SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
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For the fiscal year ended December 31, 1994
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Commission file number 1-8142
ENGELHARD CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 22-1586002
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
101 WOOD AVENUE, ISELIN, NJ 08830
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (908) 205-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock, par value $1 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
Number of shares of common stock outstanding as of March 2, 1995 - 95,400,983
Aggregate market value of common stock held by non-affiliates as of March 2,
1995 - $1,724,284,602
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates certain information by reference to the Proxy Statement
for the 1995 Annual Meeting of Shareholders.
Items Amended herein : Item 1.
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PART I
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Item 1. Business
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Engelhard Corporation and its Subsidiaries (collectively referred to
as the Company) are the successors to the businesses previously operated by
Engelhard Minerals & Chemicals Corporation (EMC). In 1981, the Company's Common
Stock was distributed to the shareholders of EMC, and the Company became a
separate, publicly-held corporation. The Company's principal executive offices
are located at 101 Wood Avenue, Iselin, New Jersey, 08830 (telephone number
(908) 205-5000).
The Company develops, manufactures and markets technology-based
specialty chemical products and engineered materials for a wide spectrum of
industrial customers and provides services to precious metals customers.
In 1993 the Company provided for a plan to realign and consolidate
businesses, concentrate resources and better position itself to achieve its
strategic growth objectives. See Note 2 "Special Charge" of the Notes to
Consolidated Financial Statements on pages 31-32 of this 10-K. This plan
resulted in a special charge of $148.0 million ($91.8 million after tax or $.95
per share) in 1993 consisting of a $118.0 million pre-tax restructure provision
for asset writedowns related to product lines or sites being exited together
with provisions for facility shutdown, rundown and relocation and for employee
reassignment, severance and related benefits and a $30.0 million pretax
environmental reserve. See Note 15 "Environmental Costs" of the Notes to
Consolidated Financial Statements on pages 44-46 of this 10-K and the
"Environmental Matters" section below on pages 8-10 of this 10-K for a
discussion of environmental matters and the amount of the Company's
environmental reserve.
The Company employed approximately 5,800 people as of January 1,
1995 and operates on a worldwide basis with corporate and operating
headquarters and principal manufacturing facilities and mineral reserves in the
United States with other operations conducted in the European Community, the
Russian Federation and the Asia-Pacific region.
The Company's businesses are organized into three segments -
Catalysts and Chemicals, Pigments and Additives, and Engineered Materials and
Precious Metals Management.
Information concerning the Company's net sales, operating earnings
and identifiable assets by industry segment and by geographic area; inter-area
transfers by geographic area; and export sales is included in Note 13 "Industry
Segment and Geographic Area Data" of the Notes to Consolidated Financial
Statements on pages 41-43 of this 10-K.
Catalysts and Chemicals
The Catalysts and Chemicals segment comprises four principal product
groups: the Automotive Emission Systems Group (AES), serving the automotive,
off-road vehicle, and aircraft industries; the Stationary Source Emission
Control Group (SSEC) serving the power generation and process industries;
the Petroleum Catalysts Group, serving the petroleum refining industries; and
the Chemical Catalysts Group, serving the chemical, petrochemical,
pharmaceutical and food processing industries.
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Environmental catalysts, comprising AES and SSEC, are used in
applications such as the abatement of carbon monoxide, oxides of nitrogen and
hydrocarbons from gasoline, diesel and alternate fueled vehicle exhaust gases
to meet emission control standards. These catalysts are also used for the
removal of odors, fumes and pollutants generated by a variety of process
industries including but not limited to the painting of automobiles, appliances
and other equipment; printing processes; the manufacture of nitric acid and
tires, in the curing of polymers; and power generation sources. In the third
quarter of 1994, the Company purchased the assets of General Plasma, Inc. a
supplier of thermal spray coating technology and services. This acquisition,
when combined with the Company's catalyst technology, provides for a broader
offering of emission control systems.
