----- ----- ----
<S> <C> <C> <C>
Statutory federal income
tax rate 35.0% 35.0% 34.0%
Amortization of investment
tax credit (.6) (4.0) (2.0)
Provision for non-deductible
civil penalties - 2.8 -
Effect of U.S. tax rate
increase on deferred tax
balances - 3.8 -
Other .6 1.5 2.5
---- ---- ----
35.0% 39.1% 34.5%
==== ==== ====
</TABLE>
Page 37 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 10 -- Federal and Foreign Income Taxes (continued)
The components of deferred federal and foreign income taxes are as follows:
<TABLE>
<CAPTION>
(thousands of dollars) 1994 1993
-------- ---------
<S> <C> <C>
Current Deferred Tax (Assets) Liabilities:
Reserve for environmental remediation and compliance $ (12,028) $ (10,112)
Accrual items (6,900) (7,774)
Reserve for disposition of a business (6,688) (6,720)
Inventories 5,476 7,960
Reserve for consolidation of offices (965) (6,028)
Other--net (3,199) (2,953)
--------- ---------
$ (24,304) $ (25,627)
Noncurrent Deferred Tax (Assets) Liabilities:
Depreciation $ 105,631 $ 97,291
Reserve for environmental remediation and compliance (22,142) (24,752)
Pensions 13,561 13,854
Foreign net operating loss carryforward (8,423) (14,484)
Postretirement benefits other than pensions (8,288) (9,907)
Hedging instruments 2,176 16,225
Other--net (1,161) (3,615)
--------- ---------
$ 81,354 $ 74,612
========= =========
</TABLE>
U.S. Federal income taxes have not been provided on approximately
$200,000,000 of unremitted earnings of the Company's international subsidiaries
at December 31, 1994. As a result of the availability of foreign tax credits,
based on current rates, no significant U.S. federal income taxes would be
payable if these earnings were distributed.
Provision has not been made for foreign withholding taxes due upon
remittance of foreign earnings prior to 1992. If unremitted earnings accumulated
prior to 1992 were distributed it is estimated the related taxes due on these
earnings would not be significant.
Cash payments for federal and foreign income taxes amounted to $40,462,000
(1994), $29,817,000 (1993), and $21,811,000 (1992).
Unamortized investment tax credits aggregated $1,085,000 at December 31,
1994, and are being amortized over the estimated useful lives of the related
assets.
Page 38 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 11 -- Pension Plans
The Company has various non-contributory defined benefit pension plans
covering substantially all of its domestic employees and certain international
employees. Benefits are primarily based upon levels of compensation and/or years
of service. The Company's funding policy is based upon funding at the minimum
annual amounts required by applicable federal laws and regulations plus such
additional amounts as the Company may determine to be appropriate from time to
time. Plan assets consist of publicly traded securities and investments in
commingled funds administered by independent investment advisors.
Certain union employees of the Company participate in multi-employer plans
and the Company makes contributions primarily based upon hours worked. These
plans provide defined benefits to these employees.
In November 1992, the Company acquired certain domestic and international
operations of Schering AG. The related international plans accounted for
approximately $6,100,000 and $4,800,000 of the 1994 and 1993 net periodic
pension cost, respectively. In the years prior to 1993, net periodic pension
cost of the international plans was not significant.
Employees of international subsidiaries are covered by various pension
benefit arrangements, some of which are considered to be defined benefit plans
for financial reporting purposes. Assets of the plans are comprised of insurance
contracts and equity securities. Benefits under these plans are primarily based
upon levels of compensation. Funding policies are based on legal requirements,
tax considerations, and local practices.
