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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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 (Zip Code)
executive offices)
Registrant's telephone number, including area code: 804-788-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
COMMON STOCK, $1 Par NEW YORK STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
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 at least the past 90 days.
Yes X No
Aggregate market value of voting stock held by non-affiliates of the registrant
as of December 31, 1994: $ 937,696,596.38.*
Number of shares of Common Stock outstanding as of December 31, 1994:
118,434,401.
* In determining this figure, an aggregate of 21,011,378 shares of
Common Stock reported in the registrant's Proxy Statement for the 1995
Annual Meeting of Shareholders as beneficially owned by Floyd D.
Gottwald, Jr., Bruce C. Gottwald, and the members of their immediate
families have been excluded because the shares are held by affiliates.
See Item 12 herein. The aggregate market value has been computed on the
basis of the closing price in the New York Stock Exchange Composite
Transactions on December 31, 1994, as reported by The Wall Street
Journal.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Ethyl Corporation's Annual Report to Shareholders for the year
ended December 31, 1994 (the "Annual Report"), are incorporated by
reference into Parts I, II and IV of this Form 10-K.
2. Portions of Ethyl Corporation's definitive Proxy Statement for its 1995
Annual Meeting of Shareholders to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A under the Securities Exchange Act of
1934 (the "Proxy Statement") are incorporated by reference into Part III of
this Form 10-K.
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PART I
Item 1. BUSINESS
DESCRIPTION OF BUSINESS
Ethyl Corporation (the "Company") is incorporated in Virginia and is a
major manufacturer and blender of petroleum additives. Petroleum
additives products include additives for gasoline, diesel fuels, and home
heating oils, as well as additives for passenger-car and diesel crankcase
lubricants including railroad engine oil additives, automatic transmission
fluids and lubricants for gears, hydraulic and industrial equipment.
During 1994 and 1993, the Company completed certain actions in
positioning itself as a highly focused maker and marketer of petroleum
additives to customers around the world. On September 15, 1994, the
Company sold its wholly owned pharmaceuticals subsidiary, Whitby, Inc.,
which markets and distributes finished pharmaceuticals. Earlier in the
year, the Company completed the tax-free spin-off of its wholly owned
subsidiary, Albemarle Corporation (Albemarle), at the close of business on
February 28, 1994, which included the operations of the olefins and
derivatives, bromine chemicals and specialty chemicals businesses. The
results of both the pharmaceuticals subsidiary and Albemarle are included
in the consolidated financial statements in Ethyl's annual report through
those dates.
The Company also completed the tax-free spin-off of its approximately
80% interest in First Colony Corporation (First Colony) on July 1, 1993,
which includes the operations of First Colony Life Insurance Company and
subsidiaries, which engage primarily in writing life insurance and
annuities.
The completion of these transactions places the Company solely in the
petroleum additives business with approximately 1,500 employees.
The following discussion of the Company's businesses as of December 31,
1994, should be read in conjunction with the information contained in the
"1994 Financial Review" section of Ethyl's Annual Report as of December 31,
1994, referred to in Item 7 below.
PRO FORMA financial information to help explain Ethyl's comparative
results of operations as if the spin-off of Albemarle had occurred
January 1, 1993, is shown in the footnotes to the Annual Report and is
incorporated herein by reference thereto.
The Company manufactures and blends a broad range of performance
enhancing additives for motor fuels and lubricating oils. Most sales of
fuel additives for gasoline, diesel fuels and heating oils are sold
directly to petroleum refiners and marketers, terminals and blenders.
Lubricant additive packages are sold directly to companies producing
finished oils and fluids in the United States and throughout the world.
The processes and technology for most of Ethyl's products were developed in
the Company's research and development laboratories, although some
technology was obtained from acquired businesses.
The Company manufactures and blends a majority of its lubricant
additives and nonantiknock fuel additives products in the United States and
also has manufacturing and blending facilities in Belgium and Canada, and
obtains other products under long-term supply agreements (discussed on page
15). The Company obtains its lead antiknock fuel additives products
under a long-term supply agreement with Octel (discussed on page 5) and its
manganese based antiknock fuel additive product under a long-term supply
agreement with Albemarle (discussed on pages 6 and 20).
The Company operates in a highly competitive environment. Some market
areas involve a significant number of competitors, while others involve
only a few. The competitors are both larger and smaller than the Company
in terms of resources and market shares. Competition in connection with
all of the Company's products requires continuing investments in research
and development of new products or leading technologies, in continuing
product and process improvements and in providing specialized customer
services.
The Company conducts its worldwide petroleum additives operations in two
groups of products: lubricant additives and fuel additives. Lubricant
additives extend the useful life of an oil, and help the lubricant provide
protection against wear and corrosion of metallic parts, protect seals,
withstand extremely high temperatures and pressures, and increase the
adhesion of oils to metallic parts. Lubricant additives are used in oils,
fluids and greases for over-the-road and off-highway vehicles, aircraft,
power tools, marine, railroad, industrial and other equipment, machinery
and processes requiring lubrication. Fuel additives increase the quality
of gasolines and diesel fuel by raising the level of octane and cetane,
respectively, retain the quality of fuel over time, maintain engine
cleanliness, protect metals, reduce friction and wear and reduce emissions.
Fuel additives are used by the refiners to meet imposed regulations and
standards. Fuel additives are also used in fuels for over-the-road and
off-highway vehicles, piston and jet aircraft, railroad, marine and other
gasoline, diesel or synfuel powered engines as well as home heating oil.
The lubricant additive products include (i) engine oil additive packages
for passenger car motor oils for gasoline engines, heavy-duty diesel oils
for diesel powered vehicles, diesel oils for locomotive, marine and
stationary power engines and oils for two-cycle engines, (ii) specialty
additive packages for automatic transmission fluids, automotive and
industrial gear oils, hydraulic fluids and industrial oils, and (iii)
components for engine oil and specialty additive packages such as
antioxidants to resist high-temperature degradation, antiwear agents to
protect metal surfaces from abrasion, detergents to prevent carbon and
varnish deposits from forming on engine parts, dispersants to keep engine
parts clean by suspending insoluble products of fuel combustion and oil
oxidation, friction reducers to facilitate movement, pour point depressants
to enable oils to flow at cold temperatures, and corrosion inhibitors to
protect metal parts.
Gasoline fuel additive products include lead and manganese antiknock
compounds to increase octane and prevent power loss due to early or late
combustion (engine knock); hindered phenolic antioxidants to prevent
thermal degradation during storage and transport; corrosion inhibitors to
prevent failures during fuel storage and pumping; and detergent packages to
keep carbon deposits from forming on fuel injectors, intake valves or
carburetors and in combustion chambers.
Lead antiknock compounds, which are sold worldwide to petroleum
refiners, remain one of the Company's largest product lines. The Company
estimates that it accounts for approximately one-third of the total
worldwide sales of lead antiknock compounds.
Lead antiknock compounds have been subject to regulations restricting
the amount of the product that can be used in gasoline in the United States
since the 1970s and in Canada since 1990. The North American market for
these products in motor vehicles has effectively been eliminated, but the
market for their use in piston aircraft and certain other applications has
remained at about the same level for years and is expected to remain
stable. As the Company has forecasted and planned, the market for lead
antiknock compounds in other major markets, particularly Western Europe,
continues to decline as the use of unleaded gasoline grows.
On a consolidated basis, including operations of spun-off businesses
while they were part of Ethyl, the contribution of lead antiknock compounds
to the Company's net sales was about 22% in 1994, 13% in 1993 and about 16%
in 1992. The lead antiknock profit contribution to the Company's
consolidated operating profit, excluding allocation of corporate expenses,
is estimated to have been 56% in 1994, 49% in 1993 and 50% in 1992.
Excluding a 1994 environmental charge, the 1994 lead antiknock consolidated
profit contribution would have been about 58%. Excluding the 1993 costs
related to the planned cessation of lead antiknock compound production at
the Company's Canadian subsidiary's plant, the 1993 lead antiknock
consolidated profit contribution would have been about 52%.
On a PRO FORMA basis, excluding the spun-off businesses, the
contribution of lead antiknock compounds to net sales would have been 25%
in 1994 and 1993 and 32% in 1992. On a PRO FORMA basis, the contribution
to operating profit would have been 60% in 1994, 70% in 1993 and 79% in
1992. In recent years, the Company has been able to offset a continuing
decline in shipments of lead antiknock compounds with higher margins due
primarily to increases in selling prices. Any further decline in the use
of lead antiknocks would adversely affect such sales and profit
contributions unless the Company can offset such declines with increased
margins.
Prior to March 1994, the Company produced some of its lead antiknock
compounds in its subsidiary's Canadian plant, and prior to July 1994 the
Company obtained additional quantities under a supply agreement with E.I.
DuPont de Nemours & Company. On January 11, 1994, the Company announced an
agreement with The Associated Octel Company Limited ("Octel") of London,
England, under which Octel has agreed to allocate a portion of its
production capacity of lead antiknock compounds to the Company for sale and
distribution through the Company's worldwide network, and as a result the
Company's Canadian subsidiary ceased production of lead antiknock compounds
near the end of March 1994. The Octel agreement continues as long as the
Company determines that a market continues to exist for lead antiknock
compounds. Under the agreement with Octel, which is cancellable at the
Company's option with no minimum purchase obligations, the Company has
the right to purchase from Octel antiknock compounds which the Company
estimates will be sufficient to cover its needs in any contract year.
Purchases are at a fixed initial price per pound with periodic
escalations and adjustments.
In addition to the supply agreement, Octel and the Company have agreed
that Ethyl will distribute for Octel any of its lead antiknock compounds
that are shipped in bulk in ocean going vessels.
The Company believes the agreements with Octel will assure the Company
of an ongoing efficient source of supply for lead antiknock compounds as
the worldwide demand for these products continues to decline. It does not
anticipate that the cessation of its Canadian subsidiary's antiknock
operations and the entry into the Octel supply agreement will adversely
affect its relations with its customers, nor will these changes have a
material effect on its future results of operations. The Company and Octel
continue to compete vigorously in sales and marketing of lead antiknock
compounds.
The Company also sells manganese-based antiknock compounds,
HiTEC (register mark) 3000 performance additive (MMT), which are used in
unleaded gasoline primarily in Canada and are manufactured by Albemarle
under a long-term supply contract with Ethyl. The Company conducted
extensive testing of this product prior to filing a request in 1990 for
a fuel-additive waiver from the United States Environmental Protection
Agency (the "EPA") which is required in order to begin marketing the
additive for use in unleaded gasoline in the United States. The Company
voluntarily withdrew its waiver application in November 1990 after
public hearings and detailed exchanges of information with the EPA, when
the EPA raised several health and environmental questions near the end
of the 180-day statutory review period. The Company continued testing
and filed a new waiver request in July 1991, followed by additional
public hearings and detailed exchanges of information with the EPA.
In January 1992, the EPA denied the Company's application for a
waiver. An appeal was filed with the United States Court of Appeals for
the District of Columbia Circuit contesting the EPA's denial of the
application for a waiver for the use of the additive in unleaded
gasoline. In April 1993, the Court remanded the case to the EPA for
reconsideration within 180 days of its denial of the Company's waiver
application, directing the EPA to consider new evidence and make a new
decision.
On November 30, 1993, the EPA determined that emissions data
contained in the Company's application satisfy all Clean Air Act
standards, but reported that it was not able to complete its assessment
of the overall public health implications of manganese. The Company and
the EPA mutually agreed to an 180-day extension, subsequently extended
for an additional six weeks, to resolve this last remaining issue.
In July 1994, the EPA refused to grant the waiver for the use of the
additive in unleaded gasoline, finding that there was insufficient data
to alleviate its concerns about the overall public health implications
of manganese despite their own statements about favorable health
effects. The Company filed an appeal in July 1994, with the United
States Court of Appeals for the District of Columbia Circuit seeking
relief from the EPA's actions. The Court heard oral arguments in
Ethyl's appeal on January 13, 1995, and it is anticipated that a
decision will be made before the Court's term ends in early June.
In a related matter, Ethyl is awaiting the establishment of a
briefing schedule in a lawsuit challenging the EPA's July 13, 1994,
determination that Ethyl must complete additional manganese health
testing before it can obtain a "registration" under the Clean Air Act
for sale of MMT as an unleaded gasoline fuel additive. Based on the
long history of use of MMT in the U.S., Ethyl maintains that MMT is
currently registered for use in unleaded gasoline as well as in leaded
gasoline.
In the meantime, in Canada, the federal government is examining
claims made by the Motor Vehicle Manufacturers Association of Canada
("MVMA") about MMT's compatibility with automobile exhaust emissions
systems. Ethyl believes that the MVMA has made its claims without the
support of credible study or test data. The Company has joined the
Canadian Petroleum Producers Association in calling for an independent
panel to review the merits of the additive. The Canadian government is
still studying this proposal.
Ethyl is also working with the government of British Columbia and a
task force of the Canadian Council of Ministers of the Environment,
which both have initiated consultations with gasoline refiners,
automobile manufacturers and others with respect to the potential
development of new vehicle emission and efficiency standards and fuel
formulations.
The Company has shared with Canadian federal and provincial governments
extensive test data demonstrating that the additive, which has been used in
almost all unleaded Canadian gasoline for nearly 18 years, provides vital
environmental benefits including significant reductions in smog-causing
automobile emissions of nitrogen oxides as well as reductions in benzene
and other dangerous emissions.
The Company also produces diesel fuel additive products, including
cetane improvers for consistent combustion and power delivery; amine
stabilizers and hindered phenolic antioxidants to prevent degradation
during storage and transport; cold flow improvers to enhance fuel pumping
under cold-weather conditions; detergent packages to keep carbon deposits
from forming on fuel injectors and in combustion chambers; dyes for fuel
identification and leak detection; lubricity agents; and a conductivity
modifier to neutralize static charge build-up in fuel and products for home
heating oils.
Major raw materials used by the Company include process oil, polybutene,
olefins, phosphorus pentasulfide, 2-ethyl-1-hexanol, amines and
polypropene, as well as electricity and natural gas as fuels, which are
purchased or provided under supply contracts at prices the Company believes
are competitive.
Recent product developments include formulated additive packages for
meeting new industry specifications for passenger car motor oils, gear
oils, and gasoline protecting intake valve systems. The Company continues
to review its product lines as a part of a major ongoing effort to expand
and improve the product lines and expand geographic distribution of
petroleum additives products. The market for lubricant additives has been
experiencing significant changes as a result of market and regulatory
demands. The demands for better fuel economy, reduced emissions and
cleaner oils have led to new equipment design and more stringent
performance requirements. Such requirements mean reformulation of many
products, new product development and more product qualification tests.
To maintain and enhance a responsive worldwide product supply network
for its petroleum additives, Ethyl has been constructing major new
manufacturing capacity for some products and expanding manufacturing
capacity for other products. Some of the new capacity will replace the
manufacturing capacity of products produced under contract for Ethyl by
Amoco Petroleum Additives Company. The three-year product supply contract
has been in effect since mid-1992, when Ethyl acquired Amoco's petroleum
additives business. Certain of the new, more efficient facilities were
started up in late 1994, at Sauget, Illinois, and Natchez, Mississippi;
while others are being started up in early 1995 at Houston, Texas, and
Feluy, Belgium.
Research and Patents
The Company's research and development staff activities consist
primarily of research and development activities, and the balance of
activities are related to technical services support to customers, testing
of existing products, cost reduction, quality improvement and environmental
studies. Substantially all of such activities were sponsored by the
Company.
On a consolidated basis, including the operations spun off, the Company
spent approximately $83 million, $127 million, and $112 million in 1994,
1993 and 1992, respectively, on research, development and testing expenses,
of which approximately $50 million, $76 million and $74 million in 1994,
1993 and 1992, respectively, qualified as research and development expense
under the technical accounting definition. Most of the research and
development expense was related to the Company's specialty chemicals (now a
part of Albemarle) and petroleum additives operations.
On a PRO FORMA basis, the Company spent approximately $74 million, $76
million and $63 million in 1994, 1993 and 1992, respectively, on research,
development and testing expense, of which approximately $46 million, $45
million and $42 million in 1994, 1993 and 1992, respectively, qualified as
research and development expense under the technical accounting definition.
Most of the research and development expense was related to the Company's
petroleum additives operations, but a small portion was related to design
and development of new drug molecules by Whitby Research prior to the
decision to discontinue pharmaceutical research in December 1993.
The Company owns approximately 800 active United States and foreign
patents with over 400 patents pending. Some of these patents are
licensed to others. In addition, rights under the patents and inventions
of others have been acquired by the Company through licenses. The
Company's patent position is actively managed and is considered to be
adequate for the conduct of its business.
Environmental Requirements
The Company is subject to Federal, state and local requirements
regulating the handling, manufacture or use of materials (some of which are
classified as hazardous or toxic by one or more regulatory agencies), the
discharge of materials into the environment and the protection of the
environment. It is the Company's policy to comply with these requirements
and to provide workplaces for employees that are safe, healthy and
environmentally sound work environments which will not adversely affect the
safety, health or environment of communities in which the Company does
business. The Company believes that as a general matter its policies,
practices and procedures are properly designed to prevent any unreasonable
risk of environmental damage, and of resulting financial liability, in
connection with its business.
The Clean Air Act Amendments of 1990 ("the Amendments") became Federal
law on November 15, 1990. While the EPA issued certain detailed
requirements in March 1994, several of the states, including the states
where the Company has its major facilities, are still in the process of
completing and implementing definitive regulations, interpreting the
Amendments and establishing detailed requirements. Therefore, the Company
is unable at this time to make any detailed assessment of the effect of the
Amendments on its earnings or operations. However, based on discussions
the Company's environmental staff have had with the states, the Company
does not expect the impact on financial position, liquidity or results
of operations to be material.
Among other environmental requirements, the Company is subject to the
Federal Comprehensive Environmental Response, Compensation and Liability
Act ("Superfund") and similar state laws, under which the Company has
been designated as a potentially responsible party ("PRP") which may be
liable for a share of the costs associated with cleaning up various
hazardous waste sites, some of which are on the EPA's Superfund national
priority list. Although, under some court interpretations of these
laws, a PRP might have to bear more than its proportional share of the
cleanup costs if appropriate contributions from other PRPs are not able
to be obtained, the Company has been able to demonstrate it is only a
minor participant at all but two of the sites where Ethyl has been named
a PRP. Also, the Company has settled or substantially resolved its
share of liability related to certain sites (including the two largest
ones) and generally has not had to bear significantly more than its
proportional share in multiparty situations. Further, almost all of the
sites, including the two largest, represent environmental issues that
are quite mature and that have been investigated, studied and in many
cases, including the two largest ones, the remediation methodology and
proportionate shares of each PRP have been substantially established and
the financial viability of the other PRP's is reasonably assured.
Therefore, point estimates for remediation and monitoring costs had been
accrued previously. At one of the largest sites, the remediation is
substantially complete. The other is partly remediated. At these and
certain other sites, the remediation and/or monitoring probably will
continue for extended periods of time. The estimated remaining
remediation and post remediation monitoring costs have been
substantially provided for, with the remaining unaccrued amounts being
immaterial, after considering expected insurance recoveries. In DE
MINIMIS PRP matters, the Company's policy generally is to negotiate a
consent decree and to pay any apportioned settlement, enabling the
Company to be effectively relieved of any further liability as a PRP,
except for remote contingencies. In minor PRP matters other than those
that are DE MINIMIS, the Company's records indicate that unresolved
exposures are not material individually or in the aggregate to Ethyl's
financial statements.
At the Company's former Baton Rouge plant manufacturing site, which is
partially occupied by the Company's former process development center now
owned and occupied by another corporation on land under lease from the
Company, the Company has been conducting monitoring, containment and
remediation activities for a number of years, including monitoring,
containment and remediation of groundwater contamination. The Company
continues to evaluate options with respect to the overall environmental
situation, including the extent and duration of continued monitoring,
appropriate containment and potential alternate remediation activities
at the site to the extent necessary, as well as further possible
commercial uses of the site.
The Company reviews the status of significant existing or potential
environmental issues, including Superfund sites and current and former
plant sites, accrues and expenses its proportionate share of
environmental remediation and monitoring costs in accordance with FASB
Statement No. 5 and FASB Interpretation No. 14 and adjusts reserves, as
appropriate, on the basis of additional information. The Company
believes that the costs of remediation of current sites, which will
occur over an extended period of time, will not have a material adverse
impact on its consolidated financial position but possibly could have a
material effect, when ultimately resolved, on results of operations in a
given period.
Compliance with government pollution-abatement and safety regulations
usually increases operating costs and requires remediation costs and
investment of capital that in some cases produces no monetary return.
Consolidated operating and remediation costs charged to expense were $31
million in 1994, $61 million in 1993 and $51 million in 1992 (excluding
depreciation of previous capital expenditures). On a PRO FORMA basis,
operating and remediation costs were approximately $24 million (which
includes the $8.0 million environmental special charge) in 1994, $13
million in 1993 and $12 million in 1992 and are expected to be somewhat
higher in the next few years than in 1993 and 1992. The ongoing costs of
operations were about $11 million in 1994 and $6 million in 1993 and 1992,
with the balance representing remediation and monitoring costs incurred or
accrued. Consolidated capital expenditures for pollution-abatement and
safety projects, including such costs that are included in other projects,
were about $16 million, $30 million and $29 million in 1994, 1993 and 1992,
respectively. On a PRO FORMA basis, such expenditures were $14 million in
1994, $4 million in 1993 and $7 million in 1992. For each of the next few
years, capital expenditures for these types of projects are likely to
decrease somewhat from current levels reflecting a generally lower capital
expenditures program. Management's estimates of the effects of compliance
with governmental pollution-abatement and safety regulations are subject to
(i) the possibility of changes in the applicable statutes and regulations
or in judicial or administrative construction of such statutes and
regulations, and (ii) uncertainty as to whether anticipated solutions to
pollution problems will be successful, or whether additional expenditures
may prove necessary, and (iii) the possibility that emerging technology
will change remediation methods and reduce remediation and monitoring
costs.
FINANCIAL INFORMATION AS TO INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS
The Company's remaining operations, as of December 31, 1994, are in
petroleum additives. Geographic area information for the Company's
operations for the three years ended December 31, 1994, is presented in the
Annual Report to Shareholders (Annual Report) on pages 24 and 25 (and the
related notes on page 26) and is incorporated herein by reference.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
Financial information about the Company's foreign and domestic
operations and export sales for the three years ended December 31, 1994, is
set forth in the Annual Report on pages 24 and 25 and in Notes 1, 3, 4, 13,
15, 16 and 18 of the Notes to the Financial Statements on pages 33, 34, 36,
38, 39, 40, 41, 42 and 43 and is incorporated herein by reference. See
also information as to the Company's foreign lead antiknock compounds
business under "DESCRIPTION OF BUSINESS" above.
Export sales from the United States to non-affiliates may be made
worldwide but are made primarily in the Far East, Latin America and Europe.
Foreign unaffiliated sales are made primarily in Europe, Canada, the Far
East and the Middle East.
The Company's foreign manufacturing facilities and laboratories are in
European and Asian countries with stable economies from which repatriation
of earnings has been successful. Product sales in other areas are normally
paid for through letters of credit or are prepaid. Customer relationships
mainly consist of financially viable governmental organizations and large
private companies.
The Company attempts to limit its exposure to changing foreign currency
exchange rates primarily through operational actions. The Company both
manufactures and purchases products from certain foreign companies giving
it a cost basis to offset its revenue exposures in its foreign operations.
The foreign currency exposure risk has been relatively low. Since the
Company's policy is to monitor its exposures and keep them at a minimum,
the practice of using external hedging transactions is used infrequently.
Item 2. PROPERTIES
The following is a brief description of the principal plants and related
facilities of the Company, all of which are owned except as stated below.
LOCATION PRINCIPAL OPERATIONS
Bracknell, Berkshire, England Research and testing activities
Feluy, Belgium Production of lubricant additives
Houston, Texas Production of lubricant additive
dispersants and blends and other
petroleum additives
Natchez, Mississippi Production of lubricant additives,
mainly detergents
Orangeburg, South Carolina Production of fuel additives, including
(Leased Land) diesel fuel cetane improver
Richmond, Virginia Research and testing activities
Sarnia, Ontario, Canada Production of lubricant additives,
cold flow improvers and diesel fuel
cetane improver
Sauget, Illinois Production of lubricant additives,
including detergents, dispersants,
antioxidants, antiwear agents,
crankcase packages, transmission and
gear packages and friction reducers
The Company receives its lead antiknock compounds under a long-term
supply agreement with Octel, as discussed on Page 5. The Company
receives its MMT under a long-term supply agreement with Albemarle, as
discussed on pages 6 and 20.
