- 1 -
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
/ X / OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-3426
American Cyanamid Company
(Exact name of registrant as specified in its charter)
Maine 13-0430890
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Cyanamid Plaza
Wayne, New Jersey 07470
(Address of principal executive offices)
(201)-831-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 91,685,362 shares of
Common Stock, par value $5 per share, were outstanding at October 31,
1994.
This report, including two exhibits, contains 19 pages numbered
sequentially from this cover page. The exhibit index is located at Page
17.
PAGE
<PAGE>
Form 10-Q
PART I - FINANCIAL INFORMATION
AMERICAN CYANAMID COMPANY AND SUBSIDIARIES
The unaudited condensed consolidated financial statement information included
herein has been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission for reporting on Form 10-Q. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. The statements should be read
in conjunction with the accounting policies and notes to consolidated financial
statements in the American Cyanamid Company and Subsidiaries (Cyanamid or the
company) 1993 Annual Report on Form 10-K.
In the opinion of management, the financial statement information included
herein reflects all adjustments necessary for a fair statement of the
information presented as of September 30, 1994, and for the three and nine month
periods ended September 30, 1994, and 1993. Such adjustments are of a normal,
recurring nature. The results of operations for the three and nine month
periods ended September 30, 1994, are not necessarily indicative of the results
to be expected for the full year. Certain reclassifications have been made to
the 1993 condensed consolidated financial statements to conform with the 1994
presentation.
PAGE
<PAGE>
<TABLE> Form 10-Q
AMERICAN CYANAMID COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three months ended
September 30,
1994 1993
(Millions of dollars,
except per share amounts)
<S> <C> <C>
Net sales $1,033.5 $ 899.4
Expenses:
Manufacturing cost of sales 414.7 342.4
Selling and advertising 328.2 300.4
Research and development 158.5 148.9
Administrative and general (Note 1) 112.2 72.8
Acquired in-process research
and development (Note 3) - -
1,013.6 864.5
Earnings from operations 19.9 34.9
Interest and other income, net 38.3 41.8
58.2 76.7
Interest expense 13.7 14.9
Earnings before taxes on income 44.5 61.8
Taxes on income (Note 8) 16.5 5.8
Earnings (loss) before minority interests 28.0 56.0
Minority interests (5.9) (6.4)
Earnings (loss) from continuing operations 22.1 49.6
Discontinued operations (Notes 2 and 6):
Loss from operations, net of
taxes of $66.4 and $64.7, respectively - (85.6)
Loss on distribution, net of taxes of $44.2 - (326.8)
Cumulative effect of accounting changes,
f net of taxes of $144.9 - -
- (412.4)
Earnings (loss) before cumulative effect
of accounting changes 22.1 (362.8)
Cumulative effect of accounting changes
(Note 6) - -
Net earnings (loss) $ 22.1 $(362.8)
Per share of common stock:
Earnings (loss) from continuing operations $ .23 $ .55
Loss from discontinued operations - (4.59)
Earnings (loss) before cumulative effect
of accounting changes .23 (4.04)
Cumulative effect of accounting changes - -
Net earnings (loss) $ .23 $ (4.04)
Dividends $ .4625 $ .4375
Average number of common shares
outstanding 90,704,838 89,842,247
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
PAGE
<PAGE>
<TABLE> Form 10-Q
AMERICAN CYANAMID COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Nine months ended
September 30,
1994 1993
(Millions of dollars,
except per share amounts)
<S> <C> <C>
Net sales $3,788.1 $ 3,291.4
Expenses:
Manufacturing cost of sales 1,543.1 1,257.8
Selling and advertising 1,043.9 963.0
Research and development 483.8 429.3
Administrative and general (Note 1) 283.7 219.0
Acquired in-process research
and development (Note 3) - 383.6
3,354.5 3,252.7
Earnings from operations 433.6 38.7
Interest and other income, net 58.1 76.9
491.7 115.6
Interest expense 45.9 48.0
Earnings before taxes on income 445.8 67.6
Taxes on income (Note 8) 126.2 126.7
Earnings (loss) before minority interests 319.6 (59.1)
Minority interests 4.3 (11.3)
Earnings (loss) from continuing operations 323.9 (70.4)
Discontinued operations (Notes 2 and 6):
Loss from operations, net of
taxes of $66.4 and $64.7, respectively - (75.6)
Loss on distribution, net of taxes of $44.2 - (326.8)
Cumulative effect of accounting changes,
net of taxes of $144.9 - (219.8)
- (622.2)
Earnings (loss) before cumulative effect
of accounting changes 323.9 (692.6)
Cumulative effect of accounting changes
(Note 6) - (332.6)
Net earnings (loss) $ 323.9 $(1,025.2)
Per share of common stock:
Earnings (loss) from continuing operations $ 3.59 $ (.78)
Loss from discontinued operations - (6.92)
Earnings (loss) before cumulative effect
of accounting changes 3.59 (7.70)
