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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
Commission file number 1-5263
THE LUBRIZOL CORPORATION
29400 Lakeland Boulevard
Wickliffe, Ohio 44092-2298
(Name of registrant and address of principal executive offices)
OHIO 34-0367600
(State of incorporation) (I.R.S. Employer Identification No.)
Registrant's telephone number, including area code: (216) 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
Preferred 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 non-affiliates as of March 3, 1995: $2,118,855,519
Number of the registrant's Common Shares, without par value, outstanding as
of March 3, 1995: 64,754,607
Documents Incorporated by Reference
-----------------------------------
Portions of the registrant's 1994 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 15, 1995
(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 full service supplier of
performance chemicals to diverse markets worldwide. These specialty chemical
products are created through the application of advanced chemical, mechanical
and biological technologies to enhance the performance and quality of the
customer products in which they are used. The company develops, produces and
sells specialty additive systems for gasoline and diesel engine lubricating
oils, for automatic transmission fluids and for gear oils, and marine and
tractor lubricants. The company also supplies specialty products for
industrial lubricants and functional fluids, fuel additives and diversified
specialty chemical products.
Prior to December 1, 1992, the company had a separately reportable
Agribusiness segment. That segment developed, produced and marketed planting
seeds and specialty vegetable oils, and also conducted strategic biotechnology
research and development. As described in Note 16 to the Financial Statements
(included in the company's 1994 Annual Report to its shareholders and
incorporated herein by reference), the company transferred substantially all of
its Agribusiness segment, other than the specialty vegetable oil operations, to
Mycogen Corporation and a joint venture partnership formed with Mycogen. The
transferred assets were related to the seed business activities of the
company's former Agrigenetics Division. The Agribusiness assets and operations
retained by the company are not reportable as a separate industry segment after
1992.
Financial information for the industry segments, prior to December 1, 1992,
is contained in Note 14 to the Financial Statements included in the company's
1994 Annual Report to its shareholders and is incorporated herein by reference.
SPECIALTY CHEMICALS
PRINCIPAL PRODUCTS. The company's principal products are additive systems
for gasoline and diesel engine oils, automatic transmission fluids, gear oils,
industrial fluids, metalworking compounds and fuels. The company also offers
other specialty chemical products. Additives for engine oils accounted for 51%
of consolidated revenues in 1994, 50% in 1993, and 48% in 1992. Additives for
driveline oils accounted for 24%, 19% and 18% 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.
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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 heavy duty engine oils for 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, product performance and customer service. The company's principal
competitors, both in the United States and overseas, are four 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 Lubrizol. Excluding viscosity
improvers, management believes, based on volume sold, that the company is the
largest supplier to the petroleum industry of performance chemicals 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 60% of the company's sales are made to
customers outside of North America. 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 45% of consolidated sales in
1994. Although the loss of any one of these customers could have a material
adverse effect on the company's business, each is made up of a number of
separate business units that the company believes make independent purchasing
decisions with respect to chemical additives. Sales to Royal Dutch Petroleum
Company (Shell) and its affiliates accounted for 9% of consolidated sales in
1994.
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 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 1995.
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. These standards change periodically and the
frequency of these performance upgrades compress the time cycles for new
product development and affect the company's technical spending patterns.
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Research and development expenditures were $90.7 in 1994, $88.5 million in
1993 and $76.2 million for 1992. These amounts were equivalent to 5.7%, 5.8%
and 5.3% 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,
$74.8 million, $83.0 million and $63.6 million was spent in 1994, 1993 and
1992, 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. Lubrizol 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.
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 Lubrizol 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") alleging infringements by Exxon of certain of the company's patents.
These suits are pending in the United States and in Canada, France 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. In another patent infringement suit, instituted by Exxon in the
United States, liability and
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damages determinations have been made (which are currently in the appeal
process) against the company and in favor of Exxon. For further information
regarding these cases, refer to Note 18 to the Financial Statements included in
the company's 1994 Annual Report to its shareholders.
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 are anticipated to be
approximately $20 million in 1995, which is comparable to the
environmental-related expenditures in 1994. 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 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 clean-up 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 does not
believe liabilities for environmental matters will have a material adverse
effect on the company's financial position, operating results or liquidity.
