<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 30, 1997
------------------
Cytec Industries Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-12372 22-3268660
- ---------------------------- ----------- ------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
Five Garret Mountain Plaza
West Paterson, NJ 07424
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 973-357-3100
------------
- --------------------------------------------------------------------------------
(Former name or former address if changed since last report.)
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
INDEX TO FORM 8-K
Item
----
Item 2. Acquisition or Disposition of Assets
Description
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1996
and September 30, 1997 (unaudited)
Consolidated Statements of Operations for the year
ended December 31, 1996 and the nine months ended
September 30, 1997 (unaudited) and 1996 (unaudited)
Consolidated Statement of Stockholders' Equity for
the year ended December 31, 1996.
Consolidated Statements of Cash Flows for the year
ended December 31, 1996 and the nine months ended
September 30, 1997 (unaudited) and 1996 (unaudited)
(b) Unaudited Pro Forma Condensed Consolidated Financial
Information
Pro forma financial information - Statements of
Operations for the year ended December 31, 1996 and the
nine months ended September 30, 1997 and 1996.
(c) Exhibits
2
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
ITEM 2. Acquisition or Disposition of Assets
On September 30, 1997, the Company acquired substantially all of the assets and
liabilities of Fiberite, Inc. (collectively with its parent Fiberite Holdings,
Inc. "Fiberite"), a leading worldwide supplier of advanced composite materials
for aerospace, industrial and recreational applications, for $344 million in
cash (the "Fiberite Acquisition"). The assets and liabilities were acquired from
Stamford FHI Acquisition Corp., which acquired the right to purchase Fiberite on
April 20, 1997 from its previous owners. The assets acquired include all of the
businesses of Fiberite, except for its satellite materials business. Annualized
sales in 1997 for the acquired businesses are estimated at approximately $260
million. The Fiberite Acquisition has been accounted for under the purchase
method of accounting and the results of operations will be included in the
Company's consolidated statement of income beginning October 1, 1997.
3
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
ITEM 7. Financial Statements, Pro Forma Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Fiberite Holdings, Inc.:
We have audited the accompanying consolidated balance sheet of Fiberite
Holdings, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1996
and the related consolidated statement of operations, stockholders' equity and
cash flows for the year then ended. These financial statements are the
responsibility of management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Fiberite Holdings, Inc. and
subsidiaries as of December 31, 1996 and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Phoenix, Arizona
February 19, 1997
5
<PAGE>
FIBERITE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31 September 30
1996 1997
----------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 755 $ 649
Accounts receivable, net 27,664 38,163
Inventories 24,402 38,299
Prepaid expenses 737 125
Deferred tax asset 2,181 1,361
--------- ---------
Total current assets 55,739 78,597
--------- ---------
Deferred tax asset 179 179
Property, plant and equipment, net 88,526 92,115
Intangible assets 11,998 255,276
Deferred financing costs 4,746 --
--------- ---------
Total assets $ 161,188 $ 426,167
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 19,864 $ 29,851
Accrued payroll and benefits 4,752 6,099
Accrued liabilities and other 5,459 4,004
Current portion of pension and post retirement
benefits 1,000 914
Current portion of long-term debt 6,900 --
Notes payable -- 171,500
--------- ---------
Total current liabilities 37,975 212,368
--------- ---------
Accrued pension benefits, net of current portion 6,363 7,157
Accrued post retirement benefits, net of current
portion 12,485 15,230
Long-term debt, net of current portion 70,200 --
Subordinated Notes (net of discount of
$30.4 million) 35,502 --
Other non-current liabilities 750 795
--------- ---------
Total liabilities 163,275 235,550
--------- ---------
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $.01 par value, 2.0 million shares
authorized, no shares issued or outstanding -- --
Common stock, $.01 par value, 15.0 million shares
authorized, 11.1 million and 11.5 million shares
