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________________________________________________________________________________
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, 1995 COMMISSION FILE NO. 1-4654
------------------------
WITCO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<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
Rights to Purchase Series A Participating New York Stock Exchange
Cumulative Preferred Stock
</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. [x]
As of March 1, 1996, the aggregate market value of the voting stock held by
non-affiliates of the Registrant, based on the closing price on March 1, 1996,
on the New York Stock Exchange for the Registrant's Common Stock, was $1.82
billion.
There were 56,489,369 shares of the Registrant's Common Stock outstanding
on March 1, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive Proxy Statement for its April 24, 1996,
Annual Meeting of Shareholders are incorporated by reference into Part III.
________________________________________________________________________________
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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. Established in 1920, at December 31, 1995, the
Company had 8,053 employees worldwide.
The Company's operations are divided between three business segments:
Chemical, OSi Specialties and Petroleum 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 and Italy.
On October 19, 1995, Witco completed the acquisition of OSi Specialties
Holding Company ('OSi Specialties' or 'OSi'), an entity engaged in the
manufacture of silicone surfactants, amine catalysts, organofunctional silanes
and specialty fluids and the operation of manufacturing and blending facilities
in West Virginia, Europe, South America and Asia.
In 1995, the Company completed the disposition of its Battery Parts and
Carbon Black operations. These dispositions completed the Company's previously
announced plan to dispose of all of the businesses of the Company's Diversified
Products segment.
In September 1995, the Company announced its intention to dispose of all of
the businesses in the Lubricants portion of its Petroleum segment. The Company
anticipates completing this disposition by mid-1996.
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. Its
executive offices are 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 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 between three business segments:
Chemical, OSi Specialties and Petroleum 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 products complement those offered by
the Petroleum Specialties Group of the Company's Petroleum
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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, serves 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 more than 6,000
customers in the United States and more than 80 foreign countries operating 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, 1995, no
customer accounted for more than 4 1/2% of Chemical Segment sales, and sales to
the ten largest customers accounted for approximately 15% of Chemical Segment
sales.
Competition
Competition in the Company's specialty chemicals business is based
primarily on product consistency, quality and performance, customer service, and
the technological resources necessary to develop and deliver new products that
meet customer needs. Several factors constitute barriers to entry for new
participants in many of the Company's markets: the need to make significant
capital and research and development expenditures; the need for an extensive
distribution network; the high level of expertise needed to solve technical
problems for customers; manufacturing and product formulation
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knowledge; the lengthy product development process and customers' general
aversion to contracting with unproven suppliers of specialty chemical products.
Competition is fragmented, with no one competitor offering products across all
of the Company's chemical product lines.
OSi Specialties
OSi Specialties, a wholly-owned subsidiary of the Company acquired in
October 1995, manufactures and sells over 500 silicone-based chemical
intermediate products to manufacturers of fiberglass, reinforced plastics,
polyurethane foam, textiles, coatings, automotives, adhesives, rubber,
pharmaceuticals, thermoplastics, sealants and agricultural, electrical and
personal care products throughout the world. In 1958, OSi invented the use of
silicone surfactants in the manufacture of urethane foam. This fundamental
technological advance facilitated a lower-cost, continuous manufacturing method,
resulting in accelerated growth in the urethane foam industry. OSi was also a
pioneer in the silanes industry, and was instrumental in developing key
technology for the reinforcement of plastics.
Regardless of form, most silicones share a combination of properties,
including electrical resistance, ability to maintain performance across a broad
range of temperatures, resistance to aging, water repellence, lubricating
characteristics and relative chemical and physiological inertness. The
versatility of silicone-based intermediates has led to a wide variety of
applications across a broad spectrum of industries in all major countries.
Examples of OSi's products include catalysts, surfactants, coupling agents,
process aids and other silicone-based specialty chemicals. Catalysts promote the
process of urethane foam and polymer formation. Surfactants promote the mixing
of reactants, control cell size and stabilize urethane foam. Surfactants also
serve as wetting agents in a broad spectrum of applications and are used in
personal care products (hair conditioning) and coatings (for flow control and
leveling). Coupling agents bond inorganic and organic materials and enhance the
physical, mechanical and adhesion properties of a variety of products, including
fiberglass, sealants, rubber and coatings. Process aides include foam control
agents, which inhibit foam formation or reduce foam in such diverse applications
as antacid tablets, fountain soda and pulp and paper processing.
Raw Materials
The principal raw materials for the OSi Specialties Segment's products are
trichlorosilane, polyether fluids and dimethyl siloxane hydrolyzate. The Segment
purchases, in the aggregate, more than 50% of its raw materials from Dow Corning
Corporation and Union Carbide Corporation under various long-term agreements
expiring from 1998 to 2000. The Segment purchases other raw materials from a
variety of domestic and international suppliers, and these products are readily
available from other suppliers.
Customers
The Company markets its OSi Specialties products through direct
distribution using a trained sales force, and through distributor sales in the
United States and foreign locations. Since the acquisition, no customer
accounted for more than 14.2% of OSi Specialties Segment sales, and sales to the
ten largest customers accounted for approximately 38.8% of OSi Specialties
Segment sales.
Competition
The OSi Specialties Segment faces relatively few direct silicone
competitors. Competition is based primarily on product consistency, quality and
performance, customer service and the technological resources necessary to
develop and deliver new products that meet customer needs. Several factors
constitute barriers to entry in many of the OSi Specialties Segment's markets:
the need to make significant capital and research and development expenditures;
the need for an extensive distribution network; the high level of expertise
needed to solve technical problems for customers; manufacturing and product
formulation knowledge; and the lengthy product development process and
customers' general aversion to contracting with unproven suppliers of specialty
chemical products.
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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 specialty road and surface treatment products, which
are sold primarily for highway construction and maintenance. In September 1995,
Witco announced its intention to divest its Lubricants Group. Results of its
Lubricants Group are currently reported as discontinued operations.
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, 1995, no customer accounted for more than 7% of continuing Petroleum Segment
sales, and sales to the ten largest customers accounted for approximately 27% of
continuing 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.
International Operations
Sales of Witco's continuing non-U.S. operations were $787.6 million, or 40%
of total sales for continuing operations, for the year ended December 31, 1995.
Witco's manufacturing and producing operations outside the United States are in
Belgium, Brazil, Canada, Denmark, England, France, Germany, Hong Kong,
Indonesia, Israel, Italy, Korea, Malaysia, Mexico, the Netherlands, Spain and
Thailand.
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Patents and Trademarks
The Company owns and controls patents, trade secrets, trademarks, trade
names, copyrights and confidential information, which in the aggregate are of
material importance to its business. However, the Company is not materially
dependent upon any single patent or trademark. The Company's trademarks are
registered in the United States and in a number of foreign countries, with terms
of registration expiring generally between 1996 and 2006. The Company also has
approximately 1,400 patents and applications worldwide related to its continuing
operations. The Company intends to renew and maintain in a timely manner those
trademarks and patents that are renewable and maintainable and are deemed
important to its business.
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
The Company is actively engaged in research and development programs
designed to develop new products, manufacturing processes, systems and
technologies to enhance existing products and processes. The Company believes
its investments in research and development have been an important factor in
establishing and maintaining its competitive position. Witco expended
approximately $52.9 million in 1995, $40.7 million in 1994 and $40.3 million in
1993 on research and development of new products and services for its continuing
operations, and for improvements and new applications of existing products and
services for its continuing operations.
Environmental Matters
The 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.
Environmental reserves related to continuing operations at December 31,
1995 amounted to $83.6 million, which reflects management's assessment of future
remediation costs in light of currently available information. Remediation
expenditures charged to those reserves were $13.7 million in 1995 and include
expenditures currently mandated as well as those not required by any regulatory
authority or third party. The Company anticipates 1996 expenditures to
approximate $24.0 million.
Capital expenditures related to continuing operations for air, water and
solid waste control equipment and facilities related to continuing operations
amounted to $8.9 million in 1995. The Company estimates that approximately $20.0
million will be expended on similar capital projects in 1996.
The Company is continuing its efforts to reduce hazardous waste and
emissions generated by its operations. Through improved operating efficiencies,
installation of additional environmental control equipment and utilization of
the latest innovations in waste treatment technology, management believes
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that direct recurring operating costs associated with managing hazardous
substances and pollution can be controlled. Such costs related to continuing
operations amounted to $28.2 million in 1995.
(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 specialty products; subsidiaries in Belgium,
Brazil, Canada, Denmark, England, France, Germany, Israel, Italy, Mexico and
Spain manufacture chemical products. In early 1996, the Company acquired a
resins manufacturing plant in Singapore.
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 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 for its continuing
businesses in 51 manufacturing plants and other producing facilities, owned in
fee or occupied under lease, of which 21 are in the United States and 30 in
other countries. Of these facilities, 33 are utilized for Chemical product
manufacturing; 10 are utilized for OSi Specialties product manufacturing; and 8
are utilized for Petroleum product manufacturing. All of the facilities are in
good operating condition.
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PRINCIPAL MANUFACTURING PLANTS AND OTHER IMPORTANT PHYSICAL PROPERTIES RELATED
TO CONTINUING
OPERATIONS -- LOCATIONS BY INDUSTRY SEGMENT (OWNED IN FEE EXCEPT
WHERE PARENTHETICAL DATES REFER TO LEASE EXPIRATION)
CHEMICAL SEGMENT FACILITIES
United States
Santa Fe Springs, California*
Blue Island, Illinois
Chicago, Illinois
Mapleton, Illinois -- 2 Plants
Harahan, Louisiana
Taft, Louisiana
Brainards, New Jersey*
Newark, New Jersey*
Perth Amboy, New Jersey
Brooklyn, New York
Memphis, Tennessee
Fort Worth, Texas
Houston, Texas
LaPorte, Texas
Marshall, Texas
Janesville, Wisconsin
International
Brantford, Canada
Montreal, Canada
Oakville, Canada
Soro, Denmark (2005)
Accrington, England
Droitwich, England
Flimby, England
Elbeuf, France
St. Amour, France
Bergkamen, Germany (2091)
Steinau, Germany
Haifa, Israel
Gambolo, Italy
Cuatitlan, Mexico
Singapore
Granollers, Spain
OSI SPECIALTIES SEGMENT FACILITIES
United States
Sistersville, West Virginia
International
Zwijndrecht, Belgium
Itatiba, Brazil
Termoli, Italy
PETROLEUM SEGMENT FACILITIES
United States
Gretna, Louisiana
Petrolia, Pennsylvania
Trainer, Pennsylvania
International
Scarborough, Canada (1996)
West Hill, Canada
Amsterdam, the Netherlands
Haarlem, the Netherlands
Koog Aan De Zaan, the Netherlands
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* Manufacturing plants to be closed in 1996 and 1997 as a part of the Company's
plant consolidation program.
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OTHER FACILITIES
United States
Greenwich, Connecticut (2014)
Los Angeles, California (2001)
Tarrytown, New York (1997)
Oakland, New Jersey
Dublin, Ohio
Houston, Texas (1996)
S. Charleston, West Virginia (1997)
Danbury, Connecticut (2000)
World Headquarters -- Principal
Executive, Administrative and Sales Office
Administrative and Sales Office
Research
Research
Research
Administrative and Research
Administrative and Research
Administrative Office
International
Paris, France (1999)
Frankfurt, Germany (1997)
Singapore (1999)
Meyrin, Switzerland (2007)
Administrative and Sales Office
Principal European Executive and
Administrative Office
Administrative and Research
Administrative and Research
In addition, OSi Specialties operates producing and other facilities in
Mexico, Korea, Hong Kong, Malaysia, Thailand and Indonesia.
ITEM 3 -- LEGAL PROCEEDINGS
The Company has been notified that it is a potentially responsible party
('PRP') or a defendant in a number of governmental (federal, state, and local)
and private actions associated with the release, or suspected release, of
contaminants into the environment. As a PRP, the Company may be liable for costs
associated with the investigation and remediation of environmental
contamination, as well as various penalties, and damages to persons, property
and natural resources. As of December 31, 1995, the Company was a PRP, or a
defendant, in connection with 67 sites at which it is likely to incur costs
associated with environmental investigation or remedial actions which have been
or will be executed pursuant to the Comprehensive Environmental Response
Compensation and Liability Act ('CERCLA'), the Resource Conservation and
Recovery Act ('RCRA'), or similar state or local laws. With 22 exceptions, all
of these sites involve one or more PRPs, and in most cases, there are numerous
other PRPs in addition to the Company. CERCLA, RCRA, and the state counterparts
to these federal laws, authorize governments to investigate and remediate actual
or suspected damage to the environment caused by the release or suspected
release of hazardous substances into the environment, or to order the
responsible parties to investigate and/or remediate such environmental damage.
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 certain 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 party to a Consent Decree with the United States
Environmental Protection Agency ('EPA') and the United States Department of
Justice ('DOJ') filed with the District Court,
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Eastern District of California, on June 7, 1995. The Consent Decree settles
certain litigation related to the Company's Oildale, California refinery
operated by its Lubricants Group. Pursuant to the Consent Decree, the Company
must construct a new wastewater recycling system at the refinery, which system
must be operational by June 30, 1998, must operate for 10 years, and must
recycle at least 75% of the total annualized process and storm water in the
first year of operation, at least 78% in the second year and at least 82% in the
third year and thereafter. The Company must also close the deep injection wells
at the refinery by June 30, 1998, although the Company may keep one deep
injection well operational past this date (but in no event beyond June 30, 2002)
under certain circumstances specified in the Consent Decree. The Consent Decree
also requires the Company to perform certain groundwater monitoring and site
characterization work at the refinery (including some work off-site at the
Chevron property adjacent to the refinery) and to submit to EPA Region IX the
Company's recommendations for future site characterization and remediation, if
any, deemed necessary as a result of the initial site characterization efforts.
The Consent Decree also requires the Company to take certain additional actions
at the refinery, some of which have previously been completed, and to report
semi-annually to EPA and DOJ its progress with respect to design, construction
and operation of the wastewater recycling system.
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 Nipomo Community Services District v. Shell Oil Co., et al.; filed in May
1995, and pending in Superior Court for the County of San Luis Obispo. 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.
On November 3, 1995, the United States filed suit against the Company in
United States District Court for the Central District of Illinois seeking up to
$4.5 million in civil penalties for the alleged discharge of pollutants in
violation of the Clean Water Act. In this action, the United States alleges
that, at various times from 1990 to 1993, the Company discharged pollutants into
the Illinois River from its Mapleton, Illinois facility without first obtaining
a National Pollutant Discharge Elimination System Permit.
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. However, depending on the amount and timing
of an unfavorable resolution of these contingencies, it is possible that the
Company's future results of operations could be materially affected in a
particular period.
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, 1995.
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EXECUTIVE OFFICERS OF THE COMPANY
The following sets forth information regarding executive officers of the
Company as of February 29, 1996, and is included in Part I in accordance with
Instruction 3 of Item 401(b) of Regulation S-K.
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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 52
Vice President and Controller
John M. Bondur .............................. 1995 Managing director, Ward Howell 52
Vice President -- Human Resources International -- 1989 to 1995.
Bruce G. Davis .............................. 1995 Vice President Purchasing and Logistics, 47
Vice President -- Purchasing and Logistics Standard Products -- 1993 to 1995.
Manager -- Materials, Sourcing and Support
Operations, GE Transportation Systems -- 1990
to 1993.
Ronald Edelstein ............................ 1995 Vice President -- Information Systems -- April 46
Chief Information Officer, Vice 1992 to December 1995. General
President -- Information Systems Manager -- 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 49
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 58
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 64
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, Inc, prior 46
Vice President, General Counsel and to April 1993.
Corporate Secretary
Lawrence B. Nelson .......................... 1990 Group Vice President -- Petroleum Group 65
Group Vice President -- Corporate
Technology
James M. Rutledge ........................... 1990 Assistant Controller 43
Vice President and Treasurer
Carl R. Soderlind ........................... 1993 Group Vice President -- Commercial 62
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 65
Chairman of the Board and Chief Executive Officer -- March 1990 to September 1990.
Officer Executive Vice President -- Finance and
Administration prior to March 1990.
</TABLE>
(table continued on next page)
10
<PAGE>
<PAGE>
(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>
CHEMICAL SEGMENT
Group Vice Presidents:
Nirmal Jain ................................. 1993 Vice President and General Manager -- Argus 58
Polymer Additives Division prior to January 1993.
Peter Loewrigkeit ........................... 1995 Group Vice President -- Resins business unit 57
Resins from 1994 to 1995, Vice
President -- Polyurethane/Polyesters business
unit from 1993 to 1994, Vice
President -- Business Manager -- Urethane
business unit from 1991 to 1993.
Frederick A. Shinners ....................... 1994 Vice President and General Manager -- GE 53
Oleochemicals/Surfactants Silicones from August 1990 to June 1994.
President -- GE Plastics, Japan prior to
August 1990.
OSI SPECIALTIES SEGMENT
Group Vice President:
David I. Barton ............................. 1995 Chairman of the Board and Chief Executive 57
Officer, OSi Specialties, Inc. -- July 1993 to
August 1995. Employed by GAF Chemicals
Corporation and its successor, International
Specialty Products, Inc. -- March 1988 to
October 1992.
PETROLEUM SEGMENT
Group Vice President:
Harvey L. Golubock .......................... 1990 Vice President Supply and Distribution prior to 53
Lubricants September 1990.
