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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission File No. 0-19983
SYBRON CHEMICALS INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0301280
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Birmingham Rd., P.O. Box 66, Birmingham, NJ. 08011
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 893-1100
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
NONE NONE
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $0.01 per share
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates of the
Registrant based upon the closing sale price of the Common Stock on March 15,
1996 as reported on the NASDAQ Exchange, was approximately $15,461,000. Shares
of Common Stock held by each officer and director and by each person who owns 5%
or more of the outstanding Common Stock have been excluded in that such persons
may be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes. At March 15, 1996,
there were 5,650,560 shares of the Registrant's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Certain portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held May 31, 1996 are incorporated by reference into Part III
of this Annual Report.
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SYBRON CHEMICALS INC.
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SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
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The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information included in this Annual
Report contains information that is forward looking, such as information
relating to future capital expenditures and environmental cleanup costs as well
as the effects of future regulation and competition. Such forward looking
information involves important risks and uncertainties that could significantly
affect expected results in the future from those expressed in any
forward-looking statements made by, or on behalf of, the Company. These risks
and uncertainties include, but are not limited to, uncertainties relating to
economic conditions, fluctuations in exchange rates of various foreign
currencies, and other risks associated with foreign operations, changes in
governmental and regulatory policies including environmental regulations, the
pricing of raw materials, the ability of the Company to make and successfully
integrate corporate acquisitions, technological developments and changes in the
competitive environment in which the Company operates.
TABLE OF CONTENTS
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Item Page
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PART I
1 Business........................................ 1
2 Properties...................................... 15
3 Legal Proceedings............................... 16
4 Submission of Matters to a Vote of Security
Holders........................................ 16
PART II
5 Market for the Registrant's Common Stock and
Related Stockholder Matters.................... 17
6 Selected Financial Data......................... 18
7 Management's Discussion and Analysis of
Financial Condition and Results of Operations.. 20
8 Financial Statements and Supplementary Data..... 29
9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure......... 29
PART III
10 Directors and Executive Officers of the
Registrant..................................... 29
11 Executive Compensation.......................... 30
12 Security Ownership of Certain Beneficial
Owners and Management.......................... 31
13 Certain Relationships and Related
Transactions................................... 31
PART IV
14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K........................ 31
Signatures...................................... 33
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PART 1
ITEM 1. BUSINESS
General
Sybron Chemicals Inc. (the "Company") is an international specialty
chemical company that develops, produces and markets products and related
services for two main markets: environmental (primarily related to water and
waste treatment) and textile dyeing and finishing. The Company's two operating
segments, Environmental Products and Services and Textile Chemical Specialties,
accounted for 32.8% and 67.2%, respectively, of total sales for 1995. The
Company's Environmental Products and Services segment includes water treatment
products such as ion exchange resins for use in home water
softening/conditioning and industrial water treatment; high quality reverse
osmosis membrane elements used primarily in point-of-use drinking water
purification systems; biochemicals for treating industrial and sanitary waste,
contaminated soil and groundwater; and specialty polymers. The Company's Textile
Chemical Specialties segment includes various products used in wet processing of
natural and synthetic fibers to enhance the aesthetic and physical
characteristics of textile fabrics, as well as related organic chemicals.
The Company offers over 1,500 products which are sold to over 5,800 active
customers worldwide. Many of the Company's products are custom designed to meet
the particular needs of its customers. The top 10 customers accounted for
approximately 14.7%, 15.3% and 16.5% of sales in 1995, 1994 and 1993,
respectively. The largest customer in each year accounted for less than 5% of
consolidated sales.
The Company, a Delaware corporation formerly known as Sybron Chemical
Industries Inc., is the successor to a business established in the 1920's. That
business became a specialty chemical company (the "Sybron Chemical Group") in
the 1960's under the ownership of Sybron Corporation. The Company acquired the
Sybron Chemical Group from Sybron Corporation in 1987.
The Company's business is based predominantly on providing products and
services which solve customers' problems, thereby allowing them to achieve
desired performance in their own products and processes. The cost of the
Company's products and services typically is small compared to the benefits
derived by the customer from the use of such products and services. The
Company's extensive field sales force and marketing representatives, most of
whom have had direct working experience in the industries which they service,
function as applications engineers. They work in conjunction with the Company's
research groups and customers to develop and sell products and applications
know-how to meet customers' individual needs.
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The following table sets forth the Company's sales, operating income and
operating income as a percentage of sales by segment for the periods indicated:
Year ended December 31,
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1995 1994 1993
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(in thousands, except percentages)
Sales
Environmental Products and Services $ 54,969 $ 50,898 $ 53,235
Textile Chemical Specialties 112,838 94,828 82,737
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Total $167,807 $145,726 $135,972
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Operating Income
Environmental Products and Services $ 4,730 $ 5,395 $ 7,769
Textile Chemical Specialties 10,247 10,361 $ 7,512
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Total $ 14,977 $ 15,756 $ 15,281
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Operating Income as a Percentage of Sales
Environmental Products and Services 8.6% 10.6% 14.6%
Textile Chemical Specialties 9.1% 10.9% 9.1%
Total 8.9% 10.8% 11.2%
All other financial information about business segments and foreign
operations is included in Items 7 and 8 to this Annual Report on Form 10-K and
is incorporated herein by reference.
Unless noted otherwise, market share estimates contained in this Annual
Report have been developed by the Company from internal sources and no assurance
can be given regarding the accuracy of such estimates.
Environmental Products and Services Segment
The Company's environmental products and services segment consists of ion
exchange resins for use in home water softening and conditioning and industrial
water treatment; membranes used primarily in point-of-use drinking water
purification systems; biochemicals for treating industrial and sanitary waste,
contaminated soil and groundwater; specialty polymers and a line of tank
cleaning equipment which was sold in December 1993. The following table sets
forth net sales by product line for the years indicated:
Years ended December 31,
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Product Line 1995 1994 1993
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(in thousands)
Water Treatment (1) $34,750 $32,273 $34,532
Biochemicals 14,119 13,588 12,887
Specialty Polymers 6,100 5,037 4,564
Tank Cleaning Equipment (2) -- -- 1,252
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$54,969 $50,898 $53,235
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(1) Includes the Ion Exchange and Membranes business units.
(2) The tank cleaning equipment business was sold in December 1993.
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Ion Exchange Resins
The Company's ion exchange resins, which are used to improve water quality,
serve two distinct markets, industrial and household. Ion exchange resins are
solid chemical compounds (polymers), generally in bead form, which are used
primarily for the softening and demineralization of water and the removal of
contaminants from other fluids. The softening and demineralization processes
involve the exchange of acceptable ions which are originally chemically bound to
the resins for undesirable ions present in water. The process is reversible in
that the resins can be regenerated to their original ionic forms permitting
continuous reuse. Depending upon the type of resin and application, resins will
typically last for between three to ten years before replacement is necessary.
Ion exchange resins are either anion exchange resins, which remove negatively
charged ions, or cation exchange resins, which remove positively charged ions.
Both cation and anion exchange resins are used in equipment for industrial
applications, while only cation resins are used in home water softening
equipment. The Company's ion exchange products are sold under the IONAC(R)
tradename.
The industrial ion exchange water treatment market involves the
demineralization of incoming water for high pressure boilers and the
purification of process water and other fluids. The use of untreated boiler
water causes scaling of the heat exchangers which, in turn, leads to loss of
efficiency or damage to costly turbine blades. Treatment of water with cation
and anion exchange resins is required to reduce such risks. Electrical utilities
are the largest industrial resin endusers. Other major industrial endusers
include large water users such as paper mills, refineries, and petrochemical
plants and those industries requiring a high level of water purity, such as
semi-conductor manufacturers and laboratories. A market exists in trailers
containing ion exchange equipment that provide temporary on-site water treatment
to various industries and utilities. The service deionization business, which
provides on-site water treatment to a number of businesses, such as the
electronics industry, also continues to grow.
During 1995, the Company expanded the sales of the SR (Selective Resin)
line of ion exchange resins. These premium resins selectively remove
contaminants from water, wastewater and process streams which enables the
Company to target higher profit margin segments. In addition, the Company
continued to reduce its fixed costs supporting the ion exchange business in
response to weakened market conditions and reduced profitability.
A three-tiered channel of distribution exists in the U.S.
industrial water treatment market. Resins for water treatment are occasionally
sold directly to endusers by the resin manufacturer but normally are sold to
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original equipment manufacturers ("OEM") for use in new equipment and to both
OEM's and distributors for resale to replace resins in existing equipment. The
Company has developed close working relationships with major OEM's and selected
distributors based on strong technical support and customer service. The ion
exchange sales force, comprised of chemists and engineers, also maintains an
active enduser contact program through which members of the sales force act as
advisors on matters related to the various needs for quality water. This key
customer service aspect of the Company's marketing strategy has enabled the
Company to have its resins specified by numerous endusers. International
business, representing approximately 25% of the Company's industrial ion
exchange business, is conducted primarily through agents supported by the
Company's in-house personnel. The Company's industrial ion exchange resins are
sold to approximately 150 customers.
Other industrial ion exchange products manufactured and sold by the Company
include electrodialysis membranes impregnated with ion exchange resins used
primarily in the cleanup of automotive paint baths, and desalting kits used for
low volume desalinization of water, which are primarily sold to governments and
the air and marine transportation industries for emergency use.
In addition to the industrial market, the Company provides cation exchange
resins to the U.S. household water softening market with a market share in
excess of 50%. The Company believes that the market for household water
treatment products is positioned for growth in the coming years, as the concern
for water quality continues to grow. The Company's main softening resins,
including Ionac(R) C-249, are sold directly to water softening equipment
manufacturers such as Culligan International Company to whom the Company has
been a major supplier for over 30 years. The Company has maintained its leading
market position in the United States for years through its strong technical
support and customer service to the softener manufacturers and through the
introduction of new products with physical characteristics specifically suited
for this market segment.
Based on industry publications, the Company estimates the total U.S. market
for ion exchange resins in 1995 to be approximately $175 million. The Dow
Chemical Co., Purolite Corporation and Rohm and Haas Co. are the major
competitors in this segment. The ion exchange business requires significant
investment in production facilities as well as specialized know-how in product
synthesis, applications and customer support. As a result, it is difficult for
companies not presently manufacturing ion exchange resins to enter this market.
Membranes
Purification Products Company ("PPC"), a wholly owned-subsidiary of the
Company, headquartered in San Marcos, California, manufactures and supplies high
quality reverse osmosis ("RO") membrane elements used primarily in point-of-use
drinking water purification systems.
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Reverse osmosis is a filtration process in which the RO membrane filters
out undesirable impurities such as metal salts, nitrates, other dissolved solids
and certain organic compounds from the water. Point-of-use RO treatment produces
purified, better tasting water which passes through to the enduser such as a
homeowner or commercial establishment. PPC manufactures and assembles a
cellulose triacetate membrane and membrane element and assembles a thin film
composite membrane element.
The point-of-use drinking water market has been a growing segment of the
quality water market as consumer concern regarding the presence of harmful
impurities in drinking water supplies has heightened. Many manufacturers of
point-of-use drinking water systems for the home also produce and sell home
water softening equipment, for which the Company is a major supplier of the
softening ion exchange resin (Ionac(R) C-249). In addition to home water
softening equipment, PPC is producing larger RO elements for the commercial and
industrial markets and is developing membrane products for waste treatment
applications. Larger companies such as Dow Chemical Co. and Osmonics, Inc. are
major competitors of PPC as well as some smaller companies who focus primarily
on producing membrane elements.
Biochemicals
The biochemicals business supplies selectively adapted bacterial strains
under the BI-CHEM(R) trademark and appropriate application technology under the
trade name Biosystems Engineering. The Company has established a leadership
position in the waste degradation field through its development of highly active
bacterial strains, as well as through its understanding of the optimal
conditions for application of those strains to solve field problems. In the
biodegradation process, bacterial strains which are developed under laboratory
conditions through a process of natural selection and adaptation, reduce or
eliminate specific contaminants by breaking them down into harmless components
such as carbon dioxide and water. The Company's biochemical products are used in
the treatment of industrial and municipal wastewater; the elimination of
hazardous contaminants in soil and groundwater caused by spills and leaking
underground storage tanks; the operation of septic systems; and the reduction of
fat and grease in places such as household drains, retention ponds and
restaurant grease traps. The Company expects these markets to experience high
growth due to the increasing emphasis on treating waste problems utilizing
environmentally safe methods and minimizing the quantity of waste for disposal.
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The Company's biochemical products are based on naturally occurring
microorganisms already present in the environment. The Company's primary
expertise is in isolating, selecting, adapting and growing organisms so they
will degrade specific hazardous or toxic organic compounds at a much faster rate
than would otherwise occur with indigenous organisms under normal conditions.
Highly trained technical service and field sales engineers, supported by skilled
laboratory technicians, biologists and environmental engineers, provide the
necessary knowledge and experience to identify and solve customers' problems and
to develop a growing base of business.
For over twenty years, the Company has served the on-site waste treatment
market (domestic and institutional septic systems). Over the past few years, the
Company has expanded its presence in this market segment through the
introduction of biological formulations for institutional and household
utilization, such as bathroom and carpet deodorizers as well as fat and grease
digesters for unclogging drains and pipes in toilets, kitchens and fast food
restaurants. In June 1993, the Company began supplying a biologically active
formulation to a major consumer products company for use in their new biological
drain maintenance product. This product, which eliminates deposit buildup in
drain lines and prevents its recurrence, has been well received by the market
since its introduction.
In January 1995, the Company began supplying a new biologically active
formulation designed to enhance septic tank performance. This product is being
marketed by the same company who markets the drain maintenance product with the
Company's formulation. The Company believes that its septic tank product is
superior to other similar products currently sold in the market place. The
Company believes that the growth potential for the septic treatment product is
significant since studies indicate that only 10% of households with a septic
waste treatment system utilize septic treatment products.
The Company's biochemical products are developed and manufactured in a
facility located in Salem, Virginia, where up-to-date research, quality control,
and product development laboratories are located together with fermentation,
blending and packaging operations.
There are a few other companies that grow and sell bacterial strains such
as International Biochemicals Group, Polybac Corporation and Semco Corporation,
but the Company believes its products have achieved a higher degree of
technological and regulatory acceptance than its direct competitors' products.
The Company also believes it has developed unique application know-how in this
area.
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Specialty Polymers
The specialty polymers business supplies polymer beads for use as binders
in dry toners for office copy machines and laser printers and other polymeric
materials for use in adhesives and coatings and plastic (PVC) compounds. The
Company's products in this segment represent a small portion of the total
specialty polymers market. The Company's customers include major laser printer
equipment manufacturers, independent toner manufacturers and major adhesive and
tape suppliers. During 1995, the Company substantially increased its sales in
the growing toners/polymers area through a toll manufacturing agreement with
another company which services this business segment. The Company's major
competitors in the products that it manufactures include, Hercules-Sanyo, Inc.,
Image Polymers Inc. and Polytribo Inc.
Textile Chemical Specialties Segment
The Company's textile chemical specialty products business consists of
textile chemicals and related organic products. The following table sets forth
net sales by product line for the years indicated:
Years ended December 31,
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Product Line 1995 1994 1993
- ------- ---- ------ ------ -----
(in thousands)
Textile Chemicals
- America Division(1) $ 57,924 $45,995 $37,746
- Europe Division(2) 48,859 43,071 40,095
Organics 6,055 5,762 4,896
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$112,838 $94,828 $82,737
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(1) Includes the Company's U.S. operations as well as sales to Canada, Mexico,
Latin America and the Far East.
(2) Includes the Company's operations in Europe as well as sales to the Middle
East and Africa.
Textile Chemicals
Chemical usage in the worldwide textile industry is divided among the fiber
and yarn forming, fabric forming and wet processing industry segments. The
Company participates in the largest segment, wet processing, which is divided
into four major types: fabric preparation (scouring and bleaching), printing,
dyeing and finishing.
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Constant developments in textile fibers, fashions, manufacturing processes
and regulatory requirements create a continuing need for new chemicals. The
Company capitalizes on these business opportunities through an ongoing process
of product development. In this process, the Company's research and applications
chemists respond to field requirements identified by sales and marketing
personnel who maintain close contact with the Company's customers.
The Company markets its dyehouse products in the United States and Europe
under the brand name TANATEX(R). The Company markets its fabric finishing
products primarily in the United States under various names. In Europe, the
Company has also developed proprietary technology and substantial market share
in the high-quality fabric printing industry.
U.S. textile mills purchase their preparation and dyeing chemical
requirements from large dyestuff suppliers and many small companies. The Company
estimates the market segments for the preparation and dyeing chemicals in which
it competes in the United States to be in excess of $500 million. The Company's
major competitors in these segments include American Emulsions Company, Apollo
Chemical Company, Ciba-Geigy Corp., Henkel Corp., High Point Chemical Company,
Piedmont Chemical Industries Inc. and Virkler Chemical Company. Products sold by
the Company to these market areas include surfactants for wetting and removal of
impurities, stabilizers and detergents for use in bleaching, enzymes, agents to
increase dye yield and provide smooth level shades, pH control agents and
materials which prevent dye from washing out or degrading.
The Company also services the Canadian and Mexican markets through its own
local organizations in these countries, including a manufacturing facility in
Mexico City, and uses various agents and licensees to access other Latin
American markets.
The Company has a manufacturing facility and a marketing organization in
Taiwan. During 1995, the Company set up a subsidiary in Seoul, Korea in order to
service the Korean textile market. The products to be sold in the Korean market
will be manufactured by the Company's Taiwanese manufacturing plant.
