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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
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 for to
Commission file number 0-15899
WELLMAN, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-1761740
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1040 Broad Street, Suite 302
Shrewsbury, New Jersey 07702
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (908) 542-7300
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, New York Stock
$.001 par value 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
Rule 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 amendments to this Form 10-K. []
Aggregate market value of the voting stock held by nonaffiliates of the
registrant, computed on the basis of $21.875 per share (the closing price of
such stock on March 15, 1994 on the New York Stock Exchange): $709,095,734.
The number of shares of the registrant's Common Stock, $.001 par value,
and Class B Common Stock, $.001 par value, outstanding as of March 15, 1994
was 32,882,642 and -0-, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
1. Proxy Statement for the 1994 Annual Meeting of Stockholders (to be
filed with the Securities and Exchange Commission on or before April 30,
1994) is incorporated by reference in Part III hereof.
PART I
Item 1. Business
Recent Developments
In March 1993, the Company sold its 44% ownership interest
in Wellstar Holding B.V. ("Wellstar"), a Netherlands-based
manufacturer of PET beverage bottles, for a total consideration
of approximately $33 million. The transaction resulted in a
net gain, before applicable income taxes, of $12.4 million.
The sale of Wellstar increased 1993 net earnings by
approximately $7.3 million or $.22 per share. See Note 2 of
the Notes to the Consolidated Financial Statements.
General
The principal business of Wellman, Inc. (which, together
with its subsidiaries, is herein referred to as the "Company")
is the manufacture and sale of polyester and nylon fibers and
resins.
The Company's Fibers Group manufactures and markets
polyester and nylon staple fibers and partially-oriented yarn
("POY"). Polyester staple and POY production is sold under the
Fortrel/ brand to major domestic yarn processors and integrated
fabric mills for use in apparel, home furnishings and
industrial applications. The Fibers Group also manufactures
polyester and nylon staple fibers from waste raw materials,
including fiber producer wastes, postconsumer PET soft drink
bottles and film producer wastes, for use in the fiberfill,
furniture, home furnishings, carpet, and industrial markets in
the United States and Europe. The Company believes it is the
largest recycler in the United States of post-consumer plastics
and the largest producer of polyester staple fiber made from
recycled feedstocks.
The Company's Manufactured Products Group ("MPG")
manufactures and markets PET resins, a portion of which is used
in the Company's POY production, for use in polyester fibers
and PET packaging. Prior to 1993, sales of PET resin were
reported by the Company under the Fibers Division (which
consists of the domestic operations of the Fibers Group). MPG
also processes raw wool to produce wool top for worsted fabric
manufacturing; anhydrous lanolin is a by-product of this
production. MPG also manufactures nylon engineering resins,
primarily from producer waste raw materials, for automotive,
consumer and industrial uses. MPG converts polyester fiber
into high-loft nonwoven battings which are used as filling
primarily for the home furnishings industry, and manufactures
needle-punched fabrics primarily for geotextile applications.
In addition, MPG processes postconsumer plastics and certain
producer wastes into suitable raw materials for the Company.
It also markets recycled high density polyethylene ("HDPE")
resins produced from the basecups of soft drink bottles. The
Company manufactures and markets PET and other plastic
thermoformed packaging products and PET sheet.
New England CR Inc. ("CRInc") designs, equips, constructs
and operates materials recovery facilities ("MRFs"). MRFs
separate and process commingled recyclables reclaimed from
households and commercial establishments through curbside
recycling programs. CRInc holds the exclusive North American
rights to distribute the patented Bezner automated materials
sorting process, a German MRF sortation technology. CRInc also
sells the recyclables from its MRFs and brokers recyclables for
other parties. CRInc also operates glass beneficiation
facilities in California and a polystyrene recycling facility
in New Jersey.
Raw Materials
Fibers Group. The major raw materials used by the Company
in the manufacture of polyester staple fiber and POY are
purified terephthalic acid ("PTA") and monoethylene glycol
("MEG"), two petrochemicals, and various waste raw materials.
The Company believes it is the largest producer of polyester
staple fiber made from recycled feedstocks.
The Company purchases PTA under an exclusive supply
contract which expires December 31, 1995 with Amoco Chemical
Corporation ("Amoco"). The Company purchases MEG under an
exclusive supply contract with Oxy Chem Inc. which expires
December 31, 1997. The prices of PTA and MEG have fluctuated
in the past and may continue to do so in the future.
Three categories of wastes are also utilized in the
production of staple fibers: fiber producer waste, PET bottle
waste and PET film waste. A material portion of fiber producer
waste is purchased from fiber manufacturers that compete with
the Company in the sale of fiber. The Company believes it is
the largest U.S. recycler of postconsumer PET bottles, which
are obtained from deposit return and curbside recycling
programs. PET film waste is obtained from various audio,
video, photographic, packaging and X-ray film producers. Fiber
producer and film wastes represent off-quality production, trim
and other wastes. The Company also uses virgin PET resin in
polyester fiber production. The Company's Recycling Division
is responsible for the procurement and processing of the waste
raw materials.
The availability of its petrochemical and waste raw
materials is essential to the Company's fiber operations.
While historically suppliers have provided adequate quantities
of raw materials, the unavailability, scarcity or significantly
increased cost of certain raw materials could have a material
adverse effect on the Company.
Manufactured Products Group. MPG utilizes PTA and MEG to
manufacture PET resins and utilizes recycled PET bottles and
producer waste feedstocks to produce nylon engineering and
recycled HDPE resins. MPG utilizes raw wool and wool grease
for the production of wool top and anhydrous lanolin,
respectively. MPG also uses polyester fiber, supplied by the
Company's Fibers Group and other polyester fiber producers, to
manufacture nonwoven products. MPG utilizes virgin and
recycled PET in the production of PET thermoformed packaging
products and sheet.
Products and Markets
The following table presents the combined net sales (in
millions) and percentage of net sales by business of the
Company for the periods indicated. For purposes of this data,
intercompany transactions have been eliminated and with respect
to its Irish fiber subsidiary, Wellman International Limited
("WIL"), historical exchange rates have been applied to the
data for the periods indicated.
1993 1992 1991
Net % of Net % of Net % of
Sales Total Sales Total Sales Total
Fibers Grp(1) $655.2 77.8% $674.5 81.5% $651.2 80.8%
MPG(1)(2) $163.1 19.4 134.3 16.2 124.3 15.4
CRInc 23.8 2.8 19.4 2.3 30.2 3.8
TOTAL $842.1 100.0% $828.2 100.0% $805.7 100.0%
(1) 1991 and 1992 sales were restated to include
sales of PET resins, which were previously
reported under the Fibers Division, in MPG.
(2) Includes sales of Creative Forming, Inc. ("CFI")
from November 18, 1992, the date of its
acquisition by the Company.
Fibers Group.
Fibers Division. The Fibers Division produces polyester
and nylon staple fibers and POY.
Staple, the primary product produced, is multi-strand fiber
cut into short lengths to simulate certain properties found in
natural fibers such as cotton and wool and/or to meet the end
product needs of the Company's customers. In 1993,
approximately 35% of the Company's domestic polyester staple
sales were to the apparel industry, approximately 22% to the
home furnishings industry, 19% as fiberfill, 12% to the carpet
industry, and the balance to nonwovens and industrial markets.
The Company's domestic nylon staple production was utilized
primarily by the carpet industry, with the balance used in
specialty applications. The Fiber Division's staple products
are manufactured at facilities in Darlington (Palmetto),
Johnsonville and Marion, SC.
Polyester textile staple, the Division's largest staple
product, is produced at Palmetto from PTA and MEG and is sold
primarily to textile mills and spinners for processing into
fabric for a variety of applications, including apparel, home
furnishings and industrial uses. The stated annual fiber
production capacity of the Palmetto plant is approximately 450
million pounds. All other domestic polyester staple production
occurs at the Johnsonville and Marion facilities. The primary
end market for the production from these facilities is the
fiberfill market, followed by the carpet and industrial
markets. The Johnsonville plant, site of all domestic nylon
staple fiber production, has approximately 255 million pounds
of annual fiber production capacity, based on a product mix of
80% polyester and 20% nylon staple. The Marion facility has
approximately 32 million pounds of annual polyester staple
fiber production capacity.
POY, a continuous polyester filament product, is sold by
the Company to integrated textile mills and texturizers for
further processing for use primarily in apparel, home
furnishings and industrial applications. POY is produced at
the Company's Fayetteville, NC plant from PET resin
manufactured by the Company at its Palmetto plant. The
Company's Fayetteville plant increased its stated annual POY
production capacity to approximately 130 million pounds, or by
30%, in the first quarter of 1994.
The Company's polyester textile staple and POY production
is sold under the Fortrel/ brand.
Wellman International Limited. The fiber production
process of WIL, a wholly-owned subsidiary based in Mullagh,
Republic of Ireland, is similar to that of the Company's
Johnsonville plant. WIL also uses recycled raw materials,
including producer fiber and film wastes and, to a lesser
extent, postconsumer PET soft drink bottles, to produce
polyester and nylon staple fibers. The majority of WIL's raw
materials are producer wastes, some of which are obtained from
suppliers who compete with it in the fibers business in
Europe. Postconsumer PET bottles procured by WIL are processed
at the Company's European PET bottle recycling facility,
located in Spijk, the Netherlands.
The maximum annual fiber production capacity of WIL is
approximately 154 million pounds, based on a product mix of
approximately 90% polyester and 10% nylon staple. WIL's
polyester fibers are used primarily in fiberfill, nonwovens and
industrial applications, while its nylon fibers are used mainly
by the carpet industry. WIL exports, primarily to the United
Kingdom and Europe, virtually all of its fiber production.
Manufactured Products Group.
Polymer Products Division. Located at the Palmetto plant,
this Division utilizes PTA and MEG to produce approximately 220
million pounds of PET resin, the commodity bulk form in which
pure polyester is transported and utilized. In 1993,
approximately 47% of the Division's resin was used by the
Fayetteville plant to produce POY. The remainder was sold to
Hoechst Celanese Corp. ("HCC"), pursuant to the terms of a take
or pay supply arrangement which expired in the second half of
1993, and to other customers.
In the first quarter of 1994, the Company commenced
operation of new solid stating equipment at Palmetto which will
enable it to upgrade approximately 80 million pounds per year
of its current PET resin production to higher-value PET bottle
resin, which is used to manufacture PET packaging such as soft
drink bottles. In addition, the new solid stating unit has
capacity to upgrade an additional 80 million pounds per year of
PET resin when the monomer and polymerization capacity at the
Palmetto plant increases as described below.
Monomer is the PET feedstock derived from PTA and MEG from
which polyester textile staple fiber and PET resin is
produced. The Company plans to expand monomer capacity by 400
million pounds, or over 55%, in late 1994. The Company also
plans to add 160 million pounds of PET resin capacity in the
second quarter of 1995.
Wool Division. At the Wool Division's facility in
Johnsonville, SC, raw wool is processed through sorting and
blending operations, scoured, carded, combed, and packaged as
wool top primarily for use in worsted fabric applications for
apparel. The Wool Division's plant has the flexibility to
process and blend various wool grades and to simultaneously run
several different wool blends.
As a by-product of the wool scouring process, wool grease
is recovered which, in combination with wool grease purchased
in the open market, is processed to produce anhydrous lanolin.
The Company believes that it is the largest U.S. producer of
anhydrous lanolin, which it sells to the pharmaceutical,
cosmetics and industrial markets.
Engineering Resins Division. The Engineering Resins
Division, located in Johnsonville, SC, manufactures and markets
nylon engineering resins to the injection molding industry.
These resins, chiefly Nylon 6 and 66 and co-polymers of these
types, are produced primarily from producer wastes and
compounded and combined with various additives (glass,
minerals, fire retardant, etc.) to impart desired performance
characteristics. The Company serves a variety of markets with
these compounded engineering resins, with the largest being
automotive, followed by consumer products, industrial and other.
Nonwovens Business. The Nonwovens business, located in
Charlotte, NC, and Commerce, CA, utilizes polyester fiber to
produce high-loft battings, primarily for the home furnishings
industry, and needle-punched fabrics primarily for geotextile
applications. High-loft battings are used for their cushioning
and insulating properties in bedspreads, comforters, quilts and
other similar products and are sometimes sold under the
Fortrel/ brand. The largest customers of this product are
vertically-integrated textile mills and independent bedspread
and comforter manufacturers. Geotextile fabrics are used for
soil reinforcement and filtration in various civil engineering
applications, including landfill and pond linings and railroad
and road stabilization. The Nonwovens business utilizes
polyester staple fiber produced by the Fibers Group, as well as
other fiber manufacturers, as raw material.
Recycling Division. The Recycling Division processes
postconsumer PET soft drink bottles and producer fiber and film
wastes into usable raw materials for the Fibers and Engineering
Resins Divisions and CFI. It also markets recycled HDPE
resins, primarily to manufacturers of basecups for soft drink
bottles.
The Division consists of PET bottle and producer waste
recycling operations in Johnsonville, SC and PET bottle
recycling operations in Bridgeport, NJ, which was acquired in
May 1993.
In the third quarter of 1993, the Recycling Division
expanded its annual capacity to recycle PET bottles at its
Johnsonville location by over 70%, from 110 million pounds to
190 million pounds. Annual PET bottle recycling capacity in
Bridgeport is approximately 50 million pounds.
Creative Forming, Inc. Utilizing PET as well as other
materials, Creative Forming, Inc. custom designs, manufactures
and markets thermoformed plastic packaging products for the
consumer products industry. It also produces PET sheet,
utilizing both virgin and recycled raw materials, for use in
its own thermoforming operations and for sale in the open
market. CFI, which is based in Ripon, WI, expanded its
capacity to produce sheet by 33% and installed coextrusion
equipment in early 1994.
New England CR Inc. CRInc designs, equips, constructs and
operates materials recovery facilities ("MRFs"). MRFs separate
and process commingled recyclables reclaimed from households
and commercial establishments through curbside recycling
programs. CRInc holds exclusive North American, United Kingdom
and Irish rights to distribute the patented Bezner automated
materials sorting process, a German MRF sortation technology.
