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1993
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8142
ENGELHARD CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 22-1586002
(State or other jurisdiction of incorporation or organization) (I.R.S.
Employer Identification No.)
101 WOOD AVENUE, ISELIN, NJ 08830
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (908) 205-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, par value $1 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
Number of shares of common stock outstanding as of March 1, 1994 - 95,952,842
Aggregate market value of common stock held by non-affiliates as of March 1,
1994 - $1,796,447,510
DOCUMENTS INCORPORATED BY REFERENCE
(To The Extent Indicated Herein)
Parts I, II and IV incorporate certain information by reference to the 1993
Annual Report to Shareholders for
the fiscal year ended December 31, 1993.
Part III incorporates certain information by reference to the Proxy Statement
for the 1994 Annual Meeting of Shareholders.
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Table of Contents
Page
-------------------------
1993 1993
Form Annual Proxy
Item 10-K Report Statement
------- ------- ---------
Part I
1. Business
(a) General development of business 3 - -
(b) Industry segment and geographic area data 3 - 8 37 - 38 -
(c) Description of business 3 - 8 - -
2. Properties 8 - 9 - -
3. Legal Proceedings 9 - -
4. Submission of Matters to a Vote of 10 - -
Security Holders
Part II
5. Market for Registrant's 10 19 -
Common Equity and Related
Stockholder Matters
6. Selected Financial Data 10 18 -
7. Management's Discussion and 10 20 - 24 -
Analysis of Financial Condition
and Results of Operations
8. Financial Statements and
Supplementary Data
(a) Financial Statements 10 25 - 41 -
(b) Selected Quarterly Financial Data 10 19 -
9. Changes in and Disagreements with 10 - -
Accountants on Accounting and Financial
Disclosure
Part III
10. Directors and Executive Officers of 11 - 12 - 3 - 5
the Registrant
11. Executive Compensation 12 - 10 - 20
12. Security Ownership of Certain 12 - 2-3, 6
Beneficial Owners and Management
13. Certain Relationships and Related 12 - 2-3, 4-5, 6, 9
Transactions
Part IV
14. Exhibits, Financial Statement 12 - 17 - -
Schedules, and Reports on Form 8-K
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PART I
Item 1. Business
Engelhard Corporation and its Subsidiaries (collectively referred to as
the Company) are the successors to the businesses previously operated by
Engelhard Minerals & Chemicals Corporation (EMC) through its Engelhard
Industries and Minerals & Chemicals Divisions. In 1981, the Company's Common
Stock was distributed, as a spin-off, to the shareholders of EMC, and the
Company became a separate, publicly-held corporation. The Company's principal
executive offices are located at 101 Wood Avenue, Iselin, New Jersey, 08830
(telephone number (908) 205-5000).
The Company develops, manufactures and markets technology-based specialty
chemical products and engineered materials for a wide spectrum of industrial
customers and provides services to precious metals customers.
The Company recently announced a plan to realign and consolidate
businesses, concentrate resources and better position itself to achieve its
strategic growth objectives. See Note 2 "Special charge" to the Consolidated
Financial Statements on page 30 of the 1993 Annual Report to Shareholders.
This plan resulted in a special charge of $148.0 million ($91.8 million after
tax or $.95 per share) which covered a $118.0 million pretax restructure
provision for asset writedowns related to product lines or sites being exited
together with provisions for facility shutdown, rundown and relocation and for
employee reassignment, severance and related benefits and a $30.0 million
pretax environmental reserve for sites directly affected by this plan and for
the most recent assessment of continuing environmental developments.
The plan provides for the closure, relocation or consolidation of five
facilities in the U.S. and two sites in Europe currently operated by the
Chemical Catalysts and Engineerd Materials Groups. These actions are being
taken to ensure that certain product lines stay competitive despite changing
market conditions. Further, the plan covers one Specialty Minerals and Colors
facility in the U.S. which will be rationalized or idled. The Company expects
that these restructuring activities will impact approximately 600 employees.
The plan also provides for assets of the Petroleum Catalysts, Paper Pigments
and Chemicals and Specialty Minerals and Colors Groups which will become
obsolete as a result of the development of new production processes and the
reconfiguration of existing production processes or because certain product
lines have become uneconomic. A special team has been designated by the
Management Committee of the Company to implement the changes and programs
contemplated by this plan within the year 1994.
The Company employed approximately 5,750 people as of January 1, 1994 and
operates on a worldwide basis with corporate and operating headquarters and
principal manufacturing facilities and mineral reserves in the United States
with other operations conducted in the European Community, the Russian
Federation and the Pacific Rim.
The Company's businesses are organized into three segments -Catalysts and
Chemicals, Pigments and Additives, and Engineered Materials and Precious
Metals Management.
Information concerning the Company's net sales, operating earnings and
identifiable assets by industry segment and by geographic area; inter-area
transfers by geographic area; and export sales is included in Note 13
"Industry segment and geographic area data" to the Consolidated Financial
Statements on pages 37 and 38 of the 1993 Annual Report to Shareholders and is
incorporated herein by reference.
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Catalysts and Chemicals
The Catalysts and Chemicals segment is comprised of three principal
product groups: the Environmental Catalysts Group, serving the automotive,
off-road vehicle, aircraft, industrial power generation and process
industries; the Petroleum Catalysts Group, serving the petroleum refining
industries; and the Chemical Catalysts Group, serving the chemical,
petrochemical, pharmaceutical and food processing industries.
Environmental catalysts are used in applications such as the abatement of
carbon monoxide, oxides of nitrogen and hydrocarbons from gasoline, diesel and
alternate fueled vehicle exhaust gases to meet emission control standards.
These catalysts are also used for the removal of odors, fumes and pollutants
generated by a variety of process industries including but not limited to the
painting of automobiles, appliances and other equipment; printing processes;
the manufacture of nitric acid and tires, in the curing of polymers; and power
generation sources.
The Company also participates in the manufacture and supply of automobile
exhaust emissions control catalysts through affiliates serving the Pacific
Rim: N.E. Chemcat Corporation (Japan) - 38.8 percent owned; and Hankuk-
Engelhard (South Korea) - 49 percent owned, both of which also produce other
catalysts and products. In the third quarter of 1992, the Company and Salem
Industries, Inc., formed Salem Engelhard, a jointly owned partnership to
produce and market products and services to abate, by catalytic and non-
catalytic methods, emissions of volatile organic chemicals and other
pollutants generated by a variety of process industries.
The petroleum refining catalyst products consist of a variety of catalysts
and processes used in the petroleum refining industry. The principal products
are zeolitic fluid cracking catalysts which are widely used to provide
economies in petroleum processing. The Company offers commercially a full
line of fluid cracking catalyst based on patented technology including the
DYNAMICS (registered trademark) line which can be used to control selectivity
and cracking activity virtually independently of one another. This
characteristic permits custom catalysts formulation for essentially all users.
The Company manufactures petroleum catalysts used for catalytic reforming
and isomerization of hydrocarbons to produce higher octane gasoline, for
isomerization of xylenes to produce paraxylene and orthoxylene and for
selective hydrogenation of alkylation feed stocks. The Company also
manufactures hydrotreating catalysts which are used in viscosity improvement
and aromatics saturation of lube oil feedstocks and for the removal of
contaminant sulfur, nitrogen and metals. These reforming, isomerization
and hydrotreating catalysts are marketed in North America and the Caribbean by
Acreon Catalysts, a jointly owned partnership formed by the Company and
Procatalyse. Process technologies developed by the Company are also offered
for license to the petroleum industry.
In March 1994, the Company completed its purchase of the assets
of the sorbents and moving bed catalysts businesses of Solvay Catalysts, GmbH,
in Nienburg Germany. This acquisition expands the Company's moving bed
catalysts business and provides complementary product lines serving adsorbents
applications.
The chemical catalysts products consist of catalysts and sorbents used in
the production of a variety of products or intermediates, including synthetic
fibers, fragrances, antibiotics, vitamins, polymers, plastics, detergents,
fuels and lube oils, solvents, oleochemicals and edible products. These
catalysts are generally used in both batch and continuous operations requiring
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special catalysts for each application. Chemical catalysts utilize the
Company's proprietary technology and many times are developed in close
cooperation with specific customers. Sorbents are used to purify and
decolorize naturally occurring fats and oils for manufacture into shortenings,
margarines and cooking oils.
In early 1994, the Company and ICC Technologies, Inc. formed
Engelhard/ICC, a jointly owned partnership, to develop and commercialize air
conditioning and air-treatment systems based on a proprietary new desiccant
developed by Engelhard. The partnership will market these systems worldwide.
The products of the Catalysts and Chemicals segment compete in the
marketplace on the basis of product performance, technical service and price.
No single competitor is dominant in the markets in which the Company operates.
The manufacturing operations of the Catalysts and Chemicals segment are
carried out in seven states in the United States. Wholly-owned foreign
facilities are located in Italy, The Netherlands, Germany and the United
Kingdom with equity investments located in the U.S., Japan and South Korea.
The products are sold principally through the Company's sales organizations or
its equity investments, supplemented by independent distributors and
representatives.
The principal raw materials used by the Catalysts and Chemicals segment
include precious metals, procured by the Engineered Materials and Precious
Metals Management Segment; kaolin, supplied by the Pigments and Additives
Segment; and a variety of minerals and chemicals which are generally readily
available.
As of January 1, 1994 the Catalysts and Chemicals segment had
approximately 1,860 employees worldwide, many of whom are hourly employees
covered by collective bargaining agreements. Employee relations have
generally been good.
Pigments and Additives
The Pigments and Additives segment is comprised of two principal product
groups: the Paper Pigments and Chemicals Group, serving the paper industry and
the Specialty Minerals and Colors Group, serving the plastics, coatings, paint
and allied industries.
Paper pigments and chemicals products consist primarily of coating and
extender pigments. The coating pigments provide whiteness, opacity and
improved printing properties for high-quality paper and paperboard. Other
products are used as extenders and/or combined with fibers during the
manufacture of paper or paperboard. Products for the paper market include
Ultra White 90 (registered trademark) pigment, a high-brightness material for
high-quality paper coating; Ansilex (registered trademark) pigments that
provide the desired opacity, brightness, gloss and printability in paper
products; Nuclay (registered trademark) specialized coating pigment for
lightweight publication papers; EXSILON (trademark) structured pigment that
improves the printability of lightweight coated paper and carbonless forms;
and Spectrafil (trademark) pigments for the newsprint and groundwood
specialties markets.
Specialty minerals and colors kaolin based products are used as pigments
and extenders for a variety of purposes in the manufacture of plastic, rubber,
ink, ceramic, adhesive products and in paint. Principal products include
Satintone (registered trademark) products, ASP (registered trademark) pigments
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and Translink (registered trademark) surface modified reinforcements. Other
specialty minerals and colors products which serve essentially the same end
markets as the Company's kaolin-based pigments and extenders comprise a
variety of organic and inorganic color pigments. The Group also produces
gellants and sorbents for a wide range of applications.
The products of the Pigments and Additives segment compete with similar
products as well as products made from other materials on the basis of product
performance and price. No single competitor is dominant in the markets in
which the Company operates.
Pigments and Additives operations are carried out in four states in the
United States and in Finland. The products are sold principally through the
Company's sales organization supplemented by independent distributors and
representatives.
The principal raw materials used by the Pigments and Additives segment
include kaolin and attapulgite from mineral reserves owned or leased by the
Company and a variety of minerals and chemicals which are generally readily
available.
As of January 1, 1994 the Pigments and Additives segment had approximately
1,840 employees worldwide, many of whom are hourly employees covered by
collective bargaining agreements. Employee relations have generally been
good.
Engineered Materials and Precious Metals Management
The Engineered Materials and Precious Metals Management segment includes
the Engineered Materials Group, serving a broad spectrum of industries and the
Precious Metals Management Group, which is responsible for precious metals
sourcing and dealing and for managing the precious metals requirements of the
Company and its customers.
The products of the Engineered Materials Group consist primarily of metal-
based materials such as temperature-sensing devices, crucibles, bushings,
gauze, precious metals coating and electroplating materials, conductive pastes
and powders, brazing alloys and precious metal wire, sheet, and tubing. These
products are used in the manufacture of automotive components, industrial
devices, glass and glass fiber, ceramics, chemicals, instruments, control
devices, fine jewelry, dental and medical supplies, hardware, furniture and
air conditioners. The Group also provides refining services to internal and
external customers.
The products of the Engineered Materials Group compete with similar
products as well as products made from other materials on the basis of product
performance, technical service and price. No single competitor is dominant in
the markets in which the Company operates.
Engineered Materials manufacturing and refining operations are carried out
in four states in the United States and in facilities located in the United
Kingdom, France and Italy. The products are sold principally through the
Company's sales organization, supplemented by independent distributors and
representatives.
The principal raw materials used by these operations are precious metals
including those of the platinum group (platinum, palladium, rhodium, iridium
and ruthenium), silver and gold, all of which are generally available.
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In January, 1993 the Company sold its 40 percent interest in M&T Harshaw,
an affiliate through which the Company had participated in the base metal
plating industry. In the fourth quarter of 1992, the Company formed Heraeus
Engelhard Electrochemistry Corp., a venture with Heraeus Inc. The venture, 46
percent owned, markets electrochemical products in the Western Hemisphere.
The Precious Metals Management Group is responsible for procuring precious
metals requirements of the Company's operations and its customers. Supplies
of newly mined platinum group metals are obtained primarily from South Africa
and the Russian Federation and to a lesser extent from the United States and
Canada, which four regions are the only known significant sources. Most of
these platinum group metals are obtained pursuant to a number of contractual
arrangements with different durations and terms. Management believes that
available supplies of such metals will be adequate to meet the needs of the
Company for the foreseeable future. Gold and silver are purchased from
various sources. In addition, in the normal course of business, certain
customers and suppliers deposit significant quantities of precious metals with
the Company under a variety of arrangements. Equivalent quantities of
precious metals are returnable as product or in other forms.
The Precious Metals Management Group also engages in precious metal
dealing operations with industrial consumers, dealers, central banks, miners
and refiners. The group does not routinely speculate in the precious metals
market. Offices are located in the United States, the United Kingdom,
Switzerland, Japan and the Russian Federation.
As of January 1, 1994 the Engineered Materials and Precious Metals
Management segment had approximately 1,470 employees throughout the world,
many of whom are hourly employees covered by collective bargaining agreements.
Employee relations have generally been good.
Major Customer
Approximately 12 percent and 10 percent of the Company's net sales for the
years ended December 31, 1992 and 1991, respectively, were generated from a
customer of both the Catalysts and Chemicals and Engineered Materials and
Precious Metals Management segments. Sales to this customer included both
fabricated products and precious metal and were therefore significantly
influenced by fluctuations in precious metal prices as well as the quantity of
metal purchased. In such cases, the market price fluctuations and quantities
purchased can result in material variations in sales reported but do not
usually have a direct or substantive effect on earnings.
Research and Patents
The Company currently employs approximately 300 scientists, technicians
and auxiliary personnel engaged in research and development in the field of
chemistry and metallurgy. These activities are conducted in the United States
and abroad. The Company spent approximately $45 million on research and
development in each of the last three years.
Research facilities include fully staffed instrument analysis
laboratories, which the Company maintains in order to achieve the high level
of precision necessary for its various businesses and to assist customers in
understanding the performance of Engelhard products in their specific
application.
The Company owns or is licensed under numerous patents which have been
secured over a period of years. It is the policy of the Company to apply for
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patents whenever it develops new products or processes considered to be
commercially viable and, in appropriate circumstances, to seek licenses when
such products or processes are developed by others. While the Company deems
its various patents and licenses to be important to certain aspects of its
operations, it does not consider any significant portion or its business as a
whole to be materially dependent on patent protection.
Environmental Matters
The Company devotes considerable attention to the requirements of
environmental compliance. Management believes that compliance programs in
effect at all major operations satisfactorily meet the requirements of local,
state and federal environmental agencies. However, risks of increased costs
and liabilities relating to environmental matters are inherent in certain
Company operations, as they are with most other industrial companies. See
Note 15 "Environmental costs" in the Notes to the Consolidated Financial
Statements on pages 39 and 40 of the 1993 Annual Report to Shareholders.
The Company is preparing, has under review, or is implementing with the
oversight of cognizant environmental agencies, studies and cleanup plans at
several locations, including Salt Lake City, Utah and Plainville,
Massachusetts. In addition, the Company is in the process of implementing a
cleanup plan approved by the New Jersey Department of Environmental Protection
and Energy for the Company's Newark, New Jersey site. In December 1993 in
connection with obtaining its operating permit under the Utah Solid and
Hazardous Waste Act, the Company entered into an agreement with the Utah Solid
and Hazardous Waste Control Board to assess the environmental status of its
Salt Lake facility. With respect to the Plainville site, in September 1993,
the United States Environmental Protection Agency (EPA) and the Company
entered into a Consent Order under which the Company will conduct
stabilization measures and further study contamination at the site. This site
is also included on the Nuclear Regulatory Commission's (NRC) "Existing Site
Decommissioning Management Plan Sites" list and the NRC has approved the
Company's proposed plans for additional investigation of the site and an
interior cleanup of the plant.
The Company is currently identified as a potentially responsible party
(PRP) at 16 sites by the EPA under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (CERCLA) or by a state or
local equivalent under analogous laws. Subject to outstanding state claims or
the reopening of existing settlement agreements for extraordinary
circumstances or natural resource damages, the Company has settled a number of
other cleanup proceedings. In several additional instances, PRPs named by the
EPA or its state equivalent have notified or sued the Company claiming that
the Company should have been named a PRP and allocated a share of clean-up
costs. The Company has also responded to information requests from the EPA at
other CERCLA sites. The Company believes it is a de minimis contributor at
most of the sites referenced above and that there is no legal or factual basis
for the Company's alleged responsibility for any hazardous substances present
at certain of these sites.
While it is not possible at this time to predict with certainty the
ultimate outcome of all of the matters discussed above, it is the opinion of
management, after consultation with counsel and based on existing information,
that the resolution of these lawsuits and other matters in the aggregate will
not have a material adverse effect on the Company or its business.
Item 2. Properties
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The Company owns approximately 15 acres of land and three buildings with a
combined area of approximately 168,000 square feet in Iselin, New Jersey.
These buildings serve as the major research and development facilities for the
Company's operations. The Company also owns a research facility in the
Cleveland, Ohio area. In 1990, the Company entered into a 15 year lease for a
271,000 square foot building in Iselin, New Jersey, proximate to its owned
facilities, which serves as the principal executive and administrative offices
of the Company and its operating segments. This lease provides for three
consecutive five-year-period extensions. The building is owned by a
partnership in which the Company holds a significant interest.
The Catalysts and Chemicals segment owns and operates a complex of plants
in Georgia that manufactures petroleum cracking catalysts, and other domestic
plants located in Union, New Jersey; Huntsville, Alabama; Seneca, South
Carolina; Little Rock, Arkansas; Elyria, Ohio and Jackson, Mississippi.
Foreign manufacturing operations are conducted at owned facilities in Italy,
The Netherlands, Germany and the United Kingdom. In addition, the segment
owns a mine in Mississippi and leases a mine in Arizona.
The Pigments and Additives segment owns and operates five kaolin mines and
five milling facilities in middle Georgia which serve an 85 mile network of
pipelines to four processing plants. It also owns land containing kaolin clay
and leases, on a long-term basis, kaolin mineral rights to additional acreage.
The segment also owns and operates an attapulgite processing plant in
Attapulgus, Georgia near the area containing its attapulgite reserves.
Management believes that the Company's crude kaolin and attapulgite reserves
will be sufficient to meet its needs for the foreseeable future. The segment
also owns and operates color pigments manufacturing facilities in Louisville,
Kentucky, Sylmar, California and Elyria, Ohio. Foreign operations are
conducted at owned facilities in Finland. In addition, the segment owns mines
in Florida.
The Engineered Materials and Precious Metals Management segment owns and
operates manufacturing facilities in Carteret and East Newark, New Jersey,
Anaheim and Fremont, California, Lincoln Park, Michigan and Warwick, Rhode
Island. Other manufacturing operations are conducted at owned facilities in
the United Kingdom, France and Italy.
The Company announced a plan to realign and consolidate businesses,
concentrate resources and better position itself to achieve its strategic
growth objectives. (See Item 1 "Business" above and Note 2 "Special charge"
in the Notes to the Consolidated Financial Statements on page 30 of the 1993
Annual Report to Shareholders.) Management believes that the resulting
configuration will be suitable and have sufficient capacity to meet its normal
operating requirements for the foreseeable future.
Item 3. Legal Proceedings
The Company is a defendant in a number of lawsuits covering a wide range
of matters. In some of these pending lawsuits, the remedies sought or damages
claimed are substantial. The Company has also received a demand for
indemnification from a distributor of the Company's talc products. The
Company is vigorously defending against these claims. See also "Environmental
Matters" for a discussion about lawsuits and matters concerning environmental
compliance. While it is not possible at this time to predict with certainty
the ultimate outcome of these lawsuits or the resolution of the environmental
contingencies, it is the opinion of management, after consultation with counsel
and based on available information that the disposition of these matters should
not have a material adverse effect on the Company or its business.
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Submission of Matters to a Vote of
Item 4. Security Holders
Not applicable.
PART II
Market for Registrant's Common Equity
Item 5. and Related Stockholder Matters
Information concerning the Company's common stock market prices,
dividends, principal markets on which the stock is traded and number of
stockholders of record is included in the Common Stock Data on page 19 of the
1993 Annual Report to Shareholders and is incorporated herein by reference.
Item 6. Selected Financial Data
Information concerning the Company's net sales, net earnings, net earnings
per share, total assets, long-term debt and cash dividends paid per share for
the years 1989 through 1993 is included in the Selected Financial Data on page
18 of the 1993 Annual Report to Shareholders and is incorporated herein by
reference.
Management's Discussion and Analysis
Item 7. of Financial Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of
Operations may be found on pages 20 through 24 of the 1993 Annual Report to
Shareholders and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The following financial statements and supplementary information, included
in the 1993 Annual Report to Shareholders, is incorporated herein by
reference:
1993 Annual Report
------------------
Report of Independent Public Accountants 41
Consolidated Statements of Earnings for each of the 25
three years in the period ended December 31, 1993
Consolidated Balance Sheets at December 31, 1993 and 1992 26
Consolidated Statements of Cash Flows for each of the 27
three years in the period ended December 31, 1993
Consolidated Statements of Shareholders' Equity for each of 28
the three years in the period ended December 31, 1993
Notes to Consolidated Financial Statements 29 - 40
Selected Quarterly Financial Data 19
Changes in and Disagreements with
Item 9. Accountants on Accounting and Financial Disclosure
Not applicable.