The Company is obtaining lubricant additives, including crankcase
packages and certain components, under a long-term supply agreement with
a subsidiary of Mitsubishi Kasei Corporation from its petroleum
additives plant in Yokkaichi, Japan. The Company also has a long-term
services agreement for research and product development and customer
technical services activities at the research facility associated with
the petroleum additives plant in Yokkaichi, Japan.
The Company is partially replacing the manufacturing capacity of
Amoco's Wood River, Illinois, lubricant and fuel additives plant from
which the Company currently is receiving products under a supply
agreement that runs until June 30, 1995. Some of the new and more
efficient replacement facilities started up in late 1994 at Sauget,
Illinois, and Natchez, Mississippi. Additional new and more efficient
facilities are scheduled for start-up in 1995 at Houston, Texas, and
Feluy, Belgium.
The Company also receives certain other miscellaneous products under
various term supply contracts.
The Company believes that its plants, including approved expansions,
as well as contract manufacturing under long-term supply agreements, are
more than adequate to meet projected sales levels. Operating rates of
certain plants vary with product mix and normal seasonal sales swings.
The Company believes that its plants generally are well maintained and
in good operating condition.
The Company owns its corporate headquarters offices in Richmond,
Virginia, and its regional offices in Bracknell, Berkshire, England.
The Company leases its regional offices in Brussels, Belgium;
Mississauga, Ontario, Canada; Sydney, Australia; Singapore; and Tokyo,
Japan, as well as various sales and other offices.
Research and product-development activities at St. Louis, Missouri,
have been phased out and replaced with the $70-million lubricant and
fuel additives research and product-development facility in Richmond,
Virginia. All expenses in connection with the discontinuance of the St.
Louis operations have been fully provided for.
Item 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved from time to time in
legal proceedings of types regarded as common in the Company's
businesses, particularly administrative or judicial proceedings seeking
remediation under environmental laws, such as Superfund, and product
liability litigation. Previous Form 10-K filings have made reference to
a product liability suit brought in 1992 against Ethyl, another chemical
company and various real estate interests in a Minnesota state court.
This suit alleged that two Minneapolis children were injured by
ingesting soil and dust containing lead from peeling paint and
automotive emissions. The real estate defendants paid the plaintiffs to
end the litigation premised on leaded paint. Ethyl and the other
chemical company, however, refused to pay the plaintiffs anything
whatsoever and vigorously defended against claims based on leaded
gasoline. In August 1994, the plaintiffs decided simply to abandon the
litigation against Ethyl and the other chemical company. The suit was
then dismissed with prejudice.
While it is not possible to predict or determine the outcome of the
proceedings presently pending in other cases, in the Company's opinion
they will not ultimately result in any liability that would have a
material adverse effect upon the results of operations or financial
condition of the Company and its subsidiaries on a consolidated basis.
ADDITIONAL INFORMATION - EXECUTIVE OFFICERS OF THE COMPANY
The names and ages of all executive officers of the Company, as of
March 25, 1995, are set forth on the following pages. The term of office
of each such officer is until the meeting of the Board of Directors
following the next annual shareholders meeting (April 13, 1995). All of
such officers have been employed by the Company for at least the last
five years, with the exceptions of Thomas E. Gottwald, who rejoined the
Company August 1, 1991, following two years as General Manager of
Tredegar Film Products, a division of Tredegar Industries, Inc., which
was spun off to Ethyl shareholders in mid-1989, following assignments
with Ethyl in Corporate Business Development and Strategic Planning; and
Christopher Hicks, who joined the Company on May 1, 1994, after five
years as a partner in the Washington law firm of Anderson, Hibey &
Blair, three years as general counsel of the U.S. Department of
Agriculture, and five years on the White House staff, including service
as deputy assistant to the President.
Name Age Office
*Bruce C. Gottwald 61 Chairman of the Board and
of the Executive
Committee, Chief
Executive Officer,
Director
*Floyd D. Gottwald, Jr. 72 Vice Chairman of the
Board, Director
*Charles B. Walker 56 Vice Chairman of the Board, Chief
Financial Officer and Treasurer, Director
*Thomas E. Gottwald 34 President and Chief Operating Officer,
Director
*William M. Gottwald, MD 47 Senior Vice President , Director
E. Whitehead Elmore 56 Special Counsel to the Company's Executive
Committee and Corporate Secretary
Sampson H. Bass, Jr. 65 Vice President - Secretary to the
Executive Committee
David A. Fiorenza 45 Vice President - Finance
and Controller
Christopher Hicks 44 Vice President - Government Relations
C. S. Warren Huang 45 Vice President - Research and Development
Donald R. Lynam 56 Vice President - Air Conservation
Steven M. Mayer 52 Vice President and General Counsel
Ian A. Nimmo 53 Vice President - Lubricant Additives
Henry C. Page, Jr. 56 Vice President - Human Resources
Newton A. Perry 52 Vice President - Fuel Additives
A. Prescott Rowe 57 Vice President - External Affairs
* Member of the Executive Committee
Floyd D. Gottwald, Jr., and Bruce C. Gottwald are brothers. William M.
Gottwald, MD, is a son of Floyd D. Gottwald, Jr. Thomas E. Gottwald is a
son of Bruce C. Gottwald.
Certain Agreements Between Albemarle and Ethyl
At the close of business on February 28, 1994, ("the Distribution
Date") Ethyl Corporation distributed to its common stock shareholders
all of the common stock ("the Distribution") of Albemarle Corporation
("Albemarle"). These businesses which are now Albemarle in the past
engaged in numerous transactions with Ethyl. Although Ethyl continues
to provide certain support services to Albemarle, and Albemarle provides
certain support services to Ethyl, most of such services are expected
ultimately to be discontinued. In addition to these services, for a
more extended period of time, Albemarle will continue to provide
services to Ethyl at Orangeburg, South Carolina, and Feluy, Belgium, and
Albemarle and Ethyl will continue to exchange services at Houston,
Texas.
Orangeburg, South Carolina, Agreements
The Orangeburg, South Carolina, plant includes facilities for the
production of petroleum additives. After the Distribution on February
28, 1994, Albemarle began operating for Ethyl certain facilities owned
by Ethyl that produce petroleum additives ("the Orangeburg Additives
Facility") for a period of 10 years, with an option by Ethyl to extend
for an additional 10 years. Albemarle owns the land on which Ethyl's
Orangeburg Additives Facility is located. In conjunction with
Albemarle's operation of the Orangeburg Additives Facility for Ethyl,
Albemarle leases the land to Ethyl for a period of 10 years, with an
option by Ethyl to extend for an additional 10 years. Under the
operating agreement relating to the Orangeburg Additives Facility (the
"Orangeburg Operating Agreement"), Albemarle produces certain petroleum
additive products meeting Ethyl's specifications and provides certain
services and utilities customarily used by or reasonably necessary to
maintain the Orangeburg Additives Facility in accordance with design
capacity. At its option and upon 180 days' notice, Ethyl may assume
responsibility for the operation of the Orangeburg Additives Facility,
in which event Albemarle would continue to provide certain services and
utilities for that facility. Ethyl reimburses Albemarle for certain
costs specified in the Orangeburg Operating Agreement and pays to
Albemarle a monthly operating fee based on a percentage of such
reimbursable costs. Albemarle also produces MMT for Ethyl under a
supply contract in facilities owned by Albemarle. Albemarle also is
licensed by Ethyl, subject to certain restrictions, to produce and sell
MMT for its own account to the extent of any excess not set aside for
Ethyl under the supply contract.
Albemarle and Ethyl have a separate blending services agreement
("Orangeburg Blending Agreement"), pursuant to which Albemarle provides
storage, blending and packaging services to Ethyl in connection with the
operation of the Orangeburg Additives Facility. The term of the
Orangeburg Blending Agreement is 10 years, and Ethyl has the option to
extend for an additional 10 years. Pursuant to the Orangeburg Blending
Agreement, Ethyl reimburses Albemarle for specified costs associated
with the blending operations and pays Albemarle a monthly operating fee
based on a percentage of such reimbursable costs. Pursuant to an
antioxidant supply agreement, Albemarle produces antioxidants for Ethyl
at the Orangeburg plant. Ethyl reimburses Albemarle for specified
production costs and pays a monthly fee. The antioxidant supply
agreement is for 10 years, and Ethyl has the option to extend for an
additional 10 years.
Houston, Texas, Agreement
The Houston, Texas, plant includes facilities for the production of
petroleum additives. Since the Distribution on February 28, 1994, Ethyl
has owned the petroleum additives facility at the Houston plant,
including land, ("the Houston Additives Facilities"), and Albemarle owns
the other facilities, including land.
Albemarle and Ethyl have a reciprocal agreement (the "Houston
Services Agreement"), with respect to the operation of Ethyl's Houston
Additives Facilities and Albemarle's chemical operations adjoining the
Houston Additives Facilities. Pursuant to the Houston Services
Agreement, Ethyl provides to Albemarle certain services and utilities
related to Albemarle's chemicals operations in Houston, while Albemarle
provides to Ethyl certain services and utilities related to Ethyl's
petroleum additives operations in Houston. The term of the Houston
Services Agreement is 10 years, but any party receiving services and
utilities may terminate one or more of such services or utilities upon
giving 60 days' notice to the other party or may terminate all such
services and utilities upon giving 180 days' notice to the other party.
Each party also has the right to extend for an additional 10 years the
Houston Services Agreement with respect to the services and utilities
that it is receiving. Each party providing services receives from the
other party reimbursement of specified costs and a monthly service fee
based on a percentage of such reimbursable costs.
Feluy, Belgium, Agreement
The Feluy, Belgium, site includes facilities for the production of
petroleum additives, olefins and derivatives and specialty chemicals.
Since the Distribution on February 28, 1994, Ethyl through a subsidiary
has owned and operated the petroleum additives facility (the "Feluy
Additives Facility"), and Albemarle through a subsidiary owns the
facilities that produce olefins and derivatives and specialty chemicals.
The subsidiaries of Albemarle and Ethyl have an agreement (the "Feluy
Services Agreement"), with respect to the operation of the Feluy
Additives Facility. Pursuant to the Feluy Services Agreement,
Albemarle's subsidiary provides to Ethyl's subsidiary certain services
and utilities related to the petroleum additives operation in Feluy.
The term of the Feluy Services Agreement is 10 years, but Ethyl may
terminate one or more of such services or utilities upon giving 60 days'
notice to Albemarle or may terminate all of such services and utilities
upon giving 180 days' notice to Albemarle. Ethyl also has the right to
extend the Feluy Services Agreement for an additional 10 years.
Albemarle receives from Ethyl reimbursement of specified costs and a
monthly service fee based on a percentage of such reimbursable costs.
Indemnification and Tax-Sharing Agreements
Pursuant to an indemnification agreement between Ethyl and Albemarle,
Ethyl indemnifies Albemarle for losses to Albemarle after the
Distribution Date of February 28, 1994, resulting from the conduct of
Ethyl's businesses, including certain environmental liabilities, before
and after the Distribution on February 28, 1994, and Albemarle
indemnifies Ethyl for losses to Ethyl after the Distribution of February
28, 1994, resulting from the conduct of the Albemarle's businesses,
including certain environmental liabilities, before and after the
Distribution Date. Tax liabilities, and related indemnification, are
covered under a tax sharing agreement. Under that agreement Ethyl is
responsible for the taxes of Ethyl's businesses and Albemarle's
businesses for periods prior to the Distribution on February 28, 1994,
except with respect to taxes attributable to subsidiaries of Ethyl that
became subsidiaries of Albemarle in connection with the Distribution on
February 28, 1994. Albemarle is responsible for the taxes of its
businesses for periods after February 28, 1994.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information contained on page 27 of the Annual Report under the
captions "Dividend Information & Equity Per Common Share" and "Market
Prices of Common Stock & Shareholder Data" and on pages 34, 37 and 38
of the Annual Report in Notes 1 and 12 of the Notes to Financial
Statements is incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
The information for the five years ended December 31, 1994, contained
in the Five-Year Summary on pages 44 and 45 of the Annual Report is
incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The textual and tabular information concerning the years 1994, 1993
and 1992 contained in the "1994 Financial Review" section on pages 14
through 25 of the Annual Report (and the related notes on page 26) are
incorporated herein by reference.
Information on 1993 restructuring costs, which is in addition to that
included in the 1994 Annual Report, is as follows:
The $36.1 million of consolidated special charges in 1993 ($22.4
million after income taxes, or $.19 per share) resulted from the
development of a company-wide restructuring plan which was designed to
focus the Company on certain business operations, reduce operating costs
and position the Company for maximum growth potential. These special
charges would not have occurred without this restructuring plan.
The $14.2 million charge, which related to the Company's decision to
cease production at the Canadian antiknock facility in 1994, included an
$11.4 million noncash charge for facility writedown, which will reduce
depreciation and amortization by about $1.5 million a year, but which
will be substantially offset by higher per unit cost of the lead
antiknock fluids obtained through the Octel Agreement. Expenditures
related to the $7.6 million early-retirement and work-force-reduction
charge were substantially completed in early 1994, and expenditures for
the $8.3 million charge for the relocation of certain research and
development and administrative groups, primarily petroleum additives,
were substantially completed by year-end 1994. The differences between
amounts accrued and costs incurred were DE MINIMIS.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements contained on pages 28 through
32, the Notes to Financial Statements contained on pages 33 through 43,
the Report of Independent Accountants on page 46 and the information
under the caption "Selected Quarterly Consolidated Financial Data
(Unaudited)" on page 26 of the Annual Report are incorporated herein by
reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Inapplicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in the Proxy Statement under the caption
"Election of Directors" concerning directors and persons nominated to
become directors of the Company is incorporated herein by reference.
See "Additional Information -- Executive Officers of the Company" in
Part I above for information about the executive officers of the
Company.
Item 11. EXECUTIVE COMPENSATION
The information contained in the Proxy Statement under the caption
"Compensation of Executive Officers and Directors" concerning executive
compensation is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information contained in the Proxy Statement under the caption
"Stock Ownership" is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the Proxy Statement under the caption
"Election of Directors," specifically in the last several paragraphs of
such section, is incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) The following consolidated financial statements of the
Registrant, and related information, are included on pages 28 to 43 and
page 46 in the Annual Report and incorporated herein by reference in
Item 8:
Consolidated balance sheets as of December 31, 1994 and
December 31, 1993
Consolidated statements of income, shareholders' equity and
cash flows for the years ended December 31, 1994, 1993, and
1992
Notes to financial statements
Report of Independent Accountants
(a) (2) Financial Statement Schedules - none required.
(a) (3) Exhibits
The following documents are filed as exhibits to this Form 10-K
pursuant to Item 601 of Regulation S-K:
3.1 Restated Articles of Incorporation of the registrant
(filed as Exhibit 3.1 to the registrant's Report on
Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference thereto).
3.2 By-laws of the registrant.
4.1 $500 million Credit Agreement, dated as of February 16,
1994 (filed as Exhibit 4.1 to the registrant's Report
on Form 10-K for the year ended December 31, 1993, and
incorporated herein by reference thereto) as
supplemented by the Extension Agreement thereto dated
as of March 1, 1995, and filed herewith.
4.2 Indenture, dated as of June 15, 1985 (filed as Exhibit
4 to the registrant's Registration Statement on Form
S-3 filed on June 27, 1985, and incorporated herein by
reference thereto), as supplemented by the First
Supplemental Indenture dated as of June 15, 1986 (filed
as Exhibit 4.2 to the registrant's Registration
Statement on Form S-3 filed on June 12, 1986, and
incorporated herein by reference thereto), and the
Prospectus Supplement, dated as of September 16, 1988,
setting the terms for the public sale of $200,000,000
aggregate principal amount of its 9.8% Notes due
September 15, 1998 (filed on September 16, 1988, and
incorporated herein by reference thereto).
10.1 Bonus Plan of the registrant (filed as Exhibit 10.1 to
the registrant's Report on Form 10-K for the year ended
December 31, 1992, and incorporated herein by reference
thereto).
10.2 Incentive Stock Option Plan of the registrant (filed as
Exhibit 10.2 to the registrant's Report on Form 10-K
for the year ended December 31, 1992, and incorporated
herein by reference thereto).
10.3 Non-Employee Directors' Stock Acquisition Plan (filed
as Exhibit A to the registrant's Proxy Statement for
Annual Meeting of Shareholders filed on March 17, 1993,
and incorporated herein by reference thereto).
10.4 Excess Benefit Plan of the registrant (filed as Exhibit
10.4 to the registrant's Report on Form 10-K for the
year ended December 31, 1992, and incorporated herein
by reference thereto).
10.5 Supply Agreement, dated as of December 22, 1993,
between Ethyl Corporation and the Associated Octel
Company Limited (filed as Exhibit 99 on the
Registrant's Report on Form 8-K filed on February 17,
1994, and incorporated herein by reference thereto).
11.1 Computation of Earnings Per Share.
11.2 Computation of PRO FORMA Earnings Per Share.
13 The registrant's Annual Report to Shareholders for the
year ended December 31, 1994 (note 1).
22 List of subsidiaries of the registrant.
23 Consent of Independent Certified Public Accountants.
Note 1. With the exception of the information incorporated
in this Form 10-K by reference thereto, the Annual Report
shall not be deemed "filed" as part of this Form 10-K.
28 Trust Agreement Between Ethyl Corporation and Nations
Bank of Virginia, N.A. (filed as Exhibit 28 to the
registrant's Report on Form 10-K for the year ended
December 31, 1992, and incorporated herein by reference
thereto).
99 Form 8-K filed on February 25, 1994 (filed as Exhibit
99 to the registrant's Report on Form 10-K for the year
ended December 31, 1993).
(b) None filed.
(c) Exhibits - The response to this portion of Item 14 is
submitted as a separate section of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
ETHYL CORPORATION
(Registrant)
By: /s/ Bruce C. Gottwald
Bruce C. Gottwald
Chairman of the Board
Dated: February 23, 1995
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated as of February
23, 1995.
Signature Title
/s/ Bruce C. Gottwald Chairman of the Board,
(Bruce C. Gottwald) Chairman of the Executive
Committee, Chief Executive
Officer and Director
(Principal Executive Officer)
/s/ Charles B. Walker Vice Chairman of the Board,
(Charles B. Walker) Treasurer, Chief Financial
Officer and Director
(Principal Financial Officer)
/s/ David A. Fiorenza Vice President - Finance and
(David A. Fiorenza) Controller (Principal
Accounting Officer)
/s/ Lloyd B. Andrew Director
(Lloyd B. Andrew)
/s/ William W. Berry Director
(William W. Berry)
/s/ Allen C. Goolsby Director
(Allen C. Goolsby)
/s/ Bruce C. Gottwald, Jr. Director
(Bruce C. Gottwald, Jr.)
/s/ Floyd D. Gottwald, Jr. Vice Chairman of the Board
(Floyd D. Gottwald, Jr.) and Director
/s/ Thomas E. Gottwald President and Director
(Thomas E. Gottwald)
/s/ William M. Gottwald Senior Vice President
(William M. Gottwald) and Director
/s/ Gilbert M. Grosvenor Director
(Gilbert M. Grosvenor)
/s/ Andre B. Lacy Director
(Andre B. Lacy)
/s/ Emmett J. Rice Director
(Emmett J. Rice)
/s/ Sidney Buford Scott Director
(Sidney Buford Scott)
/s/ Phyllis L. Cothran Director
(Phyllis L. Cothran)
EXHIBIT INDEX
<TABLE>
<Captions>
Number and Name of Exhibit Page Number
<S> <C> <C>
3.1 Restated Articles of Incorporated by reference -
Incorporation see Page 28
3.2 By-laws Pages 35 through 53
4.1 $500 million Credit Agreement, Incorporated by reference -
dated as of February 16, 1994, and see Page 28
Extension Agreement dated March 1, 1995 Pages 54 through 60
4.2 1988 $200,000,000 Debt Incorporated by reference -
Offering see Page 28
10.1 Bonus Plan Incorporated by reference -
see Page 29
10.2 Incentive Stock Option Incorporated by reference -
Plant see Page 29
10.3 Non-Employee Directors' Stock Incorporated by reference -
Acquisition Plan see Page 29
10.4 Excess Benefit Plan Incorporated by reference -
see Page 29
10.5 Supply Agreement between Ethyl Incorporated by reference -
Corporation & Associated Octel Company see Page 29
11.1 Computation of Earnings Per Share Page 61
11.2 Computation of PRO FORMA Earnings Per Share Page 62
13 Annual Report Pages 63 through 116
22 List of Subsidiaries Page 117
23 Consent of Independent Page 118
Certified Public Accountants
28 Trust Agreement Incorporated by reference -
see Page 30
99 Form 8K filed on February 25, 1994 Previously filed.
</TABLE>
EXHIBIT 3.2
ETHYL CORPORATION
BY-LAWS
ARTICLE I.
Meeting of Stockholders
Section 1. Places of Meetings. All
meetings of the stockholders shall be held at
the registered office of the Corporation in the
City of Richmond, Virginia, or at such other
place, either within or without the State of
Virginia, as may, from time to time, be fixed by
the Board of Directors.
3/18/65 Section 2. Annual Meetings. The annual
1/25/68 meeting of the stockholders, for the election of
12/23/80 directors and transaction of such other business
5/8/87 as may come before the meeting, shall be held in
5/24/90 each year on the fourth Thursday in April, at 11
o'clock in the forenoon, Richmond, Virginia
time, or at such other date and at such other
time as the Board of Directors of the
Corporation may designate from time to time.
6/18/64 Section 3. Special Meetings. Special
4/25/68 meetings of stockholders for any purpose or
2/28/72 purposes may be called at any time by the
2/28/74 Chairman of the Board, the Vice Chairman of the
9/25/80 Board who is most senior in service with the
2/19/85 Corporation or by a majority of the Board of
(eff. Directors. At a special meeting no business
1/1/86) shall be transacted and no corporate action
4/23/92 shall be taken other than that stated in the
(eff. notice of the meeting.
3/1/94)
2/28/86 Section 4. Notice of Meetings. Notice
of the time and place of every meeting of the
stockholders shall be mailed at least ten (10)
days and not more than sixty (60) days previous
thereto to each stockholder of record entitled
to vote at the meeting, who shall have furnished
a written address to the Secretary of the
Corporation. Such further notice shall be given
as may be required by law, but meetings may be
held without notice if all the stockholders
entitled to vote at the meeting are present in
person or by proxy or if notice is waived in
writing by those not present.
Section 5. Quorum. Any number of
stockholders together holding at least a
majority of the outstanding shares of capital
stock entitled to vote in respect to the
business to be transacted, who shall be present
in person or represented by proxy at any meeting
duly called, shall constitute a quorum for the
transaction of business. If less than a quorum
shall be in attendance at the time for which a
meeting shall have been called, the meeting may
be adjourned from time to time by a majority of
the stockholders present or represented by proxy
without notice other than by announcement at the
meeting until a quorum shall attend.
2/28/86 Section 6. Voting. At any meeting of
the stockholders each stockholder of a class
entitled to vote on the matters coming before
the meeting shall have one vote, in person or by
proxy, for each share of capital stock standing
in his or her name on the books of the
Corporation at the time of such meeting or on
any date fixed by the Board of Directors not
exceeding seventy (70) days prior to the
meeting.
Section 7. Voting List. The officer or
agent having charge of the stock transfer books
for shares of the Corporation shall make, at
least ten (10) days before each meeting of
stockholders, a complete list of the
stockholders entitled to vote at such meeting or
any adjournment thereof, with the address of and
the number of shares held by each. Such list,
for a period of ten (10) days prior to such
meeting, shall be kept on file at the registered
office of the Corporation or at its principal
place of business or at the office of its
transfer agent or registrar and shall be subject
to inspection by any stockholder at any time
during usual business hours. Such list shall
also be produced and kept open at the time and
place of the meeting and shall be subject to the
inspection of any stockholder during the whole
time of the meeting. The original stock
transfer books shall be prima facie evidence as
to who are the stockholders entitled to examine
such list or transfer books or to vote at any
meeting of stockholders. If the requirements of
this section have not been substantially
complied with, the meeting shall, on the demand
of any stockholder in person or by proxy, be
adjourned until the requirements are complied
with.
9/24/87 Section 8. Stockholder Proposals. To
be properly brought before an annual meeting of
stockholders, business must be either (i)
specified in the notice of meeting (or any
supplement thereto) given by or at the direction
of the Board of Directors or (ii) otherwise
properly brought before the meeting or at the
direction of the Board of Directors, or (iii)
otherwise properly brought before the annual
meeting by a stockholder. In addition to any
other applicable requirements, for business to
be properly brought before an annual meeting by
a stockholder, the stockholder must have given
timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a
stockholder's notice must be given, either by
personal delivery or by United States mail,
postage prepaid, to the Secretary of the
Corporation not later than sixty (60) days in
advance of the annual meeting. A stockholder's
notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring
before the annual meeting (i) a brief
description of the business desired to be
brought before the annual meeting and the
reasons for conducting such business at the
annual meeting, (ii) the name and record address
of the stockholder proposing such business,
(iii) the class and number of shares of the
Corporation that are beneficially owned by the
stockholder, and (iv) any material interest of
the stockholder in such business.