Cumulative effect of accounting changes - (3.70)
Net earnings (loss) $ 3.59 $ (11.40)
Dividends $ 1.3625 $ 1.2875
Average number of common shares
outstanding 90,165,510 89,936,347
</TABLE>
See Notes to Condensed Consolidated Financial Statements.<PAGE>
<TABLE> Form 10-Q
AMERICAN CYANAMID COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1994 1993
(Millions of dollars)
Assets
<S> <C> <C>
Current assets
Cash and cash equivalents $ 356.3 $ 426.1
Marketable securities and time deposits 122.5 101.7
Accounts receivable, less allowance for doubtful
accounts of $44.6 in 1994 and $40.1 in 1993 1,065.3 1,120.1
Inventories 1,043.2 1,027.9
Deferred tax assets 444.2 410.1
Total current assets 3,031.5 3,085.9
Investments and advances 361.1 307.2
Plants, equipment and facilities, at cost 3,269.5 3,106.0
Less accumulated depreciation 1,438.4 1,335.7
Net plant investment 1,831.1 1,770.3
Intangibles resulting from business acquisitions,
net of accumulated amortization 289.2 305.3
Deferred tax assets 304.5 328.5
Other assets 320.6 260.2
$6,138.0 $6,057.4
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued expenses $1,899.0 $1,860.0
Short-term borrowings 196.6 432.6
Funded debt installments due within one year 61.1 182.9
Income taxes 282.4 254.9
Total current liabilities 2,439.1 2,730.4
Funded debt 327.3 344.3
Deferred tax liabilities 38.7 27.6
Other noncurrent liabilities 1,441.5 1,444.4
Minority interests 132.4 143.7
Shareholders' equity
Common stock 513.6 513.6
Additional paid-in capital 68.0 38.9
Earnings employed in the business 1,648.8 1,448.2
Accumulated translation and other adjustments (7.9) (49.3)
Accumulated net unrealized gains on available-
for-sale securities (Note 7) 35.3 -
Treasury stock, at cost (498.8) (584.4)
Total shareholders' equity 1,759.0 1,367.0
$6,138.0 $6,057.4
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION> Form 10-Q
AMERICAN CYANAMID COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended
September 30,
1994 1993
(Millions of dollars)
<S> <C> <C>
Net cash provided by operating activities of
continuing operations $ 568.6 $ 881.0
Net cash provided by operating activities of
discontinued operations - 59.7
Net cash provided by operating activities 568.6 940.7
Cash flows provided by (used for) investing activities
Additions to plants, equipment and facilities (201.4) (219.5)
Available for sale securities:
Purchases (287.2) -
Sales 247.9 -
Maturities 24.2 -
Additions to investments -
principally marketable securities - (430.1)
Reductions to investments -
principally marketable securities - 264.4
Acquisitions of businesses, net of cash acquired - (339.0)
Net investing activities of discontinued operations - (83.1)
Other, net 10.2 (7.3)
Net cash used for investing activities (206.3) (814.6)
Cash flows provided by (used for) financing activities
Change in short-term borrowings, net (220.8) 177.3
Funded debt additions 70.6 198.6
Funded debt reductions (219.8) (278.7)
Purchases of treasury stock (6.2) (17.9)
Cash dividends (123.3) (115.8)
Cash component of Cytec dividend (27.1) (.6)
Exercise of stock options 90.8 4.0
Net cash used for financing activities (435.8) (33.1)
Effect of exchange rate changes on cash
and cash equivalents 3.7 (6.1)
Increase (decrease) in cash and cash equivalents (69.8) 86.9
Cash and cash equivalents, beginning of year 426.1 341.7
Cash and cash equivalents, end of period $ 356.3 $ 428.6
Supplemental information:
Cash paid for interest (net of amounts capitalized) $ 48.2 $ 45.1
Cash paid for taxes $ 94.5 $ 95.3
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
PAGE
<PAGE>
Form 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
(1) On August 17, 1994, American Home Products Corporation and Cyanamid
entered into a definitive merger agreement which provided for Cyanamid
shareholders to receive a price of $101 per share net in cash for all
outstanding shares of Cyanamid. Under the merger agreement, Cyanamid's
preferred stock purchase rights will be redeemed at $.02 per right.
The total value of the transaction, on a fully diluted basis, is
approximately $9,700.0. The agreement has been approved by the Boards of
Directors of both companies. The Cyanamid Board has determined that the
terms of the offer and merger are fair to, and in the best interests of,
the company and its shareholders and recommends that shareholders tender
their Cyanamid shares in American Home Products' tender offer.
The existing tender offer, as amended, is scheduled to expire at 8:00 p.m.
on November 21, 1994, unless extended. American Home Products has
announced that it has entered into an agreement with the Federal Trade
Commission in connection with the tender offer and expects to consummate
the tender offer on November 21, 1994. Subsequent to the completion of
the tender offer, Cyanamid will be merged with a subsidiary of American
Home Products and each Cyanamid share not previously purchased will be
converted into the right to receive $101 per share net in cash.
