<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------- -----------
Commission File Number 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
incorporation or organization) Identification No.)
ONE AMERICAN LANE, GREENWICH, CONNECTICUT 06831-2559
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
(203) 552-2000
--------------
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
The number of shares of common stock outstanding is as follows:
<TABLE>
<S> <C>
Class Outstanding at April 30, 1999
----- -----------------------------
Common Stock - $5 par value 57,644,017
</TABLE>
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WITCO CORPORATION
FORM 10-Q
For the quarterly period ended March 31, 1999
<TABLE>
<CAPTION>
CONTENTS PAGE
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheets at March 31, 1999 (unaudited) and
December 31, 1998 2
Condensed consolidated statements of income (unaudited) for the three
months ended March 31, 1999 and 1998 3
Condensed consolidated statements of cash flows (unaudited) for the
three months ended March 31, 1999 and 1998 4
Notes to condensed consolidated financial statements (unaudited) 5
Independent accountants' report on review of interim financial
information 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosure of Market Risk 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
Index to Exhibits 21
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WITCO CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998 (a)
--------- ------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 32,691 $ 36,986
Accounts and notes 354,164 324,738
receivable-net
Inventories
Raw materials and supplies $ 57,574 $ 53,024
Finished goods 212,432 270,006 202,501 255,525
-------- --------
Deferred income taxes 42,850 42,533
Prepaid 16,601 20,836
---------- ----------
TOTAL CURRENT ASSETS 716,312 680,618
---------- ----------
PROPERTY, PLANT, AND
EQUIPMENT - less accumulated
depreciation of $814,396 and $813,311 985,344 961,703
GOODWILL AND OTHER INTANGIBLE
ASSETS - less accumulated
amortization of $156,593 and $151,472 599,979 611,943
DEFERRED INCOME TAXES 3,610 7,605
DEFERRED COSTS AND OTHER ASSETS 91,097 77,000
---------- ----------
TOTAL ASSETS $2,396,342 $2,338,869
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes and loans payable $ 298,266 $ 201,437
Accounts payable and other current
liabilities 443,875 433,154
---------- ----------
TOTAL CURRENT LIABILITIES 742,141 634,591
---------- ----------
LONG-TERM DEBT 681,045 688,192
DEFERRED CREDITS AND OTHER LIABILITIES 344,395 358,263
SHAREHOLDERS' EQUITY
$2.65 Cumulative Convertible
Preferred Stock, par value
$1 per share: authorized - 14 shares,
issued and outstanding - 6 shares 6 6
Common Stock, par value $5 per share:
authorized - 100,000 shares,
issued - 57,662 shares and
57,632 shares 288,308 288,163
Capital in excess of par value 161,582 161,267
Accumulated other comprehensive loss (36,672) (14,884)
Restricted stock programs (1,712) (1,613)
Retained earnings 217,694 225,310
Treasury stock, at cost - 16
shares and 12 shares (445) (426)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 628,761 657,823
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $2,396,342 $2,338,869
========== ==========
</TABLE>
(a) The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date.
See accompanying notes.
2
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WITCO CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
------------ -----------
<S> <C> <C>
Net Sales $ 480,591 $ 507,374
Cost of Goods Sold 364,547 380,220
--------- ---------
Gross Profit 116,044 127,154
Operating Expenses
Selling expense 25,128 25,712
General and administrative expenses 39,430 34,032
Research and development 19,112 17,885
Other expenses (income) - net 1,522 1,020
Restructuring charges 2,682 2,262
--------- ---------
Total Operating Expenses 87,874 80,911
--------- ---------
Operating Income 28,170 46,243
Other Expense (Income) - Net
Interest expense 12,862 11,990
Interest income (1,016) (1,320)
Other expense - net 573 921
--------- ---------
Income before Income Taxes 15,751 34,652
Income Taxes 7,245 14,207
--------- ---------
Net Income $ 8,506 $ 20,445
========= =========
Net Income Per Common Share: Basic $ .15 $ .36
========= =========
Average Number of Common Shares: Basic 57,561 57,443
========= =========
Net Income Per Common Share: Diluted $ .15 $ .35
========= =========
Average Number of Common Shares: Diluted 57,735 58,334
========= =========
Dividends Declared $ .28 $ .28
========= =========
</TABLE>
See accompanying notes.
3
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WITCO CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES $(17,114) $(73,393)
-------- --------
INVESTING ACTIVITIES
Expenditures for property, plant, and equipment (68,471) (52,271)
Proceeds from dispositions 2,707 21,770
Other investing activities -- 6,256
-------- --------
Net Cash Used in Investing Activities (65,764) (24,245)
-------- --------
FINANCING ACTIVITIES
Proceeds from borrowings 388,561 55,288
Payments on borrowings (291,957) (16,567)
Dividends paid (16,122) (16,076)
Proceeds from exercise of stock options -- 2,771
-------- --------
Net Cash Provided by Financing Activities 80,482 25,416
-------- --------
Effects of Exchange Rate Changes on Cash and
Cash Equivalents (1,899) (729)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (4,295) (72,951)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 36,986 96,383
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 32,691 $ 23,432
======== ========
</TABLE>
See accompanying notes.
