<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1995
Commission file number 0-685
PETROLITE CORPORATION
Incorporated in the State of Delaware
Employer Identification No. 43-0617572
369 Marshall Avenue, St. Louis, MO 63119
Telephone 314/961-3500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to
Section 12(g) of the Act:
Title of Class:
Capital Stock without par value
Exhibits Index is on pages 17 through 19
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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, 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. / /
As of January 5, 1996, 11,332,948 shares of Capital Stock were
outstanding (after deducting 887,749 held in treasury). The aggregate market
value of the voting shares held by non-affiliates of the Registrant (based
upon the closing bid price of the Registrant's Common Stock on January 5,
1996 of $27.75 per share) was approximately $165 million.
Documents Incorporated by Reference:
1. Portions of Petrolite Corporation 1995 Annual Report (Part I,
II, III and IV of this Report).
2. Portions of Petrolite Corporation Notice of Annual Meeting and
Proxy Statement dated January 23, 1996 (Part III of this Report).
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PART I
ITEM 1. BUSINESS
(a) General Development of Business. The Registrant was incorporated
--------------------------------
under the laws of the state of Delaware in 1930. The general development of
the Registrant's business for the fiscal year ended October 31, 1995, is set
out in the Registrant's 1995 Annual Report to Stockholders on pages 12
through 17 and is incorporated by reference herein. No material changes in
the Registrant's mode of doing business occurred during the five years ended
October 31, 1995.
(b) Financial information about Industry Segments. Industry segment
----------------------------------------------
data is set out in the Registrant's 1995 Annual Report to Stockholders on
pages 12-13 under the caption "Consolidated Operating Results", page 16 under
the caption "Industry Segment Data", page 17 under the caption "Worldwide
Operations" and page 28 under the caption "Segment Information", and is
incorporated by reference herein.
(c) Narrative Description of Business.
----------------------------------
1. Specialty Chemical Segment. Specialty chemical products are
---------------------------
produced primarily from petrochemicals and petroleum-derived raw materials.
The products include demulsifiers, corrosion inhibitors, drilling fluids,
polymers and waxes, water treating chemicals, and fuel and other additives.
Sales for the three major product groupings within the specialty chemical
segment (oil field chemicals, industrial chemicals, and industrial polymers
and waxes) for the three fiscal years through October 31, 1995, are
summarized in the 1995 Annual Report to Stockholders on page 16 under the
caption "Industry Segment Data", which summary is incorporated by reference
herein.
Registrant markets its products and services primarily to producers and
transporters of crude oil and natural gas, related service companies and
petroleum refineries throughout the world through the Registrant's own field
staff and a limited number of agents and distributors. The Registrant also
serves other major markets such as adhesives, agribusiness, coatings,
packaging, petrochemicals, plastics fabrication, power utilities, and
printing inks.
During the fiscal year ended October 31, 1995, there were no material
changes in
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the kinds of products or services rendered, or in the Registrant's methods
of distribution. The U.S. domestic market continues to be difficult
and highly competitive, as producers and refiners seek to reduce costs in
light of tight market conditions. It is the continuing nature of the
business for a number of new or improved products to be introduced annually;
typically, no individual new product or service is immediately material to
sales or earnings.
Registrant is dependent on the availability of petrochemicals and
petroleum-derived raw materials and supplies, which have been available in
the past in adequate quantities. In the past year, Registrant's operations
were not affected materially by any raw material shortages. Registrant
presently does not foresee any shortage of materials in the near future.
Registrant has numerous patents, patent applications, and licenses
under patents, of various durations which, in the aggregate, are material to
the operations of the Registrant. The Registrant, however, does not believe
that expiration of any particular patent or group thereof would have a
material adverse effect upon its business as a whole.
The specialty chemical business is not considered to be seasonal. The
Registrant traditionally has carried sufficient inventory at various stages
of production to respond quickly to the needs of its customers. Accounts
receivable generally are due within thirty days of invoicing, and letters of
credit are employed when deemed appropriate. The Registrant believes that
its practices are consistent with industry standards.
Registrant's customers are located throughout the world and no one
customer constitutes more than 10% of the Registrant's business. Non-U.S.
revenues were approximately 32% to 38% of total specialty chemical revenues
during each of the last three years.
Orders from customers for specialty chemical products generally are
filled from stock or manufactured within a few days or weeks after receipt of
the order and, as a result, backlog of orders is not significant in relation
to total annual dollar volume of sales.
The Registrant's specialty chemical product lines, oil field chemicals,
industrial
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chemicals, and industrial polymers and waxes are in competition with
a number of manufacturers. Competitive companies vary in size from
large international companies to small companies which may compete with the
Registrant in the sale of one product or a line of products. All aspects of
this business are considered to be very competitive. In the Registrant's
opinion, Registrant's overall competitive position in the market has not
changed materially in the past fiscal year, although Registrant is unable to
predict the extent to which its business may be affected by future
competition or by consolidations within the industry. Information on
acquisitions, joint ventures, and alliances made by the Registrant is set out
in the Registrant's 1995 annual report on page 14 under the caption
"Acquisitions, Joint Ventures, and Alliances" and is incorporated by
reference herein.
2. Equipment Segment - The equipment segment designs, installs and
-----------------
services processing equipment for petroleum, petrochemical and electrical
power generating industries. Products and services are marketed both
domestically and in foreign countries through the Registrant's own field
staff and a limited number of agents and distributors.
During the fiscal year ended October 31, 1995, there were no material
changes in the kinds of products or services rendered, or in the Registrant's
methods of distribution. During the past year the Registrant has not had,
and in the foreseeable future does not anticipate, any shortage of raw
materials. Certain products of the equipment segment are covered under
patents, patent applications, and licenses under patents. Registrant does
not believe that expiration of any particular patent or group thereof would
have a material adverse effect upon its business as a whole.
The equipment segment business is not seasonal, but is subject to the
business cycles of the industries which it serves.
This segment primarily produces processing equipment upon order from
customers. Accounts receivable generally are due within thirty days of
invoicing, and letters of credit are employed when deemed appropriate. The
Registrant believes that its practices are consistent with industry
standards.
Registrant's equipment customers are located throughout the world and
no one customer constitutes a significant portion of the Registrant's
business on a continuing
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basis. However, one or several equipment contracts may represent a
significant portion of the equipment segment revenues in a particular year.
Non-U.S. revenues ranged from 44% to 69% of total equipment revenues during
the last three years.
The amount of backlog orders for the equipment segment at October 31,
1995, approximates $8.2 million. Substantially all of these orders are
expected to be completed in fiscal 1996. Backlog orders as of October 31,
1994 were $11.1 million.
The equipment segment is in competition with similar equipment and
services offered by other competitors. Although, in Registrant's opinion,
Registrant's competitive position in its equipment business has not changed
materially in the past year, the Registrant is unable to predict the extent
to which its business may be affected by future competition.
3. Registrant's Business in General - The Registrant expended $12.8
--------------------------------
million, $12.7 million, and $13.6 million in fiscal years 1995, 1994 and
1993, respectively, on research activities relating to development of new
products and services, and on improvement of existing products and services.
During the last three years, approximately 94% to 96% was applicable to the
Registrant's specialty chemical products segment. The Registrant also
continued its commitment to technology through its emphasis on field
applications support which, when combined with the research and development
amounts, resulted in total technology expenditures of $20.6 million,
$23.3 million and $24.4 million in fiscal years 1995, 1994 and 1993,
respectively. The Registrant directly sponsors substantially all of its
research activities.
The Registrant is subject to various federal, state and local laws and
regulations concerning environmental matters. The Registrant maintains a
separate Safety, Health and Environmental Affairs Department charged with the
responsibility of monitoring compliance with these various laws and
regulations. For fiscal year 1995, these efforts did not result in any
material capital expenditure or material charges to income, and it is not
likely that these efforts will result in any material capital expenditure or
material charges to income during fiscal year 1996.
Approximately 1,748 persons are employed worldwide by Registrant and its
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subsidiaries.
(d) Financial Information About Foreign and Domestic Operations and
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Export Sales. Information under this caption is included in the
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Registrant's 1995 Annual Report to Stockholders for each of the three years
ended October 31, 1995, 1994, and 1993, respectively, on page 17 under the
caption "Worldwide Operations" and is incorporated by reference herein.
Substantially all of the Registrant's non-U.S. sales are made to major
international companies, national oil companies and utilities, and
contractors and distributors, some of long standing. Letters of credit are
required when and where appropriate. The risk attendant to the foreign
business conducted by Registrant and its subsidiaries is believed to be
greater than the risk involved in doing business within the United States.
The Registrant protects itself from potential losses due to foreign currency
fluctuations through pricing adjustments, maintenance of offsetting asset and
liability balances, and utilization of foreign currency futures contracts
when deemed appropriate.
ITEM 2. PROPERTIES
Principal properties of the Registrant and its subsidiaries are set
forth in the following table:
<TABLE>
<CAPTION>
Type of Industry Segment
Facility User
---------------- --------------------
<S> <C> <C>
Petrolite Corporation -
Barnsdall, Oklahoma Manufacturing Specialty Chemical
La Porte, (Bayport) Texas Manufacturing Specialty Chemical
Brea, California Real Estate Corporate
Kilgore, Texas Manufacturing Specialty Chemical
Rancho Dominguez, California Sales Office and Specialty Chemical
Warehouse
Midland, Texas Blending and Warehouse Specialty Chemical
Tulsa, Oklahoma Administrative Specialty Chemical
Webster Groves, Missouri Manufacturing, Specialty Chemical/
Research and Corporate
Administrative
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Houston, Texas Manufacturing, Equipment
Engineering and
Administrative
Consolidated Subsidiaries -
Luzzatto & Figlio (France) S.A. Sales Office Specialty Chemical
(Paris, France)
Petrolite Canada Inc. Blending Specialty Chemical
(Nisku, Alberta Canada)
Petrolite Limited Manufacturing and
(Kirkby, England) Administrative Specialty Chemical
Petrolite Pacific Pte. Ltd. Blending Specialty Chemical
(Singapore)
Petrolite Saudi Arabia Ltd. Blending Specialty Chemical
(Dammam, Saudi Arabia)
P.T. Petrolite Indonesia Manufacturing Specialty Chemical
Patrama (Batam, Indonesia)
Petrolite Suramericana, S.A. Blending Specialty Chemical
(Barcelona, Venezuela) and Administrative
</TABLE>
All properties are owned by the Registrant, except for the following:
Petrolite Saudi Arabia Ltd. blending facilities are located on leased
properties with the lease expiring 2002.
Petrolite Pacific Pte. Ltd. blending facilities are located on leased
properties with the lease expiring 2009.
P.T. Petrolite Indonesia Patrama manufacturing facilities are located
on leased property with the lease expiring in October, 2015.
In addition to the foregoing properties, the Registrant and its
subsidiaries occupy a number of small general and sales offices under
short-term leases and its subsidiaries occupy a number of distribution
warehouses located on small sites owned in fee.
Although facilities are of varying ages, the Registrant considers them
generally to be well maintained, equipped with modern and efficient
equipment, and in good operating condition. Current productive capacity is
adequate to meet demands for the immediate future.
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ITEM 3. LEGAL PROCEEDINGS
Various claims, lawsuits and other legal and administrative proceedings
arising in the ordinary course of business are pending against the
Registrant. Management and legal counsel are of the opinion that any sum the
Registrant may be required to pay in connection with the ultimate disposition
of such proceedings in excess of the amounts recorded or disclosed in the
financial statements of the Registrant will not have a material adverse
effect on its financial condition or results of operations.
The Registrant has been named a potentially responsible party (PRP)
under the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 with respect to three "Superfund" sites. The Registrant has not
owned or operated any of the sites and other PRPs also have been so
designated with respect to each such site. Although this law technically
imposes joint and several liability on each responsible party at each site,
the extent of the Registrant's expected financial contribution is expected to
be limited based on the number of other PRPs and the relative volumes and
types of materials involved at each site that may be attributable to the
Registrant. The Registrant also is involved in remedial response and
voluntary environmental cleanup, in some cases under the direction of
governmental agencies, at other locations which are not the subject of the
Superfund law. Subject to the difficulty in estimating future environmental
costs, the Registrant expects that any sums it may be required to pay in
connection with such environmental matters in excess of the amounts recorded
in the financial statements of the Registrant will not have a material
adverse effect on its financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders, through
the solicitation of proxies or otherwise, during the fourth quarter of fiscal
1995.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information regarding Registrant's capital stock appears on page 15 of
the Registrant's 1995 Annual Report to Stockholders under the caption
"Stockholders' Equity/Capital Stock" and is incorporated by reference herein.
As of January 5, 1996 the Registrant had 2,084 stockholders of record.
ITEM 6. SELECTED FINANCIAL DATA
A summary of selected financial data for the five years ended October
31, 1995 appears on pages 30 and 31 of the Registrant's 1995 Annual Report to
Stockholders under the caption "11-Year Summary", and is incorporated by
reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information under this caption is in the Registrant's 1995 Annual
Report to Stockholders on pages 12 through 17, under the caption "Financial
Review", and on page 24 under the captions "Short-Term Borrowings and Lines
of Credit, and Long-Term Debt" and is incorporated by reference herein.
Also during the fourth quarter of 1994, the Registrant recorded a
$20,025,000 pretax charge for reorganization of its Specialty Chemical
operations. For additional information on this charge, see the caption
"Reorganization" on page 24 of the Registrant's 1995 Annual Report to
Stockholders.
During fiscal 1995, the United States, Canada, and several major
countries in Europe including the United Kingdom, France and Germany, which
collectively represent a significant part of the Registrant's worldwide
operations, experienced inflation in the range of 3% to 4%. Inflation in
other countries of less significance to the Registrant generally range from
2% to 10%, except for certain countries in Latin America and the former
Soviet Union which experienced much higher inflation rates.
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Raw material price increases experienced by the Registrant approximated
5% in North America and 14% in the United Kingdom. These raw material price
increases generally could not be passed along to customers in the
Registrant's price-sensitive markets and accounted for the majority of the
reduction in gross profit reported by the Registrant as compared to the prior
year. The remainder of the reduction in gross profit was attributable
primarily to reduced sales volume.
In addition to raw material price increases, the Registrant's chemical
business continued to face difficult market conditions, especially in North
America where the petroleum industry continued to reconfigure itself in
response to tight market conditions. Profit margins in the refinery markets
also tightened as competitive pressures increased and refiners continued to
downsize operations in the wake of their own lower profitability. The
Registrant anticipates that this market will remain substantially unchanged
for the foreseeable future.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements of the Registrant and its
subsidiaries, and the Notes to Consolidated Financial Statements, together
with the report thereon of Price Waterhouse LLP dated November 30, 1995,
appearing on pages 18 through 29, the "Quarterly Results" on page 13,
"Industry Segment Data" on page 16, and "Worldwide Operations" information on
page 17 in the Registrant's 1995 Annual Report to Stockholders, are
incorporated by reference herein.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
During the Registrant's two most recent fiscal years there were no
changes in or disagreements with the Registrant's independent accountants on
accounting or financial disclosure.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
a) Directors of Registrant - Information regarding directors on
-----------------------
pages 5 through 8 of the Registrant's Notice of Annual Meeting and Proxy
Statement dated January 23, 1996, hereby is incorporated by reference. Also
see information on page 32 of the Registrant's Annual Report to Stockholders
under the caption "Corporate Organization" which is incorporated by reference
herein.
b) Executive officers of Registrant - Executive officers of the
--------------------------------
Registrant, their ages and positions held, are as follows:
<TABLE>
<CAPTION>
Date elected to Age at
Name Title present office Oct. 31, 1995
- --------------------------- -------------------------------- --------------- -------------
<S> <C> <C> <C>
Paul H. Hatfield <F1> Chairman, President and 11/20/95 59
Chief Executive Officer
John M. Casper Vice President and 02/14/94 50
Chief Financial Officer
Ralph J. Churchill Vice President, 08/09/89 51
General Manager,
Tretolite Division
Toby R. Graves Vice President; 06/08/88 49
General Manager,
Polymers Division
William F. Haberberger Controller 03/04/91 45
John F. McCartney Vice President, 08/09/90 59
General Counsel
Charles R. Miller Corporate Secretary, 08/12/92 40
Associate General Counsel
William E. Nasser <F2> Former Chairman, President 05/19/88 56
and Chief Executive Officer
Derek Redmore Vice President, 12/08/93 57
Technology
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Steven F. Schaab Treasurer 01/01/93 43
Richard J. Seidel <F3> Vice President 04/08/85 54
General Manager,
Petreco Division
James M. Zemenick Vice President, 06/01/82 48
Administration and
Corporate Development
<FN>
<F1> Paul H. Hatfield was elected to succeed William E. Nasser as chairman,
president and chief executive officer at a meeting of the company's
board of directors held on November 20, 1995.
<F2> William E. Nasser retired as chairman, president and chief executive
officer on November 20, 1995.
<F3> Richard J. Seidel resigned as a vice president and General Manager
effective November 30, 1995.
</TABLE>
c) Identification of certain significant employees - Mr. Stuart
------------------------------------------------
Monro joined the Registrant in January, 1978. After having served in various
sales and managerial positions in international operations, in March of 1989
he was appointed Managing Director of Petrolite Ltd. In June 1991, he also
was appointed to the position of General Manager of the newly created
EuroChem Division. He holds various diplomas and degrees including a
Licentiate in Chemistry and an M.B.A. degree in Management from the City
University in London.
Mr. David Winslett joined the Registrant in December of 1982 with 15
years of refinery and specialty chemical experience. From 1982 to 1989 he
was Operations Manager for the European Industrial Chemicals business based
in Kirkby, England. Since 1989, he has served in various capacities in
Petrolite's St. Louis office, including Vice President in the Industrial
Chemicals Division. On June 16, 1993, he was named General Manager of the
Industrial Chemicals Division. He is a graduate of the University of Wales
with a B.Sc. (Honors) in Chemistry.
Mr. Francis X. Foran joined the Registrant in April, 1993 when the
Registrant acquired the business and certain of the assets of Welchem, Inc.
He had served at
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Welchem as head of international operations, and before that he served in
various management positions during his 28 years' experience in the oil
service industry worldwide. He is a graduate of University College Dublin.
d) Business experience - Information regarding business experience
-------------------
of directors, on pages 6 and 7 of the Registrant's Notice of Annual Meeting
and Proxy Statement dated January 23, 1996, hereby is incorporated by
reference.
Officers are elected to serve until removed or until a successor has
been elected or appointed. Except as noted below, each of the officers in
Item 10 (b) has served in his present office for at least five years. The
following is a brief description of past positions of those officers who were
elected to their present position within the last five years.
Mr. Paul H. Hatfield joined the Registrant on November 20, 1995, as
chairman, president and chief executive officer. Prior to joining the
Registrant, Mr. Hatfield served as chief executive officer of Protein
Technologies International, a subsidiary of Ralston Purina Company. He
retired from Ralston in the fall of 1994 after 34 years, 17 of those as an
officer. Since mid-August, 1995, he had served as the Registrant's vice
chairman, responsible for the operations of the Chemicals Group. He holds a
B.S. in Agricultural Economics and a M.S. in Economics/Marketing, both from
Kansas State University.
Mr. John M. Casper joined the Registrant in February, 1994 as Vice
President and Chief Financial Officer. He has 25 years of experience in
financial and operations management, most recently as Executive Vice
President with Mitek, Inc., where he was Chief Financial Officer and
responsible for overseas operations in Southeast Asia, Japan, Australia/New
Zealand, Africa and Canada. He holds a B.S. degree from Drexel Institute of
Technology and an M.B.A. from Oklahoma State University.
Dr. Ralph J. Churchill returned to the Registrant July 1, 1989 as Vice
President-Corporate Development. In June 1990, he became Vice President of
Technology and in January 1993, he also was named to the position of Vice
President, Marketing. In December, 1993, he was appointed Vice
President-Special Projects and in June, 1994, he was appointed vice president
and general manager of the Tretolite Division. He served the Registrant in
various research and management positions before leaving in 1981 to
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head his own management consulting firm. He holds a Ph.D. in engineering.
Mr. William F. Haberberger joined the Registrant in October 1977, as an
internal auditor. Since 1980, he has served in various financial managerial
positions of the Registrant's international operations until his election to
Controller on March 4, 1991. He holds a B.S. degree in Business from the
University of Missouri - St. Louis and is a certified public accountant.
Mr. John F. McCartney joined the Registrant in 1973, managing legal
aspects of the Registrant's international operations, primarily working to
establish subsidiaries, affiliates and joint venture companies worldwide. He
was named Vice President in August 1989. During July 1992, he also assumed
responsibility for the administration of the Law Department and now is Vice
President, General Counsel.
Mr. Charles R. Miller joined the Registrant in May 1990, as an
attorney, and was elected Secretary on August 12, 1992. His title now is
Corporate Secretary, Associate General Counsel. He has fifteen years
experience in the public and private practice of law.
Dr. Derek Redmore joined the Registrant as a research chemist in 1965
and was promoted to group Leader in 1966. From 1972 to 1993, he held various
managerial positions with increasing responsibility in Research and
Development, most recently Director of Technology Support. In December 1993,
he was elected Vice President, Technology. He earned his B.Sc. and Ph.D.
degrees in Organic Chemistry at the University of Nottingham.