Vice Presidents:
Eric R. Myers ............................... 1993 Vice President and General Manager -- 49
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 60
INTERNATIONAL
Group Vice President:
Yuan-Hu (Dick) Liu .......................... 1995 President, Du Pont China Holding Co. Ltd., from 58
Asian Operations 1993 - 1995. Group Manager/Director Greater
China, Du Pont China Ltd. from 1987 to 1993.
</TABLE>
11
<PAGE>
<PAGE>
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>
1995 1994
---------------- ----------------
QUARTER HIGH LOW HIGH LOW
- --------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
First........................................ $29.38 $24.25 $35.00 $30.00
Second....................................... $33.13 $27.25 $32.00 $26.38
Third........................................ $35.63 $31.50 $31.25 $27.38
Fourth....................................... $35.13 $27.50 $28.75 $24.38
</TABLE>
The approximate number of holders of record of the Company's Common Stock
as of February 29, 1996, was .
Dividends on the Common Stock have been declared quarterly during the past
two years as follows:
<TABLE>
<CAPTION>
PER SHARE
------------
QUARTER 1995 1994
- ---------------------------------------------------------------------- ---- ----
<S> <C> <C>
First................................................................. $.28 $.25
Second................................................................ $.28 $.25
Third................................................................. $.28 $.28
Fourth................................................................ $.28 $.28
</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.
12
<PAGE>
<PAGE>
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 3 through 6 of the Proxy Statement to be filed
pursuant to Regulation 14A no later than March 31, 1996.
(b) Identification of Executive Officers
Reference is made to Part I of this Form 10-K.
(c) Business Experience
Reference is made to pages 3 through 6 of the Proxy Statement to be filed
pursuant to Regulation 14A no later than March 31, 1996 and Part I of this Form
10-K.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Reference is made to page 6 of the Proxy Statement to be filed pursuant to
Regulation 14A no later than March 31, 1996.
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, 1996.
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, 1996.
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, 1996.
(b) Certain Business Relationships
Reference is made to the information set forth under the captions 'Other
Transactions' on page 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, 1996.
13
<PAGE>
<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.
(i) -- 1. Agreement and Plan of Merger dated as of September 10, 1995, among Witco
Corporation, Witsel Corporation and OSi Specialties Holding Company.(3)
-- 2. Amendment dated as of October 18, 1995, to the Agreement and Plan of Merger dated
as of September 10, 1995, among Witco Corporation, Witsel Corporation and OSi
Specialties Holding Company.(4)
(iii)(A) -- Executive Compensation Plans and Arrangements Required to be Filed:
-- 1. 1986 Stock Option Plan for Employees, as amended.(5)
-- 2. 1989 Stock Option Plan for Employees.(6)
-- 3. 1992 Stock Option Plan for Employees.(7)
-- 4. Consultancy Agreement Between the Company and William Wishnick.(8)
-- 5. Witco Corporation 1994 Deferred Compensation Plan.(9)
-- 6. Supplemental Executive Retirement Plan of Witco Corporation as amended and
restated effective December 5, 1995.
11 -- Statement re Computation of Per Share Earnings.
21 -- Subsidiaries of the Registrant.
23 -- Consent of Independent Auditors.
24 -- Power of Attorney.(10)
27 -- Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K.
(i) A report on Form 8-K dated October 31, 1995, as amended by a
report on Form 8-K/A dated December 20, 1995, was filed during the quarter
ended December 31, 1995, responding to Items 2 and 5 in connection with the
Company's completion of the acquisition of OSi Specialties Holding Company.
(ii) A report on Form 8-K dated December 20, 1995, was filed during
the quarter ended December 31, 1995, responding to Item 7 filing the
historical and pro forma financial statements required by that Item as a
result of the Company's acquisition of OSi Specialties Holding Company.
(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.
(footnotes continued on next page)
14
<PAGE>
<PAGE>
(footnotes continued from previous page)
(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) This Exhibit was included as Exhibit 2(a) to Form 8-K filed with the
Securities and Exchange Commission on September 25, 1995, and such Exhibit
is hereby incorporated by reference.
(4) This Exhibit was included as Exhibit 2(c) to Form 8-K filed with the
Securities and Exchange Commission on October 31, 1995, and such Exhibit is
hereby incorporated by reference.
(5) 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.
(6) 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.
(7) 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.
(8) 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.
(9) This Exhibit was included as an exhibit to the annual report on Form 10-K
for the fiscal year ended December 31, 1994, and such Exhibit is hereby
incorporated by reference.
(10) The Power of Attorney appears on the Signature Page.
15
<PAGE>
<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 20th day of
March, 1996.
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
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
PRINCIPAL EXECUTIVE OFFICERS:
/s/ WILLIAM R. TOLLER Chairman of the Board and Chief Executive March 20, 1996
......................................... Officer
WILLIAM R. TOLLER
/s/ WILLIAM E. MAHONEY Vice Chairman and Chief Operating Officer March 20, 1996
.........................................
WILLIAM E. MAHONEY
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ MICHAEL D. FULLWOOD Executive Vice President and Chief Financial March 20, 1996
......................................... Officer
MICHAEL D. FULLWOOD
DIRECTORS:
/s/ WILLIAM J. ASHE Director March 20, 1996
.........................................
WILLIAM J. ASHE
/s/ SIMEON BRINBERG Director March 20, 1996
.........................................
SIMEON BRINBERG
/s/ WILLIAM G. BURNS Director March 20, 1996
.........................................
WILLIAM G. BURNS
</TABLE>
16
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ WILLIAM R. GRANT Director March 20, 1996
.........................................
WILLIAM R. GRANT
/s/ RICHARD M. HAYDEN Director March 20, 1996
.........................................
RICHARD M. HAYDEN
/s/ HARRY G. HOHN Director March 20, 1996
.........................................
HARRY G. HOHN
/s/ WILLIAM E. MAHONEY Director March 20, 1996
.........................................
WILLIAM E. MAHONEY
/s/ L. JOHN POLITE, JR. Director March 20, 1996
.........................................
L. JOHN POLITE, JR.
/s/ DAN J. SAMUEL Director March 20, 1996
.........................................
DAN J. SAMUEL
/s/ WILLIAM R. TOLLER Director March 20, 1996
.........................................
WILLIAM R. TOLLER
/s/ BRUCE F. WESSON Director March 20, 1996
.........................................
BRUCE F. WESSON
/s/ WILLIAM WISHNICK Director March 20, 1996
.........................................
WILLIAM WISHNICK
</TABLE>
17
<PAGE>
<PAGE>
SCHEDULE II
WITCO CORPORATION AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COLUMN C
------------------------
COLUMN E
COLUMN B ADDITIONS --------
---------- ------------------------ BALANCE
COLUMN A BALANCE AT CHARGED TO CHARGED TO COLUMN D AT END
- -------------------------------------------------- BEGINNING COSTS AND OTHER ---------- OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- -------------------------------------------------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Valuation and qualifying accounts deducted
from assets to which they apply:
Allowances for doubtful
receivables-trade..................... $8,863 $2,615 $ (3,197)(a) $1,177(b) $7,104
---------- ---------- ---------- ---------- --------
---------- ---------- ---------- ---------- --------
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(b) $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(b) $6,821
---------- ---------- ---------- ---------- --------
---------- ---------- ---------- ---------- --------
</TABLE>
- ------------
Notes:
(a) Amount principally consists of the allowance for doubtful accounts of $2.2
million from the Lubricants Group, which is reflected on the balance sheet
as net assets of discontinued operations.
(b) Uncollectible receivables charged against the allowance provided.
S-1
<PAGE>
<PAGE>
EXHIBIT 10(iii)(A)-6
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
OF
WITCO CORPORATION
AS AMENDED AND RESTATED EFFECTIVE DECEMBER 5, 1995
PREAMBLE
Witco Corporation hereby establishes this Supplemental Executive Retirement
Plan of Witco Corporation (the 'Plan') effective January 1, 1994, as amended and
restated effective December 5, 1995, in order to provide benefits to selected
executives as provided herein. The Plan is intended to replace the individual
agreements established between selected key employees and Witco Corporation
which were designed to provide 'Additional Benefits' as such term is defined in
such agreements.
The Plan is intended to be an unfunded plan maintained primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees as described in Section 201(2) of the Employee
Retirement Income Security Act of 1974, as amended.
ARTICLE I
DEFINITIONS
1.1. 'Actuarial Equivalent' means an amount or benefit of equivalent value
when calculated using the GAM 1988 Mortality Table and an interest rate equal to
the average of the market rate for 10-year Treasury notes on the last business
day of the fourth, fifth, and sixth months preceding the date on which benefit
payments under the Plan commence.
1.2. 'Affiliate' means (a) any corporation that is a member of the
'controlled group of corporations' that includes Witco, determined in accordance
with Code Section 1563(a) without regard to Code Sections 1563(a)(4) and
(e)(3)(C), and (b) any organization that is part of a group of trades or
businesses under common control pursuant to Code Section 414(b) that includes
Witco.
1.3. 'Beneficiary' means the beneficiary or beneficiaries last designated
by the Participant in writing. In the absence of an effective designation or if
the final surviving designated beneficiary has predeceased the Participant, the
Beneficiary shall be the Participant's estate. In the event the Participant is
survived by a Beneficiary who dies after payments to him have commenced but
before receiving all amounts due him under the Plan, any remaining amounts shall
be paid to an alternate beneficiary designated by the Participant or, in the
absence of an alternate surviving Beneficiary, to the estate of the last
surviving Beneficiary.
1.4. 'Benefit Commencement Date' means the first day of the month as of
which benefits under the Plan first become payable to a Participant.
1.5. 'Board of Directors' means the board of directors of Witco and any
committee authorized by such board to act on its behalf with respect to the
Plan.
1.6. 'Cause' means (a) intentional and continued failure by the Participant
to perform his duties for his Employer (other than such failure resulting from
mental or physical incapacity) or (b) intentional misconduct including, among
other things, theft, embezzlement, dishonesty, criminal conduct or disloyalty.
1.7. 'Change in Control' shall be deemed to have occurred if:
(a) any 'person', as such term is used in Sections 3(a)(9) and
13(d)(3) 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'
(which means the capital stock of any class or classes of Witco having
general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of such corporation) of Witco;
1
<PAGE>
<PAGE>
(b) 33 1/3% of the Board of Directors consists of individuals other
than the members of the Board of Directors on January 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;
(c) Witco adopts any plan of liquidation providing for the
distribution of all or substantially all of its assets;
(d) 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
(e) 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 occurs.
1.8. 'Code' means the Internal Revenue Code of 1986, as amended.
1.9. 'Committee' means the Organization and Compensation Committee
appointed by the Board of Directors (excluding any members of such committee who
are current or former employees of Witco or an Affiliate).
1.10. 'Disability' means total and permanent disability such that the
Participant is eligible to receive payments under the Witco Long-Term Disability
Plan.
1.11. 'Employer' means Witco and any other Affiliate.
1.12. 'Final Average Compensation' means the 'Average Annual Earnings'
received by a Participant during the periods specified below. Average Annual
Earnings shall mean the sum of (a) the Participant's base salary (prior to
reduction for any contributions that are determined on a salary reduction basis
under any plan maintained by Witco or an Affiliate) received during the 36
complete months of employment (or, if shorter, the actual months of employment)
with an Employer preceding the Participant's termination of employment, divided
by 3, and (b) the average of the highest three bonuses awarded under the Witco
Corporation Officers' Annual Incentive Plan, the Management Incentive Plan or
any other annual cash bonus plan of an Employer during the 60 complete months of
employment (or, if shorter, the actual months of employment) with an Employer
preceding the Participant's termination of employment; provided, however, that
Earnings shall not include salary or bonus awarded by any company acquired by
Witco or an Affiliate with respect to any period ending on or prior to the
acquisition date. For purposes of this definition, a Participant' employment
with an acquired Employer shall not be counted as 'months of employment'.
1.13. 'Good Reason' means (a) following a Change in Control, the assignment
to the Officer of any duties inconsistent in any material respect with the
Officer's position or any other action by his Employer which results in a
material diminution or material adverse change in his position, status,
authority, duties or responsibilities as in effect immediately prior to the
Change in Control, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied promptly after
receipt of notice thereof given by the Officer; (b) a material reduction in the
Officer's compensation as in effect immediately prior to the Change in Control
without his express written consent; or (c) the relocation of the Officer's
office (other than a relocation to Greenwich, Connecticut) in excess of 25 miles
from the location where the Officer was based prior to the Change in Control or
a requirement that the Officer travel on business of his Employer to an extent
materially greater than his business travel obligations prior to the Change in
Control.
1.14. 'Normal Retirement Date' means the first day of the month coinciding
with or next following the Participant's 65th birthday.
1.15. 'Normal Supplemental Retirement Benefit' means the benefit computed
in accordance with Section 3.1.
2
<PAGE>
<PAGE>
1.16. 'Officer' means an employee of an Employer who is elected as an
officer by the Board of Directors.
1.17. 'Participant' means an Officer of an Employer who is designated by
the Board of Directors as a Participant under the Plan.
1.18. 'Plan' means the Supplemental Executive Retirement Plan of Witco
Corporation as set forth in this document, as it may be amended from time to
time.
1.19. 'Retirement Plan' means the Witco Corporation Retirement Plan as it
may be amended from time to time.
1.20. 'Social Security Primary Benefit' means the annual primary old-age
insurance benefit which the Participant would be entitled to receive under the
Social Security Act as defined in the Retirement Plan. For purposes of
determining a Normal Supplemental Retirement Benefit under Section 3.3, Social
Security Primary Benefit shall mean the Participant's disability benefit which
he is entitled to receive under the Social Security Act.
1.21. 'Witco' means Witco Corporation or any successor thereto.
The masculine pronoun, wherever used herein, shall include the feminine
pronoun, unless the context clearly indicates a different meaning.
ARTICLE II
PARTICIPATION
2.1. Initial Participation. The Board of Directors shall designate
specified Officers to be Participants in the Plan. In determining whether an
Officer shall be designated as a Participant, the Board of Directors may
consider the nature of the services rendered by the Officer, his contributions
to the success of the Employer, his seniority, remuneration and position and
such other factors as the Board of Directors deems relevant.
With respect to the participation of Officers as of the Effective Date, an
Officer shall become a Participant if he is designated as eligible to become a
Participant pursuant to resolutions adopted by the Board of Directors on October
17, 1993, and if he had a prior individual agreement with Witco designed to
provide the Officer with 'additional benefits' as defined therein, the Officer
agrees in writing to waive all rights under such agreement in a manner
prescribed by the Committee.
2.2. Termination of Participation. In the event a Participant is demoted
so that he ceases to be an Officer but he continues in the employ of an
Employer, his benefit under the Plan shall be frozen at the level in effect as
of the date of his change in status and he shall only be entitled to such
benefit if he meets the requirements of Sections 3.1, 3.2, 3.3, 3.4 or 3.6
(other than the requirement that he be an active Officer at his date of
retirement, Disability, termination of employment, or death).
ARTICLE III
BENEFITS
3.1. Normal Supplemental Retirement Benefit. Each Participant who retires
from the employ of an Employer as an active Officer on or after attaining age 65
shall be entitled to receive a monthly Normal Supplemental Retirement Benefit
commencing at his Normal Retirement Date equal to one-twelfth of the annual
benefit which is equal to:
(a) 50% of the Participant's Final Average Compensation; reduced by
(b) the sum of (1), (2) and (3) where (1), (2) and (3) are defined to
mean:
(1) any amount payable pursuant to the Retirement Plan;
(2) any amount payable pursuant to the Excess Benefit and
Compensation Cap Plan of Witco Corporation; and
(3) an amount equal to 50% of his Social Security Primary Benefit.
The Social Security Primary Benefit shall be converted to an annual
benefit and shall be adjusted to the amount that would be payable at age
65 if his Social Security retirement age is greater than age 65.
3
<PAGE>
<PAGE>
The amounts determined under (b)(1) and (b)(2) shall, in the case of a married
Participant, be determined as if they were to be paid on a 50% joint and
survivor basis; or, in the case of a single Participant or a married Participant
whose beneficiary is other than spouse, be determined as if they were to be paid
on a 10 year certain and life basis regardless of the actual form of payment.
3.2. Early Retirement Benefit. Each Participant who retires from the
employ of an Employer as an active Officer prior to attaining age 65 but on or
after attaining age 62 shall be entitled to receive a monthly pension commencing
on the first day of the month coinciding with or next following his date of
retirement equal to one-twelfth of the annual benefit which is equal to:
(a) 50% of the Participant's Final Average Compensation reduced by
5/9ths of 1% for each month that the Participant's Benefit Commencement
Date precedes his Normal Retirement Date; provided, however, that at the
discretion of the Board of Directors, this reduction may be waived; reduced
by
(b) the sum of (1), (2) and (3) where (1), (2) and (3) and defined to
mean:
(1) any amount payable pursuant to the Retirement Plan as of his
Benefit Commencement Date;
(2) any amount payable pursuant to the Excess Benefit and
Compensation Cap Plan of Witco Corporation as of his Benefit
Commencement Date; and
(3) an amount equal to 50% of his Social Security Primary Benefit.
The Social Security Primary Benefit shall be converted to an annual
benefit and shall be adjusted to the amount that would be payable at his
Benefit Commencement Date.
