<PAGE>
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Page 1 of 32 Pages
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Transition Period from to
For Quarter Ended September 30, 1995 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 23218
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code - (804) 788-5000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Number of shares of common stock, $1 par value, outstanding as of
October 31, 1995: 118,434,401.
<PAGE>
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ETHYL CORPORATION
I N D E X
Page
Number
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets - September 30, 1995 and
December 31, 1994 3 - 4
Consolidated Statements of Income - Three Months and Nine
Months Ended September 30, 1995 and 1994 5
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1995 and 1994 6
Notes to Financial Statements 7 - 9
ITEM 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 10 - 15
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 16
ITEM 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
EXHIBIT INDEX 18
EXHIBIT 3.1 Certificate of Restatment of the Amended Articles
of Incorporation of the Company 19 - 32
2<PAGE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
ETHYL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
<CAPTION>
September 30 December 31
ASSETS 1995 1994
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 24,256 $ 31,166
Accounts receivable, less allowance for doubtful
accounts (1995 - $2,401; 1994 - $2,395) 164,619 229,477
Inventories:
Finished goods 141,612 118,731
Work-in-process 14,150 9,959
Raw materials 15,761 10,842
Stores, supplies and other 6,744 5,531
---------- ----------
178,267 145,063
Deferred income taxes and prepaid expenses 20,406 25,744
---------- ----------
Total current assets 387,548 431,450
---------- ----------
Property, plant and equipment, at cost 707,043 684,379
Less accumulated depreciation and amortization (276,847) (250,012)
---------- ----------
Net property, plant and equipment 430,196 434,367
---------- ----------
Other assets and deferred charges 149,389 144,856
Goodwill and other intangibles - net of amortization 16,169 19,742
---------- ----------
Total assets $ 983,302 $ 1,030,415
========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
3<PAGE>
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<TABLE>
ETHYL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
(Unaudited)
<CAPTION>
September 30 December 31
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
--------- ---------
<S> <C> <C>
Current liabilities:
Accounts payable $ 59,202 $ 77,223
Accrued expenses 54,700 73,118
Cash dividends payable 14,804 14,807
Income taxes payable 16,640 17,652
--------- ---------
Total current liabilities 145,346 182,800
--------- ---------
Long-term debt 311,921 349,766
Other noncurrent liabilities 84,627 78,902
Deferred income taxes 37,431 28,010
Shareholders' equity:
Common stock ($1 par value)
Issued - 118,434,401 in 1995 and 1994 118,434 118,434
Additional paid-in capital 2,706 2,706
Foreign currency translation adjustments 3,734 (2,253)
Retained earnings 279,103 272,050
--------- ---------
403,977 390,937
--------- ---------
Total liabilities and shareholders' equity $ 983,302 $ 1,030,415
========= =========
<FN>
See accompanying notes to financial statements.
</TABLE>
4<PAGE>
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<TABLE>
ETHYL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -------------------
1995 1994 1995 1994
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Net sales $ 241,672 $ 244,935 $ 700,493 $ 910,100
Cost of goods sold 159,754 158,079 465,797 599,940
-------- -------- -------- --------
Gross profit 81,918 86,856 234,696 310,160
Selling, general and administrative expenses 24,500 33,220 71,646 118,939
Research, development and testing expenses 18,854 19,210 57,359 62,682
Special charge 4,750 - 4,750 -
-------- -------- -------- --------
Operating profit 33,814 34,426 100,941 128,539
Interest and financing expenses 7,564 5,996 21,581 18,762
Other (income) expense, net (340) 1,851 (588) 1,773
-------- -------- -------- --------
Income before income taxes 26,590 26,579 79,948 108,004
Income taxes 9,623 4,085 28,482 34,868
-------- -------- -------- --------
Net Income 16,967 22,494 51,466 73,136
Preferred stock dividends - (3) - (9)
-------- -------- -------- --------
Net income applicable to common stock $ 16,967 $ 22,491 $ 51,466 $ 73,127
======== ======== ======== ========
Earnings per share $ .14 $ .19 $ .43 $ .62
======== ======== ======== ========
Shares used to compute earnings per share 118,442 118,448 118,442 118,455
======== ======== ======== ========
Cash dividends per share of common stock $ .125 $ .125 $ .375 $ .40
======== ======== ======== ========
<FN>
See accompanying notes to financial statements.
</TABLE>
5<PAGE>
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<TABLE>
ETHYL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30
---------------------
1995 1994
---------------------
<S> <C> <C>
Cash and cash equivalents at beginning of year $ 31,166 $ 48,201
-------- --------
Cash flows from operating activities:
Net income 51,466 73,136
Adjustments to reconcile net income to cash flows
from operating activities:
Depreciation and amortization 35,795 42,719
Special charge 4,750 -
Working capital decrease (increase) 10,012 (8,892)
Other, net 4,746 (8,120)
-------- --------
Cash provided from operating activities 106,769 98,843
-------- --------
Cash flows from investing activities:
Capital expenditures (33,608) (136,257)
Proceeds from sale of subsidiary - 60,500
Other, net 2,149 719
-------- --------
Cash used in investing activities (31,459) (75,038)
Cash flows from financing activities:
Additional long-term debt 162,000 30,400
Repayment of long-term debt (200,000) -
Cash dividends paid (44,416) (47,376)
Cash and cash equivalents of Albemarle spun off
as a div on February 28, 1994 - (29,332)
Other, net 196 260
-------- --------
Cash used in financing activities (82,220) (46,048)
-------- --------
Decrease in cash and cash equivalents (6,910) (22,243)
-------- --------
Cash and cash equivalents at end of period $ 24,256 $ 25,958
======== ========
<FN>
See accompanying notes to financial statements.
</TABLE>
6<PAGE>
<PAGE> 7
ETHYL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(In Thousands Except Per-Share Amounts)
(Unaudited)
1. In the opinion of management, the accompanying consolidated
financial statements of Ethyl Corporation and Subsidiaries (the
"Company") contain all adjustments necessary to present fairly,
in all material respects, the Company's consolidated financial
position as of September 30, 1995, the consolidated results of
operations for the three and nine-month periods ended September
30, 1995 and 1994 and the consolidated cash flows for the
nine-month periods ended September 30, 1995 and 1994. All
adjustments are of a normal, recurring nature. Certain
reclassifications have been made to prior year information to
conform to the current presentation. These financial statements
should be read in conjunction with the consolidated financial
statements and notes thereto included in the December 31, 1994
Annual Report. The December 31, 1994 consolidated balance sheet
data was derived from audited financial statements but does not
include all disclosures required by generally accepted
accounting principles. The results of operations for the
nine-month period ended September 30, 1995, are not necessarily
indicative of the results to be expected for the full year.