Mr. Steven F. Schaab joined the Registrant in November 1992, and was
elected Treasurer effective January 1, 1993. He has 19 years of experience
in financial and treasury management, most recently with Peabody Holding
Company, Inc. A certified public accountant, he holds a B.S.B.A. degree in
accounting from the University of Missouri-Columbia.
e) Compliance with Section 16(a) of the Exchange Act. Information
--------------------------------------------------
regarding compliance with Section 16(a) of the Exchange Act, on page 15 of
the Registrant's Notice of Annual Meeting and Proxy Statement dated January
23, 1996, hereby is incorporated
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by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding Compensation of Executive Officers, Retirement
Benefits, and Compensation of Directors on pages 9 through 14 of the
Registrant's Notice of Annual Meeting and Proxy Statement dated January 23,
1996, hereby is incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information regarding Security Ownership of Certain Beneficial Owners
and Management set out on pages 3 through 5 of the Registrant's Notice of
Annual Meeting and Proxy Statement dated January 23, 1996, hereby is
incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information appearing under Certain Transactions on pages 8 and 9 of
the Registrant's Notice of Annual Meeting and Proxy Statement dated January
23, 1996, hereby is incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
The consolidated financial statements and supplementary information of
the Registrant have been incorporated by reference under Item 8. With the
exception of the aforementioned information, and the information incorporated
specifically in Items 1, 5, 6, 7, 8, 10, and 14, the Petrolite Corporation
1995 Annual Report is not to be deemed filed as part of this report.
Financial statement schedules listed below should be read in conjunction with
financial statements in the 1995 Annual Report to Stockholders. Financial
statement schedules not included in this Form 10-K Annual Report have been
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omitted because they are not applicable or because the required information
is shown in the financial statements or notes thereto.
a) Documents filed as a part of this report:
Financial Statements previously incorporated by reference under Item 8
herein above.
Consolidated statements of earnings for the years ended October 31,
1995, 1994 and 1993 as shown on page 18 of the Registrant's 1995 Annual
Report to Stockholders.
Consolidated balance sheets at October 31, 1995 and 1994 as shown on
page 19 of the Registrant's 1995 Annual Report to Stockholders.
Consolidated statements of cash flows for the years ended October 31,
1995, 1994 and 1993 as shown on page 20 of the Registrant's 1995 Annual
Report to Stockholders.
Consolidated statements of stockholders' equity for the years ended
October 31, 1995, 1994 and 1993 as shown on page 21 of the Registrant's
1995 Annual Report to Stockholders.
Notes to consolidated financial statements as shown on pages 22 through
28 of the Registrant's 1995 Annual Report to Stockholders.
Report of independent accountants as shown on page 29 of the
Registrant's 1995 Annual Report to Stockholders.
<TABLE>
Exhibit Index (Listed by numbers corresponding to the Exhibit
Table of Item 601 in Regulation S-K)
<CAPTION>
Exhibit No.
<C> <S>
3.1 - Restated Certificate of Incorporation of the Registrant,
incorporated by reference from the Notice of Annual Meeting
and Proxy Statement dated January 21, 1987, Exhibit B and
the Notice of Annual Meeting and Proxy Statement dated
February 3, 1984, Exhibit A.
3.2 - Bylaws of the Registrant, as adopted and restated
December 14, 1994, incorporated by reference from the
Registrant's Form 10-K Annual Report for the year ended
October 31, 1994.
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4.1 - Note Purchase Agreement dated as of September 3,1993,
between the Registrant and Equity Life Assurance Society
of the United States, Aid Association for Lutherans, The
Canada Life Assurance Company, Canada Life Insurance
Company of America(CLICA), Provident Mutual Life Insurance
Company-CALIC, Provident Mutual Life and Annuity Company of
America, Provident Mutual Life Insurance Company of
Philadelphia-SPDA, incorporated by reference from the
Registrant's Form 10-K Annual Report for the year ended
October 31, 1993.
4.2 - Rights Agreement dated as of March 25, 1994, between the
Registrant and Society National Bank, as Rights Agent,
incorporated by reference from the Registrant's Form 8-K
filed April 16, 1994.
4.3 - Amendment No. 1 to the Rights Agreement dated as of March 25,
1994, between the Registrant and Society National Bank as
Rights Agent, incorporated by reference from the
Registrant's Form 8-K filed December 13, 1994.
4.4 - Amendment No. 2 to the Rights Agreement dated as of March 25,
1994, between the Registrant and Society National Bank as
Rights Agent, incorporated by reference from the
Registrant's Form 8-K filed February 14, 1995.
10.1 - 1987 Stock Incentive Plan, incorporated by reference from the
Registrant's Notice of Annual Meeting and Proxy Statement
dated January 21, 1987, Exhibit A.<F*>
10.2 - Petrolite 1993 Stock Incentive Plan, as amended on August 8,
1994, incorporated by reference from the Registrant's
Form 10-K Annual Report for the year ended October 31,
1994.<F*>
10.3 - Form of Executive Agreement between the Registrant and
certain executives of the Registrant, incorporated by
reference from the Registrant's Form 10-K Annual Report
for the year ended October 31, 1994.<F*>
-18-
<PAGE> 19
10.4 - Petrolite Corporation Non-Qualified Savings Plan effective
October 1, 1995, and form of Compensation Reduction
Agreement.<F*>
10.5 - Management Agreement dated as of August 11, 1995 with a
director of the Registrant.<F*>
10.6 - Stock Option Agreement dated as of August 11, 1995 with a
director of the Registrant.<F*>
10.7 - Agreement terminating a Management Agreement and a Stock
Option Agreement with a director effective November 20,
1995.<F*>
10.8 - Agreement between the Registrant and William E. Nasser
dated as of November 20, 1995.<F*>
13.1 - Those portions of the 1995 Annual Report to Stockholders
expressly incorporated by reference herein
21.1 - Subsidiaries of the Registrant
23.1 - Consent of Independent Accountants
24.1 - Power of Attorney
27.1 - Financial Data Schedule.
99 - Notice of Annual Meeting and Proxy Statement
<FN>
<F*> Indicates a management contract or compensatory plan or agreement.
</TABLE>
b) No reports on Form 8-K were filed with the SEC during the fourth
quarter of fiscal 1995.
Individual financial statements of the Registrant's subsidiaries have
been omitted since the Registrant is primarily an operating company and the
operating subsidiaries included in the consolidated financial statements, in
the aggregate, do not have minority equity interest and/or indebtedness to
any person other than the Registrant or its consolidated subsidiaries in
amounts which, together, exceed 5 percent of total consolidated assets at
October 31, 1995. Separate financial statements of subsidiaries not
-19-
<PAGE> 20
consolidated, and 50% or less owned entities (accounted for by the equity
method) have been omitted because, if considered in the aggregate, they would
not constitute a significant subsidiary.
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.
PETROLITE CORPORATION
---------------------
(Registrant)
By s/ John M. Casper
-----------------------------
John M. Casper
Vice President and
Chief Financial Officer
Dated: January 26, 1996
-----------------------------
-20-
<PAGE> 21
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 and on the dates indicated.
By s/ Paul H. Hatfield By s/ John M. Casper
------------------------------- ---------------------------------
Paul H. Hatfield John M. Casper
Principal Executive Officer Principal Financial Officer
and Director
Dated: January 26 , 1996 Dated: January 26 , 1996
---------------------- -----------------------
By By s/ William F. Haberberger
-------------------------------- ---------------------------------
Paul F. Cornelsen, Director William F. Haberberger
Principal Accounting Officer
Dated: January 26 , 1996 Dated: January 26 , 1996
---------------------- -----------------------
By s/ Andrew B. Craig<F*> By s/ Louis Fernandez<F*>
-------------------------------- ---------------------------------
Andrew B. Craig, Director Louis Fernandez, Director
Dated: January 26 , 1996 Dated: January 26 , 1996
---------------------- -----------------------
By s/ Wayne J. Grace<F*> By s/ William E. Maritz<F*>
-------------------------------- ---------------------------------
Wayne J. Grace, Director William E. Maritz, Director
Dated: January 26 , 1996 Dated: January 26 , 1996
---------------------- -----------------------
By s/ William E. Nasser <F*> By s/ Richard L. O'Shields<F*>
-------------------------------- ---------------------------------
William E. Nasser, Director Richard L. O'Shields, Director
Dated: January 26 , 1996 Dated: January 26 , 1996
---------------------- -----------------------
By s/ Fairfax F. Pollnow <F*> By
-------------------------------- ---------------------------------
Fairfax F. Pollnow, Director Thomas P. Reidy, Director
Dated: January 26 , 1996 Dated: January 26 , 1996
---------------------- -----------------------
By s/ Joseph T. Williams <F*> [FN]
-------------------------------- <F*> By s/ Charles R. Miller
Joseph T. Williams, Director ----------------------------
Charles R. Miller, Attorney in Fact
Dated: January 26 , 1996
----------------------
-21-
<PAGE> 1
EXHIBIT 10.4
PETROLITE CORPORATION
NON-QUALIFIED SAVINGS PLAN
--------------------------
ARTICLE I
SCOPE OF PLAN AND DEFINITIONS
1.1 PURPOSE AND SCOPE OF PLAN. Petrolite Corporation hereby
adopts a non-qualified savings plan known as the PETROLITE
CORPORATION NON-QUALIFIED SAVINGS PLAN. The Plan enables
Participants to receive those benefits provided generally
under the Company's Employees' Savings Plan that are not
available to Plan participants because of limits contained in
the Internal Revenue Code of 1986, as amended, including the
following:
(a) Section 401(k)(3) and 401(m)(2), which limit the pre-tax
and after-tax contributions made by and on behalf of
Highly Compensated Employees pursuant to qualified plans;
(b) Section 402(g), which limits an Employee's annual Pre-Tax
Contributions to $7,000 (as adjusted for certain
increases under Section 415(d) of the Code); and
(c) Section 415, which limits the annual sum of Employee and
Company contributions to the Employees' Savings Plan made
by or on behalf of an Employee to $30,000 (as adjusted
for certain increases under Treasury Regulations pursuant
to Section 415 of the Code).
1.2 DEFINITIONS. Whenever used in the Plan the following terms
shall have the respective meaning set forth below unless
expressly provided otherwise herein or unless a different
meaning is plainly required by the context:
(a) "BENEFICIARY" and "BENEFICIARIES" mean(s) the person,
persons or entity, including one or more trusts, last
designated by a Participant on a form supplied by the
Company as a beneficiary or beneficiaries to receive a
payment or payments under the Plan in the event of the
death of the Participant. A Participant may designate
any number of successor Beneficiaries. If no such
designation is in effect at the time of death of the
Participant, or if no such persons or entities survive
the Participant, the Beneficiary shall be the
Participant's estate. Only one beneficiary designation
may be in effect at any time.
Effective 10/1/95
<PAGE> 2
(b) "BOARD OF DIRECTORS" means the Board of Directors of
Petrolite Corporation.
(c) "CODE" means the Internal Revenue Code of 1986, as
amended.
(d) "COMMITTEE" means the committee established and appointed
pursuant to Section 5.1 of this Plan.
(e) "COMPANY" means Petrolite Corporation.
(f) "COMPENSATION" means compensation as defined in
Section 2.1 of the Employees' Savings Plan, as amended.
(g) "COMPENSATION REDUCTION ACCOUNT" means the account
established for a Participant pursuant to Section 2.2 of
the Plan into which amounts are credited as provided in
the Plan.
(h) "COMPENSATION REDUCTION AGREEMENT" means an agreement
between the Company and a Participant pursuant to the
Plan.
(i) "EFFECTIVE DATE" means October 1, 1995.
(j) "EMPLOYEE" means an employee of the Company who is among
a select group of highly compensated or management
employees of the Company as determined by the Committee
and who is eligible to participate in the Employees'
Savings Plan and has authorized the Company, on a form
provided by the Company, to deduct an amount from his
Compensation and contribute that amount to his tax-
deferred contribution account in the Employees' Savings
Plan.
(k) "EMPLOYEES' SAVINGS PLAN" means the Petrolite Corporation
Employees' Savings Plan, Plan No. 004, as it may be
amended from time to time.
(l) "HIGHLY COMPENSATED EMPLOYEE" means an Employee who is a
highly compensated employee as defined in Section 414(q)
of the Code and any regulations promulgated thereunder.
(m) "PARTICIPANT" means an Employee who has satisfied the
eligibility and participation requirements of this Plan
and who has entered into a Compensation Reduction
Agreement pursuant to the Plan.
(n) "PLAN" means the Petrolite Corporation Non-Qualified
Savings Plan as set forth herein and as it may be amended
from time to time.
-2-
<PAGE> 3
(o) "PLAN YEAR" means each calendar year; except that, the
first Plan Year shall commence on the Effective Date of
this Plan and shall end December 31, 1995.
(p) "TAX-DEFERRED CONTRIBUTION" means a contribution
authorized by an Employee or Participant to the tax-
deferred contribution account in the Employees' Savings
Plan pursuant to Section 4.2 of the Employees' Savings
Plan.
1.3 GENDER AND NUMBER. Whenever used herein, a masculine pronoun
shall be deemed to include the feminine pronoun, a singular
word shall be deemed to include the singular and plural, and
a plural word shall be deemed to include the singular and
plural in all cases where the context requires.
1.4 CROSS-REFERENCES. References herein to "Section" or
"subsection" shall refer to the referenced Section or
subsection of this Plan unless indicated otherwise.
ARTICLE II
ELIGIBILITY AND PLAN PARTICIPATION
COMPENSATION REDUCTION AGREEMENTS AND ACCOUNTS
2.1 ELIGIBILITY. If the Committee determines that all or any
portion of the Tax-Deferred Contribution authorized by an
Employee pursuant to the Employees' Savings Plan will be
reduced because of limits contained in the Code, including
those contained in Sections 401(a)(17), 401(k)(3), 402(g) and
415, the Employee shall be eligible to become a Participant by
entering into a Compensation Reduction Agreement as provided
in this Plan.
2.2 COMPENSATION REDUCTION AGREEMENTS.
(a) The Compensation Reduction Agreement shall be in a form
as prescribed by the Committee and shall include:
(i) The Participant's authorization for a reduction in
his Compensation for the Plan Year referenced in
the Compensation Reduction Agreement. The amount
of such reduction shall be equal to the reduction
in the Participant's Tax-Deferred Contribution
referenced in Section 2.1 of this Plan, except
that the reduction for the first Plan Year may be
some lesser amount as approved by the Committee;
and
(ii) The Company's agreement to credit the
Participant's Compensation Reduction Account with
the amount of such reduction and to pay interest
-3-
<PAGE> 4
thereon at the rate determined by the Committee
for each Plan Year.
(b) The interest rate established by the Committee shall
apply to all amounts credited to a Participant's
Compensation Reduction Account regardless of the
particular Compensation Reduction Agreement pursuant to
which an amount was credited. Interest on amounts in a
Participant's Compensation Reduction Account shall be
compounded annually, and all amounts credited to a
Participant's Compensation Reduction Account shall be
deemed to have been credited at the beginning of the Plan
Year.
(c) A Compensation Reduction Agreement shall become effective
on the first day of the Plan Year next following the date
it is executed by the Company and the Participant, and
will continue in effect until amounts credited to the
Compensation Reduction Account pursuant thereto have been
paid as provided in the Plan.
2.3 LIMIT ON COMPENSATION REDUCTION AGREEMENTS. No Compensation
Reduction Agreement may provide for a reduction in
Compensation that is greater than the maximum Tax-Deferred
Contribution specified in the Employees' Savings Plan without
reference to any limitations in the Code.
2.4 COMPENSATION REDUCTION ACCOUNTS. The Company shall credit the
amount designated by a Participant in a Compensation Reduction
Agreement to the Participant's Compensation Reduction Account.
Amounts may be withdrawn from a Compensation Reduction Account
only as provided in this Plan.
ARTICLE III
VESTING
3.1 COMPENSATION REDUCTION ACCOUNT. Each Participant shall be
vested fully at all times in amounts contributed to the
Participant's Compensation Reduction Account pursuant to a
Compensation Reduction Agreement and to interest accumulated
thereon.
ARTICLE IV
PAYMENTS FROM THE PLAN
4.1 ENTITLEMENT TO AND COMMENCEMENT OF PAYMENT. Upon a
Participant's retirement (as defined in the Petrolite
Corporation Retirement Plan No. 001), disability (as defined
in the Petrolite Corporation Disability Plan No. 508), or
termination from employment, amounts credited to the
Participant's Compensation Reduction Account shall be paid to
-4-
<PAGE> 5
or on behalf of the Participant. The full payment, or the
initial payment, depending on the payment option elected, will
be made during January of the year next following the year
during which the Participant became entitled to payment.
4.2 ELECTION OF PAYMENT OPTIONS. Amounts payable to or on behalf
of a Participant from the Participant's Compensation Reduction
Account shall be paid either as a lump sum or in 15 annual
installments, as elected by the Participant in the applicable
Compensation Reduction Agreement.
4.3 LUMP SUM PAYMENT.
(a) If a Participant has elected to receive all or any
portion of the amount in his Compensation Reduction
Account in a lump sum payment, that portion of the
Participant's Compensation Reduction Account to be paid
in a lump sum payment shall be valued as of the last day
of the calendar year during which the Participant became
entitled to payment. The lump sum payment shall be made
during January of the year next following the year during
which the Participant became entitled to payment and no
interest shall accrue on such amount between the
valuation date and the date the lump sum payment is made.
(b) If a Participant who has elected to receive all or any
portion of the amount in his Compensation Reduction
Account in a lump sum payment dies before the payment is
made, the lump sum payment shall be made to the
Participant's Beneficiary.
4.4 ANNUAL INSTALLMENT PAYMENTS.
(a) If a Participant has elected to receive all or any
portion of the amount in his Compensation Reduction
Account in annual cash installment payments, that portion
to be paid in annual cash installment payments shall be
valued as of the last day of the calendar year during
which the Participant became entitled to payment. The
initial annual installment payment shall be made during
January of the year next following the year during which
the Participant became entitled to payment, and shall be
determined by dividing the value of the Participant's
Compensation Reduction Account on such valuation date by
15. No interest shall accrue on the initial annual
installment payment between the valuation date and the
date such payment is made. Thereafter, interest shall be
credited to the Participant's Compensation Reduction
Account in accordance with Section 2.2(a) of the Plan.
Subsequent annual installment payments shall be made
during January of each subsequent year, and shall be
adjusted to reflect interest credited by dividing the
-5-
<PAGE> 6
value of such Participant's Compensation Reduction
Account as of the last day of the preceding calendar year
by the number of payments remaining to be paid the
Participant.
(b) If a Participant who has elected to receive all or any
portion of the amount in his Compensation Reduction
Account in annual installment payments dies before
distribution of the full amount of such Participant's
Compensation Reduction Account, the remaining installment
payments shall be made to the Participant's Beneficiary.
4.5 PAYMENT ON PARTICIPANT'S DEATH. If a Participant dies before
becoming entitled to a payment under the Plan, amounts
credited to the Participant's Compensation Reduction Account
shall be paid to the Participant's Beneficiary in the payment
form or forms elected by the Participant.
ARTICLE V
ADMINISTRATION OF PLAN
5.1 RESPONSIBILITIES AND POWERS OF THE ADMINISTRATIVE COMMITTEE.
The Plan shall be administered by a Committee of at least
three persons appointed by the Board of Directors, as
constituted from time to time. The Committee shall have the
authority to interpret the Plan, to make all determinations
with respect to the Plan, and to take all other actions
necessary or advisable for the implementation and
administration of the Plan. Decisions and determinations of
the Committee on all matters relating to the Plan shall be in
its sole discretion and shall be conclusive. No member of the
Committee shall be liable for any action taken or decision
made in good faith relating to the Plan.
5.2 PROFESSIONAL SERVICES. The Committee shall have authority to
engage counsel and such clerical, financial, investment,
accounting and other services as the Committee deems necessary
or desirable to the operation and administration of the Plan.
5.3 CLAIM PROCEDURES.
(a) The Committee shall cause a written response to be made
to any claim for payment under the Plan within a
reasonable time after such claim is received by the
Company. Except as provided below, any denial of a claim
shall be in writing and shall set forth the specific
reasons for such denial including, but not limited to:
(i) Reference to relevant Sections or subsections of
the Plan and such additional information as may be
relevant to the denial of the claim;
-6-
<PAGE> 7
(ii) An explanation of the claims review procedure
established in the Plan; and
(iii) Notice that such claimant may review pertinent
Plan documents and/or request a review of such
denial, as provided herein.
(b) Within sixty (60) days following notice of the denial of
a claim, the claimant may request a review of such
denial. Within ten (10) days of its receipt of such
request, the Committee shall review the determination
made in light of the additional information or comments
submitted by such claimant.
(c) The Committee may, but shall not be required to, hold a
hearing at which such claimant may present the basis for
his claim. The Committee may establish rules of
procedure or conduct prior to commencing any such
hearing.
(d) The Committee shall render a decision within sixty (60)
days after a claimant's request for review unless the
Committee shall require a longer period of time for good
cause shown, and shall advise the claimant in writing of
its decision. The decision of the Committee shall be
final and conclusive.
(e) If the Committee fails to act on a claim within any time
period provided in the Plan, the claim shall be deemed to
have been denied by the Committee.
ARTICLE VI
AMENDMENT AND TERMINATION
6.1 AMENDMENT AND TERMINATION OF THE PLAN. The Company may at any
time and from time to time modify, amend or terminate the Plan
in any respect; provided, however, the termination or any
modification or amendment of the Plan shall not, without the
consent of a Participant, affect any vested amounts on the
date of such amendment, modification or termination.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 SOURCE OF PAYMENTS. The Plan shall not be funded and all
payments hereunder shall be made from the general assets of
the Company. The Company shall not, by virtue of any
provision of the Plan or by any action of any person
hereunder, be deemed to be a trustee or other fiduciary of any
property for any Participant or his Beneficiaries, and the
-7-
<PAGE> 8
liability of the Company to any Participant or his Beneficiary
pursuant to the Plan shall be those of a debtor pursuant only
to such contractual obligations created by the Plan; no such
obligation of the Company shall be deemed to be secured by any
pledge or other encumbrance on any property of the Company.
To the extent that any Participant or his Beneficiary acquires
a right to receive a payment from the Company under the Plan,
such right shall be no greater than the right of any unsecured
general creditor of the Company.
7.2 TRUST AUTHORIZED. The Board of Directors may, in its sole
discretion, authorize the creation of a trust account or
accounts to fund the payment of Payments herein.