The amounts determined under (b)(1) and (b)(2) shall, in the case of a married
Participant, be determined as if they were to be paid on a 50% joint and
survivor basis, or, in the case of a single Participant or a married Participant
whose beneficiary is other than spouse, be determined as if they were to be paid
on a 10 year certain and life basis regardless of the actual form of payment.
3.2.A. Recalculation of Benefit. If, after a Participant retires, (i) the
Participant is entitled to a benefit calculated pursuant to Section 3.1 or
Section 3.2, (ii) the Participant is awarded a bonus under the Witco Corporation
Officers' Annual Incentive Plan (or under any other annual cash bonus plan of an
Employer) with respect to the year in which he retires (a 'Retirement Year
Bonus'), and (iii) the Retirement Year Bonus awarded to the Participant is
greater than one of the three bonuses used in the calculation of Final Average
Compensation to determine the Participant's supplemental retirement benefit, the
Participant's supplemental retirement benefit shall be recalculated under
Section 3.1 or 3.2, as applicable, in the same manner as originally calculated
(and without regard to any changed circumstances since the original retirement
date) except that Final Average Compensation shall be redetermined by
substituting the lowest of the 3 bonuses used in the calculation of Final
Average Compensation with the Retirement Year Bonus. The increase in a
Participant's supplemental retirement benefit effected by the recalculation
shall be made retroactive to the date of the Participant's retirement, and the
excess of the Participant's recalculated benefit over the benefit actually
received by the Participant prior to the recalculation date shall be paid in one
lump sum as soon as practicable following the recalculation date.
3.3. Disability Retirement Benefit. Each Participant whose employment with
an Employer is terminated prior to his Normal Retirement Date as a result of
Disability shall be entitled to receive his Normal Supplemental Retirement
Benefit determined in accordance with the formula in Section 3.1 payable
commencing on the first day of the month coinciding with or next following the
determination that he has incurred a Disability; provided, however, that in
determining the reduction applicable under Section 3.1(b), the reduction shall
be determined as of the later of the date of the Participant's Disability or the
earliest commencement date of such benefit under the applicable plan or the
Social Security Act. In the event that a Participant's Disability retirement
benefit commences prior to the date a benefit can be paid under one of such
plans or the Social Security Act, the reduction shall only be applied to reduce
his benefit under this Plan when reducing benefit is actually available to the
Participant. In addition, a Participant's Disability retirement benefit under
this Plan shall be reduced by any amounts paid under the Witco Long-Term
Disability Plan. In the event the Participant recovers from his Disability
before his Normal Retirement Date and does not resume participation in this
Plan,
4
<PAGE>
<PAGE>
he shall only be entitled to a termination benefit as described in Section 3.4
or, if eligible at the time of his Disability, an early retirement benefit as
described in Section 3.2.
3.4. Termination Benefit. Except as provided in this Section 3.4, each
Participant whose employment with the Employer is terminated prior to his
attainment of age 62 other than as a result of Disability or death, shall not be
entitled to any benefits under this Article III; provided, however, that in the
event his employment is terminated at the option of his Employer for reasons
other than Cause, the Board of Directors, in its absolute discretion, may decide
to provide him with his Normal Supplemental Retirement Benefit payable
commencing on his Normal Retirement Date. In the event of the death prior to his
Benefit Commencement Date of such a Participant with respect to whom the Board
of Directors has decided to provide a Normal Supplemental Retirement Benefit,
his Beneficiary shall be entitled to the death benefit described in Section 3.6.
3.5. Form of Pension Payments. (a) The normal form of payment of benefits
payable under this Article III, shall be a monthly pension equal to the amount
determined under Sections 3.1, 3.2, 3.3 or 3.4, as the case may be, payable to
the Participant for life with no further payments due after the Participant's
death.
(b) Alternatively, at any time prior to his Benefit Commencement Date, a
Participant may elect to receive his pension in one of the following forms:
(1) Joint and Survivor Option -- a monthly pension equal to the amount
determined under Sections 3.1, 3.2, 3.3 or 3.4, as the case may be, payable
to the Participant for life with the provision that after his death, a
monthly pension shall continue to his surviving spouse (to whom he is
married at his Benefit Commencement Date) for the remainder of the spouse's
life in an amount equal to 50% of the Participant's pension. The
Participant may elect to receive the Actuarial Equivalent of the joint and
50% survivor option payable as a joint and 75% or 100% survivor option, in
which case 75% or 100%, respectively, of the Participant's pension will be
continued to his surviving spouse for life.
(2) 15-Year Certain and Life Option -- a monthly pension equal to the
amount determined under Sections 3.1, 3.2, 3.3 or 3.4, as the case may be,
payable to the Participant for life or for 15 years, whichever is longer.
If a Participant dies before the expiration of the 15-year period certain,
payments shall be continued to the Participant's Beneficiary for the
remainder of such period or, in the absence of a surviving Beneficiary, the
Actuarial Equivalent of such payments shall be paid in a lump sum to the
Participant's estate.
(3) Cash Refund Option -- a monthly pension equal to the amount
determined under Sections 3.1, 3.2, 3.3. or 3.4, as the case may be,
payable to the Participant for life and, at his death, any excess of the
Actuarial Equivalent value of the pension determined at his Benefit
Commencement Date (on a 15-year certain and life basis) over the amount of
payments actually received by him shall be paid to the Participant's
Beneficiary in a single sum.
Each Participant shall elect a form of payment upon becoming a Participant. Such
election may be changed at any time prior to his Benefit Commencement Date.
3.6. Death Benefits. In the event of the death prior to his Benefit
Commencement Date of a Participant (a) who is an active Officer at the time of
his death, (b) who has ceased to be a Participant as a result of a demotion in
accordance with Section 2.2 but who is still employed by Witco or an Affiliate
at his date of death or (c) whose employment was terminated at the option of his
Employer and the Board of Directors elected to provide him with a Normal
Supplemental Retirement Benefit in accordance with Section 3.4, his Beneficiary
shall receive a death benefit. Such death benefit shall be equal to his Normal
Supplemental Retirement Benefit payable commencing on the first day of the month
coinciding with or next following the Participant's date of death; provided,
however, that in determining the reduction applicable under Section 3.1(b), the
reduction shall be determined as of the later of the date of the Participant's
death or the earliest commencement date of such benefit under the applicable
plan or the Social Security Act. In the event that a death benefit commences
hereunder prior to the date a benefit can be paid under one of such plans or the
Social Security Act, the reduction shall only be applied to reduce his benefit
under this Plan when the reducing benefit is actually available to the
Participant. Such benefit shall be paid in the form last selected by the
Participant prior to his death,
5
<PAGE>
<PAGE>
i.e., (i) as an annuity for the life of his spouse equal to 50% of the
Participant's Normal Supplemental Retirement Benefit if he elected the joint and
survivor option, (ii) over 15 years if he elected the 15-year certain and life
option, or (iii) in a lump sum that is the Actuarial Equivalent of the benefit
payable on a full cash refund basis if he elected the full cash refund option.
ARTICLE IV
BENEFITS ON A CHANGE IN CONTROL
4.1. Change in Control Benefit. In addition to any other benefits payable
hereunder, in the event of the termination of a Participant's employment within
three years after a Change in Control, by an Employer (other than for Cause), or
by the Participant for Good Reason, the Participant shall be entitled to receive
an amount equal to three times his average annual total compensation received
from Witco or any Affiliate for the five calendar years ending before the year
in which the Change in Control occurs (determined in accordance with Code
Section 280G(b)) less one dollar. Such benefit shall be paid in a lump sum as
soon as practicable following the Participant's termination of employment.
4.2. Limitation. In addition to the amount payable pursuant to Section
4.1, in the event that any payment received or to be received by the Participant
in connection with a Change in Control (whether pursuant to the terms of this
Plan or any other plan, arrangement or agreement with Witco or an Affiliate)
would be subject to the excise tax imposed by Code Section 4999, the Participant
shall be entitled to receive an amount equal to any (a) excise tax liability
imposed by Code Section 4999 plus (b) Federal, state and local income taxes and
additional excise taxes imposed by Section 4999 of the Code on the Participant
(or his Beneficiary) as a result of the payment of the amounts in clauses (a)
and (b) of this sentence.
ARTICLE V
ADMINISTRATION
5.1. Administration. The Plan shall be administered by the Committee which
may employ agents and may delegate any of its rights, powers, duties and
responsibilities with respect to the operation and administration of the Plan to
any other person (whether or not an employee of an Employer) or organization.
5.2. Powers and Duties. In addition to any implied powers and duties that
may be needed to carry out the provisions of the Plan, the Committee shall have
the following specific powers and duties:
(a) to make and enforce such rules and regulations as it shall deem
necessary or proper for the efficient administration of the Plan;
(b) to interpret the Plan and to decide any and all matters arising
under the Plan, including the right to remedy possible ambiguities,
inconsistencies or omissions; provided, however, that all such
interpretations and decisions shall be applied in a uniform and
nondiscriminatory manner to all Officers similarly situated;
(c) to compute the amount of benefits that shall be payable to any
Participant or Beneficiary in accordance with the provisions of the Plan;
(d) to authorize disbursements with respect to the Plan on behalf of
Witco; and
(e) to allocate, from time to time, to one or more of its members any
of its rights, powers, duties and responsibilities with respect to the
operation and administration of the Plan.
5.3. Benefit Claim Procedures. Applications for benefits shall be
processed in the same manner as applications for benefits under the Retirement
Plan.
5.4. Member's Own Participation. No member of the Committee may act, vote
or otherwise influence a decision of the Committee specifically relating to his
participation under the Plan.
6
<PAGE>
<PAGE>
ARTICLE VI
AMENDMENT AND TERMINATION
The Board of Directors may, in its absolute discretion, without notice, at
any time and from time to time, modify or amend, in whole or in part, any or all
of the provisions of the Plan, or suspend or terminate it entirely, provided,
that no such modification, amendment, suspension or termination may apply,
without his consent, to or affect the payment or distribution to any Participant
or adversely affect the right of any Participant to any benefits provided under
the Plan as in effect as of the date on which he first became a Participant.
ARTICLE VII
GENERAL PROVISIONS
7.1. Funding. Distributions under the Plan shall be made solely from the
general assets of Witco. A Participant or Beneficiary shall have only the rights
of a general unsecured creditor of Witco with respect to any rights under the
Plan. Except as provided in the next sentence, no Participant, Beneficiary or
any other person shall have any interest in any fund or in any specific asset or
assets of Witco by reason of the right to receive a benefit under the Plan. The
Board of Directors shall establish a trust to accumulate funds to provide
benefits under the Plan. Such trust shall at all times be subject to the claims
of general creditors of Witco and shall comply with such other requirements as
the Internal Revenue Service may require for so-called 'rabbi trusts'.
Prior to a Change in Control, Witco may, but is not required to, contribute
cash or other property to the trust from time to time. Upon a Change in Control,
Witco or any successor corporation shall, as soon as possible, but in no event
later than 30 days following the Change in Control make an irrevocable
contribution to the trust in an amount sufficient to pay each Participant or, in
the event of the death of a Participant, his Beneficiary, the benefits to which
he would be entitled as of the date on which the Change in Control occurred
assuming termination of employment on the date of the Change in Control under
circumstances that would entitle the Participant to benefits pursuant to Article
IV.
7.2. No Guarantee of Employment. The Plan shall not be deemed to
constitute a contract between an Employer and any Participant or to be a
consideration for, or an inducement for, the employment of any Participant by an
Employer. Nothing contained in the Plan shall be deemed to give any Participant
the right to be retained in the service of an Employer or to interfere with the
right of the Employer to discharge or to terminate the service of any
Participant at any time without regard to the effect such discharge or
termination may have on any rights under the Plan.
7.3. Payments to Minors and Incompetents. If a person entitled to receive
any payments under the Plan is a minor or is deemed by the Committee or is
adjudged to be legally incapable of giving valid receipt and discharge for such
payments, the Committee may direct payments to the legal representative of such
person, or if none, to a person designated by the Committee for the benefit of
such person, or the Committee may direct application of the payment for the
benefit of such person in such manner as the Committee considers advisable. Such
payment shall, to the extent made, be deemed a complete discharge of any
liability for such payment under the Plan.
7.4. Nonalienation of Benefits. To the extent permitted by law, no
benefits payable under the Plan will be subject in any manner to anticipation,
assignment, garnishment or pledge; and any attempt to anticipate, assign,
garnish or pledge the same will be void; no such benefits will be in any manner
liable for or subject to the debts, liabilities, engagements or torts of any
person entitled to receive such benefits.
7.5. Applicable Laws; Severability. This document shall be construed,
administered and governed in all respects under and by the laws of the United
States and, to the extent applicable, under and by the laws of the State of New
York. If any provision of this document shall be held by a court or governmental
agency of competent jurisdiction to be invalid or unenforceable, the remaining
provisions of this document shall continue to be fully effective.
7
<PAGE>
<PAGE>
EXHIBIT 11
WITCO CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Primary
Income from continuing operations......................................... $100,346 $ 94,420 $25,132
Interest on convertible subordinated debentures (net of tax).............. -- 1,109 5,363
Adjustment for dividend requirements of preferred stock................... (19) (20) (24)
-------- -------- -------
100,327 95,509 30,471
Income (loss) from discontinued operations -- net of income taxes......... 4,099 12,647 (5,369)
-------- -------- -------
Total................................................................ $104,426 $108,156 $25,102
-------- -------- -------
-------- -------- -------
Weighted average shares outstanding....................................... 56,312 54,812 49,055
Assumed conversions:
Convertible subordinated debentures..................................... -- 1,266 5,500
Stock options........................................................... 237 300 311
-------- -------- -------
Total................................................................ 56,549 56,378 54,866
-------- -------- -------
-------- -------- -------
Net Income Per Common Share:
Income from continuing operations....................................... $ 1.78 $ 1.70 $ 0.56
Income (loss) from discontinued operations -- net of income taxes....... 0.07 0.22 (0.10)
-------- -------- -------
Net income.............................................................. $ 1.85 $ 1.92 $ 0.46
-------- -------- -------
-------- -------- -------
Fully Diluted
Income from continuing operations......................................... $100,346 $ 94,420 $25,132
Interest on dilutive debentures (net of tax).............................. -- 1,109 5,366
-------- -------- -------
100,346 95,529 30,498
Income (loss) from discontinued operations -- net of income taxes......... 4,099 12,647 (5,369)
-------- -------- -------
Total................................................................ $104,445 $108,176 $25,129
-------- -------- -------
-------- -------- -------
Weighted average shares outstanding....................................... 56,312 54,812 49,055
Assumed conversions:
Convertible subordinated debentures..................................... -- 1,266 5,519
Stock options........................................................... 237 300 465
Preferred stock......................................................... 117 129 149
-------- -------- -------
Total................................................................ 56,666 56,507 55,188
-------- -------- -------
-------- -------- -------
Net Income Per Common Share:
Income from continuing operations....................................... $1.77 $1.69 $ 0.56
Income (loss) from discontinued operations -- net of income taxes....... 0.07 0.22 (0.10)
-------- -------- -------
Net income.............................................................. $1.84 $1.91 $0.46
-------- -------- -------
-------- -------- -------
</TABLE>
<PAGE>
<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, 1995
<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, 1995, are included in Item
8:
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Report of Independent Auditors.................................................................... F-1
Consolidated Balance Sheets -- December 31, 1995 and 1994......................................... F-2
Consolidated Statements of Income -- Years Ended December 31, 1995, 1994 and 1993................. F-3
Consolidated Statements of Cash Flows -- Years Ended December 31, 1995, 1994 and 1993............. F-4
Consolidated Statements of Shareholders' Equity -- Years Ended December 31, 1995, 1994 and 1993... 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>
<PAGE>
Eleven-Year Financial and Statistical Summary
Witco Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
==========================================================================================================================
(thousands of dollars except per share data) 1995 1994 1993
- ----------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Selected Statement of Income Data(e)
Net sales $ 1,985,077 $ 1,841,414 $ 1,763,086
Interest 15,104 10,032 8,679
- ----------------------------------------------------------------------- ----------- ----------- -----------
Total revenues 2,000,181 1,851,446 1,771,765
- ----------------------------------------------------------------------- ----------- ----------- -----------
Cost of goods sold (exclusive of depreciation and amortization) 1,548,943 1,412,079 1,363,246
Selling and administrative expenses 199,452 185,576 181,173
Depreciation and amortization 102,571 88,663 86,480
Interest 43,689 29,674 34,984
Other expense (income) - net (55,278)(a)(b) (9,708) 64,585(c)
- ----------------------------------------------------------------------- ----------- ----------- -----------
Total costs and expenses 1,839,377 1,706,284 1,730,468
- ----------------------------------------------------------------------- ----------- ----------- -----------
Income from continuing operations before federal and
foreign income taxes 160,804 145,162 41,297
Federal and foreign income taxes 60,458 50,742 16,165
- ----------------------------------------------------------------------- ----------- ----------- -----------
Income from continuing operations 100,346 94,420 25,132
Income (loss) from discontinued operations - net of income taxes 4,099 12,647 (5,369)
- ----------------------------------------------------------------------- ----------- ----------- -----------
Income before cumulative effect of accounting change 104,445 107,067 19,763
Cumulative effect of accounting change - - -
- ----------------------------------------------------------------------- ----------- ----------- -----------
Net Income $ 104,445 $ 107,067 $ 19,763
- ----------------------------------------------------------------------- ----------- ----------- -----------
Selected Balance Sheet Data
Working capital $ 249,580 $ 551,620 $ 451,235
Current ratio 1.36 2.60 2.32
Property, plant, and equipment expenditures (including acquisitions) $ 343,030 $ 107,438 $ 103,689
Property, plant, and equipment - net $ 811,667 $ 719,966 $ 696,462
Total assets $ 2,772,444 $ 1,919,345 $ 1,838,998
Long-term debt $ 683,830 $ 346,545 $ 496,266
Total shareholders' equity $ 1,004,117 $ 940,006 $ 713,415
Book value per common share $ 17.78 $ 16.73 $ 14.12
- ----------------------------------------------------------------------- ----------- ----------- -----------
Selected Other Financial Data
Number of shareholders - at year end 4,990 5,194 5,253
Weighted average number of common shares outstanding
(in thousands) 56,549 56,378 54,866
Per common share:
Income from continuing operations $ 1.78 $ 1.70 $ .56
Net income $ 1.85 $ 1.92 $ .46
Net income - assuming full dilution $ 1.84 $ 1.91 $ .46
Dividends declared $ 1.12 $ 1.06 $ .96
Dividends paid per share:
Common stock $ 1.12 $ 1.03 $ .94
Preferred stock $ 2.65 $ 2.65 $ 2.65
Market price to the nearest dollar, per common
share on New York Stock Exchange (high-low) $ 36-24 $ 35-24 $ 32-24
==========================================================================================================================
</TABLE>
(a) Includes a provision of $51.9 million related to plant consolidation,
environmental remediation and litigation.
