<PAGE> 1
Page 1 of 24 Pages
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
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Transition Period from to
For Quarter Ended March 31, 1994 Commission File Number 1-5112
ETHYL CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA 54-0118820
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
330 SOUTH FOURTH STREET
P. O. BOX 2189
RICHMOND, VIRGINIA 23217
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code - (804) 788-5000
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 [ ]
Number of shares of common stock, $1 par value, outstanding as of April 30,
1994: 118,421,280
<PAGE> 2
ETHYL CORPORATION
I N D E X
Page
Number
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets - March 31, 1994, and
December 31, 1993 3 - 4
Consolidated Statements of Income - Three Months
Ended March 31, 1994 and 1993 5
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1994 and 1993 6
Notes to Financial Statements 7 - 10
ITEM 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 11 - 14
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security
Holders 15
ITEM 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
EXHIBIT INDEX 17
Exhibit 10 Incentive Stock Option Plan 18 - 24
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
ETHYL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
March 31
1994 December 31
ASSETS (Unaudited) 1993
-------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,422 $ 48,201
Accounts receivable, less allowance for doubtful
accounts (1994 - $3,420; 1993 - $4,189) 208,720 345,160
Inventories:
Finished goods 130,732 219,001
Work-in-process 6,239 12,419
Raw materials 15,312 32,173
Stores, supplies and other 5,973 27,221
-------- ---------
158,256 290,814
Deferred income taxes and prepaid expenses 34,192 49,522
-------- ---------
Total current assets 408,590 733,697
-------- ---------
Property, plant and equipment, at cost 616,080 1,908,630
Less accumulated depreciation and amortization (235,757) (910,360)
-------- ---------
Net property, plant and equipment 380,323 998,270
Other assets and deferred charges 119,109 164,382
Goodwill and other intangibles - net of amortization 76,838 112,849
-------- ---------
Total assets $ 984,860 $ 2,009,198
======== =========
<FN>
See accompanying notes to financial statements.
</TABLE>
3
<PAGE> 4
<TABLE>
ETHYL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
<CAPTION>
March 31
1994 December 31
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited) 1993
--------- -----------
<S> <C> <C>
Current liabilities:
Accounts payable $ 100,170 $ 154,971
Accrued expenses 57,709 125,704
Cash dividends payable 14,805 17,764
Long-term debt, current portion 9 14,056
Income taxes payable 27,170 14,020
-------- -----------
Total current liabilities 199,863 326,515
-------- -----------
Long-term debt 345,131 686,986
Other noncurrent liabilities 60,031 99,240
Deferred income taxes 24,718 143,676
Redeemable preferred stock:
Cumulative First Preferred
($100 par value) 6% Series A 200 200
Shareholders' equity:
Common stock ($1 par value)
Issued - 118,419,466 in 1994 and
118,405,287 in 1993 118,419 118,405
Additional paid-in capital 2,593 2,450
Foreign currency translation adjustments (5,080) (1,757)
Retained earnings 238,985 633,483
-------- -----------
354,917 752,581
-------- -----------
Total liabilities and shareholders' equity $ 984,860 $ 2,009,198
========= ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
4
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<TABLE>
ETHYL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended
March 31
------------------
1994 1993
------- -------
<S> <C> <C>
Net sales $ 389,082 $ 469,828
Cost of goods sold 273,541 338,820
------- -------
Gross profit 115,541 131,008
Selling, general and administrative expenses 59,833 62,427
Research and development expenses 14,722 17,436
------- -------
Operating profit 40,986 51,145
Interest and financing expenses 8,022 11,259
Other (income), net (90) (1,421)
------- -------
Income from continuing operations before income
taxes 33,054 41,307
Income taxes 12,790 14,978
------- -------
Income from continuing operations 20,264 26,329
Income from discontinued insurance operation
(see note 6 on page 10) - 45,536
------- -------
Net income 20,264 71,865
Preferred stock dividends (3) (3)
------- -------
Net income applicable to common stock $ 20,261 $ 71,862
======= =======
Earnings per share:
Income from continuing operations $ .17 $ .22
Income from discontinued insurance operation - .39
------- -------
Net income $ .17 $ .61
======= =======
Shares used to compute earnings per share 118,462 118,428
======= =======
Cash dividends per share of common stock $ .15 $ .15
======= =======
<FN>
See accompanying notes to financial statements.