-10-
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Directors -
Information concerning directors of the Company is included under the
caption "Election of Directors" and "Information with Respect to Nominees
and Directors Whose Terms Continue" on pages 3 through 5 of the Proxy
Statement for the 1994 Annual Meeting of Shareholders and is incorporated
herein by reference.
(b) Executive Officers -
ORIN R. SMITH * Age 58. President and Chief Executive Officer of
the Company from prior to 1989. Mr. Smith is
also a director of Vulcan Materials Company, The
Summit Bancorporation, The Louisiana Land and
Exploration Company and New Jersey Manufacturers
Insurance Company.
L. DONALD LATORRE * Age 56. Senior Vice President and Chief
Operating Officer of the Company since June 1990.
Vice President of the Company and President of
the Pigments and Additives Division prior
thereto.
ROBERT L. GUYETT * Age 57. Senior Vice President and Chief
Financial Officer of the Company since September
1991. Senior Vice President and Chief Financial
Officer of Fluor Corporation prior thereto. Mr.
Guyett is also a director of Canonie
Environmental Services Corp. and Newport
Corporation.
MARTIN J. CONNOR, JR. Age 61. Controller of the Company from prior to
1989.
ARTHUR A. DORNBUSCH, II Age 50. Vice President, General Counsel and
Secretary of the Company from prior to 1989.
WILLIAM M. DUGLE Age 51. Vice President, Human Resources of the
Company from prior to 1989.
HARMON M. GARFINKEL Age 60. Vice President, Research and Development
of the Company from prior to 1989.
ROBERT J. SCHAFFHAUSER Age 55. Vice President, Corporate Development
since September 1989. Vice President, Business
Development of Chemical Waste Management from
prior to September 1989.
MICHAEL A. SPERDUTO Age 36. Treasurer of the Company since January
1993. Vice President of Finance of the Precious
Metals Management Group from prior to 1989.
- ---------------------------------
* Also a director of the Company
-11-
FRANCIS X. VITALE, JR. Age 49. Vice President, Investor Relations and
Corporate Communications of the Company from
prior to 1989.
Officers of the Company are elected at the meeting of the Board of
Directors held in May of each year after the annual meeting of shareholders
and serve until their successors shall be elected and qualified and shall
serve as such at the pleasure of the Board.
Item 11. Executive Compensation
Information concerning executive compensation is included under the
caption "Executive Compensation and Other Information" on pages 10 through 20
of the Proxy Statement for the 1994 Annual Meeting of Shareholders and is
incorporated herein by reference.
Security Ownership of Certain
Item 12. Beneficial Owners and Management
Information concerning security ownership of certain beneficial owners and
management is included under the captions "Information as to Certain
Shareholders" and "Share Ownership of Directors and Officers" on pages 2
through 3 and page 6, respectively, of the Proxy Statement for the 1994 Annual
Meeting of Shareholders and is incorporated herein by reference.
Additionally, as of March 3, 1994, no Director or Officer of the Company
beneficially owned as much as one percent of the Company's common stock
(including exercisable options) and all Directors and Officers as a group own
approximately two percent of the total outstanding shares (including
exercisable options).
Certain Relationships
Item 13. and Related Transactions
Information concerning certain business relationships of nominees for
director and directors and related transactions is included under the captions
"Information as to Certain Shareholders", "Information with Respect to
Nominees and Directors Whose Terms Continue", "Share Ownership of Directors
and Officers" and "Compensation Committee Interlocks, Insider Participation
and Certain Transactions" on pages 2 through 3, pages 4 through 5, page 6, and
page 9, respectively, of the Proxy Statement for the 1994 Annual Meeting of
Shareholders and is incorporated herein by reference.
PART IV
Exhibits, Financial Statement
Item 14. Schedules and Reports on Form 8-K
(a) Financial Statements and Schedules
(1) Financial Statements - The Report of Independent Public Accountants
and Financial Statements are incorporated herein by reference to the
page numbers indicated in the 1993 Annual Report to Shareholders.
-12-
1993 Annual Report
--------------------
Report of Independent Public Accountants 41
Consolidated Statements of Earnings for each of the 25
three years in the period ended December 31, 1993
Consolidated Balance Sheets at December 31, 1993 and 1992 26
Consolidated Statements of Cash Flows for each of the 27
three years in the period ended December 31, 1993
Consolidated Statements of Shareholders' Equity for each 28
of the three years in the period ended December 31, 1993
Notes to Consolidated Financial Statements 29 - 40
(2) Financial Statement Schedules
1993 Form 10-K
----------------
Report of Independent Public Accountants on Financial 20
Statement Schedules
V - Property, Plant and Equipment 21
VI - Accumulated Depreciation, Depletion and 22
Amortization of Property, Plant and Equipment
IX - Short-term Borrowings 23
X - Supplementary Income Statement Information 24
Consolidated financial statement schedules not filed herein have been
omitted either because they are not applicable or the required information is
shown in the Notes to Consolidated Financial Statements of the 1993 Annual
Report to Shareholders.
-13-
Location:
-----------
(3) Exhibits
(3a) Certificate of Incorporation of the Company *
(incorporated by reference to Form 10, as amended
on Form 8-K filed with the Securities and Exchange
Commission on May 19, 1981).
(3b) By-laws of the Company as amended September 17, 1981 *
(incorporated by reference to Form 10-Q for the
quarter ended September 30, 1981).
(3c) Certificate of Amendment to the Restated Certificate *
of Incorporation of the Company (incorporated by
reference to Form 10-K for the year ended
December 31, 1987).
(3d) Article XVII of the Registrant's By-laws as amended *
on May 2, 1988 (incorporated by reference to Form 8-K
filed with the Securities and Exchange Commission on
May 21, 1988).
(3e) Certificate of Amendment to the Restated Certificate *
of Incorporation of the Company (Incorporated by
reference to Form 10-Q for the quarter ended
March 31, 1993).
(10) Material Contracts.
(a) Form of Agreement of Transfer entered into between *
Engelhard Minerals & Chemicals Corporation and the
Company, dated May 18, 1981 (incorporated by
reference to Form 10, as amended on Form 8 filed
with the Securities and Exchange Commission on
May 19, 1981).
(b) Engelhard Corporation Non-Qualified Stock Option *
Plan of 1981 (incorporated by reference to the Proxy
Statement for 1981 Annual Meeting of Shareholders of
the Engelhard Minerals & Chemicals Corporation).
(c) Amendment to the Engelhard Corporation Non-Qualified *
Stock Option Plan of 1981 adopted January 7, 1982
(incorporated by reference to the Engelhard Corporation
Annual Report, Form 10-K for the fiscal year ended
December 31, 1981).
(d) Supplementary Supply Agreement between Rustenburg *
Platinum Mines Limited and Engelhard Minerals &
Chemicals Corporation, effective as of January
1, 1972 (incorporated by reference to the Engelhard
Minerals & Chemicals Corporation Annual Report, Form
10-K for the fiscal year ended December 31, 1972). **
-14-
Location:
----------
(e) Amendment to the Supplementary Supply Agreement **
between Rustenburg Platinum Mines Limited and
Engelhard Minerals & Chemicals Corporation,
effective as of January 1, 1972 dated April 1,
1973 (incorporated by reference to the Engelhard
Minerals & Chemicals Corporation Annual Report,
Form 10-K for the fiscal year ended December 31, 1973).
(f) Addendum to the Supplementary Supply Agreement between **
Rustenburg Platinum Mines Limited and Engelhard
Minerals & Chemicals Corporation dated June 18
and July 5, 1974 (incorporated by reference to
Form 10-K, as amended on Form 8 filed with the
Securities and Exchange Commission on May 19, 1981).
(g) Amendment dated December 14, 1977 as supplemented **
January 10, 1978 to the Main Supply Agreement and
Supplementary Supply Agreement between Rustenburg
Platinum Mines Limited and Engelhard Minerals &
Chemicals Corporation (incorporated by reference
to the Engelhard Minerals & Chemicals Corporation
Annual Report, Form 10-K for the fiscal year ended
December 31, 1977).
(h) Amendment dated April 3, 1979 to the Supplemental **
Supply Agreement between Rustenburg Platinum Mines
Limited and Engelhard Minerals & Chemicals Corporation
(incorporated by reference to the Engelhard Minerals &
Chemicals Corporation Annual Report, Form 10-K for the
fiscal year ended December 31, 1979).
(i) Main Supply Agreement between P.G.M. (Brakspruit) **
(Proprietary) Limited and Engelhard Industries
International Limited effective as of January 1, 1972
and supplementary letter with respect thereto
(incorporated by reference to the Engelhard Minerals
& Chemicals Corporation Annual Report, Form 10-K for
the fiscal year ended December 31, 1972).
(j) Agreement between Rustenburg Platinum Mines Limited **
and Engelhard Minerals & Chemicals Corporation,
dated November 3, 1972 (incorporated by reference to
the Engelhard Minerals & Chemicals Corporation Annual
Report, Form 10-K for the fiscal year ended
December 31, 1972).
(k) Amendment to the Engelhard Corporation Stock Option *
Plan of 1981 adopted January 6, 1983 (incorporated by
reference to the Engelhard Corporation Registration
Statement on Form S-8 dated June 15, 1983).
-15-
Location:
-----------
(l) Form of agreement with elected officers with *
employment agreements in the event of an
acquisition of a control interest in the
Company (incorporated by reference to the
Engelhard Corporation Annual Report, Form 10-K
for the fiscal year ended December 31, 1983).
(m) Form of agreement with elected officers without *
employment agreements in the event of an acquisition
of a control interest in the Company (incorporated
by reference to the Engelhard Corporation Annual
Report, Form 10-K for the fiscal year ended December
31, 1983).
(n) Amendment to the Engelhard Corporation Non-qualified *
Stock Option Plan of 1981 adopted March 7, 1986
(incorporated by reference to Engelhard Corporation
Annual Report, Form 10-K for the fiscal year ended
December 31, 1986).
(o) Key Employees Stock Bonus Plan of Engelhard Corporation *
effective July 1, 1986 (incorporated by reference to the
Engelhard Corporation Annual Report, Form 10-K for the
fiscal year ended December 31, 1986).
(p) Employee Agreement with Orin R. Smith, President and *
Chief Executive Officer of the Company, dated May
21, 1986 (incorporated by reference to the Engelhard
Corporation Annual Report, Form 10-K for the fiscal
year ended December 31, 1986).
(q) Amendment to the Key Employees Stock Bonus Plan of *
Engelhard Corporation adopted March 7, 1991
(incorporated by reference to the Engelhard Corporation
1991 definitive Proxy Statement as filed with the
Securities and Exchange Commission on March 27, 1991).
(r) Stock Option Plan of 1991 (incorporated by reference to *
the Engelhard Corporation 1991 definitive Proxy
Statement as filed with the Securities and Exchange
Commission on March 27, 1991).
(s) Letters from Rustenburg Platinum Mines Limited dated *
March 13, 1992 advising that the Main Supply and
Supplementary Supply Agreement (Exhibits D through J
above) will terminate in their present forms on
December 31, 1996, the end of the initial period.
-16-
Location:
-----------
(13) Items included in the 1993 Annual Report to 25
Shareholders expressly incorporated by reference.
(22) Subsidiaries of the Registrant 57
(24) Consent of Independent Public Accountants 59
(25) Powers of Attorney 61
(28) (a) Annual Report on Form 11-K of the Salary Deferral 70
Savings Plan of Engelhard Corporation for each
of the three years in the period ended
December 31, 1993.
(b) Annual Report on Form 11-K of the Engelhard 97
Corporation Savings Plan for Hourly Paid
Employees for each of the three years in the
period ended December 31, 1993.
(b) Report on Form 8-K
-------------------
Not applicable
* Incorporated by reference as indicated.
** Incorporated by reference as indicated and
granted confidential treatment pursuant
to an application filed by Engelhard
Minerals & Chemicals Corporation.
-17-
Signatures
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in Iselin, New
Jersey on the 28th day of March 1994.
Engelhard Corporation
-----------------------
Registrant
/s/Orin R. Smith
------------------
Orin R. Smith
(President and Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/Orin R. Smith President and Chief Executive March 28, 1994
-------------------- Officer & Director
Orin R. Smith (Principal Executive Officer)
/s/Robert L. Guyett Senior Vice President and March 28, 1994
--------------------- Chief Financial Officer & Director
Robert L. Guyett (Principal Financial Officer)
/s/Martin J. Connor, Jr. Controller March 28, 1994
-------------------------- (Principal Accounting Officer)
Martin J. Connor, Jr.
-18-
* Director March 28, 1994
--------------------------
Marion H. Antonini
* Director March 28, 1994
--------------------------
L. Donald LaTorre
* Director March 28, 1994
--------------------------
Gerard E. Munera
* Director March 28, 1994
--------------------------
James V. Napier
* Director March 28, 1994
--------------------------
Norma T. Pace
* Director March 28, 1994
--------------------------
Reuben F. Richards
* Director March 28, 1994
--------------------------
Henry R. Slack
* Director March 28, 1994
--------------------------
Douglas G. Watson
* By this signature below, Arthur A. Dornbusch, II has signed this Form 10-K
as attorney-in-fact for each person indicated by an asterisk pursuant to
duly executed powers of attorney filed with the Securities and Exchange
Commission included herein as Exhibit 25.
/s/ Arthur A. Dornbusch, II March 28, 1994
----------------------------------
Arthur A. Dornbusch, II
-19-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
FINANCIAL STATEMENT SCHEDULES
To the Shareholders and Board of Directors of Engelhard Corporation:
Our report on the consolidated financial statements of Engelhard Corporation
and Subsidiaries has been incorporated by reference in this Form 10-K from
page 41 of the 1993 Annual Report to Shareholders of Engelhard Corporation.
In connection with our audits of such financial statements, we have also
audited the related financial statement schedules listed in the Index in Item
14 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND
New York, New York
March 28, 1994
-20-
SCHEDULE V
ENGELHARD CORPORATION AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT THREE YEARS ENDED DECEMBER 31, 1993
(in thousands)
Balance Other Balance
at Beginning Additions Changes at End
Classification of Period at Cost Disposals Add(Deduct) of Period
----------- ----------- ----------- ---------- ----------
1993
Land $ 20,138 $ 110 $ - $ (546) $ 19,702
Buildings and building improvements 150,808 4,960 274 (2,733) 152,761
Machinery and equipment 849,004 76,620 16,735 8,231 (a) 917,120
Construction and installations in progress 41,674 24,672 - 1,518 67,864
Mineral deposits and mine development 63,560 17,775 - (13,336)(c) 67,999
1993 Special charge - - - (54,400) (54,400)
----------- ----------- ----------- ---------- ----------
$1,125,184 $ 124,137 $ 17,009 $ (61,266) $1,171,046
=========== =========== =========== ========== ==========
1992
Land $ 21,301 $ 484 $ 68 $ (1,579) $ 20,138
Buildings and building improvements 143,243 3,098 1,601 6,068 150,808
Machinery and equipment 833,803 38,504 9,782 (13,521)(b) 849,004
Construction and installations in progress 28,188 16,984 - (3,498) 41,674
Mineral deposits and mine development 62,873 14,792 - (14,105)(c) 63,560
----------- ----------- ----------- ---------- ----------
$1,089,408 $ 73,862 $ 11,451 $ (26,635) $1,125,184
=========== =========== =========== ========== ==========
1991
Land $ 21,161 $ 160 $ 57 $ 37 $ 21,301
Buildings and building improvements 147,308 1,880 3,440 (2,505) 143,243
Machinery and equipment 826,685 38,816 27,867 (3,831) 833,803
Construction and installations in progress 20,714 9,968 - (2,494) 28,188
Mineral deposits and mine development 61,951 13,836 - (12,914)(c) 62,873
----------- ----------- ----------- ---------- ----------
$1,077,819 $ 64,660 $ 31,364 $ (21,707) $1,089,408
=========== =========== =========== ========== ==========
(a) Predominately the grossing up of certain foreign assets previously recorded net of depreciation.
(b) Predominately foreign currency translation adjustment.
(c) Predominately amortization of deferred stripping costs.
-21-
SCHEDULE VI
ENGELHARD CORPORATION AND SUBSIDIARIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
THREE YEARS ENDED DECEMBER 31, 1993
(in thousands)
Additions
Balance Charged to Other Balance
At Beginning Costs and Changes at End
Description of Period Expenses Disposals Add(Deduct)(a) of Period
---------- ---------- ---------- ---------- ----------
1993
Depreciation and amortization
Buildings and building improvements $ 75,341 $ 6,188 $ 41 $ 1,754 $ 83,242
Machinery and equipment 528,718 59,254 12,850 11,070 (b) 586,192
Depletion-mineral deposits and
mine development 6,703 469 - - 7,172
---------- ---------- ---------- ---------- ----------
$ 610,762 $ 65,911 $ 12,891 $ 12,824 $ 676,606
========== ========== ========== ========== ==========
1992
Depreciation and amortization
Buildings and building improvements $ 70,698 $ 6,461 $ 1,002 $ (816) $ 75,341
Machinery and equipment 478,702 65,524 7,201 (8,307) 528,718
Depletion-mineral deposits and
mine development 6,712 456 - (465) 6,703
---------- ---------- ---------- ---------- ----------
$ 556,112 $ 72,441 $ 8,203 $ (9,588) $ 610,762
========== ========== ========== ========== ==========
1991
Depreciation and amortization
Buildings and building improvements $ 64,410 $ 6,800 $ 3,088 $ 2,576 $ 70,698
Machinery and equipment 444,215 68,228 26,160 (7,581) 478,702
Depletion-mineral deposits and
mine development 5,784 928 - - 6,712
---------- ---------- ---------- ---------- ----------
$ 514,409 $ 75,956 $ 29,248 $ (5,005) $ 556,112
========== ========== ========== ========== ==========
(a) Unless otherwise noted, predominately foreign currency translation adjustment.
(b) Predominately the grossing up of certain foreign assets previously recorded net of depreciation.
-22-
SCHEDULE IX
ENGELHARD CORPORATION AND SUBSIDIARIES
SHORT-TERM BORROWINGS
THREE YEARS ENDED DECEMBER 31, 1993
(in thousands)
Weighted Maximum Average Weighted
Balance Average Amount Amount Average
at End of Interest Rate Outstanding Outstanding Interest Rate
Category Period at End of Period During Period(a) During Period(a) During Period(a)
-------- ---------------- ----------------- ----------------- -----------------
1993
Domestic and foreign banks $ 79,987 3.7 % $113,587 $ 64,170 4.5 %
Holders of commercial paper 20,000 3.3 50,000 15,977 3.1
1992
Domestic and foreign banks $ 50,682 5.0 % $ 85,030 $ 49,899 6.9 %
Holders of commercial paper - - - - -
1991
Domestic and foreign banks $ 17,691 6.4 % $ 87,614 $ 53,551 7.2 %
Holders of commercial paper - - 100,000 34,755 6.2
(a) Information is calculated based on month-end balances and interest rates.
-23-
SCHEDULE X
ENGELHARD CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
THREE YEARS ENDED DECEMBER 31, 1993
(in thousands)
Charged to
Description Costs and Expenses
----------------------
1993
Maintenance and Repairs $58,589
1992
Maintenance and Repairs $61,226
1991
Maintenance and Repairs $60,264
-24-
EXHIBIT 13:
ITEMS INCLUDED IN THE
1993 ANNUAL REPORT TO
SHAREHOLDERS EXPRESSLY
INCORPORATED BY REFERENCE.
-25-
Selected Financial Data *
($ in millions, except per share amounts)
1993 1992 1991 1990 1989
--------- --------- --------- --------- ---------
Net sales $ 2,150.9 $ 2,399.7 $ 2,436.4 $ 2,942.2 $ 2,403.0
Net earnings (loss)(a) .7 10.6 87.9 70.3 (77.5)
Net earnings (loss)
per share(a) .01 .11 .87 .70 (.76)
Property, plant and
equipment, net $ 494.4 $ 514.4 $ 533.3 $ 563.4 $ 551.7
Total assets 1,279.1 1,287.7 1,279.4 1,343.3 1,339.6
Long-term debt 112.2 113.9 114.5 119.4 220.1
Shareholders' equity 531.3 647.2 756.6 709.8 636.9
Cash dividends paid
per share $ .42 $ .37 $ .33 $ .30 $ .25
Return on average
shareholders' equity(a) .1% 1.5% 12.0% 10.4% (11.1)%
Current ratio 1.1 1.5 1.5 1.3 1.4
Net cash provided by
operating activities $ 130.4 $ 169.5 $ 135.4 $ 150.0 $ 109.3
(a) Results in 1993 include a special charge of $91.8 million after-tax ($.95
per share) for realignment and consolidation of businesses and environmental
matters; an after tax gain of $6.3 million ($.06 per share) from the sale of
the Company's interest in M&T Harshaw, a base-metal plating business; and an
after-tax cumulative effect of an accounting change of $16.0 million ($.16
per share) as a result of adopting the provisions of Statement of Financial
Accounting Standards No. 112 "Employers' Accounting for Postemployment
Benefits".
Results in 1992 include an after-tax cumulative effect of accounting
changes of $89.5 million ($.89 per share) as a result of adopting the
provisions of Statements of Financial Accounting Standards No. 106
"Employers' Accounting for Postretirement Benefits Other Than Pensions" and
No. 109 "Accounting for Income Taxes".
Results in 1989 include a special charge of $160.4 million after tax
($1.59 per share) for exiting and restructuring certain operations; and an
after-tax gain of $21.5 million ($.21 per share) from the public sale of a
portion of the stock of N.E. Chemcat Corporation, a Japanese affiliate.
* Reflects the three-for-two stock splits as of September 30, 1993 and
September 30, 1992.