(b) Includes gains of $52.9 million as a result of settlements with certain of
the Company's insurers, net of related legal and other costs and $51.2
million from the disposition of businesses.
(c) Includes a provision for environmental remediation and compliance,
disposition of a business, work force reduction, and other matters of $68.9
million.
(d) Includes a provision for consolidation of offices of $20.1 million.
(e) Amounts differ from previously reported amounts due to the presentation of
the Lubricants Group as discontinued operations.
1
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
=====================================================================================================
1992 1991 1990 1989 1988 1987 1986 1985
- ----------- ---------- ---------- ---------- ----------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,342,012 $1,244,949 $1,228,837 $1,219,153 $ 1,220,246 $ 1,050,643 $965,901 $1,010,289
9,303 10,529 19,380 21,248 15,792 12,405 6,595 3,369
- ----------- ---------- ---------- ---------- ----------- ----------- -------- ----------
1,351,315 1,255,478 1,248,217 1,240,401 1,236,038 1,063,048 972,496 1,013,658
- ----------- ---------- ---------- ---------- ----------- ----------- -------- ----------
1,055,047 979,902 973,906 962,314 954,669 818,918 747,971 811,058
139,438 135,373 126,297 127,985 129,053 115,750 116,499 107,796
61,130 53,681 47,155 44,871 42,064 41,868 42,779 41,183
16,448 16,027 16,400 16,289 16,394 15,732 12,045 11,343
20,734(d) (1,665) (8,989) 53,666 11,196 116 (786) (6,613)
- ----------- ---------- ---------- ---------- ----------- ----------- -------- ----------
1,292,797 1,183,318 1,154,769 1,205,125 1,153,376 992,384 918,508 964,767
- ----------- ---------- ---------- ---------- ----------- ----------- -------- ----------
58,518 72,160 93,448 35,276 82,662 70,664 53,988 48,891
20,178 23,492 33,626 11,900 32,554 26,652 24,478 21,357
- ----------- ---------- ---------- ---------- ----------- ----------- -------- ----------
38,340 48,668 59,822 23,376 50,108 44,012 29,510 27,534
15,525 24,807 8,132 11,633 21,513 19,281 35,705 29,240
- ----------- ---------- ---------- ---------- ----------- ----------- -------- ----------
53,865 73,475 67,954 35,009 71,621 63,293 65,215 56,774
(14,690) - - - 20,289 - - -
- ----------- ---------- ---------- ---------- ----------- ----------- -------- ----------
$ 39,175 $ 73,475 $ 67,954 $ 35,009 $ 91,910 $ 63,293 $ 65,215 $ 56,774
- ----------- ---------- ---------- ---------- ----------- ----------- -------- ----------
$ (21,611) $ 320,934 $ 359,091 $ 456,183 $ 439,250 $ 417,332 $246,661 $ 233,554
.97 2.25 2.76 3.54 3.24 3.06 2.49 2.34
$ 322,786 $ 74,307 $ 106,650 $ 70,387 $ 79,509 $ 82,090 $ 60,102 $ 75,606
$ 721,171 $ 474,755 $ 471,026 $ 417,175 $ 400,996 $ 374,628 $367,789 $ 360,950
$ 1,811,794 $1,198,276 $1,178,885 $1,139,256 $ 1,114,575 $ 1,056,298 $819,768 $ 810,292
$ 173,086 $ 179,132 $ 230,183 $ 235,510 $ 240,709 $ 242,641 $ 95,590 $ 136,020
$ 614,296 $ 625,700 $ 587,472 $ 571,582 $ 578,341 $ 513,615 $465,465 $ 415,410
$ 13.80 $ 14.35 $ 13.55 $ 12.67 $ 12.89 $ 11.47 $ 10.43 $ 9.39
- ----------- ---------- ---------- ---------- ----------- ----------- -------- ----------
5,262 5,602 5,949 5,635 5,784 5,823 5,965 6,228
49,801 49,212 49,703 50,674 50,499 49,477 44,538 44,267
$ .88 $ 1.10 $ 1.32 $ .57 $ 1.10 $ .97 $ .67 $ .62
$ .90 $ 1.60 $ 1.48 $ .80 $ 1.93 $ 1.36 $ 1.47 $ 1.28
$ .89 $ 1.59 $ 1.47 $ .79 $ 1.91 $ 1.35 $ 1.44 $ 1.26
$ .92 $ .91 $ .86 $ .84 $ .73 $ .60 $ .55 $ .50
$ .92 $ .89 $ .86 $ .81 $ .70 $ .58 $ .53 $ .50
$ 2.65 $ 2.65 $ 2.65 $ 2.65 $ 2.65 $ 2.65 $ 2.65 $ 2.65
$ 25-20 $ 22-14 $ 20-11 $ 23-17 $ 19-15 $ 24-13 $ 20-13 $ 14-11
=====================================================================================================
</TABLE>
2
<PAGE>
<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 the Company's liquidity, provided funds of $454.1 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 amount of dividends paid
to shareholders. 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.
During the fourth quarter of 1995, the Company acquired OSi Specialties Holding
Company and its wholly owned subsidiary OSi Specialties, Inc. (collectively "OSi
Specialties," or "OSi") in a cash transaction for $486 million. The acquisition
was financed with cash on hand and short-term bank loans of $375 million under a
credit agreement totaling $675 million with a consortium of banks.
The Company subsequently purchased for cash all of OSi's 11.50% Senior Secured
Discount Debentures due 2004 for $137.6 million and more than 99% of OSi
Specialties' 9.25% Senior Subordinated Notes due 2003 for $140.1 million. The
Company funded the redemption with short-term bank loans under the $675 million
credit agreement.
The Company had $605 million of bank loans outstanding under the credit
agreement as of December 31, 1995. In February 1996, the Company issued $150
million of 6.125% Notes due 2006 and $150 million of 6.875% Debentures due 2026,
netting approximately $297 million. The net proceeds, plus cash on hand, were
used to repay $300 million of short-term bank loans under the credit agreement.
Immediately thereafter, the availability under the credit agreement, as amended,
was reduced to $375 million. The Company plans to repay the remaining $305
million with proceeds from the sale of the Lubricants Group, cash flow from
operations or additional long-term financing.
As the Company continues to focus on global expansion, it has, through certain
of its international subsidiaries, arrangements with various banks for lines of
credit. At December 31, 1995, these lines of credit aggregated $50.9 million, of
which $47.1 million was unused at year-end. The Company has also entered into
certain long-term hedging arrangements to protect against possible adverse
currency exchange and interest rate fluctuations (see Note 13 of Notes to
Financial Statements for additional details).
Further progress has been made in divesting non-core businesses. The Company
completed the divestiture of its Diversified Products Segment during the second
quarter of 1995 with the sale of its Battery Parts and Carbon Black operations
in March and June, respectively, for approximately $146 million in cash.
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, inflationary factors, product supply, economic controls,
and nationalization and appropriation, the Company does not believe these
factors will significantly affect its operations.
The Company periodically evaluates, and periodically reviews with the Finance
Committee of the Board of Directors, 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 1995, the Company continued to upgrade existing facilities and to expand
capacity to meet changing market demands. Total capital expenditures for 1995
were $115.8 million. Capital expenditures related to continuing operations were
$98.3 million, bringing the total for the past three years to $276 million. The
capital investment program in 1996 will continue to focus on capacity expansion
and market share growth and is expected to exceed 1995 levels. Investments in
the form of research and development, quality initiatives, and marketing
alliances will also continue in all key product lines.
The acquisition of OSi not only adds strategic research and development
capabilities along with a full line of silicone surfactants, amine catalysts,
organofunctional silanes and specialty fluids, but provides the base for
acceleration of growth of the Company's existing
3
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<PAGE>
products in Asia, South America and Eastern Europe. During 1996, the Company
will be committed to the successful integration of this acquisition.
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. In early 1996, the Company acquired a resins manufacturing plant in
Singapore. The Company presently anticipates that additional capital investments
may be in the form of joint ventures. For non-capital initiatives, cooperative
marketing and technical agreements will be pursued.
In addition, to effectively service the expanding customer base in Asia, the
Company plans on establishing a local technical support center. This service
center will house lab personnel and technical service representatives whose
function will be to address the specific needs of customers in that part of the
world.
The evaluation and development of specific businesses or opportunities will take
place throughout 1996 with the focus on: surfactants for agriculture, personal
care, and laundry products; polyurethane systems for footwear manufacturers; and
lubricants for plastics including polyethylene, polypropylene, and film.
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. The Company's
international production facilities operate in an environmental regulatory
framework in which governmental authorities typically are granted broad
discretionary powers which require manufacturing facilities to obtain operating
permits to continue operations.
The Company believes that expenditures for compliance with these statutes,
regulations, and permits will continue to have a significant impact upon the
conduct of its business. The trend toward greater environmental awareness and
more stringent environmental regulations is likely to continue, and while the
Company cannot accurately predict how this will affect future operations and
earnings, the Company does not believe its costs will significantly vary from
those of its competitors.
Consistent with the Company's concern for the protection and improvement of the
environment worldwide, the Company continually monitors the environmental impact
of past and present operating practices in light of changing environmental
standards. Where remedial action is indicated, the Company assesses the
probability and scope of potential remediation costs. To determine the
appropriate reserve amounts, management reviews on a quarterly basis, currently
available information pertaining to each environmental site. Inherent in this
process are considerable uncertainties which affect the Company's ability to
estimate the ultimate costs of remediation. Such uncertainties include the
nature and extent of contamination at each site, evolving governmental standards
regarding remediation requirements, changes in environmental regulations, widely
varying costs of 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. As a result, as remediation efforts proceed at existing
sites and new sites are assimilated into the review process, charges against
income for environmental reserves could have a material effect on results of
operations in a particular quarter or year. However, such charges are not
expected to have a material adverse effect on the Company's consolidated
financial position, cash flow, or liquidity.
The Company has numerous insurance policies which it believes provide coverage
for certain environmental liabilities. The Company has settled litigation during
1995 with most of its insurers concerning the applicability and amount of
insurance coverage for environmental costs under these policies. The results of
continuing operations for 1995 include a pre-tax gain of $52.9 million, as a
result of settlements with certain of the Company's insurers, net of related
legal and other costs. Additional settlements are expected during 1996.
Environmental reserves related to continuing operations at December 31, 1995
amounted to $83.6 million, which reflects management's assessment of future
remediation costs in light of currently available information. Reme-diation
expenditures charged to those reserves were $13.7 million in 1995 and include
expenditures currently mandated as well as those not required by any regulatory
authority or third party. The Company anticipates 1996 expenditures to
approximate $24 million.
Capital expenditures for air, water, and solid waste control equipment and
facilities related to continuing operations amounted to $8.9 million in 1995.
The Company
4
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<PAGE>
estimates that approximately $20 million will be expended on similar capital
projects in 1996.
The Company is continuing its efforts to reduce hazardous waste and emissions
generated by its operations. Through improved operating efficiencies,
installation of additional environmental control equipment, and utilization of
the latest innovations in waste treatment technology, management believes that
direct recurring operating costs associated with managing hazardous substances
and pollution can be maintained at current levels. Such costs related to
continuing operations amounted to $28.2 million in 1995.
Contingencies
The Company has been notified that it is a potentially responsible party ("PRP")
or a defendant in a number of governmental (federal, state, and local) and
private actions associated with the release, or suspected release, of
contaminants into the environment. As a PRP, the Company may be liable for costs
associated with the investigation and remediation of environmental
contamination, as well as various penalties, and damages to persons, property,
and 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
for any particular quarterly or annual period, could be materially affected by
such legal proceedings or environmental matters. However, the Company does not
expect the results of such proceedings or environmental matters to materially
affect its competitive position.
Discontinued Operations
On September 11, 1995, the Company announced its intention to divest its
Lubricants Group (see Note 16 of Notes to Financial Statements).
Results of Continuing Operations
The Company reported income from continuing operations in 1995 of $100.3 million
compared to $94.4 million in 1994 and $25.1 million in 1993. 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 amounts of these items were included in the "Other expense (income) -
net" caption of the Consolidated Statements of Income.
Included in 1995 income from continuing operations were $34.4 million of
settlements, net of legal and other costs, with certain of the Company's
insurance carriers arising out of litigation concerning coverage for certain
environmental expenditures. A $22 million provision for consolidation of plants,
which will enable the Company to serve its customers more effectively at larger
and more effi-cient facilities, was also recorded in 1995. Additionally, a $9
million provision for environmental remediation and compliance, which reflects
the Company's assessment of its costs to comply with regulatory requirements and
standards, was recorded in the current year. A provision for litigation of $2.8
million was also included in 1995 results. In 1995, the Company completed the
divestiture of its Diversified Products Segment and recorded a $33.3 million
gain on the disposition of the Carbon Black and Battery Parts businesses.
<TABLE>
<CAPTION>
====================================================================================================================================
(millions of dollars except per share data) 1995 1994 1993
- -------------------------------------------------- ------------------------- ------------------------- --------------------------
Pre-Tax Income Pre-Tax Income Pre-Tax Income
Income Income Per Share Income Income Per Share Income Income Per Share
- -------------------------------------------------- ------ ------ --------- ------ ------ --------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Continuing operations excluding
non-recurring items $108.6 $66.4 $1.19 $140.4 $91.3 $1.64 $110.6 $70.1 $1.37
Settlements with certain of the Company's
insurers 52.9 34.4 .60 - - - - - -
Provision for plant consolidation (33.8) (22.0) (.39) - - - - - -
Provision for environmental remediation
and compliance (13.8) (9.0) (.16) - - - (29.1) (18.9) (.34)
Provision for litigation (4.3) (2.8) (.05) - - - - - -
Provision for disposition of a business - - - - - - (19.2) (12.4) (.23)
Provision for work force reduction - - - - - - (12.2) (7.9) (.14)
Gain on disposition of operations
of subsidiaries 51.2 33.3 .59 4.8 3.1 .06 8.8 5.7 .11
Provision for loss on sublease of office facilities - - - - - - (9.2) (6.1) (.11)
Other - net - - - - - - (8.4) (5.4) (.10)
- ------------------------------------------------------------------------------------------------------------------------------------
Continuing operations $160.8 $100.3 $1.78 $145.2 $94.4 $1.70 $41.3 $25.1 $ .56
====================================================================================================================================
</TABLE>
5
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<PAGE>
Income from continuing operations for 1994 included a $3.1 million gain on the
disposition of the Allied-Kelite operations.
Income from continuing operations for 1993 included an $18.9 million
environmental provision for remediation and compliance costs the Company
expected to incur to comply with regulatory requirements and standards.
Following its strategy to emphasize core businesses and divest itself of others,
the Company recorded a provision of $12.4 million in 1993 for the planned
divestiture of the Battery Parts business. Additionally, the Company established
a $7.9 million provision for a reduction in its worldwide workforce to further
realign and reorganize operations. Pursuing its divestiture strategy, the
Company sold the operations of its Chemprene subsidiary in 1993 for a gain of
$5.7 million. 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.
1995 vs. 1994
Consolidated 1995 net sales from continuing operations rose $143.7 million or 8
percent compared to 1994 levels. The inclusion of OSi's fourth quarter sales of
$101.3 million offset an $80.6 million decline in sales resulting from the
disposition of the Diversified Products Segment. Of the remaining increase, 55
percent was attributed to higher sales prices and product mix and 40 percent to
favorable currency exchange rates, while 5 percent resulted from increased
volume.