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AGRIBUSINESS
As discussed in Note 16 to the Financial Statements, on December 1, 1992,
the company transferred substantially all of the Agribusiness segment, other
than the specialty vegetable oil operations, to Mycogen Corporation and to a
joint venture formed with Mycogen. The company's 1994 and 1993 consolidated
revenues, costs and expenses include specialty vegetable oil operations, but do
not include amounts related to the transferred assets. As also discussed in
Note 16 to the Financial Statements, on December 31, 1993, the company
exchanged another portion of its investment in the partnership for additional
Mycogen common stock and cash. The company's investment in Mycogen, which
includes Agrigenetics, Inc. (formerly Agrigenetics, L.P.), is accounted for by
the equity method, under which the company recognizes its share of the earnings
or losses of such entities.
The specialty vegetable oil operation retained by the company sells
specialty vegetable oils and operates an oilseed crushing and refining
facility. Specialty vegetable oil sales consist primarily of high oleic
sunflower oil in either crude or refined forms and safflower oil. Pursuant to
contractual arrangements, the company has agreed to purchase planting seed for
specialty vegetable oils from Agrigenetics, Inc., which in turn is to supervise
production of oilseed for crushing. The company's ability to acquire high
oleic oil seed is subject to governmental, agricultural and export policies as
well as the weather. The discussion below is presented only for historical
purposes except for any references to specialty vegetable oils.
The transferred portion of the Agribusiness operations produced and marketed
planting seeds for agricultural crops. The principal seed products were hybrid
seed corn, hybrid sorghum, soybeans, hybrid sunflowers, alfalfa, and cotton.
Revenues from planting seeds contributed approximately 75% of the Agribusiness
sales in 1992.
Substantially all of the company's planting seed, and oilseed for
crushing, was produced by an established network of growers under specified
planting conditions on a short-term contract basis. The company furnished
parental seed to its growers, primarily from stock developed, multiplied and
maintained by the company. Company personnel supervised planting, growing and
harvesting.
The seed products were marketed through three regional groups representing
eight Agrigenetics seed brands and through an international marketing group and
three overseas subsidiaries, all of which sold planting seeds. The products
were marketed primarily to dealers and distributors, most of whom were farmers
with long-term relationships with the company. The company sold its seeds
primarily in the major farm production areas in the United States. The company
markets specialty vegetable oil through its own sales organization and
commissioned agents. Sales to date have been principally to food processors.
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The United States seed industry is highly competitive and fragmented. Based
on revenue figures from industry sources, management believes the transferred
Agribusiness operations were the sixth largest seed company in the United
States. The market for vegetable oils is very large and very competitive. The
company's TRISUN(R) sunflower oil sells for a premium over regular sunflower
oil. TRISUN(R) oil is very high in monounsaturates, and therefore more stable
and resistant to oxidation than other vegetable oils.
Agribusiness revenues from the sale of planting seeds were earned
principally during the first half of the calendar year, and losses from these
operations were incurred in the last half as a result of continuing operating
expenses with low sales. Working capital needs were also seasonal.
Expenditures for inventories were made during the last half of the year, while
substantial collections on sales were not received until the second and third
quarters of the following year.
Strategic Agribusiness activities consisted principally of internal
biotechnology research and development directed toward developing new products
for the agriculture, food and chemical industries. Agribusiness' research and
development consisted of traditional plant breeding and strategic research in
advanced plant science. Plant breeding attempts to create desirable plants by
crossing selected parent plants. The genetic combinations of the crosses are
then tested under field conditions to determine if desired characteristics
appear. Traditional research expense of the Agribusiness segment was $7.2
million in 1992.
A major portion of Agribusiness' strategic research and development was
conducted at the research laboratory in Madison, Wisconsin. Strategic research
was focused on specialty chemicals and food products derived from oil seed
crops and on genetic improvement of specific attributes of hybrid plant
varieties. Total Agribusiness strategic research expense was $7.7 million in
1992.
The company has two United States patents covering its high oleic sunflower
technology; one covers the seeds and plants and the other covers the oil. On
February 17, 1995, the Court of Appeals for the Federal Circuit upheld the
patent covering the seeds and plants. This patent had previously been rejected
by the United States Patent and Trademark Office (PTO) under a reexamination
initiated in 1988 by a consortium of seed companies. The other patent covering
the oil is also in reexamination and is on appeal to the PTO Board of Patent
Appeals and Interferences.