-26-
Selected Quarterly Financial Data (unaudited)
(in millions, except per share amounts)
First Second Third Fourth
quarter quarter quarter quarter
1993 ------- ------- ------- -------
Net sales $ 490.2 $ 563.2 $ 558.1 $ 539.4
Gross profit 78.6 93.4 91.4 93.0
Earnings (loss) before income taxes and
cumulative effect of an accounting change 29.7 38.1 35.2 (107.7)
Earnings (loss) before cumulative effect
of an accounting change 22.2 28.5 27.6 (61.6)
Net earnings (loss) 6.2 28.5 27.6 (61.6)
Net earnings (loss) per share of common stock:*
Before cumulative effect of an accounting change .22 .29 .29 (.64)
Net earnings (loss) .06 .29 .29 (.64)
1992
Net sales $ 630.0 $ 637.0 $ 586.6 $ 546.1
Gross profit 91.6 93.9 91.9 89.3
Earnings before income taxes and cumulative
effect of accounting changes 30.4 34.6 31.3 37.6
Earnings before cumulative effect of
accounting changes 22.5 25.6 24.0 28.0
Net earnings (loss) (67.0) 25.6 24.0 28.0
Net earnings per share of common stock:*
Before cumulative effect of accounting changes .22 .25 .24 .29
Net earnings (loss) (.66) .25 .24 .29
Results in the first quarter of 1993 include a $10.1 million gain on the sale
of M&T Harshaw ($6.3 million after tax or $.06 per share). Results in the
fourth quarter of 1993 include a $148.0 million special charge ($91.8 million
after tax or $.95 per share) for realignment and consolidation of businesses
and environmental matters. In the fourth quarter of 1993, the Company
realized a similar amount of income from the sale of environmental catalyst
technology to Russia as in the first quarter of 1992 (approximately $2.4
million after tax). During the fourth quarter of 1993, the Company changed
its method of accounting for postemployment benefits, effective as of January
1, 1993. The results presented for the first quarter of 1993 have been
restated for the cumulative effect of this change. The results presented for
the first three quarters of 1993 have not been restated for the incremental
impact of the new accounting method as the effect was not significant.
Effective as of January 1, 1992, the Company changed its methods of
accounting for income taxes and postretirement benefits other than pensions.
During the fourth quarter of 1992, the Company recovered certain employee
benefit costs ($2.3 million after tax) previously expensed.
Earnings per share amounts are calculated independently for each of the
quarters presented. The sum of the quarters may not equal the full year
earnings per share amounts.
-27-
Common Stock Data (unaudited)
As of March 5, 1994, there were 8,869 holders of record of the Company's
common stock, which is traded on the New York Stock Exchange (ticker symbol
"EC"), as well as the London and Swiss stock exchanges. The range of market
prices and cash dividends paid for each quarterly period were as follows:
NYSE Market Price* Cash
----------------------- dividends paid
High Low per share*
-------- -------- ----------
1993
First quarter $ 29 7/8 $ 22 7/8 $ .10
Second quarter 28 5/8 19 3/8 .10
Third quarter 27 3/8 25 1/4 .11
Fourth quarter 28 3/4 22 3/4 .11
1992
First quarter $ 17 $ 13 7/8 $ .09
Second quarter 18 1/8 15 1/2 .09
Third quarter 20 5/8 17 5/8 .10
Fourth quarter 24 3/8 19 5/8 .10
* Reflects the three-for-two stock splits as of September 30, 1993 and
September 30, 1992.
-28-
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
- ----------------------
The Company reported net earnings before cumulative effect of
accounting changes of $16.7 million ($.17 per share) in 1993 compared
with $100.1 million ($1.00 per share) in 1992 and $87.9 million ($.87
per share) in 1991. 1993 net earnings included a special charge (see
"Special Charge") of $91.8 million ($.95 per share) and a gain on the
sale of an investment (see "Gain on Sale of Investment") of $6.3
million ($.06 per share). Net sales for 1993 were $2.2 billion
compared with $2.4 billion in 1992 and $2.4 billion in 1991.
In 1993, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 112 "Employers' Accounting for
Postemployment Benefits" (SFAS No. 112). The impact of this change on
1993 results was a one-time, noncash, after-tax charge of $16.0
million ($.16 per share). Net earnings after the cumulative effect
were $.7 million ($.01 per share).
In 1992, the Company adopted the provisions of Statements of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions" (SFAS No. 106) and No. 109 "Accounting
for Income Taxes." The impact of these changes on 1992 results was a
one-time, noncash, after-tax charge of $89.5 million ($.89 per share).
Net earnings after the cumulative effect were $10.6 million ($.11 per
share).
Special Charge
- ---------------
The Company announced a plan to realign and consolidate businesses,
concentrate resources and better position itself to achieve its
strategic growth objectives. This plan resulted in a special charge
of $148.0 million ($91.8 million after tax or $.95 per share) in
1993, which covered a $118.0 million pretax restructure provision for
asset writedowns related to product lines or sites being exited
together with provisions for facility shutdown, rundown and
relocation and for employee reassignment, severance and related
benefits and a $30.0 million pretax environmental reserve for sites
directly affected by this plan and for the most recent assessment of
continuing environmental developments. The special charge comprised
$76.0 million of noncash charges and a net cash outlay of $15.8
million after considering estimated proceeds and tax benefits.
The plan provides for the closure, relocation or consolidation of five
facilities in the U.S. and two sites in Europe currently operated by
the Chemical Catalysts and Engineered Materials Groups. These actions
are being taken to ensure that certain product lines stay competitive
despite changing market conditions. Further, the plan covers one
Specialty Minerals and Colors facility in the U.S. which will be
rationalized or idled. The Company expects that these restructuring
activities will impact approximately 600 employees.
The plan also provides for assets of the Petroleum Catalysts, Paper
Pigments and Chemicals and Specialty Minerals and Colors Groups which
will become obsolete as a result of the development of new production
processes and the reconfiguration of existing production processes or
because certain product lines have become uneconomic.
-29-
The realignment and consolidation plans are expected to yield annual
savings of about $20 to $25 million beginning in 1995 as a result of
lower manufacturing and operating expenses and annual cash savings of
about $15 million as a result of lower employee and plant operating
costs.
A special team has been designated by the Management Committee of the
Company to implement the changes and programs contemplated by this
special charge within the year 1994. The team is expected to ensure
that the special charge actions better position the Company to
achieve its strategic growth objectives.
The environmental provision represents the most recent estimate of
such costs at sites being idled or affected ($15.5 million), where
conditions have recently changed ($4.0 million) or where studies and
cleanup plans have been approved and the assessment of the likelihood
or extent of remediation has changed ($10.5 million).
Gain on Sale of Investment
- ---------------------------
In the first quarter of 1993, the Company sold its share of M&T
Harshaw, formed in 1990, to its partner, Elf Atochem North America,
Inc., for $40 million in cash with the buyer assuming all assets and
liabilities. The Company realized an after-tax gain of $6.3 million
($.06 per share).
The following discussions of the Company's segments focus on their
results of operations excluding the special charge:
Catalysts and Chemicals
- ------------------------
The Catalysts and Chemicals segment develops, manufactures and markets
a wide range of catalysts, chemical products and process technologies
for the automotive, off-road vehicle, aircraft, industrial power
generation, process, petroleum refining, chemical, petrochemical,
pharmaceutical and food processing industries.
Results of operations
(in millions) 1993 1992 1991
------- ------- -------
Net sales $ 541.1 $ 511.0 $ 459.9
Operating earnings 81.9 70.9 55.8
Special charge (79.1) _ _
1993 compared with 1992
Operating earnings increased 16 percent while sales increased six
percent over the prior year. Significantly higher earnings from the
Petroleum and Chemical Catalysts Groups more than offset lower
earnings from the Environmental Catalysts Group.
Increased demand and favorable pricing in the Petroleum Catalysts Group
produced significantly higher results in its fluid catalytic cracking
catalysts(FCC) business. The Chemical Catalysts Group benefitted from
substantial reductions in manufacturing costs as a result of its
reengineering programs, which more than offset lower volumes, largely
due to the timing of customer orders. The decline in the Environmental
Catalysts Group earnings was attributable to an increase in new
product development expenses and lower nonautomotive volumes, which
-30-
more than offset an increase in U.S. and European auto catalyst
volumes including the initial sales of diesel truck catalysts.
1992 compared with 1991
Operating earnings increased 27 percent in 1992. Sales increased 28
percent, as a result of the acquisition of the remainder of the
Company's former German joint venture (see "Investments") by the
Environmental Catalysts Group. The Petroleum Catalysts Group
generated increased sales and benefitted from favorable pricing and
product mix for fluid catalytic cracking catalysts in 1992. Lower
Environmental Catalysts Group earnings were due to reduced domestic auto
catalysts shipments, higher costs associated with the European auto
catalysts business and increased new product development and marketing
expenses, partially offset by technology transfer income. The Chemical
Catalysts Group earnings benefitted from cost reductions, which were
offset by the impact of the recession on the chemical, construction
and automotive industries.
1991 compared with 1990
Operating earnings increased 25 percent while sales increased slightly
over the prior year. The Environmental Catalysts Group benefitted from
higher worldwide sales of catalysts to the automotive industry. The
Petroleum Catalysts Group realized higher average pricing and a
favorable product mix for fluid catalytic cracking catalysts during
the year and strong moving bed catalysts volume in the first half of
the year. Earnings for the Chemical Catalysts Group declined primarily
as a result of the impact of the U.S. recession on the chemical,
construction and automotive industries and less favorable annual
physical inventory results.
Outlook
The completion of the new plant in Germany will increase the capacity
of the auto catalyst business and enable the Environmental Catalysts
Group to obtain a greater share of the European auto catalyst market.
The Company expects growth in the diesel truck catalysts business and
the pressures on its stationary source business to somewhat lessen.
The Petroleum Catalysts Group is expected to continue its favorable
trend by capturing more of the worldwide FCC market through increased
capacity and new technology. The Chemical Catalysts Group should
continue to benefit from its reengineering programs while it pursues
geographic expansion opportunities in Russia and the Far East.
Pigments and Additives
- -----------------------
The Pigments and Additives segment develops, manufactures and markets
coating and extender pigments for the paper industry and pigments and
additives, thickeners and absorbents for the plastics, coatings, paint and
allied industries.
Most of the minerals used by this segment are mined by the Company
from reserves it owns or has under long-term leases. The Company has
sufficient mineral reserves for its operations.
-31-
Results of operations
(in millions) 1993 1992 1991
------- ------- -------
Net sales $ 369.0 $ 362.2 $ 349.2
Operating earnings 55.0 56.8 54.8
Special charge (30.3) _ _
1993 compared with 1992
Operating earnings decreased three percent while sales increased
slightly. Earnings declined for both the Paper Pigments and Chemicals
Group and the Specialty Minerals and Colors Group.
The decline in the Paper Pigments and Chemicals Group was primarily
due to lower pricing and higher manufacturing and operating costs
which more than offset increased volumes. The Specialty Minerals and
Colors Group experienced unfavorable attapulgite volumes and higher
manufacturing costs in its minerals business, which more than offset
favorable volumes and pricing for its colors business.
1992 compared with 1991
Operating earnings and sales increased four percent in 1992. Higher
volumes, favorable sales prices and lower manufacturing costs,
partially offset by lower sales of attapulgite products primarily into
commodity markets, were the primary causes of favorable earnings in
the Specialty Minerals and Colors Group. A decline in the Paper
Pigments and Chemicals Group earnings reflected lower prices and
higher energy costs, partially offset by higher volumes and lower
operating expenses.
1991 compared with 1990
Operating earnings and sales decreased slightly. In the Specialty
Minerals and Colors Group, favorable pricing was offset by lower
volumes due to weakness in end-use markets. The Paper Pigments and
Chemicals Group increased its earnings due to lower production and
operating costs, despite the overall weakness of the worldwide paper
industry, which resulted in lower volumes and pricing for paper
pigments.
Outlook
Because the Company expects pricing pressures to continue in the paper
industry, the Paper Pigments and Chemicals Group will continue to
concentrate on the reengineering and cost reduction programs
initiated in 1993. The Specialty Minerals and Colors Group should
continue to benefit from improved margins in the U.S. coatings
business, while its minerals business should benefit from improved
market conditions.
Engineered Materials and Precious Metals Management
- ----------------------------------------------------
The Engineered Materials and Precious Metals Management segment
develops, manufactures and markets precious metals products and
coatings for a broad spectrum of industries and is engaged in refining
and in precious metals dealing and management.
-32-
Results of operations
(in millions) 1993 1992 1991
------- ------- -------
Net sales $ 1,240.8 $ 1,526.5 $ 1,627.3
Operating earnings 31.0 42.0 47.8
Special charge (38.6) _ _
Precious metals are a significant component of sales if the metal has
been supplied by the Company for the manufacture of a product. In
such cases, precious metals market price fluctuations can result in
material variations in sales. The Company also has arrangements
whereby customers supply the precious metals for the manufactured
product, and, in these arrangements, precious metals values are not
reflected in sales. The mix of such arrangements and the extent of
market price fluctuations significantly impact the level of sales
reported while not usually having a direct effect on earnings,
because purchases and sales of precious metals are generally hedged.
1993 compared with 1992
Operating earnings decreased 26 percent as sales decreased 19 percent.
The sales decline was principally the result of lower precious metal
volumes and pricing for certain platinum group metals. Lower earnings
from the Precious Metals Management Group more than offset higher
earnings from the Engineered Materials Group. Current market conditions
with reduced customer requirements and lower volumes and pricing for
certain platinum group metals caused the significant decline in the
earnings of the Precious Metals Management Group. The Engineered Materials
Group experienced cost savings and some volume increases in the U.S
market.
1992 compared with 1991
Operating earnings decreased 12 percent and sales decreased 11
percent. The sales decline was principally the result of the
acquisition of the remainder of the Company's former German joint
venture (see "Investments") and lower precious metals prices.
Earnings for the Engineered Materials Group were about the same as
last year, as higher volumes in the United States were partially
offset by the impact of weak European markets. Earnings from the
Precious Metals Management Group decreased as a result of generally
weaker market conditions.
1991 compared with 1990
Operating earnings increased 17 percent while sales declined 24
percent. The decline in net sales was principally caused by lower
precious metals volumes and prices and the absence of sales from
businesses sold or operated as part of a joint venture. In the
Engineered Materials Group, earnings improved significantly as cost
reductions continued to offset lower industrial products and jewelry
volumes. The Precious Metals Management Group had higher earnings as
a result of transaction timing and favorable market conditions.
Outlook
The Engineered Materials Group is expected to benefit from further
manufacturing efficiencies and geographic expansion which is expected
to somewhat offset a weak, but recovering European economy. The
-33-
results of the Precious Metals Management Group will continue to
depend largely on market conditions.
Equity Earnings, Interest and Taxes
- ------------------------------------
Equity in earnings of affiliates decreased to $3.4 million in 1993
from $7.4 million in 1992 and $5.0 million in 1991. The decrease in
1993 is primarily due to the absence of M&T Harshaw (sold in January,
1993). The 1992 increase reflects the results of the Company's former
German joint venture now being recorded in operating income. The 1991
results included the first full year of earnings of M&T Harshaw.
Net interest expense was reduced to $13.7 million in 1993 from $16.2
million in 1992 and $21.7 million in 1991. Gross interest expense and
offsetting contango income, which are components of net interest
expense, reflect the extent of precious metals financed by spot and
forward transactions during each year. The lower net interest expense
in 1993 was primarily due to the expiration of an unfavorable
interest rate swap agreement in 1992 and the initiation of a
favorable interest rate swap agreement in 1993. The lower net
interest expense in 1992 and 1991 resulted from the Company's planned
debt reductions. Interest income, included as a component of net
sales, was $2.0 million, $2.5 million and $6.5 million in 1993, 1992
and 1991, respectively. The lower interest income in 1993 and 1992
resulted primarily from lower average cash balances.
The Company recorded a $21.4 million income tax benefit in 1993
primarily due to the special charge. Excluding the impact of the
special charge, the effective income tax expense rate was 24.3 percent
in 1993 and 25.2 percent in 1992 and 1991. The lower expense rate in
1993 was primarily due to 1993 U.S. tax legislation which rein-stated
the research and development credit and increased the U.S. income tax
rate, which had a favorable impact on the Company's net deferred tax
asset. At December 31, 1993 the net deferred tax asset included in the
balance sheet was $117.3 million and related primarily to the adoption
of SFAS No. 106 and SFAS No. 112, the special charge and other
accruals. Management believes that the Company will generate sufficient
taxable earnings and tax planning opportunities to ensure
realization of these tax benefits.
Investments
- ------------
In March 1994, the Company completed its purchase, for cash, of the
assets of the sorbents and moving bed catalysts businesses of Solvay
Catalysts, GmbH, in Nienburg Germany. These businesses generated
sales of approximately $24 million in 1993. This acquisition expands
the Company's moving bed catalysts business and provides
complementary product lines serving adsorbents applications.
In early 1994, the Company and ICC Technologies, Inc. formed
Engelhard/ICC, a jointly owned partnership, to develop and
commercialize air conditioning and air-treatment systems based on a
proprietary new desiccant developed by Engelhard. The partnership
will market these systems worldwide.
In the fourth quarter of 1992, the Company and Procatalyse formed
Acreon Catalysts, a jointly owned partnership to market hydroprocessing
catalysts in North America and the Caribbean. In the fourth quarter of 1992,
the Company formed Heraeus Engelhard Electrochemistry Corp., a venture with
Heraeus Inc., 46 percent owned by Engelhard, which markets electrochemical
products in the Western Hemisphere.
-34-
In the third quarter of 1992, the Company formed Salem Engelhard with
Salem Industries, Inc., a major supplier of air pollution control
systems in Michigan. The jointly owned partnership markets products
and services to abate emissions of volatile organic chemicals and
other pollutants.
In the first quarter of 1992, the Company acquired the remaining 50
percent of Engelhard Kali-Chemie GmbH, an auto catalyst manufacturer
and marketer in Germany. In 1993 and 1992, the results of this
operation were included in the Catalysts and Chemicals segment.
Financial Condition and Liquidity
- ----------------------------------
At December 31, 1993, the Company had $53.8 million of working
capital, including $25.6 million of cash, available for its
operations. In addition, the year-end market value of the Company's
precious metals exceeded its carrying cost by $74.5 million . At
December 31, 1993 the Company's ratio of current assets to current
liabilities decreased to 1.1 from 1.5 a year earlier, primarily due to
increased borrowings and the special charge.
Short-term and commercial paper borrowings increased to $100.0 million
at December 31, 1993 from $50.7 million at December 31, 1992. The
increased borrowings were primarily due to the investment in catalyst
plants in Germany and Georgia and the financing of the Company's
stock purchase program. Typically, short-term borrowings are used to
finance precious metals in excess of the Company's owned inventories
needed for manufacturing and refining operations, as well as for
precious metals dealing activities. Such metals, when purchased, are
normally hedged, frequently with futures or forward sales contracts,
so that the Company is not at risk for subsequent price fluctuations.
Short-term borrowings are reduced as products are delivered to customers
or forward contracts are settled.
The Company's total debt to total capital ratio increased to 29
percent at December 31, 1993 from 20 percent at December 31, 1992 as
a result of higher short-term borrowings and lower shareholders'
equity, primarily due to purchases by the Company of its common stock
and the 1993 special charge. The Company currently has available $645
million in committed revolving credit facilities. The Company also
has authorization from its Board of Directors to issue up to $200
million of commercial paper ($20 million outstanding at December 31,
1993) and $100 million of additional long-term financing and has
uncommitted lines of short-term credit exceeding $700 million.
Management believes that the Company will continue to have adequate
access to short-term and long-term credit and capital markets to
meet its needs for the foreseeable future.
Net cash provided by operating activities was $130.4 million in 1993
compared with $169.5 million in 1992 and $135.4 million in 1991. For
the past three-year period, cash and internally generated funds were
adequate to fund working capital requirements, support capital
projects, sustain increased dividend payments and reduce average
outstanding share and debt levels. For 1994, the Company anticipates
that cash and cash flows will again be adequate to fund operational
and capital requirements.
-35-
Capital Expenditures, Commitments and Contingencies
- ----------------------------------------------------
Capital projects designed to maintain capacity, expand operations,
improve efficiency or protect the environment amounted to $107.1
million in 1993, compared with $54.1 million in 1992 and $46.3 million
in 1991. Capital expenditures in 1994 are projected to approximate
$80 million. See Note 15 "Environmental costs" and Note 16 "Litigation
and contingencies" of the Notes to the Consolidated Financial
Statements for further information about contingencies.
Effect of Foreign Currency Translation
- ---------------------------------------
Worldwide, currency exchange rate fluctuations did not have a
significant effect on the results of operations. Precious
metals transactions are generally not impacted by foreign currency
rate fluctuations because they are denominated in U.S. dollars.
Dividends and Capital Stock
- ----------------------------
In the third quarter of 1993, the Board of Directors authorized a
three-for-two split of common stock and approved a 10 percent increase
in the quarterly dividend on common stock to $.11 (restated to reflect
the split). These actions were effective as of September 30, 1993.
The annualized common stock dividend rate at the end of 1993 was $.44
per share.
In the fourth quarter of 1993, the Board of Directors approved a plan
to purchase up to 2.4 million shares of common stock for delivery under its
stock incentive and employee benefit plans and elected to retire 3.5
million shares of stock previously held in treasury.
In the third quarter of 1992, the Board of Directors authorized a
three-for-two split of common stock as of September 30, 1992.
In the second quarter of 1992, the Board of Directors approved two
separate plans to purchase up to 8.3 million shares (restated to
reflect the split) of the Company's common stock. At December 31,
1993, 6.7 million shares had been purchased.
-36-
Consolidated Statements of Earnings
Engelhard Corporation
(in thousands, except per share amounts)
Year ended December 31, 1993 1992 1991
----------- ----------- -----------
Net sales $ 2,150,865 $ 2,399,749 $ 2,436,356
Cost of sales 1,794,438 2,033,012 2,078,397
----------- ----------- -----------
Gross profit 356,427 366,737 357,959
Selling, administrative and other expenses 213,018 224,093 223,756
Special charge 148,000 - -
----------- ----------- -----------
Earnings (loss) from operations (4,591) 142,644 134,203
Gain on sale of investment 10,145 - -
Equity in earnings of affiliates 3,433 7,445 5,024
Interest expense, net of capitalized amounts 17,292 19,067 26,610
Less contango on futures and forward contracts (3,596) (2,836) (4,952)
----------- ----------- -----------
Net interest expense 13,696 16,231 21,658
----------- ----------- -----------
Earnings (loss) before income taxes and
cumulative effect of accounting changes (4,709) 133,858 117,569
Income tax expense (benefit) (21,381) 33,732 29,627
----------- ----------- -----------
Net earnings before cumulative effect
of accounting changes 16,672 100,126 87,942
Cumulative effect of accounting changes (16,000) (89,509) -
----------- ----------- -----------
Net earnings $ 672 $ 10,617 $ 87,942
=========== =========== ===========
Net earnings per share of common stock before
cumulative effect of accounting changes $ .17 1.00 $ .87
Cumulative effect of accounting changes (.16) (.89) -
----------- ----------- -----------
Net earnings per share $ .01 $ .11 $ .87
=========== =========== ===========
Average number of shares outstanding 96,792 100,287 101,129
========== =========== ===========
See accompanying Notes to Consolidated Financial Statements.
