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 June 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: 89,803,336 shares of Common Stock, par value $5 per
share, were outstanding at June 30, 1994.
This report, including three exhibits, contains 33 pages
numbered sequentially from this cover page. The exhibit index
is located at Page 18.
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<TABLE>
Form 10-Q
PART I FINANCIAL INFORMATION
AMERICAN CYANAMID COMPANY AND SUBSIDIARIES
<CAPTION> CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Six months ended
June 30, June 30,
1994 1993 1994 1993
(Millions of dollars, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $1,499.8 $1,246.5 $2,754.6 $2,392.0
Expenses:
Manufacturing cost of sales 622.3 482.2 1,128.4 915.3
Selling and advertising 359.3 329.9 715.7 662.6
Research and development 164.6 137.3 325.3 280.5
Administrative and general 87.1 76.8 171.5 146.2
Acquired in-process research
and development (Note 3) - 383.6 - 383.6
1,233.3 1,409.8 2,340.9 2,388.2
Earnings (loss) from operations 266.5 (163.3) 413.7 3.8
Interest and other income (charges), net (2.0) 12.6 19.8 35.1
264.5 (150.7) 433.5 38.9
Interest expense 16.2 18.0 32.2 33.1
Earnings (loss) before taxes on income 248.3 (168.7) 401.3 5.8
Taxes on income (Note 9) 68.1 64.8 109.7 120.9
Earnings (loss) before minority interests 180.2 (233.5) 291.6 (115.1)
Minority interests 4.9 (1.4) 10.2 (4.9)
Earnings (loss) from continuing operations 185.1 (234.9) 301.8 (120.0)
Discontinued operations (Notes 2 and 7):
Earnings from operations, net of
taxes of $3.2 and $5.2, respectively - 6.2 - 10.0
Cumulative effect of accounting changes - - - (219.8)
- 6.2 - (209.8)
Earnings (loss) before cumulative effect
of accounting changes 185.1 (228.7) 301.8 (329.8)
Cumulative effect of accounting changes
(Note 7) - - - (332.6)
Net earnings (loss) $ 185.1 $ (228.7) $ 301.8 $ (662.4)
Per share of common stock:
Earnings (loss) from continuing operations $ 2.06 $ (2.61) $ 3.36 $ (1.33)
Earnings (loss) from discontinued operations - 0.07 - (2.33)
Earnings (loss) before cumulative effect
of accounting changes 2.06 (2.54) 3.36 (3.66)
Cumulative effect of accounting changes - - - (3.70)
Net earnings (loss) $ 2.06 $ (2.54) $ 3.36 $ (7.36)
Dividends $ .4625 $ .4375 $ .9000 $ .8500
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<TABLE>
Form 10-Q
AMERICAN CYANAMID COMPANY AND SUBSIDIARIES
<CAPTION> CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1994 1993
(Millions of dollars)
Assets
<S> <C> <C>
Current assets
Cash and cash equivalents $298.0 $426.1
Marketable securities and time deposits 179.3 101.7
Accounts receivable, less allowance for doubtful
accounts 1,389.4 1,120.1
Inventories 1,008.2 1,027.9
Deferred tax assets 409.9 410.1
Total current assets 3,284.8 3,085.9
Investments and advances 363.2 307.2
Plants, equipment and facilities, at cost 3,212.13,106.0
Less accumulated depreciation 1,411.0 1,335.7
Net plant investment 1,801.1 1,770.3
Intangibles resulting from business acquisitions,
net of accumulated amortization 295.6 305.3
Deferred tax assets 309.7 328.5
Other assets 259.3 260.2
$6,313.7 $6,057.4
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued expenses $1,898.9 $1,860.0
Short-term borrowings 422.4 432.6
Funded debt installments due within one year 102.6 182.9
Income taxes 292.3 254.9
Total current liabilities 2,716.2 2,730.4
Funded debt 338.7 344.3
Deferred tax liabilities 36.2 27.6
Other noncurrent liabilities 1,451.2 1,444.4
Minority interests 129.9 143.7
Shareholders' equity
Common stock 513.6 513.6
Additional paid-in capital 38.1 38.9
Earnings employed in the business 1,669.2 1,448.2
Accumulated translation and other adjustments (32.8) (49.3)
Accumulated net unrealized gains on available-
for-sale securities (Note 8) 38.7 -
Treasury stock, at cost (585.3) (584.4)
Total shareholders' equity 1,641.5 1,367.0
$6,313.7 $6,057.4
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
PAGE
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<TABLE>
Form 10-Q
<CAPTION> AMERICAN CYANAMID COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended
June 30,
1994 1993
(Millions of dollars)
<S> <C> <C>
Net cash provided by operating activities of
continuing operations $ 265.4 $ 534.5
Net cash provided by operating activities of
discontinued operations - 72.4
Net cash provided by operating activities 265.4 606.9
Cash flows provided by (used for) investing activities
Additions to plants, equipment and facilities (138.7) (144.1)
Available for sale securities:
Purchases (258.0) -
Sales 162.2 -
Maturities 23.0 -
Additions to investments -
principally marketable securities - (232.8)
Reductions to investments -
principally marketable securities - 112.6
Acquisitions of businesses, net of cash acquired - (345.4)
Net investing activities of discontinued operations - (45.4)
Other, net 16.9 3.1
Net cash used for investing activities (194.6) (652.0)
Cash flows provided by (used for) financing activities
Change in short-term borrowings, net 4.3 319.5
Funded debt additions 67.3 201.4
Funded debt reductions (161.0) (221.8)
Purchases of treasury stock (6.2) (15.1)
Cash dividends (80.8) (76.5)
Cash component of Cytec dividend (26.5) -
Other, net 2.8 2.0
Net cash provided by financing activities (200.1) 209.5
Effect of exchange rate changes on cash
and cash equivalents 1.2 (1.6)
Increase (decrease) in cash and cash equivalents (128.1) 162.8
Cash and cash equivalents, beginning of year 426.1 341.7
Cash and cash equivalents, end of period $ 298.0 $ 504.5
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
PAGE
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Form 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
(1) 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 (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 June 30, 1994, and for the three and
six month periods ended June 30, 1994, and 1993. Such adjustments are
of a normal, recurring nature. The results of operations for the three
and six month periods ended June 30, 1994, are not necessarily
indicative of the results to be expected for the full year.