The U.S. fabric finishing market segment is dominated by a few large
suppliers of commodity products such as glyoxal resins, acrylic polymers and
melamine resins. The Company has chosen to participate in this segment as a
supplier to selected specialty niches. The Company's product line includes
specialty permanent press resins, hand modifiers (for products such as acetate
linings, nylon jacket fabric and lace), fabric softeners for industrial use and
flame retardants (used on industrial fabrics, drapes, wall coverings and
curtains). During 1995, the Company introduced several new products including
systems used in creating wrinkle free 100% cotton garments with improved
physical properties.
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The Company has an important position in the high-quality and technically
oriented wet-end processing segment of the European textile industry. The
textile manufacturing industry in Europe tends to be characterized by producers
that are smaller and more oriented to fashion and quality than the producers in
the United States. European customers rely to a large extent on the expertise
and product development capabilities of their suppliers of dyehouse products.
The Company believes that its technological capabilities and customer support
services have enabled it to grow and gain a significant share of the dyehouse
products market in Europe. In 1994, a new thickener system was successfully
commercialized to allow printing of carpets with the new chromojet machine,
giving more flexibility in patterns and sharper prints with higher brilliancy
and color yield. In 1995, the Company introduced Tannex Rena, a new stabilizer
for the peroxide bleaching of cotton. Tannex Rena generates the optimal peroxide
stabilizing characteristics of silicate without the negative aspects of
machinery pollution and the influence on handling and sewability of the cotton
fabric.
Some of the major chemical and dye manufacturing companies in Europe, such
as BASF, Bayer A.G., Ciba-Geigy A.G., Hoechst A.G., Sandoz A.G. and Zeneca, are
major competitors of the Company, as are some larger local specialty chemical
manufacturers such as Allied Colloids Ltd. and C.H. Tubingen.
The Company serves approximately 2,000 customers in the major textile
centers in Europe through its direct sales forces in Austria, France, Holland,
Italy, Germany, Portugal, Spain and the United Kingdom; and through exclusive
agency and distributor agreements in the Baltic States, Belgium, Bulgaria,
Egypt, Greece, Hungary, Morocco, Poland, Scandinavia, Slovakia, Slovenia and
Turkey.
The Company also services the South African textile market through its own
local sales organization and manufacturing facility in Durban.
Acquisition of Auralux Corporation
In January 1995, the Company completed the purchase of all the outstanding
stock of Auralux Corporation ("Auralux"). At the time of the acquisition, the
acquired business had annualized sales revenue of approximately $10 million.
Auralux is a manufacturer of textile chemicals used in fabric finishing and
their product line includes fire retardants, softeners, thermosetting resins and
other specialty products. In connection with this acquisition, the Company
purchased a nine acre site in Yantic, Connecticut (the "Yantic Facility") from
which Auralux manufactures, distributes and warehouses its products. This
facility enables the Company to maintain a leadership position in the important
Northeast textile market through more effective servicing of its customers.
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In January 1996, the outstanding common stock and operations of Auralux
were merged into the Company in order to take advantage of their common business
synergies in the manufacturing and marketing of textile chemicals in the United
States.
Organics
The Company markets its production capabilities and process expertise to
major chemical companies that require custom synthesis and fine chemicals. The
demand for the Company's technology in these areas has allowed its Wellford,
South Carolina plant to utilize excess capacity and has enabled the Company to
expand its capabilities and increase its overall margins. Clients for these
services include some of the largest chemical companies in the United States.
The Company plans to continue its successful strategy of marketing and
developing its proprietary product line and utilizing excess capacity for custom
manufacturing.
The organics product line was developed to capitalize on the Company's
proprietary manufacturing technology in the areas of quaternization, alkylation
and esterification (typical organic synthesis reactions used to make a variety
of industrial chemical products). Products produced from these and other types
of reactions are now sold for use as phase transfer agents, surfactants and
intermediates for textile, cosmetic and various industrial applications. The
Company's distillation capabilities enable the products to be purified to the
exact specifications demanded by these industries. Many of the chemicals
produced and sold by this unit serve as raw materials for the formulations sold
by the textile groups. Therefore, the organics product line represents both a
vertical integration and a branching out into new markets.
Employees and Labor Relations
At December 31, 1995, the Company had 710 employees worldwide, of whom 65%
were salaried employees and 35% were hourly employees, with 80 employees in
management and administration, 187 in sales and marketing, 72 in engineering and
research, and 371 in production. The hourly employees at the Company's
Birmingham, New Jersey facility are covered by collective bargaining agreements
with two unions. These labor agreements will expire on April 11, 1996.
Negotiations with these two unions relating to a new collective bargaining
agreement are ongoing at this time. Employees at the Ede, Holland facility are
all members of national unions, which is customary in Holland. The Company
considers its relations with its union and non-union employees to be
satisfactory.
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Risks Attendant to Foreign Operations
The Company conducts its business in numerous foreign countries and as a
result is subject to risks of fluctuations in exchange rates of various foreign
currencies and other political and economic risks associated with international
business. The Company's foreign entities report their assets, liabilities and
results of operations in the currency in which the foreign entity primarily
conducts its business. The foreign currencies are ultimately translated in U.S.
dollars for financial reporting purposes.
For the fiscal years 1995, 1994, and 1993, approximately 41.9%, 41.8% and
40.5% of the Company's net sales were to customers outside the United States,
predominantly in Western Europe, with most of the balance in Canada, Mexico and
the Far East.
For the fiscal years 1995, 1994 and 1993, approximately 62%, 64% and 68% of
the Company's identifiable assets were in North America. The remainder of the
Company's identifiable assets were predominantly in Western Europe although the
Company does lease small production facilities in Taiwan and South Africa.
For the fiscal years 1995, 1994 and 1993, the Company derived 56%, 56% and
63%, of its operating income from the America Division. The America Division
consists of the Company's subsidiaries in the United States, Canada, Mexico and
the Far East. The balance of the Company's operating income was principally
derived from the Company's European subsidiaries.
Raw Materials
The Company purchases various raw materials including styrene, sulfuric
acid and surface active agents from a number of suppliers and does not rely on a
sole source to any material extent. The Company does not foresee any significant
difficulty in obtaining necessary raw materials or supplies.
Research and Development
Each of the Company's individual business groups has its own dedicated
research and development activities. The research effort in ion exchange
products is dedicated toward improving existing products and new product
development. During 1995, several new products used to make toners for desk-top
laser printers were developed and introduced into the toner/polymer product
line. In addition, substantial process improvements were accomplished on major
products, including cation resins, relative to costs and pollution reduction. A
new selective resin, SR-12, was developed and commercialized under a tolling and
distribution agreement, and will be extremely useful in the removal of metallic
ions from acid solutions.
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The Company's research and development in textile chemicals has created
several new products and new uses for products in the past year. Products
developed in this period include new products and processes for garment
processing, an improved stainblocker for carpets, a new stripping and reducing
agent for dyes, a new fixative for nylon dying and new defoamers and enzyme
products.
Research efforts in the biochemical business focus on new products and
applications for the institutional and household, industrial wastewater,
bioremediation, agriculture and textile markets. In the institutional and
household area, a patent was issued to the Company for a new drain opener and
drain maintenance product that is particularly effective against grease. A
patent application has been filed for a unique surface sanitizer that utilizes
beneficial microorganisms to prevent the growth of potentially pathogenic
microorganisms on the surfaces of restroom fixtures. The Company also completed
field and laboratory scale scientific studies of the benefit of bioaugmentation
on the operation of residential septic systems. These studies are being used to
support the Company's septic system treatment product claims.
In the area of wastewater treatment products, a patent was issued to the
Company for a microbial process for the degradation of common industrial
solvents such as Dioxane.
Research and development expenditures for 1995, 1994 and 1993 were $3.9
million, $3.2 million and $2.9 million, respectively. The sharp increase in R&D
spending from 1994 to 1995 is primarily due to the addition of research
personnel associated with the acquisition of the Auralux Corporation, as well as
increased spending in biochemicals and Europe textiles.
Competition
The Company has numerous competitors in its environmental products and
services and textile businesses, a number of which have substantially greater
financial and other resources than the Company. There can be no assurance that
the Company will not encounter increased competition in the future.
Environmental Matters
The manufacture of the Company's products, and in some cases their storage,
transportation and disposal, involve a number of environmental considerations.
These activities are subject to federal, state, local and foreign laws and
regulations concerning, among other things, solid and hazardous waste disposal,
air emissions, waste water discharge, toxic substances and occupational safety.
Violations of any of these laws and regulations, uncontrolled releases of toxic
or hazardous materials into the environment or third party or government
-12-
<PAGE>
actions relating to environmental matters could expose the Company to
significant liability. The Company believes that it has all the necessary
permits to operate its plants and that it is in substantial compliance with
current regulatory requirements material to the conduct of its business.
Periodically, the Company is advised that it may be named as a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA") or similar state statutes with respect to the
transport and disposal of hazardous wastes. At present, the Company is a party
in a legal action in the United States regarding the cleanup of hazardous waste
or chemicals at a site never occupied by the Company or its predecessors. In
addition, the Company has received inquiry letters or notices on nine other
hazardous waste sites where it could be named as a potentially responsible
party. All of these claims relate to disposition of waste occurring prior to the
Company's acquisition of the Sybron Chemical Group.
In connection with the acquisition of the Sybron Chemical Group from Sybron
Corporation, (a) the Company agreed to assume all liabilities relating to
environmental matters arising as a result of the conduct of the business of the
Sybron Chemical Group, and (b) Sybron Corporation agreed to make available to
the Company insurance coverage of Sybron Corporation that was in force during
the time that the Sybron Chemical Group was part of Sybron Corporation. Such
insurance covered certain liabilities that were settled in the past relating to
the disposition of waste prior to 1984 at third-party sites not occupied by the
Company or its predecessor. Although there can be no assurance that the
insurance carriers will accept coverage for additional such events that are not
already settled, the Company believes that such insurance adequately covers its
exposure. The Company does not have any additional insurance covering
environmental liabilities as it believes that such insurance is not presently
available on commercially reasonable terms. The Company has not reduced its
environmental liabilities or recorded any assets related to potential insurance
recoveries from any policies previously in force.
In connection with the acquisition of the Sybron Chemical Group from Sybron
Corporation in 1987, the Company, as the buyer, entered into an Administrative
Consent Order with the DEP Division of Hazardous Waste Management, Bureau of
Industrial Site Evaluation for the conduct of the ISRA review of the Company's
facility in Birmingham, New Jersey. The Company has conducted an extensive
sampling plan for both soil and groundwater and has proposed a remedial action
work plan (the "Work Plan") to the DEP related to the cleanup of the Birmingham
facility. DEP has conditionally approved the Work Plan and the Company has
initiated the cleanup based on DEP's conditional approval. The remedial
activities pursuant to the Work Plan are expected to be completed by the end of
1996.
-13-
<PAGE>
The Company has identified certain soil and groundwater contamination at
its facility in Wellford, South Carolina. The Company submitted a proposed
sampling and testing program to the South Carolina Department of Health and
Environmental Control (DHEC) for its review. DHEC has approved the Company's
proposed action for the next phase of the investigation and remediation of
potential groundwater contamination.
The Company has completed a number of studies to identify the extent of
certain soil and groundwater contamination at its manufacturing facility in Ede,
Holland and other facilities adjacent thereto (collectively, the "Dutch
Facilities"). As a result of these studies, the Company is presently remediating
certain contamination at its Ede facility. An environmental consulting firm is
performing additional studies and developing a plan of remediation for the Dutch
Facilities. The Company anticipates that the remediation plan will be presented
to local government officials in Ede, Holland for their approval by the end of
1996.
The Company has not identified any sites which may require remediation but
which have not been cited specifically by regulatory authorities for
noncompliance with environmental rules and regulations.
Although there can be no assurance regarding the outcome of environmental
proceedings, the Company believes that it has made adequate accruals to cover
all cleanup and other related costs with respect to environmental problems of
which it is aware. The Company believes that the environmental matters described
above, individually or in the aggregate, will not have a material adverse effect
on the financial position, cash flow or operating results of the Company.
Patents and Trademarks
The Company's products are sold under a variety of trademarks and trade
names. The Company owns all of the trademarks and trade names that the Company
believes to be material to the operation of its business, including the
BICHEM(R), IONAC(R), AURALUX(tm), TANATEX(R), and JERSEY STATE(tm) trademarks.
The Company believes such trademarks have widespread commercial recognition in
their respective fields. The Company also owns various patents and considers
selected patents related to its textile chemicals and biochemicals to be of
commercial significance. The Company does not believe any single patent is
material to the operations of its business as a whole.
-14-
<PAGE>
ITEM 2. Properties
Facilities
The Company's largest production facility is in Birmingham, New Jersey,
where it produces three major product lines: ion exchange resins, textile
finishing chemicals and specialty polymers. This plant accounted for
approximately 25%, 26% and 34% of 1995, 1994 and 1993 total sales, respectively.
It is located on 75 acres of a total of 500 acres owned by the Company in a
rural area approximately 23 miles from Philadelphia, Pennsylvania. The Company
presently has no plans to sell or to develop its undeveloped real estate in New
Jersey.
At December 31, 1995, the Company occupied six other U.S. facilities: (i) a
22 acre site owned in Wellford, South Carolina producing textile chemicals and
organics, (ii) a 2 acre owned facility in Salem, Virginia producing
biochemicals, (iii) a 5 acre owned facility in Salem, Virginia used for
packaging and warehousing biochemicals, (iv) a one acre leased site in San
Marcos, California producing reverse osmosis membranes, (v) a 2 acre leased
facility in Dalton, Georgia used for warehousing textile chemicals, and (vi) a 9
acre site owned in Yantic, Connecticut producing textile chemicals.
The Company owns a production center consisting of a 5 acre facility in
Ede, Holland producing textile chemicals. This plant accounted for approximately
29%, 30% and 29% of 1995, 1994 and 1993 total sales, respectively. The Company
also leases small production facilities in Mexico, South Africa and Taiwan. The
Company is in the process of constructing a new production facility in Mexico on
land owned by the Company. This facility is expected to be in operation by the
middle of 1996. Once production begins in its new Mexican facility, the Company
will terminate its existing lease with no penalties.
The Company has ample manufacturing capacity for most of its product lines
for its current level of business including anticipated growth for at least the
next two years. With respect to certain ion exchange resins, the Company has
supplemented its production capacity when necessary by making purchases from
other suppliers to meet peak customer demands. The Company has been able to
increase manufacturing capacity as needed in the past without significant
capital expenditures through the development of process improvements and
modifications.
In addition to offices maintained at its production facilities, the Company
leases sales office space in (i) Vienna, Austria, (ii) Toronto, Canada, (iii)
Oldham, England, (iv) Paris, France, (v) Krefeld, Germany, (vi) Milan, Italy,
(vii) Yokohama, Japan, (viii) Seoul, Korea, (ix) Guimaraes, Portugal, (x)
Barcelona, Spain, (xi) Elmwood Park, New Jersey and (xii) Stafford, Texas. The
Company's office and warehouse space is currently adequate for its needs. The
leases are for total periods of one to five years at commercial rates.
Management believes that suitable equivalent facilities could be obtained in
each of the cities in which the Company maintains offices.
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<PAGE>
ITEM 3. Legal Proceedings
Periodically, the Company is advised that it may be named as a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA") or similar state statutes with respect to the
transport and disposal of hazardous wastes. At present, the Company is a party
in a legal action in the United States regarding the cleanup of hazardous waste
or chemicals at a site never occupied by the Company or its predecessors. In
addition, the Company has received inquiry letters or notices on nine other
hazardous waste sites where it could be named as a potentially responsible
party. All of these claims relate to disposition of waste occurring prior to the
Company's acquisition of the Sybron Chemical Group. In connection with that
acquisition, the Company agreed to assume all liabilities relating to
environmental matters arising as a result of the prior conduct of the business
of the Sybron Chemical Group. The Company has not identified any sites which may
require remediation but which have not been cited specifically by regulatory
authorities for noncompliance with environmental rules and regulations.
There are also pending against the Company several claims and lawsuits
arising in the normal course of business. Such claims and lawsuits include
allegations of patent infringement, injuries from the inhalation of hazardous
chemicals and breach of contract. The Company believes it has adequate insurance
to cover any such claims subject to a self-insurance retention of $1,000,000.
Similarly, the Company has outstanding several claims and lawsuits arising in
the normal course of business against various other parties.
The Company believes that the legal proceedings described above,
individually or in the aggregate, will not have a material adverse effect on the
financial position, cash flow or operating results of the Company.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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<PAGE>
PART II
ITEM 5. Market for the Registrant's Common Stock and Related
Stockholder Matters.
Since its inception the Company has not paid any dividends on any class of
its Common Stock. Under the terms of its existing bank debt agreements, the
Company is required to comply with certain debt covenants which require certain
levels of cash flow and equity to be maintained. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in Item 7 of this
Annual Report and Note 6 to the Consolidated Financial Statements also contained
herein. The payment of any future dividends will be at the discretion of the
Company's Board of Directors and will depend upon, among other factors, the
Company's earnings, financial condition, cash flow and the covenants contained
in the bank agreement. The Company has no present intention to pay cash
dividends on its Common Stock.
Based upon record ownership as of February 28, 1996, the approximate number
of record holders of the Company's Common Stock is 850. A significant number of
shares of the Company's Common Stock is held in street name by various
institutions for the benefit of their clients.
The Company's Common Stock trades on The Nasdaq Stock Market National
Market ("Nasdaq") under the symbol "SYCM". The following table sets forth the
high and low sale prices of the Company's common stock as reported by the Nasdaq
National Market for each of the quarters indicated.
