<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K405
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1996
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 39 through 41
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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.
/ X /
As of January 3, 1997, 11,364,948 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 3, 1997, of
$46.25 per share) was approximately $ 276.1 million.
Documents Incorporated by Reference: NONE
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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 Registrant is a specialty
chemical company offering integrated technologies to customers in a dozen
major markets in nearly 80 countries. Its products and services, which are
used primarily in energy-related industries, include chemical treatment
programs, performance-enhancing additives, process equipment and engineering
services. It also manufactures and markets polymers used as additives in a wide
range of industrial and consumer product applications.
Revenues decreased in 1996 by $4.2 million or 1% due to a decline in the
Registrant's equipment business, the closure of its Venezuelan operations,
and the continuing transfer of wax product business from its Polymers
Division to the Bareco Products joint venture with a subsidiary of Pennzoil
Company which began in April, 1995. The joint venture is accounted for using
the equity method. Without the effect of the Venezuelan closure and transfer
of wax business to Bareco Products, revenues would have increased 1% in 1996
over 1995.
Excluding the effect of the tax benefit from the closure of the Registrant's
Venezuelan facility in 1996 and the write-down of certain assets in 1995,
earnings increased $2.7 million or 18% year over the prior year. The earnings
gain was due to increased sales and improved gross profit margins in the
Registrant's core businesses in addition to increased earnings from the Bareco
Products joint venture.
No material changes in the Registrant's mode of doing business occurred
during the year ended October 31, 1996.
(b) Financial Information about Industry Segments. The Registrant'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 earnings of affiliated
companies, foreign exchange gains and losses, other nonoperating income and
expense, and the provision for income taxes.
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<PAGE> 4
<TABLE>
<CAPTION>
(Dollars in thousands)
For Years Ended October 31 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues:
Specialty Chemical Products $ 342,147 $ 338,999 $ 344,846
Equipment 18,556 25,878 24,381
- -----------------------------------------------------------------------------------------------------
360,703 364,877 369,227
- -----------------------------------------------------------------------------------------------------
Earnings (loss) from operations:
Specialty Chemical Products 20,414 15,835 26,172
Equipment 987 3,851 3,278
Write-off of investment in subsidiary (5,137) - -
Write-down of assets (14,354)
Reorganization costs (20,025)
- -----------------------------------------------------------------------------------------------------
16,264 5,332 9,425
- -----------------------------------------------------------------------------------------------------
Identifiable assets:
Specialty Chemical Products 214,972 216,042 260,953
Equipment 12,996 17,419 13,750
Investments in affiliated companies 14,417 13,116 9,223
Corporate 59,402 46,008 31,013
- -----------------------------------------------------------------------------------------------------
301,787 292,585 314,939
- -----------------------------------------------------------------------------------------------------
Other related disclosures:
Specialty Chemical Sales by product group-
Oil Field Chemicals 193,853 193,952 208,673
Industrial Chemicals 81,980 74,220 67,828
Specialty Polymers and Waxes 66,314 70,827 68,345
- -----------------------------------------------------------------------------------------------------
342,147 338,999 344,846
- -----------------------------------------------------------------------------------------------------
Depreciation:
Specialty Chemical Products 14,995 14,496 18,814
Equipment 442 505 436
Corporate 83 289 76
- -----------------------------------------------------------------------------------------------------
15,520 15,290 19,326
- -----------------------------------------------------------------------------------------------------
Capital expenditures, net:
Specialty Chemical Products 10,783 11,893 16,674
Equipment 395 598 547
Corporate 74 4,604
- -----------------------------------------------------------------------------------------------------
$ 11,178 $ 12,565 $ 21,825
- -----------------------------------------------------------------------------------------------------
</TABLE>
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Earnings from operations reported under industry segment data have been
charged with corporate expenses of approximately $3.8 million, $2.8 million
and $5.7 million in 1996, 1995 and 1994, respectively, of which approximately
90% was allocated to the Specialty Chemical Products segment each year.
These corporate expenses consist primarily of administrative costs which were
allocated to segments based upon services provided. The increase in corporate
expenses in 1996 is due to costs incurred in connection with the Registrant's
review of strategic alternatives with respect to Wm. S. Barnickel Co.'s
ownership of Capital Stock of the Registrant, and a reserve for severances.
Profitability of the Registrant's foreign operations by geographic area, as
reported on page 9 of this Form 10-K, was determined based on ultimate
sales to unaffiliated customers. The Registrant's total profit was included
in the geographic area of the entity transacting the final sale.
The following is a reconciliation of foreign earnings from operations to
pretax foreign earnings:
<TABLE>
<CAPTION>
(Dollars in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings from operations:
Europe $ 7,626 $ 7,446 $ 12,751
Canada / Latin America 738 (1,562) 7
Middle East / Far East 4,971 2,174 4,885
- --------------------------------------------------------------------------------------
13,335 8,058 17,643
Intercompany charges, net (6,689) (3,715) (7,385)
Nonoperating income, net (1,097) 539 (202)
- --------------------------------------------------------------------------------------
Pretax foreign earnings $ 5,549 $ 4,882 $ 10,056
- --------------------------------------------------------------------------------------
</TABLE>
Intercompany charges include intercompany profits realized in the United
States on sales originating domestically and foreign expenses incurred by the
domestic Registrant. 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.
(c) Narrative Description of Business.
----------------------------------
1. Specialty Chemical Products Segment. The Registrant's specialty
------------------------------------
chemicals, produced primarily from petrochemicals and petroleum-derived raw
materials, include demulsifiers, corrosion inhibitors, scale inhibitors,
paraffin inhibitors, biocides, water treatment chemicals, fuel additives,
polymers and waxes.
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<PAGE> 6
The 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 its 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 production, power generation, and printing inks.
During the fiscal year ended October 31, 1996, there were no material changes
in the kinds of products sold, or services rendered, by the Registrant, or in
its methods of distribution. The U.S. domestic energy chemicals market
continues to be highly competitive. It is the continuing nature of the
business that a number of new or improved products are introduced annually;
typically, no individual new product or service is immediately material to
sales or earnings.
The 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, its operations were not
affected materially by any raw material shortages, the Registrant currently
does not foresee any shortages in the near future.
The Registrant has numerous patents, patent applications, and licenses under
patents of various duration which, in the aggregate, are material to its
specialty chemicals segment business. The Registrant does not believe that
expiration of any particular patent or group thereof would have a material
adverse effect on its business as a whole.
The specialty chemicals business is not considered to be seasonal. The
Registrant historically has carried sufficient inventory at various stages of
production to respond quickly to the needs of its customers. Accounts
receivable generally are due within 30 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 worldwide and no one customer constitutes
more than 10% of its business. Non-U.S. revenues ranged from approximately
33% 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 their receipt
and, as a result, any backlog of orders is not significant in relation to
the total annual dollar volume of sales.
The Registrant's specialty chemical product lines - oil field chemicals,
industrial chemicals, and specialty polymers and waxes - are in competition
with a number of manufacturers and distributors. Competitive companies vary
in size from large international firms 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 competitive. The Registrant is
recognized as a leader in providing products and services to the oil field
chemicals market. In the Registrant's opinion, its overall competitive
position in the market has not changed materially in the past fiscal year,
although the Registrant is unable to predict the extent to which its business
may be affected by future competition or by consolidations within the industry.
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<PAGE> 7
No acquisitions or joint ventures occurred during 1996. In April 1995,
Bareco Products, a 50-50 partnership between a subsidiary of the Registrant
and a subsidiary of Pennzoil 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, the
Registrant discontinued manufacturing microcrystalline waxes.
The partnership arrangement provides for the transfer of Registrant'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
Registrant may require Pennzoil to purchase Registrant's partnership interest,
or Pennzoil may require Registrant to sell its partnership interest to
Pennzoil. The purchase price of Registrant's partnership interest will be
determined by using an agreed-upon formula.
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, 1996, there were no material changes
in the kinds of products or services rendered, or in the Registrant's methods
of distribution. The Registrant has numerous patents of various duration
which, in the aggregate, are material to its equipment segment business.
The Registrant does not believe that expiration of any particular patent,
or group thereof, would have a material adverse effect on its business as
a whole.
The equipment business is not seasonal, but it is subject to the business
cycles of the industries it serves. This segment primarily produces
processing equipment upon order from customers. Accounts receivable
generally are due within 30 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 worldwide and no one customer
constitutes a significant portion of its business on a continuing 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, 1996, is
approximately $2.9 million. Substantially all of these orders are expected to
be completed in fiscal 1997. Backlog orders as of October 31, 1995, were
$8.2 million.
The Registrant's equipment segment products compete with similar equipment
and services offered by competitors. Although, in Registrant's opinion, its
competitive position in the 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.
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<PAGE> 8
3. Registrant's Business in General - The Registrant expended $15.3 million,
--------------------------------
$12.8 million and $12.7 million in fiscal years 1996, 1995 and 1994,
respectively, on research activities relating to development of new products
and services, and improvement of existing products and services. During the
last three years, approximately 96% to 97% of these expenditures 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 $22.4 million, $20.6
million and $23.3 million in fiscal years 1996, 1995 and 1994, 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 1996, 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 1997.
Approximately 1,663 persons are employed worldwide by Registrant and its
subsidiaries.
(d) Financial Information about Foreign and Domestic Operations and Export
----------------------------------------------------------------------
Sales. The Registrant's worldwide operations are summarized below.
- ------
Inter-area net revenues include sales from one unit to another located in a
different geographic area. Earnings from operations include total Registrant
earnings on sales to unaffiliated customers.
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<PAGE> 9
<TABLE>
<CAPTION>
Net
Revenues
--------------------------------- Earnings
(Dollars in thousands) Unaffiliated from Identifiable
For Years Ended October 31 Customers Inter-area Operations Assets
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
- --------------------------------------------------------------------------------------------------------------------
UNITED STATES $ 218,686 $ 30,905 $ 2,929 $ 131,410
EUROPE 86,524 7,609 7,626 65,207
CANADA / LATIN AMERICA 27,682 2,403 738 11,278
MIDDLE EAST / FAR EAST 27,811 4,971 20,073
INVESTMENTS IN AFFILIATED COMPANIES 14,417
CORPORATE 59,402
ELIMINATIONS (40,917)
- --------------------------------------------------------------------------------------------------------------------
$ 360,703 $ - $ 16,264 $ 301,787
- --------------------------------------------------------------------------------------------------------------------
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 $ - $ 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 $ - $ 9,425 $ 314,939
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Export revenues included in the United States net revenues to unaffiliated
customers were as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
For years ended October 31 1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GEOGRAPHIC AREAS:
FAR EAST $ 16,396 $ 13,609 $ 16,167
CANADA/LATIN AMERICA 8,939 12,946 11,590
EUROPE 41 163 228
AFRICA 2,893 3,079 5,162
MIDDLE EAST 438 3,794 3,378
- -------------------------------------------------------------------------------------------------
$ 28,707 $ 33,591 $ 36,525
- -------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 10
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. 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 Research and Specialty Chemical/
Administrative Corporate
Houston, Texas Manufacturing, Equipment
Engineering and
Administrative
Consolidated Subsidiaries -
Luzzatto & Figlio S.A. Sales Office Specialty Chemical/
(Paris, France) Equipment
Petrolite Canada Inc. Blending Specialty Chemical
(Nisku, Alberta Canada)
Petrolite Limited Manufacturing, Specialty Chemical
(Kirkby, England) Research and
Administrative
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)
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<PAGE> 11
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. The Registrant has completed its
sale of facilities at this site.
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.
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 as a whole, or on the results of its
operations.
The Registrant has been named a potentially responsible party (PRP) under the
Federal Comprehensive Environmental Response, Compensation, and Liability Act
of 1980 (the "Superfund Law") with respect to one "Superfund" site. The
Registrant has not owned or operated the site, other PRPs also have been so
designated, and the extent of the Registrant's liability at the site has been
determined with respect to anticipated remediation costs. The extent of the
Registrant's percentage contribution to remediation costs at the site is capped
at 1%. The Registrant's reserves include amounts expected to be incurred with
respect to this site. The Registrant also is involved in remedial response and
voluntary environmental cleanups, in some cases under the direction of
governmental agencies, at other locations which are not the subject of the
Superfund law. The Registrant 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 conditions. Based on, among other
factors, its previous experience with respect to such activities and its
ongoing review and analysis, at October 31, 1996, the Registrant's balance
sheet included an accrual for estimated remediation and other environmental
costs of approximately $2.8 million. Subject to the difficulty in estimating
future environmental costs, the Registrant believes that any sums it may be
required to pay in connection with such
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<PAGE> 12
environmental matters in excess of the amounts so recorded 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
year 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
DIVIDENDS PER SHARE
The Registrant paid quarterly dividends of $0.28 per share for a total annual
dividend of $1.12 per share in both fiscal 1996 and 1995. The Registrant has
paid dividends every year since its incorporation in 1930 and has maintained
or increased its dividends per share every year since 1946.
The Registrant's capital stock is included in the NASDAQ National Market
System of over-the-counter securities and is traded under the symbol PLIT.
CAPITAL STOCK PRICES
The high- and low-bid stock prices for 1996 and 1995 are listed in the
following table, compiled from published sources:
</TABLE>
<TABLE>
<CAPTION>
1996 1995
-----------------------------------------------------------------
Quarter ending HIGH LOW High Low
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January 31 $29 $22 $30 1/4 $24 1/4
April 30 32 1/4 24 3/4 31 1/4 25
July 31 33 27 3/4 32 1/2 27 3/4
October 31 36 29 1/2 29 23 1/4
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
STOCKHOLDERS' EQUITY/CAPITAL STOCK
<CAPTION>
(Dollars in thousands, except per share data) 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
At October 31 -
Stockholders' equity $166,835 $159,464
Number of shares outstanding 11,342 11,333
Stockholders' equity per share $ 14.71 $ 14.07
Return on average stockholders' equity -
Before write-off of investment in subsidiary
and write-down of assets 11.0% 9.3%
After write-off of investment in subsidiary
and write-down of assets 11.7% 3.8%
</TABLE>
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<PAGE> 13
The Registrant has stock option and incentive plans which are described in
detail in the Notes to Consolidated Financial Statements on pages 58 through 60.
The Registrant also has contributory employees' savings plans, which include an
option for investment in Petrolite stock that is partially funded by the
Registrant. These plans are administered by an independent trustee which
purchases shares on the open market on a current basis.
In 1994, the Registrant agreed to acquire the 50% of Petrolite Suramericana
S.A., that it did not already own in exchange for $0.5 million of Petrolite
stock.
As of January 3, 1997, the Registrant had 1,911 stockholders of record.
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<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
5-YEAR SUMMARY
For Years Ended October 31
(Dollars in thousands, except share and per share data) 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Summary of Operations -
Net revenues $ 360,703 $ 364,877 $ 369,227 $ 351,779 $ 317,950
Gross profit 144,820 135,365 153,744 150,112 130,358
Earnings from operations 16,264 5,332 9,425 31,565 24,397
Interest expense 2,795 3,278 3,371 1,475 936
Nonrecurring (charge) (5,137) (14,354) (20,025)
Earnings before income taxes and effect
of change in accounting principle 21,612 8,114 8,506 31,432 24,849
Net earnings:
Before effect of change in accounting principle 7,007 20,546
Percent of revenues 5.3% 1.7% 1.9% 5.8% 5.2%
Return on average stockholders' equity 11.7% 3.8% 4.3% 12.5% 10.0%
After effect of change in accounting principle<F**> 19,033 6,230 9,044 14,046 16,479
- --------------------------------------------------------------------------------------------------------------------------------
Year-end Financial Position -
Working capital $ 92,694 $ 79,004 $ 66,269 $ 58,060 $ 56,974
Current ratio 2.34:1 2.18:1 1.83:1 1.79:1 1.98:1
Total properties:
Gross 277,722 277,743 305,500 288,367 265,067
Net 100,751 111,374 127,063 124,101 107,022
Total assets 301,787 292,585 314,939 301,145 240,991
Long-term debt 38,000 40,000 40,000 40,000
Stockholders' equity 166,835 159,464 165,589 163,137 164,586
- ------------------------------------------------------------------------------------------------------------------------------------
Per Share Data -
Net earnings:<F*>
Before effect of change in accounting principle $ 0.62 $ 1.82
After effect of change in accounting principle<F**> $ 1.68 $ 0.55 0.80 1.24 $ 1.45
Dividends 1.12 1.12 1.12 1.12 1.12
Stockholders' equity 14.71 14.07 14.62 14.45 14.59
- --------------------------------------------------------------------------------------------------------------------------------
General -
For the year:
Dividends $ 12,693 $ 12,691 $ 12,741 $ 12,638 $ 12,720
Capital expenditures, net 11,178 12,565 21,825 18,923 18,295
Depreciation 15,520 15,290 19,326 16,765 15,957
Research 15,336 12,768 12,737 13,587 12,224
Average number of shares outstanding 11,337,948 11,329,854 11,304,681 11,283,283 11,350,962
At year-end:
Number of shares outstanding 11,342,448 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 No. 109 related to income taxes
in 1994 and SFAS No. 106 related to postretirement in 1993.
</TABLE>
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<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
<TABLE>
CONSOLIDATED REVENUES, NET EARNINGS AND EARNINGS PER SHARE
<CAPTION>
(Dollars in thousands, except per share data) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 360,703 $ 364,877 $ 369,227
Net earnings (loss):
Before write-off, write-down, reorganization,
and accounting change 17,920 15,187 19,503
Write-off of investment in subsidiary,
net of taxes 1,113
Write-down of assets (8,957)
Reorganiation of chemical operations (12,496)
Accounting change 2,037
Net earnings 19,033 6,230 9,044
Earnings (loss) per share:
Before write-off, write-down, reorganiation,
and accounting change 1.58 1.34 1.73
Write-off of investment in subsidiary,
net of taxes. 0.10
Write-down of assets (0.79)
Reorganization of chemical operations (1.11)
Accounting change 0.18
Earnings per share 1.68 0.55 0.80
- ------------------------------------------------------------------------------------------------------
</TABLE>
Revenues decreased in 1996 by $4.2 million or 1% due to a decline in the
Registrant's equipment business, the closure of its Venezuelan operations,
and the transfer of wax product business from its Polymers Division to the
Bareco Products joint venture with Pennzoil Company which began in April,
1995 and is accounted for using the equity method. Without the effect of the
Venezuelan closure and transfer of wax business to Bareco Products, revenues
would have increased 1% in 1996 over 1995.
Excluding the effect of the tax benefit from the write-off of the
Registrant's Venezuelan investment in 1996 and the write-down of certain
assets in 1995, earnings increased $2.7 million or 18% year over year. The
earnings gain was due to increased sales and improved gross profit margins in
the Registrant's core businesses, in addition to increased earnings from the
Bareco Products joint venture.
