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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the transition period from ..... to .....
Commission file number 1-5263
THE LUBRIZOL CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 34-0367600
(State of incorporation) (I.R.S. Employer Identification No.)
29400 Lakeland Boulevard
Wickliffe, Ohio 44092-2298
(Address of principal executive officers, including zip code)
Registrant's telephone number, including area code: (440) 943-4200
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------------------- -----------------------
Common Shares without par value New York Stock Exchange
Common Share purchase rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value (on basis of closing sale price) of voting stock
held by nonaffiliates as of March 6, 1998 $2,192,961,092
Number of the registrant's Common Shares, without par value,
outstanding as of March 6, 1998 56,901,269
Documents Incorporated by Reference
Portions of the registrant's 1997 Annual Report to its shareholders
(Incorporated into Part I and II of this Form 10-K)
Portions of the registrant's Proxy Statement dated March 18, 1998
(Incorporated into Part III of this Form 10-K)
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PART I
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ITEM 1. BUSINESS
The Lubrizol Corporation was organized under the laws of Ohio
in 1928. The company began business as a compounder of special-purpose
lubricants, and in the early 1930's was among the first to commence research in
the field of lubricant additives. Today, the company is a worldwide supplier of
performance chemicals and products to diverse markets worldwide. Principally,
the company develops, produces and sells specialty additive packages used in
transportation and industrial finished lubricants such as gasoline and diesel
engine lubricating oils, automatic transmission fluids, gear oils, marine and
tractor lubricants, fuel products and industrial fluids. The company's additive
packages are generally produced in shared manufacturing facilities and sold
largely to a common customer base. These specialty chemical products are created
through the application of advanced chemical and mechanical technologies to
enhance the performance, quality and value of the products in which they are
used. The company also produces and supplies coatings additives, refinery and
oil field chemicals, specialty monomers, process chemicals, synthetic
refrigerant compressor lubricants, fluid metering devices and particulate
emission trap devices.
Over the past five years the company has divested its
non-strategic assets comprised primarily of its assets associated with its
former Agribusiness segment, including its investments in Mycogen Corporation,
and its investments in Genentech, Inc. common stock. The company had
substantially liquidated its non-strategic assets as of December 31, 1996.
(Please refer to Note 8 to the Financial Statements which is included in the
company's 1997 Annual Report to its shareholders and is incorporated herein by
reference.)
PRINCIPAL PRODUCTS. The company's principal products are
specialty additive systems for gasoline and diesel engine lubricating oils,
automatic transmission fluids, gear oils, industrial fluids, metalworking
compounds and fuels. The company also offers other specialty chemical products,
fluid metering devices and particulate emission trap devices. Additives for
engine lubricating oils accounted for 51% of consolidated revenues in 1997, 1996
and 1995. Additives for driveline oils accounted for 23%, 25% and 24% of
consolidated revenues for these respective periods.
Additives improve the lubricants and fuels used in cars,
trucks, buses, off-highway equipment, marine engines and industrial
applications. In lubricants, additives enable oil to withstand a broader range
of temperatures, limit the buildup of sludge and varnish deposits, reduce wear,
inhibit the formation of foam, rust and corrosion, and retard oxidation. In
fuels, additives help maintain efficient operation of the fuel delivery system,
help control deposits and corrosion, improve combustion and assist in preventing
decomposition during storage.
Due to the variety in the properties and applications of oils,
a number of different chemicals are used to formulate the company's products.
Each additive combination is designed to fit the characteristics of the
customer's base oil and the level of performance specified. Engine oils for
passenger cars contain a combination of chemical additives which usually
includes one or more detergents, dispersants, oxidation inhibitors and wear
inhibitors, pour point depressants and viscosity improvers. Other chemical
combinations are used in specialty additive systems for heavy duty engine oils
used by trucks and off-highway equipment and in formulations for gear oils,
automatic transmission fluids, industrial oils, metalworking fluids, and
gasoline, diesel and residual fuels.
COMPETITION. The chemical additive field is highly competitive
in terms of price, technology development, product performance and customer
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service. The company's principal competitors, both in the United States and
overseas, are three major petroleum companies and one chemical company. The
petroleum companies produce lubricant and fuel additives for their own use, and
also sell additives to others. These competing companies are also customers of
the company. Excluding viscosity improvers, management believes, based on volume
sold, that the company is the largest supplier to the petroleum industry of
performance additive systems for lubricants.
