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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, 1996 COMMISSION FILE NO. 1-4654
------------------------
WITCO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C>
DELAWARE 13-1870000
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
ONE AMERICAN LANE 06831-2559
GREENWICH, CONNECTICUT (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 552-2000
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- - ----------------------------------------------------------------------- ------------------------
<S> <C>
Common Stock -- $5 Par Value New York Stock Exchange
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 February 28, 1997, the aggregate market value of the voting stock
held by non-affiliates of the Registrant, based on the closing price on February
28, 1997, on the New York Stock Exchange for the Registrant's Common Stock, was
$1.75 billion.
There were 56,920,255 shares of the Registrant's Common Stock outstanding
on February 28, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive Proxy Statement for its April 23, 1997,
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
Witco Corporation (the 'Company' or 'Witco'), established in 1920, 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. On December 31, 1996, the Company had approximately 7,220 employees
worldwide.
In 1992, the Company completed the acquisition of the Industrial Chemicals
and Natural Substances divisions of Schering AG Berlin. 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 with 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, Witco announced its intention to divest its Lubricants
Group. In November 1996, the Company disposed of its grease gun and motor oil
portions of its Lubricants business. The Company plans to complete the
disposition of the Lubricants business by mid 1997.
As of December 31, 1996, the Company's operations were divided among three
business segments: Chemical, OSi Specialties and Petroleum which are described
in Section (c) below. In connection with the Company's 1996 restructuring plan,
on January 28, 1997, the Company announced the reorganization of its business
into four groups; Oleochemicals and Derivatives, Polymer Chemicals, Performance
Chemicals and OrganoSilicones. The Oleochemicals and Derivatives Group, which
contains the Oleochemical assets of the former Oleo/Surfactants Group, produces
basic oleochemicals--fatty acids, plastic lubricants and oleochemical
derivatives. The Polymer Chemicals Group, includes assets of the former Polymer
Additives Group and certain assets of the former Resins Group. This group
focuses on the production of additives and initiators in addition to metal
organics, coatings and adhesives. The Performance Chemicals Group consists of
the former Petroleum Specialties Group, certain assets of the old
Oleo/Surfactants and Resins Groups and Baxenden, a joint venture headquartered
in the United Kingdom. The group focuses on producing petroleum specialties,
sulfonation and ethoxylation operations, and urethane chemicals. The fourth
segment, the OrganoSilicones Group, which consists of the former OSi Specialties
Group, produces silanes, specialty fluids and urethane additives.
On December 12, 1996, the Company announced a $600 million three-year
capital spending plan for new capacity, modernization, environmental and safety
compliance and information systems. The Company also plans to increase
investment in research and development. The Company intends to reduce the number
of its manufacturing facilities from 46 to 31 while consolidating related
distribution, research and development and administrative centers. The Company
also announced its intent to reduce its work force by 1,800 employees.
The Company 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.
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(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Reference is made to Note 17 of Notes to Financial Statements. See Item
8--Financial Statements and Supplementary Data following Part IV of this
report.
(c) NARRATIVE DESCRIPTION OF BUSINESS
As of December 31, 1996, the Company's operations were divided among three
business segments: Chemical, OSi Specialties and Petroleum Products.
Chemical Products
Oleo/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 textiles. 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 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 global producer of aluminum alkyls, used as
cocatalysts 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, epoxy resins and hardeners with
manufacturing facilities in the U.S., France, U.K., Germany, Italy, Denmark and
Singapore.
Witco has been developing water-based and high solids technologies to
replace solvent-based systems. This has increased the number of new products and
Witco's market share among multi-product customers. Witco is continually
developing technical applications for these products in new markets. Examples
include new water-based breathable textile coatings; patented dimethyl puyrazol
(DMP) blocked polyurethane high performance coatings; low fogging polyesters for
flexible polyurethane foam for the European market; polyurethane systems for
footwear; and water-based epoxy coating systems developed for the global market.
2
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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, 1996, no
customer accounted for more than 4.4% of Chemical Segment sales, and sales to
the ten largest customers accounted for approximately 19.5% 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 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 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, the OSi organization
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 diethyl siloxane hydrolyzate. The Segment
purchases, in the aggregate, more than 40.7% of its raw materials from Dow
Corning Corporation and Union Carbide Corporation under various long-term
agreements, which terms expire at various times through 2000. The Segment
purchases other raw materials from a variety of domestic and international
suppliers, and these products are readily available from other suppliers.
3
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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. During the year ended December 31, 1996, no
customer accounted for more than 6.7% of OSi Specialties Segment sales, and
sales to the ten largest customers accounted for approximately 24.5% of OSi
Specialties Segment sales.
Competition
The OSi Specialties Segment competes with most of the global silicones
companies, but typically in product or market niches. 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; the lengthy product
development process; and customers' general aversion to contracting with
unproven suppliers of specialty chemical products.
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
Oleo/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
In September 1995, Witco announced its intention to divest its Lubricants
Group. In 1996, Witco sold its Kendall/Amalie, private label grease and grease
gun manufacturing businesses. In addition, Witco sold its Bradford, PA refinery
in March 1997. Witco continues to operate as 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 through its Golden
Bear refinery. It is anticipated that the Golden Bear refinery, the remaining
business of the Lubricants Group, will be sold in 1997. 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, 1996, no customer accounted for more than 6.3% of continuing Petroleum
Segment sales, and sales to the ten largest customers accounted for
approximately 24.1% of continuing Petroleum Segment sales.
4
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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 gives it advantages in the marketplace.
International Operations
Sales of Witco's continuing non-U.S. operations were $935.4 million, or
41.3% of total sales for continuing operations, for the year ended December 31,
1996. Witco's manufacturing and producing operations outside the United States
are in Belgium, Brazil, Canada, Denmark, England, France, Germany, Hong Kong,
Indonesia, Italy, Korea, Malaysia, Mexico, the Netherlands, Singapore, Spain and
Thailand.
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
renewable terms of registration expiring generally between 1996 and 2006. The
Company intends to renew in a timely fashion those trademarks that are renewable
and deemed important to its continuing business operations. Additionally, the
Company currently has approximately 3,200 patents and pending patent
applications worldwide related to its continuing business operations. The
Company intends to continue to file patent applications on new and emerging
technologies.
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 $73.1 million in 1996, $52.9 million in 1995 and $40.7 million in
1994 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. During 1997 the Company will be
consolidating its U.S. research and development facilities into three primary
locations.
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.
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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.
In 1996, the Company completed a comprehensive study of its environmental
remediation and compliance issues throughout the organization. This study
resulted in an increase to environmental reserves by $83.4 million. Reserves for
environmental remediation and compliance costs at December 31, 1996 amounted to
$219.7 million (including $64.2 million associated with environmental expenses
of the Lubricants Group), which reflects management's assessment of future
remediation and compliance costs in light of currently available information. Of
these reserves, $77.6 million are associated with plants to be shut-down or sold
as part of the 1996 and 1995 restructuring plans. Remediation expenditures
charged to those reserves were $14.7 million in 1996 and include expenditures
currently mandated as well as those not initiated by any regulatory authority or
third party. The Company anticipates 1997 expenditures to be approximately $60
million.
Capital expenditures for air, water and solid waste control equipment and
facilities amounted to $12.6 million in 1996. The Company estimates that
approximately $20.0 million will be expended on similar capital projects in
1997.
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 or slightly above current levels. Such costs
amounted to approximately $38 million in 1996.
(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, Italy, Mexico and Spain
manufacture chemical products. In early 1996, the Company acquired a resins
manufacturing plant in Singapore. In addition, OSi Specialties operates
producing and other facilities in Korea, Hong Kong, Malaysia, Thailand and
Indonesia.
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 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 17 of Notes to Financial Statements. See Item
8--Financial Statements and Supplementary Data following Part IV of this
report.
ITEM 2--PROPERTIES
At December 31, 1996, Witco conducted its operations for its continuing
businesses in 57 manufacturing plants and other facilities, owned in fee or
occupied under lease, of which 25 are in the United States and 32 in other
countries. Of these facilities, 29 are utilized for Chemical product
manufacturing; 10 are utilized for OSi Specialties product manufacturing; 7 are
utilized for Petroleum product manufacturing; and 11 are utilized for
administrative and research purposes. 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
Blue Island, Illinois*
Chicago, Illinois*
Mapleton, Illinois -- 2 Plants
Harahan, Louisiana*
Taft, Louisiana
Perth Amboy, New Jersey
Brooklyn, New York*
Memphis, Tennessee
Fort Worth, Texas*
Houston, Texas
La Porte, Texas*
Marshall, Texas
Janesville, Wisconsin
International
Brantford, Canada* St. Amour, France
Montreal, Canada* Bergkamen, Germany (2091)
Oakville, Canada* Steinau, Germany
Soro, Denmark (2005) Gambolo, Italy
Accrington, England Cuatitlan, Mexico
Droitwich, England Singapore
Flimby, England Granollers, Spain
Elbeuf, France
OSI SPECIALTIES SEGMENT FACILITIES
United States
Sistersville, West Virginia
International
Antwerp, Belgium (2019)
Itatiba, Brazil
Termoli, Italy
Lerma, Mexico*
PETROLEUM SEGMENT FACILITIES
United States
Gretna, Louisiana
Petrolia, Pennsylvania*
Trainer, Pennsylvania*
International
West Hill, Canada Haarlem, the Netherlands
Amsterdam, the Netherlands Koog Aan De Zaan, the Netherlands
- - ------------
* Manufacturing plants, for which public announcements have been made regarding
the Company's intention to close or sell as part of its asset consolidation
plan.
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OTHER FACILITIES
United States
Greenwich, Connecticut (2014) World Headquarters--Principal
Executive, Administrative and
Sales Office
Los Angeles, California (2001) Administrative and Sales Office
Tarrytown, New York (1997) Research
Oakland, New Jersey Research
Dublin, Ohio Research
Houston, Texas Administrative and Research
S. Charleston, West Virginia (1997) Administrative and Research
International
Paris, France (1999) Administrative and Sales Office
Frankfurt, Germany (1997) Principal European Executive
and Administrative Office
Singapore (1999) Administrative and Research
Meyrin, Switzerland (2007) Administrative and Research
In addition, OSi Specialties operates producing and other facilities in
Korea, Hong Kong, Malaysia, Thailand and Indonesia.
ITEM 3--LEGAL PROCEEDINGS
The Company 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, 1996, the
Company was a PRP, or a defendant, in connection with 76 sites at which it is
likely to incur environmental response costs as a result of actions brought
against the Company pursuant to the federal Comprehensive Environmental Response
Compensation and Liability Act ('CERCLA'), the federal Resource Conservation and
Recovery Act ('RCRA') or similar state or local laws. With 27 exceptions, all of
these sites involve one or more other 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 is a defendant in six similar actions arising out of the
Company's involvement in the polybutylene resin manufacturing business in the
1970's. Five of the following cases are currently pending in California state
courts and one is pending in Texas state court; East Bay Municipal Utility
District v. Mobil Oil Corporation, et al., filed in November 1993, and pending
in Superior Court for the County of San Mateo, California; City of Santa Maria
v. Shell Oil Company, et al., filed in May 1994, and pending in Superior Court
for the County of San Luis Obispo, California; Nipomo Community Services
District v. Shell Oil Company, et al., filed in May 1995, and pending in
Superior Court for the County of Santa Barbara, California; Alameda County Water
District v. Mobil Oil Corporation, et al., filed in April
8
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1996, and Marin Municipal Water District v. Shell Oil Company, et al., filed in
May 1996, both pending in Superior Court for the County of San Mateo; and City
of Austin v. Shell Oil Company, et al. filed in June 1996, and pending in the
District Court of Travis County, Texas. 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 in the California and Texas actions include breach of the California
Unfair Practices Act and the Texas Deceptive Practices Act, respectively; breach
of warranty, fraud and strict liability. It is possible that the Company may be
named as a defendant in future actions arising out of its past involvement in
the polybutylene resin manufacturing business.
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, the Company's operating results
could be materially affected in future periods by the resolution of these
contingencies.
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, 1996.
9
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EXECUTIVE OFFICERS OF THE COMPANY
The following sets forth information regarding executive officers of the
Company as of March 1, 1997, and is included in Part I in accordance with
Instruction 3 of Item 401(b) of Regulation S-K.
<TABLE>
<CAPTION>
SERVED IN
PRESENT
POSITION PRIOR BUSINESS EXPERIENCE
NAME AND PRESENT TITLE SINCE (WITHIN LAST FIVE YEARS) AGE
- - --------------------------------------------- --------- ------------------------------------------------ ---
<S> <C> <C> <C>
Peter J. Biancotti .......................... 1983 53
Vice President and Controller
E. Gary Cook ................................ 1996 President and COO of Albermarle 52
Chairman of the Board, Corporation--March 1994 to June 1996.
President and CEO President--Chemicals of Ethyl
Corp.--January 1992 to March 1994.
Bruce G. Davis .............................. 1995 Vice President Purchasing and Logistics, 48
Vice President, Purchasing and Logistics Standard Products--1993 to 1995. Manager of
Materials, Sourcing and Support Operations, GE
Transportation Systems--1990 to 1993.
Camillo J. DiFrancesco ...................... 1996 Vice President of Investor Relations--March 47
Senior Vice President and Chief Financial 1996 to September 1996. Vice President and
Officer CFO, OSi Specialties, Inc.--July 1993 to
March 1996. Senior Vice President and CFO,
Roberston CECO Corporation--March 1991 to
May 1992.
Ronald Edelstein ............................ 1995 Vice President, Information Systems--April 47
Chief Information Officer, Vice President, 1992 to December 1995. General Manager of
Information Systems Information Systems--October 1991 to April
1992.
Nirmal Jain ................................. 1996 Group Vice President, Polymer Additives--1993 59
Group Vice President, Polymer Chemicals to 1996. Vice President and General Manager,
Argus Division prior to January 1993.