</TABLE>
5
<PAGE> 6
<TABLE>
ETHYL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
(Unaudited)
CAPTION>
Three Months Ended
March 31
--------------------
1994 1993
-------- --------
<S> <C> <C>
Cash and cash equivalents at beginning of year $ 48,201 $ 162,988
-------- --------
Cash flows from operating activities:
Net Income from continuing operations 20,264 26,329
Adjustments to reconcile income to cash flows from
operating activities:
Depreciation and amortization 23,968 31,886
Working capital increases excluding cash and cash equivalents:
Income tax payment on 1992 gain on sale of approximately
20% of First Colony Corporation - (58,036)
Other working capital increases (15,324) (45,604)
Other, net 1,595 (3,755)
-------- --------
Cash provided from (used in) continuing operating
activities 30,503 (49,180)
-------- --------
Cash flows from investing activities:
Capital expenditures (66,959) (45,065)
Acquisitions of businesses (net of $5,369 cash acquired) - (125,431)
Other, net (265) (10)
-------- --------
Cash used in investing activities of continuing
operations (67,224) (170,506)
-------- --------
Cash flows from financing activities:
Additional long-term debt 42,900 201,000
Repayment of long-term debt - (100,000)
Cash dividends paid (17,761) (17,756)
Cash and cash equivalents of Albemarle spun off as a dividend
on February 28, 1994 (29,332) -
Other, net 135 137
-------- --------
Cash (used in) provided from financing activities
of continuing operations (4,058) 83,381
-------- --------
Net cash used in continuing operations (40,779) (136,305)
Cash provided by discontinued insurance operation) - 2,574
-------- --------
Decrease in cash and cash equivalents (40,779) (133,731)
-------- --------
Cash and cash equivalents at end of period $ 7,422 $ 29,257
======== ========
<FN>
See accompanying notes to financial statements.
</TABLE>
6
<PAGE> 7
ETHYL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(In Thousands Except Per-Share Amounts)
(Unaudited)
1. In the opinion of management, the accompanying consolidated financial
statements of Ethyl Corporation and Subsidiaries (the "Company") contain
all adjustments necessary to present fairly, in all material respects, the
Company's consolidated financial position as of March 31, 1994, and the
consolidated results of operations and cash flows for the three-month
periods ended March 31, 1994 and 1993. All adjustments are of a normal,
recurring nature. These financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in
the December 31, 1993 Annual Report. The year-end consolidated balance
sheet data was derived from audited financial statements but does not
include all disclosures required by generally accepted accounting
principles. The results of operations for the three-month period ended
March 31, 1994 are not necessarily indicative of the results to be
expected for the full year.
2. At the close of business on February 28, 1994, the Company completed the
distribution to its common shareholders of all of the outstanding shares
of its wholly owned subsidiary Albemarle Corporation ("Albemarle"), a
Virginia corporation. Following the distribution, Albemarle owned,
directly or indirectly, the olefins and derivatives, bromine chemicals and
specialty chemical businesses formerly owned directly or indirectly by the
Company. The distribution was made in the form of a tax-free spin-off to
shareholders of record at the close of business on February 28, 1994. One
share of Albemarle common stock was distributed to Ethyl common share-
holders for every two shares of Ethyl common stock held. Under U.S.
federal tax rules, on the record date, 65.0081% of basis should be
allocated to common stock of the Company and 34.9919% should be allocated
to common stock of Albemarle. Fractional share equivalents, which may be
taxable to the recipients, were purchased by Albemarle, and shareholders
received $6.60 if they were entitled to one-half of a share.
The spin-off required an adjustment of the number of shares of Cumulative
Second Preferred Stock, Series B, for which Rights under the Rights
Agreement dated September 24, 1987, between the Company and Harris Trust
and Savings Bank may become exercisable. As a result of the required
adjustment, in the event the Rights become exercisable under the terms of
the Rights Agreement, each Right would be exercisable for 2.522 one-
thousandths of a share of Series B stock.
The operating results of the predecessor businesses to what is now
Albemarle are included in the consolidated statements of income and the
condensed consolidated statements of cash flows for the two months in 1994
(prior to the spin-off) and three months in 1993.
The March 31, 1994 consolidated balance sheet reflects the impact of the
$399,957 reduction in retained earnings and a $4,143 reduction in the
foreign currency translation adjustment in connection with the distribu-
tion of the Albemarle stock. The following non-cash supplemental informa-
tion is provided regarding the accounts of Albemarle spun off as a stock
dividend, which aggregated $404,100 (including cash and cash equivalents
of $29,332) on February 28, 1994:
7
<PAGE> 8
<TABLE>
<CAPTION>
2. Continued
<S> <C>
Working capital, net of cash and cash equivalents $ 174,847
Net property, plant and equipment 663,505
Other assets and deferred charges 49,480
Goodwill and other intangibles 33,132
Long-term debt (384,924)
Other non-current liabilities (40,996)
Deferred income taxes (120,276)
--------
Non-cash portion of businesses spun off $ 374,768
========
</TABLE>
3. Previously reported financial statements for 1993 have been reclassified
to conform to the current presentation.
4. On February 16, 1994, the Company entered into a new, five-year, $1-billion
unsecured credit facility to replace its existing $700-million credit
agreement. The credit facility was automatically split into two separate
$500-million facilities upon the spin-off of Albemarle. Fees of up to
3/8 of 1% per annum are assessed on the unused portion of the commitment.
The credit facility permits borrowing for the next five years at various
interest rate options. The facility contains a number of covenants,
representations and events of default typical of a credit facility agree-
ment of this size and nature, including financial covenants requiring the
Company to maintain consolidated indebtedness (as defined) of not more
than 60% of the sum of shareholders' equity and consolidated indebtedness
(both as defined) and maintenance of minimum shareholders' equity after the
spin-off of at least $250 million.