2. At the close of business on February 28, 1994, the Company
completed the distribution to its common shareholders of all of
the outstanding shares of its wholly owned subsidiary, Albemarle
Corporation ("Albemarle"), a Virginia corporation. Following
the distribution, Albemarle owned, directly or indirectly, the
olefins and derivatives, bromine chemicals and specialty
chemical businesses formerly owned directly or indirectly by the
Company. The distribution was made in the form of a tax-free
spin-off to shareholders of record at the close of business on
February 28, 1994. One share of Albemarle common stock was
distributed to Ethyl common shareholders for every two shares of
Ethyl common stock held. The operating results and cash flows
of the predecessor businesses to what is now Albemarle are
included in the Consolidated Statement of Income and the
Condensed Consolidated Statement of Cash Flows for the first two
months in 1994.
The following non-cash supplemental information is provided
regarding the accounts of Albemarle spun off as a stock dividend,
which aggregated $404,100 (including cash and cash equivalents of
$29,332) on February 28, 1994:
Working capital, net of cash and cash equivalents $174,847
Net property, plant and equipment 663,505
Other assets and deferred charges 49,480
Goodwill and other intangibles 33,132
Long-term debt (384,924)
Other non-current liabilities (40,996)
Deferred income taxes (120,276)
-------
Non-cash portion of businesses spun off $374,768
=======
7<PAGE>
<PAGE> 8
ETHYL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(In Thousands Except Per-Share Amounts)
(Unaudited)
3. Long-term debt consists of the following: September 30 December 31
1995 1994
------------ -----------
Variable-rate bank loans (average effective
interest rates were 6.5% for the nine-month
period ended September 30, 1995 and 4.5% for
the year 1994) $279,000 $117,000
9.8% Notes (redeemed September 15, 1995) - 200,000
8.6% to 8.86% Medium-Term Notes due through 2001 33,750 33,750
------- -------
Total long-term debt 312,750 350,750
Less unamortized discount (829) (984)
------- -------
Net long-term debt $311,921 $349,766
======= =======
4. The special charge relates to a provision for an anticipated legal
settlement by the Company with the civil division of the U.S. Department
of Justice resulting in an after tax charge of $4,150 or $.04 per share.
5. On September 15, 1994, Ethyl sold its pharmaceutical subsidiary, Whitby,
Inc., for $60,500 resulting in a gain of $4,150 after income taxes or $.04
per share.
8<PAGE>
<PAGE> 9
ETHYL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(In Thousands Except Per-Share Amounts)
(Unaudited)
6. The Company is providing the following pro forma information to enable
the reader to obtain a meaningful understanding of the Company's results
of operations. The pro forma statement of income presented is for
informational purposes only to illustrate the estimated effects of the
distribution of Albemarle as ifit had occurred on January 1, 1994.
<TABLE>
Statement of Income
(In thousands except earnings per share)
<CAPTION>
Nine Months Ended September 30
------------------------------------
1994
------------------------------------
Historical Adjustments(i) Pro Forma
------------------------------------
<S> <C> <C> <C>
Net sales $ 910,100 $ (155,064) $ 755,036
Cost of goods sold 599,940 (119,086) 480,854
-------- --------- --------
Gross profit 310,160 (35,978) 274,182
Selling, general and administrative expenses 118,939 (14,471) 104,468
Research, development and testing expenses 62,682 (8,662) 54,020
-------- --------- --------
Operating profit 128,539 (12,845) 115,694
Interest and financing expenses 18,762 (2,873)(ii) 15,889
Other expense, net 1,773 543 2,316
-------- --------- --------
Income before income taxes 108,004 (10,515) 97,489
Income taxes 34,868 (4,239)(iii) 30,629
-------- --------- --------
Net income $ 73,136 $ (6,276) $ 66,860
======== ========= ========
Earnings per share (iv) $ .62 $ .57
======== ========
<FN>
Introduction to Notes:
Notes (i), (ii) and (iii) reflect a summary of the adjustments in the pro forma
statement of income.
Notes:
(i) To eliminate the historical income and expenses of Albemarle for the period
presented.
(ii) To eliminate interest expense (net of capitalized interest) that would have
incurred by Albemarle on debt transferred to Albemarle.
(iii) To record the estimated income tax for the pro forma adjustments.
(iv) Historical and pro forma earnings per share are computed after deducting
applicable preferred stock dividends using the weighted-average number of
shares of common stock and common stock equivalents outstanding for the
period presented.
</TABLE>
9<PAGE>
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following is management's discussion and analysis of certain significant
factors affecting the Company's results of operations during the periods
included in the accompanying consolidated statements of income and changes
in the Company's financial condition since year-end 1994.
At the close of business on February 28, 1994, the Company completed the
tax-free spin-off of its wholly owned subsidiary, Albemarle Corporation
(Albemarle). Consequently, Albemarle's results of operations are included
in the Consolidated Statements of Income and the Condensed Consolidated
Statements of Cash Flows for only the first two months of 1994. Due to the
significance of the spin-off of Albemarle, a pro forma statement of income is
provided for the nine-month period ended September 30, 1994, in Note 6 of the
Notes to Financial Statements for informational purposes to illustrate the
estimated effects of the distribution of Albemarle stock assuming the
distribution had occurred as of January 1, 1994, which includes interest
charges resulting from an assumed debt structure. In the following discussion,
in addition to the consolidated information discussed for nine months 1995
versus 1994, pro forma comparisons are provided to illustrate the Company's
1994 results excluding the Albemarle businesses spun off. The proforma
information presented is not necessarily indicative of the future results of
operations of the Company or what the results of operations would have been
had Albemarle operated as a separate, independent company during the period
presented.
On September 15, 1994, Ethyl sold its pharmaceutical subsidiary, Whitby, Inc.,
placing Ethyl solely in the petroleum additives business.
Third Quarter 1995 Compared with Third Quarter 1994
Total net sales for the third quarter of 1995 amounted to $241.7 million,
down $3.2 million from $244.9 million in 1994. The reduction in aggregate
net sales primarily reflected the absence of revenues from the pharmaceuticals
business in 1995 versus $14.1 million revenues in the 1994 quarter, while the
$10.9 million increase in the petroleum additives business reflected the
beneficial impact from higher selling prices ($13.0 million), partly offset
by the effect of lower shipments ($2.1 million).
