UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ..... to .....
Commission File Number 1-5263
THE LUBRIZOL CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 34-0367600
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
29400 Lakeland Boulevard
Wickliffe, Ohio 44092-2298
(Address of principal executive offices)
(Zip Code)
(216) 943-4200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and 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 the registrant's common shares, without par value, outstanding, as of
July 31, 1995: 63,542,263
<PAGE>
PART I. FINANCIAL INFORMATION
THE LUBRIZOL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
(In Thousands of Dollars) 1995 1994
---------- -----------
<S> <C> <C>
ASSETS
Cash and short-term investments....................... $ 77,628 $ 36,379
Receivables........................................... 288,455 250,392
Inventories:
Finished products................................... 107,931 102,605
Products in process................................. 92,586 98,105
Raw materials and supplies.......................... 100,171 97,621
---------- ----------
300,688 298,331
---------- ----------
Other current assets.................................. 38,586 39,286
---------- ----------
Total current assets............... 705,357 624,388
Property and equipment - net.......................... 647,234 558,744
Investments in nonconsolidated companies.............. 105,249 138,013
Intangible and other assets........................... 76,974 73,219
---------- ----------
TOTAL.......................... $1,534,814 $1,394,364
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt....................................... $ 41,919 $ 53,700
Accounts payable...................................... 109,392 114,244
Income taxes and other current liabilities............ 112,490 85,589
---------- ----------
Total current liabilities........... 263,801 253,533
Long-term debt........................................ 218,151 114,161
Postretirement health care obligation................. 100,133 98,453
Noncurrent liabilities................................ 70,314 68,799
Deferred income taxes................................. 15,837 27,379
---------- ----------
Total liabilities................... 668,236 562,325
---------- ----------
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
THE LUBRIZOL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
(In Thousands of Dollars) 1995 1994
---------- -----------
<S> <C> <C>
Contingencies and commitments
Shareholders' equity:
Preferred stock without par value - authorized
and unissued:
Serial Preferred Stock - 2,000,000 shares
Serial Preferred Shares - 25,000,000 shares
Common Shares without par value:
Authorized 120,000,000 shares
Outstanding - 63,583,841 shares as of June 30,
1995 after deducting 22,612,053 treasury shares,
64,844,560 shares as of December 31, 1994
after deducting 21,351,334 treasury shares........ 83,750 84,059
Retained earnings................................... 770,423 734,533
Unrealized gain on marketable securities............ 23,169
Accumulated translation adjustment.................. 12,405 (9,722)
---------- ----------
Total shareholders' equity......... 866,578 832,039
---------- ----------
TOTAL.......................... $1,534,814 $1,394,364
========== ==========
</TABLE>
Amounts shown are unaudited.
<PAGE>
THE LUBRIZOL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Second Quarter Six Months
Ended June 30 Ended June 30
-------------------- -----------------------
(In Thousands Except Per Share Data) 1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales........................... $436,774 $407,163 $851,705 $804,979
Royalties and other revenues........ 1,690 1,341 3,480 3,218
-------- -------- -------- --------
Total revenues............ 438,464 408,504 855,185 808,197
Cost of sales....................... 287,909 272,442 565,465 545,048
Selling and administrative expenses. 42,166 39,994 83,090 79,031
Research, testing and development
expenses.......................... 44,922 38,665 86,178 78,790
-------- -------- -------- --------
Total cost and expenses... 374,997 351,101 734,733 702,869
Gain on sale of investments......... 25,353 11,875 38,459 23,387
Other income - net.................. 4,190 1,876 8,475 6,481
Interest income..................... 1,256 1,271 2,576 1,910
Interest expense.................... (2,080) (661) (4,108) (1,494)
-------- -------- -------- --------
Income before income taxes.......... 92,186 71,764 165,854 135,612
Provision for income taxes.......... 30,935 22,632 55,501 43,199
-------- -------- -------- --------
Net income.......................... $ 61,251 $ 49,132 $110,353 $ 92,413
======== ======== ======== ========
Net income per share................ $ .96 $ .74 $1.71 $1.40
===== ===== ===== =====
Dividends per share................. $ .23 $ .22 $ .46 $ .44
===== ===== ===== =====
Average number of shares outstanding 64,066 65,953 64,394 66,230
====== ====== ====== ======
</TABLE>
Amounts shown are unaudited.