<TABLE>
Long-term debt consists of the following:
<CAPTION>
March 31 December 31
1994 1993
-------- ---------
<S> <C> <C>
Variable rate bank loans (average effective
rates were 3.8% for the three-month period
ended March 31, 1994 and 3.6% for the
year 1993) $ 112,500 $ 373,000
9.8% Notes due 1998 200,000 200,000
Foreign bank borrowing (3.3 billion Belgian
Francs, Effective rate 6.96%) due through
2000 - 92,116
8.6% to 8.86% Medium-Term Notes due through
2001 33,750 33,750
Other 30 3,368
-------- --------
Total long-term debt 346,280 702,234
Less unamortized discount (1,140) (1,192)
-------- --------
Net long-term debt 345,140 701,042
Less current portion (9) (14,056)
-------- --------
$ 345,131 $ 686,986
======== ========
<FN>
$303,400 of variable rate bank debt was transferred to Albemarle, as well
as all foreign bank borrowing, which amounted to $81,524.
</TABLE>
8
<PAGE> 9
ETHYL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(In Thousands Except Per-Share Amounts)
(Unaudited)
5. The Company is providing the following pro forma information to enable the
reader to obtain a meaningful understanding of the Company's results of
operations. The pro forma condensed statements of income presented are for
informational purposes only to illustrate the estimated effects of the
distribution as if it had occurred on January 1, 1993.
<TABLE>
Condensed Statements of Income
(In thousands except earnings per share)
<CAPTION>
1994 1993
------------------------------------------- ---------------------------------------
First Quarter Ended March 31 Historical Adjustments(i) Pro Forma Historical Adjustments(i) Pro Forma
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 389,082 $ (155,064) $ 234,018 $ 469,828 $ (215,877) $ 253,951
Cost of goods sold 273,541 (119,086) 154,455 338,820 (171,850) 166,970
-------- --------- -------- -------- --------- --------
Gross profit 115,541 (35,978) 79,563 131,008 (44,027) 86,981
Selling, general and administrative
expenses 59,833 ( 19,046) 40,787 62,427 (22,377) 40,050
Research and development expenses 14,722 (4,087) 10,635 17,436 (7,472) 9,964
-------- --------- -------- -------- --------- --------
Operating profit 40,986 (12,845) 28,141 51,145 (14,178) 36,967
Interest and financing expenses 8,022 (2,873) (ii) 5,149 11,259 (4,148) (ii) 7,111
Other (income) expense, net (90) 543 453 (1,421) 54 (1,367)
-------- --------- -------- -------- --------- --------
Income from continuing operations
before income taxes 33,054 (10,515) 22,539 41,307 (10,084) 31,223
Income taxes 12,790 (4,239) (iii) 8,551 14,978 (4,770) (iii) 10,208
-------- --------- -------- -------- ---------- --------
Income from continuing operations $ 20,264 $ (6,276) $ 13,988 $ 26,329 $ (5,314) $ 21,015
======== ======== ======== ======== ========= ========
Earnings per share based on income
from continuing operations $ .17 (iv) $ .12 (iv)$ .22 (iv) $ .18(iv)
======== ======== ======== ========
<FN>
Introduction to Notes: Notes (i), (ii) and (iii) reflect a summary of the
adjustments in the pro-forma condensed statements of income.
Notes:
(i) To eliminate the historical income and expenses of Albemarle for the
respective periods presented, as if the distribution had occurred on
January 1, 1993.
(ii) To eliminate interest expense that would have been incurred by
Albemarle on debt transferred to Albemarle (as if the distribution
had occurred on January 1, 1993), including debt under the credit
facility transferred from Ethyl. Interest eliminated was computed at
the weighted-average interest rates of 3.8% and 3.6%, for the two
months ended February 28, 1994 and the first quarter ended March 31,
1993 respectively, less capitalized interest. The interest rates used
were the rates available for both periods to Ethyl under its revolving
credit agreement. Management was advised that the rates to Albemarle
and Ethyl on a stand-alone basis would have been approximately the
same.
(iii) Includes the estimated income tax effects of the pro forma adjustments
described in Note (ii) at assumed combined state and federal income tax
rates of 37.9% and 37.0% for the two months ended February 28, 1994 and
three months ended March 31, 1993, respectively.
(iv) Historical and pro forma earnings per share, based on income from
continuing operations is computed after deducting applicable preferred
stock dividends from such income and using the weighted-average number
of shares of common stock and common stock equivalents outstanding for
the periods presented.
</TABLE>
9
<PAGE> 10
ETHYL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(In Thousands Except Per-Share Amounts)
(Unaudited)
6. The 1993 financial statements reflect the Company's then approximately
80-percent interest in First Colony Corporation stock, which was spun-off
on July 1, 1993. Accordingly, the results of First Colony Corporation
prior to the spin-off are reported in the financial statements as a dis-
continued insurance operation. This noncash transaction is not reflected
in the 1993 Condensed Consolidated Statement of Cash Flows.