GENERAL
EMPLOYEES. At December 31, 1994, the company and its wholly-owned
subsidiaries had 4,520 employees of which approximately 60% were in the U.S.
INTERNATIONAL OPERATIONS. Financial information with respect to domestic
and foreign operations is contained in Note 12 to the Financial Statements that
is included in the company's 1994 Annual Report to its shareholders and is
incorporated herein by reference.
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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 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 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, currency mix and pricing
flexibility. Generally, the income statement effect of changes in the dollar
value of foreign currencies is partially or wholly offset by the company's
ability to make corresponding price changes in local currency. 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. In 1994, currency fluctuations did not have a
material effect on net earnings.
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
Eastlake, Ohio; 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 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
mechanical testing facilities in Wickliffe, Ohio; Hazelwood, England; and
Atsugi, Japan. The company also owns an oilseed crushing and refining plant
located in Culbertson, Montana. Finally, the company owns in fee a
manufacturing plant in Germany that manufactures performance chemical additives
for the coatings industry.
Additive manufacturing plants in India, Mexico, Saudi Arabia and Venezuela
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;
East Liverpool, Ohio; 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.
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The company initiated a manufacturing rationalization plan during the third
quarter of 1993. The plan will be substantially implemented by the end of 1996
and, through consolidation, is expected to result in a one-third reduction in
the number of units used to produce intermediate products. See Note 17 to the
Financial Statements included in the company's 1994 Annual Report to its
shareholders.
Although the company continues to maintain a capital expenditure program to
support its operations, management of the company believes that its 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. In December 1992, the trial jury rendered a verdict that the company
willfully infringed an Exxon patent pertaining to an oil soluble copper
additive component. In early 1993, the court prohibited the company from
making or selling any additive packages in the United States that contained
this component and awarded Exxon $18.1 million for attorneys' fees. On
November 18, 1993, another jury in the same case awarded Exxon $48 million in
damages. The findings of infringement and validity of the Exxon patent as well
as the $18.1 million attorneys' fee award are on appeal to the United States
Court of Appeals for the Federal Circuit in Washington, D.C., which has
jurisdiction over all patent cases. Oral argument in this appeal was heard on
December 6, 1993, and the company does not know when a decision will be
announced. On February 18, 1994, acting on a request from Exxon that the
damages amount be tripled, the trial court judge doubled the damages amount and
awarded prejudgment interest, court costs and additional attorneys' fees to
Exxon. The total amount of the judgment, including the previously awarded
attorneys' fees, is $129 million. The company has appealed the February 1994
damages award to the same court in Washington, D.C., as is considering the
appeal of the original verdict. Oral argument in the damages appeal was heard
on March 8, 1995, and the company does not know when a decision will be
announced.
The company's management continues to believe that it has not infringed the
Exxon patent and that the patent is invalid. Based on the advice of legal
counsel, management believes that the December 1992 trial court judgment will
not be upheld on appeal.
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, 1994.
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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, 1995.
Name Business Experience
---- -------------------
L. E. Coleman Dr. Coleman, age 64, has been Chairman of the Board
since 1982. He has been Chief Executive
Officer since 1978.
W. G. Bares Mr. Bares, age 53, was elected President in 1982 and
Chief Operating Officer in 1987.
R. A. Andreas Mr. Andreas, age 50, has been Vice President and Chief
Financial Officer since June 1990. From 1983
to 1990 he was Corporate Controller.
J. W. Bauer Mr. Bauer, age 41, became Vice President and General
Counsel in April 1992, after serving as General
Counsel from August 1991. From 1989 to 1991, he was
Corporate Counsel - Litigation.
J. G. Bulger Mr. Bulger, age 59, holds the position of Vice
President - Sales and was named Vice President in
September 1993. From 1989 to 1993, he was Senior
Vice President - Sales for Lubrizol Petroleum
Chemicals Company.
S. A. Di Biase Dr. Di Biase, age 42, is Vice President - Research
and Development and has been Vice President since
September 1993. From 1990 to September 1993, he
was Director of Strategic Research. During 1989
through 1990, he was Manager of Industrial Technology.