CRInc commenced operation of three MRFs in 1993 so that at
year-end 1993, CRInc had 13 full-service MRFs operational.
CRInc also sells the recyclables from its MRFs and brokers
recyclables for other parties. CRInc also operates glass
beneficiation facilities in California and a polystyrene
recycling facility in New Jersey.
Capital Investment Program
Pursuant to its on-going long-term capital investment
program, the Company's 1993 capital expenditures totaled
approximately $105 million. The capital projects included in
the 1993 expenditures were the installation of solid-stating
equipment, expansion of PET bottle recycling and POY production
capacity and equipment modernization at the Company's domestic
fiber operations.
The Company's 1994 capital expenditures are expected to
total approximately $90 million, which will include the
expansion of monomer and PET resin production capacity and
continued equipment upgrades at the domestic fiber operations.
Marketing
The Company markets the majority of its products through a
direct sales force consisting of approximately 50 sales
personnel. For certain sales outside the United States, the
Company utilizes representatives or agents.
The Company also markets its polyester fibers through
various activities, such as advertising, sales promotion,
market analysis, product development and fashion forcasting
directed to its customers and organizations downstream from its
customers. As part of this effort, the Company's marketing
personnel encourage downstream purchasers of apparel, home
furnishings and other products to specify to their suppliers
the use of Fortrel/ brand polyester in their products.
Competitors
Each of the Company's major fiber markets is highly
competitive. The Company competes primarily on the basis of
quality, service, brand identity and price. Several
competitors are substantially larger than the Company and have
substantially greater economic resources. The Company's
primary competitors are E.I. DuPont de Nemours & Co.and the
Hoechst Celanese division of Hoechst A.G. The Company believes
it is currently the third-largest producer of polyester staple
and POY in the United States, representing approximately 26%
and 13%, respectively, of U.S. production capacity for these
products. The Company also competes with Nan Ya Plastics
Corp., which completed construction of a facility in 1993 to
sell polyester staple and POY.
The polyester staple fiber and POY markets have
historically displayed price and volume cyclicality. The
domestic polyester textile fiber markets are subject to changes
in, among other factors, polyester fiber and/or textile product
imports and consumer preferences, spending and retail sales
patterns, which are driven by general economic conditions.
Consequently, a downturn in either the domestic or global
economy or an increase in imports of textile or polyester fiber
products could adversely affect the Company's business.
Research and Development
The Company has approximately 75 U.S. employees devoted to
research and development activities. The Company has entered
into technology sharing arrangements from time to time with
various parties.
Foreign Activities
Primarily through WIL, its Irish fiber subsidiary, the
Company operates in international markets, primarily the United
Kingdom and Western Europe. Since substantially all of WIL's
sales are for export, changes in exchange rates may affect
WIL's profit margins and sales levels. In addition,
fluctuations between the United States dollar and Irish pound
may also affect reported results.
The Company's foreign business is subject to certain risks
customarily attendant upon foreign operations and investments
in foreign countries, including restrictive action by local
governments, limitations on repatriating funds and changes in
currency exchange rates. See Note 11 of the Notes to the
Consolidated Financial Statements for additional information
relating to the Company's foreign activities.
Employees
As of December 31, 1993, the Company employed approximately
3,600 persons in the United States and Europe. At December 31,
1993, approximately 790 U.S. employees were members of The
Amalgamated Clothing and Textile Workers Union ("ACTWU"). The
Company's contract with the ACTWU expires in July, 1996. In
addition, approximately 351 of its Irish employees were
represented by four unions. The wage agreements with these
unions each expire on April 30, 1994.
The Company believes that its relations with its employees
are satisfactory.
Environmental Matters
The Company has determined that groundwater contamination
exists at certain of its facilities. In 1986 contamination
involving chlorinated solvents and hydrocarbon derivatives was
found at its Johnsonville, SC facility, principally associated
with a former drum storage site and an underground storage
tank. In 1987, the Company entered into a consent order with
the South Carolina Department of Health and Environmental
Control ("SCDHEC") for remediation of the Johnsonville site.
In September 1989, nitrate contamination of groundwater at the
Johnsonville facility, primarily resulting from a wool dust
stockpile, was also confirmed.
Varying levels of groundwater contamination at the Palmetto
plant, believed to have been the result of a leak in the
chemical sewers and emergency ponds, were reported to SCDHEC by
HCC prior to the acquisition of the plant by Fiber Industries,
Inc. ("FI") in January 1988. Although no formal action to
require remediation or penalties has been taken by the SCDHEC,
the underground sewer lines have been replaced with a pumped
above-ground system. HCC and Celanese Fibers Inc. ("Celanese")
have completed at their expense the sewer line replacement and
the replacement of two emergency waste ponds and a storm water
pond at the Palmetto plant in order to prevent further
groundwater contamination. Extraction systems for removal of
groundwater contamination by the sewer lines and old emergency
ponds and new emergency holding facilities have been installed
at the expense of HCC and are presently in operation.
In April 1991, the Company entered into a consent order
with the SCDHEC over nitrate contamination of groundwater at
the Company's Palmetto plant. Additional groundwater
contamination, resulting from the leakage of 1,4 dioxane, a
process by-product, was discovered at Palmetto in 1992. The
Company has requested that SCDHEC defer action on the nitrate
consent order based on the limited extent of the nitrate
contamination. In September 1993, the Company entered into a
second consent order with the SCDHEC over 1,4 dioxane
contamination discovered at Palmetto in 1992. All requirements
of this consent order (continued monitoring of the nitrate
contamination, definition of the 1,4 dioxane plume, assessment
of risk from the dioxane plume and development of a plan for
groundwater remediation) have been met to date. The Company is
also evaluating whether to repair or replace its wastewater
treatment plant.
In January 1994 the Company determined that its Palmetto
plant was in violation of its wastewater permit with respect to
biological oxygen demand parameters and toxicity. The Company
has notified the SCDHEC of such violation and is undertaking
remediation action. The cost of such remediation is not
expected to be material.
The Fayetteville plant was notified in 1987 of an "event of
noncompliance" by the North Carolina Department of Environment,
Health and Natural Resources ("NCDEHNR"), formerly the
Department of Natural Resources and Community Development, due
to an increase in total organic carbon levels in two of its six
groundwater monitoring wells. On October 25, 1991 the Company
received a Notice of Violation from the NCDEHNR with regard to
groundwater monitoring results shared with them, showing
chlorinated hydrocarbon contamination. One on-site source, a
chemical wastewater sump, was identified and removed.
Additional off-site sources are suspected.
In August 1992, SCDHEC requested that the Palmetto plant
submit a plan for compliance with the National Ambient Air
Quality Standards ("NAAQS") for sulphur dioxide. The Company
plans to install a new tall stack and related equipment at
Palmetto in late 1994 or early 1995.
Assessment of and remedial plans at the Company's sites are
on-going. While it is often difficult to reasonably quantify
future environmental-related expenditures, the Company
currently estimates its non-capital expenditures related to
environmental matters to range between $13.0 million and $25.0
million. Such expenditures are expected to occur over a
significant number of future years. In connection with these
expenditures, the Company has accrued $15.5 million at December
31, 1993, representing management's best estimate of probable
non-capital environmental expenditures. In addition, capital
expenditures aggregating approximately $10.0 million to $15.0
million may be required over the next several years related to
currently existing environmental matters. See Notes 1 and 8 of
the Company's Notes to Consolidated Financial Statements.
The Company's plants are subject to numerous existing and
proposed laws and regulations designed to protect the
environment from wastes, emissions and hazardous substances.
Except as discussed in the preceding paragraphs, the Company
believes it is either in material compliance with all currently
applicable regulations or is operating in accordance with the
appropriate variances and compliance schedules or similar
arrangements. The Company believes that compliance with
current laws and regulations will not require significant
capital expenditures other than as identified above or have a
material adverse effect on its operations.
Executive Officers of the Registrant
The current executive officers of the Company are as
follows:
Name and Age Position
Thomas M. Duff, 46 President, Chief Executive Officer
and Director
Clifford J. Christenson, 44 Executive Vice President
Keith R. Phillips, 39 Vice President, Chief Financial
Officer and Treasurer
C.W. Beckwith, 62 Vice President and Director;
Chief Executive Officer of WIL
James P. Casey, 53 Vice President; President, Fibers
Division
Paul D. Apostol, 48 Vice President, Manufactured
Products Group, Strategic Planning
and Business Development
Richard J. Kattar, 61 Vice President; President, New
England CR Inc.
Mark J. Rosenblum, 40 Vice President, Controller
Ernest G. Taylor, 43 Vice President, Administration
Officers are elected annually by the Board of Directors.
Set forth below is certain information with respect to the
Company's executive officers.
Thomas M. Duff. Mr. Duff has been President of the Company
since its inception in 1985.
Clifford J. Christenson. Mr. Christenson has been
Executive Vice President since October 4, 1993. Prior to that
time he was Chief Financial Officer and Treasurer since he
joined the Company in 1985 and Vice President since 1986.
Keith R. Phillips. Mr. Phillips has been Vice President,
Chief Financial Officer and Treasurer since October 4, 1993.
Prior to joining the Company on October 1, 1993 he was a
partner in Ernst & Young.
C.W. Beckwith. Mr. Beckwith has been Vice President of
Wellman and Chief Executive Officer of WIL since the
acquisition of WIL in 1987. Prior to such time, he was
managing director of WIL since 1972.
James P. Casey. Mr. Casey has been President of the Fibers
Division since October 4, 1993; prior to such time he was Vice
President, Marketing since March 25, 1991. Prior to that time,
he was Vice President of Marketing of FI and its predecessor
companies.
Paul D. Apostol. Mr. Apostol has been Vice President,
Manufactured Products Group and Strategic Planning and Business
Development since March 15, 1991. Prior to such time, Mr.
Apostol was Vice President of Marketing of FI and its
predecessor companies.
Richard J. Kattar. Mr. Kattar has been Vice President
since May 21, 1991. He has been President of CRInc since its
inception in 1982.
Mark J. Rosenblum. Mr. Rosenblum has been Vice President,
Controller since September 1, 1989 and Controller since he
joined the Company in 1985. Mr. Rosenblum is a certified
public accountant.
Ernest G. Taylor. Mr. Taylor has been Vice President in
charge of Administration since January 1991. From November
1989 until 1991 he was Manager of Administration. Prior to
such time, he was a manager of information systems for FI and
its predecessor companies.
Section 16 Compliance. Section 16(a) of the Securities
Exchange Act of 1934 requires the Company's officers and
directors, and persons who own more than 10% of a registered
class of the Company's equity securities ("insiders"), to file
reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Insiders are
required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. Based solely on review
of the copies of such forms furnished to the Company, the
Company believes that during 1993 all Section 16(a) filing
requirements applicable to its insiders were complied with,
except that a trust for which Mr. Apostol serves as trustee
inadvertently failed to timely file an initial report of its
holdings as required by Section 16.
Item 2. Properties
The location and general description of the principal
properties owned or leased by the Company are set forth in the
table below:
Principal Square
Location Function Footage Ownership
Shrewsbury, NJ Corporate 7,600 Leased
Johnsonville, SC Manufacturing 2,291,000 Owned
and Warehouse
Darlington, SC Manufacturing 1,015,000 Owned
(Palmetto) and Warehouse
Mullagh, Ireland (1) Manufacturing 340,633 Owned
and Warehouse
Fayetteville, NC Manufacturing 295,048 Owned
and Warehouse
Commerce, CA Fiber Converting 90,000 Leased
Facility
Marion, SC Manufacturing 247,500 Owned
and Warehouse
Charlotte, NC Fiber Converting 75,000 Owned
Facility
Administrative 55,020 Leased
and Research
Chelmsford, MA Sales and 13,750 Leased
Administrative
Ripon, WI Manufacturing and 106,000 Owned
Warehouse
Bridgeport, NJ Plastic Bottle Re- 80,000 Leased
cycling Facility
Spijk, The Neth- Plastic Bottle Re- 55,812 Leased
erlands cycling Facility
(1) WIL's lenders currently have a lien on this
facility.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The Company's Common Stock is listed on the New York Stock
Exchange under the symbol WLM. The following table shows the
high and low sales prices on the New York Stock Exchange as
reported on its Composite Tape and the cash dividends paid on
its Common Stock for the last two fiscal years.
Year High Low Dividend
1993
First Quarter $23-3/4 $19-3/4 $0.03
Second Quarter $24-7/8 $18-1/8 $0.05
Third Quarter $22 $17-3/8 $0.05
Fourth Quarter $19-3/8 $16-1/4 $0.05
1992
First Quarter $31-1/2 $22-1/8 $0.03
Second Quarter $30-7/8 $20 $0.03
Third Quarter $24-5/8 $20 $0.03
Fourth Quarter $22-3/8 $16-1/2 $0.03
The Company had approximately 1,657 stockholders of record
of Common Stock as of March 16, 1994.