CUSTOMERS. In the United States, the company markets its
additive products through its own sales organization. The company's additive
customers consist primarily of oil refiners and independent oil blenders and are
located in more than 100 countries. Approximately 40% of the company's sales are
made to customers in North America, 30% in Europe and 30% in Asia-Pacific, the
Middle East and Latin America. Sales to Mobil Corporation and its affiliates
accounted for 10% of consolidated sales in 1997, 1996 and 1995. The company's
ten largest customers, most of which are international oil companies and a
number of which are groups of affiliated entities, accounted for approximately
44% of consolidated sales in 1997. The loss of one or more of these customers
could have a material adverse effect on the company's business.
RAW MATERIALS. The company utilizes a broad variety of
chemical raw materials in the manufacture of its additives and uses oil in
processing and blending additives. These materials are obtainable from several
sources, and for the most part are derived from petroleum. Unstable political
and economic conditions in the Middle East have, in the past, caused and may
continue to cause the cost of raw materials to fluctuate significantly; however,
the availability of raw materials to the company has not been significantly
affected when these conditions occurred. The company expects raw materials to be
available in adequate quantities during 1998.
RESEARCH, TESTING AND DEVELOPMENT. The company has
historically emphasized research and has developed a large percentage of the
additives it manufactures and sells. Technological developments in the design of
engines and other automotive equipment, combined with rising demands for
environmental protection and fuel economy, require increasingly sophisticated
chemical additives to meet industry performance standards. The frequency of
changes in industry performance standards compresses time cycles for new product
development and affects the company's technical spending patterns.
Research and development expenditures were $88.4 million in
1997, $93.4 million in 1996 and $104.9 million in 1995. These amounts were
equivalent to 5.3%, 5.8% and 6.3% of the respective revenues for such years.
These amounts include expenditures for the performance evaluation of additive
developments in engines and other types of mechanical equipment as well as
expenditures for the development of specialty chemicals for industrial
applications. In addition, $58.2 million, $67.6 million and $74.7 million was
spent in 1997, 1996 and 1995, respectively, for technical service activities,
principally for evaluation in mechanical equipment of specific lubricant
formulations designed for the needs of petroleum industry customers throughout
the world.
The company has two research facilities at Wickliffe, Ohio,
one of which is principally for lubricant additive research and the other for
research in the field of other specialty chemicals. The company also maintains a
mechanical testing laboratory at Wickliffe, equipped with a variety of gasoline
and diesel engines and other mechanical equipment to evaluate the performance of
additives for lubricants and fuels. The company has similar mechanical testing
laboratories in England and Japan and, in addition, makes extensive use of
independent contract research firms. Extensive field testing is also conducted
through various arrangements with fleet operators and others.
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Liaison offices in Detroit, Michigan; Hazelwood, England;
Hamburg, Germany; Tokyo, Japan; and Paris, France maintain close contact with
the principal automotive and equipment manufacturers of the world and keep the
company abreast of the performance requirements for its products in the face of
changing technologies. These liaison activities also serve as contacts for
cooperative development and evaluation of products for future applications.
Contacts with the automotive and equipment industry are important so the company
may have the necessary direction and lead time to develop products for use in
engines, transmissions, gear sets, and other areas of equipment that require
lubricants of advanced design.
PATENTS. The company owns certain United States patents
relating to lubricant and fuel additives, lubricants, chemical compositions and
processes, and protective coating materials and processes. It also owns similar
patents in foreign countries. While such domestic and foreign patents expire
from time to time, the company continues to apply for and obtain patent
protection on an ongoing basis. Although the company believes that, in the
aggregate, its patents constitute an important asset, it does not regard its
business as being materially dependent upon any single patent or any group of
related patents.
The company has filed claims against Exxon Corporation and its
affiliates ("Exxon") relating to various commercial matters, including alleged
infringements by Exxon of certain of the company's patents. These suits are
pending in the United States (in Ohio), Canada, and the United Kingdom, and are
at various stages. The international suits allege infringement of patents that
correspond to a United States patent admitted as valid by Exxon in a settlement
in 1988. In the suit in Canada, a determination of liability has been made by
the courts against Exxon and in favor of the company, and the case has been
returned to the trial court for an assessment of damages, but no date has been
set for a determination of such damages. In the suit in the United Kingdom, a
patent trial court declared the company's patent invalid and the company is
appealing that decision, which appeal is expected to be heard in March 1998. For
further information regarding these cases, refer to Note 18 to the Financial
Statements which is included in the company's 1997 Annual Report to its
shareholders and is incorporated herein by reference.
ENVIRONMENTAL MATTERS. The company is subject to federal,
state and local laws and regulations designed to protect the environment and
limit manufacturing wastes and emissions. The company believes that as a general
matter its policies, practices and procedures are properly designed to prevent
unreasonable risk of environmental damage and the consequent financial liability
to the company. Compliance with the environmental laws and regulations requires
continuing management effort and expenditures by the company. Capital
expenditures for environmental projects approximated $7 million in 1997, and
over the past three years have averaged 14% of annual capital spending.
