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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition period from
-------------- to
--------------
Commission file number 1-10270
MORTON INTERNATIONAL, INC.
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<S> <C>
Incorporated in the State of Indiana IRS Employer Identification
No. 36-3640053
</TABLE>
Principal Executive Offices:
100 North Riverside Plaza, Chicago, Illinois 60606-1596
Telephone Number: (312) 807-2000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------------------ --------------------------
<S> <C>
Common Stock, par value New York Stock Exchange
$1.00 per share Chicago Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Chicago Stock Exchange
</TABLE>
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. [X]
Aggregate market value of registrant's voting stock held by non-affiliates,
based upon the closing price of said stock on the New York Stock
Exchange-Composite Transaction Listing on August 31, 1995 ($32.50 per share):
$4,798,771,868.
Number of shares of Common Stock outstanding as of August 31, 1995:
148,282,293
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Annual Report to Shareholders for the fiscal year ended June
30, 1995: Parts II and IV.
2. Portions of definitive Proxy Statement dated September 14, 1995: Parts
III and IV.
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PART I
ITEM 1. BUSINESS
BUSINESS SEGMENTS
The Company* operates in three business segments: Specialty Chemicals, Salt,
and Automotive Safety Products, manufacturing and marketing a wide range of
products for industrial and consumer use, in the United States ("U.S.") and
internationally. The Company's international business is subject to those risks
inherent in carrying on business outside of the U.S., including currency
fluctuations, possible nationalization, expropriation, price controls or other
restrictive government action.
SPECIALTY CHEMICALS
The specialty chemicals segment manufactures a wide variety of high
technology and specialized chemical products for a multitude of customer
applications. It conducts chemical operations directly and through sixteen
directly or indirectly wholly-owned subsidiaries and four joint venture
arrangements which are between 5% and 50% owned. Specialty chemical products are
marketed throughout the world directly to customers and indirectly through
distributors and agents. The specialty chemicals segment is divided into four
product groups: Adhesives & Specialty Polymers, Coatings, Electronic Materials
and Specialty Chemical Products.
ADHESIVES & SPECIALTY POLYMERS GROUP
A major product line for this group is adhesives used for flexible packaging
materials and industrial applications. Laminating adhesives are used primarily
in food packaging to bond paper, film, or foil. Industrial adhesives are used
for bonding rigid substrates, such as rubber to metal or panels used in
construction. The other major product lines manufactured by the group include
thermoplastic polyurethanes, waterbased polymers, extrudable resins, and product
lines with diverse applications. Its Advanced Materials subsidiary employs the
chemical vapor deposition process to manufacture crystalline substrates for
lenses used in lasers and optical devices.
COATINGS GROUP
This group manufactures and markets a wide range of automotive, commercial,
and industrial coatings products, including customized performance liquid
coatings, principally utilized on plastic components and parts in automotive
markets; protective and decorative powder coatings employed on metal substrates
in commercial and automotive markets; coil coatings, extrusion coatings and
other general industrial coatings for application to aluminum and steel
substrates; and conventional and durable highway marking coatings products and
application equipment.
ELECTRONIC MATERIALS GROUP
This group manufactures chemicals for the electronics market, principally
dry film photoresists used as part of a process to image circuit patterns on
printed circuit boards as well as photoimageable solder masks for circuit boards
and multichip modules.
SPECIALTY CHEMICAL PRODUCTS GROUP
This group manufactures liquid dyes to color petroleum products for
identification purposes and other dyes and coloring products used in printing
and writing inks, and in plastics; sodium borohydride, a reducing agent used
principally as a bleaching chemical in paper manufacturing; polysulfide polymers
used in the production of sealants, rubber products, coatings and solid rocket
fuel; sealants for insulating glass and aircraft; heat stabilizers and
lubricants used in rigid polyvinyl chloride ("PVC") applications in the
construction industry, principally for pipe and siding; industrial biocides for
the protection of plastic products; and magnesium compounds.
------------------------
* The term "Company" as used herein refers to Morton International, Inc. and
its subsidiaries, unless otherwise indicated.
1
<PAGE>
ITEM 1. BUSINESS--(Continued)
SALT
The salt segment produces and sells salt, principally in the U.S. and
Canada, under the MORTON and WINDSOR trademarks, respectively, for human and
animal consumption, water conditioning, and highway ice melting, as well as for
industrial and chemical uses.
Table salt is sold under the MORTON and WINDSOR brands and under private
labels. Sales of MORTON brand table salt in the U.S. are approximately equal to
the aggregate sales of all other table salts. Salt for water conditioning is
compressed or coarse grade and is sold principally for residential use, mostly
in packages. Some coarse grade is sold in bulk for municipal and industrial
water conditioning. Salt for industrial and chemical use is sold in bulk and in
packages, and is used for food and meat processing and in a wide variety of
chemical applications. Salt for ice melting on streets and highways is sold
mostly in bulk form to government agencies, with some ice melting salt being
sold in packages under the SAFE-T-SALT brand.
Sales of salt are made through the Company sales force, as well as through
independent distributors, agents and brokers. Regional sales offices and
customer service facilities are maintained throughout the U.S. and Canada.
Total salt production by the Company in fiscal year 1995 was approximately
11.9 million tons in the aggregate. Rock salt and brine well reserves vary, but
all facilities have sufficient reserves to satisfy anticipated production
requirements for the foreseeable future. Salt reserves for solar evaporation
facilities are regarded as unlimited.
AUTOMOTIVE SAFETY PRODUCTS
The automotive safety products segment, located in Utah, designs, develops,
manufactures and sells gas generators ("inflators") and modules for use in
driver, passenger and side-impact automotive airbag passive restraint systems. A
module consists of an inflator, airbag and cover. The Company is also evaluating
adaptive or tailorable airbag systems, for which it is developing SMART-TM-
inflators and SMARTBAG-TM- modules.
The Company markets its automotive safety products throughout the world
directly to automobile manufacturers. In the United States, federal legislation
will require driver- and passenger-side airbags in all passenger cars by model
year 1998, and in all light trucks, vans and sport utility vehicles by model
year 1999. Currently, U.S. automakers are producing dual-airbag vehicles ahead
of the schedule mandated by law. In Europe, nearly all new cars are expected to
have dual airbags by the end of the decade, and a similar rate of airbag
introduction is anticipated for the domestic Japanese market. In view of the
continued growth foreseen in the worldwide market, the Company has continued the
expansion of its facilities that commenced in the late 1980's. Over 40 million
units have been produced to date.
The Company has a 50% owned joint venture (known as "Morton Bendix") with
the Bendix Safety Restraints Group of Allied-Signal Inc. for the purpose of
assembling passenger-side airbag modules. Such modules are marketed directly to
applicable automobile manufacturers by the Company and the Bendix Safety
Restraints Group. Morton Bendix has a module assembly facility in Maryville,
Tennessee, which commenced operations in April 1992.
The Company markets driver and passenger inflators to some Japanese
automobile manufacturers through a 50% owned joint venture in Japan. On December
1, 1994, the Company established a Technical Center in Yokohama, Japan to
provide technical and other liaison with its Asian customers.
In anticipation of rapid growth in the European airbag market, the Company
has acquired production facilities in Braunschweig, Germany, and Amsterdam, The
Netherlands. Both facilities will be used for the
2
<PAGE>
ITEM 1. BUSINESS--(Continued)
assembly of airbag modules, and The Netherlands facility will also be used for
the assembly of hybrid inflators. The Company has also established a European
Technical Center near Stuttgart, Germany, in a facility that was acquired during
the last quarter of fiscal 1995.
Reflecting the Company's commitment to the development of new technologies,
its patent application for a fluid-fueled inflator has been allowed by the U.S.
Patent and Trademark Office. In addition, a patent for an adaptive airbag system
using SMART-TM- inflators and SMARTBAG-TM- modules has been awarded jointly to
the Company and to Robert Bosch GmbH. Both of these technologies are significant
milestones in the evolution of airbags and in the Company's progress towards its
goal of continuing to offer its customers the best alternatives in advanced
products.
COMPETITION
The majority of the specialty chemicals segment's business is highly
competitive. The Company is the only U.S. producer of polysulfide polymers, but
there is substantial competition from a foreign producer and a variety of
alternative materials. The specialty chemicals segment is the world's largest
producer of sodium borohydride, and has a majority share of the markets for
biocides for incorporation into plastics and hydride chemicals. Principal
methods of competition include technical service for specialized customer
requirements, price and quality.
All areas in which the salt segment operates are highly competitive.
Although the salt segment is a major factor in the salt industry, its market
share varies widely, depending on the geographic area and the type of product
involved. This segment uses price, quality, service, product performance, and
technical, advertising and promotional support as its principal methods of
competition.
Currently, the automotive safety products segment competes with a number of
other firms, some of which are large, well-qualified and possess sufficient
resources to compete effectively for the business of a relatively small number
of automobile manufacturers selling large numbers of cars in the U.S., Europe
and Asia. The continuing rapid expansion of the automotive airbag industry has
led to a number of new entrants into the market.
RESEARCH AND DEVELOPMENT
Expenses incurred for research and development activities related to Company
businesses were $72.5 million, $66.1 million, and $68.6 million for fiscal 1995,
1994 and 1993, respectively.
ENVIRONMENTAL PROTECTION
Federal, state and local environmental laws and regulations are increasing
in number, complexity and stringency. Public perception of risk to health,
safety and the environment has become the driving force behind many new
regulations. It is the Company's policy to comply with these requirements, and
the Company believes that as a general matter its policies, practices and
procedures are properly designed to prevent unreasonable risk of environmental
damage, and of resulting financial liability, in connection with its businesses.
Some risk of environmental damage is, however, inherent in particular operations
and products of the Company, as it is with other companies engaged in similar
businesses.
The Company is and has been engaged in the handling, manufacture, use and
disposal of many substances which are classified as hazardous or toxic by one or
more regulatory agencies. The Company believes that its handling, manufacture,
use and disposal of such substances have generally been in accord with
environmental laws and regulations. It is possible, however, that future
knowledge or other developments, such as improved capability to detect
substances in the environment, increasingly strict environmental laws and
standards and enforcement policies thereunder, could bring into question the
Company's handling, manufacture, use or disposal of such substances.
3
<PAGE>
ITEM 1. BUSINESS--(Continued)
Among other environmental requirements, the Company is subject to the
federal Superfund law, and similar state laws, under which the Company has been
named a potentially responsible party and under which it may be liable for
cleanup costs associated with approximately 60 inactive waste disposal sites.
The Company's cleanup expenditures totaled approximately $3.0 million in fiscal
1995. Although, under some court interpretations of these laws, there is a
possibility that a responsible party might have to bear more than its
proportional share of the cleanup costs if it is unable to obtain appropriate
contribution from other responsible parties, the Company has not had to bear
significantly more than its proportional share in multiparty situations taken as
a whole.
Although the level of future expenditures for environmental matters cannot
be determined with any degree of certainty, based on the facts presently known
to it, management does not believe that such costs will have a material effect
on the Company's financial position, results of operations or liquidity. Capital
expenditures related to environmental matters were $9.0 million for fiscal 1995
and are estimated at $10.5 million for fiscal 1996.
EMPLOYEES
The number of employees of the Company at June 30, 1995 was approximately
13,800, compared to 13,100 at June 30, 1994.
RAW MATERIALS
The Company's businesses use many raw materials in the manufacture of their
products, all of which are generally bought from a large number of qualified
suppliers. The Company's businesses have not experienced significant difficulty
in obtaining raw materials.
SEASONALITY; BACKLOG
Sales of highway ice control salt are quite seasonal, and vary with winter
weather conditions in areas where that product is used. In keeping with industry
practice, ice control salt is stockpiled both by the salt segment and by its
customers in sufficient quantities to meet estimated requirements for the next
season.
Sales of products by the specialty chemicals and automotive safety products
segments do not exhibit significant seasonal fluctuations. There are no material
backlogs in the Company's businesses.
PATENTS AND TRADEMARKS
The Company's businesses conduct comprehensive research and development
programs to enable them to maintain their competitive position. The Company owns
approximately 2,700 patents and patent applications, which expire on varying
dates through the year 2015.
The Company's businesses are engaged in research and development and own
patents and patent applications in the fields of photochemicals for the printed
circuit board industry, sodium borohydride reducing and bleach generating agents
and other products, industrial biocides, heat stabilizers for PVC, asphalt
additives, chemically vapor deposited lenses, polysulfide polymers, sealants and
other polymers, specialty and powdered coatings, adhesives, dyes, salt and brine
products, and airbag inflators, modules and gas generants.
The Company believes that its present commercial position in these fields is
enhanced by the patents it owns as well as the technical expertise, know-how,
and trade secrets it has developed.
The Company has about 1,900 U.S. and foreign trademarks and trademark
applications which are generally renewable while the marks remain in use.
4
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ITEM 1. BUSINESS--(Continued)
CUSTOMERS
Neither the specialty chemicals nor salt segments is dependent upon any
single customer, or any single group of customers, the loss of any one of which
would have a material adverse effect on such business segment. However, the loss
of certain existing customers of the automotive safety products segment
currently could have a material adverse effect on such business.
ITEM 2. PROPERTIES
The Company considers the condition of its plants, warehouses and other
properties to be generally good and adequate for the needs of its businesses.
The table below sets forth the locations and approximate sizes of certain
principal properties leased or owned by the Company and its subsidiaries:
<TABLE>
<CAPTION>
LAND (ACRES) BUILDINGS (SQ. F.) LEASE
-------------------- -------------------- EXPIRES
DOMESTIC LOCATIONS OWNED LEASED OWNED LEASED ON DESCRIPTION
-------------------------------------- --------- --------- --------- --------- ----------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
I. CORPORATE HEADQUARTERS
CHICAGO, IL
100 N. Riverside................ 301,834 3/31/2055 Corporate Headquarters
110 North Wacker, Inc.
110 N. Wacker Dr................ 1.0 201,000 3/31/2055 Former Corporate Headquarters
II. SPECIALTY CHEMICALS
ADHESIVES & SPECIALTY POLYMERS GROUP
Woburn, MA........................ 22,100 6/30/96 Office & Research
Weeks Island, LA.................. 50.0 44,810 Manufacturing
Ringwood, IL*..................... 118.3 202,114 6,885 2/28/96 Manufacturing
Elk Grove Village, IL............. 3.9 51,986 Manufacturing
Greenville, SC.................... 78.0 97,315 Manufacturing
Stamford, CT...................... 3.1 21,540 Manufacturing
West Alexandria, OH............... 8.4 73,702 1,248 4/14/96 Manufacturing
Seabrook, NH...................... 5.5 40,438 Manufacturing
Seabrook, NH...................... 10,239 9/30/96 Office
Woodstock, IL..................... 66.5 101,150 Research
COATINGS GROUP
Warsaw, IN........................ 7.5 101,878 Manufacturing
Wytheville, VA.................... 23.7 60,000 Manufacturing
Reading, PA....................... 3.1 34,080 Office & Research
Reading, PA....................... 10.1 93,830 Manufacturing
Batavia, IL....................... 11.2 65,600 Manufacturing
Los Angeles, CA................... 1.2 25,350 Manufacturing
Colton, CA........................ 6.7 46,800 Manufacturing
Columbus, OH...................... 3,517 12/31/97 Research
Chicopee, MA...................... 7.3 58,150 Manufacturing
Decatur, AL....................... 10.2 89,635 Manufacturing
Dixon, CA......................... 2.0 14,802 Manufacturing
Salem, OR......................... 11.8 82,586 Manufacturing
Salem, OR......................... 2.2 31,288 9/30/98 Manufacturing
Mt. Angel, OR..................... .8 4,400 Manufacturing
Orrville, OH...................... 5.0 54,620 Manufacturing
N. Brunswick, NJ.................. 3.8 44,148 12/31/95 Manufacturing
N. Brunswick, NJ.................. 3.6 40,626 12/31/95 Office & Warehousing
Chicago Heights, IL............... 6.0 60,000 Manufacturing
Lansing, IL....................... 14.9 171,000 Office, Manufacturing &
Research
Lansing, IL....................... 4.1 40,400 Storage & Manufacturing
Rochester Hills, MI............... 6.5 58,900 Pilot Plant & Research
ELECTRONIC MATERIALS GROUP
Tustin, CA........................ 7.0 122,500 Office, Manufacturing &
Research
Moss Point, MS.................... 39.7 111,325 Manufacturing
Spartanburg, SC................... 3.2 69,876 6/30/2004 Manufacturing
</TABLE>
5
<PAGE>
ITEM 2. PROPERTIES--(Continued)
<TABLE>
<CAPTION>
LAND (ACRES) BUILDINGS (SQ. F.) LEASE
-------------------- -------------------- EXPIRES
DOMESTIC LOCATIONS OWNED LEASED OWNED LEASED ON DESCRIPTION
-------------------------------------- --------- --------- --------- --------- ----------- ------------------------------
SPECIALTY CHEMICAL PRODUCTS GROUP
<S> <C> <C> <C> <C> <C> <C>
Beverly, MA....................... 3.5 58,948 Manufacturing & Research
Elma, WA.......................... 26.6 40,000 Manufacturing
Chicago, IL....................... 2.4 37,330 Manufacturing
Manistee, MI...................... 76.8 59,208 Manufacturing (Leased from
Salt Group)
Cincinnati, OH.................... 31.9 170,296 Manufacturing
Danvers, MA*...................... 63.2 151,880 Manufacturing
Moss Point, MS.................... 511.1 185,000 Manufacturing
Paterson, NJ...................... 6.3 63,546 Manufacturing
Garden Grove, CA.................. 25,300 7/30/2000 Manufacturing
North Andover, MA................. 33,406 6/30/2009 Office & Lab
III. SALT
Fairport, OH...................... 152.1 5,000.0 100,222 12/31/2008 Mine Operation
Grand Saline, TX.................. 560.4 216,293 Mine & Brine Operation
Hutchinson, KS.................... 444.6 172,414 Brine Operation
Long Beach, CA.................... 5.2 20,000 7/31/2005 Warehouse & Bagging
Manistee, MI...................... 352.0 242,882 Brine Operation
Newark, CA........................ 26.3 138,638 Brine Operation
Perth Amboy, NJ................... 5.3 40,320 4/30/98 Warehouse & Bagging
Port Canaveral, FL................ 3.5 19,195 8/31/2009 Warehouse & Bagging
Rittman, OH....................... 1,113.3 500,962 Brine Operation
Grantsville, UT................... 15,193.0 5,560.8 99,067 6/30/2017 Evaporation Pond Operation
Silver Springs, NY................ 806.9 189,695 Brine Operation
Weeks Island, LA.................. 891.3 867.8 329,732 12/5/2070 Mine & Brine Operation
Chicago, IL....................... 4.1 121,033 Warehouse & Bagging
Chicago, IL....................... 13.3 28,050 Stockpile Operation
Glendale, AZ...................... 108.3 42,600 5/31/2005 Evaporation Pond
Glendale, AZ...................... 41.2 12/12/2015 Operation
IV. AUTOMOTIVE SAFETY PRODUCTS
Ogden, UT......................... 19.5 103,740 Headquarters & Manufacturing
Ogden, UT......................... 87.7 251,000 Manufacturing
Ogden, UT......................... 4.6 49,500 11/30/96 Manufacturing
Promontory, UT.................... 526.3 227,000 Manufacturing
Brigham City, UT.................. 92.0 585,000 Manufacturing
Maryville, TN**................... 4.1 70,000 Manufacturing
Rochester Hills, MI............... 12,720 5,100 3/17/99 Research, Development &
Testing
<FN>
*Includes Adhesives & Specialty Polymers and Specialty Chemical Products
**Owned by Morton Bendix, a partnership in which the Company has a 50% equity interest
</TABLE>
<TABLE>
<CAPTION>
FOREIGN LOCATIONS
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<S> <C> <C> <C> <C> <C> <C>
I. SPECIALTY CHEMICALS
Morton International
G.m.b.H.
