<PAGE>
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 COMMISSION FILE NO. 1-4654
------------------------
WITCO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C>
DELAWARE 13-1870000
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
ONE AMERICAN LANE 06831-2559
GREENWICH, CONNECTICUT (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 552-2000
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
----------------------------------------------------------------------- ------------------------
<S> <C>
Common Stock -- $5 Par Value New York Stock Exchange
7.45% Debentures due 1997 New York Stock Exchange
Rights to Purchase Series A Participating
Cumulative Preferred Stock New York Stock Exchange
</TABLE>
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of February 28, 1995, the aggregate market value of the voting stock
held by non-affiliates of the Registrant, based on the closing price on February
28, 1995 on the New York Stock Exchange for the Registrant's Common Stock, was
$1.6 billion.
There were 56,173,302 shares of the Registrant's Common Stock outstanding
on February 28, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive Proxy Statement for its April 26, 1995
Annual Meeting of Shareholders are incorporated by reference into Part III.
________________________________________________________________________________
<PAGE>
PART I
ITEM 1 -- BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
The Company is a global manufacturer and marketer of specialty chemical and
petroleum products for use in a wide variety of industrial and consumer
applications. Most of the Company's products are sold to industrial customers
for use as additives and intermediates which impart particular characteristics
to such customers' end products. The Company provides manufacturing flexibility
and a high degree of technical service to create value-added chemical and
petroleum products that meet customers' specialized needs. Established in 1920,
Witco has ranked among the Fortune 500 largest U.S. industrial firms for many
years, ranking 212 for 1993. At December 31, 1994, the Company had 7,955
employees worldwide.
The Company's operations are divided among three business segments:
Chemical, Petroleum and Diversified Products, which are described in Section (c)
below.
In 1992 the Company completed the acquisition of the Industrial Chemicals
and Natural Substances divisions of Schering AG Berlin (the 'Schering
Acquisition'). As a result of the acquisition, the Company's international
presence expanded with the addition of a large chemical manufacturing base in
Germany and operations in Spain, the United Kingdom, France, Italy, and Ecuador.
The Company completed the sale of the Allied-Kelite Division's businesses
in 1994. The Company expects to complete the sale of its carbon black and
battery container manufacturing businesses by mid-1995.
On March 11, 1994, the Company called for redemption on March 28, 1994 all
of its $150 million outstanding 5 1/2% Convertible Subordinated Debentures due
2012. $149.9 million of this debt was converted into the Company's common stock.
The redemption was called to provide greater financial flexibility as the
Company continues in its efforts to expand product lines and marketing
capabilities of its core businesses.
Witco Corporation was incorporated in 1958 under the laws of Delaware as
Witco Chemical Company, Inc., at which time it succeeded by merger to the
business of Witco Chemical Company, an Illinois corporation formed in 1920.
During 1994 the move to the Company's new world headquarters in Greenwich,
Connecticut was completed. Its executive offices are now located at One American
Lane, Greenwich, Connecticut 06831-2559, telephone (203) 552-2000.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Reference is made to Note 15 of the Notes to Financial Statements. See Item
8 -- Financial Statements and Supplementary Data following Part IV of this
report.
(C) NARRATIVE DESCRIPTION OF BUSINESS
The Company's operations are divided among three business segments:
Chemical, Petroleum and Diversified Products.
Chemical Products
Oleochemicals/Surfactants
Witco offers one of the broadest lines of surfactants and oleochemicals in
the chemical industry, providing 'one-stop shopping' for its customers on a
global basis. These products are sold to a range of industries, including
cosmetics and pharmaceuticals; personal care, soap and detergent; agricultural;
rubber; food; paint and protective coatings; and textile. Surfactants change the
surface tension of liquids. They include agricultural emulsifiers, which are
used to break up pesticides into small particles, thereby increasing dispersion
and improving penetration, and food emulsifiers, which impart particular
characteristics (such as consistency) to certain foods. In addition, surfactants
are used in personal care products, fabric softeners, and detergents to improve
penetration and cleaning capability. These
1
<PAGE>
products complement those offered by the Petroleum Specialties Group of the
Company's Petroleum Products segment in this area. Oleochemicals are derived
from natural fats and oils, and include fatty acids, fatty amines, esters and
glycerines. Oleochemicals modify surfaces either as direct lubricants, or as
components of ingredients that modify surfaces. Examples of their diverse
applications include acting as lubricants in plastics; imparting mold release
features for the rubber industry; and acting as curing systems for rubber. The
Company is a worldwide producer of cationic and amphoteric surfactant products.
These materials are major ingredients in fabric softener, hair conditioner and
other personal care products.
Polymer Additives
Witco is a worldwide supplier of additives and catalysts for the polymer
industry. It manufactures stabilizers, lubricants, plasticizers, and peroxide
catalysts used in the manufacture of polyvinyl chloride (PVC) resin for such
applications as pipes, fittings, siding and packaging materials. The company is
also a supplier of lubricants, antioxidants, and peroxide catalysts to
polyolefin/polystyrene manufacturers. These resins are used extensively in a
broad spectrum of applications ranging from packaging film to small appliance
housings. The Company is a European producer of aluminum alkyls, used as co-
catalysts in the production of polyolefins (including polyethylene and
polypropylene, which are among the world's largest volume plastics used in
packaging, cars, furniture, and appliances) and produces organotin compounds for
the production of PVC stabilizers and biocides for marine paints.
Resins
The Resins Group, based in Germany, was formed in 1994 to serve Witco's
diverse global customer base for polyurethane intermediates, coatings, and epoxy
resins and hardeners. It encompasses Witco's U.S.-based polyurethane
intermediates businesses and epoxy resins, hardeners and polyurethanes
manufacturing and marketing operations in the U.K., France, Germany, Italy, and
Denmark.
Witco has been developing water-based polyurethanes to replace higher
volatile organic compound solvent-based systems. This has increased the number
of new products and Witco's market share among multi-product customers. Witco is
conducting an effort to develop technical applications for these products in new
markets. Examples include new water-based textile coatings and a patented
dimethyl pyrazol (DMP) polyurethane for anti corrosive coatings developed in the
U.K., polyurethane systems for footwear developed in France for manufacturers in
Asia and South America, low-fogging polyesters for the European and Asian
markets, water-based epoxy resins and hardeners and polyurethane dispersions
worldwide.
Worldwide, footwear, adhesives, and coatings are believed to offer
significant new business potential for customers with both epoxy resin and
polyurethane needs. To meet these needs, Witco is investing in capacity
expansions at plants worldwide.
Customers
The Company markets its specialty chemical products directly through its
own sales force and through an organized distribution program to a large number
of customers in a broad range of industries. Its chemical business is not
dependent upon any single customer or a few customers. During the year ended
December 31, 1994, no customer accounted for more than 4.3% of Chemical Segment
sales, and sales to the ten largest customers accounted for approximately 14.5%
of Chemical Segment sales.
Competition
Many of the specialty chemical products produced by the Company are
characterized by a need for a high degree of manufacturing competence and
technical service, particularly because customer specifications vary
considerably and special formulations must be devised to meet customer needs.
Competition is fragmented, with no one competitor offering products across all
of the Company's
2
<PAGE>
chemical product lines. Competition is primarily on the basis of performance of
the Company's products compared with similar products produced by its
competitors.
Petroleum Products
Petroleum Specialties
Witco is an important manufacturer and marketer of white mineral oils,
petrolatums, refrigeration oils and telecommunication cable filling compounds,
as well as natural and synthetic petroleum sulfonates. White mineral oils and
petrolatums are extensively refined, high purity petroleum products suitable for
food grade, pharmaceutical and cosmetic applications. They are inert and
non-reactive, and impart emolliency, moisture resistance, lubrication and
insulation properties. These products are marketed in coordination with the
Oleochemicals/Surfactants Group of the Company's Chemical Segment. In addition
to personal care and food applications, white mineral oils and petrolatums are
used in plastics, agriculture, textiles and chemical processing. Petroleum
sulfonates are oil soluble, surface active agents derived from both synthetic
and natural petroleum feedstocks. They provide properties of emulsification,
dispersion, wetting of solids, and rust and corrosion inhibition, and are used
in lubricant additives and metalworking fluids. The Company is also a supplier
of fully refined, FDA-quality microcrystalline waxes, which are primarily used
in paper lamination and packaging applications including cheese coatings.
Lubricants
The Company produces motor oils and lubricants which it sells under the
Kendall and Amalie brand names. Kendall and Amalie brand products are sold
worldwide through a network of over 300 warehouse distributors. Kendall and
Amalie brand products are also sold directly to large national accounts
domestically. In addition, Witco is the largest domestic private label grease
manufacturer and markets Lubrimatic brand products and lubricating equipment
directly to its customers. Witco is also a supplier of specialty naphthenic
oils, which are marketed to the rubber, plastics, ink and agricultural
industries, and asphalt and surface treatment products, which are sold primarily
for highway construction and maintenance.
Customers
The Company's petroleum products are marketed directly through its own
sales force and through distributors and agents. During the year ended December
31, 1994, no customer accounted for more than 3.5% of Petroleum Segment sales,
and sales to the ten largest customers accounted for approximately 17.5% of
Petroleum Segment sales.
Competition
Many of the specialty petroleum products produced by Witco, like its
specialty chemical products, are characterized by a need for a high degree of
manufacturing competence and technical service. The petroleum products market is
highly competitive with the Company's products competing primarily on the basis
of pricing, quality and service. The Company believes its technical expertise,
reputation for quality products, and, in the case of consumer products, brand
name recognition, give it advantages in the marketplace.
Diversified Products
Diversified Products include battery containers, covers and parts, as well
as carbon black. In the U.S., Witco is the leading independent producer of
battery containers. Carbon black is sold to the domestic tire and other rubber
products industries. The Company is a leading supplier of specialty carbon black
for the tire industry. The Company expects to complete the sale of its carbon
black and battery container manufacturing businesses by mid-1995. The Company is
divesting these businesses as a part of its strategy to concentrate on its core
businesses.
3
<PAGE>
Customers
During the year ended December 31, 1994, one customer accounted for
approximately 21% of this segment's 1994 sales and the ten largest customers for
approximately 91.2%.
International Operations
Sales of Witco's non-U.S. operations were $650.7 million, or 29% of total
sales, for the year ended December 31, 1994. Witco's operations outside the
United States are in Canada, Denmark, Ecuador, England, France, Germany, Israel,
Italy, Mexico, the Netherlands, and Spain. Witco now operates 57 manufacturing
facilities in 12 countries.
Patents
Witco owns and has been licensed to use a number of patents, some of which
are important in connection with particular products but all of which, as a
group, are not material to the Company.
Backlog
The nature of the Company's business is such that customer orders are
usually filled within 30 days. Accordingly, backlog is not significant to the
Company's business.
Research and Development
Witco expended approximately $43.1 million in 1994, $42.6 million in 1993
and $29.2 million in 1992 on research and development of new products and
services, and for improvements and new applications of existing products and
services.