<TABLE>
Income from discontinued insurance operation included in the accompanying
Consolidated Statements of Income consists of the following:
<CAPTION>
First Quarter
1993
-------------
<S> <C>
Revenues $ 359,201
Benefits and expenses 271,148
Interest and financing expenses 2,680
--------
Income before income taxes 85,373
Income taxes 28,683
--------
Net income 56,690
Less provision for minority interest 11,154
--------
Income from discontinued insurance
operation $ 45,536
========
</TABLE>
7. On February 8, 1993, the Company completed the acquisition of Potasse
et Produits Chimiques (PPC) from Rhone-Poulenc S.A., the Paris-based
multinational chemical and pharmaceutical company. The transaction
was financed with additional long-term debt of $122 million under the
Company's revolving credit agreement.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following is management's discussion and analysis of certain
significant factors affecting the Company's results of operations during the
periods included in the accompanying consolidated statements of income and
changes in the Company's financial condition since year-end 1993.
On February 28, 1994, the Company completed the tax-free spin-off of its
wholly-owned subsidiary, Albemarle Corporation (Albemarle). Consequently,
Albemarle's results of operations are included in the Consolidated Statements
of Income and the Condensed Consolidated Statements of Cash Flows for two
months of 1994 versus three months of 1993.
Therefore, pro forma condensed statements of income are provided for the
periods ended March 31, 1994 and 1993 in Note 5 of Notes to Financial
Statements for informational purposes to illustrate the estimated effects of
the distribution of Albemarle stock assuming the distribution had occurred as
of January 1, 1993, which includes interest charges resulting from an assumed
debt structure. The pro forma information presented is not necessarily
indicative of the future results of operations of the Company or what the
results of operations would have been had Albemarle operated as a separate
independent company during the periods presented.
On July 1, 1993, the Company completed the spin-off of its approximately
80% interest in First Colony Corporation (First Colony), which included the
operations of First Colony Life Insurance Company and subsidiaries.
Consequently, the results of operations of First Colony are reported in the
financial statements as income from discontinued operations.
Results of Operations
First Quarter 1994 Compared with First Quarter 1993
Total net sales for the first quarter of 1994 amounted to $389.1 million,
down 17% from $469.8 million in 1993. The reduction in aggregate net sales
was primarily because of the inclusion of two months of Albemarle sales in
1994 versus three months in 1993.
On a pro forma basis, assuming the distribution occurred on January 1,
1993, net sales for the first quarter of 1994 of $234 million decreased eight
percent from first quarter of 1993 sales of $254 million. The decrease was
due to lower shipments, primarily in lubricant additives and lead antiknocks,
partly offset by slightly higher selling prices. Shipments and selling
prices of other fuel additives were lower, while shipments and prices of
pharmaceutical products were higher. The shipments of lead antiknocks, while
lower in the first quarter, are expected to pick up in the second quarter
reflecting normal fluctuations in shipping schedules.
11
<PAGE> 12
Cost of goods sold in 1994 decreased 19% from the 1993 period. The
decline in aggregate cost of goods sold occurred primarily because of the
inclusion of two months of Albemarle costs of goods sold in 1994 versus three
months in 1993.
On a pro forma basis, assuming the distribution occurred on January 1,
1993, cost of goods sold was $154.5 million in 1994, down 7% from $167.0
million in the 1993 quarter. The decrease was due mainly to lower shipments.
The net result of an 8% percent decrease in net sales and a 7% decrease in
cost of goods sold was that the gross profit margin decreased slightly to
34.0% in the 1994 quarter from 34.3% in the 1993 quarter.
Selling, general and administrative expenses, combined with research and
development expenses, amounted to $74.6 million in the first quarter of 1994,
a decrease of 7% from $79.9 million in the 1993 period. The reduction in
aggregate expenses occurred, primarily because of the inclusion of two months
of Albemarle expenses in 1994 versus three months in 1993.
On a pro forma basis, assuming the distribution occurred on January 1,
1993, expenses were $51.4 million in the 1994 quarter, up 3% from $50.0
million in the 1993 quarter. The increase primarily consists of higher
research and development expenses and higher employee-related expenses
partially offset by the effect of the work-force-reduction program implemented
at the end of 1993 and discontinuing the pharmaceutical research operations of
Whitby Research, Inc. As a percentage of net sales, selling, general and
administrative expenses, including research and development expenses, increased
to 22.0% in 1994 from 19.7% in the 1993 period.
Operating profit in 1994 decreased 20% from the 1993 period, but included
two months operating profit of Albemarle ($12.8 million) in first quarter 1994
compared with three months operating profit of Albemarle ($14.2 million) in
first quarter 1993. The 1994 profit reflected a higher level of monthly ship-
ments by Albemarle of poly alpha olefins, linear alpha olefins and flame
retardants and related improvements in profit margins, partly offset by lower
petroleum additives shipments, as discussed in the following paragraph.