G. R. Hill Dr. Hill, age 53, became Senior Vice President -
Business Development in October 1993 and was named
Senior Vice President in 1988.
J. E. Hodge Mr. Hodge, age 52, is Vice President - Operations
and was named Vice President in September 1993.
During 1989 through 1993, he was General Manager
- Deer Park/Bayport Plants.
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Name Business Experience
---- -------------------
K. H. Hopping Mr. Hopping, age 48, became Vice President and
Secretary of the Corporation in April 1991 after
serving as Senior Vice President - Marketing and
Product Development for Lubrizol Petroleum
Chemicals Company from 1988 to 1991.
R. Y. K. Hsu Dr. Hsu, age 67, was named Counselor to the Chairman
in 1992, upon reaching the mandatory retirement
age for elected officers. From 1982 to 1992, he
was Senior Vice President.
W. R. Jones Mr. Jones, age 52, has been Treasurer since 1980.
S. F. Kirk Mr. Kirk, age 45, holds the position of Vice
President - Segment Management and was named Vice
President in September 1993. From January 1991 to
1993, he was Senior Vice President - Marketing
and Technology for Lubrizol Petroleum Chemicals
Company. During 1989 through January 1991, Mr. Kirk
was General Manager - North American Sales for
Lubrizol Petroleum Chemicals Company.
Y. Le Couedic Mr. Le Couedic, age 47, is Vice President - Management
Information Systems and became Vice President
in September 1993. From 1991 to 1993, he was Division
Head - Corporate R&D - Administrative Services. From
September 1989 to August 1991 he was Administrative
Manager for the Hazelwood, U.K. Laboratory.
G. P. Lieb Mr. Lieb, age 42, 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. During 1989 to October 1991, Mr. Lieb
was Manager of Accounting and Financial Reporting.
M. W. Meister Mr. Meister, age 40, is Vice President - Human
Resources and was named Vice President in April 1993.
From November 1992 to April 1993, he was General
Manager - Human Resources. During 1989 to 1992, he
was Director - Human Resources for Agrigenetics Company.
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Name Business Experience
---- -------------------
D. A. Muskat Mr. Muskat, age 55, was named Operations Manager in
August 1993. From September 1989 to August 1993
he was Vice President - Operations for Lubrizol
Petroleum Chemicals Company.
J. A. Thomas Mr. Thomas, age 56, is Vice President - Corporate
Planning and Development and was named Vice
President in April 1994. From December 1990 to
April 1994, he was General Manager - Sales for Asia
Pacific, Latin America and the Middle East. From
1986 through 1990, Mr. Thomas was Sales Manager -
Asia Pacific.
<FN>
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 6,427 as of March 3, 1995.
Information relating to the recent price and dividend history
of the company's Common Shares follows:
Common Share Price History
-------------------------- Dividends
1994 1993 Per Common Share
---- ---- ----------------
High Low High Low 1994 1993
---- --- ---- --- ---- ----
1st quarter $38 5/8 $32 1/8 $31 1/4 $26 5/8 $ .22 $ .21
2nd quarter 36 7/8 33 1/8 34 1/2 28 7/8 .22 .21
3rd quarter 36 1/2 29 7/8 36 29 .22 .21
4th quarter 34 28 1/2 36 3/8 30 3/4 .23 .22
----- -----
$ .89 $ .85
===== =====
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 1994 Annual Report to its shareholders is incorporated herein by
reference. Other income for 1994 and 1993 includes $41.2 million and $42.4
million respectively for the gain on sale of Genentech, and 1993 includes a
special charge of $86.3 million (see Note 17). Included in other income for
1990 is $101.9 million for the gain on sale of Genentech.
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 contained on pages 20 through 24, inclusive, of the
company's 1994 Annual Report to its shareholders is incorporated herein by
reference.
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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 24 through 36, inclusive, of the company's 1994 Annual
Report to its shareholders, and the Quarterly Financial Data (Unaudited)
contained on page 37 of such 1994 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, and under "Filings Under Section 16(a)
of the Securities Exchange Act of 1934" on pages 18 and 19 of the company's
Proxy Statement dated March 15, 1995, is incorporated herein by reference.
Information relative to executive officers of the company is contained under
Part I of this Annual Report on Form 10-K.