General
The chemical and petroleum industries in which Witco operates have
experienced increased operating costs and capital investments due to statutes
and regulations at the federal, state and local levels for the protection of the
environment and the health and safety of employees and others. Witco believes
that expenditures for compliance with these statutes and regulations will
continue to have a significant impact upon the conduct of its business. The
trend for greater environmental awareness and more stringent environmental
regulations is likely to continue and while Witco cannot accurately predict how
this trend will affect future operations and earnings, Witco does not believe
its costs will vary significantly from those of its competitors in the chemical
and petroleum industries.
The Company evaluates and reviews environmental reserves for future
remediation and other costs on a quarterly basis to determine appropriate
reserve amounts. Inherent in this process are considerable uncertainties which
affect the Company's ability to estimate the ultimate costs of remediation
efforts. Such uncertainties include the nature and extent of contamination at
each site, evolving governmental standards regarding remediation requirements,
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, environmental reserves amounted to $97.4 million.
These reserves reflect management's assessment of future remediation and
compliance costs in light of all available information. Witco expended $11
million in 1994 against these reserves and anticipates 1995 expenditures to
approximate $34 million.
The Company's current construction projects include up-to-date methods and
equipment for protecting the environment. In addition, Witco is continuing its
program for modification of its facilities to meet current standards for the
control of emissions, effluents and solid wastes. Capital expenditures to
improve safety and to conform to environmental regulations amounted to
approximately $14 million in 1994 and $17.6 million in 1993.
Witco is continuing its efforts to reduce hazardous waste and emissions
generated by its operations. Through improved operating efficiencies,
installation of additional environmental control equipment,
4
<PAGE>
and utilization of the latest innovations in waste treatment technology,
management believes that operating costs associated with managing hazardous
substances and pollution can be controlled. Such operating costs amounted to
$21.2 million in 1994 and $20 million in 1993.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
Witco's foreign subsidiaries generally manufacture products similar to the
principal products manufactured domestically. Subsidiaries in the Netherlands
and Canada manufacture petroleum products; subsidiaries in Canada, Denmark,
Ecuador, England, France, Germany, Israel, Italy, Mexico and Spain manufacture
chemical products.
In accord with normal market conditions, sales made outside the United
States are generally made on longer terms of payment than would be normal within
the United States. Foreign operations are subject to certain risks inherent in
carrying on international business, including currency devaluations and
controls, export and import restrictions, inflationary factors, product supply,
economic controls, nationalization and expropriation. The likelihood of such
occurrences varies from country to country and is not predictable. However, the
Company's primary foreign operations are based in Western Europe, Canada, and
other stable areas, and, therefore, the Company does not believe these risks
will have a significant impact upon the Company.
Reference is made to Note 15 of the Notes to Financial Statements. See Item
8 -- Financial Statements and Supplementary Data following Part IV of this
report.
ITEM 2 -- PROPERTIES
Witco currently conducts its manufacturing operations in 57 plants, owned
in fee or occupied under lease, of which 35 are in the United States and 22 in
other countries. Of these facilities, 33 are utilized for Chemical product
manufacturing; 19, including 2 refineries, are utilized for Petroleum product
manufacturing; and 5 are utilized for the manufacture of Diversified Products.
All of the facilities are in good operating condition.
PRINCIPAL PLANTS AND OTHER IMPORTANT PHYSICAL PROPERTIES -- LOCATIONS BY
INDUSTRY SEGMENT
(OWNED IN FEE EXCEPT WHERE PARENTHETICAL DATES REFER TO LEASE EXPIRATION)
<TABLE>
<S> <C>
CHEMICAL SEGMENT FACILITIES
United States
Santa Fe Springs, California Perth Amboy, New Jersey
Blue Island, Illinois Brooklyn, New York
Chicago, Illinois Memphis, Tennessee
Mapleton, Illinois -- 2 Plants Fort Worth, Texas
Harahan, Louisiana Houston, Texas
Taft, Louisiana LaPorte, Texas
Brainards, New Jersey Marshall, Texas
Newark, New Jersey Janesville, Wisconsin
International
Brantford, Canada Elbeuf, France
Montreal, Canada St. Amour, France
Oakville, Canada Bergkamen, Germany (2091)
Soro, Denmark (2005) Steinau, Germany
Quito, Ecuador Haifa, Israel
Accrington, England Gambolo, Italy
Droitwich, England Cuatitlan, Mexico
Flimby, England Granollers, Spain
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
PETROLEUM SEGMENT FACILITIES
United States
Los Angeles, California Gretna, Louisiana
Oildale, California -- Refinery Omaha, Nebraska (1999)
Rancho Dominguez, California Bakerstown, Pennsylvania
Richmond, California (1999) Bradford, Pennsylvania -- Refinery
Jacksonville, Florida Petrolia, Pennsylvania
Spencer, Iowa Trainer, Pennsylvania
Olathe, Kansas
International
Scarborough, Canada (1995) Amsterdam, the Netherlands
Toronto, Canada Haarlem, the Netherlands
West Hill, Canada Koog Aan De Zaan, the Netherlands
DIVERSIFIED PRODUCTS SEGMENT FACILITIES
United States
Phenix City, Alabama Ponca City, Oklahoma
Indianapolis, Indiana Sunray, Texas
Philadelphia, Mississippi
OTHER FACILITIES
United States
Greenwich, Connecticut (2014) World Headquarters -- Principal Executive,
Administrative and Sales Office
Los Angeles, California (2001) Administrative and Sales Office
Oakland, New Jersey Research
Dublin, Ohio Research
Houston, Texas (1995) Administrative, Research and Sales Office
International
Willowdale, Canada (2002) Administrative Office
Paris, France (1995) Administrative and Sales Office
Frankfurt, Germany (1997) Principal European Executive and Administrative
Office
</TABLE>
ITEM 3 -- LEGAL PROCEEDINGS
The Company has been notified, or is named as a potentially responsible
party ('PRP') or a defendant in a number of governmental (federal, state, and
local) and private actions associated with environmental matters, such as those
relating to hazardous wastes. These actions seek remediation costs, penalties
and/or damages for personal injury or damage to property or natural resources.
As of 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.
6
<PAGE>
The Company evaluates and reviews environmental reserves for future
remediation and other costs on a quarterly basis to determine appropriate
reserve amounts. Inherent in this process are considerable uncertainties which
affect the Company's ability to estimate the ultimate costs of remediation
efforts. Such uncertainties include the nature and extent of contamination at
each site, evolving governmental standards regarding remediation requirements,
changes in environmental regulations, widely varying costs of alternative
cleanup methods, the number and financial condition of other potentially
responsible parties at multi-party sites, innovations in remediation and
restoration technology, and the identification of additional environmental
sites.
The Company has numerous insurance policies which it believes provide
coverage at various levels for environmental liabilities. The Company is
currently in litigation with many of its insurers concerning the applicability
and amount of insurance coverage for environmental costs under certain of these
policies. Except for amounts reflected in executed settlement agreements, no
provision for recovery under any of these policies is included in the Company's
financial statements.
The Company is a defendant in a case filed in October 1992 by the United
States Department of Justice on behalf of the United States Environmental
Protection Agency styled United States v. Witco, et al. pending in the United
States District Court for the Eastern District of California. The United States
alleged that the Company has violated the Clean Air Act, the Safe Water Drinking
Act, and the Resource Conservation and Recovery Act in connection with certain
activities at its Oildale, California, refinery. The Company has executed a
consent decree settling this action in which the Company neither admits nor
denies liability. Execution of the consent decree on behalf of the United States
is awaiting completion of its internal approval process. Thereafter, the consent
decree must be approved by the court in order to become effective. Under the
terms of the decree, Witco and a third party will jointly pay a civil penalty of
$700,000, and Witco will, among other things: (i) make certain modifications to
existing equipment in the refinery, and install certain new equipment; (ii)
close deep injection wells on an agreed timetable; (iii) install a storm water
and wastewater treatment facility at the refinery; and, (iv) complete a site
evaluation at the location of the refinery and adjacent properties.
The Company is a defendant in 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 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.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter ended December
31, 1994.
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EXECUTIVE OFFICERS OF THE COMPANY
The following sets forth information regarding executive officers of the
Company as of February 28, 1995, and is included in Part I in accordance with
Instruction 3 of Item 401(b) of Regulation S-K.
<TABLE>
<CAPTION>
SERVED IN
PRESENT
POSITION PRIOR BUSINESS EXPERIENCE
NAME AND PRESENT TITLE SINCE (WITHIN LAST FIVE YEARS) AGE
--------------------------------------------- --------- ------------------------------------------------ ---
<S> <C> <C> <C>
CORPORATE
Peter J. Biancotti .......................... 1983 51
Vice President and Controller
Ronald Edelstein ............................ 1992 General Manager -- Information Systems, 45
Vice President -- Information Systems Witco -- October 1991 to April 1992. Vice
President -- Systems Development, Revlon
Inc. -- February 1991 to September 1991. Group
Director -- Systems and Programming, Revlon,
Inc. prior to February 1991.
Michael D. Fullwood ......................... 1992 Group Vice President -- Finance and 48
Executive Vice President and Chief Administration -- October 1990 to September
Financial Officer 1992. Vice President and Treasurer prior to
October 1990.
Gerald Katz ................................. 1995 Group Vice President -- Senior Managing 57
Senior Vice President -- Corporate Director -- Witco Europe from 1992 to 1994.
Development Group Vice President -- Chemical Group prior
to 1992.
William E. Mahoney .......................... 1994 Vice Chairman and Chief Operating 63
Vice Chairman and Chief Operating Officer Officer -- Chemicals -- September 1992 to
August 1994. Executive Vice
President -- Chemical Group prior to September
1992.
Dustan E. McCoy ............................. 1993 Associate General Counsel, Ashland Oil prior to 45
Vice President, General Counsel and April 1993.
Corporate Secretary
Lawrence B. Nelson .......................... 1990 Group Vice President -- Petroleum Group 64
Group Vice President -- Corporate
Technology
James M. Rutledge ........................... 1990 Assistant Controller 42
Vice President and Treasurer
Carl R. Soderlind ........................... 1993 Group Vice President -- Commercial 61
Senior Vice President -- External Affairs Services -- March 1990 to December 1992. Vice
President -- Corporate Development and
Investor Relations prior to March 1990.
William R. Toller ........................... 1990 Vice Chairman and Chief Financial 64
Chairman of the Board and Chief Executive Officer -- March 1990 to September 1990.
Officer Executive Vice President -- Finance and
Administration prior to March 1990.
CHEMICAL SEGMENT
Group Vice Presidents:
Nirmal Jain ................................. 1993 Vice President and General Manager -- Argus 57
Polymer Additives Division prior to January 1993.
Frederick A. Shinners ....................... 1994 Vice President and General Manager -- GE 52
Oleochemicals/Surfactants Silicones from August 1990 to June 1994.
President -- GE Plastics, Japan prior to
August 1990.