Page 39 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 11 - Pension Plans (continued)
Net pension cost (credit) includes the following components:
<TABLE>
<CAPTION>
(thousands of dollars) 1994 1993 1992
------------------------- ------------------------- -------
Domestic International Domestic International
--------- ------------- ----------- ------------- -------
<S> <C> <C> <C> <C> <C>
Service cost for benefits earned
during the period $ 8,284 $ 3,722 $ 6,630 $ 2,985 $ 4,834
Interest cost on the projected
benefit obligation 22,652 5,516 20,707 4,763 16,597
Actual (return) loss on plan
assets 7,287 (2,576) (34,119) (2,861) (17,384)
Net amortization and deferral (32,743) (314) 3,177 (61) (10,265)
--------- --------- --------- --------- ---------
Total Pension Cost (Credit) 5,480 6,348 (3,605) 4,826 (6,218)
--------- --------- --------- --------- ---------
Multi-employer plans 421 - 441 - 418
Other international plans - 129 - 90 738
--------- --------- --------- --------- ---------
Net Pension Cost (Credit) 5,901 6,477 (3,164) 4,916 (5,062)
Less Pension Cost (Credit) of
Discontinued Operations 1,009 - (614) - (1,251)
--------- --------- --------- --------- ---------
Net Pension Cost (Credit) from
Continuing Operations $ 4,892 $ 6,477 $ (2,550) $ 4,916 $ (3,811)
========= ========= ========= ========= =========
</TABLE>
The weighted average assumptions used to calculate costs were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----------------------- ------------------------ -------
Domestic International Domestic International
-------- ------------- --------- ------------- -------
<S> <C> <C> <C> <C> <C>
Discount rate 7.0% 6.9% 7.9% 7.8% 8.2%
Rate of increase in compensation
level 4.5% 4.3% 5.0% 4.7% 5.0%
Expected long-term rate of
return on assets 10.0% 8.0% 12.0% 8.9% 12.0%
</TABLE>
Page 40 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 11 - Pension Plans (continued)
The funded status and amounts recognized in the Company's Consolidated Balance
Sheets at December 31, 1994 and 1993 for the domestic plans were as follows:
<TABLE>
<CAPTION>
(thousands of dollars) 1994 1993
------------------ -------------------
Plans in which: Plans in which:
------------------------- ------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefits $ (218,596) $ (41,773) $ (241,453) $ (52,555)
Nonvested benefits (7,346) (4,470) (13,996) (2,947)
---------- ---------- ---------- ----------
Accumulated Benefit Obligation (225,942) (46,243) (255,449) (55,502)
Effect of anticipated future
compensation levels (14,472) (2,364) (16,845) (2,456)
---------- ---------- ---------- ----------
Projected Benefit Obligation (240,414) (48,607) (272,294) (57,958)
Plan assets at fair value 255,467 24,687 272,360 30,730
---------- ---------- ---------- ----------
Plan Assets in Excess of (Less
than) Projected Benefit
Obligation 15,053 (23,920) 66 (27,228)
Unrecognized prior service cost 34,062 6,398 39,294 4,631
Unrecognized net transition
(asset) obligation (14,638) 1,246 (17,426) 1,339
Unrecognized net loss 31,506 4,721 46,866 12,468
Adjustment required to recognize
minimum liability -- (3,763) -- (10,074)
---------- ---------- ---------- ----------
Noncurrent Pension Asset
(Liability) $ 65,983 $ (15,318) $ 68,800 $ (18,864)
========== ========== ========== ==========
</TABLE>
The assumptions used to calculate December 31, 1994 and 1993 obligations for
domestic plans were as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Discount rate 8.5% 7.0%
Rate of increase in compensation level 4.5% 4.5%
</TABLE>
Page 41 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 11 - Pension Plans (continued)
Effective January 1, 1995, the Company revised the domestic discount rate
from 7% to 8.5%. This change resulted in a decrease of approximately $48,000,000
and $56,000,000 in the 1994 accumulated benefit obligation and projected benefit
obligation, respectively.
Effective January 1, 1994, the pension benefit formula of the Retirement
Plan of the Company was amended to a "final average pay offset" formula and
several plan provisions were revised. Also effective January 1, 1994, the
Company modified the benefit formula of the Supplemental Executive Retirement
Plan. These amendments, together with the 1994 actuarial assumption changes,
increased the 1994 domestic net periodic pension cost by approximately
$9,200,000.