Income from continuing operations, excluding non-recurring charges and gains,
was $66.4 million in 1995, compared to $91.3 million in 1994. Although
contributing $7.4 million to operating income, OSi, acquired in the fourth
quarter of 1995, generated a loss of $3.6 million, net of an income tax benefit,
goodwill amortization, and associated financing costs. Excluding OSi
Specialties' fourth quarter results, an overall erosion in gross profit margins
of 2 percent accounted for approximately 85 percent of the current year's
decline in income from continuing operations, excluding non-recurring items.
Each of the Company's segments reported 1995 earnings that were below 1994
levels, primarily as a result of the inability to fully recoup higher raw
material feedstock costs through increased sales prices. Also adversely
affecting 1995 results was a 2.6 percent increase in the effective tax rate
principally attributable to a greater proportion of earnings in higher tax
jurisdictions and an increase in non-deductible goodwill amortization. Adding to
earnings, interest income rose during 1995 as a result of higher interest rates
and the investment of additional funds generated from the sale of the
Diversified Products businesses. Remaining changes in income and expense
categories appearing on the Consolidated Statements of Income were primarily
attributable to the OSi Specialties acquisition.
Effective January 1, 1995, the Company changed its method of inventory valuation
under dollar value LIFO from LIFO double extension to LIFO link chain.
Management believes that the LIFO link chain method is preferable because it is
the predominate method used in the industry and will mitigate the dollar impact
of volume fluctuations on results of operations. It is not possible to determine
the effect of the change on retained earnings as of January 1, 1995 or on income
as previously reported for the years ended December 31, 1994 or 1993. This
change did not have a material effect on 1995 net income.
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," effective January 1, 1995. SFAS No. 121 requires impairment
losses to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. SFAS No. 121 also
addresses the accounting for long-lived assets that are expected to be disposed
of. The adoption of SFAS No. 121 did not have a material impact on the Company's
financial position or results of operations other than its effect on the
provision for plant consolidation (see Note 9 of Notes to Financial Statements).
Segment Information
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 not directly attributable to a specific segment.
The Petroleum Segment for all periods presented consists solely of the Petroleum
Specialties Group. This was a result of the Company's decision to sell the
Lubricants Group, the operating results of which have been recorded as
discontinued operations.
A comparison of operating income from continuing operations for 1995 and 1994 is
affected by the inclusion of non-recurring items in both periods. Operating
income from continuing operations, excluding non-recurring items, declined to
$161.9 million in 1995, from $178
6
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<PAGE>
million in 1994. The Company's international operations accounted for a 4
percent greater share of total net sales and operating income from continuing
operations, excluding non-recurring items, in 1995 than in 1994. These
operations accounted for 40 percent of net sales and 44 percent of operating
income from continuing operations, excluding non-recurring items, in 1995. The
acquisition of OSi Specialties and the disposition of the remaining Diversified
Products Segment's businesses had the effect of increasing the Company's
international operations' percentage share of total net sales, while decreasing
their share of operating income from continuing operations, excluding
non-recurring items.
Chemical Segment
Chemical Segment 1995 net sales of $1.4 billion were $105 million, or 8 percent,
over the prior year. Higher sales prices accounted for 60 percent of the
increase with the balance due to favorable currency translations, while volume
was unchanged. Although each of the segment's businesses reported unit sales
prices that surpassed 1994 levels, competitive pricing pressures precluded
increases sufficient to cover higher raw material feedstock costs.
The segment's 1995 operating income included a non-recurring $46 million charge
related to plant consolidation, environmental remediation and litigation.
Excluding this non-recurring charge, operating income of $107.4 million was
$14.7 million, or 12 percent, lower than 1994. Each of the segment's three
business groups reported comparable percentage declines in operating earnings.
The Oleo/Surfactants Group, the largest contributor to segment sales and
operating income, experienced a year in which product margins eroded as a result
of the inability to fully recover increased feedstock costs due to competitive
pricing restraints. This was most evident in the group's line of products that
reach the consumer market, where shipment volume was also down 12 percent from
the prior year. Additionally, the Oleo/Surfactants Group's 1995 earnings were
adversely affected by the need to purchase intermediate products as a result of
equipment renovations. The renovations have been completed and production
returned to normal levels during the fourth quarter. An increase in reserves for
insurance claims accounted for a substantial portion of the Polymer Additives
Group's decline in operating income. The group's earnings were also adversely
affected by a downturn in the housing and construction markets, and lower
product margins in specific lines of business. Shipment volume was down 4
percent in the Vinyl Business Unit, reflecting fewer housing and construction
starts. Tin stabilizer margins were off from the prior year due to higher raw
material costs, while the substitution of environmentally friendly barium and
zinc based stabilizers for those containing cadmium resulted in a further
erosion of margins. The shift was a result of a June 1994 decision to cease
domestic production of cadmium based stabilizers and exit the U.S. market. With
approximately 80 percent of the Resins Group's business originating in Europe,
the slowdown in the European economy experienced during the latter part of the
year had a great influence on the group's reported 1995 fourth quarter results.
The poor fourth quarter caused full year operating earnings to be below the
prior year. A decline in product margins also contributed to the lower earnings.
Each of the group's business units reported increases in raw material costs that
resulted in margins that were below the prior year. Additionally, increased
effluent control costs attributable to a shared, non-owned wastewater treating
plant in Germany adversely affected 1995 operating results.
OSi Specialties
The Company acquired OSi Specialties, a high margin leading global producer of
organofunctional silane and other specialty silicone derivative products, on
October 19, 1995. The newly acquired business, which traditionally experiences a
"soft" fourth quarter, added $101.3 million to sales and $7.4 million to
operating income, which included the amortization of intangibles generated by
the acquisition (see Note 2 of Notes to Financial Statements for further
information on this acquisition).
Petroleum Segment
Net sales for the Petroleum Segment of $394.8 million in 1995 exceeded the
previous year by $19.2 million, or 5 percent. One-half of the increase in sales
was attributable to favorable currency rates of exchange, particularly against
the Dutch guilder, with the bulk of the balance resulting from higher sales
prices and product mix. Rising 1 percent, shipment volume was comparable with
the prior year.
Petroleum Segment operating income for 1995 was adversely affected by a charge
for plant consolidation and environmental remediation of $2.2 million. Operating
income, excluding this non-recurring charge, was $35.6 million, a decline of
$7.8 million compared to 1994. The segment was impacted by higher feedstock
costs throughout 1995 due to periodic shortages and market conditions. The
scarcity of key feedstocks created the need to purchase higher priced, sometimes
lower
7
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<PAGE>
yield, alternatives and resulted in lost sales. Lower than anticipated
production volume, and additional costs attributable to the start-up of the
group's recently completed Extracted Sulfonic Acid Unit in the U.S. and Calcium
Sulfonates Plant in Holland, also adversely affected 1995 operating results.
Diversified Products Segment
The sale of the Carbon Black and Battery Parts businesses during the first half
of 1995 completed the divestiture of the Diversified Products Segment. Reported
segment operating earnings for 1995 and 1994 included gains of $51.2 million and
$4.8 million, respectively, attributable to the sale of the segment's
businesses.
1994 vs. 1993
Excluding non-recurring items, income from continuing operations totaled $91.3
million in 1994, compared to $70.1 million in 1993. Record sales, which were 4
percent above the previous year, and higher gross margins were responsible for
approximately 85 percent of the $21.2 million increase in income from continuing
operations, before non-recurring items. Despite the disposition of certain
operations in late 1993 and 1994, sales rose on the strength of a 7 percent
increase in shipment volume. Although increases in raw material feedstock costs
caused gross margins to deteriorate during the second half of 1994, cost saving
initiatives and lower feedstock costs earlier in the year enabled full year
margins to be 1 percent ahead of 1993. Chiefly the result of the Company's
redemption of its 5.50% Convertible Subordinated Debentures, lower net interest
costs also contributed to the higher income. A comparison of 1994 and 1993
selling and administrative expenses shows an increase of 2 percent, however,
through careful monitoring the Company was able to reduce these expenses as a
percentage of sales.
The Company's 1994 operating income of $182.8 million represents an increase of
$62.6 million over 1993. Comparison of these earnings for each of the Company's
industry segments is affected by non-recurring items. Exclusive of these items,
operating income rose to $178 million in 1994 from $159.7 million in 1993. The
contribution of the Company's international operations to net sales and
operating income, exclusive of non-recurring items, increased in 1994. Continued
emphasis on global growth and an overall improvement in the European economy led
to a change in geographic composition. International operations accounted for 36
percent of the Company's net sales in 1994 compared to 34 percent in 1993 and
its contribution to operating income, excluding non-recurring items, increased 7
percent to a 40 percent share.
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 domes-tic and European economies, and aggressive marketing translated
into higher sales volume.
Operating income for 1993 was adversely affected by a $5.6 million provision for
environmental remediation and compliance. Excluding this non-recurring charge,
1994 operating income rose $11.6 million, or 11 percent, over 1993. The
segment's Polymer Additives Group registered the largest increase, accounting
for two-thirds of the segment's total improvement. The group benefited from a
strong domestic economy, evidenced by a rise in the construction industry, and a
more robust European economy. All major business units contributed to the
group's 23 percent improvement in operating income. A 9 percent increase in net
sales attributable to greater domestic shipment volume, the introduction of a
new antioxidant product and a favorable European sales product mix led to the
group's higher earnings. Process improvements, the most notable involving the
production of amides, also contributed to the group's strong performance. The
International/Europe Group's operating income rose approximately 15 percent,
accounting for the remaining portion of the segment's favorable operating
results. The overall strength of the European economy led to greater sales and
improved earnings for each of the group's major business units. An increase in
shipment volume of approximately 10 percent, a favorable product sales mix in
key businesses, cost saving programs, and plant efficiencies proved to be a
successful combination. Although the Oleo/Surfactants Group increased its
shipment volume by 9 percent, its operating income remained relatively
unchanged. Sales growth was achieved through aggressive marketing, new product
introductions in the Oilfield and Laundry Products business units, and an
increase in overseas shipments. However, significant increases in raw material
costs in the second half of 1994, which the group was unable to fully recover
through higher sales prices due to competitive pricing pressures, offset the
increase in sales.
8
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<PAGE>
Petroleum Segment
Segment 1994 net sales of $375.6 million were $10.4 million ahead of 1993. The
segment reported an increase in volume of approximately 4 percent which offset
the effect of a 1 percent drop in prices.
Non-recurring charges of $15.2 million for environmental matters severely
affected 1993 operating income. Excluding these charges, 1994 operating income
of $43.4 million was $3.6 million greater than 1993. The 9 percent increase in
operating income was primarily due to an improvement in material margins
attributable to a decline in raw material feedstock costs that outpaced a
corresponding decrease in sales prices. A favorable product sales mix, higher
sales volume, and efficiencies in manufacturing techniques also contributed to
the segment's favorable results.
Diversified Products Segment
Reported segment operating income for 1994 included a non-recurring gain of $4.8
million from the sale of the Allied-Kelite operations, while 1993 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. Net sales and operating income for the segment's businesses which
were not sold in 1994 or 1993 (Concarb and Battery Parts) rose $13 million and
$7.4 million, respectively. A 15 percent increase in carbon black net sales,
spurred in part by greater automotive market demand in both the tire and
non-tire sectors, accounted for approximately 75 percent of the higher net 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.
Outlook
The current year has been one of transition in which the Company has refocused
its efforts on becoming a leading global specialty chemical company. The Company
believes it is well positioned to become more competitive in the global
marketplace as a result of the recently announced plant consolidation program,
which may be followed by further consolidation in 1997 and 1998; a 1995
reduction of staff and operations personnel, resulting in annual payroll savings
of $5 million commencing in 1996; the completion of the divestiture of the
Diversified Products Segment in 1995; the announcement of the Company's
intention to sell the Lubricants Group, which is expected to be completed in
mid-1996; and the fourth quarter 1995 acquisition of OSi Specialties.
The Company plans to add to its earnings by leveraging its expanded presence in
targeted high growth regions of Europe, South America, and Asia; through
improved product margins; and continued cost savings initiatives. Escalating raw
material costs weighed heavily on 1995 results. Preliminary indications suggest
that relief is forthcoming in 1996 and the Company believes it will realize
additional savings in the procurement area through the reduction of carriers and
the consolidation of regional purchasing activities.
9
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Report of Ernst & Young LLP,
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, 1995 and 1994, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Witco Corporation
and Subsidiary Companies at December 31, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the financial statements, in 1995 the Company changed
its method of accounting for inventory valuation under dollar value LIFO from
LIFO double extension to LIFO link chain.
As discussed in Note 1 to the financial statements, in 1995 the Company adopted
the provisions of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of."
ERNST & YOUNG LLP
Stamford, Connecticut
January 29, 1996,
except for Note 7, as to which
the date is February 12, 1996
F-1
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(in thousands except per share data)
==============================================================================================
December 31 1995 1994
- ------------------------------------------------------------------- ---------- ---------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 143,994 $ 197,173
Accounts and notes receivable, less allowances of $7,104 and $8,863 406,486 395,547
Inventories 322,898 258,372
Prepaid and other current assets 70,667 45,737
- ------------------------------------------------------------------- ---------- ----------
Total Current Assets 944,045 896,829
- ------------------------------------------------------------------- ---------- ----------
Property, Plant, and Equipment, less accumulated depreciation of
$586,595 and $696,043 811,667 719,966
Goodwill and Other Intangible Assets, less accumulated amortization
of $62,450 and $43,760 728,124 191,422
Deferred Costs and Other Assets 118,182 111,128
Net Assets of Discontinued Operations 170,426 -
- ------------------------------------------------------------------- ---------- ----------
Total Assets $2,772,444 $1,919,345
- ------------------------------------------------------------------- ---------- -----------
- ------------------------------------------------------------------- ---------- -----------
Liabilities and Shareholders' Equity
Current Liabilities
Notes and loans payable $ 309,171 $ 1,795
Accounts payable and other current liabilities 385,294 343,414
- ------------------------------------------------------------------- ---------- ----------
Total Current Liabilities 694,465 345,209
- ------------------------------------------------------------------- ---------- ----------
Long-term Debt 683,830 346,545
Deferred Federal and Foreign Income Taxes 87,532 81,354
Deferred Credits and Other Liabilities 302,500 206,231
Shareholders' Equity
$2.65 Cumulative Convertible Preferred Stock, par value $1 per share
Authorized - 14 shares
Issued and outstanding - 7 shares 7 7
Common stock, par value $5 per share
Authorized - 100,000 shares
Issued - 56,435 shares and 56,312 shares 282,173 281,561
Capital in excess of par value 131,076 127,643
Equity adjustments:
Foreign currency translation 17,222 (1,481)
Pensions (4,898) (2,446)
Retained earnings 578,537 537,199
Treasury stock, at cost - 165 shares - (2,477)
- ------------------------------------------------------------------- ---------- ----------
Total Shareholders' Equity 1,004,117 940,006
- ------------------------------------------------------------------- ---------- ----------
Total Liabilities and Shareholders' Equity $2,772,444 $1,919,345
=============================================================================================
</TABLE>
See accompanying notes.