</TABLE>
(table continued on next page)
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(table continued from previous page)
<TABLE>
<CAPTION>
SERVED IN
PRESENT
POSITION PRIOR BUSINESS EXPERIENCE
NAME AND PRESENT TITLE SINCE (WITHIN LAST FIVE YEARS) AGE
--------------------------------------------- --------- ------------------------------------------------ ---
<S> <C> <C> <C>
PETROLEUM SEGMENT
Group Vice Presidents:
Harvey L. Golubock .......................... 1990 Vice President Supply and Distribution prior to 52
Lubricants September 1990.
Newton E. Brightwell III .................... 1993 Vice President and General Manager -- Sonneborn 46
Petroleum Specialties Division prior to January 1993.
Vice Presidents:
Eric R. Myers ............................... 1993 Vice President and General Manager -- 48
Kendall/Amalie Division from January 1993 to
April 1993. Vice President and General
Manager -- Richardson Battery Parts Division
from May 1991 to December 1992. President and
General Manager, Bridgeport -- Piedmont
Manufacturing Co. -- Division of Bridge
Products, Inc. prior to May 1991.
Donald E. Weinberg........................... 1986 59
DIVERSIFIED PRODUCTS SEGMENT
Group Vice President:
Robert J. Seward............................. 1993 Group Vice President -- Petroleum Group prior to 62
December 1992.
</TABLE>
9
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PART II
ITEM 5 -- MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Witco's Common Stock is listed on the New York Stock Exchange. The
following table reflects the high and low sales prices, as reported on such
exchange for each quarterly period during the past two years:
<TABLE>
<CAPTION>
1994 1993
---------------- ----------------
QUARTER HIGH LOW HIGH LOW
--------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
First........................................ $35.00 $30.00 $26.69 $24.00
Second....................................... $32.00 $26.38 $28.06 $25.88
Third........................................ $31.25 $27.38 $31.38 $26.25
Fourth....................................... $28.75 $24.38 $32.25 $28.63
</TABLE>
The approximate number of holders of record of the Company's Common Stock
as of February 28, 1995, was 4,991.
Dividends on the Common Stock have been declared quarterly during the past
two years as follows:
<TABLE>
<CAPTION>
PER SHARE
------------
QUARTER 1994 1993
---------------------------------------------------------------------- ---- ----
<S> <C> <C>
First................................................................. $.25 $.23
Second................................................................ $.25 $.23
Third................................................................. $.28 $.25
Fourth................................................................ $.28 $.25
</TABLE>
ITEM 6 -- SELECTED FINANCIAL DATA
The data for this item are submitted as a separate section following Part
IV of this report.
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The data for this item are submitted as a separate section following Part
IV of this report.
ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary data of the Company
and its subsidiaries are included in a separate section following Part IV of
this report.
ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
10
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PART III
ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
(a) Identification of Directors
Reference is made to pages 2 through 6 of the Proxy Statement to be filed
pursuant to Regulation 14A no later than March 31, 1995.
(b) Identification of Executive Officers
Reference is made to Part I of this Form 10-K.
(c) Business Experience
Reference is made to pages 2 through 6 of the Proxy Statement to be filed
pursuant to Regulation 14A no later than March 31, 1995 and Part I of this Form
10-K.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Reference is made to pages 7 and 8 of the Proxy Statement to be filed
pursuant to Regulation 14A no later than March 31, 1995.
ITEM 11 -- EXECUTIVE COMPENSATION
Reference is made to the information set forth under the captions
'Compensation of Directors' and 'Executive Compensation' on pages 10 through 15
of the Proxy Statement to be filed pursuant to Regulation 14A no later than
March 31, 1995.
ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
For information with respect to beneficial ownership of the Company's
voting securities, and rights thereto, reference is made to the information set
forth under the captions 'Ownership of Securities by Directors and Officers' and
'Security Ownership of Certain Beneficial Owners' on pages 7 and 8 of the Proxy
Statement to be filed pursuant to Regulation 14A no later than March 31, 1995.
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others
Reference is made to the information set forth under the caption
'Compensation of Directors' on page 10 of the Proxy Statement to be filed
pursuant to Regulation 14A no later than March 31, 1995.
(b) Certain Business Relationships
Reference is made to the information set forth under the captions 'Other
Transactions' on pages 8 and 9 and 'Compensation Committee Interlocks and
Insider Participation' on page 15 of the Proxy Statement to be filed pursuant to
Regulation 14A no later than March 31, 1995.
11
<PAGE>
PART IV
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1 and 2 -- The response to this portion of Item 14 is submitted as a
separate section of this report.
(a) 3 -- Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
3(i) -- Restated Certificate of Incorporation.(1)
3(ii) -- By-laws, as amended.(1)
4 -- Instruments defining the rights of security holders, including indentures.
(i) -- Rights Agreement dated as of March 2, 1995, between Witco Corporation and First
Chicago Trust Company of New York.(2)
(iii) -- Pursuant to Regulation S-K, Item 601(b)(4)(iii), no debt or other security instrument
represents 10% of the total assets of the Registrant, and accordingly such
instruments are not filed herewith. Registrant agrees to furnish a copy of any such
agreement to the Commission upon request.
10 -- Material Contracts.
(iii)(A) -- Executive Compensation Plans and Arrangements Required to be Filed:
-- 1. 1986 Stock Option Plan for Employees, as amended.(3)
-- 2. 1989 Stock Option Plan for Employees.(4)
-- 3. 1992 Stock Option Plan for Employees.(5)
-- 4. Consultancy Agreement Between the Company and William Wishnick.(6)
-- 5. Supplemental Executive Retirement Plan of Witco Corporation.(7)
-- 6. Witco Corporation 1994 Deferred Compensation Plan.
11 -- Statement re Computation of Per Share Earnings.
21 -- Subsidiaries of the Registrant.
23 -- Consent of Independent Auditors.
24 -- Power of Attorney.(8)
27 -- Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K for the three months ended December
31, 1994.
(c) The Exhibits filed with this report are listed in response to Item
14(a)3.
(d) The response to this portion of Item 14 is submitted as a separate
section of this report.
------------
(1) This Exhibit was included as an exhibit to the quarterly report on Form 10-Q
for the quarter ended March 31, 1994, and such Exhibit is hereby
incorporated by reference.
(2) This Exhibit was included as an exhibit to the Registration Statement on
Form 8A filed with the Securities and Exchange Commission on March 3, 1995,
and such Exhibit is hereby incorporated by reference.
(3) The 1986 Stock Option Plan, as amended, was filed as an Exhibit to the
Registration Statement on Form S-8, registration number 33-10715,
Post-Effective Amendment No. 1 to Form S-8 effective October 3, 1988, and
Post-Effective Amendment No. 2 to Form S-8 effective June 23, 1992. Such
Exhibit is incorporated herein by reference.
(4) The 1989 Stock Option Plan was filed as an Exhibit to the Registration
Statement on Form S-8, registration number 33-30995 effective October 2,
1989, and Post-Effective Amendment No. 1 to Form S-8 effective June 23,
1992, and such Exhibit is hereby incorporated by reference.
(5) The 1992 Stock Option Plan was filed as an Exhibit to the Registration
Statement on Form S-8, registration number 33-48806, effective June 23,
1992, and such Exhibit is hereby incorporated by reference.
(6) This Exhibit was included as an exhibit to the annual report on Form 10-K
for the fiscal year ended December 31, 1992, and such Exhibit is hereby
incorporated by reference.
(7) This Exhibit was included as an exhibit to the annual report on Form 10-K
for the fiscal year ended December 31, 1993, and such Exhibit is hereby
incorporated by reference.
(8) The Power of Attorney appears on the Signatures Page.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 24th day of
March, 1995.
WITCO CORPORATION
By /s/ WILLIAM R. TOLLER
...................................
WILLIAM R. TOLLER
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints WILLIAM R. TOLLER, WILLIAM E. MAHONEY, MICHAEL D.
FULLWOOD, OR DUSTAN E. MCCOY, acting severally, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments to this Annual Report on Form 10-K, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
------------------------------------------ -------------------------------------------- -------------------
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICERS:
/s/ WILLIAM R. TOLLER Chairman of the Board and Chief Executive March 24, 1995
......................................... Officer
WILLIAM R. TOLLER
/s/ WILLIAM E. MAHONEY Vice Chairman and Chief Operating Officer March 24, 1995
.........................................
WILLIAM E. MAHONEY
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ MICHAEL D. FULLWOOD Executive Vice President and Chief Financial March 24, 1995
......................................... Officer
MICHAEL D. FULLWOOD
DIRECTORS:
/s/ WILLIAM J. ASHE Director March 24, 1995
.........................................
WILLIAM J. ASHE
/s/ SIMEON BRINBERG Director March 24, 1995
.........................................
SIMEON BRINBERG
/s/ WILLIAM G. BURNS Director March 24, 1995
.........................................
WILLIAM G. BURNS
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
------------------------------------------ -------------------------------------------- -------------------
<S> <C> <C>
/s/ WILLIAM R. GRANT Director March 24, 1995
.........................................
WILLIAM R. GRANT
/s/ RICHARD M. HAYDEN Director March 24, 1995
.........................................
RICHARD M. HAYDEN
Director
.........................................
HARRY G. HOHN
/s/ WILLIAM E. MAHONEY Director March 24, 1995
.........................................
WILLIAM E. MAHONEY
/s/ L. JOHN POLITE, JR. Director March 24, 1995
.........................................
L. JOHN POLITE, JR.
/s/ DAN J. SAMUEL Director March 24, 1995
.........................................
DAN J. SAMUEL
/s/ WILLIAM R. TOLLER Director March 24, 1995
.........................................
WILLIAM R. TOLLER
/s/ BRUCE F. WESSON Director March 24, 1995
.........................................
BRUCE F. WESSON
Director
.........................................
WILLIAM WISHNICK
</TABLE>
14
<PAGE>
ANNUAL REPORT ON
FORM 10-K
ITEM 6, ITEM 7, ITEM 8,
ITEM 14(a)(1) AND (2) AND ITEM 14(d)
INDEX OF FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1994
WITCO CORPORATION
GREENWICH, CONNECTICUT
<PAGE>
INDEX
ANNUAL REPORT ON FORM 10-K
ITEM 6, ITEM 7, ITEM 8, ITEM 14(a)(1) AND (2), AND ITEM 14(d)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
ITEM 6 -- SELECTED FINANCIAL DATA...................................................................... 1
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........ 3
ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- SEE ITEM 14(A)(1) AND (2) BELOW.
</TABLE>
ITEM 14(a)(1) AND (2) AND ITEM 14(d)
The following consolidated financial statements of Witco Corporation and
subsidiary companies, for the year ended December 31, 1994, are included in Item
8:
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Report of Independent Auditors.................................................................... F-1
Consolidated Balance Sheets -- December 31, 1994 and 1993......................................... F-2
Consolidated Statements of Income -- Years Ended December 31, 1994, 1993 and 1992................. F-3
Consolidated Statements of Cash Flows -- Years Ended December 31, 1994, 1993 and 1992............. F-4
Consolidated Statements of Shareholders' Equity -- Years Ended December 31, 1994, 1993 and 1992... F-5
Notes to Financial Statements..................................................................... F-6
Quarterly Financial Data (unaudited).............................................................. F-20
</TABLE>
The following consolidated financial statement schedules of Witco
Corporation and subsidiary companies are included in Part IV, Item 14(d):
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Schedule II -- Valuation and Qualifying Accounts.................................................. S-1
</TABLE>
All other schedules (Nos. I, III, IV and V) for which provision is made in
the applicable accounting regulation of the Securities and Exchange Commission
are not required under the related instructions or are inapplicable, and
therefore have been omitted.