Germany
Dietzenbach (EM)................ 1.0 21,500 Warehouse, Lab & Office
Bremen (A)...................... 7.2 137,500 Manufacturing
Osnabruck (A)................... 7.0 78,500 Manufacturing
Strullendorf (C)................ 7.6 59,718 Manufacturing, Research &
Office
Mannheim (SC)................... 42,965 8/31/99 Lab & Office
Morton International S.p.A
Italy
Varese (EM)..................... 2.2 38,000 Assembly & Distribution
Pavia (A)....................... .4 14,500 Manufacturing
Mozzate (A)..................... 10.5 76,688 Manufacturing
Garlasco (A).................... 4.8 24,562 Manufacturing & Office
</TABLE>
6
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ITEM 2. PROPERTIES--(Continued)
<TABLE>
<CAPTION>
LAND (ACRES) BUILDINGS (SQ. F.) LEASE
-------------------- -------------------- EXPIRES
FOREIGN LOCATIONS OWNED LEASED OWNED LEASED ON DESCRIPTION
-------------------------------------- --------- --------- --------- --------- ----------- ------------------------------
Morton International B.V.
The Netherlands
<S> <C> <C> <C> <C> <C> <C>
Amersfoort (A).................. 3.6 55,000 Manufacturing
Amersfoort (SC)................. 5,380 11/30/99 Office
Delfzijl (SC)................... 14.8 18,639 12/31/2036 Manufacturing
N.V. Morton International S.A.
Belgium
Kortenberg (SC)................. 4,734 6/30/2004 Office & Lab
Kontich (EM).................... 3.5 15,171 Warehouse & Office
Morton International
Limited
England
Warrington (EM)................. 4.9 76,245 3/4/2106 Manufacturing, Warehouse &
Office
Hounslow (SC)................... 7.0 (vacant) Former Manufacturing
14,375 4/12/98 Office
Coventry (SC)................... 1.0 12,000 3/30/2108 Office & Research
Dewsbury (A, SC)................ 19.6 50,500 Manufacturing
Morton International S.A.
France
Semoy (A)....................... 1.1 82,723 Office, Manufacturing,
Warehouse, Research
Igny (EM)....................... .2 5,000 Office & Warehouse
Jouy en Josas (C)............... 3,600 5/31/2000 Warehouse & Office
Morton International, Ltd.
Canada
Ajax, Ontario (A, C)............ 5.6 17,490 Manufacturing
Morton International S.A.
de C.V., Mexico
Mexico City (A, C).............. .8 25,000 Manufacturing
Morton Japan, Ltd
Japan
Kodama (EM)..................... 1.7 21,381 Manufacturing, Warehouse,
Office & Lab
Morton International, Ltd.
Japan
Tokyo (A)....................... 1,349 8/31/96 Office
Morton International Pte. Ltd.
Singapore
Singapore (A)................... 1,352 8/14/97 Office
Singapore (SC).................. 910 6/30/96 Office
II. SALT
The Canadian Salt
Company Limited
Canada
Pointe Claire, Quebec........... 14,250 8/31/2009 Company Headquarters
Lindbergh, Alberta.............. 103.6 112,000 Brine Operation
Ojibway, Ontario................ 250.0 143,000 Mine Operation
Pugwash, Nova Scotia............ 161.4 131,000 Mine & Brine Operation
Regina-Belle Plaine,
Saskatchewan.................. 17.0 113,000 Brine Operation
Windsor, Ontario................ 19.3 264,000 Brine Operation
Magdalen Islands,
Quebec........................ 25.0 64,583 Mine Operation
Morton Bahamas Ltd.
Bahamas
Inagua.......................... 51,541.5 12,000 Evaporation Pond Operation
</TABLE>
7
<PAGE>
ITEM 2. PROPERTIES--(Continued)
<TABLE>
<CAPTION>
LAND (ACRES) BUILDINGS (SQ. F.) LEASE
-------------------- -------------------- EXPIRES
FOREIGN LOCATIONS OWNED LEASED OWNED LEASED ON DESCRIPTION
-------------------------------------- --------- --------- --------- --------- ----------- ------------------------------
III. AUTOMOTIVE SAFETY PRODUCTS
<S> <C> <C> <C> <C> <C> <C>
Morton International
G.m.b.H.
Germany
Braunschweig.................... 12.3 70,000 Manufacturing
Markgroningen................... 1.3 41,580 Technical Center
Morton International, Inc.
Japan
Yokohama........................ 16,285 11/30/99 Technical Center
Morton Manufacturing B.V.
The Netherlands
Amsterdam....................... 14.1 334,700 12/31/2044 Manufacturing
<FN>
------------------------------
KEY:
A: Adhesives & Specialty Polymers Group EM: Electronic Materials Group
C: Coatings Group SC: Specialty Chemical Products Group
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
LITIGATION AND REGULATION
NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION AND ENERGY V. VENTRON
CORPORATION, ET AL., Superior Court of Bergen County, New Jersey, filed on March
31, 1976. After a 55-day trial held in 1979 and unsuccessful appeals to the
Appellate Division and to the Supreme Court of New Jersey, Ventron (a corporate
predecessor of the Company) and its co-defendant, Velsicol Corporation, were
each held jointly and severally liable for the cost of remediation necessary to
correct mercury related environmental problems associated with a former mercury
processing plant located in Wood-Ridge, New Jersey. Subsequent to the liability
holding, Ventron, Velsicol and the State of New Jersey entered into a consent
order under which Ventron and Velsicol agreed, subject to certain conditions and
limitations, to share the costs of a technical study to determine the
appropriate remedy for environmental problems associated with the former Wood-
Ridge operation. In October 1989, the Company and Velsicol filed suit in the
United States District Court for the District of New Jersey alleging that the 35
defendants named therein were additionally responsible, at least in part, for
the costs of such technical study and any remedial action that may be required.
Defendants were present and former owners or operators of neighboring industrial
facilities and waste disposal sites, as well as others believed to share
responsibility for environmental problems attributed to the Company and
Velsicol. With the consent of all parties, this action was later dismissed
without prejudice pending completion of negotiations among the Company,
Velsicol, and New Jersey authorities leading to a consent order modification (or
an arrangement pursuant to the existing order) permitting, among other things,
the technical study of the Wood-Ridge plant site to proceed separately and
providing for an independent but coordinated regional technical study of the
Berry's Creek Drainage Basin, performed in due course by the Company, Velsicol
and other potentially responsible parties (estimated to number in excess of
100). In July 1993, the Supreme Court of New Jersey ruled in an action styled
Morton International, Inc. v. General Accident Insurance Company of America, et
al that the Company was not entitled to indemnity under various comprehensive
general liability policies for environmental cleanup and related expenses
resulting from Ventron's operation of the mercury plant. Because of the absence
of site specific data, the unique nature of mercury plant wastes, and the
complex characteristics of the Wood-Ridge plant site and Berry's Creek Drainage
Basin, no reliable estimate can presently be made of the Company's liability (or
range of exposure) until the technical studies are sufficiently completed to
permit such determination. It is anticipated that the Wood-Ridge plant site
technical study will begin in fiscal 1996 and will be completed in approximately
42 months. Study of the Berry's Creek Drainage Basin should begin after
commencement of the plant site study on a timetable yet to be determined. The
Company's ultimate exposure will also depend upon the continued participation of
Velsicol and on the results of both formal and informal attempts to spread
liability to others believed to share responsibility. Such attempts will include
negotiations or litigation
8
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ITEM 3. LEGAL PROCEEDINGS--(Continued)
with potentially responsible parties, and additionally in the case of the
Berry's Creek Drainage Basin, the anticipated use of administrative enforcement
mechanisms by New Jersey authorities to influence other potentially responsible
parties to join in a coordinated regional study and remediation.
SUBPOENA DUCES TECUM--WEST VIRGINIA ATTORNEY GENERAL'S OFFICE. WEST VIRGINIA
INVESTIGATION--DE-ICING SALT. On September 29, 1994, the West Virginia Attorney
General's Office served a subpoena and interrogatories on the Company requiring
production of documents and the disclosure of information relating to that
state's highway de-icing salt purchases since January 1, 1992. The subpoena and
interrogatories, which the Company answered in a timely manner, were issued in
connection with a civil investigation into possible violations of the West
Virginia Antitrust Act. Nothing has occurred since the Company's response, and
this matter is now considered to be inactive.
MISCELLANEOUS. The Company is involved in a number of additional pending
legal and administrative proceedings which are not expected, individually or in
the aggregate, to be material to its business or financial condition. There are
governmental agencies with authority to limit or prohibit distribution of some
of the Company's products should they formally conclude that continued
distribution is unsafe to the population or the environment. There are currently
no challenges pending, the resolution of which would have a material effect upon
the Company's operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT (AS REQUIRED BY INSTRUCTION 3. TO ITEM
401(B) OF REGULATION S-K)
Generally, officers are elected by the Board of Directors at its first
meeting following the Annual Meeting of Shareholders, and they serve for the
succeeding year until the next such meeting, or until their successors are
elected and qualify. The next Annual Meeting of Shareholders will be held on
October 26, 1995.
Listed below are the executive officers of the Company as of the date
hereof:
<TABLE>
<CAPTION>
NAME AND AGE *POSITION
----------------------------------- -------------------------------------------
<S> <C>
S. Jay Stewart (57)................ Chairman of the Board, Chief Executive
Officer and Director
William E. Johnston (55)........... Executive Vice President, Administration
Walter W. Becky II (52)............ Group Vice President and President, Salt
Group
Daniel D. Feinberg (52)............ Group Vice President and President,
Electronic Materials Group
James J. Fuerholzer (59)........... Group Vice President and President,
Specialty Chemical Products Group
Stephen A. Gerow (52).............. Group Vice President and President,
Coatings Group
</TABLE>
9
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT--(Continued)
<TABLE>
<CAPTION>
NAME AND AGE *POSITION
----------------------------------- -------------------------------------------
<S> <C>
Fred J. Musone (51)................ Group Vice President and President,
Automotive Safety Products Group
Thomas S. Russell (50)............. Group Vice President and President,
Adhesives & Specialty Polymers Group
Nancy A. Hobor (49)................ Vice President, Communications and Investor
Relations
Christopher K. Julsrud (48)........ Vice President, Human Resources
Donald L. Kidd (64)................ Vice President, Management Information and
Services
Thomas F. McDevitt (55)............ Vice President Finance and Chief Financial
Officer
P. Michael Phelps (62)............. Vice President and Secretary
James R. Stanley (63).............. Vice President for Legal Affairs and
General Counsel
Bruce G. Wolfe (52)................ Treasurer
Lisa F. Zumbach (39)............... Controller
<FN>
------------------------
* With the exception of Mr. Musone, who joined the Company from Federal-Mogul
Corporation in 1995, all of the executive officers have held senior management
or professional positions with the Company for more than the past five years.
For Federal-Mogul, Mr. Musone was President of Worldwide Manufacturing from
1993 to 1995 and President, Chassis Product Operations from 1989 to 1993.
</TABLE>
10
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information concerning the market for the Company's common equity and
related security holder matters is included on page 32 of the Company's Annual
Report to Shareholders for fiscal 1995, and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the ten fiscal years ended June 30, 1995 are
included on pages 34-35 of the Company's Annual Report to Shareholders for
fiscal 1995, and are incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the three fiscal years ended June 30, 1995, is included on pages
16-19 of the Company's Annual Report to Shareholders for fiscal 1995, and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets of the Company as of June 30, 1995 and 1994,
and the consolidated statements of income and cash flows for each of the three
years in the period ended June 30, 1995, and notes to consolidated financial
statements which are included on pages 20-31 of the Company's Annual Report to
Shareholders for fiscal 1995 are incorporated herein by reference. Quarterly
results of operations on page 32 of the Annual Report to Shareholders for fiscal
1995 are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the directors and nominees for director of the
Company is included on pages 2-5 of the Company's definitive Proxy Statement
dated September 14, 1995, and is incorporated herein by reference.
Information concerning the executive officers of the Company is included on
pages 9-10, Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation for fiscal 1995 is included on
pages 8-18 of the Company's definitive Proxy Statement dated September 14, 1995,
and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information concerning beneficial ownership of the Company's common stock is
included on page 7 of the Company's definitive Proxy Statement dated September
14, 1995, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is
included on page 8 of the Company's definitive Proxy Statement dated September
14, 1995, under the caption "Compensation Committee Interlocks and Insider
Participation," and is incorporated herein by reference.
11
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT
1. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company and its
subsidiaries, included on pages of the Company's Annual Report to
Shareholders for the fiscal year ended June 30, 1995, are incorporated herein by
reference:
Consolidated Statements of Income--Years ended June 30, 1995, 1994 and 1993
Consolidated Balance Sheets--June 30, 1995 and 1994
Consolidated Statements of Cash Flows--Years ended June 30, 1995, 1994 and
1993
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
The following consolidated financial information for the fiscal years 1995,
1994 and 1993 is submitted herewith:
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
Report of Independent Auditors............................................................ F-1
Schedule II --Valuation and Qualifying Accounts..................................... F-2
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
3. INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
--------- ------------------------------------------------------ ------------------------------------------------------
<S> <C> <C> <C> <C>
(3) Articles of incorporation and by-laws
(a) Restated Articles of Incorporation of the Company. Incorporated by reference to Exhibit 3.2 to
Registration Statement No. 33-28803
(b) By-laws of the Company amended through January 24, Incorporated by reference to Exhibit (3)(b) to the
1991. Company's Report on Form 10-K for fiscal 1991
(4) Instruments defining the rights of security holders, including
indentures
(a) Rights Agreement dated as of June 12, 1989 between the Incorporated by reference to Exhibit 4.1 to
Company and The First National Bank of Chicago Registration Statement No. 33-28803
(b) Amendment dated January 24, 1991, to Rights Agreement Incorporated by reference to Exhibit (4)(a) to the
dated June 12, 1989 between the Company and The First Company's Report on Form 10-K for fiscal 1991
National Bank of Chicago.
(c) Amendment No. 2 dated August 11, 1994, to Rights Incorporated by reference to the Company's Report on
Agreement dated June 12, 1989 between the Company and Form 8-A12B/A
The First National Bank of Chicago.
(d) See Exhibits (3)(a) and (3)(b) above
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
--------- ------------------------------------------------------ ------------------------------------------------------
(10) Material contracts
<S> <C> <C> <C> <C>
(a) * Key Executive Long-Term Incentive Program effective Filed herewith electronically
for fiscal 1996-98.
(b) * Key Executive Annual Bonus Program (Program 1) Filed herewith electronically
effective for fiscal 1996.
(c) Staff Executive Annual Bonus Program (Program 2) Filed herewith electronically
effective for fiscal 1996.
(d) * 1989 Incentive Plan, renamed by amendment effective Incorporated by reference to Exhibit (10)(d) to the
June 23, 1994. Company's Report on Form 10-K for fiscal 1994
(e) * Morton Thiokol, Inc. Survivor Income Benefits Plan, Incorporated by reference to Exhibit 10.14 to
amended through March 24, 1983, assumed by the Registration Statement No. 33-28803
Company.
(f) * Morton International, Inc. Executive Post-Retirement Incorporated by reference to Exhibit (10)(f) to the
Life Insurance Plan. Company's Report on Form 10-K for fiscal 1992
(g) * Arrangements whereby the Company compensates its N/A
independent auditors for tax services to certain key
executives, concerning which arrangements there is no
written document.