Accordingly, this Form 10Q for the quarter ended September 30, 1994, will
most likely be the last Form 10Q to be filed by Cyanamid with the
Securities and Exchange Commission.
During the third quarter of 1994, one-time charges related to the merger
were recorded in Administrative and general expenses in the accompanying
Consolidated Statements of Operations. These charges, which consisted
primarily of costs associated with stock appreciation rights and legal and
investment advisory fees, amounted to $25.3, or $.28 per share, on an
after-tax basis.
(2) On August 17, 1993, the company's Board of Directors approved a formal
plan to effect the spin-off of Cytec Industries (Cytec), which encompassed
substantially all of the company's chemicals business, including plant
food, to shareholders. On December 17, 1993, the Board of Directors
declared a dividend payable to shareholders of record as of December 28,
1993, at the rate of one share of Cytec common stock for every seven
shares of the company's common stock. On January 24, 1994, the Cytec
common shares were distributed as a taxable dividend to shareholders. The
company retained a $200.0 preferred stock interest in Cytec.
In conjunction with the approval of the formal plan to effect the spin-
off, the operating results of the chemicals business have been accounted
for as discontinued operations since the third quarter of 1993.
Accordingly, the 1993 condensed consolidated financial statements exclude
amounts for discontinued operations from captions applicable to continuing
operations.
In anticipation of the spin-off, in the third quarter of 1993 the company
reflected in its results of discontinued operations certain costs related
to the disposition or termination of chemical business operations not
assumed by Cytec (primarily the elimination of accumulated translation
adjustments); valuation allowances related to assets (primarily deferred
tax assets) transferred to Cytec; and other spin-off costs which amounted,
in the aggregate, to $326.8 on an after-tax basis.
Based upon a comprehensive review of environmental matters completed
during the third quarter of 1993, Cyanamid recorded a provision for
remediation expense of $98.2, net of tax. This provision related to past
or current chemical business operations and was reflected in the operating
results of discontinued operations.
PAGE
<PAGE>
Form 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
(Continued)
Net sales of Cyanamid's chemicals business for the three and nine month
periods ended September 30, 1993, were $261.5 and $777.9, respectively.
(3) On June 1, 1993, shareholders of Immunex Corporation (Immunex) approved
an agreement to create a new biopharmaceutical company by merging the
company's North American Lederle oncology business with Immunex. The
company also contributed $350.0 to the new company, which retained the
Immunex name, and received 53.5% of the common stock of the new company
while Immunex shareholders retained the remaining 46.5%. The acquisition
was reflected as a purchase in the accompanying condensed consolidated
financial statements. The net assets and operating loss attributable to
the equity interest not acquired by the company is included in the caption
"Minority interests".
The nine month 1993 results include a one-time charge of $383.6 related
principally to the write-off of acquired in-process research and
development resulting from the acquisition of the 53.5% interest in
Immunex. There was no significant tax benefit available on this one-time
charge. Accordingly, earnings from continuing operations and net earnings
were reduced by $378.4 or $4.21 per share.
In the third quarter of 1993, Cyanamid and The Shell Petroleum Company
Limited (Shell) signed an agreement pursuant to which the company later
acquired substantially all assets and liabilities of the Shell companies'
crop protection business outside the United States and Canada. The Shell
acquisition, reflected as a purchase in the accompanying condensed
consolidated financial statements, was substantially complete by the end
of 1993. The total purchase price will aggregate approximately $400.0,
when all phases of the acquisition are finalized, plus royalty payments
on future product sales.
The previously announced agreement in principle to sell the Davis & Geck
wound management business has not been finalized. The parties involved
are now exploring possible alternatives.
(4) In the fourth quarter of 1993, the company commenced a global, companywide
restructuring program, which is expected to be accomplished over three
years. A pre-tax charge of $207.9 for these costs was reflected in the
company's operating results for the fourth quarter of 1993.
Since implementation of the restructuring program, the restructuring
accruals have decreased by approximately $45.2 due primarily to cash
expenditures related to severance costs and non-cash charges to curtail
and consolidate certain product lines. Approximately 1,700 employees have
been terminated through involuntary measures since inception of the
program.
As discussed in Note 1 to the condensed consolidated financial statements,
American Home Products Corporation and the company entered into a
definitive merger agreement on August 17, l994. The company cannot
predict the impact of the merger agreement on the restructuring program
at this time.
PAGE
<PAGE>
Form 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
(Continued)
(5) Components of inventories at September 30, 1994, and December 31, 1993,
were as follows:
September 30, December 31,
1994 1993
Finished goods $ 570.9 $ 599.3
Work in progress 285.4 250.4
Raw materials and supplies 306.6 276.8
1,162.9 1,126.5
Less reduction to LIFO cost (119.7) (98.6)
$1,043.2 $1,027.9
(6) Effective January 1, 1993, the company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," which
requires the accrual of retiree benefit costs over the active service
period of employees to the date of full eligibility for these benefits.
