Item 1. Business Engelhard Corporation and its Subsidiaries (collectively referred to as the Company) are the successors to the businesses previously operated by Engelhard Minerals & Chemicals Corporation (EMC) through its Engelhard Industries and Minerals & Chemicals Divisions. In 1981, the Company's Common Stock was distributed, as a spin-off, to the shareholders of EMC, and the Company became a separate, publicly-held corporation. The Company's principal executive offices are located at 101 Wood Avenue, Iselin, New Jersey, 08830 (telephone number (908) 205-5000).
The Company develops, manufactures and markets technology-based specialty chemical products and engineered materials for a wide spectrum of industrial customers and provides services to precious metals customers.
The Company recently announced a plan to realign and consolidate businesses, concentrate resources and better position itself to achieve its strategic growth objectives. See Note 2 "Special charge" to the Consolidated Financial Statements on page 30 of the 1993 Annual Report to Shareholders. This plan resulted in a special charge of $148.0 million ($91.8 million after tax or $.95 per share) which covered a $118.0 million pretax restructure provision for asset writedowns related to product lines or sites being exited together with provisions for facility shutdown, rundown and relocation and for employee reassignment, severance and related benefits and a $30.0 million pretax environmental reserve for sites directly affected by this plan and for the most recent assessment of continuing environmental developments.
The plan provides for the closure, relocation or consolidation of five facilities in the U.S. and two sites in Europe currently operated by the Chemical Catalysts and Engineerd Materials Groups. These actions are being taken to ensure that certain product lines stay competitive despite changing market conditions. Further, the plan covers one Specialty Minerals and Colors facility in the U.S. which will be rationalized or idled. The Company expects that these restructuring activities will impact approximately 600 employees. The plan also provides for assets of the Petroleum Catalysts, Paper Pigments and Chemicals and Specialty Minerals and Colors Groups which will become obsolete as a result of the development of new production processes and the reconfiguration of existing production processes or because certain product lines have become uneconomic. A special team has been designated by the Management Committee of the Company to implement the changes and programs contemplated by this plan within the year 1994.
The Company employed approximately 5,750 people as of January 1, 1994 and operates on a worldwide basis with corporate and operating headquarters and principal manufacturing facilities and mineral reserves in the United States with other operations conducted in the European Community, the Russian Federation and the Pacific Rim.
The Company's businesses are organized into three segments -Catalysts and Chemicals, Pigments and Additives, and Engineered Materials and Precious Metals Management.
Information concerning the Company's net sales, operating earnings and identifiable assets by industry segment and by geographic area; inter-area transfers by geographic area; and export sales is included in Note 13 "Industry segment and geographic area data" to the Consolidated Financial Statements on pages 37 and 38 of the 1993 Annual Report to Shareholders and is incorporated herein by reference. Catalysts and Chemicals The Catalysts and Chemicals segment is comprised of three principal product groups: the Environmental Catalysts Group, serving the automotive, off-road vehicle, aircraft, industrial power generation and process industries; the Petroleum Catalysts Group, serving the petroleum refining industries; and the Chemical Catalysts Group, serving the chemical, petrochemical, pharmaceutical and food processing industries.
Environmental catalysts are used in applications such as the abatement of carbon monoxide, oxides of nitrogen and hydrocarbons from gasoline, diesel and alternate fueled vehicle exhaust gases to meet emission control standards. These catalysts are also used for the removal of odors, fumes and pollutants generated by a variety of process industries including but not limited to the painting of automobiles, appliances and other equipment; printing processes; the manufacture of nitric acid and tires, in the curing of polymers; and power generation sources.
The Company also participates in the manufacture and supply of automobile exhaust emissions control catalysts through affiliates serving the Pacific Rim: N.E. Chemcat Corporation (Japan) - 38.8 percent owned; and Hankuk- Engelhard (South Korea) - 49 percent owned, both of which also produce other catalysts and products. In the third quarter of 1992, the Company and Salem Industries, Inc., formed Salem Engelhard, a jointly owned partnership to produce and market products and services to abate, by catalytic and non- catalytic methods, emissions of volatile organic chemicals and other pollutants generated by a variety of process industries.
The petroleum refining catalyst products consist of a variety of catalysts and processes used in the petroleum refining industry. The principal products are zeolitic fluid cracking catalysts which are widely used to provide economies in petroleum processing. The Company offers commercially a full line of fluid cracking catalyst based on patented technology including the DYNAMICS (registered trademark) line which can be used to control selectivity and cracking activity virtually independently of one another. This characteristic permits custom catalysts formulation for essentially all users.