issued and outstanding, respectively 111 115
Additional paid in capital 14,747 191,454
Retained earnings (accumulated deficit) (16,456) 8
Foreign currency translation adjustment (489) (960)
--------- ---------
Total stockholders' equity (deficit) (2,087) 190,617
--------- ---------
Total liabilities and stockholders'
equity (deficit) $ 161,188 $ 426,167
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
FIBERITE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Nine Months
Year Ended Ended Ended
December September September
31, 1996 30, 1996 30, 1997
--------------- ----------------- -----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Net Sales $ 218,827 $ 163,085 $ 214,080
Cost of sales 176,088 130,014 171,474
--------- --------- ---------
Gross profit 42,739 33,071 42,606
Operating expenses:
Marketing, general and
administrative 20,495 11,522 18,690
Research and technology 8,890 8,028 7,312
Stock-based compensation 9,678 9,678 --
Amortization 2,879 2,233 2,754
--------- --------- ---------
Operating income 797 1,610 13,850
Interest expense, net 10,775 8,261 8,835
--------- --------- ---------
Income (loss) before income
taxes (9,978) (6,651) 5,015
--------- --------- ---------
Income tax expense -- -- 1,303
--------- --------- ---------
Net income (loss) $ (9,978) $ (6,651) $ 3,712
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
FIBERITE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands)
<TABLE>
<CAPTION>
Foreign
Additional Currency
Common Paid-In Accumulated Translation Stockholders'
Stock Capital Deficit Adjustment Equity (Deficit)
----- ------- ------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ 111 $ 4,889 $ (6,478) $ -- $ (1,478)
Issuance of common stock -- 180 -- -- 180
Net loss -- -- (9,978) -- (9,978)
Stock-based compensation -- 9,678 -- -- 9,678
Foreign currency translation adjustment -- -- -- (489) (489)
-------- -------- -------- -------- --------
Balance, December 31, 1996 $ 111 $ 14,747 $(16,456) $ (489) $ (2,087)
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE>
FIBERITE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Nine Months
Year Ended Ended Ended
December 31, September 30, September 30,
1996 1996 1997
--------------- --------------- ---------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (9,978) $ (6,651) $ 3,712
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 15,865 10,439 10,640
Accreted interest on notes 3,548 3,077 2,754
Loss on sale of property, plant and equipment 128 -- --
Stock-based compensation 9,678 -- --
Changes in assets and liabilities, net of
effects of acquisitions:
Accounts receivable, net (276) (3,372) (10,456)
Inventories (3,712) (5,944) (10,798)
Prepaid expenses and other 388 6 612
Deferred taxes (1,905) -- (820)
Accounts payable 3,512 3,016 9,985
Accrued payroll and benefits 1,100 1,407 1,348
Accrued liabilities and other (1,151) 4,894 (2,264)
Other non-current liabilities (250) -- 45
Accrued pension benefits 475 489 708
Accrued post-retirement benefits 1,239 1,038 1,123
-------- -------- --------
Net cash provided by operating activities 18,661 8,399 6,589
-------- -------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment (6,222) (3,978) (9,128)
Payments for acquisitions, net of refunds 968 (721) (11,178)
-------- -------- --------
Net cash used in investing activities (5,254) (4,699) (20,306)
-------- -------- --------
Cash flows from financing activities:
Proceeds from the issuance of debt -- -- 17,507
Repayments of long term debt (13,400) (10,900) (4,271)
Proceeds from the issuance of common stock 180 -- 421
Foreign currency translation adjustment -- (15) (43)
Capital contribution -- 7,690 --
-------- -------- --------
Net cash provided by (used in) financing
activities (13,220) (3,225) 13,614
-------- -------- --------
Increase (decrease) in cash and cash
equivalents 187 475 (103)
Cash and cash equivalents at beginning of
period 568 1,694 752
-------- -------- --------
Cash and cash equivalents at end of period $ 755 $ 2,169 $ 649
======== ======== ========
Supplemental cash flow information:
Income taxes paid $ 1,901 $ 2,006 $ 1,130
======== ======== ========
Interest paid $ 7,522 $ 5,702 $ 14,426
Noncash transactions:
Debt obligations for the purchase of
Property and equipment $ 1,080 $ -- $ --
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
9
<PAGE>
FIBERITE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Fiberite Holdings, Inc. (Holdings) was formed by D.L.J. Merchant Banking
Partners, L.P. (DLJ), 90% owner, Carlisle Group, L.P. (Carlisle), 9% owner and
Steeple International, 1% owner to purchase the common stock of Fiberite, Inc.