Management believes that the cost of complying with environmental laws and
regulations will not have a material affect on the earnings, liquidity or
competitive position of the company.
The company is engaged in the handling, manufacture, use,
transportation and disposal of substances that are classified as hazardous or
toxic by one or more regulatory agencies. The company believes that its
handling, manufacture, use, transportation and disposal of such substances
generally have been in accord with environmental laws and regulations.
Among other environmental laws, the company is subject to the
federal "Superfund" law, under which the company has been designated as a
"potentially responsible party" that may be liable for cleanup costs associated
with various waste sites, some of which are on the U.S. Environmental Protection
Agency Superfund priority list. The company's experience, consistent with what
it believes to be the experience of others in
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similar cases, is that Superfund site liability tends to be apportioned among
parties based upon contribution of materials to the Superfund site. Accordingly,
the company measures its liability and carries out its financial reporting
responsibilities with respect to Superfund sites based upon this standard, even
though Superfund site liability is technically joint and several in nature. The
company views the expense of remedial cleanup as a part of its product cost, and
accrues for estimated environmental liabilities with charges to cost of sales.
Management considers its environmental accrual to be adequate to provide for its
portion of costs for all known environmental matters, including Superfund sites.
Based upon consideration of currently available information, management believes
liabilities for environmental matters will not have a material adverse affect on
the company's financial position, operating results or liquidity.
GENERAL
EMPLOYEES. At December 31, 1997, the company and its
wholly-owned subsidiaries had 4,291 employees of which approximately 62% were in
the U.S.
INTERNATIONAL OPERATIONS. Financial information with respect
to domestic and foreign operations is contained in Note 14 to the Financial
Statements which is included in the company's 1997 Annual Report to its
shareholders and is incorporated herein by reference.
The company supplies its additive customers abroad from
overseas manufacturing plants and through export from the United States. Sales
and technical service offices are maintained in more than 30 countries outside
the United States. As a result, the company is subject to business risks
inherent in non-U.S. activities, including political and economic uncertainty,
import and export limitations, exchange controls and currency fluctuations. The
company believes risks related to its foreign operations are mitigated due to
the political and economic stability of the countries in which its largest
foreign operations are located.
While changes in the U.S. dollar value of foreign currencies
will affect earnings from time to time, the longer term economic effect of these
changes should not be significant given the company's net asset exposure and
currency mix relative to its revenues and expenses. The company's consolidated
net income will generally benefit as foreign currencies increase in value
compared to the U.S. dollar and will generally decline as foreign currencies
decrease in value.
ITEM 2. PROPERTIES
The general offices of the company are located in Wickliffe,
Ohio. The company has various leases for general office space primarily located
in Houston, Texas; and London, England. The company owns three additive
manufacturing plants in the United States; one located in the Cleveland, Ohio
area, at Painesville, and two near Houston, Texas, at Deer Park and Bayport.
Outside the United States, the company owns additive manufacturing/blending
plants in Australia, Brazil, Canada, England, France (three locations), Japan,
South Africa and Singapore. All of these plants, other than Singapore, are owned
in fee. In Singapore, the company owns the plant but leases the land on which
the plant is located. The company owns in fee research, development and testing
facilities in Wickliffe, Ohio; Hazelwood, England; and Atsugi, Japan. The
company also owns in fee a facility in Midland, Michigan, at which air and
refrigeration compressor lubricants are developed and marketed; manufacturing
plants in Germany that manufacture performance chemical additives for the
coatings industry and specialty additives for the metalworking fluid and
industrial lubricant markets in Germany and throughout the European Union; a
manufacturing plant in Atlanta, Georgia, that manufactures fluid metering
devices; a manufacturing plant in Newmarket, Ontario, Canada, that manufactures
particulate emission control devices; and a manufacturing plant
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in Fareham, Hampshire, England, that manufactures additive injection equipment.
Additive manufacturing plants in India and Saudi Arabia, are
owned and operated by joint venture companies licensed by Lubrizol. Lubrizol's
ownership of each of these companies ranges from 40% to 49%.
The company has entered into long-term contracts for its
exclusive use of major marine terminal facilities at the Port of Houston, Texas.
In addition, Lubrizol has leases for storage facilities in Australia, Chile,
Ecuador, Finland, France, Holland, Singapore, Spain, South Africa, Sweden, and
Turkey; Los Angeles, California; St. Paul, Minnesota; Bayonne, New Jersey; and
Tacoma, Washington. In some cases, the ownership or leasing of such facilities
is through certain of its subsidiaries or affiliates.