As described in Note 8 below, the company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments
in Debt and Equity Securities", effective January 1, 1994.
(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 three and six month 1993 condensed consolidated
financial statements have been restated to exclude amounts for
discontinued operations from captions applicable to continuing
operations.
Net sales of Cyanamid's chemicals business for the three and six month
periods ended June 30, 1993, were $260.6 and $516.4, 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".
PAGE
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Form 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
(Continued)
The second quarter and six 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 before cumulative effect
of accounting changes 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.
On July 8, 1994, the company announced that it had agreed in principle
to sell its Davis & Geck wound management business to its European joint
venture partner, B. Braun Melsungen AG of Germany, for proceeds of ap-
proximately $220.0 which include an intermediate term dividend-
paying preferred stock investment in the combined B. Braun and Davis &
Geck business. The Company also will enter into a multi-year manufac-
turing agreement with B. Braun and will continue to own and operate its
major suture plant in Manati, Puerto Rico. The sale is subject to the
finalization of definitive agreements and required government approvals.
The Company and B. Braun currently are partners in joint venture wound
management companies in Germany, Portugal and Spain. Davis & Geck has
operations in 60 countries, and had 1993 sales of approximately $300.0.
(4) In the fourth quarter of 1993, the company commenced a global,
companywide restructuring program, which is expected to be accomplished
over three years. The restructuring includes a reduction in the
company's workforce, primarily in the medical business, and other cost-
cutting measures designed to meet increasingly competitive market
conditions and government health care reform efforts in the United
States and Europe. The total workforce reduction is projected to be at
least 2,500 positions. About half of the reduction will take place in
the United States; the balance will be overseas. The facilities
affected include Pearl River, New York and multiple locations overseas.
A pre-tax charge of $207.9 for these costs was reflected in the
company's operating results for the fourth quarter of 1993.
The major components of this charge were $132.7 for severance and
related outplacement costs to reduce the company's workforce; $22.1 to
curtail and consolidate certain product lines; $17.6 to reduce to
estimated realizable amounts the carrying value of certain assets
related to manufacturing operations to be discontinued as part of the
restructuring program; and $35.5 for other restructuring measures
including the write-off of certain intangibles, plant decommissioning
expenses and certain contract terminations. After allowing for tax
benefits of $74.5, the restructuring provision reduced earnings from
continuing operations and net earnings by $133.4, or $1.48 per share.
PAGE
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Form 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
(Continued)
Total cash outflows associated with the restructuring, primarily
severance related, are projected to be approximately $150.0, are
expected to be concentrated in the earlier periods of the restructuring
program, and will be funded by cash flows provided by operating
activities.
The company anticipates that efficiencies related to the restructuring,
primarily reduced labor and related benefits costs, will be phased in
over the next several years. The estimated annual benefit of the
efficiencies, when fully realized, continues to be approximately $100.0
on an after-tax basis.
Since implementation of the restructuring program, the restructuring
accruals have decreased by approximately $34.0 due primarily to cash
expenditures related to severance costs and non-cash charges to curtail
and consolidate certain product lines. In addition, approximately 1,500
employees have been terminated through involuntary and voluntary
measures since inception of the program.
(5) Earnings per share of common stock are based on the average number of
shares outstanding. The average shares outstanding for the three month
periods ended June 30, 1994, and 1993, were 89,805,584 and 89,977,620,
respectively.
(6) Components of inventories at June 30, 1994, and December 31, 1993 were
as follows:
June 30, December 31,
1994 1993
Finished goods $ 517.1 $ 599.3
Work in progress 274.6 250.4
Raw materials and supplies 336.1 276.8
1,127.8 1,126.5
Less reduction to LIFO cost (119.6) (98.6)
$1,008.2 $1,027.9
(7) 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.
PAGE
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Form 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
(Continued)
Also effective January 1, 1993, the company adopted SFAS No. 109,
"Accounting for Income Taxes." It requires an asset and liability
approach for financial accounting and reporting for income taxes. The
aggregate cumulative effect of this accounting change was a one-time
gain of $13.0, or $.14 per share. 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 gains of $2.4, or $.02 per share,
to continuing operations and $10.6, or $.12 per share, to discontinued
operations.