Page 42 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 11 - Pension Plans (continued)
The funded status and amounts recognized in the Company's Consolidated Balance
Sheets at December 31, 1994 and 1993 for the international plans were as
follows:
<TABLE>
<CAPTION>
(thousands of dollars) 1994 1993
------------------ ------------------
Plans in which: Plans in which:
------------------------- --------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefits $ (24,243) $ (28,034) $ (19,829) $ (28,895)
Nonvested benefits (1,405) (2,816) (1,094) (2,845)
--------- --------- --------- ---------
Accumulated Benefit Obligation (25,648) (30,850) (20,923) (31,740)
Effect of anticipated future
compensation levels (8,142) (16,231) (5,678) (16,751)
--------- --------- --------- ---------
Projected Benefit Obligation (33,790) (47,081) (26,601) (48,491)
Plan assets at fair value 37,268 -- 31,349 741
--------- --------- --------- ---------
Plan Assets in Excess of (Less
than) Projected Benefit
Obligation 3,478 (47,081) 4,748 (47,750)
Unrecognized prior service
cost 1,718 - 437 -
Unrecognized net transition
(asset) (5,978) - (6,040) (8)
Unrecognized net loss (gain) 2,637 (4,222) 2,658 6,489
--------- --------- --------- ---------
Noncurrent Pension Asset
(Liability) $ 1,855 $ (51,303) $ 1,803 $ (41,269)
========= ========= ========= =========
</TABLE>
The weighted average assumptions used to calculate December 31, 1994 and 1993
obligations for international plans were as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Discount rate 7.6% 6.9%
Rate of increase in compensation level 4.4% 4.3%
</TABLE>
Page 43 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 11 - Pension Plans (continued)
The Company sponsors a defined contribution savings plan, the Witco
Corporation Employee Retirement Savings Plan, which is organized under sections
401(k) and 401(a) of the Internal Revenue Code. The Plan allows salary and
hourly non-bargaining employees to contribute up to a maximum of 15% of their
base pay with the Company providing a matching contribution up to 3%. The Plan
permits employees to make contributions on both a pre-tax and after-tax basis.
Participants are immediately vested in their contributions and become fully
vested in the matching contribution upon meeting certain service requirements.
Union employee's participation, provisions, contributions, and employer match
are based upon terms of their respective collective bargaining agreement.
The Company's matching contribution was $4,300,000 (1994), $4,800,000
(1993), and $4,000,000 (1992).
Page 44 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 12 - Postretirement Benefits Other Than Pensions
The Company provides health and life insurance to certain domestic retired
employees, most of whom contribute to its cost. Substantially all employees
presently become eligible for retiree health benefits after reaching retirement
age while working for the Company. The cost of the retiree medical plan is
provided by retiree contributions that are adjusted annually to reflect current
health costs. For domestic employees subject to collective bargaining
arrangements the cost is shared by the Company in accordance with the bargained
agreements. Life insurance benefits for certain retired employees are provided
with the Company assuming the cost. The Company's policy is to fund the plans at
the discretion of management.
In 1992, the Company adopted Financial Accounting Standard No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." This
statement requires the accrual of the cost of providing postretirement benefits,
including medical and life insurance coverage, during the active service period
of the employee. The Company elected to record the effect of this adoption as a
cumulative effect of a change in accounting principle and immediately recognize
the accumulated liability measured as of January 1, 1992. This resulted in a
one-time after-tax charge of $14,690,000.
Page 45 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 12 - Postretirement Benefits Other Than Pensions
(continued)
Postretirement benefit obligations at December 31, 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
(Thousands of dollars) 1994 1993
-------- ---------
<S> <C> <C>
Accumulated Postretirement Benefit Obligation:
Retirees $ 24,907 $ 27,445
Active plan participants fully eligible for benefits 2,563 3,398
Other active plan participants 4,509 7,373
-------- --------
Total Accumulated Postretirement Benefit Obligation 31,979 38,216
Unrecognized net gain (loss) 685 (6,412)
-------- --------
Accrued Postretirement Benefit Liability $ 32,664 $ 31,804
======== ========
</TABLE>
Net periodic postretirement benefit costs include the following components:
<TABLE>
<CAPTION>
(thousands of dollars) 1994 1993 1992
------- ------- ---=----
<S> <C> <C> <C>
Service cost of benefits earned $ 591 $ 389 $ 196
Interest cost on accumulated postretirement
benefits 2,634 2,621 1,814
Net amortization 275 141 --
------- ------- -------
Net Periodic Postretirement Benefit Costs $ 3,500 $ 3,151 $ 2,010
======= ======= =======
</TABLE>
For measuring the expected postretirement benefit obligation, a 10 and 11
percent annual rate of increase in the per capita claims cost was assumed for
1994 and 1993, respectively. The rate was assumed to decrease by 1 percent per
year to 6 percent in 1998 and remain at that level thereafter. The weighted
average discount rate used in determining the accumulated postretirement benefit
obligation was 8.5 percent for 1994 and 7 percent for 1993. A change in the
discount rate for valuing the obligations at December 31, 1994 from 7 percent to
8.5 percent resulted in a decrease of approximately $6,700,000 in the
accumulated postretirement benefit obligation. The weighted average discount
rates used in determining the net periodic postretirement benefit costs for
1994, 1993, and 1992 were 7, 7.9, and 8.2 percent, respectively.