1994 High Low
---- ---- ---
First Quarter................... $25 1/2 $21 1/4
Second Quarter.................. 27 20 3/4
Third Quarter................... 26 3/4 24
Fourth Quarter.................. 25 1/2 14 1/4
1995 High Low
---- ---- ---
First Quarter................... $15 1/2 $11
Second Quarter.................. 15 1/4 11 1/2
Third Quarter................... 16 1/2 13 1/8
Fourth Quarter.................. 15 7/8 10
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<PAGE>
ITEM 6. Selected Financial Data
The following selected financial data has been derived from the Company's
annual financial statements and should be read in conjunction with the
consolidated balance sheet at December 31, 1995 and 1994 and the related
consolidated statements of operations and of cash flows for the three years
ended December 31, 1995 and notes thereto. See Item 8, Financial Statements and
Supplementary Data, contained in this Annual Report.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(In thousands, except share and per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Operations:
Net sales $167,807 $145,726 $135,972 $141,593 $131,074
Operating income 14,977 15,756 15,281 17,694 16,095
Income before extraordinary items and cumulative
effect of accounting changes 6,329 7,638 7,453 7,664 5,016
Extraordinary items (1) -- -- (2,197) (1,099) (98)
Cumulative effect of accounting changes (2) -- -- (9,316) -- --
Net income (loss) 6,329 7,638 (4,060) 6,565 4,918
Preferred stock dividends -- -- -- -- (357)
Net income (loss) applicable to common stock 6,329 7,638 (4,060) 6,565 4,561
Income per share before extraordinary items and
cumulative effect of accounting changes 1.12 1.35 1.32 1.41 .93
Extraordinary items (1) -- -- (.39) (.20) (.02)
Cumulative effect of accounting changes (2) -- -- (1.65) -- --
Net income (loss) per common share 1.12 1.35 (.72) 1.21 0.91
Weighted average common shares outstanding (3) 5,650,560 5,653,035 5,650,560 5,440,219 5,000,000
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents $ 11,284 $ 6,975 $ 9,719 $ 7,300 $ 3,677
Working capital 38,495 35,507 29,535 32,290 20,427
Total assets 111,329 93,934 91,805 85,049 80,577
Long-term debt
(including exchangeable redeemable preferred stock) (4) 22,532 20,366 20,777 21,075 33,328
</TABLE>
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<PAGE>
- --------------------------------
(1) The extraordinary items represent the loss, net of taxes and other
expenses, on the extinguishment of certain long-term debt prior to
scheduled maturity.
(2) The Company adopted Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions, and
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, on January 1, 1993.
(3) The Company's historical per share data and weighted average common shares
for the indicated periods have been restated for the 5 for 1 stock split
which occurred in connection with the initial public offering of the
Company's common stock in March 1992.
(4) The preferred stock was exchanged in December 1991 for certain debt
securities.
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following table sets forth certain information about the Company's two
business segments.
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
-------------------- -------------------- ------------------
% of % of % of
Amount Sales Amount Sales Amount Sales
------ ----- ------ ----- ------ -----
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Sales:
Environmental Products and Services $ 54,969 32.8% $50,898 34.9% $53,235 39.2%
Textile Chemical Specialties 112,838 67.2 94,828 65.1 82,737 60.8
-------- ----- -------- ----- -------- -----
Total $167,807 100.0% $145,726 100.0% $135,972 100.0%
======== ===== ======== ===== ======== =====
Cost of Sales:
Environmental Products and Services $39,452 71.8% $35,164 69.1% $34,756 65.3%
Textile Chemical Specialties 71,093 63.0 57,427 60.6 50,202 60.7
-------- ----- -------- ----- -------- -----
Total $110,545 65.9% $92,591 63.5% $84,958 62.5%
======== ===== ======== ===== ======== =====
Gross Margin:
Environmental Products and Services $15,517 28.2% $15,734 30.9% $18,479 34.7%
Textile Chemical Specialties 41,745 37.0 37,401 39.4 32,535 39.3
-------- ----- -------- ----- -------- -----
Total $57,262 34.1% $53,135 36.5% $51,014 37.5%
======== ===== ======== ===== ======== =====
Operating Expense:
Environmental Products and Services $10,787 19.6% $10,339 20.3% $10,710 20.1%
Textile Chemical Specialties 31,948 27.9 27,040 28.5 25,023 30.2
-------- ----- -------- ----- -------- -----
Total $42,285 25.2% $37,379 25.6% $35,733 26.3%
======== ===== ======== ===== ======== =====
Operating Income:
Environmental Products and Services $4,730 8.6% $5,395 10.6% $7,769 14.6%
Textile Chemical Specialties 10,247 9.1 10,361 10.9 7,512 9.1
-------- ----- -------- ----- -------- -----
Total $14,977 8.9% $15,756 10.8% $15,281 11.2%
======== ===== ======== ===== ======== =====
</TABLE>
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<PAGE>
1995 Compared to 1994
Operations
Sales for 1995 improved by 15.2% compared to 1994, the result of increases
in the Environmental Products and Services segment and the Textile Chemical
Specialties segment of 8.0% and 19.0%, respectively.
The Environmental Products and Services segment experienced sales growth in
the ion exchange, specialty polymer and biochemicals product lines. Ion exchange
resins sales increased 9.3% due to improved business activity in the industrial
resin product line. However, as in 1994, average selling prices declined by 3.4%
because of continued market competition and resin overcapacity. Market share
remained flat. Sales of specialty polymers jumped 21.1% due to higher selling
prices and a substantial increase in business in the toners product line.
Biochemical product line sales increased 3.9% due to increases in the average
selling price, initial revenues gained from a land-farming bioremediation
project for a major U.S. oil company, and improved industrial, municipal and
foreign sales volumes. Reverse osmosis membrane product line sales remained
relatively flat year-to-year.
Sales in the Textile Chemical Specialties segment increased substantially
in both the America and Europe divisions. The America textile chemical business
increased 25.9% due to the acquisition of the Auralux Corporation in January
1995, the full year effect of the July 1994 acquisition of the CNC International
textile chemical business, and improved sales of liquid-for-solid, preparation,
garment finishing and carpet products. Overall quantities sold increased 26.7%.
However, average selling prices declined by 2.9% due to product mix and
competitive pricing to maintain existing business. The Europe division's textile
chemical sales increased 13.4% in U.S. dollars and 6.4% in terms of local
currencies. Physical volume increased 5.9% due to greater market penetration,
primarily in Belgium, France, Germany and Turkey. Average selling prices in
terms of Dutch guilders and excluding year-to-year currency fluctuations
increased slightly. U.S. organic chemical product line sales improved 5.1% due
to increased average selling prices combined with additional custom distillation
and flaking business.
Gross margin for 1995 equaled 34.1% versus 36.5% in 1994 as both segments
showed year-to-year declines. The Environmental Products and Services segment
gross margin was 28.2% as compared with 30.9% in 1994. Margins in the ion
exchange and specialty polymers product lines dropped due to substantial
increases in the cost of several major raw materials, particularly styrene, and
overall selling price decreases, partially offset by favorable manufacturing
variances and cost control measures. An unfavorable product mix resulted in a
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<PAGE>
drop in the Biochemical product line gross margin. Production yield improvements
and lower costs for a major raw material combined to improve the reverse osmosis
membrane product line margins which more than offset an average selling price
decrease. The Textile Chemical Specialties segment gross margin dropped to 37.0%
from 1994's level of 39.4%. The America textile chemical division gross margin
fell due to an unfavorable product mix, particularly in the finishing product
line, increased raw material costs and lower average selling prices. These
negatives were somewhat offset by lower freight costs, better manpower
utilization and productivity improvements. The Europe textile chemical division
margins declined due to the weakness of the lire in Italy, the Company's largest
market in Europe, and increased U.S. dollar translated costs relating to the
strong guilder in the Netherlands, where manufacturing costs are incurred. Also
impacting the European margin were higher raw material costs which were only
partially offset by slight increases in average selling prices. The organics
product line margin improved in 1995 over 1994 due to product mix and increased
average selling prices which more than offset higher raw material and
manufacturing costs.
Operating expenses as a percentage of sales for the year improved slightly
to 25.2% as compared to last year's 25.6% as both of the Company's segments
continued with cost control measures while sales remained on the upswing.
Operating expenses as a percent of sales in the Environmental Products and
Services segment were 19.6% as compared with 20.3% in 1994. Similarly, in the
Textile Chemical Specialties segment, operating expenses were 27.9% of sales
versus 28.5% last year.
Income Taxes and Other Items
The Company's provision for income taxes was computed using applicable
prevailing income tax rates.
The Company's effective tax rate of 41.0% for 1995 increased over last
year's rate of 39.5%. This increase was the result of the Company earning more
of its income in jurisdictions with higher tax rates, such as Mexico, Canada and
Japan, and certain purchase accounting adjustments related to the acquisition of
the common stock of the Auralux Corporation.
Other expense was $4.3 million in 1995 versus $3.1 million in 1994. The
increase was primarily due to higher interest and amortization costs related to
the acquisition of the Auralux Corporation in January 1995 and the full year
effect of the July 1994 acquisition of the CNC International textile chemical
business.
-22-
<PAGE>
1994 Compared to 1993
Operations
Sales increased by 7.2% compared to the prior year on the strength of a
14.6% improvement in the Textile Chemical Specialties segment. The Environmental
Products and Services segment sales dropped by 4.4%.
Sales in the Textile Chemical Specialties segment increased in 1994 due to
improvements in both America and Europe division textile chemical businesses as
well as the U.S. organic chemicals product line. The America textile chemical
business, which comprised 48.5% of sales in this segment, improved 21.9% over
the prior year. The growth in volume resulted from increased sales of new
products for wrinkle-free cotton finishes and liquid for solid applications;
Pacific rim expansion; and the full year and partial year effects, respectively,
of the acquisitions of the National Starch and CNC International textile
chemical businesses. Overall quantities sold increased 18.7% and selling prices
averaged 1.3% higher than 1993. Europe Division textile chemical sales, which
comprised 45.4% of 1994 sales in this segment, improved in terms of U.S. dollars
by 7.4% while local currencies sales were up 9.1%. Tonnage sold increased 8.2%.
These results were primarily due to improved market conditions and increased
market share in Western Europe, particularly in Italy and Spain, strong sales
growth in the Middle East and Eastern Europe, and successful new products and
programs. These gains were partially offset by a 6.8% drop in selling prices in
terms of Dutch guilders. U.S. organic chemical product line sales, which
accounted for 6.1% of the segment, improved 17.7% due to increased proprietary
and toll manufacturing activity. Average selling prices in this area fell 2.8%.
The Environmental Products and Services segment sales declined primarily in
the ion exchange and reverse osmosis membrane product lines. Sales of ion
exchange resins, which comprised 54.1% of this segment, dropped 4.9% primarily
due to further declines in the industrial resin product line. Pricing
deteriorated due to excess capacity of resins in the marketplace, and continuing
competition from foreign resin manufacturers. Market share remained flat
compared to 1993 while average selling prices fell 3.8%. Reverse osmosis
membrane product line sales, which comprised 9.3% of 1994 sales in this segment,
declined 14.9%, the result of reduced sales to a large overseas customer
combined with an overall 4.1% reduction in selling prices. Quantities shipped
decreased 12.7%. The decline in Environmental Products and Services sales was
somewhat offset by a 5.4% increase in sales of the biochemical product line.
These products, which accounted for 26.7% of segment sales in 1994, had an
overall volume increase of 2.0% along with improved average selling prices of
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<PAGE>
1.0%. The increases were due to improved activity in products for the consumer
market, primarily for drain maintenance. Sales in the remaining product lines in
this segment fell by 13.4% in 1994, primarily the result of lower toner polymer
activity and the non-recurring 1993 sales of tank cleaning and equipment
products, a business that was sold in December 1993, somewhat offset by
increased specialty polymer sales.
The gross margin for 1994 was 36.5%, a decline from 37.5% in 1993. In the
Textile Chemical Specialties segment, the combined margins in the America
textile chemical business and the organic chemicals product line improved by one
percentage point due to favorable product mix and lower freight and raw material
costs. The Europe division gross margin increased by .6% due to lower raw
material costs and reduced allowances to customers. However, since a greater
percentage of the 1994 sales, versus 1993, in the Textile Chemical Specialties
segment came from the America division, which carries a lower margin than
Europe, the overall segment margin of 39.4% essentially equalled last year's
39.3% rate. The gross margin in the Environmental Products and Services segment
fell to 30.9% from 34.7% in 1993. Ion exchange resin margins dropped
year-to-year as a result of reduced selling prices coupled with increased raw
material costs. Higher manufacturing expenses and an unfavorable product mix
contributed to a lower margin in the biochemical business. Margins in the
reverse osmosis membrane product line also declined versus 1993 due to
product/customer mix. Somewhat offsetting these was an increase in toner/polymer
margins due to mix and productivity gains.
Operating expenses were 25.6% of sales for 1994 compared to 26.3% for last
year. This favorable impact was primarily the result of concerted effort to
reduce and control spending in all segments and manpower reductions in the
Environmental Products and Services segment. Separately, operating expenses as a
percent of sales in the Textile Chemical Specialties segment and the
Environmental Products and Services segment were 28.5% and 20.3%, respectively,
as compared to 30.2% and 20.1% in 1993.
Income Taxes and Other Items
The Company's provision for income taxes was computed using applicable
prevailing income tax rates. The Company's effective tax rate increased from
37.8% in 1993 to 39.5% in 1994. The increase principally resulted from a change
in the U.S. tax law relating to the deductibility of travel and entertainment
expenses, the amortization of intangible assets resulting from certain purchase
accounting allocations in connection with the acquisition of the textile
chemical assets of the National Starch and Chemical Company and increased
withholding taxes relating to a dividend payment between two of the Company's
foreign subsidiaries.
-24-
<PAGE>
Other income (expense) was an expense of $3.1 million in 1994 versus $3.3
million in 1993. The improvement was a net result of the following items:
- A reduction in interest expense due to the redemption of the Company's
12.5% Junior Subordinated Debentures (the "Subordinated Debentures") which was
funded from excess cash and borrowings from the Company's revolving credit
facility which carry a lower interest rate.
- An increase in the amortization of intangibles which reflect additional
goodwill charges related to the acquisition of certain textile chemical assets
in June 1993 and July 1994 (see Item 1, "Business").
- In 1993, the Company recorded a one-time pre-tax gain of $651,000
relating to the curtailment of a substantial portion of the remaining
post-retirement health care benefits of the Company's current employees.
Environmental Matters
The manufacture of the Company's products, and in some cases their storage,
transportation and disposal, involve a number of environmental considerations.
See Note 10 - Commitments and Contingencies, to the Company's Consolidated
Financial Statements contained in this Annual Report.
During 1995, 1994 and 1993 the Company incurred approximately $389,000,
$295,000 and $43,000 of costs in connection with the ongoing review of possible
soil and groundwater contamination at its Birmingham, New Jersey facility. Since
July 1987, the Company has incurred approximately $4.4 million in costs in order
to identify and remediate certain soil and groundwater contamination at various
facilities which it currently or formerly occupied in the State of New Jersey.
Approximately $4.2 million of these expenditures were charged against the
liability established at the time the Company acquired the Sybron Chemical Group
from Sybron Corporation. The remaining expenditures have been treated as land
improvements.
During 1995, 1994, and 1993 the Company spent approximately $10,000, $2,000
and $54,000, respectively, in measuring the extent of contamination at its
Wellford, South Carolina facility. These expenditures were charged against
earnings in the periods incurred.
During 1995, 1994, and 1993 the Company spent approximately $70,000,
$59,000 and $54,000, respectively, to identify and remediate certain soil
contamination at its facility in Ede, Holland which existed at the time the
Company acquired this facility from Sybron Corporation. Approximately $63,000 of
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<PAGE>
the costs incurred in 1995 were treated as land improvements while the remainder
were charged against amounts previously reserved.
The cost of remediating contamination at the Company's existing facilities
is not expected to have a material adverse effect on the Company's annual
operating results, cash flow or its financial condition. At December 31, 1995,
the Company has accrued approximately $1,016,000 to offset future environmental
assessment and remediation costs.
Liquidity and Capital Resources
Cash and cash equivalents increased to $11.3 million as of December 31,
1995 as compared with $7.0 million as of the end of the prior year.
Net cash flow generated by operating activities was $13.1 million for 1995
versus $9.7 million in 1994. This improvement, which was partially offset by
higher inventory levels, principally resulted from the acquisition of the
Auralux Corporation as well as increases in accounts payable and accrued
expenses.
Net cash used by investing activities increased to $14 million principally
resulting from the January 1995 purchase of Auralux Corporation.
Net cash provided by financing activities increased to $4.8 million in 1995
principally due to increased borrowings which funded the aforementioned
acquisition.
At December 31, 1995, the Company had a $25 million multi-currency
unsecured revolving credit facility with Bank of Boston which expires in July
1997. The amount owed under this credit facility was approximately $8.0 million.
See Note 6 - Long Term Debt, to the Company's Consolidated Financial Statements
for a description of credit availability, rate of interest and debt covenants
related to this credit facility.
The Company has entered into a series of interest rate swap agreements
which effectively converted a significant portion of its long-term debt from a
fixed rate of 8.17% to a variable rate based upon the 90 day LIBOR rate. The
last swap agreement expired in February 1996. The Company's effective interest
rate on all borrowings during 1995 was 8.36%.
During 1996, the Company expects its capital expenditures for existing
operations to be somewhat in excess of 1995 levels due to a planned relocation
and expansion of the Mexican manufacturing facility and upgrading of the Yantic
facility. The Company further believes that between its anticipated operating
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<PAGE>
cash flow and present credit facilities, it will be able to fund 1996 capital
expenditures and meet its short-term and long-term financial obligations.
New Accounting Pronouncements
FAS 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, and FAS 123, Accounting for Stock-Based
Compensation, were issued by the Financial Accounting Standards Board in March
and October 1995, respectively.