In the event that a stockholder attempts to
bring business before an annual meeting without
complying with the provisions of this Section 8,
the Chairman of the meeting shall declare to the
meeting that the business was not properly
brought before the meeting in accordance with
the foregoing procedures, and such business
shall not be transacted.
No business shall be conducted at the
annual meeting except in accordance with the
procedures set forth in this Section 8,
provided, however, that nothing in this Section
8 shall be deemed to preclude discussion by any
stockholder of any business properly brought
before the annual meeting.
ARTICLE II.
Directors
Section 1. General Powers. The
property, affairs and business of the
2/28/86 Corporation shall be managed under the direction
of the Board of Directors, and except as
otherwise expressly provided by law or by the
Articles of Incorporation, or by these By-Laws,
all of the powers of the Corporation shall be
vested in such Board.
Any contract to which the Corporation is a
party that is (i) not in the ordinary course of
business or (ii) is in the ordinary course of
business and involves a commitment by the
Corporation of more than $100,000 and is not
executed by the Chairman of the Board or the
(eff. Vice Chairman of the Board most senior in
3/1/94) service with the Corporation, must be approved
by the Board of Directors or the Executive
Committee, or in accordance with the policy
adopted by the Board of Directors or the
Executive Committee, prior to delivery.
10/16/63 Section 2. Number of Directors. The 9/25/86
4/16/64 Board of Directors shall be fourteen (14) in 12/17/87
4/19/67 number. 2/9/88
5/18/67 1/26/89
7/26/67 3/23/89
12/23/69 (eff.
5/25/89)
3/25/71 (eff.
4/25/90)
4/24/91
1/27/72 2/27/92
3/23/72 2/27/92
1/28/82 (eff.
5/13/82 4/23/92)
5/14/82 2/8/94
9/23/82 (eff.
3/24/83 3/1/94)
3/3/94
1/26/84 (eff.
3/22/84 4/28/94)
(eff. 2/23/95
4/26/84)
12/20/84
(eff.
1/1/85)
3/28/85
(eff.
4/25/85)
2/28/86
Section 3. Election of Directors.
(a) Directors shall be elected at the
annual meeting of stockholders.
(b) Directors shall hold their offices 2/28/86
until their successors are elected. Any
director may be removed from office by a
majority of the votes entitled to be cast at an
election of directors of the voting group or
voting groups by which such director was elected.
(c) Any vacancy occurring in the Board of
Directors may be filled by the affirmative vote
of the majority of the remaining directors
though less than a quorum of the Board of
Directors.
(d) A majority of the number of directors 2/28/86
fixed by these By-Laws shall constitute a quorum
for the transaction of business. The act of a
majority of the directors present at a meeting
at which a quorum is present shall be the act of
the Board of Directors.
6/18/64 Section 4. Meetings of Directors.
4/25/68 Meetings of the Board of Directors shall be held
12/28/72 at places within or without the State of
2/28/74 Virginia and at times fixed by resolution of the
9/25/80 Board, or upon call by the Chairman by the Board
4/23/92 or by the Vice Chairman of the Board who is most
(eff. senior in service with the Corporation, and the
3/1/94) Secretary or officer performing the Secretary's
duties shall give not less than twenty-four (24)
hours' notice by letter, telegraph or telephone
of all meetings of the directors, provided that
notice need not be given of regular meetings
held at times and places fixed by resolution of
the Board. Meetings may be held at any time
without notice if all of the directors are
present, or if those not present waive notice in
writing either before or after the meeting.
Directors may be allowed by resolution of the
Board, a reasonable fee and expenses for
attendance of all meetings.
9/24/87 Section 5. Nominations. Subject to the
rights of holders of any class or series of
stock having a preference over the common stock
as to dividends or upon liquidation, nominations
for the election of Directors shall be made by
the Board of Directors or a committee appointed
by the Board of Directors or by any stockholder
entitled to vote in the election of Directors
generally. However, any stockholder entitled to
vote in the election of Directors generally may
nominate one or more persons for election as
Directors at a meeting only if written notice of
such stockholder's intent to make such
nomination or nominations has been given, either
by personal delivery or by United States mail,
postage prepaid, to the Secretary of the
Corporation not later than (i) with respect to
an election to be held at an annual meeting of
stockholders, sixty (60) days in advance of such
meeting, and (ii) with respect to an election to
be held at a special meeting of stockholders for
the election of Directors, the close of business
on the seventh day following the date on which
notice of such meeting is first given to
stockholders. Each notice shall set forth: (a)
the name and address of the stockholder who
intends to make the nomination and of the person
or persons to be nominated; (b) a representation
that the stockholder is a holder of record of
stock of the Corporation entitled to vote at
such meeting and intends to appear in person or
by proxy at the meeting to nominate the person
or persons specified in the notice; (c) a
description of all arrangements or
understandings between the stockholder and each
nominee and any other person or persons (naming
such person or persons) pursuant to which the
nomination or nominations are to be made by the
stockholder; (d) such other information
regarding each nominee proposed by such
stockholder as would be required to be included
in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission,
had the nominee been nominated, or intended to
be nominated, by the Board of Directors; and (e)
the consent of each nominee to serve as a
Director of the Corporation if so elected. The
Chairman of the meeting may refuse to
acknowledge the nomination of any person not
made in compliance with the foregoing procedure.
ARTICLE III.
Committees
Section 1. Executive Committee. The
Board of Directors shall, by vote of a majority
6/18/64 of the number of directors fixed by these By-
4/25/68 Laws, designate an Executive Committee which
12/28/72 shall consist of two or more directors,
2/28/74 including the Chairman of the Board, any Vice
9/25/80 Chairman of the Board and the President. The
5/4/83 members of the Executive Committee shall serve
6/27/85 until their successors are designated by the
(eff. Board of Directors or until removed or until the
3/1/94) Executive Committee is dissolved by the Board of
Directors. All vacancies which may occur in the
Executive Committee shall be filled by the Board
of Directors.
1/16/64 Section 2. General Powers. When the
2/28/86 Board of Directors is not in session, the
Executive Committee shall have all power vested
in the Board of Directors by law, except as
otherwise provided in the Virginia Stock
Corporation Act. The Executive Committee shall
report at the next regular or special meeting of
the Board of Directors all action which the
Executive Committee may have taken on behalf of
the Board since the last regular or special
meeting of the Board of Directors.
4/25/68 Section 3. Meetings of the Executive
12/28/72 Committee. Meetings of the Executive Committee
2/28/74 shall be held at such places and at such times
9/25/80 fixed by resolution of the Committee, or upon
4/23/92 call by the Chairman of the Executive Committee
1/31/94 or the Chairman of the Board or by the Vice
Chairman of the Board most senior in service
with the Corporation. Not less than twelve (12)
hours' notice shall be given by letter,
telegraph or telephone of all meetings of the
Executive Committee, provided that notice need
not be given of regular meetings held at times
and places fixed by resolution of the Committee
and that meetings may be held at any time
without notice if all of the members of the
Committee are present or if those not present
waive notice in writing either before or after
the meeting. A majority of the members of the
Executive Committee then serving shall
constitute a quorum for the transaction of
business at any meeting.
3/19/64 Section 4. Bonus, Salary and Stock
5/28/64 Option Committee. The Board of Directors, at
11/18/65 its regular annual meeting, shall designate a
6/22/67 Bonus, Salary and Stock Option Committee which
1/23/69 shall consist of three or more directors who
7/23/87 shall not be eligible for bonus, stock option or
stock appreciation rights. In addition, the
Board at any time may designate one or more
alternate members of such Committee who shall be
directors not eligible for bonus, stock option
or stock appreciation rights who may act in
place of any absent regular member upon
invitation by the Chairman or Secretary of the
Committee.
With respect to bonus, the Bonus, Salary
and Stock Option Committee shall have and may
exercise the powers to determine the amounts
annually available for bonus pursuant to any
bonus plan or formula approved by the Board, to
determine the various bonus awards and to
exercise such further powers with respect to
bonus as may from time to time be conferred by
the Board of Directors.
With respect to salary, Bonus, Salary and
Stock Option Committee shall have and may
exercise the power to fix and determine from
time to time all salaries at a rate in excess of
$6,900 per month or such higher figure as it may
from time to time set as the salary figure for
automatic review for bonus consideration, and
such further powers with respect to salary as
may from time to time be conferred by the Board
of Directors.
The Bonus, Salary and Stock Option
Committee shall exercise such powers with
respect to the retention and fees of consultants
and the continuance of employees in the employ
of the Company past their normal retirement date
as may from time to time be conferred by the
Board of Directors.
The Bonus, Salary and Stock Option
Committee shall administer the Corporation's
Incentive Stock Option Plan (the Plan) and from
time to time may grant consistent with the Plan
stock options and stock appreciation rights.
5/28/64 Section 5. Vacancies and Procedure.
Vacancies in the Bonus and Salary Committee
shall be filled by the Board of Directors, and
members shall be subject to removal by the Board
at any time.
The Bonus and Salary Committee shall fix
its own rules of procedure. A majority of the
number of regular members then serving shall
constitute a quorum; and regular and alternate
members present shall be counted to determine
whether there is a quorum. The Bonus and Salary
Committee shall keep minutes of its meetings,
and all action taken by it shall be reported to
the Board of Directors.
11/26/80 Section 6. Audit Committee. The Board
3/24/88 of Directors at its regular annual meeting shall
designate an Audit Committee which shall consist
of three or more directors whose membership on
the Committee shall meet the requirements set
forth in the rules of the New York Stock
Exchange as amended from time to time.
Vacancies in the Committee shall be filled by
the Board of Directors with directors meeting
the requirements set forth above, giving
consideration to continuity of the committee,
and members shall be subject to removal by the
Board at any time. The Committee shall fix its
own rules of procedure and a majority of the
members serving shall constitute a quorum. The
Committee shall meet at least twice a year with
both the internal and the Corporation's outside
auditors present at each meeting and shall keep
minutes of its meetings and all action taken
shall be reported to the Board of Directors.
The Committee shall review the reports and
minutes of any audit committees of the
Corporation's subsidiaries. The Committee shall
review the Corporation's financial reporting
process, including accounting policies and
procedures. The Committee shall examine the
report of the Corporation's outside auditors,
consult with them with respect to their report
and the standards and procedures employed by
them in their audit, report to the Board the
results of its study and recommend the selection
of auditors for each fiscal year. The Committee
shall also oversee the activities of the
Corporation's internal audit program.
11/26/80 Section 7. Nominating Committee. The
4/23/92 Board of Directors shall designate a Nominating
Committee which shall consist of three or more
directors. The Committee shall make
recommendations to the Board regarding nominees
for election as directors by the stockholders at
each Annual Stockholders' Meeting and make such
other recommendations regarding tenure,
classification and compensation of directors as
the Committee may deem advisable from time to
time. The Committee shall fix its own rules of
procedure and a majority of the members serving
shall constitute a quorum.
Section 8. Other Committees of Board.
The Board of Directors, by resolution duly
adopted, may establish such other committees of
the Board having limited authority in the
management of the affairs of the Corporation as
it may deem advisable and the members, terms and
authority of such committees shall be as set
forth in the resolutions establishing the same.
4/23/92 Section 9. Ex-Officio Members. An
officer designated as an ex officio member of a
Committee shall be entitled to attend meetings,
but shall not have the power to vote unless such
officer is specifically designated as a voting
member of such Committee.
1/16/64 Section 10. Management Committees. The
4/25/68 chief executive officer of the Corporation from
1/22/70 time to time may delegate to the Executive
4/23/92 Committee or any other committee of the Board of
Directors, or to such committees as he may
establish for the purpose, such of his
management functions as chief executive officer
as he may deem advisable in the best interest of
the Corporation. The members, terms, authority
and procedures of such committees in exercising
management functions shall be as designated by
the chief executive officer.
When exercising management functions so
delegated, reports as to action taken by such
committees need not be submitted to the Board
except where the chief executive officer deems
it advisable as a matter of general information.
1/16/64 Section 11. Advisory Committee to Chief
4/25/68 Executive Officer. The Chief Executive Officer
1/22/70 may establish such advisory committees as he may
4/23/92 deem advisable to assist him in the
(eff. administration and management of the business of
3/1/94) the Corporation; such committees shall consist
of officers, employees or consultants to be
appointed by the Chief Executive Officer who
shall serve for such terms and have such
authority as may be designated by the Chief
Executive Officer.
ARTICLE IV.
Officers
Section 1.1 Election. The officers of
the Corporation shall consist of a Chairman of
6/18/64 the Board, a President, one or more Vice
7/26/67 Chairmen of the Board, a Chairman of the
4/25/68 Executive Committee, one or more Vice Presidents
1/22/70 (any one or more of whom may be designated as
12/28/72 Executive Vice Presidents or Senior Vice
2/28/74 Presidents), a Secretary and a Treasurer. In
9/25/80 addition, such other officers as are provided
(eff. for in Section 3 of this Article may from time
3/1/94) to time be elected by the Board of Directors.
All officers shall hold office until the next
annual meeting of the Board of Directors or
until their successors are elected. The
Chairman of the Board, the President, any Vice
Chairman of the Board and the Chairman of the
Executive Committee shall be chosen from among
the directors. Any two officers may be combined
in the same person as the Board of Directors may
determine, except that the President and
Secretary may not be the same person.
2/28/74 Section 2. Removal of Officers;
9/25/80 Vacancies. Any officer of the Corporation may
be removed summarily with or without cause, at
any time by a resolution passed at any meeting
by affirmative vote of a majority of the number
of directors fixed by these By-Laws. Vacancies
may be filled at any meeting of the Board of
Directors.
6/18/64 Section 3. Other Officers. Other
7/26/67 officers may from time to time be elected by the
2/28/74 Board, including one or more Assistant
9/25/80 Secretaries and Assistant Treasurers, and one or
more Divisional Presidents and Divisional Vice
Presidents (any one or more of whom may be
designated as Divisional Executive Vice
Presidents or Divisional Senior Vice
Presidents).
2/28/74 Section 4. Duties. The officers of the
9/25/80 Corporation shall have such duties as generally
pertain to their offices, respectively, as well
as such powers and duties as are hereinafter
provided and as from time to time shall be
conferred by the Board of Directors. The Board
of Directors may require any officer to give
such bond for the faithful performance of his
duties as the Board may see fit.
6/18/64 Section 5. Duties of the Chairman of
4/25/68 the Board. The Chairman of the Board shall be
1/22/70 the chief executive officer of the Corporation
12/28/72 and shall serve as Chairman of the Executive
2/28/74 Committee with the power to vote and, except as
9/25/80 otherwise provided in these By-Laws or the
4/23/92 resolutions establishing such committees, he
(eff. shall be ex officio a member of all other
3/1/94) committees of the Board. He shall preside at
all meetings of the stockholders, the Board of
Directors and the Executive Committee. In the
incapacity or absence of the President, the
Chairman of the Board shall perform the duties
and have the authority of the President. He may
appoint advisory committees as provided in
Section 8 of Article III. He may sign and
execute in the name of the Corporation deeds,
mortgages, bonds, contracts, or other
instruments, except in cases where the signing
and the execution thereof shall be expressly
delegated by the Board of Directors or by these
By-Laws to some other officer or agent of the
Corporation or shall be required by law
otherwise to be signed or executed. In
addition, he shall perform all duties incident
to the office of Chairman of the Board and chief
executive officer and such other duties as from
time to time may be assigned to him by the Board
of Directors.
(eff. Section 6. Duties of any Vice Chairman
3/1/94) of the Board. Each Vice Chairman of the Board
shall perform the duties incident to the office
of the Vice Chairman of the Board and shall have
such other powers and duties as may from time to
time be assigned to him by the Board of
Directors or the Chairman of the Board. The
Vice Chairman of the Board who is most senior in
service with the Corporation shall perform the
duties of the Chairman of the Board in the
absence of the Chairman of the Board. Any Vice
Chairman of the Board may sign and execute in
the name of the Corporation deeds, mortgages,
bonds, contracts and other instruments, except
in cases where the signing and execution thereof
shall be expressly delegated by the Board of
Directors or by these By-Laws to some other
officer or agent of the Corporation or shall be
required by law otherwise to be signed or
executed.
6/18/64 Section 7. Duties of the President.
4/25/68 The President shall be the chief operating
1/22/70 officer and chief administrative officer of the
12/28/72 Corporation, shall be responsible for the
2/28/74 execution of the policies of the Board of
9/25/80 Directors and shall have general direction and
4/23/92 supervision over the business of the Corporation
(eff. and its several officers, subject to the
3/1/94) Chairman of the Board and the Board of
Directors. He shall serve as a member of the
Executive Committee with the power to vote, and
except as otherwise provided in these By-Laws or
the resolutions establishing such committees, he
shall be ex officio a member of all other
committees of the Board. The President may sign
and execute in the name of the Corporation
deeds, mortgages, bonds, contracts or other
instruments, except in cases where the signing
and the execution thereof shall be expressly
delegated by the Board of Directors or by these
By-Laws to some other officer or agent of the
Corporation or shall be required by law
otherwise to be signed or executed. In
addition, he shall perform all duties incident
to the office of the President and such other
duties as from time to time may be assigned to
him by the Board of Directors or the Chairman of
the Board.
4/23/92 Section 8. Duties of the Vice
President. Each Vice President of the
Corporation (including any Executive Vice
President and Senior Vice President) shall have
powers and duties as pertain to the office of
the Vice President and as may from time to time
be assigned to him by the Board of Directors,
the Chairman of the Board, or the President.
When there shall be more than one Vice President
of the Corporation, the Board of Directors may
from time to time designate one of them to
perform the duties of the President in the
absence of the President and the Chairman of the
Board. Any Vice President of the Corporation
may sign and execute in the name of the
Corporation deeds, mortgages, bonds, contracts
or other instruments, except in cases where the
signing and the execution thereof shall be
expressly delegated by the Board of Directors or
by these By-Laws to some other officer or agent
of the Corporation or shall be required by law
otherwise to be signed or executed.
4/25/68 Section 9. Duties of the Treasurer.
12/28/72 The Treasurer shall have charge and custody of
2/28/74 and be responsible for all funds and securities
9/25/80 of the Corporation and shall cause all such
7/26/90 funds and securities to be deposited in such
banks and depositories as the Board of Directors
from time to time may direct. He shall in
general perform all the duties incident to the
office of Treasurer and such other duties as
from time to time may be assigned to him by the
Board of Directors, the Chairman of the Board,
the President, a Vice Chairman of the Board or
the Chairman of the Executive Committee.
7/26/90 Section 10. Duties of the Controller.
The Controller shall maintain adequate accounts
and records of all assets, liabilities and
transactions of the Corporation in accordance
with generally accepted accounting practices;
shall exhibit at the office of the Corporation
his accounts and records to any of the directors
of the Corporation at any time upon request;
shall render such statements of his accounts and
records and such other statements to the Board
of Directors and officers as often and in such
manner as they shall require; and shall make and
file (or supervise the making and filing of) all
tax returns required by law.
4/25/68 Section 11. Duties of the Secretary.
12/28/72 The Secretary shall act as secretary of all
2/28/74 meetings of the Board of Directors, the
9/25/80 Executive Committee and other Committees of the
Board, and the stockholders of the Corporation,
and shall keep the minutes thereof in the proper
book or books to be provided for that purpose.
He shall see that all notices required to be
given by the Corporation are duly given and
served; shall have custody of the seal of the
Corporation and shall affix the seal or cause it
to be affixed to all certificates for stock of
the Corporation and to all documents the
execution of which on behalf of the Corporation
under its corporate seal is duly authorized in
accordance with the provisions of these By-Laws;
shall have custody of all deeds, leases,
contracts and other important corporate
documents; shall have charge of the books,
records and papers of the Corporation relating
to its organization and management as a
Corporation; shall see that the reports,
statements and other documents required by law
(except tax returns) are properly filed; and
shall, in general, perform all the duties
incident to the office of Secretary and such
other duties as from time to time may be
assigned to him by the Board of Directors, the
Chairman of the Board, the President, a Vice
Chairman of the Board or the Chairman of the
Executive Committee.
7/26/67 Section 12. Duties of Divisional
9/25/80 Officers. Divisional Presidents and Divisional
Vice Presidents shall be deemed to be officers
of the Corporation whose duties and authority
shall relate only to the Division by which they
are employed, and they may sign and execute in
the name of the Corporation deeds, mortgages,
bonds, contracts and other instruments
authorized by the Board that relate only to the
business and properties of such Division. Other
divisional officers may be designated from time
to time by the Board of Directors and shall
serve at the pleasure of the Board and have such
duties as may be assigned by the Board. Such
officers shall be officers of the respective
divisions but shall not be deemed to be officers
of the Corporation.
7/26/67 Section 13. Other Duties of Officers.
4/25/68 Any officer of the Corporation shall have, in
12/28/72 addition to the duties prescribed herein or by
2/28/74 law, such other duties as from time to time
9/25/80 shall be prescribed by the Board of Directors,
the Chairman of the Board, the President, a Vice
Chairman of the Board or the Chairman of the
Executive Committee.
ARTICLE V.
Capital Stock
Section 1. Certificates. The shares of
capital stock of the Corporation shall be
evidenced by certificates in forms prescribed by
the Board of Directors and executed in any
manner permitted by law and stating thereon the
information required by law. Transfer agents
and/or registrars for one or more classes of the
stock of the Corporation may be appointed by the
Board of Directors and may be required to
countersign certificates representing stock of
such class or classes. In the event that any
officer whose signature or facsimile thereof
shall have been used on a stock certificate
shall for any reason cease to be an officer of
the Corporation and such certificate shall not
then have been delivered by the Corporation, the
Board of Directors may nevertheless adopt such
certificate and it may then be issued and
delivered as though such person had not ceased
to be an officer of the Corporation.
Section 2. Lost, Destroyed and
Mutilated Certificates. Holders of the stock of
the Corporation shall immediately notify the
Corporation of any loss, destruction or
mutilation of the certificate therefor, and the
Board of Directors may in its discretion cause
one or more new certificates for the same number
of shares in the aggregate to be issued to such
stockholder upon the surrender of the mutilated
certificate or upon satisfactory proof of such
loss or destruction, and the deposit of a bond
in such form and amount and with such surety as
the Board of Directors may require.
Section 3. Transfer of Stock. The
stock of the Corporation shall be transferable
or assignable only on the books of the
Corporation by the holders in person or by
attorney on surrender of the certificate for
such shares duly endorsed and, if sought to be
transferred by attorney, accompanied by a
written power of attorney to have the same
transferred on the books of the Corporation.
The Corporation will recognize, however, the
exclusive right of the person registered on its
books as the owner of shares to receive
dividends and to vote as such owner.
2/28/86 Section 4. Fixing Record Date. For the
purpose of determining stockholders entitled to
notice of or to vote at any meeting of
stockholders or any adjournment thereof, or
entitled to receive payment of any dividend, or
in order to make a determination of stockholders
for any other proper purpose, the Board of
Directors may fix in advance a date as the
record date for any such determination of
stockholders, such date in any case to be not
more than seventy (70) days prior to the date on
which the particular action, requiring such
determination of stockholders, is to be taken.
If no record date is fixed for the determination
of stockholders entitled to notice of or to vote
at a meeting of stockholders, or stockholders
entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or
the date on which the resolution of the Board of
Directors declaring such dividend is adopted, as
the case may be, shall be the record date for
such determination of stockholders. When a
determination of stockholders entitled to vote
at any meeting of stockholders has been made as
provided in this section such determination
shall apply to any adjournment thereof.
ARTICLE VI.
Miscellaneous Provisions
Section 1. Seal. The seal of the
Corporation shall consist of a flat-face
circular die, of which there may be any number
of counterparts, on which there shall be
engraved in the center of the words
"Incorporated - February 15, 1887" and between
two concentric circles around the margin the
words "Ethyl Corporation - A Virginia
Corporation".
7/18/63 Section 2. Fiscal Year. The fiscal
year of the Corporation shall end on December
31st in each year, and shall consist of such
accounting periods as may be recommended by the
Treasurer and approved by the Executive
Committee.
Section 3. Books and Records. The
Corporation shall keep correct and complete
books and records of account and shall keep
minutes of the proceedings of its stockholders
and Board of Directors; and shall keep at its
registered office or principal place of
business, or at the office of its transfer agent
or registrar a record of its stockholders,
giving the names and addresses of all
stockholders, and the number, class and series
of the shares being held.