The Company manufactures petroleum catalysts used for catalytic reforming and isomerization of hydrocarbons to produce higher octane gasoline, for isomerization of xylenes to produce paraxylene and orthoxylene and for selective hydrogenation of alkylation feed stocks. The Company also manufactures hydrotreating catalysts which are used in viscosity improvement and aromatics saturation of lube oil feedstocks and for the removal of contaminant sulfur, nitrogen and metals. These reforming, isomerization and hydrotreating catalysts are marketed in North America and the Caribbean by Acreon Catalysts, a jointly owned partnership formed by the Company and Procatalyse. Process technologies developed by the Company are also offered for license to the petroleum industry.
In March 1994, the Company completed its purchase of the assets of the sorbents and moving bed catalysts businesses of Solvay Catalysts, GmbH, in Nienburg Germany. This acquisition expands the Company's moving bed catalysts business and provides complementary product lines serving adsorbents applications.
The chemical catalysts products consist of catalysts and sorbents used in the production of a variety of products or intermediates, including synthetic fibers, fragrances, antibiotics, vitamins, polymers, plastics, detergents, fuels and lube oils, solvents, oleochemicals and edible products. These catalysts are generally used in both batch and continuous operations requiring special catalysts for each application. Chemical catalysts utilize the Company's proprietary technology and many times are developed in close cooperation with specific customers. Sorbents are used to purify and decolorize naturally occurring fats and oils for manufacture into shortenings, margarines and cooking oils.
In early 1994, the Company and ICC Technologies, Inc. formed Engelhard/ICC, a jointly owned partnership, to develop and commercialize air conditioning and air-treatment systems based on a proprietary new desiccant developed by Engelhard. The partnership will market these systems worldwide.
The products of the Catalysts and Chemicals segment compete in the marketplace on the basis of product performance, technical service and price. No single competitor is dominant in the markets in which the Company operates.
The manufacturing operations of the Catalysts and Chemicals segment are carried out in seven states in the United States. Wholly-owned foreign facilities are located in Italy, The Netherlands, Germany and the United Kingdom with equity investments located in the U.S., Japan and South Korea. The products are sold principally through the Company's sales organizations or its equity investments, supplemented by independent distributors and representatives.
The principal raw materials used by the Catalysts and Chemicals segment include precious metals, procured by the Engineered Materials and Precious Metals Management Segment; kaolin, supplied by the Pigments and Additives Segment; and a variety of minerals and chemicals which are generally readily available.
As of January 1, 1994 the Catalysts and Chemicals segment had approximately 1,860 employees worldwide, many of whom are hourly employees covered by collective bargaining agreements. Employee relations have generally been good.
Pigments and Additives
The Pigments and Additives segment is comprised of two principal product groups: the Paper Pigments and Chemicals Group, serving the paper industry and the Specialty Minerals and Colors Group, serving the plastics, coatings, paint and allied industries.
Paper pigments and chemicals products consist primarily of coating and extender pigments. The coating pigments provide whiteness, opacity and improved printing properties for high-quality paper and paperboard. Other products are used as extenders and/or combined with fibers during the manufacture of paper or paperboard. Products for the paper market include Ultra White 90 (registered trademark) pigment, a high-brightness material for high-quality paper coating; Ansilex (registered trademark) pigments that provide the desired opacity, brightness, gloss and printability in paper products; Nuclay (registered trademark) specialized coating pigment for lightweight publication papers; EXSILON (trademark) structured pigment that improves the printability of lightweight coated paper and carbonless forms; and Spectrafil (trademark) pigments for the newsprint and groundwood specialties markets.
Specialty minerals and colors kaolin based products are used as pigments and extenders for a variety of purposes in the manufacture of plastic, rubber, ink, ceramic, adhesive products and in paint. Principal products include Satintone (registered trademark) products, ASP (registered trademark) pigments and Translink (registered trademark) surface modified reinforcements. Other specialty minerals and colors products which serve essentially the same end markets as the Company's kaolin-based pigments and extenders comprise a variety of organic and inorganic color pigments. The Group also produces gellants and sorbents for a wide range of applications.
The products of the Pigments and Additives segment compete with similar products as well as products made from other materials on the basis of product performance and price. No single competitor is dominant in the markets in which the Company operates.
Pigments and Additives operations are carried out in four states in the United States and in Finland. The products are sold principally through the Company's sales organization supplemented by independent distributors and representatives.