4
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WITCO CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE A - Basis of Preparation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. All such adjustments are
of a normal recurring nature. Operating results for the three month period ended
March 31, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1998.
The condensed consolidated financial statements at March 31, 1999 and for the
three month periods ended March 31, 1999 and 1998 have been reviewed in
accordance with standards established by the American Institute of Certified
Public Accountants, by independent accountants Ernst & Young LLP, and their
report is included herein.
NOTE B - Changes in Accounting Principles
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires that all derivatives
be recorded on the balance sheet as an asset or liability measured at its fair
value. Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in fair value of the derivative will either be offset against the
changes in fair market value of the hedged assets, liabilities, or firm
commitments through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair market value will be immediately recognized in
earnings. The Company has not yet determined what the effect of SFAS No. 133
will be on its earnings and financial position. Since the standard allows
certain foreign currency transactions to be accounted for as hedges for
financial reporting purposes that were not previously treated as hedges, the
Company may change its policies towards the management of certain foreign
currency exposures. Any changes that may occur would be to further reduce the
Company's exposure to foreign currency risks. The Company is required to adopt
the provisions of SFAS No. 133 by January 1, 2000, however, early application is
permitted as of the beginning of any preceding fiscal quarter.
NOTE C - Comprehensive Income (Loss)
The components of comprehensive income (loss) for the three month period ended
March 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
(in thousands of dollars) Three Months Ended
March 31,
-----------------------
1999 1998
--------- --------
<S> <C> <C>
Net income $ 8,506 $ 20,445
Foreign currency translation adjustments (21,788) (5,176)
-------- --------
Comprehensive income (loss) $(13,282) $ 15,269
======== ========
</TABLE>
The components of accumulated other comprehensive loss, net of related tax
benefit, at March 31, 1999 and December 31, 1998 are as follows:
<TABLE>
<CAPTION>
(in thousands of dollars) March 30, December 31,
1999 1998
--------- ------------
<S> <C> <C>
Foreign currency translation adjustments $(34,629) $(12,841)
Pension - minimum liability adjustments (2,043) (2,043)
-------- --------
Accumulated other comprehensive loss $(36,672) $(14,884)
======== ========
</TABLE>
5
<PAGE>
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NOTE D - Effective Tax Rate
The effective tax rate of 46.0% and 41.0% for the three month periods ended
March 31, 1999 and 1998, respectively, as compared to the federal statutory tax
rate of 35%, is primarily the result of state income taxes, goodwill
amortization which is not deductible for income tax purposes and the effect of
the mix between domestic and foreign earnings. The 5% increase in the tax rate
as of March 31,1999 as compared to March 31, 1998 is mainly due to the effect of
non-deductible amortization costs on reduced earnings.
NOTE E - Earnings Per Share
The following is an illustration of the reconciliation of the numerator and
denominator of basic and diluted EPS computations and other related disclosures.
<TABLE>
<CAPTION>
(in thousands of dollars and shares, Three Months Ended
except per share amounts) March 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Numerator:
- ---------
Net income $ 8,506 $ 20,445
Cumulative convertible preferred stock dividends (4) (4)
-------- --------
Numerator for basic earnings per share - income available to
common shareholders 8,502 20,441
Effect of dilutive securities:
Cumulative convertible preferred stock dividends 4 4
-------- --------
Numerator for diluted earnings per share - income available to
common shareholders after assumed conversions $ 8,506 $ 20,445
======== ========
Denominator:
- ------------
Denominator for basic earnings per share - weighted-average shares 57,561 57,443
Effect of dilutive securities:
Employee stock options -- 711
Cumulative convertible preferred stock 99 103
Restricted shares 75 77
-------- --------
Dilutive potential common shares 174 891
-------- --------
Denominator for diluted earnings per share - adjusted weighted -
average shares and assumed conversions 57,735 58,334
======== ========
Basic Earnings Per Share $ .15 $ .36
======== ========
Diluted Earnings Per Share $ .15 $ .35
======== ========
</TABLE>
NOTE F - Litigation and Environmental
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 March 31, 1999, the
Company was a PRP, or a defendant, in connection with 56 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 23 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.
6
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NOTE F - Litigation and Environmental (continued)
The Company evaluates and reviews its environmental reserves for future
remediation and other costs on a quarterly basis to determine appropriate
reserve amounts. Inherent in this process are considerable uncertainties which
affect the Company's ability to estimate the ultimate costs of remediation
efforts. Such uncertainties include the nature and extent of contamination at
each site, evolving governmental standards regarding remediation requirements,
changes in environmental regulations, widely varying costs of alternative
cleanup methods, the number and financial condition of other potentially
responsible parties at multi-party sites, innovations in remediation and
restoration technology, and the identification of additional environmental
sites.