(h) ** Form of Employment Agreement between the Company and Incorporated by reference to Exhibit (10)(g) to the
certain of its executive officers (including the five Company's Report on Form 10-K for fiscal 1990
most highly compensated, except S. J. Stewart).
(i) ** Executive Employment Agreement, dated April 1, 1994, Incorporated by reference to Exhibit (10)(i) to the
between the Company and S. J. Stewart Company's Report on Form 10-K for fiscal 1994
(j) * Supplemental Executive Retirement Program. Incorporated by reference to Exhibits 10.15 and 10.16
to Registration Statement No. 33-28803
(k) 1994 Non-Employee Directors Stock Plan Filed herewith electronically
(l) Non-Employee Directors Deferred Compen- Filed herewith electronically
sation Plan
(11) Statement re computation of per share earnings
(a) Statement re computation of per share earnings of the Filed herewith electronically
Company and subsidiaries, for the three years ended
June 30, 1995, 1994 and 1993.
(13) Annual report to security holders
(a) Annual Report to Shareholders of the Company for Filed herewith electronically
fiscal 1995 (financial information only: pages
16-35).
(22) Subsidiaries of the registrant
(a) Subsidiaries of the Company. Filed herewith electronically
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
--------- ------------------------------------------------------ ------------------------------------------------------
<S> <C> <C> <C> <C>
(27) Financial data schedule for year ended June 30, Filed herewith electronically
1995
</TABLE>
------------------------
*Exhibits 10(a), (b), (d), (e), (f), (g), and (j) consist of compensation plans
or arrangements in which all of the Company's five most highly compensated
executive officers currently participate, except that only W. E. Johnston and
T. S. Russell participate in Exhibit 10(j). These plans and, where applicable,
the foregoing individuals' current benefits under each (except Exhibit 10(g))
are described in the section captioned "Executive Compensation" beginning on
page 7 of the Company's definitive Proxy Statement dated September 14, 1995,
which descriptions are incorporated herein by reference.
**Descriptions of these employment agreements are set forth on page 15 of the
Company's definitive Proxy Statement dated September 14, 1995, which
descriptions are incorporated herein by reference.
(b) REPORTS ON FORM 8-K
Not applicable
14
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, AS OF THE 24TH DAY OF
AUGUST, 1995.
MORTON INTERNATIONAL, INC.
(REGISTRANT)
By /S/ T. F. MCDEVITT
------------------------------------
T. F. MCDEVITT
VICE PRESIDENT FINANCE AND
CHIEF FINANCIAL OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED, AS OF THE 24TH DAY OF AUGUST, 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE
-------------------------------------- ----------------------------------------------------------
<S> <C>
Chairman of the Board, Chief Executive Officer
/S/ S. J. STEWART and Director (Principal Executive Officer)
--------------------------------------
S. J. STEWART
Vice President Finance and Chief Financial Officer
/S/ T. F. MCDEVITT (Principal Financial Officer)
--------------------------------------
T. F. MCDEVITT
Controller
/S/ L. F. ZUMBACH (Principal Accounting Officer)
--------------------------------------
L. F. ZUMBACH
/S/ R. M. BARFORD Director
--------------------------------------
R. M. BARFORD
/S/ W. T. CRESON Director
--------------------------------------
W. T. CRESON
/S/ D. C. FILL Director
--------------------------------------
D. C. FILL
/S/ R. L. KEYSER Director
--------------------------------------
R. L. KEYSER
/S/ F. W. LUERSSEN Director
--------------------------------------
F. W. LUERSSEN
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
-------------------------------------- ----------------------------------------------------------
<S> <C>
/S/ E. J. MOONEY Director
--------------------------------------
E. J. MOONEY
/S/ G. A. SCHAEFER Director
--------------------------------------
G. A. SCHAEFER
/S/ R. W. STONE Director
--------------------------------------
R. W. STONE
</TABLE>
16
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and
Board of Directors
Morton International, Inc.
We have audited the consolidated financial statements of Morton
International, Inc. and subsidiaries listed in the Index at Item 14(a)(1) of the
annual report on Form 10-K of Morton International, Inc. for the year ended June
30, 1995. Our audits also included the financial statement schedule listed in
the Index at Item 14(a)(2). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Morton International, Inc. and subsidiaries at June 30, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1995, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in the notes to the consolidated financial statements, the
Company changed its method of accounting for postretirement benefits other than
pensions and postemployment benefits in 1993.
ERNST & YOUNG LLP
Chicago, Illinois
July 31, 1995
F-1
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
MORTON INTERNATIONAL, INC. AND SUBSIDIARIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
---------------------------------
(1) (2)
BALANCE AT CHARGED TO
BEGINNING CHARGED TO COSTS OTHER ACCOUNTS DEDUCTIONS BALANCE AT
DESCRIPTION OF PERIOD AND EXPENSES --DESCRIBE --DESCRIBE END OF PERIOD
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended June 30, 1995.................. $10,539 $4,940 -- $2,577(A) $13,300
(398)(B)
Year ended June 30, 1994.................. 9,025 3,124 -- 1,868(A) 10,539
(258)(B)
Year ended June 30, 1993.................. 8,426 3,419 -- 2,114(A) 9,025
706(B)
</TABLE>
------------------------
Note A-- Represents write-offs less recoveries.
Note B-- Foreign currency translation adjustment.
F-2
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
Number 33-29194 on Form S-8, Registration Statement Number 33-29195 on Form S-8,
Registration Statement Number 33-30147 on Form S-8, Registration Statement
Number 33-44170 on Form S-8, and Registration Statement Number 33-56199 on Form
S-8 of our report dated July 31, 1995, with respect to the consolidated
financial statements and schedule of Morton International, Inc. and
subsidiaries, included or incorporated by reference in the Annual Report (Form
10-K) for the year ended June 30, 1995.
ERNST & YOUNG LLP
Chicago, Illinois
September 18, 1995
<PAGE>
EXHIBIT (10)(a)
MORTON INTERNATIONAL, INC.
FISCAL 1996-98
KEY EXECUTIVE LONG-TERM INCENTIVE PROGRAM
This Program, which has been adopted pursuant to paragraph 4(d)(i) of the
Company's 1989 Incentive Plan (formerly the 1989 Stock Awards Plan), provides
cash incentive opportunities to Senior Corporate Officers, Group Vice Presidents
and key Business Unit Executives for achieving long-term growth oriented
performance goals.
A. OBJECTIVE
The objective of this Program is to further the growth of the Company by
rewarding key executives for achieving long-term growth oriented
performance goals, benefiting the shareholders.
B. TIMING
The Program will operate over a three-year performance period covering
fiscal 1996, 1997 and 1998.
C. ELIGIBILITY AND PARTICIPATION
The Program covers the following executive positions:
Chief Executive Officer
Corporate Officers reporting to the Chief Executive Officer
or Executive Vice President Administration
Business Unit Executives, in salary grade 23 or above,
reporting to a Group Vice President
Eligibility will be by position. Participation approval, however, will be
only by position and incumbent.
Positions must be nominated for participation prior to the start of the
performance period. Participation requires the approval of the Chief
Executive Officer and the Compensation Committee of the Board.
D. PROGRAM FUNDING
The Chief Financial Officer, at the direction of the Chief Executive
Officer, will reserve appropriate funds during the course of the fiscal
year to provide incentive payments. Any such reserved funds shall remain
the property of the Company and no participant shall have a right or claim
to any such funds unless the right or claim has specifically accrued under
the Program.
<PAGE>
FISCAL 1996-98 KEY EXECUTIVE LONG-TERM INCENTIVE PROGRAM
PAGE 2
E. PERFORMANCE CRITERIA
Criteria used to measure performance for the performance period are:
PARTICIPANT GROUP APPLICABLE PERFORMANCE CRITERIA
----------------- -------------------------------
CEO and Corporate Growth in Company Earnings Per Share
Staff Officers ("EPS")
Group Vice Presidents Growth in Pre-Tax Group Profit
Business Unit Executives Growth in Pre-Tax Group or Business Unit
Profit
F. ESTABLISHMENT OF PERFORMANCE OBJECTIVES
For the performance period, growth objectives have been established by the
Compensation Committee of the Board based upon recommendation by the Chief
Executive Officer.
These objectives include a threshold level at which partial incentives may
be earned, the desired objective for the period at which target incentives
may be earned, and an optimum level at which maximum incentives may be
earned, as follows:
Threshold - 5% growth compounded annually
Objective - 10% growth compounded annually
Optimum - 20% growth compounded annually
G. ADJUSTMENTS TO PROFIT OBJECTIVES
Profit objectives will be adjusted by action of the Compensation Committee
(in accordance with calculations confirmed by the Company's independent
auditors) so that the degree to which the objectives are achieved will not
be affected by any of the following which occur after the objectives are
initially established: changes in (or in the application of) accounting
principles; changes in tax laws; any material acquisition, divestiture or
joint venture; extraordinary items as defined under generally accepted
accounting principles; and any other non-recurring items which the
Company's press releases or SEC filings note and take into account in
explaining what the Company's or a business unit's profits would have been
on a comparable basis from period to period.
H. TARGET INCENTIVE AMOUNTS
A specific dollar incentive target for each participant will be established
by the Compensation Committee based on a recommendation from the CEO. The
dollar target will be computed as a percentage of the participant's base
salary immediately before the beginning of the performance period. The
percentage to be applied will vary depending on the participant's assigned
salary grade as follows:
<PAGE>
FISCAL 1996-98 KEY EXECUTIVE LONG-TERM INCENTIVE PROGRAM
PAGE 3
<TABLE>
<CAPTION>
ASSIGNED SALARY GRADE PERCENTAGE TARGET APPLIED TO SALARY
--------------------- -----------------------------------
<S> <C>
33 100%
31 100%
28 80%
27 80%
26 80%
25 70%
24 70%
23 60%
22 60%
</TABLE>
The dollar value of the incentive targets, computed in accordance with the
above schedule, may be adjusted by the Compensation Committee based on the
recommendation of the CEO, within a guideline range of plus or minus 20% to
provide a degree of flexibility in determining individual incentive
amounts. The Compensation Committee may use the same guideline range of
plus or minus 20% to determine an adjusted incentive target for the CEO.
I. ACTUAL INCENTIVE AWARDS
Actual incentive awards require the approval of the CEO and Compensation
Committee and will be based upon pre-established payout schedules
reflecting achievement of performance objectives for the performance
period.
The payout schedules are presented below by participant group. For results
between the growth rates shown, linear interpolation will be used to
compute the percentage of the target incentive which may be earned.
1. CHIEF EXECUTIVE OFFICER AND CORPORATE STAFF OFFICERS
In this group, actual incentive awards will be based on attainment of
EPS growth objectives as follows:
<TABLE>
<CAPTION>
Percent of Target
EPS Growth which may be earned
---------- -------------------
<S> <C>
Threshold (e.g. 5% growth compounded annually) 50%
Objective (e.g. 10% growth compounded annually) 100%
Optimum (e.g. 20% growth compounded annually) 200%
</TABLE>
2. GROUP VICE PRESIDENTS
Incentive awards for this group of participants will be based on
attainment of the applicable Pre-Tax Group Profit growth objectives in
accordance with the following schedule:
<TABLE>
<CAPTION>
Percent of Target
Pre-Tax Group Profit Growth which may be earned
---------------------------- -------------------
<S> <C>
Threshold (e.g. 5% growth compounded annually) 50%
Objective (e.g. 10% growth compounded annually) 100%
Optimum (e.g. 20% growth compounded annually) 200%
</TABLE>
<PAGE>
FISCAL 1996-98 KEY EXECUTIVE LONG-TERM INCENTIVE PROGRAM
PAGE 4
3. BUSINESS UNIT EXECUTIVES
Incentive awards for this group of participants will be based on
attainment of the applicable Pre-Tax Group or Business Unit Profit
growth objectives in accordance with the following schedule:
<TABLE>
<CAPTION>
Percent of Target
Pre-Tax Group or Business Unit Profit Growth which may be earned
-------------------------------------------- -------------------
<S> <C>
Threshold (e.g. 5% growth compounded annually) 50%
Objective (e.g. 10% growth compounded annually) 100%
Optimum (e.g. 20% growth compounded annually) 200%
</TABLE>
J. INCENTIVE PAYMENTS
Any incentive payments made under the Program will be made in the form of
cash and will normally be paid in the month of August following the end of
the three-year performance period. No incentive award is earned until the
date the Compensation Committee approves such payment.
K. TERMINATION OF EMPLOYMENT OR CESSATION OF ELIGIBILITY
Because incentive awards are not earned until the date the Compensation
Committee approves payment, if termination of employment occurs or the
participant ceases to be eligible for benefits under the Program before
such date (whether or not the performance period has ended), no such
terminated or ineligible employee is entitled to any incentive payment.
Under certain circumstances, as detailed below, a terminated participant
who completed one-third of the performance period and whose employment
terminates by reason other than resignation or involuntary termination may
be considered for an incentive award. Consideration of such awards will be
at the sole discretion of the Compensation Committee and require approval
based upon the Chief Executive Officer's recommendation according to the
following schedule:
REASON FOR TERMINATION INCENTIVE AWARD ELIGIBILITY
---------------------- ----------------------------
Retirement or Death Pro rata share of incentive award,
payable to retiree or heirs/estate after
the end of the performance period
subject to the achievement of goals for
the entire performance period.
Long-Term Disability Pro rata share of incentive award,
payable after the end of the performance
period subject to the achievement of
goals for the entire performance period.
Resignation or No incentive award even if termination
Involuntary Termination occurs after the end of the performance
period but before the Compensation
Committee approves payment of awards.
<PAGE>
FISCAL 1996-98 KEY EXECUTIVE LONG-TERM INCENTIVE PROGRAM
PAGE 5
L. ADMINISTRATION
The Program will be administered by the Compensation Committee assisted by
the Company's Human Resources staff.
M. CHANGE IN CONTROL
Anything in this Program to the contrary notwithstanding, upon the
occurrence of a Change in Control of the Company (as defined from time to
time in Section 5(c) of the 1989 Incentive Plan), the performance periods
with respect to all outstanding incentive awards shall terminate as of such
date and the related incentive awards shall be payable as of such date.
The amount payable with respect to any award shall be equal to the percent
of the target determined as follows: The sum of (x) the product of (i) the
greater of (a) the percent of target that would have been earned and
payable pursuant to Section I above if the performance period had ended as
of the last day of the fiscal quarter immediately prior to such Change in
Control of the Company or (b) 100 and (ii) the number of full quarters
elapsed in the performance period (the "Elapsed Quarters") divided by
twelve and (y) the product of (i) 100 and (ii) the quotient obtained by
dividing (a) twelve minus the number of Elapsed Quarters by (b) twelve.
95LT6-1
<PAGE>
EXHIBIT (10)(b)
PROGRAM ONE
MORTON INTERNATIONAL, INC.
FISCAL 1996
KEY EXECUTIVE ANNUAL BONUS PROGRAM
This Program, which has been adopted pursuant to paragraph 4(d) (i) of the
Company's 1989 Incentive Plan (formerly the 1989 Stock Awards Plan), provides
annual cash bonus opportunities depending on performance of Corporate Officers,
Group Vice Presidents and Business Unit Executives.
A. OBJECTIVE
The objective of this Program is to reward key executives who have a direct
influence on annual profits for outstanding performance in this regard.
B. TIMING
The Program year for purposes of this Program will correspond to the
Company's 1996 fiscal year.
C. ELIGIBILITY AND PARTICIPATION
This Program covers the following executive positions:
Chief Executive Officer
Corporate Officers reporting to the Chief Executive Officer, Chief
Operating Officer or Executive Vice President Administration
Business Unit Executives, in salary grade 23 or above, reporting to a
Group Vice President
Eligibility will be by position. Participation approval, however, will be
only by position and incumbent.
Positions must be nominated for participation prior to the start of the
Program year. Participation requires the approval of the Chief Executive
Officer and the Compensation Committee of the Board.
D. PROGRAM FUNDING
A fund will be calculated for the Program year. The fund will be
determined by multiplying the individual participant's June 30, 1995 salary
by the target bonus percent for each participant's salary grade (see
Paragraph H). The sum of these amounts times 1.6 is the maximum fund.
The Chief Financial Officer, at the direction of the Chief Executive
Officer, will reserve appropriate funds during the course of the fiscal
year to provide bonus awards. Any such reserved funds shall remain the
property of the Company and no participant shall have a right or claim to
any such funds unless the right or claim has specifically accrued under the
Program.
E. PERFORMANCE CRITERIA
Criteria used to measure performance for the Program year are:
<PAGE>
FISCAL 1996 KEY EXECUTIVE ANNUAL BONUS PROGRAM
PAGE 2
Applicable Performance
Participant Group Criteria
------------------ -----------------------
CEO and Corporate Staff Officers Attainment of Company Earnings
Per Share ("EPS") Goal
Group Vice Presidents Attainment of EPS Goal and
Group Profit Results
Business Unit Executives Attainment of Group Profit
Results, Business Unit Profit
Results and Strategic Goals
F. ESTABLISHMENT OF SPECIFIC PERFORMANCE OBJECTIVES
For the Program year, EPS and Group and Business Unit profit objectives
have been established by the Compensation Committee of the Board upon
recommendation by the Chief Executive Officer.
The EPS objective includes the threshold level at which a bonus may be
earned, the target objective for the year, and a maximum limit beyond which
additional bonus amounts may not be earned with respect to EPS as follows:
Threshold - 6% Below Budget
Target - Budget
Maximum - 8% Above Budget
Strategic objectives for Business Unit Executives will be developed and
reviewed by appropriate levels of management. These objectives may be
financial or non-financial in nature. They may be weighted to reflect
relative importance. The objectives will also embody measurement criteria
so that the degree of accomplishment can be determined. Where objectives
encompass more than one year, milestones will be used to reflect expected
progress each year.