The principal raw materials used by the Pigments and Additives segment include kaolin and attapulgite from mineral reserves owned or leased by the Company and a variety of minerals and chemicals which are generally readily available.
As of January 1, 1994 the Pigments and Additives segment had approximately 1,840 employees worldwide, many of whom are hourly employees covered by collective bargaining agreements. Employee relations have generally been good.
Engineered Materials and Precious Metals Management
The Engineered Materials and Precious Metals Management segment includes the Engineered Materials Group, serving a broad spectrum of industries and the Precious Metals Management Group, which is responsible for precious metals sourcing and dealing and for managing the precious metals requirements of the Company and its customers.
The products of the Engineered Materials Group consist primarily of metal- based materials such as temperature-sensing devices, crucibles, bushings, gauze, precious metals coating and electroplating materials, conductive pastes and powders, brazing alloys and precious metal wire, sheet, and tubing. These products are used in the manufacture of automotive components, industrial devices, glass and glass fiber, ceramics, chemicals, instruments, control devices, fine jewelry, dental and medical supplies, hardware, furniture and air conditioners. The Group also provides refining services to internal and external customers.
The products of the Engineered Materials Group compete with similar products as well as products made from other materials on the basis of product performance, technical service and price. No single competitor is dominant in the markets in which the Company operates.
Engineered Materials manufacturing and refining operations are carried out in four states in the United States and in facilities located in the United Kingdom, France and Italy. The products are sold principally through the Company's sales organization, supplemented by independent distributors and representatives.
The principal raw materials used by these operations are precious metals including those of the platinum group (platinum, palladium, rhodium, iridium and ruthenium), silver and gold, all of which are generally available.
In January, 1993 the Company sold its 40 percent interest in M&T Harshaw, an affiliate through which the Company had participated in the base metal plating industry. In the fourth quarter of 1992, the Company formed Heraeus Engelhard Electrochemistry Corp., a venture with Heraeus Inc. The venture, 46 percent owned, markets electrochemical products in the Western Hemisphere.
The Precious Metals Management Group is responsible for procuring precious metals requirements of the Company's operations and its customers. Supplies of newly mined platinum group metals are obtained primarily from South Africa and the Russian Federation and to a lesser extent from the United States and Canada, which four regions are the only known significant sources. Most of these platinum group metals are obtained pursuant to a number of contractual arrangements with different durations and terms. Management believes that available supplies of such metals will be adequate to meet the needs of the Company for the foreseeable future. Gold and silver are purchased from various sources. In addition, in the normal course of business, certain customers and suppliers deposit significant quantities of precious metals with the Company under a variety of arrangements. Equivalent quantities of precious metals are returnable as product or in other forms.
The Precious Metals Management Group also engages in precious metal dealing operations with industrial consumers, dealers, central banks, miners and refiners. The group does not routinely speculate in the precious metals market. Offices are located in the United States, the United Kingdom, Switzerland, Japan and the Russian Federation.
As of January 1, 1994 the Engineered Materials and Precious Metals Management segment had approximately 1,470 employees throughout the world, many of whom are hourly employees covered by collective bargaining agreements. Employee relations have generally been good.
Major Customer
Approximately 12 percent and 10 percent of the Company's net sales for the years ended December 31, 1992 and 1991, respectively, were generated from a customer of both the Catalysts and Chemicals and Engineered Materials and Precious Metals Management segments. Sales to this customer included both fabricated products and precious metal and were therefore significantly influenced by fluctuations in precious metal prices as well as the quantity of metal purchased. In such cases, the market price fluctuations and quantities purchased can result in material variations in sales reported but do not usually have a direct or substantive effect on earnings.
Research and Patents
The Company currently employs approximately 300 scientists, technicians and auxiliary personnel engaged in research and development in the field of chemistry and metallurgy. These activities are conducted in the United States and abroad. The Company spent approximately $45 million on research and development in each of the last three years.
Research facilities include fully staffed instrument analysis laboratories, which the Company maintains in order to achieve the high level of precision necessary for its various businesses and to assist customers in understanding the performance of Engelhard products in their specific application.
The Company owns or is licensed under numerous patents which have been secured over a period of years. It is the policy of the Company to apply for patents whenever it develops new products or processes considered to be commercially viable and, in appropriate circumstances, to seek licenses when such products or processes are developed by others. While the Company deems its various patents and licenses to be important to certain aspects of its operations, it does not consider any significant portion or its business as a whole to be materially dependent on patent protection.