7.3 INALIENABILITY OF RIGHT TO PAYMENT. Except as provided under
applicable law, no amount payable pursuant to, or interest in,
the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or
charge and any attempt to do so shall be void. No such right
to payment or interest shall be liable in any manner for, or
subject to garnishment, attachment, execution or levy, or be
liable for or subject to the debts, contracts, liabilities,
engagements or torts of any Participant or his Beneficiaries.
In the event the Committee finds that any Participant or his
Beneficiary has become bankrupt or that any attempt has been
made to anticipate, alienate, sell, transfer, assign, pledge,
encumber or charge any right to payment under, or interest in,
the Plan, the Committee shall hold or apply such right to
payment or interest, or any part thereof as it deems
appropriate, for the benefit of such Participant or his
Beneficiary.
7.4 EXPENSES. The Company shall pay all costs and expenses
incurred in operating and administering the Plan.
7.5 NO RIGHT WITH RESPECT TO EMPLOYMENT. Nothing contained
herein, nor any action taken under the provisions hereof,
shall be construed as giving any Participant any right with
respect to employment or continued employment by the Company.
7.6 WITHHOLDING. The Company shall withhold from any payment
hereunder any amounts required to be withheld under applicable
laws, rules and regulations.
7.7 HEADINGS. The headings of the Sections in the Plan are for
convenience of reference only and the text of the Plan shall
govern.
7.8 CONSTRUCTION. The Plan shall be construed, regulated and
administered in accordance with the laws of the State of
Missouri.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the Company has caused this instrument to
be executed by its officers thereunto duly authorized and its
corporate seal to be hereunto affixed as of the 1st day of
-------
October, 1995.
PETROLITE CORPORATION
By: /s/ John M. Casper
-------------------------------
Title: Vice President,
---------------------------
Chief Financial Officer
---------------------------
ATTEST:
/s/ Charles R. Miller
- -----------------------------
-9-
<PAGE> 10
COMPENSATION REDUCTION AGREEMENT
--------------------------------
THIS AGREEMENT made this ----- day of ------------, 1995 by and
between Petrolite Corporation, a Delaware corporation (hereinafter
the "Company"), and --------------------, an employee of the
Company (hereinafter the "Participant").
WHEREAS, the Board of Directors of the Company has approved and the
Company has adopted the Petrolite Corporation Non-Qualified Savings
Plan (hereinafter the "Plan") to enable Participants to receive
those benefits provided generally under the Company's Employees'
Savings Plan that are not available to Plan Participants because of
limits contained in the Internal Revenue Code of 1986 (the "Code");
and
WHEREAS, the Committee has determined that all or a portion of a
Tax-Deferred Contribution authorized by the Participant pursuant to
the Employees' Savings Plan will be reduced because of limits
contained in the Code; and
WHEREAS, the Participant desires to authorize the Company to reduce
his Compensation pursuant to the terms of the Plan;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the Company and the Participant agree as follows:
1. PARTICIPATION. The Participant hereby elects to participate
in the Plan and hereby authorizes a reduction in his
Compensation pursuant to the terms of the Plan.
2. INCORPORATION OF THE PLAN. The Plan, and all of its
provisions, as it now exists and as it may be amended
hereafter, is incorporated herein by this reference and made
a part of this agreement.
3. DEFINITIONS. The terms used in this agreement which are
defined in the Plan shall have the respective meanings given
them in the Plan unless a different meaning is clearly
required by the context.
4. COMPENSATION REDUCTION. Pursuant to the Plan, the Participant
elects to defer the receipt of, and the Company elects to
defer the payment of, Compensation in an amount equal to the
difference between the Tax-Deferred Contribution authorized by
the Participant and the actual amount of such Tax-Deferred
Contribution during the Plan Year ending December 31, 1996,
after application of the limits contained in the Code.
5. COMPENSATION REDUCTION ACCOUNT. The Company shall credit the
amount of such reduction to the Participant's Compensation
Reduction Account.
Form Approved 9/15/95
<PAGE> 11
6. INTEREST RATE. The interest rate established by the Committee
for the Plan Year ending December 31, 1996 is 6.90%. Interest
shall be paid on amounts in the Participant's Compensation
Reduction Account as provided in the Plan.
7. WITHDRAWALS FROM THE PLAN. Amounts may be withdrawn by the
Participant from a Compensation Reduction Account only as
provided in the Plan.
8. ELECTION OF PAYMENT OPTION. Pursuant to the Plan, the
Participant hereby elects that amounts payable to or on behalf
of the Participant from the Participant's Compensation
Reduction Account for the Plan Year ending December 31, 1996,
shall be paid: [check one]
A. as a lump sum, / /
B. in 15 annual installments, / /
as further provided in the Plan.
9. ENTIRE AGREEMENT. This agreement and the Plan contain the
entire agreement and understanding by and between the Company
and the Participant regarding the subject matter hereof. No
other representations, promises, agreements or understandings,
whether written or oral, shall have any force or effect.
10. GOVERNING LAW. This agreement will be effective when accepted
by the Company at its office in Missouri, will constitute a
Missouri contract, and will be construed in accordance with
the laws of Missouri.
11. RECEIPT OF PLAN DOCUMENTS. The Participant acknowledges
receipt of a copy of the Non-Qualified Savings Plan
Information Booklet.
IN WITNESS WHEREOF, the parties have executed this agreement in
duplicate originals as of the day and year first above written.
By the Participant: Approved and Accepted by
Petrolite Corporation in
- ------------------------------ Missouri on this -------
Printed or Typed Name day of -----------, 1995.
- ------------------------------ By: --------------------------
Signature
- ------------------------------ Title: -----------------------
Date
<PAGE> 1
EXHIBIT 10.5
MANAGEMENT AGREEMENT
--------------------
This Agreement made and entered into as of the 11th day of
August, 1995, by and between Petrolite Corporation, a Delaware
Corporation, 369 Marshall Avenue, St. Louis, MO 63119 (the
"Company"), and Paul H. Hatfield, 12444 Powerscourt Drive,
Suite 300, St. Louis, Missouri 63131 (the "Manager").
WITNESSETH:
WHEREAS, the Company desires to engage the services of Manager
in accordance with the terms and conditions of this Agreement; and
WHEREAS, Manager desires to perform services for the Company
in accordance with the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
agreements herein contained, the parties hereto agree as follows:
1. SCOPE OF WORK. The Manager shall provide management
services to the Company, particularly with regard to the Company's
Chemicals Group. The Manager shall report to the Chief Executive
Officer of the Company but shall be free to set his own hours.
2. PAYMENT. In consideration of the services to be provided
hereunder, the Company shall pay Manager, during the term of this
Agreement, the sum of $125,000, payable in 12 monthly installments
in accordance with the Company's general practice, beginning
August 31, 1995. In addition, Company shall offer to enter into
that certain Stock Option Agreement of even date attached hereto as
Exhibit A and incorporated by reference herein. Manager shall not
be entitled to any other compensation or remuneration for his
services provided hereunder.
3. INDEPENDENT CONTRACTOR. Manager shall be an independent
contractor with respect to Manager's performance of all services
rendered hereunder and Manager shall not be deemed for any purpose
to be an employee, agent, servant or representative of Company in
the performance of any service hereunder. The actual performance
and superintendence of all services performed hereunder shall be by
Manager.
4. TAXES. Manager shall pay all taxes, licenses and fees
levied or assessed against Manager in connection with or incident
to Manager's performance of this Agreement by any governmental
agency for unemployment compensation insurance, old age benefits,
social security, or any other taxes upon the remuneration of
Manager. Should Manager fail to pay any such tax or governmental
charge Company may, but shall not be required to, make such payment
for the account of Manager. In such event, Manager agrees to
furnish Company with all information required to enable Company to
make any such payments or reports and Manager shall reimburse
Company promptly for all such amounts paid by Company.
<PAGE> 2
5. REIMBURSEMENT OF EXPENSES. Company will reimburse
Manager for reasonable travel and other expenses incurred by
Manager in connection with the services provided by Manager
hereunder upon Company's approval of Manager's written submission
of an itemized account of such expenses.
6. TERM. This Agreement shall become effective on the day
referenced above, and shall continue in force and effect through
August 10, 1996, unless terminated earlier by either party as
provided herein. Either party may terminate this Agreement by
giving the other party 60 calendar days' notice in writing to that
effect at the respective address set forth above. Such
termination, however, shall not relieve either party of its
liabilities arising from or incident to services performed prior to
termination of this Agreement. Manager shall be entitled only to
that remuneration accrued or vested prior to such date of
termination.
7. SPECIAL COVENANTS BY MANAGER.
A. Covenant Not to Compete. Manager acknowledges
expressly that Company has developed and established a
valuable and extensive worldwide trade in its products and
that its customers, which have been established and maintained
at substantial expense, are of great value to the Company. In
further consideration for the covenants and agreements of
Company herein set forth, Manager covenants to Company that
neither he nor any corporation, partnership, business firm or
entity in which he may now or hereafter have an equity
interest (excepting a publicly-traded corporation in which he
has a less than 1% interest for investment purposes), or by
which he may be employed or otherwise affiliated as an
employee, representative, consultant or otherwise, nor any
person subject to his control or direction will, during the
"Period of this Covenant" as hereafter defined, within the
"Trade Area" hereafter specified, directly or indirectly:
i. Conduct, engage in, be connected with, have
any interest in, consult for, or aid or assist in any
manner any person, firm or business entity (whether a
corporation, partnership, proprietorship or otherwise) in
engaging in the development, manufacture, distribution,
sale or application of services or products like or
similar to any services or products now being developed,
manufactured, marketed or distributed by Company or any
of its affiliates, or which may be developed,
manufactured, marketed or distributed by Company or any
of its affiliates at any time during Manager's employment
with Company or any of its affiliates; or
ii. In any way, directly or indirectly, solicit,
divert, take away or interfere with any of the business,
-2-
<PAGE> 3
customers, trade or patronage of Company or its
subsidiaries or affiliates; or
iii. Seek to employ any person who was an employee
of Company or any of its affiliates during the twelve
(12) months immediately preceding Manager's termination.
The "Period of this Covenant" contained in this
Section 7A shall commence on the date of this Agreement and
shall terminate automatically eighteen (18) months from and
after the date this Agreement is terminated.
The "Trade Area" contained in this Section 7A shall be
deemed to encompass the world, it being expressly declared and
acknowledged by Manager that Manager will, in the course of
his responsibilities hereunder, acquire active personal
knowledge of Company's Confidential Information and
confidential business affairs throughout said Trade Area and
will acquire and possess intimate knowledge of the marketing
and distribution of Company services and products throughout
the aforesaid Trade Area.
Manager further acknowledges and agrees that the "Period
of this Covenant" is the minimum period of time, and that the
"Trade Area" hereinabove specified is the minimum and
reasonable area necessary, to protect Company reasonably and
adequately in its business operations.
B. Secrecy Covenant. Manager further covenants and
agrees that he will not, at any time either during or after
the term of this Agreement, reveal or otherwise communicate to
any person or entity any Confidential Information to which he
will or may have access, except as such communication may be
necessarily incidental to the performance of his duties with
Company under this Agreement. For purposes of this Agreement
"Confidential Information" shall mean all confidential and
proprietary information and trade secrets of Company
including, but not limited to, financial and accounting
information and procedures, product pricing data and product
formulae, identity of customers, customer requirements, sales
data, marketing information, manufacturing processes,
inventions, know-how, technology, special processes and
techniques, and distribution methods of Company or any of its
subsidiaries or affiliates, but shall not include Confidential
Information that is in the public domain or becomes part of
the public domain other than through the fault of Manager.
C. Breach of Covenants. Manager has consulted with
Manager's legal adviser concerning this Agreement, understands
the nature, term and effects of the covenants of Manager set
forth in Sections 7A and 7B above, and acknowledges and agrees
that such covenants are reasonable and necessary for the
protection of Company and its business operations. Manager
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<PAGE> 4
further acknowledges and agrees that monetary damages could
not and cannot adequately compensate Company in the event of
the violation or breach of any of the covenants of Manager set
forth in Sections 7A and 7B above and that, irrespective of
any other provision of this Agreement, injunctive relief would
be essential for the protection of Company. Manager does
hereby agree, therefore, that Company may have such injunctive
relief without any requirement for a bond, upon due notice and
hearing, as will be necessary to provide full and ongoing
protection to Company with respect to the matters hereinabove
set forth, in addition to such further or other relief as may
appertain at equity or law.
D. Limitations. If and to the extent that any of the
covenants set forth in Section 7A or 7B above shall be deemed
by the court in which suit is brought to be unenforceable as
written by reason of its scope in terms of area or length of
time, but may be made enforceable by adjusting the area or
period of time applicable to such covenant, Manager and
Company stipulate and agree that such covenant shall be deemed
automatically to be amended for purposes of such suit so as to
incorporate the aforesaid reduction in area or duration of
time, or both, to the end that such covenant, as modified in
connection with such suit, shall be enforceable to the fullest
extent permissible under the laws and public policies of the
State of Missouri, the State under which this contract is
governed.
8. INDEMNITIES.
A. MANAGER'S COVENANT NOT TO SUE. Manager covenants not
to sue for, and shall fully hold harmless and render whole
Company, its officers, directors, employees and/or agents,
from and against all claims, losses, costs, expenses
(including, but not limited to, costs of settlement and
reasonable attorneys' fees and expenses incurred in defense of
Company, its officers, directors, employees and/or agents),
demands, damages (including exemplary and punitive damages),
suits, judgments, liabilities and causes of action of
whatsoever nature or character (collectively "Claims") made or
asserted by Manager on account of personal injury or death
caused by, arising out of, or in any way incidental to, or in
connection with, the services performed by Manager for Company
including, but not limited to, those Claims where personal
injury or death (or liability therefor) was caused by the
concurrent negligence or fault of any combination of Company,
Manager and/or any third party (and/or any of their respective
officers, directors, employees and/or agents), except to the
extent that the Claim is determined to have been caused by the
sole negligence or sole willful misconduct of Company.
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<PAGE> 5
B. COMPANY'S INDEMNITY OF MANAGER.
i. The Company shall indemnify Manager, should
Manager be made a party or threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of
the Company) in connection with the services performed by
Manager for Company, against expenses (including
reasonable attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding if
Manager acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of
the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption
that Manager did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to
the best interests of the Company and, with respect to
any criminal action or proceeding, had reasonable cause
to believe that his conduct was unlawful.
ii. The Company shall indemnify Manager, should
Manager be made a party or be threatened to be made a
party to any threatened, pending or completed action or
suit by or in the right of the Company to procure a
judgment in its favor by reason of the services performed
by Manager for Company, against expenses (including
attorneys' fees) actually and reasonably incurred by him
in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the
best interests of the Company and except that no such
indemnification shall be made in respect of any claim,
issue or matter as to which Manager shall have been
adjudged to be liable for negligence or misconduct in the
performance of this Agreement unless and only to the
extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall
determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the
case, Manager is fairly and reasonably entitled to
indemnity for such expenses which such Court of Chancery
or such other court shall deem proper.
iii. To the extent that Manager shall be successful
on the merits or otherwise in defense of any action, suit
or proceeding referred to in paragraphs (i) and (ii), or
in defense of any claim, issue or matter therein, he
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<PAGE> 6
shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him
in connection therewith.
iv. Any indemnification under paragraphs (i) and
(ii) (unless ordered by a court) shall be made by the
Company only as authorized in the specific case upon a
determination that indemnification of the Manager is
proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs
(i) and (ii). Such determination shall be made (x) by
the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such
action, suit or proceeding, or (y) if such a quorum is
not obtainable or, even if obtainable a quorum of
disinterested directors so directs, by independent legal
counsel in a written opinion, or (z) by the
stockholders; provided, however, that Manager shall not
participate in any such determination as a Director of
the Company.
v. Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the
Company in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of
Directors in the manner provided in paragraph (iv) upon
receipt of an undertaking by or on behalf of the Manager
to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the
Company as provided herein.
9. ASSIGNMENT; SUBCONTRACTING. Manager shall not assign
this Agreement or subcontract the whole or any part of the services
to be performed without the express prior written consent of
Company.
10. APPLICABLE LAW. This Agreement and all matters
pertaining hereto or arising herefrom shall be governed and
determined by the laws of the State of Missouri.
11. ENTIRE AGREEMENT. This Agreement, including Exhibit A
hereto, supersedes all prior negotiations, understandings and
agreements between the parties regarding the subject matter hereof
and constitutes the entire understanding and agreement between the
parties with respect to the subject matter hereof. No alterations,
modifications or changes to this Agreement shall be effective
unless the same are in writing and executed by both parties.
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<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date shown above.
Company: PETROLITE CORPORATION
By: /s/ William E. Nasser
------------------------------
(Signature)
Chairman, President and CEO
------------------------------
(Title)
Manager: PAUL H. HATFIELD
/s/ Paul H. Hatfield
------------------------------
(Signature)
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<PAGE> 1
EXHIBIT 10.6
PETROLITE CORPORATION
STOCK OPTION AGREEMENT
(NON-QUALIFIED)
---------------
AGREEMENT made as of the 11th day of August, 1995, by and
between Petrolite Corporation, a Delaware Corporation, 369 Marshall
Avenue, St. Louis, Missouri 63119 (hereinafter the "Company") and
Paul H. Hatfield, 12444 Powerscourt Drive, Suite 300, St. Louis,
Missouri 63131 (hereinafter the "Optionee").
WITNESSETH:
A. The Company and the Optionee have entered into that
certain Management Agreement of even date (the "Management
Agreement") pursuant to which Optionee is to render valuable
services to the Company.
B. In consideration for the services to be provided by
Optionee pursuant to the Management Agreement the Company desires
to grant, and the Optionee desires to receive, an option to
purchase shares of the Company's Capital Stock.
NOW, THEREFORE, it hereby is agreed as follows:
1. Grant of Option. Subject to and upon the terms and
conditions set forth in this Agreement, the Company hereby grants
to Optionee, as of the date of this Agreement (the "Grant Date"),
the right and option to purchase up to 36,000 shares of the
Company's Capital Stock (the "Optioned Shares") from time to time
during the option term at the price of $21.0281 per share (the
"Option Price"). The Option Price is 75% of the average of the
mid-point between the bid and asked price for a share of the
Company's Capital Stock at the close of trading on the first five
trading days of August, 1995, as reported by the National
Association of Securities Dealers, Inc.
2. Option Term. The Option shall have a maximum term of
five (5) years, measured from the Grant Date and shall accordingly
expire at the close of business on August 11, 2000 (the "Expiration
Date"), unless terminated sooner as provided in this Agreement.
3. Option Nontransferable; Exception. The Option shall be
neither transferable nor assignable by Optionee other than by will
or by the laws of descent and distribution and may be exercised,
during Optionee's lifetime, only by Optionee.
4. Exercise of Option.
a. This Agreement is made pursuant to the Management
Agreement. Subject to the right of either party to terminate
the Management Agreement earlier, the Option granted hereunder
shall become exercisable with respect to 1/12 of the shares
subject thereto on and after September 29, 1995, and with
<PAGE> 2
respect to an additional 1/12 of the shares subject thereto on
and after the last business day of each succeeding calendar
month; except that, the final 1/12 shall become exercisable on
and after August 10, 1996. In the event the Management
Agreement is terminated before the Option has become fully
exercisable, the Option shall be and remain exercisable only
with respect to those shares for which the Option became
exercisable before termination of the Management Agreement.
b. To the extent that it becomes exercisable, the
Option may be exercised by Optionee at any time during the
Option Term. In the event of the death of the Optionee during
the Option Term, the Option may be exercised by his executors,
administrators, or other legal representatives, heirs,
legatees, next of kin, or distributees, within three months,
but not later than three months, after the date of the legal
qualification of the executors or administrators of his
estate, provided diligent efforts are made and such
qualification is obtained within a reasonable time after his
death. Notwithstanding anything in this Agreement to the
contrary, the Option granted to Optionee shall in no event be
exercisable after the Expiration Date.
5. Adjustment in Option Shares.
a. In the event any change is made to the Capital Stock
issuable hereunder by reason of any stock split, stock
dividend, combination of shares, or other change affecting the
outstanding Capital Stock as a class without receipt of
consideration, the appropriate adjustments will be made to
(i) the total number of Optioned Shares subject to this
Option and/or (ii) the Option Price payable per share in
order to reflect such change and thereby preclude a dilution
or enlargement of benefits hereunder.
b. If the Company is the surviving entity in any merger
or other business combination, then this Option, if
outstanding immediately after such merger or other business
combination, shall be appropriately adjusted to apply and
pertain to the number and class of securities which would be
issuable to the Optionee on the consummation of such merger or
business combination if the Option were exercised immediately
prior to such merger or business combination, and appropriate
adjustments also shall be made to the Option Price payable per
share, provided the aggregate Option Price payable hereunder
shall remain the same.
6. Right as Shareholder. The Optionee shall not have any of
the rights of a shareholder with respect to the Optioned Shares
until the Optionee shall have exercised the Option and paid the
Option Price.
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<PAGE> 3
7. Manner of Exercising Option.
a. In order to exercise the Option with respect to all
or any part of the Optioned Shares for which the Option is at
the time exercisable, Optionee (or in the case of exercise
after Optionee's death, the Optionee's executor, administrator
heir or legatee, as the case may be) must take the following
actions:
(i) Execute and deliver written notice of such
exercise to the Company;
(ii) Pay the aggregate Option Price for the
purchased shares in cash;
(iii) Furnish to the Company appropriate
documentation that the person or persons exercising the
Option, other than the Optionee, have the right to
exercise the Option.
b. The Option shall be deemed to have been exercised
with respect to the number of Optioned Shares specified in the
notice when the notice shall have been delivered to the
Company as provided herein. Payment of the Option Price shall
become due immediately and shall accompany the notice. As
soon as practical thereafter, the Company shall mail or
deliver to Optionee, or to the other person or persons
exercising this Option, a certificate or certificates
representing the Optioned Shares so purchased and paid for,
with any appropriate legends affixed thereto.
c. In no event may this Option be exercised for any
fractional shares.