Page 46 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 12 - Postretirement Benefits Other Than Pensions
(continued)
The effect of a one percent increase in the health care cost trend rate
would increase the present value of the accumulated postretirement benefit
obligation at December 31, 1994 by approximately $4,400,000 and the net periodic
postretirement benefit cost for 1994 by approximately $400,000.
Certain union employees of the Company participate in multi-employer plans
that provide defined postretirement health and life insurance benefits. The net
periodic postretirement benefit cost for these employees is not distinguishable.
The Company's cost associated with these plans on a cash basis is not
significant.
Employees in operations in countries outside the U.S. are covered by
various postretirement benefit arrangements, none of which are presently
considered to be defined benefit plans.
Page 47 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 13 - Financial Instruments
The Company enters into foreign currency forward contracts, currency swaps,
and other financial market instruments to hedge the effect of foreign currency
fluctuations on the financial statements. The foreign exchange contracts are
accounted for as hedges of net investments, commitment hedges, and transaction
hedges. Gains and losses on hedges of net investments are recognized as a
component of shareholders' equity. Generally, gains and losses on the commitment
hedges are deferred and included in the basis of the transaction underlying the
commitment. Gains and losses on transaction hedges are recognized in income and
offset the foreign exchange gains and losses on the related transaction.
At December 31, 1994 and 1993, the Company had outstanding contracts to
hedge its foreign net investments and other foreign exposures. The aggregate
face value of these contracts, with notional amounts of approximately
$209,326,000, also fix the interest rates on the same amount of indebtedness at
a weighted average interest rate of approximately 8 percent. The net interest
rate differentials that are paid or received are reflected currently as
adjustments to interest expense. The foreign currency contracts are primarily in
German marks and expire in March 2003.
These contracts have been entered into with major financial institutions.
The risk associated with these transactions is the cost of replacing, at current
market rates, agreements in the event of default by the counterparties.
Management believes the risk of incurring such losses is remote.
The following notes summarize the major methods and assumptions used in
estimating the fair values of financial instruments.
Cash and cash equivalents: The carrying amount approximates fair value due
to the short maturity of these instruments.
Page 48 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 13 - Financial Instruments (continued)
Notes receivable: The fair value is estimated by discounting the future
cash flows using the interest rates at which similar loans would be made under
current conditions.
Long-term debt (including short-term portion): The fair value for the 6.60%
Notes and the 7.75% Debentures were based on quoted market values. For all other
long-term debt which have no quoted market price, the fair value is estimated by
discounting projected future cash flows using the Company's incremental
borrowing rate.
Foreign currency/interest rate swap contracts: The fair value is the amount
at which the contracts could be settled based on quotes provided by investment
banking firms.
Fair Values of Financial Instruments: The following table presents the
carrying amounts and estimated fair values of material financial instruments
used by the Company in the normal course of its business.
<TABLE>
<CAPTION>
(thousands of dollars) 1994 1993
------------------------ -------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents $197,173 $197,173 $183,050 $183,050
Notes receivable $ 1,693 $ 1,679 $ 2,864 $ 2,864
Long-term debt $348,230 $315,628 $498,476 $527,704
Off-balance sheet financial instruments:
Unrealized loss on foreign currency/interest
rate swap contracts $ -- $(32,736) $ -- $ (6,268)
</TABLE>
Page 49 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 14 - Commitments and Contingencies
Leases: At December 31, 1994, minimum rental commitments related to
continuing operations under noncancelable operating leases amounted to
$16,477,000 (1995), $14,141,000 (1996), $11,531,000 (1997), $9,644,000 (1998),
$9,083,000 (1999), and $97,795,000 (2000 and thereafter). Aggregate future
minimum rentals to be received under noncancelable subleases, the majority of
which are subject to barter provisions, amount to $22,240,000.
Rental expenses under operating leases from continuing operations were
$16,758,000 (1994), $16,685,000 (1993), and $13,618,000 (1992).
Capital Commitments: At December 31, 1994, the estimated costs to complete
authorized projects under construction amounted to $94,087,000.
Litigation, Claims, and Contingencies: 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 December 31, 1994, the Company had been
identified as a PRP in connection with 38 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 22 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.