##
##
Item 6. Selected Financial Data
Years Ended December 31,
(In thousands, except per share data) 1989(2) 1990 1991 1992 1993(3)
Income Statement Data:
Net sales . . . . . . . . . . . . . . . . . . . $437,777 $827,764 $805,664 $828,200 $842,064
Cost of sales . . . . . . . . . . . . . . . . . 312,137 618,519 623,546 639,664 679,182
Gross profit. . . . . . . . . . . . . . . . . . 125,640 209,245 182,118 188,536 162,882
Selling, general and administrative expenses. . 36,046 65,268 73,194 77,439 86,511
Interest expense. . . . . . . . . . . . . . . . 10,977 42,712 29,387 23,012 15,736
Gain on sale of Wellstar. . . . . . . . . . . . -- -- -- -- 12,386
Earnings before income taxes and cumulative
effect of changes in accounting principles. . 78,617 101,265 79,537 88,085 73,021
Provision for income taxes. . . . . . . . . . . 25,564 39,141 32,954 35,801 32,567
Net earnings before cumulative effect of
changes in accounting principles. . . . . . . 53,053 62,124 46,583 52,284 40,454
Cumulative effect of changes in accounting
principles, net of income taxes . . . . . . . -- -- -- -- (9,010)
Net earnings. . . . . . . . . . . . . . . . . . $53,053 $62,124 $46,583 $52,284 $31,444
Earnings (loss) per common share:
Before cumulative effect of changes in
accounting principles. . . . . . . . . . . . $1.79 $1.92 $1.43 $1.60 $1.23
Cumulative effect of changes in accounting
principles, net of income taxes. . . . . . . -- -- -- -- (0.27)
Net earnings. . . . . . . . . . . . . . . . . $1.79 $1.92 $1.43 $1.60 $0.96
Average common shares . . . . . . . . . . . . . 29,605 32,358 32,632 32,728 32,857
Dividends (1) . . . . . . . . . . . . . . . . . $ 3,389 $ 3,849 $ 3,887 $ 3,895 $ 5,885
Pro forma amounts assuming the effects of
the changes in accounting principles are
applied retroactively:
Net earnings. . . . . . . . . . . . . . . . $53,053 $62,124 $46,583 $43,759 $40,454
Net earnings per share. . . . . . . . . . . $1.79 $1.92 $1.43 $1.34 $1.23
December 31,
1989(2) 1990 1991 1992 1993
Balance Sheet Data:
Total assets. . . . . . . . . . . . . . . . . . $912,155 $944,974 $925,289 $996,583 $1,015,247
Notes payable and current maturities of
long-term debt . . . . . . . . . . . . . . . $ 42,815 $ 33,375 $ 34,291 $ 24,688 $ 18,594
Long-term debt exclusive of current maturities. $395,529 $342,066 $269,590 $299,860 $294,173
Stockholders' equity. . . . . . . . . . . . . . $320,179 $393,609 $438,440 $483,268 $506,506
(1) The Company paid quarterly cash dividends of $0.025 beginning in the first quarter of 1989.
In May 1989, the quarterly dividend was increased to $0.03 per share. In the second quarter
of 1993, the quarterly dividend was increased to $0.05 per share.
(2) Reflects the acquisition of Fiber Industries, Inc. on November 1, 1989.
(3) 1993 net earnings reflect $15.9 million ($0.48 per share) of accounting changes and unusual
and nonrecurring items. See also Management's Discussion and Analysis of Financial Condition
and Results of Operations and Notes 1, 2 and 3 of the Notes to the Consolidated Financial
Statement.
##
##
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
ACCOUNTING CHANGES
During 1993, the Company adopted the provisions of the
Financial Accounting Standards Board's Emerging Issues Task
Force (EITF) Abstract No. 93-5. EITF 93-5 provides that an
environmental liability should be evaluated independently from
any potential claim for recovery and that the loss arising from
the recognition of an environmental liability should be reduced
only when a claim for recovery is probable of realization.
Current accounting standards provide a general presumption that
disputed claims for recovery are not probable of realization.
Under practice prior to the issuance of EITF 93-5, some
companies, including the Company, offset reasonably possible
recoveries against probable losses. As a result of the
issuance of EITF 93-5, this accounting treatment is no longer
permitted.
The Company is obligated to remediate environmental
problems which existed at some of its manufacturing facilities
prior to their acquisition by the Company. The Company has
escrow funds and indemnification agreements with the prior
owners of these facilities, which may result in reimbursement
of a significant portion of the environmental liabilities.
However, as discussed above, the new accounting standards
generally permit companies to record only uncontested claims
for reimbursement of environmental liabilities. The change in
accounting for environmental liabilities resulted in an
after-tax cumulative effect charge of $6.8 million ($0.20 per
share), net of the related income tax effect of $4.2 million.
See Note 1 to the Consolidated Financial Statements.
During 1993, the Company changed its method of applying the
lower of cost or market rule to certain slow-moving and
discontinued waste raw material inventory which is valued using
the last in-first out (LIFO) dollar value method. In prior
years, the Company used the aggregate method in applying the
lower of cost or market rule to such inventories and in 1993
changed to the item-by-item method. The Company believes the
new method of accounting is preferable because it provides a
better matching of costs and revenue and results in a more
conservative valuation of slow-moving and discontinued waste
raw material inventory. This change in accounting for certain
slow-moving and discontinued inventory resulted in an after-tax
cumulative effect charge of $2.2 million ($0.07 per share), net
of the related income tax effect of $1.3 million. In addition,
this change decreased operating income in 1993 by approximately
$4.0 million. See Note 1 to the Consolidated Financial
Statements.
RESULTS OF OPERATIONS -- 1993 COMPARED TO 1992
Net sales increased from $828.2 million in 1992 to $842.1
million in 1993. Increased sales at the Manufactured Products
Group (MPG) more than offset lower sales of the Company's fiber
businesses. The increase in sales at the MPG was primarily the
result of the contribution of Creative Forming, Inc. (CFI),
acquired in November 1992, and, to a lesser extent, higher
sales at the Wool and Engineering Resins Divisions. Domestic
fiber sales decreased due to lower polyester fiber selling
prices, which more than offset higher domestic sales volumes.
At Wellman International Limited (WIL), the Company's Irish
fiber subsidiary, sales in U.S. dollars decreased due to the
unfavorable impact of the decrease in value of the Irish punt
against the U.S. dollar, which more than offset modest
improvements in selling prices expressed in terms of local
currency and sales volumes. At New England CRInc. (CRInc.),
revenues increased primarily due to an increase in the number
of operating material recovery facilities.
Gross profit amounted to $162.9 million in 1993 compared to
$188.5 million in 1992. Gross profit at the Company's fiber
businesses decreased primarily due to lower domestic polyester
fiber selling prices, and, to a lesser extent, higher costs of
the Company's waste-based fiber business. At the MPG, gross
profit increased primarily due to the contribution of CFI and
an increase in gross profit at the Polymer Products Division.
As a result of the foregoing, the Company's gross margin was
approximately 19% in 1993 compared to 23% in 1992.
In addition to the effect on 1993 earnings of the change in
accounting for certain slow-moving and discontinued inventory
mentioned earlier, gross profit was also adversely affected by
unusual items, primarily related to inventory, development of a
prototype materials recovery facility and expenses associated
with the Company's on-going capital investment program,
aggregating $11.6 million.
Selling, general and administrative expenses were $86.5
million, or approximately 10% of sales, in 1993 compared to
$77.4 million, or approximately 9% of sales in 1992. The
increase was primarily due to the inclusion of CFI, including
the amortization of intangible assets arising from the
acquisition, and a decline in earnings from unconsolidated
subsidiaries due to the sale of the Company's equity interest
in Wellstar Holding, B.V. (Wellstar) in the first quarter of
1993. In addition, certain unusual charges aggregating $2.9
million were included in selling, general and administrative
expenses in 1993.
As a result of the foregoing, operating income was $76.4
million in 1993 compared to $111.1 million in 1992.
Net interest expense for 1993 was $15.7 million compared to
$23.0 million in 1992. This decrease was primarily the result
of the decline in the Company's average interest rates on
outstanding borrowings and, to a lesser extent, an increase in
the amount of interest capitalized to property, plant and
equipment commensurate with the Company's on-going capital
investment program.
In the first quarter of 1993, the Company sold its
ownership interest in Wellstar for $33.0 million, resulting in
a pre-tax gain of $12.4 million. The transaction resulted in
an increase in 1993 net earnings of $7.3 million, or
approximately $0.22 per share.
In the third quarter of 1993, the Revenue Reconciliation
Act of 1993 (the Act) was enacted, which included an increase
in the maximum corporate tax rate from 34% to 35%. The
provisions of Statement of Financial Accounting Standards No.
109 require that the impact of changes in tax legislation,
including changes in tax rates, be recognized in the period of
the change. Accordingly, the provision for income taxes
reflects an increase in income tax expense of $2.7 million,
representing a negative effect on net earnings of approximately
$0.08 per share.
As discussed above, 1993 net earnings were adversely
effected by $15.9 million, or $0.48 per share, due to the net
effect of changes in accounting principles and unusual and
nonrecurring events. As a result of the foregoing, net
earnings in 1993 were $31.4 million, or $0.96 per share,
compared to $52.3 million, or $1.60 per share in 1992.
OUTLOOK
Demand for the Company's domestic polyester fiber products
remained relatively stable in 1993. The previously announced
expansion at the Company's Fayetteville plant should result in
increased shipments of POY in 1994 as compared to 1993. Demand
for the Company's other polyester fiber products is expected to
remain stable in 1994. Domestic fiber selling prices declined,
primarily in the last half of 1993, due to price competition
from Far Eastern and domestic fiber producers and the start-up
of a new Taiwanese-owned U.S. polyester fiber plant and the
resultant pricing strategies of the Company's domestic
competitors. Selling prices in the first quarter of 1994
appear to have stabilized at approximately year-end 1993 levels.
RESULTS OF OPERATIONS -- 1992 COMPARED TO 1991
Net sales increased 3% from $805.7 million in 1991 to
$828.2 million in 1992. This increase was primarily the result
of higher domestic sales at the Fibers Division due to an
increase in sales volumes for the Company's polyester fibers.
At WIL, sales increased due to increased sales volumes and the
favorable impact of an increase in the value of the Irish punt
against the U.S. dollar, which more than offset lower selling
prices in terms of local Irish currency. Sales at the MPG
increased primarily due to the increase in direct wool sales
activities at the Wool Division. The increases in sales
discussed above were partially offset by lower revenues at
CRInc. due to reduced construction activities.
Gross profit amounted to $188.5 million in 1992 compared to
$182.1 million in 1991. Gross profit increased for the
Company's fiber businesses due to the increase in sales of
polyester fiber discussed above, which more than offset higher
costs. The increase in costs reflects the Company's on-going
expansion and modernization of its Recycling Division, which
processes waste raw materials for two of the Company's domestic
fiber plants. Gross profit at the MPG was essentially
unchanged in 1992 compared to 1991. The increase in gross
profit at CRInc. was due to the increase in the number of
operating material recovery facilities which resulted in higher
margins. The Company's gross margin was approximately 23% in
both 1992 and 1991.
Selling, general and administrative expenses were $77.4
million in 1992 compared to $73.2 million in 1991, or
approximately 9% of sales in each of the two years. The 6%
increase in 1992 resulted primarily from increased costs
associated with recycling activities, increased general and
administrative expenses and increased expenses at CRInc., all
of which more than offset the favorable impact of the sale of
Wellman Machinery of Michigan in December 1992 and the increase
in earnings from the Company's joint venture, Wellstar.
As a result of the foregoing, operating income was $111.1
million in 1992 compared to $108.9 million in 1991.
Net interest expense for 1992 was $23.0 million compared to
$29.4 million in 1991. This decrease was the result of the
decline in the Company's average amount of outstanding
borrowings and lower weighted average interest rates on
outstanding borrowings.
As a result of the forgoing, net earnings in 1992 were
$52.3 million, or $1.60 per share, compared to $46.6 million,
or $1.43 per share, in 1991.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash from operations of $95.3 million
in 1993 compared to $95.9 million in 1992.
Net cash used in investing activities amounted to $62.2
million in 1993 compared to $102.5 million in 1992. Capital
spending amounted to $105.7 million in 1993, indicative of the
Company's on-going capital investment program. In 1993,
investing activities included proceeds of $33.0 million from
the sale of Wellstar.
Net cash used in financing activities amounted to $15.7
million for 1993 compared to $8.2 million of cash provided by
financing activities in 1992.
The Company's financing agreements contain normal financial
and restrictive covenants, including restrictions on the
payment of dividends and requirements with respect to working
capital, net worth and debt to capitalization.
The Company's capital investment program includes
approximately $90.0 million in planned expenditures in 1994.
The exact amount and timing of the capital spending is
difficult to predict, however, as certain projects may extend
into 1995 or beyond depending upon equipment delivery and
construction schedules. The 1994 capital plan includes
expansion of monomer and PET resin capacity at the Palmetto
plant, and equipment upgrades at the Company's domestic fiber
operations. See "Item 1. Business - Products and Markets" and
"- Capital Investment Program".
The Company believes that the financial resources available
to it, including approximately $58.2 million available at
December 31, 1993 under its $176.8 million bank credit
facility, approximately $12.4 million of restricted cash
resulting from the issuance of economic development revenue
bonds (included in "Other assets, net" in the Company's balance
sheet and earmarked to recycling-related capital expenditures)
and internally generated funds, will be sufficient to meet its
foreseeable working capital, capital expenditure and dividend
payment requirements.
ENVIRONMENTAL MATTERS
The Company's operations are subject to extensive and
changing federal and state environmental regulations governing
air emissions, waste water discharges and solid and hazardous
waste management activities. As discussed in Note 1 to the
Company's Consolidated Financial Statements, the
Company's policy is to accrue environmental and clean-up
related costs of a non-capital nature when it is both probable
that a liability has been incurred and the amount can be
reasonably estimated. While it is often difficult to
reasonably quantify future environmental related expenditures,
the Company currently estimates its non-capital expenditures
related to environmental matters will range between $13.0
million and $25.0 million. Such expenditures are expected to
occur over a significant number of future years. In connection
with these expenditures, the Company has accrued $15.5 million
at December 31, 1993 ($2.5 million at December 31, 1992),
representing management's best estimate of probable non-capital
environmental expenditures. In addition, capital expenditures
aggregating approximately $10.0 million to $15.0 million may be
required over the next several years related to currently
existing environmental matters. During 1993, costs associated
with environmental remediation and on-going assessment were not
significant.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In November 1992, the Financial Accounting Standards Board
issued new rules that require accrual accounting over the
employees' service period for post-employment benefits that
accumulate, such as severance benefits, instead of recognizing
an expense for those benefits when the termination decision is
made. The Company does not provide these types of benefits and
accordingly, will not be affected by these new rules.
Item 8. Financial Statements and Supplementary Data
WELLMAN, INC.