Management continues to maintain a capital expenditure program
to support the company's operations and believes that the company's facilities
are adequate for its present operations and for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The company is a party in a case brought by Exxon Corporation
and its affiliates, Exxon Chemical Patents, Inc. and Exxon Research &
Engineering Company, in the Southern District of Texas, Houston Division, on
September 19, 1989. The plaintiffs alleged that the company willfully infringed
an Exxon patent pertaining to an oil soluble copper additive component and
requested monetary damages and injunctive relief. On June 24, 1996, the U.S.
Supreme Court denied Exxon's request to review a September 1995 decision of the
United States Court of Appeals for the Federal Circuit in Washington, D.C.,
regarding this case. The Court of Appeals' decision overturned a December 1992
jury verdict that the company had infringed an Exxon patent and entered judgment
in favor of the company as a matter of law. The ruling of the Court of Appeals
also vacated an injunction and a significant monetary judgment against the
company. The Supreme Court decision finalized the Court of Appeals' judgment.
Notwithstanding the Supreme Court decision, Exxon filed a motion in the original
trial court seeking a new trial in order to assert an allegedly different theory
of infringement under the same patent. The motion was denied by the trial judge
on the ground that he lacked the authority to consider any request for a new
trial in view of the reversal of the prior trial verdict by the Appellate Court.
Acting upon an appeal by Exxon, the Court of Appeals in Washington, D.C.,
without deciding the merits of whether Exxon was entitled to a second trial,
ruled that the trial court does have the authority to consider Exxon's motion
and remanded the issue to the trial court.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the vote of the security holders
during the three months ended December 31, 1997.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth the name, age, recent business experience and
certain other information relative to each person who is an executive officer of
the company as of March 1, 1998.
Name Business Experience
---- -------------------
W. G. Bares Mr. Bares, age 56, became Chairman of the Board on
April 22, 1996, and Chief Executive Officer on January
1, 1996. He has been President since 1982. From 1987
through 1995, he was also Chief Operating Officer.
R. A. Andreas Mr. Andreas, age 53, has been Vice President and Chief
Financial Officer since June 1990.
J. W. Bauer Mr. Bauer, age 44, became Vice President and General
Counsel in April 1992, after serving as General Counsel
from August 1991.
S. A. Di Biase Dr. Di Biase, age 45, has been Vice President since
September 1993. He is responsible for Research and
Development. From 1990 to September 1993, he was
Director of Strategic Research.
G. R. Hill Dr. Hill, age 56, has been Senior Vice President since
1988. In 1996, he became responsible for Corporate
Strategic Planning and has been responsible for
Business Development since October 1993. Prior to
October 1993, he was responsible for Research and
Development.
J. E. Hodge Mr. Hodge, age 55, has been Vice President since
September 1993. He is responsible for Operations.
During 1989 through 1993, he was General Manager - Deer
Park/Bayport Plants.
K. H. Hopping Mr. Hopping, age 51, has been Vice President and
Secretary of the Corporation since April 1991.
S. F. Kirk Mr. Kirk, age 48, has been Vice President since
September 1993. In April 1996, he became responsible
for Sales. From 1993 to April 1996, he was responsible
for Segment Management. From January 1991 to 1993, he
was Senior Vice President - Marketing and Technology
for Lubrizol Petroleum Chemicals Company.
Y. Le Couedic Mr. Le Couedic, age 50, has been Vice President since
September 1993. He is responsible for Management
Information Systems. From 1991 to 1993, he was Division
Head - Corporate R&D - Administrative Services.
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Name Business Experience
- ---- -------------------
G. P. Lieb Mr. Lieb, age 45, was named Controller - Accounting and
Financial Reporting in November 1993, and was named
Principal Accounting Officer in January 1994. From
October 1991 to October 1993, he was Administrative
Manager for the Hazelwood, U.K. Laboratory.
M. W. Meister Mr. Meister, age 43, has been Vice President since
April 1993. He is responsible for Human Resources. From
November 1992 to April 1993, he was General Manager -
Human Resources.
D. A. Muskat Mr. Muskat, age 58, was named Operations Manager in
August 1993. From September 1989 to August 1993 he was
Vice President - Operations for Lubrizol Petroleum
Chemicals Company.
L. M. Reynolds Ms. Reynolds, age 37, was named Assistant Secretary in
April 1995, and has been Counsel since February 1991.
R. D. Robins Mr. Robins, age 55, became Vice President in April
1996. He is responsible for Segment Management. From
October 1993 to April 1996 he was Passenger Car Segment
Manager. From November 1991 to October 1993 he was Fuel
Products Group Business Manager.
J. A. Thomas Mr. Thomas, age 59, has been Vice President since April
1994. In 1996, he became responsible for managing
Corporate Strategies in the Asia Pacific Region. From
April 1994 through April 1996, he was responsible for
Corporate Planning and Development. From December 1990
to April 1994, he was General Manager-Sales for Asia
Pacific, Latin America and the Middle East.