G. ADJUSTMENTS TO PROFIT OBJECTIVES
Profit objectives will be adjusted by action of the Compensation Committee
(in accordance with calculations confirmed by the Company's independent
auditors) so that the degree to which the objectives are achieved will not
be affected by any of the following which occur after the objectives are
initially established: changes in (or in the application of) accounting
principles; changes in tax laws; any material acquisition, divestiture or
joint venture; extraordinary items as defined under generally accepted
accounting principles; and any other non-recurring items which the
Company's press releases or SEC filings note and take into account in
explaining what the Company's or a Business Unit's profits would have been
on a comparable basis from period to period.
H. ANNUAL BONUS TARGETS
A dollar bonus target will be established for each participant. The dollar
bonus target will be computed as a percentage of the participant's base
salary on June 30th preceding the start of the Program year. The
percentage to be applied will vary depending on the participant's assigned
salary grade as follows:
<PAGE>
FISCAL 1996 KEY EXECUTIVE ANNUAL BONUS PROGRAM
PAGE 3
<TABLE>
<CAPTION>
Assigned Salary Percentage Applied To Salary
Grade Earnings To Determine Target Bonus
--------------- ----------------------------------
<S> <C>
33 75.00
31 68.75
28 62.50
27 62.50
26 56.25
25 50.00
24 43.75
23 37.50
22 37.50
</TABLE>
I. ACTUAL BONUS AWARDS
Actual bonus awards for the Program year will be based on payout schedules
reflecting achievement of performance objectives. Payments of bonus awards
require the approval of the Chief Executive Officer and the Compensation
Committee.
The payout schedules are presented below by participant group. No bonus
shall be earned based upon EPS attainment if the EPS does not exceed that
for the prior year. For results between the performance indicators, linear
interpolation will be used to compute the percent of the target bonus which
may be earned.
1. CHIEF EXECUTIVE OFFICER AND CORPORATE STAFF OFFICERS
In this group, actual bonus awards will be based on relative
attainment of the EPS objective.
The EPS threshold for minimum bonus awards to be allocated will be 6
percentage points below the EPS goal at 100%. The EPS objective for
the bonus awards to be allocated at maximum will be 8 percentage
points above the EPS goal at 100%.
<TABLE>
<CAPTION>
EPS Percent Of Target
Attainment Bonus Which May Be Earned
---------- -------------------------
<S> <C>
6% below 52%
5% below 60%
4% below 68%
3% below 76%
2% below 84%
1% below 92%
EPS Goal 100%
5% above 140%
8% above 160%
</TABLE>
In total, the annual bonus award for a participant in this group
cannot exceed 160 percent of the participant's target bonus.
2. GROUP VICE PRESIDENTS
Actual bonus awards for this group of participants will depend on
relative attainment of the EPS objective as well as the appropriate
Group Profit objective.
The specific payout schedule based on EPS and the applicable Group
Profit is as follows:
<PAGE>
Fiscal 1996 Key Executive Annual Bonus Program
Page 4
<TABLE>
<CAPTION>
EPS GROUP PROFIT
-------------------------------- --------------------------------
Percent Of Target Actual Profit Percent Of Target
EPS Bonus Which As Percent Bonus Which
Attainment May Be Earned Of Budget May Be Earned
---------- ----------------- ------------- -----------------
<S> <C> <C> <C>
6% below 4% 85% 40%
5% below 6% 90% 48%
4% below 9% 95% 60%
3% below 11% 100% 80%
2% below 14% 105% 92%
1% below 16% 110% 104%
EPS Goal 20% 115% 120%
5% above 30% 120% 140%
8% above 36%
</TABLE>
In total, the annual bonus award for a participant in this group
cannot exceed 160 percent of the participant's target bonus.
3. BUSINESS UNIT EXECUTIVES
Actual bonus awards for this group of participants will be based on
attainment of the applicable Group profit results compared to budget
or the applicable Group and Business Unit's profit results compared to
budget. In addition, up to 20 percent of a participant's target bonus
can be earned for achievement of specific strategic goals.
The bonus award schedule based on the applicable Group Profit and the
applicable Business Unit Profit is as follows:
<TABLE>
<CAPTION>
Percent Of Target Which May Be Earned
Based On Unit Measurement:
---------------------------------------------------------
Actual Profit Group Business
As Percent Profit OR Group AND Unit
Of Budget Only Profit Profit
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<S> <C> <C> <C>
85% 28% 14.0% 14.0%
90% 40% 20.0% 20.0%
95% 56% 28.0% 28.0%
100% 80% 40.0% 40.0%
105% 97% 48.5% 48.5%
110% 114% 57.0% 57.0%
115% 134% 67.0% 67.0%
120% 160% 80.0% 80.0%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
</TABLE>
The additional bonus for achievement of strategic goals will be
determined as a percentage of the participant's original target bonus
up to a maximum of 20 percent.
In total, the annual bonus award for a participant in this group
cannot exceed 160 percent of the participant's target bonus, including
any discretionary fund payout (see Paragraph J).
<PAGE>
Fiscal 1996 Key Executive Annual Bonus Program
Page 5
J. DISCRETIONARY BONUS AWARD
Under this Program, special discretionary cash bonus awards can be made for
one-time outstanding achievements by Business Unit Executives. Such awards
must be recommended by the Chief Executive Officer and approved by the
Compensation Committee of the Board. The Chief Executive Officer,
Corporate Staff Officers and Group Vice Presidents are not eligible for
discretionary awards.
K. BONUS AWARD PAYMENTS
Any bonus award payments made under the Program will be made in the form of
cash and will normally be paid in the month of August following the end of
the fiscal year. No bonus award is earned until the date the Compensation
Committee approves such payment.
L. TERMINATION OF EMPLOYMENT OR CESSATION OF ELIGIBILITY
Because bonus awards are not earned until the date the Compensation
Committee approves payment, if termination of employment occurs or the
participant ceases to be eligible for benefits under the Program before
such date (whether or not the applicable fiscal year has ended), no such
terminated or ineligible employee is entitled to any bonus payment. Under
certain circumstances, as detailed below, a terminated participant whose
employment terminates after December 31 by reason other than resignation or
involuntary termination may be considered for a bonus award. Consideration
of such awards will be at the sole discretion of the Compensation Committee
and require approval based upon the Chief Executive Officer's
recommendation according to the following schedule:
Reason For Termination Bonus Award Eligibility
---------------------- ------------------------
Death or Retirement Pro rata share of bonus award,
payable to retiree, heirs/estate
Long-Term Disability Pro rata share of bonus award
Resignation or No bonus award even if termination
Involuntary Termination occurs after June 30 but before
Compensation Committee approves payment
of awards.
M. ADMINISTRATION
The Program will be administered by the Compensation Committee assisted by
the Company's Human Resources staff.
95EB6-1
<PAGE>
EXHIBIT (10)(c)
PROGRAM TWO
MORTON INTERNATIONAL, INC.
FISCAL 1996
CORPORATE STAFF EXECUTIVE ANNUAL BONUS PROGRAM
This Program provides annual cash bonus opportunities depending on performance
of key Corporate staff executives.
A. OBJECTIVE
The objective of this Program is to reward staff executives who can
significantly affect operating results through cost reduction, improved
efficiency, or profit improvement for outstanding performance in these
areas.
B. TIMING
The Program year for purposes of this Program will correspond to the
Company's 1996 fiscal year.
C. ELIGIBILITY AND PARTICIPATION
The Corporate Staff Executive Annual Bonus Program covers key Corporate
staff executive positions in salary grades 19 and above.
Eligibility will be by position. Participation approval will be by
position and incumbent.
Positions must be nominated for participation prior to the start of each
Program year. Participation requires the approval of the Corporate Officer
in charge of the functional area involved and the Corporate Vice President,
Human Resources.
The Chief Executive Officer will review any nomination involving a position
or incumbent to be added to this Program for the first time.
D. PROGRAM FUNDING
A fund will be calculated for each Program year. The fund will be
determined by multiplying the individual participant's January 1, 1996
salary by the target bonus percent for each participant's salary grade (see
Paragraph H). The sum of these amounts times 1.75 is the maximum fund.
The Chief Financial Officer, at the direction of the Chief Executive
Officer, will reserve appropriate funds during the course of the fiscal
year to provide bonus awards. Any such reserved funds shall remain the
property of the Company and no participant shall have a right or claim to
any such funds unless the right or claim has specifically accrued under the
Program.
E. PERFORMANCE CRITERIA
Criteria used to measure performance for the Program year are:
Attainment of Company Earnings Per Share ("EPS") Goal
Attainment of Strategic Goals
Individual Performance
<PAGE>
FISCAL 1996 CORPORATE STAFF EXECUTIVE ANNUAL BONUS PROGRAM
PAGE 2
F. ESTABLISHMENT OF SPECIFIC PERFORMANCE OBJECTIVES
PROFIT GOALS
For the Program year, the EPS objective has been established by the
Compensation Committee of the Board upon recommendation by the Chief
Executive Officer.
This objective includes the minimum level at which a bonus may be earned,
the desired objective for the year, and a maximum limit beyond which
additional bonus amounts may not be earned.
STRATEGIC GOALS
Strategic goals are other financial or non-financial objectives. These
objectives will be designed to have an impact that is beyond the
participant's day to day position responsibilities. They may be weighted
to reflect relative importance. The objectives will also embody
measurement criteria so that the degree of accomplishment can be
determined. Where objectives encompass more than one year, milestones will
be used to reflect progress for the Program year.
Strategic goals will be closely reviewed by appropriate levels of
management.
INDIVIDUAL PERFORMANCE OBJECTIVES
Individual performance objectives will be established by each participant
and the supervising Corporate Officer. These objectives are to be set at
the beginning of the Program year, and will be directed toward individual
improvements in performance, productivity, efficiencies, cost savings,
profitability and other position responsibilities. After the close of the
Program year, each participant's individual performance will be rated by
the participant's manager against those pre-established objectives.
Objectives may be weighted according to relative importance. Individual
performance for bonus purposes should be consistent with the participant's
merit increase recommendation.
G. ADJUSTMENTS TO PROFIT OBJECTIVES
Profit objectives will be adjusted by action of the Compensation Committee
(in accordance with calculations confirmed by the Company's independent
auditors) so that the degree to which the objectives are achieved will not
be affected by any of the following which occur after the objectives are
initially established: changes in (or in the application of ) accounting
principles; changes in tax laws; any material acquisition, divestiture or
joint venture; extraordinary items as defined under generally accepted
accounting principles; and any other non-recurring items which the
Company's press releases or SEC filings note and take into account in
explaining what the Company's or a Business Unit's profits would have been
on a comparable basis from period to period.
<PAGE>
FISCAL 1996 CORPORATE STAFF EXECUTIVE ANNUAL BONUS PROGRAM
PAGE 3
H. ANNUAL BONUS TARGETS
A dollar bonus target will be established at the start of the Program year
for each participant. The dollar bonus target will be computed as a
percentage of the participant's base salary on January 1st of the Program
year. The percentage to be applied will vary depending on the
participant's assigned salary grade as follows:
<TABLE>
<CAPTION>
Percentage Applied To Salary
Assigned Salary Earnings To Determine
Grade Target Bonus
--------------- -----------------------------
<S> <C>
23 30%
22 30%
21 25%
20 22%
19 18%
</TABLE>
I. ACTUAL BONUS AWARDS
Actual bonus awards for the Program year will be based on payout schedules
reflecting achievement of performance objectives. Payments of bonus awards
require the approval of the Chief Executive Officer.
PROFIT GOALS
The EPS threshold for minimum bonus awards to be allocated will be 6
percentage points below the EPS goal. The EPS objective for the bonus
awards to be allocated at maximum will be 7.5 percentage points above the
EPS goal.
<TABLE>
<CAPTION>
EPS Percent Of Target
Attainment Bonus Which May Be Earned
---------- -------------------------
<S> <C>
6% below 15%
5% below 25%
4% below 35%
3% below 45%
2% below 55%
1% below 65%
EPS Goal 75%
5% above 125%
7.5% above 150%
</TABLE>
No bonus shall be earned based upon EPS attainment if the EPS does not
exceed that for the prior year. For results between the EPS rates shown,
linear interpolation will be used to compute the percentage of the target
bonus which may be earned.
STRATEGIC GOALS
The additional award for achievement of strategic goals will be determined
as a percentage of the participant's original target bonus up to a maximum
of 25 percent. The guidelines for measuring achievement of strategic goals
are:
<PAGE>
FISCAL 1996 CORPORATE STAFF EXECUTIVE ANNUAL BONUS PROGRAM
PAGE 4
<TABLE>
<CAPTION>
Percent Of Target
Achievement Bonus Which May Be Earned
----------- -------------------------
<S> <C>
Not Met 0%
Minimum Achievement 1% - 14%
Substantially Met 15%
All Met 25%
</TABLE>
INDIVIDUAL PERFORMANCE
The resulting award for each participant is then subject to adjustment
based on the participant's individual performance compared to pre-
established objectives. The individual performance rating guidelines are
as follows:
<TABLE>
<CAPTION>
Range Of Adjustment
Percentages To Be Applied To
Rating EPS/Strategic Goal-Derived Bonus
------ --------------------------------
<S> <C>
1 - Marginal - Did not meet most objectives 0%
2 - Good - Substantially met most objectives 50% - 84%
3 - Exceeds Expectations - Met all objectives 85% - 114%
4 - Outstanding - Clearly exceeded most or 115% - 150%
all objectives
</TABLE>
In aggregate, however, bonus awards for participants in a functional area
cannot exceed the pool established as a result of EPS and strategic goal
attainment for all participants in the functional area. This will require
a leveling back of the individual performance adjustments on a pro rata
basis.
J. BONUS AWARD LIMITATIONS
Bonuses earned under this Program will be limited to no more than 175
percent of the aggregate target bonus amounts for all participants in a
Corporate functional area. This limit does not apply to any discretionary
fund awards covered in Paragraph K below.
K. DISCRETIONARY BONUS AWARD
Under this Program, special discretionary cash bonus awards can be made for
one-time outstanding achievements. Such awards must be recommended by the
Chief Executive Officer and approved by the Compensation Committee of the
Board.
L. BONUS AWARD PAYMENTS
Any bonus award payments made under the Program will be made in the form of
cash and will normally be paid in the month of August following the end of
the fiscal year. No bonus award is earned until the date the Compensation
Committee has reviewed the CEO's approval of such payment.
M. TERMINATION OF EMPLOYMENT OR CESSATION OF ELIGIBILITY
Because bonus awards are not earned until the date on which the
Compensation Committee reviews the CEO's approval of payment, if
termination of employment occurs or the participant ceases to be eligible
for benefits under the Program before such date (whether or not the
applicable fiscal year has ended), no
<PAGE>
FISCAL 1996 CORPORATE STAFF EXECUTIVE ANNUAL BONUS PROGRAM
PAGE 5
such terminated or ineligible employee is entitled to any bonus payment.
Under certain circumstances, as detailed below, a terminated participant
whose employment terminates after December 31 by reason other than
resignation or involuntary termination may be considered for a bonus award.
Consideration of such awards will be at the sole discretion of the
Compensation Committee and require approval based upon the Chief Executive
Officer's recommendation according to the following schedule:
Reason For Termination Bonus Award Eligibility
---------------------- -----------------------
Death or Retirement Pro rata share of bonus award, payable
to retiree, heirs/estate
Long-Term Disability Pro rata share of bonus award
Resignation or No bonus award even if termination
Involuntary Termination occurs after June 30 but before
Compensation Committee reviews the CEO's
approval of award payments.
N. ADMINISTRATIVE PROVISIONS
The Program will be administered by the appropriate supervising Corporate
Officer and the Corporate Vice President, Human Resources.
New participants and exceptional situations will be referred to the Chief
Executive Officer for review. Monitoring reports prepared by the Corporate
Human Resources staff will be distributed to the Chief Executive Officer
and the Compensation Committee of the Board for informational purposes.
It is the intention that this Program remain in effect in future years.
However, as with any special compensation plan, senior management and the
Board reserve the right to modify, revise, or terminate the Program at any
time.
<PAGE>
-------------------------------------------------------------------------------
EXHIBIT (10)(k)
1994 NON-EMPLOYEE DIRECTORS STOCK PLAN
On August 25, 1994, the Board of Directors adopted and recommended for
submission to shareholders for their approval the 1994 Non-Employee Directors
Stock Plan (the "Plan"). The purpose of the Plan is to provide compensation to
non-employee directors of the Company that will further link such directors'
interest with those of the Company's shareholders. If approved by shareholders,
the Plan will become effective on October 27, 1994. The following summary is
qualified in its entirety by reference to the complete text of the Plan, which
is set forth in Exhibit 1 to this proxy statement.
Participation in the Plan is limited to Company directors who are not
employees of the Company or any of its subsidiaries. An aggregate of 100,000
shares of Company common stock is reserved for issuance under the Plan. Such
number of shares may be appropriately adjusted in the event of certain changes
in the Company's capitalization, such as stock dividends, stock splits or
recapitalizations. Shares of common stock issuable under the Plan may be
authorized and unissued shares, shares held in treasury or any combination
thereof.
If the Plan is approved by shareholders, for each fiscal year beginning
with the year which commenced July 1, 1994, each non-employee director of the
Company who is elected a director at the Annual Meeting of Shareholders for such
year or who is continuing as a director as of the Annual Meeting for such year
will receive an award of 500 shares of common stock effective as of the
conclusion of such Annual Meeting. Such shares may not be sold, transferred or
otherwise disposed of for a period of six months after receipt (except in the
case of the death or disability of the director).