The aggregate initial accumulated postretirement benefit obligation at
January 1, 1993, was $565.4, net of deferred income tax effects of $355.6,
or $6.28 per share. The company elected to record this obligation,
measured as of November 30, 1992, as a one-time cumulative charge to
earnings. In connection with the spin-off of Cytec, the portion of the
cumulative effect of this accounting change applicable to the chemicals
business was reflected in discontinued operations. Accordingly, there
were charges of $335.0, net of deferred income tax effects of $210.7, or
$3.72 per share, to continuing operations and $230.4, net of deferred
income tax effects of $144.9, or $2.56 per share, to discontinued
operations. There was no impact on cash flow as the company plans to
continue to fund the obligation as the claims are paid.
Also effective January 1, 1993, the company adopted SFAS No. 109,
"Accounting for Income Taxes." Accordingly, there were gains of $2.4, or
$.02 per share, to continuing operations and $10.6, or $.12 per share, to
discontinued operations.
(7) Effective January 1, 1994, the company adopted SFAS No. 115 "Accounting
for Certain Investments in Debt and Equity Securities". The company's
portfolio had net unrealized gains of $58.5, on a pre-tax basis, as of
September 30, 1994.
(8) The company records income tax expense based upon an estimated full year
effective income tax rate. The third quarter and nine month 1993
provision for income taxes attributable to continuing operations included
a benefit of approximately $16.1, or $.18 per share, related primarily to
the remeasuring of Cyanamid's domestic net deferred tax assets
to reflect an increase in the statutory tax rate.
The nine month 1993 effective income tax rate was unusual as no material
tax benefit was available on the one-time charge of $383.6 resulting from
the Immunex acquisition. Excluding the effect of the Immunex charge and
the benefit related to the change in the tax rate, Cyanamid's effective
income tax rate declined in the first nine months of 1994 compared to the
same period last year due primarily to a change in the mix of income among
taxing jurisdictions.
(9) Certain legal proceedings to which the company is a party are discussed
in Part II, Item 1 of this report.
PAGE
<PAGE>
Form 10-Q
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition - At September 30, 1994, aggregate debt financing was
$585.0 million, equal to approximately 24% of total debt and equity including
minority interests. The corresponding amounts at December 31, 1993, were $959.8
million and 39%, respectively. The decrease in aggregate debt financing from
December 31, 1993, was due primarily to seasonal cash flows from operating
activities during the first nine months of 1994.
For detailed information concerning the pending American Home Products merger,
discontinued operations, the Immunex and Shell acquisitions, cumulative effect
of accounting changes, and income taxes, refer to Notes 1, 2, 3, 6, and 8,
respectively, to the condensed consolidated financial statements.
Third Quarter Results of Operations
Consolidated net sales for the third quarter of 1994 were $1,033.5 million, an
increase of 14.9% compared with $899.4 million in the third quarter of 1993.
The increase was due primarily to international sales of Agricultural products
acquired from Shell.
Earnings from continuing operations in the third quarter of 1994 were $22.1
million, or $.23 per share, compared to earnings of $49.6 million, or $.55 per
share, reported in the third quarter of 1993. The 1994 results include one-
time, net charges of $25.3 million, or $.28 per share, related to the American
Home Products merger.
Net earnings in the third quarter of 1994 were $22.1 million, or $.23 per share,
compared to a net loss of $362.8 million, or $4.04 per share, reported in the
third quarter of 1993. Third quarter 1994 results include one-time, net charges
of $25.3 million, or $.28 per share, related to the American Home Products
merger. Third quarter 1993 results included a net loss from discontinued
operations of $412.4 million, or $4.59 per share. The net loss from
discontinued operations, related to the spin-off of Cytec, included a net loss
from operations of $85.6 million, primarily attributable to a provision for
remediation expense of $98.2 million, and a net loss on distribution of $326.8
million.
Sales of the Medical Group increased in the third quarter of 1994 compared to
the same period a year ago. The results reflect increased domestic sales of
ethical pharmaceuticals, consumer health products and generic pharmaceuticals
partially offset by lower domestic sales of ophthalmic and biological products.
Increased domestic sales of ethical pharmaceuticals reflect introductory sales
of ZOSYN injectable antibiotic, marketed as TAZOCIN in international markets,
and ZIAC/ZEBETA bisoprolol antihypertensive, marketed under various other trade
names in international markets. These increases were partially offset by lower
international sales of NICHOLIN citicholine and PIPRACIL piperacillin due
primarily to government healthcare reform efforts in Europe. Domestic sales of
CENTRUM SILVER multivitamin/multimineral supplement increased in the third
quarter of 1994 versus the same period a year ago. Increased domestic sales of
generic pharmaceuticals were due primarily to the introduction of several new
products in late 1993 and early 1994. Lower domestic sales of HIBTITER
Haemophilus b conjugate vaccine in the third quarter of 1994 compared to the
same period last year were partially offset by higher domestic sales of
TETRAMUNE, a childhood combination vaccine of HIBTITER and TRI-IMMUNOL.