All executive officers serve at the pleasure of the Board.
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PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The common shares of the company are listed on the New York
Stock Exchange under the symbol LZ. The number of shareholders of record of
common shares was 5,708 as of March 6, 1998.
Information relating to the recent price and dividend history
of the company's common shares follows:
Common Share Price History Dividends
--------------------------
1997 1996 Per Common Share
---- ---- ----------------
High Low High Low 1997 1996
---- --- ---- --- ---- ----
1st quarter $36 $30 1/2 $31 $26 5/8 $ .25 $.24
2nd quarter 42 1/8 30 3/8 30 1/2 27 1/4 .25 .24
3rd quarter 44 7/8 41 15/16 30 1/2 27 7/8 .25 24
4th quarter 46 15/16 34 7/8 32 3/8 28 1/2 .26 .25
----- ----
$1.01 $.97
===== ====
ITEM 6. SELECTED FINANCIAL DATA.
The summary of selected financial data for each of the last
five years included in the Historical Summary contained on pages 38 and 39 of
the company's 1997 Annual Report to its shareholders is incorporated herein by
reference. Other income (charges) for 1996, 1995, 1994 and 1993 includes $53.3
million, $38.5 million, $41.2 million and $42.4 million, respectively, for gains
on sale of investments; and in 1993, a special charge of $86.3 million. In
addition, the company changed its method of accounting for postretirement
benefits and for income taxes, effective January 1, 1993, to comply with two
newly effective accounting standards, which reduced 1993 net income by $39.4
million.
Total debt reported in the Historical Summary includes the
following amounts classified as long-term at December 31: $182.2 in 1997, $157.6
million in 1996, $194.4 million in 1995, $114.2 million in 1994 and $55.3
million in 1993.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The Management's Discussion and Analysis of Financial Condition
and Results of Operations, including the company's cautionary statement for
"Safe Harbor" purposes under the Private Securities Litigation Reform Act of
1995, contained on pages 16 through 22, inclusive, of the company's 1997 Annual
Report to its shareholders is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the company and its
subsidiaries, together with the independent auditors' report relating thereto,
contained on pages 22 through 36, inclusive, of the company's 1997 Annual Report
to its shareholders, and the Quarterly Financial Data (Unaudited) contained on
page 37 of such 1997 Annual Report, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contained under the heading "Election of
Directors" on pages 2 to 6, inclusive, of the company's Proxy Statement dated
March 18, 1998, is incorporated herein by reference. Information relative to
executive officers of the company is contained under "Executive Officers of the
Registrant" in Part I of this Annual Report on Form 10-K. The information
contained under the heading "Section 16(a) Beneficial Ownership Reporting
Compliance" on page 22 of the company's Proxy Statement dated March 18, 1998, is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information relating to executive compensation contained
under the headings "Committees and Compensation of the Board of Directors" on
pages 6 and 7, "Executive Compensation" on pages 12 through 14, inclusive, and
under "Employee and Executive Officer Benefit Plans - Pension Plans" and "-
Executive Agreements" on pages 19 through 21, inclusive, of the company's Proxy
Statement dated March 18, 1998, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information relating to security ownership set forth under
the heading "Security Ownership of Directors, Executive Officers and Certain
Beneficial Owners" on pages 10 and 11 of the company's Proxy Statement dated
March 18, 1998, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
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PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES,
AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this Annual Report:
1. The following consolidated financial statements
of The Lubrizol Corporation and its
subsidiaries, together with the independent
auditors' report relating thereto, contained on
pages 22 through 37, inclusive, of Lubrizol's
1997 Annual Report to its shareholders and
incorporated herein by reference:
Independent Auditors' Report
Consolidated Statements of Income for the years
ended December 31, 1997, 1996 and 1995
Consolidated Balance Sheets at December 31, 1997
and 1996
Consolidated Statements of Cash Flows for the
years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1997, 1996 and
1995
Notes to Financial Statements
Quarterly Financial Data (Unaudited)
2. Schedules
No financial statement schedules are required to
be filed as part of this Annual Report.
3. Exhibits
(3)(a) Amended Articles of Incorporation of
The Lubrizol Corporation, as adopted
September 23, 1991. (Reference is made
to Exhibit (3)(a) to The Lubrizol
Corporation's Annual Report on Form
10-K for the year ended December 31,
1993, which Exhibit is incorporated
herein by reference.)
(3)(b) Regulations of The Lubrizol
Corporation, as amended effective April
27, 1992. (Reference is made to Exhibit
(3)(b) to The Lubrizol Corporation's
Annual Report on Form 10-K for the year
ended December 31, 1993, which Exhibit
is incorporated herein by reference.)