Environmental Matters
The Company devotes considerable attention to the requirements of environmental compliance. Management believes that compliance programs in effect at all major operations satisfactorily meet the requirements of local, state and federal environmental agencies. However, risks of increased costs and liabilities relating to environmental matters are inherent in certain Company operations, as they are with most other industrial companies. See Note 15 "Environmental costs" in the Notes to the Consolidated Financial Statements on pages 39 and 40 of the 1993 Annual Report to Shareholders.
The Company is preparing, has under review, or is implementing with the oversight of cognizant environmental agencies, studies and cleanup plans at several locations, including Salt Lake City, Utah and Plainville, Massachusetts. In addition, the Company is in the process of implementing a cleanup plan approved by the New Jersey Department of Environmental Protection and Energy for the Company's Newark, New Jersey site. In December 1993 in connection with obtaining its operating permit under the Utah Solid and Hazardous Waste Act, the Company entered into an agreement with the Utah Solid and Hazardous Waste Control Board to assess the environmental status of its Salt Lake facility. With respect to the Plainville site, in September 1993, the United States Environmental Protection Agency (EPA) and the Company entered into a Consent Order under which the Company will conduct stabilization measures and further study contamination at the site. This site is also included on the Nuclear Regulatory Commission's (NRC) "Existing Site Decommissioning Management Plan Sites" list and the NRC has approved the Company's proposed plans for additional investigation of the site and an interior cleanup of the plant.
The Company is currently identified as a potentially responsible party (PRP) at 16 sites by the EPA under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (CERCLA) or by a state or local equivalent under analogous laws. Subject to outstanding state claims or the reopening of existing settlement agreements for extraordinary circumstances or natural resource damages, the Company has settled a number of other cleanup proceedings. In several additional instances, PRPs named by the EPA or its state equivalent have notified or sued the Company claiming that the Company should have been named a PRP and allocated a share of clean-up costs. The Company has also responded to information requests from the EPA at other CERCLA sites. The Company believes it is a de minimis contributor at most of the sites referenced above and that there is no legal or factual basis for the Company's alleged responsibility for any hazardous substances present at certain of these sites.
While it is not possible at this time to predict with certainty the ultimate outcome of all of the matters discussed above, it is the opinion of management, after consultation with counsel and based on existing information, that the resolution of these lawsuits and other matters in the aggregate will not have a material adverse effect on the Company or its business.
Item 2.
Item 2. Properties
The Company owns approximately 15 acres of land and three buildings with a combined area of approximately 168,000 square feet in Iselin, New Jersey. These buildings serve as the major research and development facilities for the Company's operations. The Company also owns a research facility in the Cleveland, Ohio area. In 1990, the Company entered into a 15 year lease for a 271,000 square foot building in Iselin, New Jersey, proximate to its owned facilities, which serves as the principal executive and administrative offices of the Company and its operating segments. This lease provides for three consecutive five-year-period extensions. The building is owned by a partnership in which the Company holds a significant interest.
The Catalysts and Chemicals segment owns and operates a complex of plants in Georgia that manufactures petroleum cracking catalysts, and other domestic plants located in Union, New Jersey; Huntsville, Alabama; Seneca, South Carolina; Little Rock, Arkansas; Elyria, Ohio and Jackson, Mississippi. Foreign manufacturing operations are conducted at owned facilities in Italy, The Netherlands, Germany and the United Kingdom. In addition, the segment owns a mine in Mississippi and leases a mine in Arizona.
The Pigments and Additives segment owns and operates five kaolin mines and five milling facilities in middle Georgia which serve an 85 mile network of pipelines to four processing plants. It also owns land containing kaolin clay and leases, on a long-term basis, kaolin mineral rights to additional acreage. The segment also owns and operates an attapulgite processing plant in Attapulgus, Georgia near the area containing its attapulgite reserves. Management believes that the Company's crude kaolin and attapulgite reserves will be sufficient to meet its needs for the foreseeable future. The segment also owns and operates color pigments manufacturing facilities in Louisville, Kentucky, Sylmar, California and Elyria, Ohio. Foreign operations are conducted at owned facilities in Finland. In addition, the segment owns mines in Florida.
The Engineered Materials and Precious Metals Management segment owns and operates manufacturing facilities in Carteret and East Newark, New Jersey, Anaheim and Fremont, California, Lincoln Park, Michigan and Warwick, Rhode Island. Other manufacturing operations are conducted at owned facilities in the United Kingdom, France and Italy.