(8) Effective January 1, 1994, the company adopted SFAS No. 115 "Accounting
for Certain Investments in Debt and Equity Securities". Management
determines the appropriate classification of securities at the time of
purchase and reevaluates such designation as of each balance sheet date.
Debt securities are classified as held-to-maturity when the company has
the positive intent and ability to hold the securities to maturity.
Held-to-maturity securities are recorded at amortized cost. Debt and
equity securities not classified as held-to-maturity are classified as
available-for-sale. Available-for-sale securities are recorded at fair
value, with unrealized gains and losses, net of tax, reported in a
separate component of shareholders' equity. Realized gains and losses
are included in the consolidated statement of operations. The cost of
securities sold is based on the specific identification method for debt
securities and average cost for equity securities.
The following is a summary of available-for-sale and held-to-maturity
securities as of January 1, 1994:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available-for-sale:
U.S. Government debt $ 57.5 $ 1.9 $ .7 $ 58.7
Corporate & other debt 310.2 .4 .1 310.5
Total debt securities 367.7 2.3 .8 369.2
Equity securities 36.3 89.0 2.4 122.9
404.0 91.3 3.2 492.1
Held-to-maturity:
Corporate & other debt
securities 237.0 - - 237.0
Total available-for-sale
and held-to-maturity
securities $641.0 $91.3 $3.2 $729.1
The fair value of available-for-sale and held-to-maturity securities
includes $275.6 of cash equivalents and excludes equity method
investments of $34.0 and equity securities, with a cost basis of $9.5,
which do not have a readily determinable fair value. Marketable
securities and investments and advances at January 1, 1994, were $497.0.
The adjustment for unrealized net gains on available-for-sale securities
included as a separate component of shareholders' equity asof January
1, 1994, was $53.3, net of deferred income tax effects of $34.8.
PAGE
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Form 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
(Continued)
The amortized cost and estimated fair value of debt securities at
January 1, 1994, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because the issuers
of the securities may have the right to prepay obligations without
prepayment penalties.
Amortized Fair
Cost Value
Available-for-Sale
Due in one year or less $ 70.3 $ 70.4
Due after one year through five years 48.6 48.9
Due after five years 248.8 249.9
$367.7 $369.2
Held-to-Maturity
Due in one year or less $237.0 $237.0
(9) The company records income tax expense based upon an estimated full year
effective income tax rate. The company's effective income tax rate
decreased in the second quarter and first six months of 1994 compared
to the same periods last year. There was no significant tax benefit
available on the one-time charge of $383.6 resulting from the Immunex
acquisition which significantly increased the 1993 effective income tax
rate. Excluding the effect of the Immunex charge, the effective income
tax rate decreased due primarily to a change in the mix of income among
taxing jurisdictions. The effective income tax rate in the second
quarter and first six months of 1993 did not anticipate the effects of
certain items, primarily a change in the mix of income among taxing
jurisdictions and the passage in the United States of the Omnibus Budget
Reconciliation Act of 1993.
(10) Cash payments during the six months ended June 30, 1994, and 1993,
included interest (net of amounts capitalized) of $37.2 and $29.5 and
income taxes of $63.3 and $86.0, respectively.
(11) On August 9, 1994, American Home Products Corporation offered to
purchase all of the outstanding shares of common stock of Cyanamid for
95 dollars cash per share. The stock purchase offer is contingent upon
various significant conditions. The offer, or any provisions of it, may
be modified or revoked at any time. Cyanamid urged all its shareholders
to take no action on the tender offer until Cyanamid's board of
directors has reviewed the offer and issued a recommendation to
shareholders.
(12) Certain legal proceedings to which the company is a party are discussed
in Part II, Item 1 of this report.
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Form 10-Q
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition - At June 30, 1994, aggregate debt financing was $863.7
million, equal to approximately 33% of total debt and equity including minority
interests. The corresponding amounts at December 31, 1993, were $959.8 million
and 39%, respectively.
For detailed information concerning discontinued operations, the Immunex and
Shell acquisitions, cumulative effect of accounting changes, and income taxes,
refer to Notes 2, 3, 7 and 9, respectively, to the condensed consolidated
financial statements.
Second Quarter Results of Operations
Consolidated net sales for the second quarter of 1994 were $1,499.8 million, an
increase of 20.3% compared with $1,246.5 million in the second quarter of 1993.
The increase was due primarily to international sales of Agricultural products
acquired from Shell and higher domestic sales of PURSUIT herbicide.
Earnings from continuing operations in the second quarter of 1994 were $185.1
million, or $2.06 per share, compared to a loss of $234.9 million, or $2.61 per
share, reported in the second quarter of 1993. Second quarter 1993 results
included a one-time charge of $378.4 million, or $4.21 per share, related to the
Immunex acquisition.
Net earnings in the second quarter of 1994 were $185.1 million, or $2.06 per
share, compared to a net loss of $228.7 million, or $2.54 per share, reported
in the second quarter of 1993. Second quarter 1993 results included a one-time,
net charge of $378.4 million, or $4.21 per share, related to the Immunex
acquisition, and net earnings from discontinued operations of $6.2, or $.07 per
share.