During 1995, the Registrant charged net earnings for $9.0 million to provide
for the write-off and disposal of obsolete inventory and the write-down of
certain patents, other intangibles, and certain other assets to properly
reflect the value of these assets at October 31, 1995.
During 1994, the Registrant charged net earnings for $12.5 million to provide
for a reorganization of its specialty chemical segment operations. In addition,
the Registrant 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.
-15-
<PAGE> 16
<TABLE>
REVENUES
<CAPTION>
(Dollars in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Specialty Chemical Products $ 342,147 $ 338,999 $ 344,846
Equipment 18,556 25,878 24,381
- --------------------------------------------------------------------------------------------
Total $ 360,703 $ 364,877 $ 369,227
- --------------------------------------------------------------------------------------------
</TABLE>
Revenues from sales of specialty chemical products and services increased
by $3.1 million or 1% in 1996. Increased sales of refinery process chemicals
and fuel additives resulted in a double-digit revenue improvement over fiscal
year 1995, while revenues from North American oil field chemical sales were
essentially flat. Revenues from overseas energy chemical operations improved
in 1996, led by increases in sales to Africa and the Pacific Rim. Polymers
Division revenues declined, reflecting softness in some domestic markets
earlier in the year and the continuing transfer of wax business to the Bareco
Products joint venture.
Revenues from Equipment sales decreased in 1996 by $7.3 million or 28.3%,
reflecting a lower level of customer activity in refinery and oil field
process system markets.
<TABLE>
EARNINGS FROM OPERATIONS
<CAPTION>
(Dollars in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Specialty Chemical Products $ 20,414 $ 15,835 $ 26,172
Equipment 987 3,851 3,278
Write-off of investment in subsidiary (5,137)
Write-down of assets (14,354)
Reorganization costs (20,025)
- --------------------------------------------------------------------------------------------
Total $ 16,264 $ 5,332 $ 9,425
- --------------------------------------------------------------------------------------------
</TABLE>
Operating earnings from Specialty Chemical Products and Services increased by
$4.6 million or 29% due primarily to improved gross profit margins in the
Registrant's core businesses. Higher margins were a result of selective
price increases, principally in the U.S., Middle East, and Canadian oil field
businesses, coupled with an improvement in manufacturing efficiencies in both
domestic and international operations. The Polymers Division experienced
lower gross profit margins due primarily to the conclusion of
microcrystalline wax production and sales of resulting inventories to Bareco
Products at very low margins. This decrease in gross margins, however, was
more than offset by the improvement in earnings from the Bareco Products
partnership.
The Equipment segment showed a decrease in operating earnings of $2.9 million
or 74%, reflecting a lower level of customer activity in all segments of the
equipment business. Gross profit margins decreased due to the decline in
volume, especially in refinery catalyst sales which have comparatively high
margins.
In April 1996, the Registrant charged pretax earnings $5.1 million to record
the write-off of its investment in its Venezuelan subsidiary.
The Registrant charged pretax earnings $14.4 million in 1995 to record the
write-off and disposal of obsolete inventory and the write-down of certain
other assets and intangibles to properly reflect the value of these assets at
October 31, 1995.
-16-
<PAGE> 17
During 1994, the Registrant charged pretax earnings for $20.0 million to
record a reorganization of its chemical segment operations.
QUARTERLY RESULTS
Condensed summaries of unaudited quarterly financial results during fiscal
1996 and 1995 are as follows:
<TABLE>
<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>
1996
- -------------------------------------------------------------------------------------------------
JANUARY 31 $ 86,842 $ 34,712 $ 3,283 $ 0.29
APRIL 30 85,999 34,040 4,658 0.41
JULY 31 92,055 37,144 4,983 0.44
OCTOBER 31 95,807 38,924 6,109 0.54
- -------------------------------------------------------------------------------------------------
1995
- -------------------------------------------------------------------------------------------------
January 31 $ 92,323 $ 36,277 $ 6,229 $ 0.55
April 30 94,010 36,849 4,289 0.38
July 31 87,212 32,750 2,547 0.22
October 31 91,332 29,489 (6,835) (0.60)
- -------------------------------------------------------------------------------------------------
</TABLE>
Earnings from overseas energy chemical operations declined during the first
quarter due to delayed ordering patterns and tight margins on sales to the
Middle East. The Registrant's equipment business also recorded lower
results, reflecting a smaller backlog of orders. In addition, first quarter
results included a $1.0 million charge to secure an exclusive license for
corrosion-control technology.
While the energy chemicals business in the United States and Canada posted a
slight earnings improvement in the second quarter over the prior-year period
on increased sales to refineries, overseas energy chemical operations
earnings were off year to year due to continued lower sales in the Middle
East. The Registrant's equipment business also posted lower earnings as a
result of reduced revenues from refinery and oil field process system sales.
Second quarter earnings reflected a one-time benefit (net of taxes) of $1.1
million from ending business operations through the Registrant's Venezuelan
subsidiary and writing off its investment.
The earnings turnaround in the third quarter resulted from increased revenues
and improving margins. Chemicals Group earnings for the quarter were
stronger, led by the oil field business in the United States and Canada.
Asia-Pacific and Latin American operations posted earnings gains on higher
sales, despite the discontinuance of the Venezuelan operation. Stronger
EuroChem Division earnings were supported by growing energy chemicals
business in the Middle East, Africa and Europe. The Polymers Division had
higher earnings on increased sales while overall revenues remained flat,
reflecting the continuing transfer of wax business to the Bareco Products
joint venture.
The earnings gain in the fourth quarter was due to increased sales in the
Registrant's core businesses and continued gross profit improvement resulting
from selective price increases and manufacturing efficiencies. All of the
Registrant's worldwide energy chemicals and polymers businesses posted
-17-
<PAGE> 18
increased earnings and revenues for the fourth quarter over the comparable
prior period. Only the Registrant's equipment business was down in
year-to-year comparisons, reflecting a lower level of customer activity in
its markets.
During the first quarter of 1995, earnings included a nonoperating pretax
gain of $1.1 million or $0.07 per share from the sale of the Registrant's
Clear Lake, Texas, plant. During the fourth quarter of 1995, the Registrant
recorded a $9.0 million after-tax charge ($.79 per share) against earnings to
record the write-off and disposal of obsolete inventory and the write-down of
certain patents, other intangibles, and certain other assets.
FOREIGN CURRENCY EXCHANGE AND TRANSLATION
The Registrant's exchange gains and losses were attributable principally to
the effects of changes in value of the U.S. dollar-denominated asset and
liability accounts of its foreign subsidiaries and to the closing of foreign
currency forward contracts. The Registrant 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) 1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Europe $ 45,962 $ 44,359 $ 42,395
Far East 18,819 19,299 16,620
Canada 8,974 8,055 8,718
Middle East 6,219 2,528 6,651
Latin America 3,244 8,169 5,684
- ---------------------------------------------------------------------------
Total $ 83,218 $ 82,410 $ 80,068
- ---------------------------------------------------------------------------
</TABLE>
The increase in the Registrant's investment in Europe in 1996 was due to the
positive earnings contribution from European operations and to a
strengthening of the British pound against the U.S. dollar.
The increased investment in the Middle East in 1996 was due to both increased
activity and earnings of the Registrant's partnership in Saudi Arabia.
The decreased investment in Latin America in 1996 was due to the write-down
of the Registrant's investment in Venezuela and to losses incurred in Mexico
due to decreased activity.
-18-
<PAGE> 19
INFLATION
During fiscal 1996, the United States, Canada and most 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 1.5% to 3%. Inflation in other
countries of less significance to the Registrant generally ranges from 2% to
12%, except for certain countries in Latin America, Africa and the former
Soviet Union which experienced higher inflation rates.
In 1996, the oil field and industrial chemicals businesses in North America
experienced a raw material price decrease of approximately 1.5%, while the
polymers and wax businesses incurred a raw material increase of approximately
3.0% to 3.5%, primarily due to the price of crude oil. Raw material prices
in the United Kingdom were essentially flat during 1996.
Gross profit margins for the Registrant improved year over year due to
selective price increases, manufacturing efficiencies and favorable product
mix in addition to the aforementioned steady raw material prices. The
Registrant anticipates that this market will remain substantially unchanged
for the foreseeable future.
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.
These totaled $3.5 million at October 31, 1996. Domestic short-term funds
are obtained through an unsecured, uncommitted line of credit with a bank
totaling $15.0 million. Domestic borrowings bear interest at a fluctuating
rate below prime determined by the banks' cost of funds. At October 31, 1996,
the amount available and unused under this line of credit totaled $15.0
million.
LONG-TERM DEBT
In September 1993, the Registrant 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 $10.0 million and $30.0 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): 1997 - $2.0, 1998 - $6.3, 1999 - $6.3, 2000 - $6.3, 2001 - $6.3.
Based on borrowing rates currently available to the Registrant for loans with
similar terms and average maturities, the fair value of long-term debt is
$39.4 million (1995- $40.0 million).
-19-
<PAGE> 20
<TABLE>
INTEREST (EXPENSE) INCOME, NET
<CAPTION>
(Dollars in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest expense $(2,795) $(3,278) $(3,371)
Interest income 2,191 1,449 850
- --------------------------------------------------------------------------------------
Interest (expense) income, net $ (604) $(1,829) $(2,521)
- --------------------------------------------------------------------------------------
</TABLE>
Interest expense in 1996, 1995 and 1994 includes the interest on the $40.0
million private placement issued in September 1993. The increase in interest
income is due to the general increase in cash balances invested throughout
1996 and 1995.
<TABLE>
LIQUIDITY/CAPITAL RESOURCES
<CAPTION>
(Dollars in thousands) 1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Working capital -
Cash and marketable securities $ 44,669 $ 33,662 $ 20,564
Other 48,025 45,342 45,705
Debt -
Short-term 5,493 4,594 6,124
Long-term 38,000 40,000 40,000
Ratios -
Current 2.34:1 2.18:1 1.83:1
Long-term debt/total capitalization .19:1 .20:1 .19:1
- -------------------------------------------------------------------------------------------
</TABLE>
The Registrant's primary sources of liquidity are cash provided by operating
activities, and $15.0 million of an unsecured, uncommitted line of credit.
In addition, the Registrant sold its corporate jet in 1996 and its Clear
Lake, Texas, plant during 1995, resulting in cash proceeds of $5.3 million
and $10.3 million, respectively. Working capital increased to $93.0 million
at October 31, 1996, up from $79.0 million and $66.0 million at October 31,
1995 and 1994, respectively. The current ratio also increased to 2.34:1 in
1996 from 2:18:1 and 1.83:1 in the prior respective periods.
The Registrant's strong financial position and adequate credit availability
provide a high degree of flexibility in obtaining additional funds on
competitive terms. Detailed information on the Registrant's cash flows is
presented in the Consolidated Statements of Cash Flows.
<TABLE>
CAPITAL EXPENDITURES AND DEPRECIATION
<CAPTION>
(Dollars in thousands) 1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital expenditures, net $ 11,178 $ 12,565 $ 21,825
Depreciation 15,520 15,290 19,326
- -------------------------------------------------------------------------------------------
</TABLE>
Major capital expenditures in 1996 included the continued expansion and
upgrade of the Bayport, Texas, and Liverpool, England, manufacturing plants;
additional investment in chemical product containers that are more
environmentally safe; additional investment in distribution vehicles and
delivery trucks; and the expansion of the UNILIN(R) alcohol capacity at the
Barnsdall, Oklahoma, manufacturing facility.
-20-
<PAGE> 21
For 1997, major capital projects will include the continued expansion and
upgrade of the Bayport, Kirkby and Barnsdall manufacturing plants; investment
in three customer service facilities in Southeast Asia; and the upgrading of
information systems at certain division locations.
In fiscal 1996, the Registrant sold its aircraft and wrote down its
investment in Venezuela. The Venezuelan plant was subsequently sold at its
approximate net book value.
The Registrant has completed the sale of its Singapore facility.
DIVIDENDS PER SHARE
The Registrant paid quarterly dividends of $0.28 per share for a total annual
dividend of $1.12 per share in both fiscal 1996 and 1995. The Registrant has
paid dividends every year since its incorporation in 1930 and has maintained or
increased its dividends per share every year since 1946.
The Registrant's capital stock is included in the NASDAQ National Market
System of over-the-counter securities and is traded under the symbol PLIT.
CAPITAL STOCK PRICES
The high- and low-bid stock prices for 1996 and 1995 are listed in the
following table, compiled from published sources:
<TABLE>
<CAPTION>
1996 1995
----------------------------------------------------------------
Quarter ending HIGH LOW High Low
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January 31 $29 $22 $30 1/4 $24 1/4
April 30 32 1/4 24 3/4 31 1/4 25
July 31 33 27 3/4 32 1/2 27 3/4
October 31 36 29 1/2 29 23 1/4
- --------------------------------------------------------------------------------------------------------------
</TABLE>
PRIOR YEARS' OPERATING RESULTS
1995 VS 1994
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 a write-down, reorganization and accounting change, net earnings
decreased from 1994 by $4.3 million or 22%. The Registrant 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 Registrant's North American
chemical operations, which were affected by the continuing weakness in
petroleum chemical
-21-
<PAGE> 22
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 Registrant charged net earnings for $9.0 million to provide
for the write-off and disposal of obsolete inventory and the write-down of
certain patents, other intangibles, and certain other assets to properly
reflect the value of these assets at October 31, 1995.
During 1994, the Registrant charged net earnings for $12.5 million to provide
for a reorganization of its chemical segment operations. In addition, the
Registrant 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.
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 softness in the petroleum industry chemical market which
experienced 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 chemicals 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 continued transfer of wax
products business to the Bareco Products joint venture 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 was not as
strong as in the prior year due to weaker bookings in the fuel treatment
market and a softening of its petroleum industry markets.
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, which reflected very tough economic conditions in the domestic
petroleum industry. In addition, the Registrant 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 Registrant 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 to properly reflect the value of these
assets at October 31, 1995.
During 1994, the Registrant charged pretax earnings for $20.0 million to
provide for a reorganization of its chemical segment operations.
-22-
<PAGE> 23
1994 VS. 1993
Despite North American revenues that were down 4%, overall revenues rose 5%
in 1994 to $369.2 million on the strength of the Registrant's international
operations.
Excluding the reorganization of chemical segment operations and other
accounting changes, net earnings decreased by $1.0 million to $19.5 million.
The decline resulted from the weak performance of the Registrant'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
international markets.
During 1994, the Registrant charged pretax earnings for $20.0 million to
provide for a reorganization of its chemical segment operations. In addition,
the Registrant 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 Registrant
adopted Statement of Financial Accounting Standard No. 106 relating 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. Factoring in
these accounting changes and the reorganization charge for the chemical
segment operations, net earnings decreased $5.0 million in 1994 to $9.0
million.
Revenues from sales of Specialty Chemical Products increased $12.3 million 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 solid 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 gains in other international markets.
Revenues from Equipment sales totaled $24.4 million, up 27% from 1993. The
higher revenues were driven 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 fiscal 1995.
Operating earnings from Specialty Chemical Products declined 12% from 1993
due to the weak performance of the North American oil field business.
Operating earnings from all other Specialty Chemical operations increased
over 1993 levels. The Polymers Division improved profitability as it replaced
lower-margin sales with higher-margin products. Both the Industrial Chemicals
Division and EuroChem Division recorded improvements over prior-year
profitability by leveraging their operating expenses over an increased sales
base.
The Equipment segment earnings increased 77% due to stronger contract
revenues, both domestically and internationally, and by effectively
controlling its operating expenses, which were up only nominally over the
prior year.
-23-
<PAGE> 24
The Registrant charged pretax earnings with $20.0 million 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; 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14 (page 39)
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
During the Registrant's three most recent fiscal years there were no changes
in or disagreements with the Registrant's independent accountants on
accounting or financial disclosure.
-24-
<PAGE> 25
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
a) Directors of Registrant. Directors of the Registrant are elected by the
stockholders at an annual meeting, or by the Board of Directors to fill
vacancies on the Board of Directors. Directors of the Registrant, their ages
and positions held, are as follows:
<TABLE>
<CAPTION>
CURRENT SERVED
POSITIONS AND AS
OFFICES WITH DIRECTOR
NAME AGE THE COMPANY SINCE
---- --- ----------- -----
<S> <C> <C> <C>
Andrew B. Craig, III 65 Director 1989
Jerry B. Davis 65 Director 1996
Louis Fernandez 72 Director 1983
Wayne J. Grace <F1> 56 Director 1995
Paul H. Hatfield <F2> 60 Chairman of the 1994
Board, President
and Chief Executive
Officer
Richard L. O'Shields 71 Director 1994
Fairfax F. Pollnow <F1> 45 Director 1995
Brian M. Rushton 63 Director 1996
Joseph T. Williams 59 Director 1995
<FN>
- ----------
Note <F1>: Mr. Grace and Mr. Pollnow originally were proposed for nomination
as Directors of the Registrant by the Board of Directors of
Wm. S. Barnickel & Company ("Barnickel Company").
Additional information about Barnickel Company is presented
under Items 12 and 13.
Note <F2>: Mr. Hatfield was elected Chairman of the Board, President, and
Chief Executive Officer of the Registrant on November 20,
1995.
</TABLE>
-25-
<PAGE> 26
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, 1996
- ---------------------- ------------------------- --------------- -------------
<S> <C> <C> <C>
Paul H. Hatfield Chairman, President and 11/20/95 60
Chief Executive Officer
John M. Casper Vice President and 02/14/94 51
Chief Financial Officer
Hugh B. Chare Vice President, 04/18/96 47
Market Operations
Ralph J. Churchill Vice President, 08/09/89 52
General Manager,
Tretolite Division
Toby R. Graves Vice President, 06/08/88 50
General Manager,
Polymers Division
William F. Haberberger Controller 03/04/91 46
John F. McCartney Vice President, 08/09/90 60
General Counsel
Charles R. Miller Corporate Secretary, 08/12/92 41
Associate General Counsel
Jeffrey A. Pullen Vice President, 03/04/96 41
Business Systems
Derek Redmore Vice President, 12/08/93 58
Technology
Steven F. Schaab Treasurer 01/01/93 44
David Winslett Vice President, 03/04/96 51
Process and Additives
Technologies
</TABLE>
-26-
<PAGE> 27
c) Identification of certain significant employees - Mr. Stuart Monro
------------------------------------------------
joined the Registrant in January 1978. After having served in various sales
and managerial positions within international operations, he was appointed
Managing Director of Petrolite Ltd in March of 1989. In June 1991, he was
also appointed General Manager of the newly created EuroChem Division. He
holds various diplomas and degrees, including a chartered chemist (C.Chem), a
chartered engineer (C.Eng) and an M.B.A. degree in management from the City
University of London.
d) Business experience - Directors. Information regarding the business
--------------------------------
experience and directorships of Directors is as follows. Except as noted, each
person has served in his present occupation for at least 5 years.