Gerald Katz ................................. 1996 Senior Vice President of Corporate 59
Senior Vice President, Performance Development--1995 to 1996. Group Vice
Chemicals President and Senior Managing Director, Witco
Europe--1992 to 1994. Group Vice President
of the Chemical Group prior to 1992.
Yuan-Hu (Dick) Liu .......................... 1995 President, Du Pont China Holding Co. Ltd.--1993 59
Group Vice President, Asia/Pacific to 1995. Group Manager/ Director Greater
China, Du Pont China Ltd.--1987 to 1993.
Peter Loewrigkeit ........................... 1996 Group Vice President of the Resins business 58
Group Vice President, Special Assignment unit--1994 to 1995. Vice President,
Polyurethane/Polyesters business unit--1993
to 1994. Vice President and Business Manager,
Urethane business unit--1991 to 1993.
Dustan E. McCoy ............................. 1996 Vice President, General Counsel and Corporate 47
Senior Vice President, General Counsel and Secretary--April 1993 to October 1996.
Corporate Secretary Associate General Counsel, Ashland,
Inc.--1990 to 1993.
Clifford E. Montgomery ...................... 1997 Vice President Human Resources, Quaker Chemical 49
Vice President, Human Resources Corporation--January 1990 to December 1996.
</TABLE>
(continued on next page)
10
<PAGE>
<PAGE>
(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>
Eric R. Myers ............................... 1996 Vice President of Investor Relations-- 50
Group Vice President, Corporate September 1996 to November 1996. Vice
Restructuring/Implementation President and General Manager, Lubricants
Business--May 1993 to September 1996. Vice
President and General Manager, Kendall/Amalie
Division--January 1993 to April 1993. Vice
President and General Manager, Richardson
Battery Parts Division--May 1991 to December
1992. President and General Manager,
Bridgeport--Piedmont Manufacturing Co.
(Division of Bridge Products, Inc.) prior to
May 1991.
James M. Rutledge ........................... 1990 44
Vice President and Treasurer
Roger L. Sharp .............................. 1996 Vice President of Operations (Global Nylon) Du 54
Senior Vice President, Global Operations Pont Corporation--prior to September 1996.
Frederick A. Shinners ....................... 1996 Group Vice President of Oleo/ Surfactants--June 54
Group Vice President, Managing Director, 1994 to December 1996. Vice President and
Europe General Manager of GE Silicones--August 1990
to June 1994.
Georg Urban ................................. 1996 Managing Director of Witco's European 50
Group Vice President, Oleochemicals & Surfactants business--1993 to 1996. COO and
Derivatives Group Executive, Pfaudler--Europe prior to
1993.
David Verner ................................ 1996 Vice President, Urethane Additives business 49
Group Vice President, OrganoSilicones unit--October 1995 to April 1996. Vice
President, Urethane Additives, OSi
Specialties, Inc.--July 1993 to October
1995. Business Director of Union Carbide
Corporation prior to July 1993.
Donald E. Weinberg .......................... 1986 61
Vice President, General Manager, Golden
Bear
</TABLE>
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>
1996 1995
------------------ ----------------
QUARTER HIGH LOW HIGH LOW
- - ------------------------------------------ ------- ------- ------ ------
<S> <C> <C> <C> <C>
First..................................... $36.25 $29.13 $29.38 $24.25
Second.................................... $37.38 $31.88 $33.13 $27.25
Third..................................... $34.63 $28.13 $35.63 $31.50
Fourth.................................... $33.50 $29.50 $35.13 $27.50
</TABLE>
11
<PAGE>
<PAGE>
The approximate number of holders of record of Common Stock as of February
28, 1997, was 4,506.
Dividends on the Common Stock have been declared quarterly during the past
two years as follows:
<TABLE>
<CAPTION>
PER SHARE
------------
QUARTER 1996 1995
- - ---------------------------------------------------------------------- ---- ----
<S> <C> <C>
First................................................................. $.28 $.28
Second................................................................ $.28 $.28
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 5 of the Proxy Statement to be filed
pursuant to Regulation 14A no later than March 31, 1997.
(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 5 of the Proxy Statement to be filed
pursuant to Regulation 14A no later than March 31, 1997 and Part I of this Form
10-K.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Reference is made to page 9 of the Proxy Statement to be filed pursuant to
Regulation 14A no later than March 31, 1997.
ITEM 11--EXECUTIVE COMPENSATION
Reference is made to the information set forth under the captions
'Compensation of Directors' and 'Executive Compensation' on pages 7 and 10,
respectively, of the Proxy Statement to be filed pursuant to Regulation 14A no
later than March 31, 1997.
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 8 and 10,
respectively, of the Proxy Statement to be filed pursuant to Regulation 14A no
later than March 31, 1997.
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' and 'Transactions with Management' on pages 7 and
19, respectively, of the Proxy Statement to be filed pursuant to Regulation 14A
no later than March 31, 1997.
(b) Certain Business Relationships
Reference is made to the information set forth under the captions 'Certain
Business Relationships' on page 8 and 'Compensation Committee Interlocks and
Insider Participation' on page 8 of the Proxy Statement to be filed pursuant to
Regulation 14A no later than March 31, 1997.
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)
--3. Credit Agreement dated as of October 18, 1995.(5)
--4. Amended and Restated Credit Agreement dated as of October 11, 1996.(6)
--5. Amendment No. 1 to Amended and Restated Credit Agreement dated as of December
23, 1996.
(iii)(A)--Executive Compensation Plans and Arrangements Required to be Filed:
-- 1. 1986 Stock Option Plan for Employees, as amended.(7)
-- 2. 1989 Stock Option Plan for Employees.(8)
-- 3. 1992 Stock Option Plan for Employees.(9)
-- 4. 1995 Stock Option Plan for Employees.(10)
-- 5. Amendment No. 1 to 1995 Stock Option Plan for Employees.(11)
-- 6. Consultancy Agreement Between the Company and William Wishnick.(12)
-- 7. Employment Agreement, dated June 12, 1996, by and between Witco Corporation and
E. Gary Cook.(13)
-- 8. Witco Corporation 1994 Deferred Compensation Plan.(14)
-- 9. Supplemental Executive Retirement Plan of Witco Corporation as amended and
restated effective December 5, 1995.(15)
11 --Statement re Computation of Per Share Earnings.
21 --Subsidiaries of the Registrant.
23 --Consent of Independent Auditors.
24 --Power of Attorney.(16)
27 --Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K.
(i) A report on Form 8-K dated December 12, 1996, was filed during the
quarter ended December 31, 1996, responding to Item 5 in connection with
the Company's announcement of a merger restructuring plan including a
fourth quarter pre-tax change to earnings related to the restructure and
other matters.
(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.
(footnotes on next page)
14
<PAGE>
<PAGE>
(footnotes from previous page)
(1) This Exhibit was included as an exhibit to the quarterly report on Form
10-Q for the quarter ended March 31, 1994, and such Exhibit is hereby
incorporated by reference.
(2) This Exhibit was included as an exhibit to the Registration Statement on
Form 8A filed with the Securities and Exchange Commission on March 3, 1995,
and such Exhibit is hereby incorporated by reference.
(3) 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) This Exhibit was included as an exhibit to the Form 8-K filed with the
Securities and Exchange Commission on October 31, 1995, and such Exhibit is
hereby incorporated by reference.
(6) This Exhibit was included as an exhibit to the quarterly report on Form 10Q
for the quarter ended September 30, 1996, and such Exhibit is hereby
incorporated by reference.
(7) 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.
(8) 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.
(9) 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.
(10) The 1995 Stock Option Plan was filed as an Exhibit to the Registration
Statement on Form S-8, registration number 33-60755, effective June 30,
1995, and such Exhibit is hereby incorporated by reference.
(11) Amendment No. 1 to the 1995 Stock Option Plan for employees was filed as an
Exhibit to the Registration Statement on Form S-8, registration number
33-05509, effective June 7, 1996, and such Exhibit is hereby incorporated
by reference.
(12) 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.
(13) This Exhibit was included as an exhibit to the quarterly report on Form
10-Q for the quarter ended September 30, 1996, and such Exhibit is hereby
incorporated by reference.
(14) 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.
(15) This Exhibit was included as an exhibit to the annual report on Form 10-K
for the fiscal year ended December 31, 1995, and such Exhibit is hereby
incorporated by reference.
(16) 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 21 day of March,
1997.
WITCO CORPORATION
By /s/ E. GARY COOK
...................................
E. GARY COOK
CHAIRMAN OF THE BOARD,
PRESIDENT
AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints E. GARY COOK, CAMILLO DIFRANCESCO, 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/ E. GARY COOK Chairman of the Board, President and Chief March 21, 1997
......................................... Executive Officer
E. GARY COOK
PRINCIPAL FINANCIAL OFFICER:
/s/ CAMILLO DIFRANCESCO Senior Vice President and Chief Financial March 21, 1997
......................................... Officer
CAMILLO DIFRANCESCO
DIRECTORS:
/s/ E. GARY COOK Director March 21, 1997
.........................................
E. GARY COOK
/s/ SIMEON BRINBERG Director March 21, 1997
.........................................
SIMEON BRINBERG
/s/ WILLIAM G. BURNS Director March 21, 1997
.........................................
WILLIAM G. BURNS
/s/ WILLIAM R. GRANT Director March 21, 1997
.........................................
WILLIAM R. GRANT
</TABLE>
16
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- - ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ RICHARD M. HAYDEN Director March 21, 1997
.........................................
RICHARD M. HAYDEN
/s/ HARRY G. HOHN Director March 21, 1997
.........................................
HARRY G. HOHN
/s/ L. JOHN POLITE, JR. Director March 21, 1997
.........................................
L. JOHN POLITE, JR.
/s/ DAN J. SAMUEL Director March 21, 1997
.........................................
DAN J. SAMUEL
/s/ WILLIAM R. TOLLER Director March 21, 1997
.........................................
WILLIAM R. TOLLER
/s/ BRUCE F. WESSON Director March 21, 1997
.........................................
BRUCE F. WESSON
/s/ WILLIAM WISHNICK Director March 21, 1997
.........................................
WILLIAM WISHNICK
</TABLE>
17
<PAGE>
<PAGE>
ANNUAL REPORT ON
FORM 10-K
ITEM 6, ITEM 7, ITEM 8,
ITEM 14(a)(1) AND (2) AND ITEM 14(d)
INDEX OF FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
WITCO CORPORATION
GREENWICH, CONNECTICUT
<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, 1996
<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.......... 2
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, 1996, are included in Item
8:
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Report of Independent Auditors.................................................................... F-1
Consolidated Balance Sheets -- December 31, 1996 and 1995......................................... F-2
Consolidated Statements of Operations Years Ended December 31, 1996, 1995 and 1994................ F-3
Consolidated Statements of Cash Flows -- Years Ended December 31, 1996, 1995 and 1994............. F-4
Consolidated Statements of Shareholders' Equity -- Years Ended December 31, 1996, 1995 and 1994... F-5
Notes to Financial Statements..................................................................... F-6
Quarterly Financial Data For Continuing Operations (unaudited).................................... F-23
</TABLE>
The following consolidated financial statement schedule of Witco
Corporation and subsidiary companies is 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>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
- - ---------------------------------------------- ----------- ----------- ---------- ----------- ----------
(in millions except per share data) 1996(a) 1995(b)(e)(f) 1994(e) 1993(c)(e) 1992(d)(e)(g)
----------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF OPERATIONS DATA
Net sales $2,263.3 $1,985.1 $1,841.4 $1,763.1 $1,342.0
Gross profit 503.0 416.3 407.1 381.3 268.7
Operating income (loss) from continuing (262.1) 201.3 173.4 76.1 71.7
operations
Income (loss) from continuing operations
before income taxes (325.8) 169.1 149.8 47.2 62.6
Income (loss) from continuing operations (247.2) 100.3 94.4 25.1 38.3
Income (loss) from discontinued operations -
net of income taxes (67.9) 4.1 12.7 (5.3) 15.5
Net income (loss) $ (315.1) $ 104.4 $ 107.1 $ 19.8 $ 39.2
Per Common Share:
Income (loss) from continuing operations $ (4.35) $ 1.78 $ 1.70 $ 0.56 $ 0.88
Income (loss) from discontinued operations -
net of income taxes (1.19) 0.07 0.22 (0.10) 0.02
----------- ----------- ---------- ----------- ----------
Net income (loss) $ (5.54) $ 1.85 $ 1.92 $ 0.46 $ 0.90
=========== =========== ========== =========== ==========
SELECTED BALANCE SHEET DATA
Working capital $ 243.2 $ 249.6 $ 551.6 $ 451.2 $ (21.6)
Property, plant and equipment expenditure
(including acquisitions) $ 161.2 $ 343.0 $ 107.4 $ 103.7 $ 322.8
Property, plant and equipment - net $ 735.4 $ 789.8 $ 720.0 $ 696.5 $ 721.2
Total assets $2,391.7 $2,750.6 $1,919.3 $1,839.0 $1,811.8
Long-term debt $ 700.8 $ 683.8 $ 346.5 $ 496.3 $ 173.1
Total shareholders' equity $ 627.9 $1,004.1 $ 940.0 $ 713.4 $ 614.3
Book value per common share $ 11.05 $ 17.78 $ 16.73 $ 14.12 $ 13.80
----------- ----------- ---------- ----------- ---------
SELECTED OTHER FINANCIAL DATA
Number of shareholders (record holders) - at 4,563 4,990 5,194 5,253 5,262
year end
Weighted average number of common shares
outstanding (in thousands) 56,900 56,549 56,378 54,866 49,801
Dividends paid per share - common stock $ 1.12 $ 1.12 $ 1.03 $ 0.94 $ 0.92
Dividends declared per share - common stock $ 1.12 $ 1.12 $ 1.06 $ 0.96 $ 0.92
Market price to the nearest dollar, per
common share on New York Stock Exchange
(high-low) $ 37-28 $ 36-24 $ 35-24 $ 32-24 $ 25-20
- - ---------------------------------------------- ----------- ----------- ---------- ----------- -----------
</TABLE>
(a) Includes charges of $345.1 ($239.3 after-tax or $4.21 per common share)
related to a restructuring of the Company's operations and $91.0 ($71.3
after-tax or $1.25 per common share) for non-recurring items related to
provisions for litigation, environmental remediation costs and other costs.