(Fiberite). On October 6, 1995, Fiberite acquired all the outstanding stock of
ICI Composites Inc. (ICI) and all of the assets of an affiliated German company
in a transaction accounted for as a purchase. For tax purposes, the transaction
was accounted for as an asset purchase under Section 338(h)(10) of the Internal
Revenue Code. Prior to its purchase by Fiberite, ICI Composites Inc. was a
wholly-owned subsidiary of ICI American Holdings Inc. (ICI American), the
ultimate parent of which is Imperial Chemical Industries PLC, headquartered in
the United Kingdom. See Note 17.
Fiberite manufactures advanced composite materials which combine high
performance reinforcement fibers with resins. Sales are made to commercial
entities and to prime contractors with the United States Government. The
commercial entities and prime contractors use the composite materials as raw
materials in their production process.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Holdings,
Fiberite, and its wholly owned subsidiaries, Fiberite Europe-GmbH, and Fiberite
France (all of which taken together are hereinafter referred to as Fiberite.)
All significant intercompany accounts and transactions have been eliminated in
consolidation.
B. CASH AND CASH EQUIVALENTS
Fiberite considers all highly liquid instruments purchased with original
maturities of three months or less to be cash equivalents.
C. INVENTORIES
Inventories are stated at the lower of cost or market. Cost includes labor,
materials and production overhead. Cost is determined using the average cost
method. Market is based upon current sales price less distribution and selling
costs. Provisions are made currently for obsolete and slow-moving inventory.
10
<PAGE>
D. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost, which includes interest to
finance the acquisition and construction of major capital additions during the
construction and development stage. Interest capitalized in the year ended
December 31, 1996 was $0.2 million. For financial statement purposes,
depreciation is recorded on the straight-line basis, without any residual value,
based on useful lives of 20 years for buildings and 3 to 10 years for machinery
and equipment. For tax reporting purposes, depreciation is computed on both
accelerated and straight-line methods.
Expenditures for major renewals and betterments are capitalized, while
expenditures for maintenance and repairs which do not improve assets or extend
their useful lives are charged to expense as incurred. Repair and maintenance
expenses charged to cost of operations were $3.3 million and $3.0 million for
fiscal 1996 and the nine months ended September 30, 1997, respectively. Gains or
losses on the disposition of fixed assets are included in operations as
incurred.
E. INTANGIBLE ASSETS
Intangible assets are amortized on a straight-line basis over the estimated
useful lives of the assets, and consist of backlog (1 year), assembled workforce
(12 years), and patents, technology and other assets (3-32 years) acquired in
connection with business acquisitions. Fiberite reviews intangible and other
long lived assets for impairment whenever events or circumstances indicate that
the carrying amount of the asset may not be recoverable. If the sum of the
expected future cash flows (undiscounted and without interest charges) from an
asset to be held and used in operations is less than the carrying value of the
asset, an impairment loss is recognized in the amount of the difference between
the carrying value and the fair value. Amortization expense of $1.9 million and
$2.1 million was recorded in fiscal 1996 and the nine months ended September 30,
1997, respectively. Accumulated amortization was $3.3 million and $0.5 million
at December 31, 1996 and September 30, 1997, respectively.
F. DEFERRED FINANCING COSTS
Costs totaling $5.9 million associated with the issuance of Fiberite's debt
in October 1995 (see Note 10), were capitalized and are being amortized over the
terms of the debt on a straight-line basis. Amortization of these debt issuance
costs amounted to $1.0 million and $0.7 million in fiscal 1996, and the nine
month period ended September 30, 1997, respectively. Approximately $4.6 million
of deferred financing costs ($2.8 million net of tax)(unaudited) were
transferred to Stamford FHI Acquisition Corp. ("Stamford") as part of the
acquisition by Stamford. See Note 17.
G. NOTES PAYABLE
Notes payable represent amounts owed to a bank by Stamford incurred as
part of the acquisition of Fiberite Holdings Inc. The notes bear interest at
variable rates and are due in October and November 1997.