Mr. Andrew B. Craig, III is Chairman of the Board of Directors of NationsBank
Corporation. Previously he was Chairman and Chief Executive Officer of
Boatmen's Bancshares, Inc. He also is a Director of Anheuser-Busch
Companies, Inc., and Laclede Gas Company.
Mr. Jerry B. Davis is the retired President and Chief Executive Officer of
Otis Engineering Corporation, a subsidiary of The Halliburton Company.
Before his election as President and Chief Executive Officer he held several
positions at Otis in international and domestic operations and manufacturing.
Dr. Louis Fernandez previously served as Chairman, President and Chief
Executive Officer of Celgene Corporation. He formerly was the Chairman of
Monsanto Company. He also is a Director of Boehringer Ingelheim Corporation,
A. G. Edwards, Inc., and Alteon, Inc.
Mr. Wayne J. Grace is Managing Partner of Grace & Company, P.C., a public
accounting firm he founded. He has more than 25 years of business experience
in public accounting and in the private sector.
Mr. Paul H. Hatfield is Chairman, President and Chief Executive Officer of
the Registrant. He also is a Director of DEKALB Genetics Corporation and
Penwest, Ltd. Additional information is presented below.
Mr. Richard L. O'Shields is the retired Chairman and Chief Executive Officer
of Panhandle Eastern Corporation, operator of one of the major interstate gas
pipeline systems in the nation. He previously served as Chairman of the
Board of Daniel Industries, Inc.
Mr. Fairfax F. Pollnow is engaged in private investments and is President of
Arbor Land Company, a real estate development and investment firm. He also
is a Director and Officer of Wm. S. Barnickel & Co. and a Director of The
Churchill School.
Dr. Brian M. Rushton is a former President of the American Chemical Society.
He previously served as Senior Vice President, Research and Development, for
Air Products and Chemicals, Inc., and as President of Celanese Research
Company and Vice President of Technology for Celanese Corporation (now
Hoechst Celanese). He also is a Director of Mallinckrodt Group Inc.
-27-
<PAGE> 28
Mr. Joseph T. Williams previously served as Vice Chairman and Chief Executive
Officer of Enserch Exploration, Inc., a NYSE-listed company. He previously
served as President and Chief Executive Officer of PG & E Resources Company.
Business experience - Officers. 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. Mr. Hatfield previously served as chief
executive officer of Protein Technologies International, a subsidiary of
Ralston Purina Company from which he retired after 34 years of service in 1994.
During his career at Ralston Purina, he progressed through a wide range of
management positions which included significant international experience and 17
years as an officer. He holds a B.S. degree in agricultural economics and an
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 27 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.
Mr. Hugh B. Chare joined the Registrant on May 1, 1996, as Vice President,
Market Operations. He has 25 years of experience in operations management,
most recently as President of BP Chemicals (Hitco) Inc., where he was
responsible for four aerospace operations. He is a graduate of London
University, with a B.Sc. (Honors) in mining engineering.
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 holds a Ph.D. in engineering.
Mr. John F. McCartney has served as Assistant General Counsel since joining
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 as an attorney in May 1990, and
was elected Secretary on August 12, 1992. His title now is Corporate
Secretary, Associate General Counsel. He has 17 years experience in the
public and private practice of law.
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<PAGE> 29
Mr. Jeffrey A. Pullen joined the Registrant in March, 1996. Mr. Pullen has
over 18 years of diversified financial and operational management experience.
Prior to joining the Registrant, Mr. Pullen was a partner in the Financial
Advisory Services practice of Coopers & Lybrand L.L.P. where he specialized
in consulting with clients regarding financial, economic and business issues
related to mergers and acquisition transactions, corporate reorganizations,
business valuations and litigation matters. He holds a BA degree from the
University of Nebraska in Business Administration/Accounting.
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. Redmore earned 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 21 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.
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 the
Registrant's St. Louis office, including Vice President in the Industrial
Chemicals Division. On June 16, 1993, he was promoted to General Manager of
the Industrial Chemicals Division and in March 1996, he was elected Vice
President, Process and Additives Technologies. He is a graduate of the
University of Wales with a B.Sc. (Honors) in chemistry.
-29-
<PAGE> 30
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows information concerning the compensation for
services to the Registrant in all capacities for the fiscal years ended October
31, 1996, October 31, 1995, and October 31, 1994, of (i) those persons who
served at any time during the fiscal year ended October 31, 1996 as Chief
Executive Officer, and (ii) the four other most highly compensated Executive
Officers of the Registrant on October 31, 1996 (collectively the "Named
Executive Officers").
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
-------------------------------------- ------ -------
Other Securities
Annual Underlying LTIP All Other
Bonus Compensa- Options Payouts Compensa-
Name and Principal Position Year Salary ($) ($)<F2> tion ($) (SARs #)<F4> ($)<F5> tion ($)<F6>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul H. Hatfield 1996 $352,474<F1> $375,018 -- 220,000 -- $ 6,944
Chairman of the Board, President 1995 -- -- -- 8,000 -- $ 23,973
and Chief Executive Officer 1994 -- -- -- -- -- --
John M. Casper 1996 $198,000 $ 80,000 -- 75,000 -- $ 2,500
Vice President and 1995 $196,000 -- -- -- -- $ 2,500
Chief Financial Officer 1994 $139,444<F1> -- -- 75,000 -- $ 2,375
Toby R. Graves 1996 $178,750 $ 75,000 -- 60,000 -- $ 2,500
Vice President, General Manager, 1995 $173,250 $ 85,502 -- -- -- $ 2,500
Polymers Division 1994 $166,000 $ 84,000 -- -- $24,699 $ 2,500
Jeffrey A. Pullen 1996 $130,000<F1> $ 65,000 $ 30,000<F3> 20,000 -- --
Vice President, 1995 -- -- -- -- -- --
Business Systems 1994 -- -- -- -- -- --
Hugh B. Chare 1996 $ 97,500<F1> $ 65,000 $ 30,000<F3> 20,000 -- --
Vice President, 1995 -- -- -- -- -- --
Market Operations 1994 -- -- -- -- -- --
William E. Nasser<F7> 1996 $154,166<F1> -- -- -- -- $218,333
1995 $370,300 -- -- -- -- $ 2,500
1994 $347,750 -- -- -- $51,525 $ 2,500
<FN>
<F1> Partial year.
<F2> Payment under the Registrant's Annual Bonus Plan for the fiscal years
noted.
<F3> Amount paid in connection with relocation to St. Louis, Missouri.
<F4> Options awarded to Messrs. Casper and Graves in 1996 replace options
previously awarded to them. See the "Stock Options Granted in Fiscal Year
1996" table in this Item for additional information.
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<PAGE> 31
<F5> Reflects the value of awards made pursuant to the Registrant's Long-Term
Incentive Plan for a performance period beginning November 1, 1990, and
ending October 31, 1994.
<F6> Reflects the cash value of contributions by the Registrant to the
Employees' Savings Plan (a defined contribution savings plan) as a match to a
portion of the employee's contributions under the Savings Plan. For Messrs.
Hatfield and Nasser, reflects amounts paid pursuant to a Management Agreement
and Consulting Agreement, respectively.
<F7> Mr. Nasser resigned as Chairman, Chief Executive Officer and President
on November 20, 1995.
</TABLE>
<TABLE>
OPTIONS GRANTED IN FISCAL YEAR 1996
-----------------------------------
<CAPTION>
Individual Grants
-------------------------------------------------------------
Number of
Securities Percent of
Underlying Total Options Exercise
Options Granted in Price Expiration Grant Date
Name Granted Fiscal Year ($/Sh) Date Present Value<F4>
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Paul H. Hatfield 220,000<F1> 38.6% $24.31 12/13/2000 $ 1,148,508
John M. Casper 75,000<F2> 13.1% $27.00 1/09/2006 $ 533,977
Toby R. Graves 60,000<F2> 10.5% $27.00 1/09/2006 $ 427,182
Jeffrey A. Pullen 20,000<F3> 3.5% $27.25 3/01/2006 $ 146,160
Hugh B. Chare 20,000<F3> 3.5% $32.00 5/01/2006 $ 180,073
<FN>
- ------
<F1> The option becomes exercisable in annual installments of 73,334,
73,333, and 73,333 shares, beginning on the first anniversary of the grant
date, which was December 13, 1995. Under the terms of the 1993 Petrolite
Stock Incentive Plan, the option becomes fully exercisable upon a "change in
control" of the Registrant, as defined in the Plan.
<F2> The option replaced two previous option awards totaling the same number
of shares. The option becomes exercisable in five equal annual installments
beginning on the first anniversary of the grant date, which was January 9,
1996. Under the terms of the 1993 Petrolite Stock Incentive Plan, the option
becomes fully exercisable upon a "change in control" of the Registrant, as
defined in the Plan.
<F3> The option becomes exercisable in five equal annual installments
beginning on the first anniversary of the grant date, which was March 1, 1996
for Mr. Pullen and May 1, 1996 for Mr. Chare. Under the terms of the 1993
Petrolite Stock Incentive Plan, the option becomes fully exercisable upon a
"change in control" of the Registrant, as defined in the Plan.
<F4> Calculated in accordance with the Black-Scholes option pricing model.
The assumptions used were within the following ranges, depending on the date
of the option award: Expected volatility, .310 to
-31-
<PAGE> 32
.313; risk-free rate of return, 5.54% to 6.84%; dividend yield, 4.11% to
4.12%; time of exercise, mid-point through the option term. No adjustment
was made for non-transferability or risk of forfeiture.
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
---------------------------------
The following table shows information with respect to the Named
Executive Officers concerning unexercised options held as of October 31,
1996. No Named Executive Officer exercised a stock option during fiscal year
1996.
<TABLE>
OPTION VALUES AT END OF FISCAL YEAR 1996
----------------------------------------
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-the-Money Options
at October 31, 1996 at October 31, 1996<F1>
------------------- -----------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Paul H. Hatfield 8,000 220,000 $79,700 $1,746,800
John M. Casper -0- 75,000 --- $ 393,750
Toby R. Graves 1,000 60,000 --- $ 315,000
Jeffrey A. Pullen -0- 20,000 --- $ 100,000
Hugh B. Chare -0- 20,000 --- $ 5,000
William E. Nasser 5,000 --- --- ---
<FN>
- ----------
<F1> Calculated on the basis of the fair market value of the underlying
securities as of October 31, 1996 ($32.25 per share) minus the exercise
price. The terms under which the options become exercisable are set out in
the footnotes to the Options Granted table.
</TABLE>
EXECUTIVE AGREEMENTS
The Registrant has entered into Executive Agreements with several executive
officers, including the Named Executive Officers. The agreements, which
include confidentiality and non-competition provisions, provide severance
compensation to each covered executive in the event of the executive's
involuntary termination from employment. This severance compensation would
be in the form of a continuation of the executive's base salary for one year
(two years for Messrs. Pullen and Chare). No severance compensation payment
would be made if the executive's termination from employment is due to death,
disability or normal retirement or is for cause, as defined in the agreement.
The agreements also provide severance compensation in the event of the
executive's termination in connection with a change in control of the
Registrant. This
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<PAGE> 33
compensation would be in the form of a lump sum payment equal to two times the
executive's annual base salary and target incentive payment, and continuation of
certain other executive benefits for a period specified in the agreement.
Mr. Nasser retired as Chairman of the Board, President and Chief Executive
Officer of the Registrant on November 20, 1995. He and the Company have entered
into an agreement under which Mr. Nasser will provide consulting services to
the Registrant through March 31, 1997. That agreement, which terminated the
Executive Agreement between Mr. Nasser and the Registrant, includes: a monthly
retirement benefit beginning April 1, 1996, equal to the benefit to which Mr.
Nasser would be entitled at his normal retirement date under the Registrant's
Retirement Plan assuming an additional five years of service; continuation of
certain other executive benefits for a specified period; surrender of stock
options granted under the Petrolite 1993 Stock Incentive Plan; and a
consulting payment of $370,000, payable in monthly installments through March
31, 1997. Amounts paid to Mr. Nasser, except for benefits paid through the
Company's Retirement and Supplemental Retirement Plans, are shown in the
Summary Compensation Table.
RETIREMENT BENEFITS
The Registrant's Retirement Plan is a defined benefit plan with benefits
determined on the basis of years of service and the average covered
remuneration for the five highest consecutive years of service in the last
ten years. Covered remuneration is the annual compensation of an individual,
which includes annual base salary and certain amounts paid under the
Registrant's bonus plans. Estimated annual benefits payable upon retirement
(assuming normal retirement date) to persons participating in the Plan are
shown below:
<TABLE>
APPROXIMATE ANNUAL RETIREMENT BENEFIT
- --------------------------------------
<CAPTION>
Years of Participation in Plan
------------------------------
Final Average
Annual Earnings 10 Years 20 Years 30 Years 40 Years
- --------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$100,000 $13,250 $ 26,500 $ 39,750 $ 51,875
$150,000 $21,000 $ 42,000 $ 63,000 $ 81,750
$200,000 $28,750 $ 57,500 $ 86,250 $111,625
$250,000 $36,500 $ 73,000 $109,500 $141,500
$300,000 $44,250 $ 88,500 $132,750 $171,375
$350,000 $52,000 $104,000 $156,000 $201,250
$400,000 $59,750 $119,500 $179,250 $231,125
$450,000 $67,500 $135,000 $202,500 $261,000
$500,000 $75,250 $150,500 $225,750 $290,875
</TABLE>
The benefits shown above are based on a straight-life annuity with a five-year
guaranty and are paid in addition to any Social Security benefits to
which the individual may be entitled. The compensation covered by the Plan
for the Named Executive Officers is shown in the Summary Compensation Table
under the headings "Salary", "Bonus" and "Long-Term Incentive Plan Payments".
Years of credited
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<PAGE> 34
service to October 31, 1996, for the Named Executive Officers are: Mr.
Hatfield, 0; Mr. Casper, 2; Dr. Graves, 24; Mr. Pullen, 0; Mr. Chare, 0; Mr.
Nasser, 33.
The Internal Revenue Code limits the amount of annual benefits which may be
payable from the pension trusts; the limit currently is $120,000 per year,
subject to annual cost of living adjustments. The Internal Revenue Code also
limits the compensation that may be considered in calculating benefits payable
from the pension trusts. The Registrant has established a Supplemental
Retirement Plan for the payment of supplemental benefits for certain highly
compensated employees to whom these limits apply, or will apply in the future,
so that these employees will obtain the benefit of the Retirement Plan formula
that would have applied in the absence of the limitations. These benefits are
reflected in the foregoing table. Mr. Nasser receives a benefit from the
Supplemental Retirement Plan.
COMPENSATION OF DIRECTORS
Directors who are not full-time salaried employees of the Registrant receive an
annual retainer of $18,000, except that Directors who serve as chairman of a
committee of the Board receive an annual retainer of $21,000. Directors
receive a fee of $1,000 per meeting for each board meeting attended, and
directors who serve on committees of the Board receive a fee of $750 per
meeting for each committee meeting attended.
Under the Petrolite 1993 Stock Incentive Plan approved by the stockholders on
March 1, 1993, each Director who has been a member of the Board of Directors
for at least six months receives an option to purchase 2,000 shares of the
Registrant's capital stock on account of his or her election by the stockholders
at an annual meeting of the Registrant. Each such Director who is re-elected to
the Board of Directors at a subsequent annual meeting of the Registrant receives
an option to purchase an additional 2,000 shares at the time of each such
re-election. The exercise price for each option is the fair market value of
a share of the Registrant's capital stock on the date of such annual meeting.
No options may be granted under the Plan after October 31, 1998. Directors who
are employees of the Registrant receive no additional compensation for service
on the Board of Directors or its committees.
Item. 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table shows the holdings of each person who is known by the
Registrant to own beneficially more than 5% of the Company's capital stock. The
Registrant's capital stock constitutes the only class of voting securities of
the Registrant. Except as indicated otherwise, these beneficial owners possess
sole voting and sole dispositive power with respect to the total number of
shares reported.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ---------------- -------------------- --------
<S> <C> <C>
Wm. S. Barnickel & Co. 5,337,360<F1> 47.1%
c/o Mr. Jules Chasnoff, Esq.
Lowenhaupt & Chasnoff, L.L.C
10 South Broadway, Suite 600
St. Louis, MO 63102
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<PAGE> 35
<S> <C> <C>
T. Rowe Price Associates, Inc. 730,900<F2> 6.4%
1285 Avenue of the Americas
New York, NY 10019
Scudder Stevens & Clark, Inc. 665,000<F3> 5.9%
175 Federal Street
Boston, MA 02110
Twentieth Century Companies, Inc. 581,900 5.1%
450 Main Street
P.O. Box 418210
Kansas City, Missouri 64141
<FN>
- ----------
Note <F1>: Prior to June 6, 1995, 90% of the outstanding capital stock of
Wm. S. Barnickel & Company ("Barnickel Company") was held
by The William S. Barnickel Testamentary Trust (the
"Barnickel Trust"), established under the will of William
S. Barnickel, deceased, of which Michael V. Janes and
Boatmen's Trust Company, a subsidiary of Boatmen's
Bancshares, Inc.<F*>, served as co-trustees. The Barnickel
Trust terminated on the death of Genevieve B. Janes on
August 27, 1993, and on June 6, 1995, the Barnickel Trust
distributed its assets, consisting primarily of shares of
common stock of Barnickel Company, to its beneficiaries.
The remaining 10% of the outstanding capital stock of Barnickel
Company is held by two other trusts, The John S. Lehmann
Trust f/b/o John S. Lehmann, Jr. and The John S. Lehmann
Trust f/b/o Frederick W. Lehmann III. Boatmen's Trust
Company serves as trustee of both of the Lehmann Trusts.
On November 27, 1996, Boatmen's Bancshares, Inc. ("BBI"),
Barnickel Company, The John S. Lehmann Trust f/b/o John
S. Lehmann, Jr., The John S. Lehmann Trust f/b/o
Frederick W. Lehmann III, Michael V. Janes, Genevieve J.
Brown, William B. Janes, and Fairfax F. Pollnow
(collectively the "1996 Reporting Persons") filed a
seventh amendment to a previously amended Schedule 13D.
The seventh amendment showed no changes from the
ownership of the Registrant's capital stock reported by the
1996 Reporting Persons in the sixth amendment to the
Schedule 13D filed November 12, 1996, as follows: The 1996
Reporting Persons disclosed aggregate beneficial
ownership of 5,590,778 Shares of the Registrant's capital
stock (the "Shares"), or 49.30% of the Shares
outstanding.
BBI reported sole voting and dispositive power over no Shares,
shared voting power over 5,558,332 Shares, and shared
dispositive power over 5,547,702 Shares. BTC reported
sole voting power over 124,101 Shares, shared voting
power over 5,434,231 Shares, sole dispositive power over
16,167 Shares, and shared dispositive power over
5,531,535 Shares.