(4)(a) Amendment to Article Fourth of Amended
Articles of Incorporation. (Reference
is made to Exhibits (3)(a) and (4)(a)
to The Lubrizol Corporation's Annual
Report on Form 10-K for the year ended
December 31, 1993, which Exhibits are
incorporated herein by reference.)
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(4)(b) The company agrees, upon request, to
furnish to the Securities and Exchange
Commission copies of instruments
authorizing long-term debt. No one
instrument authorizes debt in excess of
10% of the total assets of the company
and its subsidiaries on a consolidated
basis.
(4)(c) Rights Agreement between The Lubrizol
Corporation and American Stock Transfer
& Trust Company dated as of October 13,
1997. (Reference is made to Exhibit 4.l
to The Lubrizol Corporation's
Registration Statement on Form 8-A
dated October 1, 1997, which Exhibit is
incorporated herein by reference.)
(10)(a)* The Lubrizol Corporation 1985 Employee
Stock Option Plan, as amended.
(Reference is made to Exhibit (10)(b)
to The Lubrizol Corporation's Annual
Report on Form 10-K for the year ended
December 31, 1993, which Exhibit is
incorporated herein by reference.)
(10)(b)* The Lubrizol Corporation Amended
Deferred Compensation Plan for
Directors. (Reference is made to
Exhibit (10)(b) to The Lubrizol
Corporation's Annual Report on Form
10-K for the year ended December 31,
1994, which Exhibit is incorporated
herein by reference.)
(10)(c)* Form of Employment Agreement between
The Lubrizol Corporation and certain of
its senior executive officers.
(Reference is made to Exhibit (10)(e)
to The Lubrizol Corporation's Annual
Report on Form 10-K for the year ended
December 31, 1993, which Exhibit is
incorporated herein by reference.)
(10)(d)* The Lubrizol Corporation Excess Defined
Benefit Plan, as amended. (Reference is
made to Exhibit (10)(d) to The Lubrizol
Corporation's Quarterly Report on Form
10-Q for the quarterly period ended
September 30, 1997, which Exhibit is
incorporated herein by reference.)
(10)(e)* The Lubrizol Corporation Excess Defined
Contribution Plan, as amended.
(Reference is made to Exhibit (10)(e)
to The Lubrizol Corporation's Quarterly
Report on Form 10-Q for the quarterly
period ended September 30, 1997, which
Exhibit is incorporated herein by
reference.)
(10)(f)* The Lubrizol Corporation Performance
Pay Plan (formerly Variable Award
Plan), as amended. (Reference is made
to Exhibit (10)(f) to The Lubrizol
Corporation's Annual Report on Form
10-K for the year ended December 31,
1996, which Exhibit is incorporated
herein by reference.)
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(10)(g)* The Lubrizol Corporation Executive
Death Benefit Plan, as amended.
(Reference is made to Exhibit (10)(g)
to The Lubrizol Corporation's Quarterly
Report on Form 10-Q for the quarterly
period ended September 30, 1997, which
Exhibit is incorporated herein by
reference.)
(10)(h)* The Lubrizol Corporation 1991 Stock
Incentive Plan, as amended. (Reference
is made to Exhibit (10)(h) to The
Lubrizol Corporation's Annual Report on
Form 10-K for the year ended December
31, 1996, which Exhibit is incorporated
herein by reference.)
(10)(i)* The Lubrizol Corporation Deferred Stock
Compensation Plan for Outside
Directors, as amended. (Reference is
made to Exhibit (10)(i) to The Lubrizol
Corporation's Annual Report on Form
10-K for the year ended December 31,
1995, which Exhibit is incorporated
herein by reference.)
(10)(j)* The Lubrizol Corporation Officers'
Supplemental Retirement Plan, as
amended. (Reference is made to Exhibit
(10)(j) to The Lubrizol Corporation's
Quarterly Report on Form 10-Q for the
quarterly period ended September 30,
1997, which Exhibit is incorporated
herein by reference.)
(10)(k)* The Lubrizol Corporation Deferred
Compensation Plan for Officers, as
amended. (Reference is made to Exhibit
(10)(k) to The Lubrizol Corporation's
Quarterly Report on Form 10-Q for the
quarterly period ended September 30,
1997, which Exhibit is incorporated
herein by reference.)
(10)(l)* The Lubrizol Corporation Executive
Council Deferred Compensation Plan, as
amended. (Reference is made to Exhibit
(10)(l) to The Lubrizol Corporation's
Quarterly Report on Form 10-Q for the
quarterly period ended September 30,
1997, which Exhibit is incorporated
herein by reference.)
(12) Computation of Ratio of Earnings to
Fixed Charges.