The higher selling prices were reflected in antiknocks, lubricant additives
and certain other fuel additives. The decreased shipments primarily
reflected lower than expected shipments of lubricant additives as a result
of a general weakness in the end market demand, as well as anticipated lower
shipments of certain other fuel additives, partly offset by higher shipments
of antiknocks, resulting from normal fluctuations in order and shipping
patterns of this product.
Cost of goods sold in 1995 increased by $1.7 million from 1994. The increase
in cost of goods sold occurred in spite of the absence of pharmaceutical
costs in 1995 versus $4.3 million in the 1994 quarter, which was more than
10<PAGE>
<PAGE> 11
offset by $6.0 million higher cost of goods sold from the petroleum
additives business. That increase in petroleum additives reflected the
combined impact of higher manufacturing costs in 1995 ($8.7 million),
primarily of lubricant additives including costs associated with starting
up the recently completed facilities, delayed charges from a contract
manufacturing site which for the most part was phased out during the first
half of 1995 and higher unit raw material costs, as well as an unfavorable
foreign exchange effect, all of which were partly offset by lower shipments
in 1995 ($2.7 million).
The gross profit margin decreased to 33.9% in the 1995 quarter from 35.5%
in the 1994 quarter, representing the net result of a 1% decrease in net
sales and a 1% increase in cost of goods sold. Additionally, excluding
pharmaceuticals in 1994, the gross profit margin would have been 33.4%.
The gross margin in 1995 benefited from a higher level of antiknock shipments
included in the product mix during this quarter, largely offset by lower
margins in lubricants and other fuel additives.
Selling, general and administrative expenses, combined with research,
development and testing expenses, amounted to $43.4 million in the third
quarter 1995, down $9.0 million from $52.4 million in the third quarter of
1994. The decrease primarily represents the absence of pharmaceuticals
expenses in 1995 versus $9.0 million expenses in the 1994 period. The 1995
petroleum additives business expenses were even with 1994, reflecting an
increase in in-house research, development and testing and other expenses
offset by lower outside testing costs. As a percentage of net sales,
selling, general and administrative expenses, including research, development
and testing expenses, decreased to 17.9% during the 1995 quarter from 21.4%
during the 1994 quarter. Excluding the impact of the pharmaceutical business
that was sold in September 1994, the expenses would have represented 18.8% of
net sales in the 1994 quarter.
Third quarter 1995 results include a special charge provision of $4.75
million for an anticipated legal settlement by an Ethyl subsidiary with the
civil division of the U.S. Department of Justice.
Operating profit in the 1995 quarter decreased to $33.8 million, down $0.6
million from $34.4 million in the 1994 quarter as a result of the special
charge. Without this charge, operating profit would have increased about
$4.2 million for the third quarter reflecting higher margins, primarily in
antiknocks and other refinery chemicals as well as higher antiknock shipments
(due to normal fluctuations in order and shipping patterns) partially offset
by somewhat lower lubricant additives shipments, as well as higher lubricant
additives per unit costs.
Interest and financing expenses in 1995 increased 26% to $7.6 million from
$6.0 million in the 1994 period. The increase in interest expense was due
to a lower amount of interest cost capitalized in 1995 than in 1994 of about
11<PAGE>
<PAGE> 12
$1.8 million, which combined with the $0.4 million increase due to higher
average interest rates and $0.5 million in other finance charges, more
than offset the $1.1 million effect of lower average debt outstanding.
Other income, net, amounted to $0.3 million in 1995 versus $1.8 million
other expense, net, in 1994 with no significant items in either period.
Income Taxes
Income taxes in third quarter 1995 increased 136% from third quarter 1994,
on basically unchanged pretax income, due to a higher effective rate (36.2%
in the 1995 quarter versus 15.4% in the 1994 quarter). The unusually low
1994 effective tax rate was primarily due to the tax benefit from the
September 1994 sale of Ethyl's pharmaceutical subsidiary which had a higher
tax basis than book basis, partially offset by the inclusion of non-deductible
goodwill amortization associated with the pharmaceuticals business. The
1995 effective tax rate reflected the benefit of a redetermination of
prior-year research and development tax credits resulting from a change in
federal tax regulations, as well as other favorable adjustments related to
prior tax years.
Nine Months 1995 Compared with Nine Months 1994
Total net sales for the nine months of 1995 amounted to $700.5 million,
down $209.6 million from $910.1 million in 1994. The reduction in aggregate
net sales primarily reflected the absence of Albemarle net sales in the 1995
period versus the inclusion of two months of Albemarle net sales of $155.1
million in the 1994 period.
Net sales for the first nine months of 1995 of $700.5 million decreased $54.5
million (7%) from pro forma net sales in the first nine months of 1994 of
$755.0 million. The decrease primarily reflected the absence of
pharmaceutical sales ($48.8 million included in 1994), as well as $5.7
million lower petroleum additives business sales. The lower petroleum
additives business sales reflected lower shipments ($51.3 million) which were
largely offset by the impact of higher selling prices ($45.6 million). The
decrease in shipments reflected lower shipments of antiknocks, resulting
from expected fluctuations in order and shipping patterns compared to the
1994 period, as well as lower shipments of lubricant additives, as a result
of general weakness in the end market demand, and other fuel additives,
partly offset by somewhat higher shipments of other refinery fuel additives.
The effect of lower shipments was largely offset by higher selling prices in
all major product lines.
Cost of goods sold in nine months 1995 decreased $134.1 million from the
1994 period. The decline in consolidated cost of goods sold occurred
primarily because of the absence of Albemarle costs in 1995 versus the
inclusion of two months of Albemarle cost of goods sold of $119.1 million in
the 1994 period.
12<PAGE>
<PAGE> 13
Cost of goods sold of $465.8 million for nine months 1995 was down about
$15.1 million (3%) from nine months 1994 pro forma cost of goods sold of
$480.9 million. The decrease reflects the absence of pharmaceuticals cost
of sales in 1995 versus about $16.8 million in the 1994 period, slightly
offset by $1.7 million higher petroleum additives business cost of goods
sold. The higher petroleum additives business cost of goods sold reflects
higher costs ($32.2 million) and lower shipments ($30.5 million), primarily
in antiknocks, lubricant additives and other fuel additives. The higher
costs include unfavorable capacity utilization costs reflecting the second
quarter 1995 shutdown of operations at a contract manufacturing site, an
expected cost increase associated with starting up the recently completed
facilities at several plants (about $4.8 million in 1995 versus $3.1 million
in 1994), costs associated with the strike at Feluy, higher per unit raw
material costs and an unfavorable foreign exchange effect.