F-2
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Consolidated Statements of Income
<TABLE>
<CAPTION>
(in thousands of dollars except per share data)
=========================================================================================================
For the years ended December 31 1995 1994 1993
- ----------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Revenues
Net sales $1,985,077 $1,841,414 $1,763,086
Interest 15,104 10,032 8,679
- ----------------------------------------------------------------- ---------- ---------- ----------
Total Revenues 2,000,181 1,851,446 1,771,765
- ----------------------------------------------------------------- ---------- ---------- ----------
Costs and Expenses
Cost of goods sold (exclusive of depreciation and amortization) 1,548,943 1,412,079 1,363,246
Selling and administrative expenses 199,452 185,576 181,173
Depreciation and amortization 102,571 88,663 86,480
Interest 43,689 29,674 34,984
Other expense (income) - net (55,278) (9,708) 64,585
- ----------------------------------------------------------------- ---------- ---------- ----------
Total Costs and Expenses 1,839,377 1,706,284 1,730,468
- ----------------------------------------------------------------- ---------- ---------- ----------
Income from continuing operations before Federal and
Foreign Income Taxes 160,804 145,162 41,297
Federal and Foreign Income Taxes 60,458 50,742 16,165
- ----------------------------------------------------------------- ---------- ---------- ----------
Income from continuing operations 100,346 94,420 25,132
Income (loss) from discontinued operations - net of income
taxes of $2,610, $6,960, and $(2,597) 4,099 12,647 (5,369)
- ----------------------------------------------------------------- ---------- ---------- ----------
Net Income $ 104,445 $ 107,067 $ 19,763
- ----------------------------------------------------------------- ---------- ---------- ----------
- ----------------------------------------------------------------- ---------- ---------- ----------
Net Income Per Common Share: Primary
Income from continuing operations $1.78 $1.70 $.56
Income (loss) from discontinued operations -
net of income taxes .07 .22 (.10)
- ----------------------------------------------------------------- ---------- ---------- ----------
Net Income Per Common Share: Primary $1.85 $1.92 $.46
- ----------------------------------------------------------------- ---------- ---------- ----------
Net Income Per Common Share: Fully Diluted
Income from continuing operations $1.77 $1.69 $.56
Income (loss) from discontinued operations -
net of income taxes .07 .22 (.10)
- ----------------------------------------------------------------- ---------- ---------- ----------
Net Income Per Common Share: Fully Diluted $1.84 $1.91 $.46
========================================================================================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(in thousands of dollars)
============================================================================================================================
For the years ended December 31 1995 1994 1993
- ---------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Operating Activities
Net income $ 104,445 $ 107,067 $ 19,763
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 119,571 105,120 102,502
Provision (benefit) for deferred income taxes (6,884) 17,666 (24,639)
Pension cost 10,130 12,378 1,752
Gain on disposition of operations of subsidiaries (51,183) (4,820) (8,810)
Provision for plant consolidation and other matters 43,342 - -
Provision for environmental remediation and compliance 15,348 - 52,810
Provision for work force reduction and other matters - - 29,784
Provision for disposition of a business - - 19,200
Changes in operating assets and liabilities:
Accounts and notes receivable (26,609) (51,639) (26,101)
Inventories (12,849) (23,750) 13,490
Prepaid and other current assets 9,866 (3,791) 513
Accounts payable and other current liabilities (41,709) (5,492) (6,908)
Other (28,548) (5,007) (1,958)
- ---------------------------------------------------------------------- ---------- ---------- ----------
Net Cash Provided by Operating Activities 134,920 147,732 171,398
- ---------------------------------------------------------------------- ---------- ---------- ----------
Investing Activities
Expenditures for property, plant, and equipment (115,845) (107,438) (103,689)
Proceeds from dispositions 146,026 24,194 24,160
Acquisitions of businesses, net of cash acquired (481,431) - (3,691)
Other (2,443) 1,732 (4,568)
- ---------------------------------------------------------------------- ---------- ---------- ----------
Net Cash Used in Investing Activities (453,693) (81,512) (87,788)
- ---------------------------------------------------------------------- ---------- ---------- ----------
Financing Activities
Dividends paid (63,026) (55,013) (44,679)
Payments on borrowings (367,541) (8,398)
Proceeds from exercise of stock options 6,523 2,734 5,236
Proceeds from borrowings 681,551 954 374,422
Proceeds from issuance of common stock - - 141,655
Other - (63) (3,499)
- ---------------------------------------------------------------------- ---------- ---------- ----------
Net Cash Provided by (Used in) Financing Activities 257,507 (59,786) (28,837)
- ---------------------------------------------------------------------- ---------- ---------- ----------
Effects of Exchange Rate Changes on
Cash and Cash Equivalents 8,087 7,689 (6,170)
- ---------------------------------------------------------------------- ---------- ---------- ----------
Increase (Decrease) in Cash and Cash Equivalents (53,179) 14,123 48,603
- ---------------------------------------------------------------------- ---------- ---------- ----------
Cash and Cash Equivalents at Beginning of Year 197,173 183,050 134,447
- ---------------------------------------------------------------------- ---------- ---------- ----------
Cash and Cash Equivalents at End of Year $ 143,994 $ 197,173 $ 183,050
============================================================================================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Consolidated Statements of Shareholders' Equity
<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, 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
Net Income 104,445 104,445
Cash Dividends Declared:
Preferred stock (18) (18)
Common stock (63,089) (63,089)
Common Stock Issued:
Employee plans 607 3,535 2,380 6,522
Conversions 5 (102) 97 -
Equity Adjustments 18,703 (2,452) 16,251
- --------------------------- --- --------- --------- -------- ------- -------- -------- ----------
Balance at
December 31, 1995 $ 7 $ 282,173 $ 131,076 $ 17,222 $(4,898) $578,537 $ - $1,004,117
==========================================================================================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies
Organization: Witco Corporation is a worldwide manufacturer of quality specialty
chemical, silicone and petroleum products. The Company's products are used
primarily as intermediates by other manufacturers in industries such as personal
care and household products, agricultural, housing and construction, packaging,
food and textiles.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
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. Effective January 1, 1995, the Company changed its method of
inventory valuation under dollar value LIFO from LIFO double extension to LIFO
link chain. Management believes that the LIFO link chain method is preferable
because it is the predominate method used in the industry and will mitigate the
impact of volume fluctuations on results of operations. The change in accounting
method had no material effect on income for the year ended December 31, 1995. It
is not possible to determine the effect of the change on retained earnings as of
January 1, 1995 or income as previously reported for the years ended December
31, 1994 or 1993.
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.
Impairment of Long-Lived Assets: The Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" effective January 1, 1995.
SFAS 121 requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. The adoption of SFAS No. 121 did not have a
material impact on the Company's financial position or results of operations
other than its effect on the provision for plant consolidation (see Note 9 of
Notes to Financial Statements).
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 or results of
operations.
Research and Development Costs: The Company's research and development costs are
charged to expense as incurred. These charges to continuing operations amounted
to $52,907,000 (1995), $40,717,000 (1994), and $40,308,000 (1993).
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.
Stock Based Compensation: The Company grants stock options for a fixed number of
shares to employees with an exercise price equal to the fair value of the shares
at the date of grant. The Company accounts for stock option grants in accordance
with APB Opinion No. 25, "Accounting for Stock Issued to Employees," and,
F-6
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies (continued)
accordingly, recognizes no compensation expense for the stock option grants.
Income Taxes: The Company accounts for income 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 5.50% 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 5.50%
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 - Acquisition and Dispositions
On October 19, 1995, the Company acquired OSi Specialties Holding Company and
OSi Specialties, Inc. (collectively "OSi") from an investor group led by DLJ
Merchant Banking Partners, L.P. in a cash transaction for approximately
$486,000,000. OSi manufactures a full line of silicone surfactants, amine
catalysts, organofunctional silanes and specialty fluids at key manufacturing
facilities in the United States, Belgium, Italy and Brazil.
The acquisition was accounted for as a purchase and results of operations have
been included in the consolidated financial statements from the date of
acquisition. A preliminary allocation of the purchase price resulted in an
excess over the estimated fair value of net assets acquired (goodwill) of
approximately $514,000,000. This is being amortized on a straight line basis
over forty years. 1995 results included net sales of $101,312,000 and a net loss
of approximately $3,600,000, or $.06 per common share, net of an income tax
benefit, goodwill amortization, and associated financing costs.
The pro forma unaudited results of operations for the years ended December 31,
1995 and 1994, assuming the acquisition of OSi had been consummated as of
January 1, 1994, are as follows:
<TABLE>
<CAPTION>
================================================================================
(in thousands except per share data) 1995 1994
- -------------------------------------------------- ---------- ----------
<S> <C> <C>
Net sales $2,322,216 $2,235,736
- -------------------------------------------------- ---------- ----------
Income from continuing operations $ 101,119 $ 84,547
Income from discontinued operations 4,099 12,647
- -------------------------------------------------- ---------- ----------
Net income $ 105,218 $ 97,194
- -------------------------------------------------- ---------- ----------
Net income per common share - primary
Income from continuing operations $ 1.79 $ 1.52
Income from discontinued operations .07 .22
- -------------------------------------------------- ---------- ----------
Net income per common share - primary $ 1.86 $ 1.74
================================================================================
</TABLE>
On September 11, 1995, the Company announced its intention to divest its
Lubricants Group. The Board of Directors has approved a plan of disposal with a
target date of mid-1996. These operations are reflected as discontinued
operations for all periods presented in the Company's income statements and as
net assets of discontinued operations in the December 31, 1995 balance sheet.
On June 30, 1995, the Company sold the operations of its Continental Carbon
subsidiary to China Synthetic Rubber Corporation for $121,900,000, resulting in
a gain of $27,073,000, or $.48 per common share. Continental Carbon manufactures
carbon black which is used primarily in the tire and rubber industry.
On March 24, 1995, the Company sold the operations of its Battery Parts business
to Acro Products, Inc. for $24,100,000, resulting in a gain of $6,196,000, or
$.11 per common share. Battery Parts manufactures rubber and plastic battery
containers, covers and parts and custom injection molded parts.
The operating results individually and in the aggregate of the 1995 dispositions
were not significant to the consolidated results of operations.
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.
F-7
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Notes to Financial Statements
Note 3 - Inventories
Inventories are classified as follows:
<TABLE>
<CAPTION>
================================================================================
(thousands of dollars) 1995 1994
- -------------------------------------------------- ---------- ----------
<S> <C> <C>
Raw materials and supplies $115,231 $ 96,939
Finished goods 207,667 161,433
- -------------------------------------------------- ---------- ----------
$322,898 $258,372
================================================================================
</TABLE>
Work in progress included above is not significant.
Inventories valued on a LIFO basis, at December 31, 1995 and 1994, amounted to
$118,774,000 and $158,638,000, respectively. Inventories would have been
$41,499,000 and $62,077,000 higher than reported at December 31, 1995 and 1994,
respectively, 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) 1995 1994
- -------------------------------------------------- ---------- ----------
<S> <C> <C>
Land $ 35,259 $ 32,970
Buildings and improvements 186,904 178,268
Machinery, fixtures, and equipment 1,114,452 1,140,319
Assets under construction 61,647 64,452
- -------------------------------------------------- ---------- ----------
1,398,262 1,416,009
Less accumulated depreciation 586,595 696,043
- -------------------------------------------------- ---------- ----------
$ 811,667 $ 719,966
================================================================================
</TABLE>
Depreciation expense, including amortization of assets under capital lease
obligations, from continuing operations amounted to $81,838,000 (1995),
$71,830,000 (1994), and $67,930,000 (1993). At December 31, 1995, buildings and
improvements included approximately $17,000,000 related to an office/laboratory
facility under a capital lease.
Note 5 - Goodwill and Other Intangible Assets
Goodwill and other intangible assets consist of the following:
<TABLE>
<CAPTION>
================================================================================
(thousands of dollars) 1995 1994
- -------------------------------------------------- ---------- ----------
<S> <C> <C>
Goodwill $666,880 $147,662
Patents and licenses 58,561 29,798
Other 65,133 57,722
- -------------------------------------------------- ---------- ----------
790,574 235,182
Less accumulated amortization 62,450 43,760
- -------------------------------------------------- ---------- ----------
$728,124 $191,422
================================================================================
</TABLE>
Amortization expense from continuing operations amounted to $20,733,000 (1995),
$16,833,000 (1994), and $18,550,000 (1993).
F-8
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Notes to Financial Statements
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) 1995 1994
- -------------------------------------------------- ---------- ----------
<S> <C> <C>
Trade accounts payable $166,688 $139,906
Other accruals 126,099 67,839
Payroll related liabilities 54,015 53,286
Reserves for environmental remediation and compliance 23,597 33,982
Income taxes 12,272 20,448
Reserve for disposition of a business - 19,109
Reserve for consolidation of offices 2,623 8,844
- -------------------------------------------------- ---------- ----------
$385,294 $343,414
================================================================================
</TABLE>
Note 7 - Indebtedness
On October 18, 1995, the Company entered into a one year credit agreement
totaling $675,000,000 with a consortium of banks for the purpose of financing
the OSi acquisition and to repay OSi's 11.50% Senior Secured Discount Debentures
due 2004 and OSi Specialties' 9.25% Senior Subordinated Notes due 2003. The
Company had $605,000,000 of bank loans outstanding under the credit agreement as
of December 31, 1995, of which $305,000,000 is included in the notes and loans
payable caption of the Company's balance sheet. The interest rate at December
31, 1995 was approximately 6.1%.
The Company plans to repay the short-term portion of the bank loan with proceeds
from the sale of the Lubricants Group, cash flow from operations or additional
long-term financing.
On February 12, 1996, the Company issued $300,000,000 in two equal debt
offerings of 6.125% Notes due 2006 and 6.875% Debentures due 2026. These
borrowings were used to refinance a portion of the credit agreement utilized by
the Company at December 31, 1995. Immediately thereafter, the availability under
the credit agreement, as amended, was reduced to $375,000,000.
Following is a summary of long-term debt:
<TABLE>
<CAPTION>
================================================================================
(thousands of dollars) 1995 1994
- -------------------------------------------------- ---------- ----------
<S> <C> <C>
Short-term bank loan to be refinanced $300,000 $ -
6.60% Notes due 2003 165,000 165,000
7.75% Debentures due 2023 110,000 110,000
7.325% Notes due 1998 49,210 45,171
6.47% Bank Loan due 2000 21,838 -
Capital Lease Obligation 17,822 -
5.85% Pollution Control Revenue Bonds due 2023 10,000 10,000
Industrial Development Revenue Bond due 2014 8,500 8,500
Other 3,945 9,559
- -------------------------------------------------- ---------- ----------
686,315 348,230
Less amounts included in notes and loans payable 2,485 1,685
- -------------------------------------------------- ---------- ----------
$683,830 $346,545
================================================================================
</TABLE>
The Company has arrangements with various banks for lines of credit for its
international subsidiaries aggregating $50,872,000 of which $3,773,000 was
utilized at December 31, 1995. The weighted average interest rates on
international short-term borrowings outstanding were 6.36% (1995) and 6.50%
(1994).
Principal maturities of long-term debt including capital lease obligations
through the year 2000 at December 31, 1995 are $2,485,000 (1996), $1,400,000
(1997), $50,810,000 (1998), $1,700,000 (1999), and $23,838,000 (2000).
F-9
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Notes to Financial Statements
Note 7 - Indebtedness (continued)
Following is a summary of interest from continuing operations:
<TABLE>
<CAPTION>
================================================================================
(thousands of dollars) 1995 1994 1993
- ------------------------------------------------ ------- ------- -------
<S> <C> <C> <C>
Interest expense $43,689 $29,674 $34,984
Capitalized interest 1,429 2,214 1,923
- ------------------------------------------------ ------- ------- -------
Total interest incurred $45,118 $31,888 $36,907
- ------------------------------------------------ ------- ------- -------
Total interest payments $47,016 $34,190 $30,098
================================================================================
</TABLE>
Note 8 - Shareholders' Equity
On March 2, 1995, the Board of Directors unanimously approved a Shareholder
Rights Plan. The Plan was implemented by the issuance of one preferred stock
purchase right for each share of common stock outstanding at the close of
business on March 2, 1995, or issued thereafter until the rights become
exercisable. Each right will entitle the holder in certain events to purchase
one-one thousandth of a share of participating preferred stock at a purchase
price of $110. Each one-one thousandth of a share of participating preferred
stock is intended to represent the economic equivalent of one share of common
stock. Under the Shareholder Rights Plan, 300,000 shares of Series A
participating cumulative preferred stock without par value have been authorized.
The rights currently are not exercisable. If a person or group acquires more
than 15% of the outstanding common stock, or at the Board's election if a tender
offer for more than 15% of the outstanding common stock is commenced, or if such
person or group acquires the Company in a merger or other business combination,
each right (other than those held by the acquiring person) will entitle the
holder to purchase stock of the Company or stock or other property of the
acquiring person having a value of twice the purchase price. The rights will
expire on March 2, 2005, unless redeemed earlier by the Company in whole, but
not in part, at a price of $.01 per right.
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, 1995, unissued common stock of the Company was reserved for
issuance in accordance with the stock option plans (4,893,000 shares) and the
$2.65 Cumulative Convertible Preferred Stock (115,000 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, 1995, expire on various dates through June
2005. At December 31, 1995 and 1994, options for 2,274,000 and 540,000 shares of
common stock, respectively, were available for grant.
Stock option transactions were as follows:
<TABLE>
<CAPTION>
=================================================================================
(thousands of shares) 1995 1994
- -------------------------------- ----------------------- ----------------------
Shares Price Shares Price
- -------------------------------- ------ -------------- ------ ---------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 2,054 $13.00 - $31.75 1,472 $13.00 - $26.56
Granted 879 $28.00 780 $31.75
Options exercised (300) $13.00 - $26.56 (149) $17.31 - $26.56
Cancelled (14) $26.56 - $31.75 (49) $21.38 - $31.75
- -------------------------------- ------ -------------- ------ ---------------
Outstanding at End of Year 2,619 $21.38 - $31.75 2,054 $13.00 - $31.75
- -------------------------------- ------ -------------- ------ ---------------
Exercisable at End of Year 808 $21.38 - $31.75 721 $13.00 - $31.75
=================================================================================
</TABLE>
F-10
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Notes to Financial Statements
Note 8 - Shareholders' Equity (continued)
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 $1.12
(1995), $1.06 (1994), and $.96 (1993).
Common and preferred stock transactions were as follows:
<TABLE>
<CAPTION>
================================================================================
(thousands of shares) 1995 1994 1993
- ------------------------------------------------ ------ ------ -------
<S> <C> <C> <C>
Convertible Preferred Stock
Outstanding at beginning of year 7 9 9
Conversions - (2) -
- ------------------------------------------------ ------ ------ -------
Outstanding at End of Year 7 7 9
- ------------------------------------------------ ------ ------ -------
Common Stock
Issued at beginning of year 56,312 50,818 22,534
Net shares issued under employee plans 122 - -
Conversions 1 - -
Conversion of convertible debentures - 5,494 2,875
Two-for-one stock split - - 25,409
- ------------------------------------------------ ------ ------ -------
Issued at End of Year 56,435 56,312 50,818
- ------------------------------------------------ ------ ------ -------
Treasury Stock
In treasury at beginning of year 165 318 306
Net shares issued under employee plans (159) (133) (149)
Conversions (6) (20) (22)
Two-for-one stock split - - 183
- ------------------------------------------------ ------ ------ -------
In Treasury at End of Year - 165 318
================================================================================
</TABLE>
Note 9 - Other Expense (Income) - Net
The components of other expense (income) - net from continuing operations are as
follows:
<TABLE>
<CAPTION>
=============================================================================================
(thousands of dollars) 1995 1994 1993
- ----------------------------------------------------- -------- ------- --------
<S> <C> <C> <C>
Settlements with certain of the company's insurers $(52,887) $ - $ -
Gain on disposition of operations of subsidiaries (51,183) - -
Provision for plant consolidation 33,842 - -
Provision for environmental remediation and compliance 13,800 - 29,110
Provision for disposition of a business - - - 19,200
Provision for work force reduction - - 12,200
Provision for loss on sublease of office facilities - - 9,184
Other - net 1,150 (9,708) (5,109)
- ----------------------------------------------------- -------- ------- --------
$(55,278) $(9,708) $64,585
=============================================================================================
</TABLE>
The provision for plant consolidation of $33,842,000 is a result of management's
decision to consolidate operations at larger and more efficient facilities in
order to more effectively service its customers. The shutdown of these
facilities (principally within the Chemical Segment) is expected to be completed
by 1997.