-37-
Consolidated Balance Sheets
Engelhard Corporation
December 31, 1993 1992
----------- -----------
(in thousands)
Assets
Cash $ 25,613 $ 31,326
Receivables 230,593 242,342
Inventories 216,279 241,393
Other current assets 44,095 38,603
----------- -----------
Total current assets 516,580 514,422
Investments 97,147 112,067
Property, plant and equipment,
less accumulated depreciation,
depletion and amortization 494,440 513,642
Other noncurrent assets 170,931 107,584
----------- -----------
Total assets $ 1,279,098 $ 1,287,737
=========== ===========
Liabilities and Shareholders' Equity
Short-term borrowings $ 79,987 $ 50,682
Commercial paper 20,000 _
Current maturities of long-term debt 440 832
Accounts payable 56,342 71,684
Accrued liabilities 305,968 251,233
----------- -----------
Total current liabilities 462,737 374,431
Long-term debt 112,240 113,941
Other noncurrent liabilities 170,256 140,288
Deferred income taxes 2,547 11,873
----------- -----------
Total liabilities 747,780 640,533
Commitments and contingent liabilities
Preferred stock, no par value,
5,000 shares authorized and unissued _ _
Common stock, $1 par value, 200,000
shares authorized and 98,197
shares issued 98,197 67,800
Additional paid-in capital _ 37,324
Retained earnings 497,490 606,176
Treasury stock, at cost, 2,251 and
3,173 shares, respectively (55,218) (59,254)
Cumulative translation adjustment (9,151) (4,842)
Total shareholders' equity 531,318 647,204
----------- -----------
Total liabilities and
shareholders' equity $ 1,279,098 $ 1,287,737
=========== ===========
See accompanying Notes to Consolidated Financial Statements.
-38-
Consolidated Statements of Cash Flows
Engelhard Corporation
(in thousands)
Year ended December 31, 1993 1992 1991
--------- ---------- ------------
Cash flows from operating activities
Net earnings $ 672 $ 10,617 $ 87,942
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation, depletion and amortization 68,177 73,798 77,819
Special charge 148,000 _ _
Gain on sale of investment (10,145) _ _
Cumulative effect of accounting changes 16,000 89,509 _
Equity earnings, net of dividends (854) (4,375) (1,784)
Net change in assets and liabilities (91,488) (83) (28,566)
--------- ---------- ------------
Net cash provided by operating activities 130,362 169,466 135,411
Cash flows from investing activities
Capital expenditures, net (107,088) (54,112) (46,333)
Proceeds from sale of investment, net 39,787 _ 7,100
Acquisition of business and investments, net _ (11,152) _
Other (2,749) (22,096) (2,937)
--------- ---------- ----------
Net cash used in investing activities (70,050) (87,360) (42,170)
Cash flows from financing activities
Increase (decrease) in short-term borrowings 49,305 10,081 (65,633)
Proceeds from issuance of long-term debt _ 2,379 427
Repayment of long-term debt (1,935) (6,975) (1,381)
Purchase of treasury stock (90,648) (66,485) (34,912)
Stock bonus and option plan transactions 19,030 14,304 30,585
Dividends paid (40,631) (37,861) (33,306)
--------- ---------- ----------
Net cash used in financing activities (64,879) (84,557) (104,220)
Effect of exchange rate changes on cash (1,146) (2,460) 270
--------- ---------- ----------
Net decrease in cash (5,713) (4,911) (10,709)
Cash at beginning of year 31,326 36,237 46,946
--------- ---------- ----------
Cash at end of year $ 25,613 $ 31,326 $ 36,237
========= ========== ==========
See accompanying Notes to Consolidated Financial Statements.
-39-
Consolidated Statements of Shareholders' Equity
Engelhard Corporation
(in thousands, except per share amounts)
Additional Cumulative Total
Common paid-in Retained Treasury translation shareholders'
stock capital earnings stock adjustment equity
-------- --------- ---------- --------- ----------- ------------
Balance at December 31, 1990 $ 45,200 $ 70,455 $ 578,784 $ (13,277) $ 28,626 $ 709,788
Net earnings _ _ 87,942 _ _ 87,942
Dividends ($.33 per share) _ _ (33,306) _ _ (33,306)
Foreign currency translation adjustment _ _ _ _ (3,483) (3,483)
Treasury stock acquired _ _ _ (34,912) _ (34,912)
Stock bonus plan transactions _ (2,416) _ 7,186 _ 4,770
Stock option plan transactions _ (4,632) _ 30,447 _ 25,815
-------- --------- ---------- --------- ----------- ------------
Balance at December 31, 1991 45,200 63,407 633,420 (10,556) 25,143 756,614
Net earnings _ _ 10,617 _ _ 10,617
Dividends ($.37 per share) _ _ (37,861) _ _ (37,861)
Three-for-two stock split 22,600 (22,600) _ _ _ _
Foreign currency translation adjustment _ _ _ _ (29,985) (29,985)
Treasury stock acquired _ _ _ (66,485) _ (66,485)
Stock bonus plan transactions _ (1,081) _ 9,340 _ 8,259
Stock option plan transactions _ (2,402) _ 8,447 _ 6,045
-------- --------- ---------- --------- ----------- ------------
Balance at December 31, 1992 67,800 37,324 606,176 (59,254) (4,842) 647,204
Net earnings _ _ 672 _ _ 672
Dividends ($.42 per share) _ _ (40,631) _ _ (40,631)
Three-for-two stock split 33,897 (33,897) _ _ _ _
Foreign currency translation adjustment _ _ _ _ (4,309) (4,309)
Treasury stock acquired _ _ _ (90,648) _ (90,648)
Stock bonus plan transactions _ (1,848) _ 11,310 _ 9,462
Stock option plan transactions _ (1,579) (1,989) 13,136 _ 9,568
Retirement of treasury stock (3,500) _ (66,738) 70,238 _ _
-------- --------- ---------- --------- ----------- ------------
Balance at December 31, 1993 $ 98,197 $ _ $497,490 $ (55,218) $ (9,151) $ 531,318
See accompanying Notes to Consolidated Financial Statements.
-40-
Notes to Consolidated Financial Statements
1. Summary of significant accounting policies
Principles of consolidation
The accompanying consolidated financial statements include the accounts of
Engelhard Corporation and its wholly-owned subsidiaries (collectively
referred to as the Company). All significant intercompany transactions and
balances have been eliminated in consolidation. Certain prior year amounts
have been reclassified to conform with the current year presentation.
Cost of sales and inventories
Inventories are stated at the lower of cost or market. The elements of
cost include direct labor and materials, variable overhead and the full
absorption of fixed manufacturing overhead. The cost of precious metals
inventories is determined using the last-in, first-out (LIFO) method of
inventory valuation. The cost of other inventories is principally
determined using either the average cost or first-in, first-out (FIFO)
method.
The Company routinely enters into a variety of arrangements for the
sourcing and supply of precious metals. These arrangements are spread
among a number of counter-parties, which are generally major industrial
companies or highly rated financial institutions. The conduct of this
business is closely monitored and appropriate reserves for potential
losses are maintained.
Depreciation, depletion and amortization
Additions to property, plant and equipment are stated at cost.
Depreciation and amortization of plant and equipment are provided
primarily on a straight-line basis over the estimated useful lives of the
assets. Depletion of mineral deposits and mine development are provided
under the unit of production method.
When assets are sold or retired, the cost and related accumulated
depreciation or amortization are removed from the accounts and any gain or
loss is included in earnings.
Amortization and intangible assets
Goodwill and other acquired intangible assets are recorded at cost and
amortization is provided on a straight-line basis over the estimated
useful lives of the assets, but not in excess of 40 years.
Contango and futures and forward contracts
The Company generally hedges on a daily basis purchases and sales of
precious metals inventories transacted in the normal course of business.
Such hedging transactions frequently involve the use of futures or forward
contracts for delivery of precious metals at some later date. Usually the
contract price exceeds the current (spot) price of these metals by a
premium referred to as contango, which in effect contributes toward the
cost to finance the metal holder's position. Accordingly, net contango
income, which represents the amortization of this premium over the lives
of the respective contracts, is shown as an adjustment to interest
expense.
-41-
Changes in the market value, net of contango, of futures and forward
contracts which qualify as hedges are generally recognized in earnings
when the related inventories are sold to customers. Changes in the market
value of other futures and forward contracts are recognized in earnings
in the period of the change.
Accounting changes
Effective January 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 112 "Employers' Accounting for
Postemployment Benefits." This standard requires the accrual method of
accounting for certain benefits provided to former or inactive employees
after employment but before retirement. As of January 1, 1993, the Company
recognized the full actuarially calculated amount of its estimated
accumulated postemployment benefit obligation. The charge to 1993 earnings
was $26.0 million ($16.0 million after tax or $.16 per share). The
after-tax amount has been reflected in 1993 as a cumulative effect of an
accounting change. In the third quarter of 1993, as a result of the
Omnibus Budget Reconciliation Act of 1993, the Company's obligation was
reduced by approximately $7.4 million after tax which will be amortized
over the average remaining service period of active plan participants.
Effective January 1, 1992, the Company adopted the provisions of
Statements of Financial Accounting Standards No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and No. 109
"Accounting for Income Taxes" (See Notes 4 and 6). The cumulative effect
of these accounting changes was to reduce 1992 net earnings by $89.5
million ($.89 per share).
Capital stock
The Board of Directors authorized three-for-two common stock splits
effective as of September 30, 1993 and September 30, 1992, respectively.
All share and per share data have been retroactively restated to give
effect to these stock splits.
On December 31, 1993, the Company retired 3.5 million shares of common
stock previously held in treasury.
2. Special charge
The Company announced a plan to realign and consolidate businesses,
concentrate resources and better position itself to achieve its strategic
growth objectives. This plan resulted in a special charge of $148.0
million ($91.8 million after tax or $.95 per share) in 1993, which
covered a $118.0 million pretax restructure provision for asset
writedowns related to product lines or sites being exited together with
provisions for facility shutdown, rundown and relocation and for employee
reassignment, severance and related benefits and a $30.0 million pretax
environmental reserve for the most recent estimate of such costs at sites
being idled or affected ($15.5 million), where conditions have recently
changed ($4.0 million) or where studies and cleanup plans have been
approved and the assessment of the likelihood or extent of remediation
has changed ($10.5 million).
3. Research and development costs
Research and development costs are charged to expense as incurred and were
$46.9 million in 1993, $44.6 million in 1992 and $45.1 million in 1991.
4. Pensions and other postretirement benefit
-42-
The Company has pension plans covering substantially all employees. Plans
covering most salaried employees generally provide benefits based on
years of service and the employee's final average compensation. Plans
covering most hourly, bargaining unit members generally provide benefits
of stated amounts for each year of service. The Company makes
contributions to the plans to the extent such contributions are currently
deductible for tax purposes. Plan assets primarily consist of listed
stocks and fixed income securities.
The components of the net pension credit for all plans are shown in the
following table:
Net Pension Credit
(in thousands)
1993 1992 1991
-------- -------- --------
Service cost $ 8,142 $ 8,261 $ 8,252
Interest cost on projected
benefit obligation 18,850 18,095 18,019
Actual return on
plan assets (26,909) (20,612) (40,898)
Net amortization
and deferral (2,235) (11,108) 11,219
--------- -------- --------
Net pension credit $ (2,152) $ (5,364) $ (3,408)
========= ======== ========
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligations for the pension plans are 7.5 to 7.75
percent and 3.5 to 5.0 percent, respectively. The expected long-term rate
of return on assets is 7.5 to 10.5 percent.
The following table sets forth the plans' funded status:
Funded Status
(in thousands)
1993 1992
--------- ---------
Actuarial present value of benefit obligations
Vested benefit obligation $ 209,376 $ 178,608
--------- ---------
Accumulated benefit obligation $ 220,211 $ 187,550
--------- ---------
Projected benefit obligation $ 250,166 $ 224,964
--------- ---------
Plan assets at fair value $ 280,872 $ 259,339
--------- ---------
Plan assets in excess of
projected benefit obligation $ 30,706 $ 34,375
Unrecognized net loss 34,812 24,969
Unrecognized prior service cost 6,310 6,622
Unrecognized transition asset,
net of amortization (19,682) (26,908)
--------- --------
Prepaid pension expense $ 52,146 $ 39,058
========= ========
-43-
The Company also sponsors two savings plans covering certain salaried
and hourly paid employees. The Company's contributions, which may equal up
to 50 percent of certain employee contributions, were $2.0 million in 1993,
$2.0 million in 1992 and $1.9 million in 1991.
The Company also currently provides postretirement medical and life
insurance benefits to certain retirees (and their spouses), certain
disabled employees (and their families) and spouses of certain deceased
employees. Substantially all U.S. salaried employees and certain hourly
paid employees are eligible for these benefits, which are paid through
the Company's general health care and life insurance programs, except for
certain medicare-eligible salaried retirees who are provided a defined
contribution towards the cost of a partially insured health plan. During
the year, the Company negotiated changes to the plans which reduced the
cost of postretirement medical benefits.
Effective January 1, 1992 the Company adopted the provisions of
Statement of Financial Accounting Standards No. 106 "Employers' Accounting
for Postretirement Benefits Other Than Pensions." This statement requires
the accrual method of accounting for postretirement health care and life
insurance benefits based on actuarially determined costs to be recognized
over the period from the date of hire to the full eligibility date of
employees who are expected to qualify for such benefits. As of January 1,
1992 the Company recognized the full actuarially calculated amount of its
estimated accumulated postretirement benefit obligation. The charge to
1992 earnings was $134.5 million ($83.4 million after tax or $.83 per
share). The after-tax amount has been reflected in 1992 as a cumulative
effect of an accounting change.
The components of the net expense for these postretirement benefits are
shown in the following table:
Postretirement Benefit Expense
(in thousands)
1993 1992
-------- -------
Service cost $ 2,139 $ 2,618
Interest cost on accumulated
postretirement benefit obligation 10,455 11,014
Net amortization (2,570) (978)
-------- -------
Net postretirement benefit expense $ 10,024 $ 12,654
======== =======
Cash spending for postretirement benefits was approximately $5.5 million
in 1993 and $7.8 million in 1992. In 1991, under the previous method of
accounting for postretirement benefits, the approximate amount of annual
costs (cash spending) for such benefits was $6.7 million.
The following table sets forth the components of the accrued postretirement
benefit obligation, all of which are unfunded:
-44-
Postretirement Benefit Obligation
(in thousands)
1993 1992
--------- ---------
Accumulated postretirement benefit obligation
Retirees $ 92,613 $ 87,540
Fully eligible active participants 19,907 17,869
Other active participants 25,003 18,871
--------- ---------
137,523 124,280
Unrecognized prior service cost 30,981 24,052
Unrecognized net loss (24,721) (8,044)
--------- ---------
Accrued postretirement benefit obligation $ 143,783 $ 140,288
========= =========
The weighted-average discount rate used in determining the actuarial
present value of the accumulated postretirement benefit obligation is 7.75
percent. The average assumed health care cost trend rate used for 1993 is
13.5 percent, gradually decreasing to 5.5 percent by 2004. A one percent
increase in the assumed health care cost trend rate would increase
aggregate service and interest cost in 1993 by $1.2 million and the
accumulated postretirement benefit obligation as of December 31, 1993 by
$10.6 million.
5. Related party transactions
The Company, in the ordinary course of business, has raw material supply
arrangements with entities in which it is informed Anglo American
Corporation of South Africa Limited (Anglo) has a material interest. Anglo
indirectly holds a significant minority interest in the common stock of the
Company. The Company's purchases from such entities amounted to $228.7
million in 1993, $254.5 million in 1992 and $284.1 million in 1991, and were
transacted upon terms no less favorable to the Company than those obtained
from other parties. At December 31, 1993 and 1992 amounts due to such
entities totaled $3.4 million and $16.2 million, respectively.
6. Income taxes
Effective January 1, 1992 the Company adopted the provisions of Statement
of Financial Accounting Standards No. 109 "Accounting for Income Taxes."
This statement requires the liability method of accounting for income
taxes. The cumulative effect of adopting this standard was to reduce 1992
net earnings by $6.1 million ($.06 per share).
The foreign portion of income (loss) before income tax expense (benefit)
was income of $20.9 million in 1993, $36.4 million in 1992 and $65.5
million in 1991. Taxes on income of foreign consolidated subsidiaries and
affiliates are provided at the tax rates applicable to their respective
foreign tax jurisdictions. Tax charges (credits) of $(.7) million in
1993, $(4.3) million in 1992 and $.8 million in 1991, in connection with
foreign currency adjustments, are included in such adjustments for those
years and are not reflected in the amounts shown below. The components of
income tax expense are shown in the following table:
-45-
Income Tax Expense (Benefit)
(in thousands)
1993 1992 1991
--------- --------- ---------
Current income tax expense
Federal $ 18,359 $ 13,059 $ 10,722
State 1,657 1,003 1,457
Foreign 7,791 2,482 5,354
--------- --------- ---------
27,807 16,544 17,533
Deferred income tax expense (benefit)
Federal (40,813) 11,530 (371)
Adjustment of Federal for change
in tax rates (1,558) - -
State (2,701) 2,815 500
Foreign (1,190) 6,432 11,965
Benefit of net operating
loss carryforwards (2,926) (3,589) -
--------- --------- ---------
(49,188) 17,188 12,094
--------- --------- ---------
Income tax expense (benefit) $ (21,381) $ 33,732 $ 29,627
========= ========= =========
The deferred income tax balance sheet accounts result from temporary
differences between the amount of assets and liabilities recognized for
financial reporting and tax purposes. The following table sets forth the
components of the net deferred income tax asset:
Net Deferred Income Tax Asset
(in thousands)
1993 1992
--------- ----------
Deferred tax assets
Accrued liabilities $ 102,167 $ 66,115
Noncurrent liabilities 68,111 52,734
Tax credits and carryforwards 30,296 23,511
Deferred tax liabilities
Prepaid pension expense (24,492) (17,857)
Property, plant and equipment (22,633) (40,817)
Other assets (36,101) (28,873)
---------- ----------
Net deferred income tax asset $ 117,348 $ 54,813
========== ==========
Management believes that the Company will generate sufficient taxable
earnings and tax planning opportunities to ensure realization of these tax
benefits. As of December 31, 1993 the Company had approximately $12.8
million of nonexpiring alternative minimum tax credit carryforwards
available to offset future U.S. Federal income taxes and approximately
$12.7 million of nonexpiring net operating loss carryforwards available to
offset certain foreign income taxes.
In 1991, under the previous method of accounting for income taxes, the
deferred income tax expense resulted primarily from differences in the
timing of the recognition of events for financial reporting and tax
purposes, primarily depreciation, the computation of precious metals
costs and other accruals.
-46-
A reconciliation of the difference between the Company's consolidated
income tax expense (benefit) and the expense (benefit) computed at the
federal statutory rate is shown in the following table:
Consolidated Income Tax Expense (Benefit) Reconciliation
(in thousands)
1993 1992 1991
--------- --------- ---------
Income tax expense (benefit) at
federal statutory rate $ (1,648) $ 45,512 $ 39,973
Special charge (4,440) - -
Effect of tax law changes (1,558) - -
State income taxes, net
of federal effect 2,760 2,520 1,292
Percentage depletion (11,550) (9,960) (8,994)
Equity earnings 54 (1,730) (825)
Effect of different tax rates
on foreign earnings, net (4,015) (3,112) 2,865
Foreign sales corporation (1,391) (1,800) (1,775)
Other items, net 407 2,302 (2,909)
--------- --------- ----------
Income tax expense (benefit) $ (21,381) $ 33,732 $ 29,627
========= ========= ==========
At December 31, 1993 the Company's share of the cumulative undistributed
earnings of foreign subsidiaries was approximately $229.4 million. No
provision has been made for U.S. or additional foreign taxes on the
undistributed earnings of foreign subsidiaries because such earnings are
expected to be reinvested indefinitely in the subsidiaries' operations. It
is not practicable to estimate the amount of additional tax that might be
payable on these foreign earnings in the event of distribution or sale;
however, under existing law, foreign tax credits would be available to
substantially reduce, or in some cases eliminate, U.S. taxes payable.
7. Inventories
Inventories consist of the following:
Inventories
(in thousands)
1993 1992
--------- ---------
Precious metals $ 53,428 $ 73,382
Other 162,851 168,011
--------- ---------
Total inventories $ 216,279 $ 241,393
========= =========
All precious metals inventories are stated at LIFO cost. The market value
of the precious metals inventories exceeded cost by $55.7 million and $56.3
million at December 31, 1993 and 1992, respectively. The Company also has
a long-term investment in precious metals. The combined market value of
precious metals in inventories and the investment exceeded cost by $74.5
million and $96.2 million at December 31, 1993 and 1992, respectively.
Although precious metals inventory quantities were reduced in 1993, the
net gain on these sales transactions was insignificant.
-47-
In the normal course of business, certain customers and suppliers
deposit significant quantities of precious metals with the Company under a
variety of arrangements. Equivalent quantities of precious metals are
returnable as product or in other forms.
8. Investments
The Company has investments in affiliates that are accounted for on the
equity method. The most significant of these investments is N.E. Chemcat
Corporation (N.E. Chemcat), a 38.8 percent owned, publicly-traded Japanese
corporation and a leading producer of chemical and automotive catalysts,
electronic chemicals and other precious-metals-based products. At December
31, 1993 the quoted market value of the Company's investment in N.E.
Chemcat was in excess of $135 million. This valuation represents a
mathematical calculation based on a closing quotation published by the
Tokyo over-the-counter market.
In the first quarter of 1993, the Company sold its investment in M&T
Harshaw to its partner for $40 million in cash with the buyer assuming all
assets and liabilities. As a result, the Company realized an after-tax
gain of $6.3 million ($.06 per share).
