SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
or
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____ to _____
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ENGELHARD CORPORATION SAVINGS PLAN FOR HOURLY PAID EMPLOYEES
------------------------------------------------------------
(Full title of the plan)
ENGELHARD CORPORATION
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(Exact name of issuer as specified in its charter)
101 WOOD AVENUE, ISELIN, NEW JERSEY 08830
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(Address of principal executive offices) (Zip Code)
DELAWARE 22-1586002
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1
Engelhard Corporation Savings Plan for Hourly Paid Employees
Table of Contents
Description Page
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Reports of Independent Public Accountants 3-4
Statements of Net Assets Available for Benefits 5
at December 31, 2001 and 2000
Statement of Changes in Net Assets Available for Benefits 6
for the year ended December 31, 2001
Notes to Financial Statements 7-11
Supplemental Schedules
Schedule of Assets (Held at end of year) 12
Schedule of Reportable Transactions for the
Year Ended December 31, 2001 13
Consent of Independent Public Accountants 14-15
Signature 16
2
Report of Independent Public Accountants
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To the Pension and Employee Benefit Committee of Engelhard Corporation:
We have audited the accompanying statement of net assets available for
benefits of the Engelhard Corporation Savings Plan for Hourly Paid Employees
(the "Plan") as of December 31, 2001 and the related statement of changes in net
assets available for benefits for the year ended December 31, 2001. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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 net assets available for benefits as of December
31, 2001, and the changes in net assets available for benefits for the year
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of assets (held at end of year) as of December 31, 2001 and reportable
transactions for the year then ended are presented for purposes of additional
analysis and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements, and
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
ERNST & YOUNG LLP
MetroPark, New Jersey
June 4, 2002
3
The following audit opinion is a copy of the opinion issued by Arthur
Andersen LLP on June 26, 2001. This opinion has not been reissued by Arthur
Andersen LLP. Note that only the Statement of Net Assets Available for Benefits
as of December 31, 2000 covered by the report below is included in this set of
financial statements.
Report of Independent Public Accountants
----------------------------------------
To the Pension and Employee Benefit Committee of Engelhard Corporation:
We have audited the accompanying statements of net assets available for
benefits of the Salary Deferral Savings Plan of Engelhard Corporation (the
"Plan") as of December 31, 2000 and 1999 and the related statement of changes in
net assets available for benefits for the year ended December 31, 2000. These
financial statements and the supplemental schedule referred to below are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets available for plan benefits as of
December 31, 2000 and 1999, and the changes in net assets available for benefits
for the year ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of Assets
Held for Investment Purposes and Reportable Transactions are presented for
purposes of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974. The supplemental schedules have
been subjected to the auditing procedures applied in the audit of the basic
financial statements as of and for the year ended December 31, 2000, and in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
June 26, 2001
4
Engelhard Corporation Savings Plan for Hourly Paid Employees
Statements of Net Assets Available for Benefits
At December 31, 2001 and 2000
2001 2000
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Assets
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Investments at fair value $30,375,086 $24,086,728
Receivables:
Participant Contributions 264,690 274,343
Employer Contributions 71,531 68,008
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Total Receivables $ 336,221 $ 342,351
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Net Assets Available for Benefits $30,711,307 $24,429,079
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See accompanying notes to Financial Statements
5
Engelhard Corporation Savings Plan for Hourly Paid Employees
Statement of Changes in Net Assets Available for Benefits
For the year ended December 31, 2001
2001
----
Additions:
Net Investment Income:
Dividends $ 328,640
Interest 474,341
------------
Total Investment Income 802,981
Contributions:
Participant 3,463,312
Employer 884,059
Asset Transfers In 25,861
Rollovers 1,022
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Total Contributions 4,374,254
Net Realized/Unrealized Appreciation
in Fair Value of Investments 2,548,809
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Total Additions 7,726,044
Distributions 1,442,596
Other deductions 1,220
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Total deductions 1,443,816
Net Increase 6,282,228
Net Assets Available for Benefits 24,429,079
at Beginning of Year
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Net Assets Available for Benefits $ 30,711,307
at End of Year
============
See Accompanying Notes to Financial Statements
6
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 1, 1991, is designed to provide eligible
employees of Engelhard Corporation (the "Company") an opportunity to save part
of their earnings 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 provides only general information.
Participants of the Plan should refer to the Plan Document for a more complete
description of plan provisions.