(13) The following portions of The Lubrizol
Corporation 1997 Annual Report to its
shareholders:
Pages 16-22 Management's
Discussion and
Analysis of Financial
Condition and Results
of Operations
Page 22 Independent Auditors'
Report
Page 23 Consolidated
Statements of Income
for the years ended
December 31, 1997,
1996 and 1995
Page 24 Consolidated Balance
Sheets at December 31,
1997 and 1996
Page 25 Consolidated
Statements of Cash
Flows for the years
ended December 31,
1997, 1996 and 1995
-13-
14
Page 26 Consolidated
Statements of
Shareholders' Equity
for the years ended
December 31, 1997,
1996 and 1995
Pages 27-36 Notes to Financial
Statements
Page 37 Quarterly Financial
Data (Unaudited)
Pages 38-39 Historical Summary
(21) List of Subsidiaries of The Lubrizol
Corporation
(23) Consent of Independent Auditors
(27) Financial Data Schedule for the year
ended December 31, 1997
(27.1) Restated Financial Data Schedules for
the periods ended June 30, 1997 and
September 30, 1997
(27.2) Restated Financial Data Schedules for
the periods ended March 31, 1996 and
June 30, 1996
(27.3) Restated Financial Data Schedule for
the year ended December 31, 1995
*Indicates management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three
months ended December 31, 1997.
-14-
15
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
March 23, 1998, on its behalf by the undersigned, thereunto duly authorized.
THE LUBRIZOL CORPORATION
BY /s/ W. G. Bares
----------------------------------------
W. G. Bares, Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below on March 23, 1998, by the following
persons on behalf of the Registrant and in the capacities indicated.
/s/ W. G. Bares Chairman of the Board, President and Chief
- -------------------------- Executive Officer
W. G. Bares (Principal Executive Officer)
/s/ R. A. Andreas Vice President and Chief Financial Officer
- -------------------------- (Principal Financial Officer)
R. A. Andreas
/s/ G. P. Lieb Controller, Accounting and Financial
- -------------------------- Reporting
G. P. Lieb (Principal Accounting Officer)
/s/ Edward F. Bell Director
- --------------------------
Edward F. Bell
/s/ L. E. Coleman Director
- --------------------------
L. E. Coleman
/s/ Peggy G. Elliott Director
- --------------------------
Peggy G. Elliott
/s/ Forest J. Farmer, Sr. Director
- --------------------------
Forest J. Farmer, Sr.
/s/ Gordon D. Harnett Director
- --------------------------
Gordon D. Harnett
/s/ Victoria F. Haynes Director
- --------------------------
Victoria F. Haynes
/s/ David H. Hoag Director
- --------------------------
David H. Hoag
/s/ William P. Madar Director
- --------------------------
William P. Madar
/s/ Ronald A. Mitsch Director
- --------------------------
Ronald A. Mitsch
/s/ M. Thomas Moore Director
- --------------------------
M. Thomas Moore
16
EXHIBIT INDEX
-------------
Exhibits
(3)(a) Amended Articles of Incorporation of
The Lubrizol Corporation, as adopted
September 23, 1991. (Reference is made
to Exhibit (3)(a) to The Lubrizol
Corporation's Annual Report on Form
10-K for the year ended December 31,
1993, which Exhibit is incorporated
herein by reference.)
(3)(b) Regulations of The Lubrizol
Corporation, as amended effective April
27, 1992. (Reference is made to Exhibit
(3)(b) to The Lubrizol Corporation's
Annual Report on Form 10-K for the year
ended December 31, 1993, which Exhibit
is incorporated herein by reference.)
(4)(a) Amendment to Article Fourth of Amended
Articles of Incorporation. (Reference
is made to Exhibits (3)(a) and (4)(a)
to The Lubrizol Corporation's Annual
Report on Form 10-K for the year ended
December 31, 1993, which Exhibits are
incorporated herein by reference.)
(4)(b) The company agrees, upon request, to
furnish to the Securities and Exchange
Commission copies of instruments
authorizing long-term debt. No one
instrument authorizes debt in excess of
10% of the total assets of the company
and its subsidiaries on a consolidated
basis.
(4)(c) Rights Agreement between The Lubrizol
Corporation and American Stock Transfer
& Trust Company dated as of October 13,
1997. (Reference is made to Exhibit 4.l
to The Lubrizol Corporation's
Registration Statement on Form 8-A
dated October 1, 1997, which Exhibit is
incorporated herein by reference.)
(10)(a)* The Lubrizol Corporation 1985 Employee
Stock Option Plan, as amended.
(Reference is made to Exhibit (10)(b)
to The Lubrizol Corporation's Annual
Report on Form 10-K for the year ended
December 31, 1993, which Exhibit is
incorporated herein by reference.)