Any person who shall have been a
stockholder of record for at least six months
immediately preceding his demand or who shall be
the holder of record of at least five per cent
(5%) of all the outstanding shares of the
Corporation, upon written demand stating the
purpose thereof, shall have the right to
examine, in person, or by agent or attorney at
any reasonable time or times, for any proper
purpose, its books and records of account,
minutes and records of stockholders and to make
extracts therefrom. Upon the written request of
any stockholder, the Corporation shall mail to
such stockholder its most recent published
financial statements showing in reasonable
detail its assets and liabilities and the
results of its operations.
The Board of Directors shall, subject to
provisions of the foregoing paragraph of this
section, to the provisions of Section 7 of
Article I and to the laws of the State of
Virginia, have power to determine from time to
time whether and to what extent and under what
conditions and limitations the accounts, records
and books of the Corporation, or any of them,
shall be open to the inspection of the
stockholders.
Section 4. Checks, Notes and Drafts.
Checks, notes, drafts and other orders for the
payment of money shall be signed by such persons
as the Board of Directors from time to time may
authorize. When the Board of Directors so
authorizes, however, the signature of any such
person may be a facsimile.
Section 5. Amendment of By-Laws. These
By-Laws may be amended or altered at any meeting
of the Board of Directors by affirmative vote of
a majority of the number of directors fixed by
these By-Laws. The stockholders entitled to
vote in respect of the election of directors,
however, shall have the power to rescind, alter,
amend or repeal any By-Laws and to enact By-Laws
which, if expressly so provided, may not be
amended, altered or repealed by the Board of
Directors.
1/16/64 Section 6. Voting of Stock Held.
4/25/68 Unless otherwise provided by resolution of the
12/28/72 Board of Directors or of the Executive
2/28/74 Committee, the Chairman of the Board, and Vice
9/25/80 Chairman of the Board or the President shall
4/23/92 from time to time appoint an attorney or
1/31/94 attorneys or agent or agents of this
(eff. Corporation, in the name and on behalf of this
3/1/94) Corporation, to cast the vote which this
Corporation may be entitled to cast as a
stockholder or otherwise in any other
corporation, any of whose stock or securities
may be held by this Corporation, at meetings of
the holders of the stock or other securities of
such other corporation, or to consent in writing
to any action by any of such other corporation,
and shall instruct the person or persons so
appointed as to the manner of casting such votes
or giving such consent and may execute or cause
to be executed on behalf of this Corporation and
under its corporate seal or otherwise, such
written proxies, consents, waivers or other
instruments as may be necessary or proper in the
premises; or, in lieu of such appointment, the
Chairman of the Board or the Vice Chairman of
the Board who is most senior in service with the
Corporation may attend in person any meetings of
the holders of stock or other securities of any
such other corporation and there vote or
exercise any or all power of this Corporation as
the holder of such stock or other securities of
such other corporation.
9/24/87 Section 7. Restriction on Transfer. To
5/26/88 the extent that any provision of the Rights
Agreement between the Corporation and Sovran
Bank, N.A., as Rights Agent, dated September 24,
1987, is deemed to constitute a restriction on
the transfer of any securities of the
corporation, including without limitation, the
Rights, as defined therein, such restriction is
hereby authorized by the By-Laws of the
corporation.
2/14/89 Section 8. Control Share Acquisitions
Statute. Article 14.1 of the Virginia Stock
Corporation Act ("Control Share Acquisitions")
shall not apply to acquisitions of shares of
this Corporation.
EXHIBIT 4.1
EXTENSION AGREEMENT dated as of March 1, 1995,
relating to the Competitive Advance and Revolving
Credit Facility Agreement dated as of February 16,
1994 (as amended, modified, extended or restated
from time to time, the "Credit Agreement"), among
ETHYL CORPORATION, a Virginia corporation (the
"Company"), the Banks listed in Schedule 2.01 to
the Credit Agreement (the "Banks"), CHEMICAL BANK,
a New York banking corporation, as administrative
agent for the Banks under the Credit Agreement
(the "Administrative Agent") and NATIONSBANK, N.A.
(CAROLINAS) (formerly known as NationsBank of North
Carolina, N.A.), a national banking association, as
co-agent (in such capacity, the "Co-Agent").
WHEREAS, the Banks have established a $500,000,000 credit facility for
the benefit of the Company pursuant to the terms of the Credit Agreement;
WHEREAS, in accordance with the provisions of Section 2.10(d) of the
Credit Agreement, upon the consent of Banks holding a majority in amount of
the Commitments, the Maturity Date with respect to such consenting Banks will
be extended to the first anniversary date of the Maturity Date now in effect;
and
WHEREAS, the Company has requested an extension of the Maturity Date from
February 16, 1999 to February 16, 2000 in accordance with the terms of
Section 2.10(d) of the Credit Agreement;
NOW THEREFORE, in consideration of the mutual agreements contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to them in the Credit Agreement.
Section 1.02 of the Credit Agreement shall apply to this Agreement.
SECTION 2. Extension of Maturity Date. Each of the undersigned Banks
hereby consents to the extension of the Maturity Date from February 16, 1999
to February 16, 2000. Upon the consent to such extension by Banks holding
a majority in amount of the Commitments, the Maturity Date, with respect to
such consenting Banks, shall be extended to February 16, 2000. The Maturity
Date shall remain unchanged (a) as to any non-consenting Bank, in the event
Banks holding a majority in amount of the Commitments shall consent to such
extension, and (b) as to all Banks, in the event that Banks holding less than
a majority in amount of the Commitments shall consent to such extension.
Failure by a Bank to consent to this extension may give rise to certain
rights by the Company to replace such Bank as provided in Section 2.10(d)
of the Credit Agreement.
SECTION 3. Waiver of Notice Period. Each of the undersigned Banks hereby
agrees to waive the 60-day notice requirement set forth in Section 2.10(d) of
the Credit Agreement.
SECTION 4. Expenses. The Company agrees to reimburse the Administrative
Agent for its reasonable out-of-pocket expenses in connection with this
Agreement, including the reasonable fees, charges and disbursements of
Cravath, Swaine & Moore, counsel for the Administrative Agent.
SECTION 5. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract, and shall become
effective as provided in Section 7.
SECTION 6. Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York.
SECTION 7. Effectiveness. This Agreement shall become effective as of
the date first above written when the Administrative Agent shall have received
counterparts of this Agreement which, when taken together, bear the signatures
of the Company and Banks holding a majority in amount of the Commitments.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers as of the day and
year first above written.
ETHYL CORPORATION
by /s/ Charles B. Walker
Name: Charles B. Walker
Title: Vice Chairman
CHEMICAL BANK,
acting individually and as
Administrative Agent,
by /s/ Timothy J. Storms
Name: Timothy J. Storms
Title: Managing Director
NATIONSBANK, N.A. (CAROLINAS),
acting individually and as Co-Agent,
by /s/ Robert Y. Bennett
Name: Robert Y. Bennett
Title: Senior Vice President
THE BANK OF NEW YORK,
by /s/ Alan F. Lyster, Jr.
Name: Alan F. Lyster, Jr.
Title: Vice President
BANK BRUSSELS LAMBERT, NEW YORK
BRANCH,
by /s/ Eric Hollanders
Name: Eric Hollanders
Title: Senior Vice President
Credit Department
by /s/ Craig Hallsteen
Name: Craig Hallsteen
Title: Vice President
CENTRAL FIDELITY NATIONAL BANK,
by /s/ Harry A. Turton, Jr.
Name: Harry A. Turton, Jr.
Title: Vice President
BANK OF AMERICA ILLINOIS
by /s/ Glenn F. Edwards
Name: Glenn F. Edwards
Title: Vice President
CORESTATES BANK, N.A.,
by /s/ James P. Richards
Name: James P. Richards
Title: Vice President
CREDIT LYONNAIS ATLANTA AGENCY,
by /s/ David M. Cawrse
Name: David M. Cawrse
Title: Vice President
CREDIT LYONNAIS CAYMAN ISLAND BRANCH,
by /s/ David M. Cawrse
Name: David M. Cawrse
Title: Authorized Signature
CREDIT SUISSE,
by /s/ Craig
Name: Geoffrey M. Craig
Title: Member of Senior Management
by /s/ K. R. Kristinsson
Name: Kristinn R. Kristinsson
Title: Associate
CRESTAR BANK
by /s/ Christopher B. Werner
Name: Christopher B. Werner
Title: Vice President
FIRST UNION NATIONAL BANK OF
VIRGINIA,
by /s/ L. S. Cundiff
Name: Leslie S. Cundiff
Title: Senior Vice President
THE LONG-TERM CREDIT BANK OF
JAPAN, LIMITED, NEW YORK BRANCH,
by /s/ S. Otsubo
Name: Satoru Otsubo
Title: Joint General Manager
MELLON BANK, N.A.,
by /s/ James S. Adelsheim
Name: James S. Adelsheim
Title: Vice President
THE MITSUBISHI BANK, LTD.,
NEW YORK BRANCH,
by /s/ J. B. Meredith
Name: J. B. Meredith
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
by /s/ David B. Common
Name: D. Common
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
by /s/ Gary Tyrrell
Name: Gary Tyrrell
Title: Vice President
ROYAL BANK OF CANADA,
by /s/ John Crawford
Name: John Crawford
Title: Senior Manager
SHAWMUT BANK, N.A.,
by /s/ J. P Raffert
Name: John P. Raffert
Title: Director
SIGNET BANK/VIRGINIA,
by /s/ Donald J. Mathews
Name: Donald J. Mathews
Title: Vice President
SOCIETE GENERALE,
by /s/ Ralph Saheb
Name: Ralph Saheb
Title: Vice President
SWISS BANK CORPORATION,
NEW YORK BRANCH,
by /s/ Stephanie W. Kim
Name: Stephanie W. Kim
Title: Associate Director Merchant Banking
by /s/ Nicolas T. Erni
Name: Nicolas T. Erni
Title: Credit Risk Management
TORONTO DOMINION (NEW YORK), INC.,
by /s/ Debbie A. Greene
Name: Debbie A. Greene
Title: Vice President
WACHOVIA BANK OF NORTH CAROLINA, N.A.,
by /s/ Christopher L. Fincher
Name: Christopher L. Fincher
Title: Vice President
EXHIBIT 11.1
ETHYL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
for the years ended December 31, 1994, 1993 and 1992
(In thousands except per share amounts)
<TABLE>
<CAPTION>
1994 1993 1992
<S>
Income before extraordinary item, cumulative
effect of accounting changes and <C> <C> <C>
discontinued insurance operations $ 97,755 $ 90,022 $107,245
Extraordinary item - (5,000) -
Cumulative effect of accounting changes - - (14,732)
Income before discontinued insurance operations 97,755 85,022 92,513
Income from discontinued insurance operations - 90,483 162,472
Net income 97,755 175,505 254,985
Less preferred stock dividends
First Preferred:
6% Series A, $6.00 per share (12) (12) (12)
Net income applicable to common stock 97,743 175,493 254,973
Average number of shares of common stock outstanding 118,427 118,382 118,329
Shares issuable upon the assumed exercise of
outstanding stock options (1) 24 54 51
Shares of common stock and common stock
equivalents (1) (2) 118,451 118,436 118,380
Earnings per share: (3)
Income before extraordinary item, cumulative
effect of accounting changes and
discontinued insurance operations $0.83 $0.76 $0.90
Extraordinary item - (0.04) -
Cumulative effect of accounting changes - - (0.12)
Income before discontinued insurance operations 0.83 0.72 0.78
Income from discontinued insurance operations - 0.76 1.37
Net income (3) $0.83 $1.48 $2.15
</TABLE>
Notes:
(1) For fully-diluted earnings per share, the shares issuable upon the
assumed exercise of outstanding stock options would be 26, 58,
and 57 in 1994, 1993, and 1992, respectively, and the shares of
common stock equivalents would have been 118,453, 118,440, and
118,386, respectively.
(2) To determine the average number of shares of common stock and
common stock equivalents, the average number of common shares
and common stock equivalents outstanding (actual or assumed for
equivalents) during each month were added together and the sum
was then divided by 12.
(3) Primary earnings per share and fully-diluted earnings per share
are the same amounts.
EXHIBIT 11.2
ETHYL CORPORATION AND SUBSIDIARIES
COMPUTATION OF PRO-FORMA EARNINGS PER SHARE
for the years ended December 31, 1994, 1993 and 1992
(In thousands except per share amounts)
At the close of business on February 28, 1994, Ethyl completed the
spin-off of its wholly owned subsidiary, Albemarle, in the form of a
tax-free stock dividend. Following the spin-off, Albemarle owns,
directly or indirectly, the olefins and derivatives, bromine chemicals
and specialty chemical businesses formerly owned directly or indirectly
by the Company. As a result of the aforementioned distribution, the
Company believes that the following PRO FORMA financial information is
important to enable the reader to obtain a meaningful understanding of
the Company's results of operations. The PRO FORMA information is
presented to illustrate the estimated effects of the distribution of
Albemarle on Ethyl on a stand-alone basis and may not necessarily
reflect the future results of operations of Ethyl or what the earnings
or results of operations of Ethyl would have been had Albemarle operated
as a separate, independent company.
<TABLE>
1994 1993 1992
<S> <C> <C> <C>
Pro-forma income before extraordinary item, cumulative
effect of accounting changes and
discontinued insurance operations $91,479 $74,176 $72,418
Average number of shares of common stock outstanding 118,427 118,382 118,329
Shares issuable upon the assumed exercise of
outstanding stock options (1) 24 54 51
Shares of common stock and common stock
equivalents (1) (2) 118,451 118,436 118,380
Pro-forma earnings per share: (3)
Income before extraordinary item, cumulative effect of
accounting changes and discontinued insurance operations $0.78 $0.63 $0.61
</TABLE>
Notes:
(1) For fully-diluted earnings per share, the shares issuable upon the
assumed exercise of outstanding stock options would be 26, 58,
and 57 in 1994, 1993, and 1992, respectively, and the shares of
common stock equivalents would have been 118,453, 118,440, and
118,386, respectively.
(2) To determine the average number of shares of common stock and
common stock equivalents, the average number of common shares
and common stock equivalents outstanding (actual or assumed for
equivalents) during each month were added together and the sum
was then divided by 12.
(3) Primary earnings per share and fully-diluted earnings per share
are the same amounts.
1994 FINANCIAL REVIEW
During 1994 and 1993, the Company completed certain actions in positioning
itself as a highly focused maker and marketer of petroleum additives to
customers around the world. The steps taken to sharpen its focus and streamline
its organization are significant and affect the financial results and the year-
to-year comparisons. The following Financial Review describes these actions and
financial activities.
On September 15, 1994, the Company sold its wholly owned pharmaceuticals
subsidiary, Whitby, Inc. Earlier in the year the Company completed the tax-free
spin-off of its wholly owned subsidiary, Albemarle Corporation (Albemarle), at
the close of business on February 28, 1994, which included the operations of the
olefins and derivatives, bromine chemicals and specialty chemicals businesses.
The results of both the pharmaceuticals subsidiary and Albemarle are included in
the consolidated results through those dates.
The Company also completed the tax-free spin-off of its approximately 80%
interest in First Colony Corporation (First Colony) on July 1, 1993, which
included the operations of First Colony Life Insurance Company and subsidiaries.
The accounts and operations of the Insurance segment are reported as
"Discontinued Insurance Operations" through that date.
The completion of these transactions places the Company solely in the
petroleum additives business and permits it to devote its time and energies to
developing and expanding the fuel and lubricant additive lines.
In the following review, in addition to the consolidated information
discussed for 1994 versus 1993 and 1993 versus 1992, PRO FORMA information is
provided and discussed for 1994 versus 1993 to illustrate the Company's results
without the results of the businesses spun off. PRO FORMA financial statements
are also provided as supplementary financial information on page 35.
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
Net Sales
Consolidated net sales for 1994 were $1.17 billion, down from $1.94 billion
in 1993. The reduction in net sales resulted primarily from only two months of
Albemarle sales being included in 1994 versus 12 months included in 1993.
On a PRO FORMA basis, without the spun-off businesses, net sales for 1994
would have been $1.02 billion, down about $16 million (2%) from $1.03 billion in
1993. The decrease in PRO FORMA net sales reflected the effect of the sale of
the pharmaceuticals business in September, with pharmaceutical revenues
decreasing about $23 million, partially offset by about $7 million in higher
sales revenue from fuel and lubricant additives. The increase in fuel and
lubricant additives net sales reflects about $42.8 million from sales price
increases, partially offset by $35.9 million from lower shipments.
Fuel additives (excluding antiknocks) revenues increased due to higher
shipments. Lubricant additives sales were somewhat higher due to higher selling
prices, largely offset by lower shipments of components. The increases in
lubricant and fuel additives selling prices represented general industry price
increases announced in late 1993 to cover higher material, environmental and
product-technology costs. Lead antiknock sales were about even with the prior
year, as the effect of lower shipments was substantially offset by higher
selling prices.
Costs & Expenses
Consolidated cost of goods sold in 1994 decreased to $776.5 million from
$1.39 billion in 1993. The decline in consolidated cost of goods sold primarily
reflected the inclusion of only two months of Albemarle costs of goods sold in
1994 versus 12 months in 1993 as well as the absence of pharmaceuticals cost of
goods sold following the September sale of this business.
On a PRO FORMA basis, cost of goods sold in 1994 would have been $657.4
million down about $17.9 million (3%) from $675.3 million in 1993. About $10.7
million of the decrease reflected the impact of lower antiknock and lubricant
additive shipments, partly offset by higher costs of goods sold per unit and
increased fuel additives shipments. The absence of pharmaceuticals cost of goods
sold following the sale of this business also contributed about $5.7 million to
the reduction of cost of goods sold.
Lubricant additives cost of goods sold reflected higher costs per unit due
in part to start-up costs of $7.7 million associated with the construction and
completion of new and expanded lubricant additives manufacturing facilities to
replace production now provided by Amoco under a short-term supply agreement,
partly offset by higher costs incurred in 1993 resulting from an inventory-
reduction program. Lead antiknock costs were higher due to product sourcing.
On a PRO FORMA basis, average raw material unit costs were slightly lower in
1994 than in 1993. Process oils and polybutene costs were lower, but olefin
costs increased, and other raw material unit costs were mixed. Average energy
costs were mixed, with natural gas prices lower in 1994 than in 1993, while
electricity costs remained stable.
PRO FORMA gross profit margin increased to 35.5% in 1994 from 34.8% in 1993,
primarily due to improvements in lubricant additives as well as in lead
antiknocks.
Consolidated selling, general and administrative expenses including
research, development and testing expenses decreased to $227.1 million in 1994
from $348.4 million in 1993 primarily reflecting the effect of the spin-off of
Albemarle. The discontinuance of pharmaceuticals research operations of Whitby
Research, Inc., at the end of 1993 as well as the absence of Whitby, Inc.,
expenses following the September sale also contributed to the decline.
On a PRO FORMA basis, selling, general and administrative expenses,
including research, development and testing expenses, would have been $204
million in 1994, down $7.9 million (4%) from $211.9 in 1993. The decrease
primarily reflects an $8.4-million effect from the discontinuance of the
pharmaceutical research operations of Whitby Research, Inc., at the end of 1993,
and a decline of $12.2 million of Whitby, Inc., expenses reflecting the sale of
the pharmaceutical business in September 1994. These decreases were offset
partly by a $6.4-million increase in research, development and testing expenses
for petroleum additives and higher expenses for outside consulting. The benefit
of the work-force-reduction program implemented at the end of 1993 was largely
offset by increases in other employee-related costs. As a percentage of PRO
FORMA net sales, selling, general and administrative expenses, including
research, development and testing expenses decreased to 20% in 1994 from 20.5%
in 1993.
Special Charges
The $2.7 million of special charges in 1994 ($1.7 million after income
taxes, or $.01 per share) consist of an $8-million provision for environmental
remediation as well as $2.7 million in other nonrecurring charges, largely
offset by an $8million benefit from a legal settlement.
The $36.1 million of consolidated special charges in 1993 ($22.4 million
after income taxes, or $.19 per share) include provisions for corporate
downsizing, plant write-down and related costs. The PRO FORMA special charges in
1993 would have amounted to $28.8 million ($17.8 million after income taxes or
$.15 per share) consisting primarily of a charge of $14.2 million related to the
decision to cease production at the Canadian antiknock facility in 1994
(including an $11.4 million noncash charge for write-down of facilities as well
as severance and other related costs), a $6-million charge covering downsizing
costs of Whitby Research, Inc., prior to its sale in April 1994, and an $8.6-
million charge for various early-retirement and other work-force-reduction
programs affecting approximately 175 employees in the petroleum additives and
corporate staffs in the U.S. and Europe as well as relocation costs for certain
research and development and administrative groups. All of the early retirements
and work-force reductions were completed in early 1994, and substantially all of
the relocations were completed by year-end 1994.
Operating Profit
Consolidated operating profit in the 1994 period was essentially even with
the 1993 period. However, 1994 included only two months of Albemarle operating
profit compared to 12 months in 1993. Operating profit also reflected the impact
of special charges of $2.7 million in 1994 versus $36.1 million in 1993.
On a PRO FORMA basis, operating profit in the 1994 period would have shown
an increase of $36 million, or 30% from 1993, of which $26.1 million was due to
lower special charges in 1994 than in 1993. Excluding the effects of these
special charges, PRO FORMA operating profit in 1994 increased 7% from 1993,
primarily due to higher profit in lubricant additives, reflecting higher margins
primarily resulting from higher selling prices and improved product mix, as well
as higher pharmaceuticals profit due to the year-end 1993 shutdown of Whitby
Research, Inc. This was partly offset by lower fuel additives profit due to
lower margins reflecting higher research, development and testing expenses for
this product line. Lead antiknock profit in 1994 improved over 1993, excluding
the effect of special charges, primarily because of higher margins in 1994.
Further discussion of the lead antiknock profit contribution is covered under
Information About Significant Product Lines beginning on page 19.
Interest & Financing Expenses
Consolidated interest and financing expenses in 1994 decreased 42% from the
1993 period primarily reflecting the reduction of interest expense resulting
from the debt transferred to Albemarle as part of the spin-off. On a PRO FORMA
basis, 1994 interest and financing expenses would have decreased $4.2 million
(16%) from 1993 due to a $2.2 million increase in interest capitalized in 1994
and a $9.6-million benefit from a lower average interest rate in 1994 due to the
early redemption of the Company's 93/8% Sinking Fund Debentures in December
1993, partly offset by an increase in interest of about $7.6 million reflecting
higher average debt outstanding during the 1994 period.
Other Expenses (Income), Net
Consolidated other expenses (income), net amounted to $1.2 million expense
in 1994 versus $10 million income in 1993. On a PRO FORMA basis, other expenses
would have been $1.8 million in 1994 versus $8.3 million income in 1993. The
reduction in other income on both a consolidated and PRO FORMA basis primarily
results from the inclusion in 1993 of a gain of about $5.9 million on the sale
of a financial-services subsidiary as well as lower interest income and certain
charges associated with the sale of Whitby, Inc., in 1994.
Income Taxes
Consolidated income-tax expense in 1994 was essentially even with 1993,
reflecting a lower 1994 effective tax rate (30.7% in 1994 versus 32.6% in 1993)
on a 6% increase in income before income taxes, extraordinary item and
discontinued insurance operations. On a PRO FORMA basis, income taxes in 1994
would have increased 48%, reflecting a 30% increase in income before income
taxes, extraordinary item and discontinued insurance operations, as well as a
higher effective income tax rate (30% in 1994 versus 26.2% in 1993). Both the
consolidated and PRO FORMA effective tax rates reflected various tax benefits
(1994 - from the sale of Ethyl's pharmaceuticals subsidiary, Whitby, Inc.; 1993
- from the downsizing of Whitby Research, Inc., and from the sale of a
financial-services subsidiary). The 1993 rates also included one-time charges
from the 1993 tax legislation and also reflected the absence of a tax benefit on
operating losses of the Company's former Belgian subsidiary, which was included
as part of the spin-off of Albemarle. (See Note 16 of Notes to Financial
Statements beginning on page 41 for details of changes in consolidated effective
income-tax rates.)
Discontinued Insurance Operations
The Company spun off its approximately 80% interest in First Colony on July
1, 1993. Accordingly, no income from the insurance operations was reported in
the 1994 period, whereas $90.5 million was reported in the 1993 period.
1993 COMPARED TO 1992
Net Sales
Consolidated net sales for 1993 increased $245.8 million (15%) to $1.94
billion from $1.69 billion in 1992. The increase included $222.5 million from
higher shipments and $23.3 million from higher selling prices. The increased
shipments primarily reflected the acquisitions of Amoco's petroleum additives
business in June 1992, a lubricant additives business in Japan at the end of
1992 (which increased net sales about $62 million) and the organic and inorganic
brominated compounds business of Potasse et Produits Chimiques (PPC) in February
1993 (which increased net sales about $71 million). Additional increases were
due to higher shipments of linear and poly alpha olefins and zeolites, partially
offset by lower selling prices. Shipments of flame retardants and pharmaceutical
products also were higher. Revenues from lead antiknocks were down due to lower
shipments, as expected, partly offset by higher selling prices.