The Plan will be administered by the Nominating & Organization Committee of
the Company's Board of Directors or such other Board committee as may be
appointed by the Board consisting of not less than three Board members. The
Board of Directors may amend the Plan in any respect, provided that no amendment
may be made without shareholder approval that (i) would materially increase the
maximum number of shares of common stock available for issuance under the Plan,
(ii) would materially increase the benefits accruing to participants under the
Plan, or (iii) would materially modify the requirements as to eligibility for
participation in the Plan, and provided, further, that the Plan may not be
amended more than once every six months except to comport with changes in the
Internal Revenue Code of 1986, as amended (the "Code"), or the rules thereunder.
The Board of Directors also has authority to terminate the Plan at any time.
Except as provided in the following sentence, a director will recognize
ordinary income six months following the date of receipt of the shares (I.E., at
the end of the period during which the director may not sell the shares) in an
amount equal to the fair market value of the shares at that time. Within 30
days after the date the director receives the shares, the director may elect
under Section 83(b) of the
17
<PAGE>
-------------------------------------------------------------------------------
Code to recognize taxable ordinary income at the time of receipt in an amount
equal to the fair market value of the shares at such time. Receipt of the
shares shall be considered to have occurred as of the date of the Annual Meeting
on which the award is effective.
A director's holding period for the shares for tax purposes will begin at
the time taxable income is recognized, and the tax basis in the shares will be
the amount of ordinary income so recognized. Any dividends received on the
shares prior to the date the director recognizes income as described above will
be taxable compensation income when received. The Company is entitled to a
federal income tax deduction equal to the amounts of income recognized by a
director.
The affirmative vote of the holders of a majority of the shares of Common
Stock that are present in person or by proxy and entitled to vote at the Annual
Meeting is required for approval of the Plan.
The Board of Directors recommends a vote FOR approval of the 1994 Non-
Employee Directors Stock Plan.
18
<PAGE>
EXHIBIT (10)(l)
as approved October 27, 1994
MORTON INTERNATIONAL, INC.
Non-Employee Directors Deferred Compensation Plan
1. PURPOSE
The purpose of this Plan is to provide a vehicle for non-employee directors
("Directors") of Morton International, Inc. (the "Company") to further
align their interests with those of Company shareholders through deferral
of their cash retainer and attendance fee payments from the Company
("Compensation") during times when a deferral election is effective.
2. ADMINISTRATION
The Plan shall be administered by the Nominating & Organization Committee
of the Board of Directors of the Company (the "Committee"). The Committee
shall have authority to interpret the Plan and adopt, amend and rescind
rules relating to the administration of the Plan. All such interpretations
and rules shall be conclusive and binding on all persons.
3. ELECTION
A Director may elect to defer in whole or in part Compensation payable for
services rendered in calendar year 1995 and thereafter. Such deferral
shall be elected, in writing, on an Election Statement received by the
Company prior to the time such election is to become effective. Any such
election shall remain in effect until written revocation is received by the
Company. Any such revocation shall become effective at the beginning of
the calendar year following the calendar year in which the election is
received by the Company.
4. DEFERRAL ACCOUNTS
Amounts deferred under this Plan will be credited to separate unfunded
accounts maintained by the Company for each participating Director. Such
amounts shall be converted into credits equivalent to the number of full
and fractional shares of Company common stock ("Stock") purchasable as of
the dates such amounts would otherwise have been payable, based on the
average of the Stock's high and low sales prices reported on the New York
Stock Exchange Composite Tape on such dates or the most recent preceding
dates on which Stock transactions were so reported. Thereafter, the amount
of such credits and account balances shall fluctuate with the Stock's
market value from time to time as determined in accordance with this
paragraph.
In addition, the deferral accounts described in the preceding paragraph
shall be credited with the equivalents, calculated as above, of cash or
Stock dividends, Stock splits, or similar distributions. The value of such
credits will be calculated as of the dates of the particular payments or
distributions.
The deferral account credits and balances described in this section are
bookkeeping entries only, and do not represent actual shares of Stock.
- 1 -
<PAGE>
The Company shall furnish participating Directors with quarterly state-
ments of activity and balances in their deferral accounts. No rights or
interests under the Plan, including amounts payable, may be assigned,
pledged or transferred.
5. PAYMENT
Payments shall be made under the Plan only after the Director's service as
a member of the Board of Directors terminates. Participating Directors'
deferral account balances, valued as of the date the participant ceases to
be a director, shall be paid in cash in a lump sum as soon as practicable
thereafter. In the event of the Director's death, deferral account
balances will be paid in a lump sum to the surviving spouse or to any other
person designated by the Director in a writing filed with the Company prior
to death.
6. AMENDMENT OR TERMINATION
The Company may, by resolution of the Board of Directors, amend or
terminate the Plan at any time at its pleasure. No such amendment or
termination shall have retroactive effect, however, and benefits earned or
provided herein shall constitute an irrevocable obligation of the Company.
- 2 -
<PAGE>
EXHIBIT(11)(a)
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
MORTON INTERNATIONAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Income per common and common equivalent share:
Average number of shares of Common Stock
outstanding......................................... 147,917,384 147,095,571 145,828,995
Add:
Additional shares assuming exercise of dilutive
stock options--based on treasury stock method
using average market prices....................... 2,222,708 2,994,012 2,284,200
----------- ----------- -----------
Total Shares...................................... 150,140,092 150,089,583 148,113,195
----------- ----------- -----------
----------- ----------- -----------
Income from (000 omitted):
Operations.......................................... $ 294,058 $ 226,514 $ 126,875
Cumulative effect of change in accounting for
postemployment and postretirement benefits other
than pensions, net of taxes....................... -- -- (94,405)
----------- ----------- -----------
Net income.......................................... $ 294,058 $ 226,514 $ 32,470
----------- ----------- -----------
----------- ----------- -----------
Earnings per share:
Operations.......................................... $ 1.96 $ 1.51 $ .86
Cumulative effect of change in accounting for
postemployment and postretirement benefits other
than pensions..................................... -- -- (.64)
----------- ----------- -----------
Net income.......................................... $ 1.96 $ 1.51 $ .22
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
S-1
<PAGE>
EXHIBIT (13)(a)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Morton International, Inc. manufactures and markets quality products to meet the
needs of its salt, specialty chemicals and airbag customers. For reporting
purposes, the company separates revenues and costs into three business segments
--Specialty Chemicals, Salt and Automotive Safety Products.
The following is a discussion of operating results comparing fiscal years
1995 to 1994 and 1994 to 1993; liquidity and capital resources; and the impact
of inflation.
COMPARISON: FISCAL 1995 TO FISCAL 1994
This year, Morton reported record sales and earnings. Per share net income of
$1.96 was 30 percent higher than fiscal 1994. Net sales of $3.33 billion were up
17 percent from fiscal 1994 sales of $2.85 billion.
SPECIALTY CHEMICALS
Specialty chemicals' sales and profits grew in fiscal 1995 as both the U.S. and
European economies expanded. Sales reached $1.56 billion, an increase of 14
percent over fiscal 1994 sales of $1.37 billion. Profits increased 15 percent to
$223.5 million from $193.6 million in fiscal 1994.
Sales and profits were also favorably affected by foreign currency
translation. Year-to-year exchange fluctuations increased sales by $42.5 million
and pretax profits by $6.2 million over the prior year. Currencies primarily
responsible for the translation impact were the German mark and the Dutch
guilder.
Improved volumes accounted for approximately 73 percent of the year-over-
year increase in sales. Raw material cost increases compressed specialty
chemicals' operating results by approximately $14.0 million. The effect of these
increases, however, was offset by operating efficiencies in certain product
lines, improved pricing and sales mix, and higher volumes.
Product lines that showed double-digit sales growth over fiscal 1994
results were adhesives, thermoplastic polyurethanes, performance chemicals,
plastics additives, automotive coatings, powder coatings and electronic
materials. These product lines accounted for approximately 73 percent of fiscal
1995 specialty chemicals' sales and approximately 89 percent of the year-to-year
increase.
Profits for these product lines grew 27 percent, well above the sales
growth of 18 percent. Product lines mainly contributing to the faster profit
growth were thermoplastic polyurethanes, performance chemicals, plastics
additives, automotive coatings, powder coatings and electronic materials.
Although adhesives experienced good sales growth, earnings were constrained by
raw material price increases.
Dyes and waterbased polymers showed an unfavorable year-to-year profit
comparison. Combined profits were down $12.2 million. Dyes' product line results
were hurt by increased price competition; waterbased polymers' results were
hampered by raw material price increases, primarily for styrene.
SALT
Sales and earnings were both adversely affected by the mild winter weather
experienced in fiscal 1995. This was partially offset by a carryover effect from
last year's severe winter weather. The significant snowfall, which contributed
to last year's record results, depleted customer inventories and led to strong
early season orders for ice control salt in fiscal 1995.
Salt sales fell by 1 percent to $534.9 million in fiscal 1995. Earnings
were down only 2 percent compared to last year's record. Ice control sales for
fiscal 1995 finished 8 percent below last year's record results.
Continued growth in non-ice control product lines, particularly water
conditioning products with sales up over 7 percent, also helped to offset the
unfavorable impact of the mild winter weather. In addition, careful cost
controls helped Salt achieve operating margins at the same level as fiscal 1994.
In the fourth quarter, the company's Mines Seleine salt mine on the
Magdalen Islands was shut down due to water leaking into the production shaft.
Production will be suspended at this mine for the upcoming ice control season;
however, the company has already increased production at its remaining ice
control mines.
The increased production, combined with inventory carryovers from the
previous season, should enable the company to meet customer demand for ice
control salt in fiscal 1996. Efforts to correct the problem at Mines Seleine
continue. Associated costs are expected to be covered by insurance and did not
have a material effect on the company's financial position or results of
operations.
pg 16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
AUTOMOTIVE SAFETY PRODUCTS
Sales of driver- and passenger-side airbag inflators and modules steadily
increased as automakers in the United States, Europe and Japan accelerated the
introduction of inflatable restraint systems into passenger cars, trucks and
vans. For the second year in a row, the company increased its share of the
module market, which contributed to the improved sales results.
Morton Automotive Safety Products' sales for the year were $1.23 billion,
31 percent over the prior year. Profits increased 38 percent to $226.5 million.
Included in profits was a $2.4 million pretax charge for the elimination of
324 administrative and technical support positions. Before such charge, profits
increased 40 percent over last year. Current year pretax profits were also
adversely affected by approximately $5.0 million related to the start-up of the
European airbag manufacturing operations.
Downward pricing pressure continued in fiscal 1995 as overall average
selling prices decreased 5 percent. Continued implementation of cost reductions
and operational efficiencies offset these pricing pressures and resulted in
improved operating margins of 19 percent (versus 18 percent last year). The
company anticipates that sales of Morton Automotive Safety Products will
increase approximately 20 percent in fiscal 1996.
CORPORATE
As a result of tight controls on administrative expense, lower net interest
costs and lower accruals related to certain employee stock options, total
corporate costs declined by 19 percent during the year. Net interest cost was
lower in fiscal 1995 as all three business segments continued to generate cash.
Fiscal 1994 included an accrual related to certain employee stock options
that reduced total fiscal year 1994 earnings per share by $.07. This was
primarily attributable to costs related to the impact of tax rate changes
effective in fiscal 1994.
The effective tax rate in fiscal year 1995 was 37.5 percent versus 36.7
percent the prior year.
In fiscal 1993, the company's income from operations included $19.1 million
($30.0 million pretax) of special charges for the restructuring of operations.
The company estimated that the $30.0 million restructuring charge recorded in
fiscal 1993 would result in annual cost savings of approximately $15.0 million
when fully implemented.
The company realized approximately $7.9 million of such cost savings in
fiscal 1994 and incremental cost savings of approximately $6.7 million in fiscal
1995. Full annual cost savings of approximately $19.0 million are expected to be
realized by fiscal 1997. These restructuring activities, initiated in fiscal
1993, are now expected to be substantially completed in fiscal 1996.
COMPARISON: FISCAL 1994 TO FISCAL 1993
The company's results for fiscal 1994 were favorably impacted by Salt's record
high sales and profits for the second consecutive year. Also, the airbag
business' sales and earnings grew dramatically as driver- and passenger-side
airbags became more widely available in model year 1994 cars. And, the specialty
chemicals segment demonstrated strong year-to-year growth despite continued
sluggish economies in Europe and Japan.
Income from operations of $1.51 per share for the fiscal year ended June
30, 1994, was up 76 percent from the $.86 reported in fiscal 1993. Per share
amounts reflected the 3-for-1 stock split declared on June 23, 1994, and
effective August 17, 1994. Net sales for fiscal 1994 were $2.85 billion, an
increase of 23 percent over fiscal 1993 sales of $2.31 billion.
In fiscal 1993, the company's income from operations was $126.9 million net
of special charges, which included $19.1 million ($30.0 million pretax, of which
$27.0 million related to the specialty chemicals group) for the restructuring of
operations previously discussed.
Fiscal 1993 results also reflected the adoption of FASB Statements Nos. 106
and 112 during the year. The cumulative, one-time, non-cash, pretax charge
associated with the adoption of these accounting standards was $151.6 million.
Net income per share for fiscal 1993 after all charges was $.22 compared to
$1.51 in fiscal 1994.
SPECIALTY CHEMICALS
Sales of specialty chemicals increased 7 percent during fiscal 1994 to $1.37
billion. Profits increased 43 percent to $193.6 million from $135.4 million in
fiscal 1993. The 1993 results included a $27.0 million charge related to the
restructuring of operations. Excluding these charges from fiscal 1993, the
group's profit reflected a 19 percent increase.
pg 17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Product lines reflecting major improvement compared to the previous year
were powder coatings, automotive coatings, polymer systems, organic specialties,
industrial coatings, traffic markings, waterbased polymers, thermoplastic
polyurethanes, dyes, the extrudable specialties portion of packaging adhesives,
performance chemicals and plastics additives. Combined sales for these
businesses increased $102.5 million, primarily related to volume. Earnings
for these product lines grew faster than sales with a year-to-year increase of
22 percent. Electronic Materials' fiscal 1994 profits increased over fiscal 1993
despite weaker sales, due largely to the restructuring of that business and
effective cost control.
Although fiscal 1994 sales for packaging adhesives other than extrudable
specialties were up 3 percent compared with fiscal 1993, profits were down 9
percent. This was due to an increase in lower margined sales and higher period
costs, primarily depreciation.
Foreign exchange rates negatively impacted the year-to-year comparisons of
specialty chemicals' sales by $33.3 million and profits by $5.3 million. The
unfavorable effect of the changes in exchange rates was primarily generated in
the first half of fiscal 1994 and was largely attributable to translation.
SALT
Significant snowfall in the eastern U.S. markets during the third quarter of
fiscal 1994 increased ice control sales for the year by 10 percent. Water
conditioning and grocery salt also reflected good increases in sales during
fiscal 1994. And, sales of the popular Blue Package were strong for fiscal 1994,
as a result of a new promotional program.
Overall, the company's salt sales were $541.5 million, up 6 percent for the
year, and fiscal 1994 earnings increased 17 percent to $119.3 million. Fiscal
1994 earnings benefitted from favorable pricing and tight cost control.
AUTOMOTIVE SAFETY PRODUCTS
Morton Automotive Safety Products' sales for fiscal 1994 were $938.5 million, 79
percent over the prior year, while profits increased 110 percent to $164.0
million. Sales of driver- and passenger-side airbag inflators, as well as
modules, continued to increase as automakers accelerated the introduction of
inflatable restraint systems into passenger cars and vans sold in the United
States.
The growth of passenger-side programs outpaced the growth of driver-side
programs as consumers continued to show a preference for cars and vans with dual
airbags. During fiscal 1994, the company increased its share of module business,
which also improved sales. Although pricing pressures experienced in fiscal 1994
continued to negatively affect overall results, cost reductions and increased
productivity contributed to improved operating margins for the year.
CORPORATE
Environmental accruals for fiscal year 1994 were $9.0 million versus $16.2
million in fiscal 1993. Interest expense was also lower than fiscal 1993 as cash
generated by all three business segments was used to reduce short-term
borrowings.
Corporate expenses of $119.3 million in fiscal 1994 were slightly higher
than the prior year's $115.9 million. This was primarily due to higher levels
of accruals for incentive payments, and accruals for tax obligations related to
certain of the company's stock options.
Corporate expense accruals for such employee stock options reduced total
fiscal year 1994 earnings per share by $.07, primarily attributable to the
impact of tax rate changes effective in fiscal 1994. Fiscal 1993 earnings per
share were reduced by $.05 for accruals relating to such options.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
During the three fiscal years ended June 30, 1995, operating activities were the
principal source of funds for the company, providing $358.0 million, $331.3
million and $256.7 million.
Income from operations before accounting changes provided $294.1 million of
funds in fiscal 1995 compared to $226.5 million in 1994 and $126.9 million in
1993. Depreciation and amortization of $161.3 million in 1995 was higher than
1994 and 1993 by $23.7 million and $44.5 million, the increase due principally
to the higher level of capital expenditures of Morton Automotive Safety Products
in recent years.
Changes in operating assets and liabilities resulted in a $97.6 million use
of funds in fiscal 1995 compared to a use of funds of $30.1 million in 1994 and
an $11.3 million source of funds in 1993. The change in fiscal 1995 was driven
by several factors including: higher receivables at Morton Automotive Safety
Products and
pg 18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Specialty Chemicals due to increased sales activity; higher inventory levels of
specialty chemicals that reflected the higher level of business activity, the
increase in raw material prices and the effect of foreign currency translation;
the buildup of salt inventory levels due to the mild winter experienced in
fiscal 1995; and a reduction in current liabilities at Morton Automotive Safety
Products.