<PAGE>
THE LUBRIZOL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30
------------------------
(In Thousands of Dollars) 1995 1994
-------- --------
<S> <C> <C>
Cash provided from (used for):
Operating activities:
Net income................................................... $110,353 $ 92,413
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization............................ 35,192 30,496
Deferred income taxes.................................... 2,434 (942)
Equity earnings, net of distributions.................... (3,609) (5,785)
Gain on sale of investments.............................. (38,459) (23,387)
Change in current assets and liabilities:
Accounts receivable.................................... (28,116) (38,769)
Inventories............................................ 7,548 17,203
Accounts payable and accrued expenses.................. 14,982 3,459
Other current assets................................... (1,020) (1,922)
Other items - net........................................ (4,869) (3,955)
-------- --------
Total operating activities......................... 94,436 68,811
Investing activities:
Proceeds from sale of investments............................ 40,160 24,978
Capital expenditures......................................... (105,989) (70,318)
Acquisition of subsidiary.................................... (3,521)
Other - net.................................................. 1,971 712
-------- --------
Total investing activities (67,379) (44,628)
Financing activities:
Short-term borrowing (repayment) - net....................... (12,659) 32,338
Long-term borrowing.......................................... 100,064 102
Long-term debt repayment..................................... (1,339) (1,128)
Dividends paid............................................... (29,651) (29,217)
Common shares purchased, net of options exercised............ (45,121) (32,557)
-------- --------
Total financing activities......................... 11,294 (30,462)
Effect of exchange rate changes on cash...................... 2,898 2,009
-------- --------
Net increase (decrease) in cash and short-term investments... 41,249 (4,270)
Cash and short-term investments at the beginning of period... 36,379 24,220
-------- --------
Cash and short-term investments at the end of period......... $ 77,628 $ 19,950
======== ========
</TABLE>
Amounts shown are unaudited.
<PAGE>
THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
June 30, 1995
1. The accompanying unaudited consolidated financial statements contain all
adjustments (consisting only of normal recurring accruals) necessary to
present fairly the financial position as of June 30, 1995 and
December 31, 1994, and the results of operations and the cash flows for
the six months ended June 30, 1995 and 1994.
2. Certain of the company's marketable equity securities, included in
investments in nonconsolidated companies, were classified as available
for sale and carried at fair market value. During the first half of
1995, the company sold all of its remaining shares of Genentech common
stock realizing proceeds of $40.2 million and a pretax gain of $38.5
million.
The company also holds other investments in nonconsolidated companies,
including certain investments in marketable securities that are either
accounted for on the equity basis or the cost basis due to restrictions
placed on the securities. These marketable investments have quoted
market values which exceed the book carrying values by $15.6 million at
June 30, 1995.
3. On June 26, 1995, the company publicly issued debentures in the aggregate
principal amount of $100 million. The debentures are unsecured, senior
obligations of the company that mature on June 15, 2025, and bear
interest from June 15, 1995 at 7.25% payable semi-annually on June 15 and
December 15 of each year. The debentures are not redeemable prior to
maturity and are not subject to any sinking fund.
4. The company uses derivative financial instruments only to manage well-
defined foreign currency, interest rate and commodity price risk. The
company does not use derivative financial instruments for trading
purposes. At June 30, 1995, the company had forward contracts to sell
currencies at various dates during 1995 for $9.6 million. The maximum
amount of foreign currency forward contracts outstanding at any one time
during the first six months of 1995 was $15.2 million.
The company has an interest rate swap agreement that effectively converts
floating rate debt on $18.4 million of Marine Terminal Refunding Revenue
Bonds due July 1, 2000 to a fixed rate of 6.5%. In addition during the
first quarter of 1995, the company entered into an interest rate swap
agreement that converts $50 million of variable rate short-term borrowing
to a fixed rate of 7.6% for up to 10 years.