In the first quarter of 1992, the Company acquired for cash the
remaining 50 percent of Engelhard Kali-Chemie GmbH, an auto catalyst
manufacturer and marketer in Germany.
The summarized unaudited financial information below represents an
aggregation of the Company's nonsubsidiary affiliates:
Financial Information
(in thousands)
1993 1992 1991
--------- ---------- ---------
Earnings data
Revenue $ 327,302 $ 445,530 $ 647,719
Gross profit 55,395 120,313 120,056
Net earnings 10,367 18,335 15,128
Company's equity in net earnings 3,433 7,445 5,024
Balance sheet data
Current assets $ 222,272 $ 243,043
Noncurrent assets 102,974 107,529
Current liabilities 103,441 105,471
Noncurrent liabilities 15,551 20,161
Net assets 206,254 224,940
Company's equity in net assets 90,505 103,508
The Company's share of undistributed earnings of affiliated companies
included in consolidated retained earnings was $45.8 million at December
31, 1993. Dividends from affiliated companies were $2.6 million in 1993,
$3.1 million in 1992 and $3.2 million in 1991.
The Company has other investments, including an investment in precious
metals, that are accounted for at cost.
-48-
9. Property, plant and equipment
Property, plant and equipment consist of the following:
Property, Plant and Equipment
(in thousands)
1993 1992
-------- --------
Land $ 19,702 $ 20,138
Buildings and building improvements 152,761 150,808
Machinery and equipment 862,720 849,004
Construction and installations in progress 67,864 41,674
Mineral deposits and mine development 67,999 63,560
-------- --------
1,171,046 1,125,184
Accumulated depreciation, depletion and amortization 676,606 610,762
-------- --------
Property, plant and equipment, net $ 494,440 $ 514,422
========= =========
10. Long-term debt
At December 31, 1993 unsecured committed revolving credit agreements
include a $290 million facility with a group of North American money
center banks and a $355 million facility with a group of major foreign
banks each of which expires in 1996. Commitment fees are paid on unused
portions of these lines. In connection with its credit facilities, the
Company has agreed to certain covenants, none of which are considered
restrictive to the operations of the Company.
Additional unused lines of credit available exceeded $700 million at
December 31, 1993. The Company's lines of credit with its banks are
available in accordance with normal terms for prime commercial borrowers
and are not subject to commitment fees or other restrictions.
The following table sets forth the components of long-term debt:
Debt Information
(in thousands)
1993 1992
-------- --------
10% Note, callable in 1996, due 2000
(net of discount of $191 and $220, respectively) $ 99,809 $ 99,780
Industrial revenue bond, callable in 1995,
7.91%, due 1997 5,500 6,665
Industrial revenue bonds 64.5% to 68%
of prime rate, due 1997-1999 5,500 5,500
Foreign bank loans with a weighted-average interest
rate of 7.0% and 9.5%, respectively, due 1994-1999 1,871 2,828
-------- --------
112,680 114,773
Amounts due within one year 440 832
-------- --------
Total long-term debt $ 112,240 $ 113,941
======== ========
As of December 31, 1993 the aggregate maturities of long-term debt for the
succeeding five years are as follows: $.4 million in 1994, $.3 million in
each of the years 1995 and 1996, $6.8 million in 1997 and $.2 million in
1998.
-49-
11. Lease commitments
The Company rents real property and equipment under long-term operating
leases. Future minimum rental payments required under noncancellable
operating leases, having initial or remaining lease terms in excess of one
year, are $9.3 million in 1994, $8.9 million in 1995, $8.2 million in
1996, $7.7 million in 1997, $7.1 million in 1998 and $45.5 million
thereafter. Rental/lease expense amounted to $13.5 million in 1993, $12.0
million in 1992 and $12.7 million in 1991.
12. Financial instruments
The Company's financial instruments consist primarily of cash in banks,
temporary investments, accounts receivable and debt. In addition, the
Company has an interest rate swap agreement and has foreign currency
exchange contracts that hedge its exposure on various transactions and on
certain of its net foreign investments. The fair value of financial
instruments in working capital approximated book value. At December 31,
1993 the fair value of long-term debt was about $125 million, based on
current interest rates.
None of the Company's financial instruments represent a concentration of
credit risk because the Company deals with a variety of major banks
worldwide and its accounts receivable are spread among a number of major
industries, customers and geographic areas. In addition, a centralized
credit committee reviews significant credit transactions before consummation
and an appropriate level of reserves is maintained. Provisions to these
reserves were not significant in 1993, 1992 or 1991. None of the Company's
off-balance sheet financial instruments, if a counter-party failed to
perform according to the terms of an agreement, would result in a
significant loss to the Company.
13. Industry segment and geographic area data
The Company operates in three industry segments: Catalysts and Chemicals,
Pigments and Additives, and Engineered Materials and Precious Metals
Management.
The Catalysts and Chemicals segment develops, manufactures and markets a
wide range of catalysts, chemical products and process technologies for
the automotive, off-road vehicle, aircraft, industrial power generation,
process, petroleum refining, chemical, petrochemical, pharmaceutical and
food processing industries.
The Pigments and Additives segment develops, manufactures and markets
coating and extender pigments for the paper industry and pigments and
additives, thickeners and absorbents for the plastics, coatings, paint and
allied industries.
The Engineered Materials and Precious Metals Management segment
develops, manufactures and markets precious metals products and coatings for
a broad spectrum of industries and is engaged in refining and in precious
metals dealing and management.
The following table presents certain data by industry segment
(See Note 2):
-50-
Industry Segment Information
Engineered
Materials &
Catalysts & Pigments & Precious Metals Corporate
(in millions) Chemicals Additives Management and Other Consolidated
------------ ------------ --------------- ---------- --------------
1993
Net sales $ 541.1 $ 369.0 $ 1,240.8 $ _ $ 2,150.9
Operating earnings excluding
special charge 81.9 55.0 31.0 _ 167.9
Special charge (79.1) (30.3) (38.6) _ (148.0)
Depreciation, depletion
and amortization 27.0 29.7 7.1 4.4 68.2
Identifiable assets 394.4 393.5 212.7 278.5 1,279.1
Capital expenditures, net 61.0 36.2 7.5 2.4 107.1
1992
Net sales $ 511.0 $ 362.2 $ 1,526.5 $ _ $ 2,399.7
Operating earnings 70.9 56.8 42.0 _ 169.7
Depreciation, depletion
and amortization 31.7 29.2 7.9 5.0 73.8
Identifiable assets 401.5 409.4 255.2 221.6 1,287.7
Capital expenditures, net 23.2 20.2 9.2 1.5 54.1
1991
Net sales $ 459.9 $ 349.2 $ 1,627.3 $ _ $ 2,436.4
Operating earnings 55.8 54.8 47.8 _ 158.4
Depreciation, depletion
and amortization 31.2 30.2 10.7 5.7 77.8
Identifiable assets 396.5 416.2 297.6 169.1 1,279.4
Capital expenditures, net 21.2 12.4 7.8 4.9 46.3
Intersegment sales are not significant. The special charge reduced
identifiable assets by $33.2 million in Catalysts and Chemicals, $25.4
million in Pigments and Additives and $7.5 million in Engineered Materials
and Precious Metals Management while the related tax benefit increased
identifiable assets by $48.3 million in Corporate and Other.
The following table presents certain data by geographic area:
-51-
Geographic Area Data
(in millions)
Net Inter-area Operating Special Identifiable
sales sales earnings charge assets
------- ---------- ----------- -------- -------------
1993
United States $ 1,396.8 $ 75.1 $ 118.5 $ (120.3) $ 598.1
Foreign 754.1 86.0 49.4 (27.7) 402.5
1992
United States $ 1,544.2 $ 119.6 $ 134.0 $ - $ 661.6
Foreign 855.5 49.2 35.7 - 404.5
1991
United States $ 1,528.4 $ 92.5 $ 100.3 $ - $ 702.2
Foreign 908.0 34.6 58.1 - 408.1
Inter-area sales are generally based on market prices. The special charge
reduced identifiable assets by $10.8 million in the United States and
$7.0 million in the foreign operations. Most of the Company's foreign
operations are conducted by European subsidiaries. United States export
sales to customers throughout the world were $231.2 million in 1993,
$316.3 million in 1992 and $320.3 million in 1991.
The following table reconciles segment operating earnings with the
earnings before income taxes and cumulative effect of accounting changes
as shown in the Consolidated Statements of Earnings:
Reconciliation to Consolidated Statements of Earnings
(in millions)
1993 1992 1991
------ ------- --------
Operating earnings $ 19.9 $ 169.7 $ 158.4
Gain on sale of investment 10.1 - -
Equity earnings 3.4 7.4 5.0
Interest and other expenses, net (38.1) (43.2) (45.8)
------ ------- --------
Earnings (loss) before income taxes and
cumulative effect of accounting changes $ (4.7) $ 133.9 $ 117.6
====== ======= ========
For the years ended December 31, 1992 and 1991, one customer of both the
Catalysts and Chemicals and the Engineered Materials and Precious Metals
Management segments accounted for 12 percent and 10 percent, respectively,
of the Company's net sales.
14. Stock option and bonus plans
The Company's Stock Option Plans of 1991 and 1981, as amended (the Key
Option Plans) generally provide for the granting to key employees of
-52-
options to purchase an aggregate of 11,250,000 and 4,556,250 common
shares, respectively, at fair market value on the date of grant. No
options under the Key Option Plans may be granted after June 30, 2001. In
1993, the Company established the Employee Stock Option Plan of 1993, as
amended, which generally provides for the granting to all employees
(excluding U.S. bargaining unit employees and key employees eligible
under the Key Option Plans) of options to purchase an aggregate of
1,875,000 common shares at fair market value on the date of grant. No
options under this plan may be granted after December 31, 1994. Options
under all plans become exercisable in installments after one year, and no
options may be exercised after ten years from the date of grant.
Outstanding options may be cancelled and reissued under terms specified
in the plan documents. The effect of outstanding stock options has been
excluded from the calculation of the number of shares outstanding used to
compute earnings per share of common stock because it is not significant.
Stock option transactions under all plans are as follows:
Stock Option Information
1993 1992 1991
------------------------ ------------------------ -----------------------
Number Option price Number Option price Number Option price
of shares per share of shares per share of shares per share
---------- ------------ ---------- ------------ ---------- ------------
Outstanding at
beginning of year 3,353,427 $ 6.81-23.04 3,205,723 $ 6.81-14.19 5,188,385 $ 6.45-11.59
Granted 1,850,647 22.04-28.58 1,006,575 17.17-23.04 913,725 12.25-14.19
Cancelled (93,067) 7.89-28.58 (16,734) 7.89-17.17 (59,855) 6.45-11.59
Exercised (659,655) 6.81-17.17 (842,137) 6.81-12.25 (2,836,532 ) 6.45-11.59
---------- ------------ ---------- ------------ ---------- ------------
Outstanding at
end of year 4,451,352 $ 6.81-28.58 3,353,427 $ 6.81-23.04 3,205,723 $ 6.81-14.19
========== ============ ========== ============ ========== ============
Exercisable at
end of year 1,289,318 $ 6.81-23.04 1,183,632 $ 6.81-14.19 1,189,866 $ 6.81-10.55
========== ============ ========== ============ ========== ============
Available for
future grants 9,523,709 9,406,289 10,396,130
========== ========== ==========
The Company's Key Employee Stock Bonus Plan, as amended (the Bonus Plan)
provides for the award of up to 11,250,000 common shares to key employees
as compensation for future services, not exceeding 1,012,500 shares in any
year (plus any cancelled awards or shares available for award but not
previously awarded). The Bonus Plan terminates on June 30, 1996. Shares
awarded vest in installments annually after one year, providing the
recipient is still employed by the Company on the vesting date.
Compensation expense is measured on the date the award is granted and
amortized ratably over the vesting period. Shares awarded, net of
cancellations, are included in average shares outstanding.
15. Environmental costs
In the ordinary course of business, the Company is subject to extensive
and changing federal and state environmental protection laws and
-53-
regulations. In addition, the Company is currently identified as a
potentially responsible party at a number of sites by the United States
Environmental Protection Agency, under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended or by a state
or local equivalent under analogous laws. The Company is preparing, has
under review or is implementing, with the oversight of cognizant
environmental agencies, studies and cleanup plans at certain other
locations.
It is the Company's policy to accrue environmental and cleanup related
costs of a non-capital nature when those costs are probable and can be
reasonably estimated. The quantification of environmental exposures requires
an assessment of many factors, including changing laws and regulation,
advancements in environmental technologies, the quality of information
available related to specific sites, the assessment stage of each site
investigation, the financial capability of other potentially responsible
parties and the length of time involved in remediation or settlement.
Subject to the foregoing, the liabilities for environmental costs recorded
in the consolidated balances sheets at December 31, 1993 and 1992 are
$66.1 million and $38.0 million, respectively. In 1993, $30.0 million was
provided in connection with the Special Charge (see Note 2) for the
Company's most recent estimate of environmental costs at sites being idled
or affected, where conditions have recently changed or where studies and
cleanup plans have been approved and the assessment of the likelihood or
extent of remediation has changed.
The amounts provided for environmental costs are expected to be paid out
over an extended period of time. Excluding the amount provided in the
Special Charge in 1993, environmental matters have not had a significant
impact on the Company or its business in the past three-year period as
the amounts paid and expensed have been immaterial and the amounts paid
and capitalized have comprised less than 10 percent of the Company's
capital expenditure programs. While it is not possible to predict with
certainty, management believes that the reserves at December 31, 1993 are
reasonable and adequate and that the costs of future remedial actions to
comply with the present laws governing environmental protection should be
consistent, on average, with recent experience.
16. Litigation and contingencies
The Company is a defendant in numerous lawsuits and is subject to a number
of environmental contingencies (see Note 15). While it is not possible at
this time to predict with certainty the ultimate outcome of these lawsuits
or resolution of the environmental contingencies, it is the opinion of
management, after consultation with counsel, that the disposition of these
matters should not have a material adverse effect on the Company or its
business.
17. Supplemental cash flow information
The following table presents certain supplementary information to the
Consolidated Statements of Cash Flows:
-54-
Supplementary disclosures
(in thousands)
1993 1992 1991
--------- --------- ---------
Cash paid during the year for
Interest, net of capitalized
amounts and contango $ 17,876 $ 23,582 $ 22,194
Income taxes 20,091 15,919 42,751
Change in assets and liabilities
Receivables $ 11,749 $ 26,958 $ 11,255
Inventories 17,014 7,662 11,308
Other current assets (5,492) (3,404) (1,238)
Other noncurrent assets (60,013) 1,788 (3,581)
Accounts payable (15,342) (4,483) (20,537)
Accrued liabilities (34,846) (54,024) (24,084)
Accrued postretirement
benefit obligation 3,968 5,758 -
Deferred income taxes (8,526) 19,662 (1,689)
--------- --------- ---------
Net change in assets and liabilities $ (91,488) $ (83) $ (28,566)
========= ========= =========
-55-
Report of Independent Public Accountants
To the Shareholders and Board of Directors of
Engelhard Corporation:
We have audited the accompanying consolidated balance sheets of Engelhard
Corporation and Subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of earnings, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1993.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Engelhard Corporation and Subsidiaries as of December 31, 1993 and 1992, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1993 in conformity with
generally accepted accounting principles.
As discussed in Notes 1, 4 and 6 to the consolidated financial
statements, in 1993 the Company changed its method of accounting for
postemployment benefits and in 1992 the Company changed its methods of
accounting for income taxes and postretirement benefits other than pensions.
Coopers & Lybrand
New York, New York
February 8, 1994
-56-
EXHIBIT 22:
SUBSIDIARIES OF THE REGISTRANT
-57-
Subsidiaries of the Registrant
Jurisdiction
Under Which
Incorporated
Name of Subsidiary Or Organized
- ------------------------------- ------------------
Engelhard West, Inc. California
EC Delaware, Inc. Delaware
Engelhard Metal Plating, Inc. Delaware
Engelhard Strategic Investments, Inc. Delaware
Engelhard Supply Corporation Delaware
Porocel Corporation Delaware
Mustang Property Corporation Delaware
Engelhard Pollution Control, Inc. Delaware
Engelhard Export Corporation U. S. Virgin Islands
The Harshaw Chemical Company New Jersey
Engelhard Australia Pty Ltd Australia
Engelhard Canada Limited Canada
Engelhard Industries International Limited Canada
Engelhard Technologies Limited Canada
Engelhard Pyrocontrole S.A. France
Engelhard S.A. France
Engelhard S.R.L. Italy
Engelhard Italiana S.P.A. Italy
Engelhard Holdings GmbH Germany
Engelhard Technologies Verwaltsung GmbH Germany
Petroleum Catalysts GmbH Germany
Engelhard (Hong Kong) Ltd. Hong Kong
Engelhard DeMeern B.V. The Netherlands
Engelhard Terneuzen, B.V. The Netherlands
Engelhard Netherlands, B.V. The Netherlands
Engelhard (Singapore) Pte Ltd Singapore
Engelhard Metals A.G. Switzerland
Engelhard Limited United Kingdom
Engelhard Metals Limited United Kingdom
Engelhard Sales Limited United Kingdom
Engelhard Technologies Limited United Kingdom
The Sheffield Smelting Co. Ltd United Kingdom
EC Pigments OY Finland
Engelhard Metals Japan Limited Japan
Name of Affiliate
N. E. Chemcat Corporation Japan
Hankuk-Engelhard Corporation South Korea
Salem Engelhard Michigan
Acreon Catalysts Texas
HERAEUS Engelhard Electrochemistry Delaware
Engelhard/ICC Pennsylvania
The names of other subsidiaries have been omitted since such subsidiaries, if
considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary as that term is defined in Rule 12b-2
(17 CFR 240.12b-2) promulgated under the Securities Exchange Act of 1934.
-58-
EXHIBIT 24:
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-59-
Consent of Independent Public Accountants
We consent to the incorporation by reference in the registration statements of
Engelhard Corporation on Form S-8 (File Nos. 2-72830, 2-81559, 2-84477, 2-
89747, 33-28540, 33-37724, 33-40365, 33-40338 and 33-43934) of our report
dated February 8, 1994, on our audits of the consolidated financial statements
of Engelhard Corporation and Subsidiaries, as of December 31, 1993 and 1992,
and for the years ended December 31, 1993, 1992 and 1991, which report is
incorporated by reference in this Annual Report on Form 10-K. We also consent
to the incorporation by reference of our report on the Financial Statement
Schedules which appears on page 20 of this Annual Report on Form 10-K.
COOPERS & LYBRAND
New York, New York
March 28, 1994
-60-
EXHIBIT 25:
POWERS OF ATTORNEY
-61-
ENGELHARD CORPORATION
Form 10-K
POWER OF ATTORNEY
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities
and Exchange Commission under the Securities Exchange Act of 1934 an Annual
Report on Form 10-K for the fiscal year ended December 31, 1993.
NOW, THEREFORE, the undersigned in his capacity as a director of
ENGELHARD CORPORATION hereby appoints Arthur A. Dornbusch, II and Orin R.
Smith, or either of them individually, his true and lawful attorney to execute
in his name, place and stead, in his capacity as a director of ENGELHARD
CORPORATION, said Form 10-K and any and all amendments to said Form 10-K and
all instruments necessary or incidental in connection therewith, and to file
the same with the Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of
the undersigned, in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises, as fully to all intents and purposes as
the undersigned might or could do in person. The undersigned hereby ratifies
and approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
February 3, 1994.
/s/Marion H. Antonini
-----------------------
Marion H. Antonini
-62-
ENGELHARD CORPORATION
Form 10-K
POWER OF ATTORNEY
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities
and Exchange Commission under the Securities Exchange Act of 1934 an Annual
Report on Form 10-K for the fiscal year ended December 31, 1993.
NOW, THEREFORE, the undersigned in his capacity as a director of
ENGELHARD CORPORATION hereby appoints Arthur A. Dornbusch, II and Orin R.
Smith, or either of them individually, his true and lawful attorney to execute
in his name, place and stead, in his capacity as a director of ENGELHARD
CORPORATION, said Form 10-K and any and all amendments to said Form 10-K and
all instruments necessary or incidental in connection therewith, and to file
the same with the Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of
the undersigned, in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises, as fully to all intents and purposes as
the undersigned might or could do in person. The undersigned hereby ratifies
and approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
February 3, 1994.
/s/L. Donald LaTorre
---------------------
L. Donald LaTorre
-63-
ENGELHARD CORPORATION
Form 10-K
POWER OF ATTORNEY
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities
and Exchange Commission under the Securities Exchange Act of 1934 an Annual
Report on Form 10-K for the fiscal year ended December 31, 1993.
NOW, THEREFORE, the undersigned in his capacity as a director of
ENGELHARD CORPORATION hereby appoints Arthur A. Dornbusch, II and Orin R.
Smith, or either of them individually, his true and lawful attorney to execute
in his name, place and stead, in his capacity as a director of ENGELHARD
CORPORATION, said Form 10-K and any and all amendments to said Form 10-K and
all instruments necessary or incidental in connection therewith, and to file
the same with the Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of
the undersigned, in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises, as fully to all intents and purposes as
the undersigned might or could do in person. The undersigned hereby ratifies
and approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
February 3, 1994.
/s/Gerard E. Munera
--------------------
Gerard E. Munera
-64-
ENGELHARD CORPORATION
Form 10-K
POWER OF ATTORNEY
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities
and Exchange Commission under the Securities Exchange Act of 1934 an Annual
Report on Form 10-K for the fiscal year ended December 31, 1993.
NOW, THEREFORE, the undersigned in his capacity as a director of
ENGELHARD CORPORATION hereby appoints Arthur A. Dornbusch, II and Orin R.
Smith, or either of them individually, his true and lawful attorney to execute
in his name, place and stead, in his capacity as a director of ENGELHARD
CORPORATION, said Form 10-K and any and all amendments to said Form 10-K and
all instruments necessary or incidental in connection therewith, and to file
the same with the Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of
the undersigned, in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises, as fully to all intents and purposes as
the undersigned might or could do in person. The undersigned hereby ratifies
and approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
February 3, 1994.
/s/James V. Napier
-------------------
James V. Napier
-65-
ENGELHARD CORPORATION
Form 10-K
POWER OF ATTORNEY
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities
and Exchange Commission under the Securities Exchange Act of 1934 an Annual
Report on Form 10-K for the fiscal year ended December 31, 1993.