The increase in operating assets net of liabilities in fiscal 1994 over
1993 was largely driven by higher receivable balances, which resulted from
significantly increased sales activity of Morton Automotive Safety Products in
fiscal 1994.
INVESTING ACTIVITIES
Net investing activities for fiscal 1995 required $263.9 million of cash
compared with $213.9 million and $201.6 million in fiscal years 1994 and 1993.
Capital spending was the major component of investing activities in all three
years.
The major capital spending program continued to be the expansion of airbag
facilities in both Utah and Europe. In addition, the expansion of certain
chemical facilities and the basic upkeep for salt and chemical facilities were
significant areas of capital spending.
Investing activities in fiscal 1995 also reflected $12.7 million of cash
invested in businesses acquired. Of that amount, $10.7 million related to the
purchase of selected assets of Thiokol GmbH, the sole distributor of the
company's liquid polysulfide products in Europe. In fiscal 1994, investing
activities included proceeds from property and other asset disposals of
$16.4 million, largely from the sale of the semiconductor photoresist business.
FINANCING ACTIVITIES
Financing activities for fiscal years 1995, 1994 and 1993 used funds of
$72.4 million, $107.5 million, and $40.6 million. Dividend payments for the
three years were $65.1 million, $54.9 million and $46.6 million. Year-over-year
increases in dividends primarily reflected the increase in dividends paid per
share.
Improved operating earnings and cash generation opportunities going forward
allowed the company to again raise its dividend in June 1995. The increase was
18 percent.
Repayment of long-term debt in fiscal 1995 of $22.2 million was
significantly higher than 1994 payments of $2.6 million, but less than the $37.7
million repaid in 1993. Long-term borrowings of $19.9 million somewhat offset
the repayment of long-term debt in fiscal 1995. Short-term notes payable
decreased $10.4 million and $59.0 million in 1995 and 1994 versus an increase of
$33.7 million in 1993. This reflected the lower level of short-term borrowing
required in fiscal 1995 and 1994 as cash generated from operations increased.
OTHER
The company's current ratio was 2.1 at June 30, 1995, and 1.8 at June 30, 1994.
Total debt as a percentage of total capitalization was 13.2 percent at June 30,
1995, compared to 15.5 percent at June 30, 1994.
As of June 30, 1995, the company had unexpended authorizations for fixed
asset and maintenance projects totaling $201.9 million. The authorizations
related primarily to the expansion of the airbag business as well as general
facility expansion, product improvements, and maintenance on a company-wide
basis.
Estimated cash flow from operations and current financial resources,
including financing capacity, are expected to be adequate to fund the company's
anticipated working capital requirements, fixed asset spending and dividend
payments in the foreseeable future.
IMPACT OF INFLATION
Inflation generally has not had a significant impact upon the results of the
company's operations in recent years. Historically, the company has taken steps
to reduce the effects of inflation on its business. In periods of increasing
prices, to the extent permitted by competition, the company has adjusted its
selling prices to compensate for increased costs.
An ongoing cost control program implemented throughout the company also has
contributed to reducing the influence of inflationary costs. Further, a
continuing program of investment in new and more efficient facilities,
production processes, and productivity enhancements has made a significant
contribution in offsetting inflation.
The company uses the LIFO method of accounting for its domestic inventories
of the specialty chemicals and salt groups. Under this method the cost of
products sold, as reported in the financial statements, approximates current
costs.
ENVIRONMENTAL MATTERS
For a detailed discussion, see Environmental Matters on page 30 included in the
Notes to Consolidated Financial Statements.
pg 19
<PAGE>
MORTON INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended June 30
---------------------------------------
(in millions, except per share data) 1995 1994 1993
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $3,325.9 $2,849.6 $2,309.8
Interest, royalties, and sundry income 29.0 27.9 21.1
-------- -------- --------
3,354.9 2,877.5 2,330.9
Deductions from income
Cost of products sold 2,348.8 1,981.6 1,596.4
Selling, administrative and general expense 424.4 434.0 391.7
Research and development expense 72.5 66.1 68.6
Interest expense 28.4 27.8 33.7
Amortization of goodwill 10.3 10.4 10.7
Restructuring charges -- -- 30.0
-------- -------- --------
2,884.4 2,519.9 2,131.1
-------- -------- --------
Income from operations before income taxes 470.5 357.6 199.8
Income taxes 176.4 131.1 72.9
-------- -------- --------
Income from operations 294.1 226.5 126.9
Cumulative effect of change in accounting for post-
retirement and postemployment benefits, net
of taxes -- -- (94.4)
-------- -------- --------
Net income $ 294.1 $ 226.5 $ 32.5
-------- -------- --------
-------- -------- --------
Income per share
Income per share from operations $ 1.96 $ 1.51 $ .86
Cumulative effect of change in accounting for
postretirement and postemployment benefits -- -- (.64)
-------- -------- --------
Net income $ 1.96 $ 1.51 $ .22
------------------------------------------------------------------ -------- -------- --------
-------- -------- --------
</TABLE>
See notes to consolidated financial statements.
pg 20
<PAGE>
MORTON INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30
------------------------
in millions 1995 1994
----------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 88.3 $ 58.7
Receivables, less allowances of $13.3 and $10.5 561.5 484.4
Deferred income tax benefits 24.3 27.8
Inventories 397.2 346.9
Prepaid expenses 96.9 78.6
-------- --------
Total Current Assets 1,168.2 996.4
-------- --------
OTHER ASSETS
Cost in excess of net assets of businesses acquired, less amortization 324.1 333.1
Investments in affiliates 79.2 65.6
Miscellaneous 65.0 62.6
-------- --------
468.3 461.3
-------- --------
PROPERTY, PLANT AND EQUIPMENT
Land 36.7 33.9
Buildings and improvements 554.9 496.2
Machinery and equipment 1,219.9 1,038.3
Construction in progress 194.5 188.8
-------- --------
2,006.0 1,757.2
Less allowances for depreciation 886.5 752.3
-------- --------
1,119.5 1,004.9
-------- --------
$2,756.0 $2,462.6
------------------------------------------------------------------------- -------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable and current portion of long-term debt $ 42.3 $ 68.7
Accounts payable 284.1 264.6
Accrued salaries, wages and other compensation 66.1 64.9
Other accrued expenses 131.7 133.6
Income taxes 29.9 25.4
-------- --------
Total Current Liabilities 554.1 557.2
-------- --------
NONCURRENT LIABILITIES
Long-term debt, less current portion 218.5 198.6
Deferred income taxes 54.5 55.1
Accrued postretirement benefits other than pensions 152.1 146.2
Other noncurrent liabilities 113.3 105.9
-------- --------
Total Noncurrent Liabilities 538.4 505.8
-------- --------
SHAREHOLDERS' EQUITY
Preferred stock (par value $1.00 per share)
Authorized - 25.0 shares, none issued
Common stock (par value $1.00 per share)
Authorized - 300.0 shares
Issued - 148.3 shares and 147.6 shares in
1995 and 1994 148.3 147.6
Additional paid-in capital 62.2 53.0
Retained earnings 1,417.6 1,188.6
Foreign currency translation adjustment and other 35.4 10.4
-------- --------
Total Shareholders' Equity 1,663.5 1,399.6
-------- --------
$2,756.0 $2,462.6
-------------------------------------------------------------------------- -------- --------
</TABLE>
See notes to consolidated financial statements.
pg 21
<PAGE>
MORTON INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cash provided (used)
Year ended June 30
-------------------------------------
in millions 1995 1994 1993
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 294.1 $ 226.5 $ 32.5
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 161.3 137.6 116.8
Deferred income taxes 5.7 5.3 6.4
Postretirement and postemployment benefits--cumulative effect -- -- 94.4
Undistributed earnings of affiliates (5.5) (8.0) (4.7)
Changes in operating assets and liabilities
net of effects of businesses acquired:
Increase in receivables (67.6) (93.6) (41.2)
Increase in inventories and prepaid expenses (55.0) (25.4) (20.7)
Increase in accounts payable and accrued expenses 14.2 58.4 57.3
Increase (decrease) in accrued income taxes 3.9 24.8 (3.5)
Other--net 6.9 5.7 19.4
------- ------- -------
Net cash provided by operating activities 358.0 331.3 256.7
------- ------- -------
INVESTING ACTIVITIES
Purchase of property, plant and equipment (252.2) (219.9) (201.4)
Proceeds from property and other asset disposals 2.4 16.4 4.8
Cash invested in businesses acquired (12.7) (7.0) (5.0)
Other (1.4) (3.4) --
------- ------- -------
Net cash used for investing activities (263.9) (213.9) (201.6)
------- ------- -------
FINANCING ACTIVITIES
Short-term (repayments) borrowings--net (10.4) (59.0) 33.7
Repayment of long-term debt (22.2) (2.6) (37.7)
Long-term borrowings 19.9 -- --
Stock option transactions 5.4 9.0 10.0
Dividends paid (65.1) (54.9) (46.6)
------- ------- -------
Net cash used for financing activities (72.4) (107.5) (40.6)
------- ------- -------
Effect of foreign exchange rate changes on cash and cash equivalents 7.9 3.5 (4.2)
------- ------- -------
Increase in cash and cash equivalents 29.6 13.4 10.3
Cash and cash equivalents at beginning of year 58.7 45.3 35.0
------- ------- -------
Cash and cash equivalents at end of year $ 88.3 $ 58.7 $ 45.3
-------------------------------------------------------------------- ------- ------- -------
</TABLE>
See notes to consolidated financial statements.
pg 22
<PAGE>
MORTON INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION:
Investments in 50 percent or less owned companies and joint ventures are carried
on the equity basis. All intercompany accounts and transactions have been
eliminated from the consolidated financial statements. Certain amounts in prior
years have been reclassified to conform to the 1995 presentation.
CASH EQUIVALENTS:
The company considers all highly liquid investment instruments purchased with a
maturity of three months or less to be cash equivalents.
INVENTORIES:
Inventories are stated at the lower of cost or market. The cost of domestic
inventories for the specialty chemicals and salt segments, (55 percent and 53
percent of consolidated inventories at June 30, 1995 and 1994) is determined by
the last-in, first-out (LIFO) method, while the cost of foreign inventories and
the automotive safety products inventories is determined by the first-in, first-
out (FIFO) method. If the FIFO method, which approximates replacement cost, had
been used for all inventories, the total amount for inventories would have been
increased by $36.2 million and $26.0 million at June 30, 1995 and 1994.
INTANGIBLE ASSETS:
Cost in excess of net assets of businesses acquired and other intangibles are
being amortized over periods not exceeding 40 years. The amount of such
accumulated amortization recorded as of June 30, 1995 and 1994, was $118.7
million and $104.8 million.
PROPERTY, PLANT AND EQUIPMENT:
The company provides for depreciation of property, plant and equipment, all of
which are recorded at cost, by annual charges to income, computed in part under
the straight-line method and in part under accelerated methods.
FOREIGN CURRENCY TRANSLATION:
All assets and liabilities in the balance sheet of foreign subsidiaries whose
functional currency is other than the U.S. dollar are translated at year-end
exchange rates except shareholders' equity which is translated at historical
rates. Translation gains and losses are accumulated as a separate component of
shareholders' equity. Foreign currency transaction gains and losses are
included in determining net income.
FOREIGN EXCHANGE CONTRACTS:
The company uses forward foreign exchange contracts primarily to offset the
effects of foreign currency fluctuations related to firm and anticipated foreign
denominated receivables and payables transactions, intercompany financing
transactions and dividends from subsidiaries. The company may also use forward
foreign exchange contracts to offset the currency fluctuation related to foreign
currency denominated debt. The company nets its exposures before entering into
hedge transactions. Generally, contracts do not exceed one year. Gains or
losses on forward foreign exchange contracts which hedge an identifiable foreign
currency commitment or exposure are deferred and recognized as the related
transactions are settled. Gains or losses on all other forward foreign exchange
contracts are recognized in determining net income as incurred. Exchange
(losses) gains recorded on these forward contracts in 1995, 1994 and 1993 were
$(2.2) million, $(2.9) million and $2.0 million. Outstanding forward foreign
exchange contracts at June 30, 1995, were valued at year-end foreign exchange
rates, with the changes in valuations reflected directly in net income.
INVENTORIES
Components of inventories were as follows:
<TABLE>
<CAPTION>
June 30
----------------
in millions 1995 1994
-----------------------------------------------------------------------------
<S> <C> <C>
Finished products and work-in-process $287.0 $240.3
Materials and supplies 110.2 106.6
------ ------
$397.2 $346.9
------ ------
------ ------
</TABLE>
pg 23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FINANCING ARRANGEMENTS
The company has committed credit agreements with banks which expire in November
1995. In addition, lines of credit are available from domestic and foreign
banks which generally do not have termination dates but are reviewed annually
for renewal. Under these arrangements, the company may borrow upon such terms
and conditions as the company and the banks may mutually agree. At June 30,
1995, such credit facilities amounted to approximately $429.3 million, and the
unused portions thereof were approximately $387.1 million.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
June 30
----------------
in millions 1995 1994
-------------------------------------------------------------------------------
<S> <C> <C>
Credit Sensitive Debentures (net of
unamortized discount of $1.4 and $1.5) $198.6 $198.5
Other 20.0 20.4
------ ------
218.6 218.9
Less current portion .1 20.3
------ ------
$218.5 $198.6
------ ------
------ ------
</TABLE>
The Credit Sensitive Debentures ("Debentures") due June 1, 2020, are unsecured
obligations of the company. The Debentures had an initial effective interest
rate of 9.335 percent, subject to adjustment on the calendar day that certain
changes in the debt rating of the Debentures occur as determined by Standard &
Poor's Corporation or Moody's Investor Service. No adjustment of the initial
effective interest rate has occurred.
The aggregate maturities of long-term debt through June 30, 2000, total $.3
million. Interest paid on borrowings in 1995, 1994 and 1993 was $28.2 million,
$28.4 million and $33.6 million.
Notes payable at June 30, 1995 and 1994, reflected borrowings from banks at
average interest rates of 5.9 percent and 5.8 percent.
-------------------------------------------------------------------------------
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods were used by the company to estimate its fair value
disclosures for financial instruments.
CASH AND CASH EQUIVALENTS:
The carrying amount reported in the balance sheet for cash and cash equivalents
approximates its fair value.
SHORT- AND LONG-TERM DEBT:
The carrying amount of the company's borrowings in the form of notes payable
approximates its fair value. The fair value of the company's long-term debt is
estimated using discounted cash flow analyses, based on the company's current
incremental borrowing rates for similar types of borrowing arrangements.
FOREIGN CURRENCY EXCHANGE CONTRACTS:
Forward foreign exchange contracts which hedge foreign currency exposures or
transactions are valued at current foreign exchange rates.
The carrying or notional amounts and fair value of the company's financial
instruments at June 30, 1995, were as follows:
<TABLE>
<CAPTION>
Carrying or
in millions notional Fair
amount value
-------------------------------------------------------------------------------
<S> <C> <C>
Short-term debt $ 42.2 $ 42.2
Long-term debt 218.6 266.2
Forward foreign exchange contracts 13.6 12.8
</TABLE>
pg 24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
INCOME TAXES
The provisions for income taxes applicable to operations were as follows:
in millions 1995 1994 1993
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $111.6 $ 77.1 $40.0
State 20.9 14.4 7.7
Foreign 38.2 34.3 18.8
------ ------ ------
170.7 125.8 66.5
------ ------ ------
Deferred:
Federal 4.6 3.9 4.9
State 1.0 .3 .1
Foreign .1 1.1 1.4
------ ------ ------
5.7 5.3 6.4
------ ------ ------
$176.4 $131.1 $ 72.9
------ ------ ------
------ ------ ------
</TABLE>
A reconciliation of the United States statutory rate to the effective income tax
rate applicable to operations follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 34.0%
Effect of:
State tax, net of federal
tax benefit 3.0 2.7 2.9
Depletion (1.2) (1.4) (2.1)
Net foreign items (.2) (.7) (3.0)
Additional accruals provided -- -- 3.1
Other .9 1.1 1.6
------ ------ ------
Effective rate 37.5% 36.7% 36.5%
------ ------ ------
------ ------ ------
</TABLE>
Deferred income taxes reflect the impact of temporary differences between the
valuation of assets and liabilities for financial reporting and their tax bases.
Significant components of the company's deferred tax balances at June 30, 1995
and 1994, were as follows:
<TABLE>
<CAPTION>
in millions 1995 1994
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax benefits related to:
Postretirement and postemployment benefits $ 57.2 $ 63.8
Other 99.9 85.5
------ ------
157.1 149.3
------ ------
Deferred tax liabilities related to:
Tax over book depreciation 86.6 93.0
Pension liability 23.8 22.0
Other 84.8 66.7
------ ------
195.2 181.7
------ ------
Net deferred tax liability $ 38.1 $ 32.4
------ ------
------ ------
</TABLE>
No individual item included in other deferred tax benefits or deferred tax
liabilities above is material. Deferred income tax benefits at June 30, 1995
and 1994, included $7.9 million and $5.1 million of refundable income taxes.
pg 25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Total income tax payments during fiscal years 1995, 1994 and 1993 were $165.0
million, $104.4 million and $75.3 million.