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 9 through 12 (through "Stock
Option Plans"), inclusive, and under "Employee and Executive Officer Benefit
Plans - Pension Plans" and "- Executive Agreements" on pages 15 through 18,
inclusive, of the company's Proxy Statement dated March 15, 1995, 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 and Management and Certain
Beneficial Owners" on pages 7 and 8 of the company's Proxy Statement dated
March 15, 1995, 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 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 24 through 36,
inclusive, of Lubrizol's 1994 Annual Report to its
shareholders and incorporated herein by reference:
Independent Auditors' Report
Consolidated Statements of Income for the years ended
December 31, 1994, 1993 and 1992
Consolidated Balance Sheets at December 31, 1994 and
1993
Consolidated Statements of Cash Flows for the years
ended December 31, 1994, 1993 and 1992
Consolidated Statements of Shareholders' Equity for
the years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
Quarterly Financial Data (Unaudited)
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) Article Fourth of Amended Articles of
Incorporation. (Referenceis made to Exhibit
(4)(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.)
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16
(4)(b) The company agrees, upon request, to furnish
to the Securities and Exchange Commission
copies of financial documents evidencing
long-term debt, which debt does not exceed 10% of
the total assets of the company and its
subsidiaries on a consolidated basis.
(4)(c) Rights Agreement between The Lubrizol Corporation
and National City Bank dated October 6, 1987.
(Reference is made to Exhibit (4)(c) 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)(d) Amendment to Rights Agreement dated October
6, 1987, between The Lubrizol Corporation and
National City Bank, effective October 24, 1988.
(Reference is made to Exhibit (4)(d) to The
Lubrizol Corporation's Annual Report on Form
10-K for the year ended December 31, 1993, which
Exhibit is incorporated by reference.)
(4)(e) Special Rights Agreement between The Lubrizol
Corporation and National City Bank dated October
31, 1988. (Reference is made to Exhibit (4)(e)
to The Lubrizol Corporation's Annual Report on
Form 10-K for the year ended December 31, 1993,
which Exhibit is incorporated by reference.)
(4)(f) Amendment No. 2 to Rights Agreement dated
October 6, 1987, as amended, between The
Lubrizol Corporation and National City Bank,
effective October 28, 1991. (Reference is made
to Exhibit (4)(f) to The Lubrizol Corporation's
Annual Report on Form 10-K for the year ended
December 31, 1993, which Exhibit is incorporated
by reference.)
(4)(g) Amendment No. 1 to Special Rights Agreement
dated October 31, 1988, between The Lubrizol
Corporation and National City Bank, effective
October 28, 1991. (Reference is made to Exhibit
(4)(g) to The Lubrizol Corporation's Annual
Report on Form 10-K for the year ended December
31, 1993, which Exhibit is incorporated by
reference.)
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17
(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
by reference.)
(10)(b)* The Lubrizol Corporation Amended Deferred
Compensation Plan for Directors.
(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 by reference.)
(10)(d)* The Lubrizol Corporation Excess Defined Benefit
Plan, as amended.
(10)(e)* The Lubrizol Corporation Excess Defined
Contribution Plan, as amended.
(10)(f)* The Lubrizol Corporation Variable Award Plan.
(Reference is made to Exhibit (10)(h) to The
Lubrizol Corporation's Annual Report on Form 10-K
for the year ended December 31, 1993, which
Exhibit is incorporated by reference.)
(10)(g)* The Lubrizol Corporation Executive Death
Benefit Plan, 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, 1993, which Exhibit is
incorporated by reference.)
(10)(h)* Amendment No. 1 to the Amended and Restated
Severance Agreement between The Lubrizol
Corporation and Dr. R.Y.K. Hsu. (Reference is
made to Exhibit (10)(k) to The Lubrizol
Corporation's Annual Report on Form 10-K for the
year ended December 31, 1990, which Exhibit
is incorporated herein by reference.)
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18
(10)(i)* Employment and Consulting Agreement dated
February 23, 1987, between The Lubrizol
Corporation and Dr. R.Y.K. Hsu with Amendment
dated December 28, 1989. (Reference is made
to Exhibit (10)(l) to The Lubrizol
Corporation's Annual Report on Form 10-K for the
year ended December 31, 1990, which Exhibit is
incorporated herein by reference.)