Barnickel Company reported sole voting and dispositive power over
5,337,360 Shares and shared voting and dispositive
power over no Shares.
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<PAGE> 36
The John S. Lehmann Trust f/b/o John S. Lehmann, Jr. and The John
S. Lehmann Trust f/b/o Frederick W. Lehmann III reported
no sole or shared voting or dispositive power over any
Shares.
Genevieve J. Brown, a director of Barnickel Company, reported
sole voting and dispositive power over 5,846 Shares and
shared voting and dispositive power over 5,375,850
Shares.
Michael V. Janes, a director of Barnickel Company, reported sole
voting and dispositive power over 200 Shares and shared
voting and dispositive power over 5,425,463 Shares.
William B. Janes, a director of Barnickel Company, reported sole
voting and dispositive power over 23,400 Shares and shared
voting and dispositive power over 5,337,360 Shares.
Fairfax F. Pollnow reported sole voting and dispositive power
over 3,000 Shares, including presently exercisable options to
acquire 2,000 Shares.
<F*> NationsBank Corporation merged with Boatmen's Bancshares, Inc.,
on January 7, 1997, and acquired Boatmen's Trust Company.
Note <F2>: As of December 31, 1995, T. Rowe Price Associates possessed sole
voting power over 68,300 of the Shares shown and sole
dispositive power over 730,900 of the Shares shown.
Note <F3>: As of December 31, 1995, Scudder Stevens & Clark, Inc. possessed
shared voting power over 665,000 of the Shares shown and
sole dispositive power over 665,000 of the Shares shown.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of the Registrant's capital stock
beneficially owned, directly or indirectly, by each of the Registrant's
Directors and Named Executive Officers, and by the Directors and Executive
Officers as a group. Except as noted otherwise, these persons possess sole
voting and sole dispositive power with respect to the entire number of shares
reported. The number shown includes shares deemed to be outstanding pursuant
to stock options that are presently exercisable, as follows: Mr. Craig,
8,000 shares; Dr. Fernandez, 8,000 shares; Mr. Grace, 2,000 shares; Mr.
O'Shields, 2,000 shares; Mr. Pollnow, 2,000 shares.
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<PAGE> 37
<TABLE>
DIRECTORS
<CAPTION>
NAME OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ---------------- -------------------- --------
<S> <C> <C>
Andrew B. Craig, III 9,000 <F*>
Jerry B. Davis 500 <F*>
Louis Fernandez 9,000 <F*>
Wayne J. Grace 3,700 <F*>
Paul H. Hatfield 95,199<F2><F3> <F*>
Richard L. O'Shields 4,500 <F*>
Fairfax F. Pollnow 3,000 <F1>
Brian M. Rushton 200 <F*>
Joseph T. Williams 1,000 <F*>
NAMED EXECUTIVE OFFICERS
NAME OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ---------------- -------------------- --------
John M. Casper 21,981<F3> <F*>
Toby R. Graves 17,350<F3> <F*>
Jeffrey A. Pullen 4,000<F3> <F*>
Hugh B. Chare 0 <F*>
William E. Nasser 15,933<F2><F3> <F*>
All Directors and Officers
as a Group (21 persons) 222,345<F4> 2%
<FN>
<F*> Less than 1%
- ----------
Note <F1>: See Note (1) under the heading Security Ownership of Certain
Beneficial Owners in this Item.
Note <F2>: Mr. Nasser retired, and Mr. Hatfield was elected, Chairman of the
Board, President and Chief Executive Officer of the Registrant
on November 20, 1995.
Note <F3>: The number shown includes shares which are deemed to be
outstanding pursuant to stock options that are presently
exercisable, or will become exercisable within 60 days of
January 29, 1997, as follows: Mr. Hatfield, 81,334
shares; Mr. Casper, 15,000 shares; Dr. Graves, 13,000
shares; Mr. Pullen, 4,000 shares; Mr. Nasser, 5,000
shares. The number shown includes shares of capital stock
held in trust through the Employees' Savings Plan,
as follows: Mr. Hatfield, 365 shares; Mr. Casper, 758
shares; Dr. Graves, 2,578 shares; Mr. Nasser, 7,186
shares. (Savings Plan information presented as of
September 30, 1996.)
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<PAGE> 38
Note <F4>: The number shown includes 164,334 shares which are deemed to be
outstanding pursuant to stock options that are presently
exercisable, or will become exercisable within 60 days of
January 29, 1997, and 23,884 shares held through the
Employees' Savings Plan. (Savings Plan
information presented as of September 30, 1996.)
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) On November 27, 1996, Wm. S. Barnickel & Co. ("Barnickel Company") and
the Registrant entered into a "Memorandum of Understanding Regarding Joint
Petrolite/Barnickel Efforts to Explore Sale of Petrolite" (the "Memorandum of
Understanding") which provided, among other things, that: (1) The Special
Committee of the Registrant's Board of Directors that was established on June
12, 1996, would be in charge of the exploration of the sale of the Registrant.
The Special Committee, subject to the fiduciary duties of the directors,
would pursue a process for the sale or merger of the Registrant on the most
advantageous terms for all shareholders; (2) The Special Committee would
take into account, among any other shareholders' concerns, the fact that
Barnickel Company has a strong preference for a transaction structured as a
tax-free reorganization involving Barnickel directly; (3) J. Peters MacCarthy
and Robert H. Quenon, designees of Barnickel Company, would participate in
the Special Committee, except that they would not have the right to vote; (4)
Barnickel Company would standstill (that is, take no implementing action)
with respect to any consent solicitation for 90 days so that the Registrant's
Board of Directors could pursue the Special Committee's purpose; and (5)
The Rights Agreement, dated as of March 28, 1994, as amended, with Society
National Bank, would be amended as provided in the Memorandum of
Understanding.
The foregoing summary description of the Memorandum of Understanding does
not purport to be complete and is qualified in its entirety by the terms of
the Memorandum of Understanding that is filed as an exhibit to the Registrant's
Form 8-K Report filed on December 6, 1996.
(b) During fiscal year 1996, the Registrant and its subsidiaries engaged, in
the ordinary course of business, in various types of transactions with other
corporations with which Directors of the Registrant are associated either as
officers or directors. It is expected that the Registrant and its subsidiaries
will continue to engage in such transactions. The Registrant does not believe
the amounts involved in such transactions are material in relation to the
businesses of such other corporations or the interests of the Directors
involved.
(c) The Registrant and Mr. Hatfield entered into a Management Agreement and a
Stock Option Agreement effective August 11, 1995, pursuant to which Mr.
Hatfield agreed to provide certain management services to the Registrant with
regard to the Registrant's Chemicals Group. Both agreements were terminated
effective November 20, 1995, upon Mr. Hatfield's election as Chairman,
President and Chief Executive Officer. Under the Management Agreement, Mr.
Hatfield was to be paid $125,000 in 12 monthly installments; under the Stock
Option Agreement, Mr. Hatfield was granted an option to purchase 36,000 shares
of the Registrant's capital stock at a price of $21.03 per share. The option,
which was to become exercisable in 12 monthly installments beginning September
29, 1995, became exercisable with respect to 6,000 shares before the Stock
Option Agreement was terminated.
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<PAGE> 39
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) List of financial statements filed as part of this report:
Petrolite Corporation
---------------------
Consolidated statements of earnings for the years ended October
31, 1996, 1995 and 1994.
Consolidated balance sheets as of October 31, 1996 and 1995.
Consolidated statements of cash flows for the years ended October
31, 1996, 1995 and 1994.
Consolidated statements of stockholders' equity for the years
ended October 31, 1996, 1995 and 1994.
Notes to consolidated financial statements.
Report of independent accountants.
Bareco Products
---------------
Statement of Operations for the Years Ended October 31, 1996 and
1995
Balance Sheet as of October 31, 1996 and 1995
Statement of Cash Flows for the Years Ended October 31, 1996 and
1995
Statement of Changes in Partners' Equity for the Years Ended
October 31, 1996 and 1995
Notes to Financial Statements
Report of Independent Accountants
Financial Statements for Bareco Products, an equity investee of the
Registrant, will be filed pursuant to Rule 12b-25
(b) No reports on Form 8-K were filed with the SEC during the fourth
quarter of fiscal 1996.
(c) Exhibit Index (Listed by numbers corresponding to the Exhibit
Table of Item 601 in Regulation S-K)
Exhibit No.
3.1 - Restated Certificate of Incorporation of the Registrant
(Incorporated from the definitive Proxy Statement dated
January 21, 1987, Exhibit B and the definitive Proxy
Statement dated February 3, 1984, Exhibit A).
3.2 - Bylaws of the Registrant, as adopted and restated August 14,
1996.
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 filed as Exhibit 4 to the Registrant's
Annual Report on Form 10-K for the year ended October 31,
1993, and hereby incorporated by reference herein.
-39-
<PAGE> 40
4.2 - Rights Agreement dated as of March 25, 1994, between the
Registrant and Society National Bank, as Rights Agent,
filed as Exhibit 4 to the Registrant's current report on
Form 8-K filed April 16, 1994, and hereby incorporated
by reference herein.
4.3 - Amendment No. 1 to Rights Agreement dated as of March 25, 1994
between the Registrant and Society National Bank, as Rights
Agent, filed as Exhibit 4 to the Registrant's current
report on Form 8-K filed December 13, 1994, and hereby
incorporated by reference herein.
4.4 - Amendment No. 2 to Rights Agreement dated as of March 25, 1994
between the Registrant and Society National Bank, as Rights
Agent, filed as Exhibit 4 to the Registrant's current
report on Form 8-K filed February 14, 1995, and hereby
incorporated by reference herein.
4.5 - Amendment No. 3 to Rights Agreement dated as of March 25,
1994 between the registrant and Society National Bank, as
Rights Agent, filed as part of Exhibit 10 to the Registrant's
current report on Form 8-K filed December 6, 1996, and hereby
incorporated by reference herein.
10.1 - 1987 Stock Incentive Plan filed as an Exhibit to the
Registrant's Form 10-K Annual Report for the year ended
October 31, 1987, and hereby incorporated by reference
herein.<F*>
10.2 - Petrolite 1993 Stock Incentive Plan, as amended on August 8,
1994, filed as Exhibit 10.2 to the Registrant's Form 10-K
Annual Report for the year ended October 31, 1995, and
hereby incorporated by reference herein.<F*>
10.3 - Form of 1996 restated Executive Agreement between the
Registrant and certain executives of the Registrant, entered
into on various dates in December, 1996.<F*>
10.4 - Management Agreement dated as of August 11, 1995, with a
director of the Registrant filed as an exhibit to the
Registrant's Form 10-K Annual Report for the year ended
October 31, 1995, and hereby incorporated by reference
herein.<F*>
10.6 - Stock Option Agreement dated as of August 11, 1995, with a
director of the Registrant filed as an exhibit to the
Registrant's Form 10-K.<F*>
-40-
<PAGE> 41
Annual Report for the year ended October 31, 1995, and hereby
incorporated by reference herein.<F*>
10.7 - Agreement terminating a Management Agreement and a Stock
Option Agreement with a director of the Registrant effective
November 20, 1995 filed as an exhibit to the Registrant's
Form 10-K Annual Report for the year ended October 31, 1995,
and hereby incorporated by reference herein.<F*>
10.8 - Agreement between the Registrant and William E. Nasser dated
November 20, 1995 filed as an exhibit to the Registrant's
Form 10-K Annual Report for the year ended October 31,
1995, and hereby incorporated by reference herein.<F*>
10.9 - Petrolite Corporation Supplemental Retirement Plan filed
as an exhibit to the Registrant's Form 10-K Annual Report
for the year ended October 31, 1995, and hereby incorporated
by reference herein.<F*>
10.10 - Memorandum of Understanding, dated as of November 27, 1996,
between the Registrant and William S. Barnickel Co. filed
as Exhibit 10 to the Registrant's current report on Form
8-K filed December 6, 1996, and hereby 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.
[FN]
<F*> Indicates a management contract or compensatory plan or agreement.
Individual financial statements of the Registrant's subsidiaries not included
in this Form 10-K have been omitted since the Registrant is primarily an
operating Registrant and the operating subsidiaries included in the
consolidated financial statements but for which financial statements are not
included herein, 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, 1996. Separate financial statements of subsidiaries not
consolidated, and 50%-or-less-owned entities (accounted for by the equity
method) not included herein have been omitted because they do not constitute
a significant subsidiary. Financial Statements for Bareco Products, an equity
investee of the Registrant, will be filed pursuant to Rule 12b-25.
-41-
<PAGE> 42
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 29, 1997
-----------------------
-42-
<PAGE> 43
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.
<TABLE>
<S> <C>
/s/ Paul H. Hatfield /s/ John M. Casper
- ------------------------------- ------------------------------
Paul H. Hatfield John M. Casper
Principal Executive Officer Principal Financial Officer
and Director
/s/ Andrew B. Craig<F*> /s/ William F. Haberberger
- ------------------------------- ------------------------------
Andrew B. Craig, Director Wlliam F. Haberberger
Principal Accounting Officer
/s/ Jerry B. Davis<F*> /s/ Louis Fernandez<F*>
- ------------------------------- ------------------------------
Jerry B. Davis, Director Louis Fernandez, Director
/s/ Wayne J. Grace<F*> /s/ Richard L. O'Shields<F*>
- ------------------------------- ------------------------------
Wayne J. Grace, Director Richard L. O'Shields, Director
/s/ Fairfax F. Pollnow <F*> /s/ Brian M. Rushton<F*>
- ------------------------------- ------------------------------
Fairfax F. Pollnow, Director Brian M. Rushton, Director
/s/ Joseph T. Williams <F*>
- -------------------------------
Joseph T. Williams, Director
<FN>
<F*>By /s/ Charles R. Miller
--------------------------------
Charles R. Miller, Attorney in Fact
Dated: January 29, 1997 Dated: January 29, 1997
------------------------- -------------------------
</TABLE>
-43-
<PAGE> 44
<TABLE>
CONSOLIDATED STATEMENTS OF EARNINGS
<CAPTION>
For Years Ended October 31
(Dollars in thousands,except per share data) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Revenues $ 360,703 $ 364,877 $ 369,227
Cost of Products Sold and Other Direct Costs 215,883 229,512 215,483
- -------------------------------------------------------------------------------------------------------
Gross Profit 144,820 135,365 153,744
- -------------------------------------------------------------------------------------------------------
Expenses:
Selling 85,360 86,015 88,272
Research 15,336 12,768 12,737
General and administrative 22,723 21,438 23,285
Write-off of investment in subsidiary 5,137
Write-down of assets 9,812
Reorganization of chemical operations 20,025
- -------------------------------------------------------------------------------------------------------
128,556 130,033 144,319
- -------------------------------------------------------------------------------------------------------
Earnings from operations 16,264 5,332 9,425
Other Income (Expense):
Equity in earnings of affiliates 5,859 3,146 925
Interest expense (2,795) (3,278) (3,371)
Interest income 2,191 1,449 850
Other income, net 93 1,465 677
- -------------------------------------------------------------------------------------------------------
Earnings before income taxes and effect of
change in accounting principles 21,612 8,114 8,506
- -------------------------------------------------------------------------------------------------------
Provision for U.S. and Foreign Income Taxes:
Current 884 6,362 6,458
Deferred, net 1,695 (4,478) (4,959)
- -------------------------------------------------------------------------------------------------------
2,579 1,884 1,499
- -------------------------------------------------------------------------------------------------------
Net Earnings before effect of change
in accounting principles 19,033 6,230 7,007
Effect of change in accounting for income taxes 2,037
- -------------------------------------------------------------------------------------------------------
Net Earnings $ 19,033 $ 6,230 $ 9,044
- -------------------------------------------------------------------------------------------------------
Earnings Per Share before effect of change
in accounting $ 1.68 $ 0.55 $ 0.62
Effect of change in accounting for income taxes 0.18
- -------------------------------------------------------------------------------------------------------
Earnings Per Share $ 1.68 $ 0.55 $ 0.80
- -------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
-44-
<PAGE> 45
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
OCTOBER 31 (DOLLARS IN THOUSANDS) 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 44,669 $ 33,662
Accounts receivable, less estimated doubtful accounts of
$1,191 and $986, respectively 68,324 63,352
Inventories 37,117 36,709
Other current assets 11,729 12,115
- -----------------------------------------------------------------------------------------------------------------------------
Total current assets 161,839 145,838
- -----------------------------------------------------------------------------------------------------------------------------
Investment in Affiliated Companies 14,417 13,116
- -----------------------------------------------------------------------------------------------------------------------------
Other Assets:
Patents and other intangibles, less accumulated amortization of $9,585 and $7,136, respectively 7,068 9,505
Prepaid pension costs 9,484 7,330
Other 8,228 5,422
- -----------------------------------------------------------------------------------------------------------------------------
Total other assets 24,780 22,257
- -----------------------------------------------------------------------------------------------------------------------------
Properties:
Buildings 66,063 63,325
Machinery and equipment 201,109 203,526
Construction in progress 3,681 4,159
Accumulated depreciation (176,971) (166,369)
- -----------------------------------------------------------------------------------------------------------------------------
93,882 104,641
Land 6,869 6,733
- -----------------------------------------------------------------------------------------------------------------------------
100,751 111,374
- -----------------------------------------------------------------------------------------------------------------------------
$ 301,787 $ 292,585
- -----------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings $ 5,493 $ 4,594
Accounts payable 48,251 40,964
Income taxes payable 2,113 3,378
Accrued vacation payable 3,720 4,000
Reorganization reserve 2,734
Other current liabilities 9,568 11,164
- -----------------------------------------------------------------------------------------------------------------------------
Total current liabilities 69,145 66,834
- -----------------------------------------------------------------------------------------------------------------------------
Other Liabilities:
Long-term debt 38,000 40,000
Retiree medical benefits 14,165 13,192
Other 4,598 2,317
- -----------------------------------------------------------------------------------------------------------------------------
Total other liabilities 56,763 55,509
- -----------------------------------------------------------------------------------------------------------------------------
Deferred Income taxes, Net 9,044 10,778
- -----------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Capital Stock, without par value-
Authorized - 35,000,000 shares
Issued - 12,230,197 and 12,220,697 shares, respectively 9,620 9,389
Reinvested earnings 177,283 170,943
Cumulative translation adjustment (1,374) (2,174)
- -----------------------------------------------------------------------------------------------------------------------------
185,529 178,158
Less treasury stock, at cost - 887,749 shares (18,694) (18,694)
- -----------------------------------------------------------------------------------------------------------------------------
166,835 159,464
- -----------------------------------------------------------------------------------------------------------------------------
$ 301,787 $ 292,585
- -----------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
-45-
<PAGE> 46
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For Years Ended October 31
(Dollars in thousands) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 19,033 $ 6,230 $ 9,044
- ------------------------------------------------------------------------------------------------------
Adjustments to reconcile net earnings to net
cash provided by operations:
Depreciation and amortization 17,990 18,909 21,291
Write-down of assets 14,354
Effect of change in accounting
for income taxes (2,037)
Reorganization of chemical operations 20,025
Gain on sale of fixed assets (592) (1,338) (783)
Changes in assets and liabilities:
Accounts receivable (5,148) 5,381 3,245
Inventories (569) 6,354 639
Accounts payable and accrued liabilities 3,855 (5,482) 3,849
Other, net (4,275) (14,809) (4,367)
- ------------------------------------------------------------------------------------------------------
11,261 23,369 41,862
- ------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 30,294 29,599 50,906
- ------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Capital expenditures, net (11,178) (12,565) (21,825)
Proceeds from sale of airplane 5,250
Proceeds from sale of Clear Lake plant 10,335
Other, net 255 (obsolete (1,125)
192)
- ------------------------------------------------------------------------------------------------------
Net cash used in investing activities (5,673) (2,422) (22,950)
- ------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Short-term borrowings
(repayments), net (1,152) (816) (4,009)
Dividends paid (12,693) (12,691) (12,741)
Sale of common stock 231 191 559
- ------------------------------------------------------------------------------------------------------
Net cash used in financing activities (13,614) (13,316) (16,191)
- ------------------------------------------------------------------------------------------------------
Net Increase in Cash and Equivalents 11,007 13,861 11,765
Cash and Equivalents at Beginning of Year 33,662 19,801 8,036
- ------------------------------------------------------------------------------------------------------
Cash and Equivalents at End of Year $ 44,669 $ 33,662 $ 19,801
- ------------------------------------------------------------------------------------------------------
Interest Paid $ 2,795 $ 3,278 $ 2,118
Income Taxes Paid $ 4,959 $ 6,782 $ 6,432
- ------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
-46-
<PAGE> 47
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
Capital Stock Cumulative
(Amounts in thousands, ------------------------- Reinvested Translation Treasury Stockholders'
except per share data) Shares Amount Earnings Adjustment Stock Equity
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
NET EARNINGS 19,033 19,033
DIVIDENDS PAID $1.12 PER SHARE (12,693) (12,693)
FOREIGN CURRENCY
TRANSLATION ADJUSTMENTS 800 800
EXERCISE OF STOCK UNDER OPTIONS 9 231 231
- --------------------------------------------------------------------------------------------------------------------------------
OCTOBER 31, 1996 12,230 $ 9,620 $177,283 $(1,374) $(18,694) $166,835
- --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
-47-
<PAGE> 48
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
original maturities 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 1 to 15
years.