NOW, THEREFORE, the undersigned in his capacity as a director of
ENGELHARD CORPORATION hereby appoints Arthur A. Dornbusch, II and Orin R.
Smith, or either of them individually, his true and lawful attorney to execute
in his name, place and stead, in his capacity as a director of ENGELHARD
CORPORATION, said Form 10-K and any and all amendments to said Form 10-K and
all instruments necessary or incidental in connection therewith, and to file
the same with the Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of
the undersigned, in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises, as fully to all intents and purposes as
the undersigned might or could do in person. The undersigned hereby ratifies
and approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
February 3, 1994.
/s/Norma T. Pace
------------------
Norma T. Pace
-66-
ENGELHARD CORPORATION
Form 10-K
POWER OF ATTORNEY
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities
and Exchange Commission under the Securities Exchange Act of 1934 an Annual
Report on Form 10-K for the fiscal year ended December 31, 1993.
NOW, THEREFORE, the undersigned in his capacity as a director of
ENGELHARD CORPORATION hereby appoints Arthur A. Dornbusch, II and Orin R.
Smith, or either of them individually, his true and lawful attorney to execute
in his name, place and stead, in his capacity as a director of ENGELHARD
CORPORATION, said Form 10-K and any and all amendments to said Form 10-K and
all instruments necessary or incidental in connection therewith, and to file
the same with the Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of
the undersigned, in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises, as fully to all intents and purposes as
the undersigned might or could do in person. The undersigned hereby ratifies
and approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
February 3, 1994.
/s/Reuben F. Richards
----------------------
Reuben F. Richards
-67-
ENGELHARD CORPORATION
Form 10-K
POWER OF ATTORNEY
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities
and Exchange Commission under the Securities Exchange Act of 1934 an Annual
Report on Form 10-K for the fiscal year ended December 31, 1993.
NOW, THEREFORE, the undersigned in his capacity as a director of
ENGELHARD CORPORATION hereby appoints Arthur A. Dornbusch, II and Orin R.
Smith, or either of them individually, his true and lawful attorney to execute
in his name, place and stead, in his capacity as a director of ENGELHARD
CORPORATION, said Form 10-K and any and all amendments to said Form 10-K and
all instruments necessary or incidental in connection therewith, and to file
the same with the Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of
the undersigned, in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises, as fully to all intents and purposes as
the undersigned might or could do in person. The undersigned hereby ratifies
and approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
February 3, 1994.
/s/Henry R. Slack
-------------------
Henry R. Slack
-68-
ENGELHARD CORPORATION
Form 10-K
POWER OF ATTORNEY
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities
and Exchange Commission under the Securities Exchange Act of 1934 an Annual
Report on Form 10-K for the fiscal year ended December 31, 1993.
NOW, THEREFORE, the undersigned in his capacity as a director of
ENGELHARD CORPORATION hereby appoints Arthur A. Dornbusch, II and Orin R.
Smith, or either of them individually, his true and lawful attorney to execute
in his name, place and stead, in his capacity as a director of ENGELHARD
CORPORATION, said Form 10-K and any and all amendments to said Form 10-K and
all instruments necessary or incidental in connection therewith, and to file
the same with the Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of
the undersigned, in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises, as fully to all intents and purposes as
the undersigned might or could do in person. The undersigned hereby ratifies
and approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
February 3, 1994.
/s/Douglas G. Watson
---------------------
Douglas G. Watson
-69-
EXHIBIT 28(a):
ANNUAL REPORT OF FORM 11-K OF THE
SALARY DEFERRAL SAVINGS PLAN OF ENGELHARD CORPORATION
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1993
-70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
_____ TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ___ to ___
SALARY DEFERRAL SAVINGS PLAN OF ENGELHARD CORPORATION
--------------------------------------------------------
(Full title of the plan)
ENGELHARD CORPORATION
-------------------------
(Exact name of issuer as specified in its charter)
101 WOOD AVENUE, ISELIN, NEW JERSEY 08830
-----------------------------------------------
(Address of principal executive offices) (Zip code)
DELAWARE 22-1586002
- -------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
-71-
Item 1. Changes in the Plan
See Amendments
Item 2. Changes in Investment Policy
See Amendments
Item 3. Contributions Under the Plan
Contributions under the plan by Engelhard Corporation (the Company)
are determined by reference to the participants' tax deferred
contribution and are not discretionary.
Item 4. Participating Employees
At December 31, 1993, there were approximately 2,127 employees
participating in the Plan.
Item 5. Administration of the Plan
(a) The Plan is administered by the Pension and Employee Benefit
Plans Committee of the Company (the Committee), the members of which
are appointed by the Company to serve until their successors are
appointed or until death, resignation or removal. The Committee has
full power to determine questions relating to the eligibility of
employees to participate in the Plan, to interpret the provisions of
the Plan and to adopt regulations for its administration. Any or all
members of the Committee who are employees of the Company may be
participants in the Plan.
-72-
The current members of the Committee and their addresses are as
follows:
James V. Napier 3343 Peachtree Road
Chairman of the Committee and East Tower
Director of the Company - Suite 1420
Atlanta, GA 30326
Marion H. Antonini 225 High Ridge Road
Director of the Company Stamford, CT 06905
Robert L. Guyett Engelhard Corporation
Senior Vice President, 101 Wood Avenue
Chief Financial Officer and Iselin, NJ 08830
Director of the Company
L. Donald LaTorre Engelhard Corporation
Senior Vice President, 101 Wood Avenue
Chief Operating Officer Iselin, NJ 08830
and Director of the Company
Gerald E. Munera One DTC
Director of the Company 5251 DTC Parkway
Suite 700
Englewood, CO 80111
Norma T. Pace 100 East 42nd Street
Director of the Company New York, NY 10017
Reuben F. Richards 250 Park Avenue
Chairman of the Board, New York, NY 10177
Director of the Company
Orin R. Smith Engelhard Corporation
President, Chief Executive 101 Wood Avenue
Officer and Director of Iselin, NJ 08830
the Company
(b) All expenses of the Plan incidental to its administration are
paid by the Company. Effective January 1, 1994, certain
administrative fees and brokerage commissions will be charged against
each participant's fund unit value.
-73-
Item 6. Custodian of Investments
(a) The Committee has appointed Vanguard Fiduciary Trust Company,
P.O. Box 1101 Vanguard Financial Center, Valley Forge, Pennsylvania
19482, as independent Plan Trustee. The Trustee and the Company have
entered into a trust agreement setting forth the Trustee's
responsibilities under the Plan including maintaining custody of the
Plan's investments and records of accounts for participants.
(b) The Trustee receives no compensation from the Plan.
(c) Vanguard Fiduciary Trust Company meets certain ERISA financial
criteria and the Company is not required to secure or provide bonds
as evidence of financial guarantee.
Item 7. Reports of Participating Employees
During each quarter of the plan year, each participant receives an
individual participant statement disclosing the status of his or her
account during the preceding quarter.
Item 8. Investment of Funds
The Company pays brokerage commissions only on investments in
Engelhard Corporation common stock.
-74-
Page
Item 9. Financial Statements and Exhibits No.
----
(a) Financial Statements
Report of Independent Public Accountants 76
Statements of Financial Condition 77 - 79
at December 31, 1993 and 1992
Statements of Income and Changes in Plan Equity 80 - 83
for each of the three years in the period
ended December 31, 1993
Notes to Financial Statements 84 - 88
Supplemental Schedule 89 - 90
Schedule I
Schedules II and III have been omitted because the required information is
shown in the financial statements or the notes thereto.
(b) Exhibits
Salary Deferral Savings Plan of Engelhard Corporation, *
as amended and restated as of September 1, 1989,
(incorporated by reference to the Engelhard Corporation
Registration Statement on Form S-8 dated May 4,1989).
First and Second amendments to the Salary Deferral Savings *
Plan of Engelhard Corporation (incorporated by reference to
the Engelhard Corporation Annual Report, Form 10-K for the
fiscal year ended December 31, 1989).
Third, Fourth, Fifth and Sixth Amendments to the Salary *
Deferral Savings Plan of Engelhard Corporation.
(Incorporated by reference to the Engelhard Corporation
Annual Report Form 10-K for the fiscal year ended
December 31, 1992).
Seventh, Eighth and Ninth Amendment to the Salary 91 - 96
Deferral Savings Plan of Engelhard Corporation.
* Incorporated by reference as indicated
-75-
Report of Independent Public Accountants
To the Pension and Employee Benefit Plans Committee of Engelhard Corporation:
We have audited the financial statements and the financial statement
schedule of the Salary Deferral Savings Plan of Engelhard Corporation listed
in the index on Page 105 of this Form 11-K. These financial statements and
the financial statement schedule are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Salary Deferral
Savings Plan of Engelhard Corporation as of December 31, 1993 and 1992, and
the results of its operations for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
COOPERS & LYBRAND
New York, New York
March 24, 1994
-76-
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Financial Condition
at December 31, 1993
(Page 1 of 2)
Company Fixed Equity
Stock Income Growth Balanced Index
Fund Fund Fund Fund Fund
------------ ------------ ------------ ------------ -----------
Assets:
- --------
Investments, at fair value
(combined cost of $63,441,525) $ 33,674,363 $ 23,654,085 $ 12,184,435 $ 3,927,757 $ 3,793,703
Interest Receivable - - - - -
Contributions Receivable:
Participants 129,468 183,807 114,801 43,473 45,689
Engelhard Corporation 158,813 - - - -
Promissory notes from participants 48,618 52,489 32,868 6,762 9,624
------------ ------------ ------------ ------------ -----------
Plan Equity:
- -------------
Plan equity $ 34,011,262 $ 23,890,381 $ 12,332,104 $ 3,977,992 $ 3,849,016
============ ============ ============ =========== ===========
See Accompanying Notes to Financial Statements
-77-
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Financial Condition
at December 31, 1993
(Page 2 of 2)
International Small Short-Term
Growth Cap Bond Loan
Fund Fund Fund Fund Combined
------------ ------------ ------------ ------------ -----------
Assets:
- --------
Investments, at fair value
(combined cost of $63,441,525) $ 729,804 $ 306,864 $ 94,267 $ - $78,365,278
Interest Receivable - - - 28,733 28,733
Contributions Receivable:
Participants 4,829 1,221 361 - 523,649
Engelhard Corporation - - - - 158,813
Promissory notes from participants 1,231 113 89 4,756,974 4,908,768
------------ ------------ ------------ ------------ -----------
Plan Equity:
- -------------
Plan equity $ 735,864 $ 308,198 $ 94 ,717 $ 4,785,707 $83,985,241
============ ============ ============= =========== ===========
See Accompanying Notes to Financial Statements
-78-
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Financial Condition
at December 31, 1992
Company Fixed Equity
Stock Income Growth Balanced Index Loan
Fund Fund Fund Fund Fund Fund Combined
----------- ----------- ----------- ----------- ----------- ----------- -----------
Assets:
- ----------
Investments, at fair value
(combined cost of $53,790,147) $33,112,817 $24,351,508 $ 8,923,204 $ 2,325,415 $ 2,567,150 $ - $71,280,094
Interest Receivable - - - - - 23,291 23,291
Contributions Receivable:
Participants 124,592 214,990 121,871 40,316 44,144 - 545,913
Engelhard Corporation 157,768 - - - - - 157,768
Promissory notes from participants 34,037 44,479 21,688 4,073 8,005 3,616,374 3,728,656
----------- ----------- ----------- ----------- ----------- ----------- -----------
$33,429,214 $24,610,977 $ 9,066,763 $ 2,369,804 $ 2,619,299 $ 3,639,665 $75,735,722
Plan Equity:
- -------------
Plan equity $33,429,214 $24,610,977 $ 9,066,763 $ 2,369,804 $ 2,619,299 $ 3,639,665 $75,735,722
=========== =========== =========== =========== =========== =========== ===========
See Accompanying Notes to Financial Statements
-79-
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Income and Changes in Plan Equity
for the year ended December 31, 1993
(Page 1 of 2)
Company Fixed Equity
Stock Income Growth Balanced Index
Fund Fund Fund Fund Fund
------------ ------------ ------------ ------------ ------------
Net Investment Income:
Dividends $ 584,067 $ - $ 1,031,656 $ 253,323 $ 426,995
Interest - 1,448,963 - - -
------------ ------------ ------------ ------------ ------------
584,067 1,448,963 1,031,656 253,323 426,995
Contributions and other receipts:
Participants 1,713,424 2,796,904 1,897,508 694,171 679,466
Engelhard Corporation 1,894,785 - - - -
------------ ------------ ------------ ------------ ------------
3,608,209 2,796,904 1,897,508 694,171 679,466
Net realized gain (loss) on
disposition of investments 5,249,467 - 244,480 49,311 50, 364
Unrealized appreciation
(depreciation) of
investments (3,244,954) - 608,307 93,192 (63,307)
Transaction Fees - - - - -
Distributions (3,606,977) (3,486,635) (898, 613) (246,877) (156,276)
Transfers (2,007,764) (1,479,828) 382,003 765,068 292,475
------------ ------------ ------------ ------------ ------------
582,048 (720,596) 3,265,341 1,608,188 1,229,717
Plan equity,
beginning of year 33,429,214 24,610,977 9,066,763 2,369,804 2,619,299
------------ ------------ ------------ ------------ ------------
Plan equity, end of year $ 34,011,262 $ 23,890,381 $ 12,332,104 $ 3,977,992 $ 3,849,016
============ ============ ============ ============ ============
See Accompanying Notes to Financial Statements
-80-
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Income and Changes in Plan Equity
for the year ended December 31, 1993
(Page 2 of 2)
International Small Short-Term
Growth Cap Bond Loan
Fund Fund Fund Fund Combined
------------ ------------ ------------ ------------ -----------
Net Investment Income:
Dividends $ 4,951 $ 18,255 $ 1,000 $ - $ 2,320,247
Interest - - - 313,424 1,762,387
------------ ------------ ------------ ------------ -----------
4,951 18,255 1,000 313,424 4,082,634
Contributions and other receipts:
Participants 15,673 5,675 1,066 - 7,803,887
Engelhard Corporation - - - - 1,894,785
------------ ------------ ------------ ------------ -----------
15,673 5,675 1,066 - 9,698,672
Net realized gain (loss) on
disposition of investments 930 - (557) - 5,593, 995
Unrealized appreciation
(depreciation) of investments 50,206 (9,632) (6) - (2,566,194)
Transaction Fees - (3,012) - - (3,012)
Distributions - - - (161,198) (8,556,576)
Transfers 664,104 296,912 93,214 993,816 -
------------ ------------ ------------ ------------ -----------
735,864 308,198 94,717 1,146,042 8,249,519
Plan equity, beginning of year - - - 3,639,665 75,735,722
------------ ------------ ------------ ------------ -----------
Plan equity, end of year $735,864 $308,198 $94,717 $4,785,707 $83,985,241
============ ============ ============ ============ ===========
See Accompanying Notes to Financial Statements
-81-
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Income and Changes in Plan Equity
for the year ended December 31, 1992
Company Fixed Equity
Stock Income Growth Balanced Index Loan
Fund Fund Fund Fund Fund Fund Combined
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Investment Income:
Dividends $ 556,274 $ - $ 591,169 $ 121,595 $ 171,858 $ - $ 1,440,896
Interest 6,843 1,584,809 - - - 280,819 1,872,471
----------- ----------- ----------- ----------- ----------- ----------- -----------
563,117 1,584,809 591,169 121,595 171,858 280,819 3,313,367
Contributions and other receipts:
Participants 1,422,681 3,332,197 1,854,623 461,877 602,155 - 7,673,533
Engelhard Corporation 1,881,888 - - - - - 1,881,888
----------- ----------- ----------- ----------- ----------- ----------- -----------
3,304,569 3,332,197 1,854,623 461,877 602,155 - 9,555,421
Net realized gain (loss) on
disposition 3,804,552 - (20,535) 56,613 59,827 - 3,900,457
of investments
Unrealized appreciation 8,805,318 - 688,496 (18,294) (62,547) - 9,412,973
(depreciation) of investments
Distributions (3,176,660) (3,913,072) (1,051,237) (318,299) (330,601) (183,905) (8,973,774)
Transfers (1,727,837) 1,069,956 (204,853) 94,837 (28,807) 796,704 -
----------- ----------- ----------- ----------- ----------- ----------- -----------
11,573,059 2,073,890 1,857,663 398,329 411,885 893,618 17,208,444
Plan equity,
beginning of year 21,856,155 22,537,087 7,209,100 1,971,475 2,207,414 2,746,047 58,527,278
----------- ----------- ----------- ----------- ----------- ----------- -----------
Plan equity, end of year $33,429,214 $24,610,977 $ 9,066,763 $ 2,369,804 $ 2,619,299 $ 3,639,665 $75,735,722
=========== =========== =========== =========== =========== =========== ===========
See Accompanying Notes to Financial Statements
-82-
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Income and Changes in Plan Equity
for the year ended December 31, 1991
Company Fixed Equity
Stock Income Growth Balanced Index Loan
Fund Fund Fund Fund Fund Fund Combined
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Investment Income:
Dividends $ 508,578 $ - $ 763,161 $ 108,315 $ 112,324 $ - $ 1,492,378
Interest 5,860 1,577,851 - - - 212,486 1,796,197
----------- ----------- ----------- ----------- ----------- ----------- -----------
514,438 1,577,851 763,161 108,315 112,324 212,486 3,288,575
Contributions and other receipts:
Participants 1,213,260 3,386,388 1,784,523 374,117 516,912 - 7,275,200
Engelhard Corporation 1,844,153 - - - - - 1,844,153
----------- ----------- ----------- ----------- ----------- ----------- -----------
3,057,413 3,386,388 1,784,523 374,117 516,912 - 9,119,353
Net realized gain (loss) on
disposition of investments 2,085,652 - (207,786) 13,551 40,733 - 1,932,150
Unrealized appreciation
of investments 7,898,667 - 930,150 264,873 316,029 - 9,409,719
Distributions (2,554,491) (3,587,278) (1,040,697) (343,265) (274,046) (154,216) (7,953,993)
Transfers (4,272,931) 3,713,165 (191,827) 107,731 46,745 597,117 -
----------- ----------- ----------- ----------- ----------- ----------- -----------
6,728,748 5,090,126 2,037,524 525,322 758,697 655,387 15,795,804
Plan equity, beginning of year 15,127,407 17,446,961 5,171,576 1,446,153 1,448,717 2,090,660 42,731,474
----------- ----------- ----------- ----------- ----------- ----------- -----------
Plan equity, end of year $21,856,155 $22,537,087 $ 7,209,100 $ 1,971,475 $ 2,207,414 $ 2,746,047 $58,527,278
============ =========== =========== =========== =========== =========== ===========
See Accompanying Notes to Financial Statements
-83-
Notes to Financial Statements
Note 1 - Description of the Plan
The Salary Deferral Savings Plan of Engelhard Corporation (the Plan), as
amended and restated as of September 1, 1989, is designed to provide eligible
employees of Engelhard Corporation (the Company) an opportunity to save part
of their income by having the Company reduce their compensation and contribute
the amount of the reduction to the Plan on a tax deferred basis.
The following plan description is provided for general information
purposes. Participants of the Plan should refer to the plan document for more
detailed and complete information.
Eligibility
- ------------
Except as specifically included or excluded by the Board of Directors of
the Company (the Board), U.S. salaried employees of the Company and its
wholly-owned (directly or indirectly) domestic subsidiaries and all non-
collectively bargained hourly employees who have completed at least one year
of service, as defined, are eligible to participate in the Plan as of the
first day of the month in which they meet the year of service requirement.
Contributions
- --------------
The Plan permits eligible employees participating in the Plan (the
Participants) to elect to reduce their compensation, as defined, by a whole
percentage thereof, subject to limitations, and to have that amount
contributed to the Plan and the related taxes deferred.
Matching Contributions
- -----------------------
The Company will contribute, on a monthly basis and subject to limitations and
exclusions, either cash or common stock of the Company in an amount equal to
50 percent of the amount contributed by the Participants.
Investments
- -------------
All contributions to the Plan are held and invested by Vanguard Fiduciary
Trust Company (the Trustee). The Trustee maintains eight separate investment
funds within the Trust:
a) The Company Stock Fund, which consists of assets invested or held for
investment in the common stock of the Company. In the event the
assets cannot be immediately invested in Company common stock, the
funds are invested in short-term securities pending investments in
Company common stock.
b) The Fixed Income Fund, which consists of assets invested in shares of
the Vanguard Variable Rate Investment Contract Trust. In the event
the assets cannot be immediately invested in such shares or deposited
as specified above, the assets are invested in short-term investments
at the discretion of the Pension and Employee Benefit Plans Committee
(the Committee).
-84-
c) The Growth Fund, which consists of assets invested in the Vanguard
Windsor Fund, which invests primarily in common stocks for the
purpose of realizing long-term growth of capital and income.
d) The Balanced Fund, which consists of assets invested in the Vanguard
Asset Allocation Fund, which invests in stocks, bonds and cash
reserves for the purpose of maximizing long-term total return with
less volatility than a portfolio of common stock.
e) The Equity Index Fund, which consists of assets invested in the
Vanguard Quantitative Portfolio, which invests primarily in common
stocks for the purpose of realizing a total return greater than the
Standard & Poor's 500 Index while maintaining fundamental investment
characteristics similar to such Index.
f) International Growth Fund, which consists of assets invested in
shares of the Vanguard International Growth Portfolio or such other
mutual fund or funds which invest primarily in common stocks of
companies based outside the Untied States that have above-average
growth potential for the purpose of realizing long-term capital
growth.
g) Small Cap Fund, which consists of assets invested in shares of the
Vanguard Small Capitalization Stock Fund or such other mutual fund or
funds which invest primarily in common stocks of small-sized
companies for the purpose of providing a comparatively low-cost
method of passively capturing the investment returns of small-sized
companies and attempting to provide investment results that parallel
the performance of the unmanaged Russell 2000 Small Stock Index.
h) Short-Term Bond Fund, which consists of assets 118 invested in shares
of the Short-Term Corporate Portfolio of the Vanguard Fixed Income
Securities Fund or such other mutual fund or funds which invest
primarily in relatively short maturity investment-grade bonds for
the purpose of providing a level of current income consistent with a
two to three year average maturity and helping to preserve capital.
Participants have the right to elect, subject to restrictions, in which
investment fund or funds their contributions are invested. All matching
contributions are invested in the Company Stock Fund.