Interest and other income (charges), net decreased in the second quarter of 1994
compared to the same period a year ago due primarily to lower interest income
and amortization charges related to certain Shell and Immunex acquisition costs.
Sales of the Medical Group increased in the second quarter 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 generic pharmaceuticals
and oncology products. Worldwide sales of CENTRUM and domestic sales of CENTRUM
SILVER multivitamin/multimineral supplements increased in the second 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 the last half of 1993 and early 1994. Domestic sales of oncology products
were higher in the second quarter of 1994 compared to the same period last year
due to the Immunex acquisition in June 1993. Lower sales of HIBTITER
Haemophilus b conjugate vaccine in the second quarter 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. Introductory
worldwide sales of ZOSYN injectable antibiotic, marketed as TAZOCIN in
international markets, were offset by lower domestic sales of SUPRAX cefixime
and international sales of NICHOLIN citicoline.
Medical Group operating earnings increased in the second quarter of 1994 versus
the comparable period in 1993. The increase was due to a one-time charge in the
second quarter of 1993 related to the Immunex acquisition which resulted in a
Medical Group operating loss for the second quarter of 1993. Exclusive of this
one-time charge in the second quarter of 1993, Medical Group operating earnings
declined in the second quarter of 1994 versus the comparable period in 1993.
The impact of increased sales volume in the second quarter of 1994 compared to
last year was offset by an Immunex operating loss, due primarily to research and
development expenditures, and continued price erosion in domestic pharmaceutical
products.
All brand names appearing in capital letters are registered trademarks or
trademarks owned by or licensed to the company.
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Form 10-Q
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
Worldwide sales of the Agricultural Group increased in the second quarter of
1994 versus the same period a year ago. The increase was led by worldwide sales
gains in crop protection chemicals, primarily international sales of 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 products
acquired from Shell include DELAN and SAPROL in the fungicide area; AZODRIN,
CASCADE, FASTAC, RIPCORD, and TORQUE in the insecticide/acaricide area; and
BLADEX and SUFFIX in the herbicide area. 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. Sales of the Group's animal
health and nutrition products increased in the second quarter 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 second quarter of 1994
as compared to the same period a year ago due to the impact of international
sales of products acquired from Shell and higher domestic sales of crop
protection chemicals.
Earnings before taxes on income for the second quarter of 1994 and 1993 include
exchange losses of $3.1 million and $4.3 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 from continuing operations for the first six months of
1994 were $2,754.6 million, an increase of 15.2% compared with $2,392.0 million
in the first six months of 1993. The increase was due primarily to
international sales of products acquired from Shell and higher domestic sales
of PURSUIT herbicide.
Earnings from continuing operations for the first six months of 1994 were $301.8
million, or $3.36 per share, compared to a loss of $120.0 million, or $1.33 per
share, reported for the first six months of 1993. 1993 six month results
included a one-time charge of $378.4 million, or $4.21 per share, related to the
Immunex acquisition.
Net earnings for the first six months of 1994 were $301.8 million, or $3.36 per
share, compared to a net loss of $662.4 million, or $7.36 per share, reported
for the first six months of 1993. The six 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 $209.8 million, or $2.33 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 net earnings from operations of $10.0 million and a net charge of
$219.8 million for the cumulative effect of accounting changes applicable to
discontinued operations.
Interest and other income (charges), net decreased in the first six months of
1994 compared to the same period a year ago due primarily to lower interest
income and amortization charges related to certain Shell and Immunex acquisition
costs.
PAGE
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Form 10-Q
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
Sales of the Medical Group increased in the first six 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
international sales of ethical pharmaceuticals and lower domestic sales of
ophthalmic products. Factors affecting international sales included the
strengthening of the U.S. dollar against major European currencies in the first
half of 1994 compared to the same period last year and its effect on the
translation of foreign sales, and 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 six months of 1994
versus the same period a year ago. Domestic sales of oncology products were
higher in the first six months of 1994 compared to the same period last year due
to the Immunex acquisition in June 1993. Increased domestic sales of standard
products were due primarily to the introduction of several new products in late
1993 and early 1994. Lower domestic sales of MINOCIN minocycline and MAXZIDE
triamterene/hydrochlorothiazide in the first six months of 1994 compared to the
same period last year, due primarily to continued generic competition, were
mostly offset by increased domestic sales of SUPRAX cefixime and introductory
worldwide sales of ZOSYN injectable antibiotic, marketed as TAZOCIN in
international markets. International sales of NICHOLIN citicoline and PIPRACIL
piperacillin decreased in the first six months of 1994 compared to last year due
primarily to government health care reform efforts in Europe. Lower sales of
HIBTITER Haemophilus b conjugate vaccine and TRI-IMMUNOL diphtheria, tetanus and
pertussis vaccine in the first six months of 1994 compared to the same period
last year were mostly offset by introductory sales of TETRAMUNE, a childhood
combination vaccine of HIBTITER and TRI-IMMUNOL. Lower domestic sales of Storz
products were due primarily to the disposition of the specialty devices product
line in early 1994.