<PAGE>
THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
June 30, 1995
5. On November 18, 1993, a federal court jury in Houston, Texas, awarded
Exxon Corporation $48 million in damages in a patent case brought, in
1989, against the company. The damages award relates to a December 1992
verdict that the company willfully infringed an Exxon patent pertaining
to an oil soluble copper additive component. On February 18, 1994, the
trial court judge doubled the damages amount and awarded prejudgment
interest, court costs and additional attorneys' fees to Exxon. The total
amount of the judgment, including previously awarded attorneys' fees, is
$129 million. The company has obtained a bond to stay enforcement of the
judgment pending the company's appeal discussed below.
The original December 1992 finding of willful infringement, as well as
the jury's determination that the patent is valid, remains on appeal to
the United States Court of Appeals for the Federal Circuit Court in
Washington, D.C., which has jurisdiction over all patent cases. Oral
arguments on this appeal were held on December 6, 1993, and the company
does not know when a decision will be announced. This decision could
reverse or modify the judgment against the company. In addition, oral
arguments on the February 1994 damages award were heard by the same court
in Washington, D.C., on March 8, 1995, and the company does not know when
a decision will be announced. The company's management continues to
believe that it has not infringed the Exxon patent and that the patent is
invalid. Based on the advice of legal counsel, management believes that
the December 1992 trial court judgment will not be upheld on appeal.
Therefore, no amount related to the judgement has been recorded in the
company's financial statements.
The company has prevailed in a separate case brought in Canada against
Exxon's Canadian affiliate, Imperial Oil, Ltd., for infringement of the
company's patent pertaining to dispersant, the largest additive component
used in motor oils. A 1990 trial court verdict in favor of the company
regarding the issue of liability was upheld by the Federal Court of
Appeals of Canada in December 1992, and in October 1993, the Supreme
Court of Canada dismissed Imperial Oil's appeal of the Court of Appeals
decision. The case has returned to the trial court for an assessment of
damages. On October 4, 1994, the trial court judge awarded the company
$15 million (Canadian) in special penalty damages, plus attorneys' fees,
against Imperial Oil for disregarding an earlier injunction for the
manufacture or sale of the dispersant which is the subject of this case.
Imperial Oil commenced proceedings to appeal the award of penalty
damages. The company has not reflected the award of penalty damages
within its financial statements pending the outcome of the appeal
process. The penalty damages are in addition to compensation damages, as
to which no date has been set for a determination. A reasonable
estimation of the company's potential recovery for compensation damages
cannot be made at this time.
<PAGE>
THE LUBRIZOL CORPORATION
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Revenues increased $29.6 million, or 7% in the second quarter of 1995
compared to the second quarter of 1994 and $46.7 million, or 6% for the six
months ended June 30, 1995 compared to the six months ended June 30, 1994.
Price increases implemented in 1995 and more favorable product mix increased
revenues by 5% in the second quarter of 1995 and 4% in the first six months
of 1995 as compared to the respective 1994 periods. In addition, the impact
of translating various international currencies into a weakened U.S. dollar
accounted for a 5% increase in revenues for both the second quarter and six
months ended June 30, 1995. Internationally, volume was down 4% in the
second quarter and 6% for the first six months, primarily due to unusually
high spot business in the Middle East during 1994 that did not recur in 1995.
In North America, volume was down 1% in the second quarter and up 2% for the
first six months. Overall, volume declined 3% in both the quarter and the
six month periods ended June 30, 1995 as compared to the respective prior
periods. Excluding the spot business from the 1994 periods, volume increased
2% for the quarter and 1.5% for the six months ended June 30, 1995.