The Company also participates in the manufacture and supply of
automobile exhaust emissions control catalysts through affiliates serving the
Asia-Pacific region: N.E. Chemcat Corporation (Japan) - 38.8 percent owned;
and Hankuk-Engelhard (South Korea) - 49 percent owned, both of which also
produce other catalysts and products. In the third quarter of 1992, the
Company and Salem Industries, Inc., formed Salem Engelhard, a jointly owned
partnership to produce and market products and services to abate, by catalytic
and non-catalytic methods, emissions of volatile organic chemicals and other
pollutants generated by a variety of process industries.
The petroleum refining catalyst products consist of a variety of
catalysts and processes used in the petroleum refining industry. The principal
products are zeolitic fluid cracking catalysts which are widely used to provide
economies in petroleum processing. The Company offers commercially a full line
of fluid cracking catalysts based on patented technology including the DYNAMICS
(registered trademark) line which can be used to control selectivity and
cracking activity virtually independently of one another. This characteristic
permits custom catalysts formulation for a large number of users.
The Company manufactures petroleum catalysts used for catalytic
reforming and isomerization of hydrocarbons to produce higher octane gasoline,
for isomerization of xylenes to produce paraxylene and orthoxylene and for
selective hydrogenation of alkylation feed stocks. The Company also
manufactures hydrotreating catalysts which are used in viscosity improvement
and aromatics saturation of lube oil feedstocks and for the removal of
contaminant sulfur, nitrogen and metals. These reforming, isomerization and
hydrotreating catalysts are marketed in North America and the Caribbean by
Acreon Catalysts, a jointly owned partnership formed by the Company and
Procatalyse. Process technologies developed by the Company are also offered
for license to the petroleum industry.
In March 1994, the Company completed its purchase of the assets of
the sorbents and moving bed catalysts businesses of Solvay Catalysts, GmbH, in
Nienburg Germany. This acquisition expanded the Company's moving bed catalysts
business and provided complementary product lines serving adsorbents
applications. Optimization of these operations is being pursued.
The chemical catalysts products consist of catalysts and sorbents
used in the production of a variety of products or intermediates, including
synthetic fibers, fragrances, antibiotics, vitamins, polymers, plastics,
detergents, fuels and lube oils, solvents, oleochemicals and edible products.
These catalysts are generally used in both batch and continuous operations
requiring special catalysts for each application. Chemical catalysts are based
on the Company's proprietary technology and many times are developed in close
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cooperation with specific customers. Sorbents are used to purify and
decolorize naturally occurring fats and oils for manufacture into shortenings,
margarines and cooking oils.
In early 1994, the Company and ICC Technologies, Inc. formed
Engelhard/ICC, a jointly owned partnership, to develop and commercialize air
conditioning and air-treatment systems based on a proprietary new desiccant
developed by Engelhard.
The products of the Catalysts and Chemicals segment compete in the
marketplace on the basis of product performance, technical service and price.
No single competitor is dominant in the markets in which the Company operates.
The manufacturing operations of the Catalysts and Chemicals segment
are carried out in eight states in the United States. Wholly-owned foreign
operations are located in Italy, The Netherlands, Germany, the United Kingdom
and South Africa with equity investments located in the U.S., Japan and South
Korea. The products are sold principally through the Company's sales
organizations or its equity investments, supplemented by independent
distributors and representatives.
The principal raw materials used by the Catalysts and Chemicals
segment include precious metals, procured by the Engineered Materials and
Precious Metals Management Segment; kaolin, supplied by the Pigments and
Additives Segment; and a variety of minerals and chemicals which are generally
readily available. For more information about precious metal supply contracts,
see the "Engineered Materials and Precious Metals Management" section below on
pages 6-7 of this 10-K.
As of January 1, 1995 the Catalysts and Chemicals segment had
approximately 2,250 employees worldwide, many of whom are hourly employees
covered by collective bargaining agreements. Employee relations have generally
been good.
Pigments and Additives
The Pigments and Additives segment comprises two principal
product groups: the Paper Pigments and Chemicals Group, serving the paper
industry and the Specialty Minerals and Colors Group, serving the plastics,
coatings, paint and allied industries.