F-11
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Notes to Financial Statements
Note 10 - Federal and Foreign Income Taxes
The components of income (loss) from continuing operations before federal and
foreign income taxes are:
<TABLE>
<CAPTION>
================================================================================
(thousands of dollars) 1995 1994 1993
- ------------------------------------ -------- -------- --------
<S> <C> <C> <C>
Domestic $104,972 $ 86,757 $ (5,813)
International 55,832 58,405 47,110
- ------------------------------------ -------- -------- --------
$160,804 $145,162 $ 41,297
================================================================================
</TABLE>
The provision for federal and foreign income taxes (exclusive of tax expense
(benefit) from discontinued operations) consists of the following:
<TABLE>
<CAPTION>
================================================================================
(thousands of dollars) 1995 1994 1993
- ------------------------------------ -------- -------- --------
<S> <C> <C> <C>
Current
Domestic $49,675 $25,115 $ 17,173
International 16,004 9,870 16,462
Deferred
Domestic (7,161) 7,824 (15,122)
International 2,588 8,916 (1,028)
Investment tax credit amortization (648) (983) (1,320)
- ------------------------------------ -------- -------- --------
$60,458 $50,742 $ 16,165
===============================================================================
</TABLE>
The effective income tax rate from continuing operations varied from the
statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
=================================================================================
(thousands of dollars) 1995 1994 1993
- ---------------------------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Non-deductible goodwill amortization 1.1 .3 1.1
Amortization of investment tax credits (.4) (.6) (4.0)
Provision for non-deductible civil penalties - - 2.8
Effect of U.S. tax rate increase on deferred tax balances - - 3.8
Other 1.9 .3 .4
- ---------------------------------------------------------- ---- ---- ----
37.6% 35.0% 39.1%
=================================================================================
</TABLE>
The components of deferred federal and foreign income taxes are as follows:
<TABLE>
<CAPTION>
================================================================================
(thousands of dollars) 1995 1994
- ------------------------------------------------------ --------- ---------
<S> <C> <C>
Current Deferred Tax (Assets) Liabilities:
Reserve for environmental remediation and compliance $ (12,208) $ (12,028)
Accrual items (20,451) (6,900)
Inventories 202 5,476
Other - net (15,328) (10,852)
- ------------------------------------------------------ --------- ---------
$ (47,785) $ (24,304)
- ------------------------------------------------------ --------- ---------
- ------------------------------------------------------ --------- ---------
Noncurrent Deferred Tax (Assets) Liabilities:
Depreciation $ 138,381 $ 105,631
Reserve for environmental remediation and compliance (23,548) (22,142)
Net operating loss carryforward (36,059) (8,423)
Postretirement benefits other than pensions (14,744) (8,288)
Other - net 23,502 14,576
- ------------------------------------------------------ --------- ---------
$ 87,532 $ 81,354
================================================================================
</TABLE>
F-12
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Notes to Financial Statements
Note 10 - Federal and Foreign Income Taxes (continued)
U.S. federal income taxes have not been provided on approximately $228,600,000
of unremitted earnings of the Company's international subsidiaries at December
31, 1995. 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.
At December 31, 1995, the Company has federal net operating losses of
approximately $68,900,000 which are subject to certain limitations and expire as
follows: $21,700,000 (2008), $32,200,000 (2009), and $15,000,000 (2010). The
Company has foreign net operating losses of approximately $18,200,000 with no
expiration date.
Cash payments for federal and foreign income taxes amounted to $53,715,000
(1995), $40,462,000 (1994), and $29,817,000 (1993).
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.
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 primarily 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.
Mortality rate tables used for the domestic plans were principally the 1988 GAM.
As of December 31, 1995 and 1994, the liability associated with plans not
covered by the Pension Benefit Guarantee Corporation totaled $19,630,000 and
$14,810,000, respectively. Net periodic pension cost for those plans totaled
$3,000,000 and $3,350,000 for the years ended December 31, 1995 and 1994.
Net pension cost (credit) includes the following components:
<TABLE>
<CAPTION>
=============================================================================================================================
(thousands of dollars) 1995 1994 1993
- -------------------------------------------------- ----------------------- ----------------------- -----------------------
Domestic International Domestic International Domestic International
- -------------------------------------------------- -------- ------------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Service cost for benefits earned during the period $ 6,561 $ 3,823 $ 8,284 $ 3,722 $ 6,630 $ 2,985
Interest cost on the projected benefit obligation 24,337 6,478 22,652 5,516 20,707 4,763
Actual (return) loss on plan assets (63,453) (7,486) 7,287 (2,576) (34,119) (2,861)
Net amortization and deferral 35,206 4,180 (32,743) (314) 3,177 (61)
- -------------------------------------------------- -------- ------- -------- ------- -------- -------
Total Pension Cost (Credit) 2,651 6,995 5,480 6,348 (3,605) 4,826
- -------------------------------------------------- -------- ------- -------- ------- -------- -------
Multi-employer plans 411 - 421 - 441 -
Other international plans - 73 - 129 - 90
- -------------------------------------------------- -------- ------- -------- ------- -------- -------
Net Pension Cost (Credit) 3,062 7,068 5,901 6,477 (3,164) 4,916
- -------------------------------------------------- -------- ------- -------- ------- -------- -------
Less Pension Cost (Credit) of Discontinued
Operations 15 - 1,009 - (614) -
- -------------------------------------------------- -------- ------- -------- ------- -------- -------
Net Pension Cost (Credit) from Continuing
Operations $ 3,047 $ 7,068 4,892 $ 6,477 $ (2,550) $ 4,916
=============================================================================================================================
</TABLE>
F-13
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Notes to Financial Statements
Note 11 - Pension Plans (continued)
The weighted average assumptions used to calculate costs were as follows:
<TABLE>
<CAPTION>
=============================================================================================================================
(thousands of dollars) 1995 1994 1993
- -------------------------------------------------- ----------------------- ----------------------- -----------------------
Domestic International Domestic International Domestic International
- -------------------------------------------------- -------- ------------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate 8.5% 7.1% 7.0% 6.9% 7.9% 7.8%
Rate of increase in compensation level 4.5% 4.3% 4.5% 4.3% 5.0% 4.7%
Expected long-term rate of return on assets 10.0% 8.0% 10.0% 8.0% 12.0% 8.9%
=============================================================================================================================
</TABLE>
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.
The funded status and amounts recognized in the Company's Consolidated Balance
Sheets at December 31, 1995 and 1994 for the domestic plans were as follows:
<TABLE>
<CAPTION>
===================================================================================================
(thousands of dollars) 1995 1994
- ------------------------------------------------- ------------------------ ----------------------
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 $(265,472) $(70,936) $(218,596) $(41,773)
Nonvested benefits - (2,166) (7,346) (4,470)
- ------------------------------------------------- --------- -------- --------- --------
Accumulated Benefit Obligation (265,472) (73,102) (225,942) (46,243)
Effect of anticipated future compensation levels (22,489) (20,922) (14,472) (2,364)
- ------------------------------------------------- --------- -------- --------- --------
Projected Benefit Obligation (287,961) (94,024) (240,414) (48,607)
Plan assets at fair value 291,165 38,225 5,467 24,687
- ------------------------------------------------- --------- -------- --------- --------
Plan Assets in Excess of (Less than)
Projected Benefit Obligation 3,204 (55,811) 15,053 (23,920)
Unrecognized prior service cost 28,915 6,294 34,062 6,398
Unrecognized net transition (asset) obligation (11,636) 637 (14,638) 1,246
Unrecognized net loss 45,621 12,823 31,506 4,721
Adjustment required to recognize minimum liability - (7,907) - (3,763)
- ------------------------------------------------- --------- --------- --------- --------
Noncurrent Pension Asset (Liability) $ 66,104 $(43,964) $ 65,983 $(15,318)
===================================================================================================
</TABLE>
The assumptions used to calculate December 31, 1995 and 1994 obligations for
domestic plans were as follows:
<TABLE>
<CAPTION>
================================================================================
1995 1994
- ---------------------------------------------------------- ---- ----
<S> <C> <C>
Discount rate 7.0% 8.5%
Rate of increase in compensation level 4.5% 4.5%
================================================================================
</TABLE>
Effective January 1, 1996, the Company revised the domestic discount rate from
8.5% to 7%. This change resulted in an increase of approximately $46,000,000 and
$53,000,000 in the 1995 accumulated benefit obligation and projected benefit
obligation, respectively.
F-14
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Notes to Financial Statements
Note 11 - Pension Plans (continued)
The funded status and amounts recognized in the Company's Consolidated Balance
Sheets at December 31, 1995 and 1994 for the international plans were as
follows:
<TABLE>
<CAPTION>
===================================================================================================
(thousands of dollars) 1995 1994
- ------------------------------------------------- ------------------------ ----------------------
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 $(31,122) $(41,227) $(24,243) $(28,034)
Nonvested benefits (1,620) (2,483) (1,405) (2,816)
- ------------------------------------------------- -------- -------- -------- --------
Accumulated Benefit Obligation (32,742) (43,710) (25,648) (30,850)
Effect of anticipated future compensation levels (7,387) (18,497) (8,142) (16,231)
- ------------------------------------------------- -------- -------- -------- --------
Projected Benefit Obligation (40,129) (62,207) (33,790) (47,081)
Plan assets at fair value 47,567 289 37,268 -
- ------------------------------------------------- -------- -------- -------- --------
Plan Assets in Excess of (Less than)
Projected Benefit Obligation 7,438 (61,918) 3,478 (47,081)
Unrecognized prior service cost 1,597 15 1,718 -
Unrecognized net transition (asset) (5,787) (21) (5,978) -
Unrecognized net loss (gain) (795) 1,280 2,637 (4,222)
- ------------------------------------------------- -------- -------- -------- --------
Noncurrent Pension Asset (Liability) $ 2,453 $(60,644) $ 1,855 $(51,303)
===================================================================================================
</TABLE>
The weighted average assumptions used to calculate December 31, 1995 and 1994
obligations for international plans were as follows:
<TABLE>
<CAPTION>
================================================================================
1995 1994
- ---------------------------------------------------------- ---- ----
<S> <C> <C>
Discount rate 7.1% 7.6%
Rate of increase in compensation level 4.3% 4.4%
================================================================================
</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 of 50 cents for each dollar
up to 6%. 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 employees' participation, provisions, contributions, and
employer match are based upon terms of their respective collective bargaining
agreement.
The Company's matching contribution was $3,900,000 (1995), $4,300,000 (1994),
and $4,800,000 (1993).
F-15
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Notes to Financial Statements
Note 12 - Postretirement Benefits Other Than Pensions
The Company provides health and life insurance to certain domestic retired
employees, most of whom contribute to its cost. Substantially all employees
presently become eligible for retiree health benefits after reaching retirement
age while working for the Company. The cost of the retiree medical plan is
provided by retiree contributions that are adjusted annually to reflect current
health costs. For domestic employees subject to collective bargaining
arrangements the cost is shared by the Company in accordance with the bargained
agreements. Life insurance benefits for certain retired employees are provided
with the Company assuming the cost. The Company's policy is to fund the plans at
the discretion of management.
Postretirement benefit obligations at December 31, 1995 and 1994 were as
follows:
<TABLE>
<CAPTION>
============================================================================================
(thousands of dollars) 1995 1994
- -------------------------------------------------------------------- ------- -------
<S> <C> <C>
Accumulated Postretirement Benefit Obligation:
Retirees $29,359 $24,907
Active plan participants fully eligible for benefits 9,535 2,563
Other active plan participants 12,086 4,509
- -------------------------------------------------------------------- ------- -------
Total Accumulated Postretirement Benefit Obligation 50,980 31,979
Unrecognized net gain (loss) (7,010) 685
- -------------------------------------------------------------------- ------- -------
Accrued Postretirement Benefit Liability $43,970 $32,664
============================================================================================
</TABLE>
Net periodic postretirement benefit costs include the following components:
<TABLE>
<CAPTION>
================================================================================
(thousands of dollars) 1995 1994 1993
- ---------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
Service cost of benefits earned $ 486 $ 591 $ 389
Interest cost on accumulated postretirement benefits 2,938 2,634 2,621
Net amortization (747) 275 141
- ---------------------------------------------------- ------ ------ ------
Net Periodic Postretirement Benefit Costs $2,677 $3,500 $3,151
================================================================================
</TABLE>
For measuring the expected postretirement benefit obligation, a 10% annual rate
of increase in the per capita claims cost was assumed for both 1995 and 1994.
The rate was assumed to decrease by 1% per year to 6% in 1999 and remain at that
level thereafter. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7% for 1995 and 8.5% for 1994.
A change in the discount rate for valuing the obligations at December 31, 1995
from 8.5% to 7% resulted in an increase of approximately $4,100,000 in the
accumulated postretirement benefit obligation. The weighted average discount
rates used in determining the net periodic postretirement benefit costs were
8.3% (1995), 7% (1994), and 7.9% (1993).
The effect of a 1% increase in the health care cost trend rate would increase
the present value of the accumulated postretirement benefit obligation at
December 31, 1995 by approximately $4,000,000 and the net periodic
postretirement benefit cost for 1995 by approximately $256,000.
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-16
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Notes to Financial Statements
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 and transaction hedges. Gains and
losses on hedges of net investments are recognized as a component of
shareholders' equity. 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, 1995 and 1994, the Company had outstanding contracts with
aggregate notional amounts of approximately $197,000,000 and $209,000,000,
respectively, to hedge its foreign net investments and also to fix the interest
rates on the same amount of indebtedness at a weighted average interest rate of
approximately 8%. 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.
At December 31, 1995 and 1994, the Company had outstanding forward contracts
with aggregate notional amounts of approximately $164,000,000 and $10,000,000,
respectively, to hedge foreign currency risk on accounts receivable and payable.
These forward contracts are generally outstanding for 30 days and are primarily
denominated in German marks, Italian lire and French francs.
All 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, the 7.75% Debentures and the short-term bank loan refinanced in February
1996 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) 1995 1994
- --------------------------------------------- ------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- --------------------------------------------- -------- --------- -------- ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents $143,994 $143,994 $197,173 $197,173
Notes receivable $ 26,387 $ 26,366 $ 1,693 $ 1,679
Long-term debt $686,315 $696,193 $348,230 $315,628
Off-balance sheet financial instruments:
Unrealized loss on foreign currency/interest
rate swap contracts $ - $(41,895) $ - $(32,736)
==========================================================================================
</TABLE>
F-17
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Notes to Financial Statements
Note 14 - Commitments and Contingencies
Operating Leases: At December 31, 1995, minimum rental commitments related to
continuing operations under noncancelable operating leases amounted to
$21,495,000 (1996), $18,590,000 (1997), $11,996,000 (1998), $10,649,000 (1999),
$8,380,000 (2000), and $92,973,000 (2001 and thereafter). Aggregate future
minimum rentals to be received under noncancelable subleases, the majority of
which are subject to barter provisions, amounted to $19,143,000.
Rental expenses under operating leases from continuing operations were
$16,597,000 (1995), $16,758,000 (1994), and $16,685,000 (1993).
Capital Lease: The Company has a capital lease for an office/laboratory facility
located in Meyrin, Switzerland. The lease contains purchase options and expires
in 2007.
Future minimum lease payments at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
================================================================================
(thousands of dollars)
- ------------------------------------------------------------------
<S> <C>
1996 $ 2,295
1997 2,295
1998 2,295
1999 2,295
2000 2,295
2001 and thereafter 16,063
- ------------------------------------------------------------------ --------
Total minimum lease payments 27,538
Amounts representing interest (9,716)
- ------------------------------------------------------------------ --------
Present value of net minimum
lease payments 17,822
Current portion (1,000)
- ------------------------------------------------------------------ --------
Long-term obligation $16,822
================================================================================
</TABLE>
The lease contains a sublease agreement for one third of the facility over the
length of the lease with the lessee providing a pro rata share of the minimum
lease payments.
Capital Commitments: At December 31, 1995, the estimated costs to complete
authorized projects under construction related to continuing operations amounted
to $92,209,000.