(b) Includes gains of $55.1 ($33.7 after-tax or $.59 per common share) as a
result of settlements with certain of the Company's insurers, net of related
legal and other costs and $54.0 ($33.0 after-tax or $.59 per common share)
from the disposition of businesses. Also includes a restructuring charge of
$33.8 ($20.6 after-tax or $.36 per common share) related to a write-down of
property, plant and equipment and other costs and $18.1 ($11.0 after-tax or
$.20 per common share) related to environmental remediation costs and
litigation.
(c) Includes a charge of $68.9 ($42.0 after-tax or $.77 per common share) for
environmental remediation costs, disposition of a business, work force
reduction and other matters.
(d) Includes a charge of $20.1 ($12.5 after-tax or $.25 per common share) for
consolidation of offices.
(e) Reclassified to conform to 1996 presentation.
(f) Includes the results of operations of OSi Specialties for the three months
ended December 31, 1995.
(g) Net income (loss) includes a cumulative effect of accounting change of
$(14.6).
1
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- - --------------------------------------------------------------------------------
LIQUIDITY AND FINANCIAL RESOURCES
Certain statements made in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section are "forward looking
statements" that involve certain risks and uncertainties. The factors that could
cause actual results to differ materially from those presented herein include,
without limitation, the Company's ability to generate appropriate cash flows,
the cost and timing of the implementation of certain capital improvements, the
cost and timing associated with the planned reduction in production facilities
and workforce, the Company's ability to effectively divest certain assets, the
cost of environmental remediation and compliance efforts, technological or
competitive changes in any of the Company's businesses, inability to reach
agreement with third parties on planned business arrangements, certain global
and regional economic conditions and other factors listed from time to time in
the Company's Securities and Exchange Commission filings.
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 $470 million over the past three
years. Cash generated through operations during this time period was sufficient
to support the Company's internal capital investment program. Additionally, with
proceeds received from dispositions, the Company was able to 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.
During the fourth quarter of 1996, the Company's Board of Directors approved the
1996 restructuring plan. This was the result of a review undertaken by the
Company's management to improve profitability, increase productivity and
maximize shareholder value. In connection with the plan and other initiatives,
the Company recorded total charges of $436.1 million ($310.6 million after-tax)
during the fourth quarter of 1996. Included therein is a restructuring charge of
$345.1 million, principally consisting of severance, environmental closure and
demolition costs, and write-downs of fixed assets and goodwill. In addition,
other charges of $91 million were recorded to provide for legal matters,
environmental remediation and compliance and other items. Approximately $130
million of the $310.6 million after-tax charge will be expended as cash. These
funds will be expended primarily over a three year period.
The principal actions in the restructuring involve the closure or sale of
fifteen production facilities and consolidation of support infrastructure. This
will result in the elimination of approximately 1,800 positions worldwide by
1999. The Company estimates annual savings from the restructuring to be
approximately $200 million by the end of 1999 with no anticipated reduction in
revenues.
During the fourth quarter of 1995, a restructuring plan was initiated which
addressed the shut-down of five facilities. This plan is expected to be
completed in 1997.
On October 18, 1995, the Company entered into a one year credit agreement
totaling $675 million with a consortium of banks for the purpose of financing
the acquisition of OSi Specialties Holding Company and its wholly owned
subsidiary OSi Specialties, Inc. (collectively "OSi Specialties," or "OSi") and
to prepay OSi's 11.50% Senior Secured Discount Debentures due 2004 and OSi
Specialties' 9.25% Senior Subordinated Notes due 2003. On February 12, 1996, the
Company issued $150 million of 6.125% Notes due 2006 and $150 million of 6.875%
Debentures due 2026. The net proceeds of $297 million, plus cash on hand, were
used to repay $300 million of bank loans under the credit agreement. Immediately
thereafter, the availability of funds under the credit agreement was reduced to
$375 million.
On October 11, 1996, the credit agreement was amended and the term of the
facility was extended until October 10, 1997. The interest rate at December 31,
1996, was approximately 5.77%. During 1996, proceeds received from the sale of
certain of the Company's Lubricants Group businesses and cash on hand were used
to reduce the amount outstanding under the credit agreement to $90 million at
December 31, 1996. The Company anticipates that the balance of the bank loan
will be repaid with proceeds from the sale of the remaining Lubricants Group
businesses and/or excess cash.
The Company is currently negotiating a new five-year $500 million revolving
credit agreement with various banks which will replace its current credit
agreement. It is the Company's belief that annual cash flows from operations,
along with the flexibility provided by the
2
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
new credit agreement, will be sufficient to fund, for the foreseeable future,
capital investments, dividend payments, commitments on environmental remediation
projects, and operating requirements.
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, 1996, these lines of credit aggregated $41.8 million, of
which $2.2 million was utilized 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. The Company utilizes forward
contracts to hedge foreign currency risk on trade accounts receivable and
payables. These forward contracts are generally outstanding for 30 days and are
primarily denominated in German marks, Italian lire, Swiss and French francs,
and British pounds (see Note 15 of Notes to Financial Statements for additional
details).
Currently, the Company's primary international operations are based in Western
Europe. 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 connection with the aforementioned 1996 restructuring plan and other
initiatives, the Company intends to invest more than $600 million of internally
generated funds over the next three years. $250 million will be invested in new
capacity to support future growth. An additional $200 million will be allocated
to modernize plants and replace capacity at closed facilities. Further
expenditures include $100 million for environmental, safety and other items, and
$50 million to upgrade worldwide information systems. These amounts are in
addition to approximately $130 million in cash, which is required for matters
reserved for in connection with the 1996 restructuring charge and for other
initiatives as discussed in Liquidity and Financial Resources.
In 1996, the Company continued to upgrade existing facilities and to expand
capacity to meet changing market demands. Total capital expenditures for 1996
were $161.2 million. Capital expenditures related to continuing operations were
$149.3 million, bringing the total for the past three years to $337.5 million.
The capital investment program in 1997, which will include the aforementioned
1996 restructuring plan, will continue to focus on capacity expansion and market
share growth and is expected to approximate $250 million in 1997. Investments in
the form of research and development, quality initiatives and marketing
alliances will also continue in all key product lines.
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 infor-
3
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
mation 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.
In connection with the 1996 restructuring plan, the Company completed a
comprehensive study of its environmental remediation and compliance issues
throughout the organization. This study resulted in an increase to environmental
reserves of $83.4 million. Reserves for environmental remediation and compliance
costs at December 31, 1996, amounted to $219.7 million (including $64.2 million
associated with environmental expenses of the Lubricants Group), which reflects
management's assessment of future remediation and compliance costs in light of
currently available information. Of these total reserves, $77.6 million are
associated with plants to be shut-down or sold as part of the 1996 and 1995
restructuring plans.
Remediation expenditures charged to environmental reserves were $14.7 million in
1996 and include expenditures currently mandated as well as those not initiated
by any regulatory authority or third party. The Company anticipates 1997
remediation expenditures to approximate $60 million.
Capital expenditures for air, water and solid waste control equipment and
facilities amounted to $12.6 million in 1996. The Company estimates that
approximately $20 million will be expended on similar capital projects in 1997.
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 or slightly above current levels. Such costs
amounted to approximately $38 million in 1996.
CONTINGENCIES
The Company 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, cash flow or liquidity. 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 18 of Notes to Financial Statements).
RESULTS OF CONTINUING OPERATIONS
The Company reported a loss from continuing operations in 1996 of $247.2 million
compared to income of $100.3 million and $94.4 million in 1995 and 1994,
respectively. The three-year period included several non-recurring items which
affect comparison. The following table shows the effect of these non-recurring
items on continuing operations.
4
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- - --------------------------------------------------------------------------------
SUMMARY OF NON-RECURRING ITEMS
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------
(millions of dollars 1996 1995
except per share data) --------------------------------- ----------------------------------
PRE-TAX AFTER-TAX INCOME Pre-Tax After-Tax Income
INCOME INCOME (LOSS) Income Income (Loss)
(LOSS) (LOSS) PER SHARE (Loss) (Loss) Per Share
--------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Continuing operations
excluding non-recurring $ 110.3 $ 63.4 $ 1.11 $111.9 $ 65.2 $1.16
items
Restructuring charge (a) (345.1) (239.3) (4.21) (33.8) (20.6) (.36)
Other charges (b) (91.0) (71.3) (1.25) (18.1) (11.0) (.20)
Insurance settlements (c) - - - 55.1 33.7 .59
Gain on disposition of
operations of - - - 54.0 33.0 .59
subsidiaries (d)
---------- ----------- ---------- ----------- ---------- -----------
Continuing operations $(325.8) $(247.2) $(4.35) $169.1 $100.3 $1.78
----------------------------- ---------- ----------- ---------- ----------- ---------- -----------
</TABLE>
The only non-recurring item in 1994 was a gain of $5.1 ($3.1 after-tax or
$.06 per common share) from the disposition of the metal finishing and
metalworking operations of a subsidiary.
(a) Included in the restructuring charge of $345.1 ($239.3 after-tax or $4.21
per common share) for the year ended December 31, 1996 are severance and
related costs of $104.5, a writedown of property, plant and equipment of
$96.9, environmental closure costs of $53.3, a writedown of goodwill and
intangibles of $40.0, demolition costs of $26.2, and other costs of $24.2.
In addition, the year ended December 31, 1995, includes a restructuring
charge (previously classified as other expense (income)-net) of $33.8 ($20.6
after-tax or $.36 per common share) related to a writedown of property,
plant and equipment of $21.8 and other costs of $12.0.
(b) The year ended December 31, 1996, includes other non-recurring charges of
$91.0 ($71.3 after-tax or $1.25 per common share). The charges include
provisions for litigation of $34.7, environmental remediation costs of
$30.1, and other matters of $26.2. In addition, the year ended December 31,
1995, includes other non-recurring charges of $18.1 ($11.0 after-tax or $.20
per common share) related to provisions for environmental remediation costs
and litigation.
(c) The year ended December 31, 1995, includes gains of $55.1 ($33.7 after-tax
or $.59 per common share) as a result of settlements with certain of the
Company's insurers, net of related legal and other costs.
(d) The year ended December 31, 1995, includes a gain of $9.5 ($5.9 after-tax or
$.11 per common share) from the disposition of the Battery Parts business,
and a gain of $44.5 ($27.1 after-tax or $.48 per common share) from the
disposition of the Carbon Black business.
1996 VS. 1995
Current year consolidated net sales from continuing operations of $2.3 billion
were 14 percent greater than 1995. The increase was attributable to the
inclusion of OSi Specialties in 1996 for a full year which more than covered the
loss in sales resulting from the disposition of businesses in 1996 and 1995.
Consolidated net sales, adjusted to exclude sales attributable to OSi
Specialties for the first nine months of 1996 and dispositions for both years,
rose 1 percent over 1995. This increase was driven by higher sales prices,
partially offset by the unfavorable impact of a comparatively stronger U.S.
dollar, while volume was essentially unchanged.
Income from continuing operations, excluding non-recurring items, was $63.4
million in 1996 compared to $65.2 million in 1995. The adverse effect on income
of higher interest expense, the loss of earnings attributable to the sale of
businesses and lower interest income was largely offset by the inclusion of a
full year of OSi Specialties' higher margin operations. The increase in interest
expense was attributable to financing the acquisition of OSi Specialties and the
assumption of OSi Specialties' debt, while the decline in interest income was
due to a reduction in funds available for short term investing resulting from
the acquisition of OSi Specialties and payment of bank loans. Other major income
and expense categories appearing on the Consolidated Statements of Operations,
adjusted for the acquisition and dispositions, were comparable to 1995 on a
percentage of net sales basis.
The effective tax benefit rate of 24.1% for the year ended December 31, 1996,
differs from the U.S. statutory tax rate of 35% primarily due to foreign income
taxes in excess of statutory rates, non-deductible goodwill amortization related
to OSi Specialties, state income taxes and the write-down of non-deductible
goodwill and intangibles (see Note 12 of Notes to Financial Statements).
5
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- - --------------------------------------------------------------------------------
SEGMENT INFORMATION
As a result of the Company's decision to sell the Lubricants Group, the
operating results of which have been recorded as discontinued operations, the
Petroleum Segment consists solely of the Petroleum Specialties Group.
The Company's operating income from continuing operations for both 1996 and 1995
included several non-recurring items which affect comparison. Excluding these
items, operating income from continuing operations was $174.1 million in 1996
compared to $144.0 million in 1995. The following table shows the effect of
these non-recurring items on operating income from continuing operations by
industry segment.