11
<PAGE>
H. FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign operations, where the functional currency
is the local currency, are translated into U.S. dollars at the fiscal year end
exchange rate. The related translation adjustments are recorded as cumulative
translation adjustments, a separate component of stockholders' deficit. Revenues
and expenses are translated using average exchange rates prevailing during the
year. Foreign currency transaction gains and losses are included in net income
(loss).
I. REVENUE RECOGNITION
Sales are recorded when products are shipped and title passes to the
customer. Provisions are made currently for estimated product returns.
J. INCOME TAXES
Fiberite uses the asset and liability method of accounting for income taxes
prescribed by Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amount of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
SFAS No. 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in the period that includes the enactment date.
K. POST-RETIREMENT HEALTHCARE AND LIFE INSURANCE BENEFITS
Fiberite provides certain healthcare and life insurance benefits for
retired employees. Employees covered by Fiberite sponsored plans become eligible
for those benefits when they reach normal or early retirement age while working
for Fiberite. These benefits are subject to deductibles, copayment provisions,
and other limitations. Fiberite reserves the right to change or terminate
benefit plans at any time (see Note 9).
L. STOCK-BASED COMPENSATION PLANS
Fiberite accounts for its stock-based compensation plans under Accounting
Principles Board Opinion (APB) No. 25. Effective January 1, 1996, Fiberite
adopted the disclosure option of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," (SFAS No. 123) which requires
that companies which do not elect to account for stock-based compensation
through the statement of operations as prescribed by the statement, shall
disclose the pro forma effects on net income (loss) and net income (loss) per
share as if SFAS No. 123 had been adopted. (See note 14).
M. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
12
<PAGE>
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses during the periods reported. Actual results could differ
from those estimates.
N. INTERIM PERIODS
The results of operations for the nine months ended September 30, 1997, are
not necessarily indicative of the results to be expected for the full year. All
information as of and for the nine month periods ended September 30, 1996 and
1997, is unaudited and, in the opinion of management, contains all adjustments,
consisting only of normal recurring adjustments necessary for a fair
presentation of such information for the respective periods.
(3) PURCHASE ACCOUNTING
PURCHASE OF SIMMACO
In May 1996, Fiberite completed the purchase of equipment, formulations,
and other specific assets of Simmaco SARL (Simmaco) for approximately $2.0
million. The excess of the purchase price over the fair value of the tangible
assets acquired of $1.2 million was allocated to the intangible assets acquired.
Simmaco, located in Courcelles Les-Lens, France, manufactures and markets
engineering grade bulk molding compounds produced from vinyl ester, polyester
resins and fiberglass reinforcement.
(4) RELATED PARTY TRANSACTIONS
Under the terms of a management contract with DLJ and Carlisle, Fiberite
pays each entity annual management fees of $250,000. Aggregate 1996 management
fees earned by DLJ and Carlisle were $500,000.
(5) ACCOUNTS RECEIVABLE
Accounts receivable, net consist of the following (in thousands):
December 31, September 30,
------------ -------------
1996 1997
------------ -------------
(unaudited)
Trade receivables $ 28,129 $ 39,593
Receivables from employees 733 289
Other receivables 178 (311)
-------- --------
29,040 39,571
Less: allowance for doubtful accounts (341) (513)
Less: allowance for returns and allowances (1,035) (895)
-------- --------
$ 27,664 $ 38,163
======== ========
13
<PAGE>
Fiberite performs ongoing credit evaluations of its customers' financial
condition but does not require collateral to support trade receivables. The
allowance for doubtful accounts is based on factors pertaining to the credit
risk of specific customers, historical trends and other information. The
allowance for returns and allowances is based on Fiberite's knowledge of
specific potential returns, historical trends and other information.