The number of Participants in each fund was as follows at December 31:
Participants 1993 1992
---------- ----------
Common Stock Fund 1,946 1,956
Fixed Income Fund 1,435 1,518
Growth Fund 1,064 1,019
Balanced Fund 529 439
Equity Index Fund 546 493
International Growth Fund 47 -
Small Cap Fund 21 -
Short-Term Bond Fund 7 -
The total number of Participants in the Plan was less than the sum of the
number of Participants shown above because many were participating in more
than one fund.
-85-
The number of units representing Participant interests in each fund and
the related net asset value per unit were as follows at December 31:
Participant Interests
Company Fixed Equity Int'l Small Short-Term
Stock Income Growth Balanced Index Growth Cap Bond
Fund Fund Fund Fund Fund Fund Fund Fund
--------- --------- --------- --------- --------- --------- --------- ---------
1993:
Units 1,228,287 23,890,381 886,564 275,294 233,983 54,468 19,668 8,690
Value per unit $27.69 $1.00 $13.91 $14.45 $16.45 $13.51 $15.67 $10.90
1992:
Units 1,282,779 24,610,977 711,677 173,739 160,693 - - -
Value per unit $26.06 $1.00 $12.74 $13.64 $16.30 - - -
Vesting
- ---------
Participants at all times have a fully vested and non-forfeitable interest in
their contributions and in the matching contributions allocated to their
account.
Loan Provision
- ---------------
The Plan allows Participants who have participated in the Plan for at least
one year to borrow funds from their accounts, subject to certain terms and
conditions, at a reasonable interest rate as determined by the Committee in
accordance with applicable law. Effective January 1, 1994, participants may
have two loans outstanding at a time.
Termination
- ------------
The Company, although it expects and intends to continue the Plan
indefinitely, has reserved the right of the Board to terminate or amend the
Plan.
Distributions and Withdrawals
- ------------------------------
All distributions and withdrawals from the Plan are made to Participants in a
lump sum cash payment except those amounts distributed from the Company Stock
Fund which may, at the Participant's election, be paid in full shares of the
Company's Common Stock with cash paid in lieu of fractional shares.
Note 2 - Accounting Policies
The accounts of the Plan are maintained on an accrual basis.
Purchases and sales of investments are reflected on a trade date basis.
Assets of the Plan are valued at fair value. Gains and losses on
distributions to participants and sales of investments are based on average
cost. Certain prior year amounts have been reclassified to conform with the
current year presentation.
-86-
Note 3 - Income Tax Status
The Plan and the Trust created thereunder are intended to qualify
under Section 401(a) and 501(a) of the Internal Revenue Code of 1986, as
amended (the Code) and the Plan includes a cash or deferred arrangement
intended to meet the requirements of Section 401(k) of the Code. The Internal
Revenue Service has issued a favorable determination letter as to the Plan's
qualified status under the Code. Amounts contributed to and earned by the
Plan are not taxed to the employee until a distribution from the Plan is made.
In addition, the unrealized appreciation on any shares of common stock of the
Company distributed to an employee is not taxed until the time of disposition
of such shares.
Note 4 - Administrative Expenses
All expenses of the Plan are paid for by the Company. Investment
advisory fees for portfolio management of Vanguard funds are paid directly
from fund earnings. Advisory fees are included in the fund expense ratio and
will not reduce the assets of the Plan. Brokerage commissions paid to
purchase Engelhard Corporation common stock are paid for by the Company.
Effective January 1, 1994, certain administrative fees and brokerage
commissions will be charged against each participant's fund unit value.
Note 5 - Concentrations of Credit Risk
Financial instruments which potentially subject the Plan to
concentrations of credit risk consist principally of investment contracts with
insurance and other financial institutions. The Plan places its investment
contracts with high-credit quality institutions and, by policy, limits the
amount of credit exposure to any one financial institution.
Note 6 - Investments
Investments in the Common Stock of the Company are valued at the
readily-available, quoted market price as of the valuation date and
investments in the Vanguard Funds are valued based on the quoted net asset
value (redemption value) of the respective investment company as of the
valuation date.
-87-
The net realized gain (loss) on disposition of investments was computed as follows:
Company Equity Int'l Small Short-term
Stock Growth Balanced Index Growth Cap Bond
Net realized gain (loss) Fund Fund Fund Fund Fund Fund Fund Combined
----------- ----------- --------- -------- -------- -------- -------- -----------
Year ended December 31, 1993 -
Amount realized $13,588,122 $ 4,719,228 $ 766,445 $618,340 $129,032 $ 3,013 $463,549
Cost-average 8,338,655 4,474,748 717,134 567,976 128,102 3,013 464,106
Net realized gain (loss) 5,249,467 244,480 49,311 50,364 930 - (557) $5,593,995
Year ended December 31, 1992 -
Amount realized $9,680,568 $ 3,350,211 $ 807,732 $810,182 - - -
Cost-average 5,876,016 3,370,746 751,119 750,355 - - -
Net realized gain (loss) 3,804,552 (20,535) 56,613 59,827 - - - $3,900,457
Year ended December 31, 1991 -
Amount realized $9,635,791 $ 2,912,708 $ 515,681 $640,820 - - -
Cost-average 7,550,139 3,120,494 502,130 600,087 - - -
Net realized gain (loss) 2,085,652 (207,786) 13,551 40,733 - - - $1,932,150
The net unrealized appreciation (depreciation) of investments held was computed as follows:
Company Equity Int'l Small Short-term
Stock Growth Balanced Index Growth Cap Bond
Fund Fund Fund Fund Fund Fund Fund Combined
----------- ----------- --------- -------- -------- -------- -------- -----------
Net unrealized appreciation (depreciation)
Year ended December 31, 1993 -
Balance, beginning of year $17,080,135 $ 60,690 $165,777 $183,345 $ - $ - $ - $17,489,947
Net change (3,244,954) 608,307 93,192 (63,307) 50,206 (9,632) (6) (2,566,194)
Balance, end of year 13,835,181 668,997 258,969 120,038 50,206 (9,632) (6) 14,923,753
Year ended December 31, 1992 -
Balance, beginning of year $ 8,274,817 $ (627,806) $184,071 $245,892 - - - $ 8,076,974
Net change 8,805,318 688,496 (18,294) (62,547) - - - 9,412,973
Balance, end of year 17,080,135 60,690 165,777 183,345 - - - 17,489,947
Year ended December 31, 1991 -
Balance, beginning of year $ 376,150 $(1,557,956) $(80,802) $(70,137) - - - $(1,332,745)
Net change 7,898,667 930,150 264,873 316,029 - - - 9,409,719
Balance, end of year 8,274,817 (627,806) 184,071 245,892 - - - 8,076,974
-88-
Schedule I
Salary Deferral Savings Plan
of Engelhard Corporation
Schedule of Investments
at December 31, 1993
Approximate
Cost Market Value
------------- -------------
Company Stock Fund
- -------------------
Common Stock of $19,610,756 $33,445,936
Engelhard Corporation
(1,372,141 shares)
Cash equivalents 228,427 228,427
Fixed Income Fund
- ------------------
Vanguard Variable Rate 23,654,085 23,654,085
Investment Contract Trust
Growth Fund
- -------------
Vanguard Windsor Fund 11,515,438 12,184,435
Balanced Fund
- ---------------
Vanguard Asset Allocation Fund 3,668,787 3,927,757
Equity Index Fund
- ------------------
Vanguard Quantitative Portfolio 3,673,665 3,793,703
International Growth Fund
- --------------------------
Vanguard International Growth Portfolio 679,598 729,804
Small Cap Fund
- ---------------
Vanguard Small Capitalization Stock Fund 316,496 306,864
Short-term Bond Fund
- ---------------------
Vanguard Fixed Income Securities Fund 94,273 94,267
------------- -------------
Total $63,441,525 $78,365,278
============= =============
-89-
Schedule I
Salary Deferral Savings Plan
of Engelhard Corporation
Schedule of Investments
at December 31, 1992
Approximate
Cost Market Value
------------- -------------
Company Stock Fund
- -------------------
Common Stock of $15,905,805 $32,985,940
Engelhard Corporation
(959,591 shares)
Cash equivalents 126,877 126,877
Fixed Income Fund
- ------------------
Vanguard Variable Rate 24,351,508 24,351,508
Investment Contract Trust
Growth Fund
- ------------
Vanguard Windsor Fund 8,862,514 8,923,204
Balanced Fund
- --------------
Vanguard Asset Allocation 2,159,638 2,325,415
Fund
Equity Index Fund
- ------------------
Vanguard Quantitative 2,383,805 2,567,150
Portfolio
-------------- -------------
Total $53,790,147 $71,280,094
============== =============
-90-
SEVENTH AMENDMENT TO THE
SALARY DEFERRAL SAVINGS PLAN
OF ENGELHARD CORPORATION
The Salary Deferral Savings Plan of Engelhard Corporation is hereby
amended in the following respects, effective as of the dates set forth below:
1. Effective as of November 1, 1992, Section 3.02(b) is amended to read
as follows:
"(b) is a Highly Compensated Employee (as defined in Section 414(q)
of the Code) as of the later of (i) the date the individual becomes a
Participant, or (ii) the first day of a Plan Year, if for such Plan
Year the Participant is eligible to receive an award pursuant
to the Company's Key Employees Stock Bonus Plan. Notwithstanding the
foregoing, an individual shall be treated as covered by this
subparagraph (b) only with respect to
periods on or after the first day of the month coinciding with or
next following the month in which he becomes eligible to receive an
award pursuant to the Company's Key
Employees Stock Bonus Plan, and shall cease to be covered by this
subparagraph (b) with respect to periods on or after the first day of
the month coinciding with or next following the month in which he is
no longer eligible to receive such an award; or"
2. Effective as of November 1, 1992, the last paragraph of Section 7.04
shall be amended to read as follows:
"A Participant's Accounts shall not be reduced when he receives a
loan pursuant to this Section 7.04; but if (a) the Participant fails
to comply with the provisions of the promissory note signed in
connection with the loan, (b) the Participant's employment terminates
with all Employers by reason of his Retirement, Disability, death,
discharge, quitting, or transfer to an Affiliate that is not an
Employer, or (c) the Participant incurs a Separation from Service due
to leave of absence, then any principal then outstanding and interest
accrued thereon shall become due and payable. If such amount is not
paid within sixty days of such event, the loan shall be in default.
Upon such a default, any outstanding Plan loan (including interest
accrued and unpaid thereon) to a Participant shall be charged against
the Participant's Accounts to the extent of the outstanding loan
balance, and shall be deemed a distribution to him of such Accounts.
The outstanding loan balance shall be treated as repaid to the extent
of such charge."
-91-
EIGHTH AMENDMENT TO THE
SALARY DEFERRAL SAVINGS PLAN
OF ENGELHARD CORPORATION
The Salary Deferral Savings Plan of Engelhard Corporation is hereby
amended in the following respects, effective as of the dates set forth
below:
1. Effective as of January 1, 1994, Section 3.01(b) is amended to read
as follows:
"(b) A Participant may revise his contribution percentage to any
other whole percentage not in excess of the maximum percentage
established from time to time by the Committee, or to zero, by filing
the prescribed form with the Committee at any time, and such revised
contribution percentage will be implemented as soon as practicable
after receipt of the prescribed form by the Committee."
2. Effective as of September 1, 1993, the first paragraph of Section
5.02 is amended to read as follows:
"5.02. The Trustee shall maintain eight separate investment funds
within the Trust: the Fixed Income Fund, the Balanced Fund, the
Equity Index Fund, the Growth Fund, the Company Stock Fund, the
Corporate Bond Fund, the International Growth Fund and the Small
Capitalization Equity Fund. Earnings or gains derived from the
assets of each investment fund will be invested in that Fund."
3. Effective as of September 1, 1993, Section 5.02 is amended by adding
after paragraph (e) thereof the following:
"(f) The Corporate Bond Fund -- a fund the assets of which are
invested in shares of the Short-Term Corporate Portfolio of the
Vanguard Fixed Income Securities Fund or such other mutual fund or
funds which invest primarily in relatively short maturity investment-
grade bonds for the purpose of providing a level of current income
consistent with a two to three year average maturity and helping to
preserve capital.
(g) The International Growth Fund -- a fund the assets of which are
invested in shares of the Vanguard International Growth Portfolio or
such other mutual fund or funds which invest primarily in common
stocks of companies based outside the United States that
have above-average growth potential for the purpose of realizing
long-term capital growth.
(h) The Small Capitalization Equity Fund -- a fund the assets of
which are invested in shares of the Vanguard Small Capitalization
Stock Fund or such other mutual fund or funds which invest primarily
in common stocks of small-sized companies for the purpose of
providing a comparatively low-cost method of passively capturing the
investment returns of small-sized companies and attempting to provide
investment results that parallel the performance of the unmanaged
Russell 2000 Small Stock Index."
-92-
4. Effective as of September 1, 1993, Section 5.03 is amended to read as
follows:
"5.03. Tax Deferred Contributions and, when made, Rollover
Contributions and Transfer Contributions, shall be invested at the
election of the Participant in multiples of 5% in the Fixed Income
Fund, Balanced Fund, Equity Index Fund, Growth Fund, Company Stock
Fund, Corporate Bond Fund, International Growth Fund and/or the Small
Capitalization Equity Fund. The Participant's initial election
pursuant to this Section 5.03 shall be made in writing at the time
that he files his investment election to become a Participant. A
Participant who fails to make an investment election will be deemed
to have elected to have his Tax-Deferred Contributions, Rollover
Contributions (if any) and Transfer Contributions (if any) invested
in the Fixed Income Fund. A Participant may change his investment
election as to future Tax-Deferred Contributions at any time by
telephonic instruction to the Trustee, in accordance with such
conditions as the Trustee may from time to time prescribe, to be
effective with respect to amounts received after
such change is communicated to the Trustee. The Trustee shall be
obligated to comply with a Participant's instructions as to
investment elections made in accordance with this Section 5.03,
except as otherwise provided in Department of Labor Regulation S
2550.404c-1(b) (2) (ii) (B) and (d) (2) (ii), and a Participant shall
be given an opportunity to obtain written confirmation of telephonic
instructions to the Trustee."
5. Effective as of September 1, 1993, Section 5.05 is amended to read as
follows:
"5.05. Each Participant also may elect, subject to the limitations
contained in this Section 5.05, to have all or any multiple of 5% of
the value of his Accounts (i.e., his Tax Deferred Contribution
Account, Matching Account, Rollover Account and After-Tax Transfer
Account, if any) in the Fixed Income Fund, Balanced Fund, Equity
Index Fund, Growth Fund, Common Stock Fund, Corporate Bond Fund,
International Growth Fund and/or the Small Capitalization Equity Fund
transferred to one or more of the other funds at any time by
telephonic exchange communicated to the Trustee, in accordance
with such conditions as the Trustee may from time to time prescribe,
to be effective as of the close of the business day on which (or the
first business day following which) such exchange is communicated to
the Trustee; provided, however, that (i) transfers from the Fixed
Income Fund may be elected no more frequently than once in any
calendar quarter, (ii) amounts transferred from the Fixed Income Fund
may not be transferred to the Corporate Bond Fund until 90 days have
elapsed from the date of transfer of such amount out of the Fixed
Income Fund, and (iii) transfers during any Plan Year from a
Participant's interest in the portion of the Company Stock Fund
attributable to Matching Contributions for Plan Years commencing
after December 31, 1984 (restricted interest) shall be limited to 25%
of the value of the Participant's restricted interest (determined
as of a date established by the Trustee which is as soon as
practicable following the Trustee's receipt of all Matching
Contributions for the preceding Plan Year, and after giving effect to
the application of this clause (iii) in prior Plan Years), plus the
portion of such Participant's interest in the Company Stock Fund so
made available for such transfers during any prior Plan Year and not
-93-
so transferred in any prior Plan Year; except that the limitations of
the foregoing clause (iii) shall not apply to a Participant for any
Plan Year if the value of such Participant's restricted interest as
of the applicable determination date is $100 or less. The Trustee
shall be obligated to comply with a Participant's instructions as to
investment elections made in accordance with this Section 5.05,
except as otherwise provided in Department of Labor Regulation S
2550.404c-1(b) (2) (ii) (B) and (d) (2) (ii), and a Participant shall
be given an opportunity to obtain written confirmation of telephonic
instructions to the Trustee."
6. Effective as of August 5, 1993, Section 7.04(a) is amended to read as
follows:
"(a) The amount of the loan (when added to the outstanding balance
of all other loans from the Plan) shall not exceed the lesser of:
(1) $50,000, reduced by the excess (if any) of (A) the highest
outstanding balance of loans from the Plan during the one-year period
ending on the day before the date on which such loan was made, over
(B) the outstanding balance of loans from the Plan on the date on
which such loan was made; or
(2) 50% of the balance of the Participant's Accounts."
7. Effective as of January 1, 1994, Section 7.04(f) is amended to read
as follows:
"(f) No more than two loans to a Participant may be outstanding at
any time."
8. Effective as of January 1, 1994, the first sentence of Section
7.04(i) is amended to read as follows:
"Each loan shall be made first from the Fixed Income Fund, Corporate
Bond Fund, Balanced Fund, Equity Index Fund, Growth Fund,
International Growth Fund and Small Capitalization Equity Fund on a
proportionate basis to the extent of the Participant's Account
balance therein, and any balance of such loan shall be made from the
Common Stock Fund."
9. Effective as of August 5, 1993, the third sentence of Section 9.03 is
amended to read as follows:
"A Participant's election to defer distribution of his Accounts shall
be irrevocable, except that distribution of the entire balance in
such Accounts shall be made (i) upon the death of the Participant,
(ii) upon the application of the Participant on account of financial
hardship or (iii) upon application of the Participant at any time
prior to his Normal Retirement Date if the Participant's Separation
From Service was by reason of Disability."
10. Effective as of August 5, 1993, Section 10.01 is amended by adding at
the end thereof the following:
"Payments pursuant to a qualified domestic relations order may be
made to an alternate payee prior to the Participant's earliest
retirement age, within the meaning of Section 414(p) (4) (B) of the
-94-
Code."
11. Effective as of August 5, 1993, Article XV is amended by adding at
the end thereof the following new Section 15.05:
"15.05. If an Employee who has participated in the Engelhard
Corporation Savings Plan for Hourly Paid Employees (or any other
qualified plan maintained by the Company or an Affiliate) becomes
eligible to participate in this Plan, such Participant's total
account in the Engelhard Corporation Savings Plan for Hourly Paid
Employees (or such other qualified plan) may be transferred to this
Plan at the sole discretion of the committee or its delegate. The
Participant's vested interest in the total account transferred shall
not be diminished as a result of the transfer."
-95-
NINTH AMENDMENT TO THE SALARY DEFERRAL
SAVINGS PLAN
OF ENGELHARD CORPORATION
The Salary Deferral Savings Plan of Engelhard Corporation is
hereby amended in the following respects, effective as of January 1, 1994:
1. Section 1.10 is amended by deleting the last sentence thereof and
inserting the following in its place:
"Notwithstanding the foregoing, an Employee's Compensation for any
Plan Year in excess of $150,000 as such amount shall be increased due
to cost of living increases in accordance with regulations issued
from time to time by the Secretary of the Treasury under Section
401(a) (17) of the Code, shall be disregarded for all purposes of the
Plan."
2. Section 3.03 is amended by adding the following sentence at the end
of paragraph (c) (vii) thereof:
"Total Compensation taken into account for any Plan Year shall not
include any amounts in excess of $150,000, as adjusted for increases
in the cost of living in accordance with regulations issued from time
to time by the Secretary of the Treasury under Section 401(a) (17) of
the Code."
-96-
EXHIBIT 28(b):
ANNUAL REPORT OF FORM 11-K OF THE
ENGELHARD CORPORATION SAVINGS PLAN FOR HOURLY PAID EMPLOYEES
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1993
-97-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______ to ________
__________________
ENGELHARD CORPORATION SAVINGS PLAN FOR HOURLY PAID EMPLOYEES
(Full title of the plan)
ENGELHARD CORPORATION
(Exact name of issuer as specified in its charter)
101 WOOD AVENUE, ISELIN, NEW JERSEY 08830
(Address of principal executive offices) (Zip code)
DELAWARE 22-1586002
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
-98-
Item 1. Changes in the Plan
See Amendments
Item 2. Changes in Investment Policy
None
Item 3. Contributions Under the Plan
Contributions under the Plan by Engelhard Corporation (Company)
are determined by reference to the participants' tax deferred contribution and
are not discretionary.
Item 4. Participating Employees
At December 31, 1993, there were approximately 661 employees
participating in the Plan.
Item 5. Administration of the Plan
(a) The Plan is administered by the Pension and Employee
Benefit Plans Committee of the Company (the Committee), the
members of which are appointed by the Company to serve
until their successors are appointed or until death,
resignation or removal. The Committee has full power to
determine questions relating to the eligibility of
employees to participate in the Plan, to interpret the
provisions of the Plan and to adopt regulations for its
administration.
-99-
The current members of the Committee and their addresses are as follows:
James V. Napier 3343 Peachtree Road
Chairman of the Committee and East Tower
Director of the Company - Suite 1420
Atlanta, GA 30326
Marion H. Antonini 225 High Ridge Road
Director of the Company Stamford, CT 06905
Robert L. Guyett Engelhard Corporation
Senior Vice President, 101 Wood Avenue
Chief Financial Officer and Iselin, NJ 08830
Director of the Company
L. Donald LaTorre Engelhard Corporation
Senior Vice President, 101 Wood Avenue
Chief Operating Officer Iselin, NJ 08830
and Director of the Company
Gerald E. Munera One DTC
Director of the Company 5251 DTC Parkway
Suite 700
Englewood, CO 80111
Norma T. Pace 100 East 42nd Street
Director of the Company New York, NY 10017
Reuben F. Richards 250 Park Avenue
Chairman of the Board and New York, NY 10177
Director of the Company
Orin R. Smith Engelhard Corporation
President, Chief Executive 101 Wood Avenue
Officer and Director of Iselin, NJ 08830
the Company
(b) All expenses of the Plan incidental to its administration are
paid by the Company. Effective January 1, 1994, certain
administrative fees and brokerage commissions will be charged
against participant's fund unit value.
-100-
Item 6. Custodian of Investments
(a) The Committee has appointed Vanguard Fiduciary Trust
Company, P.O. Box 1101 Vanguard Financial Center, Valley
Forge, Pennsylvania 19482, as independent Plan Trustee.