At March 31, 1999, the Company's reserves for environmental remediation and
compliance costs amounted to $115,524, 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 March 31, 1999, $95,546 of the reserves are
included in Deferred Credits and Other Liabilities on the Condensed Consolidated
Balance Sheets. The Company believes it has provided adequate reserves for these
commitments.
The Company is a defendant in five similar actions arising out of the Company's
involvement in the polybutylene resin manufacturing business in the 1970's. Four
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; 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 or liquidity. However, the Company's operating
results or cash flows could be materially affected in future periods by the
resolution of contingencies.
Note G - Segment Information
For the year ended December 31, 1998, the Company adopted SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." SFAS No.
131 requires comparative disclosure of limited segment information in financial
statements for interim periods after adoption. The adoption of SFAS No. 131 does
not affect results of operations or financial position.
<TABLE>
<CAPTION>
(in thousands of dollars) Three Months Ended
March 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Net sales
Polymer Chemicals $ 113,531 $ 124,003
OrganoSilicones 112,614 111,688
Performance Chemicals 164,990 177,598
Oleochemicals & Derivatives 89,456 94,085
--------- ---------
Total net sales $ 480,591 $ 507,374
========= =========
Operating income
Polymer Chemicals $ 8,081 $ 17,878
OrganoSilicones 12,952 11,797
Performance Chemicals 13,224 19,994
Oleochemicals & Derivatives 3,767 6
--------- ---------
Total segment operating income 38,024 49,675
Corporate and unallocated (9,854) (3,432)
--------- ---------
Operating income 28,170 46,243
Other expense - net (573) (921)
Interest expense - net (11,846) (10,670)
--------- ---------
Income before income taxes $ 15,751 $ 34,652
========= =========
</TABLE>
7
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Note H- Other Matters
The three month period ended March 31, 1999 includes a gain of $2,200 ($1,342
after-tax or $.02 per common share - diluted) for additional proceeds received
on the 1998 disposition of the company's SACI Anti-Corrosion Coatings business.
The restructuring charges of $2,682 ($1,636 after-tax or $.03 per common share -
diluted) for the three month period ended March 31, 1999 include severance and
related costs of $1,710 and other costs primarily associated with the Company's
global systems implementation. During the three month period ended March 31,
1999, the Company made cash payments against the restructuring accruals of
approximately $7,680 related principally to severance and related costs.
The restructuring charges of $2,262 ($1,380 after-tax or $.02 per common share -
diluted) for the three month period ended March 31, 1998 include expenditures
for equipment at sites previously identified for closure which otherwise would
have been capitalized and other costs primarily associated with the Company's
global systems implementation. During the three month period ended March 31,
1998, the Company made cash payments against the restructuring accruals of
approximately $4,760 related principally to severance and related costs.
8
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Independent Accountants' Review Report
The Board of Directors
Witco Corporation
We have reviewed the accompanying condensed consolidated balance sheet of Witco
Corporation and Subsidiary Companies as of March 31, 1999, and the related
condensed consolidated statements of income for the three-month period ended
March 31, 1999 and 1998, and the condensed consolidated statements of cash
flows for the three-month period ended March 31, 1999 and 1998. These financial
statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Witco Corporation and Subsidiary
Companies as of December 31, 1998, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended (not
presented herein) and in our report dated February 1, 1999, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 1998, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
May 6, 1999
9
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND FINANCIAL RESOURCES
Net cash used in operating activities was $17.1 million for the three month
period ended March 31, 1999 as compared to $73.4 million for the same period of
1998. The decrease in cash used in operating activities is mainly due to the
timing of payments associated with the 1996 restructuring plan and other
initiatives.
Total debt increased $89.7 million to $979.3 million at March 31, 1999 as
compared to December 31, 1998. The increase in total debt is primarily due to
financing capital expenditures and other costs associated with the 1996
restructuring plan and other initiatives and the Company's global systems
implementation, as a result of a decrease in net sales and an increase in
working capital requirements.
The Company has a revolving credit agreement with various banks in the amount of
$500 million, $260 million of which was outstanding at March 31, 1999. In
addition, the Company has access to short-term uncommitted facilities based on
current money market interest rates. As of March 31, 1999, the Company had $35.1
million outstanding on these uncommitted facilities. The Company also has,
through certain of its international subsidiaries, arrangements with various
banks for lines of credit in the amount of $29.3 million, of which $1 million
was utilized as of March 31, 1999. The Company plans to utilize the credit
agreement, uncommitted facilities and lines of credit periodically for its
operating requirements and planned capital investment program. Based upon the
existing covenants under the Company's revolving credit agreement, the Company
could have borrowed up to an additional $171 million on its various borrowing
arrangements as of March 31, 1999. On March 31, 1999, the Company amended its
revolving credit agreement to delay the implementation of a more restrictive
financial covenant from April 1, 1999 to January 1, 2000.