FAS 121 establishes accounting standards for the impairment of long-lived
assets, for certain identifiable intangible assets and goodwill related to those
assets to be held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. FAS 121 requires that such assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company has chosen to
adopt FAS 121 in 1996 and it is not expected to have a material impact on the
financial statements.
FAS 123 establishes financial and reporting standards for stock-based
compensation plans. Adoption is not required by the Company until 1997. Under
FAS 123, the Company may choose to reflect the fair value of stock options as
compensation cost based on the value of the option which is recognized over the
vesting period or retain the current approach set forth in APB Opinion 25 and
expand its footnote disclosure to provide pro forma disclosure as if it had
adopted the fair value accounting method. The Company expects to retain its
current accounting methodology and expand its footnote disclosure when FAS 123
is adopted.
Foreign Exchange
The Company has subsidiaries in Europe, Asia, Africa and the Americas and,
for all subsidiaries, the Company has determined the functional currencies are
the subsidiaries' local currency. The Company has a large manufacturing facility
in Ede, Holland which manufactures and sells chemicals either directly to
customers or to various subsidiaries which are principally in Europe.
Intercompany balances arise between the Dutch operation and various
subsidiaries. The Company recognized exchange losses in the Europe division in
1995 of $344,000 compared to $212,000 for the similar 1994 period. This was the
result of weak European currencies, primarily the Italian lira and British pound
versus the Dutch guilder. The U.S. dollar also weakened against the Dutch
guilder, German mark, and Spanish peseta.
-27-
<PAGE>
Inflation and Trends
United States - Average selling prices in the U.S. fell 1.5% during 1995 as
a result of competitive market factors. Raw material costs were up an average of
7.7% primarily due to substantial price increases in several major raw materials
including a 39.5% increase in the cost of styrene, one of the Company's major
raw materials in the Environmental Products and Services segment. These
unfavorable factors were partially offset by productivity improvements and
concerted cost control efforts.
Europe - The Europe division's textile chemical average selling price for
1995, in Dutch guilders, increased slightly less than 1%.
Continued growth is anticipated in the Environmental Products and Services
segment during 1996 aided by expected penetration in the ion exchange export
market and higher biochemical sales increases in industrial and consumer
applications. Continued increases in sales are expected in the Textile Chemical
Specialties segment during 1996 due to additional market penetration into
several new areas in Europe, the Middle East, the Far East, Latin America and
Mexico. The Company recognizes that future growth in the U.S. market is
dependent on introducing new products into the marketplace that cannot be easily
duplicated and streamlining their development. To accomplish this goal, a new
vice president of technology, focusing on textile chemical research and
development, was recently hired.
-28-
<PAGE>
ITEM 8. Financial Statements and Supplementary Data
The consolidated financial statements and supplementary data are set forth
in this Annual Report starting on page F-1.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
NONE
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The executive officers and directors of the Company, their ages and their
positions are set forth below:
Name Age Position
Richard M. Klein......... 58 President, Chief Executive
Officer and Director
Stephen R. Adler......... 46 Vice President, Human Resources
Joe J. Belcher........... 54 Vice President-Textile Chemicals,
North America
Peter de Bruijn.......... 47 Managing Director,Europe Division
John McPeak.............. 41 General Manager, Biochemical
Division
John H. Schroeder........ 45 Executive Vice President
Environmental Products and
Services and Director
Michael A. Delaney....... 41 Director
Heinn F. Tomfohrde, III.. 62 Director
Dr. Klein has been a director of the Company and its President and Chief
Executive Officer since its inception in 1987. Since 1969 and until July 1987,
Dr. Klein served in various managerial positions with the Sybron Chemical Group,
becoming its senior executive officer in 1978. He holds a Ph.D. in Chemistry
from the University of Illinois. Dr. Klein currently serves as a director of the
Nash Engineering Company. His term as a director will expire in 1998.
Mr. Adler has been the Vice President, Human Resources for the Company and
the Sybron Chemical Group since 1984.
Mr. Belcher has served in various managerial positions within the Company
since 1984. In April 1995, he was promoted to Vice President-Textile Chemicals,
North America with responsibility for the Company's textile chemical business in
North America. From July 1987 through March 1995, he was General Sales
Manager-Textile Chemicals.
-29-
<PAGE>
Mr. de Bruijn has served in various managerial positions within the Company
and the Sybron Chemical Group since January 1972. In January 1995, he was
promoted to Managing Director Europe Division with managerial responsibility for
the Company's textile chemical business in Europe.
Mr. McPeak has served in various managerial positions within the Company
since 1988. He has held his current position as General Manager, Biochemical
Division since September, 1995 with managerial responsibility for the Company's
biochemical business. From August 1993 to August 1995, he was the Operations
Manager for the Biochemical Division.
Mr. Schroeder has served in various managerial positions within the Company
since 1983 and became a director of the Company in 1992. He was promoted to
Executive Vice President Environmental Products and Services in March 1996 with
responsibility for all business activities for the Company's Environmental
Products and Services segment. From February 1994 to February 1996 he was the
Executive Vice President, Ion Exchange Products. He is a nominee for director at
the 1996 Annual Meeting of Stockholders.
Mr. Delaney has been a director of the Company since March 1992. Mr.
Delaney has been a Vice President of Citicorp Venture Capital, Ltd., which is an
affiliate of the Company, since 1989. From 1986 through 1989, he was Vice
President of Citicorp Mergers and Acquisitions. Mr. Delaney currently serves as
a director of AmeriSource Health Corporation, Cort Business Services, Inc., DRA
International, Enterprise Media Inc., FF Holdings Corporation, GVC Holdings
Inc., JAC Holdings Inc., Palomar Technologies Inc., SC Processing Inc. and
Triumph Holdings Inc. His term as a director will expire in 1998.
Mr. Tomfohrde has been a director of the Company since June 1992. Mr.
Tomfohrde served as President, Chief Operating Officer and Director of
International Specialty Products Inc. and its predecessor company, GAF Chemicals
Corporation, from 1987 to 1991. Since 1991, Mr. Tomfohrde has been an
independent business consultant and currently serves as a director of Harris
Chemical Group, Inc., McWhorter Technologies Inc. and Rexene Corporation. His
term as a director will expire in 1997.
ITEM 11. Executive Compensation
The information called for by Item 11 of Form 10-K is incorporated herein
by reference to such information included in the Company's Proxy Statement for
the Annual Meeting of Stockholders to be held May 31, 1996.
-30-
<PAGE>
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information called for by Item 12 of Form 10-K is incorporated herein
by reference to such information included in the Company's Proxy Statement for
the Annual Meeting of Stockholders to be held May 31, 1996.
ITEM 13. Certain Relationships and Related Transactions
The information called for by Item 13 of Form 10-K is incorporated herein
by reference to such information included in the Company's Proxy Statement for
the Annual Meeting of Stockholders to be held May 31, 1996.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
A. Documents filed as part of this Report.
1. The consolidated financial statements of Sybron
Chemicals Inc. and its subsidiaries are filed under
Item 8.
2. Financial Statement Schedules.
The following financial statement schedules should be read in conjunction
with the consolidated financial statements set forth in Item 8.
Page
Schedule VIII - Valuation and Qualifying Accounts... S-1
Schedules other than that listed above are omitted because they are not
applicable or because the required information is given in the consolidated
financial statements and notes thereto.
-31-
<PAGE>
3. Exhibits and Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
3.1 Form of Restated Certificate of Incorporation of Sybron Chemical Industries Inc. (1)
3.2 Bylaws of Sybron Chemical Industries Inc. (1)
3.3 Certificate of Ownership and Merger Merging Sybron Chemicals, Inc. into Sybron Chemical
Industries Inc. (2)
3.4 Agreement and Plan of Merger dated January 28, 1993 between Sybron Chemicals Inc. and
Sybron Chemical Industries Inc. (2)
10.4* Savings & Thrift Plan, as amended (1)
10.5* 1992 Stock Option Plan (1)
10.6* Share Participation Plan (1)
10.7 Multicurrency Revolving Credit Agreement by and among Sybron Chemicals, Inc., Sybron
Chemical Industries Nederland B.V., Sybron Chimica Italia S.p.A., Sybron Chemical
Industries Inc., and The First National Bank of Boston, dated December 18, 1992. (2)
10.7-A First Amendment and Assumption Agreement to the Multicurrency Revolving Credit
Agreement dated as of December 18, 1992 by and between Sybron Chemical Industries Inc.
and The First National Bank of Boston. (2)
10.7-B Second Amendment to the Multicurrency Revolving Credit Agreement dated as of December
18, 1992 among Sybron Chemicals Inc., Sybron Chemical Industries Nederland B.V., Sybron
Chimica Italia S.p.A. and The First National Bank of Boston. (2)
10.7-C Third Amendment to Multicurrency Revolving Credit Agreement dated as of June 24, 1994
among Sybron Chemicals Inc., Sybron Chemical Industries Nederland B.V., Sybron Chimica
Italia S.p.A. and the First National Bank of Boston. (3)
10.7-D Fourth Amendment to Multicurrency Revolving Credit Agreement dated as of June 29, 1995
among Sybron Chemicals Inc., Sybron Chemical Industries Nederland B.V., Sybron Chemica
Italia S.p.A. and The First National Bank of Boston. (4)
10.8 Note Agreement dated as of August 1, 1992, $17,000,000 8.17% Senior Notes due August
14, 2002 by and among Sybron Chemicals Inc. and The Prudential Insurance Company. (2)
10.8-A First Amendment to Note Agreement dated as of August 1, 1992, by and among Sybron
Chemicals Inc. and The Prudential Insurance Company. (2)
10.8-B Amendment and Assumption Agreement No. 2 to Note Agreement dated as of August 1,
1992 by and among Sybron Chemicals Inc. and The Prudential Insurance Company. (2)
10.9 Interest Rate and Currency Exchange Agreements dated as of July 9, 1992 between The First
National Bank of Boston and Sybron Chemicals, Inc. (2)
10.10* Executive Bonus Plan (2)
10.11* Employment Agreement, dated June 2, 1995, with Richard M. Klein. (4)
10.12* Amendment to Employment Agreement, dated July 5, 1995 with John H. Schroeder. (4)
21 Subsidiaries of the Registrant (4)
24 Powers of attorney of directors of the Registrant. (4)
</TABLE>
- --------------------
(1) Previously filed as an Exhibit to the Registrant's Registration Statement on
Form S-1 (File No. 33-46091) and incorporated herein by reference.
(2) Previously filed as an Exhibit to the Registrant's 1992 Form 10-K and
incorporated herein by reference.
(3) Previously filed as an Exhibit to the Registrant's 1994 Form 10-K and
incorporated herein by reference.
(4) Filed herewith.
* Denotes management contract required to be filed as an exhibit pursuant to
Item 14(c) of Form 10-K.
(b) Reports on Form 8-K - No reports on Form 8-K have been filed by the Company
during its year ended December 31, 1995.
-32-
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
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 authorized, on March 28, 1996.
SYBRON CHEMICALS INC.
By /s/ RICHARD M. KLEIN
--------------------------------------
RICHARD M. KLEIN
Chairman of the Board,
President, and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 28, 1996 by the following persons on
behalf of the Registrant and in the capacities indicated.
Signature Title
--------- -----
/s/ RICHARD M. KLEIN Chairman of the Board,
- ---------------------------- President, and Chief
RICHARD M. KLEIN Executive Officer
/s/ LAWRENCE R. HOFFMAN Corporate Secretary
- ----------------------------- (Acting Principal Financial
RICHARD M. KLEIN and Accounting Officer)
/s/ * Director
- ------------------------------
MICHAEL A. DELANEY
/s/ * Director
- ------------------------------
JOHN H. SCHROEDER
/s/ * Director
- ------------------------------
HEINN F. TOMFOHRDE, III
* By: /s/ RICHARD M. KLEIN
- -------------------------------------
RICHARD M. KLEIN, Attorney-in-fact
-33-
<PAGE>
Index to Consolidated Financial Statements
Sybron Chemicals Inc.
Page
----
Report of Independent Accountants......................... F-2
Consolidated Balance Sheet as of December 31, 1995
and 1994................................................ F-3
Consolidated Statement of Operations for the years
ended December 31, 1995, 1994 and 1993.................. F-4
Consolidated Statement of Stockholders' Equity for the
years ended December 31, 1995, 1994 and 1993............ F-5
Consolidated Statement of Cash Flows for the years
ended December 31, 1995, 1994 and 1993.................. F-6
Notes to Consolidated Financial Statements................ F-7
F-1
<PAGE>
Price Waterhouse LLP
Report of Independent Accountants
To the Board of Directors
and Stockholders of
Sybron Chemicals Inc.
In our opinion, the accompanying consolidated balance sheet and related
consolidated statements of operations, of stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of Sybron
Chemicals Inc. and its subsidiaries at December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits 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 Notes 2, 7 and 8 to the consolidated financial statements, in
1993 the Company changed its method of accounting for income taxes and
postretirement benefits other than pensions.
/s/ Price Waterhouse LLP
- ----------------------------
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania 19103
February 15, 1996
F-2
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands except share and per share data)
ASSETS
December 31,
1995 1994
---- ----
Current assets:
Cash and cash equivalents $ 11,284 $ 6,975
Accounts receivable-trade, net 30,685 28,349
Inventories 24,504 20,446
Prepaid and other current assets 1,293 1,415
Deferred income taxes 68 244
-------- -------
Total current assets 67,834 57,429
Property, plant and equipment, net 31,149 27,564
Intangible assets 11,804 8,411
Other assets 542 530
-------- -------
$111,329 $93,934
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 1,169 $ 692
Accounts payable 15,364 13,820
Accrued liabilities 9,067 7,303
Current portion of long-term debt 2,444
Income taxes payable 974 107
Deferred income taxes 321
-------- -------
Total current liabilities 29,339 21,922
Long-term debt 22,532 20,366
Deferred income taxes 3,450 3,010
Postretirement healthcare benefits 3,938 3,901
Other 2,117 2,035
-------- -------
Total liabilities 61,376 51,234
-------- -------
Commitments and contingencies (See Note 10)
Stockholders' equity:
Preferred stock, $.01 par value, 500,000
shares authorized; none issued
Common stock - $.01 par value, 20,000,000
shares authorized; issued 5,905,000
shares 59 59
Additional paid-in capital 23,530 23,530
Retained earnings 32,835 26,506
Cumulative translation adjustment (1,382) (2,306)
-------- -------
55,042 47,789
Less treasury stock, at cost -
254,440 shares of common stock (5,089) (5,089)
-------- -------
Total stockholders' equity 49,953 42,700
-------- -------
$111,329 $93,934
======== =======
The accompanying notes are an integral part of
the financial statements.
F-3
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share data)
Year ended December 31,
----------------------------
1995 1994 1993
---- ---- ----
Net sales $167,807 $145,726 $135,972
-------- -------- --------
Cost of sales 110,545 92,591 84,958
Selling 28,597 25,793 24,497
General and administrative 9,765 8,366 8,353
Research and development 3,923 3,220 2,883
-------- -------- --------
152,830 129,970 120,691
-------- -------- --------
Operating income 14,977 15,756 15,281
-------- -------- --------
Other income (expense):
Interest income 438 269 303
Interest expense (2,471) (1,643) (2,351)
Amortization of intangible assets (1,496) (1,091) (867)
Other, net (725) (662) (394)
-------- -------- --------
(4,254) (3,127) (3,309)
-------- -------- --------
10,723 12,629 11,972
Provision for income taxes 4,394 4,991 4,519
-------- -------- --------
Income before extraordinary items
and cumulative effect of
accounting changes 6,329 7,638 7,453
Extraordinary items
(net of taxes) (2,197)
Cumulative effect of accounting
changes (net of taxes) (9,316)
-------- -------- --------
Net income (loss) $ 6,329 $ 7,638 $ (4,060)
======== ======== ========
Income (loss) per common share:
Income before extraordinary items
and cumulative effect of
accounting changes $ 1.12 $ 1.35 $ 1.32
Extraordinary items
(net of taxes) (.39)
Cumulative effect of accounting
changes (net of taxes) (1.65)
-------- -------- --------
Net income (loss) per common share $ 1.12 $ 1.35 $ (0.72)
======== ======== ========
The accompanying notes are an integral part of
the financial statements.
F-4
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
Year Ended December 31, 1993, 1994 and 1995
(amounts in thousands)
<TABLE>
<CAPTION>
Common stock Additional Cumulative Treasury stock
------------------ paid-in translation Retained ------------------
Shares Amount capital adjustment earnings Shares Amount
------ ------ -------- ---------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1992 5,905 $ 59 $ 23,459 $ (2,015) $22,928 254 ($5,089)
Tax effects from exercise of stock options 71
Net loss (4,060)
Translation adjustment (1,532)
----- ---- -------- ------- ------- --- -------
Balances at December 31, 1993 5,905 59 23,530 (3,547) 18,868 254 ( 5,089)
Net income 7,638
Translation adjustment 1,241
----- ---- -------- ------- ------- --- -------
Balances at December 31, 1994 5,905 59 23,530 (2,306) 26,506 254 (5,089)
Net income 6,329
Translation adjustment 924
----- ---- -------- ------- ------- --- -------
Balances at December 31, 1995 5,905 59 $ 23,530 $(1,382) $32,835 254 ($5,089)
===== ==== ======== ======= ======= === =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Year ended December 31,
------------------------
1995 1994 1993
---- ---- ----
Cash flows from operating activities:
Net income (loss) $ 6,329 $ 7,638 $(4,060)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Extraordinary items 2,197
Cumulative effect of accounting changes 9,316
Depreciation and amortization 6,712 5,513 5,046
Provision for losses on accounts receivable (36) (53)
Provision for deferred taxes 485 1,633 2,030
Change in assets and liabilities:
Accounts receivable (1,016) (1,573) (2,037)
Inventory (2,248) (517) (1,295)
Other current assets 279 (23) (534)
Accounts payable and accrued expenses 2,546 (2,731) 2,146
Income taxes payable 458 (69) 42
Other assets and liabilities, net (401) (153) (830)
------ ------ ------
Net cash provided by operating activities 13,144 9,682 11,968
------ ------ ------
Cash flows from investing activities:
Capital expenditures (5,731) (5,536) (4,499)
Purchase of textile assets (8,299) (3,061) (6,654)
Proceeds from sale of business 900
Other, net (27) 181 294
------ ------ ------
Net cash used by investing activities (14,057) (8,416) (9,959)
------ ------ ------
Cash flows from financing activities:
Repayment of debt (5,388) (1,237)
Net borrowings under revolving
credit facilities 4,790 1,177 1,261
------ ------ ------
Net cash provided (used) by financing
activities 4,790 (4,211) 24
------ ------ ------
Effect of exchange rate changes on cash 432 201 386
------ ------ ------
Net increase (decrease) in cash and cash
equivalents 4,309 (2,744) 2,419
Cash and cash equivalents at beginning of
year 6,975 9,719 7,300
------ ------ ------
Cash and cash equivalents at end of year $11,284 $ 6,975 $ 9,719
======= ======= =======
The accompanying notes are an integral part of
the financial statements.