(6) INVENTORIES
Inventories consist of the following (in thousands):
December 31, September 30,
------------ -------------
1996 1997
------------ -------------
(unaudited)
Raw materials $13,978 $19,695
Work-in-process 3,300 3,096
Finished goods 7,124 15,508
------- --------
$24,402 $38,299
======= ========
(7) PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consist of the following (in thousands):
December 31, September 30,
------------ -------------
1996 1997
------------ -------------
(unaudited)
Land $ 3,836 $ 3,425
Buildings and site improvements 36,802 27,578
Machinery and equipment 59,036 57,342
Construction in progress 4,662 4,730
------- --------
104,336 93,075
Less: accumulated depreciation (15,810) (960)
-------- --------
$ 88,526 $ 92,115
======== ========
14
<PAGE>
(8) INCOME TAXES
Fiberite files a consolidated federal income tax return. Income tax expense
consists of the following (in thousands):
Fiscal 1996
-----------
Current provision
Federal $1,429
State 471
------
Total current provision 1,900
Deferred benefit
Federal (1,429)
State (471)
------
Total deferred benefit (1,900)
------
Total $ -
=======
Deferred income taxes result from provisions of the tax laws that either
require or permit certain items of income or expense to be reported in different
periods for tax purposes than for financial reporting.
The following is a summary of Fiberite's deferred income taxes (in
thousands):
December 31
-----------
1996
-----------
Deferred tax assets:
Reserves and accruals $ 2,782
Liability related to pension and post-retirement benefits 7,735
Other 1,913
--------
Total gross deferred tax assets 12,430
Less-valuation allowance (2,243)
--------
Deferred tax asset 10,187
--------
Deferred tax liabilities:
Property, plant and equipment (1,972)
Intangible assets (5,855)
--------
Deferred tax liability (7,827)
--------
Deferred tax asset $ 2,360
========
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<PAGE>
Recognition of the net deferred tax asset at December 31, 1996 has been
limited to the amount which is more likely than not to be realized.
Fiberite's effective rate for income taxes varies from the statutory U.S.
Federal rate as follows:
Fiscal
1996
------
Statutory U.S. Federal rate (34.0)%
Foreign taxes --
State taxes 1.2
Permanently nondeductible items 0.9
Nondeductible compensation 34.9
Change in valuation allowance (1.2)
Other (1.8)
-----
-%
======
(9) EMPLOYEE BENEFITS
The following describes employee benefits provided by Fiberite in the
United States. Fiberite does not provide retirement benefit plans for its
employees in Germany and France.
DEFINED CONTRIBUTION 401(K) PLANS
Fiberite sponsors two 401(k) plans, the Fiberite, Inc. 401(k) Plan I (Plan
I) and the Fiberite, Inc. 401(k) Plan II (Plan II). Except for union employees
at the Winona and Orange plants, all remaining eligible employees participate in
Plan I. The eligible Winona union employees participate in Plan II and the
Orange union employees are not eligible to participate in either plan.
Both Plan I and Plan II provide that employees are 100% vested at all
times. There is no minimum age requirement and eligibility begins after three
months service time.
Plan I allows discretionary employer contributions. Unless otherwise
determined by a resolution of the board of directors, the employer contribution
is 50% of each participant's pre-tax deferrals, limited to a total employer
contribution for each employee of 2.5% of the employee's annual compensation.
For fiscal 1996, employer contributions to this plan (or the plan provided by
the predecessor) were $384,000, respectively. Plan II does not permit employer
contributions.
16
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FIBERITE, INC. PENSION PLAN
With the exception of certain management personnel, all salaried employees
of Fiberite and all hourly employees not covered by union plans or the Fiberite,
Inc. Service Related Pension Plan described below are covered under the
Fiberite, Inc. Pension Plan, which is a defined benefit pension plan. The plan
provides full benefits to all employees who retire either at age 62 after 10
years of service or age 55 with 25 years of service. Employees have no vested
right to plan benefits prior to five years of service with Fiberite. The plan is
funded, on a current basis, to meet the requirements of the Employee Retirement
Income Security Act of 1974.