Domestic sales of Storz ophthalmic products decreased in the third quarter of
1994 compared to the same period a year ago due primarily to the disposition of
the specialty devices product line in early 1994.
All brand names appearing in capital letters are registered trademarks or
trademarks owned by or licensed to the company.
PAGE
<PAGE>
Form 10-Q
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
Medical Group operating earnings increased in the third quarter of 1994 versus
the comparable period in 1993. The impact of increased sales volume in the
third quarter of 1994 compared to last year was partially offset by an Immunex
operating loss due primarily to research and development expenditures.
Sales of the Agricultural Group increased in the third quarter of 1994 versus
the same period a year ago. The increase was due primarily to international
sales gains in agricultural products associated with the Shell acquisition,
partially offset by lower domestic sales of crop protection products. The
purchase of the Shell companies' international crop protection business was
substantially complete by the end of 1993. International sales of products
acquired from Shell were led by FASTAC, TORQUE, CASCADE, AZODRIN, and RIPCORD
insecticides/acaricides and SAPROL and ACROBAT/FORUM fungicides. Due to
favorable weather conditions and early planting in the United States in the
second quarter of 1994, some sales of PURSUIT herbicide that would have been
expected to occur in the third quarter of this year shifted to the second
quarter. The major portion of the domestic crop protection selling cycle occurs
during the first six months of the year. Sales of the Group's animal health and
nutrition products increased in the third quarter of 1994 versus the same period
last year due to international sales of products acquired from Shell and the
acquisition of an Australian veterinary biologicals company in November 1993.
The Agricultural Group traditionally incurs an operating loss in the third
quarter due primarily to the seasonality of the domestic crop protection
business. The third quarter 1994 operating loss was comparable with the same
period a year ago. The impact of higher sales related to products acquired from
Shell was offset by amortization of certain acquisition costs. In addition,
certain products acquired from Shell realize lower profit margins than existing
crop protection products. This reflects the nature of the acquired Shell
business which includes numerous third party resale products versus higher
margin proprietary products.
Excluding charges related to the pending merger, operating earnings for the
third quarter of 1994 increased versus the same period last year while earnings
from continuing operations were lower in 1994 than in 1993. The 1993 results
included a one-time tax benefit of $16.1 million, or $.18 per share, related
primarily to the remeasuring of Cyanamid's domestic net deferred tax assets to
reflect an increase in the statutory tax rate.
Earnings before taxes on income for the third quarter of 1994 and 1993 include
exchange losses of $1.8 million and $7.6 million, respectively. The exchange
losses were generated primarily by operations in hyperinflationary economies,
principally in Latin America.
Year To Date Results of Operations
Consolidated net sales for the first nine months of 1994 were $3,788.1 million,
an increase of 15.1% compared with $3,291.4 million in the first nine months of
1993. The increase was due primarily to international sales of products
acquired from Shell.
Earnings from continuing operations for the first nine months of 1994 were
$323.9 million, or $3.59 per share, compared to a loss of $70.4 million, or $.78
per share, reported for the first nine months of 1993. 1994 nine month results
include one-time, net charges of $25.3 million, or $.28 per share, related to
the American Home Products merger. 1993 nine month results included a one-time,
net charge of $378.4 million, or $4.21 per share, related to the Immunex
acquisition.
Net earnings for the first nine months of 1994 were $323.9 million, or $3.59 per
share, compared to a net loss of $1,025.2 million, or $11.40 per share, reported
for the first nine months of 1993. 1994 nine month results include one-time,
net charges of $25.3 million, or $.28 per share, related to the American Home
PAGE
<PAGE>
Form 10-Q
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
Products merger. The nine month 1993 net loss included a one-time, net charge
of $378.4 million, or $4.21 per share, related to the Immunex acquisition; a
$622.2 million, or $6.92 per share, net loss from discontinued operations; and
a $332.6 million, or $3.70 per share, net charge for the cumulative effect of
accounting changes applicable to continuing operations. The net loss from
discontinued operations, related to the spin-off of Cytec, included a net loss
from operations of $75.6 million, primarily attributable to a provision for
remediation expense of $98.2 million, a net loss on distribution of $326.8
million, and a net charge of $219.8 million for the cumulative effect of
accounting changes applicable to discontinued operations.