The gross profit margin decreased to 33.5% in the 1995 period from 36.3% on
a pro forma basis in the 1994 period, resulting from the net effect of a 7%
decrease in net sales and a 3% decrease in cost of goods sold. Additionally,
excluding the impact of the pharmaceuticals business, the gross profit margin
would have been 34.3% in the 1994 period.
Selling, general and administrative expenses, combined with research,
development and testing expenses, amounted to $129.0 million in the first
nine months of 1995 versus $181.6 million in the first nine months of 1994.
The reduction in consolidated expenses occurred, in part, because of the
absence of Albemarle expenses in 1995 versus the inclusion of two months of
Albemarle expenses of $23.1 million in the 1994 period.
Selling, general and administrative expenses of $129.0 million in the 1995
period were down $29.5 million (19%) from pro forma expenses of $158.5
million in the 1994 period. The decrease primarily represents the absence
of pharmaceuticals expenses in 1995 versus $31.2 million expenses in the
1994 period, slightly offset by a $1.7 million increase in petroleum
additives business expenses primarily due to a $4.0 million increase in
research, development and testing expenses, primarily related to MMT approval
activities and testing costs, partially offset by the nonrecurring 1994
charges related to closing certain research facilities and certain
organization expenses. As a percentage of net sales, selling, general
and administrative expenses, including research, development and testing
expenses, decreased to 18.4% during the nine months of 1995 from 21.0 % on
a pro forma basis during the first nine months of 1994 (18.0% excluding the
effect of the pharmaceuticals business).
Nine month 1995 results include a special charge provision of $4.75 million
for an anticipated legal settlement by an Ethyl subsidiary with the civil
division of the U.S. Department of Justice.
13<PAGE>
<PAGE> 14
Operating profit in 1995 decreased 21% from the 1994 period, which included
two months operating profit of Albemarle ($12.8 million) during the first
quarter of 1994.
Operating profit in the first nine months of 1995 decreased 13% to $100.9
million from pro forma operating profit of $115.7 million in the 1994
period. The decrease resulted from lower shipments, (approximately $20.8
million) primarily of lead antiknocks (reflecting normal fluctuations in
order and shipping patterns) and lubricant additives, and somewhat lower
profit margins, as well as lower operating profit from other fuel additives
and the absence of pharmaceuticals profit in 1995 versus approximately $0.8
million in the 1994 period. These decreases were partly offset by higher
profit from other refinery chemicals.
In spite of quarterly variances in order and shipping patterns, operating
profits from the lead antiknocks business in 1995 are expected to be about
even with 1994. Results from other refinery fuel additives are expected to
be well ahead of 1994 levels while lubricant additives results may be
slightly below 1994 results. Other fuel additives are expected to be well
below prior year results.
Consolidated interest and financing expenses in 1995 increased 15% to $21.6
million from the 1994 period. This increase more than offset the absence of
interest for Albemarle debt in 1995 versus the inclusion of two months'
interest for Albemarle debt in 1994. Interest and financing expenses for
nine months 1995 increased 36% in the 1995 period from pro forma interest and
financing expenses of $15.9 million in the 1994 period, primarily reflecting
increases of about $5.0 million due to a lower amount of interest cost
capitalized in 1995 than in 1994, about $1.8 million due to higher average
interest rates in 1995, and increased other financing charges, partly offset
by a benefit of $1.4 million due to lower average debt outstanding.
Other income, net, increased to $0.6 million in 1995 from $1.8 million other
expense, net, in 1994, which included $0.5 million income associated with
Albemarle. Other income, net, in 1995 increased $2.9 million from pro forma
other expense, net, of $2.3 million in 1994. The increase resulted from
higher interest income on larger amounts invested in short-term securities
and other items, none of which was individually material.
Income Taxes
Income taxes for the nine months 1995 decreased 18% compared to nine months
1994, primarily due to lower pretax income in 1995. Some of the decrease
reflected the absence of Albemarle pretax income and income taxes in the
1995 period versus two months pretax income and income taxes included
during the 1994 period.
Income taxes for the nine months 1995 decreased 7% from pro forma income
taxes for nine months 1994, primarily due to an 18% decrease in pretax
income, partly offset by a higher effective income tax rate (35.6% in the
1995 period versus 31.4% in the 1994 period). The increase in the effective
tax rate in 1995 compared to the unusually low 1994 effective tax rate was
due to the 1994 rate including the tax benefit on the September 1994 sale of
Ethyl's pharmaceutical subsidiary which had a higher tax basis than book
basis, partially offset by the inclusion of non-deductible goodwill associated
with the pharmaceutical business. The 1995 rate includes the benefit from a
redetermination of prior-year research and development tax credits resulting
from a change in Federal tax regulations, as well as favorable adjustments
related to prior tax years.
14<PAGE>
<PAGE> 15
Financial Condition and Liquidity
Cash and cash equivalents at September 30, 1995, were about $24.3 million
which represents a decrease of about $6.9 million from $31.2 million at
year-end 1994.
Cash flows were more than sufficient to cover operating activities in the
first nine months of 1995. Cash flows from operating activities of $106.8
million combined with approximately $6.9 million in cash and cash equivalents
were sufficient to cover capital expenditures of $33.6 million and cash
dividends to shareholders of $44.4 million. In addition, the Company repaid
its $200 million 9.8% Notes, funded with additional long-term debt under its
line of credit agreement, and overall has achieved a net reduction of $38
million of long-term debt through the first nine months of 1995. Management
anticipates that cash provided from operations in the future will be
sufficient to cover the Company's operating expenses and projected capital
expenditures, service debt obligations and make dividend payments to
shareholders.
The non-current portion of the Company's long-term debt amounted to $311.9
million at September 30, 1995, compared to $349.8 million at the end of
1994. The long-term debt to total capitalization ratio was 43.6% on
September 30, 1995, versus 47.2% at December 31, 1994.
The Company's capital expenditures in 1995 will be significantly less than
in 1994 as a result of the completion or substantial completion in 1994 of
major capital construction projects, all of which have since been completed.
Capital expenditures for the year 1996 are expected to be higher than 1995
levels. The capital spending will be financed primarily from operations.