-48-
<PAGE> 49
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, 1996, approximates
$7.8 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 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
common stock equivalents outstanding during the respective year.
FINANCIAL STATEMENT RECLASSIFICATION
Selected prior-year information has been reclassified to conform with 1996
annual report presentation.
-49-
<PAGE> 50
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
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 serves 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, 1996, 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.
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.
This Statement will be adopted in fiscal 1997, and the effect is expected to
be insignificant to the Company.
-50-
<PAGE> 51
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 Company is currently evaluating the impact
of the statement, the disclosure provisions of which will be adopted in
fiscal 1997.
WRITE-DOWN OF INVESTMENT IN SUBSIDIARY
In April 1996, the Company closed its Petrolite Suramericana, S.A.
subsidiary. Write-off of the Company's remaining investment in the subsidiary
resulted in a $5.137 million charge to operations and a $6.250 million tax
benefit. The Company's tax basis in this subsidiary exceeded its book basis
at the time of the closure.
WRITE-DOWN OF CERTAIN ASSETS AND INVENTORY DISPOSAL
During the fourth quarter of 1995, the Company recorded a $14.4 million
pretax charge to record the write-off and disposal of obsolete inventory, as
well as the write-down of patents, intangibles, and other assets.
Management's decision to abandon and consolidate product lines, reduce its
stocking locations, and dispose of slow-moving inventory resulted in a $4.6
million charge to cost of products sold for the write-off and disposition of
obsolete chemical inventory. Approximately $2.3 million of this amount
related to disposal costs of which $1.3 million was incurred in fiscal 1996.
In addition, 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 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 $2.0 million.
These charges are reflected in income from operations in fiscal 1995.
The net earnings and per share impact of these charges in fiscal 1995 were
$9.0 million or $0.79 per share.
REORGANIZATION
In the fourth quarter of fiscal 1994, the Company recorded a $20.0 million
pretax charge for reorganization of its Specialty Chemical Products 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,
-51-
<PAGE> 52
facilities. At October 31, 1994, $6.8 million of the severance accrual and $1.9
million of plant shutdown costs were recognized as a liability on the Company's
balance sheet.
During fiscal 1995, $4.8 million of severance costs and $1.1 million of plant
shutdown costs were charged against the reorganization accrual, leaving a
remaining balance of $2.7 `million 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. During fiscal 1996, this remaining balance was utilized.
INVENTORIES
Inventories at October 31 are summarized as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Raw materials, parts and supplies $19,706 $19,984
Finished goods 37,704 37,874
Less reserve for revaluation of inventories
to LIFO cost (18,626) (18,541)
Less reserve for obsolete inventory (1,056) (2,300)
- -------------------------------------------------------------------------------
37,728 37,017
Equipment contracts in progress (402) 13
Less advance billings (209) (321)
- -------------------------------------------------------------------------------
Inventories, net $37,117 $36,709
- -------------------------------------------------------------------------------
</TABLE>
The reserve for inventory represents the carrying value of raw materials and
finished goods which will be disposed of in fiscal 1997.
Approximately 62% and 66% of total inventories (exclusive of equipment
contracts in progress) were accounted for on a last-in, first-out (LIFO)
basis at October 31, 1996 and 1995, respectively.
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, 1996 and 1995, for Toyo-Petrolite Co. Ltd. and October
31, 1996 and 1995, for Bareco Products, respectively:
<TABLE>
<CAPTION>
(Dollars in thousands) 1996 1995
- ------------------------------------------------------------
<S> <C> <C>
Earnings data
Net revenues $ 56,028 $ 37,111
Gross profit 11,364 7,664
Net earnings 4,264 2,335
- ------------------------------------------------------------
Balance sheet data
Current assets $ 19,471 $ 19,635
Other assets 2,821 2,837
Current liabilities 7,134 7,865
Other liabilities 439 492
- ------------------------------------------------------------
Net assets 14,719 14,115
- ------------------------------------------------------------
</TABLE>
-52-
<PAGE> 53
The Company's share of undistributed earnings of affiliated companies
included in consolidated retained earnings was $7.3 million at October 31,
1996. Dividends from affiliated companies were $0.4 million in 1996.
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.
These totaled $3.5 million at October 31, 1996. Domestic short-term funds
are obtained through an unsecured, uncommitted line of credit with a bank
totaling $15.0 million. Domestic borrowings bear interest at a fluctuating
rate below prime determined by the banks' cost of funds. At October 31,
1996, the amount available and unused under this line of credit totaled $15.0
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% Services A Senior Notes, due 2000, and 6.39% Services A Senior Notes,
due 2003, in aggregate principal amounts of $10.0 million and $30.0 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): 1997-$2.0, 1998-$6.3, 1999-$6.3, 2000-$6.3, 2001-$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
$39.4 million (1995-$40.0 million).
INCOME TAXES
Below is a comparative summary of income taxes for each of the three years in
the period ended October 31:
<TABLE>
<CAPTION>
(Dollars in thousands) 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
U.S. $ (2,263) $ 3,714 $ 2,838
Foreign 3,015 2,398 3,200
State 132 250 420
Deferred
U.S. 2,334 (3,416) (4,261)
Foreign (916) (656) (220)
State 277 (406) (478)
- ------------------------------------------------------------------------------
Total $ 2,579 $ 1,884 $ 1,499
- ------------------------------------------------------------------------------
</TABLE>
-53-
<PAGE> 54
Pretax earnings related to domestic and foreign operations are summarized
below:
<TABLE>
<CAPTION>
(Dollars in thousands) 1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $ 16,063 $ 3,232 $ (1,550)
Foreign 5,549 4,882 10,056
- -------------------------------------------------------------------------
Total $ 21,612 $ 8,114 $ 8,506
- -------------------------------------------------------------------------
</TABLE>
A reconciliation of income taxes at the U.S. statutory rate to the Company's
reported effective tax rate follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes computed at the U.S.
statutory rate 35.0% 35.0% 35.0%
State income taxes net of
federal tax benefit 1.2 (1.2) (0.4)
Tax benefit - U.S. export sales (4.7) (10.1) (10.7)
Net income of foreign affiliates (1.1) (4.1) (3.8)
Tax benefit of write-off of investment
in subsidiary (20.6)
Foreign tax rate greater (less) than
domestic rate 1.2 (1.1) (2.5)
Nondeductible items 1.7 5.1 2.6
Other, net (0.8) (0.4) (2.6)
- ------------------------------------------------------------------------------------------------
Effective tax rate 11.9% 23.2% 17.6%
- ------------------------------------------------------------------------------------------------
</TABLE>
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.
The deferred tax assets and deferred tax liabilities recorded on the balance
sheet as of October 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------------------------------------------------
(Dollars in thousands) ASSETS LIABILITIES Assets Liabilities
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current
Intercompany profit
in inventory $ 1,574 $ 1,156
Accrued liabilities 2,449 3,109
Inventory
valuation/disposal costs 1,000 2,258
Other items 1,596 269 1,029 584
- --------------------------------------------------------------------------------------------------------
6,619 269 7,552 584
- --------------------------------------------------------------------------------------------------------
Noncurrent
Accrued liabilities 1,851 2,101
Plant closing expenses 3,155
Postretirement expenses
other than pension 5,326 4,960
Depreciation 12,912 16,358
Other property
-54-
<PAGE> 55
<CAPTION>
<S> <C> <C> <C> <C>
basis difference 1,123 1,123
Repatriation of
foreign earnings 1,715
Pension expense 3,302 2,492
Other items 1,116 694
- --------------------------------------------------------------------------------------------------------
8,293 17,337 10,910 21,688
- --------------------------------------------------------------------------------------------------------
Total deferred taxes $ 14,912 $17,606 $18,462 $22,272
- --------------------------------------------------------------------------------------------------------
</TABLE>
United States federal income tax returns for all years through 1994 have been
settled with the Internal Revenue Service.
SUPPLEMENTAL CASH FLOW INFORMATION
In October 1994, the Company acquired the remaining 50% of Petrolite
Suramericana, S.A. in exchange for $0.5 million 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:
<TABLE>
<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. The Company contributes funds to
trustees as necessary to provide for current service and for any unfunded,
prior-service costs. 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.
-55-
<PAGE> 56
The funded status of the U.S. plan at October 31 was as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of:
Vested benefits $(73,121) $(68,604) $(65,831)
Nonvested benefits (4,978) (5,086) (4,497)
- ---------------------------------------------------------------------------------------------
Accumulated benefit obligation (78,099) (73,690) (70,328)
Effect of future salary increases (17,045) (16,055) (14,219)
- ---------------------------------------------------------------------------------------------
Projected benefit obligation (95,144) (89,745) (84,547)
Plan assets at fair value 140,469 129,435 121,480
- ---------------------------------------------------------------------------------------------
Excess of assets over projected
benefit obligation 45,325 39,690 36,933
Unamortized net transition asset (8,134) (9,157) (10,180)
Unrecognized net gain (30,919) (26,805) (26,627)
Unrecognized prior service cost 3,212 3,602 4,529
- ---------------------------------------------------------------------------------------------
Prepaid pension cost
at October 31 $ 9,484 $ 7,330 $ 4,655
- ---------------------------------------------------------------------------------------------
</TABLE>
The net pension credit included the following components:
<TABLE>
<CAPTION>
(Dollars in thousands) 1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-
Benefits earned during the period $ 2,846 $ 2,369 $ 3,183
Interest cost on projected benefit
obligation 6,741 6,474 6,422
Return on Plan Assets (15,999) (18,564) (3,727)
Net amortization and deferral 3,134 6,636 (6,596)
- ---------------------------------------------------------------------------------------------
Net pension credit $ (3,278) $ (3,085) $ (718)
- ---------------------------------------------------------------------------------------------
</TABLE>
In addition to the net pension credits, net expenses of $1.1 million and $4.1
million were recorded in 1996 and 1994, respectively, due to voluntary
work-force reduction programs associated with reorganization efforts. The net
expense is comprised of the cost of special termination benefits of $1.1
million in 1996 and $5.6 million in 1994 and a curtailment gain of $1.5
million in 1994.
The projected benefit obligation was determined using a discount rate of 7.5%
for fiscal 1996 and 1995, and 8.25% for fiscal 1994. The assumed long-term
rate of return on plan assets is 9.0% for fiscal 1996 and 1995, and 8.5% for
fiscal 1994. 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.
Net consolidated pension income was $2.7 million for 1996, $2.5 million for
1995, and $.3 million for 1994.
-56-
<PAGE> 57
SUPPLEMENTAL RETIREMENT PLAN
The Company maintains a nonqualified, supplemental executive retirement plan
(SERP). The SERP, which is an unfunded defined benefit plan, provides
incremental benefits to eligible employees from the Company's funds so that
total pension payments equal amounts that would have been payable from the
Company's principal pension plan if it were not for limitations imposed by
income tax regulations. The plan also provides such additional benefits as
may be authorized by the board of directors. The unfunded, accumulated
benefit obligation and projected benefit obligation related to this plan
totaled $2.9 million and $3.2 million respectively, at October 31, 1996.
Pension expense for this plan was $0.6 million in 1996. The projected
benefit obligation was determined using a discount rate of 7.5% and the
assumed long-term rate of compensation increases is 5%.
POSTRETIREMENT BENEFITS
Statement of Financial Accounting Standard (SFAS) No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions, requires
recognition during employees' active service periods of the expected cost of
providing postretirement benefits (primarily health benefits).
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.
The status of the plan at October 31 was as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accumulated postretirement benefit
obligation (APBO):
Retirees $ (9,088) $ (9,202) $ (8,059)
Fully eligible plan participants (767) (824) (676)
Other plan participants (4,396) (4,458) (3,778)
- ---------------------------------------------------------------------------------------------
Total APBO $(14,251) (14,484) (12,513)
Unrecognized net loss 86 1,292
- ---------------------------------------------------------------------------------------------
Accrued postretirement benefit cost $(14,165) $(13,192) $(12,513)
- ---------------------------------------------------------------------------------------------
</TABLE>
The net periodic postretirement benefit was as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-
Benefits earned during the period $ 271 $ 246 $ 329
Interest cost on APBO 978 1,035 866
Net amortization and deferral 5 24 50
- ---------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $1,254 $1,305 $1,245
- ---------------------------------------------------------------------------------------------
-57-
<PAGE> 58
In addition to the net periodic postretirement benefit cost, the Company
recorded a net expense of $0.1 million and $1.4 million in 1996 and 1994,
respectively, representing the net effect of special termination benefits due
to voluntary work-force reduction programs associated with reorganization
efforts.
Under the former practice of expensing postretirement benefits when paid, the
expense would have been $.4 million in fiscal 1996, $.7 million in fiscal
1995, and $.9 million in fiscal 1994.
For measurement purposes, a health care cost trend of 9.0% was assumed for
fiscal 1996, declining gradually over the next four years to 5%, and
remaining at that level thereafter. For fiscal 1995, the health care cost
trend-rate assumption was 11%, declining to 6% over a five year period; and
for 1994, the health care cost trend assumption was 12%, declining to 6% over
a six-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 rate
would increase the accumulated postretirement benefit obligation for health
benefits at October 31, 1996, by $84,000 and would increase the aggregate of
the service and interest cost components of net periodic postretirement
benefit cost for health benefits for fiscal 1996 by $11,000. The discount
rate used in determining the accumulated postretirement benefit obligation
was 7.5% at October 31, 1996 and 1995, and 8.25% at October 31, 1994.
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
At October 31, 1996, the Company has two stock-based compensation plans,
which are described below. The Company applies APB Opinion No. 25 and related
interpretations in accounting for its plans. Accordingly, no compensation
cost has been recognized for its fixed-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.
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.
-58-
<PAGE> 59
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. No additional grants will be made under this plan.
Transactions under the 1987 Incentive Stock Option Plan are summarized below:
</TABLE>
<TABLE>
<CAPTION>
Stock
Options
-----------------------------------
Restricted Number Average
Stock of Option
Options Options Price
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
Exercised (6,500) 23.00
Forfeited (20,600) 31.58
Expired (5,900) 32.50
- -----------------------------------------------------------------------------------------
Outstanding October 31, 1996 69,500 $ 32.29
- -----------------------------------------------------------------------------------------
</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 initially granted two groups of options under the 1993
plan with different performance criteria. Both awards included triggers
based on specific minimum increases in the Company's stock values. The first
award required annual minimum increases and the second award was tied to an
increase in Company stock value over a five-year period.
The competitive market conditions and forward outlook changed substantially
from the factors contemplated by management in recommending the initial
awards. Upon review, the Compensation
-59-
<PAGE> 60
Committee of the Board of Directors determined the awards did not provide the
needed element of longer-term incentive compensation. The Committee and the
Board of Directors therefore authorized certain optionees to exchange their
initial stock option awards for a new stock option award. The new option
awards, which were made on January 9, 1996, are exercisable ratably in annual
installments of 20% commencing one year from the date of grant. The
Compensation Committee also approved the award of options under the 1993
Stock Incentive Plan to certain officers who previously were not awarded
options.
Transactions under the 1993 Stock Incentive Plan are summarized below:
<TABLE>
<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 16,000 26.06
Exercised (4,000) 29.53
Forfeited (21,000) 32.88
- -----------------------------------------------------------------------------------------
Outstanding October 31, 1995 624,000 36,000 32.61
Granted-various dates 560,000 14,000 26.19
Exercised (3,000) 27.04
Forfeited (629,000) 30.40
Expired (8,000) 29.27
- -----------------------------------------------------------------------------------------
Outstanding October 31, 1996 555,000 39,000 $ 28.81
- -----------------------------------------------------------------------------------------
</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 canceled 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 the Rights unless they acquire beneficial ownership of an
additional 1% of the outstanding Capital Stock.
-60-
<PAGE> 61
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 Registrant has been named a potentially responsible party (PRP) under the
Federal Comprehensive Environmental Response, Compensation, and Liability Act
of 1980 (the "Superfund Law") with respect to one "Superfund" site. The
Registrant has not owned or operated the site, other PRPs also have been so
designated, and the extent of the Registrant's liability at the site has been
determined with respect to anticipated remediation costs. The extent of the
Registrant's percentage contribution to remediation costs at the site is capped
at 1%. The Registrant's reserves include amounts expected to be incurred with
respect to this site. The Registrant also is involved in remedial response and
voluntary environmental cleanups, in some cases under the direction of
governmental agencies, at other locations which are not the subject of the
Superfund law. The Registrant 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 conditions. Based on, among other
factors, its previous experience with respect to such activities and its
ongoing review and analysis, at October 31, 1996, the Registrant's balance
sheet included an accrual for estimated remediation and other environmental
costs of approximately $2.8 million. Subject to the difficulty in estimating
future environmental costs, the Registrant believes 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 Registrant.