Paper pigments and chemicals products consist primarily of coating
and extender pigments. The coating pigments provide whiteness, opacity and
improved printing properties for high-quality paper and paperboard. Other
products are used as extenders and/or combined with fibers during the
manufacture of paper or paperboard. Products for the paper market include
Ultra White 90 (registered trademark) pigment, a high-brightness material for
high-quality paper coating; Ansilex (registered trademark) pigments that
provide the desired opacity, brightness, gloss and printability in paper
products; Nuclay (registered trademark) specialized coating pigment for
lightweight publication papers; EXSILON (trademark) structured pigment that
improves the printability of lightweight coated paper and carbonless forms; and
Spectrafil (trademark) pigments for the newsprint and groundwood specialties
markets.
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Specialty minerals and colors kaolin based products are used as
pigments and extenders for a variety of purposes in the manufacture of plastic,
rubber, ink, ceramic, adhesive products and in paint. Principal products
include Satintone (registered trademark) products, ASP (registered trademark)
pigments and Translink (registered trademark) surface modified reinforcements.
Other specialty minerals and colors products which serve essentially the same
end markets as the Company's kaolin-based pigments and extenders comprise a
variety of organic and inorganic color pigments. The Group also produces
gellants and sorbents for a wide range of applications.
The products of the Pigments and Additives segment compete with
similar products as well as products made from other materials on the basis of
product performance and price. No single competitor is dominant in the markets
in which the Company operates.
Pigments and Additives operations are carried out in four states in
the United States and in Finland and Japan. The products are sold principally
through the Company's sales organization supplemented by independent
distributors and representatives.
The principal raw materials used by the Pigments and Additives
segment include kaolin and attapulgite from mineral reserves owned or leased by
the Company and a variety of minerals and chemicals which are generally readily
available.
As of January 1, 1995 the Pigments and Additives segment had
approximately 1,640 employees worldwide, many of whom are hourly employees
covered by collective bargaining agreements. Employee relations have generally
been good.
Engineered Materials and Precious Metals Management
The Engineered Materials and Precious Metals Management segment
includes the Engineered Materials Group, serving a broad spectrum of industries
and the Precious Metals Management Group, which is responsible for precious
metals sourcing and dealing and for managing the precious metals requirements
of the Company and its customers.
The products of the Engineered Materials Group consist primarily of
metal-based materials such as temperature-sensing devices, crucibles, bushings,
gauze, precious metals coating and electroplating materials, conductive pastes
and powders, brazing alloys and precious metal wire, sheet, and tubing. These
products are used in the manufacture of automotive components, industrial
devices, glass and glass fiber, ceramics, chemicals, instruments, control
devices, fine jewelry, dental and medical supplies, hardware, furniture and air
conditioners. The Group also provides refining services to internal and
external customers.
The products of the Engineered Materials Group compete with similar
products as well as products made from other materials on the basis of product
performance, technical service and price. No single competitor is dominant in
the markets in which the Company operates.
Engineered Materials manufacturing and refining operations are
carried out in four states in the United States and in facilities located in
the United Kingdom, France and Italy. The products are sold principally
through the Company's sales organization, supplemented by independent
distributors and representatives.
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The principal raw materials used by these operations are precious
metals including those of the platinum group (platinum, palladium, rhodium,
iridium and ruthenium), silver and gold, all of which are generally available.
As previously announced, the Company has entered into negotiations
with CLAL for the establishment of a Paris-based precious metal fabrication
joint venture. Consummation of the joint venture is pending appropriate
approvals (see Note 2 "Special Charge" of the Notes to Consolidated Financial
Statements on pages 31-32 of this 10-K). The joint venture will combine most
of the assets of the Engineered Materials business with CLAL.
In January, 1993 the Company sold its 40 percent interest in M&T
Harshaw, an affiliate through which the Company had participated in the base
metal plating industry. In the fourth quarter of 1992, the Company formed
Heraeus Engelhard Electrochemistry Corp., a venture with Heraeus Inc. The
venture, 46 percent owned, markets electrochemical products in the Western
Hemisphere.
The Precious Metals Management Group is responsible for procuring
precious metals requirements of the Company's operations and its customers.
Supplies of newly mined platinum group metals are obtained primarily from South
Africa and the Russian Federation and to a lesser extent from the United States
and Canada, which four regions are the only known significant sources. Most of
these platinum group metals are obtained pursuant to a number of contractual
arrangements with different durations and terms. The contracts with one
supplier will expire in their present forms on December 31, 1996, the end of
the initial period. The Company is proceeding with arrangements to optimize
their replacement. Management believes that available supplies of such metals
will be adequate to meet the needs of the Company for the foreseeable future.