Index to Financial Statements
and Financial Statement Schedules
Page
Consolidated Statements of Income for the years 24
ended December 31, 1991, 1992 and 1993
Consolidated Balance Sheets at December 31, 1992 and 25
1993
Consolidated Statements of Stockholders' Equity 26
for the years ended December 31, 1991, 1992, and 1993
Consolidated Statements of Cash Flows for the years 27
ended December 31, 1991, 1992 and 1993
Notes to Consolidated Financial Statements 28
Consolidated schedules for the years ended December 31,
1991, 1992 and 1993:
V -- Property, plant and equipment 45
VI -- Accumulated depreciation of plant and equipment 46
VIII -- Valuation and qualifying accounts 47
X -- Supplementary income statement information 48
All other schedules are omitted since the required information
is not present or is not present in amounts sufficient to
require submission of the schedules, or because the information
required is included in the consolidated financial statements
and notes thereto.
##
##
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
(In thousands, except per share data) 1991 1992 1993
Net sales. . . . . . . . . . . . . . . . . . . $805,664 $828,200 $842,064
Cost of sales. . . . . . . . . . . . . . . . . 623,546 639,664 679,182
Gross profit . . . . . . . . . . . . . . . . 182,118 188,536 162,882
Selling, general and administrative expenses . 73,194 77,439 86,511
Operating income . . . . . . . . . . . . . . . 108,924 111,097 76,371
Interest expense . . . . . . . . . . . . . . . 29,387 23,012 15,736
Gain on sale of Wellstar . . . . . . . . . . . -- -- 12,386
Earnings before income taxes and cumulative
effect of changes in accounting principles . 79,537 88,085 73,021
Provision for income taxes (Note 3):
Current. . . . . . . . . . . . . . . . . . . 20,979 25,805 35,655
Deferred . . . . . . . . . . . . . . . . . . 11,975 9,996 (3,088)
32,954 35,801 32,567
Earnings before cumulative effect of changes
in accounting principles . . . . . . . . . . 46,583 52,284 40,454
Cumulative effect of changes
in accounting principles, net of income
taxes (Note 1) . . . . . . . . . . . . . . . -- -- (9,010)
Net earnings . . . . . . . . . . . . . . . . . $46,583 $52,284 $31,444
Earnings (loss) per common share:
Before cumulative effect of changes
in accounting principles . . . . . . . . . $1.43 $1.60 $1.23
Cumulative effect of changes
in accounting principles (Note 1). . . . . -- -- (0.27)
Net earnings . . . . . . . . . . . . . . . . $1.43 $1.60 $0.96
Average common shares. . . . . . . . . . . . . 32,632 32,728 32,857
Pro forma amounts assuming the effect of the
changes in accounting principles are applied
retroactively:
Net earnings . . . . . . . . . . . . . . . $46,583 $43,759 $40,454
Net earnings per share . . . . . . . . . . $1.43 $1.34 $1.23
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
December 31,
(Dollar amounts in thousands) 1992 1993
Assets
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . $1,749 $18,751
Accounts receivable, less allowance of $4,443
in 1992 and $4,232 in 1993.. . . . . . . . . . . . . . 89,798 96,599
Inventories (Note 5) . . . . . . . . . . . . . . . . . . 152,152 133,391
Prepaid expenses and other current assets. . . . . . . . 7,579 4,995
Total current assets. . . . . . . . . . . . . . . . . 251,278 253,736
Investment in unconsolidated partially-owned
companies (Note 2). . . . 17,584 --
Property, plant and equipment, at cost:
Land, buildings and improvements . . . . . . . . . . . . 79,581 94,652
Machinery and equipment. . . . . . . . . . . . . . . . . 405,439 489,516
485,020 584,168
Less accumulated depreciation. . . . . . . . . . . . . . 129,010 163,627
Net property, plant and equipment . . . . . . . . . . 356,010 420,541
Cost in excess of net assets acquired. . . . . . . . . . . 318,258 309,395
Other assets, net. . . . . . . . . . . . . . . . . . . . . 53,453 31,575
$996,583 $1,015,247
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . $55,218 $51,882
Accrued liabilities (Note 6) . . . . . . . . . . . . . . 25,756 27,019
Deferred taxes on income (Note 3). . . . . . . . . . . . 3,470 482
Current portion of long-term debt (Note 7) . . . . . . . 24,688 18,594
Total current liabilities . . . . . . . . . . . . . . 109,132 97,977
Long-term debt (Note 7). . . . . . . . . . . . . . . . . . 299,860 294,173
Deferred taxes on income and other liabilities (Note 3). . 104,323 116,591
Total liabilities . . . . . . . . . . . . . . . . . . 513,315 508,741
Commitments and contingencies (Note 8)
Stockholders' equity (Notes 4, 7, and 10):
Common stock, $0.001 par value; 55,000,000 shares
authorized, 32,523,650 shares issued and outstanding
in 1992, 32,780,018 in 1993. . . . . . . . . . . . . . . 33 33
Class B common stock, $0.001 par value; 5,500,000
shares authorized; no shares issued . . . . . . . . . . -- --
Paid-in capital. . . . . . . . . . . . . . . . . . . . . 210,180 215,179
Foreign currency translation adjustments . . . . . . . . 7,416 96
Retained earnings. . . . . . . . . . . . . . . . . . . . 265,639 291,198
Total stockholders' equity. . . . . . . . . . . . . . 483,268 506,506
$996,583 $1,015,247
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollar amounts in thousands)
Currency
Common Stock Paid-in Translation Retained
Shares Amount Capital Adjustments Earnings Total
Balance at December 31, 1990 . . . . . . 32,355,059 $ 32 $207,110 $11,913 $ 174,554 $ 393,609
Exercise of stock options. . . . . . . . 35,456 136 136
Issuance of restricted stock . . . . . . 2,668 61 61
Tax effect of exercise of stock options. 254 254
Currency translation adjustments . . . . 1,684 1,684
Net earnings . . . . . . . . . . . . . . 46,583 46,583
Cash dividends . . . . . . . . . . . . . (3,887) (3,887)
Balance at December 31, 1991 . . . . . . 32,393,183 32 207,561 13,597 217,250 438,440
Exercise of stock options. . . . . . . . 54,138 665 665
Contribution of common stock to
employee stock ownership and benefit
plans. . . . . . . . . . . . . . . . . 74,995 1 1,646 1,647
Issuance of restricted stock . . . . . . 1,334 30 30
Tax effect of exercise of stock options. 278 278
Currency translation adjustments . . . . (6,181) (6,181)
Net earnings . . . . . . . . . . . . . . 52,284 52,284
Cash dividends . . . . . . . . . . . . . (3,895) (3,895)
Balance at December 31, 1992 . . . . . . 32,523,650 33 210,180 7,416 265,639 483,268
Exercise of stock options. . . . . . . . 54,748 674 674
Contribution of common stock to
employee stock ownership and benefit
plans. . . . . . . . . . . . . . . . . 200,286 4,065 4,065
Issuance of restricted stock . . . . . . 1,334 26 26
Tax effect of exercise of stock options. 234 234
Currency translation adjustments . . . . (7,320) (7,320)
Net earnings . . . . . . . . . . . . . . 31,444 31,444
Cash dividends . . . . . . . . . . . . . (5,885) (5,885)
Balance at December 31, 1993 . . . . . . 32,780,018 $ 33 $215,179 $ 96 $ 291,198 $ 506,506
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(In thousands) 1991 1992 1993
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . $46,583 $52,284 $31,444
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Cumulative effect of changes in accounting principles . . . -- -- 9,010
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . 35,301 38,913 41,609
Amortization. . . . . . . . . . . . . . . . . . . . . . . . 11,967 12,764 16,313
Deferred taxes on income. . . . . . . . . . . . . . . . . . 11,975 9,996 (3,088)
Gain on sale of Wellstar. . . . . . . . . . . . . . . . . . -- -- (12,386)
Changes in assets and liabilities, net of effects from
businesses acquired and cumulative effect of changes
in accounting principles:
Accounts receivable. . . . . . . . . . . . . . . . . . . (10,413) 5,156 (9,815)
Inventories. . . . . . . . . . . . . . . . . . . . . . . (1,759) (19,764) 14,760
Prepaid expenses and other current assets. . . . . . . . 491 (3,250) 2,582
Accounts payable and accrued liabilities . . . . . . . . (82) 2,747 (925)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . (3,449) (2,922) 5,788
Net cash provided by operating activities. . . . . . . . . . . 90,614 95,924 95,292
Cash flows from investing activities:
Businesses acquired. . . . . . . . . . . . . . . . . . . . . . -- (33,686) (8,780)
Additions to property, plant and equipment . . . . . . . . . . (25,867) (39,705) (105,689)
Proceeds from sale of Wellstar . . . . . . . . . . . . . . . . -- -- 33,000
Decrease (increase) in restricted cash . . . . . . . . . . . . 5,392 (29,149) 19,242
Net cash used in investing activities. . . . . . . . . . . . . (20,475) (102,540) (62,227)
Cash flows from financing activities:
Borrowings under long-term debt. . . . . . . . . . . . . . . . 105,000 62,700 17,454
Repayments of long-term debt . . . . . . . . . . . . . . . . . (176,062) (50,607) (27,314)
Dividends paid on common stock . . . . . . . . . . . . . . . . (3,887) (3,895) (5,885)
Net cash provided by (used in) financing activities. . . . . . (74,949) 8,198 (15,745)
Effect of exchange rate changes on cash and cash equivalents . . 116 (554) (318)
Increase (decrease) in cash and cash equivalents . . . . . . . . (4,694) 1,028 17,002
Cash and cash equivalents at beginning of year . . . . . . . . . 5,415 721 1,749
Cash and cash equivalents at end of year . . . . . . . . . . . $ 721 $1,749 $18,751
Supplemental cash flow data:
Cash paid during the year for:
Interest expense . . . . . . . . . . . . . . . . . . . . $29,688 $24,016 $19,103
Income taxes . . . . . . . . . . . . . . . . . . . . . . $22,658 $ 24,144 $33,874
See notes to consolidated financial statements.
##
##
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts
of Wellman, Inc. and all wholly and majority-owned subsidiaries
(the Company). All material intercompany transactions have
been eliminated. Investments in unconsolidated partially-owned
companies are accounted for using the equity method.
Certain 1992 amounts have been reclassified to conform to
the 1993 presentation.
Revenue Recognition
Sales to customers are recorded when goods are shipped.
Inventories
Inventories are stated at the lower of cost or market.
Cost is determined using the last-in, first-out (LIFO) method
for approximately $101,000,000 and $79,000,000 of inventory at
December 31, 1992 and 1993, respectively, and the first-in,
first-out (FIFO) and average cost methods for the remainder.
Property, Plant and Equipment
Property, plant and equipment is carried at cost.
Depreciation is provided based on the estimated useful lives of
the related assets and is computed on the straight-line method.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired is amortized on the
straight-line method over 40 years. Accumulated amortization
amounted to approximately $29,803,000 and $38,505,000 at
December 31, 1992 and 1993, respectively.
The carrying value of goodwill is reviewed if the facts and
circumstances suggest that it may be impaired. If this review
indicates that goodwill will not be recoverable, as determined
based on the undiscounted cash flows of the entity acquired
over the remaining amortization period, the Company's carrying
value of the goodwill will be reduced by the estimated
shortfall of cash flows.
Other Assets
Other assets are comprised primarily of organization costs,
deferred charges related to the Company's debt agreements and
other intangible assets that are amortized over periods ranging
from one to twenty years. Additionally, other assets include
cash restricted for use obtained from borrowings under economic
development revenue bonds in the amount of approximately
$31,600,000 and $12,400,000 at December 31, 1992 and 1993,
respectively. See Note 7.
Environmental Expenditures
Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by
past operations, and which do not contribute to current or
future revenue generation, are expensed. Liabilities are
recorded when environmental assessments and/or remedial efforts
are probable and the costs can be reasonably estimated.
Income Taxes
Income taxes have been provided using the liability method
in accordance with the Financial Accounting Standards Board's
Statement No. 109, "Accounting for Income Taxes." Under this
method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases
of assets and liabilities. Deferred income taxes resulting
from such differences are recorded based on the enacted tax
rates that are currently expected to be in effect when the
differences are expected to reverse.
Cash and Cash Equivalents
The carrying amounts reported in the balance sheets for
cash and cash equivalents approximate their fair value. The
Company considers all short term investments purchased with a
maturity of three months or less to be cash equivalents for
purposes of the consolidated statements of cash flows.
Foreign Currency Translation
The financial statements of foreign entities have been
translated into U.S. dollar equivalents in accordance with
Statement of Financial Accounting Standards No. 52.
Adjustments resulting from the translation of the financial
statements of foreign entities are excluded from the
determination of income and accumulated in a separate component
of stockholders' equity.
Earnings Per Common Share
Earnings per common share is based on the weighted average
number of common and common equivalent shares outstanding.
Accounting Changes
Environmental Liabilities
During 1993, the Financial Accounting Standards Board's
Emerging Issues Task Force (EITF) issued EITF Abstract No.
93-5, "Accounting For Environmental Liabilities" (EITF 93-5).
The Company adopted the provisions of EITF 93-5 in its 1993
Consolidated Financial Statements effective January 1, 1993.
EITF 93-5 provides that an environmental liability should
be evaluated independently from any potential claim for
recovery (a two-event approach) and that the loss arising from
the recognition of an environmental liability should be reduced
only when a claim for recovery is probable of realization.
Current accounting standards provide a general presumption that
disputed claims for recovery are not probable of realization.
Under practice prior to the issuance of EITF 93-5, some
companies, including the Company, offset reasonably possible
recoveries against probable losses. As a result of the
issuance of EITF 93-5, this accounting treatment is no longer
permitted.
The cumulative effect as of January 1, 1993 of adopting the
provisions of EITF 93-5 was a charge to net income of
$6,820,000 ($0.20 per share), net of the income tax effect of
$4,180,000. Excluding the cumulative effect, the impact of
this change on 1993 net earnings and earnings per share was not
material. The pro forma effect of applying this change
retroactively would be a decrease in 1992 net earnings of
approximately $6,300,000 ($0.19 per share). This change in
accounting did not impact 1991 net earnings or earnings per
share.