The Registrant 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, 1996, the Registrant's balance sheet included an accrual for
estimated litigation costs and other contingencies of $3.0 million. Management
and legal counsel are of the opinion that any sum the Registrant may be
required to pay in connection with the ultimate dispositions 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.
-61-
<PAGE> 62
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
financial statements and accompanying footnotes included in this Form 10-K
Annual Report 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 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 LLP, 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.
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, 1996
and 1995, and the results of their operations and their cash flows for each
of the three years in the period ended October 31, 1996, 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.
(Price Waterhouse LLP)
St. Louis, Missouri
November 22, 1996
-62-
<PAGE> 1
Exhibit 3.2
By-Laws of the Registrant
BY-LAWS
OF
PETROLITE CORPORATION
---------------------
ARTICLE I
OFFICES
-------
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware, and the name of the resident agent in
charge thereof is The Corporation Trust Company.
Section 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may
from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. All meetings of the stockholders shall be held at such place
either within or without the State of Delaware as shall be
AS AMENDED 8/14/96
<PAGE> 2
designated from time to time by the Board of Directors and stated in the notice
of the meeting.
Section 2. An annual meeting of stockholders shall be held on the first
Monday in March in each year, if not a legal holiday, and if a legal holiday,
then on the next business day following, at 11:00 a.m. or at such other date
and time and at such place as may be determined from time to time by
resolution adopted by the Board of Directors, when they shall elect by a
plurality vote a Board of Directors, and transact such other business as may
properly be brought before the meeting.
Section 3. A majority of the stock issued and outstanding and entitled
to vote at any meeting of stockholders, the holders of which are present in
person or represented by proxy, shall constitute a quorum for the transaction
of business except as otherwise provided by law, by the Certificate of
Incorporation, or by these By-Laws. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, a majority of the
voting stock represented in person or by proxy may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be
AS AMENDED 8/14/96
<PAGE> 3
present or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote thereat.
Section 4. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes, or
the Certificate of Incorporation, or these By-Laws, a different vote is
required in which case such express provision shall govern and control the
decision of such question.
Section 5. At each meeting of the stockholders, each stockholder having
the right to vote may vote in person or may authorize another person or
persons to act for him by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three (3)
years prior to said meeting, unless said instrument provides for a longer
period. All proxies must be filed with the Secretary of the Corporation at
the beginning of each meeting in order to be counted in any
AS AMENDED 8/14/96
<PAGE> 4
vote at the meeting. A proxy shall be deemed signed if the stockholder's name
is placed on the proxy (whether by manual signature, typewriting, facsimile,
telegraphic transmission or otherwise) by the stockholder or the stockholder's
attorney in fact. Each stockholder shall have one vote for each share of stock
having voting power, registered in his name on the books of the Corporation on
the record date set by the Board of Directors as provided in Article V, Section
6 hereof. All elections shall be had and all questions decided by a plurality
vote.
Section 6. Special meetings of the stockholders, for any purpose, or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called at any time by the Board of Directors, or by a
majority of the members of the Board of Directors, or by a committee of the
Board of Directors which has been duly designated by the Board of Directors
and whose power and authority, as provided in a resolution of the Board of
Directors or in the By-Laws, includes the power to call such meetings.
Special meetings of stockholders of the Corporation may not be called by any
other person or persons. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
AS AMENDED 8/14/96
<PAGE> 5
Section 7. Notice of any meeting of stockholders shall be given either
personally or by mail or telegraphic or other written communication, charges
and postage prepaid, addressed to the stockholder at the address of such
stockholder appearing on the books of the Corporation or given by the
stockholder to the Corporation for the purpose of notice. Notice shall be
deemed to have been given at the time when delivered personally or deposited
in the mail or sent by telegram or other means of written communication.
If any notice addressed to a stockholder at the address of such
stockholder appearing on the books of the Corporation is returned to the
Corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the
stockholder at such address, all future notices shall be deemed to have been
duly given without further mailing if the same shall be available to the
stockholder upon written demand of the stockholder at the principal executive
office of the Corporation for a period of one (1) year from the date of the
giving of such notice.
Section 8. Attendance of a person at a meeting shall constitute a
waiver of notice to such person of such meeting, except when the person
objects at the beginning of the meeting to the transaction of any business
AS AMENDED 8/14/96
<PAGE> 6
because the meeting is not lawfully called or convened, or objects to the
consideration of matters not included in the notice of the meeting.
Section 9. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 10. Action may be taken by stockholders either at an annual or
special meeting of stockholders, or stockholders may act by written consent.
AS AMENDED 8/14/96
<PAGE> 7
Section 11. Before any meeting of stockholders, the Board of Directors
may appoint any persons other than nominees for office to act as inspectors of
election at the meeting or its adjournment. If no inspectors of election are
so appointed, the chairman of the meeting may appoint inspectors of election
at the meeting. The number of inspectors shall be either one (1) or two (2).
If any person appointed as inspector fails to appear or fails or refuses to
act, the chairman of the meeting may appoint a person to fill such vacancy.
The duties of these inspectors shall be as follows:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity and effect of proxies;
(b) Receive votes or ballots;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes;
(e) Determine the result; and
(f) Do any other acts that may be proper to conduct the election
or vote with fairness to all stockholders.
AS AMENDED 8/14/96
<PAGE> 8
Section 12. At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be
(a) specified in the notice of meeting (or any supplement thereto) given by
or at the direction of the Board of Directors, (b) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or
(c) otherwise properly brought before the meeting by a stockholder.
For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice
must be received at the principal executive offices of the Corporation not
less than 60 days nor more than 90 days prior to the meeting; provided,
--------
however, if less than 70 days' notice or prior public disclosure of the
- -------
meeting date is given or made to stockholders, notice by the stockholder shall
be timely if it is so received not later than the close of business on the
10th day following the day on which such notice of the annual meeting date was
mailed or such public disclosure was made.
A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a
brief description of the business desired to be brought before the annual
AS AMENDED 8/14/96
<PAGE> 9
meeting and the reasons for conducting such business at the annual meeting,
(b) the name and address, as they appear on the Corporation's books, of the
stockholder proposing such business, (c) the class and number of shares of
the Corporation which are owned beneficially by the stockholder, and (d) any
material interest of the stockholder in such business.
No later than the 10th day following the date of receipt of a
stockholder notice submitted pursuant to this Section 12, the Chairman of the
Board of Directors of the Corporation shall, if the facts warrant, determine
and notify the stockholder submitting such notice in writing that such notice
was not made in accordance with the time limits and/or other procedures
prescribed by the By-Laws. If no such notification is mailed to the
stockholder within this ten-day period, the stockholder notice shall be deemed
to have been made in accordance with the provisions of this Section 12.
No business shall be conducted at an annual meeting except in accordance
with the procedures set forth in this Section 12. The Chairman of the annual
meeting shall, if the facts warrant, determine and declare to the meeting that
a matter of business was not brought before the meeting in accordance with the
provisions of this Section 12, and any such business shall not be transacted.
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<PAGE> 10
Section 13. In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors, and which date shall not be more than ten
(10) days after the date upon which the resolution fixing the record date is
adopted by the Board of Directors. Any stockholder of record seeking to have
the stockholders authorize or take corporate action by written consent shall,
by written notice to the Secretary, request the Board of Directors to fix a
record date. The Board of Directors shall promptly, but in all events within
ten (10) days after the date on which such a request is received, adopt a
resolution fixing the record date. If no record date has been fixed by the
Board of Directors within ten (10) days of the date on which such a request is
received, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the
Board of Directors is required by applicable law, shall be the first date on
which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the Corporation by delivery to its registered office
in the State of Delaware, its principal place of business, or any officer or
agent
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<PAGE> 11
of the Corporation having custody of the book in which proceedings of
stockholders meetings are recorded, to the attention of the Secretary of the
Corporation. Delivery shall be by hand or by certified or registered mail,
return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by applicable
law, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be the close of business
on the date on which the Board of Directors adopts the resolution taking such
prior action.
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<PAGE> 12
ARTICLE III
DIRECTORS
---------
Section 1. The business and property of this Corporation shall be
managed and controlled by its Board of Directors, ten (10) in number. Unless
the Board of Directors shall otherwise determine, no Director shall stand for
re-election after he has attained the age of seventy-two (72) years.
Directors need not be stockholders.
Section 2. The Board of Directors, by majority vote of its members, may
at any time and from time to time, appoint one or more Advisory Directors who
shall advise and counsel the Board of Directors. Advisory Directors may
attend meetings of said Board but without the right to vote on any matter that
may come before the Board for consideration. Advisory Directors shall hold
office at the pleasure of the Board of Directors; provided, however, that the
term of office of any Advisory Director shall expire in any event at the
Annual Stockholders' Meeting next following his appointment as an Advisory
Director. No Advisory Director shall be appointed or reappointed after he has
attained the age of seventy-five (75) years.
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Section 3. The Directors shall be elected at the Annual Meeting of the
Stockholders, except as provided in Section 4 of this Article, and each
Director elected shall hold office until his successor is elected and
qualified.
Section 4. Vacancies on the Board of Directors by reason of death,
resignation, retirement, disqualification, removal from office, or otherwise,
and newly created directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors then in
office, although less than a quorum, or by a sole remaining director. The
directors so chosen shall hold office until the next annual election of
directors and until their successors are duly elected and shall qualify,
unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute.
Section 5. The property and business of the Corporation shall be
managed by or under the direction of its Board of Directors. In addition to
the powers and authorities by these By-Laws expressly conferred upon them, the
Board may exercise all such powers of the Corporation and do all such lawful
acts and things as are not by statute or by the Certificate of
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<PAGE> 14
Incorporation or by these By-Laws directed or required to be exercised or done
by the stockholders.
Section 6. Only persons who are nominated in accordance with the
procedures set forth in this Section 6 shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors may
be made at a meeting of stockholders by, or at the direction of, the Board of
Directors, or by any stockholder of the Corporation entitled to vote for the
election of directors at the meeting who complies with the notice procedures
set forth in this Section 6. Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely
notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be received at the principal executive offices of
the Corporation not less than 60 days nor more than 90 days prior to the
meeting; provided, however, if less than 70 days' notice or prior public
-------- -------
disclosure of the meeting date is given or made to stockholders, notice by the
stockholder shall be timely if it is so received not later than the close of
business on the 10th day following the day on which such notice of the meeting
date was mailed or such public disclosure was made.
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<PAGE> 15
A stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a director
(i) the name, age, business address and residence address of such person,
(ii) the principal occupation or employment of such person, (iii) the class
and number of shares of the Corporation which are beneficially owned by such
person, and (iv) any other information relating to such person that is
required to be disclosed in solicitations of proxies for election of
directors, or otherwise is required by Regulation 14A under the Securities
Exchange Act of 1934, as amended (including without limitation such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); and (b) as to the stockholder giving the
notice (i) the name and address, as they appear on the Corporation's books,
of such stockholder, and (ii) the class and number of shares of the
Corporation which are owned beneficially by such stockholder. At the request
of the Board of Directors, any person nominated by the Board of Directors for
election as a director shall furnish to the Secretary of the Corporation that
information which pertains to the nominee and is required to be set forth in a
stockholder's notice of nomination.
No later than the 10th day following receipt of a stockholder nomination
submitted pursuant to this Section 6, the Chairman of the
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<PAGE> 16
Board of Directors of the Corporation shall, if the facts warrant, determine
and notify the stockholder making such nomination in writing that such
nomination was not made in accordance with the time limits and/or other
procedures prescribed by the By-Laws. If no such notification is mailed to
such stockholder within such ten-day period, such nomination shall be deemed to
have been made in accordance with the provisions of this Section 6.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in
this Section 6. The Chairman of the annual meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made
in accordance with the procedures prescribed by the By-Laws and, if he should
so determine, he shall declare to the meeting that the defective nomination
shall be disregarded.
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<PAGE> 17
MEETINGS OF THE BOARD OF DIRECTORS
----------------------------------
Section 7. The directors may hold their meetings and have one or more
offices, and keep the books of the Corporation outside of the State of
Delaware.
Section 8. Regular meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time be determined
by the Board.
Section 9. Special meetings of the Board of Directors may be called by
the Chairman of the Board, the President, any Vice President or the Secretary
on forty-eight (48) hours' notice to each director, either personally or by
mail, telephone, telegram or facsimile. Special meetings shall be called by
the Chairman of the Board, the President or the Secretary in like manner and
on like notice on the written request of three directors unless the Board
consists of only one director, in which case special meetings shall be called
by the Chairman of the Board, the President or Secretary in like manner or on
like notice on the written request of the sole director.
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<PAGE> 18
Section 10. At all meetings of the Board of Directors a majority of the
authorized number of directors shall be necessary and sufficient to constitute
a quorum for the transaction of business, and the vote of a majority of the
directors present at any meeting at which there is a quorum, shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
statute, by the Certificate of Incorporation or by these By-Laws. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present. If
only one director is authorized, such sole director shall constitute a quorum.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action is
approved by at least a majority of the required quorum for such meeting.
Section 11. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting, if all members of the Board or committee, as the case
may be, consent thereto in writing, and the
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<PAGE> 19
writing or writings are filed with the minutes of proceedings of the Board or
committee.
Section 12. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting
of the Board of Directors, or any committee, by means of conference telephone
or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at such meeting.
COMMITTEES OF DIRECTORS
-----------------------
Section 13. The Board of Directors may at any time and from time to
time, create from its membership such committees as the Board may desire. Any
such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise such powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation,
as the Board of Directors at any time and from time to time may delegate.
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<PAGE> 20
Section 14. There shall be a permanent committee of the Board of
Directors, which shall be known as the "Executive Committee".
Section 15. The Executive Committee shall consist of not more than seven
(7) members of the Board of Directors of Petrolite Corporation. The Executive
Committee may, at any time, and from time to time, by the affirmative vote of
a majority of its members, invite any other member of the Board of Directors
to meet with the Committee when the advice and counsel of such other Board
member is required or deemed desirable. The Chairman of the Executive
Committee shall be designated by the Board of Directors. The Secretary of the
Corporation shall be the Secretary of the Executive Committee ex-officio.
Section 16. The members of the Executive Committee shall be elected by
the Board of Directors at the first meeting of the Board of Directors
following the regular Annual Meeting of Stockholders, and shall serve for a
period of one (1) year from the date of such election, and until their
respective successors are elected and shall qualify; provided, that any member
of the Executive Committee shall be subject to removal at any time by a
majority vote of the whole Board of Directors.
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<PAGE> 21
Section 17. The Board of Directors may fill vacancies in the Executive
Committee by election at any regular or special meeting.
Section 18. During the interval between the meetings of the Board of
Directors the Executive Committee shall possess and may exercise all the
powers of the Board of Directors in such management, direction and affairs of
the business of the Corporation. The Committee shall not have power or
authority in reference to amending the certificate of incorporation, adopting
an agreement of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, amending the By-Laws, filling
newly created directorships and vacancies on the Board or the Committee, or
(unless expressly authorized by resolution of the Board) declaring a dividend
or authorizing the issuance of stock.
Section 19. Meetings of the Executive Committee may be held as often as
may be necessary on call of the Chairman or of any two members of the
Committee. Two days' previous notice of any special meeting shall be given to
all members, unless waived in writing by all members of the
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<PAGE> 22
Committee. Notice may be given by telephone, telegram, facsimile or by mail.
Section 20. Four (4) members of the Executive Committee shall constitute
a quorum for the transaction of business, if the Committee consists of seven
(7) members. If the Executive Committee consists of six (6) members or less,
then three (3) members of the Committee shall constitute a quorum. Each
member of the Executive Committee shall be entitled to one vote on all matters
that may come before the Committee.
Section 21. All proceedings of the Executive Committee shall be promptly
recorded by the Secretary, and a full report thereof made to each member of
the Board of Directors. All proceedings of the Executive Committee shall be
subject to review, revision and alteration by the Board of Directors;
provided, however, that no rights or acts of third parties shall be affected
by any such review, revision or alteration.
Section 22. The Executive Committee may fix its own rules of procedure.
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Section 23. The Chairman of the Executive Committee shall preside at all
meetings of the Committee, but in his absence any member selected by the
Committee shall preside as Temporary Chairman.
Section 24. The Secretary of the Corporation shall keep the records and
minutes of the Executive Committee, and shall in general perform all the
duties usually incident to the office of the Secretary of any Executive
Committee.
COMPENSATION OF DIRECTORS
-------------------------
Section 25. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, the Board of Directors shall have the
authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of
Directors or any committee thereof and may be paid a fixed sum for attendance
at each meeting of the Board of Directors or any Committee thereof, and a
stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
INDEMNIFICATION
---------------
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<PAGE> 24
Section 26. (a) The Corporation shall indemnify any person who was or
is a party or is 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 Corporation)
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
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 Corporation, 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 the person 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 Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
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<PAGE> 25
(b) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise 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 Corporation and except that no such
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation 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, such person is fairly and reasonably entitled to indemnity for such
expenses which such Court of Chancery or such other court shall deem proper.
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<PAGE> 26
(c) To the extent that a director, officer, employee or agent of the
Corporation shall be successful on the merits or otherwise in defense, of any
action, suit or proceeding referred to in paragraphs (a) and (b), or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered
by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in paragraphs (a) and (b). Such
determination shall be made (1) 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 (2) 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 (3) by the stockholders.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation 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 (d) upon receipt of an
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<PAGE> 27
undertaking by or on behalf of the director, officer, employee or agent to
repay such amount unless it shall ultimately be determined that he is entitled
to be indemnified by the Corporation as authorized in this Section 26.
(f) The indemnification provided by this Section 26 shall not be
deemed exclusive of any other rights to which those indemnified may be
entitled under any statute, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to
a person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
(g) The Board of Directors may authorize, by a vote of a majority of a
quorum of the Board of Directors, the Corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the
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<PAGE> 28
Corporation would have the power to indemnify him against such liability under
the provisions of this Section 26.
(h) For the purposes of this Section 26, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Section with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence
had continued.
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<PAGE> 29
ARTICLE IV
OFFICERS
--------
Section 1. The officers of the Corporation shall be a Chairman of the
Board, a President, one or more Vice President(s) (any one or more of whom may
be designated as Executive, Senior or Group Vice President), a Secretary, a
Treasurer and a Controller, all of whom shall be appointed by the Board of
Directors. The same person may hold more than one office. The Board of
Directors may also designate a chief executive officer and a chief operating
officer of the Corporation.