Gross profit (sales less cost of sales) increased 10% to $148.9 million for
the second quarter and 10% to $286.2 million for the first six months of 1995
as compared to the respective periods of the previous year. Gross profit as
a percent of sales increased from 33.1% to 34.1% for the quarter and from
32.3% to 33.6% for the six months ended June 30, 1995. This improvement was
a result of higher revenues more than offsetting an increase in average
material cost per metric ton, including mix and currency, of 12% for the
quarter and 10% for the six months ended June 30, 1995 combined with the
absence of the 1994 spot business in the Middle East which had a relatively
low gross profit. Favorable currency effects also increased gross profit as
a percent of sales by approximately one-half percentage point for the quarter
and for the first six months of 1995.
The company's organizational realignment initiatives, which began in 1993,
have slowed the rate of increase in its cost and expenses. Selling and
administrative expenses increased 5% for both the second quarter and six
month period ended June 30, 1995 as compared to the prior year. Research,
testing and development expenses (technology expenses) increased 16% for the
second quarter and 9% for the six month period ended June 30, 1995.
Technology expenses have increased over the respective 1994 periods as a
result of increased emphasis on longer-term strategic research and timing of
the various testing programs related to product development worldwide.
Technology expenses for the second half of 1995 are expected to be slightly
higher than the first half levels due to testing for new engine oil
specifications in both the United States and Europe. The company's
manufacturing, technology and selling and administrative expenses increased
a total of 5% compared to the first six months of 1994. However, excluding
the effects of currency, such expenses increased less than 1%. Selling,
administrative and technology expenses for the first six months of 1995 were
just below 20% of revenues, which is consistent with management's goal.
<PAGE>
THE LUBRIZOL CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS (Continued)
The company sold all of its remaining 552,700 shares of Genentech, Inc.
common stock in the second quarter of 1995 resulting in a pretax gain of
$25.4 million (26 cents per share after tax). For the first six months of
1995, such gains were $38.5 million (39 cents per share). During 1994, the
company had pretax gains on the sales of Genentech common stock of $11.9
million (12 cents per share after tax) for the second quarter and $23.4
million (23 cents per share) for the six months.
Other income-net increased $2.3 million in the second quarter of 1995 and
$2.0 million in the six month period ended June 30, 1995, as compared to the
respective 1994 periods. Other income includes the results of the company's
investment in Mycogen Corporation and its agribusiness joint venture.
Mycogen's earnings are seasonal with the majority of its income recorded in
the first half of the year and losses recorded in the second half. Compared
to 1994, equity earnings from Mycogen were $1.9 million less for the second
quarter and $2.5 million less for the six months as a result of lower
consolidated earnings of Mycogen. Other gains, including favorable exchange
gains, and improved equity earnings from the company's specialty chemical
joint ventures more than offset the lower equity earnings from Mycogen.
Interest expense increased $1.4 million for the quarter and $2.6 million for
the six months ended June 30, 1995, due to higher average borrowings
outstanding to meet the requirements of the capital expenditure and share
repurchase programs.
The company transacts business in over 100 counties around the world. As the
U.S. dollar strengthens or weakens against other international currencies,
the financial results of the company will be affected. During 1995, the U.S.
dollar has weakened, primarily against the French franc, German deutsche mark
and Japanese yen, compared to the respective 1994 periods. This resulted in
favorable currency effects on operations of 8 cents per share in the second
quarter and 13 cents per share for the six months ended June 30, 1995.
As a result of the factors discussed above and a higher effective tax rate,
net income increased $12.1 million, or 25% for the second quarter, and
increased $17.9 million, or 19% for the first six months of 1995 as compared
to the respective periods of 1994.
Excluding the gain on sale of Genentech common stock, earnings per share were
$.70 for the second quarter and $1.32 for the first six months of 1995, an
increase of 13% for each period as compared to 1994. This improvement was
primarily the result of higher product pricing, positive currency effects and
the benefits of cost management initiatives offsetting the negative impact of
lower volume and higher raw material costs.
<PAGE>
THE LUBRIZOL CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operating activities was $94.4 million for the six months
ended June 30, 1995, compared to $68.8 million for the first six months of
1994. The increase of $25.6 million is attributable to improved earnings and
favorable changes in working capital requirements.