<TABLE>
<CAPTION>
--------------------------------------------------
(millions of dollars) 1996
--------------------------------------------------
OSI CORPORATE &
CHEMICAL SPECIALTTIES PETROLEUM UNALLOCATED TOTAL
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating income
(loss) from
continuing
operations
excluding
non-recurring items $ 113.4 $58.4 $ 23.6 $(21.3) $ 174.1
Restructuring charge (197.7) - (94.0) (53.4) (345.1)
Other charges (24.4) - (17.3) (49.3) (91.0)
Insurance settlements - - - - -
Gain on disposition
of subsidiaries - - - - -
---------------------------------------------------
Operating income
(loss) from
continuing
operations $(108.7) $58.4 $(87.7) $(124.0) $(262.0)
</TABLE>
<TABLE>
<CAPTION>
(millions of dollars) 1995
-----------------------------------------------------------
OSI DIVERSIFIED CORPORATE &
CHEMICAL SPECIALTIES PETROLEUM PRODUCTS UNALLOCATED TOTAL
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating income
(loss) from
continuing
operations
excluding
non-recurring items $109.6 $7.4 $36.1 $10.2 $(19.3) $144.0
Restructuring charge (33.1) - (0.7) - - (33.8)
Other charges (12.9) - (1.4) (1.5) (2.3) (18.1)
Insurance
settlements - - - - 55.1 55.1
Gain on disposition
of subsidiaries - - - 54.0 - 54.0
-----------------------------------------------------------
Operating income
(loss) from
continuing
operations $ 63.6 $7.4 $34.0 $62.7 $ 33.5 $201.2
- - -----------------------------------------------------------
The only non-recurring item in 1994 was a gain of $5.1 ($3.1 after-tax or $.06
per common share) from the disposition of the metal finishing and metalworking
operations of a subsidiary (Diversified Products).
</TABLE>
CHEMICAL SEGMENT
Segment 1996 net sales of $1.4 billion were essentially equal to 1995. The
effect of a 3 percent decline in volume, mainly due to the disposition of the
Company's interest in an Israeli manufacturer and the strengthening of the U.S.
dollar against key global currencies, offset the impact of a favorable product
sales mix and higher prices in certain business sectors.
Chemical segment 1996 operating income, excluding non-recurring charges from
both years, rose from $109.6 million in 1995 to $113.4 million in 1996. The 3
percent improvement was attributable to higher earnings reported by the
segment's Polymer Additives Group. The group reported higher sales benefiting
from an upturn in the construction and automotive markets. Sales and operating
earnings were particularly strong in the Vinyl portion of the group's business
where market share was gained. The consumption of rigid vinyl in house siding,
window frames and pipe resulted in strong sales of organotin heat stabilizers
and lubricants. Packaging film applications for polyolefins also provided a
strong market for amide lubricants and stearates. Despite higher sales, the
Oleo/Surfactants Group's 1996 income was down from 1995. Global demand for the
group's agricultural surfactants was up dramatically in 1996 driven by the
introduction of a new product into the pesticides market. Group earnings were
adversely affected by higher raw material costs and the loss of certain high
margin volume in a sector of the group's business, a soft glycerin market, and
higher expenses attributable to the current year's severe winter weather. The
Resins Group's 1996 sales and operating income decreased compared to 1995.
Despite excellent growth in its specialty products area of aqueous epoxy
hardeners, aqueous urethanes, breathable textile coatings and blocked isocyanate
systems, the group was adversely affected by a shrinkage of the U.S. polyester
polyurethanes foam market and the resulting lower prices. Higher costs
associated with the severity of the 1996 winter weather in both the United
States and Europe also adversely affected the Resins Group's earnings.
OSI SPECIALTIES
Current year operating income for this segment included a full year of
operations as compared to three months in 1995. OSi Specialties added $448.6
million to net sales in 1996 compared to $101.3 million in 1995. The segment's
1996 operating income of $58.4 million was $51 million greater than the income
reported in 1995.
Sales for the fourth quarter, the comparable period of ownership, were up 10
percent over 1995 due to greater volume and favorable product mix. Operating
income for this comparable period increased from $7.4 million to $13 million as
a result of efficiencies and reductions in non-manufacturing costs achieved
primarily through acquisition related synergies.
6
<PAGE>
<PAGE>
PETROLEUM SEGMENT
The segment's current year net sales of $381.6 million were 2 percent behind
1995. Although benefiting from a 1 percent increase in volume, competitive
pricing pressures and the unfavorable impact of a comparatively stronger U.S.
dollar caused segment sales to decline.
Operating income, excluding non-recurring charges, was $23.6 million in 1996
compared to $36.1 million in 1995. The segment was burdened during 1996 by
increased depreciation and manufacturing costs resulting from the
under-utilization of manufacturing capacity attributable to 1995 expansions at
facilities in the U.S. and Holland. Lower than anticipated demand precluded
recovery of these costs. 1996 earnings were also adversely affected by a
weakening of sales prices due to market conditions and increased costs
attributable to higher U.S. utility rates and severe winter weather related
expenditures.
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 $65.2 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 3.7
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 1995
restructuring charge (see Note 2 of Notes to Financial Statements).
SEGMENT INFORMATION
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
$144 million in 1995, from $168.6 million in 1994.
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
7
<PAGE>
<PAGE>
with the balance due to the favorable impact of a weaker U.S. dollar,
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.
This segment's operating income, excluding non-recurring charges, of $109.6
million in 1995 was $15.9 million, or 13 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.
PETROLEUM SEGMENT
Net sales for the Petroleum Segment of $388.9 million in 1995 exceeded the
previous year by $20.1 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, excluding non-recurring charges, was $36.1
million, a decline of $8.1 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 yield, alternatives and resulted in lost sales. Lower
than anticipated production volume, and additional costs attributed 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 $54 million and
$5.1 million, respectively, attributable to the sale of the segment's
businesses.
OUTLOOK
The Company is optimistic that results from continuing operations in 1997 will
exceed 1996 results. Several factors contribute to this optimism. The successful
im-
8
<PAGE>
<PAGE>
plementation of the 1997 portion of the 1996 restructuring plan will reduce
the Company's fixed and variable costs in 1997. While the full extent of the
reductions will not be realized until 2000, these reductions will positively
influence the Company's cost structure in 1997. During 1997, the Company will
initiate activities to improve yields at its manufacturing facilities which will
remain open following completion of the 1996 restructuring plan, and while the
most significant results from this initiative will not likely occur until after
1997, results in 1997 will be positively affected by the initiative. The Company
is attempting through innovative and aggressive activities with its raw material
suppliers to reduce its raw material costs and believes that 1997 results will
be improved by the results of these activities. The recent reorganization of the
Company's corporate structure creating four business groups from the five that
existed in 1996, along with the reduction in the number of total business units
within these groups from 18 to 11, should, along with redirected pricing and
marketing strategies, permit the Company's businesses to attain higher margins
in 1997 than in 1996, favorably influencing 1997 results.
The Company will continue to aggressively pursue implementation of the 1996
restructuring plan, and, following the completion of the restructuring
envisioned in the 1996 restructuring plan, the Company believes it will achieve
the following long-term financial goals: revenues of up to $3.0 billion within
five years; gross margins to exceed 30%; operating margins in the mid-teens;
earnings per share growth sufficient to maintain return on equity greater than
20%; debt to total capitalization of 30-45%; and, a return on capital employed
greater than the Company's cost of capital so that shareholder value will
increase.
Statements made in this "Outlook" section are "forward looking statements" that
involve certain risks and uncertainties. The factors that could cause actual
results to differ materially from those presented herein include, without
limitation, the Company's ability to generate appropriate cash flows, the cost
and timing of the implementation of certain capital improvements, the cost and
timing associated with the planned reduction in production facilities and
workforce, the Company's ability to effectively divest certain assets, the cost
of environmental remediation and compliance efforts, technological or
competitive changes in any of the Company's businesses, inability to reach
agreement with third parties on planned business arrangements, certain global
and regional economic conditions and other factors listed from time to time in
the Company's Securities and Exchange Commission filings.
9
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
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, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit 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, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
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."
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
January 31, 1997,
except for Note 19, as to
which the date is March 4, 1997
F-1
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands of dollars except per share data)
- - -------------------------------------------------------------------------------------------------
DECEMBER 31 1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 59,201 $ 143,994
Accounts and notes receivable, less allowance of $14,201
and $ 7,104 390,288 406,486
Inventories 284,500 322,898
Deferred income taxes 92,490 47,784
Prepaid and other current assets 26,947 22,883
----------- -----------
Total Current Assets 853,426 944,045
----------- -----------
Property, Plant and Equipment, less accumulated depreciation of
$761,926 and $608,435 735,392 789,827
Goodwill and Other Intangible Assets, less accumulated
amortization of $133,625 and $62,450 653,733 728,124
Deferred Income Taxes 16,438 --
Deferred Costs and Other Assets 72,976 118,182
Net Assets of Discontinued Operations 59,740 170,426
----------- -----------
TOTAL ASSETS $ 2,391,705 $ 2,750,604
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes and loans payable $ 94,929 $ 309,171
Accounts payable and other current liabilities 515,344 385,294
----------- -----------
Total Current Liabilities 610,273 694,465
----------- -----------
Long-term Debt 700,820 683,830
Deferred Income Taxes -- 87,532
Deferred Credits and Other Liabilities 452,747 280,660
Shareholders' Equity
$2.65 Cumulative Convertible Preferred Stock, par value $1
per share: authorized - 14 shares, issued and outstanding 6 7
- 6 and 7 shares
Common Stock, par value $5 per share: authorized - 100,000
shares, issued and outstanding - 56,763 and 56,435 shares 283,818 282,173
Capital in excess of par value 138,453 131,076
Equity adjustments:
Foreign currency translation 11,989 17,222
Pensions and other (6,423) (4,898)
Retained earnings 200,022 578,537
----------- -----------
Total Shareholders' Equity 627,865 1,004,117
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,391,705 $ 2,750,604
- - ---------------------------------------------------------------------- ----------- -----------
</TABLE>
See accompanying notes
F-2
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands of dollars except per share data)
- - -----------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31 1996 1995 1994
------------- -------------- -------------
<S> <C> <C> <C>
Net Sales $2,263,327 $1,985,077 $1,841,414
Cost of Goods Sold 1,760,320 1,568,822 1,434,330
------------- -------------- -------------
Gross Profit 503,007 416,255 407,084
Operating Expenses
Selling expense 106,261 83,829 77,740
General and administrative expenses 152,186 121,425 112,318
Research and development 73,088 52,907 40,717
Other expenses (income) - net 88,400 (76,998) 2,924
Restructuring charge 345,130 33,842 -
------------- -------------- -------------
Total Operating Expenses 765,065 215,005 233,699
------------- -------------- -------------
Operating Income (Loss) from Continuing Operations (262,058) 201,250 173,385
Other Expense (Income) - Net
Interest expense 69,334 43,689 29,674
Interest income (9,114) (15,104) (10,032)
Other expense - net 3,531 3,525 3,951
------------- -------------- -------------
Income (Loss) from Continuing Operations before Income
Taxes (325,809) 169,140 149,792
Income Taxes (Benefit) (78,635) 68,794 55,372
------------- -------------- -------------
Income (Loss) from Continuing Operations (247,174) 100,346 94,420
Income from Discontinued Operations - Net of Income
Taxes of $283, $3,034 and $7,685 340 4,099 12,647
Estimated Loss on Disposal - Net of Income Tax Benefit
of $43,612 (68,253) - -
------------- -------------- -------------
Income (Loss) from Discontinued Operations (67,913) 4,099 12,647
------------- -------------- -------------
Net Income (Loss) $ (315,087) $ 104,445 $ 107,067
============= ============== =============
Net Income (Loss) Per Common Share: Primary
Income (loss) from continuing operations $(4.35) $1.78 $1.70
Income (loss) from discontinued operations - net of
income taxes (1.19) .07 .22
------------- -------------- -------------
NET INCOME (LOSS) PER COMMON SHARE: PRIMARY $(5.54) $1.85 $1.92
============= ============== =============
Net Income (Loss) Per Common Share: Fully Diluted
Income (loss) from continuing operations $(4.35) $1.77 $1.69
Income (loss) from discontinued operations - net of
income taxes (1.19) .07 .22
------------- -------------- -------------
NET INCOME (LOSS) PER COMMON SHARE: FULLY DILUTED $(5.54) $1.84 $1.91
- - --------------------------------------------------------------------------------------- -------------
</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 1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(315,087) $ 104,445 $ 107,067
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 128,793 119,571 105,120
Provision (benefit) for deferred income taxes (159,311) (6,884) 17,666
Pension cost 15,154 10,130 12,378
Gain on disposition of operations of subsidiaries (412) (51,183) (4,820)
Estimated loss on disposal of Lubricants Group 111,865 -- --
Provision for environmental remediation and
compliance 30,077 15,348 --
Provision for litigation 34,733 9,500 --
Restructuring charge 345,130 33,842 --
Changes in operating assets and liabilities:
Accounts and notes receivable 13,089 (26,609) (51,639)
Inventories 36,672 (12,849) (23,750)
Prepaid and other current assets 4,956 9,866 (3,791)
Accounts payable and other current liabilities (76,286) (41,709) (5,492)
Other 17,927 (28,548) (5,007)
---------------------------------
Net Cash Provided by Operating Activities 187,300 134,920 147,732
---------------------------------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (161,163) (115,845) (107,438)
Proceeds from dispositions 136,941 146,026 24,194
Acquisitions of businesses, net of cash acquired -- (481,431) --
Other 1,769 (2,443) 1,732
---------------------------------
Net Cash Used in Investing Activities (22,453) (453,693) (81,512)
---------------------------------
FINANCING ACTIVITIES
Dividends paid (63,351) (63,026) (55,013)
Payments on borrowings (526,378) (367,541) (8,398)
Proceeds from borrowings 335,565 681,551 954
Proceeds from exercise of stock options 7,084 6,523 2,734
Other -- -- (63)
---------------------------------
Net Cash Provided by (Used in) Financing Activities (247,080) 257,507 (59,786)
---------------------------------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS (2,560) 8,087 7,689
---------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (84,793) (53,179) 14,123
---------------------------------
Cash and Cash Equivalents at Beginning of Year 143,994 197,173 183,050
---------------------------------
Cash and Cash Equivalents at End of Year $ 59,201 $ 143,994 $ 197,173
- - ---------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-4
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(in thousands of dollars)
- - -----------------------------------------------------------------------------------------------------------------------------------
Capital Foreign Pensions Treasury
Preferred Common Excess of Currency and Retained Stock
Stock Stock Par Value Translation Other Earnings at Cost Total
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
Net Income (Loss) (315,087) (315,087)
Cash Dividends Declared:
Preferred stock (18) (18)
Common stock (63,410) (63,410)
Common Stock Issued:
Employee plans 1,319 5,814 7,133
Conversions (1) 30 (25) 4
Restricted stock 296 1,588 (1,884) --
Equity Adjustments (5,233) 359 (4,874)
-----------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 $ 6 $283,818 $138,453 $11,989 $(6,423) $200,022 $ -- $627,865
-----------------------------------------------------------------------------------------------------
</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 high quality
specialty chemical products. The Company's products are used primarily as
intermediates by other manufacturers in industries such as personal care and
household products, agricultural, automotive, housing and construction,
packaging, food and textiles.