The Trustee and the Company have entered into a trust
agreement setting forth the Trustee's responsibilities
under the Plan including maintaining custody of the Plan's
investments and records of accounts for participants.
(b) The Trustee receives no compensation from the Plan.
(c) Vanguard Fiduciary Trust Company meets certain ERISA
financial criteria and the Company is not required to
secure or provide bonds as evidence of financial
guarantee.
Item 7. Reports of Participating Employees
During each quarter of the plan year, each participant receives
an individual participant statement disclosing the status of his or her
account during the preceding quarter.
Item 8. Investment of Funds
The Company pays brokerage commissions only on investments in
Engelhard Corporation common stock.
-101-
Page
Item 9. Financial Statements and Exhibits No.
(a) Financial Statements
Report of Independent Public Accountants 103
Statements of Financial Condition 104 - 105
at December 31, 1993 and 1992
Statements of Income and Changes in Plan Equity 106 - 108
for the three years in the period ended
December 31, 1993
Notes to Financial Statements 109 - 112
Supplemental Schedule 113 - 114
Schedule I
Schedules II and III have been omitted because the required
information is shown in the financial statements or the notes thereto.
(b) Exhibits
Engelhard Corporation Savings Plan for Hourly *
Paid Employees (incorporated by reference
to the Engelhard Corporation Registration
Statement on Form S-8 dated September 6, 1990).
First, Second, Third, and Fourth Amendments *
to the Engelhard Corporation Savings Plan for
Hourly Paid Employees (Incorporated by reference
to the Engelhard Corporation Annual Report Form
10-K for the fiscal year ended December 31, 1992).
Fifth, Sixth and Seventh Amendments to the 115 - 118
Engelhard Corporation Savings Plan for Hourly
Paid Employees.
* Incorporated by reference as indicated
-102-
Report of Independent Public Accountants
To the Pension and Employee Benefit Plans Committee of Engelhard Corporation:
We have audited the financial statements and the financial
statement schedule of the Engelhard Corporation Savings Plan for Hourly Paid
Employees listed in the index on Page 129 of this Form 11-K. These financial
statements and the financial statement schedule are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements and the financial statement schedule based on our audit.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of the
Engelhard Corporation Savings Plan for Hourly Paid Employees as of December
31, 1993 and 1992, and the results of its operations for each of the three
years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND
New York, New York
March 24, 1994
-103-
Engelhard Corporation Savings Plan for Hourly Paid Employees
Statement of Financial Condition
at December 31, 1993
Company Stock Fixed Income Balanced Equity Index
Fund Fund Fund Fund Combined
---------- ----------- --------- ------------ -----------
Assets:
Investments, at fair value
(combined cost of $2,865,749) $1,320,006 $1,285,061 $224,821 $254,653 $3,084,541
Contributions Receivable:
Participants 55,852 60,162 12,009 13,250 141,273
Engelhard Corporation 10,063 - - - 10,063
---------- ----------- --------- ------------ -----------
$1,385,921 $1,345,223 $236,830 $267,903 $3,235,877
Liabilities and Plan Equity:
Plan equity $1,385,921 $1,345,223 $236,830 $267,903 $3,235,877
========== =========== ========= ============ ===========
See Accompanying Notes to Financial Statements
-104-
Engelhard Corporation Savings Plan for Hourly Paid Employees
Statement of Financial Condition
at December 31, 1992
Company Stock Fixed Income Balanced Equity Index
Fund Fund Fund Fund Combined
---------- ----------- --------- ------------ -----------
Assets:
Investments, at fair value $690,070 $743,477 $113,823 $135,602 $1,682,972
(combined cost of $1,470,182)
Contributions Receivable:
Participants 30,932 53,739 7,910 9,246 101,827
Engelhard Corporation 8,491 - - - 8,491
---------- ----------- --------- ------------ -----------
$729,493 $797,216 $121,733 $144,848 $1,793,290
Liabilities and Plan Equity:
Plan equity $729,493 $797,216 $121,733 $144,848 $1,793,290
========== =========== ========= ============ ===========
See Accompanying Notes to Financial Statements
-105-
Engelhard Corporation Savings Plan for Hourly Paid Employees
Statement of Income and Changes in Plan Equity
for the year ended December 31, 1993
Company Stock Fixed Income Balanced Equity Index
Fund Fund Fund Fund Combined
---------- ----------- --------- ------------ -----------
Net Investment Income:
Dividends $ 19,236 $ - $ 14,212 $ 28,382 $ 61,830
Interest - 60,754 - - 60,754
---------- ----------- --------- ------------ -----------
19,236 60,754 14,212 28,382 122,584
Contributions:
Participants 499,512 570,358 102,059 115,863 1,287,792
Engelhard Corporation 91,659 - - - 91,659
---------- ----------- --------- ------------ -----------
591,171 570,358 102,059 115,863 1,379,451
Net realized gain on disposition
of investments 9,261 - 891 1,785 11,937
Unrealized appreciation (depreciation)
of investments 5,899 - 5,214 (5,111) 6,002
Distributions (29,484) (35,054) (3,370) (9,479) (77,387)
Transfers 60,345 (48,051) (3,909) (8,385) -
---------- ----------- --------- ------------ -----------
656,428 548,007 115,097 123,055 1,442,587
Plan equity, beginning of year 729,493 797,216 121,733 144,848 1,793,290
---------- ----------- --------- ------------ -----------
Plan equity, end of year $1,385,921 $1,345,223 $236,830 $267,903 $3,235,877
========== =========== ========= ============ ===========
See Accompanying Notes to Financial Statements
-106-
Engelhard Corporation Savings Plan for Hourly Paid Employees
Statement of Income and Changes in Plan Equity
for the year ended December 31, 1992
Company Stock Fixed Income Balanced Equity Index
Fund Fund Fund Fund Combined
---------- ----------- --------- ------------ -----------
Net Investment Income:
Dividends $ 10,043 $ - $ 5,363 $ 8,301 $ 23,707
Interest 97 33,944 - - 34,041
---------- ----------- --------- ------------ -----------
10,140 33,944 5,363 8,301 57,748
Contributions:
Participants 248,240 485,082 72,086 80,936 886,344
Engelhard Corporation 73,438 - - - 73,438
---------- ----------- --------- ------------ -----------
321,678 485,082 72,086 80,936 959,782
Net realized gain on disposition 2,400 - 108 (6) 2,502
of investments
Unrealized appreciation of investments 181,051 - 1,656 472 183,179
Distributions (1,812) (8,223) (1,297) (240) (11,572)
Transfers 27,052 (27,973) (491) 1,412 -
---------- ----------- --------- ------------ -----------
540,509 482,830 77,425 90,875 1,191,639
Plan equity, beginning of year 188,984 314,386 44,308 53,973 601,651
---------- ----------- --------- ------------ -----------
Plan equity, end of year $729,493 $797,216 $121,733 $144,848 $1,793,290
========== =========== ========= ============ ===========
See Accompanying Notes to Financial Statements
-107-
Engelhard Corporation Savings Plan for Hourly Paid Employees
Statement of Income and Changes in Plan Equity
for the year ended December 31, 1991
Company Stock Fixed Income Balanced Equity Index
Fund Fund Fund Fund Combined
---------- ----------- --------- ------------ -----------
Net Investment Income:
Dividends $ - $ - $ 1,841 $ 2,450 $ 4,291
Interest - 10,551 - - 10,551
---------- ----------- --------- ------------ -----------
- 10,551 1,841 2,450 14,842
Contributions:
Participants 120,877 308,068 40,308 50,602 519,855
Engelhard Corporation 45,205 - - - 45,205
---------- ----------- --------- ------------ -----------
166,082 308,068 40,308 50,602 565,060
Net realized gain on disposition 172 - 14 66 252
of investments
Unrealized appreciation of investments 24,354 - 2,443 2,814 29,611
Distributions (1,624) (4,233) (298) (1,959) (8,114)
---------- ----------- --------- ------------ -----------
188,984 314,386 44,308 53,973 601,651
Plan equity, beginning of year - - - - -
---------- ----------- --------- ------------ -----------
Plan equity, end of year $188,984 $314,386 $ 44,308 $ 53,973 $601,651
========== =========== ========= ============ ===========
See Accompanying Notes to Financial Statements
-108-
Notes to Financial Statements
Note 1 - Description of the Plan
The Engelhard Corporation Savings Plan for Hourly Paid
Employees (the Plan), effective as of January, 1991, is designed to provide
eligible employees of Engelhard Corporation (the Company) an opportunity to
save part of their income by having the Company reduce their compensation and
contribute the amount of the reduction to the Plan on a tax deferred basis.
The following plan description is provided for general
information purposes. Participants of the Plan should refer to the plan
document for more detailed and complete information.
Eligibility
Except as specifically included or excluded by the Board of Directors of the
Company (the Board), the hourly paid employees of Engelhard Corporation
represented by Locals 223, 237 and 238, Independent Workers of North America,
Locals 1668, 1668A and 1668B of the United Automobile Workers, Local 170 of
the United Steelworkers of America, and, as of January 1, 1994, Local 8-406 of
the Oil, Chemical and Atomic Workers International Union who have completed at
least one year of service, as defined, are eligible to participate in the Plan
as of the first day of the month in which they meet the year of service
requirement.
Contributions
The Plan permits eligible employees participating in the Plan (the
Participants) to elect to reduce their compensation, as defined, by a whole
percentage thereof, subject to limitations, and to have that amount
contributed to the Plan and the related taxes deferred.
Matching Contributions
The Company will contribute, on a monthly basis and subject to limitations and
exclusions, either cash or common stock of the Company in an amount equal to
10 percent of the amount contributed by the Participants.
Investments
All contributions to the Plan are held and invested by Vanguard Fiduciary
Trust Company (the Trustee). The Trustee maintains four separate investment
funds within the Trust:
a) The Company Stock Fund, which consists of assets invested
or held for investment in the common stock of the Company.
In the event the assets cannot be immediately invested
in Company common stock, the funds are invested in short-
term securities pending investments in Company common
stock.
b) The Fixed Income Fund, which consists of assets invested in
shares of the Vanguard Variable Rate Investment Contract
Trust. In the event the assets cannot be immediately
invested in such shares or deposited as specified above,
the assets are invested in short-term investments at the
discretion of the Pension and Employee Benefit Plans
Committee (the Committee).
c) The Balanced Fund, which consists of assets invested in the
Vanguard Asset Allocation Fund, which invests in stocks,
-109-
bonds and cash reserves for the purpose of maximizing long-
term total return with less volatility than a portfolio of
common stock.
d) The Equity Index Fund, which consists of assets invested in
the Vanguard Quantitative Portfolio, which invests
primarily in common stocks for the purpose of realizing a
total return greater than the Standard & Poor's 500 Index
while maintaining fundamental investment characteristics
similar to such Index.
Participants have the right to elect, subject to restrictions, in which
investment fund or funds their contributions are invested. All matching
contributions are invested in the Company Stock Fund.
The number of Participants in each fund was as follows at December 31:
Participants 1993 1992
--------- ---------
Common Stock Fund 599 462
Fixed Income Fund 396 342
Balanced Fund 136 104
Equity Index Fund 145 118
The total number of Participants in the Plan was less than the sum
of the number of Participants shown above because many were participating in
more than one fund.
The number of units representing Participant interests in each
fund and the related net asset value per unit were as follows at December 31:
Participant interests
Company Stock Fixed Income Balanced Equity Index
Fund Fund Fund Fund
--------------- ------------ ----------- -------------
1993:
Units 50,051 1,345,223 16,390 16,286
Value per unit $27.69 $1.00 $14.45 $16.45
1992:
Units 27,993 797,216 8,925 8,886
Value per unit $26.06 $1.00 $13.64 $16.30
-110-
Vesting
Participants at all times have a fully vested and non-forfeitable interest in
their contributions and in the matching contributions allocated to their
account.
Termination
Although it expects and intends to continue the Plan indefinitely, the Company
has reserved the right of the Board to terminate or amend the Plan.
Distributions and Withdrawals
All distributions and withdrawals from the Plan are made to Participants in a
lump sum cash payment except those amounts distributed from the Company Stock
Fund which may, at the Participant's election, be paid in full shares of the
Company's Common Stock with cash paid in lieu of fractional shares.
Note 2 - Accounting Policies
The accounts of the Plan are maintained on an accrual basis.
Purchases and sales of investments are reflected on a trade date basis.
Assets of the Plan are valued at fair value. Gains and losses on
distributions to participants and sales of investments are based on average
cost. Certain prior year amounts have been reclassified to conform with the
current year presentation.
Note 3 - Income Tax Status
The Plan and the Trust created thereunder are intended to
qualify under Section 401(a) and 501(a) of the Internal Revenue Code of 1986,
as amended (the Code) and the Plan includes a cash or deferred arrangement
intended to meet the requirements of Section 401(k) of the Code. The Internal
Revenue Service has issued a favorable determination letter as to the Plan's
qualified status under the Code. Amounts contributed to and earned by the Plan
are not taxed to the employee until a distribution from the Plan is made. In
addition, any unrealized appreciation on any shares of common stock of the
Company distributed to an employee is not taxed until the time of disposition
of such shares.
Note 4 - Administrative Expenses
All expenses of the Plan are paid for by the Company.
Investment advisory fees for portfolio management of Vanguard funds are paid
directly from fund earnings. Advisory fees are included in the fund
expense ratio and will not reduce the assets of the Plan. Brokerage
commissions paid to purchase Engelhard Corporation common stock are paid for
by the Company. Effective January 1, 1994, certain administrative fees and
brokerage commissions will be charged against each participant's unit value.
Note 5 - Concentrations of Credit Risk
Financial instruments which potentially subject the Plan to
concentrations of credit risk consist principally of investment contracts with
insurance and other financial institutions. The Plan places its investment
contracts with high-credit quality institutions and, by policy, limits the
amount of credit exposure to any one financial institutions.
-111-
Note 6 - Investments
Investments in the Common Stock of the Company are valued at
the readily-available, quoted market price as of the valuation date and
investments in the Vanguard Funds are valued based on the quoted net asset
value (redemption value) of the respective investment company as of the
valuation date.
The net realized gain on disposition of investments was computed as follows:
Company Stock Balanced Equity Index
Fund Fund Fund Combined
---------- ---------- ---------- ----------
Year ended December 31, 1993 -
Amount realized $ 45,185 $ 12,115 $ 19,261
Cost-average 35,924 11,224 17,476
Net realized gain 9,261 891 1,785 $ 11,937
Year ended December 31, 1992 -
Amount realized $ 16,127 $ 2,542 $ 717
Cost-average 13,727 2,434 723
Net realized gain (loss) 2,400 108 (6) $ 2,502
Year ended December 31, 1991 -
Amount realized $ 1,624 $ 298 $ 1,960
Cost-average 1,452 284 1,894
Net realized gain 172 14 66 $ 252
The net unrealized appreciation of investments held was computed as follows:
Company Stock Balanced Equity Index
Fund Fund Fund Combined
---------- ---------- ---------- ----------
Year ended December 31, 1993 -
Balance, beginning of year $205,405 $ 4,099 $ 3,286 $212,790
Net change 5,899 5,214 (5,111) 6,002
Balance, end of year 211,304 9,313 (1,825) 218,792
Year ended December 31, 1992 -
Balance, beginning of year $ 24,354 $ 2,443 $ 2,814 $ 29,611
Net change 181,051 1,656 472 183,179
Balance, end of year 205,405 4,099 3,286 212,790
Year ended December 31, 1991 -
Balance, beginning of year $ - $ - $ - $ -
Net change 24,354 2,443 2,814 29,611
Balance, end of year 24,354 2,443 2,814 29,611
-112-
Schedule I
Engelhard Corporation Savings Plan for Hourly Employees
Schedule of Investments
at December 31, 1993
Approximate
Cost Market Value
---------- -------------
Company Stock Fund
- -------------------
Common Stock of $1,096,878 $1,308,182
Engelhard Corporation
(53,669 shares)
Cash equivalents 11,824 11,824
Fixed Income Fund
- ------------------
Vanguard Variable Rate 1,285,061 1,285,061
Investment Contract Trust
Balanced Fund
- --------------
Vanguard Asset Allocation 215,508 224,821
Fund
Equity Index Fund
- ------------------
Vanguard Quantitative 256,478 254,653
Portfolio
---------- -------------
Total $2,865,749 $3,084,541
========== =============
-113-
Schedule I
Engelhard Corporation Savings Plan for Hourly Employees
Schedule of Investments
at December 31, 1992
Approximate
Cost Market Value
---------- -------------
Company Stock Fund
- -------------------
Common Stock of $ 481,064 $ 686,469
Engelhard Corporation
(19,970 shares)
Cash equivalents 3,601 3,601
Fixed Income Fund
- ------------------
Vanguard Variable Rate 743,477 743,477
Investment Contract Trust
Balanced Fund
- --------------
Vanguard Asset Allocation 109,724 113,823
Fund
Equity Index Fund
- ------------------
Vanguard Quantitative 132,316 135,602
Portfolio
---------- -------------
Total $1,470,182 $1,682,972
=========== =============
-114-
FIFTH AMENDMENT TO THE
ENGELHARD CORPORATION SAVINGS PLAN
FOR HOURLY PAID EMPLOYEES
The Engelhard Corporation Savings Plan for Hourly Paid Employees is hereby
amended in the following respects, effective as of January 1, 1993:
1. Appendix A to the Plan is amended by adding the following at the end
thereof:
"4. Hourly-paid employees of Engelhard Corporation represented by
Local 170 of the United Steelworkers of America.
a. Effective Date (Section 1.13).
January 1, 1993.
b. Eligibility Requirement (Section 2.01).
Employees in the employ of the Employer on or before November 24,
1992 are eligible as of the Effective Date; individuals hired
after November 24, 1992 are eligible following completion of one
year of Eligibility Service.
c. Maximum Deferral Percentage (Section 3.01).
15%
d. Matching Percentage (Section 3.02).
0% -- No Matching Contribution.
e. Investment Funds (Section 5.02).
Fixed Income Fund, Balanced Fund, Equity Index Fund.
f. Withdrawals (Section 7.01). Permitted.
g. Loans (Section 7.04). Not Permitted."
-115-
SIXTH AMENDMENT TO THE
ENGELHARD CORPORATION SAVINGS PLAN
FOR HOURLY PAID EMPLOYEES
The Engelhard Corporation Savings Plan for Hourly Paid Employees is hereb
amended in the following respects, effective as of the dates set forth below:
1. Effective as of January 1, 1994, Section 5.03 is amended by adding the
following sentence at the end thereof:
"The Trustee shall be obligated to comply with a Participant's
instructions as to investment elections made in accordance with this
Section 5.03, except as otherwise provided in Department of Labor
Regulations S 2550.404c-1(b) (2) (ii) (B) and (d) (2) (ii), and a
Participant shall be given an opportunity to obtain written
confirmation of telephonic instructions to the Trustee."
2. Effective as of January 1, 1994, Section 5.05 is amended by adding the
following sentence at the end thereof:
"The Trustee shall be obligated to comply with a Participant's
instructions as to investment elections made in accordance with this
Section 5.05, except as otherwise provided in Department of Labor
Regulations S 2550.404c-1(b) (2) (ii) (B) and (d) (2) (ii), and a
Participant shall be given an opportunity to obtain written
confirmation of telephonic instructions to the Trustee."
3. Effective as of August 5, 1993, Section 10.01 is amended by adding at
the end thereof the following:
"Payments pursuant to a qualified domestic relations order may be made
to an alternate payee prior to the Participant's earliest
retirement age, within the meaning of Section 414(p) (4) (B) of the
Code."
4. Effective as of August 5, 1993, Article XV is amended by adding at the
end thereof the following new Section 15.07:
"15.07. If a Participant transfers to a position with the Company or
an Affiliate which is not covered by the Plan and the Participant,
after the transfer, is qualified for participation in the Salary
Deferral Savings Plan of Engelhard Corporation (or any other qualified
plan maintained by the Company or an Affiliate), then such
Participant's entire Account balance may be transferred to the Salary
Deferral Savings Plan of Engelhard Corporation (or such other
qualified plan), at the sole discretion of the Committee or its
delegate, and after such transfer the Participant shall have no
further interest in this Plan."
5. Effective as of January 1, 1994, Appendix A to the Plan is amended by
adding the following at the end thereof:
"5. Hourly-paid employees of Engelhard Corporation represented by
Local 8-406 of the Oil, Chemical & Atomic Workers International Union.
-116-
a. Effective Date (Section 1.13).
January 1, 1994
b. Eligibility Requirement (Section 2.01).
Employees in the employ of the Employer on or before March 26,
1993 are eligible as of the Effective Date; individuals hired
after March 26, 1993 are eligible following completion of one year
of Eligibility Service.
c. Maximum Deferral Percentage (Section 3.01).
10%
d. Matching Percentage (Section 3.02).
10% of Tax Deferred Contributions, up to 0.6% of Compensation.
e. Investment Funds (Section 5.02).
Fixed Income Fund, Balanced Fund, Equity Index Fund.
f. Withdrawals (Section 7.01). Permitted.
g. Loans (Section 7.04). Not Permitted."
-117-
SEVENTH AMENDMENT TO THE
ENGELHARD CORPORATION SAVINGS PLAN
FOR HOURLY PAID EMPLOYEES
The Engelhard Corporation Savings Plan for Hourly Paid Employees is hereby
amended in the following respects, effective as of January 1, 1994:
1. Section 1.10 is amended by deleting the last sentence thereof and
inserting the following in its place:
"Notwithstanding the foregoing, an Employee's Compensation for any
Plan Year in excess of $150,000, as such amount shall be increased due
to cost of living increases in accordance with regulations issued from
time to time by the Secretary of the Treasury under Section 401(a)
(17) of the Code, shall be disregarded for all purposes of the Plan."
2. Section 3.03 is amended by adding the following sentence at the end of
paragraph (c) (vii) thereof:
"Total Compensation taken into account for any Plan Year shall not
include any amounts in excess of $150,000, as adjusted for increases
in the cost of living in accordance with regulations issued from time
to time by the Secretary of the Treasury under Section 401 (a) (17) of
the Code."
3. Appendix A to the Plan is amended by deleting part c. of paragraph 5
thereof and inserting the following in its place:
"c. Maximum Deferral Percentage (Section 3.01).
15%."
-118-