In late June 1995, the company publicly issued $100 million of 7.25%
debentures due in 30 years. The net proceeds from this debt issuance are
being used to repay outstanding commercial paper borrowings as they mature.
Due to the timing of commercial paper maturities, approximately $26 million
of the debt proceeds was included in cash at June 30, 1995 and, subsequently,
used to repay commercial paper after that date. Total short- and long-term
debt at June 30, 1995 was $260.1 million compared to $167.9 million at
December 31, 1994. The percent of debt to total capital increased to 23% at
June 30, 1995 from 17% at December 31, 1994.
Capital expenditures were $106 million in the first six months of 1995, up
51% over the first six months of 1994. Capital expenditures in the second
quarter of 1995 were $50.7 million as compared to $55.3 million during the
first quarter of 1995. These expenditures were primarily in the United
States and France, of which 70% pertained to capital additions at
manufacturing plants to enhance or maintain production capabilities,
including maintaining facilities in compliance with environmental and safety
regulations, and the remaining 30% was principally for construction of new
administrative and technical facilities at the company's headquarters.
Capital expenditures for the 1995 year are expected to be between $190 and
$200 million as the company continues with its capital spending program.
Management expects capital expenditures will begin to decline in 1996 as a
result of the completion of major projects.
The company repurchased 875,000 and 462,000 of its common shares during the
second and first quarters of 1995, respectively, for an aggregate cost of
$46.5 million. The company historically has used the after-tax proceeds from
its sale of Genentech common stock, as well as operating cash flow, to
repurchase its common shares. At June 30, 1995, there were approximately 3.7
million shares remaining under the company's authorized share repurchase
program. Although the company has sold its remaining investment in
Genentech, it intends to continue its share repurchase program at a reduced
rate for the remainder of 1995.
As a result of these activities, cash and short-term investments increased
$41.2 million to $77.6 million at June 30, 1995.
<PAGE>
THE LUBRIZOL CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES (Continued)
The company's financial position continues to be strong with a ratio of
current assets to current liabilities of 2.7 to 1 at June 30, 1995, and 2.5
to 1 at December 31, 1994. This increase reflects the replacement of short-
term debt with the issuance of $100 million in long-term debentures in June
1995. Management believes the company's credit facilities and internally
generated funds will be sufficient to meet its capital needs.
As discussed in Note 5 to the financial statements, the company is involved
in patent litigation with Exxon Corporation in various countries.
Determinations of liability against the company in the U.S., which is subject
to appeal, and against Exxon in Canada have been made by the courts.
Management is unable to predict the eventual outcomes of this litigation and,
therefore, the impact on future cash flows is not known. If Exxon prevails
in the U.S., management believes the company has sufficient financial
resources to meet any resulting obligation and, other than a potential one-
time charge against income, the litigation will not have a material adverse
effect on future results of operations.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Corporation was held April 24,
1995. The following matters were voted on by the shareholders:
1. Election of directors:
(a) William P. Madar. The vote was 55,804,073 shares
for and 171,380 shares to withhold authority.
(b) Richard A. Miller. The vote was 55,689,423 shares
for and 286,030 shares to withhold authority.
(c) Karl E. Ware. The vote was 55,749,841 shares
for and 225,612 shares to withhold authority.
2. A proposal to confirm the appointment of Deloitte & Touche LLP as
independent auditors. The vote was 55,710,705 shares for; 117,432
shares against; and 147,316 shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10) Deferred Compensation Plan for Officers
(As Amended June 17, 1995)
(11) Computation of Per Share Earnings
(27) Financial Data Schedule
(b) During the quarter ended June 30, 1995, The
Lubrizol Corporation filed a Current Report on
Form 8-K dated June 23, 1995, reporting under
"Item 5 - Other Events," an Exhibit 12 setting
forth the computation of the ratio of earnings
to fixed charges for each of the five years in
the period ended December 31, 1994 and for the
three month periods ended March 31, 1995 and
1994.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE LUBRIZOL CORPORATION
/s/Gregory P. Lieb
--------------------------------
Gregory P. Lieb
Chief Accounting Officer and
Duly Authorized Signatory of
The Lubrizol Corporation
Date: August 11, 1995
EXHIBIT 10
THE LUBRIZOL CORPORATION
Deferred Compensation Plan For Officers
(As Amended June 17, 1995)
1. Purpose. The purpose of this Deferred Compensation Plan For
Officers (the "Plan") is to permit an officer (as identified by the
Company for Section 16 purposes under the Securities Act of 1934)
(sometimes hereinafter referred to as "officer" or as the "Participant")
of The Lubrizol Corporation (the "Company"), who wishes, to defer a
portion of such officer"s compensation until retirement or other
termination of employment all as provided in the Plan.