PRINCIPLES OF CONSOLIDATION AND USE OF ESTIMATES: The consolidated financial
statements include the accounts of all majority owned subsidiaries after the
elimination of inter-company transactions. 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.
RECLASSIFICATIONS: Certain prior year amounts have been reclassified to conform
with the current year presentation.
CASH EQUIVALENTS: Cash equivalents consist of highly liquid investments with a
maturity of three months or less when purchased.
INVENTORIES: Inventories are stated at the lower of cost or market. Cost is
determined on either the Last-In, First-Out (LIFO) or First-In, First-Out (FIFO)
basis. 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 year ended December
31, 1994.
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.
LONG-LIVED ASSETS AND INTANGIBLE 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. As indicated in Note 2 of Notes to Financial Statements,
the Company recognized impairment losses associated with the restructuring plans
in 1996 and 1995.
Intangible assets primarily include goodwill, the excess of purchase price over
the estimated fair value of net assets acquired, and 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 estimated cash flows of
the underlying businesses. An impairment loss may be recognized if the expected
cash flow is less than book value. The Company recognized an impairment loss on
certain intangible assets, as disclosed in Note 2 of Notes to Financial
Statements, as part of the 1996 restructuring plan.
RESEARCH AND DEVELOPMENT COSTS: The Company's research and development costs are
charged to expense as incurred. These charges to continuing operations amounted
to $73,088,000 (1996), $52,907,000 (1995), and $40,717,000 (1994).
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 accounts for stock option grants in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
and, accordingly, recognizes no compensation expense for the stock options
granted since the exercise price of the option was the same as the market value
of the
F-6
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
Company's common stock. As prescribed under SFAS No. 123, "Accounting for
Stock Based Compensation," the Company has disclosed in Note 10 of Notes to
Financial Statements, the pro forma effects on net income (loss) and earnings
(loss) per share of recording compensation expense for the fair value of the
options granted.
INCOME TAXES: Income taxes have been provided using the liability method in
accordance with SFAS No. 109 "Accounting for Income Taxes."
COMMON SHARE DATA: Net income (loss) per common share is based upon net income
(loss) 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
dilutive 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 (loss) per common share
additionally reflects the assumed conversion of the outstanding convertible
preferred stock if dilutive.
NOTE 2 RESTRUCTURING
In December 1996, in connection with management's plan to reduce costs and
improve operating efficiencies, the Company recorded a restructuring charge of
approximately $345,130,000. The principal actions in the 1996 restructuring plan
involve the closure or sale of 15 production facilities (13 included in the
Chemical Segment and 2 included in the Petroleum Segment) and consolidation of
support infrastructure. This restructuring, which will result in the elimination
of approximately 1,800 corporate staff and manufacturing positions, will be
completed by 1999. In addition, the year ended December 31, 1995, included a
restructuring charge of $33,842,000 related to plant consolidation. The
shut-down of the five facilities (principally in the Chemical Segment) addressed
by the 1995 initiative is expected to be completed during 1997.
The major components of the restructuring charges are as follows:
- - --------------------------------------------------------------------------------
(thousands of dollars)
<TABLE>
<CAPTION>
DESCRIPTION 1996 1995
- - --------------------------------------------------------------------------------
<S> <C> <C>
Severance and related costs $104,456 $ 1,900
Write-down of property, plant and equipment 96,879 21,840
Environmental remediation and compliance 53,298 2,090
Write-down of goodwill and intangibles 40,000 1,856
Demolition costs 26,200 4,605
Other 24,297 1,551
-------------------
$345,130 $ 33,842
- - --------------------------------------------------------------------------------
</TABLE>
NOTE 3 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 accordingly, the results of
operations have been included in the consolidated financial statements from the
date of acquisition. An allocation of the purchase price resulted in an excess
over the estimated fair value of net assets acquired (goodwill) of approximately
$517,000,000. This is being amortized on a straight line basis over forty years.
F-7
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
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 of dollars 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 - net of income taxes 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 - net of income taxes .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. On November 1, 1996, the Company sold certain assets of its
Kendall/ Amalie business to Sun Company Inc. for $74,386,000. Also on November
1, the Company sold certain assets of its grease gun manufacturing business to
Epicor Industries, a wholly owned subsidiary of Stant Corporation, for
$11,019,000 and certain assets of its grease business to Exxon Company, U.S.A.
for $35,284,000. All amounts are subject to certain post-closing adjustments
(see Note 18 of Notes to Financial Statements for more information regarding
discontinued operations).
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 $5,918,000, 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.
NOTE 4 INVENTORIES
Inventories are classified as follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
(thousands of dollars) 1996 1995
------------- --------------
<S> <C> <C>
Raw materials and supplies $ 99,112 $115,231
Finished goods 185,388 207,667
------------- --------------
$284,500 $322,898
- - --------------------------------------------------------------------------------
Work in progress included above is not significant.
</TABLE>
Inventories valued on a LIFO basis, at December 31, 1996 and 1995, amounted to
$107,524,000 and $118,774,000, respectively. Inventories would have been
$40,964,000 and $41,499,000 higher than reported at December 31, 1996 and 1995,
respectively, if the FIFO method (which approximates current cost) had been used
by the Company for all inventories.
F-8
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
NOTE 5 PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
(thousands of dollars) 1996 1995
------------------------------
<S> <C> <C>
Land $ 34,597 $ 35,259
Buildings and improvements 172,695 186,904
Machinery, fixtures, and equipment 1,202,449 1,114,452
Assets under construction 87,577 61,647
------------------------------
1,497,318 1,398,262
Less accumulated depreciation 761,926 608,435
------------------------------
$ 735,392 $ 789,827
- - -------------------------------------------------------------------------------
</TABLE>
Depreciation expense, including amortization of assets under capital lease
obligations, from continuing operations amounted to $99,676,000 (1996),
$81,766,000 (1995), and $71,830,000 (1994).
At December 31, 1996 and 1995, buildings and improvements included approximately
$14,500,000 and $17,000,000, respectively, related to an office/laboratory
facility under a capital lease. The decrease from 1995 was the result of foreign
currency translation.
NOTE 6 GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consist of the following:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
(thousands of dollars) 1996 1995
-----------------------------
<S> <C> <C>
Goodwill $660,853 $666,880
Patents and licenses 59,912 58,561
Other 66,593 65,133
-----------------------------
787,358 790,574
Less accumulated amortization 133,625 62,450
-----------------------------
$653,733 $728,124
- - -------------------------------------------------------------------------------
</TABLE>
Amortization expense from continuing operations amounted to $29,117,000 (1996),
$20,805,000 (1995), and $16,833,000 (1994).
NOTE 7 ACCOUNTS PAYABLE AND OTHER CURRENT
LIABILITIES
Components of accounts payable and other current liabilities consist of the
following:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------
(thousands of dollars) 1996 1995
------------------------
<S> <C> <C>
Trade accounts payable $155,130 $166,688
Other accruals 154,696 126,139
Reserves for environmental remediation and compliance 68,776 23,597
Reserve for restructuring 46,244 2,583
Payroll related liabilities 39,713 54,015
Reserve for disposition of Lubricants Group 31,438 -
Income taxes 19,347 12,272
------------------------
$515,344 $385,294
- - ---------------------------------------------------------------------------------
</TABLE>
F-9
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
NOTE 8 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 prepay OSi's 11.50% Senior Secured Discount
Debentures due 2004 and OSi Specialties' 9.25% Senior Subordinated Notes due
2003. On February 12, 1996, the Company issued $150,000,000 of 6.125% Notes due
2006 and $150,000,000 of 6.875% Debentures due 2026. The net proceeds of
$297,000,000, plus cash on hand, were used to repay $300,000,000 of bank loans
under the credit agreement. Immediately thereafter, the availability of funds
under the credit agreement was reduced to $375,000,000, $90,000,000 of which was
utilized at December 31, 1996. On October 11, 1996, the credit agreement was
amended and the term of the facility was extended until October 10, 1997. The
interest rate at December 31, 1996, was approximately 5.77%.
At December 31, 1995, the Company had $605,000,000 outstanding under the credit
agreement, including $305,000,000 in the Notes and Loans Payable caption of the
Company's Balance Sheet. The interest rate at December 31, 1995 was
approximately 6.1%.
<TABLE>
<CAPTION>
Following is a summary of long-term debt:
- - -------------------------------------------------------------------------------------
(thousands of dollars) 1996 1995
---------------------------
<S> <C> <C>
Short-term bank loan (refinanced) $ - $300,000
6.125% Notes due 2006 150,000 -
6.875% Debentures due 2026 150,000 -
6.60% Notes due 2003 165,000 165,000
7.75% Debentures due 2023 110,000 110,000
7.325% Notes due 1998 46,242 49,210
6.47% Bank Loan due 2000 20,976 21,838
Capital Lease Obligation 14,449 17,822
6.30% Bank Loan due 2001 14,420 -
5.85% Pollution Control Revenue Bonds due 2023 10,000 10,000
8.20% Bank Loan due 2006 9,879 -
Industrial Development Revenue Bond due 2014 8,500 8,500
Other 2,723 3,945
---------------------------
702,189 686,315
Less amounts included in notes and loans payable 1,369 2,485
---------------------------
$700,820 $683,830
- - -------------------------------------------------------------------------------------
</TABLE>
The Company has arrangements with various banks for lines of credit for its
international subsidiaries aggregating $41,845,000, of which $2,216,000 was
utilized at December 31, 1996. The weighted average interest rates on
international short-term borrowings outstanding were 4.33% (1996) and 6.36%
(1995).
Principal maturities of long-term debt including capital lease obligations
through the year 2001 at December 31, 1996 are $1,369,000 (1997), $47,752,000
(1998), $2,517,000 (1999), $23,639,000 (2000), and $17,239,000 (2001).
Following is a summary of interest from continuing operations:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
(thousands of dollars) 1996 1995 1994
------------------------------------------
<S> <C> <C> <C>
Interest expense $69,334 $43,689 $29,674
Capitalized interest 1,503 1,429 2,214
------------------------------------------
Total interest incurred $70,837 $45,118 $31,888
------------------------------------------
Total interest payments $62,593 $47,016 $34,190
- - -------------------------------------------------------------------------------
</TABLE>
NOTE 9 SHAREHOLDERS' EQUITY
On March 2, 1995, the Board of Directors unanimously approved a Shareholder
Rights Plan (the "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 entitles 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
F-10
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
stock is intended to represent the economic equivalent of one share of common
stock. Under the Plan, 300,000 shares of 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 of Directors 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.
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. At December 31,
1996, unissued common stock of the Company was reserved for issuance in
accordance with the $2.65 Cumulative Convertible Preferred Stock (109,000
shares).
The Company has authorized 8,300,000 shares of series preferred stock, which,
when issued, will have such rights, power, 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
(1996), $1.12 (1995), and $1.06 (1994).
Common and preferred stock transactions were as follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
(thousands of shares) 1996 1995 1994
--------------------------------
<S> <C> <C> <C>
Convertible Preferred Stock
Outstanding at beginning of year 7 7 9
Conversions (1) - (2)
--------------------------------
Outstanding at End of Year 6 7 7
Common Stock
Issued at beginning of year 56,435 56,312 50,818
Net shares issued under employee plans 263 122 -
Conversions 6 1 -
Restricted stock 59 - -
Conversion of convertible debentures - - 5,494
--------------------------------
Issued at End of Year 56,763 56,435 56,312
Treasury Stock
In treasury at beginning of year - 165 318
Net shares issued under employee plans - (159) (133)
Conversions - (6) (20)
--------------------------------
In Treasury at End of Year - - 165
- - -------------------------------------------------------------------------------
</TABLE>
NOTE 10 STOCK BASED COMPENSATION PLANS
The Company has two fixed option plans for certain employees. Under the 1992
Incentive Stock Option Plan, the Company may grant options to its employees for
up to 161,000 shares of common stock. Under the 1995 Incentive Stock Option
Plan, the Company may grant options to its employees for up to 1,183,000 shares
of common stock. These plans provide that shares granted come from the Company's
authorized but unissued or reacquired common stock. The price of the options
granted pursuant to these plans will not be less than 100 percent of the fair
market value of the shares on the date of grant.
These options are exercisable in installments within a period not to exceed ten
years from the date of grant. The options outstanding at December 31, 1996 and
1995, expire on various dates through June 2006. At December 31, 1996 and 1995,
unissued common stock of the Company reserved for issuance in accordance with
the stock option plans are 5,627,000 and 4,893,000 shares, respectively.
In 1996, restricted stock awards were granted to two key employees pursuant to
certain employment agreements between the Company and such employees. The
restricted stock will vest for two awards totaling 40,000 shares if certain
performance-based criteria are met.
F-11
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
Unless these performance criteria are met, these restricted stock awards shall
terminate on either September 9, 2001, or June 13, 2002, according to the terms
of the awards. An award of 19,186 shares of restricted common stock will vest
over time through 1998.
The Company has elected to follow Accounting Principals Board Opinion (APB) No.