The Company announced a plan to realign and consolidate businesses, concentrate resources and better position itself to achieve its strategic growth objectives. (See Item 1 "Business" above and Note 2 "Special charge" in the Notes to the Consolidated Financial Statements on page 30 of the 1993 Annual Report to Shareholders.) Management believes that the resulting configuration will be suitable and have sufficient capacity to meet its normal operating requirements for the foreseeable future.
Item 3.
Item 3. Legal Proceedings
The Company is a defendant in a number of lawsuits covering a wide range of matters. In some of these pending lawsuits, the remedies sought or damages claimed are substantial. The Company has also received a demand for indemnification from a distributor of the Company's talc products. The Company is vigorously defending against these claims. See also "Environmental Matters" for a discussion about lawsuits and matters concerning environmental compliance. While it is not possible at this time to predict with certainty the ultimate outcome of these lawsuits or the resolution of the environmental contingencies, it is the opinion of management, after consultation with counsel and based on available information that the disposition of these matters should not have a material adverse effect on the Company or its business. Submission of Matters to a Vote of Item 4.
Item 4. Participating Employees
At December 31, 1993, there were approximately 2,127 employees participating in the Plan.
Item 5.
Item 5. Administration of the Plan
(a) The Plan is administered by the Pension and Employee Benefit Plans Committee of the Company (the Committee), the members of which are appointed by the Company to serve until their successors are appointed or until death, resignation or removal. The Committee has full power to determine questions relating to the eligibility of employees to participate in the Plan, to interpret the provisions of the Plan and to adopt regulations for its administration. Any or all members of the Committee who are employees of the Company may be participants in the Plan.
The current members of the Committee and their addresses are as follows:
James V. Napier 3343 Peachtree Road Chairman of the Committee and East Tower Director of the Company - Suite 1420 Atlanta, GA 30326
Marion H. Antonini 225 High Ridge Road Director of the Company Stamford, CT 06905
Robert L. Guyett Engelhard Corporation Senior Vice President, 101 Wood Avenue Chief Financial Officer and Iselin, NJ 08830 Director of the Company
L. Donald LaTorre Engelhard Corporation Senior Vice President, 101 Wood Avenue Chief Operating Officer Iselin, NJ 08830 and Director of the Company
Gerald E. Munera One DTC Director of the Company 5251 DTC Parkway Suite 700 Englewood, CO 80111
Norma T. Pace 100 East 42nd Street Director of the Company New York, NY 10017
Reuben F. Richards 250 Park Avenue Chairman of the Board, New York, NY 10177 Director of the Company
Orin R. Smith Engelhard Corporation President, Chief Executive 101 Wood Avenue Officer and Director of Iselin, NJ 08830 the Company
(b) All expenses of the Plan incidental to its administration are paid by the Company. Effective January 1, 1994, certain administrative fees and brokerage commissions will be charged against each participant's fund unit value.
Item 6.
Item 6. Custodian of Investments (a) The Committee has appointed Vanguard Fiduciary Trust Company, P.O. Box 1101 Vanguard Financial Center, Valley Forge, Pennsylvania 19482, as independent Plan Trustee. The Trustee and the Company have entered into a trust agreement setting forth the Trustee's responsibilities under the Plan including maintaining custody of the Plan's investments and records of accounts for participants.
(b) The Trustee receives no compensation from the Plan.
(c) Vanguard Fiduciary Trust Company meets certain ERISA financial criteria and the Company is not required to secure or provide bonds as evidence of financial guarantee.
Item 7.
Item 7. Reports of Participating Employees During each quarter of the plan year, each participant receives an individual participant statement disclosing the status of his or her account during the preceding quarter.
Item 8.
Item 8. Investment of Funds The Company pays brokerage commissions only on investments in Engelhard Corporation common stock.
Page Item 9.
Item 9. Financial Statements and Exhibits No.
(a) Financial Statements
Report of Independent Public Accountants 103
Statements of Financial Condition 104 - 105 at December 31, 1993 and 1992
Statements of Income and Changes in Plan Equity 106 - 108 for the three years in the period ended December 31, 1993 Notes to Financial Statements 109 - 112
Supplemental Schedule 113 - 114 Schedule I
Schedules II and III have been omitted because the required information is shown in the financial statements or the notes thereto.
(b) Exhibits Engelhard Corporation Savings Plan for Hourly * Paid Employees (incorporated by reference to the Engelhard Corporation Registration Statement on Form S-8 dated September 6, 1990).
First, Second, Third, and Fourth Amendments * to the Engelhard Corporation Savings Plan for Hourly Paid Employees (Incorporated by reference to the Engelhard Corporation Annual Report Form 10-K for the fiscal year ended December 31, 1992).