The amount and timing of repayment of borrowings will depend on the Company's
specific cash requirements.
Recent Developments
The Company announced on September 25, 1995, its proposed acquisition of the
worldwide lubricant additives business of Texaco, Inc. The acquisition,
which is expected to close by year end but is contingent upon regulatory
approval, would be funded primarily through additional long-term debt.
The Company also announced, on October 23, 1995, the Federal Appeals Court's
unanimous decision ordering the U.S. Environmental Protection Agency to
register the Company's manganese-based fuel additive for use in unleaded
gasoline removing the last hurdle to commercial introduction of the product
in the U. S. (See Other Information - Legal Proceedings)
15<PAGE>
<PAGE> 16
PART II - Other Information
ITEM 1. Legal Proceedings
There are no material legal proceedings other than the
proceeding previously disclosed in the Form 8-K filed on October
23, 1995, which is incorporated herein by reference.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit 3.1 Certificate of Restatement of the Amended
Articles of Incorporation of the Company issued and
admitted to record by the Virginia State Corporation
Commission effective July 31, 1995.
(b) A Form 8-K was filed on September 25, 1995, which announced
the proposed acquisition of the worldwide lubricant additives
business of Texaco, Inc.
A Form 8-K was filed on October 23, 1995, to which was
attached a press release announcing the Federal Appeals
Court's unanimous decision ordering the U.S. Environmental
Protection Agency to register the Company's manganese-based
fuel additive for use in unleaded gasoline retroactively to
November 30, 1993. Also attached to that 8-K was a press
release which announced the Company's third quarter earnings
and an anticipated settlement (by the Company's subsidiary,
Ethyl Petroleum Additives, Inc.) with the Civil Division of
the U.S. Department of Justice.
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PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ETHYL CORPORATION
(Registrant)
Date: November 8, 1995 By: s/ Charles B. Walker
Vice Chairman of the Board,
Chief Financial Officer
and Treasurer
(Principal Financial Officer)
Date: November 8, 1995 By: s/ Wayne C. Drinkwater,
Controller
(Principal Accounting Officer)
17<PAGE>
<PAGE> 18
EXHIBIT INDEX
Page
Number
Number and Name of Exhibit
Exhibit 3.1 Certificate of Restatement of the Amended
Articles of Incorporation of the Company
issued and admitted to record by the
Virginia State Corporation Commission
effective July 31, 1995 19
18<PAGE>
<PAGE> 19
Certificate of Restatement of the Amended Articles of EXHIBIT 3.1
Incorporation of the Company issued and admitted to
record by the Virginia State Corporation
Commission effective July 31, 1995.
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
July 31, 1995
The State Corporation Commission has found the accompanying
articles submitted on behalf of
ETHYL CORPORATION
to comply with the requirements of law, and confirms payment of
all related fees.
Therefore, it is ORDERED that this
CERTIFICATE OF RESTATEMENT
be issued and admitted to record with the articles of amendment
in the Office of the Clerk of the Commission, effective July 31,
1995.
The corporation is granted the authority conferred on it by law
in accordance with the articles, subject to the conditions and
restrictions imposed by law.
STATE CORPORATION COMMISSION
By s/ T. V. Morrison, Jr.
Commissioner
19<PAGE>
<PAGE> 20
ARTICLES OF RESTATEMENT OF THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF ETHYL CORPORATION
1. The name of the corporation is Ethyl Corporation (the
"Corporation").
2. The Articles of Incorporation of the Corporation shall be
restated in the form attached hereto as Exhibit A.
3. The Restatement was duly adopted by the Board of Directors
of the Corporation without shareholder action. The Restatement does
not contain an amendment to the Articles of Incorporation requiring
shareholder approval.
IN WITNESS WHEREOF, these Articles of Restatement have been
executed on behalf of the Corporation by its duly authorized officer this
31st day of July, 1995.
ETHYL CORPORATION
By: s/ C. B. Walker
Title: Vice Chairman
Chief Financial Officer
20<PAGE>
<PAGE> 21
EXHIBIT A
RESTATED ARTICLES OF INCORPORATION
of
ETHYL CORPORATION
ARTICLE I
The name of the Corporation is
ETHYL CORPORATION
ARTICLE II
The purposes of the Corporation are to develop, manufacture,
produce, improve, buy, sell and deal in any and all kinds of
materials, chemicals, plastics, petroleum, paper, machinery,
metals, minerals and mineral products, timber and wood products,
and all ingredients, derivatives, products, by-products, and
compounds thereof or related in any way thereto and, without
limitation by reason of the foregoing, to engage in any business
not required to be stated in the articles of incorporation.
The Corporation shall have the power to make accommodation
guarantees or endorsements of the obligations of any other
person or corporation.
ARTICLE III
The Corporation shall have authority to issue 400,000,000
shares of Common Stock, $1 par value, and 10,000,000 shares of
Cumulative Preferred Stock, with a par value, if any, to be set
forth hereinafter with respect to each series. The Cumulative
Preferred Stock may be issued in series as hereinafter provided.
The description of the Cumulative Preferred Stock and the
Common Stock, and the designations, preferences and voting powers
of such classes of stock or restrictions or qualifications thereof,
and the terms on which such stock is to be issued (together with
certain related provisions for the regulation of the business and
for the conduct of the affairs of the Corporation) shall be as
hereinafter set forth in Parts A, B and C of this Article III.
PART A. CUMULATIVE PREFERRED STOCK
1. Issuance in Series. The Cumulative Preferred Stock may be
issued from time to time in one or more series, with such distinctive
21<PAGE>
<PAGE> 22
serial designations, rights and preferences as shall be stated and
expressed herein or in the resolution or resolutions providing for
the issue of shares of a particular series, and in such resolution
or resolutions providing for the issue of shares of such series,
the Board of Directors is expressly authorized to fix:
(a) The annual dividend rate for such series, the dividend
payment dates, the date from which dividends on all shares of such
series issued shall be cumulative, and the extent of participation
rights, if any;
(b) The redemption price or prices, if any, for such series
and other terms and conditions on which shares of such series may be
retired or redeemed;
(c) The obligation, if any, of the Corporation to purchase and
retire or redeem shares of such series as a sinking fund, and the provisions
of any such sinking fund;
(d) The designation and maximum number of shares of such
series issuable;
(e) The right to vote, if any, with holders of shares of any
other series or class and any right to vote as a class, either generally
or as a condition to specified corporate action;
(f) The amount payable upon shares in event of involuntary
liquidation;
(g) The amount payable upon shares in event of voluntary
liquidation; and
(h) The rights, if any, of the holders of shares of such
series to convert such shares into other classes of stock of the
Corporation and the terms and conditions of such conversion.