25 "Accounting for Stock Issued to Employees" and related Interpretations in
accounting for its employee stock options. Under APB No. 25, the Company does
not recognize compensation expense since the exercise price of the options
granted is equal to the market value of the Company's common stock at the date
of grant. Statement of Financial Accounting Standard No. 123 "Accounting for
Stock Based Compensation" (SFAS 123) requires the Company to disclose the pro
forma impact on net income (loss) and earnings (loss) per share as if
compensation expense associated with employee stock options had been calculated
under the fair value method of SFAS 123 for employee stock options granted
subsequent to December 31, 1994.
The fair value of each option grant is estimated on the date of grant using a
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995, respectively; dividend yield of
4%; expected volatility of .214 and .215; risk-free interest rates of 6.1% and
6.05%; and weighted-average expected lives of 5.5 and 6.5 years.
The weighted-average fair value of the restricted stock on the date of grant was
$32 with a weighted-average remaining contractual life of 4.6 years.
The Company's net income (loss) and net income (loss) per common share have been
adjusted to the pro forma amounts indicated below. These pro forma effects may
not be representative of the effects on future years because of the subjective
assumptions used in the fair value estimate calculated under the Black-Scholes
model and that new grants are generally made each year.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------
(in thousands of dollars except per share data) 1996 1995
-----------------------------
<S> <C> <C> <C>
Net income (loss) As reported $(315,087) $104,445
Pro forma $(317,658) $104,105
Net income (loss) per common As reported $(5.54) $1.85
share: primary Pro forma $(5.58) $1.84
Net income (loss) per common As reported $(5.54) $1.84
share: fully diluted Pro forma $(5.58) $1.84
- - ------------------------------------------------------------------------------------
</TABLE>
Because SFAS 123 is applicable only to options granted subsequent to December
31, 1994, its pro forma effect will not be fully reflected until 1999 since
options vest over five years.
A summary of the Company's stock option activity and related information for the
years ended December 31 follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
(shares in thousands) 1996 1995 1994
----------------------------------------------------------------
WEIGHTED- Weighted- Weighted-
AVERAGE Average Average
EXERCISE Exercise Exercise
PRICE Price Price
SHARES Shares Shares
---------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding, beginning of
year 2,619 $28 2,054 $27 1,472 $23
Granted 2,182 33 879 28 780 32
Exercised (267) 25 (300) 20 (149) 18
Forfeited (251) 30 (14) 29 (49) 27
---------- --------- ---------- ---------- ---------- ----------
Options outstanding, end of year 4,283 $30 2,619 $28 2,054 $27
Options exercisable at end of year 1,827 $29 808 $27 720 $24
Weighted-average fair value of
options granted during the year $6.35 $5.66 $ -
- - -------------------------------------------------------------------------------------------------------
</TABLE>
Exercise prices for options outstanding as of December 31, 1996, ranged from
$21.38 to $33.25. The weighted-average remaining contractual life of these
options is 8.5 years.
F-12
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
NOTE 11 OTHER EXPENSES (INCOME) - NET
The components of other expenses (income) - net from continuing operations are
as follows:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------
(thousands of dollars) 1996 1995 1994
-----------------------------------
<S> <C> <C>
Provision for litigation $34,733 $ - $ -
Provision for environmental remediation and compliance 30,077 13,800 -
Amortization of intangibles 29,117 20,805 16,833
Settlements with certain of the company's insurers - (55,149) -
Gain on disposition of operations of subsidiaries - (54,079) -
Other - net (5,527) (2,375) (13,909)
-----------------------------------
$88,400 $(76,998) $ 2,924
- - -----------------------------------------------------------------------------------------------------
</TABLE>
NOTE 12 INCOME TAXES
The components of income (loss) from continuing operations before income taxes
are:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------
(thousands of dollars) 1996 1995 1994
-----------------------------------
<S> <C> <C> <C>
Domestic $(335,609) $113,308 $ 91,387
Foreign 9,800 55,832 58,405
-----------------------------------
$(325,809) $169,140 $149,792
- - -----------------------------------------------------------------------------------------------------
</TABLE>
The provision for income taxes from continuing operations consists of the
following:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------
(thousands of dollars) 1996 1995 1994
-----------------------------------
<S> <C> <C> <C>
Current
Federal $(14,514) $49,675 $25,115
State 735 8,336 4,630
Foreign 38,564 16,004 9,870
Deferred
Federal (85,750) (6,361) 6,824
State (11,771) (800) 1,000
Foreign (5,699) 2,588 8,916
Investment tax credit amortization (200) (648) (983)
-----------------------------------
$(78,635) $68,794 $55,372
- - -----------------------------------------------------------------------------------------------------
</TABLE>
The effective income tax rate from continuing operations varied from the
statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------
1996 1995 1994
-----------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate (35.0)% 35.0% 35.0%
Foreign income taxes in excess of statutory rate 8.1 - -
Non-deductible goodwill and intangibles write-down 3.9 - -
State income taxes - net (3.4) 4.5 3.8
Non-deductible goodwill amortization 1.8 1.1 .3
Amortization of investment tax credits - (.4) (.6)
Other .5 .5 (1.5)
-----------------------------------
(24.1)% 40.7% 37.0%
- - -----------------------------------------------------------------------------------------------------
</TABLE>
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------
(thousands of dollars) 1996 1995
-------------------------
<S> <C> <C>
Current Deferred Tax (Assets) Liabilities:
Reserve for environmental remediation and compliance $(27,339) $ (12,208)
Accrual items (19,698) (20,451)
Reserve for disposition of Lubricants Group (12,260) -
Inventories 3,905 202
Other - net (37,098) (15,327)
=========================
$(92,490) $ (47,784)
=========================
Non-current Deferred Tax (Assets) Liabilities:
Depreciation $110,396 $138,381
Reserve for environmental remediation and compliance (56,734) (23,548)
Net operating loss carryforward (21,239) (36,059)
Postretirement benefits other than pensions (20,469) (14,744)
Other - net (28,392) 23,502
-------------------------
$(16,438) $ 87,532
- - -----------------------------------------------------------------------------------------------------
</TABLE>
F-13
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
No federal or state income taxes have been provided on approximately
$154,438,000 of unremitted earnings of the Company's international subsidiaries
at December 31, 1996. As a result of the availability of foreign tax credits,
based on current rates, no significant federal or state income taxes would be
payable if these earnings were distributed.
At December 31, 1996, the Company has federal net operating losses of
approximately $48,800,000 which are subject to certain limitations and expire as
follows: $1,600,000 (2008), $32,200,000 (2009), and $15,000,000 (2010). The
Company has foreign net operating losses of approximately $6,600,000 with no
expiration date.
Cash payments for income taxes amounted to $24,716,000 (1996), $59,505,000
(1995), and $45,108,000 (1994).
NOTE 13 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.
Net pension cost includes the following components:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
(thousands of dollars) 1996 1995 1994
-----------------------------------------------------------------------
DOMESTIC INTERNATIONAL Domestic International Domestic International
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost for benefits earned
during the period $ 10,456 $ 4,600 $ 6,561 $ 3,823 $ 8,284 $ 3,722
Interest cost on the projected
benefit obligation 25,997 7,154 24,337 6,478 22,652 5,516
Actual (gain) loss on plan assets (39,145) (1,046) (63,453) (7,486) 7,287 (2,576)
Net amortization and deferral 9,883 (2,745) 35,206 4,180 (32,743) (314)
Curtailment loss 44,547 - - - - -
-----------------------------------------------------------------------
Total Pension Cost 51,738 7,963 2,651 6,995 5,480 6,348
Multi-employer plans 473 - 411 - 421 -
Other international plans - 68 - 73 - 129
-----------------------------------------------------------------------
Net Pension Cost 52,211 8,031 3,062 7,068 5,901 6,477
Less pension cost of
discontinued operations 10,292 - 15 - 1,009 -
-----------------------------------------------------------------------
Net Pension Cost from Continuing
Operations $ 41,919 $ 8,031 $ 3,047 $ 7,068 $ 4,892 $ 6,477
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
The domestic curtailment loss of $44,547,000 is reflected in the Consolidated
Statement of Operations as follows: $35,047,000 is included in the restructuring
charge and $9,500,000 is included in Loss from Discontinued Operations.
F-14
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
The weighted average assumptions used to calculate costs were as follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
1996 1995 1994
--------------------------------------------------------------------
DOMESTIC INTERNATIONAL Domestic International Domestic International
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate 7.0% 7.0% 8.5% 7.1% 7.0% 6.9%
Rate of increase in compensation
level 4.5% 4.3% 4.5% 4.3% 4.5% 4.3%
Expected long-term rate of
return on assets 10.0% 7.9% 10.0% 8.0% 10.0% 8.0%
- - -------------------------------------------------------------------------------------------------------
</TABLE>
The discount rate used to calculate domestic pension cost was changed from 8.5%
in 1995 to 7.0% in 1996 which increased pension cost by approximately
$4,900,000.
The funded status and amounts recognized in the Company's Consolidated Balance
Sheets at December 31, 1996 and 1995, for the domestic plans were as follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
(thousands of dollars) 1996 1995
---------------------------------------------------------
PLANS IN WHICH: Plans in which:
---------------------------------------------------------
ASSETS ACCUMULATED Assets Accumulated
EXCEED BENEFITS Exceed Benefits
ACCUMULATED EXCEED ASSETS Accumulated Exceed Assets
BENEFITS Benefits
---------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefits $(267,946) $ (82,112) $(259,114) $(70,936)
Nonvested benefits (4,995) (10,341) (6,358) (2,166)
---------------------------------------------------------
Accumulated Benefit Obligation (272,941) (92,453) (265,472) (73,102)
Effect of anticipated future compensation
levels (9,713) (18,224) (22,489) (20,922)
---------------------------------------------------------
Projected Benefit Obligation (282,654) (110,677) (287,961) (94,024)
Plan assets at fair value 294,264 49,756 291,165 38,213
---------------------------------------------------------
Plan Assets in Excess of (Less than)
Projected Benefit Obligation 11,610 (60,921) 3,204 (55,811)
Unrecognized prior service cost 10,764 6,205 28,915 6,294
Unrecognized net transition (asset)
obligation (8,522) 286 (11,636) 637
Unrecognized net loss 13,530 12,396 45,621 12,823
Adjustment required to recognize minimum - (13,395) - (14,596)
liability
---------------------------------------------------------
Noncurrent Pension Asset (Liability) $ 27,382 $ (55,429) $ 66,104 $(50,653)
- - -------------------------------------------------------------------------------------------------------
</TABLE>
The assumptions used to calculate December 31, 1996 and 1995, obligations for
domestic plans were as follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
1996 1995
-------------------------
<S> <C> <C>
Discount rate 7.5% 7.0%
Rate of increase in compensation level 4.5% 4.5%
- - -------------------------------------------------------------------------------------------------------
</TABLE>
The revised domestic discount rate of 7.5% resulted in a decrease of
approximately $17,300,000 and $20,900,000 in the 1996 accumulated and projected
benefit obligation, respectively.
F-15
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
The funded status and amounts recognized in the Company's Consolidated Balance
Sheets at December 31, 1996 and 1995, for the international plans were as
follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
(thousands of dollars) 1996 1995
---------------------------------------------------------
PLANS IN WHICH: Plans in which:
---------------------------------------------------------
ASSETS ACCUMULATED Assets Accumulated
EXCEED BENEFITS Exceed Benefits
ACCUMULATED EXCEED ASSETS Accumulated Exceed Assets
BENEFITS Benefits
---------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefits $(34,802) $(46,579) $(31,122) $(41,227)
Nonvested benefits (1,717) (8,366) (1,620) (2,483)
---------------------------------------------------------
Accumulated Benefit Obligation (36,519) (54,945) (32,742) (43,710)
Effect of anticipated future compensation
levels (7,065) (23,822) (7,387) (18,497)
---------------------------------------------------------
Projected Benefit Obligation (43,584) (78,767) (40,129) (62,207)
Plan assets at fair value 48,819 196 47,567 289
---------------------------------------------------------
Plan Assets in Excess of (Less than)
Projected Benefit Obligation 5,235 (78,571) 7,438 (61,918)
Unrecognized prior service cost 1,309 14 1,597 15
Unrecognized net transition (asset)
obligation (5,473) 2,711 (5,787) (21)
Unrecognized net loss (gain) 1,963 5,915 (795) 1,280
---------------------------------------------------------
Noncurrent Pension Asset (Liability) $ 3,034 $(69,931) $ 2,453 $(60,644)
- - -------------------------------------------------------------------------------------------------------
</TABLE>
The assumptions used to calculate December 31, 1996 and 1995, obligations for
international plans were as follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
1996 1995
-------------------------
<S> <C> <C>
Discount rate 6.6% 7.1%
Rate of increase in compensation level 3.9% 4.3%
- - -------------------------------------------------------------------------------------------------------
</TABLE>
The Company sponsors a defined contribution savings plan, the Witco Corporation
Employee Retirement Savings Plan, which is organized under sections 401(k) and
401(a) of the Internal Revenue Code. The Plan allows salary and hourly
non-bargaining employees to contribute up to a maximum of 15% of their base pay
with the Company providing a matching contribution of 50 cents for each dollar
up to 6%. In addition, the Company sponsors the OSi Specialties, Inc. 401(k)
Savings and Investment Plan which covers all full time employees of OSi. The
Plan allows employees to contribute a maximum of 17.5% of eligible compensation
and the Company provides a matching contribution of 50% up to 7.5%. The Plans
permit 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 contributions were $4,200,000 (1996), $3,900,000 (1995)
and $4,300,000 (1994).
NOTE 14 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 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.