Inventory Valuation
During 1993, the Company changed its method of applying the
lower of cost or market rule to certain slow-moving and
discontinued waste raw material inventory which is valued using
the LIFO dollar value method. In prior years, the Company used
the aggregate method in applying the lower of cost or market
rule to such inventories and in 1993 changed to the
item-by-item method.
The Company believes the new method of accounting is
preferable because it provides a better matching of costs and
revenue and results in a more conservative valuation of
slow-moving and discontinued waste raw material inventory.
The cumulative effect as of January 1, 1993 of this change
in accounting is a charge to net earnings of $2,190,000 ($0.07
per share), net of the related income tax effect of $1,342,000.
Excluding the cumulative effect, this change decreased net
earnings for 1993 by approximately $2,500,000 ($0.08 per
share). The pro forma effect of applying this change
retroactively to 1992 would be a decrease in net earnings of
approximately $2,225,000 ($0.07 per share). The pro forma
effect on 1991 net earnings and earnings per share is not
material.
2. INVESTMENT IN UNCONSOLIDATED PARTIALLY-OWNED COMPANIES
In 1992 the investment in unconsolidated partially-owned
companies consisted of the Company's 43.7% equity interest in
Wellstar Holding, B.V. (Wellstar). Wellstar's subsidiary
companies in The Netherlands, France and the United Kingdom are
engaged in manufacturing plastic beverage bottles and other
plastic containers. In March 1993, the Company sold its
ownership interest in Wellstar for a total consideration of
$33,000,000. The transaction resulted in a gain, before
applicable income taxes, of approximately $12,386,000. The
sale of Wellstar increased 1993 net earnings by approximately
$7,300,000 or $0.22 per share.
3. INCOME TAXES
For financial reporting purposes, earnings before income
taxes and the cumulative effect of changes in accounting
principles are as follows (in thousands):
Years Ended December 31,
1991 1992 1993
United States. . . . . . . . . . . . $75,784 $82,647 $54,535
Foreign. . . . . . . . . . . . . . . 3,753 5,438 18,486
$79,537 $88,085 $73,021
Significant components of the provision for income taxes before
the cumulative effect of the changes in accounting principles
are as follows (in thousands):
Years Ended December 31,
1991 1992 1993
Current:
Federal. . . . . . . . . . . . . $15,985 $20,828 $30,310
State. . . . . . . . . . . . . . 4,070 4,057 4,357
Foreign. . . . . . . . . . . . . 924 920 988
$20,979 $25,805 $35,655
Deferred:
Federal. . . . . . . . . . . . . $11,799 $9,700 $(2,566)
State. . . . . . . . . . . . . . 314 296 (522)
Foreign. . . . . . . . . . . . . (138) -- --
11,975 9,996 (3,088)
Total . . . . . . . . . . . . . . . . $32,954 $35,801 $32,567
As discussed in Note 1, deferred income tax benefits
relating to the cumulative effect of changes in accounting
principles in 1993 amounted to $5,522,000.
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the
amounts used for income tax purposes. The tax effects of these
differences are as follows (in thousands):
Years Ended
December 31,
1992 1993
Inventory . . . . . . . . . . . . . . . . . . $4,116 $ 2,618
Depreciation. . . . . . . . . . . . . . . . . 82,925 81,310
Basis in foreign subsidiaries . . . . . . . . 2,167 3,248
Other . . . . . . . . . . . . . . . . . . . . 5,677 4,232
Total deferred tax liabilities. . . . . . . . 94,885 91,408
Pension . . . . . . . . . . . . . . . . . . . 4,285 4,601
State taxes . . . . . . . . . . . . . . . . . 4,212 3,743
Long-term liabilities . . . . . . . . . . . . 1,535 6,771
Other . . . . . . . . . . . . . . . . . . . . 4,089 4,139
Total deferred tax assets . . . . . . . . . . 14,121 19,254
Net deferred tax liabilities. . . . . . . . . $80,764 $72,154
Deferred income taxes have not been provided for
approximately $56,118,000 of undistributed earnings of foreign
entities which are considered to be permanently reinvested.
Upon repatriation of those earnings in the form of dividends or
otherwise, the Company would be subject to both U.S. income
taxes (subject to an adjustment for foreign tax credits) and
foreign withholding taxes. Determination of the amount of
unrecognized deferred U. S. income tax liability is not
practicable because of the complexities associated with its
hypothetical calculation.
The difference between the provision for income taxes
before the cumulative effect of changes in accounting
principles and income taxes computed at the statutory U. S.
federal income tax rate is explained as follows:
Years Ended December 31,
1991 1992 1993
Computed at statutory rate. . . 34.0% 34.0% 35.0%
State taxes, net of federal
benefit . . . . . . . . . . . 3.6 3.3 3.4
Differences in income tax rates
between the United States and
foreign countries . . . . . . (0.2) (0.4) (1.8)
Amortization of cost in excess
of net assets acquired. . . . 3.6 3.2 4.1
Effect of tax rate change on
net deferred tax liabilities. -- -- 2.6
Other, net. . . . . . . . . . . 0.4 0.5 1.3
Effective tax rate. . . . . 41.4% 40.6% 44.6%
4. STOCKHOLDERS' EQUITY
In 1991, 1992 and the first quarter of 1993, the Company
paid quarterly cash dividends of $0.03 per share. In the
second quarter of 1993, the quarterly dividend was increased to
$0.05 per share.
Approximately 375,000 and 3,588,000 common shares have been
reserved for issuance in connection with certain of the
Company's employee benefit plans and the Company's stock option
plans, respectively. Of the 3,588,000 common shares reserved
for issue in connection with stock option plans, 1,500,000 are
subject to approval at the Company's Annual Meeting to be held
in May 1994. See Notes 9 and 10.
On August 6, 1991, the Board of Directors declared a
dividend of one common stock purchase right (a Right) for each
outstanding share of common stock. Each Right, when
exercisable, will entitle the registered holder to purchase
from the Company one share of common stock at an exercise price
of $90 per share (the Purchase Price), subject to certain
adjustments. The Rights are not represented by separate
certificates and are only exercisable when a person or group of
affiliated or associated persons acquires or obtains the right
to acquire 15% or more of the Company's outstanding common
shares (an Acquiring Person) or announces a tender or exchange
offer that would result in any person or group beneficially
owning 15% or more of the Company's outstanding common shares.
In the event any person becomes an Acquiring Person, the Rights
would give holders the right to buy, for the Purchase Price,
common stock with a market value of twice the Purchase Price.
The Rights expire on August 5, 2001, unless extended by the
Board of Directors or redeemed earlier by the Company at a
redemption price of $0.01 per Right.
Although the Rights should not interfere with a business
combination approved by the Board of Directors, they may cause
substantial dilution to a person or group that attempts to
acquire the Company on terms not approved by the Board, except
pursuant to an offer conditioned on a substantial number of
Rights being acquired.
5. INVENTORIES
Inventories consist of the following (in thousands):
December 31,
1992 1993
Finished and semi-finished goods. . $ 52,933 $ 53,083
Raw materials . . . . . . . . . . . 86,289 72,723
Supplies. . . . . . . . . . . . . . 12,930 12,467
152,152 138,273
Less adjustments of certain
inventories to a LIFO basis . . . -- 4,882
Total . . . . . . . . . . . . . . . $152,152 $133,391
The replacement cost of the Company's inventories amounted to
approximately $152,000,000 and $138,000,000 at December 31,
1992 and 1993, respectively.
6. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
December 31,
1992 1993
Payroll and other compensation. . . $ 4,776 $ 3,800
Benefit plans . . . . . . . . . . . 9,442 9,931
Property and other taxes. . . . . . 2,885 2,733
Insurance . . . . . . . . . . . . . 2,297 1,112
Interest. . . . . . . . . . . . . . 2,303 2,347
Other . . . . . . . . . . . . . . . 4,053 7,096
Total . . . . . . . . . . . . . . . $25,756 $27,019
7. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
December 31,
1992 1993
Reducing revolving credit and
term loan facilities and loan
note participations . . . . . . . $115,932 $118,559
Serialized senior unsecured notes . 100,000 100,000
Economic development revenue
bonds . . . . . . . . . . . . . . 54,500 54,500
8.41% senior note payable,
due on July 31, 2000. . . . . . . 30,000 30,000
14.5% senior promissory notes
due through July 1, 1994. . . . . 8,700 2,900
Wellman International Limited
debt. . . . . . . . . . . . . . . 14,706 6,099
Other . . . . . . . . . . . . . . . 710 709
324,548 312,767
Less amount due within one year . 24,688 18,594
Total . . . . . . . . . . . . . . . $299,860 $294,173
The reducing revolving credit and term loan facilities
originally consisted of a $222,000,000 Reducing Revolving
Credit Loan and a $178,000,000 Term Loan (collectively, the
Facilities). The reducing revolving credit and term loan
facilities mature on December 31, 1996 and June 30, 1995,
respectively. As of December 31, 1993, the Company reduced the
aggregate commitment on the Facilities from $400,000,000 to
$176,759,000.
Borrowings under each of the Facilities bear interest, at
the Company's option, at the prime rate, the LIBOR or CD rate
plus margins ranging from 0.50% to 0.75% on LIBOR loans and
0.625% to 0.875% on CD rate loans, determined on the basis of
the Company's leverage ratio, as defined in the Facilities.
The terms of the Reducing Revolving Credit Loan provide the
Company the ability to borrow under competitive bid loans.
Such borrowings, as well as borrowings under loan note
participations (LNPs), reduce the availability under the
Reducing Revolving Credit Loan and bear interest at the
offering bank's prevailing interest rate. At December 31,
1993, the average interest rate on borrowings under the
Facilities and LNPs was approximately 3.70%.
The $100,000,000 of Serialized Senior Unsecured Notes bear
interest at rates ranging between 9.02% and 9.26% (averaging
9.18%) and mature between May 1997 and May 1999.
The WIL debt consists primarily of funds borrowed under
multi-currency term loan facilities, of which approximately
$750,000 is due in 1994 and the remainder in 2000. The
interest rate floats based upon the banks' cost of funds and
the currencies borrowed. At December 31, 1993, the average
rate on WIL borrowings approximated 6.00%. The WIL debt is
secured by assets of WIL.
The economic development revenue bonds (the Bonds) bear
interest at variable rates which cannot exceed 12.00% for
certain issues and 15.00% for one issue. The Bonds mature as
follows: $8,000,000 on December 1, 2010; $32,000,000 on
December 1, 2012; $5,000,000 on April 1, 2017; and $9,500,000
on June 1, 2022. The Bonds are tenderable by the holders and
are secured by letters of credit aggregating approximately
$55,800,000 at December 31, 1993. The weighted average
interest rate on the Bonds at December 31, 1993 was
approximately 2.50%.
The Bonds and certain borrowings under the Facilities and
LNPs are classified as long term in accordance with the
Company's intention and ability to refinance such obligations
on a long term basis.
The Company's financing agreements contain normal financial
and restrictive covenants, including restrictions on the
payment of dividends and requirements with respect to working
capital, net worth and debt to capitalization. Under the most
restrictive covenant, approximately $131,300,000 of retained
earnings at December 31, 1993 is not restricted as to the
payment of dividends.
The carrying amounts of the Company's borrowings under its
variable rate credit agreements approximate their fair value.
The fair values of the Company's fixed rate credit agreements
are estimated using discounted cash flow analyses based on the
Company's current incremental borrowing rates for similar types
of borrowing arrangements. The fair value of the Company's
fixed rate debt exceeded its carrying value by approximately
$15,000,000 at December 31, 1993. Prepayment of the fixed rate
debt would result in significant penalties.
The approximate annual maturities of long term debt,
including the current portion, during each of the next five
years and thereafter are as follows: 1994 -- $18,594,000;
1995 -- $46,410,000; 1996 -- $112,137,000; 1997 -- $20,148,000;
1998 -- $40,183,000; and thereafter -- $75,295,000. Although
maturities of the Bonds range from 2010 to 2022, they have been
included as maturities in 1995 and 1996 as they are tenderable
by the holders, and the Company's present long term facilities
mature during those years.
During 1991, 1992 and 1993, the Company capitalized
interest of $809,000, $304,000 and $2,375,000, respectively, as
part of the cost of capital projects under construction.
8. COMMITMENTS AND CONTINGENCIES
The Company's operations are subject to extensive and
rapidly changing federal and state environmental regulations
governing air emissions, waste water discharges and solid and
hazardous waste management activities. As discussed in Note 1,
the Company's policy is to accrue environmental and
clean-up-related costs of a non-capital nature when it is both
probable that a liability has been incurred and the amount can
be reasonably estimated. While it is often difficult to
reasonably quantify future environmental related expenditures,
the Company currently estimates its non-capital expenditures
related to environmental matters will range between $13,000,000
and $25,000,000. Such expenditures are expected to occur over
a significant number of future years. In connection with these
expenditures, the Company has accrued $15,500,000 at
December 31, 1993 ($2,500,000 at December 31, 1992)
representing management's best estimate of probable non-capital
environmental expenditures. In addition, capital expenditures
aggregating approximately $10,000,000 to $15,000,000 may be
required over the next several years related to currently
existing environmental matters.
The Company believes that it is entitled to recover a
portion of these expenditures under indemnification and escrow
agreements.
In connection with the 1992 acquisition of Creative
Forming, Inc. (CFI), the Company may be required to make an
additional payment in 1997 based primarily on CFI's 1995 and
1996 average earnings, as defined. The contingent payment, if
any, will increase cost in excess of net assets acquired.
At December 31, 1993, the Company had approximately
$63,127,000 of outstanding letters of credit of which
approximately $55,800,000 were outstanding as security for the
Bonds, as discussed in Note 7.