Fifth, Sixth and Seventh Amendments to the 115 - 118 Engelhard Corporation Savings Plan for Hourly Paid Employees.
* Incorporated by reference as indicated
Report of Independent Public Accountants
To the Pension and Employee Benefit Plans Committee of Engelhard Corporation:
We have audited the financial statements and the financial statement schedule of the Engelhard Corporation Savings Plan for Hourly Paid Employees listed in the index on Page 129 of this Form 11-K. These financial statements and the financial statement schedule are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audit.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Engelhard Corporation Savings Plan for Hourly Paid Employees as of December 31, 1993 and 1992, and the results of its operations for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.
COOPERS & LYBRAND
New York, New York March 24, 1994
See Accompanying Notes to Financial Statements
Engelhard Corporation Savings Plan for Hourly Paid Employees Statement of Financial Condition at December 31, 1992
See Accompanying Notes to Financial Statements
Engelhard Corporation Savings Plan for Hourly Paid Employees Statement of Income and Changes in Plan Equity for the year ended December 31, 1993
See Accompanying Notes to Financial Statements
Engelhard Corporation Savings Plan for Hourly Paid Employees Statement of Income and Changes in Plan Equity for the year ended December 31, 1992
See Accompanying Notes to Financial Statements
Engelhard Corporation Savings Plan for Hourly Paid Employees Statement of Income and Changes in Plan Equity for the year ended December 31, 1991
Notes to Financial Statements
Note 1 - Description of the Plan
The Engelhard Corporation Savings Plan for Hourly Paid Employees (the Plan), effective as of January, 1991, is designed to provide eligible employees of Engelhard Corporation (the Company) an opportunity to save part of their income by having the Company reduce their compensation and contribute the amount of the reduction to the Plan on a tax deferred basis.
The following plan description is provided for general information purposes. Participants of the Plan should refer to the plan document for more detailed and complete information.
Eligibility Except as specifically included or excluded by the Board of Directors of the Company (the Board), the hourly paid employees of Engelhard Corporation represented by Locals 223, 237 and 238, Independent Workers of North America, Locals 1668, 1668A and 1668B of the United Automobile Workers, Local 170 of the United Steelworkers of America, and, as of January 1, 1994, Local 8-406 of the Oil, Chemical and Atomic Workers International Union who have completed at least one year of service, as defined, are eligible to participate in the Plan as of the first day of the month in which they meet the year of service requirement.
Contributions The Plan permits eligible employees participating in the Plan (the Participants) to elect to reduce their compensation, as defined, by a whole percentage thereof, subject to limitations, and to have that amount contributed to the Plan and the related taxes deferred.
Matching Contributions The Company will contribute, on a monthly basis and subject to limitations and exclusions, either cash or common stock of the Company in an amount equal to 10 percent of the amount contributed by the Participants.
Investments All contributions to the Plan are held and invested by Vanguard Fiduciary Trust Company (the Trustee). The Trustee maintains four separate investment funds within the Trust:
a) The Company Stock Fund, which consists of assets invested or held for investment in the common stock of the Company. In the event the assets cannot be immediately invested in Company common stock, the funds are invested in short- term securities pending investments in Company common stock.
b) The Fixed Income Fund, which consists of assets invested in shares of the Vanguard Variable Rate Investment Contract Trust. In the event the assets cannot be immediately invested in such shares or deposited as specified above, the assets are invested in short-term investments at the discretion of the Pension and Employee Benefit Plans Committee (the Committee).
c) The Balanced Fund, which consists of assets invested in the Vanguard Asset Allocation Fund, which invests in stocks, bonds and cash reserves for the purpose of maximizing long- term total return with less volatility than a portfolio of common stock.
d) The Equity Index Fund, which consists of assets invested in the Vanguard Quantitative Portfolio, which invests primarily in common stocks for the purpose of realizing a total return greater than the Standard & Poor's 500 Index while maintaining fundamental investment characteristics similar to such Index.
Participants have the right to elect, subject to restrictions, in which investment fund or funds their contributions are invested. All matching contributions are invested in the Company Stock Fund.
The number of Participants in each fund was as follows at December 31:
Participants 1993 1992 --------- ---------
Common Stock Fund 599 462 Fixed Income Fund 396 342 Balanced Fund 136 104 Equity Index Fund 145 118
The total number of Participants in the Plan was less than the sum of the number of Participants shown above because many were participating in more than one fund.
The number of units representing Participant interests in each fund and the related net asset value per unit were as follows at December 31:
Vesting Participants at all times have a fully vested and non-forfeitable interest in their contributions and in the matching contributions allocated to their account.