Page 50 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 14 - Commitments and Contingencies (continued)
The Company evaluates and reviews environmental reserves for future
remediation and other costs on a quarterly basis to determine appropriate
reserve amounts. Inherent in this process are considerable uncertainties which
effect the Company's ability to estimate the ultimate costs of remediation
efforts. Such uncertainties include the nature and extent of contamination at
each site, evolving governmental standards regarding remediation requirements,
changes in environmental regulations, widely varying costs of alternative
cleanup methods, the number and financial condition of other potentially
responsible parties at multi-party sites, innovations in remediation and
restoration technology, and the identification of additional environmental
sites.
At December 31, 1994, the Company's reserves for environmental remediation
and compliance costs amounted to $97,356,000, 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 three similar actions pending in California
state courts, which arise out of the Company's involvement in the polybutylene
resin manufacturing business in the 1970's: East Bay Municipal Utility District
v. Mobil Oil Co., et al.; filed in November 1993, and pending in Superior Court
for the County of San Mateo; City of Santa Maria v. Shell Oil Co., et al.; filed
in May 1994, and pending in Superior Court for the County of San Luis Obispo;
and City of Redding v. Mobil Oil Co., et al.; filed in July 1993, and pending in
Superior Court for
Page 51 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 14 - Commitments and Contingencies (continued)
the County of Tehama. In addition, a fourth action, 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 has been dismissed by the court, but the Company
expects the plaintiff in the action to appeal the dismissal. 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.
Page 52 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 15 - Operations by Industry Segment and Geographic Area
The Company is an international producer of a wide range of specialty chemical
and petroleum products and diversified products for industrial and consumer
uses. The following is a summary of the Company's operations by industry segment
and geographic area:
<TABLE>
<CAPTION>
(thousands of dollars) 1994 1993 1992
------------ ----------- -----------
<S> <C> <C> <C>
Net Sales
Chemical $ 1,336,907 $ 1,232,116 $ 836,272
Petroleum 375,623 365,238 345,922
Diversified products 141,995 178,889 174,886
Intersegment elimination (13,111) (13,157) (15,068)
----------- ----------- -----------
Net Sales $ 1,841,414 $ 1,763,086 $ 1,342,012
----------- ----------- -----------
Operating Income
Chemical $ 122,161 $ 104,992 $ 68,739
Petroleum 43,379 24,547 28,862
Diversified products 17,243 (9,311) 3,199
----------- ----------- -----------
Operating Income from Continuing Operations 182,783 120,228 100,800
----------- ----------- -----------
General corporate expenses -- net (17,979) (52,626) (35,137)
Interest income (expense) -- net (19,642) (26,305) (7,145)
----------- ----------- -----------
Income from Continuing Operations before Federal
and Foreign Income Taxes
$ 145,162 $ 41,297 $ 58,518
=========== =========== ===========
Assets
Chemical $ 1,101,519 $ 1,036,875 $ 1,079,769
Petroleum 507,848 461,073 433,807
Diversified products 107,376 122,930 138,565
Corporate (principally cash, cash equivalents,
and deferred pension costs) 202,602 218,120 159,653
----------- ----------- -----------
Assets $ 1,919,345 $ 1,838,998 $ 1,811,794
=========== =========== ===========
</TABLE>
Page 53 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 15 -- Operations by Industry Segment and Geographic
Area (continued)
<TABLE>
<CAPTION>
1994 1993 1992
----------- ------------ ------------
<S> <C> <C> <C>
Depreciation and Amortization
Chemical $ 62,795 $ 58,204 $ 34,456
Petroleum 14,568 15,704 13,752
Diversified products 9,351 11,054 11,304
Corporate 1,949 1,518 1,618
----------- ----------- -----------
Depreciation and Amortization from Continuing
Operations $ 88,663 $ 86,480 $ 61,130
=========== =========== ===========
Capital Expenditures (exclusive of acquisitions)
Chemical $ 44,323 $ 53,831 $ 34,355
Petroleum 43,149 40,482 31,218
Diversified products 5,623 5,829 5,027
Corporate 14,343 3,547 1,994
----------- ----------- -----------
Capital Expenditures $ 107,438 $ 103,689 $ 72,594
=========== =========== ===========
Net Sales
United States $ 1,225,062 $ 1,201,850 $ 1,010,028
Western Europe 541,060 487,508 249,618
Other International 137,855 129,195 127,643
Inter-area elimination (62,563) (55,467) (45,277)
----------- ----------- -----------
Net Sales $ 1,841,414 $ 1,763,086 $ 1,342,012
=========== =========== ===========
Operating Income
United States $ 111,415 $ 67,440 $ 70,646
Western Europe 54,184 38,705 18,740
Other International 17,184 14,083 11,414
----------- ----------- -----------
Operating Income from Continuing Operations $ 182,783 $ 120,228 $ 100,800
=========== =========== ===========
Assets
United States $ 1,211,125 $ 1,177,891 $ 1,128,016
Western Europe 604,342 565,172 592,395
Other International 103,878 95,935 91,383
----------- ----------- -----------
Assets $ 1,919,345 $ 1,838,998 $ 1,811,794
=========== =========== ===========
</TABLE>
Page 54 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 15 -- Operations by Industry Segment and Geographic
Area (continued)
Intersegment and inter-area sales are accounted for on the same basis used to
price sales to similar non-affiliated customers and such sales are eliminated in
arriving at consolidated amounts.