Gold and silver are purchased from various sources. In addition, in the normal
course of business, certain customers and suppliers deposit significant
quantities of precious metals with the Company under a variety of arrangements.
Equivalent quantities of precious metals are returnable as product or in other
forms.
The Precious Metals Management Group also engages in precious metal
dealing operations with industrial consumers, dealers, central banks, miners
and refiners. It also participates in refining and marketing of energy-related
services. The group does not routinely speculate in the precious metals
market. For more information regarding precious metals operations, see Note 12
"Financial Instruments and Precious Metals Operations" of the Notes to
Consolidated Financial Statements on pages 39-41 of this 10-K. Offices are
located in the United States, the United Kingdom, Switzerland, Japan and the
Russian Federation.
As of January 1, 1995 the Engineered Materials and Precious Metals
Management segment had approximately 1,370 employees throughout the world, many
of whom are hourly employees covered by collective bargaining agreements.
Employee relations have generally been good.
Major Customer
Approximately 11 percent and 12 percent of the Company's net sales
for the year ended December 31, 1994 and 1992, respectively, was generated from
Ford Motor Company, a customer of both the Catalysts and Chemicals and
Engineered Materials and Precious Metals Management segments. Sales to Ford
Motor Company included both fabricated products and precious metal and were
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therefore significantly influenced by fluctuations in precious metal prices
as well as the quantity of metal purchased. In such cases, the market price
fluctuations and quantities purchased can result in material variations in
sales reported but do not usually have a direct or substantive effect on
earnings.
Research and Patents
The Company currently employs approximately 320 scientists,
technicians and auxiliary personnel engaged in research and development in the
field of chemistry and metallurgy. These activities are conducted in the
United States and abroad. Research and development expense was $49.0 million
in 1994, $46.9 million in 1993 and $44.6 million in 1992.
Research facilities include fully staffed instrument analysis
laboratories, which the Company maintains in order to achieve the high level of
precision necessary for its various businesses and to assist customers in
understanding the performance of Engelhard products in their specific
application.
The Company owns or is licensed under numerous patents which have
been secured over a period of years. It is the policy of the Company to apply
for patents whenever it develops new products or processes considered to be
commercially viable and, in appropriate circumstances, to seek licenses when
such products or processes are developed by others. While the Company deems
its various patents and licenses to be important to certain aspects of its
operations, it does not consider any significant portion or its business as a
whole to be materially dependent on patent protection.
Environmental Matters
In the ordinary course of business, like most other industrial
companies, the Company is subject to extensive and changing federal, state,
local and foreign environmental laws and regulations, and has made provisions
for the estimated financial impact of environmental cleanup related costs.
The Company is currently preparing, has under review, or is
implementing, with the oversight of cognizant environmental agencies,
environmental investigations and cleanup plans at several locations which it
owns and/or operates, including Plainville, Massachusetts; Salt Lake City,
Utah; Attapulgus, Georgia; and Newark, New Jersey. With respect to Plainville,
in September 1993 the United States Environmental Protection Agency (EPA) and
the Company entered into a consent order under which the Company is
investigating contamination and will conduct site stabilization measures.
Plainville is also included on the Nuclear Regulatory Commission (NRC)
"Existing Site Decommissioning Management Plan Sites" list and the Company is
currently conducting further investigations of the site pursuant to NRC
approved plans. With respect to Salt Lake City, in connection with obtaining
an operating permit under the Utah Solid and Hazardous Waste Act, the Company
entered into an agreement in December 1993 with the Utah Solid and Hazardous
Waste Control Board under which the Company is currently investigating the
environmental status of the site. With respect to Attapulgus, in January 1994
the Georgia Department of Natural Resources, Environmental Protection Division
and the Company entered into a consent order under which the Company will
develop and implement a reclamation program. With respect to Newark, the
Company is in the process of implementing a cleanup plan in coordination with
the New Jersey Department of Environmental Protection.