Costs & Expenses
Consolidated cost of goods sold in 1993 increased $187.2 million (16%), to
$1.39 billion from $1.20 billion in 1992 primarily due to increased shipments,
mainly reflecting the impact of acquisitions in 1992 and 1993 (discussed
earlier). Other significant factors were higher operating costs (including
depreciation of the new Belgian linear alpha olefin facility) due to low
capacity utilization at the Feluy, Belgium, and Houston, Texas, olefin
manufacturing facilities and higher maintenance and repair expenses ($96.9
million in 1993 versus $83.5 million in 1992) resulting partly from scheduled
plant turnarounds at Feluy and Houston and $8 million higher environmental
expenses, of which $4.4 million related to the operation of newly acquired
facilities. These items were partly offset by slightly lower per-unit raw
material costs, the nonrecurrence of $12.7 million of start-up costs in 1992 at
the new linear alpha olefin facility in Feluy and a favorable foreign exchange
effect. In addition, lead antiknock product costs were lower because of product
source (a higher percentage of lower-cost, self-produced product was sold in
1993 than in 1992, when a larger quantity and higher percentage of purchased
material was sold).
Average raw-material unit costs decreased during 1993 from 1992. Ethylene,
process oil, aluminum metal, 2-ethyl-1-hexanol and isobutylene costs were lower.
Polybutene costs were higher. Average energy unit costs were mixed.
Natural gas prices were higher in 1993 than in the prior year, but
electricity costs were lower.
Gross profit margin decreased to 28.5% in 1993 from 29.2% in 1992 primarily
due to continuing high costs at the olefin manufacturing facilities as well as
the impact of low profit margins from the PPC operations, which reflected the
recession in Europe.
Consolidated selling, general and administrative expenses combined with
research, development and testing expenses in 1993 were $348.4 million, an
increase of 12% over 1992. The increase reflected the impact of the PPC and
petroleum additives acquisitions, a $15.3-million increase in research,
development and testing expenses, a $10.4-million increase in employee-related
expenses and a $5.2-million increase in expenses for outside consulting,
partially offset by the favorable effect of foreign-exchange rates and the $1.6-
million recovery of prior years' legal fees resulting from settlement of a
lawsuit in 1993. The additional research, development and testing expenses are
due mainly to changes in the lubricant additives market and efforts to integrate
the lubricant additives products and technologies acquired from Amoco in 1992.
Consolidated selling, general and administrative and research, development
and testing expenses as a percentage of consolidated net sales decreased
slightly to 18% in 1993 from 18.3% in 1992.
Special Charges
Consolidated special charges in 1993 amounted to $36.1 million ($22.4
million after income taxes, or $.19 per share), while 1992 had a special charge
of $9.5 million ($6 million after income taxes, or $.05 per share).
The major components of the 1993 special charges included $14.2 million
related to ceasing production at Ethyl's Canadian subsidiary's lead antiknock
facility (of which $11.4 million was a noncash write-down of facilities), $6
million for downsizing costs of Whitby Research, Inc., $8.3 million for
relocation of employees primarily in petroleum additives and other related costs
as well as $7.6 million for work-force reductions in the U.S. and Europe. The
work-force reductions and relocations were expected to be completed during 1994.
In 1992 the special charge included estimated relocation and related
expenses in connection with the transfer of Petroleum Additives Division R&D
personnel from St. Louis, Missouri, to Richmond, Virginia, which was expected to
be completed after the mid-1994 opening of the new research facilities.
Operating Profit
Consolidated operating profit in 1993 decreased 4% from 1992. However, 1993
included special charges of $36.1 million (discussed previously), while 1992
included a special charge of $9.5 million (also discussed previously). Excluding
the effects of these special charges, 1993 operating profit increased 11% from
1992. The increase was due to higher lubricant additives profit mainly
reflecting the increased 1993 volumes resulting from 1992 acquisitions, partly
offset by higher operating costs resulting from an inventory-reduction program;
higher antiknock profit mainly reflecting lower product costs; higher profit
from fuel additives other than antiknocks, primarily due to higher shipments
partly resulting from 1992 acquisitions; improved poly alpha olefin results
reflecting higher shipments and operating margins; higher zeolite profit due
mainly to additional volume; and a favorable foreign-exchange impact. Partly
offsetting factors were lower linear alpha olefin profit due to higher operating
costs, offset in part by higher shipments; lower alcohols profit due to lower
shipments and margins; lower bromine chemicals profit due to lower selling
prices and higher product costs; and lower pharmaceutical-intermediates profit
primarily due to lower margins offset in part by higher shipments.
Interest & Financing Expenses
Consolidated interest and financing expenses in 1993 decreased $18.2 million
(29%) from 1992, of which about $15.5 million was due to lower average
outstanding long-term debt, with the remainder primarily reflecting slightly
lower average interest rates (7.2% in 1993 versus 7.5% in 1992).
Other Income, Net
Consolidated other income, net, increased to $10 million from $1.5 million
in 1992 primarily due to a gain of about $5.9 million on the sale in 1993 of a
financial-services subsidiary. Also, 1992 other income reflected $1.8 million in
losses on non-operating assets.
Income Taxes
Consolidated income-tax expense in 1993 decreased 56% from 1992, reflecting
a 35% reduction in pretax income before extraordinary item, cumulative effect of
accounting changes and discontinued insurance operations as well as a lower
effective income-tax rate (32.6% in 1993 versus 48.1% in 1992). The 1993 rate
reflected a deferred-tax benefit (realized in 1994) in connection with the down-
sizing of Whitby Research in addition to other favorable tax credits, which were
partly offset by (1) the absence of a tax benefit in 1993 on significant
operating losses of the Company's Belgian subsidiary and (2) a nonrecurring
deferred-tax charge in 1993 and additional taxes on the first-half 1993 earnings
of the spun-off insurance business resulting from 1993 Federal income-tax
legislation. In addition, the 1992 rate reflected a high tax rate on the gain on
the sale of 20% of the Company's interest in First Colony due to a lower tax
basis than book basis.
See Note 16 of Notes to Financial Statements on Page 41 for details of
changes in effective income-tax rates.
Extraordinary Item
In December 1993, the Company redeemed its $116.25-million 93/8% Sinking
Fund Debentures at a premium, resulting in an after-tax charge of $5 million
($.04 per share).
Discontinued Insurance Operations
The Company's interest in First Colony's income after income taxes decreased
44% to $90.5 million in 1993 from $162.5 million in 1992. The decline resulted
from the spin-off of the Company's 80% interest in First Colony on July 1, 1993,
whereby six months of income was reported in the 1993 period versus 12 months of
income from the Company's then-100% interest in the discontinued insurance
operations that was reported in the 1992 period.
Accounting Changes
In the fourth quarter of 1992, the Company changed its method of accounting
for postretirement health benefits and its method of accounting for deferred
income taxes, both retroactive to January 1, 1992, in accordance with FASB
Statement Numbers 106 and 109, respectively.
By changing to the accrual method of accounting for postretirement health
benefits, the Company recognized a consolidated cumulative noncash charge of
$54.5 million, or $34.3 million, net of income taxes, and increased its 1992
annual consolidated expenses to approximately $7.1 million from $3.1 million. By
changing its method of accounting for income taxes, the Company also decreased
its deferred income-tax liability and increased consolidated net income by $19.6
million. The combined cumulative net charge amounted to $14.7 million ($.12 per
share). (See Notes 15 and 16 of Notes to Financial Statements beginning on page
39 for details.)
INFORMATION ABOUT SIGNIFICANT PRODUCT LINES
Lead antiknock compounds, which are sold worldwide to petroleum refiners,
remain one of the Company's most significant product lines. The Company
estimates that it accounts for approximately one-third of the total worldwide
sales of lead antiknock compounds.
Lead antiknock compounds have been subject to regulations restricting the
amount of the product that can be used in gasoline in the United States since
the 1970s and in Canada since 1990. The North American market for these products
in motor vehicles has effectively been eliminated, but the market for their use
in piston aircraft and certain other applications has remained at about the same
level for years and is expected to remain stable. As the Company has fore-cast
and planned, the market for these products in other major markets, particularly
Western Europe, continues to decline as the use of unleaded gasoline grows.
The contribution of lead antiknock compounds to the Company's consolidated
net sales was about 22% in 1994, 13% in 1993 and about 16% in 1992. The lead
antiknock profit contribution to the Company's consolidated operating profit,
excluding allocation of corporate expenses, is estimated to have been 56% in
1994, 49% in 1993 and 50% in 1992. Excluding the 1994 environmental special
charge, the 1994 lead antiknock profit contribution would have been about 58%.
Excluding the 1993 special charges related to the planned cessation of lead
antiknock compound production at the Company's Canadian subsidiary's plant, the
1993 lead antiknock profit contribution would have been about 52%.
On a PRO FORMA basis, the contribution of lead antiknock compounds to net
sales would have been 25% in 1994, 25% in 1993 and 32% in 1992. The contribution
to operating profit would have been 60% in 1994, 70% in 1993 and 79% in 1992 on
a PRO FORMA basis. Excluding the 1994 and 1993 special charges, the contribution
to PRO FORMA operating profit would have been 62% in 1994 and 72% in 1993. In
recent years, the Company has been able to offset a continuing decline in
shipments of lead antiknock compounds with higher margins due primarily to
increases in selling prices. Any further decline in the use of lead antiknocks
would adversely affect such sales and profit contributions unless the Company
can offset such declines with higher margins.
Prior to March 1994, the Company produced a portion of its lead antiknock
requirements at its Canadian subsidiary's plant, and prior to July 1994 the
Company obtained additional quantities under a supply agreement with E. I.
DuPont de Nemours & Company. On January 11, 1994, the Company announced an
agreement with The Associated Octel Company Limited (Octel) of London under
which Octel has agreed to allocate a portion of its production capacity of lead
antiknock compounds to Ethyl for sale and distribution through the Company's
worldwide network, and, as a result, the Company's Canadian subsidiary ceased
production of lead antiknock compounds near the end of March 1994. The Octel
agreement continues as long as Ethyl determines that a market continues to exist
for lead antiknock compounds. Under the agreement with Octel, the Company has
the right to purchase from Octel antiknock compounds that the Company estimates
will be sufficient to cover its needs in any contract year. Purchases are at a
fixed initial price per pound with periodic escalation and adjustments.
In addition to the supply agreement, Octel and Ethyl agreed that Ethyl will
distribute for Octel any of its lead antiknock compounds that are shipped in
bulk aboard oceangoing vessels.
The Company believes the agreements with Octel assure it of an ongoing
efficient source of supply for lead antiknock compounds as the worldwide demand
for these products continues to decline. It does not anticipate that the
cessation of its Canadian subsidiary's antiknock operations and the entry into
the Octel supply agreement will adversely affect its relations with its
customers, nor will these changes have a material effect on its future results
of operations. Ethyl and Octel continue to compete vigorously in sales and
marketing of lead antiknock compounds.
Ethyl also sells a manganese-based antiknock compound, HiTEC(R) 3000
performance additive (MMT), which is manufactured by Albemarle under a long-term
contract with Ethyl, and is used in unleaded gasoline primarily in Canada. Ethyl
conducted extensive testing of this product prior to filing a request in 1990
for a fuel-additive waiver from the United States Environmental Protection
Agency (EPA) that is required in order to begin marketing the additive for use
in unleaded gasoline in the United States. The Company voluntarily withdrew its
waiver application in November 1990 after public hearings and detailed exchanges
of information with the EPA, when the EPA raised several health and
environmental questions near the end of the 180-day statutory review period. The
Company continued testing and filed a new waiver request in July 1991, followed
by additional public hearings and detailed exchanges of information with the
EPA.
In January 1992, the EPA denied the Company's application for a waiver. An
appeal was filed with the United States Court of Appeals for the District of
Columbia Circuit contesting the EPA's denial of the application for a waiver for
the use of the additive in unleaded gasoline. In April 1993, the Court remanded
the case to the EPA for reconsideration within 180 days of its denial of the
Company's waiver application, directing the EPA to consider new evidence and
make a new decision.
On November 30, 1993, the EPA determined that emissions data contained in
the Company's application satisfied all Clean Air Act standards, but reported
that it was not able to complete its assessment of the overall public-health
implications of manganese. The Company and the EPA mutually agreed to an 180-day
extension, later extended for an additional six weeks to resolve this last
remaining issue.
In July 1994, the EPA refused to grant the waiver for the use of the
additive in unleaded gasoline, finding that there was insufficient data to
alleviate its concerns about the overall public-health implications of manganese
despite EPA's own statements acknowledging the favorable health effects of MMT.
Ethyl filed an appeal in July 1994 with the United States Court of Appeals for
the District of Columbia Circuit seeking relief from the EPA's actions. The
Court heard oral arguments in Ethyl's appeal on January 13, 1995, and it is
anticipated that a decision will be made before the Court's term ends in early
June.
In a related matter, Ethyl is awaiting the establishment of a briefing
schedule in a lawsuit challenging the EPA's July 13, 1994, determination that
Ethyl must complete additional manganese health testing before it can obtain a
"registration" under the Clean Air Act for sale of MMT as an unleaded gasoline
fuel additive. Based on the long history of use of MMT in the U.S., Ethyl
maintains that MMT is currently registered for use in unleaded gasoline as well
as in leaded gasoline.
In the meantime, in Canada, the federal government is examining claims made
by the Motor Vehicle Manufacturers Association of Canada (MVMA) about MMT's
compatibility with automobile exhaust emissions systems. Ethyl believes that the
MVMA has made its claims without the support of credible study or test data. The
Company has joined the Canadian Petroleum Products Institute in calling for an
independent panel to review the merits of the additive. The Canadian government
is still studying this proposal.
Ethyl also is working with the government of British Columbia and a task
force of the Canadian Council of Ministers of the Environment, which both have
initiated consultations with gasoline refiners, automobile manufacturers and
others with respect to the potential development of new vehicle emission and
efficiency standards and fuel formulations.
The Company has shared with Canadian federal and provincial governments
extensive test data demonstrating that the additive, which has been used in
almost all unleaded Canadian gasoline for nearly 18 years, provides vital
environmental benefits including significant reductions in smog-causing
automobile emissions of nitrogen oxides as well as reductions in benzene and
other dangerous emissions.
FINANCIAL CONDITION & LIQUIDITY
Cash and cash equivalents at December 31, 1994, were $31.2 million, which
represents a decrease of $17 million from $48.2 million at year-end 1993. The
decrease primarily reflects the effect of the spin-off of Albemarle at the close
of business on February 28, 1994, whereby $29.3 million in cash and cash
equivalents was included as part of the spin-off.
Consolidated cash flows from operating activities of $122.2 million,
together with $47.4 million in additional long-term debt and $60.5 million from
the sale of Whitby, Inc., in September 1994, were used primarily to provide
funds for capital expenditures of $147.3 million, to pay regular quarterly cash
dividends to shareholders totalling $62.2 million, as well as partly replace the
reduction of $29.3 million in cash and cash equivalents, which occurred as part
of the spin-off of Albemarle.
Consolidated cash flows from operating activities in 1993 of $140.1 million,
supplemented by additional long-term debt of $360.4 million, were used primarily
to provide funds for capital expenditures of $205 million, to acquire the
organic and inorganic brominated compounds business of Potasse et Produits
Chimiques (PPC) from Rhone-Poulenc S.A. in February 1993 and to make a further
payment in connection with the acquisition of the lubricant additives business
in Japan (total outlay for acquisitions of approximately $125.4 million), to pay
regular quarterly dividends to shareholders totalling $71 million and to repay
long-term debt. Long-term debt of $230.4 million was repaid in 1993, of which
$100 million represented the 11% Notes due in 1995 that were repaid on January
11, 1993, with a like amount of short-term securities reserved for this purpose
at December 31, 1992. The balance of $130.4 million included the early repayment
on December 15, 1993, of the Company's $116.25-million 93/8% Sinking Fund
Debentures due in 2016, and the remaining amount consisted of scheduled debt
repayments.
The Company anticipates that cash provided from operations in the future
will be sufficient to cover the Company's operating expenses, service debt
obligations (including reducing long-term debt from the amount outstanding at
December 31, 1994) and make dividend payments to shareholders. With respect to
operating expenses, management expects that, due to an increase in the discount
rates used for actuarial calculations in connection with the Company's pension
and postretirement benefit plans, these expenses will decline in 1995.
Ethyl's long-term debt, all of which is noncurrent, amounted to $349.8
million at December 31, 1994, representing a reduction in long-term debt of
about $337.2 million from December 31, 1993. The reduction results primarily
from $384.9 million transferred to Albemarle in connection with the spin-off,
consisting of $303.4 million of variable-rate bank debt and $81.5 million
primarily of foreign bank debt, net of $47.4 million borrowed by Ethyl during
the year. About $14.1 million of current foreign bank debt also was transferred.
(See Note 10 of Notes to Financial Statements on page 37 for details of the
Company's long-term debt.) The Company's consolidated long-term debt as a
percent of long-term debt plus shareholders' equity was 47.2% at December 31,
1994, versus 47.7% at December 31, 1993. The Company targets a range of
approximately 30% to 50% for its long-term debt ratio.
The Company's capital-spending program in the near future is expected to be
substantially lower than in the recent past, reflecting the completion or near
completion of major construction and expansion programs in 1994 and early 1995.
These projects primarily include completion in 1994 of Ethyl's new Research
Center in Richmond, Virginia, as well as completed or nearly completed lubricant
additive manufacturing facilities to expand capacity and replace production
provided by Amoco under a short-term supply agreement. Capital spending during
the next few years will be financed with cash provided from operations.
Ethyl's acquisitions are normally for cash and are funded through internal
and external sources, including the use of existing credit lines and long-term
debt. The proceeds from occasional sales of businesses normally are used to
repay long-term debt.
The amount and timing of additional borrowing or issuance of stock will
depend on the Company's specific cash requirements. The Company has recently
filed a shelf-registration statement for up to $300 million of debt securities
and/or preferred stock should the need arise.
Environmental Matters
The Company is subject to Federal, state and local requirements regulating
the handling, manufacture and use of materials (some of which may be classified
as hazardous or toxic by one or more regulatory agencies), the discharge of
materials into the environment and the protection of the environment. It is the
Company's policy to comply with these requirements and to provide workplaces
that are safe, healthful and environmentally sound for employees and that will
not adversely affect the safety, health or environment of communities in which
Ethyl does business. The Company believes that as a general matter its policies,
practices and procedures are properly designed to prevent any unreasonable risk
of environmental damage, and of resulting financial liability, in connection
with its business.
To the best of the Company's knowledge, Ethyl currently is complying with,
and expects to continue to comply in every material respect with, all existing
environmental laws, regulations, statutes and ordinances even though compliance
with government pollution-abatement and safety regulations usually increases
operating costs and requires remediation costs and investment of capital that in
some cases produce no monetary return. Such compliance with Federal, state,
local and foreign environmental-protection laws has not in the past had, and is
not expected to have in the future, a material effect upon the Company's
financial position.
Consolidated environmental operating and remediation costs charged to
expense were approximately $31 million in 1994, $61 million in 1993 and $51
million in 1992 (excluding depreciation of previous capital expenditures).
On a PRO FORMA basis, operating and remediation costs were approximately $24
million (which includes the $8-million environmental special charge) in 1994,
$13 million in 1993, and $12 million in 1992, and are expected to be somewhat
higher in the next few years than in 1993 and 1992. The ongoing cost of
operations was about $11 million in 1994 and $6 million in 1993 and 1992 with
the balance representing remediation and monitoring costs incurred or accrued.
Consolidated capital expenditures for pollution-abatement and safety
projects, including such costs that are included in other projects, were
approximately $16 million in 1994, versus $30 million in 1993 and $29 million in
1992.
On a PRO FORMA basis, such expenditures were $14 million in 1994, $4 million
in 1993 and $7 million in 1992. For each of the next few years, capital
expenditures for these types of projects are likely to decrease from current
levels, reflecting a generally lower capital-expenditures program.
Management's estimates of the effects of compliance with governmental
pollution-abatement and safety regulations are subject to (1) the possibility of
changes in the applicable statutes and regulations or in judicial or
administrative construction of such statutes and regulations, (2) uncertainty as
to whether anticipated solutions to pollution problems will be successful or
whether additional expenditures may prove necessary and (3) the possibility that
emerging technology will change remediation methods and reduce remediation and
monitoring costs.
Among other environmental requirements, the Company is subject to the
Federal Superfund law, and similar state laws, under which the Company may be
designated as a Potentially Responsible Party (PRP) and may be liable for a
share of the costs associated with cleaning up various hazardous-waste sites.
For sites where Ethyl has been named a PRP, in all but two cases, the Company
has been able to demonstrate it is only a DE MINIMIS participant (actual or
estimated cost for Ethyl's share is less than $50,000) or a minor participant
(actual or estimated cost for Ethyl's share is less than $300,000). Further,
almost all such sites, including the two largest, represent environmental issues
that are quite mature and have been investigated, studied and, in many cases,
including the two largest, the remediation methodology and the proportionate
shares of each PRP have been established, and the financial viability of the
other PRPs is reasonably assured. Therefore, point estimates for remediation and
monitoring costs had been accrued previously, and some or all of the remediation
has been completed. At some sites where remediation is not complete, including
one of the largest, the remediation and monitoring probably will continue for
extended periods of time.
In DE MINIMIS PRP matters and in some minor PRP matters, the Company's
policy generally is to negotiate a consent decree and to pay any apportioned
settlement, enabling the Company to be effectively relieved of any further
liability as a PRP, except for remote contingencies.
In PRP matters other than those that are DE MINIMIS, the Company's records
indicate that unresolved exposures are not material individually or in the
aggregate to Ethyl's financial statements.
The Company reviews the status of significant existing or potential
environmental issues, including PRP matters, accrues and expenses its
proportionate share of environmental remediation and monitoring costs in
accordance with FASB Statement No. 5 and FASB Interpretation No. 14 and adjusts
reserves, as appropriate, on the basis of additional information. The total
gross liabilities accrued at December 31, 1994, were approximately $38.4
million, with insurance recoveries expected for a significant portion of this
amount. In addition, the Company has contingent liabilities for environmental
remediation costs associated with past operations. Management expects accrued
and contingent amounts may be reduced as emerging technologies are proved to be
viable. The Company believes that the costs of remediation of current sites,
which will occur over an extended period of time, will not have a material
adverse impact on its consolidated financial position but possibly could have a
material effect when ultimately resolved, on results of operations in a given
year.
INTRODUCTION TO GEOGRAPHIC AREAS: The following table includes the results and
accounts of the businesses spun off as Albemarle Corporation through the
spin-off date at the close of business on February 28, 1994.
GEOGRAPHIC AREAS:
(In Thousands)
<TABLE>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Net sales:
Domestic unaffiliated:
United States $ 502,427 $ 969,438 $ 829,432 $ 712,826 $ 778,127
Export 217,067 338,944 352,596 323,564 279,639
Transfers to foreign affiliates 210,884 258,966 270,887 331,751 313,068
Foreign unaffiliated 454,592 630,008 510,554 498,181 533,174
Elimination of transfers (210,884) (258,966) (270,887) (331,751) (313,068)
Total $1,174,086 $1,938,390 $1,692,582 $1,534,571 $1,590,940
Operating profit: (b)(c)
Domestic $ 149,847 $ 161,590 $ 174,870 $ 178,776 $ 178,538
Foreign 44,828 42,392 35,068 52,058 50,833
Subtotal 194,675 203,982 209,938 230,834 229,371
Unallocated expenses (26,933) (36,377) (36,116) (38,169) (35,877)
Operating profit 167,742 167,605 173,822 192,665 193,494
Interest and financing expenses (25,378) (44,085) (62,279) (59,097) (64,839)
Gain on sale of 20% of First Colony Corporation - - 93,600 - -
Gain on sale of Hardwicke Chemical Company - - - - 78,993
Other (expenses) income, net (1,218) 9,987 1,475 1,652 8,110
Income before income taxes, extraordinary item,
cumulative effect of accounting changes and
discontinued insurance operations $ 141,146 $ 133,507 $ 206,618 $ 135,220 $ 215,758
Identifiable assets:
Domestic $ 642,814 $1,250,650 $1,155,860 $ 975,415 $ 894,269
Foreign 265,506 628,830 517,390 484,498 407,501
Non-operating assets 122,095 129,718 205,648 110,592 83,873
Net assets of discontinued insurance operations - - 658,550 909,876 775,523
Total $1,030,415 $2,009,198 $2,537,448 $2,480,381 $2,161,166
Refer to notes on page 26.