8. Compliance with Laws and Regulations.
a. The exercise of this Option and the issuance of
Optioned Shares upon such exercise shall be subject to
compliance by the Company and the Optionee with all applicable
requirements of law relating thereto and with all applicable
regulations of any stock exchange or trading system on which
shares of the Company's Capital Stock may be listed at the
time of such exercise and issuance.
b. In connection with the exercise of this Option,
Optionee shall execute and deliver to the Company such
representations in writing as may be requested by the Company
in order for it to comply with the applicable requirements of
federal and state securities laws.
c. Optionee is familiar with the Company and has
obtained such financial and other information concerning the
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<PAGE> 4
Company as Optionee deems necessary to make an informed
decision regarding any exercise of the Option granted herein.
d. Any shares acquired hereunder shall be acquired for
Optionee's own account without a view to the distribution
thereof within the meaning of the United States Securities Act
of 1933, as amended (the "Securities Act"), and the rules and
regulations thereunder.
9. Restrictions on Transfers of Optioned Shares. Optionee
understands and agrees that, unless and until the Optioned Shares
are registered under the Securities Act, the Optionee will not
offer, sell or otherwise dispose of all or any part of the Optioned
Shares to any person unless, in the opinion of counsel satisfactory
to Petrolite, an exemption from such registration requirements is
available. Optionee further agrees that a legend to the foregoing
effect may be placed upon any certificate or other documents issued
representing the Optioned Shares, and the records of Petrolite may
be marked to indicate the restrictions on transfer. On the written
request of the Optionee, Petrolite will remove the legend from the
certificate or other documents issued representing the Optioned
Shares if, in the opinion of Petrolite's securities counsel, the
shares may be transferred freely without registration.
10. Right to Registration.
a. The Optionee, upon written request at any time from
the Grant Date through the Expiration Date, may make one
demand requesting that the Company use its reasonable best
efforts to effect the registration under the Securities Act of
all or part of the Optioned Shares then held by the Optionee.
Registration requested pursuant to this Section 10 shall be
effected by the filing of a registration statement on the
appropriate registration form, as determined by the Company.
b. In connection with its obligations hereunder, the
Company shall file such prospectuses, exhibits, undertakings,
and other certificates and instruments with the Securities and
Exchange Commission (the "SEC") as may be requested or
required by the SEC or its staff, and shall file such pre-
effective amendments to its registration statement as may be
required to obtain the declaration of effectiveness. The
Company shall have the right to postpone for up to six months
any registration hereunder if, in the good faith opinion of
the Company, such registration would interfere with any
material transaction then being pursued by the Company or
otherwise would adversely affect the Company in any material
way. Anything herein to the contrary notwithstanding, the
Company shall not be required to file any registration
statement hereunder if, in the opinion of the Company's
counsel, the Optioned Shares proposed to be registered may be
sold freely without such registration.
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<PAGE> 5
c. All costs and expenses of every kind relating to or
arising from the preparation and filing of a registration
statement, amendments, supplements, prospectuses, exhibits,
undertakings and other documents shall be paid by the Company;
provided, however, that the Company shall not be required to
pay the fees and expenses of counsel for the Optionee or any
underwriting discounts, commission or transfer taxes.
d. Before the effective date of the registration
statement specified herein, the Company and the Optionee shall
enter into an agreement providing for a reciprocal
indemnification against any losses, claims, damages or
liabilities to which the Optionee or the Company may become
subject under the Securities Act or otherwise, in the form of
the reciprocal indemnification provisions with respect to
materials provided by them, respectively, for inclusion in the
type of statement that customarily appears in underwriting
agreements used by reputable investment bankers.
11. Company's Right to Repurchase. Notwithstanding the
foregoing, upon the written request of the Optionee requesting that
the Company effect the registration under the Securities Act of all
or part of the Optioned Shares, the Company may, in lieu of using
its best efforts to effect the registration of such Optioned Shares
under the Securities Act, repurchase all or any portion of the
Optioned Shares to be so registered at the current market value of
the Optioned Shares, which shall be determined by using the average
of the daily average of the bid and asked price for a share of the
Company's Capital Stock at the close of trading on the twenty (20)
days immediately following the date of such request for
registration, as reported by the National Association of Securities
Dealers, Inc. If the Company elects to repurchase all or a portion
of the Optioned Shares, the Company shall pay cash for such
Optioned Shares to be repurchased within twenty (20) business days
after notice to the Optionee of the Company's election to
repurchase such Optioned Shares, which election shall be made
within twenty (20) days after receipt by the Company of the
Optionee's written request.
12. Successors and Assigns. Except to the extent otherwise
provided herein, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the successors,
administrators, heirs, legal representatives and assigns of the
Optionee and the successors and assigns of the Company.
13. Notices. Any notice required to be given or delivered to
the Company under the terms of this Agreement shall be in writing
and addressed to the Company in care of its Secretary at its
corporate offices. Any notice required to be given or delivered to
Optionee shall be in writing and addressed to Optionee at the
address indicated above. All notices shall be deemed to have been
given or delivered upon personal delivery or upon depositing in the
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<PAGE> 6
U.S. mail, postage prepaid and properly addressed to the party to
be notified.
14. Applicable Law. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the
State of Missouri.
15. Nonstatutory Stock Option. The Option is intended not to
qualify as an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended, and
shall be so construed.
16. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed in duplicate on its behalf by its duly authorized
officer, and Optionee also has executed this Agreement in
duplicate, all as of the day and year indicated above.
Company: PETROLITE CORPORATION
By: /s/ William E. Nasser
-------------------------------
(Signature)
Chairman, President and CEO
-------------------------------
(Title)
Optionee: PAUL H. HATFIELD
/s/ Paul H. Hatfield
-------------------------------
(Signature)
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<PAGE> 1
EXHIBIT 10.7
TERMINATION AGREEMENT
---------------------
This Termination Agreement entered into as of the 20th day of
November, 1995, by and between Petrolite Corporation, a Delaware
Corporation, 369 Marshall Avenue, St. Louis, Missouri 63119 (the
"Company"), and Paul H. Hatfield, 12444 Powerscourt Drive,
Suite 300, St. Louis, Missouri 63131 ("Mr. Hatfield").
WITNESSETH:
WHEREAS, the Company and Mr. Hatfield entered into that
certain Management Agreement dated as of the 11th day of August,
1995 pursuant to which the Company engaged the services of Mr.
Hatfield (the "Management Agreement"), a copy of which is attached
hereto as Exhibit A; and
WHEREAS, pursuant to the Management Agreement, the Company and
Mr. Hatfield entered into that certain Stock Option Agreement dated
as of the 11th day of August pursuant to which the Company granted,
and Mr. Hatfield received, an option to purchase shares of the
Company's Capital Stock (the "Stock Option Agreement"), a copy of
which is attached hereto as Exhibit B; and
WHEREAS, Mr. Hatfield has become an employee of the Company
and, therefore, Mr. Hatfield and the Company mutually desire to
terminate both the Management Agreement and the Stock Option
Agreement.
NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein, the parties hereto agree as follows:
1. The Management Agreement is terminated effective
November 20, 1995. Each of the parties releases and forever
discharges the other from any and all agreements, undertakings,
obligations, duties, demands and/or claims arising out of or in
connection with the Management Agreement and the parties'
performance or lack of performance thereof; except that, neither
party shall be relieved of its liabilities or obligations arising
from or incident to services performed by Manager prior to
November 20, 1995.
2. The Stock Option Agreement is terminated effective
November 20, 1995. The option granted under the Stock Option
Agreement became exercisable with respect to 6,000 shares prior to
termination of the Stock Option Agreement and, accordingly, the
option shall be and remain exercisable according to the terms of
the Stock Option Agreement only with respect to said 6,000 shares,
subject to adjustment as provided in the Stock Option Agreement.
3. This Termination Agreement and all matters pertaining
hereto or arising herefrom shall be governed and determined by the
laws of the State of Missouri.
<PAGE> 2
4. This Termination Agreement supersedes all prior
negotiations, understandings and agreements between the parties
regarding the subject matter hereof and constitutes the entire
understanding and agreement between the parties with respect to the
subject matter hereof. No alterations, modifications or changes to
this Agreement shall be effective unless the same are in writing
and executed by both parties.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date shown above.
Company: PETROLITE CORPORATION
By: /s/ Paul F. Cornelsen
------------------------------
(Signature)
Chairman of the Compensation
------------------------------
Committee
------------------------------
(Title)
Manager: Paul H. Hatfield
------------------------------
By: /s/ Paul H. Hatfield
------------------------------
(Signature)
Chairman, President and
------------------------------
Chief Executive Officer
------------------------------
(Title)
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<PAGE> 1
EXHIBIT 10.8
AGREEMENT
---------
THIS AGREEMENT dated as of the 20th day of November, 1995
between Petrolite Corporation, a Delaware Corporation, 369 Marshall
Avenue, St. Louis, Missouri 63119 (the "Company") and William E.
Nasser, 151 Jefferson, St. Louis, Missouri 63119 (the "Executive"):
WHEREAS, Executive has announced his intention to retire from
the Company; and
WHEREAS, Executive and the Company desire to confirm the
arrangements to which they have agreed relating to Executive's
retirement:
NOW THEREFORE, the parties agree as follows:
1. Executive hereby resigns as Chairman of the Board, President
and Chief Executive Officer of the Company, and from all
directorships and offices Executive holds with subsidiaries
and affiliates of the Company, effective November 20, 1995.
Executive shall continue to serve as a member of the Company's
Board of Directors until his present term expires on March 4,
1996.
2. Executive hereby elects to retire from the Company effective
March 31, 1996. Executive shall receive, commencing April 1,
1996, a monthly benefit equal to the benefit to which
Executive would be entitled at Executive's Normal Retirement
Date, as defined in the Petrolite Corporation Retirement Plan
(the "Plan"), as calculated under Section 5.2 of the Plan.
For purposes of this calculation, Executive's years of
Credited Service, as defined in the Plan, shall include the
number of such years accrued through March 31, 1996, plus an
additional five years of Credited Service. Such calculation
shall not take into account the dollar limitation on Annual
Earnings, as provided in Section 1.6 of the Plan. The benefit
as calculated under this paragraph 2 shall be paid by the
Company to the extent it is not paid by the trust under the
Plan; except that, the Company shall have no obligation to pay
the benefit, as calculated under this paragraph 2, to the
extent it otherwise pays such benefit pursuant to any non-
qualified deferred compensation plan currently sponsored by
the Company or to be adopted by the Company at any time in the
future. Benefits paid by the Company under this paragraph 2,
other than the portion of the benefit paid pursuant to a non-
qualified deferred compensation plan, shall be paid at the
same time and the same form as the benefit is paid from the
trust under the Plan. Any optional form election Executive
makes under the Plan also shall be applicable to the benefit
paid under this paragraph 2, including any actuarial reduction
in such benefit. Payment of the benefit under this paragraph
2 shall be from the assets of the Company. Executive and any
beneficiary of such benefit shall be general, unsecured
<PAGE> 2
creditors of the Company with respect to such benefit.
Executive's right, and that of Executive's beneficiary, to
such benefit shall not be subject to anticipation, alienation,
sale, assignment, pledge, encumbrance or change and shall not
be subject to debts, contracts, liabilities or torts of the
person entitled to such benefit. A worksheet showing the
calculation of Executive's retirement benefit, including the
benefit provided by this paragraph 2, is attached hereto as
Exhibit A.
3. Between the effective date of this Agreement and March 31,
1996, Executive shall continue as an employee of the Company
and shall be paid at a rate based on Executive's annual base
salary. Except as provided otherwise in this Agreement,
Executive shall be eligible to participate in the Company's
various employee benefit plans according to their respective
terms. During this period Executive shall be available to
provide such advice and counsel as the Company reasonably may
request. Except as the Company may so request Executive shall
not perform any work or provide any services for the Company
and Executive will not be expected or permitted to be present
at any Company workplace or facility. Executive shall not be
prohibited from seeking and performing other employment
between the effective date of this Agreement and March 31,
1996, or thereafter.
4. Executive hereby elects, and qualifies for, retiree medical
coverage under the Company's Comprehensive Medical Plan as it
may exist from time to time, effective on Executive's
retirement. Executive's premium cost for coverage for an
applicable year will equal the amount payable for such
coverage by an active employee of the Company for such year.
5. Executive shall be entitled to be reimbursed for expenses
Executive actually incurs for the rental of a business office,
related expenses, and business secretarial support from
November 20, 1995, through November 30, 1996, in an amount not
to exceed $1,500 per month. The Company will provide
furniture to Executive from its existing stock of excess
office furniture and shall cause such office furniture, and
such of Executive's personal effects as Executive directs, to
be moved to the rental business office.
6. Executive may continue Executive's memberships at Old Warson
Country Club, The Bogey Club and Castle Pines Golf Club so
long as Executive assumes, and shall have full responsibility
for, membership dues, assessments and expenses incurred after
March 31, 1996. Between the effective date of this Agreement
and March 31, 1996, the Company will reimburse Executive for
membership assessments and dues paid by Executive and, in
addition, shall reimburse Executive for reasonable monthly
expenses actually incurred at these clubs.
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<PAGE> 3
7. In consideration for Executive's continuing consultation with
the Company as an independent contractor as may be requested
from time to time by the Company after April 1, 1996,
Executive or Executive's estate shall be paid $370,000,
payable in 12 equal monthly installments commencing on
April 1, 1996.
8. Notwithstanding the terms of the Petrolite 1993 Stock
Incentive Plan, and notwithstanding the terms of any options
issued to Executive pursuant thereto, Executive hereby
surrenders and shall not have the right to exercise options to
purchase shares of Petrolite stock granted to Executive under
the Petrolite 1993 Stock Incentive Plan, and all such stock
options Executive holds shall be deemed to have terminated as
of the effective date of this Agreement. Stock options
granted to Executive under the 1987 Stock Incentive Plan shall
remain exercisable according to their respective provisions.
9. Except for the stock options granted to Executive under the
1987 Stock Incentive Plan, which may be exercised according to
their respective provisions, Executive shall not be a
participant in any annual or long-term incentive plan
maintained by the Company, and Executive shall not be entitled
to any payment under any incentive plan for the fiscal year
ending October 31, 1995.
10. That certain Executive Agreement between Executive and the
Company dated August 10, 1994 shall be and the same hereby is
terminated as of the effective date of this Agreement, and
both Executive and the Company release and forever discharge
the other from any and all agreements, undertakings,
obligations, duties, demands and/or claims arising out of or
in connection with the Executive Agreement and the parties'
performance or lack of performance thereof.
11. Executive covenants and agrees that Executive will not at any
time reveal or otherwise communicate to any person or entity
any Confidential Information to which Executive had or may
have access. For purposes of this Agreement "Confidential
Information" shall mean all confidential and proprietary
information and trade secrets of the Company including, but
not limited to, financial and accounting information and
procedures, product pricing data and product formulae,
identity of customers, customer requirements, sales data,
marketing information, manufacturing processes, inventions,
know-how, technology, special processes and techniques, and
distribution methods of the Company or any of its subsidiaries
or affiliates, but shall not include Confidential Information
that is in the public domain or becomes part of the public
domain other than through any fault of Executive's.
12. Executive agrees to keep confidential the terms of this
Agreement from persons other than Executive's immediate family
-3-
<PAGE> 4
and attorneys, accountants, financial advisors, IRS
representatives and other professionals who have a legitimate
need to know. Both Executive and the Company may be required
to disclose all or part of the terms of this Agreement and
each party hereby consents to such required disclosure.
13. Executive agrees that Executive will not disparage the Company
or its business nor, after notice from the Company, continue
or pursue any action or course of action which the Company
reasonably deems to be not in the best interests of the
Company.
14. Intending to bind himself and his heirs, executors,
administrators and assigns, Executive does hereby release,
remise, acquit and forever discharge Petrolite Corporation, a
Delaware corporation, and its present and former officers,
directors, executives, agents, employees, employee benefit
plans and trustees thereof, affiliated companies, divisions,
subsidiaries, successors, predecessors and assigns
(collectively the "Released Parties"), of and from any and all
claims, actions, causes of action, demands, rights, damages,
debts, sums of money, accounts, financial obligations, suits,
expenses, attorneys' fees and liabilities of whatever kind or
nature in law, equity or otherwise, whether now known or
unknown, suspected or unsuspected, which Executive,
individually or as a member of a class, now has, owns or
holds, or at any time heretofore had, owned or held, against
any Released Party arising out of or in any way connected with
Executive's employment relationship with the Company, its
subsidiaries, predecessors or affiliated entities, or the
termination thereof including, without limitation,
a. any such claim or action at law or equity under any
federal, state or local law, regulation or executive
order including, but not limited to, actions under
Title VII of the Civil Rights Act of 1964, as amended,
42 U.S.C. Sec. 2000 et seq., the Americans with
-- ----
Disabilities Act, the Equal Pay Act, the Employee
Retirement Income Security Act; and
b. any such claim or action under the Age Discrimination in
Employment Act of 1967 (ADEA) as amended, 29 U.S.C.
Sec. 621 et seq. (except that this waiver does not apply
-- ----
to rights or claims that may arise under the ADEA after
the date this waiver is executed); and
c. any such claim or action that would or could be the
subject of any administrative proceeding under any
federal, state or local law or regulation; and
d. any such claim or action under the Missouri Fair
Employment Practices Act, Sec. 213.010 et seq., RSMO; and
-- ----
-4-
<PAGE> 5
e. any such claim or action at common law in contract or
tort including, but not limited to, claims for severance
or vacation benefits, unpaid wages, salary or incentive
payments, breach of contract, wrongful discharge,
impairment of economic opportunity, reimbursement for
fines paid, back pay, front pay, wages, and compensatory
damages, punitive damages, attorneys' fees, seniority,
reinstatement and re-employment, and including all
possible claims for defamation, slander, libel, and
infliction of mental distress;
excepting only:
1. those obligations of the Company under this
Agreement;
2 any rights to indemnification Executive may have
under applicable corporate law, the by-laws or
certificate of incorporation of any Released Party
or as an insured under any D&O or liability
insurance policy now or previously in force; and
3. any claims under any applicable workers'
compensation statute which arose prior to the date
of Executive's termination from employment.
15. Executive acknowledges and agrees that nothing in this
Agreement shall be construed as an admission of any liability
whatsoever by any Released Party under Title VII, ADEA or any
other federal or state statute or the principles of common
law.
16. Executive acknowledges that Executive has been given full
opportunity to read and consider this Agreement, that
Executive has received advice from those legal, financial,
tax, and other advisors that Executive desired to consult in
reviewing this Agreement prior to executing it, and that
Executive fully understands all of its terms. Executive
acknowledges that Executive has not been coerced in any
manner, and that Executive entered into this Agreement of
Executive's own free will and after advice and representation
by legal counsel of Executive's choice, with full knowledge of
the terms and consequences of this Agreement. Executive
further acknowledges that Executive has twenty-one (21) days
from the date of presentation of this Agreement to decide
whether to execute it and that Executive has been specifically
-------------------------------
advised that Executive should seek consultation with an
-------------------------------------------------------
attorney before signing it. Executive further acknowledges
--------------------------
that Executive may revoke this Agreement, thereby nullifying
it and all of its terms, by notifying the Company of such
revocation at any time within seven (7) days after execution
of this Agreement. Executive further understands that this
Agreement, and all of its terms, are not effective or
-5-
<PAGE> 6
enforceable until the seven (7) day revocation period has
elapsed. Executive acknowledges that no promises or
representations have been made to Executive to obtain the
release from liability other than those that are expressly set
forth in this Agreement.
17. Executive agrees to execute such documents as the Company
reasonably may request from to time to implement the
provisions of this Agreement.
18. Executive acknowledges and agrees that in the event of any
breach hereof which continues uncured after ten (10) days'
notice, the Company may, in addition to other remedies, cease
making any payments required hereunder, except that this right
shall not apply to the benefit provided by paragraph 2 of this
Agreement. Executive further acknowledges and agrees that
monetary damages could not and cannot adequately compensate
the Company in the event of the violation or breach of any of
the terms of this Agreement and that injunctive relief would
be essential for the protection of the Company. Executive
does agree, therefore, that the Company may have such
injunctive relief without any requirement for a bond, upon due
notice and hearing, as will be necessary to provide full and
ongoing protection to the Company with respect to the matters
set out herein, in addition to such further or other relief as
may appertain at equity or law. Suit for injunctive relief
(and for such monetary damages as may be proved as a result of
breach of any term of this Agreement) may be filed in an
appropriate Federal or State court having general trial
jurisdiction in any political subdivision (i) in Missouri or
(ii) in any State in which Executive then may be found or
(iii) in any State in which a breach or violation of any of
the aforesaid terms and conditions is alleged to have
occurred, and Executive consents to the jurisdiction of any
such court in which such suit is instituted and further agrees
that service of process upon Executive by certified or
registered mail shall be valid and sufficient and shall be
deemed to have the same legal effect as if personal service
had been made upon Executive in the jurisdiction in which such
suit has been initiated.
19. Executive is a Participant in the Employees' Savings Plan and
the Non-Qualified Savings Plan, both of which are maintained
by the Company. Nothing in this Agreement shall be construed
to affect any rights Executive may have under either of such
Plans.
20. This Agreement has been entered into in the State of Missouri
and is a Missouri contract. Accordingly, its terms and
provisions shall be governed by, and construed and enforced in
accordance with, the law of the State of Missouri without
application of any Missouri principles of conflict of laws.
-6-
<PAGE> 7
21. This Agreement contains the entire agreement between the
parties with respect to the subject matter hereof and is fully
approved and agreed to by the undersigned parties effective
the 20th day of November, 1995.