Sales of the Medical Group increased in the first nine months of 1994 compared
to the same period a year ago. The results reflect increased worldwide sales
of consumer health products and increased domestic sales of oncology products
and generic pharmaceuticals. These increases were partially offset by lower
domestic sales of ophthalmic products. Increased sales of domestic ethical
pharmaceuticals were offset by lower international sales. International sales
were impacted by government health care reform efforts in Europe, including
cutbacks on state-reimbursed pharmaceutical purchases. Worldwide sales of
CENTRUM and domestic sales of CENTRUM SILVER multivitamin/multimineral
supplements increased in the first nine months of 1994 versus the same period
a year ago. Domestic sales of oncology products were higher in the first nine
months of 1994 compared to the same period last year due to the Immunex
acquisition in June 1993. Increased domestic sales of generic pharmaceuticals
were due primarily to the introduction of several new products in late 1993 and
early 1994. Increased domestic sales of SUPRAX cefixime and introductory
worldwide sales of ZOSYN injectable antibiotic, marketed as TAZOCIN in
international markets, were partially offset by lower domestic sales of MINOCIN
minocycline and MAXZIDE triamterene/ hydrochlorothiazide due primarily to
increased competition and generic substitution. International sales of NICHOLIN
citicholine and PIPRACIL piperacillin decreased in the first nine months of 1994
compared to last year due primarily to government health care reform efforts in
Europe. Lower domestic sales of HIBTITER Haemophilus b conjugate vaccine and
TRI-IMMUNOL diphtheria, tetanus and pertussis vaccine in the first nine months
of 1994 compared to the same period last year were mostly offset by higher
domestic sales of TETRAMUNE, a childhood combination vaccine of HIBTITER and
TRI-IMMUNOL, and increased domestic sales of ORIMUNE Poliovirus vaccine live
oral trivalent. Lower domestic sales of Storz ophthalmic products were due
primarily to the disposition of the specialty devices product line in early
1994.
Medical Group operating earnings increased in the first nine months of 1994
versus the comparable period in 1993. The increase was due to the one-time
charge in the second quarter of 1993 related to the Immunex acquisition which
resulted in a Medical Group operating loss for the first nine months of 1993.
Exclusive of this one-time charge in the second quarter of 1993, Medical Group
operating earnings were about even in the first nine months of 1994 versus the
comparable period in 1993. The favorable impact of increased sales volume in
the first nine months of 1994 compared to last year was offset by an Immunex
operating loss, due primarily to research and development expenditures, and
continued sales price erosion on domestic pharmaceutical products.
Worldwide sales of the Agricultural Group increased in the first nine months of
1994 versus the same period a year ago. The increase was primarily due to
worldwide sales gains in agricultural products, primarily sales of crop
protection products acquired from Shell and higher domestic sales of PURSUIT
herbicide. The purchase of the Shell companies' international crop protection
business was substantially complete by the end of 1993. International sales of
PAGE
<PAGE>
Form 10-Q
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
products acquired from Shell were led by FASTAC, TORQUE, AZODRIN, CASCADE, and
RIPCORD insecticide/acaricides; DELAN, SAPROL and ACROBAT/FORUM fungicides; and
SUFFIX and BLADEX herbicides. Sales of the Group's animal health and nutrition
products increased in the first nine months of 1994 versus the same period last
year due to sales of products acquired from Shell and the acquisition of an
Australian veterinary biologicals company in November 1993.
Agricultural Group operating earnings were higher in the first nine months of
1994 compared to the same period a year ago due primarily to the impact of
higher domestic sales of crop protection products. The impact of higher sales
related to products acquired from Shell was offset by amortization of certain
acquisition costs. In addition, certain products acquired from Shell realize
lower profit margins than existing crop protection products. This reflects the
nature of the acquired Shell business which includes numerous third party resale
products versus higher margin proprietary products.
The 1993 results included a one-time tax benefit of $16.1 million, or $.18 per
share, related primarily to the remeasuring of Cyanamid's domestic net deferred
tax assets to reflect an increase in the statutory tax rate.
Earnings before taxes on income for the first nine months 1994 and 1993 include
exchange losses of $11.4 million and $15.5 million, respectively. The exchange
losses were generated primarily by operations in hyperinflationary economies,
principally in Latin America.
As discussed in Note 1 to the condensed consolidated financial statements, on
August 17, 1994, American Home Products Corporation and Cyanamid entered into
a definitive merger agreement which provided for Cyanamid shareholders to
receive a price of $101 net in cash for all outstanding shares of Cyanamid.
During the third quarter of 1994, one-time charges related to the merger were
recorded in Administrative and general expenses in the accompanying Consolidated
Statement of Operations. The company anticipates that additional one-time
charges of approximately $300 million, on a pre-tax basis, will be recorded upon
the effective date of the merger under the terms of the merger agreement
described above. These charges will consist primarily of costs associated with
the cash settlement of employee stock options and contingent investment advisory
fees.
PAGE
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
Deductible amounts under Cyanamid's liability insurance
coverage (particularly product and environmental liability) are
such that Cyanamid must regard itself, for practical purposes, as
self-insured with respect to most events. Cyanamid has a
self-insurance program which provides reserves for costs based on
past claims experience.