On a pro forma basis, assuming the distribution had occurred on January
1, 1993, operating profit in the 1994 period decreased 24% from the 1993
period. Most of the decrease came from lower shipments of lead antiknocks
due to the timing of scheduled shipments as well as lower shipments of
lubricant additives and fuel additives, other than antiknocks. This was
slightly offset by a higher pharmaceuticals profit reflecting the shutdown of
Whitby Research, Inc.
Interest expense in 1994 decreased 29% from the 1993 period. The reduc-
tion in aggregate interest expense occurred primarily because of the inclusion
of two months' interest for Albemarle debt in 1994 versus three months in 1993,
as well as a lower average interest rate in 1994 versus 1993 and a higher
amount of interest capitalized in 1994. On a pro forma basis, assuming the
12
<PAGE> 13
distribution occurred on January 1, 1993, interest is $2.0 million lower
(28%) due to a lower average interest rate in 1994 and a higher amount of
interest capitalized in 1994 partially offset by a higher amount of debt
outstanding during the 1994 period.
Other income, net, decreased to $0.1 million in 1994 from $1.4 million
in 1993. On a pro forma basis, other income in 1994 decreased by $1.8 million
to a net expense of $0.4 million, primarily reflecting less interest income
on lower amounts invested in short-term securities and other assets in the
1994 period.
Income Taxes
Income taxes in the 1994 period decreased 15% compared to the 1993 period,
due to a 20% decrease in pretax income from continuing operations partially
offset by a higher 1994 effective tax rate (38.7% in 1994 versus 36.3% in
1993).
On a pro forma basis assuming the distribution occurred on January 1,
1993, income taxes decreased 16%, due to a 28% reduction in pretax income from
continuing operations partially offset by a higher effective income tax rate
(37.9% in the 1994 period versus 32.7% in the 1993 period). The higher 1994
tax rate was partially due to higher federal income tax rates in 1994 and
other changes resulting from the 1993 federal income tax legislation which
had not become effective in first quarter 1993.
Discontinued Operation - Insurance
The Company spun-off its 80% interest in First Colony on July 1, 1993,
and accordingly no income from the insurance operation was reported in the
1994 first quarter whereas $45.6 million was reported in the first quarter
1993.
Financial Condition and Liquidity
Cash and cash equivalents at March 31, 1994, were about $7.4 million
which represents a decrease of about $40.8 million from $48.2 million at year-
end 1993. The decline primarily reflects the spin-off of Albemarle at
February 28, 1994, which had $29.3 million in cash and cash equivalents on
that date.
Cash flows were more than sufficient to cover operating activities in the
first quarter of 1994, including a working capital increase of $15.3 million,
excluding the effects of the spin-off.
Cash flows from operating activities of $30.5 million, together with
$42.9 million in additional long-term debt and $48.2 million of cash on hand
at the beginning of the year, were sufficient to cover capital expenditures of
$67.0 million, cash dividends to shareholders of $17.8 million and a reduction
of $29.3 million in cash and cash equivalents as part of the spin-off of
Albemarle on February 28, 1994. Management anticipates that cash provided
from operations in the future will be sufficient to cover the Company's
13
<PAGE> 14
operating expenses, service debt obligations, and make dividend payments to
shareholders.
The non-current portion of the Company's long-term debt amounted to
$345.1 million at March 31, 1994, compared to $687 million at the end of 1993.
The decrease reflects $384.9 million transferred in connection with the
spin-off of Albemarle Corporation, partially offset by $42.9 million of
additional borrowing by Ethyl. The long-term debt to total capitalization
ratio was 49.3% on March 31, 1994, after the spin-off of Albemarle versus
47.7% at December 31, 1993, prior to the spin-off of Albemarle.
The Company's capital expenditures in 1994 are expected to be less than
in 1993 as a result of the spin-off of Albemarle. The capital spending will be
financed primarily with additional long-term debt. The amount and timing of
additional borrowing will depend on the Company's specific cash requirements.
Recent Developments
As reported earlier, the U.S. Environmental Protection Agency (EPA)
determined last November 30 that emissions data contained in Ethyl's
fuel-additive waiver application for HiTEC 3000 performance additive (MMT)
satisfy all Clean Air Act standards for approval. However, the EPA was not
able to complete its assessment of the overall public health implications
of manganese. As a result, Ethyl and the EPA mutually agreed to an extension
of 180 days for the EPA to resolve this last remaining issue. The EPA is
expected to rule on Ethyl's waiver application by May 27, 1994.
14
<PAGE> 15
<TABLE>
Part II Other Information
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders held on April 28, 1994, the
shareholders elected the directors nominated in the Proxy with the
following affirmative votes and votes withheld:
<CAPTION>
Director Affirmative Votes Votes Withheld
<S> <C> <C>
Lloyd B. Andrew 102,400,077 1,396,056
William W. Berry 102,400,087 1,396,046
Allen C. Goolsby 102,388,571 1,407,562
Bruce C. Gottwald 102,404,201 1,391,932
Bruce C. Gottwald, Jr. 102,399,518 1,396,615
Floyd D. Gottwald, Jr. 102,397,444 1,398,689
Thomas E. Gottwald 102,382,143 1,413,990
William M. Gottwald 102,379,253 1,416,879
Gilbert M. Grosvenor 102,400,840 1,395,293
Andre B. Lacy 102,408,456 1,387,677
Emmett J. Rice 102,359,685 1,436,448
Sidney Buford Scott 102,406,986 1,389,147
Charles B. Walker 102,339,407 1,456,725
</TABLE>
The shareholders also approved the selection of Coopers & Lybrand as the
Company's auditors with 100,099,956 affirmative votes, 186,869 votes
against and 210,215 abstentions.