(10)(j)* The Lubrizol Corporation 1991 Stock
Incentive Plan, as amended. (Reference is
made to Exhibit (10)(l) to The Lubrizol
Corporation's Annual Report on Form 10-K for the
year ended December 31, 1993, which Exhibit is
incorporated by reference.)
(10)(k)* The Lubrizol Corporation Deferred Stock
Compensation Plan for Outside Directors.
(Reference is made to Exhibit (10)(m) to The
Lubrizol Corporation's Annual Report on Form 10-K
for the year ended December 31, 1993, which
Exhibit is incorporated by reference.)
(10)(l)* Amendment to Employment and Consulting Agreement
dated October 1, 1992, between The Lubrizol
Corporation and Dr. R.Y.K. Hsu. (Reference is
made to Exhibit (10)(q) to The Lubrizol
Corporation's Annual Report on Form 10-K for the
year ended December 31, 1992, which Exhibit is
incorporated herein by reference.)
(10)(m)* The Lubrizol Corporation Officers'
Supplemental Retirement Plan, as amended.
(10)(n)* The Lubrizol Corporation Deferred Compensation
Plan for Officers.
(10)(o)* The Lubrizol Corporation International
Retirement Plan, as amended.
(11) Statement setting forth computation of per share
earnings.
(12) Computation of Ratio of Earnings to Fixed Charges
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19
(13) The following portions of The Lubrizol
Corporation 1994 Annual Report to its
shareholders:
Pages 20-24 Management's Discussion and Analysis
of Financial Condition and Results of
Operations
Page 24 Independent Auditors' Report
Page 25 Consolidated Statements of Income
for the years ended December 31,
1994, 1993 and 1992
Page 26 Consolidated Balance Sheets at
December 31, 1994 and 1993
Page 27 Consolidated Statements of Cash
Flows for the years ended December
31, 1994, 1993 and 1992
Page 28 Consolidated Statements of
Shareholders' Equity for the years
ended December 31, 1994, 1993 and
1992
Pages 29-36 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
*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, 1994.
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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 27, 1995, on its behalf by the undersigned, thereunto duly
authorized.
THE LUBRIZOL CORPORATION
BY /s/L. E. Coleman
----------------------------------
L. E. Coleman, Chairman of the
Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below on March 27, 1995, by the following
persons on behalf of the Registrant and in the capacities indicated.
/s/L. E. Coleman Chairman of the Board and Chief
------------------------- Executive Officer and Director
L. E. Coleman (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 (Principal Accounting
G. P. Lieb Officer)
/s/W. G. Bares President, Chief Operating Officer
------------------------- and Director
W. G. Bares
/s/Edward F. Bell Director
-------------------------
Edward F. Bell
/s/Peggy G. Elliott Director
-------------------------
Peggy G. Elliott
/s/David H. Hoag Director
-------------------------
David H. Hoag
/s/Thomas C. MacAvoy Director
-------------------------
Thomas C. MacAvoy
/s/William P. Madar Director
-------------------------
William P. Madar
/s/Richard A. Miller Director
-------------------------
Richard A. Miller
/s/Ronald A. Mitsch Director
-------------------------
Ronald A. Mitsch
/s/Renold D. Thompson Director
-------------------------
Renold D. Thompson
/s/Karl E. Ware Director
-------------------------
Karl E. Ware
21
EXHIBIT INDEX
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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) Article Fourth of Amended Articles of Incorporation.
(Reference is made to Exhibit (4)(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.)
(4)(b) The company agrees, upon request, to furnish to the
Securities and Exchange Commission copies of financial
documents evidencing long-term debt, which debt does not
exceed 10% of the total assets of the company and its
subsidiaries on a consolidated basis.
(4)(c) Rights Agreement between The Lubrizol Corporation and
National City Bank dated October 6, 1987. (Reference
is made to Exhibit (4)(c) 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)(d) Amendment to Rights Agreement dated October 6, 1987,
between The Lubrizol Corporation and National City Bank,
effective October 24, 1988. (Reference is made to Exhibit
(4)(d) to The Lubrizol Corporation's Annual Report on Form
10-K for the year ended December 31, 1993, which Exhibit is
incorporated by reference.)
(4)(e) Special Rights Agreement between The Lubrizol Corporation
and National City Bank dated October 31, 1988.