Financial statements (and summarized financial information) of 50% or less
owned persons accounted for by the equity method have been omitted because they
do not, considered individually or in the aggregate, constitute a significant
subsidiary.
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
ELEVEN-YEAR FINANCIAL AND STATISTICAL SUMMARY
<TABLE>
<CAPTION>
1994
--------------------------------------------
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
<S> <C>
Selected Statement of Income Data
Net sales........................................................................ $2,224,669
Interest......................................................................... 10,032
------------
Total revenues.......................................................... 2,234,701
------------
Cost of goods sold (exclusive of depreciation, depletion, and amortization)...... 1,708,867
Selling and administrative expenses.............................................. 235,699
Depreciation, depletion, and amortization........................................ 105,120
Interest......................................................................... 29,674
Other expense (income) -- net.................................................... (9,428)
------------
Total costs and expenses................................................ 2,069,932
------------
Income before federal and foreign income taxes and cumulative effect of
accounting change.............................................................. 164,769
Federal and foreign income taxes................................................. 57,702
------------
Income before cumulative effect of accounting change............................. 107,067
Cumulative effect of accounting change........................................... --
------------
Net Income....................................................................... $ 107,067
As a percent of net sales.................................................... 4.8%
As a percent of average shareholders' equity................................. 13.0%
------------
Selected Balance Sheet Data
Working capital.................................................................. $ 551,620
Current ratio.................................................................... 2.60
Property, plant, and equipment expenditures (including acquisitions)............. $ 107,438
Property, plant, and equipment -- net............................................ $ 719,966
Total assets..................................................................... $1,919,345
Long-term debt................................................................... $ 346,545
Total shareholders' equity....................................................... $ 940,006
Book value per common share...................................................... $ 16.73
------------
Selected Other Financial Data
Number of shareholders -- at year end............................................ 5,194
Weighted average number of common shares outstanding (in thousands).............. 56,378
Per common share:
Net income................................................................... $ 1.92
Net income -- assuming full dilution......................................... $ 1.91
Dividends declared........................................................... $ 1.06
Dividends paid per share:
Common stock................................................................. $ 1.03
Preferred stock.............................................................. $ 2.65
Market price to the nearest dollar, per common share on New York Stock Exchange
(high - low)................................................................... $ 35-24
<CAPTION>
1993
--------------------------------------------
<S> <C>
Selected Statement of Income Data
Net sales........................................................................ $2,142,555
Interest......................................................................... 8,679
------------
Total revenues.......................................................... 2,151,234
------------
Cost of goods sold (exclusive of depreciation, depletion, and amortization)...... 1,649,143
Selling and administrative expenses.............................................. 230,722
Depreciation, depletion, and amortization........................................ 102,502
Interest......................................................................... 34,984
Other expense (income) -- net.................................................... 100,552(a)
------------
Total costs and expenses................................................ 2,117,903
------------
Income before federal and foreign income taxes and cumulative effect of
accounting change.............................................................. 33,331
Federal and foreign income taxes................................................. 13,568
------------
Income before cumulative effect of accounting change............................. 19,763
Cumulative effect of accounting change........................................... --
------------
Net Income....................................................................... $ 19,763
As a percent of net sales.................................................... .9%
As a percent of average shareholders' equity................................. 3.0%
------------
Selected Balance Sheet Data
Working capital.................................................................. $ 451,235
Current ratio.................................................................... 2.32
Property, plant, and equipment expenditures (including acquisitions)............. $ 103,689
Property, plant, and equipment -- net............................................ $ 696,462
Total assets..................................................................... $1,838,998
Long-term debt................................................................... $ 496,266
Total shareholders' equity....................................................... $ 713,415
Book value per common share...................................................... $ 14.12
------------
Selected Other Financial Data
Number of shareholders -- at year end............................................ 5,253
Weighted average number of common shares outstanding (in thousands).............. 54,866
Per common share:
Net income................................................................... $ .46
Net income -- assuming full dilution......................................... $ .46
Dividends declared........................................................... $ .96
Dividends paid per share:
Common stock................................................................. $ .94
Preferred stock.............................................................. $ 2.65
Market price to the nearest dollar, per common share on New York Stock Exchange
(high - low)................................................................... $ 32-24
<CAPTION>
1992
--------------------------------------------
<S> <C>
Selected Statement of Income Data
Net sales........................................................................ $1,728,896
Interest......................................................................... 9,303
------------
Total revenues.......................................................... 1,738,199
------------
Cost of goods sold (exclusive of depreciation, depletion, and amortization)...... 1,355,450
Selling and administrative expenses.............................................. 190,339
Depreciation, depletion, and amortization........................................ 76,162
Interest......................................................................... 16,448
Other expense (income) -- net.................................................... 17,688(b)
------------
Total costs and expenses................................................ 1,656,087
------------
Income before federal and foreign income taxes and cumulative effect of
accounting change.............................................................. 82,112
Federal and foreign income taxes................................................. 28,247
------------
Income before cumulative effect of accounting change............................. 53,865
Cumulative effect of accounting change........................................... (14,690)
------------
Net Income....................................................................... $ 39,175
As a percent of net sales.................................................... 2.3%
As a percent of average shareholders' equity................................. 6.3%
------------
Selected Balance Sheet Data
Working capital.................................................................. $ (21,611)
Current ratio.................................................................... 0.97
Property, plant, and equipment expenditures (including acquisitions)............. $ 322,786
Property, plant, and equipment -- net............................................ $ 721,171
Total assets..................................................................... $1,811,794
Long-term debt................................................................... $ 173,086
Total shareholders' equity....................................................... $ 614,296
Book value per common share...................................................... $ 13.80
------------
Selected Other Financial Data
Number of shareholders -- at year end............................................ 5,262
Weighted average number of common shares outstanding (in thousands).............. 49,801
Per common share:
Net income................................................................... $ .90
Net income -- assuming full dilution......................................... $ .89
Dividends declared........................................................... $ .92
Dividends paid per share:
Common stock................................................................. $ .92
Preferred stock.............................................................. $ 2.65
Market price to the nearest dollar, per common share on New York Stock Exchange
(high - low)................................................................... $ 25-20
</TABLE>
------------
(a) Includes provisions for environmental remediation and compliance,
disposition of a business, work force reduction, and other matters of $92.6
million.
(b) Includes a provision for consolidation of offices of $20.1 million.
(c) Includes a provision of $59.8 million primarily related to environmental
projects and plant shutdowns.
1
<PAGE>
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987 1986 1985
---------- ---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
$1,630,521 $1,631,481 $1,587,788 $1,585,856 $1,427,650 $1,355,018 $1,448,929
10,529 19,380 21,248 15,792 12,405 6,595 3,369
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,641,050 1,650,861 1,609,036 1,601,648 1,440,055 1,361,613 1,452,298
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,270,954 1,309,907 1,261,918 1,240,730 1,121,118 1,039,727 1,166,415
178,573 167,686 167,229 165,364 149,968 149,823 138,130
67,622 60,098 56,813 52,867 53,659 54,159 51,536
16,027 16,400 16,289 16,394 15,732 12,045 11,343
(1,930) (9,074) 53,368(c) 10,776 (578) (2,451) (8,741)
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,531,246 1,545,017 1,555,617 1,486,131 1,339,899 1,253,303 1,358,683
---------- ---------- ---------- ---------- ---------- ---------- ----------
109,804 105,844 53,419 115,517 100,156 108,310 93,615
36,329 37,890 18,410 43,896 36,863 43,095 36,841
---------- ---------- ---------- ---------- ---------- ---------- ----------
73,475 67,954 35,009 71,621 63,293 65,215 56,774
-- -- -- 20,289 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 73,475 $ 67,954 $ 35,009 $ 91,910 $ 63,293 $ 65,215 $ 56,774
4.5% 4.2% 2.2% 5.8% 4.4% 4.8% 3.9%
12.1% 11.7% 6.1% 16.8% 12.9% 14.8% 14.4%
---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 320,934 $ 359,091 $ 456,183 $ 439,250 $ 417,332 $ 246,661 $ 233,554
2.25 2.76 3.54 3.24 3.06 2.49 2.34
$ 74,307 $ 106,650 $ 70,387 $ 79,509 $ 82,090 $ 60,102 $ 75,606
$ 474,755 $ 471,026 $ 417,175 $ 400,996 $ 374,628 $ 367,789 $ 360,950
$1,198,276 $1,178,885 $1,139,256 $1,114,575 $1,056,298 $ 819,768 $ 810,292
$ 179,132 $ 230,183 $ 235,510 $ 240,709 $ 242,641 $ 95,590 $ 136,020
$ 625,700 $ 587,472 $ 571,582 $ 578,341 $ 513,615 $ 465,465 $ 415,410
$ 14.35 $ 13.55 $ 12.67 $ 12.89 $ 11.47 $ 10.43 $ 9.39
---------- ---------- ---------- ---------- ---------- ---------- ----------
5,602 5,949 5,635 5,784 5,823 5,965 6,228
49,212 49,703 50,674 50,499 49,477 44,538 44,267
$ 1.60 $ 1.48 $ .80 $ 1.93 $ 1.36 $ 1.47 $ 1.28
$ 1.59 $ 1.47 $ .79 $ 1.91 $ 1.35 $ 1.44 $ 1.26
$ .91 $ .86 $ .84 $ .73 $ .60 $ .55 $ .50
$ .89 $ .86 $ .81 $ .70 $ .58 $ .53 $ .50
$ 2.65 $ 2.65 $ 2.65 $ 2.65 $ 2.65 $ 2.65 $ 2.65
$ 22-14 $ 20-11 $ 23-17 $ 19-15 $ 24-13 $ 20-13 $ 14-11
<CAPTION>
1984
----------
<S> <C>
$1,495,831
6,190
----------
1,502,021
----------
1,208,966
139,183
45,504
14,482
1,541
----------
1,409,676
----------
92,345
29,743
----------
62,602
--
----------
$ 62,602
4.2%
17.6%
----------
$ 202,890
2.24
$ 85,192
$ 348,740
$ 755,777
$ 143,409
$ 374,786
$ 8.51
----------
6,618
43,956
$ 1.43
$ 1.39
$ .48
$ .47
$ 2.65
$ 13-9
</TABLE>
2
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
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 Witco'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 Witco 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, Witco has the financial capacity needed should an acquisition opportunity
present itself.
Further progress has been made in divesting non-core businesses. During the
second quarter of 1994, Witco sold its metal finishing and metal working
businesses for $24.2 million in cash. The Company expects its divestiture
program to be completed by mid-1995 with the sale of its battery parts and
carbon black operations. 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, and economic controls, Witco 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 sub-sidiaries, 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. Witco 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).