Shareholders also approved an amendment to the Ethyl Incentive Stock
Option Plan to increase the number of shares of Common Stock that may be
issued pursuant to the plan by 5,900,000 shares and to establish an
annual limit of 200,000 shares for which options and stock appreciation
rights may be granted to an individual. This amendment received
91,530,180 affirmative votes and 10,884,899 negative votes, with 807,080
abstentions.
Item 6. Exhibit and Reports on Form 8-K
(a) Exhibit 10. Incentive Stock Option Plan of the Registrant,
as amended on April 28, 1994.
(b) A Form 8-K was filed on February 25, 1994, which included pro forma
condensed balance sheet as of December 31, 1993, and pro forma
condensed statements of income for periods ending December 31, 1992,
and September 30, 1993, reflecting the spin-off of Albemarle which
was completed after the close of business on February 28, 1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ETHYL CORPORATION
(Registrant)
Date: May 12, 1994 By: s/ C. B. Walker
Vice Chairman,
Chief Financial Officer
and Treasurer
(Principal Financial Officer)
Date: May 12, 1994 By: s/ David A. Fiorenza
Vice President,
Finance and Controller
(Principal Accounting Officer)
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EXHIBIT INDEX
Page
Number and Name of Exhibit Number
- - -------------------------- ------
Exhibit 10. Incentive Stock option Plan of the Registrant,
as amended on April 28, 1994 18 - 24
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<PAGE> 18
EXHIBIT 10
ETHYL CORPORATION
INCENTIVE STOCK OPTION PLAN
(as amended through April 28, 1994)
Article I
DEFINITIONS
1.01 Affiliate means any Subsidiary or "parent corporation" (within the
meaning of Section 422A of the Code) of the Company.
1.02 Agreement means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the
terms and conditions of an Option or SAR granted to such Participant.
1.03 Board means the Board of Directors of the Company.
1.04 Code means the Internal Revenue Code of 1954, as amended.
1.05 Committee means a committee, consisting of not less than three
members of the Board, appointed by the Board to administer the Plan. No
member of the Committee shall be eligible to participate in the Plan.
1.06 Common Stock means the common stock of the Company.
1.07 Company means Ethyl Corporation.
1.08 Fair Market Value means, on any given date, the closing price of a
share of Common Stock as reported on the New York Stock Exchange composite
tape on such day or, if the Common Stock was not traded on the New York Stock
Exchange on such day, then on the next preceding day that the Common Stock
was traded on such exchange, all as reported by such source as the Committee
may select. If shares of Common Stock are not then traded on the New York
Stock Exchange, the Fair Market Value shall be determined by the Committee
using any reasonable method in good faith.
1.09 Option means a stock option that entitles the holder to purchase
from the Company a stated number of shares of Common Stock at the price set
forth in an Agreement.
1.10 Participant means an employee of the Company or of a Subsidiary,
including an employee who is a member of the Board, who satisfies the
requirements of Article IV and is selected by the Committee to receive an
Option.
1.11 Plan means the Ethyl Corporation Incentive Stock Option Plan.
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1.12 SAR means a stock appreciation right (which may be granted only in
conjunction with an Option) that entitles the holder to receive, with respect
to each share of Common Stock encompassed by the exercise of such SAR, the
lesser of (a) the excess of the Fair Market Value at the time of exercise
over the option price of the related Option or (b) the Fair Market Value on
the date of grant. Such payment shall be made in Common Stock or in cash and
Common Stock as determined by the Committee in accordance with Section 8.03.
1.13 Subsidiary means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if each of the corporations
in the chain (other than the last corporation) owns stock possessing at least
50 percent of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
Article II
PURPOSES
This Plan is intended to assist the Company in recruiting and retaining key
employees with ability and initiative by enabling employees who contribute
significantly to the Company to participate in its future success and to
associate their interests with those of the Company. It is further intended
that Options granted under this Plan (unless otherwise designated by their
terms) shall constitute "incentive stock options" within the meaning of
Section 422A of the Code. No Option shall be invalid for failure to qualify
as an incentive stock option. The proceeds received by the Company from the
sale of Common Stock pursuant to this Plan shall be used for general corporate
purposes.
Article III
ADMINISTRATION
This Plan shall be administered by the Committee. The Committee shall
have authority to grant Options and SARs upon such terms (not inconsistent
with the provisions of this Plan) as the Committee may consider appropriate.