</TABLE>
Domestic operating profit includes profit from U.S. export sales and profit
from sales to foreign affiliates of products that are resold in foreign markets.
Intercompany transfers from foreign areas to the United States are not material.
Transfers between geographic areas are made at prices intended to reflect arm's-
length pricing.
Consolidated net unaffiliated sales of foreign subsidiaries for 1994
decreased 28% from 1993 primarily reflecting the inclusion of Albemarle's
foreign unaffiliated sales for two months in 1994 versus 12 months in 1993.
Consolidated net unaffiliated sales of foreign subsidiaries for 1993 increased
23% over 1992, primarily due to the PPC acquisition and the acquisition of a
lubricant additives business in Japan.
On a PRO FORMA basis, net unaffiliated sales of foreign subsidiaries in 1994
would have been about $413.4 million, down about 2% from some $422.7 million in
1993. Most of the decrease was due to lower lead antiknock sales by Ethyl's
Canadian subsidiary, following the cessation of lead antiknock production at the
Canadian lead antiknock manufacturing facility in early 1994, and slightly lower
sales of lubricant and fuel additives in the Far East.
Consolidated export sales decreased 36% in 1994 from 1993, primarily
reflecting the inclusion of only two months of Albemarle's export sales in 1994
versus 12 months of export sales in 1993. Consolidated export sales decreased 4%
in 1993 from 1992. This decrease was due to a decline in shipments of lead anti-
knocks and alpha olefins to Europe, partially offset by increases in shipments
of lead antiknocks to Latin America and of lubricant additives to the Far East.
On a PRO FORMA basis, export sales would have been about $191.5 million in
1994, down about 2% from $194.4 million in 1993 due to lower shipments of lead
antiknocks and lubricant and fuel additives to the Far East, partly offset by
increased antiknock shipments to Latin America.
Consolidated foreign operating profit for 1994 increased 6% from 1993,
reflecting primarily the effect of the spin-off, whereby Albemarle's foreign
subsidiaries' operating losses are included only for the first two months of
1994 versus the inclusion of 12 months of operating losses for 1993, and the
1993 special charge of $14.2 million related to the shutdown of Ethyl's Canadian
subsidiary's lead antiknock facility, partially offset by lower operating profit
in 1994 following the cessation of lead antiknock production by Ethyl's Canadian
subsidiary. Consolidated foreign operating profit for 1993 increased 21% from
1992 due to the acquisition of the lubricant additives business in Japan and
favorable foreign-exchange effects, partially offset by the $14.2-million
special charge related to the shutdown of the Canadian subsidiary's lead
antiknock facility.
On a PRO FORMA basis, foreign operating profit in 1994 was about $47.2
million, down from approximately $58.1 million in 1993, because of lower lead
antiknock sales by the Company's Canadian subsidiary following the cessation of
lead antiknock manufacturing at this facility, partially offset by the charge
for write-down of the facility in 1993.
Consolidated total assets were $1,030.4 million at the end of 1994, a
decrease of $978.8 million from $2,009.2 million at the end of 1993, primarily
reflecting the effect of the spin-off of Albemarle. The $2,009.2 million in
total assets at the end of 1993 represented an increase of $130.3 million from
$1,878.9 million, excluding the net assets of the discontinued insurance
operations, at the end of 1992. The increase in operating assets in 1993
primarily reflected capital expenditures for new plants and expansions in the
U.S. and the acquisition of PPC in France.
The decrease in non-operating assets in 1994 was due to the spin-off of
Albemarle, while the decrease in 1993 primarily reflected the use of $100
million in short-term securities reserved at December 31, 1992, for redemption
of the Company's $100-million 11% Notes on January 11, 1993.
INTRODUCTION TO SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA: The following
information includes the results of the businesses spun off as Albemarle
Corporation through the spin-off date at the close of business on February 28,
1994.
SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA(a) (In Thousands Except Earnings
Per Share) (Unaudited)
<TABLE>
First Second Third Fourth
1994 Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Net sales $ 389,082 $ 276,083 $ 244,935 $ 263,986
Gross profit $ 115,541 $ 107,763 $ 86,856 $ 87,418
Special charges (b) $ 638 $ 1,332 $ - $ 750
Net income $ 20,264 $ 30,378 $ 22,494 $ 24,619
Earnings per share $ .17 $ .26 $ .19 $ .21
Shares used to compute earnings per
share 118,462 118,454 118,448 118,441
1993
Net sales $ 469,828 $ 495,038 $ 486,874 $ 486,650
Gross profit $ 131,008 $ 140,486 $ 150,349 $ 130,296
Special charges (c) - $ 2,400 $ 10,600 $ 23,150
Income before extraordinary item and
discontinued
insurance operations $ 26,329 $ 30,825 $ 19,966 $ 12,902
Extraordinary after-tax charge due to
early extinguishment of debt (d) - - - (5,000)
Income before discontinued insurance
operations 26,329 30,825 19,966 7,902
Income from discontinued insurance
operations (e) 45,536 44,947 - -
Net income $ 71,865 $ 75,772 $ 19,966 $ 7,902
Earnings per share:
Income before extraordinary item
and discontinued insurance operations $ .22 $ .26 $ .17 $ .11
Extraordinary after-tax charge (d) - - - (.04)
Income before discontinued insurance
operations .22 .26 .17 .07
Income from discontinued insurance
operations (e) .38 .38 - -
Net income $ .60 $ .64 $ .17 $ .07
Shares used to compute earnings per
share 118,428 118,436 118,444 118,436
</TABLE>
NOTES TO FINANCIAL TABLES
(a) Certain 1994 previously reported quarterly amounts and certain prior-year
amounts have been reclassified to conform to current presentation.
(b) Operating profit for 1994 includes a net charge of $2,720 ($1,690 after
income taxes) primarily for an environmental remediation provision and
certain other charges net of the benefit of a legal settlement.
Fourth-quarter adjustments included an $8,000 benefit from a legal
settlement and an $8,000 provision for environmental remediation.
(c) Operating profit for 1993 includes special charges totalling $36,150
($22,400 after income taxes) for the write-down of the Canadian subsidiary's
plant and other costs of $14,200, costs of a work-force-reduction program in
the U.S. and Europe amounting to $7,635 and $14,315 for downsizing costs of
Whitby Research, Inc., and relocation of employees and other related costs.
(d) The extraordinary charge resulted from the early redemption of Ethyl's
$116,250 93/8% Sinking Fund Debentures, net of income taxes of $3,000.
(e) On July 1, 1993, Ethyl completed the spin-off of its 80% interest in First
Colony Corporation, which included the operations of First Colony Life
Insurance Company and subsidiaries. The results of the Insurance business
are reported as discontinued insurance operations.
HOW ETHYL USED THE REVENUES IT RECEIVED (PRO FORMA BASIS, EXCLUDING SPUN-OFF
OPERATIONS)
(In Millions) (Unaudited)
1994
Materials,
services, etc.. . . . . . . . . . . . . . . . . . . $ 698.5 68.7%
Payrolls &
employee benefits . . . . . . . . . . . . . . . . . 103.6 10.2
Regular dividends
declared. . . . . . . . . . . . . . . . . . . . . . 59.2 5.8
Current income &
other taxes . . . . . . . . . . . . . . . . . . . . 41.6 4.1
Interest expense . . . . . . . . . . . . . . . . . 22.5 2.2
For use in the business
including expansion &
modernization . . . . . . . . . . . . . . . . . . . 91.9 9.0
Total revenues . . . . . . . . . . . . . . . . . . $1,017.3 100.0%
DIVIDEND INFORMATION & EQUITY PER COMMON SHARE
On March 3, 1994, the Company's board of directors adjusted the prior common
stock dividend rate to reflect the effect of the dividend to be paid by
Albemarle Corporation, which was spun-off at the close of business on February
28, 1994. The combination of Ethyl's current quarterly dividend rate of $.125
per share or $.50 on an annual basis and the Albemarle dividend, established at
the time of the spin-off, equals the annual dividend rate prior to the spin-off.
Equity per common share at December 31, 1994, was $3.30. This reflects a
reduction from December 31, 1993, due to the dividend of common stock of
Albemarle Corporation, which was equivalent to $3.38 per Ethyl common share
based on book value.
MARKET PRICES OF COMMON STOCK & SHAREHOLDER DATA
The Company's common stock is traded primarily on the New York Stock
Exchange under the symbol EY. The reported high and low prices by quarters for
the years 1994 and 1993 are shown in the following table.
1994 1993
HIGH LOW High Low
First Quarter 19 5/8 11 1/8 30 7/8 26 1/4
Second Quarter 13 3/4 11 30 3/8 27 1/4
Third Quarter 13 5/8 10 3/4 20 7/8 17 1/2
Fourth Quarter 11 3/4 9 1/2 19 1/8 16 3/4
The 1994 prices reflect the effect of the spin-off of Ethyl's wholly owned
subsidiary, Albemarle Corporation, at the close of business on February 28,
1994. Shareholders of record on that date received one share of Albemarle common
stock for every two shares of Ethyl common stock held. There were 118,414,769
shares of Ethyl common stock outstanding on February 28, 1994.
The 1993 prices reflect the effect of the spin-off on July 1, 1993, of
Ethyl's 80-percent investment in First Colony Corporation. Shareholders of
record on June 11, 1993, received approximately one share of First Colony
Corporation common stock for every three shares of Ethyl common stock held. The
exact distribution ratio was .33451 of a share of First Colony for each Ethyl
share. There were 118,381,949 shares of Ethyl common stock outstanding on the
distribution date.
There were 118,434,401 shares of common stock held by 12,606 shareholders of
record as of December 31, 1994.
CONSOLIDATED BALANCE SHEETS
INTRODUCTION TO THE CONSOLIDATED FINANCIAL STATEMENTS: At the close of
business on February 28, 1994, the Company completed the spin-off of its wholly
owned subsidiary, Albemarle Corporation. The December 31, 1994, balance sheet
accounts reflect the reductions in connection with the spin-off. The operating
results of what is now Albemarle are included in the Consolidated Statements of
Income and Consolidated Statements of Cash Flows for the two months ended
February 28, 1994, and the full years 1993 and 1992. The Company is including
certain PRO FORMA financial statements to illustrate the Company's estimated
financial results excluding the operations and accounts of the businesses spun
off (see Note 2 beginning on page 34).
(In Thousands of Dollars Except Share Data)
December 31 1994 1993
ASSETS
Current assets:
Cash and cash equivalents $ 31,166 $ 48,201
Accounts receivable, less allowance for doubtful
accounts (1994 - $2,395; 1993 - $4,189) 229,477 345,160
Inventories:
Finished goods 118,731 219,001
Work-in-process 9,959 12,419
Raw materials 10,842 32,173
Stores, supplies and other 5,531 27,221
145,063 290,814
Deferred income taxes and prepaid expenses 25,744 49,522
Total current assets 431,450 733,697
Property, plant and equipment, at cost 684,379 1,908,630
Less accumulated depreciation and amortization (250,012) (910,360)
Net property, plant and equipment 434,367 998,270
Other assets and deferred charges 144,856 164,382
Goodwill and other intangibles - net of
amortization 19,742 112,849
TOTAL ASSETS $1,030,415 $2,009,198
See accompanying notes to financial statements.
December 31 1994 1993
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 77,223 $ 154,971
Accrued expenses 73,118 125,704
Long-term debt, current portion - 14,056
Dividends payable 14,807 17,764
Income taxes payable 17,652 14,020
Total current liabilities 182,800 326,515
Long-term debt 349,766 686,986
Other noncurrent liabilities 78,902 99,240
Deferred income taxes 28,010 143,676
Redeemable preferred stock:
Cumulative First Preferred ($100 par value) 6%
Series A - 200
Shareholders' equity:
Common stock ($1 par value)
Issued - 118,434,401 in 1994 and 118,405,287 in
1993 118,434 118,405
Additional paid-in capital 2,706 2,450
Foreign currency translation adjustments (2,253) (1,757)
Retained earnings 272,050 633,483
390,937 752,581
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $1,030,415 $2,009,198
See accompanying notes to financial statements.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars Except Per-Share Amounts)
<TABLE>
Years ended December 31 1994 1993 1992
<S> <C> <C> <C>
Net sales $ 1,174,086 $1,938,390 $1,692,582
Cost of goods sold 776,508 1,386,251 1,199,096
Gross profit 397,578 552,139 493,486
Selling, general and administrative expenses 144,455 221,384 198,466
Research, development and testing expenses 82,661 127,000 111,698
Special charges 2,720 36,150 9,500
Operating profit 167,742 167,605 173,822
Interest and financing expenses 25,378 44,085 62,279
Gain on sale of 20% interest in First Colony Corporation - - (93,600)
Other expenses (income), net 1,218 (9,987) (1,475)
Income before income taxes, extraordinary item, cumulative
effect of
accounting changes and discontinued insurance
operations 141,146 133,507 206,618
Income taxes 43,391 43,485 99,373
Income before extraordinary item, cumulative effect of
accounting changes
and discontinued insurance operations 97,755 90,022 107,245
Extraordinary after-tax charge due to early extinguishment
of debt - (5,000) -
Income before cumulative effect of accounting changes and
discontinued insurance operations 97,755 85,022 107,245
Cumulative effect of accounting changes for:
Postretirement health benefits (net of tax) - - (34,348)
Deferred income taxes - - 19,616
Total - - (14,732)
Income before discontinued insurance operations 97,755 85,022 92,513
Income from discontinued insurance operations - 90,483 162,472
Net income $ 97,755 $ 175,505 $ 254,985
Earnings per share:
Income before extraordinary item, cumulative effect
of accounting changes
and discontinued insurance operations $ .83 $ .76 $ .90
Extraordinary item - (.04) -
Cumulative effect of accounting changes - - (.12)
Income before discontinued insurance operations .83 .72 .78
Income from discontinued insurance operations - .76 1.37
Net income $ .83 $ 1.48 $ 2.15
</TABLE>
See accompanying notes to financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
(In Thousands of Dollars Except Share Data)
Years Ended December 31 1994 1993 1992
SHARES AMOUNTS Shares Amounts Shares Amounts
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
(AUTHORIZED 400,000,000 SHARES)
Beginning balance 118,405,287 $ 118,405 118,357,515 $ 118,358 118,316,994 $ 118,317
Issued upon exercise of stock options and SARs 75,723 76 75,714 75 59,199 59
Purchased and retired (46,609) (47) (27,942) (28) (18,678) (18)
Ending balance 118,434,401 118,434 118,405,287 118,405 118,357,515 118,358
ADDITIONAL PAID-IN CAPITAL
Beginning balance 2,450 1,708 865
Exercise of stock options and SARs 858 1,374 1,367
Retirement of purchased common stock (602) (621) (524)
Distribution of common stock under bonus plan - (11) -
Ending balance 2,706 2,450 1,708
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
Beginning balance (1,757) 9,840 20,993
Translation adjustments 3,647 (11,597) (11,153)
Spin-off of Albemarle Corporation (4,143) - -
Ending balance (2,253) (1,757) 9,840
UNREALIZED GAIN ON MARKETABLE EQUITY SECURITIES
Beginning balance - 64,901 56,640
Unrealized gains - 13,326 8,261
Spin-off of First Colony Corporation - (78,227) -
Ending balance - - 64,901
RETAINED EARNINGS
Beginning balance 633,483 1,206,472 1,022,498
Net income 97,755 175,505 254,985
Cash dividends declared:
First Preferred stock, $6.00 per share (12) (12) (12)
Common stock, $.50 per share in 1994
and $.60 per share in 1993 and 1992 (59,215) (71,033) (70,999)
Dividend of common stock of Albemarle Corporation,
at book value (399,957) - -
Dividend of common stock of First Colony
Corporation,
at book value - (677,449) -
Redemption of 6% First Preferred stock (4) - -
Ending balance 272,050 633,483 1,206,472
TOTAL SHAREHOLDERS' EQUITY $ 390,937 $ 752,581 $1,401,279
</TABLE>
See accompanying notes to financial statements.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
Years ended December 31 1994 1993 1992
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR $ 48,201 $ 162,988 $ 36,031
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before discontinued insurance operations 97,755 85,022 92,513
Adjustments to reconcile income to cash flows from
operating activities:
Depreciation and amortization 53,983 127,456 105,765
Special charges 10,720 36,150 9,500
Gain on sale of subsidiaries (4,150) (6,121) -
After-tax gain on sale of 20% interest in First
Colony Corporation - - (30,200)
Cumulative effect of accounting changes - - 14,732
Deferred income taxes, excluding cumulative
effect of accounting changes 10,262 (7,663) (3,030)
Changes in assets and liabilities, net of
effects from acquisitions:
Income-tax payment on 1992 gain on sale of
20% of First Colony Corporation - (60,552) -
(Increase) decrease in accounts receivable (29,701) (16,268) 3,506
Decrease (increase) in inventories 9,166 (918) (16,807)
(Increase) in prepaid expenses (5,516) (999) (3,140)
(Decrease) increase in accounts payable
and accrued expenses (2,621) (13,686) 43,879
(Decrease) increase in income taxes
payable (6,903) (2,454) 3,231
Other, net (10,775) 166 2,118
Cash provided from operating
activities before discontinued insurance
operations 122,220 140,133 222,067
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (147,260) (205,029) (157,412)
Acquisitions of businesses (net of $5,369 cash
acquired in 1993) - (125,431) (136,500)
Proceeds from sale of 20% interest in First Colony
Corporation - - 256,350
Proceeds from sale of subsidiary 60,500 10,000 -
Other, net (8,234) 537 (4,274)
Cash used in investing activities before
discontinued insurance operations (94,994) (319,923) (41,836)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional long-term debt 47,400 360,448 164,500
Repayment of long-term debt - (230,355) (409,700)
Cash dividends paid (62,184) (71,037) (71,006)
Cash and cash equivalents of Albemarle spun off as a
dividend on February 28, 1994 (29,332) - -
Repurchases of capital stock (649) (649) (543)
Other, net 504 1,448 1,475
Cash (used in) provided from financing
activities before
discontinued insurance operations (44,261) 59,855 (315,274)
Net cash used in operations before discontinued insurance
operations (17,035) (119,935) (135,043)
Cash provided by discontinued insurance operations - 5,148 262,000
(Decrease) increase in cash and cash equivalents (17,035) (114,787) 126,957
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 31,166 $ 48,201 $ 162,988
</TABLE>
See accompanying notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CONSOLIDATION - The consolidated financial statements include the
accounts and operations of Ethyl Corporation and all of its subsidiaries
(the Company). All significant intercompany accounts and transactions
are eliminated in consolidation.
BASIS OF PRESENTATION - At the close of business on February 28,
1994, the Company completed the spin-off of its wholly owned subsidiary,
Albemarle Corporation (Albemarle), in the form of a tax-free stock
dividend to Ethyl common shareholders. The operating results of what is
now Albemarle are included in the Consolidated Statements of Income and
the Consolidated Statements of Cash Flows and related notes to financial
statements for the two months ended February 28, 1994, and the full
years 1993 and 1992. The December 31, 1994, Consolidated Balance Sheet
and related notes to financial statements reflect reductions in
connection with the spin-off.
On July 1, 1993, the Company completed the spin-off of its then
80-percent interest in First Colony Corporation (First Colony) in the
form of tax-free stock dividend to Ethyl common shareholders. The
Company has accounted for the financial results and net assets of First
Colony prior to the spin-off as a discontinued insurance operation in
accordance with Accounting Principles Board (APB) Opinion No. 30.
FOREIGN CURRENCY TRANSLATION - The financial statements of all
foreign subsidiaries were prepared in their respective local currencies
and translated into U.S. dollars based on the current exchange rate at
the end of the period for the balance sheet and a weighted-average rate
for the period on the statement of income. Translation adjustments (net
of deferred income tax benefits of $1,481,000 and $1,164,000 in 1994 and
1993, respectively, and a deferred income-tax charge of $5,716,000 in
1992) are reflected as foreign currency translation adjustments in
Shareholders' Equity and accordingly have no effect on net income.
Transaction adjustments for all foreign subsidiaries are included in
income.
INVENTORIES - Inventories are stated at the lower of cost or market,
with cost determined on the last-in, first-out (LIFO) basis for
substantially all domestic inventories, and on either the
weighted-average cost or first-in, first-out basis for other
inventories. Cost elements included in work-in-process and
finished-goods inventories are raw materials, direct labor and
manufacturing overhead. Raw materials include purchase and delivery
costs. Stores and supplies include purchase costs.
PROPERTY, PLANT & EQUIPMENT - Accounts include costs of assets
constructed or purchased, related delivery and installation costs and
interest incurred on significant capital projects during their
construction periods. Expenditures for renewals and betterments also are
capitalized, but expenditures for repairs and maintenance are expensed
as incurred. The cost and accumulated depreciation applicable to assets
retired or sold are removed from the respective accounts, and gains or
losses thereon are included in income. Depreciation is computed
primarily by the straight-line method based on the estimated useful
lives of the assets.
ENVIRONMENTAL COMPLIANCE & REMEDIATION Environmental-compliance
costs include the cost of purchasing and/or constructing assets to
prevent, limit and control pollution or to monitor the environmental
status at various locations. These costs are capitalized and depreciated
based on estimated useful lives.
Environmental-compliance costs also include maintenance and
operating costs with respect to pollution-prevention-and-control
facilities and administrative costs. Such operating costs are expensed
as incurred.
Environmental remediation costs of facilities used in current
operations are generally immaterial and are expensed as incurred.
Remediation costs and post- remediation costs including postremediation
monitoring costs at facilities or off-plant-disposal sites that relate
to an existing condition caused by past operations are accrued as
liabilities and expensed when costs can be reasonably estimated.
GOODWILL & OTHER INTANGIBLES - Goodwill acquired prior to November
1, 1970 ($1,652,000) is not being amortized. Goodwill acquired
subsequently ($9,815,000 and $75,333,000 at December 31, 1994 and 1993,
respectively, net of accumulated amortization) is being amortized on a
straight-line basis, over a period of 10 years. Other intangibles
($8,275,000 and $35,864,000 at December 31, 1994 and 1993, respectively,
net of accumulated amortization) are being amortized on a straight-line
basis primarily over periods from three to seven years. Goodwill and
other intangibles were reduced during the year due to the spin-off of
Albemarle and the sale of Whitby, Inc. Amortization of goodwill and
other intangibles amounted to $9,379,000 for 1994, $14,464,000 for 1993
and $9,508,000 for 1992. Accumulated amortization of goodwill and other
intangibles was $13,256,000 and $41,058,000 at the end of 1994 and 1993,
respectively.
PENSION PLANS & OTHER POSTEMPLOYMENT BENEFITS Annual costs of
pension plans are determined actuarially based on Financial Accounting
Standards Board (FASB) Statement No. 87, "Employers' Accounting for
Pensions." The policy of the Company is to fund its U.S. pension plans
at amounts not less than the minimum requirements of the Employee
Retirement Income Security Act of 1974. Annual costs of other
postretirement plans are accounted for based on FASB Statement No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions."
The policy of the Company is to fund its postretirement health benefits
for retirees on a pay-as- you-go basis. Annual costs of other
postemployment plans for employees who leave the Company for reasons
other than retirement are immaterial and are accounted for based on FASB
Statement No. 112, "Employers' Accounting for Postemployment Benefits."
The Company's policy is to fund such benefits on a pay-as-you-go basis.
PROFIT-SHARING & EMPLOYEE SAVINGS PLAN - The Company's employees
participate in the Ethyl-defined contribution 401(k) profit-sharing and
employee savings plan, which is generally available to all full-time and
non-union hourly employees. Certain other employees are covered by a
collective bargaining agreement pursuant to the terms of such agreement.
The plans are funded with contributions by participants and the Company.
Expenses recorded for the 401(k) plans related to the Company in 1994,
1993, and 1992 were $2,879,000, $7,478,000, and $6,788,000,
respectively.
RESEARCH, DEVELOPMENT & TESTING EXPENSES Company-sponsored research,
development and testing expenses related to present and future products
are expensed currently as incurred. Research and development expenses
determined in accordance with FASB Statement No. 2, "Accounting for
Research and Development Costs," were $49.7 million, $75.6 million and
$73.8 million in 1994, 1993 and 1992, respectively.
INCOME TAXES - Income taxes are determined based on FASB Statement
No. 109, "Accounting for Income Taxes." Deferred tax liabilities and
assets are recognized for the expected future tax consequences of events
that have been included in the financial statements or tax returns.
Deferred tax liabilities and assets are determined based on differences
between financial statement carrying amounts and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.
DERIVATIVE INSTRUMENTS & HEDGING OF FOREIGN CURRENCY EXPOSURES - The
Company's current policy is not to make use of derivative financial
instruments. The Company's policy is to manage foreign currency exposure
by maintaining assets and liabilities in approximate balance for each of
the major foreign currencies to which the Company has risk exposure. At
December 31, 1994, the Company was not a party to any derivative
financial instruments.