Witco 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, Witco 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 $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 $144 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 non-capital initiatives, cooperative
marketing and technical agreements will be pursued. The screening and
development of specific businesses will take place throughout 1995 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
3
<PAGE>
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, state, and local levels. Witco'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.
Witco 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 Witco
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 Witco'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, Witco 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 Witco'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 Witco's consolidated financial position, cash flow,
or liquidity.
The Company has numerous insurance policies which it believes provide coverage
for certain environmental liabilities. Witco is currently in litigation with
many of its insurers concerning the applicability and amount of 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.
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 $34 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
years. The Company estimates that from 1995 through 1997, approximately $46
million will be expended on similar capital projects.
Witco 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 defendent in a number of governmental (federal, state, and local) and pri-
4
<PAGE>
vate 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.
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.
RESULTS OF OPERATIONS
The Company reported record net income in 1994 of $107.1 million compared to
$19.8 million in 1993 and $39.2 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.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
(millions of dollars except
per share data) 1994 1993 1992
------------------------------ --------------------------- --------------------------- ---------------------------
PRE-TAX NET NET INCOME Pre-Tax Net Net Income Pre-Tax Net Net Income
INCOME INCOME PER SHARE Income Income Per Share Income Income Per Share
------- ------ ---------- ------- ------ ---------- ------- ------ ----------
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income excluding non-recurring
items $160.0 $104.0 $ 1.86 $137.9 $87.8 $ 1.70 $102.2 $67.2 $ 1.46
Provision for environmental
remediation
and compliance -- -- -- (52.8) (34.3) (.63) -- -- --
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 -- -- --
Charge for a legal judgment -- -- -- (11.6) (7.6) (.14) -- -- --
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 before cumulative
effect of
accounting change 164.8 107.1 1.92 33.3 19.8 .46 82.1 53.9 1.19
Accounting change (adoption of
SFAS No. 106) -- -- -- -- -- -- -- (14.7) (.29)
------------------------------ ------- ------ ----- ------- ------ ----- ------- ------ -----
Income as reported $164.8 $107.1 $ 1.92 $ 33.3 $19.8 $ .46 $ 82.1 $39.2 $ .90
--------------------------------------------------------------------------------------------------------------------
</TABLE>
Current year results included a $3.1 million gain on the sale of the
Allied-Kelite operations which reflects the Company's continued efforts to
divest its non-core businesses.
Results for 1993 included a $34.3 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.
The $7.6 million legal settlement recorded in 1993 resulted from a judgment
against the Company in the Lightning Lube litigation. 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.
5
<PAGE>
1994 VS. 1993
Excluding non-recurring items, net income totaled $104 million in 1994, compared
to $87.8 million in 1993. Record sales, which were 4 percent above the previous
year, were responsible for approximately 65 percent of the $16.2 million
increase in net income, before non-recurring items. Despite the disposition of
certain operations in late 1993 and 1994, sales rose on the strength of a 5
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 slightly 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. Notwithstanding higher
domestic pension costs, attributable to plan amendments and assumption changes,
that had a $6 million adverse effect on net earnings, reported net income and
net income excluding non-recurring items reached all-time highs.
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.
Witco's 1994 operating income of $202.1 million represents an increase of $87.6
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 $197.3 million in 1994 from $189.3 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 30
percent of the Company's net sales in 1994 compared to 28 percent in 1993 and
its contribution to operating income, excluding non-recurring items, increased 6
percent to a 37 percent share.
The Company has decided to change its method of applying LIFO in valuing its
inventory effective January 1, 1995. This involves a change in the computational
technique used within Dollar Value LIFO from Double Extension to Link Chain.
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.
Prior year's operating income was adversely affected by a $5.6 million provision
for environmental remediation and compliance. Excluding this non-recurring
charge, operating income rose $13.2 million, or 12 percent, over 1993. The
segment's Polymer Additives Group registered the largest increase, accounting
for two-thirds of the segment's 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
6
<PAGE>
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
Current year segment sales of $759.5 million were slightly ahead of 1993.
Shipment volume and selling prices remained relatively flat due to market
conditions and highly competitive pricing. Both of the segment's business groups
reported an increase in volume of approximately 3 percent which offset the
effect of a 1 percent drop in prices.
Non-recurring charges of $50.6 million for environmental matters and a legal
judgment severely affected prior year's operating earnings. Excluding these
charges, current year's operating income of $57 million was $8.7 million lower
than 1993. The 13 percent drop in operating income was attributable to a
substantial decline in the Lubricants Group's operating earnings. This group's
operating earnings were down a disappointing 55 percent as a result of adverse
market conditions for its asphalt products and its inability to increase sales
prices to recoup higher raw material costs, advertising expenditures, pension
costs, and salaries. These factors overshadowed the positive impact that a 6
percent volume increase in the group's main product line, branded lubricants,
had on operating income.
Although segment results, excluding non-recurring charges, were down compared to
1993, the Petroleum Specialties Group reported a 10 percent increase in
operating earnings. The group's strong performance 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 group's favorable results.
DIVERSIFIED PRODUCTS SEGMENT
The Company is in the final stages of its program to divest its Diversified
Products Segment. The Company sold its Chemprene subsidiary in 1993 and its
Allied-Kelite operations in 1994. It is expected that the sale of the Battery
Parts and Concarb divisions will be completed by the middle of 1995.
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 $7.2
million, respectively. A 15 percent increase in carbon black net sales, spurred
in part by greater automotive market demand in both the tire and non-tire
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
Net income, adjusted to exclude non-recurring items, was $87.8 million in 1993,
compared to $67.2 million in 1992. The 31 percent increase in net income, before
non-recurring items, was primarily attributable to record sales, which rose 24
percent to $2.1 billion, and a 1 percent improvement in gross margins. The
November 1992 acquisition of the Industrial Chemicals and Natural Substances
divisions of Schering AG (Schering Acquisition) accounted for the higher sales
and approximately 50 percent of the improved margins. The re-maining 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 attributable to the Schering Acquisition,
partially offset the higher sales and improved margins.
Income from operations in 1993 was $114.5 million, compared to $129.7 million in
1992. A comparison of the results of these periods was affected by a net
non-recurring charge of $74.8 million recorded in 1993. Excluding non-recurring
items, operating income increased $59.6 million to $189.3 million. All seg-
7
<PAGE>
ments 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 $113.8 million in 1993 increased $39.5 million, or 53
percent, from 1992. Each of the segment's business groups reported 1993
operating earnings that were substantially higher than the preceding year. The
inclusion of the acquired Schering businesses' full year operating results in
1993, compared to two months for 1992, accounted for the higher operating
earnings. The Schering Acquisition contributed $41 million to the segment's 1993
operating earnings, 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 earnings. The
favorable operating earnings were 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.
PETROLEUM SEGMENT
Net sales in 1993 were $746 million, an increase of $11.7 million over the
$734.3 million recorded in 1992. Despite a soft global economy and the
strengthening of the dollar overseas, both 1993 sales volume and prices were
generally comparable to 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 $50.6 million of non-recurring charges, was
$65.6 million, an increase of $14.1 million, or 27 percent, over 1992. The
Petroleum Specialties Group accounted for approximately two-thirds of the
segment's higher operating earnings, excluding non-recurring charges, while the
Lubricants Group's results accounted for the remaining improvement. Operating
earnings from the Petroleum Specialties Group'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 group's Holland operation reported lower operating earnings
attributable to the depressed European economy and a stronger dollar. The
Lubricants Group's operating earnings improved approximately 20 percent during
1993. Higher operating earnings were primarily due to a stronger asphalt market
and a 10 percent decline in crude oil feedstock costs at its California
refinery. Additionally, the group's lube oil and grease operations reported 1993
operating earnings that were marginally higher than the previous year's. Lower
crude oil and feedstock costs boosted these operations' material margins by 1
percent.
DIVERSIFIED PRODUCTS SEGMENT
Net sales, excluding those attributable to Chemprene, Inc., were $154 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 $7.4 million from $.4 million in 1992 to $7.8 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.
8
<PAGE>
OUTLOOK
The escalation in raw material prices experienced during the latter part of 1994
has begun to stabilize. Higher costs will continue to be recovered as the market
supports additional sales price increases. New programs have been introduced to
enhance Witco's global manufacturing capabilities. This initiative includes the
establishment of global cross-functional teams chartered to significantly reduce
manufacturing costs commencing in 1995.
Witco continues to be committed to global growth through expanding its markets
in its core chemical and petroleum specialty businesses. With the divestiture of
the Diversified Products' businesses in its final stages, the Company will step
up its efforts to evaluate its other operations to determine their contribution
potential in meeting long-term corporate goals. Resources that become available
through further dispositions will be used to finance acquisitions.
A goal of $5 billion in sales and a 16 percent return on equity by the year 2000
has been set. Major acquisitions, joint ventures, and continued internal growth
in existing core businesses are the key elements in the Company's plan to meet
this goal. The Company will continue to concentrate on expanding its global
offerings in North America, Europe, and the Pacific Rim.
9
<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 listed in the Index at Item
14(a). 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
F-1
<PAGE>
CONSOLIDATED BALANCE SHEETS Witco Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
(in thousands except per share data)
-----------------------------------------------------------------------------------------------------------------
December 31 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.
F-2
<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 $2,224,669 $2,142,555 $1,728,896
Interest 10,032 8,679 9,303
------------------------------------------------------------------------ ---------- ---------- ----------
Total Revenues 2,234,701 2,151,234 1,738,199
------------------------------------------------------------------------ ---------- ---------- ----------
Costs and Expenses
Cost of goods sold (exclusive of depreciation and amortization) 1,708,867 1,649,143 1,355,450
Selling and administrative expenses 235,699 230,722 190,339
Depreciation and amortization 105,120 102,502 76,162
Interest 29,674 34,984 16,448
Other expense (income) -- net (9,428) 100,552 17,688
------------------------------------------------------------------------ ---------- ---------- ----------
Total Costs and Expenses 2,069,932 2,117,903 1,656,087
------------------------------------------------------------------------ ---------- ---------- ----------
Income before Federal and Foreign Income Taxes and Cumulative
Effect of Accounting Change 164,769 33,331 82,112
Federal and Foreign Income Taxes 57,702 13,568 28,247
------------------------------------------------------------------------ ---------- ---------- ----------
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 before cumulative effect of accounting change $1.92 $.46 $1.19
Cumulative effect of accounting change -- -- (.29)
------------------------------------------------------------------------ ---------- ---------- ----------
NET INCOME PER COMMON SHARE: PRIMARY $1.92 $.46 $ .90
------------------------------------------------------------------------ ---------- ---------- ----------
Net Income Per Common Share: Fully Diluted
Income before cumulative effect of accounting change $1.91 $.46 $1.18
Cumulative effect of accounting change -- -- (.29)
------------------------------------------------------------------------ ---------- ---------- ----------
NET INCOME PER COMMON SHARE: FULLY DILUTED $1.91 $.46 $ .89
-----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-3
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Witco Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
(in thousands of dollars)
--------------------------------------------------------------------------------
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
----------------------------------------------------------------------------- -------- -------- --------
Net 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.