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The Company has been designated as a potentially responsible party
(PRP) by EPA under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended and by certain state environmental
authorities under similar state laws (collectively referred to as Superfund)
with respect to the cleanup of contamination resulting from the disposal of
hazardous substances at 16 sites to which the Company, among others, sent waste
in the past. Superfund requires cleanup of certain sites from which there has
been a release or threatened release of hazardous substances and authorizes EPA
to take any necessary response action at such sites, including ordering PRPs to
cleanup or contribute to the cleanup of a site. Courts have interpreted
Superfund to impose strict, joint and several liability. These claims are in
various stages of administrative or judicial proceedings, and include demands
for recovery of past governmental costs and future investigative or cleanup
action. In many cases, the dollar amount of the claim is unspecified and
claims have been asserted against a number of other entities for the same
recovery or other relief as was asserted against the Company. Based on
existing information, the Company believes that it is a de minimis contributor
at most of the sites referenced above. Subject to outstanding state claims or
the reopening of existing settlement agreements for extraordinary circumstances
or natural resource damages, the Company has settled a number of other cleanup
proceedings. In several additional instances, PRPs designated by EPA or a
state equivalent have notified or sued the Company, claiming that the Company
should have been named a PRP and allocated a share of cleanup costs. The
Company has also responded to information requests from EPA at other CERCLA
sites.
The Company's policy is to accrue environmental cleanup related
costs of a noncapital nature when those costs are believed to be probable and
can be reasonably estimated. The quantification of environmental exposures
requires an assessment of many factors, including changing laws and
regulations, advancements in environmental technologies, the quality of
information available related to specific sites, the assessment stage of each
site investigation, preliminary findings, and the length of time involved in
remediation or settlement. For the Superfund sites, the Company also assesses
the financial capability of other PRPs and, where allegations are based on
tentative findings, the reasonableness of the Company's apportionment. The
Company has not anticipated recoveries from insurance carriers or other
potentially responsible third parties in its consolidated balance sheets. The
liabilities for environmental cleanup related costs recorded in the
consolidated balance sheets at December 31, 1994 and 1993 were $62.2 million
and $66.1 million, respectively, including $10.8 million and $11.8 million,
respectively, for the Superfund sites. These amounts represent those costs
which the Company believes are probable and reasonably estimable. Based on
currently available information and analysis, the Company's accrual represents
approximately 90 percent of what it believes are reasonably possible
environmental cleanup related costs of a noncapital nature. The estimate of
reasonably possible costs is less certain than the probable estimate upon which
the accrual is based.
During the past three-year period, cash payments for environmental
cleanup related matters were $4.5 million, $.3 million and $.7 million for
1994, 1993 and 1992, respectively. In 1994 and 1992, the amounts accrued in
connection with environmental cleanup related matters were not significant. In
1993, $30.0 million was accrued as a result of developments during that year
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which caused the Company to revise its estimates of environmental cleanup
related costs at sites being idled or affected by restructuring, where
conditions had recently changed, or where studies and cleanup plans had been
approved and the assessment of the likelihood or extent of remediation had
changed.
For the past three-year period, environmental related capital
projects have averaged less than 10 percent of the Company's total capital
expenditure programs and the expense of environmental compliance (environmental
testing, permits, consultants and in-house staff) was not significant.
There can be no assurances that the environmental laws and
regulations will not become more stringent in the future or that the Company
will not incur significant costs in the future to comply with such laws and
regulations. Based on existing information and currently enacted environmental
laws and regulations, cash payments for environmental cleanup related matters
are projected to approximate $10.0 million for 1995, all of which has already
been accrued. Further, the Company anticipates that the future amounts of
capitalized environmental projects and the future expense of environmental
compliance will approximate current levels. While it is not possible to
predict with certainty, management believes that environmental cleanup related
reserves at December 31, 1994 are reasonable and adequate and that
environmental matters are not expected to have a material adverse effect on
financial condition or on the results of operations.
Signature
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf
by the undersigned, thereunto duly authorized, in Iselin, New Jersey on
the 30th day of May 1995.
Engelhard Corporation
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Registrant
/s/Martin J. Connor, Jr.
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Martin J. Connor, Jr.
Controller
(Principal Accounting Officer)
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