Termination Although it expects and intends to continue the Plan indefinitely, the Company has reserved the right of the Board to terminate or amend the Plan.
Distributions and Withdrawals All distributions and withdrawals from the Plan are made to Participants in a lump sum cash payment except those amounts distributed from the Company Stock Fund which may, at the Participant's election, be paid in full shares of the Company's Common Stock with cash paid in lieu of fractional shares.
Note 2 - Accounting Policies
The accounts of the Plan are maintained on an accrual basis. Purchases and sales of investments are reflected on a trade date basis. Assets of the Plan are valued at fair value. Gains and losses on distributions to participants and sales of investments are based on average cost. Certain prior year amounts have been reclassified to conform with the current year presentation.
Note 3 - Income Tax Status
The Plan and the Trust created thereunder are intended to qualify under Section 401(a) and 501(a) of the Internal Revenue Code of 1986, as amended (the Code) and the Plan includes a cash or deferred arrangement intended to meet the requirements of Section 401(k) of the Code. The Internal Revenue Service has issued a favorable determination letter as to the Plan's qualified status under the Code. Amounts contributed to and earned by the Plan are not taxed to the employee until a distribution from the Plan is made. In addition, any unrealized appreciation on any shares of common stock of the Company distributed to an employee is not taxed until the time of disposition of such shares.
Note 4 - Administrative Expenses
All expenses of the Plan are paid for by the Company. Investment advisory fees for portfolio management of Vanguard funds are paid directly from fund earnings. Advisory fees are included in the fund expense ratio and will not reduce the assets of the Plan. Brokerage commissions paid to purchase Engelhard Corporation common stock are paid for by the Company. Effective January 1, 1994, certain administrative fees and brokerage commissions will be charged against each participant's unit value.
Note 5 - Concentrations of Credit Risk
Financial instruments which potentially subject the Plan to concentrations of credit risk consist principally of investment contracts with insurance and other financial institutions. The Plan places its investment contracts with high-credit quality institutions and, by policy, limits the amount of credit exposure to any one financial institutions.
Note 6 - Investments
Investments in the Common Stock of the Company are valued at the readily-available, quoted market price as of the valuation date and investments in the Vanguard Funds are valued based on the quoted net asset value (redemption value) of the respective investment company as of the valuation date.
Schedule I
Engelhard Corporation Savings Plan for Hourly Employees Schedule of Investments at December 31, 1993
Approximate Cost Market Value ---------- -------------
Company Stock Fund - ------------------- Common Stock of $1,096,878 $1,308,182 Engelhard Corporation (53,669 shares)
Cash equivalents 11,824 11,824
Fixed Income Fund - ------------------ Vanguard Variable Rate 1,285,061 1,285,061 Investment Contract Trust
Balanced Fund - -------------- Vanguard Asset Allocation 215,508 224,821 Fund
Equity Index Fund - ------------------ Vanguard Quantitative 256,478 254,653 Portfolio ---------- -------------
Total $2,865,749 $3,084,541 ========== =============
Schedule I
Engelhard Corporation Savings Plan for Hourly Employees Schedule of Investments at December 31, 1992
Approximate Cost Market Value ---------- -------------
Company Stock Fund - ------------------- Common Stock of $ 481,064 $ 686,469 Engelhard Corporation (19,970 shares)
Cash equivalents 3,601 3,601
Fixed Income Fund - ------------------ Vanguard Variable Rate 743,477 743,477 Investment Contract Trust
Balanced Fund - -------------- Vanguard Asset Allocation 109,724 113,823 Fund
Equity Index Fund - ------------------ Vanguard Quantitative 132,316 135,602 Portfolio ---------- ------------- Total $1,470,182 $1,682,972 =========== =============
FIFTH AMENDMENT TO THE ENGELHARD CORPORATION SAVINGS PLAN FOR HOURLY PAID EMPLOYEES
The Engelhard Corporation Savings Plan for Hourly Paid Employees is hereby amended in the following respects, effective as of January 1, 1993:
1. Appendix A to the Plan is amended by adding the following at the end thereof:
"4. Hourly-paid employees of Engelhard Corporation represented by Local 170 of the United Steelworkers of America.
a. Effective Date (Section 1.13).
January 1, 1993.
b. Eligibility Requirement (Section 2.01).
Employees in the employ of the Employer on or before November 24, 1992 are eligible as of the Effective Date; individuals hired after November 24, 1992 are eligible following completion of one year of Eligibility Service.
c. Maximum Deferral Percentage (Section 3.01).