2. Administration. The Plan shall be administered by the Organization
and Compensation Committee of the Board of Directors of the Company (the
"Committee"). The Committee's interpretation and construction of all
provisions of the Plan shall be binding and conclusive upon all
Participants and their heirs and/or successors.
3. Right to Defer Compensation.
(a) An officer of the Company may, at any time prior to January 1
of a given calendar year, elect, for one or more future successive
calendar years, to defer under the Plan a pre-selected amount of such
officer's total annual compensation, including bonus, which such officer
may thereafter be entitled to receive for services performed during such
elected calendar year or years.
(b) The election under this Section 3 shall take effect on the
first day of the calendar year following the date on which the election is
made and such election shall be irrevocable for any elected calendar year
after such elected calendar year shall have commenced.
(c) The pre-selected amount that an officer may elect to defer
shall be one or more of the following:
(i) a fixed dollar amount or percentage of the officer's bi-
weekly base salary;
(ii) a fixed dollar amount or percentage of the officer's
quarterly pay;
(iii) a fixed dollar amount or percentage of the officer's
share in the variable compensation component, if any;
(iv) a fixed dollar amount or percentage of the officer's
participation in the variable award plan, if any.
<PAGE>
(d) In addition to the provisions of paragraph (c), an officer may
elect to defer that portion or all of the officer's participation, if any,
in (i) the variable compensation component and/or (ii) the variable award
plan for services rendered during the elected calendar year, to the extent
that such amounts would otherwise be non-deductible by the Company
pursuant to section 162(m) of the Internal Revenue Code of 1986. The
amount of the election under this paragraph (d) shall be determined after
taking into account the officer's election, if any, under paragraph (c).
(e) Notwithstanding paragraphs (a) and (b), where an officer first
becomes eligible to participate in the Plan, the newly eligible officer
may make the election under this Section 3 to defer the specified
compensation for services to be performed subsequent to the election and
for the remainder of the calendar year in which the election under this
Section 3 is made provided such election is made within 30 days after the
date the officer first becomes eligible.
(f) All elections under this Plan shall be made by written notice
delivered to the Vice President, Human Resources, of the Company
specifying (i) the number of calendar years, one or more, during which the
election shall apply, (ii) the portion, if any, determined under paragraph
(c), of each category of the Participant's compensation to be deferred for
such year or years, as described above, and (iii) the periodic payment
schedule selected subject to (x) the installment period limitation and (y)
the computation of each installment payment, as provided in Section 5.
(g) A Participant may designate that the election under this
Section 3 shall remain in effect until the Participant, on a prospective
basis, withdraws the election or changes the amount to be deferred;
PROVIDED THAT that, if the Participant changes only the amount to be
deferred, the periodic payment schedule selected under paragraph (f)(iii)
shall continue to apply. Any notice of the withdrawal of the election
shall be effective on the first day of the calendar year following the
date on which such notice is given to the Company's Vice President, Human
Resources; PROVIDED THAT, such notice shall not change, alter or terminate
the deferral of the officer's participation in the variable award plan for
the year in which such notice of withdrawal is given which, except for the
deferral, would be payable in the calendar year following the date on
which such notice of withdrawal is given. Notwithstanding paragraph (f)
and the first sentence of this paragraph (g), any compensation earned
after the end of the first month in which a Participant under this Plan
no longer is an officer of the Company, as defined in Section 1, but
continues to be employed by the Company, shall not be deferred, PROVIDED
HOWEVER, the balance in the Participant's Accounts shall continue to be
held and administered pursuant to the Plan.