On January 13, 1999, the Company announced the next phase of its strategic plan,
which includes its intention to divest or seek a strategic alliance for its
Oleochemical and Derivatives business (ODG). In the event of a transaction which
generates proceeds, the proceeds will be used to reduce short-term debt. In
addition to the ODG strategic alternatives, the Company will focus its resources
on realigning its portfolio mix with an emphasis on its market leadership, high
growth, core businesses. The Company also plans to reduce its non-manufacturing
operating expenses, including costs related to the corporate infrastructure. On
April 28, 1999, the Company's Board of Directors approved the 1999 Enhanced
Retirement Opportunity (1999 ERO) as part of its strategic plan. This is a
voluntary program, that will provide enhanced retirement benefits to certain
U.S. based employees. Certain U.S. based employees as of May 1, 1999 may be
eligible for the 1999 ERO if they will be at least 50 years old and will have at
least five years of vesting service as of December 31, 1999. The impact the 1999
ERO will have on the Company's earnings and financial position will not be known
until participation in the program has been determined. In addition, on May 5,
1999, the Company announced its intention to sell its Petroleum Additives
business. The proceeds from this divestiture will be used to reduce short-term
debt.
It is the Company's belief that annual cash flows from operations, along with
the flexibility provided by the credit agreement, uncommitted facilities and
lines of credit will be sufficient to fund, for the foreseeable future,
operating requirements, the 1996 restructuring plan and other initiatives,
capital investments, Year 2000 expenditures, dividend payments, and commitments
on environmental remediation projects.
RESTRUCTURING CHARGES
For information regarding restructuring charges, see Note H of the Notes to
Condensed Consolidated Financial Statements.
CAPITAL INVESTMENTS AND COMMITMENTS
Capital expenditures for the first three months of 1999 amounted to $68.5
million as compared to $52.3 during the same period of 1998. Capital
expenditures during the first three months of 1999 were primarily related to the
1996 restructuring plan and other initiatives and the Company's global systems
implementation. The Company expects capital expenditures to be between $180 and
$200 million for the year.
YEAR 2000
State of Readiness
The Company is currently in the process of addressing date sensitive system
issues associated with the Year 2000. The Company's Year 2000 project is led by
the Group Vice President of Corporate Restructuring/Implementation and is
managed by an executive steering committee of key management personnel. The
Company has assigned business teams, regional and
10
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<PAGE>
location coordinators and contracted third-party vendors to carry out the
Company's Year 2000 compliance plan. The Company's Board of Directors is updated
regularly regarding the Year 2000 compliance plan and its progress. The
Company's approach to mitigating the Year 2000 issue involves the following five
phases: awareness, assessment (including an inventory of hardware, software,
process control equipment and monitoring devices for plants, safety systems and
other non-information technology systems and equipment), repair/replacement,
testing and implementation.
In connection with the Company's 1996 restructuring plan and other initiatives,
the Company began a worldwide business process redesign and implementation
project (Project EDGE). It is anticipated that the new systems implemented as
part of Project EDGE, which are Year 2000 compliant, will replace substantially
all of the Company's existing information technology (IT) business application
systems. All other IT business application systems, which are not part of
Project EDGE, and all non-IT systems and equipment (collectively non-EDGE) will
be made compliant through the efforts of internal resources and third-party
vendors. In order to assess the readiness of its EDGE and non-EDGE systems and
equipment with the Year 2000 issue, the Company has completed an inventory of
hardware, software, process control equipment and monitoring devices for plants,
safety systems and other non-IT systems and equipment. Regarding both the EDGE
and non-EDGE projects, the Company has completed the awareness phase, is over 95
percent complete with respect to the assessment phase, is 50 percent complete
with respect to the repair/replacement phase and is 30 percent complete with
respect to each of the testing and implementation phases. Completion of the
assessment phase is expected during the second quarter of 1999, with completion
of the repair/replacement, testing and implementation phases to be completed
during the third quarter of 1999, with the exception of a small percentage of
locations, including the Asia/Pacific region, where we are updating our existing
business systems, the repair/replacement, testing and implementation phases will
be completed in the fourth quarter 1999.
The Company has identified critical raw material suppliers, service providers
and major customers and has initiated communications with these third parties in
an effort to assess their plans and progress in addressing the Year 2000 issue.
The Company is 80 percent complete with respect to its evaluation of critical
raw material suppliers, service providers, and major customers. The Company has
identified approximately 100 high-impact suppliers whose failure to deliver raw
materials could cause disruption to operations and a loss of business. The
Company has obtained information from key service providers with respect to
their Year 2000 readiness and is in the process of reviewing their Year 2000
compliance status. The Company has also surveyed its major customers regarding
their Year 2000 compliance status and is in the process of reviewing the results
of these surveys. The Company will closely monitor the Year 2000 readiness of
its high-impact suppliers, key service providers and major customers throughout
1999.
Costs
The total costs associated with Project EDGE and non-EDGE systems and equipment
are expected to range from $110-$115 million (including $95-$100 million of
capital expenditures), of which $85.3 million has been incurred ($70.0 million
capitalized and $15.3 million expensed) to date. Expenditures of $7.6 million
were made during the first quarter of 1999 ($6.9 million capitalized and $.7
million expensed). Substantially all of these costs are associated with Project
EDGE. The costs associated with the third-party evaluation initiative are not
expected to be significant.