(10)(b)* The Lubrizol Corporation Amended
Deferred Compensation Plan for
Directors. (Reference is made to
Exhibit (10)(b) to The Lubrizol
Corporation's Annual Report on Form
10-K for the year ended December 31,
1994, which Exhibit is incorporated
herein by reference.)
(10)(c)* Form of Employment Agreement between
The Lubrizol Corporation and certain of
its senior executive officers.
(Reference is made to Exhibit (10)(e)
to The Lubrizol Corporation's Annual
Report on Form 10-K for the year ended
December 31, 1993, which Exhibit is
incorporated herein by reference.)
17
(10)(d)* The Lubrizol Corporation Excess Defined
Benefit Plan, as amended. (Reference is
made to Exhibit (10)(d) to The Lubrizol
Corporation's Quarterly Report on Form
10-Q for the quarterly period ended
September 30, 1997, which Exhibit is
incorporated herein by reference.)
(10)(e)* The Lubrizol Corporation Excess Defined
Contribution Plan, as amended.
(Reference is made to Exhibit (10)(e)
to The Lubrizol Corporation's Quarterly
Report on Form 10-Q for the quarterly
period ended September 30, 1997, which
Exhibit is incorporated herein by
reference.)
(10)(f)* The Lubrizol Corporation Performance
Pay Plan (formerly Variable Award
Plan), as amended. (Reference is made
to Exhibit (10)(f) to The Lubrizol
Corporation's Annual Report on Form
10-K for the year ended December 31,
1996, which Exhibit is incorporated
herein by reference.)
(10)(g)* The Lubrizol Corporation Executive
Death Benefit Plan, as amended.
(Reference is made to Exhibit (10)(g)
to The Lubrizol Corporation's Quarterly
Report on Form 10-Q for the quarterly
period ended September 30, 1997, which
Exhibit is incorporated herein by
reference.)
(10)(h)* The Lubrizol Corporation 1991 Stock
Incentive Plan, as amended. (Reference
is made to Exhibit (10)(h) to The
Lubrizol Corporation's Annual Report on
Form 10-K for the year ended December
31, 1996, which Exhibit is incorporated
herein by reference.)
(10)(i)* The Lubrizol Corporation Deferred Stock
Compensation Plan for Outside
Directors, as amended. (Reference is
made to Exhibit (10)(i) to The Lubrizol
Corporation's Annual Report on Form
10-K for the year ended December 31,
1995, which Exhibit is incorporated
herein by reference.)
(10)(j)* The Lubrizol Corporation Officers'
Supplemental Retirement Plan, as
amended. (Reference is made to Exhibit
(10)(j) to The Lubrizol Corporation's
Quarterly Report on Form 10-Q for the
quarterly period ended September 30,
1997, which Exhibit is incorporated
herein by reference.)
(10)(k)* The Lubrizol Corporation Deferred
Compensation Plan for Officers, as
amended. (Reference is made to Exhibit
(10)(k) to The Lubrizol Corporation's
Quarterly Report on Form 10-Q for the
quarterly period ended September 30,
1997, which Exhibit is incorporated
herein by reference.)
(10)(l)* The Lubrizol Corporation Executive
Council Deferred Compensation Plan, as
amended. (Reference is made to Exhibit
(10)(l) to The Lubrizol Corporation's
Quarterly Report on Form 10-Q for the
quarterly period ended September 30,
1997, which Exhibit is incorporated
herein by reference.)
18
(12) Computation of Ratio of Earnings to
Fixed Charges.
(13) The following portions of The Lubrizol
Corporation 1997 Annual Report to its
shareholders:
Pages 16-22 Management's Discussion
and Analysis of
Financial Condition and
Results of Operations
Page 22 Independent Auditors'
Report
Page 23 Consolidated Statements
of Income for the years
ended December 31,
1997, 1996 and 1995
Page 24 Consolidated Balance
Sheets at December 31,
1997 and 1996
Page 25 Consolidated Statements
of Cash Flows for the
years ended December
31, 1997, 1996 and 1995
Page 26 Consolidated Statements
of Shareholders' Equity
for the years ended
December 31, 1997, 1996
and 1995
Pages 27-36 Notes to Financial
Statements
Page 37 Quarterly Financial
Data
(Unaudited)
Pages 38-39 Historical Summary
(21) List of Subsidiaries of The Lubrizol
Corporation
(23) Consent of Independent Auditors
(27) Financial Data Schedule for the year
ended December 31, 1997
(27.1) Restated Financial Data Schedules for
the periods ended June 30, 1997 and
September 30, 1997
(27.2) Restated Financial Data Schedules for
the periods ended March 31, 1996 and
June 30, 1996
(27.3) Restated Financial Data Schedule for
the year ended December 31, 1995
* Indicates management contract or compensatory plan or arrangement.