<PAGE>
4. Deferred Compensation Accounts.
(a) On the last day of each month during which the compensation
deferred under the Plan would have become payable to the Participant in
the absence of an election under the Plan to defer payment thereof, the
amount of such deferred compensation, reduced by the amount of any
applicable federal, state and/or local payroll taxes, shall be credited to
a DEFERRED COMPENSATION ACCOUNT (the "Participant's Account") which shall
be established and maintained for each Participant in the Company's
accounting books and records. To the extent that, at the time amounts are
credited to a Participant's Account, any federal, state or local payroll
withholding tax applies (e.g., Medicare withholding tax), the Participant
shall be responsible for the payment of such amount to the Company and the
Company shall promptly remit such amount to the proper taxing authority.
(b) Interest shall accrue on the month-end balance in each
Participant's Account as of the last day of each month and shall be
computed at the Federal Reserve 90-day Composite Rate in effect for the
previous calendar quarter. Such interest amount so determined shall be
credited monthly to such Participant's Account.
5. Payment of Deferred Compensation.
(a) The total amount standing as a credit in a Participant's
Account shall, upon termination of employment, be payable to the
Participant either in a lump sum or in periodic installments over such
period, not exceeding ten years, as the Participant shall have selected
pursuant to Section 3(f)(iii). Such periodic payments shall begin or
the lump sum payment shall be made, as the case may be, from the
Participant's Accounts, at such time, not more than twelve (12) months
after the Participant ceases to be an employee of the Company, as the
Participant shall have selected pursuant to Section 3 (f)(iii) at the
time of entering the Plan. All amounts payable in accordance with this
Section 5(a) shall be subject to applicable federal, state and/or local
payroll withholding taxes then in effect.
(b) The amount of each installment payable to a Participant
shall be determined by dividing the balance of such Participant's
Account by the number of periodic installments (including the current
installment) remaining to be paid. Until a Participant's Account has
been completely distributed, the balance thereof remaining, from time to
time, shall bear interest on a monthly basis calculated as provided in
Section 4(b).
(c) In the event a Participant dies prior to receiving payment
of the entire amount in that Participant's Account, the unpaid balance
shall be paid to such beneficiary as the Participant may have designated
in writing to the Vice President, Human Resources, of the Company as the
beneficiary to receive any such post-death distribution under the Plan
or, in the absence of such written designation, to the Participant's
legal representative or to the beneficiary designated in the
Participant's last will as the one to receive such distributions.
Distributions subsequent to the death of a Participant may be made
either in a lump sum or in periodic installments in such amounts and
over such period, not exceeding ten years from the date of death, as the
Committee may direct and the amount of each installment shall be
computed as provided in Section 5(b).
<PAGE>
6. Acceleration of Payments. The Committee may accelerate the
distribution of part or all of a Participant's Account for reasons of
severe financial hardship. For purposes of the Plan, severe financial
hardship shall be deemed to exist in the event the Committee determines
that a Participant needs a distribution to meet immediate and heavy
financial needs resulting from a sudden or unexpected illness or
accident of the Participant or a member of the Participant's family,
loss of the Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstance arising as a result of
events beyond the control of the Participant. A distribution based on
financial hardship shall not exceed the amount required to meet the
immediate financial need created by the hardship.
7. Non-assignability. None of the rights or interests in a
Participant's Account shall, at any time prior to actual payment or
distribution pursuant to the Plan, be assignable or transferable in
whole or in part, either voluntarily or by operation of law or
otherwise, and such rights and interest shall not be subject to payment
of debts by execution, levy, garnishment, attachment, pledge, bankruptcy
or in any other manner; provided that, upon the occurrence of any such
assignment or transfer or the attempted assignment or transfer, all
payments under Section 5 shall be payable in the sole and unrestricted
judgment and discretion of the Committee, as to time and amount
(including a lump sum amount), and shall be distributable to the person
who would have received the payment but for this Section 7 only at such
time or times and in such amounts as the Committee, from time to time,
and in its sole and unrestricted judgment and discretion, shall
determine. Should an event covered by this Section 7 occur prior to the
death of a Participant, the balance, if any, in the Participant's
Account shall, after such death, be thereafter distributed as provided
in Section 5(c) subject to the provisions of this Section 7.