Risks and Contingency Plans
The Company has ascertained that failure to alleviate the Year 2000 issues
within its EDGE and non-EDGE projects could result in possible system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, produce
products and engage in similar normal business activities, with a corresponding
impact on the Company's results of operations. The Company is in the process of
developing contingency plans for its critical EDGE and non-EDGE activities,
which involve, among other actions, manual and/or external processing and
building inventories. The Company is 75 percent complete with respect to the
development of such contingency plans and expects to be complete during the
second quarter of 1999.
To the extent that the operations of critical raw material suppliers, service
providers, and major customers are impacted by their failure to address their
Year 2000 issues, such disruption may have a direct impact on the Company's
results of operations. Contingency plans are being developed and will include,
but will not be limited to, building inventories, switching suppliers, managing
production levels and finding alternate methods of transportation. The Company
is 75 percent complete with respect to the development of its third-party
contingency plans, with preliminary plans for raw material suppliers and service
providers already completed. Reviews and revisions of such plans will be made
throughout 1999 as circumstances warrant.
The Company is confident that the Year 2000 issues will be resolved by the
implementation of the EDGE and non-EDGE projects and the completion of the
third-party initiative. If the measures associated with the EDGE and non-EDGE
projects, as well as the efforts associated with critical raw material
suppliers, service providers, and major customers, were to fail, the contingency
plans currently being formulated will be implemented. The amount of potential
liability and lost revenue
11
<PAGE>
<PAGE>
associated with the failure to alleviate the Year
2000 issues or implement appropriate contingency plans cannot be reasonably
estimated at this time.
EURO CONVERSION
On January 1, 1999, certain member countries of the European Union adopted the
Euro as their common legal currency. Between January 1, 1999 and January 1,
2002, transactions may be conducted in either the Euro or the participating
countries national currency. However, by July 1, 2002, the participating
countries will withdraw their national currency as legal tender and complete the
conversion to the Euro.
The Company conducts business in Europe and does not expect the conversion to
the Euro to have an adverse effect on its competitive position or consolidated
financial position. The Company believes that the implementation of Project EDGE
will allow the Company to conduct business transactions in both the Euro as well
as the participating countries national currency.
The Company has determined that failure to implement systems that are able to
process both the Euro and participating countries national currency may cause
disruptions to operations including, among other things, a temporary inability
to process transactions, send invoices or engage in normal business activities.
These problems could be substantially alleviated with manual processing.
However, this would cause delays in certain normal business activities.
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, including environmental
matters, which it believes will have a material adverse effect on its
consolidated financial position or liquidity. However, the Company's results of
operations or cash flows could be materially affected in future periods by the
resolution of contingencies. See Note F of Notes to Condensed Consolidated
Financial Statements.
RESULTS OF OPERATIONS
First quarter 1999 net sales of $480.6 million were $26.8 million, or
approximately 5 percent, lower than the same quarter of 1998. The shortfall was
attributable to a decline in volume of approximately 3 percent, partially offset
by a more favorable product sales mix.
Net income for the first quarter of 1999 was $8.5 million compared to $20.4
million for the same quarter of 1998. The decline was mainly due to reduced
sales volume. An increase in operating expenses primarily attributable to higher
general and administrative expenses, including costs associated with business
process improvement initiatives, and higher research and development costs added
to the decline. Higher depreciation and net interest expenses, along with a 5
percent increase in the effective tax rate also contributed to the decrease in
net income. The higher tax rate was mainly related to the effect of
non-deductible amortization costs on reduced earnings and non-recurring tax
benefits recorded in 1998.
12
<PAGE>
<PAGE>
SEGMENT INFORMATION
Segment net sales and operating income for the first quarter of 1999 and 1998
are set forth on the following table.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(Unaudited - In Millions) 1999 1998
----------- -----------
<S> <C> <C>
Net sales
Polymer Chemicals $113.5 $124.0
OrganoSilicones 112.6 111.7
Performance Chemicals 165.0 177.6
Oleochemicals & Derivatives 89.5 94.1
----------- -----------
Net sales $480.6 $507.4
=========== ===========
Operating income
Polymer Chemicals $ 8.1 $17.8
OrganoSilicones 13.0 11.8
Performance Chemicals 13.2 20.0
Oleochemicals & Derivatives 3.8 -
Corporate and unallocated (9.9) (3.4)
----------- -----------
Operating income $28.2 $46.2
=========== ===========
</TABLE>
POLYMER CHEMICALS
Polymer Chemicals' net sales for the first quarter of 1999 declined $10.5
million, or approximately 8 percent, to $113.5 million compared to the same
period of 1998. This shortfall was primarily the result of a decline in volume
of approximately 13 percent caused by the impact of the 1998 swap of Witco's
epoxy systems and adhesives business for Ciba Specialty Chemicals' PVC heat
stabilizers business, product rationalization, weaker demand for marine
antifouling coatings in Asia and competitive pressures in North America in
selected markets. The adverse impact of these items was partially offset by a
more favorable product sales mix.