Section 2. The officers of the Corporation, except such officers as may
be appointed in accordance with the provisions of Section 3 or Section 5 of
this Article, shall be chosen by the Board of Directors, and each shall serve
at the pleasure of the Board, subject to the rights, if any, of any officer
under any contract of employment.
Section 3. The Board of Directors may appoint, and may empower the
Chairman of the Board to appoint, such other officers as the business of the
Corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in the By-Laws or as
the Board of Directors may from time to time determine.
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<PAGE> 30
Section 4. Any officer may be removed, either with or without cause, by
the Board of Directors, at any regular or special meeting thereof, or, except
in case of an officer chosen by the Board of Directors, by any officer upon
whom such power of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Corporation. Any such resignation shall take effect on receipt or at any
later time specified therein. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Any such resignation is without prejudice to the rights, if any, of the
Corporation under any contract to which the officer is a party.
Section 5. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
prescribed in these By-Laws for regular appointments to such office.
Section 6. The Chairman of the Board shall, if present, preside at all
meetings of the Board of Directors and of the stockholders, and shall, subject
to the control of the Board of Directors, have general supervision, direction
and control of the business and affairs of the Corporation and
AS AMENDED 8/14/96
<PAGE> 31
shall exercise and perform such other powers and duties as may be from time to
time assigned to him by the Board of Directors or prescribed by the By-Laws.
Section 7. The President shall exercise and perform such powers and
duties as may be from time to time assigned to him by the Board of Directors
or the Chairman of the Board.
Section 8. In the absence or disability of the Chairman of the Board,
the President shall perform all of the duties of the Chairman of the Board,
and when so acting, shall have all of the powers of, and be subject to all of
the restrictions upon, the Chairman of the Board. In the absence or
disability both of the Chairman of the Board and of the President, and until
the Board of Directors designates otherwise, the Vice Presidents, if any,
shall perform all of the duties of the President, and when so acting shall
have all of the powers of, and be subject to all of the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by
the Board of Directors, the Chairman of the Board, the President or the
By-Laws.
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<PAGE> 32
Section 9. The Secretary shall keep or cause to be kept, at the
principal office or such other place as the Board of Directors may order, a
book of minutes of all meetings and actions of directors, committees of
directors and stockholders, with the time and place of holding, whether
regular or special, and, if special, how authorized, the notice thereof given,
the names of those present at directors and committee meetings, the number of
shares present or represented at stockholders meetings, and the proceedings
thereof.
The Secretary shall keep, or cause to be kept, at the principal office
or at the office of the Corporation's transfer agent or registrar, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellations.
The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required by the By-Laws or
by law to be given, and he shall keep the seal of the Corporation, if one be
adopted, in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or by the By-Laws.
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<PAGE> 33
Section 10. The Treasurer and the Controller shall each have such powers
and perform such duties as from time to time may be prescribed for him by the
Board of Directors, the Chairman of the Board, the President or by the
By-Laws.
ARTICLE V
CERTIFICATES OF STOCK
---------------------
Section 1. Every holder of stock of the Corporation shall be entitled
to have a certificate signed by, or in the name of the Corporation by, the
Chairman or Vice Chairman of the Board of Directors, or the President or a
Vice President, and by the Secretary or an Assistant Secretary, or the
Treasurer or an Assistant Treasurer of the Corporation, certifying the number
of shares represented by the certificate owned by such stockholder in the
Corporation.
Section 2. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with the same
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<PAGE> 34
effect as if he were such officer, transfer agent, or registrar at the date of
issue.
LOST, STOLEN OR DESTROYED CERTIFICATES
--------------------------------------
Section 3. The Board of Directors, the Secretary and the Treasurer each
may direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may require the owner of such lost, stolen or destroyed
certificate or certificates or his legal representative to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
------------------
Section 4. Upon surrender to the Corporation or the transfer agent of
the Corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to
AS AMENDED 8/14/96
<PAGE> 35
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
FIXING RECORD DATE
------------------
Section 5. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of the stockholders, or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the Board of Directors may fix a record date which
shall not be more than sixty (60) nor less than ten (10) days before the date
of such meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
REGISTERED STOCKHOLDERS
-----------------------
Section 6. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and
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<PAGE> 36
accordingly shall not be bound to recognize any equitable or other claim or
interest in such share on the part of any other person, whether or not it
shall have express or other notice thereof, save as expressly provided by the
laws of the State of Delaware.
ARTICLE VI
GENERAL PROVISIONS
------------------
DIVIDENDS
---------
Section 1. Dividends upon the capital stock of the Corporation, subject
to the provisions of the Certificate of Incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting pursuant to law.
Dividends may be paid in cash, in property, or in shares of capital stock,
subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the
AS AMENDED 8/14/96
<PAGE> 37
interests of the Corporation, and the directors may abolish any such reserve.
AS AMENDED 8/14/96
<PAGE> 38
CHECKS
------
Section 3. All checks, drafts or other orders for payment of money,
notes or other evidences of indebtedness, issued in the name of or payable to
the Corporation shall be signed by such officer or officers as the Board of
Directors, the Chairman of the Board, the President or any Vice President may
from time to time designate.
Section 4. To the extent authorized by the Board of Directors or
otherwise provided in these By-Laws:
(a) The President, any Vice President, the Secretary or the
Treasurer may enter into contracts and execute instruments on behalf of
the Corporation;
(b) The Board of Directors, the Chairman of the Board, the
President or any Vice President may authorize any officer or officers,
and any employee or employees or agent or agents of the Corporation or
any of its subsidiaries, to enter into any contract or execute any
instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
FISCAL YEAR
-----------
AS AMENDED 8/14/96
<PAGE> 39
Section 5. The fiscal year of the Corporation shall be November 1
through October 31, unless otherwise fixed by resolution of the Board of
Directors.
AS AMENDED 8/14/96
<PAGE> 40
SEAL
----
Section 6. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Seal, Delaware".
Said seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
NOTICES
-------
Section 7. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be
given to any director or stockholder, it shall not be construed to require
personal notice, but such notice may be given in writing, by mail, addressed
to such director or stockholder, at his address as it appears on the records
of the Corporation, with postage thereon prepaid, and such notice shall be
deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given by telegram or facsimile.
Section 8. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or
AS AMENDED 8/14/96
<PAGE> 41
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
AS AMENDED 8/14/96
<PAGE> 42
ANNUAL STATEMENT
----------------
Section 9. The Board of Directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
Corporation.
DELEGATION OF AUTHORITY
-----------------------
Section 10. Pursuant to Section 141 of the General Corporation Law of
the State of Delaware, the Board of Directors hereby delegates, subject to
such limitations as the Chairman of the Board or the President may impose, to
the officers of the Corporation the management of the day-to-day business and
affairs of the Corporation, including authority, provided the transaction is
in the ordinary course of the Corporation's business:
(1) To sell or otherwise dispose of real or personal property
for such consideration as deemed proper;
(2) To purchase or otherwise acquire real or personal property
for such consideration as deemed proper;
(3) To enter into leases of real and personal property as lessor
or lessee, subject to the limitation below regarding financing
arrangements, and to enter into contracts, obligations and other
agreements;
AS AMENDED 8/14/96
<PAGE> 43
(4) To enter into any instrument in the name and on behalf of
the Corporation;
(5) To open, maintain, and close checking, savings and other
banking accounts, brokerage and other investment accounts, and to deposit,
transfer, invest and withdraw funds to, in and from said accounts, which
accounts shall be maintained in the name and on behalf of the Corporation;
and
(6) To do all other such acts and things as are necessary to
effectuate the foregoing and to exercise all powers which are necessary or
useful to carry on the business of the Corporation.
The officers shall not, without approval of the Board of Directors of
this Corporation:
(a) Incur indebtedness for borrowed money or otherwise enter
into financing arrangements;
(b) Dispose of any of the Corporation's divisions, subsidiaries
or principal product lines, or in any one transaction assets having a
value in excess of two percent (2%) of the disposing Corporation's total
assets;
(c) Acquire any corporation, partnership or other entity if the
fair value of the consideration paid is in excess of two percent (2%) of
the acquiring corporation's total assets; or
AS AMENDED 8/14/96
<PAGE> 44
(d) Take any action which would cause this Corporation to be in
default of its debt obligations.
ARTICLE VII
AMENDMENTS
----------
Section 1. These By-Laws may be altered, amended or rescinded or new
By-Laws may be adopted by the Board of Directors.
Section 2. These By-Laws may not be altered, amended or rescinded and
new By-Laws may not be adopted by the stockholders of the Corporation except
by the vote of the holders of not less than seventy-five percent (75%) of the
total shares of stock of the Corporation entitled to vote in the election of
directors.
- ----------
AS AMENDED 8/14/96
<PAGE> 1
Exhibit 10.3
1996 Restated Executive Agreement
RESTATED EXECUTIVE AGREEMENT
----------------------------
THIS RESTATED EXECUTIVE AGREEMENT (the "Agreement") is made
and entered into this ---- day of ------------, 1996, by and
between Petrolite Corporation (the "Company") and 1, residing
at 2, (the "Executive").
WHEREAS, the Executive and the Company have entered into an
Executive Agreement dated 3 (the "Executive Agreement"); and
WHEREAS, the Executive and Company desire to amend the
Executive Agreement to clarify certain of its provisions and to
make additional technical and conforming changes, without
materially changing the respective benefits and obligations of
the parties thereunder; and
WHEREAS, the Executive and the Company desire to restate the
Executive Agreement in its entirety by entering into this
Agreement, which Restated Executive Agreement will replace and
supersede the Executive Agreement as provided herein; and
WHEREAS, the Board of Directors of the Company has approved
and authorized the execution of this Agreement:
In consideration of the mutual covenants and agreements
herein, the parties agree as follows:
1. Employment. The Company employs Executive on the terms
----------
hereinafter set forth and Executive accepts such employment.
Executive shall devote his full time and attention, and best
efforts, to the performance of his duties as assigned from time
to time by the Company.
2. Compensation and Related Arrangements. For all
-------------------------------------
services rendered by Executive, the Company shall pay Executive
an annual base salary of not less than the Executive's annual
base salary on the date of this Agreement, payable pursuant to
the Company's normal payroll practices. Executive may
participate in such employee benefit plans as the Company
maintains for its employees generally, according to their
<PAGE> 2
respective terms, and Executive may be designated to participate
in the Company's incentive compensation and stock incentive
plans.
3. Termination of Employment. This Agreement does not
-------------------------
create or provide for any period of employment and Executive's
employment may be terminated at will by Executive or the Company.
A. Termination by the Company "For Cause". If the
--------------------------------------
Company terminates the employment of Executive "For Cause",
all further obligations of the Company under this Agreement
shall end automatically. The term "For Cause" means acts of
theft, unethical conduct or dishonesty affecting the assets,
properties or business of the Company, willful misconduct,
material dereliction of duty, or violation of any of the
covenants set forth in Section 4 below.
B. Termination by the Company other than "For Cause".
-------------------------------------------------
If the Company terminates the employment of Executive other
than "For Cause", (i) the Company shall continue to pay
Executive his base salary then in effect for one year
following the termination of Executive's employment; and,
(ii) if Executive elects and qualifies for COBRA
continuation of medical coverage under the Petrolite
Corporation Comprehensive Medical Plan, the premium payable
by Executive during the first twelve (12) months of COBRA
continuation of medical coverage will be the premium then
payable by active employees of the Company for the same
coverage, as the same may be adjusted from time to time.
Provided, however, as a condition precedent to the Company's
obligations under this Section 3B, Executive shall execute
and deliver a general release to be provided by the Company
substantially in the form attached hereto as Exhibit A.
C. Termination by Executive. If Executive terminates
------------------------
his employment with the Company voluntarily for any reason,
if Executive dies, or if Executive becomes disabled from
performing Executive's duties for the Company, except as
provided otherwise in Section 6 hereof the Company shall
have no further obligations to Executive under this
Agreement.
4. Special Covenants by Executive.
------------------------------
-2-
<PAGE> 3
A. Covenant Not to Compete. Executive acknowledges
-----------------------
that the Company (including its subsidiaries and affiliates)
has developed a valuable and extensive worldwide trade in
its products and that its Confidential Information and
customers, which have been established and maintained at
substantial expense, are of great value to the Company. The
Company will permit Executive to utilize, during his
employment and in pursuit of the Company's business, the
Company's Confidential Information and will provide training
about its business and operations, including the Company's
products, customers and customer requirements. Executive
covenants to the 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 entire
"Period of this Covenant Not to Compete" 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 the Company or
any of its affiliates, or which may be developed,
manufactured, marketed or distributed by the Company or
any of its affiliates at any time during Executive's
employment with the Company or any of its affiliates;
or
ii. In any way solicit, divert, take
away or interfere with any of the business, customers,
trade or patronage of the Company or its subsidiaries
or affiliates; or
iii. Seek to employ or otherwise retain any
person who was an employee of the Company or any of its
affiliates during
-3-
<PAGE> 4
the twelve (12) months immediately preceding Executive's
termination.
The "Period of this Covenant" shall commence on the
date of this Agreement and shall terminate automatically
eighteen (18) months from and after the date that Executive
shall no longer be employed by the Company.
The "Trade Area" shall be deemed to encompass those
specific geographical areas of the world where the
Executive, or any individual who reported to the Executive,
was involved in, had access to Confidential Information
about, or had a material influence with respect to, the
business or operations of the Company (or any of its
subsidiaries or affiliates) at any time during the twelve
(12) months immediately preceding termination of Executive's
employment.
Executive acknowledges and agrees that the "Period of
this Covenant Not to Compete" is the minimum period of time,
and that the "Trade Area" is the minimum area necessary, to
protect the Company reasonably and adequately in its
business operations.
B. Covenant of Confidentiality. Executive covenants
---------------------------
and agrees that he will not, at any time either during or
after Executive's employment with the Company, 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 the Company
under this Agreement. 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, business strategies and plans,
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 the
fault of Executive. Executive shall deliver promptly to
-4-
<PAGE> 5
the Company at the termination of his employment, or at any
other time that the Company may request, all memoranda,
diaries, electronic data storage medium, notebooks, computer
software, sales or service manuals and data, and all other
documents relating to any Confidential Information.
C. Intellectual Property. Executive shall
---------------------
communicate promptly to the Company all inventions,
discoveries, works of authorship, and improvements, whether
patentable or copyrightable or not (the "Intellectual
Property"), which Executive makes, conceives or develops,
either alone or in collaboration with others, while in the
employment of the Company which (i) result from or are
suggested by any work which Executive may perform for or on
behalf of the Company, or (ii) which relate to the
Company's business or interests. All such Intellectual
Property (including any patents and copyright registrations
which may be issued based on such Intellectual Property)
shall be the sole and exclusive property of the Company.
Executive hereby assigns to the Company all of Executive's
entire right, title and interest in all such Intellectual
Property, patents and patent applications, and agrees to
execute all documents reasonably requested by the Company
with respect thereto. If Executive, or anyone on his
behalf, files a patent application for any such Invention
within six (6) months after termination of Executive's
employment with the Company, Executive agrees that such
Intellectual Property shall be presumed to have been
conceived during the period of Executive's employment with
the Company.
D. Confidential Information of Others. Executive
----------------------------------
will not disclose to the Company, or use for its benefit,
any proprietary information of others, including any of
Executive's former employers.
E. Breach of Covenants. Executive has had the
-------------------
opportunity to consult with Executive's legal adviser
concerning this Agreement, understands the nature, term and
effects of the Executive's covenants herein, and
acknowledges and agrees that such covenants are reasonable
and necessary for the protection of the Company. Executive
further acknowledges and agrees that monetary damages could
not compensate the Company adequately in the event of
-5-
<PAGE> 6
Executive's violation of any of the covenants herein and
that injunctive relief would be essential for the protection
of the Company. Executive therefore agrees that the Company
may have such injunctive relief (upon due notice and hearing
but without any requirement for a bond) as may be necessary
to provide full and ongoing protection to the Company, in
addition to any other relief as may appertain at equity or
law. Suit may be filed in an appropriate Federal or State
Court in the State of Missouri, and Executive hereby
consents to the jurisdiction of such court and agrees that
service of process upon Executive by certified or registered
mail 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 was initiated.
F. Reformation. If any of the covenants set forth in
-----------
this Section 4 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, period of time, or activity, but may
be made enforceable by adjusting the area, period of time,
or activity applicable to such covenant, Executive and the
Company stipulate and agree that such covenant shall be
deemed automatically to be adjusted for purposes of such
suit 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.
G. Survival. The provisions of this Section 4 shall
--------
survive any termination of the Executive's employment with
the Company.
5. Withholding. The Company may, to the extent required
-----------
by law, withhold applicable federal, state and local income and
other taxes from any payments made to Executive hereunder.
6. Change of Control Benefits. If Executive terminates
--------------------------
his employment with the Company within the one year immediately
following a Change of Control, or if the Company terminates the
employment of Executive other than "For Cause" within the six
months immediately preceding and the two years immediately
following a Change of Control (the effective date of either such
termination hereafter referred to as the "Termination Date"),
Executive shall be entitled to the benefits provided in
-6-
<PAGE> 7
this Section 6 in lieu of those provided in Section 3 of this
Agreement; provided, however, as a condition precedent to the
Company's obligation to provide the benefits in this Section 6,
Executive shall execute and deliver a general release
substantially in the form attached hereto as Exhibit A.
A. Severance Benefits. The Company shall pay
------------------
Executive a lump sum amount, in cash, equal to the sum of:
(i) two times the Executive's Annual Base Salary and
(ii) the Incentive Payment, as hereafter defined.
B. Continued Welfare Benefits. Until the earlier of
--------------------------
eighteen (18) months following the Termination Date or the
date on which Executive becomes employed by a new employer,
the Company (or its successor) shall at its expense (less
applicable premium or other payments required from time to
time of active employees, and subject to any deductibles
contained in the applicable plan) provide Executive with
medical, dental, life insurance, disability and accidental
death and dismemberment benefits at the highest level for
which Executive and his or her dependents were enrolled on
the Termination Date. If the Company cannot provide any of
such benefits to Executive on a nontaxable basis through an
employee benefit plan by reason of any law, government
regulation, or third-party contractual provision, or if it
would be discriminatory under Internal Revenue Code Section
105(h) for the Company to provide any of such benefits
through an employee benefit plan, then the Company otherwise
shall procure or purchase, at its expense, a similar benefit
or benefits for Executive and his applicable dependents and
beneficiaries and, if such coverage or benefit received by
Executive is subject to federal, state or local income
taxes, the Company shall pay Executive an amount sufficient
to reimburse him for tax liability he reasonably incurs
because of (i) such coverage or benefits and (ii) such
reimbursement payment, calculated substantially in
accordance with Exhibit B. If Executive becomes employed by
an employer that maintains a major medical plan (or its
equivalent) that either:
i. does not cover Executive with
respect to a pre-existing condition which was covered
under the Petrolite medical plan, or
-7-
<PAGE> 8
ii. does not cover Executive for a
designated waiting period,
Executive's medical plan benefit under this Agreement shall
continue (but shall be limited in the event of non-coverage
due to a pre-existing condition to the pre-existing
condition itself) until the earlier of the end of the
applicable period of non-coverage under the new employer's
plan or the end of the eighteenth month following the
Termination Date.