Income and expenses not allocated to industry segments or geographic areas in
computing operating income include general corporate expenses, interest income
and expense, and other income and expenses of a general corporate nature.
In 1993, general corporate expenses include provisions for a work force
reduction, loss on sublease of office facilities, and other matters totalling
$29,784,000. General corporate expenses in 1992 include $20,135,000 for the
provision for the consolidation of offices.
Foreign currency translation and transaction gains and losses included in net
income are not significant.
Page 55 of 61
Exhibit Index is on page 4
<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 16--Subsequent Events
Acquisition
On October 19, 1995, the Company acquired OSi Specialties Holding Company
and its wholly owned subsidiary, OSi Specialties, Inc. (collectively "OSi") from
an investor group led by DLJ Merchant Banking Partners, L.P. in a cash
transaction which values 100 percent of OSi's equity at $486 million. The
acquisition was accounted for as a purchase.
To finance the acquisition, the Company utilized cash on hand and
short-term financing of $375 million under a one year credit agreement with a
syndicate of 10 banks with Morgan Guaranty Trust Company of New York, as agent.
The credit agreement, which contains the customary covenants inherent in such
agreements, is for a total of $675 million of which $375 million was utilized
for the acquisition.
The Company subsequently purchased for cash all of OSi's 11-1/2% Senior
Secured Discount Debentures due 2004 for $137.6 million and more than 99% of
OSi's Specialties 9-1/4% Senior Subordinated Notes due 2003 for $140.1 million.
The Company funded the acquisition of the Debentures and Notes with additional
short-term bank loans available under $675 million credit agreement.
The Company intends to replace all or part of the short-term bank loans
with long-term financing in the public markets.
Page 56 of 61
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<PAGE>
<PAGE>
Notes to Financial Statements Witco Corporation and
Subsidiary Companies
Note 16--Subsequent Events (continued)
Dispositions
On September 11, 1995, the Company announced its intention to divest its
Lubricants Group. The Board of Directors has approved a plan and retained an
investment banking firm to assist in the disposal of these operations with a
target date of mid 1996. These operations are reflected as discontinued
operations for all periods presented in the Company's income statements. Total
revenues for the years ended December 31, 1994, 1993 and 1992 were $383,255,000,
$379,469,000 and $386,884,000, respectively.
On March 24, 1995, the Company sold the operations of its Battery Parts
business to Acro Products, Inc. for $24,100,000, resulting in a gain of
$9,532,000. Battery Parts manufactures rubber and plastic battery containers,
covers and parts and custom injection molded parts.
On June 30, 1995, the Company sold the operations of its Continental Carbon
subsidiary to China Synthetic Rubber Corporation for $121,900,000, resulting in
a gain of $41,651,000. Continental Carbon manufacturers carbon black which is
used primarily in the tire and rubber industry.
Insurance Settlements
The Company has been in litigation with many of its insurers concerning the
applicability and amount of insurance coverage for environmental costs under
certain of these policies. Subsequent to December 31, 1994, the Company has
ended litigation with several of its insurers, resulting in executed settlement
agreements aggregating $42,664,000, net of related legal and other costs.