Operating income for the first quarter of 1999 declined $9.8 million to $8.1
million compared to the same quarter of 1998. This was directly attributable to
lower sales volume as well as additional costs associated with a February 1999
fire at the Company's Bergkamen, Germany facility.
ORGANOSILICONES
First quarter 1999 net sales of $112.6 million for OrganoSilicones were $.9
million, or approximately 1 percent, greater than the same period in 1998.
Shipments were up approximately 1 percent with increases reported in North
America and Asia Pacific. The adverse effect of the devaluation of the Brazilian
Real was offset by a weakening of the US dollar against most other world
currencies and a more favorable product sales mix.
First quarter 1999 operating income of $13.0 million was $1.2 million, or
approximately 10 percent, higher than the same quarter of the prior year.
Although volume improved, the increase in operating income was mainly due to
improved margins attributable to increased operating efficiencies and a more
favorable product sales mix.
PERFORMANCE CHEMICALS
Performance Chemicals' net sales of $165.0 million for the first quarter of 1999
were $12.6 million, or approximately 7 percent, less than 1998. Although volume
was flat compared to the prior year, the arrangement entered into with
Petro-Canada Lubricants in late 1998 resulted in an expansion of the paraffinic
white oil business. With continued weakness in the oil field surfactants and
polyester markets, this less favorable product mix was responsible for the
decline in net sales.
Current quarter operating income of $13.2 million, which included a $2.2 million
non-recurring gain for additional proceeds received on the 1998 disposition of
the SACI Anti-Corrosion Coatings business, represented a decrease of $6.8
million, or approximately 34 percent, compared to the prior year. The decrease
was driven by the revenue shortfall and additional costs attributable to fires
at the segment's Petrolia, Pennsylvania facility and at Petro-Canada's refinery
during the first quarter of 1999.
13
<PAGE>
<PAGE>
OLEOCHEMICALS AND DERIVATIVES
Oleochemicals and Derivatives' first quarter 1999 net sales of $89.5 million
were $4.6 million, or approximately 5 percent, lower than the same quarter of
1998. The decline was attributable principally to a volume decline of
approximately 5 percent of low margin products. Also contributing to the
decrease in net sales were lower prices related to formula sales contracts that
are based on raw material prices, which were lower in the first quarter of 1999
as compared to the same period last year.
Operating income for the first quarter of 1999 increased significantly from the
prior year's break-even quarter to $3.8 million. The increase was attributable
to a reduction in operating expenses, lower raw material costs and an improved
product mix, including increased sales of refined glycerin due to the
installation of a new glycerin still.
OUTLOOK
During 1999, the Company will take steps to implement the next phase of its
strategic plan focusing its resources on its market leadership, high growth
businesses: Polymer Chemicals, OrganoSilicones and Industrial Specialties.
Refined Products, a lower growth but market leadership business, will continue
as an important part of the Company's portfolio providing cash generation. The
Company intends to complete a transaction regarding the divestiture or other
strategic alliance of its Oleochemicals and Derivatives Group (ODG) during 1999.
The Company has received proposals for this business and is nearing the
completion of the second phase of the process. In addition , the Company plans
to divest its Petroleum Additives business during 1999. In the event that these
transactions generate proceeds, they will be used to reduce short-term debt. The
Company also intends to find strategic solutions for its remaining non-core
portfolio businesses during 1999. As a result of these actions, the Company will
become a smaller but more efficient and focused company with higher quality
earnings. As volume and revenue increase during the year and combine with the
leverage present in the cost structure, the benefits of the restructuring
efforts will begin to become visible in the Company's earnings.
In connection with these portfolio changes, the Company also plans to reduce
non-manufacturing operating expenses, including costs related to corporate
infrastructure, consistent with the restructuring of the portfolio and change in
business emphasis. As plans to achieve these reductions are better defined,
additional restructuring charges will be taken at various times during 1999 to
provide for the costs of transitioning to the new business support structure.
Although during the first quarter of 1999 the Company experienced sequential
improvement in its businesses, and conditions in certain world regions seem to
have stabilized, the Company believes 1999 will continue to be a difficult year
and remains cautious about market and economic conditions for the remainder of
the year. During 1999, the Company will complete the remaining elements of its
three year restructuring program, while continuing its efforts to grow its
business in the current environment.
Capital spending in 1998 was $281.6 million, the highest level of the three year
restructuring plan, and is now expected to be approximately $180 and $200
million during 1999. Total capital spending for the three year period ending in
1999 will exceed original estimates by approximately $63 -$83 million. This will
result in significantly higher depreciation in 1999 and future years as compared
to 1998. Total debt increased by approximately $90 million during the first
quarter of 1999 to $979.3 million. The Company expects debt to continue at
approximately this level, or be slightly higher, excluding any proceeds that may
be received as a result of the ODG and Petroleum Additives transactions
mentioned above.