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 333 of the Independent Workers of North America, Locals
233, 237 and 238 of the United Paper Workers International Union, Local 1668,
1668A and 1668B of the United Automobile Workers, Local 8-406 and 2-286 of the
Oil, Chemical and Atomic Workers International Union, Local 663 of the
International Chemicals Workers Union, Local 73 of the International Chemical
Workers Union, Local 1430 of the International Brotherhood of Electrical Workers
and Local 174 of the United Steel Workers of America 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
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The Plan permits eligible employees participating in the Plan the
opportunity to defer on a pretax basis up to 15 percent of their compensation,
as defined, subject to certain restrictions and limitations, and to have that
amount contributed to the Plan. Employees may also contribute, subject to
certain restrictions and limitations, up to 10 percent of compensation to the
Plan on a post-tax basis.
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, ranging
from 10% to 50% of the first 6%, depending on the union contract, 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 the following seventeen
separate investment funds within the Plan:
a) The Company Stock Fund.
b) The Fixed Income Fund (Vanguard Retirement Savings Trust).
c) The Windsor II Growth Fund (Vanguard Windsor II Fund).
d) The Windsor Growth Fund (Vanguard Windsor Fund).
7
e) The Balanced Fund (Vanguard Asset Allocation Fund).
f) The Equity Index Fund (Vanguard Growth and Income Fund).
g) The Small Cap Fund (Vanguard Small-Cap Index Fund).
h) The Life Strategy Growth Fund (Vanguard Life Strategy Growth
Fund).
i) The Life Strategy Conservative Growth Fund (Vanguard Life
Strategy Conservative Growth Fund).
j) The Vanguard U.S. Growth Fund.
k) The Life Strategy Moderate Growth Fund (Vanguard Life Strategy
Moderate Growth Fund).
l) The Prime Cap Funds (Vanguard PRIMECAP Fund).
m) The International Growth Fund (Vanguard International Growth
Fund).
n) The Life Strategy Income Fund (Vanguard Life Strategy Income
Fund).
o) The Short-Term Bond Fund (Vanguard Short-Term Corporate Fund).
p) Explorer Fund.
q) Treasury Money Market Fund.
Participants have the right to elect, subject to restrictions, the
investment fund or funds in which their contributions are invested. All matching
contributions are initially invested in the Company Stock Fund. The Participants
matching contributions are initially restricted and become unrestricted at the
rate of 25 percent per year. Once unrestricted, funds may be moved to any of the
other investment funds.
Included in the Statement of Net Assets Available for Benefits are
non-participant directed funds that are included in the Company Stock Fund.
These amounts represent the restricted portion of the Employer Matching
Contribution. The following describes the change in the balance during the year
ended December 31, 2001.
Balance @ 12/31/00 $ 395,494
Dividends 13,727
Net realized gain/unrealized
Appreciation 234,852
Contributions 880,536
Transfer to unrestricted (112,045)
Distributions (29,241)
Other 15,043
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Balance @ 12/31/01 $1,398,366
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8
Participant Accounts
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Each participant's account is credited with the participant's contributions
and allocations of (a) the Company Contributions and (b) plan earnings including
realized gains/losses, unrealized appreciation/depreciation, and an allocation
of fund expenses. Allocations are based on participant earnings or account
balances, as defined. The benefit to which a participant is entitled is the
benefit that can be provided from the participants account.
Vesting
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Participants at all times have a fully vested and non-forfeitable interest
in their contributions and in the matching contributions allocated to their
account.
Plan Termination
----------------
Although it has not expressed any intent to do so, the Company has the
right under the plan to discontinue its contributions at any time and to
terminate the plan subject to the provisions of ERISA.
Loan Provision
--------------
Participants may borrow from their funds accounts a minimum of $1,000 up to
a maximum equal to 50% of their fund balance or $50,000, whichever is less. The
loans are secured by the balance in the Participant's accounts and bear interest
at a reasonable rate as determined by the Company in accordance with applicable
laws and regulations. Principal and interest is paid ratably through monthly
payroll deductions. Loans are generally five years in duration unless the loan
is for the purchase of a primary residence in which case the term can be up to
ten years.
Distributions and Withdrawals
-----------------------------
Upon termination of employment, as provided in the Plan Document, employees
generally have the option of taking a distribution, rolling the balance over
into another qualified plan, or leaving the money in the Plan until retirement.