PETROLITE CORPORATION
By: /s/ Paul F. Cornelsen
--------------------------------
Paul F. Cornelsen
Chairman, Compensation Committee
/s/ William E. Nasser
--------------------------------
William E. Nasser
-7-
<PAGE> 1
FINANCIAL REVIEW
CONSOLIDATED OPERATING RESULTS
<TABLE>
CONSOLIDATED REVENUES, NET EARNINGS AND EARNINGS PER SHARE
<CAPTION>
(Dollars in thousands, except per share data) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $364,877 $369,227 $351,779
Net earnings (loss):
Before write-down,
reorganization, and
accounting changes 15,187 19,503 20,546
Write-down of assets (8,957)
Reorganization of
chemical operations (12,496)
Accounting changes 2,037 (6,500)
Net earnings 6,230 9,044 14,046
Earnings (loss) per share:
Before write-down,
reorganization, and
accounting changes 1.34 1.73 1.82
Write-down of assets (.79)
Reorganization of
chemical operations (1.11)
Accounting changes .18 (.58)
Earnings per share .55 .80 1.24
- ------------------------------------------------------------------------------------------
</TABLE>
Revenues decreased in 1995 by $4.4 million or 1% due primarily to the decline
of oil field chemical revenues in North America and to the transfer of wax
product business from the Polymers Division to the newly formed joint
venture, Bareco Products, which is accounted for using the equity
method.
Excluding the write-down, reorganization and accounting changes, net earnings
decreased from 1994 by $4.3 million or 22%. The company incurred significant
raw material cost increases during the year which could not be passed along
to customers in its highly competitive, price-sensitive markets. These
increases more than offset the effect of cost savings derived from the
ongoing reorganization of the Chemicals Group. The decline in earnings also
resulted from the weak performance of the company's North American chemical
operations which were affected by the continuing weakness in petroleum
chemical markets. In addition, earnings suffered from a bad debt write-off
of nearly $1.0 million brought about by the devaluation of the Mexican peso.
During 1995, the company charged net earnings for $9.0
million to provide for the write-off and disposal of obsolete inven-
tory, the write-down of certain patents, other intangibles, and certain other
assets in order to properly reflect the carrying value of these assets at
October 31,1995.
During 1994, the company charged net earnings for $12.5
million to provide for a reorganization of its chemical segment
operations. In addition, the company adopted Statement of Financial
Accounting Standard No. 109 relating to accounting for income taxes, which
resulted in a nonrecurring, non-cash benefit of $2.0 million or $0.18 per
share. In 1993, the company adopted Statement of Financial Accounting
Standard No. 106 related to medical and other postretirement benefits, which
resulted in a nonrecurring, non-cash, after-tax charge of $6.5 million, or
$0.58 per share.
<TABLE>
REVENUES
<CAPTION>
(Dollars in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Specialty Chemical Products $338,999 $344,846 $332,512
Equipment 25,878 24,381 19,267
- ------------------------------------------------------------------------------------------
Total $364,877 $369,227 $351,779
- ------------------------------------------------------------------------------------------
</TABLE>
Revenues from the sale of Specialty Chemical Products declined by $5.8
million or 2% in 1995. North American oil field revenues were lower,
reflecting the softness in the petroleum industry chemical market which is
experiencing very difficult economic conditions. Sales of oil field chemicals
outside of North America showed continued growth particularly in Europe and
the Middle East. Sales of refinery process services and fuel performance
additives were also higher in 1995, led by increases in Europe and the
Pacific Rim, continuing a three-year growth trend. Polymers Division revenues
continued to increase even though the continual transfer of wax-products
business to Bareco Products, a new joint venture which began operations in
April 1995, reduced the division's revenues in this market.
Revenues from equipment sales increased in 1995 by $1.5 million or 6%. The
increase was due to sales of desalters, replacement equipment parts and
refinery catalyst. The division's backlog of jobs for fiscal 1996 is not as
strong as the prior year backlog due to
weaker bookings in the fuel treatment market and a softening of its
energy-industry markets.
<TABLE>
EARNINGS FROM OPERATIONS
<CAPTION>
(Dollars in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Specialty Chemical Products $15,835 $26,172 $29,714
Equipment 3,851 3,278 1,851
Write-down of assets (14,354)
Reorganization costs (20,025)
- ------------------------------------------------------------------------------------------
Total $ 5,332 $ 9,425 $31,565
- ------------------------------------------------------------------------------------------
</TABLE>
Operating earnings from Specialty Chemical Products declined by $10.3 million
or 39% due primarily to an increase in raw material prices for petroleum
chemicals worldwide and to the weak performance of North American chemical
operations, resulting from very tough economic conditions in the domestic
petroleum industry. In addition, the company incurred a bad debt write-off of
nearly $1.0 million as a result of the devaluation of the Mexican peso. The
Polymers Division recorded improvements on last year's profitability due to
an increased sales base and the early success of its new joint venture,
Bareco Products.
The Equipment segment also showed improved earnings due to increased sales of
refinery catalyst and replacement equipment parts which have comparatively
high margins.
The company charged pretax earnings in 1995 for $14.4 million to provide for
the write-off and disposal of obsolete inventory and the write-down of
certain other assets and intangibles in order to properly reflect the
carrying value of these assets at October 31, 1995.
During 1994, the company charged pretax earnings for $20
million to provide for a reorganization of its chemical segment
operations.
12
<PAGE> 2
<TABLE>
INTEREST (EXPENSE) INCOME, NET
<CAPTION>
(Dollars in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest expense $(3,278) $(3,371) $(1,475)
Interest and dividend income 1,449 850 828
- ------------------------------------------------------------------------------------------
Interest (expense) income, net $(1,829) $(2,521) $ (647)
- ------------------------------------------------------------------------------------------
</TABLE>
Interest expense in 1995 and 1994 includes interest on the $40 million
private placement issued in September 1993. The increase in interest income
in 1995 is due to the general increase in cash balances invested throughout
fiscal 1995.
<TABLE>
QUARTERLY RESULTS
Condensed quarterly unaudited summaries of financial results
during fiscal 1995 and 1994 are as follows:
<CAPTION>
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------------------------------
Net Earnings
Three Months Gross Earnings (Loss)
Ended Revenues Profit (Loss) Per Share
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
- --------------------------------------------------------------------------------------------------------
JANUARY 31 $92,323 $36,277 $6,229 $.55
APRIL 30 94,010 36,849 4,289 .38
JULY 31 87,212 32,750 2,547 .22
OCTOBER 31 91,332 29,489 (6,835) (.60)
- --------------------------------------------------------------------------------------------------------
1994
- --------------------------------------------------------------------------------------------------------
January 31
Before effect of
accounting change $91,796 $38,101 $5,414 $.48
After effect of
accounting change 91,796 38,101 7,451 .66
April 30 90,556 37,381 4,330 .38
July 31 90,223 38,673 3,767 .34
October 31 96,652 39,589 (6,504) (.58)
- --------------------------------------------------------------------------------------------------------
</TABLE>
While the negative effects of raw material price increases were felt as early
as the first quarter, overall results benefited in the first quarter from
continued strong demand for the company's products and services in most
international markets and somewhat improved results from the North American
oil field operations. In addition, the company realized a gain of $1.1
million from the sale of its plant in Clear Lake, Texas.
In the second quarter, strong advances by the Polymers and Equipment
businesses and continued strength in the international markets were offset by
the weak performance of the Chemicals Group, whose results suffered from a
bad debt write-off of nearly $1.0 million brought about by the devaluation of
the Mexican peso and the continued tightening of margins.
In the third quarter, sales declined as oil producers and refiners reduced
their use of production and process chemicals worldwide. In addition,
substantial hikes in the cost of raw materials, which could not
be passed along to customers in highly competitive markets, put further
pressure on margins, which more than offset the effect of cost savings
derived from the ongoing reorganization of the Chemicals Group.
While the Polymers and Equipment divisions continued to turn in solid
performances during the fourth quarter, the difficult economic conditions in
the petroleum industry chemical markets had a significant impact on the final
overall results. In addition, the company recorded a $9.0 million after-tax
charge ($.79 per share) against earnings to provide for the write-off and
disposal of obsolete inventory, the write-down of certain patents, other
intangibles, and certain other assets.
During the first quarter of 1994, the company adopted Statement of Financial
Accounting Standard No. 109 relating to accounting for income taxes, which
resulted in a nonrecurring, non-cash benefit of $2.0 million or $0.18 per
share. During the fourth quarter of 1994, the company charged net earnings
for $12.5 million, or $1.11 per share, to provide for a reorganization of its
chemical segment operations.
FOREIGN CURRENCY EXCHANGE AND TRANSLATION
The company's exchange gains and losses were principally attributable to the
effects of changes in value of U.S. dollar-denominated asset and liability
accounts of its foreign subsidiaries and to the closing of foreign currency
forward contracts. The company uses several measures to protect returns on
its foreign subsidiaries' net assets from significant changes in the value of
the dollar versus foreign currencies. These measures include pricing
adjustments, maintenance of offsetting asset and liability balances, and
investment in foreign currency forward contracts. There were no significant
contracts outstanding at year-end. Balance sheet changes in the cumulative
translation adjustment reflect the general fluctuation in the value of the U.S.
dollar versus foreign currencies.
<TABLE>
FOREIGN INVESTMENTS
<CAPTION>
(Dollars in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Europe $44,359 $42,395 $35,391
Far East 15,648 16,620 15,224
Canada 8,055 8,718 8,177
Middle East 2,528 6,651 6,096
Latin America 8,169 5,684 7,136
- ------------------------------------------------------------------------------------------
Total $78,759 $80,068 $72,024
- ------------------------------------------------------------------------------------------
</TABLE>
The increase in the company's investment in Europe was due to the positive
earnings contribution from the European operations this past year and to a
strengthening, in general, of the European currencies against a weakening
U.S. dollar.
The decrease in the Middle East was due to a reduction in the capital
structure of the company's partnership in Saudi Arabia.
The decrease in the company's investment in Latin America in 1994 was due to
the losses incurred by the Venezuelan subsidiary caused by an unstable
currency, hyperinflation and the closing of the manufacturing facility as part
of the 1994 reorganization. The improvement in 1995 was due to increased
activity primarily in Mexico and Venezuela.
13
<PAGE> 3
<TABLE>
LIQUIDITY/CAPITAL RESOURCES
<CAPTION>
(Dollars in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Working capital-
Cash and marketable securities $33,662 $20,564 $ 8,799
Other 45,342 45,705 49,261
Debt-
Short-term 4,594 6,124 9,920
Long-term 40,000 40,000 40,000
Ratios-
Current 2.18:1 1.83:1 1.79:1
Long-term debt/total
capitalization .20:1 .19:1 .20:1
- ------------------------------------------------------------------------------------------
</TABLE>
The company's primary sources of liquidity are cash provided
by operating activities and $26 million of unsecured, uncommitted lines of
credit. In addition, the company sold its Clear Lake, Texas, plant during
1995, resulting in cash proceeds of $10.3 million. Working capital increased
to $79 million at October 31, 1995, up from $66 million at October 31, 1994,
with the current ratio increasing to 2.18:1 from 1.83:1.
The company's strong financial position and adequate credit availability
provides a high degree of flexibility in obtaining additional funds on
competitive terms. Detailed information on the company's cash flows is
presented in the Consolidated Statements of Cash Flows.
<TABLE>
CAPITAL EXPENDITURES AND DEPRECIATION
<CAPTION>
(Dollars in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital expenditures, net $12,565 $21,825 $18,923
Depreciation 15,290 19,326 16,765
- ------------------------------------------------------------------------------------------
</TABLE>
Major capital expenditures in 1995 included a container handling facility at
the Bayport, Texas, manufacturing plant, the completion of the customer
service center and technology laboratory in Kirkby, England, an upgrade of
the Nisku, Alberta, Canada, blending and distribution facility and
modifications of contract treating trucks.
For 1996, major capital projects will include the continued expansion and
upgrade of the Bayport and Kirkby manufacturing plants; additional investment
in containers that are more environmentally safe; additional investment in
distribution vehicles, including both contract treating and delivery trucks;
and expansion of our UNILIN(R) alcohol capacity at our Barnsdall, Oklahoma,
manufacturing facility. The company expects 1996 capital expenditures will
approximate 1995 expenditures.
The decrease in depreciation expense in fiscal 1995 is due to the write-down
of plant assets in the October 1994 reorganization charge and the sale of the
Clear Lake, Texas, plant in December 1994.
ACQUISITIONS, JOINT VENTURES, AND ALLIANCES
Effective April 1995, Bareco Products, a 50-50 partnership between Petrolite
Wax Partner Company and Pennzoil Wax Partner Company, began operations to
market a broad line of wax products to purchasers of paraffin,
microcrystalline and related synthetic waxes worldwide. Previously, the two
companies manufactured and sold noncompeting wax products. Under the
partnership agreement, Petrolite will discontinue manufacturing
microcrystalline waxes.
The partnership arrangement allows for the transfer of Petrolite's
partnership interest to Pennzoil under certain defined circumstances. As a
result, at any time after September 1, 1997, and before August 31, 1998,
either Petrolite may require Pennzoil to purchase Petrolite's partnership
interest, or Pennzoil may require Petrolite to sell its partnership interest
to Pennzoil. The purchase price of Petrolite's partnership interest will be
determined by using an agreed-upon formula.
During 1994, the company acquired the 50% of Petrolite Suramericana, S.A.
that it did not own in exchange for shares of Petrolite stock. The balance
sheet effect of this transaction resulted in additional assets of
approximately $2,750,000, assumed liabilities of $2,250,000 and the issuance
of $500,000 of Petrolite stock.
Petrolite also entered into a strategic global alliance with Ashland Chemical
Company's Drew Industrial Division to integrate water and process treatment
management worldwide, resulting in administrative and operating efficiencies.
In 1993, the company acquired certain assets and liabilities of Welchem,
Inc., a wholly owned subsidiary of Amoco Chemical Holding Company. The
company also purchased Sulfa-Scrub(R) patents and technology from Quaker
Chemical and, during the last quarter of 1993, the company acquired certain
assets of Chemical Specialties Corporation of Louisiana.
WM. S. BARNICKEL & COMPANY
On December 9, 1994, the company announced that it had signed a letter of
intent under which the company would acquire substantially all of the assets
of Wm. S. Barnickel & Company ("Barnickel Company"), its largest stockholder,
in a tax-free reorganization between the two companies (the "Transaction").
The Transaction was subject to a number of conditions, including the receipt
of certain favorable rulings from the Internal Revenue Service regarding the
tax treatment of the Transaction. As reported on January 26, 1995, the company
and Barnickel Company were advised that Revenue Procedure 94-76, under which
the Internal Revenue Service suspended consideration of certain advance ruling
requests pending completion of a designated study, applied to the Transaction.
As reported previously, both parties determined that it was unlikely that the
Transaction would be completed on the terms originally agreed upon. The parties
are reviewing alternatives to the Transaction in light of the application of
the Revenue Procedure. No agreement with respect to the terms of any such
alternative transaction has been reached.
The Transaction is described in more detail on Form 8-K filed with the
Securities and Exchange Commission on December 13, 1994, and in the company's
proxy statements dated February 8, 1995, and January 23, 1996.
14
<PAGE> 4
<TABLE>
STOCKHOLDERS' EQUITY/CAPITAL STOCK
<CAPTION>
(Dollars in thousands, except per share data) 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
At October 31-
Stockholders' equity $159,464 $165,589
Number of shares outstanding 11,333 11,325
Stockholders' equity per share $ 14.07 $ 14.62
Return on average stockholders' equity-
Before write-down of assets,
reorganization and accounting change 9.3% 11.9%
After write-down of assets,
reorganization and accounting change 3.8% 5.5%
- -----------------------------------------------------------------------------
</TABLE>
Petrolite has stock option and incentive plans which are described in detail
in the Notes to Consolidated Financial Statements on pages 26 and 27. The
company also has contributory employees' savings plans, which include an option
for investment in Petrolite stock which is partially funded by the company.
These plans are administered by an independent trustee that purchases shares on
the open market on a current basis.
In 1994, the company acquired the 50% of Petrolite Suramericana, S.A. that it
did not own in exchange for $500,000 of Petrolite stock.
DIVIDENDS PER SHARE
Petrolite paid quarterly dividends of $0.28 per share for a total annual
dividend of $1.12 per share in 1995 and 1994. Petrolite has paid dividends
every year since its incorporation in 1930 and has maintained or increased
its dividends per share every year since 1946.
<TABLE>
CAPITAL STOCK PRICES
The high and low bid prices for 1995 and 1994 are shown in
the following table compiled from published sources:
<CAPTION>
1995 1994
----------------------- -----------------------
Quarter Ending HIGH LOW High Low
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January 31 $ 30 1/4 $ 24 1/4 $ 40 1/4 $ 30 3/4
April 30 31 1/4 25 37 1/2 29 3/4
July 31 32 1/2 27 3/4 37 29 3/4
October 31 29 23 1/4 33 3/4 28
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Petrolite Corporation's capital stock is included in the NASDAQ National
Market System of over-the-counter securities. The company's capital stock is
traded under the symbol PLIT. As of October 31, 1995, Petrolite had 2,122
shareholders of record.
PRIOR YEARS' OPERATING RESULTS
1994 VS. 1993
Revenues rose 5% in 1994 to $369,227,000 on the strength of the company's
international operations, while North American revenues were down 4% from
1993.
Excluding the reorganization of the chemical segment operations and other
accounting changes, net earnings decreased by $1,043,000 from 1993 to
$19,503,000. The decline resulted primarily from the weak performance of the
company's North American oil field chemical operations which were affected by
the continuing weakness in the domestic oil field markets. All other divisions
showed improved profits and continued to perform well, especially those serving
the international markets.
During 1994, the company charged pretax earnings for $20,025,000 to provide
for a reorganization of its chemical segment operations. In addition, the
company adopted Statement of Financial Accounting Standard No. 109 relating
to accounting for income taxes, which resulted in a nonrecurring, non-cash
benefit of $2,037,000 or $0.18 per share. In 1993, the company adopted
Statement of Financial Accounting Standard No. 106 related to medical and
other postretirement benefits, which resulted in a nonrecurring, non-cash,
after-tax charge of $6,500,000, or $0.58 per share. Considering these
accounting changes and the reorganization charge for the chemical segment
operations, net earnings decreased $5,002,000 in 1994 to $9,044,000.
Revenues from sales of Specialty Chemical Products increased $12,334,000 in
1994 representing a 4% gain. Tretolite Division revenues were lower reflecting
the weakness in the domestic oil field market. Sales of oil field chemicals
outside of North America showed continued solid growth, particularly in Europe,
the Middle East and Southeast Asia. Sales of refinery process services and fuel
performance additives were also higher in 1994 after posting good growth in
1993. Polymers Division revenues were comparable to 1993 as elimination of some
very low margin commodity wax business in Europe was offset by increased
revenues in international markets.
Revenues from equipment sales were $24,381,000, up 27% from 1993. Equipment
design business revenues were boosted by several large contracts involving
overseas sales of turbine fuel treatment systems and oil field dehydrators and
a resurgence of orders from U.S. refiners seeking system upgrades. The division
carried a strong backlog of contracts forward into 1995.
Operating earnings of Specialty Chemical Products declined 12% from 1993
primarily due to the weak performance of the North American oil field
business. Operating earnings of all other Specialty Chemical operations
increased over 1993 levels. The Polymers Division improved its margins as a
result of a reduction in lower margin sales being replaced with higher margin
products. Both the Industrial Chemicals Division and the EuroChem Division
recorded improvements on last year's profitability due to an increased sales
base and leveraging their operating expenses accordingly.
The Equipment segment earnings increased 77% due to stronger contract
revenues, both domestically and overseas, and by effectively controlling its
operating expenses which were up only nominally over the prior year.
The company charged pretax earnings with $20,025,000 to cover a
reorganization of its chemicals segment operations. This reorganization,
which resulted from a reengineering study of the oil field operations and a
decision to exit the manufacturing of microcrystalline waxes, will result in
the elimination of approximately 290 jobs, and the discontinuance of chemical
manufacturing operations in Webster Groves, Missouri, and Clear Lake, Texas;
discontinuance of ethoxylation activities at Barcelona, Venezuela; and
discontinuance of the microcrystalline wax manufacturing process at Kilgore,
Texas, and Barnsdall, Oklahoma.
1993 VS. 1992
Petrolite's revenues rose 11% in fiscal 1993 to $351,779,000. All
15
<PAGE> 5
of the company's operating divisions participated in the revenue improvement.
About 50% of the increase came from the acquisition of the assets and business
of Welchem, Inc., a subsidiary of Amoco Chemical Holding Company, which was
completed in April 1993.
Net earnings in fiscal 1993, before effect of a change in accounting
principle, increased 25% to $20,546,000, or $1.82 per share, compared with
$16,479,000, or $1.45 per share, in the prior period. All operating divisions
also shared in the earnings improvement.
During 1993, Petrolite adopted Statement of Financial Accounting Standard No.
106 related to medical and other postretirement benefits, which resulted in a
nonrecurring, non-cash, after-tax charge of $6,500,000, or $0.58 per share.
This charge reduced reported fiscal 1993 earnings to $14,046,000, or $1.24 per
share.
Revenues from sales of Specialty Chemical Products were $332,512,000 in
fiscal 1993, a 10% increase over fiscal 1992. New business gained as a result
of the Welchem acquisition accounted for approximately 60% of the
improvement. The largest revenue increase was realized by the Tretolite
Division principally due to the Welchem acquisition. New revenue sources also
included the hydrogen sulfide management programs added to Petrolite's
service offerings through purchase of Sulfa-Scrub(R) patents and technology
from Quaker Chemical Corporation.
The Industrial Chemicals Division also benefited from acquiring the Welchem
customer base. In addition, there was continued strong demand for fuel
additives and the division's basic refinery product base. Oil field and
industrial chemicals sales also showed good improvement in Latin American
markets and the Pacific Rim.