Page 57 of 61
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<PAGE>
<PAGE>
SCHEDULE II
WITCO CORPORATION AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- --------------------------------------------------------------------------------------------
Additions
Balance at Charged to Charged to Balance
Beginning Costs and Other at end
Description of Period Expenses Accounts Deductions of Period
- ------------------------------ ---------- ---------- ---------- ---------- ---------
(Thousands of dollars)
<S> <C> <C> <C> <C>
Year ended December 31, 1994:
Valuation and qualifying accounts
deducted from assets to
which they apply:
Allowances for doubtful
receivables--trade.................. $6,821 $2,209 $821 $988(a) $8,863
====== ====== ==== ==== ======
Year ended December 31, 1993:
Valuation and qualifying accounts
deducted from assets to
which they apply:
Allowances for doubtful
receivables--trade.................. $5,623 $2,652 $427 $1,881(a) $6,821
====== ====== ==== ====== ======
Year ended December 31, 1992:
Valuation and qualifying accounts
deducted from assets to
which they apply:
Allowances for doubtful
receivables--trade.................. $4,768 $1,773 $334 $1,252 $5,623
====== ====== ==== ====== ======
</TABLE>
- ---------
Notes:
(a) Uncollectible receivables charged against the allowance provided therefor.
Page 58 of 61
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<PAGE>
<PAGE>
Report of Independent Auditors
Board of Directors and Shareholders
Witco Corporation
We have audited the accompanying consolidated balance sheets of Witco
Corporation and Subsidiary Companies as of December 31, 1994 and 1993, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1994. Our audits
also included the financial statement schedule (Schedule II--Valuation and
Qualifying Accounts). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule 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 includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Witco
Corporation and Subsidiary Companies at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
As discussed in Note 12 to the financial statements, in 1992, the Company
changed its method of accounting for postretirement benefits other than
pensions.
ERNST & YOUNG LLP
Stamford, Connecticut
January 26, 1995,
except for Note 16, as to which
the date is December 20, 1995
Page 59 of 61
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<PAGE>
<PAGE>
EXHIBIT 99(d)
WITCO CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF PER SHARE EARNINGS(a)
(Unaudited)
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1994 1993 1992
---------- --------- ---------
(in thousands except per share data)
PRIMARY
<S> <C> <C> <C>
Income from Continuing Operations $ 94,420 $ 25,132 $ 38,340
Interest on convertible subordinated debentures (net of tax) 1,109 5,363 5,445
Dividend requirements of preferred stock (20) (24) (24)
--------- --------- ---------
Total 95,509 30,471 43,761
Income from Discontinued Operations--net of income taxes 12,647 (5,369) 15,525
Cumulative effect of accounting change -- -- (14,690)
--------- --------- ---------
Net Income $ 108,156 $ 25,102 $ 44,596
========= ========= =========
Weighted average shares outstanding 54,812 49,055 44,026
Assumed conversions:
Convertible subordinated debentures 1,266 5,500 5,500
Stock options 300 311 275
--------- --------- ---------
Total 56,378 54,866 49,801
========= ========= =========
Per share amounts:
Income from Continuing Operations $ 1.70 $ .56 $ .88
Income from Discontinued Operations--net of income taxes .22 (.10) .31
Cumulative effect of accounting change -- -- (.29)
--------- --------- ---------
Net Income $ 1.92 $ .46 $ .90
========= ========= =========
FULLY DILUTED
Income from Continuing Operations $ 94,420 $ 25,132 $ 38,340
Interest on dilutive debentures (net of tax) 1,109 5,366 5,450
--------- --------- ---------
Total 95,529 30,498 43,790
Income from Discontinued Operations - net of income taxes 12,647 (5,369) 15,525
Cumulative effect of accounting change -- -- (14,690)
--------- --------- ---------
Net Income $ 108,176 $ 25,129 $ 44,625
========= ========= =========
Weighted average shares outstanding 54,812 49,055 44,026
Assumed conversions:
Convertible subordinated debentures 1,266 5,519 5,526
Stock options 300 465 392
Preferred stock 129 149 156
--------- --------- ---------
Total 56,507 55,188 50,100
========= ========= =========
Per share amounts:
Income from Continuing Operations $ 1.69 $ .56 $ .87
Income from Discontinued Operations--net of income taxes .22 (.10) .31
Cumulative effect of accounting change -- -- (.29)
--------- --------- ---------
Net Income $ 1.91 $ .46 $ .89
========= ========= =========
(a) Amounts differ from previously reported amounts due to the presentation of
the Lubricants Group as a discontinued operation.