Components of the company's income from operations before income taxes were as
follows:
<TABLE>
<CAPTION>
(in millions) 1995 1994 1993
----------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $373.4 $267.0 $125.5
Foreign 97.1 90.6 74.3
------ ------ ------
$470.5 $357.6 $199.8
------ ------ ------
------ ------ ------
</TABLE>
The Internal Revenue Service has completed its examination of the company's
federal income tax returns through fiscal year 1989, and has issued notices of
deficiency on certain issues, no one of which is significant. The company
disagrees with the proposed adjustments and is taking appropriate action to
contest such deficiency notices. Management believes the ultimate resolution of
these matters will not have a material effect upon the company's financial
condition, results of operations, or liquidity.
SHAREHOLDERS' EQUITY
Changes in shareholders' equity are summarized below:
<TABLE>
<CAPTION>
Foreign
currency
Common stock Additional translation
-------------------- paid-in Retained adjustment
(in millions) Shares Amount capital earnings and other
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance June 30, 1992 48.5 $ 48.5 $20.5 $1,129.5 $ 24.4
Net income -- -- -- 32.5 --
Cash dividends paid, $.96(1) per share -- -- -- (46.6) --
Exercise of stock options and related income tax benefits .3 .3 12.2 -- --
Translation adjustment -- -- -- -- (21.2)
Other -- -- -- -- .1
------- ------- ------- -------- ------
Balance June 30, 1993 48.8 48.8 32.7 1,115.4 3.3
Net income -- -- -- 226.5 --
Cash dividends paid, $1.12(1) per share -- -- -- (54.9) --
Exercise of stock options and related income tax benefits .4 .4 20.3 -- --
Translation adjustment -- -- -- -- 6.7
Other -- -- -- -- .4
3-for-1 stock split 98.4 98.4 -- (98.4) --
------- ------- ------- -------- ------
Balance June 30, 1994 147.6 147.6 53.0 1,188.6 10.4
Net income -- -- -- 294.1 --
Cash dividends paid, $.44 per share -- -- -- (65.1) --
Exercise of stock options and related income tax benefits .7 .7 8.7 -- --
Translation adjustment -- -- -- -- 25.1
Other -- -- .5 -- (.1)
------- ------- ------- -------- ------
Balance June 30, 1995 148.3 $148.3 $62.2 $1,417.6 $ 35.4
------- ------- ------- -------- ------
<FN>
(1) On a pre-split basis.
</TABLE>
On June 23, 1994, the company declared a 3-for-1 stock split of its common
stock. The stock split was in the form of a 200 percent stock dividend, payable
on August 17, 1994, to shareholders of record on August 3, 1994.
In June 1989, the company declared a dividend distribution of one Preferred
Share Purchase Right for each outstanding common share. Until exercisable, the
Rights will not be transferable apart from the company's common stock. When
exercisable, each Right will entitle its holder to buy one three-hundredths of a
share of the company's new series of preferred stock at an exercise price of
$58.33 1/3 until July 1, 1999. The Rights will only become exercisable if a
person or group acquires or makes an offer to acquire 20 percent or more of the
company's common stock. In the event the company is acquired in a merger, each
Right entitles the holder to purchase common stock of the surviving company
having a market value of twice the exercise price of the Rights. In the event
any person or group acquires 20 percent or more of the company's common stock
(reducible to 15 percent under certain
pg 26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
circumstances), each Right entitles the holder (other than such acquirer) to
purchase common stock of the company having a market value of twice the exercise
price of the Right. The Rights may be redeemed by the company at the price of
1/3 cent per Right prior to the acquisition of 20 percent of the outstanding
shares of the company's common stock. At June 30, 1995, 0.6 million shares of
preferred stock were reserved for future exercises of Preferred Share Purchase
Rights.
BENEFIT PLANS
PENSIONS:
The company has noncontributory defined benefit pension plans covering employees
at most domestic operations. The benefits are based on an average of the
employee's earnings in the years preceding retirement and on credited service.
Certain supplemental unfunded plan arrangements also provide retirement benefits
to specified groups of participants. Most international subsidiaries also have
retirement plans.
The company's funding policy for the domestic plans is to contribute amounts
sufficient to meet the minimum funding requirements of the Employee Retirement
Income Security Act of 1974, plus any additional amounts which the company may
determine to be appropriate.
The net pension expense for company-sponsored pension plans consisted of the
following components:
<TABLE>
<CAPTION>
(in millions) 1995 1994 1993
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost--benefits earned
during the year $15.7 $13.9 $12.2
Interest cost on projected
benefit obligation 34.5 30.9 28.4
Return on plan assets:
Actual $(59.8) $(18.1) $(50.3)
Deferred portion 20.5 (20.1) 14.8
------ ------ ------
Expected return (39.3) (38.2) (35.5)
Net amortization 1.6 (1.4) (2.6)
------ ------ ------
Net pension expense $12.5 $ 5.2 $ 2.5
------ ------ ------
------ ------ ------
</TABLE>
The reconciliation of the funded status of pension plans was as follows:
<TABLE>
<CAPTION>
June 30, 1995 June 30, 1994
---------------------------------------- --------------------------------------
Plans in which Plans in which Plans in which Plans in which
assets exceed accumulated assets exceed accumulated
accumulated benefit obligation accumulated benefit obligation
(in millions) benefit obligation exceeds assets benefit obligation exceeds assets
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plan assets at fair value $ 459.1 $ 3.7 $ 402.7 $ 3.4
------ ------- ------ ------
Actuarial present value of projected
benefit obligations:
Accumulated benefit obligation
Vested 367.7 25.5 331.6 21.4
Non-vested 23.3 -- 20.8 --
Provision for future salary
increases 81.4 5.1 74.4 3.7
------ ------- ------ ------
472.4 30.6 426.8 25.1
------ ------- ------ ------
Plan assets less than
projected benefit obligation (13.3) (26.9) (24.1) (21.7)
Unrecognized net experience loss
since 7/1/86 109.6 14.4 115.3 10.5
Prior service cost not yet recognized
in net pension cost (1.0) 2.6 (1.1) 2.9
Unrecognized net (asset) obligation
at 7/1/86 (27.0) .7 (30.8) .8
Adjustment to recognize minimum liability -- (12.6) -- (10.5)
Net pension asset (liability) recognized
in the consolidated balance sheets ------ ------- ------ ------
$ 68.3 $ (21.8) $ 59.3 $(18.0)
------ ------- ------ ------
------ ------- ------ ------
</TABLE>
pg 27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The weighted averages of assumptions used in the determination of the projected
benefit obligation were:
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.6% 7.8% 8.3%
Rate of increases in
compensation level 4.9% 5.2% 5.2%
Expected long-term rate
of return on assets 9.5% 9.5% 9.9%
</TABLE>
The assets of the company-sponsored plans are invested primarily in equities and
bonds.
Certain pension plans contain restrictions on the use of excess pension
plan assets in the event of a change in control of the company.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:
The company currently provides postretirement health care and life insurance
benefits to most U.S. and Canadian retirees. In general, U.S. employees who
retire after attaining age 55 with five years of service are eligible for
continued health care and life insurance coverage. Dependent health care and
life insurance coverage are also available. Most retirees contribute toward the
cost of health care coverage, with the contributions generally varying based on
service. In June 1993, the company adopted a provision which caps the level of
company subsidy at the amount in effect as of the year 2000 for most U.S.
employees who retire after December 31, 1992. In general, most Canadian
employees who retire after attaining age 55 and are entitled to a pension
benefit are eligible for continued retiree health and life insurance coverage.
Dependent health insurance is also generally available. The benefits are
provided on a noncontributory basis.
During fiscal year 1993, the company adopted FASB Statement No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions." This
statement requires accrual of the expected cost of providing postretirement
benefits during the years an employee renders service. Prior to adoption of
this standard, the company recognized these benefits on a pay-as-you-go basis.
As a result of this adoption, the company recorded a one-time, pretax charge of
$142.3 million ($88.6 million after tax or $.60 per share) as the cumulative
effect of the accounting change as of July 1, 1992.
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
(in millions) 1995 1994 1993
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost--benefits earned during the year $ 2.2 $ 2.3 $ 2.7
Interest cost on accumulated postretirement benefit obligation 11.1 11.9 12.2
Net amortization (.9) (.7) --
----- ----- -----
Net periodic postretirement benefit cost $12.4 $13.5 $14.9
----- ----- -----
----- ----- -----
</TABLE>
At present, there is no prefunding of the postretirement benefits recognized
under FASB Statement No. 106. The following table presents the status of the
plans reconciled with amounts recognized in the consolidated balance sheets for
the company's postretirement benefits:
<TABLE>
<CAPTION>
June 30
---------------------
(in millions) 1995 1994
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees and dependents $102.7 $100.9
Fully eligible active plan participants 9.6 9.8
Other active plan participants 36.7 35.9
------ ------
149.0 146.6
Unrecognized prior period gain(loss) 2.3 (1.4)
Unamortized plan amendment 9.4 10.2
------ ------
Postretirement benefit liability recognizedin the consolidated balance sheets $160.7 $155.4
------ ------
</TABLE>
pg 28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For measurement purposes, the assumed weighted average annual rate of increase
per capita cost of health care benefits was 10.5 percent for 1996 and assumed to
decrease one percent per year to 5.5 percent in 2001 and remain constant
thereafter. As noted above, for U.S. employees retiring after December 31,
1992, the company's policy is to increase retiree contributions so that the
company's annual per capita cost contribution remains constant at the level
incurred in the year 2000. The weighted average discount rate used in
determining the accumulated postretirement benefit obligation was 7.6 percent at
June 30, 1995, and 7.8 percent at June 30, 1994. The rate of increase on
compensation levels assumed was 4.8 percent at June 30, 1995, and 5.0 percent at
June 30, 1994.
A one percent increase in the annual health care cost trend rates would
have increased the accumulated postretirement benefit obligation at June 30,
1995, by approximately $9.2 million and increased postretirement benefit expense
for fiscal 1995 by approximately $.9 million.
OTHER:
The company contributes to savings plans for eligible domestic employees.
Company contributions to the savings plans were $8.3 million, $7.7 million and
$6.4 million in 1995, 1994 and 1993.
In fiscal 1993, the company adopted FASB Statement No. 112, "Employers'
Accounting for Postemployment Benefits." This statement requires accrual of
postemployment benefits provided to former or inactive employees, their
beneficiaries and covered dependents after employment but before retirement.
The adoption of this standard impacted the company's accounting for certain
income replacement and medical benefits provided to eligible disabled employees
and their dependents. Prior to adoption of FASB Statement No. 112, the cost of
these benefits was charged against earnings as incurred. Adoption of this
standard in fiscal 1993 resulted in a pretax charge of $9.3 million ($5.8
million after tax or $.04 per share) as the cumulative effect of the accounting
change as of July 1, 1992.
INCENTIVE PLAN
Under the company's 1989 Incentive Plan (formerly 1989 Stock Awards Plan),
grants may be made to key employees of stock options, stock appreciation rights,
shares of restricted stock, other awards valued by reference to the company's
common stock and cash. Under the 1982 Key Employees Stock Option and
Performance Unit Plan grants could be made to key employees of stock options,
stock options with alternative appreciation rights and appreciation rights not
related to any option. In addition, options may provide for supplemental cash
payments to optionees upon exercise for the purpose of reimbursing them for the
income tax liability incurred as a result of such exercises. Stock option
activity is summarized as follows:
<TABLE>
<CAPTION>
Option price
Shares per share
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at June 30, 1993 6,829,080 $ 7.28 to $18.08
Granted 978,480 28.29 to 35.13
Lapsed (25,920) 28.29
Exercised (1,711,374) 7.28 to 18.08
----------
Options outstanding at June 30, 1994 6,070,266 9.53 to 35.13
Granted 895,870 28.56 to 30.06
Lapsed (27,100) 28.29 to 29.63
Exercised (785,474) 9.53 to 28.29
----------
Options outstanding at June 30, 1995 (5,282,092 exercisable shares) 6,153,562 10.30 to 35.13
----------
</TABLE>
Options outstanding at June 30, 1995, had expiration dates ranging from June 26,
1996, to April 1, 2005. All stock options granted have an option price equal to
the stock's fair market value at date of grant and the number of options is
fixed. Therefore, the granting of such options does not result in a charge
against earnings. In addition, limited appreciation rights were outstanding
covering 2,959,689 option shares. Limited appreciation rights are paid in cash
in lieu of the related options upon a change in control of the company, at which
time a charge to earnings would be recorded. As of June 30, 1995, supplemental
cash payment rights were outstanding with respect to 1,178,373 option shares,
payable upon exercise of options or limited appreciation rights. Supplemental
cash payment rights outstanding have been accrued based on the current fair
market value of the company's stock and current income tax rates.
Under the terms of the 1989 Incentive Plan, restricted stock award shares
have been granted to certain employees at no cost. The outstanding restricted
stock award shares vest from one to five years subsequent to their award dates.
The cost of restricted stock awards, based on the stock's fair market value at
the award dates, is charged to shareholders' equity and subsequently amortized
against earnings over the vesting period. At June 30, 1995, common stock shares
of 35,250 were outstanding under restricted stock awards.
At June 30, 1995, common stock shares of 8,172,010 were reserved for both
outstanding and future grants of options and payment of appreciation rights and
other stock-based awards.
pg 29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ENVIRONMENTAL MATTERS
The company, like others in similar businesses, is subject to extensive Federal,
state and local environmental laws and regulations. Although company
environmental policies and practices are designed to ensure compliance with
these laws and regulations, future developments and increasingly stringent
regulation could require the company to make additional unforeseen environmental
expenditures.
Environmental accruals are routinely reviewed on an interim basis as events
and developments warrant and are subjected to a comprehensive review annually
during the fiscal fourth quarter.
The company has been named a potentially responsible party at approximately
60 inactive waste disposal sites where cleanup costs have been or may be
incurred under the Federal Comprehensive Environmental Response, Compensation
and Liability Act and similar state statutes. The company's potential exposure
has been evaluated on a site-by-site basis, and an accrual reflecting the
company's best estimate of the liability has been established to the extent
sufficient information is available to reasonably estimate costs which may be
incurred. However, at certain of these sites, the company is unable, due to a
variety of factors, to assess and quantify the ultimate extent of its
responsibility for study and remediation costs. The most significant of these
sites is located in Wood-Ridge, New Jersey, where, at present, the company and
one other party have been held jointly and severally liable for the cost of
remediation necessary to correct mercury related environmental problems
associated with a former mercury processing plant. Although the company has
accrued for expected site study costs and some remedial effort, no reliable
estimate can presently be made of the company's range of liability due to the
absence of site specific data, the unique nature of mercury plant wastes and the
complex characteristics of the plant site and adjacent areas. An estimate of
the range of liability at Wood-Ridge is not reasonably possible until technical
studies are sufficiently completed to permit such a determination. It is
anticipated that the Wood-Ridge plant site study will commence in fiscal 1996
and will be completed in approximately 42 months. Study of the surrounding area
should begin after commencement of the plant site study on a timetable yet to be
determined. The company's ultimate exposure will also depend upon the continued
participation of the other party held liable and on the results of both formal
and informal attempts to spread liability to others believed to share
responsibility.
Where appropriate, the analysis to determine the company's liability, if
any, with respect to remedial costs at the above sites reflects an assessment of
the likelihood and extent of participation of other potentially responsible
parties. The possibility of recovery from insurance carriers is factored into
accrual determinations only when the company is reasonably assured that such
recoveries are probable of realization.
The company's cleanup expenditures totaled approximately $3.0 million,
$7.8 million and $7.7 million for fiscal years 1995, 1994 and 1993. Amounts
accrued as of June 30, 1995, are generally expected to be paid out over a period
of up to 15 years.
Although the level of future expenditures for environmental matters cannot
be determined with any degree of certainty, based on the facts presently known
to it, management does not believe that such costs will have a material effect
on the company's financial position, results of operations, or liquidity.
LITIGATION AND REGULATION
There are judicial and administrative claims pending or contemplated against the
company in addition to those of an environmental nature discussed in the
Environmental Matters note above. Management believes that the resolution of
those claims should not have a material effect upon the company's financial
condition, results of operations, or liquidity.
Various governmental agencies have authority to limit or prohibit
distribution of some of the company's products should they formally conclude
that continued distribution is unsafe to the population or the environment.
There are currently no challenges pending, the resolution of which would have a
material effect upon the company's operations.
LEASE COMMITMENTS
The company has commitments under operating leases primarily for building and
office space, railroad equipment and real estate. Rental expense charged in
1995, 1994 and 1993 was $36.3 million, $34.6 million and $32.8 million,
including insignificant amounts for contingent rentals and sublease income.
Renewal and purchase options are available on certain of these leases.
