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 _____
_______________
SALARY DEFERRAL SAVINGS PLAN OF ENGELHARD CORPORATION
-----------------------------------------------------
(Full title of the plan)
ENGELHARD CORPORATION
(Exact name of issuer as specified in its charter)
101 WOOD AVENUE, ISELIN, NEW JERSEY 08830
----------------------------------- ---------
(Address of principal executive offices) (Zip code)
DELAWARE 22-1586002
------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1
Salary Deferral Savings Plan
of Engelhard Corporation
Table of Contents
Description Page
----------- ----
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 13
Consent of Independent Public Accountants 14-15
Signature 16
2
Report of Independent Public Accountants
----------------------------------------
To the Pension and Employee Benefit Committee of Engelhard Corporation:
We have audited the accompanying statement of net assets available for
benefits of the Salary Deferral Savings Plan of Engelhard Corporation (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 plan 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 audit was 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. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in the audit 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
Salary Deferral Savings Plan of Engelhard Corporation
Statements of Net Assets Available for Benefits
At December 31, 2001 and 2000
2001 2000
---- ----
Assets
------
Investments at fair value $217,059,474 $196,171,485
Receivables:
Participant Contributions 792,925 778,356
Employer Contributions 231,744 224,468
------------ ------------
Total Receivables $ 1,024,669 $ 1,002,824
------------ ------------
Net Assets Available for Benefits $218,084,143 $197,174,309
============ ============
See Accompanying Notes to Financial Statements
5
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 2001
2001
----
Additions:
Net Investment Income:
Dividends $ 3,251,893
Interest 2,610,170
-------------
Total Investment Income 5,862,063
Contributions:
Participant 13,263,732
Employer 3,092,278
Asset Transfers In 449,964
Rollovers 798,351
-------------
Total Contributions 17,604,325
Net Realized/Unrealized Appreciation
in Fair Value of Investments 7,502,036
-------------
Total Additions 30,968,424
Deductions:
Distributions 10,038,384
Other Expenses 15,500
Asset Transfer 4,706
-------------
Total Deductions 10,058,590
Net Increase 20,909,834
Net Assets Available for Benefits at 197,174,309
Beginning of Year
-------------
Net Assets Available for Benefits at $218,084,143
End of year
=============
See Accompanying Notes to Financial Statements
6
Notes to Financial Statements
Note 1 - Description of the Plan
The Salary Deferral Savings Plan of Engelhard Corporation (the "Plan"),
effective September 1, 1989, 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 and/or post-tax 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"), United States salaried employees of the Company and
its wholly-owned (directly or indirectly) domestic subsidiaries and all non-
collectively bargained hourly employees are eligible to participate in the Plan.
Contributions
-------------
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 (see also note 8 for amendment to plan effective
January 1, 2002).
Matching Contributions
----------------------
The Company will contribute, on a monthly basis, subject to certain
limitations and exclusions, either cash or common stock of the Company in an
amount equal to 50 percent of the first 6 percent contributed by the
Participants. Participants must have completed one year of service to be
eligible for a matching contribution.
Investments
-----------
All contributions to the Plan are held and invested by Vanguard Fiduciary
Trust Company (the Trustee). The Trustee maintains the following fifteen
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).
e) The Balanced Fund (Vanguard Asset Allocation Fund).
f) The Equity Index Fund (Vanguard Growth and Income Fund).
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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).
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 one 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 employee matching
contribution. The following describes the change in the balance during the year
ended December 31, 2001.
Balance @ 12/31/00 $ 8,644,839
Dividends 156,572
Net realized gain/unrealized
Appreciation 3,795,792
Contributions 3,085,003
Transfer to unrestricted (2,440,828)
Distributions (468,527)
Other 338,847
-----------
Balance @ 12/31/01 $13,111,698
===========
Participant Accounts
--------------------
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 participant's account.
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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.
Loan Provision
--------------
Participants may borrow from their Fund 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.
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.
Distributions and Withdrawals
-----------------------------
Upon termination of employment, as provided in the Plan Document, participants
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
Company Stock Fund which 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.
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.