F-4
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Witco Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
(in thousands of dollars)
------------------------------------------------------------------------------------------------------------------------------------
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.
F-5
<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.
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 incurred. These charges amounted to $43,119,000 (1994),
$42,635,000 (1993), and $29,207,000 (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.
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.
F-6
<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.
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 amounted to $88,204,000 (1994), $83,816,000 (1993), and
$67,051,000 (1992).
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 amounted to $16,916,000 (1994), $18,686,000 (1993), and
$9,111,000 (1992).
F-7
<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>
NOTE 7 -- INDEBTEDNESS
In 1994, the Company called for redemption 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
------------------------------------------------------------------------------------------ -------- --------
<S> <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 Revenue Bond due 2014 8,500 8,500
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).
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>
F-8
<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>
---------------------------------------------------------------------------------------------------------------------------
(thousands of dollars) 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 exercised (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 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>
F-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS Witco Corporation and Subsidiary Companies
NOTE 9 -- OTHER EXPENSE (INCOME) -- NET
The components of other expense (income) -- net are as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
(thousands of dollars) 1994 1993 1992
----------------------------------------------------------------------------------- ------- -------- -------
<S> <C> <C> <C>
Provision for environmental remediation and compliance $ -- $ 52,810 $ --
Provision for disposition of a business -- 19,200 --
Provision for work force reduction -- 12,200 --
Charge for a legal judgment -- 11,636 --
Provision for loss on sublease of office facilities -- 9,184 --
Provision for the consolidation of offices -- -- 20,135
Other -- net (9,428) (4,478) (2,447)
----------------------------------------------------------------------------------- ------- -------- -------
$(9,428) $100,552 $17,688
--------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 10 -- FEDERAL AND FOREIGN INCOME TAXES
The components of income (loss) 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 $106,364 $(13,779) $51,551
International 58,405 47,110 30,561
---------------------------------------------------------------------------------- -------- -------- -------
$164,769 $ 33,331 $82,112
--------------------------------------------------------------------------------------------------------------------
</TABLE>
The provision for federal and foreign income taxes (exclusive of 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 $30,166 $ 21,745 $18,330
International 9,870 16,462 10,558
Deferred
Domestic 9,733 (22,291) 1,322
International 8,916 (1,028) (307)
Investment tax credit amortization (983) (1,320) (1,656)
----------------------------------------------------------------------------------- ------- -------- -------
$57,702 $ 13,568 $28,247
--------------------------------------------------------------------------------------------------------------------
</TABLE>
The effective income tax rate from continuing operations varied from the
statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
1994 1993 1992
------------------------------------------------------------------------------------- ---- ---- ----
<S> <C> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 34.0%
Amortization of investment tax credits (.6 ) (4.0) (2.0)
Provision for non-deductible civil penalties -- 4.0 --
Effect of U.S. tax rate increase on deferred tax balances -- 3.8 --
Other .6 1.9 2.4
------------------------------------------------------------------------------------- ---- ---- ----
35.0% 40.7% 34.4%
---------------------------------------------------------------------------------------------------------------------
</TABLE>
F-10
<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.
F-11
<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.
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)
-------------------------------------------------------------------------------------------------------------------------
</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>
F-12
<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>
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.
F-13
<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>
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).
NOTE 12 -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides health and life insurance benefits 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
F-14
<PAGE>
NOTES TO FINANCIAL STATEMENTS Witco Corporation and Subsidiary Companies
NOTE 12 -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
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.
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.
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.
F-15
<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.
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>
F-16
<PAGE>
NOTES TO FINANCIAL STATEMENTS Witco Corporation and Subsidiary Companies
NOTE 14 -- COMMITMENTS AND CONTINGENCIES
LEASES: At December 31, 1994, minimum rental commitments under noncancelable
operating leases amounted to $18,800,000 (1995), $15,850,000 (1996), $12,752,000
(1997), $10,499,000 (1998), $9,635,000 (1999), and $98,110,000 (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 were $19,689,000 (1994), $19,849,000
(1993), and $16,518,000 (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.
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 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
F-17
<PAGE>
NOTES TO FINANCIAL STATEMENTS Witco Corporation and Subsidiary Companies
NOTE 14 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
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.
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 $1,338,124 $1,232,732 $ 836,794
Petroleum 759,549 746,026 734,330
Diversified products 142,414 179,466 175,061
Intersegment elimination (15,418) (15,669) (17,289)
--------------------------------------------------------------------------- ---------- ---------- ----------
Net Sales $2,224,669 $2,142,555 $1,728,896
--------------------------------------------------------------------------- ---------- ---------- ----------
Operating Income
Chemical $ 127,013 $ 108,215 $ 74,286
Petroleum 56,962 15,069 51,475
Diversified products 18,134 (8,802) 3,960
--------------------------------------------------------------------------- ---------- ---------- ----------
Operating Income 202,109 114,482 129,721
--------------------------------------------------------------------------- ---------- ---------- ----------
General corporate expenses -- net (17,698) (54,846) (40,464)
Interest income (expense) -- net (19,642) (26,305) (7,145)
--------------------------------------------------------------------------- ---------- ---------- ----------
Income before Federal and Foreign Income Taxes and Cumulative
Effect of Accounting Change $ 164,769 $ 33,331 $ 82,112
--------------------------------------------------------------------------- ---------- ---------- ----------
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
--------------------------------------------------------------------------- ---------- ---------- ----------
Depreciation and Amortization
Chemical $ 62,795 $ 58,204 $ 34,456
Petroleum 31,025 31,726 28,784
Diversified products 9,351 11,054 11,304
Corporate 1,949 1,518 1,618
--------------------------------------------------------------------------- ---------- ---------- ----------
Depreciation and Amortization $ 105,120 $ 102,502 $ 76,162
--------------------------------------------------------------------------- ---------- ---------- ----------
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
--------------------------------------------------------------------------------------------------------------------
</TABLE>
F-18
<PAGE>
NOTES TO FINANCIAL STATEMENTS Witco Corporation and Subsidiary Companies
NOTE 15 -- OPERATIONS BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA (CONTINUED)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
(thousands of dollars) 1994 1993 1992
--------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Net Sales
United States $1,606,145 $1,578,847 $1,393,667
Western Europe 541,060 487,508 249,618
Other International 143,280 135,092 133,899
Inter-area elimination (65,816) (58,892) (48,288)
--------------------------------------------------------------------------- ---------- ---------- ----------
Net Sales $2,224,669 $2,142,555 $1,728,896
--------------------------------------------------------------------------- ---------- ---------- ----------
Operating Income
United States $ 130,545 $ 61,617 $ 98,899
Western Europe 54,184 38,444 18,740
Other International 17,380 14,421 12,082
--------------------------------------------------------------------------- ---------- ---------- ----------
Operating Income $ 202,109 $ 114,482 $ 129,721
--------------------------------------------------------------------------- ---------- ---------- ----------
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>
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.
F-19
<PAGE>
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(in thousands of dollars except per share data)
------------------------------------------------------------------------------------------------------------------
1994 1993
-------- ------------------------------------------------- --------------------------------------------------
NET Net
COST OF INCOME Cost of Net Income
NET GOODS NET PER Net Goods Income Per
Quarter SALES SOLD(a) INCOME SHARE Sales Sold(a) (Loss) Share(f)
-------- ---------- ---------- -------- ------ ---------- ----------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First $ 553,417 $ 453,101 $ 22,041 $ .41 $ 553,174 $ 458,549 $ 18,807 $ .40
Second 565,597 456,180 32,382(b) .57 (b) 549,449 451,853 14,898(c) .29(c)
Third 564,174 464,975 26,998 .48 540,603 441,786 13,625(d) .27(d)
Fourth 541,481 439,731 25,646 .46 499,329 399,457 (27,567)(e) (.47)(e)
-------- ---------- ---------- -------- ------ ---------- ----------- -------- ------
$2,224,669 $1,813,987 $107,067 $1.92 $2,142,555 $ 1,751,645 $ 19,763 $ .46
-------------------------------------------------------------------------------------------------------------------
</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 metalworking 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 a charge of $7,563, or $.14 per common share, as a result of a
legal judgment against the Company and $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 $60,126, or $1.10 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.
F-20
<PAGE>
SCHEDULE II
WITCO CORPORATION AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN C
COLUMN B -----------------------
-------- COLUMN E
BALANCE ADDITIONS --------
AT ----------------------- BALANCE
COLUMN A BEGINNING CHARGED TO CHARGED TO COLUMN D AT END
---------------------------------------------- OF COSTS AND OTHER -------- OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
---------------------------------------------- -------- ---------- ---------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <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(a) $5,623
-------- ---------- ---------- -------- --------
-------- ---------- ---------- -------- --------
</TABLE>
------------
Notes:
(a) Uncollectible receivables charged against the allowance provided therefor.
S-1
<PAGE>
EXHIBIT 10(III)(A)-6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
WITCO CORPORATION
1994 DEFERRED COMPENSATION PLAN
AS EFFECTIVE DECEMBER 1, 1994
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
WITCO CORPORATION
1994 DEFERRED COMPENSATION PLAN
I. NAME AND PURPOSE
The name of this plan is the Witco Corporation 1994 Deferred Compensation
Plan (the 'Plan'). Its purpose is to provide certain employees of Witco
Corporation and its subsidiary companies (Witco Corporation and such
subsidiaries being hereinafter collectively called the 'Company') with the
opportunity to defer some or all of the bonus and/or base salary otherwise
payable to them by the Company.
II. EFFECTIVE DATE
The Plan shall be effective as of December 1, 1994.
III. PARTICIPANTS
Each employee of the Company who is a participant in either the Officers
Annual Incentive Plan or the Management Incentive Plan (an 'Employee') shall be
eligible to participate in the Plan. (Any Employee who elects to participate in
the Plan is hereinafter called a 'Participant'.) The Company will establish for
each Participant an unfunded deferred compensation account to be maintained in
the manner specified in Section V.
IV. ELECTION OF DEFERRAL
A. A Participant shall be entitled to defer the base salary and/or bonus
otherwise payable to him for the period beginning January 1 of each year and
ending December 31 of each year by giving irrevocable written notice to the
Company which notice must be received by the Company prior to January 1 of the
deferral year and be in the form of Exhibit A hereto (and otherwise in
accordance with the Plan) setting forth (i) the amount to be deferred, (ii) the
period of deferral and (iii) the Participant's election as to the amount to be
credited with interest and the amount to be converted to phantom shares in the
manner described in Section V(C). The amount to be deferred may be expressed as
(1) a percentage of the total amount, (2) a specified dollar amount or (3) any
amount in excess of a specified dollar amount.
B. Each such election shall be irrevocable as to the period of deferral,
which deferral period may not end earlier than two years after December 31 of
the deferral year or later than the later of (i) 15 years after December 31 of
the deferral year or (ii) the Employee's retirement and which deferral period
shall end on December 31 except in the case of retirement.