CAUTIONARY STATEMENTS
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 the actual results to differ materially from those presented herein
include, without limitation, the cost and timing of the implementation of the
Company's EDGE and non-EDGE projects, the ability of the Company to implement
its EDGE and non-EDGE projects before the calendar year 2000, the timely
response to and correction by third parties, suppliers and customers to address
Year 2000 problems, the ability of the Company to assess and implement
contingency plans to its EDGE and non-EDGE projects, the Company's ability to
generate sufficient cash flows, the cost and timing of the implementation of
certain capital improvements, the cost and timing associated with the cost
savings initiatives, the Company's ability to effectively divest certain
businesses and enter into other strategic alternatives and transactions
regarding other businesses, the amount of proceeds the Company receives as a
result of any divestiture or other transaction, the ability of the Company to
commercialize new products and bring them to the market place, the ability of
the Company to improve its customer service and error free delivery rates, the
ability of the Company to implement its sales initiatives, including, realizing
cross-business group selling opportunities, account development and a process to
track new opportunities, the cost of environmental remediation and compliance
efforts, technological or competitive changes in any of the Company's
businesses, the ability to
14
<PAGE>
<PAGE>
reach agreement with third parties on planned business arrangements, the
Company's ability to maintain price increases, changes in product mix,
availability and pricing of raw material, shifts in market demand, price
and product competition, certain global and regional economic conditions
and other factors listed from time to time in the Company's other Securities
Exchange Commission filings.
15
<PAGE>
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
Refer to the Market Risk and Risk Management Polices section of Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's annual report on Form 10-K for the year ended December
31, 1998.
16
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
ITEM 1.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 March 31, 1999, the
Company was a PRP, or a defendant, in connection with 56 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 23 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 its 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 five similar actions arising out of the Company's
involvement in the polybutylene resin manufacturing business in the 1970's. Four
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; 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 or liquidity. However, the Company's operating
results or cash flows could be materially affected in future periods by the
resolution of contingencies.
17
<PAGE>
<PAGE>
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) The Company's Annual Meeting of Shareholders was held on April 28, 1999, at
the offices of the Company, One American Lane, Greenwich, Connecticut
beginning at 10:30 a.m.
(b) At the Annual Meeting, the Company's shareholders elected three directors to
serve a term expiring in 2002 as follows:
<TABLE>
<CAPTION>
Votes
-------------------------------
For Withheld
-------------- --------------
<S> <C> <C>
Don L. Blankenship 53,482,093 683,980
Harry G. Hohn 53,407,846 758,227
Dan J. Samuel 53,395,272 770,801
Bruce F. Wesson 53,492,052 674,021
</TABLE>
Directors who did not stand for election and continue in office
until the 2000 Annual Meeting are: Simeon Brinberg, William R.
Grant, Richard M. Hayden and Nicholas Pappas. Directors who did
not stand for election and continue in office until the 2001
Annual Meeting are: Bruce R. Bond, William G. Burns, E. Gary
Cook, Lousie Goeser and William Wishnick.
(c) In addition to the election of directors, at the Annual Meeting the
Company's shareholders:
(i) Ratified the appointment of Ernst & Young LLP as the Company's
independent auditors for 1999.
<TABLE>
<CAPTION>
Votes
----------------------------------------------
For Against Abstain
--------------- -------------- --------------
<S> <C> <C>
54,080,357 61,388 24,328
</TABLE>
18
<PAGE>
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10(i) Amendment No. 1 to Credit Agreement dated March 31, 1999
15 Letter re unaudited interim financial information
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three months ended
March 31, 1999.
19
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WITCO CORPORATION
(Registrant)
/s/ BRIAN J. DICK
Date: May 7, 1999 ---------------------------------
Brian J. Dick
Controller - Chief Accounting Officer
/s/ EDGAR J. SMITH, JR.
Date: May 7, 1999 ---------------------------------
Edgar J. Smith, Jr.
Vice President, General Counsel and
Corporate Secretary
20
<PAGE>
<PAGE>
WITCO CORPORATION
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
NO.
----------- -------------------------------------------------------
10(i) Amendment No. 1 to Credit Agreement dated March 31, 1999
15 Letter re unaudited interim financial information
27 Financial Data Schedule
21
<PAGE>
<PAGE>
EXHIBIT 10(i)
AMENDMENT NO. 1 TO FIVE-YEAR CREDIT AGREEMENT
AMENDMENT dated as of March 31, 1999 to the Credit Agreement dated as of
March 31, 1997 (the "Agreement") among WITCO CORPORATION (the "Company"), the
ELIGIBLE SUBSIDIARIES referred to therein, the BANKS
party hereto (the "Banks") THE CHASE MANHATTAN BANK, as
Administrative Agent, and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Documentation Agent (the "Documentation Agent").
W I T N E S S E T H :
WHEREAS, the parties hereto desire to amend the Agreement as set forth
herein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Defined Terms; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Agreement has 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, after this Amendment becomes effective, refer to the Agreement as amended
hereby.