All shares of Cumulative Preferred Stock of any one series
shall be identical with each other in all respects except, if so
determined by the Board of Directors, as to the dates from which
dividends thereon shall be cumulative; and all shares of Cumulative
Preferred Stock shall be of equal rank with each other, regardless
of series, and shall be identical with each other in all respects
except as provided herein or in the resolution or resolutions
providing for the issue of a particular series. In case dividends
on all shares of Cumulative Preferred Stock for any quarterly
dividend period are not paid in full, all such shares shall
participate ratably in any partial payment of dividends for such
period in proportion to the full amounts of dividends for such
period to which they are respectively entitled.
If and whenever, from time to time, the Board of Directors
shall determine to issue Cumulative Preferred Stock of any
series hereinafter designated, the Board shall, prior to the
issue of any shares of such new series, cause provisions
respecting it to be set out in articles of amendment filed with
the State Corporation Commission of Virginia. The Board of
Directors, in any such articles of amendment filed with the
State Corporation Commission of Virginia, may reclassify any of
22<PAGE>
<PAGE> 23
the authorized but unissued shares of any particular series as
shares or additional shares of any other series, or, unless
otherwise provided in the articles of amendment establishing any
particular series, increase any maximum number of shares
theretofore established for a particular series to any greater
number then authorized by the articles of incorporation.
2. Cumulative Preferred Stock, Convertible Series B. A series
of Cumulative Preferred Stock is hereby designated "Series B,"
which series shall have the following description and terms:
(a) Dividends and Distributions.
(i) The holders of shares of Series B shall be
entitled to receive, when and as declared by the Board of
Directors out offunds legally available therefor, dividends
payable quarterly on the first day of each January, April,
July and October (each such date being referred to herein
as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series B, in
an amount per share (rounded to the nearest cent) equal to
the greater of (a) $50.00 or (b) subject to the provision
for adjustment hereinafter set forth, 1000 times the
aggregate per share amount of all cash dividends, and
1000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions
other than a dividend payable in shares of Common Stock or
a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise), declared on the Common
Stock, par value $1.00 per share, of the Corporation (the
"Common Stock") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Preferred
Stock. In the event the Corporation shall at any time
after October 5, 1987 (the "Rights Declaration Date") (i)
declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount to which
holders of shares of Series B were entitled immediately prior
to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(ii) The Corporation shall declare a dividend or
distribution on the Series B as provided in subsection
(i) above immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been
declared on the Common Stock during the period between
23<PAGE>
<PAGE> 24
any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $50.00
per share on the Series B Preferred Stock shall nevertheless
be payable on such subsequent Quarterly Dividend Payment Date.
(iii) Dividends shall begin to accrue and be cumulative
on outstanding shares of Series B from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of
Series B, unless the date of issue of such shares is prior to
the record date for the first Quarterly Dividend Payment, in
which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is
a Quarterly Dividend Payment Date or is a date after the record
date for the determination of holders of shares of Series B
entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the shares of Series
B in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the
time outstanding. The Board of Directors may fix a record date
for the determination of holders of shares of Series B entitled
to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 70 days prior
to the date fixed for the payment thereof.
(iv) Dividends in full shall not be declared or paid
or set apart for payment on the Series B for a dividend period
terminating on the Quarterly Dividend Payment Date unless
dividends in full have been declared or paid or set apart for
payment on the Cumulative Preferred Stock of all series (other
than series with respect to which dividends are not cumulative
from a date prior to such dividend date) for the respective
dividend periods terminating on such dividend date.
(b) Voting Rights. The holders of shares of Series B shall
have the following voting rights:
(i) Subject to the provision for adjustment hereinafter
set forth, each share of Series B shall entitle the holder thereof
to 1000 votes on all matters submitted to a vote of the shareholders
of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each
such case the number of votes per share to which holders
of shares of Series B were entitled immediately prior to
such event shall be adjusted by multiplying such number by a
fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(ii) Except as otherwise provided herein or in the Bylaws,
the holders of shares of Series B and the holders of shares of
Common Stock shall vote together as one voting group on all
matters submitted to a vote of stockholders of the Corporation.
24<PAGE>
<PAGE> 25
(iii) In addition, in the event that at any time or from
time to time while any shares of the Series B are outstanding,
six or more quarterly dividends, whether consecutive or not, on
any shares of the Series B shall be in arrears and unpaid,
whether or not earned or declared, then the holders of all of
the outstanding shares of the Series B together with any other
series of Cumulative Preferred Stock then entitled to such a
vote under the terms of the Articles of Incorporation of the
Corporation, voting as a single class, shall be entitled to
elect two members of the Board of Directors of the Corporation.
Immediately after the occurrence of such event, the Corporation
shall cause the number of directors of the Corporation to be
increased by two and (unless a regular meeting of stockholders
of the Corporation is to be held within sixty (60) days for the
purpose of electing directors) shall give prompt notice to the
holders of all of the outstanding shares of the Cumulative
Preferred Stock then so entitled to such a vote of a special
meeting of such holders to take place within sixty (60) days
after the occurrence of such event. If such meeting shall not
have been called as so provided, such meeting may be called at
the expense of the Corporation by the holders of not less than
five percent (5%) of such Cumulative Preferred Stock at the time
outstanding, on written notice specifying the time and place of
the meeting given by mail not less than ten (10) days or more
than thirty (30) days before the date of such meeting specified
in such notice. At such meeting the holders of all of such
Cumulative Preferred Stock at the time outstanding, voting as a
single class, shall have the right to elect two (2) members of
the Board of Directors of the Corporation.
If a regular meeting of the stockholders of the Corporation
for the purpose of electing directors is to be held within sixty
(60) days after the occurrence of such event then at such
meeting, and, in any event, at each subsequent meeting of the
stockholders of the Corporation called for the purpose of
electing directors, the holders of such Cumulative Preferred
Stock at the time outstanding, voting as a single class, shall
have the right to elect two (2) members of the Board of
Directors on the same conditions as stated above.
At any special or regular meeting provided for in the next
two preceding subsections, each outstanding share of such
Cumulative Preferred Stock shall be entitled to one vote for the
election of the directors provided for herein; the holders of a
majority of the shares of such Cumulative Preferred Stock at the
time outstanding shall constitute a quorum; and a plurality vote
of such quorum shall govern.