F-6
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all dollar amounts in thousands except share and per share data)
NOTE 1 - THE COMPANY:
- ---------------------
The Company is an international "specialty" chemical company which serves two
main markets: environmental products and services (primarily related to water
and waste treatment) and textile chemical specialties products.
In 1987, Sybron Chemicals Inc. (formerly Sybron Chemical Industries Inc.)
acquired the Chemical Division of Sybron Corporation ("Sybron") through the
acquisition (the "Acquisition") of all the outstanding capital stock of Sybron's
subsidiaries operating in the Chemical Group (the "Sybron Chemical Group"). As
used herein, unless otherwise indicated, the "Company" refers to Sybron
Chemicals Inc. and its subsidiaries.
NOTE 2 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES:
- -------------------------------------------------------
Basis of Presentation:
- ----------------------
The financial statements include the accounts of Sybron Chemicals Inc. and its
wholly-owned subsidiaries. All significant inter-company accounts and activity
have been eliminated.
Accounting Policies:
- --------------------
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 and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Inventories -
-----------
Inventories are stated at the lower of cost or market. For U.S. operations, cost
is determined using the last-in, first-out (LIFO) method. For foreign
operations, cost is determined using the first-in, first-out (FIFO) method.
F-7
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 2 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Continued):
- ------------------------------------------------------
Property, Plant and Equipment -
-----------------------------
Property, plant and equipment is stated at cost less accumulated depreciation.
Depreciation is provided over the estimated useful lives of depreciable assets
(generally 10-40 years for buildings and 3-20 years for machinery and equipment)
using the straight-line method.
Intangible and Other Assets -
---------------------------
Intangible assets (net of accumulated amortization - 1995, $5,444; 1994, $3,948)
include the unamortized fair values of trademarks, license agreements, patents,
non-compete agreements and goodwill. Intangible assets are amortized on a
straight-line basis over estimated useful lives of 5 to 20 years. The Company
continually evaluates the reasonableness of its amortization for intangibles. In
addition, if it becomes probable that expected future undiscounted cash flows
associated with intangible assets are less than their carrying value, the assets
are written down to their fair value. Costs associated with the issuance of
long-term debt are amortized on a straight-line basis over the term of the debt.
Environmental Liabilities and Expenditures -
------------------------------------------
Accrued liabilities and other liabilities include accruals for environmental
matters which are established and reflected as operating expenses when it is
probable that a liability has been incurred and the amount of the liability can
be reasonably estimated. Accrued liabilities are exclusive of claims against
third parties and are not discounted.
In general, costs related to environmental remediation are charged to expense.
Environmental costs are capitalized if the costs increase the value of the
property as compared to the state of the property when acquired, or mitigate or
prevent contamination from future operations.
Revenue Recognition and Related Disclosures -
-------------------------------------------
The Company recognizes revenue on the accrual basis of accounting upon shipment
of products. Receivables resulting from these sales approximate fair value. The
Company monitors the credit worthiness of its customers to which it grants
credit terms in the normal course of business. Concentrations of credit risk
F-8
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 2 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Continued):
- ------------------------------------------------------
Revenue Recognition and Related Disclosures (Continued) -
-------------------------------------------
associated with these trade receivables are considered minimal due to the
Company's diverse customer base. The allowance for doubtful accounts at December
31, 1995 and 1994 was $2,048 and $1,565, respectively.
Retirement Benefits -
-------------------
Pension expense for the Company's domestic and significant international defined
benefit pension plans is determined in accordance with Statement of Financial
Accounting Standards No. 87 (FAS 87), "Employers' Accounting for Pensions". See
Note 8 for further description.
On January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Post-retirement Benefits Other
than Pensions" ("FAS 106"). The Company elected to reflect the initial
application of FAS 106 as a cumulative effect of a change in accounting
principle. Upon adoption of FAS 106, the Company recorded a one-time aggregate
charge of $2,766, net of applicable taxes.
Interest Rate Swap Agreements -
-----------------------------
The Company entered into contractual arrangements in the ordinary course of
business to hedge its interest rate risks. The counterparties to these
contractual arrangements were major financial institutions. The Company does not
anticipate nonperformance by the counterparties to these contracts and no
material loss would be expected from any such nonperformance.
Statement of Financial Accounting Standards No. 107, Disclosure about Fair Value
of Financial Instruments, requires that the Company disclose estimated fair
values for its financial instruments. The fair values of interest rate swap
agreements are obtained from dealer quotes (see Note 14). These values represent
the estimated amount the Company would pay or receive to terminate the
agreements as quoted by the bank with which the Company executed the swap
agreements. The difference to be paid or received is accrued as interest rates
change and is recognized in income over the life of the agreements (see Note 6).
F-9
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 2 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Continued):
- ------------------------------------------------------
Income Taxes -
------------
On January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("FAS 109"). Under the asset
and liability method of FAS 109, deferred tax assets and liabilities are
recognized for future tax consequen- ces attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carry-forwards.
The Company elected to reflect the initial application of the standard as a
cumulative effect of a change in accounting principle in 1993, the year of
adoption. The adoption of FAS 109 resulted in a charge of approximately $6,550,
which related primarily to the impact of FAS 109 on accounting for the tax
effects of the acquisition of the Company from its previous owner.
Foreign Currency Translation:
- ----------------------------
The financial statements and transactions of the Company's foreign subsidiaries
are maintained in their local currencies which are considered to be their
functional currencies and are translated into U.S. dollars in accordance with
Statement of Financial Accounting Standards No. 52.
Assets and liabilities of foreign subsidiaries are translated into U.S. dollars
using current exchange rates and the resulting translation adjustments are
recorded to the cumulative translation adjustment component of stockholders'
equity. Revenues and expenses of foreign subsidiaries are translated at weighted
average rates of exchange for the respective periods. Foreign exchange losses
for 1995, 1994 and 1993 were approximately $390, $212 and $362, respectively.
Earnings Per Common Share:
- -------------------------
Earnings per common share data is based on the weighted average number of common
and common equivalent shares outstanding during the year applied to net income.
The weighted average number of shares outstanding for 1995, 1994 and 1993 was
approximately 5,650,560, 5,653,035 and 5,650,560, respectively.
Statement of Cash Flows:
- -----------------------
Cash and cash equivalents include funds invested in liquid short-term
investments with a maturity of three months or less.
F-10
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 2 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Continued):
- ------------------------------------------------------
Statement of Cash Flows (Continued):
- -----------------------
For such investments the carrying amount approximates fair value. At December
31, 1995 and 1994 these investments amounted to $9,027 and $5,685, respectively.
Interest paid was $2,416 in 1995, $2,088 in 1994 and $2,077 in 1993; taxes paid
were $2,981 in 1995, $3,437 in 1994 and $2,458 in 1993. In December 1993 the
Company redeemed its Subordinated Debentures. This resulted in an extraordinary
loss of $2,197 (net of taxes). The Subordinated Debenture holders were paid in
January 1994.
NOTE 3 - INVENTORIES:
- --------------------
The components of inventories are:
December 31,
-------------------
1995 1994
---- ----
Finished goods $17,020 $14,047
Work-in-process 194 218
Raw materials 7,290 6,181
------- -------
$24,504 $20,446
======= =======
LIFO inventories comprise 58% and 63% of total inventories at December 31, 1995
and 1994, respectively. If the FIFO method of accounting for inventories had
been used by the Company, inventories would have been greater than reported by
$1,402 and $1,348 at December 31, 1995 and 1994, respectively.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT:
- --------------------------------------
The components of property, plant and equipment are:
December 31,
-------------------
1995 1994
---- ----
Land $ 2,803 $ 2,386
Buildings 15,116 12,492
Machinery and equipment 38,842 34,498
Construction in process 2,642 1,349
------- -------
59,403 50,725
Accumulated depreciation 28,254 23,161
------- -------
$31,149 $27,564
======= =======
F-11
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT (Continued):
- --------------------------------------
Depreciation expense for the years ended December 31, 1995, 1994 and 1993 was
$5,072, $4,280 and $3,941, respectively. Maintenance and repairs expense for the
same periods amounted to $1,963, $1,875 and $1,806, respectively.
NOTE 5 - ACCRUED LIABILITIES:
- ----------------------------
The components of accrued liabilities are:
December 31,
-------------------
1995 1994
---- ----
Accrued compensation $ 1,768 $ 1,386
Accrued selling and marketing expenses 1,892 1,570
Accrued fringe benefits 431 460
Accrued vacation and holiday pay 1,270 1,142
Accrued property and payroll taxes 472 372
Accrued professional fees 597 366
Other accrued liabilities 2,637 2,007
------- -------
$ 9,067 $ 7,303
======= =======
NOTE 6 - LONG-TERM DEBT:
- -----------------------
The components of long-term debt are:
December 31,
-------------------
1995 1994
---- ----
Notes payable bearing interest at 8.17% $14,571 $17,000
Revolving credit facility bearing interest
at the bank's prime rate or 1% over the
LIBOR rate 7,961 3,366
------- -------
$22,532 $20,366
======= =======
Notes Payable:
- -------------
The unsecured notes payable bear interest at 8.17% and mature in August 2002.
Interest is payable quarterly. The notes require payments of $2,429 in August of
the years 1996 to 2001, inclusive, together with accrued interest to the payment
dates. Optional prepayments may be made by the Company.
F-12
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 6 - LONG-TERM DEBT (Continued):
- -----------------------
Revolving Credit Agreements:
- ---------------------------
The Revolving Credit Agreement permits the Company and several of its wholly
owned foreign subsidiaries to borrow in Eurodollars or in several foreign
currencies, including the Italian lira, Dutch guilder or French franc. The
borrowings under the revolving credit facility shall not exceed the U.S. dollar
equivalent of $25,000, and the facility expires on July 31, 1997. The Company
has the option on U.S. dollar borrowings under the revolving credit facility to
incur interest at the bank's prime rate or 1% above the London Interbank Offered
Rate ("LIBOR"). Foreign currency borrowings incur interest at 1% above LIBOR.
All borrowings under this facility are unsecured. At December 31, 1995 there
were $7,961 of outstanding borrowings under this credit facility at an interest
rate of 7.75%.
The Company has the ability and intent to borrow under the facility on a
long-term basis and accordingly has classified outstanding borrowings at
December 31, 1995 as long-term debt.
Annual Repayments:
- -----------------
The aggregate annual repayments of long-term debt outstanding at December 31,
1995 are as follows:
1997 $10,390
1998 2,429
1999 2,429
2000 2,429
2001 2,429
Thereafter 2,426
-------
$22,532
=======
Debt Covenants:
- --------------
At December 31, 1995, certain of the debt agreements contain conditions and
restrictions, such as financial tests relating to interest coverage and cash
flow ratios, required amount of net worth, limitations on additional borrowings,
limitations on capital expenditures and restrictions relating to asset sales and
repayments of existing debt. The Company believes it is in compliance with these
covenants and restrictions.
F-13
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 6 - LONG-TERM DEBT (Continued):
- -----------------------
Interest Rate Swap Agreements:
- -----------------------------
In February 1994, the Company entered into a 2 year interest rate swap agreement
("1994 Swap") having a total notional principal of $17,000 with a major
financial institution. This 1994 Swap effectively converted a significant
portion of the Company's long-term debt from a fixed to a variable rate based
on the 90 day LIBOR rate. On specific 90 day intervals, the 90 day LIBOR rate is
compared against the 1994 Swap rate (5.03%), and to the extent that the LIBOR
rate is higher or lower than the 1994 Swap rate, payments are made or received
by the Company.
At times, the Company enters into interest rate forward agreements (the
"Forward") with major financial institutions which effectively convert the
Swap's variable interest rate to a fixed rate for respective 90 day intervals.
As a result of the Swap and Forward, the Company's effective interest rates
during 1995, 1994 and 1993 on the related long-term debt were approximately
9.2%, 7.8% and 7.0%, respectively.
The aggregate close-out value of the Swap at December 31, 1995 was approximately
$36. This value represents the estimated amount the Company would pay at
December 31, 1995 to terminate the Swap. There were no Forwards outstanding at
December 31, 1995.
NOTE 7 - INCOME TAXES:
- ---------------------
Provisions for income taxes are:
Year ended December 31,
--------------------------
1995 1994 1993
---- ---- ----
Currently payable:
Federal $ 305 $ 160 $1,332
State 120 77 212
Foreign 3,484 3,121 2,413
------ ------ ------
3,909 3,358 3,957
Deferred taxes:
Federal 562 1,429 358
State 2 244 223
Foreign (79) (40) (19)
------ ------ ------
$4,394 $4,991 $4,519
====== ====== ======
F-14
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 7 - INCOME TAXES (Continued):
- ---------------------
Provisions for income taxes differ from the amount computed by applying the
statutory federal rate due to the following:
Year ended December 31,
---------------------------
1995 1994 1993
---- ---- ----
Income tax computed at Federal
statutory tax rates $3,646 $4,294 $4,070
State income taxes, net of
federal income tax benefit 138 202 147
Foreign subsidiaries taxed at
higher rates 599 435 325
Other items, net 11 60 (23)
------ ------ ------
$4,394 $4,991 $4,519
====== ====== ======
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1995 and
1994 are presented below.
December 31,
---------------------
1995 1994
---- ----
Deferred tax assets:
Postretirement employee benefits $ 1,659 $ 1,621
Net operating loss carryforwards 870
Accrued expenses 1,143 899
Other 125 27
------- -------
Total deferred tax assets 2,927 3,417
------- -------
Deferred tax liabilities:
Depreciation (3,090) (3,242)
Inventory (1,029) (1,280)
Intangibles (1,110) (672)
Property (704) (704)
Other (697) (285)
------- -------
Total deferred tax liabilities (6,630) (6,183)
------- -------
Net deferred tax liability $(3,703) $(2,766)
======= =======
F-15
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 7 - INCOME TAXES (Continued):
- ---------------------
The components of income before income taxes, extraordinary items
and the cumulative effect of accounting changes are:
Year ended December 31,
---------------------------
1995 1994 1993
---- ---- ----
United States $ 2,514 $ 4,950 $ 5,888
Foreign 8,209 7,679 6,084
------- ------- -------
$10,723 $12,629 $11,972
======= ======= =======
Retained earnings of foreign subsidiaries totaling approximately $36,700 at
December 31, 1995 are considered to be reinvested indefinitely in these
businesses. Accordingly, no provision for income taxes has been made for the
repatriation of these earnings.
In 1993, the Company recognized certain tax benefits related to the exercise of
certain common stock options (see Note 8). The tax benefits derived resulted in
an increase of $71 to additional paid-in capital and deferred tax assets.
NOTE 8 - PENSION, POST RETIREMENT AND OTHER EMPLOYEE BENEFITS:
- -------------------------------------------------------------
Pension Benefits:
- ----------------
The Company has a defined contribution pension plan (the "Plan") for U.S.
salaried employees. In accordance with the Plan, the Company contributes a fixed
percentage of a salaried employee's annual earnings ranging from 3.75% to 18.6%,
based on the employee's age and length of service with the Company. Expense
related to this plan was $525, $530 and $573 for the years ended December 31,
1995, 1994 and 1993, respectively.
The Company has defined benefit pension plans covering substantially all U.S.
hourly and all foreign employees. Plans covering U.S. hourly employees provide
benefits based on years of service and applicable contractual agreements. Plans
covering foreign employees are generally based on various formulas, the
principal factors of which are years of service and compensation. The Company's
funding policy is to make the minimum annual contribution required by applicable
regulations.