Such terms may include conditions (in addition to those contained in this Plan)
on the exercisability of all or any part of an Option or SAR. Notwithstanding
any such conditions, the Committee may, in its discretion, accelerate the time
at which any Option or SAR may be exercised; provided, however, that such
acceleration shall not affect the applicability of Section 7.04 (relating to
the order in which incentive stock options and related SARs may be exercised).
In addition, the Committee shall have complete authority to interpret all
provisions of this Plan; to prescribe the form of Agreements; to adopt, amend,
and rescind rules and regulations pertaining to the administration of this
Plan; and to make all other determinations necessary or advisable for the
administration of this Plan. The express grant in this Plan of any specific
power to the Committee shall not be construed as limiting any power or
authority of the Committee. Any decision made, or action taken, by the
Committee in or in connection with the administration of this Plan shall be
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final and conclusive. No member of the Committee shall be liable for any act
done in good faith with respect to this Plan or any Agreement, Option, or
SAR. All expenses of administering this Plan shall be borne by the Company.
Article IV
ELIGIBILITY
4.01 General. Any employee of the Company or of any Subsidiary (including
any corporation that becomes a Subsidiary after the adoption of this Plan)
who, in the judgment of the Committee, has contributed or can be expected to
contribute to the profits or growth of the Company or a Subsidiary may be
granted one or more Options and SARs. Directors of the Company who are
employees and are not members of the Committee are eligible to participate in
this Plan.
4.02 Grants. The Committee will designate employees to whom Options and
SARs are to be granted and will specify the number of shares of Common Stock
subject to each grant. An Option may be granted with or without a related
SAR. An SAR may be granted only in conjunction with an Option and for a
number of shares not exceeding the number of shares subject to the related
Option. All Options and SARs granted under this Plan shall be evidenced by
Agreements which shall be subject to applicable provisions of this Plan and
to such other provisions as the Committee may adopt.
No Participant may be granted incentive stock options (under all incentive
stock option plans of the Company and Affiliates) in any calendar year for
stock having an aggregate fair market value (determined as of the date an
option is granted) exceeding $100,000 plus any unused limit carryover (as
defined in Subsection 422A(c)(4) of the Code) to such year. The preceding
annual limitation shall not apply with respect to Options that are not
incentive stock options.
After April 28, 1994, no Participant may be granted Options and SARS in any
calendar year for more than 200,000 shares of Common Stock. For purposes of
this limitation, an Option and related SAR are treated as a single award.
Article V
STOCK SUBJECT TO OPTIONS OR SARS
Upon the exercise of any Option or SAR, the Company may deliver to the
Participant authorized but unissued stock, treasury stock, or any combination
thereof. The maximum aggregate number of shares of Common Stock that may be
issued pursuant to Options and SARs granted under this Plan is 11,900,000
subject to adjustment as provided by Article IX.
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If an Option is terminated, in whole or in part, for any reason other than its
exercise or the exercise of a related SAR, the number of shares of Common
Stock allocated to the Option or portion thereof may be reallocated to other
Options to be granted under this Plan. If an SAR is terminated, in whole or
in part, for any reason other than its exercise or the exercise of a related
Option, the number of shares of Common Stock allocated to the SAR or portion
thereof may be reallocated to other SARS to be granted under this Plan.
Article VI
OPTION PRICE
The price per share for Common Stock purchased on the exercise of any Option
granted under this Plan shall be not less than the Fair Market Value on the
date the Option is granted.
Article VII
EXERCISE OF OPTIONS AND SARS
7.01 Maximum Option or SAR Period. No Option or related SAR shall be
exercisable after the expiration of 10 years from the date the Option was
granted. The terms of any Option or SAR may provide that it is exercisable
for a period less than such maximum period.
7.02 Nontransferability. Any Option or SAR granted under this Plan shall be
nontransferable except by will or by the laws of descent and distribution. In
the event of any such transfer, the Option and related SAR must be transferred
to the same person(s). During the lifetime of the Participant to whom the
Option is granted, the Option or SAR may be exercised only by the Participant.
No right or interest of a Participant in any Option or SAR shall be liable for,
or subject to, any lien, obligation, or liability of such Participant.
7.03 Employee Status. For purposes of determining the applicability of
Section 422A of the Code (relating to incentive stock options), or in the
event that the terms of any Option provide that it may be exercised only
during employment or within a specified period of time after termination of
employment, the Committee may decide in each case to what extent leaves of
absence for governmental or military service, illness, temporary disability,
or other reasons shall not be deemed interruptions of continuous employment.
7.04 Nonexercisability While Previously Granted Option Outstanding. No
Option which is an incentive stock option or related SAR shall be exercisable
by a Participant while that Participant has outstanding (within the meaning of
Subsection 422A(c)(7) of the Code) any option which was granted before the
Option was granted and that is an incentive stock option to purchase stock in
the Company, in a corporation that (at the time the Option was granted) is an
Affiliate, or in a predecessor of any of such corporations.