The directors elected by the holders of such Cumulative
Preferred Stock shall hold office until their successors shall
be elected; provided that their term of office shall
automatically expire at such time as all dividends on all
outstanding shares of such Cumulative Preferred Stock in arrears
shall have been paid in full.
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(iv) Except as otherwise provided in the Articles of
Incorporation, holders of Series B shall have no special voting
rights and their consent shall not be required (except to the
extent they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.
(c) Certain Restrictions.
(i) Whenever quarterly dividends or other dividends or
distributions payable on the Series B as provided in subsection
(a) are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares
of Series B outstanding shall have been paid in full, the
Corporation shall not
(1) declare or pay or set apart for payment any
dividends (other than dividends payable in shares of
any class or classes of stock of the Corporation ranking
junior to the Series B) or make any other distributions
on, any class of stock of the Corporation ranking junior
(either as to dividends or upon liquidation, dissolution
or winding up) to the Series B and shall not redeem,
purchase or otherwise, acquire, directly or indirectly,
whether voluntarily, for a sinking fund, or otherwise
any shares of any class of stock of the Corporation
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series B, provided that,
notwithstanding the foregoing, the Corporation may at any time
redeem, purchase or otherwise acquire shares of stock of any
such junior class in exchange for, or out of the net cash
proceeds from the concurrent sale of other shares of stock of
any such junior class;
(2) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution
or winding up) with the Series B, except dividends paid
ratably on the Series B and all such parity stock on which
dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are
then entitled;
(3) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding
up) with the Series B, provided that the Corporation may at
any time redeem, purchase or otherwise acquire shares of
any such parity stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends
or upon dissolution, liquidation or winding up) to the
Series B;
(4) purchase or otherwise acquire for consideration any
shares of Series B, or any shares of stock ranking on a parity
26<PAGE>
<PAGE> 27
with the Series B, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board
of Directors) to all holders of such shares upon such terms
as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(ii) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration
any shares of stock of the Corporation unless the Corporation
could, under subsection (i) of this subsection (c), purchase or
otherwise acquire such shares at such time and in such manner.
(d) Reacquired Shares. Any shares of Series B purchased or
otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Cumulative Preferred Stock and
may be reissued as part of a new series of Cumulative Preferred
Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on
issuance set forth herein.
(e) Liquidation, Dissolution or Winding Up.
(i) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, no distribution
shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or
winding up) to the Series B unless, prior thereto, the holders
of shares of Series B shall have received $3,000.00 per share,
plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of
such payment (the "Series B Liquidation Preference"). Following
the payment of the full amount of the Series B Liquidation
Preference, no additional distributions shall be made to the
holders of shares of Series B unless, prior thereto, the holders
of shares of Common Stock shall have received an amount per
share (the "Common Adjustment") equal to the quotient obtained
by dividing (1) the Series B Liquidation Preference by (2) 1000
(as appropriately adjusted as set forth in subsection (iii)
below to reflect such events as stock splits, stock dividends
and recapitalizations with respect to the Common Stock) (such
number in clause (ii) being hereinafter referred to as the
"Adjustment Number"). Following the payment of the full amount
of the Series B Liquidation Preference and the Common Adjustment
in respect of all outstanding shares of Series B and Common
Stock, respectively, holders of Series B and holders of shares
of Common Stock shall receive their ratable and proportionate
share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Series B and
Common Stock, on a per share basis, respectively.
27<PAGE>
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(ii) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series B
Liquidation Preference and the liquidation preferences of all
other series of Cumulative Preferred Stock, if any, that rank on
a parity with the Series B, then such remaining assets shall be
distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences. In the
event, however, that there are not sufficient assets available
to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of
Common Stock.
(iii) In the event the Corporation shall at any time after
the Rights Declaration Date (1) declare any dividend on Common
Stock payable in shares of Common Stock, (2) subdivide the
outstanding Common Stock, or (3) combine the outstanding Common
Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a
fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(f) Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction
in which the shares of Common Stock are exchanged for or changed into
other stock or securities, cash and/or any other property, then in any
such case the shares of Series B shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 1000 times the aggregate
amount of stock, securities, cash and/or any other property (payable in
kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series B shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(g) Redemption. The outstanding shares of Series B may be
redeemed at the option of the Board of Directors as a whole, but not in
part, at any time, at which no person beneficially owns more than 20%
of the outstanding Common Stock of the Corporation at a cash price per
share equal to (i) 100% of the product of the Adjustment Number times
the Average Market Value (as such term is hereinafter defined) of the
Common Stock, plus (ii) all dividends which on the redemption date have
28<PAGE>
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accrued on the shares to be redeemed and have not been paid or
declared and a sum sufficient for the payment thereof set apart,
without interest; provided, however, that if and whenever any
quarterly dividend shall have accrued on the Series B that has not
been paid or declared and a sum sufficient for the payment thereof
set apart, the Corporation may not purchase or otherwise acquire
any shares of Series B unless all shares of such stock at the
time outstanding are so purchased or otherwise acquired. The
"Average Market Value" is the average of the closing sale prices
of a share of the Common Stock during the 30 day period
immediately preceding the date before the redemption date on the
Composite Tape for New York Stock Exchange Listed Stocks, or, if
such stock is not quoted on the Composite Tape, on the New York
Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934, as
amended, on which such stock is listed, or, if such stock is not
listed on any such exchange, the average of the closing bid
quotations with respect to a share of Common Stock during such
30-day period on the National Association of Securities Dealers,
Inc. Automated Quotations System or any system then in use, or
if no such quotations are available, the fair market value of a
share of the Common Stock as determined by the Board of Directors
in good faith.
(h) Ranking. The Series B shall rank junior to all other
series of the Corporation's Cumulative Preferred Stock as to the
payment of dividends and the distribution of assets, unless the
terms of any such series shall provide otherwise.
(i) Amendment. The Corporation shall not create any other
class or classes of stock ranking prior to the Series B either as to
dividends or liquidation, or increase the authorized number of shares
of any such other class of stock, or amend, alter, or repeal any of
the provisions of the Articles of Incorporation or the resolution
or resolutions adopted by the Board of Directors authorizing the
Series B so as to adversely affect the preferences, rights or
powers of the Series B without the affirmative vote of the holders of
more than two-thirds of the outstanding shares of the Series B, voting
separately as one voting group.