C. Each such election shall include an election (which may be modified as
described in Section V(D) below) as to the percentage of the amount deferred to
be credited with interest at the rate specified in Section V(B) and the amount
deferred to be converted to phantom shares of the Company Common Stock as
described in Section V(C).
V. DEFERRED COMPENSATION ACCOUNTS
A. A separate account shall be established and maintained for each
Participant, which account shall reflect amounts deferred pursuant to this Plan
and interest credited pursuant to Section (B) below and dividends credited
pursuant to Section (C) below.
B. The portion of each Participant's account balance to be credited with
interest shall be credited quarterly with interest as of the end of each
calendar quarter. In the event a Participant's account balance is distributed
other than at the end of any calendar quarter, the Participant shall be credited
with interest thereon from the end of the immediately preceding calendar quarter
to the date of distribution. No interest shall be credited to a Participant's
account after the distribution in full of such Participant's account balance.
Interest to be credited for any period shall be at an annual rate equal to the
yield quotation as of the end of the calendar quarter for the U.S. Treasury
10-year note or an annual
<PAGE>
rate selected by the Administrator (as defined in Section XIII) in good faith
prior to the beginning of any calendar year (the 'Interest Rate'). Interest will
be computed on the basis of a 360-day year, 30-day month.
C. The portion of salary and/or bonus to be deferred in the form of phantom
shares of the Company's stock ('Phantom Shares') shall be converted to such
Phantom Shares by dividing the dollar amount of the salary and/or bonus deferred
by the closing price per share of the Company's Common Stock on the New York
Stock Exchange (the 'Exchange') on the last trading day prior to the day on
which the salary and/or bonus would otherwise be paid and shall be credited to
the Participant's account balance. Each Participant's account balance shall be
credited with additional Phantom Shares on each day that the Company pays a
dividend by multiplying the number of Phantom Shares in the Participant's
account balance by (i) in the case of a cash dividend, the dividend paid per
share of the Company's Common Stock and dividing such product by the closing
price per share of the Company's stock on the Exchange on the last trading day
prior to such payment date and (ii) in the case of a stock dividend, the number
of shares of the Company's Common Stock distributed per share of the Company's
Common Stock.
D. A Participant shall be entitled to make an election (in the form of
Exhibit A hereto) to change the percentage of his or her account balance to be
credited with interest and the percentage of his or her account balance to be
credited with Phantom Shares. Such election to change shall not be made more
frequently than quarterly and may be made by giving written notice to the Vice
President of Human Resources of the Company or his or her designee during the
period beginning on the third business day following the Company's announcement
of its quarterly earnings and ending on the twelfth business day following such
date. Such election shall be effective as of the last day of the quarter in
which such election is delivered to the Vice President of Human Resources of the
Company or his or her designee at which time the Participant's account balance
shall be adjusted to reflect the percentages specified in such election by (i)
reducing the balance to be credited with the Interest Rate and converting the
amount of the reduction to Phantom Shares by dividing such amount by the closing
price per share of the Company's Common Stock on the Exchange on the last
trading day prior to such conversion or (ii) increasing the balance to be
credited with the Interest Rate and reducing the Phantom Shares by the number of
Phantom Shares that is equal to the amount of such increase divided by the
closing price per share of the Company's Common Stock on the Exchange on the
last trading day prior to such conversion.
E. Amounts credited to a Participant's Account shall remain a part of the
general funds of the Company and nothing contained in this Plan shall be deemed
to create a trust or fund of any kind or create any fiduciary relationship.
Nothing contained herein shall be deemed to give any Participant any ownership
or other proprietary, security or other rights in any funds, stock or assets
owned or possessed by the Company, whether or not earmarked for the Company's
own purposes as a reserve or fund to be utilized by the Company for the
discharge of its obligations hereunder. To the extent that any person acquires a
right to receive payments or distributions from the Company under this Plan,
such right shall be no greater than the right of any unsecured creditor of the
Company.
VI. METHOD OF DISTRIBUTION OF DEFERRED COMPENSATION
A. No distribution of a Participant's account balance may be made except as
provided in this Section VI or in Sections VII or VIII.
B. Subject to the provisions of Sections VII and VIII, the value of a
Participant's account balance shall be payable in cash, at the time selected by
the Participant in a lump sum or in installment payments on January 1 of each
year during a period of years specified by the Participant in accordance with
the election made pursuant to Section IV (B). Subject to the provisions of
Section IV (B), in the event that no election is made with respect to
distribution of the Participant's account balance, in the event of termination
by retirement, death, or disability such balance shall be payable in a lump sum
as soon as reasonably practicable following the date of termination.
2
<PAGE>
C. Subject to the provisions of Section IV (B), in the event of termination
other than by reason of retirement, death, or disability, the value of a
Participant's account balance shall be paid in a lump sum as soon as reasonably
practicable following the date of termination.
D. A Participant may petition the Administrator of this Plan to permit
distribution of some or all of the Participant's account balance prior to the
time selected by the Participant in accordance with Section IV(B) above in the
event of extraordinary personal financial hardship, including but not limited to
hardship due to medical emergencies. In no case may such distribution occur
earlier than the earliest date specified in Section IV(B). The Company shall
have no liability for any penalties including but not limited to any tax
penalties resulting from such distribution.
VII. DISTRIBUTION UPON DEATH
A Participant may designate one or more persons to whom payments are to be
made if the Participant dies before receiving payment of all amounts due
hereunder. A designation of beneficiary will be effective only after a signed
designation is filed with the Vice President of Human Resources of the Company
or his or her designee while the Participant is alive and will cancel all
designations of beneficiary signed and filed earlier. If a Participant dies
before receiving all amounts credited to his or her account, the unpaid amounts
in the Participant's account shall be paid to the Participant's designated
beneficiary in a single lump sum or, in the absence of any designation, to the
Participant's estate in a single lump sum.
VIII. CHANGE IN CONTROL
A. A change in control ('Change in Control') of Witco Corporation ('Witco')
shall be deemed to have occurred if (i) any 'person', as such term is used in
Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934 (the 'Exchange
Act'), other than an affiliate or any employee benefit plan sponsored by Witco
or an affiliate becomes a 'beneficial owner', as such term is used in Rule 13d-3
promulgated under the Exchange Act, of 20% or more of the 'Voting Stock' of
Witco (which means the capital stock of any class or classes of a corporation
having general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of such corporation); (ii) 33 1/3% of the
Board of Directors of Witco consists of individuals other than the members of
the Board of Directors on December 1, 1994 (the 'Incumbent Directors');
provided, however, that any person becoming a director subsequent to such date
whose election or nomination for election was approved by two-thirds (but in no
event less than two) of the directors who at the time of such election or
nomination comprise the Incumbent Directors shall, for purposes of this Plan, be
considered an Incumbent Director; (iii) Witco adopts any plan of liquidation
providing for the distribution of all or substantially all of its assets; (iv)
Witco combines with another company (whether or not Witco is the surviving
corporation) and immediately after the combination, the shareholders of Witco
immediately prior to the combination (other than shareholders who, immediately
prior to the combination, were 'affiliates' of such other company, as such term
is defined in the rules of the Securities and Exchange Commission) do not
beneficially own, directly or indirectly, more than 20% of the Voting Stock of
the combined company; or (v) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
the assets of Witco.
B. Notwithstanding any provision of this Plan to the contrary, in the event
of a Change in Control, each Participant in the Plan shall receive an automatic
lump-sum cash distribution of all amounts accrued in the Participant's account
not later than 15 days after the date of the Change in Control. For this
purpose, the balance in the portion of a Participant's account invested in
Phantom Shares shall be determined by multiplying the number of Phantom Shares
by the higher of (i) the highest closing price per share of the Company's Common
Stock on the Exchange 30 days prior to such Change in Control, or (ii) if the
Change in Control of the Company occurs as a result of a tender or exchange
offer or consummation of a corporate transaction, then the highest price paid
per share of Common Stock pursuant thereto. Any consideration other than cash
forming a part or all of the consideration for Common Stock to be paid pursuant
to the applicable transaction shall be valued at the valuation price thereon
determined by the Administrator.
3
<PAGE>
In addition, the Company shall reimburse a Participant for the legal fees
and expenses incurred if the Participant is required to seek to obtain or
enforce any right to distribution. In the event that it is determined that such
Participant is properly entitled to a cash distribution hereunder, such
Participant shall also be entitled to interest thereon payable in an amount
equivalent to the Interest Rate from the date such distribution should have been
made to and including the date it is made. Notwithstanding any provision of this
Plan to the contrary, this Section VIII may not be amended after a Change in
Control occurs without the written consent of a majority in number of
Participants.
IX. BENEFIT PLANS
The amount of base salary and/or bonus which a Participant elects to defer
under the Plan shall be included as compensation for the purpose of calculating
the amount of a Participant's benefits or contributions under a pension plan or
retirement plan (qualified under Section 401(a) of the Internal Revenue Code),
the amount of life insurance payable under any life insurance plan established
or maintained by the Company, or the amount of any disability benefit payments
payable under any disability plan established or maintained by the Company,
except to the extent specifically limited in any such plan.
X. ADJUSTMENTS IN CERTAIN EVENTS
In the event of any change in the outstanding common stock of the Company
by reason of any stock split, share dividend, recapitalization, merger,
consolidation, reorganization, combination, or exchange or reclassification of
shares, split-up, split-off, spin-off, liquidation or other similar change in
capitalization, or any distribution to common shareholders other than cash
dividends, the number of Phantom Shares credited under the Plan shall be
automatically adjusted so that the proportionate interest of the Participants
shall be maintained as before the occurrence of such event. Such adjustment
shall be conclusive and binding for all purposes of the Plan.
XI. PARTICIPANT'S RIGHTS
Establishment of the Plan shall not be construed as giving any Participant
the right to be retained in the Company's service or employ or the right to
receive any benefits not specifically provided by this Plan. A Participant shall
not have any interest in the base salary and/or bonus deferred or interest or
appreciation in Phantom Shares credited to his account until such account is
distributed in accordance with the Plan.
XII. NON-ALIENABILITY AND NON-TRANSFERABILITY
The rights of a Participant to the payment of deferred compensation as
provided in the Plan shall not be assigned, transferred, pledged or encumbered
or be subject in any manner to alienation or anticipation. No Participant may
borrow against his or her account. No account shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
charge, garnishment, execution or levy of any kind, whether voluntary or
involuntary, including but not limited to any liability for alimony or other
payments for the support of a spouse or former spouse, or for any other relative
of any Participant.
XIII. ADMINISTRATION
The Administrator of this Plan shall be the Organization and Compensation
Committee of the Board of Directors of Witco except as otherwise determined by
such Board of Directors. Such Committee shall have authority to adopt rules and
regulations for carrying out the Plan and to interpret, construe and implement
the provisions hereof. Any decision or interpretation of any provision of the
Plan adopted by such Committee shall be final and conclusive. A Participant who
is also a member of the Board of Directors shall not participate in any decision
involving any request made by him or relating in any way solely to his right,
duties and obligation as a Participant under the Plan.