Medical Group operating earnings increased in the first six 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 six months of 1993.
Exclusive of this one-time charge in the second quarter of 1993, Medical Group
operating earnings declined in the first six months of 1994 versus the
comparable period in 1993. The favorable impact of increased sales volume in
the first six months of 1994 compared to last year was offset by an Immunex
operating loss, due primarily to research and development expenditures,
continued price erosion in domestic pharmaceutical products and a shift in
product mix toward lower margin products, primarily in the domestic
pharmaceutical business.
Worldwide sales of the Agricultural Group increased in the first six months of
1994 versus the same period a year ago. The increase was led by worldwide sales
gains in crop protection chemicals, primarily sales of 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 products acquired from Shell include
DELAN and SAPROL in the fungicide area; AZODRIN, CASCADE, FASTAC, RIPCORD, and
TORQUE in the insecticide/acaricide area; and BLADEX and SUFFIX in the herbicide
area. 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. Sales of the Group's animal health and nutrition products
increased in the first six 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 six months of
1994 as compared to the same period a year ago due primarily to the impact of
higher domestic sales of crop protection chemicals and sales of products
acquired from Shell.
PAGE
<PAGE>
Form 10-Q
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
Due to the seasonality of the Agricultural business which is heavily
concentrated in the first six months of the year, performance in the first half
of 1994 is not indicative of the results to be expected for the full year.
As discussed in Note 11 to the condensed consolidated financial statements, on
August 9, 1994, a cash tender offer was made to the company's shareholders to
purchase all of the outstanding shares of common stock of the company. The
company cannot predict the ultimate outcome of this offer or its impact on
future results of operations at this time. However, the company anticipates
that charges related to the offer, including costs associated with advisory
fees, legal fees and stock appreciation rights, may have an unfavorable impact
on the company's third quarter 1994 results of operations.
Earnings before taxes on income for the first six months 1994 and 1993 include
exchange losses of $9.6 million and $7.9 million, respectively. The exchange
losses were generated primarily by operations in hyperinflationary economies,
principally in Latin America.
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
June 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 recently 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 June 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 sub-
stantially 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 to purchase all the outstanding shares of common stock of Cyanamid,
six lawsuits have been filed in the N.J. Superior Court on August 3 and 5, 1994
against Cyanamid and its directors by three law firms on behalf of six
individual stockholders. The suits allege that the directors of Cyanamid, in
violation of their fiduciary obligations, have failed to encourage acceptance
of the American Home offer or to solicit other offers to maximize the value to
the stockholders of Cyanamid. On August 9, 1994 American Home Products
Corporation 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, and (b) to enjoin Cyanamid from invoking or enforcing any of such
requirements or provisions. The suit also seeks to nullify Cyanamid's
stockholder rights plan.
<PAGE>
Item 4. Submission of Matters to Vote of Security Holders
(a) The Annual Meeting of Shareholders of the Company was held on April 18,
1994.
(c) (i) A. R. Dragone was elected a director. Votes for -- 69,862,127;
votes against or withheld -- 44,409.
A. J. Levine was elected a director. Votes for -- 69,894,077;
votes against or withheld -- 12,459.
A. Wexler was elected a director. Votes for -- 69,888,107; votes
against or withheld -- 18,429.
(ii) A proposal to amend the company's Restated Articles of
Incorporation to permit the company to hold meetings of share-
holders within or outside the state of Maine was approved.
Votes for -- 71,382,445; votes against or withheld -- 485,627;
abstentions and broker non-votes -- 357,313.
(iii) A proposal to amend the company's Incentive Compensation Plan to
provide for payment of long-term incentive grants in shares of the
company's Common Stock was approved. Votes for -- 68,632,242;
votes against or withheld -- 3,614,544; abstentions and broker
non-votes -- 549,587.
(iv) A proposal by a shareholder requesting the company to require
confidential treatment of all proxies, ballots and voting
tabulations and independent, non-employee tabulators and
inspectors of election was approved. Votes for -- 33,243,888;
votes against or withheld -- 28,487,058; abstentions and broker
non-votes -- 736,958.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10. Executive Income Continuity Plan of Registrant, as
amended through June 21, 1994.
(b) Exhibit 12.1. Ratio of Earnings to Fixed Charges.
(c) Exhibit 27. Financial Data Schedule.
(d) No reports on Form 8-K were filed for the quarter ended June 30,
1994. A report on Form 8-K as filed on July 19, 1994, pursuant to
Item 5 other events, 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
August 15, 1994
10Q-2QRT.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 June 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 10. Executive Income Continuity Plan 19 - 31
(b) Exhibit 12.1. Ratio of Earnings to Fixed Charges 32
(c) Exhibit 27. Financial Data Schedule 33
EXECUTIVE INCOME CONTINUITY PLAN
OF
AMERICAN CYANAMID COMPANY
(As amended through June 21, 1994)
1. Purpose. The purpose of the Executive Income Continuity
Plan (this Plan) is to reinforce and encourage the continuing
attention, dedication and loyalty of executives in the senior
management group of American Cyanamid Company and its subsidiaries
without the distraction of concern over the possibility of involun-
tary or constructive termination of employment resulting from
unforeseen developments, by providing income continuity for a
limited period.