8. Plan to be Unfunded. The Company shall be under no obligation to
segregate or reserve any funds or other assets for purposes relating to
the Plan and, except as set forth in this Plan, no Participant shall
have any rights whatsoever in or with respect to any funds or other
assets held by the Company for purposes of the Plan or otherwise. Each
Participant's Account maintained for purposes of the Plan merely
constitutes a bookkeeping entry on records of the Company, constitutes
the unsecured promise and obligation of the Company to make payments as
provided herein, and shall not constitute any allocation whatsoever of
any cash or other assets of the Company or be deemed to create any trust
or special deposit with respect to any of the Company's assets.
<PAGE>
9. Amendment. The Board of Directors of the Company may, from time to
time, amend or terminate the Plan, provided that no such amendment or
termination of the Plan shall adversely affect a Participant's Account
as it existed immediately before such amendment or termination or the
manner of distribution thereof, unless such Participant shall have
consented thereto in writing. Any reduction in the quarterly interest
rate set forth in Section 4(b), by amendment to the Plan, shall affect
only contributions made to the Plan for calendar years subsequent to the
adoption of the amendment. The balance in a Participant's Account prior
to the effective date of any such interest rate reduction shall continue
to bear interest at the rate in effect prior to any such reduction in
interest rate. Notice of any amendment or termination of the Plan shall
be given promptly to all Participants.
10. Plan Implementation. This Plan is adopted and effective on the
25th day of July, 1994 as amended on June 17, 1995.
EXHIBIT 11
THE LUBRIZOL CORPORATION
Computation of Per Share Earnings
Second Quarter, 1995
The computation of primary earnings per share and fully diluted earnings per
share is as follows:
(In Thousands of Shares Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Average shares outstanding for
computation of primary
earnings per share 64,066 65,953 64,394 66,230
Add adjustment to treat shares
for options exercised as if
such shares were outstanding
during the entire period 20 54 55 123
Add equivalent shares for
unexercised options at end
of period* 425 505 428 545
------ ------ ------ ------
Average shares outstanding for
computation of fully diluted
earnings per share 64,511 66,512 64,877 66,898
====== ====== ====== ======
Primary earnings per share $.96 $.74 $1.71 $1.40
==== ==== ===== =====
Fully diluted earnings per share $.95 $.74 $1.70 $1.38
==== ==== ===== =====
</TABLE>
*Computed under the "Treasury Stock Method" using the higher of quoted ending or
average market price.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from consolidated
balance sheets and consolidated statements of income and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000060751
<NAME> THE LUBRIZOL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 77,628
<SECURITIES> 0
<RECEIVABLES> 248,784
<ALLOWANCES> 3,012
<INVENTORY> 300,688
<CURRENT-ASSETS> 705,357
<PP&E> 1,406,565
<DEPRECIATION> 759,331
<TOTAL-ASSETS> 1,534,814
<CURRENT-LIABILITIES> 263,801
<BONDS> 218,151
<COMMON> 83,750
0
0
<OTHER-SE> 782,828
<TOTAL-LIABILITY-AND-EQUITY> 1,534,814
<SALES> 851,705
<TOTAL-REVENUES> 855,185
<CGS> 565,465
<TOTAL-COSTS> 565,465
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (573)
<INTEREST-EXPENSE> 4,108
<INCOME-PRETAX> 165,854
<INCOME-TAX> 55,501
<INCOME-CONTINUING> 110,353
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110,353
<EPS-PRIMARY> 1.71
<EPS-DILUTED> 1.70
</TABLE>