Major sales volume gains were realized by the EuroChem Division, although a
general decline in the value of European currencies versus the dollar diluted
the comparative revenue effect. Larger revenue gains were in the Middle East,
Northern Europe and Africa. The Polymers Division also posted higher revenues
in international markets which offset the impact of sluggish demand in domestic
markets.
Equipment revenues were $19,267,000, a 17% increase over fiscal 1992. Petreco
Division equipment contract activity accelerated significantly, particularly in
Europe and the Pacific Rim. The division also enjoyed a healthy backlog of
contracts which were realized in fiscal 1994.
Operating earnings of Petrolite's Specialty Chemical Products business
segment improved 22% to $29,714,000 in fiscal 1993. All divisions contributed
to the improvement. Operating margins of the Tretolite and Industrial
Chemicals divisions were higher due to a more favorable product mix, stable
raw material costs and the beneficial impact of higher sales volumes on fixed
operating costs. There were also improved contributions from Latin America
and the Far East.
The EuroChem Division significantly improved its profitability, despite the
effect of generally weaker currencies on revenues. Operating earnings of the
Polymers Division improved on higher revenues, while margins were tested by
intense competition in several product lines.
The company's Equipment segment generated operating earnings of $1,851,000,
representing a 38% gain over the prior year. Stronger equipment revenues
produced by the company's European subsidiaries were a major factor in the
improvement.
INDUSTRY SEGMENT DATA
Petrolite's business is classified into two industry segments: Specialty
Chemical Products and Equipment. The Specialty Chemical Products segment
includes development, manufacture, distribution and marketing of oil field
and industrial chemicals, and industrial polymers and waxes. The Equipment
segment includes development, assembly, distribution and marketing of
specialized lines of equipment for a variety of major industries.
Following is a summary of net revenues, earnings from operations and other
financial data by industry segment. Earnings from operations are defined as
earnings before interest income and expense, equity in net earnings of
affiliated companies, foreign exchange gains and losses, other nonoperating
income and expense, and the provision for income taxes.
<TABLE>
INDUSTRY SEGMENT INFORMATION<F*>
<CAPTION>
(Dollars in thousands)
For Years Ended October 31 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues:
Specialty Chemical Products $338,999 $344,846 $332,512
Equipment 25,878 24,381 19,267
- ------------------------------------------------------------------------------------------
364,877 369,227 351,779
- ------------------------------------------------------------------------------------------
Earnings (loss) from operations:
Specialty Chemical Products 15,835 26,172 29,714
Equipment 3,851 3,278 1,851
Write-down of assets (14,354)
Reorganization costs (20,025)
- ------------------------------------------------------------------------------------------
5,332 9,425 31,565
- ------------------------------------------------------------------------------------------
Identifiable assets:
Specialty Chemical Products 216,042 260,953 271,401
Equipment 17,419 13,750 10,780
Investments in affiliated companies 13,116 9,223 9,309
Corporate 46,008 31,013 9,655
- ------------------------------------------------------------------------------------------
292,585 314,939 301,145
- ------------------------------------------------------------------------------------------
Other related disclosures:
Specialty Chemical Sales by
product group--
Oil Field Chemicals 193,952 208,673 199,847
Industrial Chemicals 74,220 67,828 63,249
Specialty Polymers and Waxes 70,827 68,345 69,416
- ------------------------------------------------------------------------------------------
338,999 344,846 332,512
- ------------------------------------------------------------------------------------------
Depreciation:
Specialty Chemical Products 14,496 18,814 16,325
Equipment 505 436 404
Corporate 289 76 36
- ------------------------------------------------------------------------------------------
15,290 19,326 16,765
- ------------------------------------------------------------------------------------------
Capital expenditures, net:
Specialty Chemical Products 11,893 16,674 18,239
Equipment 598 547 635
Corporate 74 4,604 49
- ------------------------------------------------------------------------------------------
$ 12,565 $ 21,825 $ 18,923
- ------------------------------------------------------------------------------------------
<FN>
<F*>The financial statements and related notes thereto on pages 18 to 28 should
be read in conjunction with this data.
</TABLE>
16
<PAGE> 6
WORLDWIDE OPERATIONS
Petrolite's worldwide operations are summarized below. Inter-area net
revenues include sales from one Petrolite unit to another located in a
different geographic area. Earnings from operations include total company
earnings on sales to unaffiliated customers.
<TABLE>
WORLDWIDE OPERATIONS INFORMATION<F*>
<CAPTION>
Net Revenues
-------------------------- Earnings
Unaffiliated from Identifiable
For Years Ended October 31 (Dollars in thousands) Customers Inter-area Operations Assets
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
- --------------------------------------------------------------------------------------------------------
UNITED STATES $224,300 $ 30,967 $(2,726) $140,483
EUROPE 87,990 5,753 7,446 62,082
CANADA/LATIN AMERICA 28,804 2,088 (1,562) 13,501
MIDDLE EAST/FAR EAST 23,783 2,174 17,395
INVESTMENTS IN AFFILIATED COMPANIES 13,116
CORPORATE 46,008
ELIMINATIONS (38,808)
- --------------------------------------------------------------------------------------------------------
$364,877 $ 0 $ 5,332 $292,585
- --------------------------------------------------------------------------------------------------------
1994
- --------------------------------------------------------------------------------------------------------
United States $237,579 $ 33,503 $(8,218) $170,581
Europe 87,957 5,242 12,751 69,944
Canada/Latin America 21,861 1,118 7 10,815
Middle East/Far East 21,830 4,885 23,363
Investments in affiliated companies 9,223
Corporate 31,013
Eliminations (39,863)
- --------------------------------------------------------------------------------------------------------
$369,227 $ 0 $ 9,425 $314,939
- --------------------------------------------------------------------------------------------------------
1993
- --------------------------------------------------------------------------------------------------------
United States $231,544 $ 30,576 $15,947 $195,827
Europe 83,271 4,692 11,856 54,168
Canada/Latin America 18,969 444 1,069 10,689
Middle East/Far East 17,995 2,693 21,497
Investments in affiliated companies 9,309
Corporate 9,655
Eliminations (35,712)
- --------------------------------------------------------------------------------------------------------
$351,779 $ 0 $31,565 $301,145
- --------------------------------------------------------------------------------------------------------
Export revenues included in the United States net
revenues to unaffiliated customers were as follows:
<CAPTION>
For Years Ended October 31 (Dollars in thousands) 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Geographic Areas:
Far East $ 13,609 $16,167 $ 10,358
Canada/Latin America 12,946 11,590 12,602
Europe 163 228 152
Africa 3,079 5,162 4,272
Middle East 3,794 3,378 3,415
- --------------------------------------------------------------------------------------------------------
$ 33,591 $36,525 $ 30,799
- --------------------------------------------------------------------------------------------------------
<FN>
<F*>The financial statements and related notes thereto on pages 18 to 28 should
be read in conjunction with this data.
</TABLE>
17
<PAGE> 7
<TABLE>
CONSOLIDATED STATEMENTS OF EARNINGS
<CAPTION>
For Years Ended October 31 (Dollars in thousands, except per share data) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Revenues $364,877 $369,227 $351,779
Cost of Products Sold and Other Direct Costs 229,512 215,483 201,667
- ---------------------------------------------------------------------------------------------------------------------
Gross profit 135,365 153,744 150,112
- ---------------------------------------------------------------------------------------------------------------------
Expenses:
Selling 86,015 88,272 80,750
Research 12,768 12,737 13,587
General and administrative 21,438 23,285 24,210
Write-down of assets 9,812
Reorganization of chemical operations 20,025
- ---------------------------------------------------------------------------------------------------------------------
130,033 144,319 118,547
- ---------------------------------------------------------------------------------------------------------------------
Earnings from operations 5,332 9,425 31,565
Other Income (Expense):
Equity in earnings (loss) of affiliates 3,146 925 (127)
Interest expense (3,278) (3,371) (1,475)
Interest and dividend income 1,449 850 828
Other, net 1,465 677 641
- ---------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and effect of change in accounting principles 8,114 8,506 31,432
- ---------------------------------------------------------------------------------------------------------------------
Provision for U.S. and Foreign Income Taxes:
Current 6,362 6,458 11,489
Deferred, net (4,478) (4,959) (603)
- ---------------------------------------------------------------------------------------------------------------------
1,884 1,499 10,886
- ---------------------------------------------------------------------------------------------------------------------
Net Earnings before effect of change in accounting principles 6,230 7,007 20,546
Effect of changes in accounting for income taxes (1994)
and postretirement benefits (1993) 2,037 (6,500)
- ---------------------------------------------------------------------------------------------------------------------
Net Earnings $ 6,230 $ 9,044 $ 14,046
- ---------------------------------------------------------------------------------------------------------------------
Earnings Per Share before effect of change in accounting principles $ .55 $ .62 $ 1.82
Effect of changes in accounting for income taxes (1994)
and postretirement benefits (1993) .18 (.58)
- ---------------------------------------------------------------------------------------------------------------------
Earnings Per Share $ .55 $ .80 $ 1.24
- ---------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
18
<PAGE> 8
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
October 31 (Dollars in thousands) 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 33,662 $ 19,801
Marketable securities 763
Accounts receivable, less estimated doubtful accounts of $986 and $1,306, respectively 63,352 68,733
Inventories 36,709 43,863
Other current assets 12,115 12,557
- ---------------------------------------------------------------------------------------------------------------------
Total current assets 145,838 145,717
- ---------------------------------------------------------------------------------------------------------------------
Investment in Affiliated Companies 13,116 9,223
- ---------------------------------------------------------------------------------------------------------------------
Other Assets:
Patents and other intangibles, less accumulated amortization of $7,136 and
$2,848, respectively 9,505 17,767
Other 12,752 15,169
- ---------------------------------------------------------------------------------------------------------------------
Total other assets 22,257 32,936
- ---------------------------------------------------------------------------------------------------------------------
Properties:
Buildings 63,325 68,027
Machinery and equipment 203,526 223,500
Construction in progress 4,159 6,489
Accumulated depreciation (166,369) (178,437)
- ---------------------------------------------------------------------------------------------------------------------
104,641 119,579
Land 6,733 7,484
- ---------------------------------------------------------------------------------------------------------------------
111,374 127,063
- ---------------------------------------------------------------------------------------------------------------------
$ 292,585 $ 314,939
- ---------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings $ 4,594 $ 6,124
Accounts payable 40,964 42,114
Income taxes payable 3,378 9,047
Accrued vacation payable 4,000 3,910
Reorganization reserve 2,734 8,667
Other current liabilities 11,164 9,586
- ---------------------------------------------------------------------------------------------------------------------
Total current liabilities 66,834 79,448
- ---------------------------------------------------------------------------------------------------------------------
Other Liabilities:
Long-term debt 40,000 40,000
Retiree medical benefits 13,192 12,513
Other 2,317 4,295
- ---------------------------------------------------------------------------------------------------------------------
Total other liabilities 55,509 56,808
- ---------------------------------------------------------------------------------------------------------------------
Deferred Income Taxes, Net 10,778 13,094
- ---------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Capital stock, without par value--
Authorized--35,000,000 shares
Issued--12,220,697 and 12,215,697 shares, respectively 9,389 9,248
Reinvested earnings 170,943 177,404
Cumulative translation adjustment (2,174) (2,319)
- ---------------------------------------------------------------------------------------------------------------------
178,158 184,333
Less treasury stock, at cost (887,749 and 890,518 shares, respectively) (18,694) (18,744)
- ---------------------------------------------------------------------------------------------------------------------
159,464 165,589
- ---------------------------------------------------------------------------------------------------------------------
$ 292,585 $ 314,939
- ---------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
19
<PAGE> 9
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For Years Ended October 31 (Dollars in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 6,230 $ 9,044 $ 14,046
- ---------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation and amortization 18,909 21,291 17,396
Effect of changes in accounting for income taxes (1994) and
postretirement benefits (1993) (2,037) 6,500
Write-down of assets 14,354
Reorganization of chemical operations 20,025
Gain on sale of assets (1,338) (783) (648)
Changes in assets and liabilities:
Accounts receivable 5,381 3,245 (16,510)
Inventories 6,354 639 (9,562)
Accounts payable and accrued liabilities (5,482) 3,849 16,276
Other, net (14,809) (4,367) (3,799)
- ---------------------------------------------------------------------------------------------------------------------
23,369 41,862 9,653
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 29,599 50,906 23,699
- ---------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Capital expenditures, net (12,565) (21,825) (18,923)
Proceeds from sale of Clear Lake plant 10,335
Welchem assets acquired (25,148)
Other, net (192) (1,125) (4,422)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (2,422) (22,950) (48,493)
- ---------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Long-term borrowings 40,000
Short-term borrowings (repayments), net (816) (4,009) (3,583)
Dividends paid (12,691) (12,741) (12,638)
Sales of common stock 191 559
Other 239
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (13,316) (16,191) 24,018
- ---------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Equivalents 13,861 11,765 (776)
Cash and Equivalents at Beginning of Year 19,801 8,036 8,812
- ---------------------------------------------------------------------------------------------------------------------
Cash and Equivalents at End of Year $ 33,662 $ 19,801 $ 8,036
- ---------------------------------------------------------------------------------------------------------------------
Interest Paid $ 3,278 $ 2,118 $ 1,475
Income Taxes Paid $ 6,782 $ 6,432 $ 8,123
- ---------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
20
<PAGE> 10
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
Capital Stock Cumulative Total
-------------------- Reinvested Translation Treasury Stockholders'
(Amounts in thousands, except per share data) Shares Amount Earnings Adjustment Stock Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1992 12,190 $8,498 $179,693 $(4,313) $(19,292) $164,586
Net earnings 14,046 14,046
Dividends paid $1.12 per share (12,638) (12,638)
Foreign currency translation adjustments (3,096) (3,096)
Exercise of stock under options
and restricted stock awards 6 196 43 239
- -----------------------------------------------------------------------------------------------------------------------------------
October 31, 1993 12,196 8,694 181,101 (7,409) (19,249) 163,137
Net earnings 9,044 9,044
Dividends paid $1.12 per share (12,741) (12,741)
Foreign currency translation adjustments 5,090 5,090
Exercise of stock under options 20 554 5 559
Issuance of stock for acquisition 500 500
- -----------------------------------------------------------------------------------------------------------------------------------
October 31, 1994 12,216 9,248 177,404 (2,319) (18,744) 165,589
Net earnings 6,230 6,230
Dividends paid $1.12 per share (12,691) (12,691)
Foreign currency translation adjustments 145 145
Exercise of stock under options 5 141 50 191
- -----------------------------------------------------------------------------------------------------------------------------------
October 31, 1995 12,221 $9,389 $170,943 $(2,174) $(18,694) $159,464
- -----------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
21
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated statements include the accounts of the company, its
subsidiaries and its unconsolidated 50%-owned corporate affiliates,
Toyo-Petrolite Co. Ltd. and Bareco Products, a partnership, both of which are
accounted for using the equity method. All significant intercompany accounts
and transactions have been eliminated.
TRANSLATION OF FOREIGN CURRENCIES
Foreign currency denominated financial statements are translated in
accordance with Statement of Financial Accounting Standard No. 52. Under this
standard all assets and liabilities of operations outside the United States,
except for operations in highly inflationary economies, are translated into
U.S. dollars at exchange rates in effect at the end of the year. Operating
results are translated at a weighted average of exchange rates in effect during
the year. Net unrealized gains and losses on translation of foreign currency
financial statements, other than those in highly inflationary economies, are
recorded in stockholders' equity, as a cumulative translation adjustment, and
will be included in income only upon sale or liquidation of the underlying
asset. Realized gains and losses resulting from completed transactions are
included in net earnings.
CASH EQUIVALENTS
Cash equivalents are comprised of highly liquid debt instruments with a
maturity of three months or less.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined
under the last-in, first-out (LIFO) method for most domestic inventories of
Specialty Chemical Products. The remainder is stated at standard cost, which
approximates actual cost, or at actual cost. Standard costs are determined on a
fully absorbed basis.
INTANGIBLES
Patents and other intangibles are amortized over periods ranging from 4 to 15
years.
PROPERTIES AND DEPRECIATION
Properties are carried at cost and include expenditures for new facilities
and those which substantially extend the useful lives of existing capital
assets. Maintenance, repairs and minor renewals are expensed as incurred.
Upon disposal or retirement of properties, the related cost and accumulated
depreciation are removed from the accounts and any profit or loss on
disposition is recorded in income. Depreciation is generally provided on a
straight-line basis at rates based on estimated useful lives of the
properties (buildings 5 to 50 years, machinery and equipment 3 to 20 years).
Included in properties are land and certain assets which are being held for
sale. The net book value of these assets at October 31, 1995, approximates
$5.2 million.
INCOME TAXES
The company follows the practice of providing for income taxes based on
financial statement earnings. Consolidated income taxes include provisions
for additional taxes or tax refunds on repatriation of income earned abroad
and also reflect the deferred tax effect of accelerated depreciation and
other timing differences in reporting income and deductions for tax purposes.
CAPITAL STOCK
Proceeds from sales of capital stock issued under stock option and incentive
plans and tax benefits to the company resulting from early disposition of
stock acquired by the employees under options are credited to capital stock.
Proceeds in excess of cost from sales of treasury stock are also credited to
capital stock.
REVENUE RECOGNITION
The company follows the practice of reporting income from equipment contracts
on the percentage-of-completion method. Revenue other than equipment contracts
is recorded based on shipment date.
EARNINGS PER SHARE
Net earnings per share are based on the weighted average number of shares of
capital stock outstanding during the respective year.
FINANCIAL STATEMENT RECLASSIFICATION
Selected prior year information has been reclassified to conform with 1995
annual report presentation.
SUMMARY OF OTHER FINANCIAL DATA
CONCENTRATION OF CREDIT RISK
The company sells a majority of its products to customers in the oil and gas
industry. While most of the company's business activity is with customers
located within North America, the company also services customers in Europe,
Africa, the Middle East, Far East, and South America. The company performs
ongoing credit evaluations of its customers and generally does not require
collateral. When appropriate, the company requires letters of credit or other
similar guarantees particularly in international transactions. The company
maintains reserves for potential credit losses and such losses have been
within management's expectations. As of October 31, 1995, the company had no
significant concentrations of credit risk.
FINANCIAL INSTRUMENTS
The fair value of financial instruments is determined by reference to various
market data and other valuation techniques as appropriate. Unless otherwise
disclosed, the fair values of financial instruments approximate their
recorded values.
22
<PAGE> 12
ACCOUNTING FOR INVESTMENTS
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." The effect of adopting this statement during the
first quarter of fiscal 1995 was insignificant to the company.
IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets." The
statement prescribes the accounting for the impairment of long-lived assets,
such as property, plant, and equipment; identifiable intangibles, including
patents and trademarks; and goodwill related to those assets.
The FASB has deferred mandatory implementation of this statement until fiscal
1997. The company is currently evaluating the impact of the proposed
statement and the timing of its adoption.
ACCOUNTING FOR STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 123, "Accounting for Stock-Based Compensation." This statement
establishes financial accounting and reporting standards for stock-based
employee compensation plans.
The FASB has deferred mandatory inplementation of this statement until fiscal
1997. The company is currently evaluating the impact of the proposed
statement and the timing of its adoption.
INVESTMENT IN UNCONSOLIDATED AFFILIATES
The company's investment in affiliated companies which are not majority owned
or controlled are accounted for using the equity method. Investments carried at
equity and the percentage interest owned consist of Toyo-Petrolite Co. Ltd.
(50%) and Bareco Products (50%).
Financial information representing Petrolite's share of affiliated companies
accounted for by the equity method is as follows, based on fiscal year-end
results at March 31, 1995, and October 31, 1995, for Toyo-Petrolite Co. Ltd.
and Bareco Products, respectively:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995
- ---------------------------------------------------------------
<S> <C>
Earnings data
Net revenues $37,111
Gross profit 7,664
Net earnings 3,100
- ---------------------------------------------------------------
Balance sheet data
Current assets $19,635
Other assets 2,837
Current liabilities 7,865
Other liabilities 492
Net assets 14,115
- ---------------------------------------------------------------
</TABLE>
The company's share of undistributed earnings of affiliated companies
included in consolidated retained earnings was $7,380,000 at October 31,
1995. Dividends from affiliated companies were $1,287,000 in 1995.
<TABLE>
INVENTORIES
Inventories at October 31 are summarized as follows:
<CAPTION>
(Dollars in thousands) 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials, parts and supplies $ 19,984 $ 28,174
Finished goods 37,874 33,051
Less reserve for revaluation of
inventories to LIFO cost (18,541) (17,427)
Less reserve for obsolete inventory (2,300)
- ------------------------------------------------------------------------------------------
37,017 43,798
Equipment contracts in progress 13 1,026
Less advance billings (321) (961)
- ------------------------------------------------------------------------------------------
Inventories, net $36,709 $43,863
- ------------------------------------------------------------------------------------------
</TABLE>
Raw materials declined at all divisions both domestically and internationally
due primarily to an inventory reduction program initiated by the company
during 1995. The increase in finished goods is due to the formation of new
subsidiaries and respective stock locations in Mexico and Trinidad in
addition to a general increase in international business. The reserve for
obsolete inventory represents the carrying value of raw materials and
finished goods which will be disposed of in 1996 (see footnote regarding
write-down of certain assets and inventory disposal for additional
information). The decline in equipment contracts in progress at year-end 1995
is due to the continual change in the mix and status of jobs in progress at
the respective year-end dates.
Approximately 66% and 70% of total inventories (exclusive of equipment
contracts in progress) were accounted for on a last-in, first-out (LIFO)
basis at October 31, 1995 and 1994, respectively.
WRITE-DOWN OF CERTAIN ASSETS AND INVENTORY DISPOSAL
In the fourth quarter of 1995, the company decided that a $14.4 million
pretax charge was necessary to provide for the write-off and disposal of
obsolete inventory as well as the write-down of patents, intangibles and
other assets.