Approximate minimum rental commitments under non-cancelable
leases (principally for buildings and equipment) during each of
the next five years and thereafter are as follows: 1994 --
$4,235,000; 1995 -- $3,759,000; 1996 -- $2,976,000; 1997 --
$2,788,000; 1998 -- $2,773,000; and thereafter -- $5,832,000.
Rent expense for cancelable and non-cancelable operating
leases was $5,049,000, $4,797,000, and $6,295,000 for the
years ended December 31, 1991, 1992 and 1993, respectively.
9. RETIREMENT PLANS
The Company has defined benefit and defined contribution
pension plans and an employee stock ownership plan (the ESOP)
covering substantially all employees.
Payments upon retirement or termination of employment under
the defined contribution plans are based on vested amounts
credited to individual accounts. The plans provide for Company
contributions based on the earnings of eligible employees.
Such contributions, excluding amounts contributed to the ESOP,
amounted to approximately $3,556,000, $6,442,000 and $7,553,000
for the years ended December 31, 1991, 1992 and 1993,
respectively. Company contributions to the ESOP amounted to
approximately $1,847,000 and $2,249,000 for the years ended
December 31, 1992 and 1993, respectively. The increase in
total contributions in 1992 and 1993 compared to prior years is
primarily due to the formation of the Wellman, Inc. Retirement
Plan (WIRP) and the ESOP. The WIRP effectively consolidates
retirement benefits for certain domestic employees.
Accordingly, amendments to certain provisions of a domestic
defined benefit plan were made effective on January 1, 1992.
Benefits under the WIL defined benefit plan are based on
employees' compensation and length of service, while benefits
under defined benefit plans covering domestic employees are
based on employees' compensation and length of service or at
stated amounts based on length of service. The Company's
policy is to fund amounts which are actuarially determined to
provide the plans with sufficient assets to meet future benefit
payment requirements. Assets of the plans are invested
primarily in equity securities and commingled trust funds. The
pension costs of the defined benefit plans consist of the
following (in thousands):
Years Ended December 31,
1991 1992 1993
Service cost. . . . . . . . . . $3,391 $ (706) $ (370)
Interest cost on projected
benefit obligations . . . . . 3,908 4,113 4,336
Less actual return on assets. . 3,236 (1,697) 7,512
Net amortization and deferral . 345 (5,009) 4,621
Total $4,408 $ 95 $1,075
The following table sets forth the funded status and
amounts included in the Company's Consolidated Balance Sheets
at December 31, 1992 and 1993 for its defined benefit pension
plans (in thousands):
December 31,
1992 1993
Actuarial present value of benefit
obligations:
Vested benefit obligations. . . . $ 27,600 $ 33,502
Accumulated benefit obligations . $ 27,907 $ 33,952
Projected benefit obligations . . $ 51,585 $ 52,913
Plan assets at fair market value. . 38,564 45,063
Funded status . . . . . . . . . . . (13,021) (7,850)
Unrecognized net (gain) loss. . . . 1,990 (1,875)
Unrecognized net asset
at transition . . . . . . . . . . (50) (5)
Unrecognized prior service cost . . (1,083) (1,395)
Accrued pension costs . . . . . . . $(12,164) $(11,125)
The unrecognized prior service cost relates primarily to
amendments to the early retirement provisions of a domestic
plan. Such amendments became effective January 1, 1992.
At December 31, 1992 and 1993, assumed discount rates of 8%
and 7.25%, respectively, and rates of increase in future
compensation levels of 6% and 4.5%, respectively, were used in
determining the actuarial present value of benefit obligations
for the domestic plans. The assumed long-term rates of return
on domestic plan assets were 8%.
The assumptions used in calculating the actuarial present
value of benefit obligations for WIL were discount rates of 9%
and 7% and rates of increases in future compensation levels of
6.5% and 5% at December 31, 1992 and 1993, respectively. The
assumed long-term rates of return on plan assets for WIL were
9%, 9% and 7% at December 31, 1991, 1992 and 1993, respectively.
10. STOCK OPTION PLANS
The Company has stock option plans (the Plans) which
authorize the grant of non-qualified stock options (NQSOs).
The maximum number of common shares authorized for grant under
the Plans is 3,588,000. Of the 3,588,000 common shares,
1,500,000 are subject to shareholder approval at the Company's
Annual Meeting to be held in May 1994.
For substantially all options granted in connection with
the Plans, the option period extends for either ten years and
one day from the date of grant, or 11 years from the date of
grant, and the shares vest at 20% per year over the first five
years. The option price at which options are granted under the
Plans must be at least equal to the fair market value at the
date of grant.
Information regarding the NQSOs is as follows:
1991 1992 1993
Options outstanding at January 1 943,169 1,185,073 1,481,735
Options granted at prices of
$19.875 in 1991, $20.625 in
1992 and $17.375 in 1993. . . . . 346,500 366,300 223,714*
Options exercised at average
prices of $3.83 in 1991, $12.28
in 1992 and $12.32 in 1993. . . . (35,456) (54,138) (54,748)
Options canceled at average
prices of $24.99 in 1991, $22.36
in 1992 and $20.42 in 1993 . . . (69,140) (15,500) (5,590)
Options outstanding at December
31 at average prices of $19.38
in 1991, $19.92 in 1992 and
$19.63 in 1993. . . . . . . . . . 1,185,073 1,481,735 1,645,111*
Options exercisable at
December 31 . . . . . . . . . . . 390,458 558,380 768,960
Options available for grant
at December 31. . . . . . . . . . 568,924 218,124 -0-*
*The options granted in 1993 and options outstanding at December 31, 1993
exclude options relating to 136,286 common shares. These options were
granted by the Board of Directors pending shareholder authorization of
additional common shares to the Plans.
11. BUSINESS SEGMENT AND GEOGRAPHIC AREAS
The Company operates in one business segment: principally
the manufacture and sale of polyester and nylon fibers and
resins primarily for use in the apparel, home furnishings and
other consumer products markets.
Revenues and operating income for the years ended
December 31, 1991, 1992 and 1993 and identifiable assets at the
end of each year, classified by the major geographic areas in
which the Company operates, are as follows (in thousands):
Years Ended December 31,
1991 1992 1993
Net sales
U.S. . . . . . . . . . . . . $711,862 $728,733 $ 754,882
Western Europe . . . . . . . 93,802 99,467 87,182
Total net sales. . . . . . $805,664 $828,200 $ 842,064
Operating income
U.S. . . . . . . . . . . . . $103,733 $105,943 $ 69,305
Western Europe . . . . . . . 5,191 5,154 7,066
Total operating
income. . . . . . . . . . 108,924 111,097 76,371
Interest expense . . . . . . . 29,387 23,012 15,736
Gain on sale of Wellstar . . . -- -- 12,386
Earnings before
income taxes . . . . . . . . $ 79,537 $ 88,085 $ 73,021
Identifiable assets
U.S. . . . . . . . . . . . . $834,020 $913,384 $ 927,330
Western Europe . . . . . . . 91,269 83,199 87,917
Total. . . . . . . . . . . $925,289 $996,583 $1,015,247
UNAUDITED QUARTERLY FINANCIAL DATA
Quarterly financial information for the years ended
December 31, 1992 and 1993 is summarized as follows:
(In thousands, except per share data):
March 31, June 30, September 30, December 31, Total
Quarter ended 1993(1) 1993 1993(1) 1993(1) 1993(1)
Net sales $207,968 $214,005 $210,151 $209,940 $842,064
Gross profit $49,583 $46,046 $41,594 $25,659 $162,882
Earnings (loss) before cumulative effect
of changes in accounting principles $21,804 $12,783 $7,056 $(1,189) $40,454
Net earnings (loss) $12,794 $12,783 $7,056 $(1,189) $31,444
Earnings (loss) per common share before
cumulative effect of changes
in accounting principles $0.66 $0.39 $0.21 ($0.04) $1.23
Net earnings (loss) per common share $0.39 $0.39 $0.21 ($0.04) $0.96
March 31, June 30, September 30, December 31, Total
Quarter ended 1992 1992 1992 1992 1992
Net sales $207,529 $ 205,355 $212,382 $202,934 $828,200
Gross profit $47,295 $49,414 $46,962 $44,865 $188,536
Net earnings $12,453 $14,448 $12,763 $12,620 $52,284
Net earnings per common share $0.38 $0.44 $0.39 $0.39 $1.60
(1) 1993 Net earnings reflect $15.9 million ($0.48 per share) of accounting changes and unusual and nonrecurring
items. In March 1993, the Company sold its ownership interest in Wellstar Holding, B.V. for $33.0 million.
The resulting gain before applicable taxes, was approximately $12.4 million. As a result of the sale, 1993
net earnings increased by approximately $7.3 million ($0.22 per share). Net earnings for the quarter ended
March 31, 1993 have been restated from amounts previously reported (net earnings $21.8 million; net earnings
per share $0.66) to reflect the cumulative effect of changes in accounting principles for environmental
liabilities and certain inventories ($9.0 million, net of the related tax effect). In the third quarter of
1993 the Revenue Reconciliation Act of 1993 was enacted which raised the maximum corporate tax rate from 34%
to 35%. This resulted in $2.7 million ($0.08 per share) in additional taxes. In the fourth quarter of 1993,
the Company incurred unusual charges aggregating $11.5 million ($0.35 per share) primarily related to
inventory, development of a prototype materials recovery facility and expenses associated with the Company's
on-going capital investment program. See also Management's Discussion and Analysis of Financial Condition and
Results of Operations and Notes 1, 2 and 3 of the Notes to Consolidated Financial Statements.
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Wellman, Inc.
We have audited the accompanying consolidated balance
sheets of Wellman, Inc. as of December 31, 1993 and 1992, and
the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period
ended December 31, 1993. Our audits also included the
financial statement schedules listed in the Index at Item 8.
These financial statements and schedules are the responsibility
of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedules based on
our audits. We did not audit the financial statements and
schedules of a wholly-owned subsidiary of the Company, which
statements reflect total assets constituting 6% in 1993 and 8%
in 1992 and total revenues constituting 10% in 1993 and 11% in
1992 and 1991 of the related consolidated totals. Those
statements and schedules were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it
relates to data included for the Company's wholly-owned
subsidiary, is based solely on the report of other auditors.
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 and the
report of other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the report of other
auditors, the consolidated financial statements referred to
above present fairly, in all material respects, the
consolidated financial position of Wellman, Inc. at December
31, 1993 and 1992, and the consolidated results of its
operations and its cash flows for each of the three years in
the period ended December 31, 1993, in conformity with
generally accepted accounting principles. Also, in our
opinion, based on our audits and the report of other auditors,
the related financial statement schedules, when considered in
relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set
forth therein.
As discussed in Note 1 to the financial statements, in 1993
the Company changed its method of accounting for recoveries
related to environmental liabilities and its method of valuing
certain inventories.
ERNST & YOUNG
Charlotte, North Carolina
February 15, 1994
SCHEDULE V
WELLMAN, INC. AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
Years ended December 31, 1991, 1992, and 1993
(In thousands)
Year ended December 31, 1991
===============================================================================================================
Balance at Balance at
Beginning End of
Classification of Year Additions(a) Retirements Other(b) Year
- ---------------------------------------------------------------------------------------------------------------
Land, Buildings and improvements $ 69,968 $ 6,899 $2,408 $(1,846) $ 72,613
Machinery and equipment 350,130 18,968 1,573 221 367,746
------- ------- ------ ------ --------
$420,098 $25,867 $3,981 $(1,625) $440,359
======== ======= ======= ======= =======
Year ended December 31, 1992
===============================================================================================================
Balance at Balance at
Beginning End of
Classification of Year Additions(a) Retirements Other(b) Year
- ---------------------------------------------------------------------------------------------------------------
Land, buildings and improvements $ 72,613 $ 9,673 $ 2,169 $ ( 536) $ 79,581
Machinery and equipment 367,746 52,652 11,795 (3,164) 405,439
-------- ------- ------ ------ --------
$440,359 $62,325 $13,964 $(3,700) $485,020
======= ======= ====== ====== =======
Year ended December 31, 1993
===============================================================================================================
Balance at Balance at
Beginning End of
Classification of Year Additions(a) Retirements Other(b) Year
- ---------------------------------------------------------------------------------------------------------------
Land, buildings and improvements $ 79,581 $ 16,202 $ 95 $(1,036) $ 94,652
Machinery and equipment 405,439 94,437 5,001 (5,359) 489,516
-------- -------- ------ ------ --------
$485,020 $110,639 $5,096 $(6,395) $584,168
======== ======== ====== --==== ========
(a) Includes the effects of businesses acquired.
(b) Primarily foreign currency translation adjustments.
SCHEDULE VI
WELLMAN, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION OF PLANT AND EQUIPMENT
Years Ended December 31, 1991, 1992, and 1993
(In thousands)
Year ended December 31, 1991
==================================================================================================
Balance at Balance at
Beginning End of
Classification of Year Additions Retirements Other(a) Year
- --------------------------------------------------------------------------------------------------
Land, buildings and improvements $ 9,476 $ 3,217 $ 909 $( 113) $ 11,671
Machinery and equipment 59,566 32,084 908 ( 499) 90,243
------- ------- ------- ------- -------
$69,042 $35,301 $1,817 $( 612) $101,914
======= ======= ======= ======= =======
Year ended December 31, 1992
==================================================================================================
Balance at Balance at
Beginning End of
Classification of Year Additions Retirements Other(a) Year
- --------------------------------------------------------------------------------------------------
Land, buildings and improvements $11,671 $ 3,617 $ 1,866 $ (263) $ 13,159
Machinery and equipment 90,243 35,296 8,198 (1,490) 115,851
------- ------- ------- ------ -------
$101,914 $38,913 $10,064 $(1,753) $129,010
======= ======= ======= ====-= =======
Year ended December 31, 1993
==================================================================================================
Balance at Balance at
Beginning End of
Classification of Year Additions Retirements Other(a) Year
- --------------------------------------------------------------------------------------------------
Land, buildings and improvements $ 13,159 $ 4,743 $ 51 $ 160 $ 18,011
Machinery and equipment 115,851 36,866 3,910 (3,191) 145,616
------- ------- ------ ------ -------
$129,010 $41,609 $3,961 $(3,031) $163,627
======= ======= ====== ====== =======
(a) Primarily foreign currency translation adjustments.