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<PAGE>22
Article VIII
METHOD OF EXERCISE
8.01 Exercise. Subject to the provisions of Articles VII and X, an Option
or SAR may be exercised in whole at any time or in part from time to time at
such times and in compliance with such requirements as the Committee shall
determine; provided, however, that an SAR may be exercised only to the extent
the related Option is exercisable and when the Fair Market Value exceeds the
option price of the related Option. An Option or SAR granted under this Plan
may be exercised with respect to any number of whole shares less than the full
number for which the Option or SAR could be exercised. Such partial exercise
of an Option or SAR shall not affect the right to exercise the Option or SAR
from time to time in accordance with this Plan with respect to the remaining
shares subject to the Option or related to the SAR. The exercise of either
an Option or SAR shall result in the termination of the other to the extent of
the number of shares with respect to which the Option or SAR is exercised.
8.02 Payment. Unless otherwise provided by the Agreement or permitted
by the Committee, payment of the Option price shall be made in cash or such
cash equivalent as shall be acceptable to the Committee. If the Agreement
provides or the Committee permits, payment of all or a part of the Option
price may be made by surrendering shares of Common Stock to the Company. If
Common Stock is used to pay all or part of the Option price, the shares
surrendered must have a fair market value (determined by the Committee using
any reasonable method in good faith) that is not less than such price or part
thereof.
8.03 Determination of Payment of Cash and/or Common Stock Upon Exercise of
SAR. If the Agreement provides or the Committee so determines, up to one-half
of the amount payable as a result of the exercise of an SAR may be settled by
the payment of cash and the remainder by the issuance of Common Stock having
an aggregate Fair Market Value equal thereto. In the absence of such
provision or determination, a Participant exercising an SAR shall be entitled
to receive Common Stock equal in aggregate Fair Market Value to the amount
payable as a result of the exercise of an SAR.
8.04 Shareholder Rights. No Participant shall, as a result of receiving
any Option or SAR, have any rights as a shareholder until the date he
exercises such Option or SAR.
Article IX
ADJUSTMENT UPON CHANGE IN COMMON STOCK
Should the Company effect one or more stock dividends, stock split-ups,
subdivisions or consolidations of shares or other similar changes in
capitalization, then the maximum number of shares as to which Options and SARs
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<PAGE> 23
may be granted under this Plan shall be proportionately adjusted and the terms
of Options and SARs shall be adjusted as the Committee shall determine to be
equitably required. Any determination made under this Article IX by the
Committee shall be final and conclusive.
The issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services, either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, Options or
SARs.
Article X
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Option or SAR shall be exercisable, no Common Stock shall be issued,
no certificate for shares of Common Stock shall be delivered, and no payment
shall be made under this Plan except in compliance with all applicable federal
and state laws and regulations (including, without limitation, withholding tax
requirements) and the rules of all domestic stock exchanges on which the
Company's shares may be listed. The Company shall have the right to rely on
an opinion of its counsel as to such compliance. Any share certificate issued
to evidence Common Stock for which an Option or SAR is exercised may bear such
legends and statements as the Committee may deem advisable to assure
compliance with federal and state laws and regulations. No Option or SAR
shall be exercisable, no Common Stock shall be issued, no certificate for
shares shall be delivered, and no payment shall be made under this Plan until
the Company has obtained such consent or approval as the Committee may
deem advisable from regulatory bodies having jurisdiction over such matters.
Article XI
GENERAL PROVISIONS
11.01 Effect on Employment. Neither the adoption of this Plan, its
operation, nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any employee any right to continue in the employ of
the Company or a Subsidiary or in any way affect any right and power of the
Company or a Subsidiary to terminate the employment of any employee at any
time with or without assigning a reason therefor.
11.02 Unfunded Plan. This Plan, insofar as it provides for grants, shall
be unfunded, and the Company shall not be required to segregate any assets
that may at any time be represented by grants under the Plan. Any liability
of the Company to any person with respect to any grant under this Plan shall
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be based solely upon any contractual obligations which may be created pursuant
to this Plan. No such obligation of the Company shall be deemed to be secured
by any pledge of, or other encumbrance on, any property of the Company.
11.03 Rules of Construction. Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
Article XII
AMENDMENT
The Board may amend or terminate this Plan from time to time; provided,
however, that no amendment may become effective until shareholder approval
is obtained if (i) the amendment increases the aggregate number of shares that
may be issued pursuant to Options and SARs, (ii) the amendment reduces the
option price, or (iii) the amendment changes the class of employees eligible to
become Participants. No amendment shall, without a Participant's consent,
adversely affect any rights of such Participant under any Option or SAR
outstanding at the time such amendment is made.
Article XIII
DURATION OF PLAN
No Option or SAR may be granted under this Plan after February 26, 2002.
Options and SARs granted before that date shall remain valid in accordance
with their terms.
Article XIV
EFFECTIVE DATE OF PLAN
Options and SARs may be granted under this Plan upon its adoption by the
Board, provided that no Option or SAR will be effective unless this Plan is
approved (at a duly held shareholders' meeting) by shareholders holding a
majority of the Company's outstanding voting stock within twelve months of
such adoption.
24