15%
d. Matching Percentage (Section 3.02).
0% -- No Matching Contribution.
e. Investment Funds (Section 5.02).
Fixed Income Fund, Balanced Fund, Equity Index Fund.
f. Withdrawals (Section 7.01). Permitted.
g. Loans (Section 7.04). Not Permitted."
SIXTH AMENDMENT TO THE ENGELHARD CORPORATION SAVINGS PLAN FOR HOURLY PAID EMPLOYEES
The Engelhard Corporation Savings Plan for Hourly Paid Employees is hereb amended in the following respects, effective as of the dates set forth below:
1. Effective as of January 1, 1994, Section 5.03 is amended by adding the following sentence at the end thereof:
"The Trustee shall be obligated to comply with a Participant's instructions as to investment elections made in accordance with this Section 5.03, except as otherwise provided in Department of Labor Regulations S 2550.404c-1(b) (2) (ii) (B) and (d) (2) (ii), and a Participant shall be given an opportunity to obtain written confirmation of telephonic instructions to the Trustee."
2. Effective as of January 1, 1994, Section 5.05 is amended by adding the following sentence at the end thereof:
"The Trustee shall be obligated to comply with a Participant's instructions as to investment elections made in accordance with this Section 5.05, except as otherwise provided in Department of Labor Regulations S 2550.404c-1(b) (2) (ii) (B) and (d) (2) (ii), and a Participant shall be given an opportunity to obtain written confirmation of telephonic instructions to the Trustee."
3. Effective as of August 5, 1993, Section 10.01 is amended by adding at the end thereof the following:
"Payments pursuant to a qualified domestic relations order may be made to an alternate payee prior to the Participant's earliest retirement age, within the meaning of Section 414(p) (4) (B) of the Code."
4. Effective as of August 5, 1993, Article XV is amended by adding at the end thereof the following new Section 15.07:
"15.07. If a Participant transfers to a position with the Company or an Affiliate which is not covered by the Plan and the Participant, after the transfer, is qualified for participation in the Salary Deferral Savings Plan of Engelhard Corporation (or any other qualified plan maintained by the Company or an Affiliate), then such Participant's entire Account balance may be transferred to the Salary Deferral Savings Plan of Engelhard Corporation (or such other qualified plan), at the sole discretion of the Committee or its delegate, and after such transfer the Participant shall have no further interest in this Plan."
5. Effective as of January 1, 1994, Appendix A to the Plan is amended by adding the following at the end thereof:
"5. Hourly-paid employees of Engelhard Corporation represented by Local 8-406 of the Oil, Chemical & Atomic Workers International Union.
a. Effective Date (Section 1.13). January 1, 1994
b. Eligibility Requirement (Section 2.01). Employees in the employ of the Employer on or before March 26, 1993 are eligible as of the Effective Date; individuals hired after March 26, 1993 are eligible following completion of one year of Eligibility Service.
c. Maximum Deferral Percentage (Section 3.01). 10%
d. Matching Percentage (Section 3.02). 10% of Tax Deferred Contributions, up to 0.6% of Compensation.
e. Investment Funds (Section 5.02). Fixed Income Fund, Balanced Fund, Equity Index Fund.
f. Withdrawals (Section 7.01). Permitted.
g. Loans (Section 7.04). Not Permitted."
SEVENTH AMENDMENT TO THE ENGELHARD CORPORATION SAVINGS PLAN FOR HOURLY PAID EMPLOYEES
The Engelhard Corporation Savings Plan for Hourly Paid Employees is hereby amended in the following respects, effective as of January 1, 1994:
1. Section 1.10 is amended by deleting the last sentence thereof and inserting the following in its place:
"Notwithstanding the foregoing, an Employee's Compensation for any Plan Year in excess of $150,000, as such amount shall be increased due to cost of living increases in accordance with regulations issued from time to time by the Secretary of the Treasury under Section 401(a) (17) of the Code, shall be disregarded for all purposes of the Plan."
2. Section 3.03 is amended by adding the following sentence at the end of paragraph (c) (vii) thereof:
"Total Compensation taken into account for any Plan Year shall not include any amounts in excess of $150,000, as adjusted for increases in the cost of living in accordance with regulations issued from time to time by the Secretary of the Treasury under Section 401 (a) (17) of the Code."
3. Appendix A to the Plan is amended by deleting part c. of paragraph 5 thereof and inserting the following in its place:
"c. Maximum Deferral Percentage (Section 3.01). 15%."