F-16
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 8 - PENSION, POST RETIREMENT AND OTHER EMPLOYEE BENEFITS
- -------------------------------------------------------------
(Continued):
Significant assumptions used in determining net periodic pension cost of the
hourly plans and related pension obligations were:
Year ended December 31,
-----------------------
1995 1994 1993
---- ---- ----
Domestic:
Discount rate 7.25% 8.5% 7.5%
Expected long-term rate of return 9.0% 9.0% 9.0%
Rate of increase in compensation
levels 4.0% 4.0% 4.0%
Foreign:
Discount rate 7.25% 6.25% 7.5%
Expected long-term rate of return 7.25% 6.25% 7.5%
Rate of increase in compensation
levels 3.5% 2.0% 3.5%
The components of consolidated net periodic pension cost are:
Year ended December 31,
----------------------------
1995 1994 1993
---- ---- ----
Defined benefit pension plans:
Service cost $ 425 $ 424 $ 296
Interest on projected benefit
obligations 681 545 515
Return on plan assets (980) (573) (517)
Amortization and deferral of
unrecognized items 460 107 102
----- ----- -----
Net periodic pension cost 586 503 396
Other foreign plans, including
certain social payments 293 293 277
----- ----- -----
$ 879 $ 796 $ 673
===== ===== =====
F-17
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 8 - PENSION, POST RETIREMENT AND OTHER EMPLOYEE BENEFITS
- -------------------------------------------------------------
(Continued):
The following table summarizes the funded status of the Company's
domestic defined benefit pension plans:
December 31,
--------------------
1995 1994
---- ----
Actuarial present value of benefit
obligations:
Vested benefit obligation ($4,033) ($3,125)
======= =======
Accumulated benefit obligation ($4,262) ($3,290)
======= =======
Projected benefit obligation ($4,262) ($3,290)
Fair value of plan assets 3,823 3,191
------- -------
Plan assets less than projected
benefit obligation (439) (99)
Unrecognized net obligation
arising at transition (36) (14)
Unrecognized net loss 576 46
Unrecognized prior service cost 317 331
Additional minimum liability (439) (99)
------- -------
Accrued pension costs $ (21) $ 165
======= =======
The following table summarizes the funded status of the Company's significant
foreign defined benefit pension plans:
December 31,
------------------
1995 1994
---- ----
Actuarial present value of benefit
obligations:
Vested benefit obligation ($4,272) ($3,790)
======= =======
Accumulated benefit obligation ($4,993) ($4,560)
======= =======
Projected benefit obligation ($6,019) ($5,132)
Fair value of plan assets 5,457 4,823
------- -------
Plan assets less than projected
benefit obligation (562) (309)
Unrecognized net obligation
arising at transition 606 631
Unrecognized net loss (gain) 52 (335)
------ -------
Accrued pension asset (liability) $ 96 ($ 13)
======= =======
Plan assets are held in trust and are composed of investments in cash
equivalents, bonds and marketable securities.
F-18
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 8 - PENSION, POST RETIREMENT AND OTHER EMPLOYEE BENEFITS
- -------------------------------------------------------------
(Continued):
Post Retirement Benefits:
- ------------------------
In addition to providing pension benefits, the Company provides certain health
care and life insurance benefits for a portion of its retired employees which
are funded as costs are incurred. These benefits are provided through various
insurance companies whose premiums are based on the claims paid during the
period. In addition, current retirees contribute varying percentages of
equivalent premiums toward the cost of their health care coverage. Retiree
contributions are automatically indexed to keep up with health care inflation.
The expense associated with these retiree benefits was approximately $312, $241
and $245 for the years ended December 31, 1995, 1994 and 1993, respectively.
The components of net periodic postretirement benefit cost for 1995
and 1994 are:
1995 1994 1993
---- ---- ----
Service cost benefits attributed
to service during the year $ 2 $ 4 $ 26
Interest cost on accumulated post
retirement benefit obligation 281 324 302
------ ------ ------
Net periodic postretirement
benefit cost $ 283 $ 328 $ 328
====== ====== ======
The following table sets forth the postretirement plans' status as recorded in
the Company's consolidated balance sheet:
Accumulated postretirement benefit obligation:
December 31,
---------------------
1995 1994
---- ----
Retirees $(2,218) $(3,601)
Fully eligible participants (219) (610)
Participants not fully eligible (10) (16)
------- -------
Accumulated post retirement benefit
obligation (2,447) (4,227)
Unrecognized prior service cost (1,606) 15
Unrecognized net (gain) loss (197) 62
------- -------
Accrued post retirement benefit cost $(4,250) $(4,150)
======= =======
F-19
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 8 - PENSION, POST-RETIREMENT AND OTHER EMPLOYEE BENEFITS
- -------------------------------------------------------------
(Continued):
The discount rate used in determining the net periodic benefit cost was 7.25%
and 8.5% at December 31, 1995 and 1994, respectively. The assumed average
inflation rate of medical costs over the life of the benefits ranged from 10% at
December 31, 1995 to 5.5% in 2006 and thereafter. An increase of one percentage
point in the per capita cost of health care costs would increase the accumulated
postretirement benefit obligation as of December 31, 1995 by approximately $186
and the aggregate of the service and interest cost components of net periodic
postretirement benefit cost by approximately $14.
In 1993, the Company recorded a pre-tax gain of $651 relating to the curtailment
of a substantial portion of the remaining post-retirement health care benefits
of the Company's fully eligible participants in connection with the signing of
new collective bargaining agreements in April 1993.
Other Employee Benefits:
- -----------------------
Stock Options-
-------------
Effective May 1, 1992, the Company adopted the 1992 Stock Option Plan (the
"Option Plan") and the initial grants were made to employees in October 1992.
The aggregate maximum number of shares of Common Stock available for awards
under the Plan is 350,000 less the shares required, if any, to be used for the
Sybron Chemicals Inc. Executive Bonus Plan. Options granted under the Option
Plan may be either incentive stock options or non-qualified stock options.
Changes in stock options outstanding are as follows:
F-20
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 8 - PENSION, POST-RETIREMENT AND OTHER EMPLOYEE BENEFITS
- -------------------------------------------------------------
(Continued):
Stock Options- (Continued)
-------------
<TABLE>
<CAPTION>
Number Price
of shares Per Share
--------- ---------
<S> <C> <C>
Options outstanding at December 31, 1992............. 118,950 $25.50
Granted............................................ 400 $19.50
Exercised.......................................... --
Cancelled and available for reissue................ (1,525) $19.50-$25.50
-------
Options outstanding at December 31, 1993............. 117,825
Granted............................................ 76,735 $18.75-$20.75
Exercised.......................................... --
Cancelled and available for reissue................ (11,525) $25.50
Options outstanding at December 31, 1994............. 183,035 $18.75-$25.50
Granted............................................ 17,875 $15.50
Exercised.......................................... --
Cancelled and available for reissue................ (42,650) $18.75-$25.50
-------
Options outstanding at December 31, 1995............. 158,260 $15.50-$25.50
=======
Options exercisable at December 31, 1995............. 49,177 $18.75-$25.50
=======
Options available for grant at
December 31, 1995.................................. 191,740
=======
</TABLE>
For future accounting periods, the Company intends to retain the APB 25
measurement principles rather than adopt the measurement principles of Statement
of Financial Accounting Standards No. 123.
Share Participation Plan-
------------------------
The Company has a Share Participation Plan (the "Share Plan") as a means of
rewarding certain employees of the Company for their effort in contributing to
an increase in the value of the Company as well as to provide an incentive to
continue employment in the Company. The Share Plan covers all full-time
employees of the Company, with the exception of executive officers and certain
other senior employees of the Company, who have completed at least one full year
of service.
The Share Plan entitles employees holding shares to receive a pro rata portion
of a cash award pool to be established in the event the Company sells a
substantial portion of its assets, undergoes a substantial change in beneficial
ownership of its equity securities, merges or is consolidated into an
unaffiliated third party. In the event that an employee receives payment for
their shares under the Share Plan, a proportionate percentage of their stock
F-21
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 8 - PENSION, POST-RETIREMENT AND OTHER EMPLOYEE BENEFITS
- -------------------------------------------------------------
(Continued):
Share Participation Plan- (Continued):
------------------------
options, if any, in the Option Plan will be subject to cancellation. At December
31, 1995 and 1994, there were approximately 1.9 million shares outstanding under
the Share Plan.
NOTE 9 - OPERATING LEASES:
- -------------------------
The Company leases certain manufacturing, warehouse and office facilities, and
equipment. Future minimum lease payments required as of December 31, 1995 under
operating leases that have initial non-cancelable lease terms exceeding one year
are as follows:
Facility Equipment
Year Rentals Rentals Total
---- -------- --------- ------
1996 $ 380 $1,555 $1,935
1997 349 1,359 1,708
1998 320 777 1,097
1999 149 358 507
2000 15 42 57
Thereafter 15 13 28
------ ------ ------
$1,228 $4,104 $5,332
====== ====== ======
Rent expense was approximately $2,932 for 1995, $2,795 for 1994 and $2,704 for
1993.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
- ---------------------------------------
In connection with the Acquisition, the Company, as the buyer, entered into an
Administrative Consent Order with the New Jersey Department of Environmental
Protection (the "DEP") Division of Hazardous Waste Management, Bureau of
Industrial Site Evaluation for the conduct of a review of the Company's facility
in Birmingham, New Jersey. The Company has conducted an extensive sampling plan
for both soil and groundwater and has proposed a remedial action work plan (the
"Work Plan") to the DEP related to the clean-up of the Birmingham facility. DEP
has conditionally approved the Work Plan and the Company has initiated the
F-22
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued):
- ---------------------------------------
clean-up based on DEP's conditional approval. The remedial activities pursuant
to the Work Plan are expected to be completed by the end of 1996.
The Company has identified certain soil and groundwater contamination at its
facility in Wellford, South Carolina. The Company submitted a proposed sampling
and testing program to the South Carolina Department of Health and Environmental
Control (DHEC) for its review. DHEC has approved the Company's proposed action
for the next phase of the investigation and remediation of potential groundwater
contamination.
The Company has completed a number of studies to identify the extent of certain
soil and groundwater contamination around its manufacturing facility in Ede,
Holland which it purchased from Sybron Corporation in July 1987 and other
facilities owned by third parties which are adjacent thereto (collectively, the
"Dutch Facilities"). As a result of these studies, the Company is presently
remediating certain contamination at its Ede facility. An environmental
consulting firm is performing additional studies and developing a detailed plan
of remediation for the Dutch Facilities. The Company anticipates that a
remediation plan will be presented to local government officials in Ede, Holland
for their approval by the end of 1996.
The Company's best estimate regarding the cost of remediating the Dutch
Facilities ranges from $2,200 to $7,200 based on a cleanup period that takes
from fifteen to fifty years to complete. The ultimate cost and length of time to
complete the project is unclear and will depend upon the extent of contamination
found as the project progresses and the nature of the cleanup requirements set
forth by local government officials. The Company estimates that twenty percent
of the estimated remediation costs relate to sites owned by third parties and
has reserved approximately $671 to offset future environmental remediation
expenditures. The remainder of the estimated remediation costs will be used to
cleanup the facility which the Company acquired from Sybron Corporation in July
1987.
In addition to sites occupied by the Company, the Company has on occasion been
advised that it may be named as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
F-23
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued):
- ---------------------------------------
or similar state statutes with respect to the transport and disposal of
hazardous wastes. At present, the Company is a party in a legal action in the
United States regarding the clean-up of hazardous waste or chemicals at a site
never occupied by the Company or its predecessors. In addition, the Company has
received inquiry letters or notices on nine other hazardous waste sites where
they could be a potentially responsible party. All of these claims relate to
disposition of waste occurring prior to the Company's acquisition of the Sybron
Chemical Group. In connection with the Acquisition, (a) the Company agreed to
assume any liabilities relating to environmental matters arising as a result of
the conduct of the business of the Sybron Chemical Group, and (b) Sybron
Corporation agreed to make available to the Company insurance coverage that was
in force during the time that the Sybron Chemical Group was part of Sybron
Corporation. The Company has not reduced its environmental liabilities or
recorded any assets related to potential insurance recoveries.
The Company has not identified any sites which may require remediation but which
have not been cited specifically by regulatory authorities for non-compliance
with environmental rules and regulations.
Although there can be no assurance regarding the outcome of environmental
proceedings, the Company believes that it has made adequate accruals for all
clean-up and other related costs with respect to environmental problems of which
it is aware. At December 31, 1995 and 1994, the Company has accrued
approximately $1,016 and $692, respectively, to offset future environmental
assessment and remediation costs. This increase in this reserve from 1994 to
1995 is primarily due to the accrual of $300 relating to the removal of certain
underground storage tanks and other remedial activities related to the
acquisition of the Auralux Corporation in January 1995.
There are also pending against the Company several claims and lawsuits arising
in the normal course of its business. Such claims and lawsuits include
allegations of patent infringement, injuries from the inhalation of hazardous
chemicals and breach of contract. The Company believes it has adequate insurance
to cover any such claims subject to a self insurance retention of $1,000.
Similarly, the Company has several outstanding claims and lawsuits arising in
the normal course of business against various other parties.
F-24
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued):
- ---------------------------------------
The Company believes that adequate provision has been made for the environmental
and legal proceedings described above, and that such proceedings will not have a
material adverse effect on the financial position, cash flow or operating
results of the Company.
NOTE 11 - CAPITAL STOCK:
- -----------------------
Preferred Stock:
- ---------------
The Company has authorized 500,000 shares of Preferred Stock, $.01 par value per
share. No shares of Preferred Stock are outstanding and the Company does not
presently contemplate the issuance of such shares.
Common Stock:
- ------------
The Company has authorized 20,000,000 shares of Common Stock, $.01 par value per
share of which 5,905,000 are outstanding.
NOTE 12 - EXTINGUISHMENT OF DEBT:
- --------------------------------
In 1993, the Company redeemed its 12.5% Subordinated Debentures due 2000 (the
"Debentures") prior to scheduled maturity, resulting in an extraordinary loss,
net of taxes, of $2,197. The primary holders of the Debentures as of the date of
redemption consisted of an affiliate of a major shareholder and two senior
officers of the Company.
NOTE 13 - ACQUISITION:
- ---------------------
On January 9, 1995, the Company completed the purchase of all the outstanding
stock of the Auralux Corporation ("Auralux"). Auralux, with annual revenues of
approximately $10 million at the time of the acquisition, is a manufacturer of
textile chemicals used in fabric finishing with product lines including fire
retardants, softeners, thermosetting resins and other specialty products. In
connection with this acquisition, the Company acquired a nine acre site in
Yantic, Connecticut from which Auralux manufactures, distributes and warehouses
its products.
In June 1994, Sybron entered into a license and asset purchase agreement with
Celgene Corporation ("Celgene") whereby Sybron acquired equipment, and the right
F-25
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 13 - ACQUISITION (Continued):
- ---------------------
to commercially utilize Celgene's biotreatment technology. In return, Sybron
paid Celgene a nominal amount for the equipment and is obligated to pay
royalties to Celgene based on a percentage of net sales. As of December 31,
1995, no royalties were due Celgene.
In July 1994, the Company purchased the assets of the textile chemical business
of CNC International Inc. ("CNC"). The acquisition was accounted for as a
purchase. The product line acquired includes water repellents, printing
auxiliaries and softeners. The acquired business had annualized sales revenues
of approximately $5 million at the time of the acquisition. The results of these
acquisitions were included as of the date they were acquired. All acquisitions
were accounted for as purchases. None of these acquisitions, whether
individually or combined, were considered material for disclosure of pro forma
effects.
The results of these acquisitions were included as of the date they were
acquired. All acquisitions were accounted for as purchases. None of these
acquisitions, whether individually or combined, were considered material for
disclosure of pro forma effects.
NOTE 14 - FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS:
- ----------------------------------------------------
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" ("SFAS 107"), requires that the Company disclose
estimated fair values for its financial instruments. Fair value estimates,
methods, and assumptions are set forth below for the Company's financial
instruments.
The interest rate on the Note Payable (the "Note") is fixed at 8.17% during its
entire term. The fair value of the Note as of December 31, 1995 was determined
by estimating the interest rate at which the Company could refinance the Note
given the same maturity period. The Company assumed a rate of 8% in its
calculations.
The fair values of interest rate swap agreements are obtained from dealer
quotes. These values represent the estimated amount the Company would pay if the
agreements were terminated as quoted by the bank with which the Company executed
the swap agreements.
F-26
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 14 - FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS (Continued):
- ----------------------------------------------------
The interest rate on the Revolving Credit Facility is at market interest rates,
therefore, its fair market value approximates its carrying value.
December 31, 1995
---------------------
Reported Estimated
Amount Fair Value
-------- ----------
(In thousands)
Long term debt.......................... $14,571 $14,571
Interest rate swap agreements (1)....... (36)
(1) Bracketed amount represents a liability.
NOTE 15 - GEOGRAPHIC AND BUSINESS SEGMENT INFORMATION:
- -----------------------------------------------------
The Company operates in the following two business segments - environmental
products and services and textile chemical specialty products.
Sales and transfers between geographic areas are generally priced to recover
cost plus an appropriate markup for profit. Operating income is revenue less
related costs and direct and allocated operating expenses, excluding interest
and amortization of intangible assets and other income (expense), net.
No single customer accounts for more than 10% of revenue in the periods
presented.