9
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/drepreciation 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 market 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:
Investments 2001 2000
----------- ------------ ------------
Engelhard Corporation Company Stock Fund $ 59,201,120 $ 54,062,664
Fixed Income Fund (Retirement Savings Trust) 38,638,981 27,587,279
Growth Fund (Windsor Fund) 29,237,340 24,114,366
Balanced Fund (Asset Allocation Fund) 13,948,093 14,312,032
Equity Index Fund (Growth and Income Portfolio) 19,719,141 20,660,370
Prime Cap Fund 14,317,977 16,113,585
U.S. Growth Fund - 10,343,902
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Note 7 - Related Party Transactions
For the 2001 plan year, the Company transferred 122,114 treasury stock
shares (representing a contribution dollar amount of $3,092,278) 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.
Note 8 - Plan Amendments
The plan was amended in December of 2001 to reflect certain provisions of
the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). Among
the more significant changes to the plan were the following:
* Changed the limit of employee pretax contributions from a maximum of 15%
of salary to 100% of salary subject to certain plan limitations.
* Increased the compensation limit in determining after tax contributions
and IRC 415 limits to the plan from $170,000 to $200,000.
* Allows catch-up contributions for those 50 and over by the end of the
plan year. These catch up contributions allow participants to contribute
an additional $1,000 per year.
EGTRRA provides for the above amounts to be indexed each year as specified
in the legislation. These amendments are effective for plan years beginning
after December 31, 2001. The full context of these provisions is described in
the plan document and summary plan description.
11
Salary Deferral Savings Plan of Engelhard Corporation
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 $38,153,630 $ 59,201,120**
* Vanguard Fiduciary Fixed Income Fund 38,638,981 38,638,981**
Trust Company (Retirement Savings Trust)
* Vanguard Fiduciary Windsor II Fund 5,986,262 5,444,416
Trust Company
* Vanguard Fiduciary Growth Fund 28,740,328 29,237,340**
Trust Company (Windsor Fund)
* Vanguard Fiduciary Balanced Fund 13,279,196 13,948,093**
Trust Company (Asset Allocation Fund)
* Vanguard Fiduciary Equity Index Fund 18,971,541 19,719,141**
Trust Company (Growth and Income Portfolio)
* Vanguard Fiduciary International Growth 4,466,582 3,684,624
Trust Company Portfolio
* Vanguard Fiduciary Small Cap Fund 4,578,787 4,336,663
Trust Company
* Vanguard Fiduciary Short Term Bond Fund 3,496,388 3,514,373
Trust Company
* Vanguard Fiduciary Life Strategy Growth 3,501,813 3,267,603
Trust Company Portfolio
* Vanguard Fiduciary Prime Cap Fund 16,344,955 14,317,977**
Trust Company
* Vanguard Fiduciary Life Strategy Income Portfolio 663,360 656,621
Trust Company
* Vanguard Fiduciary Life Strategy Conservative 1,187,506 1,157,209
Trust Company Growth Portfolio
* Vanguard Fiduciary U.S. Growth Fund 14,480,387 8,917,287
Trust Company
* Vanguard Fiduciary Life Strategy Moderate 3,115,698 2,959,489
Trust Company Growth Portfolio
*Promissory notes from Participants - 8,058,537
having interest at rates of 5.75% to 10.5%
------------ ------------
Total $195,605,414 $217,059,474
============ ============
**Market value is greater than 5% of Net Assets
*Represents party-in-interest
12
Engelhard Corporation
Salary Deferral Savings Plan
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 and Income $ 5,844,020 $ 5,844,020
Vanguard Vanguard Growth and Income $ 4,222,918 $ 4,419,521 4,222,918 $ (196,603)
Vanguard Vanguard PRIMECAP Fund 5,890,290 5,890,290
Vanguard Vanguard PRIMECAP Fund 5,342,809 5,634,577 5,342,809 (291,768)
Vanguard Vanguard U.S. Growth 6,153,838 6,153,838
Vanguard Vanguard U.S. Growth 3,917,187 5,008,360 3,917,187 (1,091,172)
Vanguard Vanguard Retir. Savings Trust 31,259,070 31,259,070
Vanguard Vanguard Retir. Savings Trust 20,203,981 20,203,981 20,203,981
Engelhard Engelhard Corp. Stock Fund 19,318,957 -
Engelhard Engelhard Corp. Stock Fund 32,617,814 26,386,243 32,617,814 6,231,571
*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 Salary Deferral Savings Plan of our
report dated June 4, 2002, with respect to the financial statements and
schedules of the Salary Deferral Savings Plan 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.
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Signature
---------
Form 11-K
Salary Deferral Savings Plan of Engelhard Corporation
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