SCHEDULE VIII
WELLMAN, INC.
VALUATION AND QUALIFYING ACCOUNTS
For The Years Ended December 31, 1991, 1992, and 1993
(In thousands)
Balance at Charged to Balance
Beginning Costs and at End
Description of Year Expenses Other Deductions of Year
Allowance for doubtful accounts receivable:
Year ended December 31, 1991 $4,184 $ 51 $ 1,315(a) $ 205(b) $ 5,345
====== ====== ======= ====== =======
Year ended December 31, 1992 $5,345 $ 646 $ (39)(a) $1,509(b) $ 4,443
====== ====== ======= ======= =======
Year ended December 31, 1993 $4,443 $ 702 $ (60)(a) $ 853(b) $ 4,232
====== ====== ========= ======= =======
(a) Primarily foreign currency translation adjustments.
(b) Accounts written off.
SCHEDULE X
WELLMAN, INC.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
For The Years Ended December 31, 1991, 1992, and 1993
(In thousands)
=================================================================
1991 1992 1993
- -----------------------------------------------------------------
Maintenance and repairs $33,479 $36,721 $37,959
======= ======= =======
Amortization of
intangible assets $11,967 $12,764 $16,313
======= ======= =======
Other amounts are less than 1 percent of sales.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
"Election of Directors" in the Company's Proxy Statement
for the 1994 Annual Meeting of Stockholders to be filed with
the Securities and Exchange Commission on or before April 30,
1994 is hereby incorporated by reference herein.
Item 11. Executive Compensation
"Compensation of Directors and Officers" in the Company's
Proxy Statement for the 1994 Annual Meeting of Stockholders to
be filed with the Securities and Exchange Commission on or
before April 30, 1994 is hereby incorporated by reference
herein. Such incorporation by reference shall not be deemed to
specifically incorporate by reference the information referred
to in Item 402(a)(8) of Regulation S-K.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
"Introduction" and "Election of Directors" in the Company's
Proxy Statement for the 1994 Annual Meeting of Stockholders to
be filed with the Securities and Exchange Commission on or
before April 30, 1994 is hereby incorporated by reference
herein.
Item 13. Certain Relationships and Related Transactions
"Compensation of Directors and Officers" in the Company's
Proxy Statement for the 1994 Annual Meeting of Stockholders to
be filed with the Securities and Exchange Commission on or
before April 30, 1994 is hereby incorporated by reference
herein.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
(a) 1. Financial Statements
The financial statements included in Item 8 are
filed as part of this annual report.
2. Financial Statement Schedules
The financial statement schedules included in
Item 8 are filed as part of this annual report.
3. Exhibits
Exhibit Number Description
3(a)(1) Restated Certificate of Incorporation
(Exhibit 3.1 of the Company's Registration
Statement on Form S-1, File No. 33-13458,
incorporated by reference herein)
3(a)(2) Certificate of Amendment to Restated
Certificate of Incorporation (Exhibit
3(a)(2) of the Company's Registration
Statement on Form S-4, File No. 33-31043,
incorporated by reference herein)
3(a)(3) Certificate of Amendment to Restated
Certificate of Incorporation (Exhibit 28 of
the Company's Registration Statement on Form
S-8, File No. 33-38491, incorporated by
reference herein)
3(a)(4) Certificate of Amendment to Restated
Certificate of Incorporation
3(b) By-Laws, as amended
4(a) Loan Agreement dated December 7, 1990 by and
between the Company and Fleet National Bank,
as agent, and certain other financial
institutions (Exhibit 4(a) of the Company's
Form 10-K for the year ended December 31,
1990 incorporated by reference herein)
4(b) Note and Stock Purchase Agreement dated
July 31, 1985, among the Company, the
Prudential Insurance Company of Amer
("Prudential") and Teachers Insurance and
Annuity Association of America ("Teachers")
(Exhibit 4.6 of the Company's Registration
Statement on Form S-1, File No. 33-23988,
incorporated by reference herein)
4(c) Letter Agreement dated June 10, 1987 between
the Company and Teachers (Exhibit 19.2 of
the Company's Form 10-Q for the Quarter
ended June 30, 1987 incorporated by
reference herein)
4(d) Letter Agreement dated October 2, 1989
between the Company and Teachers (Exhibit
4(c) of the Company's Form 8-K for the event
dated November 1, 1989 incorporated by
reference herein)
4(e) Letter Agreement dated June 10, 1987 between
the Company and Prudential (Exhibit 19.3 of
the Company's Form 10-Q for the Quarter
ended June 30, 1987 incorporated by
reference herein)
4(f) Letter Agreement dated October 2, 1989
between the Company and Prudential (Exhibit
4(d) of the Company's Form 8-K for the event
dated November 1, 1989 incorporated by
reference herein)
4(g) Letter Agreement dated March 20, 1990
between the Company and Prudential (Exhibit
4(g) of the Company's Form 10-K for the year
ended December 31, 1991 incorporated by
reference herein)
4(h) Letter Agreement dated March 20, 1990
between the Company and Teachers (Exhibit
4(h) of the Company's Form 10-K for the year
ended December 31, 1991 incorporated by
reference herein)
4(i) Letter Agreement dated December 7, 1990
between the Company and Prudential (Exhibit
4(i) of the Company's Form 10-K for the year
ended December 31, 1991 incorporated by
reference herein)
4(j) Letter Agreement dated December 7, 1990
between the Company and Teachers (Exhibit
4(j) of the Company's Form 10-K for the year
ended December 31, 1991 incorporated by
reference herein)
4(k) Amendment Agreement dated February 27, 1992
between the Company and Prudential (Exhibit
4(k) of the Company's Form 10-K for the year
ended December 31, 1991 incorporated by
reference herein)
4(l) Amendment Agreement dated February 27, 1992
between the Company and Teachers (Exhibit
4(l) of the Company's Form 10-K for the year
ended December 31, 1991 incorporated by
reference herein)
4(m) Facilities dated December 19, 1991 between
WIL and Ulster Investment Bank Limited
(Exhibit 4(m) of the Company's Form 10-Q for
the quarter ended June 30, 1992 incorporated
by reference herein)
4(n) Registration Rights Agreement dated as of
August 12, 1985 by and among the Company,
Teachers, Prudential, Narragansett First
Fund, Thomas M. Duff, John L. Dings, Alex
Holder, Calvin Hughes, and Frank McGuire
(Exhibit 4.7 of the Company's Registration
Statement on Form S-1, File No. 33-13458,
incorporated by reference herein)
4(o) Loan Agreement between South Carolina Jobs -
Economic Development Authority (the
"Authority") and the Company dated as of
December 1, 1990 (Exhibit 4(n) of the
Company's Form 10-K for the year ended
December 31, 1990 incorporated by reference
herein)
4(p) First Supplemental Loan Agreement between
the Authority and the Company dated as of
April 1, 1991 (Exhibit 4(a) of the Company's
Form 10-Q for the quarter ended June 30,
1991 incorporated by reference herein)
4(q) Note Purchase Agreement dated as of June 14,
1991 between the Company and the Purchasers
named in Schedule I thereto (Exhibit 4(b) of
the Company's Form 10-Q for the quarter
ended June 30, 1991 incorporated by
reference herein)
4(r) Rights Agreement dated as of August 6, 1991
between the Company and First Chicago Trust
Company of New York, as Rights Agent
(Exhibit 1 to the Company's Form 8-K dated
as of August 6, 1991 incorporated by
reference herein)
4(s) Loan Agreement between the Authority and the
Company, dated as of June 1, 1992 (Exhibit
4(u) of the Company's Form 10-Q for the
quarter ended June 30, 1992 incorporated by
reference herein)
4(t) Note Purchase Agreement between the Company
and Teachers dated July 28, 1992 (Exhibit
4(v) of the Company's Form 10-Q for the
quarter ended June 30, 1992 incorporated by
reference herein)
4(u) Loan Agreement between the Authority and the
Company, dated as of December 1, 1992
(Exhibit 4(w) of the Company's Form 10-K for
the year ended December 31, 1992
incorporated by reference herein)
4(v) Promissory Note dated May 15, 1992 of the
Company to the City of Florence, SC (Exhibit
4(x) of the Company's Form 10-K for the year
ended December 31, 1992 incorporated by
reference herein)
4(w) Loan note participations with the Sumitomo
Bank, Limited, dated July 27, 1992, Buliner
Handels-und Frankfurter Bank dated June 15,
1992, Banco di Napoli dated September 14,
1992, Istituto Bancario San Paolo di Torino
S.p.A. dated January 4, 1992, Continental
Bank N.A. dated November 26, 1991 (Exhibit
4(y) of the Company's Form 10-K for the year
ended December 31, 1992 incorporated by
reference herein)
4(x) Promissory Note dated August 9, 1993 of the
Company to First Fidelity Bank, National
Bank (Exhibit 4(z) of the Company's Form
10-Q for the quarter ended September 30,
1993 incorporated by reference herein)
4(y) Commercial Purpose Loan Note dated August
11, 1993 to Chemical Bank New Jersey,
National Association
4(z) Promissory Note dated June 18, 1993 of the
Company to Fleet National Bank
Executive Compensation Plans and Arrangements
10(a) Wellman, Inc. 1985 Incentive Stock Option
Plan, as amended (Exhibit 4(a) of the
Company's Registration Statement on Form
S-8/S-3, File No. 33-17196, incorporated by
reference herein)
10(b)(1) Employment Agreement dated as of January 1,
1990 between the Company and Thomas M. Duff
(Exhibit 10(e) of the Company's Form 10-K
for the year ended December 31, 1989
incorporated by reference herein)
10(b)(2) Amendment to Employment Agreement dated as
of January 1, 1993 between the Company and
Thomas M. Duff (Exhibit 19 to the Company's
Form 10-Q for the quarter ended March 31,
1993 incorporated by reference herein)
10(c)(1) Employment Agreement dated as of January 1,
1990 between the Company and Clifford J.
Christenson (Exhibit 10(f) of the Company's
Form 10-K for the year ended December 31,
1989 incorporated by reference herein)
10(c)(2) First Amendment to Employment Agreement
dated as of January 1, 1993 between the
Company and Clifford J. Christenson (Exhibit
10(c)(2) of the Company's Form 10-K for the
year ended December 31, 1992 incorporated by
reference herein)
10(d) Service Agreement dated as of June 26, 1991
between Wellman International Investments
Limited and Charles William Beckwith (Ehibit
10(g) of the Company's Form 10-K for the
year ended December 31, 1991 incorporated by
reference herein)
10(e) Employment Agreement dated as of October 1,
1991 between the Company and James P. Casey
(Ehibit 10(j) of the Company's Form 10-K for
the year ended December 31, 1991
incorporated by reference herein)
10(f) Employment Agreement dated as of April 1,
1992 between the Company and Paul D. Apostol
(Exhibit 10(f) of the Company's Form 10-K
for the year ended December 31, 1992
incorporated by reference herein)
10(g) Directors Stock Option Plan dated as of
December 2, 1991 (Exhibit 4(a) of the
Company's Registration Statement on Form
S-8, File No. 33-44822 incorporated by
reference herein)
10(h) Management Incentive Compensation Plan
10(i) Summary of Executive Life Insurance Plan
(Exhibit 10.22 of the Company's Registration
Statement on Form S-1, File No. 33-13458,
incorporated by reference herein)
10(j)(1) Amended and Restated Restricted Stock
Agreement dated November 17, 1988 between
the Company and Peter H. Conze (Exhibit
10(x)(1) of the Company's Form 10-K for the
year ended December 31, 1990 incorporated by
reference herein)
10(j)(2) Amended and Restated Restricted Stock
Agreement dated December 5, 1988 between the
Company and Richard F. Heitmiller (Exhibit
10(x)(2) of the Company's Form 10-K for the
year ended December 31, 1990 incorporated by
reference herein)
10(j)(3) Restricted Stock Agreement dated March 31,
1989 between the Company and Jonathan M.
Nelson (Exhibit 10(w)(4) of the Company's
Registration Statement on Form S-4, File No.
33-31043, incorporated by reference herein)
10(j)(4) Restricted Stock Agreement dated March 31,
1989 between the Company and Roger A.
Vandenberg (Exhibit 10(w)(5) of the
Company's Registration Statement on Form
S-4, File No. 33-31043, incorporated by
reference herein)
10(j)(5) Restricted Stock Agreement dated as of
August 9, 1990 between the Company and Allan
R. Dragone (Exhibit 10(x)(5) of the
Company's Form 10-K for the year ended
December 31, 1990 incorporated by reference
herein)
10(j)(6) Restricted Stock Agreement dated as of
August 9, 1990 between the Company and
Raymond C. Tower (Exhibit 10(x)(6) of the
Company's Form 10-K for the year ended
December 31, 1990 incorporated by reference
herein)
10(j)(7) Restricted Stock Agreement dated September
21, 1993 between the Company and James E.
Rogers
Other Material Agreements
10(k) Environmental Agreement dated as of
August 8, 1985, by and among the Company,
Arthur O. Wellman, Jr., and Edward R. Sacks
(Exhibit 10.12 of the Company's Registration
Statement on Form S-1, File No. 33-13458,
incorporated by reference herein)
10(l) Post-Closing Escrow Agreement dated
August 12, 1985 by and among the Company,
Arthur O. Wellman, Jr., Edward R. Sacks and
certain other parties (Exhibit 10.2 of the
Company's Registration Statement on Form
S-1, File No. 33-13458, incorporated by
reference herein)
10(m) Guarantee of indebtedness of Wellman Fibers
Limited to National Westminster Bank PLC
(Exhibit 10(r) of the Company's Form 10-K
for the year ended December 31, 1991
incorporated by reference herein)
10(n) Letter Agreement, relating to certain
environmental matters, dated August 17,
1987, by and among FI, HCC and Celanese
(Exhibit 10.3 of FI's Registration Statement
on Form S-1, File No. 33-20626, incorporated
herein by reference)
10(o) Trademark Assignment and License, dated
January 28, 1988, by and among FI, HCC and
Celanese (Exhibit 10.14 of FI's Registration
Statement on Form S-1, File No. 33-20626,
incorporated herein by reference)
18 Letter of Ernst & Young re change in
accounting principles
21 Subsidiaries of the Company
23(a) Consent of Ernst & Young
23(b) Consent of KPMG Stokes Kennedy Crowley
99 Report of KPMG Stokes Kennedy Crowley
(b) Reports on Form 8-K
None.