Litigation, Claims, and Contingencies: The Company has been notified that it
is a potentially responsible party ("PRP") or a defendant in a number of
governmental (federal, state, and local) and private actions associated with
the release, or suspected release, of contaminants into the environment. As a
PRP, the Company may be liable for costs associated with the investigation and
remediation of environmental contamination, as well as various penalties, and
damages to persons, property and natural resources. As of December 31, 1995,
the Company was a PRP, or a defendant, in connection with 67 sites at which it
is likely to incur costs associated with environmental investigation or
remedial actions which have been or will be executed pursuant to the
Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"),
the Resource Conservation and Recovery Act ("RCRA"), or similar state or local
laws. With 22 exceptions, all of these sites involve one or more PRPs, and in
most cases, there are numerous other PRPs in addition to the Company. CERCLA,
RCRA, and the state counterparts to these federal laws, authorize governments
to investigate and remediate actual or suspected damage to the environment
caused by the release or suspected release of hazardous substances into the
environment, or to order the responsible parties to investigate and/or
remediate such environmental damage.
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, 1995, the Company's reserves for environmental remediation and
compliance costs related to continuing operations amounted to $83,646,000
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 certain 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. In 1995, the Company
F-18
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Notes to Financial Statements
Note 14 - Commitments and Contingencies (continued)
executed settlements with certain of the Company's insurance carriers resulting
in income of $52,887,000, net of related legal and other costs.
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
Nipomo Community Services District v. Shell Oil Co., et al.; filed in May 1995,
and pending in Superior Court for the County of San Luis Obispo. 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. However, depending on the amount and timing of
an unfavorable resolution of these contingencies, it is possible that the
Company's future results could be materially affected in a particular period.
Note 15 - Operations by Industry Segment and Geographic Area
The following is a summary of the Company's operations by industry segment and
geographic area:
<TABLE>
<CAPTION>
================================================================================================================
(thousands of dollars) 1995 1994 1993
- ---------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Net Sales
Chemical $1,442,320 $1,336,907 $1,232,116
OSi Specialties 101,312 - -
Petroleum 394,822 375,623 365,238
Diversified products 61,412 141,995 178,889
Intersegment elimination (14,789) (13,111) (13,157)
- ---------------------------------------------------------------------- ---------- ---------- ----------
Net Sales $1,985,077 $1,841,414 $1,763,086
- ---------------------------------------------------------------------- ---------- ---------- ----------
Operating Income
Chemical $ 61,450 $ 122,161 $ 104,992
OSi Specialties 7,385 - -
Petroleum 33,415 43,379 24,547
Diversified products 62,689 17,243 (9,311)
- ---------------------------------------------------------------------- ---------- ---------- ----------
Operating Income from continuing operations 164,939 182,783 120,228
- ---------------------------------------------------------------------- ---------- ---------- ----------
General corporate expenses - net 24,450 (17,979) (52,626)
Interest income (expense) - net (28,585) (19,642) (26,305)
- ---------------------------------------------------------------------- ---------- ---------- ----------
Income from continuing operations before Federal
and Foreign Income Taxes $ 160,804 $ 145,162 $ 41,297
- ---------------------------------------------------------------------- ---------- ---------- ----------
Assets
Chemical $1,111,927 $1,101,519 $1,036,875
OSi Specialties 966,501 - -
Petroleum 247,009 507,848 461,073
Diversified products - 107,376 122,930
Net assets of discontinued operations 170,426 - -
Corporate (principally cash, cash equivalents,
and deferred pension costs) 276,581 202,602 218,120
- ---------------------------------------------------------------------- ---------- ---------- ----------
Assets $2,772,444 $1,919,345 $1,838,998
================================================================================================================
</TABLE>
F-19
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Notes to Financial Statements
Note 15 - Operations by Industry Segment and Geographic Area (continued)
<TABLE>
<CAPTION>
==========================================================================================================
(thousands of dollars) 1995 1994 1993
- --------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Depreciation and Amortization
Chemical $ 69,917 $ 62,795 $ 58,204
OSi Specialties 9,439 - -
Petroleum 16,758 14,568 15,704
Diversified products 3,719 9,351 11,054
Corporate 2,738 1,949 1,518
- --------------------------------------------------------------- ---------- ---------- ----------
Depreciation and Amortization from
continuing operations $ 102,571 $ 88,663 $ 86,480
- --------------------------------------------------------------- ---------- ---------- ----------
Capital Expenditures (exclusive of acquisitions)
Chemical $ 53,134 $ 44,323 $ 53,831
OSi Specialties 12,400 - -
Petroleum 16,755 25,647 24,607
Diversified products 4,388 5,623 5,829
Discontinued operations 17,557 17,502 15,875
Corporate 11,611 14,343 3,547
- --------------------------------------------------------------- ---------- ---------- ----------
Capital Expenditures $ 115,845 $ 107,438 $ 103,689
- --------------------------------------------------------------- ---------- ---------- ----------
Net Sales
United States $1,247,287 $1,225,062 $1,201,850
Western Europe 662,099 541,060 487,508
Other International 163,636 137,855 129,195
Inter-area elimination (87,945) (62,563) (55,467)
- --------------------------------------------------------------- ---------- ---------- ----------
Net Sales $1,985,077 $1,841,414 $1,763,086
- --------------------------------------------------------------- ---------- ---------- ----------
Operating Income
United States $ 95,279 $ 111,415 $ 67,440
Western Europe 55,338 54,184 38,705
Other International 14,322 17,184 14,083
- --------------------------------------------------------------- ---------- ---------- ----------
Operating Income from continuing operations $ 164,939 $ 182,783 $ 120,228
- --------------------------------------------------------------- ---------- ---------- ----------
Assets
United States $1,512,278 $1,211,125 $1,177,891
Western Europe 884,139 604,342 565,172
Other International 205,601 103,878 95,935
Net assets of discontinued operations (United States) 170,426 - -
- --------------------------------------------------------------- ---------- ---------- ----------
Assets $2,772,444 $1,919,345 $1,838,998
==========================================================================================================
</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.
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 not directly attributable to a specific segment.
In 1995, general corporate expenses include income as a result of settlements
with certain of the Company's insurers, net of related legal and other costs
totaling $52,887,000.
In 1993, general corporate expenses include provisions for a work force
reduction, loss on sublease of office facilities, and other matters totaling
$29,784,000.
Foreign currency translation and transaction gains and losses included in net
income are not significant.
OSi Specialties purchases, in the aggregate, more than 50% of its raw materials
from Dow Corning Corporation and Union Carbide Corporation under various
long-term agreements expiring from 1998 to 2000.
F-20
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Notes to Financial Statements
Note 16 - Discontinued Operations
On September 11, 1995, the Company announced its intention to divest its
Lubricants Group. The Board of Directors has approved a plan of disposal with a
target date of mid-1996. These operations are reflected as discontinued
operations for all periods presented in the Company's income statements. Summary
operating results of discontinued operations are as follows:
<TABLE>
<CAPTION>
====================================================================================
(thousands of dollars) 1995 1994 1993
- ----------------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Net sales $373,363 $383,255 $379,469
- ----------------------------------------------------- -------- -------- --------
Income (loss) before federal and foreign income taxes $ 6,709 $ 19,607 $ (7,966)
Federal and foreign income taxes 2,610 6,960 (2,597)
- ----------------------------------------------------- -------- -------- --------
Net income (loss) $ 4,099 $ 12,647 $ (5,369)
====================================================================================
</TABLE>
Net assets of discontinued operations at December 31, 1995 have been segregated
in the Company's balance sheet. A breakout of the net assets is as follows:
<TABLE>
<CAPTION>
================================================================================
(thousands of dollars) 1995
- ----------------------------------------------------------------- ---------
<S> <C>
Accounts and notes receivable - net $ 61,633
Inventories 38,378
Property, plant, and equipment - net 112,639
Accounts payable and other current liabilities (39,603)
Other assets and liabilities - net (2,621)
- ----------------------------------------------------------------- ---------
$170,426
================================================================================
</TABLE>
Under generally accepted accounting principles, no loss on discontinued
operations has been included based on management's best estimates of the amounts
expected to be realized on the sale of its Lubricants Group. While estimates are
based on an analysis of the facilities, including appraisals by investment
bankers, there have been limited recent sales of comparable properties to
consider in preparing such valuations. The amounts the Company will ultimately
realize could differ materially in the near term from the amounts assumed in
arriving at the gain anticipated on disposal of the discontinued operations.
F-21
<PAGE>
<PAGE>
Witco Corporation and Subsidiary Companies
Quarterly Financial Data From Continuing Operations
(Unaudited)
<TABLE>
<CAPTION>
(in thousands of dollars except per share data)
==============================================================================================================
1995 1994
- ------- -------------------------------------------------- -----------------------------------------------
Income (loss) Income
Income (loss) from Income from
Cost of from Continuing Cost of from Continuing
Net Goods Continuing Operations Net Goods Continuing Operations
Quarter Sales Sold(a) Operations Per Share Sales Sold(a) Operations Per Share
- ------- --------- ---------- ----------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First $ 517,952 $ 425,107 $ 30,270(b) $ .54(b) $ 465,079 $ 381,302 $19,970 $.37
Second 489,231 410,003 69,021(c) 1.22(c) 467,337 377,336 27,142(g) .48(g)
Third 441,902 369,965 19,444(d) .34(d) 457,388 378,643 22,656 .40
Fourth 535,992 446,439 (18,389)(e)(f) (.32)(e)(f) 451,610 363,461 24,652 .45
- ------- ---------- ---------- -------- ----- ---------- ---------- ------- -----
$1,985,077 $1,651,514 $100,346 $1.78 $1,841,414 $1,500,742 $94,420 $1.70
==============================================================================================================
</TABLE>
(a) Includes depreciation and amortization.
(b) Includes a gain of $6,196, or $.11 per common share, from the disposition
of the Company's Battery Parts business.
(c) Includes a gain of $27,073, or $.48 per common share, from the disposition
of the Company's Carbon Black business, and a gain of $23,032, or $.40 per
common share, as a result of settlements with certain of the company's
insurers, net of related legal and other costs.
(d) Includes a gain of $4,700, or $.08 per common share, as a result of
settlements with certain of the company's insurers, net of related legal
and other costs.
(e) Includes a charge of $33,762, or $.60 per common share, related to plant
consolidation, environmental remediation and litigation, and a gain of
$6,645, or $.12 per common share, as a result of settlements with certain
of the company's insurers, net of related legal and other costs.
(f) Includes a loss of approximately $3,600, or $.06 per common share,
attributable to the operations of OSi Specialties. This loss is net of an
income tax benefit, goodwill amortization, and associated financing costs.
(g) Includes a gain of $3,133, or $.06 per common share, from the disposition
of the metal finishing and metalworking operations of a subsidiary.
F-22
<PAGE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF WITCO CORPORATION(1)(2)(3)
AS OF JANUARY 1, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF
VOTING SECURITIES
OWNED DIRECTLY OR STATE OR
INDIRECTLY BY COUNTRY OF
WITCO CORPORATION ORGANIZATION
------------------ ---------------
<S> <C> <C>
Aero Oil Company, Inc................................................... 100.0% Indiana
Assured Insurance Company............................................... 100.0 Vermont
Baxenden Chemicals Limited.............................................. 53.5 United Kingdom
Baxenden Scandinavia AS................................................. 53.5 Denmark
Beam Oil Company, Inc................................................... 100.0 Georgia
Celette Ltd............................................................. 100.0 Ireland
Enenco, Incorporated(4)................................................. 50.0 New York
Firma W/K Witco EPA(4).................................................. 50.0 The Netherlands
Jonk BV................................................................. 100.0 The Netherlands
Nerap Expeditie BV...................................................... 100.0 The Netherlands
OSi Specialties Asia Pacific Inc........................................ 100.0 Delaware
OSi Specialties Asia Limited............................................ 100.0 Hong Kong
OSi Specialties (Australia) Pty Ltd..................................... 100.0 Australia
OSi Specialties Benelux NV.............................................. 100.0 Belgium
OSi Specialties Canada Inc.............................................. 100.0 Canada
OSi Specialties China Limited........................................... 100.0 China
OSi Specialties Colombia Limitada....................................... 100.0 Colombia
OSi Specialties de Mexico S.A. de C.V................................... 100.0 Mexico
OSi Specialties do Brasil Ltda.......................................... 100.0 Brazil
OSi Specialties Germany GmbH............................................ 100.0 Germany
OSi Specialties Holding Company......................................... 100.0 Delaware
OSi Specialties Inc..................................................... 100.0 Delaware
OSi Specialties Inc. (Chile) Limitada................................... 100.0 Chile
OSi Specialties Italia S.p.A............................................ 100.0 Italy
OSi Specialties (Korea) Limited......................................... 100.0 Korea
OSi Specialties (Malaysia) Sdn Bhd...................................... 100.0 Malaysia
OSi Specialties New Zealand, Inc........................................ 100.0 Delaware
OSi Specialties S.A..................................................... 100.0 Switzerland
OSi Specialties Singapore PTE Ltd....................................... 100.0 Singapore
OSi Specialties Thailand Co. TD......................................... 100.0 Thailand
OSi Specialties (U.K.) Ltd.............................................. 100.0 United Kingdom
OSi Specialties USA, Inc................................................ 100.0 Delaware
PT OSi Specialities..................................................... 100.0 Indonesia
Rinol AG(4)............................................................. 10.0 Germany
Sherex Chemical Company, Inc............................................ 100.0 Ohio
Southwest Petro-Chem, Inc............................................... 100.0 Delaware
Witco Asia Pacific PTE Ltd.............................................. 100.0 Singapore
Witco Australia Pty Limited............................................. 100.0 Australia
Witco BV................................................................ 100.0 The Netherlands
Witco Canada Inc........................................................ 100.0 Canada
Witco Corporation UK Limited............................................ 100.0 United Kingdom
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
VOTING SECURITIES
OWNED DIRECTLY OR STATE OR
INDIRECTLY BY COUNTRY OF
WITCO CORPORATION ORGANIZATION
------------------ ---------------
<S> <C> <C>
Witco Deutschland GmbH.................................................. 100.0% Germany
Witco do Brasil Ltda.................................................... 100.0 Brazil
Witco Dominion Financial Services Company, Ltd.......................... 100.0 Canada
Witco Ecuador S.A....................................................... 100.0 Ecuador
Witco Espana, S.L....................................................... 100.0 Spain
Witco Europe Financial Services Co...................................... 100.0 Delaware
Witco Europe Investment Partners........................................ 100.0 Delaware
Witco Financial Services Co............................................. 100.0 Ireland
Witco Foreign Sales Corporation......................................... 100.0 Barbados
Witco GmbH.............................................................. 100.0 Germany
Witco Grand Banks, Inc.................................................. 100.0 Canada
Witco Handels GmbH...................................................... 100.0 Austria
Witco International Corporation......................................... 100.0 New Jersey
Witco Investment Holdings BV............................................ 100.0 The Netherlands
Witco Investments BV.................................................... 100.0 The Netherlands
Witco Investments SNC................................................... 100.0 France
Witco Italiana SRL...................................................... 100.0 Italy
Witco Ltd............................................................... 60.0 Israel
Witco Marketing and Distribution Ltd.................................... 60.0 Israel
Witco Mexico S.A. de C.V................................................ 100.0 Mexico
Witco Polymers and Resins BV............................................ 100.0 The Netherlands
Witco S.A............................................................... 100.0 France
Witco Solvay Duromer GmbH(4)............................................ 50.0 Germany
Witco Specialties PTE Ltd............................................... 100.0 Singapore
Witco Surfactants GmbH.................................................. 100.0 Germany
Witco Warmtekracht BV................................................... 100.0 The Netherlands
</TABLE>
- ------------
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 these unconsolidated entities.
<PAGE>
<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
Registration Statement (Form S-3, No. 33-65203) pertaining to the issuance of
notes and debentures, the Post-effective Amendment No. 2 to the Registration
Statement (Form S-8, No. 33-10715), Post-effective Amendment No. 1 to the
Registration Statements (Form S-8, Nos. 33-30995 and 33-45194), each pertaining
to stock option plans of Witco Corporation, the Registration Statement (Form
S-8, No. 33-48806), pertaining to an employee benefit plan of Witco Corporation,
and the Registration Statement (Form S-8, No. 33-60755), pertaining to the 1995
Stock Option Plan for Employees of Witco and its Subsidiaries, of our report
dated January 29, 1996 (except Note 7, as to which the date is February 12,
1996), with respect to the consolidated financial statements and schedule of
Witco Corporation and Subsidiary Companies for the year ended December 31, 1995
included in this Annual Report (Form 10-K).
ERNST & YOUNG LLP
Stamford, Connecticut
March 19, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 143,994
<SECURITIES> 0
<RECEIVABLES> 413,590
<ALLOWANCES> 7,104
<INVENTORY> 322,898
<CURRENT-ASSETS> 944,045
<PP&E> 1,398,262
<DEPRECIATION> 586,595
<TOTAL-ASSETS> 2,772,444
<CURRENT-LIABILITIES> 694,465
<BONDS> 683,830
<COMMON> 282,173
0
7
<OTHER-SE> 721,937
<TOTAL-LIABILITY-AND-EQUITY> 2,772,444
<SALES> 1,985,077
<TOTAL-REVENUES> 2,000,181
<CGS> 1,651,514
<TOTAL-COSTS> 1,651,514
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,615
<INTEREST-EXPENSE> 43,689
<INCOME-PRETAX> 160,804
<INCOME-TAX> 60,458
<INCOME-CONTINUING> 100,346
<DISCONTINUED> 4,099
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 104,445
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 1.84
<PAGE>