</TABLE>
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<PAGE>
EXHIBIT 99(e)
Witco Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
FIVE-YEAR FINANCIAL AND STATISTICAL SUMMARY
- -----------------------------------------------------------------------------------------------------------------------------------
(thousands of dollars except per share data) 1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Selected Statement of Income Data(c)
Net sales $ 1,841,414 $ 1,763,086 $ 1,342,012 $ 1,244,949 $ 1,228,837
Interest 10,032 8,679 9,303 10,529 19,380
------------ ------------ ------------ ------------ ------------
Total revenues 1,851,446 1,771,765 1,351,315 1,255,478 1,248,217
------------ ------------ ------------ ------------ ------------
Cost of goods sold (exclusive of depreciation and
amortization) 1,412,079 1,363,246 1,055,047 979,902 973,906
Selling and administrative expenses 185,576 181,173 139,438 135,373 126,297
Depreciation and amortization 88,663 86,480 61,130 53,681 47,155
Interest 29,674 34,984 16,448 16,027 16,400
Other expense (income)--net (9,708) 64,585(a 20,734(b) (1,665) (8,989)
------------ ------------ ------------ ------------ ------------
Total costs and expenses 1,706,284 1,730,468 1,292,797 1,183,318 1,154,769
------------ ------------ ------------ ------------ ------------
Income from continuing operations before federal
and foreign income taxes 145,162 41,297 58,518 72,160 93,448
Federal and foreign income taxes 50,742 16,165 20,178 23,492 33,626
------------ ------------ ------------ ------------ ------------
Income from continuing operations 94,420 25,132 38,340 48,668 59,822
Income (loss) from discontinued operations--(net of
income taxes of $6,960, $(2,597), $8,069,
$12,837 and $4,264) 12,647 (5,369) 15,525 24,807 8,132
------------ ------------ ------------ ------------ ------------
Income before cumulative effect of accounting
change 107,067 19,763 53,865 73,475 67,954
Cumulative effect of accounting change -- -- (14,690) -- --
------------ ------------ ------------ ------------ ------------
Net Income $ 107,067 $ 19,763 $ 39,175 $ 73,475 $ 67,954
============ ============ ============ ============ ============
Selected Balance Sheet Data
Working capital $ 551,620 $ 451,235 $ (21,611) $ 320,934 $ 359,091
Current ratio 2.60 2.32 0.97 2.25 2.76
Property, plant, and equipment expenditures
(including acquisitions) $ 107,438 $ 103,689 $ 322,786 $ 74,307 $ 106,650
Property, plant, and equipment--net $ 719,966 $ 696,462 $ 721,171 $ 474,755 $ 471,026
Total assets $ 1,919,345 $ 1,838,998 $ 1,811,794 $ 1,198,276 $ 1,178,885
Long-term debt $ 346,545 $ 496,266 $ 173,086 $ 179,132 $ 230,183
Total shareholders' equity $ 940,006 $ 713,415 $ 614,296 $ 625,700 $ 587,472
Book value per common share $ 16.73 $ 14.12 $ 13.80 $ 14.35 $ 13.55
------------ ------------ ------------ ------------ ------------
Selected Other Financial Data
Number of shareholders at year end 5,194 5,253 5,262 5,602 5,949
Weighted average number of common shares
outstanding (in thousands) 56,378 54,866 49,801 49,212 49,703
Per common share:
Net Income $ 1.92 $ .46 $ .90 $ 1.60 $ 1.48
Net income-assuming full dilution $ 1.91 $ .46 $ .89 $ 1.59 $ 1.47
Dividends declared $ 1.06 $ .96 $ .92 $ .91 $ .86
Dividends paid per share:
Common stock $ 1.03 $ .94 $ .92 $ .89 $ .86
Preferred stock $ 2.65 $ 2.65 $ 2.65 $ 2.65 $ 2.65
Market price to the nearest dollar, per common
share on New York Stock Exchange (high-low) $ 35-24 $ 32-24 $ 25-20 $ 22-14 $ 20-11
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes provision for environmental remediation and compliance,
disposition of a business, work force reduction, and other matters of $68.9
million.
(b) Includes a provision for consolidation of offices of $20.1 million.
(c) Amounts differ from previously reported amounts due to the presentation of
the Lubricants Group as a discontinued operation.
Page 61 of 61
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<PAGE>