F-16
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
Postretirement benefit obligations at December 31, 1996 and 1995, are as
follows:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------
(thousands of dollars) 1996 1995
----------------------------
<S> <C> <C>
Accumulated Postretirement Benefit Obligation:
Retirees $43,134 $29,359
Active plan participants fully eligible for benefits 8,250 9,535
Other active plan participants 7,362 12,086
----------------------------
Total Accumulated Postretirement Benefit Obligation 58,746 50,980
Unrecognized net (loss) (262) (7,010)
----------------------------
Accrued Postretirement Benefit Liability $58,484 $43,970
- - -----------------------------------------------------------------------------------------------------
</TABLE>
Net periodic postretirement benefit costs include the following components:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------
(thousands of dollars) 1996 1995 1994
------------------------------------------
<S> <C> <C> <C>
Service cost of benefits earned $ 637 $ 486 $ 591
Interest cost on accumulated postretirement benefits 3,082 2,938 2,634
Curtailment loss 13,443 - -
Net amortization 21 (747) 275
------------------------------------------
Net Periodic Postretirement Benefit Costs $17,183 $2,677 $3,500
- - -----------------------------------------------------------------------------------------------------
</TABLE>
For measuring the expected postretirement benefit obligation, a 8% and 8.5%
annual rate of increase in the per capita claims cost was assumed for 1996 and
1995, respectively. The rate was assumed to decrease by 1% per year to 5% in
1999 and remain at that level thereafter. The discount rate used in determining
the accumulated postretirement benefit obligation was 7.5% for 1996 and 7% for
1995. The discount rates used in determining the net periodic postretirement
benefit costs were 7% (1996), 8.3% (1995) and 7% (1994). In 1996, a curtailment
charge of $13,443,000 was recognized in connection with the 1996 restructuring
plan.
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, 1996, by approximately $4,900,000 and the net periodic
postretirement benefit cost for 1996 by approximately $500,000.
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 costs associated with these plans on a cash basis is not
significant.
NOTE 15 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, 1996 and 1995, the Company had outstanding swap contracts with
aggregate notional amounts of approximately $197,000,000 for each year 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, 1996 and 1995, the Company had outstanding forward contracts
with aggregate notional amounts of approximately $137,000,000 and $164,000,000,
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, Swiss and French francs, and British
pounds.
All contracts have been entered into with major financial institutions. The risk
associated with these
F-17
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
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 summarizes 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% and
the 6.125% Notes in addition to the 7.75% and the 6.875% Debentures were based
on quoted market values. For all other long-term debt which have no quoted
market price, the fair value is estimated by discounting projected future cash
flows using the Company's incremental borrowing rate.
FOREIGN CURRENCY/INTEREST RATE SWAP CONTRACTS: The fair value is the amount at
which the contracts could be settled based on quotes provided by investment
banking firms.
FAIR VALUES OF FINANCIAL INSTRUMENTS: The following table presents the carrying
amounts and estimated fair values of material financial instruments used by the
Company in the normal course of its business.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
(thousands of dollars) 1996 1995
---------------------------------------------------------
CARRYING Carrying
AMOUNT FAIR VALUE Amount Fair Value
---------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 59,201 $59,201 $143,994 $143,994
Notes receivable $ 24,422 $24,449 $ 26,387 $ 26,366
Long-term debt $ 700,820 $666,847 $686,315 $696,193
Off-balance sheet financial instruments:
Unrealized loss on foreign
currency/interest rate swap contracts $ - $(35,775) $ - $(41,895)
- - -------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 16 COMMITMENTS AND CONTINGENCIES
OPERATING LEASES: At December 31, 1996, minimum rental commitments related to
continuing operations under noncancelable operating leases amounted to
$19,954,000 (1997), $12,854,000 (1998), $11,378,000 (1999), $8,374,000 (2000),
$8,243,000 (2001), and $85,440,000 (2002 and thereafter).
Rental expenses under operating leases from continuing operations were
$22,725,000 (1996), $16,597,000 (1995) and $16,758,000 (1994).
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, 1996, were as follows:
--------------------------------------------------
(thousands of dollars)
1997 $ 1,964
1998 1,964
1999 1,964
2000 1,964
2001 1,964
2002 and thereafter 11,786
----------
Total minimum lease payments 21,606
Amounts representing interest (7,157)
----------
Present value of net minimum lease 14,449
payments
Current portion (869)
----------
Long-term obligation $13,580
--------------------------------------------------
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, 1996, the estimated costs to complete
authorized projects under construction related to continuing operations amounts
to $82,024,000.
F-18
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
LITIGATION, CLAIMS AND CONTINGENCIES: The Company 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, 1996, the Company was a PRP, or a
defendant, in connection with 76 sites at which it is likely to incur
environmental response costs as a result of actions brought against the Company
pursuant to the federal Comprehensive Environmental Response Compensation and
Liability Act ("CERCLA"), the federal Resource Conservation and Recovery Act
("RCRA") or similar state or local laws. With 27 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.
At December 31, 1996 and 1995, the Company's reserves for environmental
remediation and compliance costs (including $64,224,000 at December 31, 1996, of
both current and long-term environmental liabilities for the Lubricants Group
and $77,649,000 at December 31, 1996, of both current and long-term
environmental liabilities for plants to be either sold or closed) amounted to
$219,697,000 and $106,182,000 (including $22,536,000 for the Lubricants Group),
respectively, reflecting the Company's estimate of the costs to be incurred over
an extended period of time in respect of those matters which are reasonably
estimable. At December 31, 1996 and 1995, $150,921,000 and $60,049,000,
respectively, of the reserves are included in Deferred Credits and Other
Liabilities on the Consolidated Balance Sheets.
The Company is a defendant in six similar actions arising out of the Company's
involvement in the polybutylene resin manufacturing business in the 1970's. Five
of the following cases are currently pending in California state courts and one
is pending in Texas state court; East Bay Municipal Utility District v. Mobil
Oil Corporation, et al., filed in November 1993, and pending in Superior Court
for the County of San Mateo, California; City of Santa Maria v. Shell Oil
Company, et al., filed in May 1994, and pending in Superior Court for the County
of San Luis Obispo, California; Nipomo Community Services District v. Shell Oil
Company, et al., filed in May 1995, and pending in Superior Court for the County
of Santa Barbara, California; Alameda County Water District v. Mobil Oil
Corporation, et al., filed in April 1996, and Marin Municipal Water District v.
Shell Oil Company, et al., filed in May 1996, both pending in superior Court for
the County of San Mateo; and City of Austin v. Shell Oil Company, et al., filed
in June 1996, and pending in the District Court of Travis County, Texas. 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 in the California and
Texas actions include breach of the California Unfair Practices Act and the
Texas Deceptive Practices Act, respectively, breach of warranty, fraud and
strict liability. It is possible that the Company may be named as a defendant in
future actions arising out of its past involvement in the polybutylene resin
manufacturing business.
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, the Company's operating results could
be materially affected in future periods by the resolution of these
contingencies.
F-19
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
NOTE 17 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) 1996 1995 1994
--------------------------------------------
<S> <C> <C> <C>
Net Sales
Chemical $ 1,435,852 $ 1,442,320 $ 1,336,907
OSi Specialties 448,592 101,312 --
Petroleum 381,621 388,872 368,747
Diversified products -- 61,412 141,995
Intersegment elimination (2,738) (8,839) (6,235)
--------------------------------------------
Net Sales $ 2,263,327 $ 1,985,077 $ 1,841,414
--------------------------------------------
Operating Income
Chemical $ (108,687) $ 63,611 $ 125,459
OSi Specialties 58,351 7,385 --
Petroleum (87,746) 33,955 44,240
Diversified products -- 62,689 17,714
Corporate and unallocated (123,976) 33,610 (14,028)
--------------------------------------------
Operating income (loss) from continuing operations (262,058) 201,250 173,385
--------------------------------------------
Other expense - net (3,531) (3,525) (3,951)
Interest income (expense) - net (60,220) (28,585) (19,642)
--------------------------------------------
Income (loss) from continuing operations before income
taxes $ (325,809) $ 169,140 $ 149,792
--------------------------------------------
Assets
Chemical $ 915,604 $ 1,090,837 $ 1,101,519
OSi Specialties 969,620 966,501 --
Petroleum 209,154 246,259 507,848
Diversified products -- -- 107,376
Net assets of discontinued operations 59,740 170,426 --
Corporate (principally cash, cash equivalents and 237,587 276,581 202,602
deferred pension costs)
--------------------------------------------
Assets $ 2,391,705 $ 2,750,604 $ 1,919,345
- - --------------------------------------------------------------------------------------------------------
</TABLE>
The following table presents a reconciliation of operating income (loss) from
continuing operations on a segment basis detailing unusual or infrequently
occurring items which affect comparability between years:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------
(thousands of dollars)
1996
-------------------------------------------------------------------------
OSi CORPORTAE &
CHEMICAL SPECIALTIES PETROLEUM UNALLOCATED TOTAL
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating income
(loss) from
continuing
operations on a
comparative basis $ 113,398 $ 58,351 $ 23,582 $ (21,273) $ 174,058
Restructuring charge (197,724) -- (94,031) (53,375) (345,130)
Other charges (24,361) -- (17,297) (49,328) (90,986)
Insurance
settlements -- -- -- -- --
Gain on disposition
of subsidiaries -- -- -- -- --
-------------------------------------------------------------------------
Operating income
(loss) from
continuing
operations $(108,687) $ 58,351 $ (87,746) $(123,976) $(262,058)
-------------------------------------------------------------------------
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------
(thousands of dollars)
1995
-----------------------------------------------------------------------------------------
OSi Diversified Corporated &
Chemical Specialties Petroleum Products Unallocated Total
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating income
(loss) from
continuing
operations on a
comparative basis $ 109,603 $ 7,385 $ 36,105 $ 10,160 $ (19,289) $ 143,964
Restructuring charge (33,092) -- (750) -- -- (33,842)
Other charges (12,900) -- (1,400) (1,550) (2,250) (18,100)
Insurance
settlements -- -- -- -- 55,149 55,149
Gain on disposition
of subsidiaries -- -- -- 54,079 -- 54,079
-----------------------------------------------------------------------------------------
Operating income
(loss) from
continuing
operations $ 63,611 $ 7,385 $ 33,955 $62,689 $ 33,610 $ 201,250
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The only unusual item in 1994 was a gain of $5,070 from the disposition of the
metal finishing and metalworking operations of a subsidiary (Diversified
Products).
F-20
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
(thousands of dollars) 1996 1995 1994
-------------------------------------------
<S> <C> <C> <C>
Depreciation and Amortization
Chemical $ 67,312 $ 69,917 $ 62,795
OSi Specialties 37,865 9,439 --
Petroleum 19,110 16,758 14,568
Diversified products -- 3,719 9,351
Corporate 4,506 2,738 1,949
-------------------------------------------
Depreciation and amortization from continuing $ 128,793 $ 102,571 $ 88,663
operations
-------------------------------------------
Capital Expenditures (exclusive of acquisitions)
Chemical $ 74,230 $ 53,134 $ 44,323
OSi Specialties 40,477 12,400 --
Petroleum 16,641 16,755 25,647
Diversified products -- 4,388 5,623
Discontinued operations 11,844 17,557 17,502
Corporate 17,971 11,611 14,343
-------------------------------------------
Capital Expenditures $ 161,163 $ 115,845 $ 107,438
-------------------------------------------
Net Sales
United States $ 1,450,996 $ 1,247,287 $ 1,225,062
Western Europe 775,078 662,099 541,060
Other International 217,447 163,636 137,855
Inter-area elimination (180,194) (87,945) (62,563)
-------------------------------------------
Net Sales $ 2,263,327 $ 1,985,077 $ 1,841,414
-------------------------------------------
Operating Income
United States $ (280,774) $ 131,604 $ 102,017
Western Europe 22,153 55,324 54,184
Other International (3,437) 14,322 17,184
-------------------------------------------
Operating income (loss) from continuing operations $ (262,058) $ 201,250 $ 173,385
-------------------------------------------
Assets
United States $ 1,580,470 $ 1,491,188 $ 1,211,125
Western Europe 640,265 884,139 604,342
Other International 111,230 204,851 103,878
Net assets of discontinued operations (United States) 59,740 170,426 --
-------------------------------------------
Assets $ 2,391,705 $ 2,750,604 $ 1,919,345
- - -------------------------------------------------------------------------------------------------------
</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 1996, corporate and unallocated includes charges of $53,375,000 related to a
restructuring of the Company's operations and $49,328,000 of non-recurring items
related to provisions for litigation and other matters.
1995 corporate and unallocated includes income of $55,149,000 as a result of
settlements with certain of the Company's insurers, net of related legal and
other costs.
Foreign currency translation and transaction gains and losses included in net
income are not significant.
OSi Specialties purchases, in the aggregate, approximately 40% of its raw
materials from Dow Corning Corporation and Union Carbide Corporation under
various long-term agreements which terms expire at various times through 2000.
NOTE 18 DISCONTINUED OPERATIONS
On September 11, 1995, the Company announced its intention to divest its
Lubricants Group. These operations are reflected as discontinued operations for
all periods presented in the Company's Statements of Operations. Net sales for
discontinued operations amounted to $332,930,000 (1996), $373,363,000 (1995) and
$383,255,000 (1994). During 1996, the Company recorded an estimated net loss on
disposal of $68,253,000,
F-21
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
or $1.20 per common share, associated with the divestiture of the Lubricants
Group. The loss is based upon events and information which resulted in
management's revised estimate of the net realizable value of the Lubricants
Group. This revised estimate is based upon contract negotiations, lower than
anticipated bids for portions of the group and amendments to the Company's plan
of disposal, including plant closures, which resulted in a write-down of certain
assets and a provision for associated costs.
On November 1, 1996, the Company sold certain assets of its Kendall/Amalie
business and certain assets of its grease and grease gun manufacturing
businesses for approximately $120,689,000, subject to certain post-closing
adjustments.