(Reference is made to Exhibit (4)(e) to The Lubrizol
Corporation's Annual Report on Form 10-K for the year
ended December 31, 1993, which Exhibit is incorporated by
reference.)
(4)(f) Amendment No. 2 to Rights Agreement dated October 6, 1987,
as amended, between The Lubrizol Corporation and
National City Bank, effective October 28, 1991.
(Reference is made to Exhibit (4)(f) to The Lubrizol
Corporation's Annual Report on Form 10-K for the year ended
December 31, 1993, which Exhibit is incorporated by
reference.)
(4)(g) Amendment No. 1 to Special Rights Agreement dated October
31, 1988, between The Lubrizol Corporation and National
City Bank, effective October 28, 1991. (Reference is
made to Exhibit (4)(g) to The Lubrizol Corporation's Annual
Report on Form 10-K for the year ended December 31, 1993,
which Exhibit is incorporated 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
by reference.)
22
(10)(b) The Lubrizol Corporation Amended Deferred Compensation Plan
for Directors.
(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 by
reference.)
(10)(d) The Lubrizol Corporation Excess Defined Benefit Plan, as
amended.
(10)(e) The Lubrizol Corporation Excess Defined Contribution Plan, as
amended.
(10)(f) The Lubrizol Corporation Variable Award Plan.
(Reference is made to Exhibit (10)(h) to The Lubrizol
Corporation's Annual Report on Form 10-K for the year ended
December 31, 1993, which Exhibit is incorporated by
reference.)
(10)(g) The Lubrizol Corporation Executive Death Benefit Plan, 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, 1993, which Exhibit is incorporated
by reference.)
(10)(h) Amendment No. 1 to the Amended and Restated Severance
Agreement between The Lubrizol Corporation and Dr. R.Y.K.
Hsu. (Reference is made to Exhibit (10)(k) to The Lubrizol
Corporation's Annual Report on Form 10-K for the year
ended December 31, 1990, which Exhibit is incorporated herein
by reference.)
(10)(i) Employment and Consulting Agreement dated February 23,
1987, between The Lubrizol Corporation and Dr. R.Y.K. Hsu
with Amendment dated December 28, 1989. (Reference is made
to Exhibit (10)(l) to The Lubrizol Corporation's Annual
Report on Form 10-K for the year ended December 31, 1990,
which Exhibit is incorporated herein by reference.)
(10)(j) The Lubrizol Corporation 1991 Stock Incentive Plan, as
amended. (Reference is made to Exhibit (10)(l) to The
Lubrizol Corporation's Annual Report on Form 10-K for the
year ended December 31, 1993, which Exhibit is incorporated
by reference.)
(10)(k) The Lubrizol Corporation Deferred Stock Compensation Plan
for Outside Directors. (Reference is made to Exhibit
(10)(m) to The Lubrizol Corporation's Annual Report on Form
10-K for the year ended December 31, 1993, which Exhibit is
incorporated by reference.)
(10)(l) Amendment to Employment and Consulting Agreement dated
October 1, 1992, between The Lubrizol Corporation and Dr.
R.Y.K. Hsu. (Reference is made to Exhibit (10)(q) to The
Lubrizol Corporation's Annual Report on Form 10-K for the
year ended December 31, 1992, which Exhibit is incorporated
herein by reference.)
(10)(m) The Lubrizol Corporation Officers' Supplemental Retirement
Plan, as amended.
(10)(n) The Lubrizol Corporation Deferred Compensation Plan for
Officers.
(10)(o) The Lubrizol Corporation International Retirement Plan, as
amended.
23
(11) Statement setting forth computation of per share earnings.
(12) Computation of Ratio of Earnings to Fixed Charges
(13) The following portions of The Lubrizol Corporation 1994
Annual Report to its shareholders:
Pages 20-24 Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 24 Independent Auditors' Report
Page 25 Consolidated Statements of Income for the
years ended December 31, 1994, 1993 and 1992
Page 26 Consolidated Balance Sheets at December 31, 1994
and 1993
Page 27 Consolidated Statements of Cash Flows for the
years ended December 31, 1994, 1993 and 1992
Page 28 Consolidated Statements of Shareholders'
Equity for the years ended December 31, 1994,
1993 and 1992
Pages 29-36 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