Continuing weak North American sales caused management to abandon and
consolidate product lines, reduce its stocking locations, and dispose of
slow-moving inventory. As a result, $4.6 million was charged to cost of
products sold for the write-off and disposition of obsolete chemical
inventory. Approximately $2.3 million of this amount relates to disposal
costs to be incurred in fiscal 1996.
In light of continuing weak earnings in North American chemical markets,
management assessed the ongoing value of Chemicals Group patents, intangibles
and other assets which related to acquisitions or investments made by the
company during the last three
23
<PAGE> 13
years. Based on the projected net present value of future cash flows, the
company determined that these intangibles and other assets should be written
down by $7.8 million. A similar evaluation resulted in the write-down of fixed
assets related to the company's computerized information systems by $2 million.
These charges are reflected in income from operations.
The net earnings and per share impact of this charge is $9 million or $0.79
per share.
REORGANIZATION
In the fourth quarter of fiscal 1994, the company recorded a $20,025,000
pretax charge for reorganization of its Specialty Chemicals segment operations.
Reorganization actions through October 31, 1994, included the early retirement
or voluntary severance of employees, the decision to discontinue all chemical
manufacturing at Webster Groves, Missouri, and Clear Lake, Texas, the decision
to discontinue ethoxylation activities at Barcelona, Venezuela, and the
decision to discontinue production of microcrystalline waxes at the company's
Barnsdall, Oklahoma, and Kilgore, Texas, facilities. At October 31, 1994,
$6,767,000 of the severance accrual and $1,900,000 of plant shutdown costs were
recognized as a liability on the company's balance sheet.
During fiscal 1995, $4,783,000 of severance costs and $1,150,000 of plant
shutdown costs were charged against the reorganization accrual, leaving a
remaining balance of $2,734,000 at October 31, 1995, relating to severance
and plant shutdown costs for the discontinuance of production of
microcrystalline waxes at the company's Barnsdall, Oklahoma, and Kilgore,
Texas, facilities. Due to delays experienced by the joint-venture partner in
replacing this microcrystalline production capacity, the company expects this
portion of the reserve ($2,734,000) to be carried forward until the fourth
quarter of fiscal 1996 when it is anticipated that severance and plant
shutdown costs will be incurred.
SHORT-TERM BORROWINGS AND LINES OF CREDIT
Short-term funds for certain international operations are obtained through
unsecured overdraft facilities and short-term notes payable with local banks
which totaled $4,594,000 at October 31, 1995. Domestic short-term funds are
obtained through unsecured, uncommitted lines of credit with two banks
totaling $26 million. Domestic borrowings bear interest at a fluctuating rate
below prime determined by the banks' cost of funds. At October 31, 1995, the
amount available and unused under these lines of credit aggregated $26
million.
LONG-TERM DEBT
In September 1993, the company entered into a Note Purchase Agreement with
several institutional investors providing for the private placement of its
5.90% Series A Senior Notes due 2000 and 6.39% Series A Senior Notes due 2003
in aggregate principal amounts of $10 million and $30 million, respectively.
Proceeds from the sale of these unsecured notes, which were issued in November
1993, were used to retire short-term borrowings.
The Note Purchase Agreement contains certain restrictive covenants including
limitations on additional borrowings and disposition of assets, and the
maintenance of minimum net worth. Long-term debt maturities are (in
millions): 1996 - $0, 1997 - $2.0, 1998 - $6.3, 1999 - $6.3, 2000 - $6.3.
Based on borrowing rates currently available to the company for loans with
similar terms and average maturities, the fair value of long-term debt is
$40.0 million (1994 - $36.6 million).
<TABLE>
INCOME TAXES
Below is a comparative summary of income taxes for each of the
three years ended October 31:
<CAPTION>
(Dollars in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
U.S. $ 3,714 $ 2,838 $ 6,898
Foreign 2,398 3,200 3,791
State 250 420 800
Deferred
U.S. (3,416) (4,261) (467)
Foreign (656) (220) (136)
State (406) (478)
- ------------------------------------------------------------------------------------------
Total $ 1,884 $ 1,499 $10,886
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
Pretax earnings related to domestic and foreign operations are
summarized below:
<CAPTION>
(Dollars in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $ 3,232 $(1,550) $21,765
Foreign 4,882 10,056 9,667
- ------------------------------------------------------------------------------------------
Total $ 8,114 $ 8,506 $31,432
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
A reconciliation of income taxes at the U.S. statutory rate to the company's
reported effective tax rate follows:
<CAPTION>
(Dollars in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes computed at the
U.S. statutory rate 35.0% 35.0% 34.8%
State income taxes net of federal
tax benefit (1.2) (0.4) 1.7
Tax benefit - U.S. export sales (10.1) (10.7) (2.7)
Net (income) loss of foreign affiliates (4.1) (3.8) 0.1
Foreign tax rate greater (less) than
domestic tax rate (1.1) (2.5) 1.1
Non-deductible items 5.1 2.6 0.5
Other, net (0.4) (2.6) (0.9)
- ------------------------------------------------------------------------------------------
Effective tax rate 23.2% 17.6% 34.6%
- ------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 14
Effective November 1, 1993, the company adopted Statement of Financial
Accounting Standard (SFAS) No. 109, "Accounting for Income Taxes," which
requires an asset and liability approach to financial accounting and
reporting for deferred income taxes. The cumulative effect of adopting this
accounting change was a one-time gain of $2.0 million or $.18 per share.
Prior-year financial statements have not been restated to reflect the
provisions of SFAS No. 109.
<TABLE>
The deferred tax assets and deferred tax liabilities recorded on the balance
sheet as of October 31 are as follows:
<CAPTION>
1995 1994
---------------------------------------------------
(Dollars in thousands) ASSETS LIABILITIES Assets Liabilities
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current
Intercompany profit
in inventory $ 1,156 $ $ 1,530 $
Accrued liabilities 3,109 2,896
Inventory
valuation/disposal costs 2,258
Plant closing expenses 2,720
Other items 1,029 584 1,181 113
- --------------------------------------------------------------------------------------------------------
7,552 584 8,327 113
- --------------------------------------------------------------------------------------------------------
Non-Current
Accrued liabilities 2,101 1,298
Plant closing expenses 3,155 711
Postretirement benefits
other than pension 4,960 4,818
Depreciation 16,358 15,621
Other property basis
difference 1,123 1,123
Repatriation of
foreign earnings 1,715
Pension expense 2,492 599
Research and
development expense 2,031
Other items 694 407 954
- --------------------------------------------------------------------------------------------------------
10,910 21,688 7,234 20,328
- --------------------------------------------------------------------------------------------------------
Total deferred taxes $18,462 $22,272 $15,561 $20,441
- --------------------------------------------------------------------------------------------------------
</TABLE>
United States federal income tax returns for all years through 1991 have been
settled with the Internal Revenue Service.
<TABLE>
SUPPLEMENTAL CASH FLOW INFORMATION
In October 1994, the company acquired the remaining 50% of Petrolite
Suramericana, S.A. in exchange for $500,000 of Petrolite Stock. At the same
time, the company changed the method of accounting for its investment in
Petrolite Suramericana from the equity method to consolidation. These
activities resulted in the following non-cash transactions:
<CAPTION>
(Dollars in thousands) 1994
- ---------------------------------------------------------------
<S> <C>
Current assets $ 536
Equity in affiliate (3,630)
Fixed assets, net 4,724
Current liabilities (1,130)
Treasury stock (500)
- ---------------------------------------------------------------
</TABLE>
PENSION BENEFITS
The company has a noncontributory final average pay defined benefit plan
covering all eligible U.S. employees. Certain benefit improvements under the
plan were initiated for current employees as of November 1, 1991, and for
most retirees as of January 1, 1992. The company contributes funds to the
trustee as necessary to provide for current service and for any unfunded
prior service costs over a reasonable period. To the extent that these
requirements are fully covered by assets on hand, a contribution may not be
made in a particular year. Plan assets consist principally of common stocks
and fixed income securities. Pension costs for non-U.S. plans are not material
in the aggregate and are not included in these disclosures.
<TABLE>
The funded status of the U.S. plan at October 31 was as follows:
<CAPTION>
(Dollars in thousands) 1995 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of:
Vested benefits $(68,604) $(65,831) $(62,338)
Nonvested benefits (5,086) (4,497) (4,440)
- -----------------------------------------------------------------------------------------
Accumulated benefit obligation (73,690) (70,328) (66,778)
Effect of future salary increases (16,055) (14,219) (18,799)
- -----------------------------------------------------------------------------------------
Projected benefit obligation (89,745) (84,547) (85,577)
Plan assets at fair value 129,435 121,480 121,868
- -----------------------------------------------------------------------------------------
Excess of assets over projected
benefit obligation 39,690 36,933 36,291
Unamortized net transition asset (9,157) (10,180) (11,203)
Unrecognized net gain (26,805) (26,627) (22,319)
Unrecognized prior service cost 3,602 4,529 5,260
- -----------------------------------------------------------------------------------------
Prepaid pension cost
at October 31 $ 7,330 $ 4,655 $ 8,029
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
The net pension credit included the following components:
<CAPTION>
(Dollars in thousands) 1995 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost -
Benefits earned during the period $ 2,369 $3,183 $ 2,881
Interest cost on projected
benefit obligation 6,474 6,422 6,307
Return on plan assets (18,564) (3,727) (21,240)
Net amortization and deferral 6,636 (6,596) 12,022
- -----------------------------------------------------------------------------------------
Net pension credit $(3,085) $ (718) $ (30)
- -----------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 15
In addition to the net pension credit of $718,000 in fiscal 1994, net
expenses of $4.1 million were recorded in 1994 due to a voluntary work-force
reduction program associated with reorganization efforts. The net loss is
comprised of the cost of special termination benefits of $5.6 million and a
curtailment gain of $1.5 million. (See reorganization footnote for
additional information.)
The projected benefit obligation was determined using a discount rate of 7.5%
for fiscal 1995, 8.25% for fiscal 1994, and 7.5% for fiscal 1993. The assumed
long-term rate of return on plan assets is 9.0% for fiscal 1995 and 8.5% for
both fiscal 1994 and 1993. The assumed long-term rate of compensation
increases is 5.0%. The net transition asset at November 1, 1985, is being
amortized over 19 years.
Consolidated pension income (expense) was $2.5 million for 1995, $.3 million
for 1994, and $(.5) million for 1993.
POSTRETIREMENT BENEFITS
The company implemented Statement of Financial Accounting Standard (SFAS) No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions,"
effective for fiscal 1993. The company elected to immediately recognize its
transition obligation of $9.7 million as the effect of a change in method of
accounting. SFAS 106 requires recognition during employees' active service
periods of the expected cost of providing postretirement benefits (primarily
health benefits). The company's previous practice was to expense these costs
as they were paid. Postretirement health benefits are provided to current and
former employees and their spouses who retire at or after age 55 with 10
years of service. The postretirement health care plans are contributory,
based upon years of service at retirement, and are subject to deductibles and
copayments. The company reserves the right to change or terminate the
benefits at any time. The plan is funded as claims are paid.
<TABLE>
The status of the plan at October 31 was as follows:
<CAPTION>
(Dollars in thousands) 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit
obligation (APBO):
Retirees $ (9,202) $ (8,059)
Fully eligible plan participants (824) (676)
Other plan participants (4,458) (3,778)
- ----------------------------------------------------------------------------
Total APBO (14,484) (12,513)
Unrecognized net loss 1,292
- ----------------------------------------------------------------------------
Accrued postretirement benefit cost $(13,192) $(12,513)
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
The net periodic postretirement benefit cost was as follows:
<CAPTION>
(Dollars in thousands) 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Service cost-
Benefits earned during the period $ 246 $ 329
Interest cost on APBO 1,035 866
Net amortization and deferral 24 50
- ----------------------------------------------------------------------------
Net periodic postretirement benefit cost $ 1,305 $ 1,245
- ----------------------------------------------------------------------------
</TABLE>
In addition to the net periodic postretirement benefit cost for fiscal 1994,
the company recorded a net expense of $1.4 million representing the net
effect of special termination benefits and a curtailment gain due to a
voluntary work-force reduction program associated with reorganization
efforts. (See reorganization footnote for additional information.)
Under the former practice of expensing postretirement benefits when paid, the
expense would have been $.7 million in fiscal 1995, $.9 million in fiscal 1994,
and $.8 million in fiscal 1993.
For measurement purposes, a health care cost trend of 10% was assumed for
fiscal 1995, declining gradually over the next four years to 6% and remaining
at that level thereafter. For fiscal 1994, the health care cost trend rate
assumption was 12%, declining to 6% over a five-year period. The health care
cost trend rate affects the accumulated postretirement benefit obligation and
net periodic cost for health benefits. A one-percentage-point increase in
the assumed health care cost trend rates would increase the accumulated
postretirement benefit obligation for health benefits at October 31, 1995, by
$69,000 and would increase the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for health benefits
for fiscal 1995 by $6,000. The discount rates used in determining the
accumulated postretirement benefit obligation at October 31, 1995 and 1994
were 7.5% and 8.25%, respectively.
POSTEMPLOYMENT BENEFITS
In November 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS)
No. 112 -"Employers' Accounting for Postemployment Benefits." This statement
requires the company to accrue the cost of certain benefits, including
severance, workers' compensation, and health coverage, over an employee's
service life. The effect of adopting this statement during fiscal 1995 was
insignificant to the company.
STOCK OPTION PLANS
On December 10, 1986, the company's Board of Directors approved the 1987
Incentive Stock Option Plan. Under this plan, 600,000 shares of unissued
stock were reserved for grant to officers and key employees and could have
been awarded in the form of stock options or restricted stock units.
26
<PAGE> 16
Stock options are granted at prices not less than 100% of fair market value
of stock on dates of grant and were issued with a fixed expiration date, not
to exceed 11 years from date of grant. Options are exercisable ratably in
annual installments of 25%, commencing one year from date of grant.
A restricted stock unit is the right to receive either cash or shares of
capital stock, upon fulfillment of certain conditions, without payment to the
company. Restricted stock units are contingent upon continued employment or
attainment of predetermined performance targets during a restriction period,
generally three years.
<TABLE>
No additional grants will be made under this plan. Transactions under the
1987 Incentive Stock Option Plan are summarized
below:
<CAPTION>
Stock Options
------------------------
Restricted Number Average
Stock of Option
Units Options Price
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding October 31, 1992 3,161 174,900 $31.59
Exercised (1,750) (6,400) 30.59
Forfeited (500) 32.50
Expired (28,700) 31.67
- ------------------------------------------------------------------------------------------
Outstanding October 31, 1993 1,411 139,300 31.62
Exercised (3,200) 28.13
Forfeited (1,411) (7,300) 31.99
Expired (3,400) 32.50
- ------------------------------------------------------------------------------------------
Outstanding October 31, 1994 125,400 31.66
Exercised (1,000) 23.00
Forfeited (6,200) 32.50
Expired (15,700) 32.50
- ------------------------------------------------------------------------------------------
Outstanding October 31, 1995 102,500 $31.57
- ------------------------------------------------------------------------------------------
</TABLE>
Under the 1993 Stock Incentive Plan, which was approved by the shareholders
on March 1, 1993, 800,000 shares of unissued stock were reserved for grant
to executive officers, key managers and non-employee members of the Board of
Directors and may be awarded in the form of stock options or restricted stock
units. The plan provides that stock options are granted at prices not less
than 100% of fair market value of stock on dates of grant and are issued with
a fixed expiration date, not to exceed 10 years from date of grant.
Annually, each member of the Board of Directors who has served on the board
at least six months, is not an employee of the company, and who is elected at
an annual shareholders meeting, receives an option to purchase 2,000 shares
of the company's capital stock, subject to the five-year term of the plan.
The Board of Directors granted two groups of options under the 1993 plan with
different performance criteria. The first group of options is keyed to
compound annual increases in the value of the company's shares, which
consists of the market price plus dividends paid. Options to purchase shares
are exercisable in five years, however, the exercise date may be accelerated
if certain criteria are met. The second group of options is keyed to the
increase in the value of the company's shares over a five-year period
commencing on the date of the grant. Options to purchase shares are
exercisable in five years, however, the actual number of shares which can be
purchased under the plan will depend on the annual growth in the value of the
company's stock.
<TABLE>
Transactions under the 1993 Stock Incentive Plan are summarized below:
<CAPTION>
Number of Options
----------------------- Average
Non-Employee Option
Employees Directors Price
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding October 31, 1993 610,000 28,000 $31.18
Granted-various dates 95,000 12,000 32.56
Exercised (16,000) 29.00
Forfeited (60,000) 32.80
- ------------------------------------------------------------------------------------------
Outstanding October 31, 1994 645,000 24,000 32.75
Granted-March 6, 1995 0 16,000 26.06
Exercised (4,000) 29.53
Forfeited (21,000) 32.88
- ------------------------------------------------------------------------------------------
Outstanding October 31, 1995 624,000 36,000 $32.61
- ------------------------------------------------------------------------------------------
</TABLE>
Under a Stock Option Agreement dated August 11, 1995, Mr. Paul H. Hatfield,
then a Director of the Company, received an option to purchase 36,000 shares
at an exercise price of $21.03 per share, exercisable in monthly installments
of 3,000 shares, subject to the terms of a concurrent Management Agreement.
The Stock Option Agreement was cancelled effective November 20, 1995. The
option, exercisable with respect to 6,000 shares, will expire on August 11,
2000.
STOCKHOLDER RIGHTS PLAN
In March 1994, the company adopted a stockholder rights plan and distributed
a dividend of a right to purchase one share of capital stock (a "Right") for
each share of capital stock of the company ("Capital Stock") outstanding on
and after April 8, 1994. Each Right initially would entitle the holder to
purchase one share of Capital Stock for $120 under certain circumstances.
The Rights become exercisable only if a person or group becomes the
beneficial owner of 15% or more of the company's Capital Stock, or announces
a tender or exchange offer which would result in its ownership of 15% or more
of the Capital Stock. Stockholders who reported beneficial ownership of 15%
or more of the outstanding Capital Stock before April 8, 1994, do not trigger
the exercise of
27
<PAGE> 17
the Rights unless they acquire beneficial ownership of an additional 1% of the
outstanding Capital Stock.
After the Rights have become exercisable, holders would be entitled to
purchase additional shares of Capital Stock at one-half of the then-current
price per share. If the company is acquired in a merger, or 50% or more of
the company's assets are sold in one or more related transactions, the holder
would be entitled to purchase shares of capital stock of the acquiring
company at one-half of the then-current market price of such capital stock.
The Rights are redeemable and may be amended or exchanged at the company's
option before they become exercisable. The Rights have no voting power nor
do they entitle a holder to receive dividends. The Rights expire on March
28, 2004.
ENVIRONMENTAL MATTERS
The company has been named a potentially responsible party (PRP) under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
with respect to three "Superfund" sites. The company has not owned or
operated any of the sites and other PRPs also have been so designated with
respect to each site. Although this law technically imposes joint and
several liability on each responsible party at each site, the extent of the
company's financial contribution is expected to be limited based on the
number of other PRPs and the relative volumes and types of materials involved
at each site attributable to the company. The company also is involved in
remedial response and voluntary environmental cleanup, in some cases under
the direction of governmental agencies, at other locations which are not the
subject of the Superfund law. The company accrues for these costs when it is
likely that a liability exists and the amount of a payment with respect
thereto can be reasonably estimated. Actual costs may vary from estimates
due to inherent uncertainties in evaluating environmental exposures. Based
on, among other things, its previous experience with respect to such
activities and its ongoing review and analysis of all sites, at October 31,
1995, the company's balance sheet included an accrual for estimated
remediation and other environmental costs of approximately $2.6 million.
Subject to the difficulty in estimating future environmental costs, the
company expects that any sums it may be required to pay in connection with
such environmental matters in excess of the amounts so recorded will not have
a material adverse effect on its financial condition or results of
operations.
LITIGATION AND OTHER CONTINGENCIES
Various claims, lawsuits and other legal and administrative proceedings
arising in the ordinary course of business are pending against the company.
The company accrues for these costs when it is probable that a liability has
been incurred and the amount of the loss can be reasonably estimated. At
October 31, 1995, the company's balance sheet included an accrual for
estimated litigation costs and other contingencies of $3.1 million.
Management and legal counsel are of the opinion that any sum the company may
be required to pay in connection with the ultimate disposition of such
proceedings in excess of the amounts recorded or disclosed above will not
have a material adverse effect on its financial condition or results of
operations.
SEGMENT INFORMATION
Statement of Financial Accounting Standards No. 14 requires disclosure of
certain industry and world area "segment data." Accordingly, industry segment
and worldwide operations data appearing on pages 16 and 17 of this annual
report are an integral part of the accompanying financial statements.
Earnings from operations reported under industry segment data have been
charged with corporate expenses of approximately $2.8 million, $5.7 million,
and $6.8 million in 1995, 1994 and 1993, respectively, of which approximately
90% was allocated to the Specialty Chemical Products segment each year. These
corporate expenses consisted primarily of administrative costs which were
allocated to segments based upon services provided.
Profitability of the company's foreign operations by geographic area, as
reported on page 17 of this annual report, was determined based on ultimate
sales to unaffiliated customers. Total company profit was included in the
geographic area of the entity transacting the final sale.
<TABLE>
The following is a reconciliation of foreign earnings from operations as
presented on page 17, to pretax foreign earnings as presented
on page 24:
<CAPTION>
(Dollars in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings from operations:
Europe $7,446 $12,751 $11,856
Canada/Latin America (1,562) 7 1,069
Middle East/Far East 2,174 4,885 2,693
- ------------------------------------------------------------------------------------------
8,058 17,643 15,618
Intercompany charges, net (3,715) (7,385) (6,784)
Nonoperating income, net 539 (202) 833
- ------------------------------------------------------------------------------------------
Pretax foreign earnings $4,882 $10,056 $ 9,667
- ------------------------------------------------------------------------------------------
</TABLE>
Intercompany charges include intercompany profits realized in the United
States on sales originating domestically and foreign expenses incurred by the
domestic company. Transfers between geographic areas were recorded at
regular selling prices, less an amount intended to compensate the affiliated
purchaser for costs incurred in selling the product, and also to allow a
reasonable profit.