EARNINGS PER SHARE - Earnings per share is computed after deducting
applicable preferred stock dividends from net income and using the
weighted- average number of shares of common stock and common stock
equivalents outstanding during the year. The numbers of shares used in
computing earnings per share were 118,451,000 in 1994, 118,436,000 in
1993 and 118,380,000 in 1992.
2. SPIN-OFF OF ALBEMARLE CORPORATION:
At the close of business on February 28, 1994, Ethyl completed the
spin-off of its wholly owned subsidiary, Albemarle, in the form of a
tax-free stock dividend. Following the spin-off, Albemarle owns,
directly or indirectly, the olefins and derivatives, bromine chemicals
and specialty chemical businesses formerly owned directly or indirectly
by the Company. One share of Albemarle common stock was distributed to
Ethyl common shareholders for every two shares of Ethyl common stock
held.
The December 31, 1994, consolidated balance sheet reflects the
impact of the $399,957 reduction in retained earnings and a $4,143
foreign currency translation adjustment in connection with the
distribution of the Albemarle stock. The following supplemental
information is provided regarding the accounts of Albemarle spun off at
the close of business on February 28, 1994:
(In Thousands)
February 28, 1994
ASSETS
Current assets:
Cash & cash equivalents $ 29,332
Accounts receivable, less allowance
for doubtful accounts 147,513
Inventories 137,624
Deferred income taxes & prepaid expenses 16,059
Total current assets 330,528
Property, plant & equipment 1,355,537
Less accumulated depreciation (692,032)
Net property, plant & equipment 663,505
Other assets & deferred charges 49,480
Goodwill & intangibles - net of amortization 33,132
Total assets 1,076,645
LIABILITIES
Current liabilities:
Accounts payable 65,162
Accrued expenses 47,122
Long-term debt, current portion 14,065
Total current liabilities 126,349
Long-term debt 384,924
Other noncurrent liabilities 40,996
Deferred income taxes 120,276
Total liabilities 672,545
Net assets of Albemarle $ 404,100
SUPPLEMENTAL PRO FORMA FINANCIAL INFORMATION (UNAUDITED) - As a
result of the aforementioned distribution, the Company believes that the
following PRO FORMA financial information is important to enable the
reader to obtain a meaningful understanding of the Company's results of
operations. The PRO FORMA financial statements are for informational
purposes only to illustrate the estimated effects of the distribution of
Albemarle on Ethyl on a stand-alone basis and may not necessarily
reflect the future results of operations of Ethyl or what the earnings
or results of operations of Ethyl would have been had Albemarle operated
as a separate, independent company.
PRO FORMA CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(In Thousands Except Per-Share Amounts)
<TABLE>
1994 1993
PRO PRO
Years Ended December 31 Historical Adjustments(a) FORMA Historical Adjustments(a) FORMA
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 1,174,086 $ (155,064) $1,019,022 $1,938,390 $(903,418) $1,034,972
Cost of goods sold 776,508 (119,086) 657,422 1,386,251 (710,970) 675,281
Gross profit 397,578 (35,978) 361,600 552,139 (192,448) 359,691
Selling, general & administrative expenses 144,455 (14,471) 129,984 221,384 (85,470) 135,914
Research, development & testing expenses 82,661 (8,662) 73,999 127,000 (50,994) 76,006
Special charges 2,720 - 2,720 36,150 (7,322) 28,828
Operating profit 167,742 (12,845) 154,897 167,605 (48,662) 118,943
Interest & financing expenses 25,378 (2,873)(b) 22,505 44,085 (17,358)(b) 26,727
Other expenses (income), net 1,218 543 1,761 (9,987) 1,640 (8,347)
Income before income taxes, extraordinary
item and discontinued insurance operations 141,146 (10,515) 130,631 133,507 (32,944) 100,563
Income taxes 43,391 (4,239)(c) 39,152 43,485 (17,098)(c) 26,387
Income before extraordinary item and
discontinued insurance operations $ 97,755 $ (6,276) $ 91,479 $ 90,022 $ (15,846) $ 74,176
Earnings per share based on income before
extraordinary item and
discontinued insurance operations (d) $ .83 $ .78 $ .76 $ .63
</TABLE>
INTRODUCTION TO NOTES: The following is a summary of the adjustments
reflected in the PRO FORMA condensed Statements of Income. Following the
distribution, in the opinion of management, expenses of Ethyl would not
have differed materially from the amounts remaining in the Ethyl
consolidated financial statements after eliminating those expenses
attributable to Albemarle.
NOTES:
(a) To eliminate the historical income and expenses of Albemarle for the
respective periods presented, as if the distribution had occurred on
January 1, 1993.
(b) 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 under the
credit facility was computed at the weighted-average interest rates
of 3.8% and 3.6% for the two months ended February 28, 1994, and the
year ended December 31, 1993, respectively, less capitalized
interest of $124,000 and $1,101,000, respectively. Interest rates
used to calculate the Albemarle interest eliminated under the credit
facility are those rates that were available to Ethyl under its
revolving credit agreement during the respective periods presented.
Such rates were used because, during management's negotiations to
obtain the credit facility, the rates available to Ethyl and
Albemarle on a stand-alone basis were approximately the same.
Management was advised that these rates would have been the same
during the respective periods presented.
(c) To record the estimated income-tax effect for the PRO FORMA
adjustments described in Notes (a) and (b) for the two months ended
February 28, 1994, and the year ended December 31, 1993,
respectively.
(d) Historical and PRO FORMA earnings per share, based on income before
discontinued insurance operations and extraordinary item are
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.
3. SUPPLEMENTAL CASH-FLOW INFORMATION:
Supplemental information for the Consolidated Statements of Cash
Flows is as follows:
(In Thousands)
1994 1993 1992
Cash paid during the year for:
Income taxes $ 45,513 $110,867 $35,863
Interest and financing expenses
(net of capitalization) 24,118 45,352 62,320
Supplemental investing and financing
non-cash transactions:
Dividend of common stock of
Albemarle Corporation -
at book value 399,957 - -
Dividend of common stock of
First Colony Corporation -
at book value - 677,449 -
Assumption of liabilities in
connection with the acquisition
of Potasse et Produits Chimiques
(PPC) in February 1993 - 49,000 -
Also see Notes 2 and 21 with respect to spun-off operations.
4. INDUSTRY SEGMENT:
The geographic-areas table on page 24 (and the related notes on page
26) is an integral part of the consolidated financial statements.
Information about the Company's geographic areas is presented for the
years 1990-1994. The discussion of geographic-areas information is
unaudited.
5. CASH & CASH EQUIVALENTS:
Cash and cash equivalents consist of the following:
(In Thousands)
1994 1993
Cash and time deposits $31,166 $43,854
Short-term securities - 4,347
Total $31,166 $48,201
Short-term securities (generally commercial paper maturing in less
than 90 days) are stated at cost plus accrued income, which approximates
market value.
6. INVENTORIES:
Domestic inventories stated on the LIFO basis amounted to $49,889,000
and $115,874,000 at December 31, 1994 and 1993, respectively, which are
below replacement cost by approximately $17,080,000 and $36,239,000,
respectively.
7. DEFERRED INCOME TAXES & PREPAID EXPENSES:
Deferred income taxes and prepaid expenses consist of the following:
(In Thousands)
1994 1993
Deferred income taxes - current $20,404 $42,754
Prepaid expenses 5,340 6,768
Total $25,744 $49,522
8. PROPERTY, PLANT & EQUIPMENT, AT COST:
Property, plant and equipment, at cost consist of the following:
(In Thousands)
1994 1993
Land $ 48,781 $ 60,227
Land improvements 27,947 59,637
Buildings 94,224 137,980
Machinery and equipment 408,982 1,436,965
Capitalized interest 19,283 41,580
Construction in progress 85,162 172,241
Total $684,379 $1,908,630
Interest capitalized on significant capital projects in 1994, 1993
and 1992 was $8,060,000, $6,864,000 and $6,763,000, respectively, while
amortization of capitalized interest (which is included in depreciation
expense) was $1,294,000, $3,246,000 and $2,807,000, respectively.
9. ACCRUED EXPENSES:
Accrued expenses consist of the following:
(In Thousands)
1994 1993
Employee benefits, payrolls and related taxes $11,871 $ 35,565
Other 61,247 90,139
Total $73,118 $125,704
10. LONG-TERM DEBT:
A summary of long-term debt maturities at December 31, 1994, is
listed below:
(In Thousands)
Variable-
Variable- 9.8% Rate
Rate Notes Medium-
Bank Due Term
Loans 1998 Notes Total
1995 -
1996 -
1997 $ 6,750 $ 6,750
1998 $200,000 6,750 206,750
1999 $117,000 6,750 123,750
2000-2001 13,500 13,500
$117,000 $200,000 $33,750 350,750
Less unamortized discount (984)
Total long-term debt at December 31, 1994 $349,766
On February 16, 1994, the Company entered into a new, five-year,
$1-billion unsecured credit facility with a group of banks to replace
its existing $700- million credit agreement. The credit facility was
split into two separate $500- million facilities upon the spin-off of
Ethyl's wholly owned subsidiary, Albemarle Corporation. As a result of
the spin-off, $303,400,000 of variable- rate bank debt was transferred
to Albemarle, as well as foreign bank borrowing and other debt,
amounting to $95,589,000 (of which $81,524,000 was noncurrent). Under
the new credit facility, 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 agreement of this size and nature,
including financial covenants requiring the Company to maintain
consolidated long-term debt (as defined) of not more than 60% of the sum
of shareholders' equity (as defined) and consolidated long-term debt and
maintenance of minimum shareholders' equity of at least $250 million.
The Company was in compliance with such covenants at December 31, 1994.
$100 million was borrowed under the agreement at December 31, 1994.
Amounts outstanding at February 16, 1999, mature on that date. Average
interest rates on variable-rate loans during 1994 and 1993 were 4.5% and
3.6%, respectively.
The Company also has three uncommitted agreements with banks
providing for immediate borrowings up to a maximum of $135 million at
the individual bank's money-market rate. There was $17 million
outstanding under these agreements at December 31, 1994. The average
interest rates on borrowings during 1994 and 1993 under these agreements
were 4% and 3.4%, respectively.
The Company's $200-million 9.8% Notes are due September 15, 1998, at
100% of their principal amount. The Notes are not redeemable prior to
September 15, 1995, when they will be redeemable at the option of the
Company at 100% of their principal amount.
The Company's $33.75-million variable-rate (ranging from 8.6% to
8.86%) Medium-Term Notes were issued in five series (1 through 5) of
$6.75 million each, which are due annually in serial order at 100% of
their principal amount, beginning December 15, 1997, through December
15, 2001.
11.OTHER NONCURRENT LIABILITIES:
Other noncurrent liabilities consist of the following:
(In Thousands)
1994 1993
Provision for environmental remediation
and future shutdown costs $47,609 $35,574
Other 31,293 63,666
Total $78,902 $99,240
12. CAPITAL STOCK:
REDEEMABLE PREFERRED STOCK - Transactions in 1992-1994 were as follows:
Issued
Shares Amounts
Cumulative First Preferred, 6% Series A
(authorized 1,000,000 shares)
January 1, 1992, December 31, 1992
and 1993, balance 2,002 $ 200,200
Called for redemption in 1994 (2,002) (200,200)
December 31, 1994, balance - $ -
The Cumulative First Preferred 6% Series A stock was called for
redemption in December 1994 at $101 per share, plus accrued dividends.
SHAREHOLDER RIGHTS PLAN - In 1987, the Company declared a dividend of
one preferred-share purchase right on each outstanding share of common
stock as part of a new Shareholder Rights Plan.
Each right entitles common shareholders to buy 2.522 one-thousandth
of a share of the Company's authorized Cumulative Second Preferred
stock, Series B, at an exercise price of $105. The rights will be
exercisable, if not earlier redeemed, only if a person or group acquires
20% or more of the Company's common stock or announces a tender offer,
the consummation of which would result in ownership by a person or group
of 30% or more of the common stock.
Each holder of a right, upon the occurrence of certain events, will
become entitled to receive, upon exercise and payment of the purchase
price, preferred stock (or in certain circumstances, cash, property or
other securities of the Company or another person) having a value equal
to twice the amount of the purchase price. The rights will expire on
September 24, 1997.
STOCK-OPTION PLAN - The Company has an incentive stock-option plan,
whereby incentive stock options and non-qualifying stock options may be
granted to officers and other key employees to purchase a specified
number of shares of common stock at a price not less than the fair
market value on the date of grant and for a term not to exceed 10 years.
In addition to the stock options, the optionee may also be granted a
stock appreciation right (SAR). To date, SARs generally have been
granted for the same number of shares subject to related options. During
1994, the Board of Directors of the Company unanimously adopted and the
shareholders approved an amendment to the Company's incentive stock
option plan increasing the number of shares issuable under the option
plan by 5,900,000 to 11,900,000 and established an annual limit of
200,000 on the number of shares for which options may be granted to an
individual. Activity in 1992, 1993 and 1994 is shown at right:
Shares Option Prices
Outstanding at January 1, 1992 567,546 $20.07-$28.74
Granted 178,900 $28.00-$31.49
Exercised (56,759) $20.07-$27.53
Surrendered upon exercise of SARs (29,564) $20.07-$26.13
Lapsed (6,605) $22.00-$27.53
Outstanding at December 31, 1992 653,518 $20.07-$31.49
Adjustment for First Colony spin-off 238,711 $13.22-$20.73
Exercised (71,865) $13.22-$28.74
Surrendered upon exercise of SARs (59,212) $14.49-$26.13
Lapsed (153,539) $15.94-$31.49
Outstanding at December 31, 1993 607,613 $13.22-$20.73
Granted 3,042,000 $ 12.50
Adjustment for Albemarle spin-off 168,650 $ 9.00-$14.11
Exercised (73,475) $ 9.00-$17.20
Surrendered upon exercise of SARs (48,402) $ 9.86-$18.85
Lapsed (413,112) $ 9.86-$20.73
Outstanding at December 31, 1994 3,283,274 $ 9.00-$14.11
All of the unexercised options and related SARs granted prior to
1994 were exercisable at December 31, 1994. None of the stock options
and related SARs granted in 1994 were exercisable at December 31, 1994.
On December 31, 1993 and 1994, 3,053,552 and 6,156,014 shares,
respectively, were available for grant.
13.GAINS & LOSSES ON FOREIGN CURRENCY:
Foreign currency transaction adjustments resulted in gains of
$1,968,000 in 1994 and $1,725,000 in 1993 and a loss of $4,918,000 in
1992.
14.CONTRACTUAL COMMITMENTS & CONTINGENCIES:
Rental expense was $17,120,000 for 1994, $29,680,000 for 1993 and
$27,060,000 for 1992.
The Company has a number of operating lease agreements primarily for
office space, transportation equipment and storage facilities.
Future lease payments for the next five years for all non-cancelable
leases as of December 31, 1994, are $6,764,000 for 1995, $5,428,000 for
1996, $3,308,000 for 1997, $852,000 for 1998, $587,000 for 1999, and
amounts payable after 1999 are $3,644,000.
Contractual obligations for plant construction and purchases of real
property and equipment amounted to approximately $37,500,000 at December
31, 1994.
The Company and Albemarle entered into agreements, dated as of
February 28, 1994, pursuant to which the Company and Albemarle agreed to
coordinate certain facilities and services of adjacent operating sites
at plants in Orangeburg, South Carolina; Houston, Texas; and Feluy,
Belgium. In addition, the Company and Albemarle entered into agreements
providing for the blending by Albemarle of Ethyl's additive products and
the production of antioxidants and manganese-based antiknock compounds
at the Orangeburg plant. Ethyl was billed approximately $48 million in
connection with these agreements during 1994.
The Company is from time to time subject to routine litigation
incidental to its business. The Company is not a party to any pending
litigation proceedings that will have a materially adverse effect on the
Company's results of operations or financial condition. Further, no
additional disclosures are required in conformity with FASB Statement
No. 5, "Accounting for Contingencies," due to immateriality.
At December 31, 1994 and 1993, the Company had accruals of
$38,400,000 and $25,400,000, respectively, for environmental
liabilities. In developing its estimates of environmental remediation
and monitoring costs, the Company considers, among other things,
risk-based assessments of the contamination, currently available
technological solutions, alternative cleanup methods, and prior Company
experience in remediation of contaminated sites, all based on presently
enacted laws and regulations. Amounts accrued do not take into
consideration claims for recoveries from insurance. Although studies
have not been completed for certain sites, some amounts generally are
estimated to be expended over extended periods. When specific amounts
within a range cannot be determined, the Company has accrued the minimum
amount in that range.
Environmental exposures are difficult to assess and estimate for
numerous reasons including the complexity and differing interpretations
of regulations, lack of reliable data, multiplicity of possible
solutions, and length of time. As the scope of the Company's
environmental contingencies becomes more clearly defined, it is possible
that amounts in excess of those already accrued may be necessary.
However, management believes that these overall costs are expected to be
incurred over an extended period of time and, as a result, such
contingencies are not expected to have a material impact on the
consolidated financial position or liquidity of the Company, but they
could have a material adverse effect on the Company's results of
operations in any given future quarterly or annual period.
15. PENSION PLANS & OTHER
POSTRETIREMENT BENEFITS:
U.S. PENSION PLANS - The Company has noncontributory defined-benefit
pension plans covering most U.S. employees. The benefits for these plans
are based primarily on years of service and employees' compensation. The
Company's funding policy complies with the requirements of Federal law
and regulations. Plan assets consist principally of common stock, U.S.
government and corporate obligations and group annuity contracts. The
pension information for all periods includes amounts related to the
Company's salaried plan and to the hourly plans.
The major changes from 1993 to 1994 in the following tables reflect
the effects of the spin-off of Albemarle at the close of business on
February 28, 1994, with the related wage-roll plans and a portion of the
salaried plan identified with employees who were transferred to
Albemarle.
As a result of the spin-off, plan assets and projected benefit
obligations reported at December 31, 1993, were reduced by $286,035,000
and $240,278,000, respectively, as of January 1, 1994. The expected
returns and interest cost reported for 1994 are computed based upon the
lesser amounts.
The components of net pension income are as follows:
(In Thousands)
Years ended December 31 1994 1993 1992
Return on plan assets:
Actual return $ 32,018 $ 50,130 $ 43,970
Expected return higher
than actual 3,256 3,679 7,091
Expected return 35,274 53,809 51,061
Amortization of transition asset 4,730 6,995 6,995
Service cost (benefits earned
during the year) (5,462) (12,355) (11,219)
Interest cost on projected
benefit obligation (24,122) (36,978) (34,740)
Amortization of prior service costs (2,958) (4,318) (3,811)
Net pension income $ 7,462 $ 7,153 $ 8,286
Amortization of the transition asset is based on the amount
determined at the date of adoption of FASB Statement No. 87.
Net pension income and plan obligations are calculated using
assumptions of estimated discount and interest rates and rates of
projected increases in compensation. The discount rate on projected
benefit obligations was primarily assumed to be 8.25% at December 31,
1994, 6.75% at December 31, 1993, and 7.25% at December 31, 1992. The
assumed interest rate at the beginning of each year is the same as the
discount rate at the end of each prior year. The rates of projected
compensation increase were assumed to be primarily 4.5% at December 31,
1994 and 1993, and 5% at December 31, 1992. The expected long-term rate
of return on plan assets was assumed to be primarily 9% each year. Net
pension income (table above) is determined using assumptions as of the
beginning of each year. Funded status (table next page) is determined
using assumptions as of the end of each year.
The following table presents a reconciliation of the funded status
of the U.S. pension plans to prepaid pension expense, which is included
in "Other assets and deferred charges":
(In Thousands)
Years ended December 31
1994 1993
Plan assets at fair value $367,471 $637,427
Less actuarial present value of benefit obligations:
Accumulated benefit obligation (including vested
benefits of $271,458 and $486,284, respectively) 274,346 502,828
Projected compensation increase 13,666 63,873
Projected benefit obligation 288,012 566,701
Plan assets in excess of projected benefit obligation 79,459 70,726
Unrecognized net (gain) loss (16,087) 30,379
Unrecognized transition asset being amortized
principally over 16 years (30,861) (56,422)
Unrecognized prior-service costs being amortized 24,992 44,997
Prepaid pension expense $ 57,503 $ 89,680
One of the Company's U.S. pension plans is the supplemental
executive retirement plan (SERP), which is an unfunded defined benefit
plan. The actuarial present value of accumulated benefit obligations
related to the Company's SERP totalled $10,263,000 and $12,705,000 at
December 31, 1994 and 1993, respectively. The prepaid pension expense
asset in the table above is net of an accrued pension expense liability
of $9,255,000 and $9,270,000 related to the SERP at December 31, 1994
and 1993, respectively. Pension expense for the SERP totalled
$1,459,000, $1,550,000, and $1,111,000 for 1994, 1993, and 1992,
respectively.
FOREIGN PENSION PLANS - Pension coverage for employees of the
Company's foreign subsidiaries is provided through separate plans.
Obligations under such plans are systematically provided for by
depositing funds with trustees or under insurance policies. 1994, 1993
and 1992 pension cost for these plans was $3,317,000, $2,265,000 and
$1,954,000, respectively. The actuarial present value of accumulated
benefits at December 31, 1994 and 1993, was $12,159,000 and $13,445,000,
substantially all of which was vested, compared with net assets
available for benefits of $15,571,000 and $14,451,000, respectively.
CONSOLIDATED - Consolidated net pension income for 1994, 1993 and
1992 was $4,145,000, $4,888,000 and $6,332,000, respectively.
OTHER POSTRETIREMENT BENEFITS - The Company also provides
postretirement medical benefits and life insurance for certain groups of
retired employees.
In 1992, the Company adopted FASB Statement No. 106. The Company
elected to recognize immediately the cumulative effect of the change in
accounting for postretirement benefits of $54.5 million ($34.3 million
net of income tax benefit), which represents the accumulated
postretirement benefit obligation (APBO) existing at January 1, 1992,
net of plan assets. The Company continues to fund medical and life
insurance benefit costs principally on a pay-as-you-go basis. Although
the availability of medical coverage after retirement varies for
different groups of employees, the majority of employees who retire from
the Company before becoming eligible for Medicare can continue group
coverage by paying the full cost of a composite monthly premium designed
to cover the claims incurred by active and retired employees. The
availability of group coverage for Medicare-eligible retirees also
varies by employee group with coverage designed either to supplement or
coordinate with Medicare. Retirees generally pay a portion of the cost
of the coverage.
The components of net periodic postretirement benefit cost are as
follows:
(In Thousands)
Years ended December 31
1994 1993
Service cost (benefits attributed to
employee service during the year) $(1,789) $(3,088)
Interest cost on accumulated postretirement
benefit obligation (4,419) (6,911)
Actual return on plan assets 2,101 2,823
Net periodic postretirement benefit cost $(4,107) $(7,176)
Summary information on the Company's plans is as follows:
(In Thousands)
Years ended December 31
1994 1993
Accumulated postretirement benefit obligation for:
Retirees $41,985 $ 51,091
Fully eligible, active plan participants 2,008 18,608
Other active plan participants 7,709 41,492
51,702 111,191
Less plan assets at fair value 24,447 33,153
(Plus) less unrecognized net (gain) loss (717) 14,776
Accrued postretirement benefit cost $27,972 $ 63,262
Plan assets are held under an insurance contract and reserved for
retiree life-insurance benefits.
As a result of the spin-off, plan assets and projected benefit
obligations reported at December 31, 1993, were reduced by approximately
$7,242,000 and $46,002,000, respectively, as of January 1, 1994. The
expected returns and interest cost reported for 1994 are computed based
on the lesser amounts.
The discount rate used in determining the APBO was 8.25% at December
31, 1994, 6.75% at December 31, 1993, and 8% at December 31, 1992. The
expected long-term rate of return on plan assets used in determining the
net periodic postretirement benefit cost was 9% in 1994 and 1993, and
the estimated pay increase was 4.5% at December 31, 1994 and 1993, and
5% at December 31, 1992. The assumed health-care cost trend rate used in
measuring the accumulated postretirement benefit obligation was 15% in
1992 and 14% in 1993, and 13% in 1994, declining by 1% per year to an
ultimate rate of 7%, except that managed- care costs were assumed to
begin at 12% in 1992 and 11% in 1993 and 10% in 1994, declining by 1%
per year to 6%.
If the health-care cost-trend rate assumptions were increased by 1%,
the APBO, as of December 31, 1994, would be increased by approximately
$4 million. The effect of this change on the sum of the service cost and
interest cost components of net periodic postretirement benefit cost for
1994 would be an increase of about $0.9 million.