After-tax contributions may be withdrawn at any time however the earnings on the
contribution will be subject to current income taxes, as well as a penalty for
early withdrawal unless the participant has reached the age of 59 1/2. All
distributions are made in the form of cash except the balance in the Engelhard
stock fund may be made in the form of shares at the Participant's discretion.
The Plan under certain circumstances permits hardship withdrawals. The
hardship withdrawals are only made in accordance with IRS guidelines and must be
approved in advance by the Employee Benefit Plans Administrative Committee.
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.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
9
The Plan provides for various investment options in any combination of
stocks or mutual funds. Investment securities are exposed to various risks, such
as interest rate, market and credit. Due to the level of risk associated with
certain investment securities and the level of uncertainty related to changes in
the value of investment securities, it is at least reasonably possible that
changes in market value in the near term would materially affect Participants'
account balances and the amounts reported in the Statement of Net Assets
Available for Benefits and the Statement of Changes in Net Assets Available for
Benefits.
Note 3 - Income Tax Status
The Plan has received a determination letter from the Internal Revenue
Service dated February 28, 1996, stating that the Plan is qualified under
Section 401 (a) of the Internal Revenue Code (the "Code") and, therefore, the
related trust is exempt from taxation. Subsequent to this issuance of the
determination letter, the Plan was amended. Once qualified, the Plan is required
to operate in conformity with the Code to maintain its qualification. The plan
administrator believes the Plan is being operated in compliance with the
applicable requirements of the Code and, therefore, believes that the Plan, as
amended, is qualified and the related trust is tax exempt.
Note 4 - Administrative Expenses
Expenses are incurred at either the fund level or the Plan level. All
expenses incurred by the fund (commissions, management fees, etc.) are paid out
of investor assets and are therefore netted in unrealized
appreciation/depreciation of investments in the statement of changes in net
assets available for benefits. Loan administration expenses are included in
other expenses in the statement of changes in net assets available for benefits.
Commissions on the purchase of Engelhard Corporation stock incurred when such
purchases are made in the stock market are netted in unrealized
appreciation/depreciation of investments in the statement of changes in net
assets available for benefits. The Company pays all other plan administrative
expenses.
Note 5 - Concentrations of Credit Risk
Investments in securities are generally exposed to various risks, such as
interest rate, credit, and overall volatility risks.
Financial instruments which potentially subject the plan to concentration
of credit risk consist principally of investments in the Engelhard Corporation
Stock Fund. The plan limits the concentration of credit risk by allowing
participants, subject to the lapsing of restrictions, the opportunity to invest
in an array of mutual funds offered by the Vanguard Group.
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 Vanguard Funds are valued based on the quoted net asset value (redemption
value) of the respective investment fund as of the valuation date.
Investments that represent more than 5% or more of fair value of the Plan's
net assets are as follows:
10
Investments 2001 2000
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Engelhard Corporation Company Stock Fund $ 12,885,445 $ 9,728,519
Fixed Income Fund (Retirement Savings Trust) 5,648,101 4,049,152
Balanced Fund (Asset Allocation Fund) 2,813,421 2,631,655
Equity Index Fund (Growth and Income Portfolio) 3,947,575 3,903,156
Note 7 - Related Party Transactions
For the 2001 plan year the Company transferred 34,844 treasury stock shares
(representing a contribution dollar amount of $884,059) to Vanguard to fund the
employer match. The number of shares transferred each month represented the
employer matching contribution divided by the closing market price on the day
the contribution was remitted.