2. Definitions. Unless the context otherwise requires, the
following terms shall have the meanings respectively indicated:
(a) "Board of Directors" shall mean the board of direc-
tors of American Cyanamid Company.
(b) "Cause" shall mean (A) the willful and continued
failure by a member substantially to perform his duties with
the Company (other than any such failure resulting from his
incapacity due to physical or mental illness), after a demand
for substantial performance is delivered to him by the Company
which specifically identifies the manner in which the Company
believes that he has not substantially performed his duties,
or (B) the willful engaging by him in conduct demonstrably
injurious to the Company. For purposes of this definition, no
act, or failure to act, on the part of a member shall be
considered "willful" unless done, or omitted to be done, by
him without reasonable belief that his action or omission was
in the best interests of the Company and was lawful.
(c) A "change in control" shall be deemed to have oc-
curred if: (i) any "person," as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than the Company, any
trustee or other fiduciary holding securities under an employ-
ee benefit plan of the Company, or any Company owned, directly
or indirectly, by the stockholders of the Company in substan-
tially the same proportions as their ownership of stock of the
Company), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding secu-
rities; or (ii) there occurs any transaction or action which
results in the individuals who at the beginning of a period
commencing 24 hours prior to the commencement of the transac-
tion were members of the Board of Directors, together with
individuals subsequently elected to the Board upon the recom-
mendation of a majority of the continuing directors, ceasing
to constitute at least a majority thereof; or (iii) the stock-
holders or the Board of Directors of the Company approves a
definitive agreement to merge or consolidate the Company with
or into another corporation (including any such transaction in
which the Company is the surviving corporation) or to sell or
otherwise dispose of all or substantially all of its assets,
or to adopt a plan of liquidation of the Company.
(d) "Company" shall mean American Cyanamid Company and,
except for the purposes of Paragraph 2(c), shall include any
of its subsidiaries which employs members of this Plan.
(e) "Compensation Committee" shall mean the Compensation
Committee as constituted from time to time of the Board of
Directors, or such other entity as shall have similar authori-
ty and responsibility.
(f) "Date of termination" shall mean (A) if the employ-
ment of a member is terminated by his death, the date of his
death, (B) if such employment is terminated by his retirement,
the date of retirement under the Employees Retirement Plan,
(C) if such employment is terminated for disability, upon the
expiration of his continuous service credits as determined by
the Company, (D) if his employment is terminated by him for
good reason, the date specified in the notice of termination,
and (E) if his employment is terminated for any other reason,
the date on which notice of termination is given; provided
that if within 30 days after any notice of termination is
given the party receiving such notice notifies the other party
that a dispute exists concerning the termination, the date of
termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties
or by a final judgment, order or decree of a court of compe-
tent jurisdiction (the time for appeal therefrom having ex-
pired and no appeal having been perfected).
(g) "Disability" shall mean inability of a member due to
sickness or injury to perform the duties pertaining to his
occupation with the Company, as determined in accordance with
the Long Term Disability Plan and the personnel policies of
the Company.
(h) "Good reason" shall mean:
(A) a change in assignment resulting in the assign-
ment to a member of substantially reduced responsibili-
ties compared with those assigned to him prior to such
change, or any change in his status or position which
represents a demotion from his status or position im-
mediately prior to such change, except in connection with
the termination of his employment because of death or
retirement, by the Company for disability or cause, or by
him other than for good reason;
(B) a reduction in the base salary of a member as
the same may be increased from time to time;
(C) a failure to continue the Incentive Compensation
Plan (or a plan providing substantially similar benefits)
as the same may be modified from time to time but in a
form not less favorable than as of the date of adoption
of this Plan (the "I.C. Plan"), or a failure to continue
a member as a participant in the I.C. Plan on a basis
consistent with the basis on which the I.C. Plan is ad-
ministered as of such date, or a failure to pay to a
member any installment of a previous allotment made to
him under the I.C. Plan;
(D) the relocation of the principal executive offic-
es of the Company to a location more than 25 miles from
the location of the present executive offices or outside
of New Jersey, or requiring a member to be based anywhere
other than the principal executive offices (or, if a
member is not based at such executive offices, requiring
such member to be based at another location) except for
required travel on business to an extent substantially
consistent with his duties and responsibilities, or in
the event of consent to any such relocation of the base
location of a member the failure to pay (or provide reim-
bursement for) all expenses of such member incurred re-
lating to a change of principal residence in accordance
with the applicable personnel policies of the Company in
effect as of the date of adoption of this Plan;
(E) the failure to continue in effect any benefit or
compensation plan (including but not limited to the Em-
ployees Retirement Plan, the Supplemental Employees Re-
tirement Plan, the Long Term Disability Plan, the Person-
nel Protection Program, the I.C. Plan, the 1977, 1984 and
1992 Employees Stock Plans, the Employees Savings Plan,
pension plan, life insurance plan, health and accident
plan, disability or vacation plan in which a member is
participating (or plans providing substantially similar
benefits)), or the taking of any action which would ad-
versely affect participation in or materially reduce
benefits under any of such plans, unless such action is
required pursuant to law or such action is applied uni-
formly to all Members;
(F) the failure to obtain the assumption of or an
agreement to carry out the terms of this Plan by any
successor as contemplated in Section 10; or
(G) any purported termination of a member's employ-
ment which is not effected pursuant to a notice of termi-
nation as herein defined.