F-27
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(all dollar amounts in thousands except share and per share data)
NOTE 15 - GEOGRAPHIC AND BUSINESS SEGMENT INFORMATION (Continued):
- ------------------------------------------------------
The following schedule presents information about the Company's operations by
geographic location:
Year ended December 31,
----------------------------
1995 1994 1993
---- ---- ----
Net sales to unaffiliated customers
originated from:
America $115,620 $100,124 $ 94,107
Europe 52,187 45,602 41,865
-------- -------- --------
Total net sales $167,807 $145,726 $135,972
======== ======== ========
Intercompany sales between geographic
areas originated from:
America $ 1,867 $ 1,207 $ 910
Europe -- -- --
-------- -------- --------
Total intercompany sales $ 1,867 $ 1,207 $ 910
======== ======== ========
Operating income:
America $ 8,458 $ 8,891 $ 9,734
Europe 6,519 6,865 5,547
-------- -------- --------
Total operating income $ 14,977 $ 15,756 $ 15,281
======== ======== ========
Identifiable assets:
America $ 68,503 $ 59,665 $ 63,191
Europe 42,826 34,269 28,614
-------- -------- --------
Total assets $111,329 $ 93,934 $ 91,805
======== ======== ========
F-28
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(in thousands)
NOTE 15 - GEOGRAPHIC AND BUSINESS SEGMENT INFORMATION (Continued):
The following schedule presents information about the Company's operations by
business segment (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------------------------------------
1995 1994 1993
----------------------------------- ---------------------------------- ----------------------------------
Environmental Textile Environmental Textile Environmental Textile
Products and Chemical Products and Chemical Products and Chemical
Services Specialties Total Services Specialties Total Services Specialties Total
------------ ----------- -------- ------------ ----------- ------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales to other segments $ 119 $ 1 $ 120 $ 283 $ -- $ 283 $ 375 $ 38 $ 413
======= ======== ======== ======= ======= ======== ======= ======= =========
Sales to unaffiliated
customers $54,969 $112,838 $167,807 $50,898 $94,828 $145,726 $53,235 $82,737 $135,972
Cost of sales 39,452 71,093 110,545 35,164 57,427 92,591 34,756 50,202 84,958
------- -------- -------- ------- ------- -------- ------- ------- --------
Gross margin 15,517 41,745 57,262 15,734 37,401 53,135 18,479 32,535 51,014
Operating expenses 10,787 31,498 42,285 10,339 27,040 37,379 10,710 25,023 35,733
------- -------- -------- ------- ------- -------- ------- ------- --------
Operating income $ 4,730 $10,247 $ 14,977 $ 5,395 $10,361 $15,756 $ 7,769 $ 7,512 $ 15,281
======= ======== ======== ======= ======= ======== ======= ======= =========
Identifiable assets $30,490 $80,839 $111,329 $30,354 $63,580 $93,934 $33,605 $58,200 $ 91,805
======= ======== ======== ======= ======= ======== ======= ======= =========
Depreciation and
amortization $ 2,865 $ 3,847 $ 6,712 $ 2,891 $ 2,622 $ 5,513 $ 2,840 $ 2,206 $ 5,046
======= ======== ======== ======= ======= ======== ======= ======= =========
Capital expenditures $ 1,332 $ 4,399 $ 5,731 $ 1,664 $ 3,872 $ 5,536 $ 1,787 $ 2,712 $ 4,499
======= ======== ======== ======= ======= ======== ======= ======= =========
</TABLE>
F-29
<PAGE>
SYBRON CHEMICALS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued)
(in thousands except share and per share data)
NOTE 16 - QUARTERLY FINANCIAL DATA (Unaudited):
- ---------------------------------------------
The following is a summary of quarterly financial results for the years ended
December 31, 1995 and 1994 (amounts in thousands except per share data):
<TABLE>
<CAPTION>
1995 1994
----------------------------------------------------- ----------------------------------------------------
Three Months Ended Three Months Ended
----------------------------------------------------- ----------------------------------------------------
March 31 June 30 September 30 December 31 March 31 June 30 September 30 December 31
-------- ------- ------------ ----------- -------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $43,008 $43,931 $39,127 $41,741 $36,086 $37,162 $35,665 $36,813
Gross profit 15,109 15,224 12,628 14,301 13,073 14,568 12,618 12,876
Operating income 4,677 4,271 2,210 3,819 4,284 5,042 3,309 3,121
Net income 1,957 1,995 619 1,758 2,181 2,634 1,469 1,354
Net income per share .35 .35 .11 .31 .39 .47 .26 .24
</TABLE>
F-30
<PAGE>
SCHEDULE VIII
SYBRON CHEMICALS INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
For the years ended December 31, 1995, 1994 and 1993
(In thousands)
Additions
------------------------
Balance at
beginning of Charged to costs Charged to Balance at
period and expenses other accounts Deductions end of period
------------ ---------------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts
For the year ended:
December 31, 1995 $1,565 $831 $42 $(390) $2,048
December 31, 1994 1,259 485 27 (206) 1,565
December 31, 1993 1,285 135 62 (223) 1,259
</TABLE>
S-1
<PAGE>
EXHIBIT 10.7-D
FOURTH AMENDMENT TO
MULTICURRENCY REVOLVING CREDIT AGREEMENT
THIS AGREEMENT OF AMENDMENT, dated as of June 29, 1995, among (a) Sybron
Chemicals Inc. (the surviving entity of a merger of Sybron Chemicals, Inc. into
Sybron Chemical Industries Inc.), a Delaware corporation having its principal
place of business in Birmingham, New Jersey (the "Company"), (b) Sybron Chemical
Industries Nederland B.V., a Netherlands corporation ("Sybron Netherlands"), (c)
Sybron Chimica Italia S.p.A., an Italian corporation ("Sybron Italy") and (d)
The First National Bank of Boston, a national banking association acting through
its principal branch in Nassau, The Bahamas ("FNBB"), as agent for itself and
such other lenders that are or may become parties to this Agreement (the
"Agent"), parties to a Multicurrency Revolving Credit Agreement dated as of
December 18, 1992, as amended by the First Amendment and Assumption Agreement
dated as of January 28, 1993, the Second Amendment dated February 1, 1993 (as so
amended, the "Credit Agreement"), and the Third Amendment dated June 30, 1994.
Terms used herein which are defined in the Credit Agreement and not defined
herein have the same meaning herein as therein.
WHEREAS, the Company, Sybron Italy, Sybron Netherlands, (collectively, the
"Sybron Companies") and FNBB have entered into the Credit Agreement;
WHEREAS, the Sybron Companies and FNBB desire to amend the Credit
Agreement;
NOW THEREFORE, the Sybron Companies and FNBB hereby covenant and agree as
follows:
Section 1. Amendment to Credit Agreement. Subject to the satisfaction of
the conditions precedent set forth in Section 3 hereof, the definition of
"Maturity Date" in Section 1.2 of the Credit Agreement is amended in its
entirety to read as follows:
"'Maturity Date'shall mean July 31, 1997."
<PAGE>
-2-
Section 2. Representations and Warranties. Each of the Sybron Companies
hereby represents and warrants to FNBB as follows:
(a) Representations and Warranties in Credit Agreement. The
representations and warranties of the Sybron Companies contained in the Credit
Agreement were true and correct in all material respects when made and continue
to be true and correct in all material respects on the date hereof
(b) Authority, No Conflicts, Etc. The execution, delivery and performance
by the Sybron Companies of this Fourth Amendment and the consummation of the
transactions contemplated hereby, (i) are within the corporate power of the
Sybron Companies and have been duly authorized by all necessary corporate action
on the part of the Sybron Companies, (ii) do not require any approval or consent
of, or filing with, any governmental agency or authority, or any other person,
association or entity, which bears on the validity of this Fourth Amendment and
which is required by law or the regulation or rule of any agency or authority,
or other person, association or entity, (iii) do not violate any provisions of
any law, rule or regulation or any provision of any order, writ, judgment,
injunction, decree, determination or award presently in effect in which any of
the Sybron Companies is named, or any provision of the charter documents of the
Sybron Companies, (iv) do not result in any breach of or constitute a default
under any agreement or instrument to which any of the Sybron Companies is a
party or by which it or any of its properties are bound, including without
limitation any indenture, loan or credit agreement, lease, debt instrument or
mortgage, except for such breaches and defaults which would not have a material
adverse effect on any of the Sybron Companies, and (v) do not result in or
require the creation or imposition of any mortgage, deed of trust, pledge, lien,
security interest or other charge or encumbrance of any nature upon any of the
assets or properties of any of the Sybron Companies, except in favor of FNBB
pursuant to the Credit Agreement, as amended by this Fourth Amendment.
(c) Enforceability of Obligations. This Fourth Amendment, the Credit
Agreement as amended hereby and the other Loan Documents constitute the legal,
valid and binding obligations of the Sybron Companies, enforceable against the
Sybron Companies in accordance with their respective terms, provided that (a)
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application affecting the rights and
remedies of creditors, and (b) enforcement may be subject to general principles
of equity, and the availability of the remedies of specific performance and
injunctive relief may be subject to the discretion of the court before which any
proceedings for such remedies may be brought.
<PAGE>
-3-
Section 3. Condition to Effectiveness. The Company shall deliver or cause
to be delivered, contemporaneously with the execution hereof (a) this Fourth
Amendment signed by the Sybron Companies and (b) an opinion addressed to the
Banks and the Agent from in-house counsel to the Sybron Companies, in form and
substance satisfactory to the Agent.
Section 4 No Other Amendments. Except as expressly provided in this Fourth
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents remain in full force and effect.
Section 5. Execution in Counterparts. This Fourth Amendment may be
executed in any number of counterparts and by each party on a separate
counterpart, each of which when so executed and delivered shall be an original,
but all of which together shall constitute one instrument. In proving this
Fourth Amendment, it shall not be necessary to produce or account for more than
one such counterpart signed by the party against whom enforcement is sought.
IN WITNESS WHEREOF, the parties have executed this Fourth Amendment as of
the date first above written.
SYBRON CHEMICALS INC.
By:
----------------------------
Title:
----------------------------
SYBRON CHEMICAL
INDUSTRIES NEDERLAND B.V.
By:
----------------------------
Title:
----------------------------
<PAGE>
-4-
SYBRON CHIMICA ITALIA S.p.A.
By:
---------------------------
Title:
---------------------------
THE FIRST NATIONAL BANK
OF BOSTON, individually
and as Agent
By:
---------------------------
Title:
---------------------------
<PAGE>
SENIOR EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of this 2nd day of June, 1995,
between SYBRON CHEMICALS INC., a Delaware corporation having its principal
executive office at Birmingham Road, Birmingham, NJ (the "Corporation") and
Richard M. Klein, residing at 369 King Highway, Cherry Hill, New Jersey 08022
(the "Executive").
As of the date of the execution of this Agreement the
Executive is President and Chief Executive Officer of the Corporation, an office
he has held since January 1, 1984, and he has been an employee of the
Corporation or its predecessors since November 24, 1969. This Agreement restates
and clarifies the Executive's Senior Executive Employment Agreement dated
December 8, 1982, as amended January 1, 1984 and June 17, 1986.
The Board of Directors of the Corporation desires to retain
the Executive and maintain his employment with other senior executive officers
of the Corporation. In order to do so, compensation of the Executive must be
provided and other benefits of employment assured, commensurate with his
responsibilities and performance, and in reasonable comparison with compensation
and benefits offered other senior executive officers of corporations in
comparable circumstances.
The Board of Directors of the Corporation also believes that
it is essential to preserve and maintain the stability and continuity of
management of the Corporation. The Executive and other senior executive officers
of the Corporation must be assured of economic and other security from the
uncertainty of risks inherent in the present day economic environment which
might jeopardize their employment.
<PAGE>
Therefore, this Agreement is made to retain the employment of
the Executive and to fulfill the objectives recited above, all of which are
deemed by the Board of Directors to serve the best interests of the Corporation.
Accordingly, the Corporation and the Executive agree as follows:
1. Employment. The Corporation hereby employs the Executive
as its President and Chief Executive Officer. The Executive hereby accepts such
employment and agrees to remain in the Corporation's employ, to devote his
full-time and best efforts to the performance of his duties in connection
therewith, and to perform the duties prescribed by the Board of Directors
consistent with his position as the Chief Executive Officer of the Corporation.
2. Location. The Executive shall perform his duties hereunder
at the Corporation's headquarters in Birmingham, New Jersey, or at such other
location as may be mutually agreed upon by the Board of Directors of the
Corporation and the Executive. The Executive shall, however, also travel to
other locations at such times as may be appropriate for the performance of his
duties hereunder.
3. Term of Employment. The term of employment under this
Agreement shall extend from the date hereof until December 31, 1996, subject to
termination as provided herein.
-2-
<PAGE>
The term of employment under this Agreement shall continue for successive one
year periods thereafter on the same terms and conditions of this Agreement,
subject to termination as provided herein.
4. Compensation. The Corporation shall pay the Executive, for
all services rendered under this Agreement, a salary ("Base Salary") at an
annual rate approved by the Audit and Compensation Committee of the Board of
Directors (the "A & C Committee") as set forth in the records of that Committee.
From time to time the A & C Committee may increase the Base Salary to be paid to
the Executive, but the Base salary may not be decreased below the Base salary
then in effect without the agreement of the Executive. The Executive shall also
participate in the Corporation's Annual Incentive compensation Plan and its
Long-Term cash Incentive Plan (the "Incentive Plans") (Compensation payable to
the Executive under the Incentive Plans is referred to as "Incentive
Compensation".) The Base Salary and incentive compensation shall be paid by the
Corporation to the Executive in accordance with normal corporation policy and
subject to such deductions and withholdings as may be required by law or by
agreement with the Executive. Nothing contained in this paragraph shall be
construed as granting the Executive any vested rights to increases in Base
Salary or to any Incentive compensation.
5. Benefits. The Executive shall receive such benefits and
perquisite as the Corporation at the time provides for its senior executive
officers. The Executive shall also participate in other benefit plans (including
pension plans) at the time in effect for employees generally.
-3-
<PAGE>
6. Stock Options. The Executive shall be eligible to
participate, to the extent determined in the sole discretion of the A & C
Committee, in the Corporation's present and future stock option plans. (Options
to acquire securities of the Corporation which are now held, or are hereafter
acquired, by the Executive are the "Executive's Options".)
7. Expenses. The Corporation shall reimburse the Executive
for all reasonable expenses incurred in the performance of his duties under this
Agreement, to the extent such expenses are substantiated and are consistent with
the general policy of the Corporation relating to the reimbursement of expenses
of senior executive officers as in effect from time to time.
8. Indemnification. To the full extent authorized by law, the
Corporation shall indemnify the Executive who at any time is made, or is
threatened to be made, a party in any civil or criminal action or proceeding by
reason of the fact that he is or was a director or officer of the Corporation or
served another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise in any capacity at the request of the Corporation. In
addition to the indemnification herein provided, the Corporation shall maintain
in full force and effect during the term of the Executive's employment under
this Agreement and for a period of not less than six years after termination
-4-
<PAGE>
thereof by either party, a policy of directors' and officers' liability
insurance providing coverage to the Executive in kind and amounts not less than
that provided under the policy in effect with the Corporation as of the date
of the execution of this Agreement.
9. Confidential Information. The Executive agrees he will
not, without the prior written consent of the Corporation, during the term of or
after termination of his employment under this Agreement directly or indirectly
disclose to any individual, corporation or other entity, other than the
Corporation, or any subsidiary or affiliate thereof, or its officers, directors
or employees entitled to such information, or use for his own or another's
benefit, any confidential or proprietary information relating to the business
affairs or operations of the Corporation or its subsidiaries, including, without
limitation, any trade secrets, know how, technical or other information relating
to the manufacturing, processing or marketing of any of the products in the
Corporation's or its subsidiaries lines of business, whether heretofore or
hereafter acquired in the course of the Executive's employment by the
Corporation, its subsidiaries or predecessors.
10. Restrictive Covenant. The Executive agrees that so long as
he is employed by the Corporation under this Agreement and for a period of one
year thereafter, the Executive shall not, directly or indirectly, as a
principal, officer, director, shareholder (except as owner of less than 1% of
the shares of a corporation the stock of which is publicly traded), partner,
-5-
<PAGE>
employee or in any capacity whatsoever, engage in or become associated with, or
advise or assist, any business or enterprise which is engaged in providing any
goods or services which are competitive with any goods or services that are
offered by or being developed by the Corporation or its subsidiaries during his
employment. It is agreed that Executive's services are unique and irreplaceable
and that the loss of Executive's services or the use of those services by a
competitor would cause irreparable harm to the Corporation and that any breach
or threatened breach by the Executive of any provision of this paragraph 10
cannot be remedied solely by damages. Accordingly, in the event of a breach or
threatened breach by the Executive of any of the provisions of this Paragraph
10, the Corporation shall be entitled to injunctive relief restraining the
Executive and any business, firm, partnership, individual, corporation or entity
participating in such breach or threatened breach. Nothing herein shall be
construed as prohibiting the Corporation from pursuing any other remedies
available at law or in equity for such breach or threatened breach, including
the recovery of damages.
11. Disability or Illness. If during the term of his
employment under this Agreement, the Executive fails to perform his duties on
behalf of the Corporation on account of illness or other incapacity, the
Executive's Base Salary, during the term of such incapacity, shall be reduced by
the amount of any disability income benefits which the Executive receives from
social security for the Executive or his family, the Corporation's pension plan,
-6-
<PAGE>
statutory disability benefits, or any other group disability income plans
provided or sponsored by the Corporation.
12. Change in Control.
(a) For purposes of this Agreement, a Change in Control of the
Corporation shall mean a change in control of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation 14A or to
Item 1 of Form 8-K promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or to any similar reporting requirement hereafter
promulgated by the Securities and Exchange Commission; provided that, without
limitation, a Change in Control shall be in any event deemed to occur when and
if (if any "person") as that term is used in Section 13(d) and 14(d)(2) of the
Exchange Act, but excluding Citicorp or its affiliates, becomes the beneficial
owner, directly or indirectly, of securities of the Corporation representing 20%
or more of the combined voting power of the Corporation's then outstanding
securities ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in elections of directors, or (ii)
within two years after a tender offer or exchange offer for voting stock of the
Corporation, or as a result of a merger, consolidation, sale of assets or
contested election or any combination of the foregoing, persons who were
directors of the Corporation immediately prior thereto or were directors
nominated by those directors cease to constitute a majority of the Board of
-7-
<PAGE>
Directors of the Corporation, or of its successor by merger, consolidation or
sale of assets.
(b) In the event of failure of the Corporation to obtain the
assumption of the obligation to perform this Agreement by any successor, and the
Executive's counsel does not render his opinion to the Executive that such
assumption has occurred as a matter of law, as contemplated by Paragraph 16
below, or if within eighteen months after any Change in Control the Executive's
employment under this Agreement terminates as provided in Paragraph 13(c), (d)
or (e) below:
(1) Within 30 days after the Termination Date, the
Corporation shall pay to the Executive his Base salary as then in effect which
has accrued to the Termination Date, plus an incentive award for the previous
calendar year (if such award has not yet been paid to him) in an amount not less
than the Target Award percentage applicable to his salary grade and Base Salary
that year under the terms of the Corporation's Annual Incentive Compensation
Plan, and an incentive award for a year during which the Termination Date occurs
equal to the Target Award percentage applicable to his salary grade and Base
salary as then in effect under the terms of the Corporation's Annual Incentive
Compensation Plan, adjusted pro rata based upon the portion of the award period
occurring prior to the Termination Date.