Cyanamid and its subsidiaries are parties to numerous suits
and claims arising out of the conduct of business, many of which
involve very large damage claims, including claims for punitive
damages. Included among such suits, as of September 30, 1994, are
21 involving personal injury or death allegedly occurring in
connection with administration of Cyanamid's DTP
(diphtheria-tetanus-pertussis) and oral polio vaccines.
In 1990, Cyanamid's supplier of MAXZIDE triamterene/
hydrochlorothiazide filed suit against Cyanamid alleging breach of
a 1984 exclusive licensing agreement and seeking damages and rights
to the MAXZIDE trademarks and trade dress owned by Cyanamid. After
a trial on the merits in Federal District Court, a jury rejected
the supplier's claims. Cyanamid has appealed the dismissal of its
defamation counterclaim and plaintiff has cross-appealed.
The Federal Trade Commission has subpoenaed information
concerning (i) Cyanamid's opposition to a petition by another
company to the FDA to reclassify sutures and a patent infringement
lawsuit against that company and (ii) prices charged for certain
agricultural products (which may be similar to a long moribund but
now revived investigation by the Attorney General of the State of
Florida).
Cyanamid has been named as one of many defendant
pharmaceutical manufacturers and distributors in a number of
federal and state civil antitrust suits alleging that the
defendants conspired to discriminate against retail druggists by
providing lower prices to mail order pharmacies, health maintenance
organizations and similar purchasers.
As of September 30, 1994, Cyanamid was a party to, or
otherwise involved in, legal proceedings directed at the cleanup of
40 Superfund sites, including the Cyanamid-owned Bound Brook site.
In many cases, future environmental related expenditures cannot be
quantified with a reasonable degree of accuracy. It is Cyanamid's
policy to accrue environmental cleanup costs if it is probable that
a liability has been incurred and an amount is reasonably
estimable. As assessments and cleanups proceed, these liabilities
are reviewed periodically and adjusted as additional information
becomes available. Environmental liabilities are inherently
unpredictable. The liabilities can change substantially due to
such factors as additional information on the nature or extent of
contamination, methods of remediation required, and other actions
by governmental agencies or private parties. Cash expenditures
often lag by a number of years the period in which an accrual is
recorded. Insurance coverage of various environmental matters is
currently being litigated; potential recoveries, if any, however,
are unknown at this time. Thus all environmental related accruals
have been recorded without giving effect to any possible future
insurance proceeds. The 40 Superfund sites exclude sites for which
Cytec Industries Inc., Cyanamid's former chemicals business which
was spun-off to Cyanamid's shareholders through a dividend declared
in December 1993 and distributed in January 1994, assumed full
liability and agreed to indemnify Cyanamid but include certain
sites for which there is shared responsibility between Cyanamid and
Cytec. Cyanamid has no reason to believe that it has any practical
exposure to any of the liabilities against which Cytec has agreed
to assume and indemnify Cyanamid.
While it is not feasible to predict the outcome of all pending
suits and claims, based on the most recent review by management of
these matters, management is of the opinion that the ultimate
disposition of, or additional provisions for, such suits and
claims, will not have a material adverse effect upon the
consolidated financial position but could be material to the
results of operations in any one accounting period.
In connection with the August 2, 1994 proposal by American
Home Products Corporation ("AHP") to purchase all the outstanding
shares of common stock of Cyanamid, several lawsuits were filed in
the New Jersey Superior Court on August 3 and 5, 1994 against
Cyanamid and its directors by three law firms on behalf of
individual stockholders. The suits alleged that the directors of
Cyanamid, in violation of their fiduciary obligations, failed to
encourage acceptance of the AHP offer or to solicit other offers to
maximize the value to the stockholders of Cyanamid. On August 9,
1994 AHP announced a cash tender offer for all the outstanding
shares of common stock of Cyanamid and filed a suit in the U.S.
District Court in Maine seeking (a) to set aside or invalidate
certain statutory requirements and Company by-law and charter
provisions that govern business combinations and mergers, offers to
purchase Cyanamid's stock and the election of directors of
Cyanamid, (b) to enjoin Cyanamid from invoking or enforcing any of
such requirements or provisions, and (c) to nullify Cyanamid's
stockholder rights plan. On August 17, 1994, Cyanamid and AHP
entered into a definitive merger agreement for the acquisition by
AHP of all of the issued and outstanding shares of Cyanamid common
stock, including the associated Rights, for $101.00 per share in
cash. The U.S. District Court in Maine dismissed American Home
Products Corporation's lawsuit against Cyanamid. On September 21,
1994, the New Jersey Superior Court denied the individual
stockholders' motions for a preliminary injunction against
Cyanamid's merger with AHP. The existing tender offer, as amended,
is scheduled to expire at 8:00 p.m. on November 21, 1994, unless
extended. AHP has announced that it has entered into an agreement
with the Federal Trade Commission in connection with the tender
offer and expects to consummate the tender offer on November 21,
1994. Subsequent to the completion of the tender offer, Cyanamid
will be merged with a subsidiary of American Home Products
Corporation and each Cyanamid share not previously purchased will
be converted into the right to receive $101.00 net in cash.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 12.1. Ratio of Earnings to Fixed Charges.