Future minimum rental commitments under operating leases having initial or
remaining non-cancelable terms in excess of one year as of June 30, 1995, were
as follows (in millions): 1996 - $26.1; 1997 - $23.2; 1998 - $14.7; 1999 -
$12.5; 2000 - $10.9; thereafter - $315.1.
pg 30
<PAGE>
------------------------------------[MORTON 95]-------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
OPERATIONS IN DIFFERENT BUSINESSES PROFIT AS A PERCENT
OF AVERAGE
SALES AND PROFIT Sales(1) Profit(2) IDENTIFIABLE ASSETS
----------------------------------- --------------------------------- ----------------------
in millions 1995 1994 1993 1995 1994 1993(3) 1995 1994 1993
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Specialty Chemicals $1,564.7 $1,369.6 $1,274.3 $ 223.5 $ 193.6 $ 135.4 15.8% 14.7% 10.6%
Salt 534.9 541.5 511.5 117.4 119.3 102.3 34.0 37.8 32.1
Automotive Safety Products 1,226.3 938.5 524.0 226.5 164.0 78.0 34.8 30.5 18.7
-------- -------- -------- ------- ------- --------
Business totals 3,325.9 2,849.63 2,309.8 567.4 476.9 315.7 23.5 21.9 15.7
General Corporate expense--net -- -- -- (96.9) (119.3) (115.9)
-------- -------- -------- ------- ------- --------
Consolidated net sales
and income from
operations before income taxes $3,325.9 $2,849.6 $2,309.8 $ 470.5 $ 357.6 $ 199.8
-------- -------- -------- ------- ------- --------
<CAPTION>
ASSETS, CAPITAL EXPENDITURES, Year end Capital Depreciation and
DEPRECIATION AND AMORTIZATION identifiable assets expenditures Amortization
---------------------- ------------------------------ -----------------------
in millions 1995 1994 1995 1994 1993 1995 1994 1993
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Specialty Chemicals $1,459.3 $1,370.2 $ 83.0 $ 87.5 $ 62.6 $ 63.1 $ 57.9 $ 56.1
Salt 371.9 319.2 42.1 35.7 32.6 30.8 30.1 29.9
Automotive Safety Products 709.7 593.6 125.8 94.3 102.6 63.5 45.7 27.2
-------- -------- ------- ------- ------- ------ ------ ------
Business totals 2,540.9 2,283.0 250.9 217.5 197.8 157.4 133.7 113.2
General Corporate(4) 215.1 179.6 1.3 2.4 3.6 3.9 3.9 3.6
-------- -------- ------- ------- ------- ------ ------ ------
Consolidated totals $2,756.0 $2,462.6 $ 252.2 $ 219.9 $ 201.4 $161.3 $137.6 $116.8
-------- -------- ------- ------- ------- ------ ------ ------
<CAPTION>
OPERATIONS IN DIFFERENT GEOGRAPHIC AREAS
Year end
Sales(1) Profit identifiable assets
------------------------------------ ------------------------------ ---------------------
in millions 1995 1994 1993 1995 1994 1993 1995 1994
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United States $2,645.7 $2,280.5 $1,750.6 $467.2 $384.3 $229.7 $1,909.9 $1,775.7
Foreign Areas--
Canada and Bahamas 185.3 197.6 198.1 35.1 45.9 43.9 153.4 148.2
Europe 465.0 341.2 327.2 61.7 43.7 41.4 452.3 328.6
Others 29.9 30.3 33.9 3.4 3.0 .7 25.3 30.5
-------- -------- -------- ------ ------ ------ -------- --------
$3,325.9 $2,849.6 $2,309.8 $567.4 $476.9 $315.7 $2,540.9 $2,283.0
-------- -------- -------- ------ ------ ------ -------- --------
<FN>
(1) Export sales from the United States in fiscal year 1995 were 18% of sales
to unaffiliated customers, primarily to Canada, Europe and Japan, while in
fiscal years 1994 and 1993, such sales were 16% and 14%. Intersegment and
intergeographic area sales and transfers were insignificant. No country
within the European grouping contributed or represented 10% or more of
sales, profit, or identifiable assets. During fiscal 1995 and 1994, a
customer of the automotive safety products segment accounted for
approximately 12.6% and 10.5% of total sales.
(2) Business segment profit is before income taxes, interest income, interest
expense and allocation of certain corporate administrative expenses, but
included foreign exchange gains (losses) of $.3 million $(2.9) million and
$.6 million in 1995, 1994 and 1993.
(3) Fiscal year 1993 specialty chemicals' profit and general corporate expense
included charges of $27.0 million and $3.0 million, related to the
restructuring of operations.
(4) Corporate assets are principally cash and cash equivalents, deterred income
tax benefits, prepaid expenses and property, plant and equipment.
</TABLE>
pg 31
<PAGE>
QUARTERLY FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
Fiscal year 1995 Fiscal year 1994
-------------------------------------------------- --------------------------------------------------
Three months ended Three months ended
-------------------------------------------------- --------------------------------------------------
in millions,
except per share data June 30 March 31 Dec. 31 Sept. 30 June 30 March 31 Dec. 31 Sept. 30
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 828.5 $ 921.0 $ 830.9 $ 745.5 $ 730.8 $ 808.3 $ 690.9 $ 619.6
Gross profit 233.8 274.0 244.8 224.5 216.4 252.6 205.7 193.3
Income before income taxes 111.3 143.8 116.3 99.1 93.1 113.1 85.3 66.1
Net income 69.6 89.9 72.7 61.9 58.6 71.3 53.7 42.9
Net income per share(1) .46 .60 .49 .41 .39 .47 .36 .29
Cash dividends per share .11 .11 .11 .11 .093 .093 .093 .093
Market price of
common stock(2)
High 32 30-7/8 29-1/2 30-1/4 34-1/8 37-1/4 33-1/2 29-3/4
Low 26-1/4 26-1/4 25-3/4 25-7/8 25-1/2 30-5/8 28-1/2 25-3/4
<FN>
(1) Net income per share has been calculated based on the average number of
common and common equivalent shares outstanding for the company.
(2) The principal market is the New York Stock Exchange and prices are based on
the Composite Tape (Ticker symbol MII).
</TABLE>
pg 32
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
To the Shareholders and Board of Directors
Morton International, Inc.
We have audited the accompanying consolidated balance sheets of Morton
International, Inc. as of June 30, 1995 and 1994, and the related consolidated
statements of income and cash flows for each of the three years in the period
ended June 30, 1995. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Morton
International, Inc. at June 30, 1995 and 1994, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended June 30, 1995, in conformity with generally accepted accounting
principles.
As discussed in the notes to the consolidated financial statements, the
company changed its method of accounting for postretirement benefits other than
pensions and postemployment benefits in 1993.
/s/ Ernst & Young LLP
Chicago, Illinois
July 31, 1995
<PAGE>
Report of Management
We have prepared the accompanying consolidated financial statements of Morton
International, Inc. in conformity with generally accepted accounting principles
appropriate in the circumstances. The integrity and objectivity of data in these
financial statements are the responsibility of management. Based on currently
available information, management makes informed judgments and estimates of the
effects of certain events and transactions when preparing the financial
statements. Financial information included elsewhere in this Annual Report is
consistent with that contained in the financial statements.
We maintain a highly developed accounting system and controls to provide
reasonable assurance that assets are safeguarded against loss from unauthorized
use or disposition and that financial records are reliable for preparing
financial statements and maintaining accountability for assets. However, there
are inherent limitations that should be recognized in considering the potential
effectiveness of any system of internal accounting control. The concept of
reasonable assurance is based on the recognition that the cost of a system of
internal control should not exceed the benefits derived and that the evaluation
of those factors requires estimates and judgments by management. The company's
systems provide such reasonable assurance.
The functioning of the accounting system and controls over it are reviewed
by an extensive program of internal audits and by the company's independent
auditors, Ernst & Young LLP. The responsibility of the Board of Directors for
the company's financial statements is exercised through its Audit Committee
which is composed of Directors who are not company employees. The Audit
Committee recommends to the Board of Directors the selection of the independent
auditors and reviews their fee arrangements. It meets periodically with
management, the internal auditors and the independent auditors to assure that
each is carrying out its responsibilities. The independent auditors have full
and free access to the Audit Committee to discuss auditing and financial
reporting matters.
The company's legal counsel has reviewed the company's position with
respect to litigation, claims, assessments, and illegal or questionable acts,
has communicated that position to our independent auditors, and is satisfied
that it is properly disclosed in the financial statements.
The company has prepared and distributed to its employees a statement of
its policies prohibiting certain activities deemed illegal, unethical, or
against the best interest of the company. Certification of compliance with such
policies is required and any apparent problems are reviewed by a committee of
the Board of Directors. In consultation with our independent auditors, we have
developed and instituted additional internal controls and internal audit
procedures designed to prevent or detect violations of those policies. We
believe that the policies and procedures provide reasonable assurance that our
operations are conducted in conformity with the law and with a high standard of
business conduct.
/s/ Thomas F. McDevitt
Thomas F. McDevitt
Vice President Finance and Chief Financial Officer
July 31, 1995
pg 33
<PAGE>
MORTON INTERNATIONAL, INC.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
dollars in millions, except per share data 1995 1994 1993 1992 1991 1990
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net sales $3,325.9 $2,849.6 $2,309.8 $2,043.9 $1,905.9 $1,638.7
Cost of products sold 2,348.8 1,981.6 1,596.4 1,399.6 1,319.7 1,123.3
Selling, administrative and
general expense 424.4 434.0 391.7 341.7 289.7 260.9
Research and development expense 72.5 66.1 68.6 61.3 58.6 47.8
Interest expense 28.4 27.8 33.7 33.8 36.4 17.3
Amortization of goodwill 10.3 10.4 10.7 10.8 10.6 7.0
Restructuring, reorganization and
other unusual charges (income) - - 30.0 - - (14.3)
Income from operations, net of
income taxes(1) 294.1 226.5 126.9 144.5 138.3 134.8
Other charges to income(2) - - 94.4 - - -
Net income 294.1 226.5 32.5 144.5 138.3 134.8
Provision for depreciation 147.0 123.7 103.0 91.3 80.9 68.9
-----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL
Total assets $2,756.0 $2,462.6 $2,238.8 $2,110.9 $1,925.8 $1,813.7
Working capital 614.1 439.2 340.6 324.9 347.5 324.4
Current ratio 2.1 1.8 1.6 1.7 1.8 1.8
Long-term debt $ 218.5 $ 198.6 $ 217.8 $222.6 $255.7 $261.4
Total debt to capitalization 13.2% 15.5% 20.6% 20.2% 22.1% 24.0%
Shareholders' equity $1,663.5 $1,399.6 $1,200.2 $1,222.9 $1,103.4 $1,008.1
Shareholders' equity per share $ 11.22 $9.48 $ 8.20 $8.40 $7.61 $7.00
Return on shareholders' equity(3) 21.0% 18.9% 10.4% 13.1% 13.7% 15.0%
Capital expenditures $ 252.2 $ 219.9 $ 201.4 $200.1 $163.6 $111.3
Cash dividends paid 65.1 54.9 46.6 46.5 45.2 41.4
-----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA(5)
Income from operations(1) $ 1.96 $ 1.51 $ .86 $ .98 $ .95 $ .93
Other charges to income(2) - - (.64) - - -
-------- -------- -------- ----- ----- -----
Net income $ 1.96 $ 1.51 $ .22 $ .98 $ .95 $ .93
-------- -------- -------- ----- ----- -----
Cash dividends paid $ .440 $ .373 $ .320 $.320 $.313 $.287
-----------------------------------------------------------------------------------------------------------------------------------
GENERAL
Average number of common shares
outstanding (in thousands)(5) 150,140 150,090 148,113 147,140 145,583 144,458
Approximate number of shareholders 9,900 8,860 9,370 9,870 10,190 10,600
Approximate number of employees 13,800 13,100 11,900 10,700 10,200 9,700
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1989 (4) 1988 (4) 1987 (4) 1986 (4) 1985 (4)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net sales $1,406.6 $1,248.3 $1,093.9 $1,023.3 969.8
Cost of products sold 957.6 826.7 702.6 671.7 653.6
Selling, administrative and
general expense 223.0 211.7 199.1 181.0 165.7
Research and development expense 38.1 34.9 31.1 28.8 24.9
Interest expense 9.1 4.1 3.0 2.8 2.5
Amortization of goodwill 5.7 5.1 4.4 3.7 2.9
Restructuring, reorganization an
other unusual charges (income) 37.1 - - - -
Income from operations, net of
income taxes(1) 97.1 116.4 105.0 89.8 #VALUE!
Other charges to income(2) - 3.8 - - 75.1
Net income 97.1 112.6 105.0 89.8 #VALUE!
Provision for depreciation 58.1 52.9 46.6 46.6 37.1 (7)
--------------------------------------------------------------------------------------------------------------------
FINANCIAL
Total assets $1,364.3 $1,178.9 $1,009.1 $852.7 825.2
Working capital 256.3 227.3 189.3 133.5 129.6
Current ratio 1.9 2.0 1.9 1.7 1.7
Long-term debt $ 43.9 $ 45.6 $ 4.8 $5.6 6.7
Total debt to capitalization 9.3% 8.4% 3.4% 4.9% 3.6%
Shareholders' equity $ 900.7 $ 790.1 $ 676.8 $ 524.8 510.0
Shareholders' equity per share $ 6.27 $ 5.53 $ 4.77 $ 3.71 3.61
Return on shareholders' equity 12.3% 17.2% 20.0% 17.6% 14.9%
Capital expenditures $ 131.9 $ 97.7 $ 72.5 $ 60.1 69.5 (7)
Cash dividends paid - - - - -
--------------------------------------------------------------------------------------------------------------------
PER SHARE DATA(5)
Income from operations(1) $ .68 $ .81 $ .74 $ .63 .55
Other charges to income(2) - (.02) - - .50
-------- -------- -------- ----- -----
Net income $ .68 $ .79 $ .74 $ .63 $1.05
-------- -------- -------- ----- -----
Cash dividends paid - - - - -
--------------------------------------------------------------------------------------------------------------------
GENERAL
Average number of common shares
outstanding (in thousands)(5) 143,678 143,558 142,933 142,269 147,558
Approximate number of shareholde 11,280 11,930 12,520 14,220 14,550
Approximate number of employees 8,400 7,800 7,700 7,700 7,800
<FN>
(1) Fiscal year 1993 included special accruals related to the restructuring of
operations including disposition of facilities and relocation of
manufacturing facilities of $19.1 million or $.13 per share. Fiscal year
1990 included the gain on sale of a 40% interest in a foreign affiliate of
$13.1 million or $.09 per share and unusual charges of $7.3 million or $.05
per share for additional anticipated costs related primarily to previously
divested operations and to the spin-off. Fiscal year 1989 included
reorganization and other unusual charges of $25.0 million or $.17 per
share.
(2) 1993 charge was the cumulative effect of change in accounting for
postretirement benefits other than pensions and postemployment benefits.
1988 charge was the cumulative effect of change in accounting for income
taxes.
(3) Based on total income from operations and calculated on beginning of year
shareholder's equity.
(4) Effective July 1, 1989. Morton Thiokol, Inc. (MTI) transferred its
commercial businesses and certain corporate assets and certain liabilities
to the company, Since July 1, 1989, MTI (now Thiokol Corporation) and the
company have been independent companies. MTI was responsible for dividend
payments prior to July 1, 1989.
(5) For fiscal years 1990 through 1995, per share amounts were calculated based
on the average number of common and common equivalent shares outstanding
for the company. For periods prior to July 1, 1989, per share amounts were
calculated based on the average number of common and common equivalent
shares outstanding for MTI.
</TABLE>
pg 35
<PAGE>
EXHIBIT (22)(a)
SUBSIDIARIES OF MORTON INTERNATIONAL, INC.
The following is a list of the subsidiaries of the Company as of June 30,
1995. Certain subsidiaries, which considered in the aggregate as a single
subsidiary would not constitute a significant subsidiary, have been omitted.
The consolidated financial statements reflect the operations of all
subsidiaries as they existed on June 30, 1995, except for certain primarily
inactive subsidiaries not considered significant as defined in Regulation S-X,
Rule 1.02(v).
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF
INCORPORATION OR
NAME OF SUBSIDIARY ORGANIZATION
------------------------------------------------------------ ----------------
<S> <C>
Bee Chemical Company........................................ Illinois
CVD Incorporated............................................ Delaware
The Canadian Salt Company Limited........................... Canada
Inagua Transports, Incorporated............................. Liberia
Morton Bahamas Limited...................................... Bahamas
Inagua General Store, Limited........................... Bahamas
Morton International B.V.................................... The Netherlands
Morton International G.m.b.H................................ Germany
IRO Chemie Verwaltungsgesellschaft m.b.H................ Germany
Morton International Limited................................ England
Morton International, Ltd................................... Canada
Morton International, Ltd................................... Japan
Morton International S.A.................................... France
Morton S.A.............................................. France
Morton International, S.A. de C.V........................... Mexico
Morton International S.p.A.................................. Italy
Morton Japan, Ltd........................................... Japan
Morton Manufacturing B.V.................................... The Netherlands
Morton Nichiyu Co., Ltd..................................... Japan
(50% owned by Morton International, Inc.)
Morton Yokohama, Inc........................................ Delaware
(50% owned by Morton International, Inc.)
N.V. Morton International S.A............................... Belgium
Nippon-Bee Chemical Co. Ltd................................. Japan
(50% owned by Bee Chemical Company)
Toray Thiokol Company, Ltd.................................. Japan
(5% owned by Morton International, Inc.)
Toyo-Morton, Limited........................................ Japan
(50% owned by Morton International, Inc.)
</TABLE>
S-2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 61800
<SECURITIES> 26500
<RECEIVABLES> 547800
<ALLOWANCES> (13300)
<INVENTORY> 397200
<CURRENT-ASSETS> 1168200
<PP&E> 2006000
<DEPRECIATION> (886500)
<TOTAL-ASSETS> 2756000
<CURRENT-LIABILITIES> 554100
<BONDS> 218100
<COMMON> 148300
0
0
<OTHER-SE> 1515200
<TOTAL-LIABILITY-AND-EQUITY> 2756000
<SALES> 3325900
<TOTAL-REVENUES> 3354900
<CGS> 2348800
<TOTAL-COSTS> 2840800
<OTHER-EXPENSES> 10300
<LOSS-PROVISION> 4900
<INTEREST-EXPENSE> 28400
<INCOME-PRETAX> 470500
<INCOME-TAX> 176400
<INCOME-CONTINUING> 294100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 294100
<EPS-PRIMARY> 1.96
<EPS-DILUTED> 1.96
</TABLE>