Notwithstanding the foregoing, the Company and the Executive
may agree on a cash payment in lieu of all or some portion
of the benefits provided under this Section.
C. Effect on Stock Option Agreements.
---------------------------------
Notwithstanding the terms of any stock option agreement
between the Company and Executive to the contrary, to the
extent that any stock option held by Executive is to be
counted in determining whether all or any portion of the
Payment (as hereafter defined) is subject to Excise Taxes
(as hereafter defined), or is not considered to be
reasonable compensation for personal services, the option
shall be subject to the adjustment provided in Section 6D of
this Agreement.
D. Best Payment Provision.
----------------------
i. In the event that the grant,
exercise or vesting of any stock options in connection
with a Change of Control, together with the value of
all other payments and benefits received or to be
received by the Executive upon a Change of Control
(collectively the "Payment"), would result in all or a
portion of the Payment being subject to excise tax
under Section 4999 of the Internal Revenue Code (the
"Code"), then the Payment to the Executive, including
the value of stock options, shall be either (A) the
full amount of the Payment, or (B) such lesser amount
which would result in no portion of the Payment being
subject to excise tax under Section 4999 of the
Internal Revenue Code, whichever of the foregoing
amounts, taking into account the applicable federal,
state, and local employment taxes, income taxes, and
the excise tax imposed by Section 4999 of the Code,
results in the receipt by the
-8-
<PAGE> 9
Executive, on an after-tax basis, of the greatest
amount of the Payment notwithstanding that all or some
portion of the Payment may be taxable under Section 4999
of the Code. All determinations required to be made
under this Section shall be made by Price Waterhouse or
any other nationally recognized accounting firm which is
the Company's outside auditor at the time of such
determination, which other firm must be reasonably
acceptable to Executive (the "Accounting Firm"). The
Company shall cause the Accounting Firm to provide
detailed supporting calculations of its determinations
to the Company and Executive. The Company shall give
notice to the Accounting Firm within 15 business days
after an event entitling Executive to a payment under
this Agreement. All fees and expenses of the
Accounting Firm shall be borne solely by the Company.
The Accounting Firm also shall provide the Company and
Executive with written advice to the effect that there
is substantial authority for the treatment of the
Payment on their respective federal income tax returns
in a manner that is consistent with the Accounting
Firm's determinations under this Section. The
Accounting Firm shall consult with the Executive in
making the determinations required under this Section
and, to the extent practicable, shall comply with any
stated preference of the Executive with respect to the
allocation of any reduction in the Payment.
ii. If, after the Executive has
received the Payment calculated in accordance with
Section 6Di hereof, it is determined, pursuant to final
regulations or published rulings of the Internal
Revenue Service, final judgment of a court of competent
jurisdiction or, if so requested by the Executive,
pursuant to an opinion of a nationally recognized
accounting or tax law firm, that the Accounting Firm's
determination under Section 6Di hereof was incorrect
and that the Executive's excise tax liability under
Code Section 4999 with respect to the Payment exceeds
the amount of such tax (if any) that the Executive
would have incurred had such determination been
correct, the Company shall promptly pay the Executive
an amount equal to the sum of (a) any such additional
excise tax liability, plus (b) any interest, fines,
penalties, expenses and other costs incurred by the
Executive and resulting from the
-9-
<PAGE> 10
Executive having taken a position that the Payment, or a
portion of the Payment, is not subject to Excise Taxes
in accordance with the determination made by the
Accounting Firm, plus (c) the amount necessary to
reimburse the Executive for any federal, state, local or
other income or excise taxes payable by the Executive
with respect to the reimbursement amounts (including the
amount payable under this clause (c)) substantially in
accordance with the formula set forth on Exhibit B,
which is attached hereto and incorporated by reference
herein.
E. Costs of Proceedings. The Company shall pay all
--------------------
costs and expenses, including attorneys' fees and
disbursements, at least monthly, of Executive in connection
with any legal proceeding (including arbitration), whether
or not instituted by the Company or Executive, relating to
the interpretation or enforcement of any provision of
Section 6 of this Agreement, except that if Executive
instituted the proceeding and the judge, arbitrator or other
individual presiding over the proceeding affirmatively finds
that Executive instituted the proceeding in bad faith,
Executive shall pay all costs and expenses, including
attorneys' fees and disbursements, of Executive. The
Company shall pay prejudgment interest on any money judgment
obtained by Executive as a result of such proceeding,
calculated at the prime rate of interest as reported in The
Wall Street Journal for the day judgment is entered.
F. Section 6 Definitions. As used in this Section 6
---------------------
of this Agreement the following terms, when capitalized,
have the meaning indicated:
i. "Annual Base Salary" means
Executive's annual rate of base salary in effect on the
date of the Change of Control or the Termination Date,
whichever is higher.
ii. "Change of Control" means the
first to occur of any of the following dates:
a. The date of:
-10-
<PAGE> 11
(i) The closing of any
transaction, including a
consolidation, merger, sale,
lease, exchange or other
transfer, where the majority of
the directors of the continuing or
surviving corporation are not
Continuing Directors;
(ii) The liquidation or
dissolution of the Company;
b. The date any person (as
defined in Section 13(d) of the Securities
Exchange Act of 1934, hereinafter the "1934 Act"),
other than Wm. S. Barnickel & Company or one or
more trusts established by the Company for the
benefit of employees of the Company or its
subsidiaries, shall become the beneficial owner
(within the meaning of Rule 13d-3 under the 1934
Act) of twenty percent (20%) or more of the
Company's outstanding Capital Stock (unless such
shares have been issued to such person directly by
the Company); except that, those persons who filed
a Statement on Schedule 13D dated February 24,
1994, with Wm. S. Barnickel & Company, including
those persons who were included in subsequent
amendments to such Statement on Schedule 13D
through the date of this Agreement, shall not be
deemed to have beneficial ownership of Petrolite
Capital Stock reported therein solely by virtue of
such 13D filings;
c. The date Wm. S. Barnickel &
Company shall become the beneficial owner (within
the meaning of Rule 13d-3 under the 1934 Act) of
more than forty-eight percent (48%) of the
Company's outstanding Capital Stock; except that,
Wm. S. Barnickel & Company shall not be deemed to
have beneficial ownership of Petrolite Capital
Stock solely by virtue of its having filed a
Statement on Schedule 13D dated February 24, 1994,
as subsequently amended through the date of this
Agreement; or
-11-
<PAGE> 12
d. The date on which individuals
who qualify as Continuing Directors shall have
ceased for any reason to constitute at least a
majority of the Board of Directors of the Company
or a majority of the Board of Directors of a
corporation owning, directly or indirectly, not
less than eighty percent (80%) of the outstanding
shares of the Company.
iii. "Continuing Director" means:
a. any member of the Board of
Directors of the Company at the close of business
on the date of this Agreement;
b. any member of the Board of
Directors of the Company who succeeds any
Continuing Director if such successor was elected
or nominated for election by the affirmative votes
of the greater of: (i) a majority of the
Continuing Directors then in office and (ii) five
Continuing Directors; or
c. any director elected or
nominated for election to fill any vacancy or
newly-created directorship on the Board of
Directors of the Company by the affirmative votes
of the greater of: (i) a majority of the
Continuing Directors then in office and (ii) five
Continuing Directors.
iv. "Incentive Payment" means twice
the cash amount payable to Executive under a cash
incentive plan for the fiscal year during which the
Change of Control occurs, calculated on the assumption
that all performance measurements are achieved and that
Executive is entitled to the maximum payment available
to Executive for the fiscal year. If, for any reason,
a cash amount payable to Executive under a cash
incentive plan has not been established for the year in
which the Change of Control occurs, the Incentive
Payment shall be twice the cash amount paid to
Executive under a cash incentive plan for the last
fiscal year with respect to which a cash payment was
made.
-12-
<PAGE> 13
7. Coordination with Company Benefit Plans. The benefits
---------------------------------------
provided in this Agreement are in lieu of, and not in addition
to, any severance benefits otherwise available to Executive under
any severance benefit plan maintained by the Company. Except as
provided otherwise in this Agreement, this Agreement shall not be
construed to affect any rights Executive may have under any
employee benefit plan of the Company including, but not limited
to, the Employees' Savings Plan, the Non-Qualified Savings Plan,
and the Company's Retirement Plan.
8. Mitigation. Executive shall not be required to
----------
mitigate the amount of any payment provided under this Agreement
by seeking other employment or otherwise, and compensation earned
from such employment or otherwise shall not reduce the amounts
otherwise payable under this Agreement. No amounts payable under
Section 6 of this Agreement shall be subject to reduction or
offset in respect of any claims which the Company (or any other
person or entity) may have against Executive.
9. Indemnification; Director's and Officer's Liability
---------------------------------------------------
Insurance. After any termination of employment Executive shall
- ---------
retain all rights to indemnification under applicable law and
under the Petrolite Certificate of Incorporation or By-Laws, as
they may be amended or restated from time to time. In addition,
the Company shall maintain Director's and Officer's liability
insurance on behalf of Executive, at the level in effect
immediately prior to the date of termination, for the two (2)
year period following the date of termination and throughout the
period of any applicable statute of limitations.
10. Situs. This Agreement has been entered into in the
-----
State of Missouri and is a Missouri contract. Accordingly, its
validity, and its terms and provisions, shall be governed by, and
construed and enforced in accordance with, the laws of the State
of Missouri without application of any principles of conflict of
laws.
11. Scope and Binding Effect of Agreement. This Agreement
-------------------------------------
represents the complete agreement between the parties regarding
the subject matter hereof and shall be binding upon, and inure to
the benefit of, the Company and its successors (including
successors by merger) and assigns, and Executive, his heirs,
executors, administrators and legal representatives. The
Executive Agreement is replaced and superseded by
-13-
<PAGE> 14
this Agreement; provided, however, if any provision of this
Agreement is judicially determined to be unenforceable for any
reason that portion of the Executive Agreement relating to the
subject matter of the unenforceable provision shall be deemed
revived and reinstated. It is expressly agreed that the rights
and obligations of Executive hereunder may not be assigned or
delegated by Executive, but that the Company may assign this
Agreement to any successor to the Company's business provided
that such Assignee assumes the Company's obligations hereunder
without the Company being relieved therefrom. It is expressly
understood that all references herein to the Company shall be
deemed to include the surviving corporation in any merger
involving the Company.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
PETROLITE: PETROLITE CORPORATION
By: --------------------------
EXECUTIVE:
------------------------------
-14-
<PAGE> 15
EXHIBIT A
GENERAL RELEASE
---------------
For good and valuable consideration, the receipt and
sufficiency of which is acknowledged hereby, the Executive, with
the intention of binding himself/herself and his/her heirs,
executors, administrators and assigns, does hereby release,
remise, acquit and forever discharge Petrolite Corporation, a
Delaware corporation, ("Petrolite"), and its present and former
officers, directors, executives, agents, attorneys, employees,
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 the Executive, individually or as a member of
a class, now has, owns or holds, or has at any time heretofore
had, owned or held, against any Released Party arising out of or
in any way connected with the Executive's employment relationship
with Petrolite, its subsidiaries, predecessors or affiliated
entities, or the termination thereof, including without
limitation, any claims for severance or vacation benefits, unpaid
wages, salary or incentive payment, breach of contract, wrongful
discharge, impairment of economic opportunity, reimbursement for
fines paid, intentional infliction of emotional harm or other
tort, or employment discrimination under any applicable federal,
state or local statute, provision, order or regulation including,
but not limited to, any claim under Title VII of the Civil Rights
Act ("Title VII"), the Federal Age Discrimination in Employment
Act ("ADEA") and any similar or analogous state statute excepting
only:
A. those obligations of Petrolite under that certain
Executive Agreement between Petrolite and the Executive dated
- -------------------- (the "Agreement"), pursuant to which this
General Release is being executed and delivered;
B. any rights to indemnification the Executive may have
under applicable corporate law, the by-laws or certificate of
incorporation of any Released Party or as an insured under any
Director's and Officer's liability insurance policy now or
previously in force;
-15-
<PAGE> 16
C. any claims under any applicable workers' compensation
statute which arose prior to the date of the Executive's
termination from employment;
D. any claims for benefits under any employee benefit plan
of Petrolite (within the meaning of Section 3(3) of the Employee
Income Security Act of 1974, as amended); and
E. any claims under any stock option agreement to which
Petrolite and Executive are parties.
The Executive acknowledges and agrees that neither the
Agreement nor this General Release is to be construed in any way
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, any such liability having been
expressly denied.
The Executive further declares and represents that he/she
has carefully read and fully understands the terms of this
General Release and the Agreement, that he/she has been given not
less than forty-five (45) days to consider this General Release,
that he/she has been advised to seek, and has had the opportunity
to seek, the advice and assistance of counsel with regard to this
General Release and the Agreement, and that he/she knowingly and
voluntarily, of his/her own free will, without any duress, being
fully informed and after due deliberate thought and action,
accepts the terms of and signs the same as his/her own free act.
The Executive acknowledges and agrees that this General
Release shall become final and binding on the 8th day after it
has been executed and delivered to the Company.
------------------------------
Executive
-16-
<PAGE> 17
STATE OF ---------- )
) SS.
COUNTY OF --------- )
On this ----- day of ------------, 1996, before me
personally appeared 1, to me known to be the person described
in and who executed the General Release and acknowledged that
he/she executed the same as his/her free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
affixed my official seal in the County and State aforesaid, the
day and year first above written.
------------------------------
Notary Public
My Commission Expires:
-17-
<PAGE> 18
EXHIBIT B
GROSS-UP FORMULA
----------------
A Gross-up Payment made pursuant to this Agreement shall be
calculated as follows:
A. The Gross-up Payment shall be the product of
(i) the amount of the additional Excise Taxes, any
interest, fines, penalties, expenses, and other costs
relating to such Excise Taxes incurred by the Executive,
and/or the amount of the reimbursement payment to Executive,
as the case may be, times (ii) a fraction the numerator of
which is 1, and the denominator of which is 1 minus the
combined total rates expressed as a fraction, determined in
accordance with paragraph B of this Exhibit B, of all
federal, state, local and other income and other taxes and
any Excise Taxes applicable to such Gross-up Payment.
B. For purposes of determining the denominator of the
fraction set forth in clause (ii) of paragraph A of this
Exhibit B, the rates of federal, state, local and other
income and other taxes and Excise Taxes shall be the rates
set forth in the table below:
Federal Income Tax The Executive's highest
marginal federal income tax
rate in effect for the
applicable year, including the
effective rate resulting from
the phaseout of itemized
deductions and the personal
exemption ("Federal Income Tax
Rate")
State and Local Income Tax The Executive's highest
marginal state and local
income tax rates in effect for
the applicable year
Excise Tax 20% (or if Section 4999 of the
Code is amended, the excise
tax rate in effect after the
amendment)
All Other Taxes Actual Net Tax Rate
-18-
<PAGE> 1
<TABLE>
EXHIBIT NO. 21
Subsidiaries of Registrant
<CAPTION>
State or Other Jurisdiction Percent 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 U.S. 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 100
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
Petrolite Nederland B.V. Netherlands 100
</TABLE>
Each of these subsidiaries is included in the consolidated financial
statements in this registration statement. The following three wholly owned
subsidiaries are also included in the Registrants consolidated financial
statements; however, the ownership is through other Registrant subsidiaries
as follows: Petrolite Italiana S.p.A. is owned 100% by Petrolite Limited;
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 Co., Ltd.
in Japan and Bareco Products which are accounted for using the equity method.
-63-
<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
22, 1996, appearing on page--- in this Annual Report on Form 10-K.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
St. Louis, Missouri
January 29, 1997
-64-
<PAGE> 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 1996 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>
/s/ Andrew B. Craig, III Director January 8, 1997
- ------------------------------
Andrew B. Craig, III
/s/ Jerry B. Davis Director January 8, 1997
- ------------------------------
Jerry B. Davis
/s/ Louis Fernandez Director January 8, 1997
- ------------------------------
Louis Fernandez
/s/ Wayne J. Grace Director January 8, 1997
- ------------------------------
Wayne J. Grace
/s/ Paul H. Hatfield Director January 8, 1997
- ------------------------------
Paul H. Hatfield
/s/ Richard L. O'Shields Director January 8, 1997
- ------------------------------
Richard L. O'Shields
/s/ Fairfax F. Pollnow Director January 8, 1997
- ------------------------------
Fairfax F. Pollnow
-65-
<PAGE> 2
<C> <C> <C>
/s/ Brian M. Rushton Director January 8, 1997
- ------------------------------
Brian M. Rushton
/s/ Joseph T. Williams Director January 8, 1997
- ------------------------------
Joseph T. Williams
</TABLE>
STATE OF MISSOURI )
) SS.
COUNTY OF ST. LOUIS )
On this 8th day of January, 1997, before me personally appeared
Andrew B. Craig, III, Louis Fernandez, Wayne J. Grace, Paul H. Hatfield,
Jerry B. Davis, Brian M. Rushton, Richard L. O'Shields, Fairfax F. Pollnow,
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.
Edith I Rudder
--------------
Notary Public
My Commission Expires December 3, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> OCT-31-1995 OCT-31-1996
<PERIOD-START> NOV-01-1994 NOV-01-1995
<PERIOD-END> OCT-31-1995 OCT-31-1996
<CASH> 33,662 44,669
<SECURITIES> 0 0
<RECEIVABLES> 63,352 68,324
<ALLOWANCES> 0 0
<INVENTORY> 36,709 37,117
<CURRENT-ASSETS> 145,839 161,839
<PP&E> 271,011 270,853
<DEPRECIATION> 166,369 176,971
<TOTAL-ASSETS> 292,586 301,787
<CURRENT-LIABILITIES> 66,834 69,152
<BONDS> 40,000 38,000
<COMMON> 9,389 9,620
0 0
0 0
<OTHER-SE> 168,516 175,903
<TOTAL-LIABILITY-AND-EQUITY> 292,585 301,789
<SALES> 364,877 360,703
<TOTAL-REVENUES> 364,877 360,703
<CGS> 229,512 215,883
<TOTAL-COSTS> 349,733 344,439
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 1,006 445
<INTEREST-EXPENSE> 3,278 2,795
<INCOME-PRETAX> 8,115 21,610
<INCOME-TAX> 1,884 2,579
<INCOME-CONTINUING> 6,231 19,031
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,231 19,031
<EPS-PRIMARY> 0.55 1.68
<EPS-DILUTED> 0.55 1.68
</TABLE>