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Engelhard Corporation Savings Plan for Hourly Paid Employees
Schedule of Assets (Held at end of year)
as of December 31, 2001
(C)Description of
(B)Identity of Investment Including
Issue, Borrower, Maturity Date, Rate of
(A) Lessor, or Interest, Collateral, Par (E)Current
Similar Party or Maturity Value (D)Cost Value
--- -------------- --------------------------- ----------- -----------
* Vanguard Fiduciary Engelhard Corporation
Trust Company Company Stock Fund $ 9,337,848 $12,885,445 **
* Vanguard Fiduciary Fixed Income Fund 5,648,101 5,648,101 **
Trust Company (Retirement Savings Trust)
* Vanguard Fiduciary Explorer Fund 547,382 526,173
Trust Company
* Vanguard Fiduciary Balanced Fund 2,860,040 2,813,421 **
Trust Company (Asset Allocation Fund)
* Vanguard Fiduciary Equity Index Fund 4,129,703 3,947,575 **
Trust Company (Growth and Income Portfolio)
* Vanguard Fiduciary International Growth Fund 630,879 534,886
Trust Company
* Vanguard Fiduciary Treasury Money Market Fund 218,130 218,130
Trust Company
* Vanguard Fiduciary Life Strategy Growth Fund 168,853 157,078
Trust Company
* Vanguard Fiduciary Prime Cap Fund 755,892 653,821
Trust Company
* Vanguard Fiduciary U.S. Growth Portfolio 299,865 210,251
Trust Company
* Vanguard Fiduciary Growth Fund 180,096 180,415
Trust Company (Windsor Fund)
* Vanguard Fiduciary Windsor II Fund 103,855 101,316
Trust Company
* Vanguard Fiduciary Life Strategy Conservative 43,588 43,833
Trust Company Growth Fund
* Vanguard Fiduciary Life Strategy Moderate 30,096 28,981
Trust Company Growth Fund
* Vanguard Fiduciary Life Strategy Income Fund 4,211 4,184
Trust Company
* Vanguard Fiduciary Short Term Bond Fund 93,194 93,781
Trust Company
* Vanguard Fiduciary Small Cap Fund 111,870 110,473
Trust Company
*Promissory notes from Participants - 2,217,222
having interest at rates of 5.75% to 10.50%
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Total $25,163,603 $30,375,086
=========== ===========
**Market value is greater than 5% of Net Assets.
*Represents party-in-interest
12
Engelhard Corporation Plan for
Hourly Paid Employees
Schedule of Reportable Transactions*
Year Ended December 31, 2001
Identity of Party Description of Assets (include Purchase Selling Historical Cost Current Value
Involved interest rate and maturity in Price Price of Asset of Asset Historical
the case of a loan) on Transactions Gain(Loss)
----------------- ------------------------------ ---------- -------- --------------- ----------------- ----------
Vanguard Vanguard Growth & Income 1,126,877 1,126,877
Vanguard Vanguard Growth & Income 591,110 626,361 591,110 (35,252)
Vanguard Vanguard Retir. Savings Trust 2,856,386 2,856,386
Vanguard Vanguard Retir. Savings Trust 1,257,437 1,257,437 1,257,437
Engelhard Engelhard Corp. Stock Fund 2,589,244 2,589,244
Engelhard Engelhard Corp. Stock Fund 2,941,730 2,291,367 2,941,730 650,363
*Transactions or a series of transactions in excess of 5% of the current value of the Plan's assets as of the beginning
of the plan year as defined in section 2520.103-6 of the Department of Labor Rules and Regulations for Reporting and
and Disclosure under ERISA.
13
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
We consent to the incorporation by reference in the Registration Statement
(Form S-8 Nos.: 2-72830, 2-81559, 2-84477, 2-89747, 33-28540, 33-37724,
33-40365, 33-40338, 33-43934, 33-65990, 333-02643, 333-71439, 333-39570,
333-71856, 333-88424) pertaining to the Plan for Hourly Paid Employees of our
report dated June 4, 2002, with respect to the financial statements and
schedules of the Plan for Hourly Paid Employees included in this Annual Report
(Form 11-K) for the year ended December 31, 2001.
/s/ ERNST & YOUNG L.L.P.
MetroPark, New Jersey
June 24, 2002
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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
---------------------------------------------
The Company is unable to obtain the consent of Arthur Andersen LLP and has
therefore dispensed with the requirement to file such written consent in
reliance on Rule 437a of the Securities Act of 1933. Because Arthur Andersen LLP
has not consented to the incorporation of their report included in this Form
11-K into any of the Company's previously filed Registration Statements,
securityholders may not be able to recover against Arthur Andersen LLP under
Section 11 of the Securities Act for any untrue statements of a material fact
contained in the financial statements audited by Arthur Andersen or any
omissions to state a material fact required to be stated therein.
15
Signature
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Form 11-K
Engelhard Corporation Savings Plan for Hourly Paid Employees
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Pension and Employee Benefit Plans Committee of Engelhard Corporation has
duly caused this Form 11-K to be signed on its behalf by the undersigned,
thereunto duly authorized, in Iselin, New Jersey on this 25th day of June,
2002.
/s/ John C. Hess
-------------
By: John C. Hess
Secretary to the Committee and
Vice President of Human Resources
16