-8-
<PAGE>
(2) Within 30 days after the Termination Date, the
Corporation shall pay to the Executive a lump Sum equal to: (i) three times the
Executive's annual Base Salary as then in effect, plus (ii) three times the
average Incentive Compensation awarded to the Executive during the preceding
three calendar years (or such lesser number of years as he may have been
eligible therefor), plus (iii) one-half of the Executive's Base Salary as then
in effect in lieu of further benefits and perquisites then currently being
provided the Executive by the Corporation including an automobile, club
memberships, professional dues and subscriptions, and other similar benefits or
perquisites. Nothing contained herein shall affect the Executive's rights and
benefits under the Corporation's pension plans, any supplementary retirement
plans or agreements, and any other benefit plans provided by the Corporation to
its employees, subject to the provisions of such plans and the policies
applicable thereto.
(3) Within 30 days after the Termination Date, the
Executive shall have the right to surrender to the Corporation for cancellation
all or any part of the Executive's Options, and in such event within 30 days
thereafter the Corporation shall pay to the Executive an amount equal to the
difference between the option prices set forth in the Executive's Options for
the shares surrendered and the higher of (x) the fair market value of the shares
determined to be the mean between the highest and lowest price for the shares
traded on NASDAQ on the last trading day preceding the day of surrender, or (y)
the highest price per share offered to the Corporation's shareholders in any
-9-
<PAGE>
tender or exchange offer which led to the Change in Control. The right to
surrender the Executive's Options shall apply to all shares covered by such
options regardless of any restrictions covering the purchase of shares or any
waiting periods subject only to the provisions for "alternate rights" as
provided in such Options. The right shall not, if unexercised, limit in any way
the rights or benefits otherwise provided by the terms and conditions of the
Executive's Options.
13. Termination. The Executives employment under this
Agreement may be terminated as follows:
(a) If the Executive fails to perform his duties under
this Agreement on account of illness or other incapacity which continues for a
period of six consecutive calendar months, the Corporation may give notice to
the Executive to terminate this Agreement on a date not less than 30 days
thereafter and if the Executive has not resumed full performance of his duties
under this Agreement within such period of time then the Executive's employment
under this Agreement will terminate on the date provided in the notice
("Termination Date"). Within 30 days after the Termination Date, the Corporation
shall pay to the executive his Base salary as then in effect which has accrued
to the Termination Date, plus an incentive award for the previous calendar year
(if such award has not yet been paid to him) in an amount not less than the
Target Award percentage applicable to his salary grade and Base Salary that year
under the Terms of the Corporation's Annual Incentive Compensation Plan, and an
-10-
<PAGE>
incentive award for the year during which the Termination Date occurs equal to
the Target Award percentage applicable to his salary grade and Base Salary as
then in effect under the terms of the Corporation's Annual Incentive
Compensation Plan, adjusted pro rata based upon the portion of the award period
occurring prior to the Termination Date. Rights of the Executive under the
Executive's Options and to benefits and perquisites and other benefit plans
(including pension plans) as the Corporation may provide shall be determined as
provided in the plans or policies applicable thereto.
(b) If the Executive dies, his employment under this
Agreement will terminate as of the date of death ("Termination Date"). Within 30
days after the Termination Date, the Corporation shall pay to the legal
representative of the Executive his Base Salary as then in effect which has
accrued to the last day of the month in which the Termination Date occurs plus
an incentive award for the previous calendar year (if such award has not yet
been paid to him) in an amount not less than the Target Award percentage
applicable to his salary grade and Base Salary that year under the terms of the
Corporation's Annual Incentive Compensation Plan, and an incentive award for the
year during which the Termination Date occurs equal to the Target award
percentage applicable to his salary grade and Base Salary as then in effect
under the terms of the Corporation's Annual Incentive Compensation Plan,
adjusted pro rata based upon the portion of the award period occurring prior to
-11-
<PAGE>
the Termination Date. Rights of the Executive under the Executive's Options and
to benefits and perquisites and other benefit plans (including pension plans) as
the Corporation may provide shall be determined as provided in the plans or
policies applicable thereto.
(c) The Executive's employment under this Agreement may be
terminated by the Executive as of the last day of any calendar month
("Termination Date") by giving notice thereof to the Corporation not less than
90 days prior thereto. Except during the eighteen months following a Change in
Control when payments will instead be made by the Corporation to the Executive
pursuant to paragraph 12(b): within 30 days after the Termination Date, the
Corporation shall pay to the Executive his Base Salary as then in effect which
has accrued to the Termination Date; and rights of the Executive under the
Executive's Options and to benefits and perquisites and other benefit plans
(including pension plans) as the Corporation may provide shall be determined as
provided in the plans or policies applicable thereto.
(d) The Executive's employment under this Agreement may be
terminated by the Corporation as of the last day of any calendar year
("Termination Date") by giving notice thereof to the Executive not less than 90
days Prior thereto. Except during the eighteen months following a Change in
Control when payments will instead be made by the Corporation pursuant to
Paragraph 12(b): within 30 days after the Termination Date, the Corporation
-12-
<PAGE>
shall pay to the Executive his Base Salary as then in effect which has accrued
to the Termination Date and thereafter pay him his Base Salary as then in effect
in accordance with then normal Corporation salary and benefit continuance policy
but in no event for a period of less than twelve months following the
Termination Date; and within 70 days after the Termination Date, the Corporation
shall pay to him an incentive award for the previous calendar year (if such
award has not been paid to him) in an amount not less than the Target Award
percentage applicable to his salary grade and Base Salary that year under the
terms of the Corporation's Annual Incentive Compensation Plan and rights of the
Executive under the Executive's Options and to benefits and perquisites and
other benefit plans (including pension plans) as the Corporation may provide
shall be determined as provided in the plans or policies applicable thereto.
(e) The Corporation may terminate this Agreement for just
cause at any time by giving notice thereof to the Executive. (The date of such
notice is the "Termination Date" unless otherwise provided in the notice).
Except during the eighteen months following any Change in Control when payments
will instead be made by the Corporation pursuant to paragraph 12(b): within 30
days after the Termination Date the Corporation shall pay to the Executive his
Base Salary as then in effect which has accrued to the Termination Date; and
rights of the Executive under the Executive's Options and to benefits and
perquisites and other benefit plans (including pension plans) as the Corporation
may provide shall be determined as provided in the plans or policies applicable
thereto.
-13-
<PAGE>
14. Payment of Certain Costs of the Executive. If a dispute
arises regarding a termination of the Executive or the interpretation or
enforcement of this Agreement and the Executive obtains a final judgment in his
favor from a court of competent jurisdiction from which no appeal may be taken,
whether because the time to do so has expired, or otherwise, or his claim is
settled by the Corporation prior to the rendering of such a judgment, all legal
fees and expenses incurred by the Executive in contesting or disputing any such
termination or seeking to obtain or enforce any right or benefit provided for in
this Agreement or in otherwise pursuing his claim will be promptly paid by the
Corporation with interest thereon at 12% from the date of payment thereof by the
Executive to the date of reimbursement to him by the Corporation.
15. Mitigation. The Executive is not required to mitigate the
amount of any payments to be made by the Corporation pursuant to this Agreement
by seeking other employment or otherwise, nor shall the amount of any payments
provided for in this Agreement be reduced by any compensation earned by the
Executive as the result of employment by another employer after the date of
termination of his employment with the Corporation.
16. Successors. The Corporation will require any successor
(whether direct or indirect, by purchase merger, consolidation, or otherwise) to
-14-
<PAGE>
all or substantially all of the business, and/or assets of the Corporation, by
agreement in form and substance satisfactory to the Executive to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place unless in the opinion of counsel to the Executive
this Agreement has been assumed by the successor as a matter of law. Failure of
the Corporation to obtain such agreement prior to the effectiveness of any such
succession (unless the foregoing opinion is rendered to the Executive) shall be
a breach of this Agreement and shall entitle the Executive to compensation from
the Corporation pursuant to paragraph 12(b) above, and for purposes of
implementing the foregoing the date on which any such succession becomes
effective shall be deemed the "Termination Date". As used in this Agreement,
Corporation shall mean the corporation as hereinbefore defined and any successor
to its business and/or assets which executes and delivers the agreement provided
for in this Paragraph 16 or which otherwise becomes bound by all the terms and
provisions of this Agreement as a matter of law.
If the Executive dies while any amounts are
payable to him hereunder, this Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representative and all amounts payable
hereunder shall then be paid in accordance with the terms of this Agreement to
the Executive's devisee, legatee or other designee or, if there be no such
designee, to his Estate.
-15-
<PAGE>
17. Notices. Any notices referred to herein shall be made in
writing and shall be sufficient if delivered in person or sent by U.S.
registered or certified mail to the Executive at the address at the beginning of
this Agreement, or to the Corporation at its principal executive office; Attn:
Board of Directors, or to such other address as the Executive or the Corporation
may hereafter designate in writing.
18. Waiver. Any waiver of or breach of any of the terms of
this Agreement shall not operate as a waiver of any other breach of such terms
or conditions or any other terms, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision.
19. Severability. If any provision of this Agreement or the
application thereof is held invalid or unforceable, the invalidity or
unenforceability thereof shall not affect any other provisions or applications
of this Agreement which can be given effect without the invalid or unenforceable
provision or application. If the provisions of any of Paragraphs 9 or 10 shall
be determined to be unreasonable by any court, the parties agree that the
provisions of such paragraphs shall be reduced to such less restrictive
limitations as are determined to be reasonable.
20. Governing Law. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
New Jersey.
-16-
<PAGE>
21. Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof,
superseding any other agreement for employment, written or oral. This Agreement
may not be amended or modified except by a written instrument signed by both
parties.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first set forth above.
SYBRON CHEMICALS INC.
By: Michael Delaney
---------------------------------------
Michael Delaney
---------------------------------------
/s/ Richard M. Klein
---------------------------------------
Richard M. Klein
-17-
<PAGE>
EXHIBIT 10.12
SYBRON CHEMICALS INC. LOGO
PRIVATE
July 5, 1995
Mr. John H. Schroeder
Executive Vice President
Sybron Chemicals Inc.
Birmingham Road
Birmingham, NJ 08011
Dear John:
This will confirm our understanding that, in the event Sybron Chemicals
Inc. (the "Company") disposes of substantially all of the assets of, spins off,
or otherwise sells its Ion Exchange Business (the "Divestiture") while you are
the executive within the Company directly responsible for the Ion Exchange
Business, or within three months after your employment with the Company
terminates without cause (as hereinafter defined), you shall be entitled to the
benefits set forth below.
(a) If you are not offered Comparable Employment (as hereinafter defined)
by the successor owner of the Ion Exchange Business (the "Successor"):
(i) you shall be entitled to remain employed by the Company for a
period of two years after the Divestiture with remuneration,
benefits and responsibilities prior to the Divestiture
("Comparable Employment"); or, at the Company's option,
(ii) you shall be entitled to receive from the Company for a period
of two years after the Divestiture payments equal to your base
salary plus target bonus at the time of the Divestiture, payable
at such times as you would have been entitled to receive them
had you remained employed by the Company. Such payments shall be
reduced by the amount of any compensation you receive from other
sources, but there shall be no obligation on your part to
mitigate the Company's payments to you by performing any
services or by seeking to perform any services for others.
(b) If you are offered Comparable Employment by the Successor but your
employment terminates prior to the second anniversary of the
Divestiture Without Cause:
(i) you shall be entitled to be employed by the Company for the
balance of such two-year period on terms and conditions
constituting Comparable Employment; or, at the Company's option,
BIRMINGHAM ROAD, P.O. BOX 66, BIRMINGHAM, NEW JERSEY 08011
(609) 893-1100 1-(800) 678-0020 FAX: MARKETING (609) 894-8641
FAX: ACCOUNTING (609) 893-2063 TELEX: WUD: 834446 WUI: 685-1227
<PAGE>
Page Two
J. H. Schroeder
July 5, 1995
(ii) you shall be entitled to receive from the Company for the
balance of such two-year period payments equal to your base
salary plus target bonus at the time of the Divestiture, payable
at such times as you would have been entitled to receive them
had you remained employed by the Company. Such payments shall be
reduced by any severance or continuation payments you are
entitled to receive from the Successor and by the amount of any
compensation you receive from other sources, but there shall be
no obligation on your part to mitigate the Company's payments to
you by performing any services or by seeking to perform any
services for others.
The benefits enumerated above shall not be available to you if you are
offered Comparable Employment by the Successor and you refuse such employment,
and this letter shall not be applicable to the sale, merger or disposition of
the Company as a whole.
Termination of employment Without Cause shall mean (a) termination of
employment by the employer without just cause, or (b) termination of employment
by you by the reason of (i) the employer's failure to make any of the payments,
or provide any of the material benefits (or their equivalent), to which you are
entitled, or (ii) a material adverse change in your position or in the scope of
your duties and responsibilities.
Nothing herein shall impact upon your confidentiality, non-solicitation
and/or non-competition agreements with the Company, which agreements shall
remain in full force and effect.
If the above correctly reflects our understanding, please so indicate by
signing in the space provided below for such purpose.
Sincerely,
/s/ Richard M. Klein
---------------------------------
Richard M. Klein
President and C.E.O.
RMK/me
cc: D. Gitlin (Wolf, Block, Schorr & Solis-Cohen)
AGREED:
/s/ John H. Schroeder
- -------------------------
John H. Schroeder
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Country of Owned
Company Incorporation By
------- ------------- -----
<S> <C> <C>
1. Sybron Chemicals Inc. USA-DEL. --
2. Sybron Chemical Holdings Inc. USA-DEL. 1
3. Sybron Chemicals Korea Ltd. KOREA 2
4. Sybron Chemicals (Japan) Ltd. JAPAN 2
5. Sybron Chemical Industries Nederland B.V. HOLLAND 2
6. Sybron Chemicals Canada Ltd. CANADA 2
7. Tanatex Mexicana S.A. De C.V. MEXICO 2
8. Sybron Chemicals Holdings B.V. HOLLAND 5
9. Sybron Quimica (Iberica) S.A. SPAIN 8
10. Sybron Chemie (Nederland) B.V. HOLLAND 8
11. Sybron Chemie (Deutschland) G.m.b.H. GERMANY 8
12. Sybron Chemicals (SA) Proprietary Limited S. AFRICA 8
13. Sybron Chemicals Handelsgesellschaft G.m.b.H. AUSTRIA 8
14. Sybron Chemicals UK Limited UK 10
15. Sybron Chimica Italia S.p.A. ITALY 8
16. Sybron Chimie France S.A. FRANCE 8
17. Purification Products Company USA-DEL. 2
18. Sybron Chemicals Taiwan Ltd. Taiwan 2
</TABLE>
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, a member of the Board
of Directors of Sybron Chemicals Inc., constitutes and appoints Richard M. Klein
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to execute Form 10-K, Annual Report on behalf of Sybron Chemicals
Inc., for the fiscal year ended December 31, 1995, promulgated by the Securities
and Exchange Commission pursuant to Section 13 of the Securities Exchange Act of
1934 and to file the same, and any other documents in connection therewith, from
time to time as said attorney-in-fact and agent, or his substitute or
substitutes, deems necessary and appropriate, with the Securities and Exchange
Commission and such other exchange, self-regulatory organization, or entity to
which Sybron Chemicals Inc. may, now or hereafter, be required by applicable
regulation to file.
Date: March 21, 1996 /s/ H. F. Tomfohroe III
------------------------- -----------------------------------
H. F. Tomfohroe III
-----------------------------------
(Print Name)
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, a member of the Board
of Directors of Sybron Chemicals Inc., constitutes and appoints Richard M. Klein
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to execute Form 10-K, Annual Report on behalf of Sybron Chemicals
Inc., for the fiscal year ended December 31, 1995, promulgated by the Securities
and Exchange Commission pursuant to Section 13 of the Securities Exchange Act of
1934 and to file the same, and any other documents in connection therewith, from
time to time as said attorney-in-fact and agent, or his substitute or
substitutes, deems necessary and appropriate, with the Securities and Exchange
Commission and such other exchange, self-regulatory organization, or entity to
which Sybron Chemicals Inc. may, now or hereafter, be required by applicable
regulation to file.
Date: March 19, 1996 /s/ John H. Schroeder
------------------------- -----------------------------------
John H. Schroeder
-----------------------------------
(Print Name)
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, a member of the Board
of Directors of Sybron Chemicals Inc., constitutes and appoints Richard M. Klein
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to execute Form 10-K, Annual Report on behalf of Sybron Chemicals
Inc., for the fiscal year ended December 31, 1995, promulgated by the Securities
and Exchange Commission pursuant to Section 13 of the Securities Exchange Act of
1934 and to file the same, and any other documents in connection therewith, from
time to time as said attorney-in-fact and agent, or his substitute or
substitutes, deems necessary and appropriate, with the Securities and Exchange
Commission and such other exchange, self-regulatory organization, or entity to
which Sybron Chemicals Inc. may, now or hereafter, be required by applicable
regulation to file.
Date: March 21, 1996 /s/ Michael A. Delaney
------------------------- -----------------------------------
Michael A. Delaney
-----------------------------------
(Print Name)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000832815
<NAME> SYBRON CHEMICALS INC
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
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<RECEIVABLES> 30,685,000
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<INVENTORY> 24,504,000
<CURRENT-ASSETS> 67,834,000
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