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, on March 24, 1994.
WELLMAN, INC.
By /s/ Thomas M. Duff
President
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 in the capacities indicated
on March 24, 1994.
Signatures Title
/s/ Thomas M. Duff President, Chief Executive Officer
Thomas M. Duff and Director (Principal Executive
Officer)
/s/ Keith R. Phillips Vice President, Chief Financial
Keith R. Phillips Officer and Treasurer (Principal
Financial Officer)
/s/ Mark J. Rosenblum Vice President, Controller
Mark J. Rosenblum (Principal Accounting Officer)
/s/ C. William Beckwith Director
C. William Beckwith
/s/ Peter H. Conze Director
Peter H. Conze
/s/ Allan R. Dragone Director
Allan R. Dragone
/s/ Richard F. Heitmiller Director
Richard F. Heitmiller
/s/ Jonathan M. Nelson Director
Jonathan M. Nelson
/s/ James E. Rogers Director
James E. Rogers
/s/ Raymond C. Tower Director
Raymond C. Tower
/s/ Roger A. Vandenberg Director
Roger A. Vandenberg
EXHIBIT INDEX
Exhibit Number Description
3(a)(1) Restated Certificate of Incorporation
(Exhibit 3.1 of the Company's
Registration Statement on Form
S-1, File No. 33-13458,
incorporated by reference herein)
3(a)(2) Certificate of Amendment to Restated
Certificate of Incorporation
(Exhibit 3(a)(2) of the
Company's Registration Statement
on Form S-4, File No. 33-31043,
incorporated by reference herein)
3(a)(3) Certificate of Amendment to Restated
Certificate of Incorporation
(Exhibit 28 of the Company's
Registration Statement on Form
S-8, File No. 33-38491,
incorporated by reference herein)
3(a)(4) Certificate of Amendment to Restated
Certificate of Incorporation
3(b) By-Laws, as amended
4(a) Loan Agreement dated December 7, 1990
by and between the Company and
Fleet National Bank, as agent,
and certain other financial
institutions (Exhibit 4(a) of
the Company's Form 10-K for the
year ended December 31, 1990
incorporated by reference herein)
4(b) Note and Stock Purchase Agreement
dated July 31, 1985, among the
Company, the Prudential
Insurance Company of America
("Prudential") and Teachers
Insurance and Annuity
Association of America
("Teachers") (Exhibit 4.6 of the
Company's Registration Statement
on Form S-1, File No. 33-23988,
incorporated by reference herein)
Exhibit Number Description
4(c) Letter Agreement dated June 10, 1987
between the Company and Teachers
(Exhibit 19.2 of the Company's
Form 10-Q for the Quarter ended
June 30, 1987 incorporated by
reference herein)
4(d) Letter Agreement dated October 2,
1989 between the Company and
Teachers (Exhibit 4(c) of the
Company's Form 8-K for the event
dated November 1, 1989
incorporated by reference herein)
4(e) Letter Agreement dated June 10, 1987
between the Company and
Prudential (Exhibit 19.3 of the
Company's Form 10-Q for the
Quarter ended June 30, 1987
incorporated by reference herein)
4(f) Letter Agreement dated October 2, 1989
between the Company and
Prudential (Exhibit 4(d) of the
Company's Form 8-K for the event
dated November 1, 1989
incorporated by reference herein)
4(g) Letter Agreement dated March 20, 1990
between the Company and
Prudential (Exhibit 4(g) of the
Company's Form 10-K for the year
ended December 31, 1991
incorporated by reference herein)
4(h) Letter Agreement dated March 20, 1990
between the Company and Teachers
(Exhibit 4(h) of the Company's
Form 10-K for the year ended
December 31, 1991 incorporated
by reference herein)
4(i) Letter Agreement dated December 7, 1990
between the Company and
Prudential (Exhibit 4(i) of the
Company's Form 10-K for the year
ended December 31, 1991
incorporated by reference herein)
Exhibit Number Description
4(j) Letter Agreement dated December 7, 1990
between the Company and Teachers
(Exhibit 4(j) of the Company's
Form 10-K for the year ended
December 31, 1991 incorporated
by reference herein)
4(k) Amendment Agreement dated February 27,
1992 between the Company and
Prudential (Exhibit 4(k) of the
Company's Form 10-K for the year
ended December 31, 1991
incorporated by reference herein)
4(l) Amendment Agreement dated February 27,
1992 between the Company and
Teachers (Exhibit 4(l) of the
Company's Form 10-K for the year
ended December 31, 1991
incorporated by reference herein)
4(m) Facilities dated December 19, 1991
between WIL and Ulster
Investment Bank Limited (Exhibit
4(m) of the Company's Form 10-Q
for the quarter ended June 30,
1992 incorporated by reference
herein)
4(n) Registration Rights Agreement dated
as of August 12, 1985 by and
among the Company, Teachers,
Prudential, Narragansett First
Fund, Thomas M. Duff, John L.
Dings, Alex Holder, Calvin
Hughes, and Frank McGuire
(Exhibit 4.7 of the Company's
Registration Statement on Form
S-1, File No. 33-13458,
incorporated by reference herein)
4(o) Loan Agreement between South Carolina
Jobs - Economic Development
Authority (the "Authority") and
the Company dated as of December
1, 1990 (Exhibit 4(n) of the
Company's Form 10-K for the year
ended December 31, 1990
incorporated by reference herein)
Exhibit Number Description
4(p) First Supplemental Loan Agreement
between the Authority and the
Company dated as of April 1,
1991 (Exhibit 4(a) of the
Company's Form 10-Q for the
quarter ended June 30, 1991
incorporated by reference herein)
4(q) Note Purchase Agreement dated as of
June 14, 1991 between the
Company and the Purchasers named
in Schedule I thereto (Exhibit
4(b) of the Company's Form 10-Q
for the quarter ended June 30,
1991 incorporated by reference
herein)
4(r) Rights Agreement dated as of
August 6, 1991 between the
Company and First Chicago Trust
Company of New York, as Rights
Agent (Exhibit 1 to the
Company's Form 8-K dated as of
August 6, 1991 incorporated by
reference herein)
4(s) Loan Agreement between the Authority
and the Company, dated as of
June 1, 1992 (Exhibit 4(u) of
the Company's Form 10-Q for the
quarter ended June 30, 1992
incorporated by reference herein)
4(t) Note Purchase Agreement between the
Company and Teachers dated July
28, 1992 (Exhibit 4(v) of the
Company's Form 10-Q for the
quarter ended June 30, 1992
incorporated by reference herein)
4(u) Loan Agreement between the Authority
and the Company, dated as of
December 1, 1992 (Exhibit 4(w)
of the Company's Form 10-K for
the year ended December 31, 1992
incorporated by reference herein)
Exhibit Number Description
4(v) Promissory Note dated May 15, 1992
of the Company to the City of
Florence, SC (Exhibit 4(x) of
the Company's Form 10-K for the
year ended December 31, 1992
incorporated by reference herein)
4(w) Loan note participations with the
Sumitomo Bank, Limited, dated
July 27, 1992, Buliner
Handels-und Frankfurter Bank
dated June 15, 1992, Banco di
Napoli dated September 14, 1992,
Istituto Bancario San Paolo di
Torino S.p.A. dated January 4,
1992, Continental Bank N.A.
dated November 26, 1991 (Exhibit
4(y) of the Company's Form 10-K
for the year ended December 31,
1992 incorporated by reference
herein)
4(x) Promissory Note dated August 9, 1993
of the Company to First Fidelity
Bank, National Bank (Exhibit
4(z) of the Company's Form 10-Q
for the quarter ended September
30, 1993 incorporated by
reference herein)
4(y) Commercial Purpose Loan Note dated
August 11, 1993 to Chemical Bank
New Jersey, National Association
4(z) Promissory Note dated June 18, 1993
of the Company to Fleet National
Bank
Executive Compensation Plans and Arrangements
10(a) Wellman, Inc. 1985 Incentive Stock
Option Plan, as amended (Exhibit
4(a) of the Company's
Registration Statement on Form
S-8/S-3, File No. 33-17196,
incorporated by reference herein)
Exhibit Number Description
10(b)(1) Employment Agreement dated as of
January 1, 1990 between the
Company and Thomas M. Duff
(Exhibit 10(e) of the Company's
Form 10-K for the year ended
December 31, 1989 incorporated
by reference herein)
10(b)(2) Amendment to Employment Agreement
dated as of January 1, 1993
between the Company and Thomas
M. Duff (Exhibit 19 to the
Company's Form 10-Q for the
quarter ended March 31, 1993
incorporated by reference herein)
10(c)(1) Employment Agreement dated as of
January 1, 1990 between the
Company and Clifford J.
Christenson (Exhibit 10(f) of
the Company's Form 10-K for the
year ended December 31, 1989
incorporated by reference herein)
10(c)(2) First Amendment to Employment Agreement
dated as of January 1, 1993
between the Company and Clifford
J. Christenson (Exhibit 10(c)(2)
of the Company's Form 10-K for
the year ended December 31, 1992
incorporated by reference herein)
10(d) Service Agreement dated as of
June 26, 1991 between Wellman
International Investments
Limited and Charles William
Beckwith (Ehibit 10(g) of the
Company's Form 10-K for the year
ended December 31, 1991
incorporated by reference herein)
10(e) Employment Agreement dated as of
October 1, 1991 between the
Company and James P. Casey
(Ehibit 10(j) of the Company's
Form 10-K for the year ended
December 31, 1991 incorporated
by reference herein)
Exhibit Number Description
10(f) Employment Agreement dated as of
April 1, 1992 between the
Company and Paul D. Apostol
(Exhibit 10(f) of the Company's
Form 10-K for the year ended
December 31, 1992 incorporated
by reference herein)
10(g) Directors Stock Option Plan dated
as of December 2, 1991 (Exhibit
4(a) of the Company's
Registration Statement on Form
S-8, File No. 33-44822
incorporated by reference herein)
10(h) Management Incentive Compensation Plan
10(i) Summary of Executive Life Insurance
Plan (Exhibit 10.22 of the
Company's Registration Statement
on Form S-1, File No. 33-13458,
incorporated by reference herein)
10(j)(1) Amended and Restated Restricted Stock
Agreement dated November 17,
1988 between the Company and
Peter H. Conze (Exhibit 10(x)(1)
of the Company's Form 10-K for
the year ended December 31, 1990
incorporated by reference herein)
10(j)(2) Amended and Restated Restricted Stock
Agreement dated December 5, 1988
between the Company and Richard
F. Heitmiller (Exhibit 10(x)(2)
of the Company's Form 10-K for
the year ended December 31, 1990
incorporated by reference herein)
10(j)(3) Restricted Stock Agreement dated
March 31, 1989 between the
Company and Jonathan M. Nelson
(Exhibit 10(w)(4) of the
Company's Registration Statement
on Form S-4, File No. 33-31043,
incorporated by reference herein)
Exhibit Number Description
10(j)(4) Restricted Stock Agreement dated
March 31, 1989 between the
Company and Roger A. Vandenberg
(Exhibit 10(w)(5) of the
Company's Registration Statement
on Form S-4, File No. 33-31043,
incorporated by reference herein)
10(j)(5) Restricted Stock Agreement dated as
of August 9, 1990 between the
Company and Allan R. Dragone
(Exhibit 10(x)(5) of the
Company's Form 10-K for the year
ended December 31, 1990
incorporated by reference herein)
10(j)(6) Restricted Stock Agreement dated as
of August 9, 1990 between the
Company and Raymond C. Tower
(Exhibit 10(x)(6) of the
Company's Form 10-K for the year
ended December 31, 1990
incorporated by reference herein)
10(j)(7) Restricted Stock Agreement dated
September 21, 1993 between the
Company and James E. Rogers
Other Material Agreements
10(k) Environmental Agreement dated as of
August 8, 1985, by and among the
Company, Arthur O. Wellman, Jr.,
and Edward R. Sacks (Exhibit
10.12 of the Company's
Registration Statement on Form
S-1, File No. 33-13458,
incorporated by reference herein)
10(l) Post-Closing Escrow Agreement dated
August 12, 1985 by and among the
Company, Arthur O. Wellman, Jr.,
Edward R. Sacks and certain
other parties (Exhibit 10.2 of
the Company's Registration
Statement on Form S-1, File No.
33-13458, incorporated by
reference herein)
Exhibit Number Description
10(m) Guarantee of indebtedness of Wellman
Fibers Limited to National
Westminster Bank PLC (Exhibit
10(r) of the Company's Form 10-K
for the year ended December 31,
1991 incorporated by reference
herein)
10(n) Letter Agreement, relating to certain
environmental matters, dated
August 17, 1987, by and among
FI, HCC and Celanese (Exhibit
10.3 of FI's Registration
Statement on Form S-1, File No.
33-20626, incorporated herein by
reference)
10(o) Trademark Assignment and License,
dated January 28, 1988, by and
among FI, HCC and Celanese
(Exhibit 10.14 of FI's
Registration Statement on Form
S-1, File No. 33-20626,
incorporated herein by reference)
18 Letter of Ernst & Young regarding
change in accounting principles
21 Subsidiaries of the Company
23(a) Consent of Ernst & Young
23(b) Consent of KPMG Stokes Kennedy Crowley
99 Report of KPMG Stokes Kennedy Crowley