(i) "Member" shall mean a person who is employed by the
Company on a full-time basis and for a regular fixed compensa-
tion (other than on a retainer or compensation for temporary
employment) and who is included in the membership of this Plan
as provided in Section 3.
(j) "Notice of termination" shall mean a notice which
indicates the specific basis for termination of employment
relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide such basis.
(k) "Officers" shall mean the chairman, vice chairman,
chief executive officer, president, and all vice presidents
elected from time to time by the Board of Directors.
(1) "Retirement" shall mean termination of employment in
accordance with the provisions of the Employees Retirement
Plan; provided, however, that termination of employment by a
member before his Normal Retirement Date (as defined in such
Plan) for good reason shall not be deemed to be retirement for
purposes of this Plan even though such member may be eligible
for and elect to receive retirement benefits.
The masculine pronoun wherever used herein shall include
the feminine except as the context specifically indicates.
3. Membership. All Officers shall be members of this Plan.
The Compensation Committee may designate any other employee as a
member of this Plan. After an employee becomes a member of this
Plan, his membership shall continue until (a) his death or retire-
ment, (b) termination of his employment by the Company for disabil-
ity or cause, (c) termination of his employment by such member
other than for good reason, or (d) termination of his employment
which is related to the spin-off of the Company's chemical business
in 1993, or any subsequent reorganization, recapitalization, con-
solidation, merger, split-up, combination, spin-off, exchange of
shares or like event which is designated by the Compensation Com-
mittee to fall within this subparagraph (d).
4. Termination of Employment. Each member of this Plan shall
be entitled to receive the income continuation payments provided
for in Section 5 upon termination of his employment, unless such
termination is (a) because of his death or retirement, (b) by the
Company for disability or cause, (c) by such member other than for
good reason, or (d) related to the spin-off of the Company's chemi-
cal business in 1993 or any subsequent reorganization, recapital-
ization, consolidation, merger, split-up, combination, spin-off,
exchange or like event which is designated by the Compensation
Committee to fall within this subparagraph (d).
5. Income Continuation. Subject to the provisions of Section
7, upon termination of the employment of a member pursuant to
Section 4 who is one of the Officers or who is age 50 or over and
has at least 10 years of service with the Company, the Company
shall pay to him the sum of twice his annual base salary at the
rate in effect at the time notice of termination is given plus
twice his annual target award (excluding performance allotments or
any long term incentive) under the I.C. Plan based on such rate, in
equal monthly installments over a period of 24 months following the
date of termination, on the first day of each month commencing with
the first day of the first month after such date. Subject to the
provisions of Section 7, upon termination of the employment of any
other member pursuant to Section 4 who has at least 10 years of
service with the Company and is at least age 40 but less than age
50, the Company shall pay to him his annual target award (excluding
performance allotments any long term incentive) under the I.C.
Plan based on the rate in effect at the time notice is given, in
equal monthly installments over a period of 12 months following the
date of termination, plus his monthly base salary at such rate for
the following number of months:
<PAGE>
Age Months
40 12
41 13
42 14
43 15
44 16
45 17
46 18
47 19
48 20
49 22
in equal monthly installments over the number of months equal to
the number of months of base salary to which such Member is enti-
tled. The Compensation Committee may determine the level of income
payable to a member, not to exceed the maximum income payable to an
Officer as set forth above. All payments shall be made on the
first day of each month commencing with the first day of the first
month after such date. Notwithstanding the foregoing, (i) no
payment shall be made with respect to any period beyond the date of
a member's 65th birthday, (ii) no payment shall be made with re-
spect to any period beyond the date of a member's 60th birthday, or
such earlier date of retirement as shall have been determined by
the Compensation Committee or the Executive Committee under the
Supplemental Employees Retirement Plan, if such member is also, at
the date of termination of his employment, a member of the Supple-
mental Employees Retirement Plan, and (iii) there shall be deducted
from any payments required hereunder any payments made with respect
to any required notice period under any employment agreement be-
tween a member and the Company.
6. Other Payments. Subject to the provisions of Section 7,
upon termination of the employment of a member pursuant to Section
4, the Company shall, in addition to the payments provided for in
Section 5, pay to him:
(a) all relocation payments described in Section 2(h)(D)
and all legal fees and expenses incurred by him as a result of
such termination (including all such fees and expenses, if
any, incurred in contesting or disputing any such termination
or in seeking to obtain or enforce any right or benefit pro-
vided by this Plan or in connection with any tax audit or
proceeding to the extent attributable to the application of
Section 4999 of the Internal Revenue Code of 1986 to any
payment or benefit provided hereunder); and
(b) during the period of two years following the date of
termination, all reasonable expenses incurred by him in seek-
ing comparable employment with another employer to the extent
not otherwise reimbursed to him, including, without limita-
tion, the fees and expenses of a reputable outplacement
organization, and reasonable travel, telephone and office
expenses.