CHANGES IN ESTIMATES - The higher discount rate at December 31,
1994, decreased the pension accumulated benefit obligation by about $39
million and the pension projected benefit obligation by about $40.9
million. The higher discount rate at December 31, 1994, decreased the
postretirement accumulated benefit obligation by approximately $9.4
million. The rate-change effects on net pension income and
postretirement benefit cost are not material to the Company's financial
statements.
16. INCOME TAXES:
Effective January 1, 1992, the Company adopted FASB Statement No.
109, which requires the use of the asset-and-liability approach for
financial accounting and reporting for income taxes. The cumulative
effect of the accounting change resulted in a reduction of the deferred
income-tax liability and an increase in net income of $19.6 million, or
$.17 per share. This amount was included in the 1992 consolidated
statements of income reported as part of the cumulative effect of
accounting changes.
Income before discontinued insurance operations, income taxes,
extraordinary item and cumulative effect of accounting changes and
current and deferred income taxes are composed of the following:
(In Thousands)
Years ended December 31 1994 1993 1992
Income before discontinued
insurance operations, income
taxes, extraordinary item and
cumulative effect of accounting
changes:
Domestic $103,083 $121,486 $189,788
Foreign 38,063 12,021 16,830
Total $141,146 $133,507 $206,618
Current income taxes:
Federal $ 19,451 $ 33,195 $ 78,268
State 3,109 4,171 11,897
Foreign 10,569 13,782 12,238
Total 33,129 51,148 102,403
Deferred income taxes:
Federal 6,180 (10,944) 4,987
State (45) (282) 259
Foreign 4,127 3,563 (8,276)
Total 10,262 (7,663) (3,030)
Total income taxes $ 43,391 $ 43,485 $ 99,373
The significant differences between the U.S. Federal statutory rate
and the effective income-tax rate are as follows:
% of Income Before Income Taxes
1994 1993 1992
Federal statutory rate 35.0% 35.0% 34.0%
Gain on sale of subsidiaries (3.8) (1.7) -
State taxes, net of federal tax benefit 1.8 1.9 1.4
Foreign sales corporation benefit (1.2) (1.8) (1.5)
Deferred-tax benefit attributable to
Whitby Research downsizing - (7.0) -
Higher net tax on foreign related operations
primarily due to absence of tax benefit
on significant losses of Belgian subsidiary - 3.9 -
Increase in federal deferred taxes to
enacted 35% rate - 1.8 -
Gain on sale of 20% of First
Colony Corporation - - 16.3
Other items, net (1.1) .5 (2.1)
Effective income-tax rate 30.7% 32.6% 48.1%
1994 and 1993 deferred income taxes result from temporary
differences in the recognition of income and expenses for financial and
income-tax reporting purposes, using the liability or balance sheet
method. Such temporary differences result primarily from differences
between the financial statement carrying amounts and tax bases of assets
and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse. Federal income-tax legislation
enacted in 1993 increased the corporate income-tax rate to 35%
retroactive to January 1, 1993. This rate has been applied to all future
years and resulted in an increase in the deferred income-tax liability
and a decrease in net income of $2.3 million, or $.02 per share in 1993.
The deferred income-tax assets and deferred income-tax liabilities
recorded on the balance sheets as of December 31, 1994, and 1993, are as
follows:
(In Thousands)
Deferred tax assets:
1994 1993
Environmental reserves $12,892 $12,599
Future employee benefits 3,903 8,753
Undistributed earnings of foreign subsidiaries 7,267 2,920
Intercompany profit in inventories 4,916 6,015
Inventory capitalization 654 1,876
Corporate downsizing, plant write-down
and related costs 5,555 9,740
Foreign currency translation adjustment 1,481 -
Deferred-tax benefit attributable to
Whitby Research downsizing - 9,300
Belgian subsidiary net operating
loss carryforward - 16,360
Valuation allowance for Belgian
loss carryforward - (9,104)
Other 3,510 4,931
Net deferred tax asset 40,178 63,390
Deferred tax liabilities:
Depreciation 25,259 129,526
Future employee benefits 11,441 10,581
Foreign currency translation adjustment - 6,485
Capitalization of interest 2,011 10,209
Other 9,073 7,511
Deferred tax liabilities 47,784 164,312
Net deferred tax liabilities $ 7,606 $100,922
Reconciliation to financial statements:
Current tax assets $20,404 $ 42,754
Deferred tax liabilities 28,010 143,676
Net deferred tax liabilities $ 7,606 $100,922
The reduction in net deferred tax liabilities in the table above
reflects $109.8 million spun off as part of Albemarle.
During 1993, it was concluded that it was more likely than not that
a portion of the tax benefit from the Belgian subsidiary's operating
loss carryforward would not be realized, and consequently there was a
need for a valuation allowance. The business and related valuation
adjustment was part of Albemarle, which was spun off at the close of
business on February 28, 1994.
Based on current United States income-tax rates, it is anticipated
that no additional United States income taxes would be incurred if the
unremitted earnings of the Company's foreign subsidiaries were remitted
to Ethyl Corporation due to available foreign tax credits.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and estimates were used by the Company in
estimating the fair values of its outstanding financial instruments in
conformity with the disclosure requirements of FASB Statement No. 107,
"Disclosures About Fair Value of Financial Instruments."
CASH & CASH EQUIVALENTS - The carrying value approximates fair value.
LONG-TERM DEBT - The fair value of the Company's long-term debt is
estimated based on current rates available to the Company for debt of
the same remaining duration.
The estimated fair values of Ethyl's financial instruments are as
follows:
(In Thousands)
December 31, 1994 Carrying Fair
Value Value
Cash and cash equivalents $ 31,166 $ 31,166
Long-term debt, including current maturities $349,766 $360,489
December 31, 1993
Cash and cash equivalents $ 48,201 $ 48,201
Long-term debt, including current maturities $701,042 $732,500
18. SPECIAL CHARGES:
Special charges in 1994 amounted to $2,720,000 ($1,690,000 after
income taxes, or $.01 per share) consisting of a charge of $10,720,000
primarily for a provision for environmental remediation as well as other
costs largely offset by the benefit of an $8,000,000 legal settlement.
Special charges for 1993 amounted to $36,150,000 ($22,400,000 after
income taxes, or $.19 per share), of which $14,200,000 was incurred for
plant write- down and other related costs in connection with the
Company's decision to discontinue production of lead antiknock compounds
at Ethyl's subsidiary's Sarnia, Ontario, plant. This decision resulted
from entering into an agreement with The Associated Octel Company
whereby Ethyl is assured of an ample long-term supply of lead antiknock
compounds. The remainder of the special charges related to costs of
work-force reductions in the U.S. and Europe amounting to $7,635,000 and
$14,315,000 for downsizing costs of Whitby Research, Inc., relocation of
employees and other miscellaneous costs.
A special charge in 1992 amounting to $9,500,000 ($6,000,000 after
income taxes, or $.05 per share) covered expenses for the relocation of
the Petroleum Additives Division research-and-development employees to
Richmond, Virginia, in 1994.
19. GAIN ON SALE OF 20% INTEREST IN FIRST COLONY CORPORATION:
The gain on the sale of 20% of the Company's interest in First
Colony Corporation of $93,600,000 ($30,200,000 after income taxes, or
$.25 per share) resulted from the December 15, 1992, initial public
offering of 9,700,000 shares of First Colony Corporation stock at a
price of $28.00 per share less expenses. The after-tax gain of
$30,200,000 reflects higher tax expenses based on a lower tax basis than
book basis.
20. EXTRAORDINARY CHARGE:
The extraordinary charge of $5,000,000, or $.04 per share (net of
income taxes of $3,000,000), due to early extinguishment of debt results
from the Company redeeming its $116.25-million 9 3/8% Sinking Fund
Debentures due December 15, 2016, on December 15, 1993, at a redemption
price of 105.081 of the principal amount and the write-off of remaining
deferred financing costs associated with the sinking-fund debt.
21. DISCONTINUED INSURANCE OPERATIONS:
On July 1, 1993, the Company's 80-percent investment in First Colony
Corporation was spun off in a tax-free distribution to the Company's
shareholders. The distribution consisted of the net assets of the
Company's investment in First Colony Corporation totaling $757,211,000
less unrealized gains on marketable equity securities amounting to
$78,227,000 (net of deferred income taxes of $40,299,000) and
retroactive income-tax charges of $1,535,000 due to a change in federal
tax legislation.
The results of operations during the first six months of 1993 and
the year ended December 31, 1992, were as follows:
Statements of Income (In Thousands)
Six
Months Ended Year Ended
June 30 December 31
1993 1992
Revenues $737,137 $1,282,448
Benefits and expenses 566,174 1,044,580
Income before income taxes and
cumulative effect of
accounting changes 170,963 237,868
Income taxes 58,316 74,475
Income before cumulative effect
of accounting changes 112,647 163,393
Cumulative effect of
accounting changes - 332
Net income 112,647 163,725
Less provision for minority interest 22,164 1,253
Income from discontinued
insurance operations $ 90,483 $ 162,472
FIVE-YEAR SUMMARY
INTRODUCTION TO THE FIVE-YEAR SUMMARY: The following Five-Year
Summary includes the results of the businesses spun off as Albemarle
Corporation through the spin-off date at the close of business on
February 28, 1994. The financial position and other data at December 31,
1994, reflect the impact of the spin-off of Albemarle.
The results and net assets of the Insurance segment, spun off on
July 1, 1993, are reported as discontinued insurance operations.
(In Thousands Except Per-Share Amounts)
Years Ended December 31 1994
RESULTS OF OPERATIONS
Net sales $1,174,086
Costs and expenses 1,003,624
Special charges(1) 2,720
Operating profit 167,742
Interest and financing expenses 25,378
Gain on sale of 20% of First Colony Corporation(2) -
Gain on sale of subsidiary(3) -
Other expenses (income), net 1,218
Income before income taxes, extraordinary charge,
cumulative effect of accounting changes and discontinued
insurance operations 141,146
Income taxes 43,391
Income before extraordinary charge, cumulative effect of
accounting changes and discontinued insurance operations 97,755
Extraordinary after-tax charge due to early extinguishment
of debt(4) -
Cumulative effect of accounting changes for:(5)
Postretirement health-care benefits (net of tax) -
Deferred income taxes -
Income before discontinued insurance operations 97,755
Income from discontinued insurance operations -
Net income $97,755
FINANCIAL POSITION AND OTHER DATA
Total assets - before discontinued insurance operations $1,030,415
Net assets of discontinued insurance operations -
Total $1,030,415
Continuing Operations:
Working capital $ 248,650
Current ratio 2.36 TO 1
Depreciation and amortization $ 53,983
Capital expenditures 147,260
Acquisitions of businesses -
Gross margin as a % of net sales 33.9
Research, development and testing expenses(6) $ 82,661
Long-term debt(7) 349,766
Redeemable preferred stock -
Common and other shareholders' equity 390,937
Long-term debt as a % of total capitalization(7) 47.2
Net Income as a % of shareholders' equity 17.1
COMMON STOCK
Earnings per share:
Income before extraordinary charge, cumulative
effect of accounting changes and discontinued insurance
operations $ .83
Extraordinary charge -
Cumulative effect of accounting changes -
Income before discontinued insurance operations .83
Income from discontinued insurance operations -
Net income $ .83
Shares used to compute earnings per share 118,451
Dividends per share:
Cash dividends declared $ .50
Dividend of common stock of Albemarle Corporation,
at book value 3.38
Dividend of common stock of First Colony
Corporation, at book value -
Total $ 3.88
Equity per share(8) $ 3.30
1993 1992 1991 1990
$1,938,390 $1,692,582 $1,534,571 $1,590,940
1,734,635 1,509,260 1,330,721 1,348,736
36,150 9,500 11,185 48,710
167,605 173,822 192,665 193,494
44,085 62,279 59,097 64,839
- (93,600) - -
- - - (78,993)
(9,987) (1,475) (1,652) (8,110)
133,507 206,618 135,220 215,758
43,485 99,373 41,168 79,331
90,022 107,245 94,052 136,427
(5,000) - - -
- (34,348) - -
- 19,616 - -
85,022 92,513 94,052 136,427
90,483 162,472 112,616 95,762
$ 175,505 $ 254,985 $ 206,668 $ 232,189
$2,009,198 $1,878,898 $1,570,505 $1,385,643
- 658,550 909,876 775,523
$2,009,198 $2,537,448 $2,480,381 $2,161,166
$ 407,182 $ 327,840 $ 318,716 $ 277,289
2.25 to 1 1.71 to 1 2.25 to 1 2.12 to 1
$ 127,456 $ 105,765 $ 89,879 $ 88,522
205,029 157,412 166,148 151,822
125,431 136,500 24,035 61,575
28.5 29.2 31.9 31.6
$ 127,000 $ 111,698 $ 114,732 $ 106,172
686,986 711,736 810,849 683,829
200 200 200 214
752,581 1,401,279 1,219,313 1,047,606
47.7 33.7 39.9 39.5
16.3 19.5 18.2 23.8
$ .76 $ .90 $ .80 $ 1.15
(.04) - - -
- (.12) - -
.72 .78 .80 1.15
.76 1.37 .95 .80
$ 1.48 $ 2.15 $ 1.75 $ 1.95
118,436 118,380 118,380 119,309
$ .60 $ .60 $ .60 $ .60
- - - -
5.72 - - -
$ 6.32 $ .60 $ .60 $ .60
$ 6.36 $ 11.84 $ 10.31 $ 8.85
(1) Special charges in 1994 consist of $10,720 primarily for a
provision for environmental remediation as well as other costs, largely
offset by the benefit of an $8,000 legal settlement (totalling $1,690
after income taxes). 1993 includes the write-down of the Canadian plant
and other related costs of $14,200, costs of work-force reductions in the
U.S. and Europe amounting to $7,635, and $14,315 for downsizing costs of
Whitby Research, Inc., and relocation of employees and other related
costs (totalling $22,400 after income taxes); 1992 includes charges for
the relocation of the Petroleum Additives Division R&D personnel ($6,000
after taxes); 1991 includes expenses and write- offs of $6,350 resulting
from the discontinuance of certain developmental research programs as
well as expenses of $4,835 covering the relocation of the Petroleum
Additives Division headquarters ($7,000 after income taxes); 1990
includes mainly the write-off of goodwill and provisions for relocation
expenses of Whitby, Inc., and for environmental remediation projects at
certain chemical facilities ($42,441 after income taxes).
(2) Resulted from the December 1992 sale of approximately 20% of
First Colony Corporation stock ($30,200 after income taxes).
(3) Resulted from the 1990 sale of Hardwicke Chemical Company ($50,765
after income taxes).
(4) The extraordinary after-tax charge is the result of the early
redemption of the $116,250, 9 3/8% Sinking Fund Debentures, net of
income taxes of $3,000.
(5) Change in accounting for postretirement health benefits ($54,460
before income taxes) and deferred income taxes in accordance with FASB
Statements No. 106 and 109, respectively, adopted effective January 1,
1992.
(6) Research-and-development expenses determined in accordance with
FASB Statement No. 2 were $49,651 for 1994, $75,624 for 1993, $73,831
for 1992, $69,119 for 1991 and $65,186 for 1990.
(7) The reduction in long-term debt in 1994 reflects $384,924 of debt
transferred to Albemarle at the close of business on February 28, 1994.
Excluding the debt and net assets of the businesses spun off, the
consolidated debt-to-total-capitalization ratio at December 31, 1993,
would have been 46.2%. 1992 includes $250 million of debt of First
Colony Corporation spun off July 1, 1993.
(8) Based on the number of common shares outstanding at the end of
each year. The decline in 1994 reflects the dividend of common
stock of Albemarle Corporation of $3.38 per share at book value. The
decline in 1993 reflects the dividend of common stock of First Colony
Corporation of $5.72 per share at book value.
MANAGEMENTS REPORT ON
THE FINANCIAL STATEMENTS
Ethyl Corporation's management has prepared the financial statements
and related notes appearing on pages 28 through 45 in conformity with
generally accepted accounting principles. In so doing, management makes
informed judgments and estimates of the expected effects of events and
transactions. Financial data appearing elsewhere in this annual report
are consistent with these financial statements.
Ethyl maintains a system of internal controls to provide reasonable,
but not absolute, assurance of the reliability of the financial records
and the protection of assets. The internal control system is supported
by written policies and procedures, careful selection and training of
qualified personnel and an extensive internal audit program.
These financial statements have been audited by Coopers & Lybrand,
L.L.P., independent certified public accountants. Their audit was made
in accordance with generally accepted auditing standards and included a
review of Ethyl's internal accounting controls to the extent considered
necessary to determine audit procedures.
The audit committee of the board of directors, composed only of
outside directors, meets with management, internal auditors and the
independent accountants to review accounting, auditing and financial
reporting matters. The independent accountants are appointed by the
board on recommendation of the audit committee, subject to shareholder
approval.
REPORT OF INDEPENDENT ACCOUNTANTS
certified public accountants Riverfront Plaza West
901 East Byrd Street
in principal areas of Suite 1200
the world Richmond, Virginia 23219
Telephone (804) 697-1900
TO THE BOARD OF DIRECTORS & SHAREHOLDERS OF ETHYL CORPORATION
We have audited the accompanying consolidated balance sheets of
Ethyl Corporation and Subsidiaries (the Company) as of December 31, 1994
and 1993, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the
period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Ethyl Corporation and Subsidiaries as of December 31, 1994 and 1993, and
the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
As discussed in Notes 15 and 16 to the consolidated financial
statements, effective January 1, 1992, the Company changed its method of
accounting both for postretirement benefits other than pensions and for
income taxes by adopting Financial Accounting Standards Board Statements
No. 106 and No. 109, respectively.
[SIGNATURE]
February 21, 1995
*BRUCE C. GOTTWALD
Chairman of the Board
Ethyl Corporation
Richmond,Virginia
*FLOYD D. GOTTWALD, JR.
Vice Chairman of the Board
Ethyl Corporation
Richmond,Virginia
*CHARLES B. WALKER
Vice Chairman of the Board
Ethyl Corporation
Richmond,Virginia
*THOMAS E. GOTTWALD
President
Ethyl Corporation
Richmond,Virginia
*WILLIAM M. GOTTWALD, MD
Senior Vice President
Ethyl Corporation
Richmond,Virginia
LLOYD B. ANDREW
Retired Executive Vice President
Ethyl Corporation
Richmond,Virginia
WILLIAM W. BERRY
Retired Chairman of the Board
Dominion Resources, Inc.
Richmond,Virginia
+PHYLLIS L. COTHRAN
President & Chief Operating Officer
Trigon Blue Cross Blue Shield
Richmond, Virginia
ALLEN C. GOOLSBY
Partner
Hunton & Williams
Richmond,Virginia
BRUCE C. GOTTWALD, JR.
Chairman of the Board
First Colony Corporation
Richmond,Virginia
GILBERT M. GROSVENOR
President & Chairman
National Geographic Society
Washington, D.C.
ANDRE B. LACY
Chairman, Chief Executive Officer
& President
LDI Management, Inc.
Indianapolis, Indiana
EMMETT J. RICE
Retired Member - Board of Governors
Federal Reserve System
Washington, D.C.
SIDNEY BUFORD SCOTT
Chairman of the Board
Scott & Stringfellow, Inc.
Richmond,Virginia
OFFICERS & STAFF
* BRUCE C. GOTTWALD
Chairman of the Board
Chief Executive Officer
Chairman - Executive Committee
* FLOYD D. GOTTWALD, JR.
Vice Chairman of the Board
* CHARLES B. WALKER
Vice Chairman of the Board
Chief Financial Officer
* THOMAS E. GOTTWALD
President
Chief Operating Officer
* WILLIAM M. GOTTWALD, MD
Senior Vice President - Business
& Finance Support
SAMPSON H. BASS, JR.
Vice President
Secretary - Executive Committee
as Management Committee
E. WHITEHEAD ELMORE
Secretary & Special Counsel
to the Executive Committee
DAVID A. FIORENZA
Vice President - Finance
& Controller
CHRISTOPHER HICKS
Vice President - Government
Relations
C. S. WARREN HUANG
Vice President - Research
& Development
DONALD R. LYNAM
Vice President - Air Conservation
STEVEN M. MAYER
Vice President & General Counsel
IAN A. NIMMO
Vice President- Lubricant Additives
HENRY C. PAGE, JR.
Vice President - Human Resources
NEWTON A. PERRY
Vice President - Fuel Additives
A. PRESCOTT ROWE
Vice President - External Affairs
JOHN S. PATTON
Director- Investor Relations
Fuel Additives
NEWTON A. PERRY
Corporate Vice President - General Manager
ROGER H. VENABLE
Marketing Vice President - Antiknocks
ROBERT A. YONDOLA
Marketing Vice President - Fuel Additives
Lubricant Additives
IAN A. NIMMO
Corporate Vice President - General Manager
RAYMOND C. GUDUM
Marketing Vice President - North America
JAMES D. HANES
Marketing Vice President - Far East,
Latin America/Caribbean
KENNETH J. DONLAN
Managing Director - Ethyl Petroleum
Additives Limited
LEE A. CHOUINARD
General Manager - Product Supply
* Member of the Executive Committee
+ Elected February 23, 1995
PRODUCTS & LOCATIONS
PRODUCTS
Ethyl formulates fuel and lubricant additive packages that help meet
or exceed a wide range of industry and government performance standards.
The most prominent of these include reducing exhaust emissions,
improving fuel economy, prolonging oil-drain intervals and extending
equipment life.
FUEL ADDITIVES FOR GASOLINE
. antiknock compounds to increase octane and prevent engine knock
. antioxidants/stabilizers to prevent degradation during storage/transport
. corrosion inhibitors to prevent storage/pumping system failures
. detergents to prevent carbon deposits on engine parts
. dyes to provide color differentiation
FUEL ADDITIVES FOR DIESEL
. antioxidants/stabilizers to prevent degradation during storage/transport
. cetane improvers for consistent combustion and emission reduction
. cold-flow improver to enhance fuel pumping
. conductivity modifier to neutralize static charge build-up in fuel
. detergents/dispersants to prevent carbon deposits on engine parts
. dyes for fuel identification and leak detection
. lubricity agents
LUBRICANT ADDITIVES FOR ENGINE CRANKCASE OILS (PASSENGER CAR,
HEAVY-DUTY VEHICLE AND RAILROAD)
. antioxidants to resist high-temperature degradation
. antiwear agents to protect metal surfaces from abrasion
. corrosion inhibitors to protect metal parts
. detergents to prevent carbon and varnish deposits on engine parts
. dispersants to keep engine parts clean
. pour-point depressants to enable oil flow at cold temperatures
LUBRICANT ADDITIVES FOR SPECIALTY OILS (AUTOMATIC TRANSMISSION,
HYDRAULIC, INDUSTRIAL AND GEAR)
. antioxidants to resist high-temperature degradation
. antiwear agents to protect metal surfaces from abrasion
. corrosion inhibitors to protect metal parts
. detergents to prevent carbon and varnish deposits on engine parts
. friction reducers to facilitate movement
PLANTS
Feluy, Belgium
Houston, Texas
Natchez, Mississippi
Orangeburg, South Carolina
Sarnia, Ontario, Canada
Sauget, Illinois
Yokkaichi, Japan
OFFICES
Brussels, Belgium
Chicago, Illinois
Detroit, Michigan
Hamburg, Germany
Houston, Texas
Milan, Italy
Moscow, Russia
Paris, France
Richmond, Virginia
Singapore
Sydney, Australia
Tokyo, Japan
Washington, D.C.
RESEARCH, DEVELOPMENT
& TESTING FACILITIES
Ashland, Virginia
Bracknell, Berkshire, England
Richmond, Virginia
Yokkaichi, Japan
EXHIBIT 22
LIST OF SUBSIDIARIES
The following is a list of the significant subsidiaries of the
registrant as of December 31, 1994. Each such subsidiary does business
under its corporate name.
Jurisdiction of
Subsidiary Incorporation
EID Corporation Liberia
Ethyl Asia Pacific Company Virginia
Ethyl Canada Inc. Province of Ontario, Canada
Ethyl Foreign Sales Corporation U.S. Virgin Islands
Ethyl Interamerica Corporation Delaware
Ethyl Japan Corporation Japan
Ethyl Mineraloel-Additive GmbH Germany
Ethyl Petroleum Additives, Inc. Delaware
Ethyl Petroleum Additives Limited United Kingdom
Ethyl Europe S.A. Belgium
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Ethyl Corporation on Form S-8 (File Nos. 33-44990,
33-50368, 33-50366 and 33-31899) of our report dated February 21, 1995,
on our audits of the consolidated financial statements of Ethyl
Corporation and Subsidiaries as of December 31, 1994 and 1993, and for
the years ended December 31, 1994, 1993 and 1992, appearing on page 46
of the Ethyl Corporation 1994 Annual Report to Shareholders, which
report is incorporated by reference in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Richmond, Virginia
March 30, 1995
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