(b) Exhibit 27. Financial Data Schedule.
(c) A report on Form 8-K as filed on August 18, 1994,
pursuant to Item 5 other events, is incorporated by
reference.
(d) Amendment No. 3 to report on Form 8-A/A as filed on
August 18, 1994, is incorporated by reference.
(e) Amendment No. 4 to report on form 8-A/A as filed on
August 19, 1994, is incorporated by reference.
(f) Schedule 14D-9 as filed on August 23, 1994, is
incorporated by reference. Exhibit 4 to the Schedule 14D-
9 is the Agreement and Plan of Merger among American Home
Products Corporation, AC Acquisition Corp. and American
Cyanamid Company, dated August 17, 1994.
(g) Amendment No. 1 to Schedule 14D-9 as filed on August 26,
1994, is incorporated by reference.
(h) Amendment No. 2 to Schedule 14D-9 as filed on September
14, 1994, is incorporated by reference.
(i) Amendment No. 3 to Schedule 14D-9 as filed on September
23, 1994, is incorporated by reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMERICAN CYANAMID COMPANY
(Registrant)
By:R. T. Ritter
R. T. Ritter
Controller and
Principal Accounting Officer
November 14, 1994
10Q-3QRT.94<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
/ X / OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13
OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission file number 1-3426
American Cyanamid Company
(Exact name of registrant as specified in its charter)
Maine 13-0430890
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Cyanamid Plaza
Wayne, New Jersey 07470
(Address of principal executive offices)
(201) 831-2000
(Registrant's telephone number, including area code)
INDEX TO EXHIBITS
Page No.
(a) Exhibit 12.1. Ratio of Earnings to Fixed Charges. 18
(b) Exhibit 27. Financial Data Schedule. 19
- 18 -
<TABLE> Exhibit 12.1
AMERICAN CYANAMID COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
(Millions of dollars, except ratio amounts)
<CAPTION>
Nine Months
Ended Year Ended December 31,
September 30,
1994 1993 1992 2 1991 2 1990 2 19892
<S> <C> <C> <C> <C> <C> <C>
Earnings
Earnings (loss) from continuing
operations before taxes on
income $453.01 $(111.8)3 $555.0 $507.0 $378.04 $394.8
Add:
Fixed charges 60.2 82.2 77.9 78.4 114.4 174.0
Less:
Capitalized interest (2.9) (4.6) (4.0) (11.0) (13.5) (14.0)
Total Earnings (Loss) $510.3 $ (34.2) $628.9 $574.4 $478.9 $554.8
Fixed Charges
Interest and debt expenses $ 45.9 $ 62.4 $ 58.8 $ 53.7 $ 88.4 $147.7
Add:
Capitalized interest 2.9 4.6 4.0 11.0 13.5 14.0
Add:
One-third of rental expense 11.4 15.2 15.1 13.7 12.5 12.3
Total Fixed Charges $ 60.2 $ 82.2 $ 77.9 $ 78.4 $114.4 $174.0
Ratio Of Earnings To Fixed Charges 8.481 *3 8.07 7.33 4.194 3.19
* Calculation of the ratio results in an amount that is less than one.
The amount of the earnings deficiency for the year ended December 31,
1993 was $116.4.2
1 Due to the seasonality of the agricultural business, which is heavily
concentrated in the first six months of the year, performance in the
first nine months of the 1994 is not indicative of the results to be
expected for the full year.
2 Restated for discontinued operations related to the spin-off of Cytec
Industries, Inc. in 1993.
3 Includes one-time, pre-tax charges of $383.6 related to the acquisition
of Immunex Corporation and $207.9 related to a companywide restructuring
program. Excluding these charges, the ratio of earnings to fixed
charges would have been 6.78.
4 Includes a pre-tax special charge of $97.2 associated primarily with the
curtailment and consolidation of certain product lines. Excluding this
charge, the ratio of earnings to fixed charges would have been 5.04.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 356
<SECURITIES> 123
<RECEIVABLES> 1110
<ALLOWANCES> 45
<INVENTORY> 1043
<CURRENT-ASSETS> 3032
<PP&E> 3270
<DEPRECIATION> 1438
<TOTAL-ASSETS> 6138
<CURRENT-LIABILITIES> 2439
<BONDS> 388
<COMMON> 514
0
0
<OTHER-SE> 1245
<TOTAL-LIABILITY-AND-EQUITY> 6138
<SALES> 3788
<TOTAL-REVENUES> 3788
<CGS> 1543
<TOTAL-COSTS> 3355
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> 446
<INCOME-TAX> 126
<INCOME-CONTINUING> 324
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<NET-INCOME> 324
<EPS-PRIMARY> 3.59
<EPS-DILUTED> 3.59
</TABLE>