28
<PAGE> 18
RESPONSIBILITY FOR
FINANCIAL STATEMENTS
The management of Petrolite is responsible for the integrity and objectivity
of the financial statements of the company and its subsidiaries. The
accompanying financial statements, including the notes, were prepared by the
company in conformity with generally accepted accounting principles,
appropriate in the circumstances, and necessarily include some amounts that
are based on our best estimates and judgments. The financial information in
the remainder of this annual report is consistent with the financial
statements.
The company maintains a system of internal accounting control designed and
intended to provide reasonable assurance that assets are safeguarded and
transactions are executed and recorded in accordance with management's
authorization. The system is tested and evaluated regularly by the company's
internal auditors as well as by its independent accountants, Price
Waterhouse, in connection with their annual audit.
The adequacy of the company's internal financial controls and the accounting
principles employed in financial reporting are under the general surveillance
of the Audit Committee of the Board of Directors, consisting of four outside
directors. The independent accountants and internal auditors have free and
direct access to the Audit Committee and meet with the committee
periodically, with and without management present, to discuss accounting,
auditing and financial reporting matters. The committee also recommends
appointment of the independent accountants to the Board of
Directors.
Petrolite Corporation
REPORT OF INDEPENDENT
ACCOUNTANTS
To the Stockholders and Directors of Petrolite Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, of changes in stockholders' equity and
of cash flows present fairly, in all material respects, the financial
position of Petrolite Corporation and its subsidiaries at October 31, 1995
and 1994, and the results of their operations and their cash flows for each
of the three years in the period ended October 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of Petrolite's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As discussed in the footnotes to the consolidated financial statements, the
company changed its method of accounting for income taxes in 1994 and for
postretirement benefit costs other than pensions in 1993.
/s/ Price Waterhouse LLP
St. Louis, Missouri
November 30, 1995
29
<PAGE> 19
<TABLE>
11-YEAR SUMMARY
<CAPTION>
For Years Ended October 31 (Dollars in thousands, except per share data) 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Summary of Operations --
Net revenues $364,877 $369,227 $351,779 $317,950
Gross profit 135,365 153,744 150,112 130,358
Earnings from operations 5,332 9,425 31,565 24,397
Interest expense 3,278 3,371 1,475 936
Nonrecurring (charge) credit (14,354) (20,025)
Earnings before income taxes and effect of change
in accounting principle 8,114 8,506 31,432 24,849
Income taxes 1,884 1,499 10,886 8,370
Net earnings:
Before effect of change in accounting principle 7,007 20,546
Percent of revenues 1.7% 1.9% 5.8% 5.2%
Return on average stockholders' equity 3.8% 4.3% 12.5% 10.0%
After effect of change in accounting principle<F**> 6,230 9,044 14,046 16,479
- --------------------------------------------------------------------------------------------------------------------------------
Year-end Financial Position --
Working Capital $ 79,004 $ 66,269 $ 58,060 $ 56,974
Current ratio 2.18:1 1.83:1 1.79:1 1.98:1
Total properties:
Gross 277,743 305,500 288,367 265,067
Net 111,374 127,063 124,101 107,022
Total assets 292,585 314,939 301,145 240,991
Long-term debt 40,000 40,000 40,000
Stockholders' equity 159,464 165,589 163,137 164,586
- --------------------------------------------------------------------------------------------------------------------------------
Per Share Data --
Net earnings:<F*>
Before effect of change in accounting principle $ .62 $ 1.82
After effect of change in accounting principle<F**> $ .55 .80 1.24 $ 1.45
Dividends 1.12 1.12 1.12 1.12
Stockholders' equity 14.07 14.62 14.45 14.59
- --------------------------------------------------------------------------------------------------------------------------------
General --
For the year:
Dividends $ 12,691 $ 12,741 $ 12,638 $ 12,720
Capital expenditures, net 12,565 21,825 18,923 18,295
Depreciation 15,290 19,326 16,765 15,957
Research 12,768 12,737 13,587 12,224
Average number of shares outstanding 11,329,854 11,304,681 11,283,283 11,350,962
At year-end:
Number of shares outstanding 11,332,948 11,325,179 11,289,171 11,281,474
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
<F*> Earnings per share are based on weighted average number of shares
outstanding during each year.
<F**>Reflects after-tax effect of adopting SFAS 109 related to income taxes in
1994 and SFAS 106 related to postretirement benefits in 1993.
</TABLE>
30
<PAGE> 20
<TABLE>
<CAPTION>
For Years Ended October 31 (Dollars in thousands, except per share data) 1991 1990 1989 1988
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Summary of Operations --
Net revenues $323,516 $296,737 $290,849 $301,269
Gross profit 127,504 114,206 111,883 113,774
Earnings from operations 24,418 18,693 9,164 16,792
Interest expense 1,407 950 1,736 1,260
Nonrecurring (charge) credit (7,700) 820
Earnings before income taxes and effect of change
in accounting principle 22,359 19,868 10,057 18,766
Income taxes 7,602 6,733 2,930 5,750
Net earnings:
Before effect of change in accounting principle
Percent of revenues 4.6% 4.4% 2.5% 4.3%
Return on average stockholders' equity 8.8% 8.0% 4.3% 7.6%
After effect of change in accounting principle<F**> 14,757 13,135 7,127 13,016
- --------------------------------------------------------------------------------------------------------------------------------
Year-end Financial Position --
Working Capital $ 58,780 $ 68,544 $ 71,043 $ 76,329
Current ratio 2.00:1 2.32:1 2.46:1 2.71:1
Total properties:
Gross 261,990 249,963 233,317 234,826
Net 107,981 104,608 99,262 105,698
Total assets 243,995 241,803 231,113 237,335
Long-term debt 1,674 1,800 2,700
Stockholders' equity 165,953 168,622 160,688 168,925
- --------------------------------------------------------------------------------------------------------------------------------
Per Share Data --
Net earnings:<F*>
Before effect of change in accounting principle
After effect of change in accounting principle<F**> $ 1.30 $ 1.16 $ .63 $ 1.15
Dividends 1.12 1.12 1.12 1.12
Stockholders' equity 14.62 14.86 14.18 14.90
- --------------------------------------------------------------------------------------------------------------------------------
General --
For the year:
Dividends $ 12,712 $ 12,707 $ 12,695 $ 12,695
Capital expenditures, net 21,039 13,648 11,737 16,530
Depreciation 15,603 14,440 14,640 14,576
Research 11,431 12,242 12,029 12,284
Average number of shares outstanding 11,348,931 11,340,539 11,334,873 11,349,850
At year-end:
Number of shares outstanding 11,351,086 11,345,482 11,334,873 11,334,873
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
<F*> Earnings per share are based on weighted average number of shares
outstanding during each year.
<F**>Reflects after-tax effect of adopting SFAS 109 related to income taxes in
1994 and SFAS 106 related to postretirement benefits in 1993.
</TABLE>
<TABLE>
<CAPTION>
For Years Ended October 31 (Dollars in thousands, except per share data) 1987 1986 1985
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Summary of Operations --
Net revenues $278,642 $279,953 $308,298
Gross profit 109,247 114,673 124,425
Earnings from operations 21,527 24,047 33,952
Interest expense 892 453 1,406
Nonrecurring (charge) credit (5,217)
Earnings before income taxes and effect of change
in accounting principle 18,879 28,237 36,632
Income taxes 7,000 10,787 14,273
Net earnings:
Before effect of change in accounting principle
Percent of revenues 4.3% 6.2% 7.3%
Return on average stockholders' equity 7.0% 10.5% 13.7%
After effect of change in accounting principle ** 11,879 17,450 22,359
- -------------------------------------------------------------------------------------------------------------------
Year-end Financial Position --
Working Capital $ 82,014 $ 86,905 $100,614
Current ratio 2.53:1 2.96:1 3.51:1
Total properties:
Gross 222,484 206,868 186,042
Net 102,983 94,061 83,186
Total assets 248,171 231,404 227,961
Long-term debt 2,560 5,000 6,250
Stockholders' equity 172,005 164,554 167,663
- -------------------------------------------------------------------------------------------------------------------
Per Share Data --
Net earnings:<F*>
Before effect of change in accounting principle
After effect of change in accounting principle<F**> $ 1.04 $ 1.51 $ 1.91
Dividends 1.12 1.12 1.12
Stockholders' equity 14.98 14.37 14.31
- -------------------------------------------------------------------------------------------------------------------
General --
For the year:
Dividends $ 12,846 $ 12,974 $ 13,120
Capital expenditures, net 18,965 25,321 23,627
Depreciation 14,838 14,029 13,447
Research 12,031 12,131 12,402
Average number of shares outstanding 11,466,683 11,572,817 11,714,648
At year-end:
Number of shares outstanding 11,484,573 11,451,248 11,714,648
- -------------------------------------------------------------------------------------------------------------------
<FN>
<F*> Earnings per share are based on weighted average number of shares
outstanding during each year.
<F**>Reflects after-tax effect of adopting SFAS 109 related to income taxes in
1994 and SFAS 106 related to postretirement benefits in 1993.
</TABLE>
31
<PAGE> 21
CORPORATE ORGANIZATION
DIRECTORS
- --------------------------------
PAUL H. HATFIELD
Chairman, President and
Chief Executive Officer,
Petrolite Corporation
St. Louis, Missouri
PAUL F. CORNELSEN
Former Chairman of the Board
and Chief Executive Officer,
MiTek, Inc.
St. Louis, Missouri
ANDREW B. CRAIG, III
Chairman, President and
Chief Executive Officer,
Boatmen's Bancshares, Inc.
St. Louis, Missouri
LOUIS FERNANDEZ
Former Chairman of the Board,
President and Chief
Executive Officer,
Celgene Corporation
Summit, New Jersey
WAYNE J. GRACE
Managing Partner,
Grace & Company, P.C.
St. Louis, Missouri
WILLIAM E. MARITZ
Chairman of the Board,
President and
Chief Executive Officer,
Maritz, Incorporated
Fenton, Missouri
- --------------------------------
WILLIAM E. NASSER
Former Chairman of the
Board, President and
Chief Executive Officer,
Petrolite Corporation
St. Louis, Missouri
RICHARD L. O'SHIELDS
Former Chairman of the Board,
Panhandle Eastern
Pipe Line Company
Colorado Springs, Colorado
FAIRFAX F. POLLNOW
President,
Arbor Land Company
St. Louis, Missouri
THOMAS P. REIDY
President and
Chief Executive Officer,
Reidy International, Inc.
Houston, Texas
JOSEPH T. WILLIAMS
Vice Chairman and
Chief Executive Officer,
Enserch Exploration, Inc.
Dallas, Texas
OFFICERS AND KEY MANAGERS
- --------------------------------
PAUL H. HATFIELD
Chairman, President and
Chief Executive Officer
JOHN M. CASPER
Vice President,
Chief Financial Officer
RALPH J. CHURCHILL
Vice President,
General Manager,
Tretolite Division
FRANCIS X. FORAN
General Manager,
International Division
TOBY R. GRAVES
Vice President,
General Manager,
Polymers Division
WILLIAM F. HABERBERGER
Controller
JOHN F. MCCARTNEY
Vice President,
General Counsel
CHARLES R. MILLER
Corporate Secretary,
Associate General Counsel
- --------------------------------
STUART MONRO
Managing Director,
Petrolite Limited and
General Manager,
EuroChem Division
DEREK REDMORE
Vice President,
Technology
STEVEN F. SCHAAB
Treasurer
DAVID WINSLETT
General Manager,
Industrial Chemicals Division
JAMES M. ZEMENICK
Vice President,
Administration and
Corporate Development
32
<PAGE> 22
CORPORATE DIRECTORY
OPERATING DIVISIONS
- --------------------------------
CHEMICALS GROUP
- --------------------------------
INDUSTRIAL CHEMICALS DIVISION
INTERNATIONAL DIVISION
TRETOLITE DIVISION
369 Marshall Avenue
St. Louis, Missouri 63119
EUROCHEM DIVISION
Kirkby Bank Road
Knowsley Industrial Park (North)
Liverpool, England
L33 7SY
PETRECO DIVISION
5455 Old Spanish Trail
Houston, Texas 77023
POLYMERS DIVISION
6910 East 14th Street
Tulsa, Oklahoma 74112
SUBSIDIARIES
- --------------------------------
ECUATORIANA DE PETROQUIMICOS-
PETROLITE S.A.
Edificio Albatros
Av. de los Shyris
No. 1240 y Portugal
P.O. Box 11026
Quito, Ecuador
LUZZATO & FIGLIO (FRANCE) S.A.
10 Avenue Percier
F-75008 Paris, France
PETROLITE CANADA INC.
369 Marshall Avenue
St. Louis, Missouri 63119
PETROLITE FRANCE, S.A.
10 Avenue Percier
F-75008 Paris, France
PETROLITE GMBH
P.O. Box 2031
Kaiser-Friedrich Promenade 59
6380 Bad Homburg 1, Germany
PETROLITE HANDELSGESELLSCHAFT m.b.H.
Bruner Strasse 105
A-1210 Wien, Austria
PETROLITE IBERICA, S.A.
Marques de Urquijo 8
28008 Madrid, Spain
PETROLITE INTERNATIONAL
SALES CORPORATION
369 Marshall Avenue
St. Louis, Missouri 63119
PETROLITE ITALIANA S.P.A.
Via Sasari 86
95127 Catania, Italy
PETROLITE LIMITED
Kirkby Bank Road
Knowsley Industrial Park (North)
Liverpool, England
L33 7SY
PETROLITE DE MEXICO S.A. DE C.V.
Mercurio 126
Fracc. Galaxia
Villahermosa, Tabasco, Mexico
PETROLITE NEDERLAND B.V.
Willem Barentszstraat 13
3772 RZ BARNEVELD
The Netherlands
- -------------------------------
PETROLITE NORGE A/S
Harestadvika
4070 Randaberg, Norway
PETROLITE PACIFIC PTE. LTD.
2 Tanjong Penjuru Crescent
Jurong, Singapore 2260
PETROLITE SAUDI ARABIA LTD.
P.O. Box 1940
Dammam, Saudi Arabia
PETROLITE SURAMERICANA, S.A.
Zona Industrial Los Montones
3ra. Etapa
Apartado Postal 293
Barcelona, Edo.
Anzoategui 6001, Venezuela
PETROLITE WAX PARTNER COMPANY
369 Marshall Avenue
St. Louis, Missouri 63119
P.T. PETROLITE INDONESIA PRATAMA
Batu Ampar
Pulau Batam, Indonesia
SOUTH AMERICA PETROLITE CORPORATION
369 Marshall Avenue
St. Louis, Missouri 63119
PETROLITE TRINIDAD, INC.
Isthmus Road
Galeota Point
Trinidad, West Indies
A.B. ENGINEERING
5455 Old Spanish Trail
Houston, Texas 77023
AFFILIATES
- --------------------------------
PETROLITE (MALAYSIA) SDN. BHD.
2.12, 2nd Floor, Angkasa
Raya Building
Jalan Ampang
50450 Kuala Lumpur, Malaysia
BARECO PRODUCTS
148 East Main Street
Rock Hill, South Carolina 29730
TOYO-PETROLITE CO. LTD.
TOIN Bldg. 12-15
2-Chome, Shinkawa
Chuo-Ku, Tokyo 104, Japan
CORPORATE INFORMATION
- --------------------------------
Petrolite's headquarters is
located in St. Louis. Our
stock, traded over the counter
under the symbol PLIT, is
listed among the NASDAQ
national market issues. For
more information, please
contact:
William F. Haberberger
Controller
Petrolite Corporation
369 Marshall Avenue
St. Louis, Missouri 63119
(314) 961-3500
ANNUAL MEETING
The next Annual Meeting of
Stockholders of Petrolite
Corporation will take place
on Monday, March 4, 1996,
at 11 a.m. in Conference
Room One on the Atrium
Level of Boatmen's Plaza,
800 Market Street,
St. Louis, Missouri
FORM 10-K
A copy of the annual report
submitted by Petrolite
Corporation to the Securities
and Exchange Commission
on the latter's Form 10-K can
be obtained by any stock-
holder at no charge upon
request in writing to:
William F. Haberberger
Controller
Petrolite Corporation
369 Marshall Avenue
St. Louis, Missouri 63119
TRANSFER AGENT
Boatmen's Trust Company
St. Louis, Missouri
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
St. Louis, Missouri
Bender, Bilectric, Building Performance Together, Sulfa-Scrub, XTEND, XTEND
Continuous Protection Program and the Petrolite corporate emblem are
trademarks of Petrolite Corporation.
(C) 1996 Petrolite Corporation.
<PAGE> 1
EXHIBIT 21.1
<TABLE>
Subsidiaries of Registrant
<CAPTION>
Percent
State of Other Jurisdiction of
Name of Subsidiary of Incorporation Ownership
- ------------------ -------------------------------- ---------
<S> <C> <C>
Petrolite Canada Inc. Dominion of Canada 100
Petrolite France, S.A. Republic of France 100
Petrolite GmbH Federal Republic of Germany 100
Petrolite Iberica, S.A. Spain 100
Petrolite International Sales Corporation Virgin Islands 100
Petrolite Limited United Kingdom of Great
Britain and Northern Ireland 100
Petrolite Norge A/S Norway 100
Petrolite Pacific Pte. Ltd. Singapore 100
South American Petrolite Corporation Delaware 100
A.B. Engineering Delaware 100
Ecuatoriana de Petroquimicos-Petrolite, S.A. Ecuador 80
P.T. Petrolite Indonesia Pratama Indonesia 80
Petrolite Saudi Arabia Ltd. Saudi Arabia 75
Petrolite (Malaysia) SDN.BHD. Malaysia 49
Petrolite Suramericana, S.A. Venezuela 100
Petrolite de Mexico S.A. de C.F. Mexico 100
Petrolite Trinidad, Inc. Missouri 100
Petrolite Wax Partner Company Delaware 100
</TABLE>
Each of these subsidiaries is included in the consolidated financial
statements incorporated by reference into this registration statement. The
following three wholly owned subsidiaries are included in the Registrants
consolidated financial statements;
<PAGE> 2
however, the ownership is through other Registrant subsidiaries as follows:
Petrolite Italiana S.p.A. is owned 90% by Petrolite Limited and 10% by the
Registrant; Petrolite Handelsgesellschaft m.b.H., is owned 100% by
Petrolite Limited; and Luzzato & Figlio is owned 96% by Petrolite France
with the remaining 4% split equally between three other Registrant
subsidiaries and the Registrant. In addition, the Registrant has a 50%
interest in both Toyo-Petrolite Company, Ltd. in Japan and Bareco Products
in South Carolina which are accounted for using the equity method. Also see
information on page 33 of the Registrant's 1995 Annual Report to
Stockholders under the heading "Subsidiaries" which is incorporated by
reference herein.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 2-80631, 33-20553, 33-21962, 33-24261, 33-63108,
33-47814, and 33-47815) of Petrolite Corporation of our report dated November
30, 1995 appearing on page 29 of the Petrolite Corporation 1995 Annual Report
to Stockholders which is incorporated in this Annual Report on Form 10-K.
s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
St. Louis, Missouri
January 26, 1996
-22-
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Paul H. Hatfield, John M. Casper,
John F. McCartney and Charles R. Miller, jointly and severally, each in his
own capacity, his true and lawful attorney-in-fact, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign the 1995 Form 10-K, Annual Report pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or their substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Director ----------------
- ---------------------
Paul F. Cornelsen
/s/ Director January 10, 1996
- ---------------------
Andrew B. Craig, III
/s/ Director January 10, 1996
- ---------------------
Louis Fernandez
/s/ Director January 10, 1996
- ---------------------
Wayne J. Grace
/s/ Director January 10, 1996
- ---------------------
Paul H. Hatfield
/s/ Director January 10, 1996
- ---------------------
William E. Maritz
/s/ Director January 10, 1996
- ---------------------
William E. Nasser
<PAGE> 2
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Director January 10, 1996
- ---------------------
Richard L. O'Shields
/s/ Director January 10, 1996
- ---------------------
Fairfax F. Pollnow
Director ----------------
- ---------------------
Thomas P. Reidy
/s/ Director January 10, 1996
- ---------------------
Joseph T. Williams
</TABLE>
STATE OF MISSOURI )
) SS.
COUNTY OF ST. LOUIS )
On this 10th day of January, 1996, before me personally appeared
Paul F. Cornelsen, Andrew B. Craig, III, Louis Fernandez, Wayne J. Grace,
Paul H. Hatfield, William E. Maritz, William E. Nasser, Richard L.
O'Shields, Fairfax F. Pollnow, Thomas P. Reidy and Joseph T. Williams, to me
known to be the persons described in and who executed the foregoing Power of
Attorney, and acknowledged that they executed the same as their free act and
deed.
/s/ Terry Raftery
-------------------------------
Notary Public
My Commission Expires: November 9, 1996
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-1-1994
<PERIOD-END> OCT-31-1995
<CASH> 33,662
<SECURITIES> 0
<RECEIVABLES> 64,338
<ALLOWANCES> (986)
<INVENTORY> 36,709
<CURRENT-ASSETS> 145,838
<PP&E> 271,010
<DEPRECIATION> 166,369
<TOTAL-ASSETS> 292,585
<CURRENT-LIABILITIES> 66,837
<BONDS> 40,000
<COMMON> 9,389
0
0
<OTHER-SE> 168,769
<TOTAL-LIABILITY-AND-EQUITY> 292,585
<SALES> 364,877
<TOTAL-REVENUES> 374,906
<CGS> 229,512
<TOTAL-COSTS> 349,733
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,006
<INTEREST-EXPENSE> 3,278
<INCOME-PRETAX> 8,114
<INCOME-TAX> 1,884
<INCOME-CONTINUING> 6,230
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,230
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.55
</TABLE>