7. Competitive Employment. The Company, at its option,
may discontinue any payments being made to any member pursuant to
Section 5 or Section 6 if such member engages in the operation or
management of any business in the United States of America, whether
as owner, stockholder, partner, officer, consultant, employee or
otherwise, which at such time is in competition with any business
of the Company in any field with which such member was involved
during the last two years of his employment by the Company. Owner-
ship by such member of five percent or less of the shares of stock
of any company listed on a national securities exchange or having
at least 100 stockholders shall not make such member a "stockhold-
er" within the meaning of that term as used in this Section.
8. Maintenance of Plans. The Company shall maintain in full
force and effect, for the continued benefit of each member entitled
to receive payments pursuant to Section 5, for two years following
the date of his termination, all employee benefit plans and pro-
grams or arrangements (including Comprehensive Medical and Dental
Insurance, Group Life Insurance, and Financial Planning and Tax
Preparation and Counseling Services) in which he was entitled to
participate at the time the notice of termination was given subject
to approved plan amendments, provided that his continued participa-
tion is permitted under the general terms and provisions of such
plans and programs.
9. No Mitigation. No member shall be required to mitigate
the amount of any payment provided for under this Plan by seeking
other employment or otherwise, nor shall the amount of any payment
so provided for be reduced by any compensation earned by any member
as the result of employment by another employer, by retirement
benefits or by offset against any amount claimed to be owed by him
to the Company.
10. Successors. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and assets
of the Company, by a written agreement, to expressly assume and
agree to carry out the provisions of this Plan in the same manner
and to the same extent that the Company would be required to carry
them out if no such succession had occurred.
11. Notice. Any notice expressly provided for under this
Plan shall be in writing, shall be given either manually or by
mail, telegram, telex, telefax or cable, and shall be deemed suffi-
ciently given, if and when received by the Company at its offices
at One Cyanamid Plaza, Wayne, New Jersey 07470 Attention: Secre-
tary, or by any member at his address on the records of the Compa-
ny, or if and when mailed by registered mail, postage prepaid,
return receipt requested, addressed to the Company or the member to
be notified at such address. Either the Company or any member may,
by notice to the other, change its address for receiving notices.
12. Funding. All payments provided for under this Plan for
members (including those who have retired) shall not be funded, but
shall become fully vested and nonforfeitable upon the termination
of a member's employment other than (a) because of his death or
retirement, (b) by the Company for disability or cause, or (c) by
him other than for good reason, and shall be paid by the Company as
and when they become due as provided herein.
13. Amendment and Termination. The Board of Directors by
resolution may at any time or from time to time amend or terminate
this Plan; provided, however, that no such amendment or termination
may adversely affect any accrued or vested benefits hereunder; and,
provided further, that after a change in control, this Plan may not
be amended without the consent of all persons who were members as
of the date of such change in control (including those who have re-
tired).
14. Governing Law. This Plan, and the rights and obligations
of the Company and the members hereunder, shall be construed and
governed in accordance with the law of the State of New Jersey.
<TABLE> - 32 -
Exhibit 12.1
AMERICAN CYANAMID COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
(Millions of dollars, except ratio amounts)
<CAPTION>
Six Months Year Ended December 31,
Ended June 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 $408.31 $(111.8)3 $555.0 $507.0 $378.04 $394.8
Add:
Fixed charges 41.5 82.2 77.9 78.4 114.4 174.0
Less:
Capitalized interest (1.7) (4.6) (4.0) (11.0) (13.5) (14.0)
Total Earnings (Loss) $448.1 $ (34.2) $628.9 $574.4 $478.9 $554.8
Fixed Charges
Interest and debt expenses $ 32.2 $ 62.4 $ 58.8 $ 53.7 $ 88.4 $147.7
Add:
Capitalized interest 1.7 4.6 4.0 11.0 13.5 14.0
Add:
One-third of rental expense 7.6 15.2 15.1 13.7 12.5 12.3
Total Fixed Charges $ 41.5 $ 82.2 $ 77.9 $ 78.4 $114.4 $174.0
Ratio Of Earnings To Fixed Charges 10.80 * 8.07 7.33 4.19 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 half 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>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
SIX MONTH PERIOD ENDED JUNE 30, 1994, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> QTR-2
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1994
<CASH> 298.0
<SECURITIES> 179.3
<RECEIVABLES> 1433.0
<ALLOWANCES> 43.6
<INVENTORY> 1008.2
<CURRENT-ASSETS> 3284.8
<PP&E> 3212.1
<DEPRECIATION> 1411.0
<TOTAL-ASSETS> 6313.7
<CURRENT-LIABILITIES> 2716.2
<BONDS> 441.3
<COMMON> 513.6
0
0
<OTHER-SE> 1127.9
<TOTAL-LIABILITY-AND-EQUITY> 6313.7
<SALES> 2754.6
<TOTAL-REVENUES> 2754.6
<CGS> 1128.4
<TOTAL-COSTS> 2340.9
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3.8
<INTEREST-EXPENSE> 32.2
<INCOME-PRETAX> 401.3
<INCOME-TAX> 109.7
<INCOME-CONTINUING> 301.8
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 301.8
<EPS-PRIMARY> 3.36
<EPS-DILUTED> 3.36
</TABLE>