4
<PAGE>
XIV. AMENDMENT AND TERMINATION
The Plan may, at any time or from time to time, be amended, modified or
terminated by the Board of Directors of Witco. However, no amendment,
modification or termination of the Plan shall, without the consent of a
Participant, adversely affect such Participant's rights with respect to amounts
then accrued in his or her account.
XV. GENERAL PROVISIONS
A. Controlling Law. The laws of the State of Connecticut shall be
controlling in all matters relating to the Plan, including the construction and
performance hereof.
B. Captions. The captions of Sections and paragraphs of this Plan are for
convenience of reference only and shall not control or affect the meaning or
construction of any of its provisions.
C. Facility of Payment. Any amounts payable thereunder to any person who is
under legal disability or who, in the judgment of the Organization and
Compensation Committee of the Board of Directors, is unable to properly manage
his financial affairs may be paid to the legal representative of such person or
may be applied for the benefit of such person in any manner which such Committee
may select, and any such payment shall be deemed to be payment for such person's
account and shall be a complete discharge of all liability of the Company with
respect to the amount so paid.
D. Withholding Payroll Taxes. To the extent required by law, the Company
shall withhold from any payments made hereunder any taxes required to be
withheld for federal, state or local government purposes.
E. Administrative Expenses. All expense of administering the Plan shall be
borne by the Company and no part thereof shall be charged against any
Participant's account or any amounts distributed hereunder.
F. Severance Clause. Any provision of this Plan prohibited by the law of
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition without invalidating the remaining provisions hereof.
G. Disclaimer of Liability. Except as otherwise expressly provided herein,
no member of the Board of Directors of Witco or the Organization and
Compensation Committee and no officer, employee, or agent of the Company, shall
have any liability to any person based on or arising out of the Plan.
XVI. UNFUNDED STATUS OF THE PLAN
Any and all payments made to the Participant pursuant to the Plan shall be
made only from the general assets of the Company. All accounts under the Plan
shall be for bookkeeping purposes only and shall not represent a claim against
specific assets of the Company. Nothing contained in this Plan shall be deemed
to create a trust of any kind or create any fiduciary relationship.
IN WITNESS WHEREOF, Witco Corporation, has caused this Plan to be executed
this 15th day of December, 1994.
WITCO CORPORATION,
By: /s/ WILLIAM R. TOLLER
....................................
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
5
<PAGE>
EXHIBIT A
WITCO CORPORATION 1994 DEFERRED COMPENSATION PLAN
NOTICE OF ELECTION
TO: VICE PRESIDENT OF HUMAN RESOURCES OF WITCO CORPORATION
In accordance with the provisions of the Witco Corporation 1994 Deferred
Compensation Plan, I hereby elect to defer the portion of the base salary and/or
bonus specified below that may otherwise be payable to me for services as an
employee of Witco Corporation and/or its subsidiaries for the period beginning
January 1, 1995, and ending December 31, 1995, with such deferral to be for the
period specified below.
I. DEFERRAL ELECTION FOR BASE SALARY AND/OR BONUS:
(1) _____% of Base Salary (applied to each base salary payment);
$___________ of Base Salary (applied on a pro rata basis to each base
salary payment); or
Total amount in excess of $___________ (applied on a pro rata basis to
each payment of base salary made after total payments during the year
equal to the specified amount).
(2) _____% of Bonus Paid, if any.
$___________ of Bonus Paid, if any; or
Total amount of Bonus Paid, if any, in excess of $___________.
(3) Deferred until
Lump Sum
_______ Retirement (or other termination)
_______ December 31, _____ (Date may be no earlier than December 31, 1997
and no later than December 31, 2010).
Installments
_______% per year payable January 1 for _____ years beginning
__________________. (Date may be no earlier than January 1, 1998 and no
later than January 1, 2010).
This election is irrevocable and is subject to the terms of the Plan.
(4) Percentage of Account Balance to be credited with Interest Rate _____%
(5) Percentage of Account Balance to be held as Phantom Shares of Witco
_____%
II. DESIGNATION OF BENEFICIARY
I hereby designate the following person as my designated beneficiary under
the Plan:
Name ____________________
Address _________________
_________________________
Social Security Number ________
<PAGE>
A designation of beneficiary on this form will be deemed a revocation of
any prior designation of beneficiary.
I hereby specifically reserve the right to change my Designation of
Beneficiary at any time by written notice to the Vice President of Human
Resources, without notice to or the consent of any beneficiary.
Date: ______________________________, 19 ____________________
Participant
Print Name of Employee: __________________________________________
Received on the day _____ of ____________, 19__, on behalf of Witco Corporation
By: __________________________________________
2
<PAGE>
EXHIBIT 11
WITCO CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1994 1993 1992
-------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
PRIMARY
Income before cumulative effect of accounting change................. $107,067 $19,763 $ 53,865
Interest on convertible subordinated debentures (net of tax)......... 1,109 5,363 5,445
Adjustment for dividend requirements of preferred stock.............. (20) (24) (24)
-------- ------- --------
108,156 25,102 59,286
Cumulative effect of accounting change............................... -- -- (14,690)
-------- ------- --------
Total...................................................... $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 amount:
Income before cumulative effect of accounting change............ $ 1.92 $ 0.46 $ 1.19
Cumulative effect of accounting change.......................... -- -- (0.29)
-------- ------- --------
Net income...................................................... $ 1.92 $ 0.46 $ 0.90
-------- ------- --------
-------- ------- --------
FULLY DILUTED
Income before cumulative effect of accounting change................. $107,067 $19,763 $ 53,865
Interest on dilutive debentures (net of tax)......................... 1,109 5,366 5,450
-------- ------- --------
108,176 25,129 59,315
Cumulative effect of accounting change............................... -- -- (14,690)
-------- ------- --------
Total...................................................... $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 amount:
Income before cumulative effect of accounting change............ $ 1.91 $ 0.46 $ 1.18
Cumulative effect of accounting change.......................... -- -- (0.29)
-------- ------- --------
Net income...................................................... $ 1.91 $ 0.46 $ 0.89
-------- ------- --------
-------- ------- --------
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF WITCO CORPORATION -- NOTES (1)(2)(3)
AS OF JANUARY 1, 1995
<TABLE>
<CAPTION>
PERCENTAGE OF
VOTING SECURITIES
OWNED DIRECTLY
OR INDIRECTLY STATE OR
BY WITCO COUNTRY OF
CORPORATION ORGANIZATION
----------------- --------------------------
<S> <C> <C>
Aero Oil Company, Inc................................................... 100.0% Indiana
Assured Insurance Company............................................... 100.0% Vermont
Beam Oil Company, Inc................................................... 100.0% Georgia
Continental Carbon Company.............................................. 100.0% Delaware
Continental Carbon Australia Pty. Ltd.(4)............................. 49.0% Australia
Enenco, Incorporated(4)................................................. 50.0% New York
The Richardson Company.................................................. 100.0% Ohio
A-K Divestiture, Inc.................................................. 100.0% Delaware
Sherex Chemical Company, Inc............................................ 100.0% Ohio
Southwest Petro-Chem, Inc............................................... 100.0% Delaware
Witco Foreign Sales Corporation......................................... 100.0% Barbados
Witco International Corporation......................................... 100.0% New Jersey
Witco Australia Pty. Limited.......................................... 100.0% Australia
Witco B.V............................................................. 100.0% the Netherlands
Witco Polymers and Resins B.V...................................... 100.0% the Netherlands
Witco Warmtekracht B.V............................................. 100.0% the Netherlands
Nerap Expeditie B.V................................................ 100.0% the Netherlands
Jonk B.V........................................................... 100.0% the Netherlands
Witco Canada Inc...................................................... 100.0% Canada
Witco Dominion Financial Services Company, Ltd..................... 100.0% Province of
Ontario, Canada
Witco Financial Services Co................................... 100.0% Ireland
Witco Colombia Ltda................................................... 100.0% Colombia
Witco Corporation U.K. Limited........................................ 100.0% England
Baxenden Chemicals Limited......................................... 53.5% England
Baxenden Scandinavia AS.......................................... 53.5% Denmark
Witco Deutschland GmbH................................................ 100.0% Germany
Witco GmbH......................................................... 100.0% Germany
Witco Surfactants GmbH............................................. 100.0% Germany
Witco Solvay Duromer GmbH(4)....................................... 50.0% Germany
Witco do Brasil Ltda.................................................. 100.0% Brazil
Witco Ecuador S.A..................................................... 100.0% Ecuador
Witco Espana, S.L..................................................... 100.0% Spain
Witco Grand Banks Inc................................................. 100.0% Province of
Newfoundland, Canada
Witco Handels-GmbH.................................................... 100.0% Austria
Witco Italiana S.r.l. ................................................ 100.0% Italy
Witco S.A............................................................. 100.0% France
Witco Singapore Pte Ltd............................................... 100.0% Republic of Singapore
Witco Ltd............................................................... 60.0% Israel
Witco Marketing and Distribution Ltd.................................. 60.0% Israel
Witco Mexico, S.A. de C.V............................................... 100.0% Mexico
</TABLE>
See next page.
<PAGE>
Notes:
(1) The Company lists the business entities in which it has investments, for
information purposes only. Such listing is not to be deemed an admission
that these business entities are under the control of the Company within the
meaning of the General Rules and Regulations under the Securities Exchange
Act of 1934.
(2) With respect to certain subsidiaries, shares in names of nominees and
qualifying shares in names of directors are included in the above
percentages.
(3) With the exception of the companies covered by footnote (4), the companies
named are included in the consolidated financial statements.
(4) The Company records in the consolidated financial statements its equity in
undistributed earnings (losses) of this unconsolidated entity.
<PAGE>
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, and the Registration Statement (Form S-8, No. 33-48806), pertaining
to an employee benefit plan of Witco Corporation, of our report dated January
26, 1995, with respect to the consolidated financial statements and schedule of
Witco Corporation and Subsidiary Companies included in this Annual Report (Form
10-K) for the year ended December 31, 1994.
ERNST & YOUNG LLP
Stamford, Connecticut
March 24, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 197,173
<SECURITIES> 0
<RECEIVABLES> 404,410
<ALLOWANCES> 8,863
<INVENTORY> 258,372
<CURRENT-ASSETS> 896,829
<PP&E> 1,416,009
<DEPRECIATION> 696,043
<TOTAL-ASSETS> 1,919,345
<CURRENT-LIABILITIES> 345,209
<BONDS> 346,545
0
7
<COMMON> 281,561
<OTHER-SE> 658,438
<TOTAL-LIABILITY-AND-EQUITY> 1,919,345
<SALES> 2,224,669
<TOTAL-REVENUES> 2,234,701
<CGS> 1,708,867
<TOTAL-COSTS> 2,069,932
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,209
<INTEREST-EXPENSE> 29,674
<INCOME-PRETAX> 164,769
<INCOME-TAX> 57,702
<INCOME-CONTINUING> 107,067
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 107,067
<EPS-PRIMARY> 1.92
<EPS-DILUTED> 1.91
</TABLE>