(j) Fractional Shares. Series B may be issued in fractions
of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit
of all other rights of holders of Series B.
PART B. COMMON STOCK
1. Voting Rights. The holders of the Common Stock shall, to
the exclusion of the holders of any other class of stock of the
Corporation, have the sole and full power to vote for the
election of directors and for all other purposes without
limitation except only as provided in sections 1 and 2 of Part
A, and as otherwise expressly provided by the then existing
statutes of the Commonwealth of Virginia. The holders of the
Common Stock shall have one (1) vote for each share of Common
Stock held by them.
2. Dividends. Subject to the provisions hereinabove set forth
with respect to Cumulative Preferred Stock, the holders of shares
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of Common Stock shall be entitled to receive dividends if, when and as
declared by the Board of Directors out of funds legally available therefor.
PART C. PRE-EMPTIVE RIGHTS
1. No holder of Cumulative Preferred Stock shall as such holder
have any pre-emptive or preferential right to purchase or subscribe
to (i) any shares of any class of stock of the Corporation, whether
now or hereafter authorized, (ii) any warrants, rights or options to
purchase any such stock, or (iii) any obligations convertible into
any such stock or into warrants, rights or options to purchase any
such stock.
2. The holders of Common Stock shall have no pre-emptive rights
to purchase or subscribe to any shares of Cumulative Preferred Stock
or to any shares of any class of stock of the Corporation that may be
issued on conversion of any shares of Cumulative Preferred Stock.
ARTICLE IV
1. Number of Directors. Unless otherwise fixed in the By-Laws,
the number of directors of the Corporation shall be eighteen (18),
but in no event shall such number be less than three (3).
2. Indemnification of Directors and Officers.
(a) To the full extent that the Virginia Stock Corporation
Act, as it existed on May 27, 1988, the effective date of this
section, or as hereafter amended, permits the limitation or
elimination of the liability of Directors and officers, no
Director or officer of the Corporation made a party to any
proceeding shall be liable to the Corporation or its
stockholders for monetary damages arising out of any
transaction, occurrence or course of conduct, whether occurring
prior or subsequent to the effective date of this section.
(b) To the full extent permitted by the Virginia Stock
Corporation Act, as it existed on May 28, 1988, the effective
date of this section, or as hereafter amended, the Corporation
shall indemnify any person who is or was a party to any
proceeding by reason of the fact that (i) he is or was a
Director or officer of the Corporation, or (ii) he is or was
serving at the request of the Corporation as a director,
trustee, partner or officer of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise,
against any liability incurred by him in connection with such
proceeding. A person is considered to be serving an employee
benefit plan at the Corporation's request if his duties to the
Corporation also impose duties on, or otherwise involve services
by, him to the plan or to participants in or beneficiaries of
the plan. The Board of Directors is hereby empowered, by a
majority vote of a quorum of the disinterested Directors, to
enter into a contract to indemnify any Director or officer in
respect of any proceeding arising from any act or omission,
whether occurring before or after the execution of such contract.
30<PAGE>
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(c) The Board of Directors is hereby empowered, by majority
vote of a quorum of the disinterested Directors, to cause the
Corporation to indemnify or contract to indemnify any person not
specified in subsection (a) or (b) of this section who was, is
or may become a party to any proceeding, by reason of the fact
that he is or was an employee, agent or consultant of the
Corporation, or is or was serving at the request of the
Corporation as an employee, agent or consultant of another
corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise, to the same extent as if such person
were specified as one to whom indemnification is granted in
subsection (b) of this section.
(d) The provisions of this section shall be applicable to all
proceedings commenced after the effective date hereof arising
from any act or omission, whether occurring before or after such
effective date. No amendment or repeal of this section shall
have any effect on the rights provided under this section with
respect to any act or omission occurring prior to such amendment
or repeal. The Corporation shall promptly take all such
actions, and make all such determinations, as shall be necessary
or appropriate to comply with its obligation to make any
indemnity under this section and shall pay or reimburse promptly
all reasonable expenses, including attorneys' fees, incurred by
such Director or officer in connection with such actions and
determinations or proceedings of any kind arising therefrom.
(e) In the event there has been a change in the composition of
a majority of the Board of Directors after the date of the
alleged act or omission with respect to which indemnification is
claimed, any determination as to indemnification and advancement
of expenses with respect to any claim for indemnification made
pursuant to this section shall be made by special legal counsel
agreed upon by the Board of Directors and the applicant. If the
Board of Directors and the applicant are unable to agree upon
such special legal counsel, the Board of Directors and the
applicant each shall select a nominee, and the nominees shall
select such special legal counsel.
(f) Every reference herein to Directors, officers, trustees,
partners, employees, agents or consultants shall include former
Directors, officers, trustees, partners, employees, agents or
consultants and their respective heirs, executors and
administrators. The indemnification hereby provided and
provided hereafter pursuant to the power hereby conferred by
this section on the Board of Directors shall not be exclusive of
any other rights to which any person may be entitled, including
any right under policies of insurance that may be purchased and
maintained by the Corporation or others, with respect to claims,
issues or matters in relation to which the Corporation would not
have the power to indemnify such person under the provisions of
this section. Such rights shall not prevent or restrict the
power of the Corporation to make or provide for any further
indemnity, or provisions for determining entitlement to
indemnity, pursuant to one or more indemnification agreements,
bylaws, or other arrangements (including, without limitation,
creation of trust funds or security interests funded by letters
31<PAGE>
<PAGE> 32
of credit or other means) approved by the Board of Directors
(whether or not any of the Directors of the Corporation shall be
a party to or beneficiary of any such agreements, bylaws or
arrangements); provided, however, that any provision of such
agreements, bylaws or other arrangements shall not be effective
if and to the extent that it is determined to be contrary to
this section or applicable laws of the Commonwealth of Virginia.
(g) Each provision of this section shall be severable and an
adverse determination as to any such provision shall in no way
affect the validity of any other provision.
(h) Unless otherwise defined, terms used in this section shall
have the definitions assigned to them in the Virginia Stock
Corporation Act, as it exists on the date hereof or as hereafter
amended.
ARTICLE V
Any amendment or restatement of these Articles other than an
amendment or restatement that amends or affects the shareholder vote
required by the Virginia Stock Corporation Act to approve a merger,
statutory share exchange, sale of all or substantially all of the
Corporation's assets or the dissolution of the Corporation shall be
approved by a majority of the votes entitled to be cast by each
shareholder voting group that is entitled to vote on the matter.
32<PAGE>
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