The components of net assets of discontinued operations included in the
Company's Consolidated Balance Sheets at December 31, 1996 and 1995, are as
follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
(thousands of dollars) 1996 1995
-------------------------
<S> <C> <C>
Accounts and notes receivable - net $19,331 $ 61,633
Inventories 10,781 38,378
Property, plant and equipment - net 30,756 112,639
Accounts payable and other current liabilities (2,000) (39,603)
Other assets and liabilities - net 872 (2,621)
-------------------------
$59,740 $170,426
- - -------------------------------------------------------------------------------
</TABLE>
Additional liabilities of the Lubricants Group to be retained by the Company as
of December 31, 1996, amounted to $66,634,000 included in the Accounts Payable
and Other Current Liabilities caption of the Company's Balance Sheet including
$31,438,000 related to the reserve for disposition of the business, $18,611,000
for environmental remediation and compliance costs and $16,585,000 for current
payables and accruals. Additionally, $45,613,000 is included in the Deferred
Credits and Other Liabilities caption for environmental remediation and
compliance costs.
Under generally accepted accounting principles, a provision for loss on
discontinued operations has been included based on management's best estimates
of the amounts expected to be realized on the sale of the remaining portions of
the 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 loss anticipated on
disposal of the discontinued operations.
NOTE 19 SUBSEQUENT EVENTS
DISCONTINUED OPERATIONS
Effective February 28, 1997, the Company sold its refinery in Bradford,
Pennsylvania to American Refining Group, Inc. for approximately $17,000,000. On
March 4, 1997, the Company signed a letter of intent to sell its Golden Bear
Division, the remaining business of the Lubricants Group. The Company
anticipates no additional losses will be incurred as a result of these
transactions.
F-22
<PAGE>
<PAGE>
WITCO CORPORATION AND SUBSIDIARY COMPANIES
QUARTERLY FINANCIAL DATA FROM CONTINUING OPERATIONS (UNAUDITED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands of dollars except per share data)
- - ------------------------------------------------------------------------------------------------------------------
1996 1995
-------------------------------------------------- ------------------------------------------------
INCOME Income
INCOME (LOSS) Income (Loss)
(LOSS) FROM (Loss) from
COST OF FROM CONTINUING Cost of from Continuing
NET GOODS CONTINUING OPERATIONS Net Goods Continuing Operations
QUARTER SALES SOLD OPERATIONS PER SHARE(f) Sales Sold Operations Per Share(f)
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First $ 589,425 $ 448,345 $25,581 $ .45 $517,952 $405,213 $30,270 (a) $ .54 (a)
Second 571,458 434,680 18,519 .33 489,231 390,634 69,021 (b) 1.22 (b)
Third 562,049 437,952 11,928 .21 441,902 352,554 19,444 (c) .34 (c)
Fourth 540,395 439,343 (303,202)(e) (5.33)(e) 535,992 420,421 (18,389)(d) (.32)(d)
------------------------------------------------------------------------------------------------------
$2,263,327 $1,760,320 $(247,174) $(4.35) $1,985,077 $1,568,822 $100,346 $1.78
- - --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes a gain of $5,918, or $.11 per common share, from the disposition of
the Company's Battery Parts business.
(b) 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.
(c) Includes a gain of $4,410, or $.08 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 restructuring charge of $20,644, or $.36 per common share; other
non-recurring charges of $11,041, or $.20 per common share, related to
provisions for environmental remediation costs and litigation; and a gain of
$6,236, or $.11 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 restructuring charge of $239,270, or $4.21 per common share, and
other non-recurring charges of $71,336, or $1.25 per common share, related
to provisions for litigation, environmental remediation costs and other
costs.
(f) Per share amounts for the quarter are computed independently; and, due to
the computation formula, the sum of the quarters may not equal the
year-to-date period.
RESPONSIBILITY FOR FINANCIAL STATEMENTS
Witco is responsible for the integrity of the financial data reported by it and
its subsidiary companies. This requires preparing financial statements and other
financial data which fairly reflect Witco's consolidated financial position and
results of operations in accordance with generally accepted accounting
principles, including certain data that is based on management's best estimates
and judgment.
In the preparation of its financial data and to safeguard its assets against
unauthorized acquisition, use, or disposition, Witco establishes and maintains
accounting and reporting systems supported by internal accounting controls.
Witco believes that a high level of internal accounting control is maintained by
the selection and training of qualified personnel, by appropriate delegation of
authority and division of responsibilities, by the establishment and
communication of accounting and business policies, and by conducting internal
audits including follow-up procedures that require responsive action by
management. In establishing systems of internal accounting control, Witco weighs
the cost of such systems against the benefits that it believes can be derived.
Ernst & Young LLP, independent auditors, are engaged to audit and render an
opinion as to whether Witco's financial statements present fairly Witco's
consolidated financial position and operating results. Their audits are
conducted in accordance with generally accepted audited standards, and their
report is included herein.
The Audit Committee of the Board of Directors, consisting of four non-employee
directors, reviews Witco's accounting and auditing policies, practices and the
services to be performed by the independent auditors. The Audit Committee meets
with management, with the internal auditors and with the independent auditors in
the exercise of its responsibilities.
F-23
<PAGE>
<PAGE>
SCHEDULE II
WITCO CORPORATION AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- - --------------------------------------------------- -------- ------------------------ -------- --------
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
- - -------------------------------------------------- BEGINNING COSTS AND OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- - -------------------------------------------------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Valuation and qualifying accounts deducted
from assets to which they apply:
Allowances for doubtful
receivables-trade..................... $7,104 $8,235 $ 3,036(a) $4,174(b) $14,201
---------- ---------- ---------- ---------- --------
---------- ---------- ---------- ---------- --------
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)(c) $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
---------- ---------- ---------- ---------- --------
---------- ---------- ---------- ---------- --------
</TABLE>
- - ------------
Notes:
(a) Amount represents a reclassification.
(b) Uncollectible receivables charged against the allowance provided.
(c) 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.
S-1
<PAGE>
<PAGE>
WITCO CORPORATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- - -------- -----------
<S> <C>
10(i)(5). -- Amendment No. 1 to Amended and Restated Credit Agreement dated as
of December 23, 1996.
11. -- Statement re Computation of Per Share Earnings.
21. -- Subsidiaries of the Registrant.
23. -- Consent of Independent Auditors.
27. -- Financial Data Schedule.
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 10(i)(5)
AMENDMENT NO. 1 TO
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDMENT dated as of December 23, 1996 to the Amended and Restated Credit
Agreement dated as of October 11, 1996 (the 'Agreement') among WITCO CORPORATION
and the BANKS listed on the signature pages hereof.
WITNESSETH:
WHEREAS, the parties hereto desire to amend the Agreement to provide for
the change in the debt covenant specified below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Agreement shall have the
meaning assigned to such term in the Agreement. Each reference to 'hereof',
'hereunder', 'herein' and 'hereby' and each other similar reference and each
reference to 'this Agreement' and each other similar reference contained in the
Agreement shall from and after the date hereof refer to the Agreement as amended
and restated hereby.
SECTION 2. Amendment of Section 5.07. Section 5.07 of the Agreement is
amended to replace '120%' with '175%'.
SECTION 3. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 4. Counterparts; Effectiveness. This Amendment may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Amendment shall become effective as of the date hereof when the Agent shall have
received duly executed counterparts hereof signed by the Company and the
Required Banks (or, in the case of any party as to which an executed counterpart
shall not have been received, the Agent shall have received written confirmation
from such party of execution of a counterpart hereof by such party).
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
WITCO CORPORATION
By /S/ JAMES M. RUTLEDGE
...................................
Title: Vice President and Treasurer
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By /S/ ROBERT BOTTAMEDI
...................................
Title: Vice President
THE CHASE MANHATTAN BANK
By /S/ ROBERT T. SACKS
...................................
Title: Vice President
<PAGE>
<PAGE>
ABN AMRO BANK N.V.,
NEW YORK BRANCH
By /S/ GEORGE M. DUGAN
...................................
Title: Vice President
By /S/ JOHN M. KINNEY
...................................
Title: A.V.P.
BANK OF AMERICA ILLINOIS
By /S/ WENDY L. LORING
...................................
Title: Vice President
CITIBANK, N.A.
By /S/ MARY W. CORKRAN
...................................
Title: Vice President
COMMERZBANK AG, NEW YORK
AND/OR CAYMAN ISLANDS BRANCH
By /S/ ROBERT J. DONOHUE
...................................
Title: Vice President
By /S/ ANDREW R. CAMPBELL
...................................
Title: Assistant Cashier
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS BRANCH
By /S/ JOHN AUGSBURGER
...................................
Title: Vice President
By /S/ LYDIA ZAININGER
...................................
Title: Vice President
MELLON BANK, N.A.
By /S/ JOHN SABROSKE
...................................
Title: Vice President
2
<PAGE>
<PAGE>
FLEET NATIONAL BANK
By /S/ ROBERT C. RUBINO
...................................
Title: Vice President
THE SUMITOMO BANK, LIMITED
NEW YORK BRANCH
By /S/ YOSHINORI KAWAMURA
...................................
Title: Joint General Manager
3
<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,
---------------------------------
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
PRIMARY
Income (loss) from continuing operations............................... ($247,174) $100,346 $ 94,420
Interest on convertible subordinated debentures (net of tax)........... -- -- 1,109
Adjustment for dividend requirements of preferred stock................ (18) (19) (20)
--------- -------- --------
(247,192) 100,327 95,509
Income (loss) from discontinued operations............................. (67,913) 4,099 12,647
--------- -------- --------
Total............................................................. ($315,105) $104,426 $108,156
--------- -------- --------
--------- -------- --------
Weighted average shares outstanding.................................... 56,900 56,312 54,812
Assumed conversions:
Convertible subordinated debentures.................................. -- -- 1,266
Stock options........................................................ -- 237 300
--------- -------- --------
Total............................................................. 56,900 56,549 56,378
--------- -------- --------
--------- -------- --------
Net Income (Loss) Per Common Share:
Income (loss) from continuing operations............................. $ (4.35) $ 1.78 $ 1.70
Income (loss) from discontinued operations........................... (1.19) 0.07 0.22
--------- -------- --------
Net Income (Loss).................................................... $ (5.54) $ 1.85 $ 1.92
--------- -------- --------
--------- -------- --------
FULLY DILUTED
Income (loss) from continuing operations............................... ($247,174) $100,346 $ 94,420
Interest on dilutive debentures (net of tax)........................... -- -- 1,109
--------- -------- --------
($247,174) 100,346 95,529
Income (loss) from discontinued operations............................. (67,913) 4,099 12,647
--------- -------- --------
Total............................................................. ($315,087) $104,445 $108,176
--------- -------- --------
--------- -------- --------
Weighted average shares outstanding.................................... 56,900 56,312 54,812
Assumed conversions:
Convertible subordinated debentures.................................. -- -- 1,266
Stock options........................................................ -- 237 300
Preferred stock...................................................... -- 117 129
--------- -------- --------
Total............................................................. 56,900 56,666 56,507
--------- -------- --------
--------- -------- --------
Net Income (Loss) Per Common Share:
Income (loss) from continuing operations............................. $(4.35) $1.77 $1.69
Income (loss) from discontinued operations........................... (1.19) 0.07 0.22
--------- -------- --------
Net Income (Loss).................................................... $(5.54) $1.84 $1.91
--------- -------- --------
--------- -------- --------
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF WITCO CORPORATION(1)(2)(3)
AS OF JANUARY 1, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF
VOTING SECURITIES
OWNED DIRECTLY OR STATE OR
INDIRECTLY BY COUNTY OF
WITCO CORPORATION ORGANIZATION
------------------ ---------------
<S> <C> <C>
A-K Divestiture, Inc.................................................... 100.0% Delaware
AOC Div., Inc........................................................... 100.0 Indiana
Assured Insurance Company............................................... 100.0 Vermont
Baxenden Chemicals Limited.............................................. 53.5 United Kingdom
Baxenden Scandinavia AS................................................. 53.5 Denmark
BOC Div., Inc........................................................... 100.0 Georgia
CCC Divestiture Company................................................. 100.0 Delaware
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 de 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 Ltd............................................ 100.0 Thailand
OSi Specialties (U.K.) Ltd.............................................. 100.0 United Kingdom
OSi Specialties USA, Inc................................................ 100.0 Delaware
PT OSi Specialities Indonesia........................................... 100.0 Indonesia
Rinol AG(4)............................................................. 4.0 Germany
Sherex Chemical Company, Inc............................................ 100.0 Ohio
SWPC Div., Inc.......................................................... 100.0 Delaware
TRC Divestiture Company................................................. 100.0 Ohio
Witco Asia Pacific PTE Ltd.............................................. 100.0 Singapore
Witco Australia Pty Limited............................................. 100.0 Australia
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
VOTING SECURITIES
OWNED DIRECTLY OR STATE OR
INDIRECTLY BY COUNTY OF
WITCO CORPORATION ORGANIZATION
------------------ ---------------
<S> <C> <C>
Witco BV................................................................ 100.0% The Netherlands
Witco Canada Inc........................................................ 100.0 Canada
Witco Corporation UK Limited............................................ 100.0 United Kingdom
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 Ireland Investment Company Limited................................ 100.0 Ireland
Witco Italiana SrL...................................................... 100.0 Italy
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,
the Registration Statement (Form S-8, No. 33-60755), pertaining to the 1995
Stock Option Plan for Employees of Witco Corporation and its Subsidiaries, and
the Post-effective Amendment No. 1 to the Registration Statement (Form S-8, No.
333-05509), pertaining to the 1995 Stock Option Plan for Employees of Witco
Corporation and its Subsidiaries, of our report dated January 31, 1997 (except
Note 19, as to which the date is March 4, 1997), with respect to the
consolidated financial statements and schedule of Witco Corporation and
Subsidiary Companies for the year ended December 31, 1996 included in this
Annual Report (Form 10-K).
/S/ ERNST & YOUNG LLP
Stamford, Connecticut
March 20, 1997
<PAGE>
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