SECTION 2. Debt. Section 5.07(a) of the Agreement is amended as Follows:
(a) the date "March 31, 1999" is changed to "December 31, 1999"; and
(b) the date "April 1, 1999" is changed to "January 1, 2000".
SECTION 3. Representations of Company. The Company represents and Warrants
that as of the date hereof and after giving effect hereto:
(a) no Default under the Agreement has occurred and is continuing; and
(b) each representation and warranty of the Company set forth in the
Agreement is true and correct.
SECTION 4. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
<PAGE>
<PAGE>
SECTION 5. 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 Documentation
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 Documentation Agent shall
have received telegraphic, telex or other written confirmation from such party
of execution of a counterpart hereof by such party).
<PAGE>
<PAGE>
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 Rutledge
-------------------------------------
Title: Vice President and Treasurer
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as a Bank and as Documentation Agent
By /s/ Robert Bottamedi
-------------------------------------
Title: Vice President
THE CHASE MANHATTAN BANK
as a Bank and as Administrative Agent
By /s/ Mary Elisabeth Swerz
-------------------------------------
Title: Vice President
ABN AMRO BANK N.V.,
NEW YORK BRANCH
By /s/ John W. Deegan
-------------------------------------
Title: Group Vice President
By /s/ Pauline McHugh
-------------------------------------
Title: Vice President
<PAGE>
<PAGE>
BANCA COMMERCIALE ITALIANA,
NEW YORK BRANCH
By /s/ Charles Dougherty
-------------------------------------
Title: Vice President
By /s/ Tiziano Gallonetto
-------------------------------------
Title: Assistant Vice President
BANK OF AMERICA NT&SA
By /s/ Wendy J. Gorman
-------------------------------------
Title: Assistant Vice President
CITIBANK, N.A.
By /s/ Frank Gerbasi
-------------------------------------
Title: Vice President
COMMERZBANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCH
By /s/ Robert Donohue
-------------------------------------
Title: Senior Vice President
By /s/ Peter Doyle
-------------------------------------
Title: Assistant Vice President
<PAGE>
<PAGE>
DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By /s/ Jean Hannigan
-------------------------------------
Title: Vice President
By /s/ Andreas Neumeier
-------------------------------------
Title: Vice President
FLEET NATIONAL BANK
By /s/ Barbara Agostini Keega
-------------------------------------
Title: Vice President
MELLON BANK, N.A.
By /s/ Mark T. Ricci
-------------------------------------
Title: Banking Officer
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH
By /s/ J. Bruce Meredith
-------------------------------------
Title: Senior Vice President
<PAGE>
<PAGE>
EXHIBIT 15
LETTER RE: UNAUDITED FINANCIAL INFORMATION
ACKNOWLEDGMENT LETTER
May 6, 1999
The Board of Directors
Witco Corporation
We are aware of the incorporation by reference in the Registration Statement
(Form S-3, No. 33-45865) and the Post-effective Amendment No. 2 to the
Registration Statement (Form S-3, No. 33-58066), each pertaining to the issuance
of debentures, the 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 debt
securities, preferred stock, and common stock, the Post-effective Amendment No.
2 to the Registration Statement (Form S-8, No. 33-10715), the Post-effective
Amendment No. 1 to the Registration Statement (Form S-8, No. 33-30995), and
Registration Statement (Form S-8, No. 33-48806), each pertaining to stock option
plans of Witco Corporation, the Registration Statement (Form S-8, No. 33-45194),
pertaining to an employee benefit plan of Witco Corporation, the Registration
Statement (Form S-8, No. 33-60755) and Registration Statement (Form S-8, No.
333-05509), each pertaining to stock option plans, the Registration Statement
(Form S-8, No. 333-33221), pertaining to the Witco Corporation 1997 Stock
Incentive Plan and the Registration Statement (Form S-8, No. 333-66033),
pertaining to an employee benefit plan, of our report dated May 6, 1999 relating
to the unaudited condensed consolidated interim financial statements of Witco
Corporation and Subsidiary Companies which is included in its Form 10-Q for the
quarter ended March 31, 1999.
Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not part of
the registration statements prepared or certified by accountants within the
meaning of Sections 7 or 11 of the Securities Act of 1933.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 32,691
<SECURITIES> 0
<RECEIVABLES> 365,305
<ALLOWANCES> 11,141
<INVENTORY> 270,006
<CURRENT-ASSETS> 716,312
<PP&E> 1,799,740
<DEPRECIATION> 814,396
<TOTAL-ASSETS> 2,396,342
<CURRENT-LIABILITIES> 742,141
<BONDS> 681,045
<COMMON> 288,308
0
6
<OTHER-SE> 340,447
<TOTAL-LIABILITY-AND-EQUITY> 2,396,342
<SALES> 480,591
<TOTAL-REVENUES> 480,591
<CGS> 364,547
<TOTAL-COSTS> 364,547
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 341
<INTEREST-EXPENSE> 12,862
<INCOME-PRETAX> 15,751
<INCOME-TAX> 7,245
<INCOME-CONTINUING> 8,506
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,506
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