Net periodic pension cost included the following components (in thousands):
Fiscal
1996
--------
Service cost $ 675
Interest cost 979
Net deferral 267
Less: Return on assets (1,100)
-------
Periodic pension cost $ 821
======
Discount rate 7.25%
Rate of increase in compensation levels 6.50%
Expected long-term rate of return on assets 8.00%
On December 31, 1996 the plan's assets were invested primarily in stocks and
bonds. The following table sets forth the plan's funded status and amounts
recognized in Fiberite's Consolidated Balance Sheet calculated at the end of the
period (in thousands):
December 31,
1996
Actuarial present value of benefit obligations:
Vested benefit $11,248
-------
Accumulated benefit obligation 11,297
-------
Projected benefit obligation for services rendered to date 15,032
Plan assets at estimated fair value 11,536
-------
Projected benefit obligation in excess of plan assets 3,496
Unrecognized net gain 492
-------
Accrued pension cost recognized on Fiberite's balance sheet $ 3,988
=======
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<PAGE>
FIBERITE, INC. SERVICE RELATED PENSION PLAN
Union employees at the Winona and Delano plants are covered under the
Fiberite, Inc. Service Related Pension Plan, which is a defined benefit pension
plan. The plan provides full benefits to all employees who retire either at age
62 after 10 years of service or age 55 with 25 years of service. Employees have
no vested right to plan benefits prior to five years of service with Fiberite.
The plan is funded, on a current basis, to meet the requirements of the Employee
Retirement Income Security Act of 1974.
Net periodic pension cost included the following components (in thousands):
Fiscal
1996
------
Service cost $ 120
Interest cost 275
Net deferral 80
Less: Return on assets (255)
-------
Period pension cost $ 220
=======
Discount rate 7.25%
Rate of increase in compensation levels Not applicable
Expected long-term rate of return on assets 8.00%
On December 31, 1996 the plan's assets were invested primarily in stocks
and bonds. The following table sets forth the plan's funded status and amounts
recognized in Fiberite's Consolidated Balance Sheet calculated at the end of the
period (in thousands):
December 31,
1996
Actuarial present value of benefit obligations:
Vested benefit obligation $ 4,264
-------
Accumulated benefit obligation 4,284
-------
Projected benefit obligation for services rendered to date 4,284
Plan assets at estimated fair value 2,440
-------
Projected benefit obligation in excess of plan assets 1,844
Unrecognized net gain -
-------
Accrued pension cost recognized on Fiberite's balance sheet $ 1,844
=======
18
<PAGE>
POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
Fiberite offers medical, dental and life insurance benefits to retired
employees and eligible dependents of the retired employees of Fiberite. Retirees
pay insurance premiums based on their years of service with Fiberite and their
age. Fiberite funds the post-retirement costs on a current basis.
The net periodic post-retirement cost included the following components (in
thousands):
Fiscal
1996
------
Service cost $ 524
Interest cost 767
Amortization of gain (20)
------
$1,271
======
The following table sets forth post-retirement amounts recognized in the
Company's Consolidated Balance Sheet calculated at the end of the period (in
thousands):
December 31,
1996
------------
Accumulated post-retirement benefit obligations:
Retirees $ 2,258
Fully eligible actives 2,690
Other actives 6,691
Unrecognized net gain (loss) 1,346
-------
Accrued post-retirement benefits $12,985
=======
The 1996 amount assumes a healthcare cost trend rate for pre-age 65
benefits of 9.5% for indemnity insurance and 7.5% for HMO coverage and post-age
65 benefits of 8.5% for indemnity insurance and 7.5% for HMO coverage. These
rates were assumed to decrease each year to 5.0% by 2035 and remain at that
level thereafter. The assumed discount rate and rate of increase in compensation
levels was 7.25% and 6.50%, respectively. The effect of a one percentage point
increase in the assumed healthcare cost trend rates for each future year would
increase the accumulated post-retirement benefit obligation as of December 31,
1996 by $483,000. The effect of this change on the aggregate of the service and
interest cost components of the net periodic post-retirement cost would have
been an increase of $53,000 for 1996.
19
<PAGE>
OTHER BENEFITS
Fiberite offers its employees several standard benefits including medical
insurance through either an indemnity plan or a Health Maintenance Organization,
dental and life insurance. A large portion of Fiberite's employees participate
in the indemnity and dental insurance plans, for which Fiberite has purchased
stop loss insurance covering any individual claims over $200,000 and aggregate
claims over $850,000 in any one year. For claims under these stop loss limits,
Fiberite is self-insured. Fiberite recorded $460,000 as reserves for medical and
dental claims which were incurred but not paid as of December 31, 1996. These
estimates are based on the claims history of the plans and specific knowledge of
outstanding claims.
(10) LONG-TERM DEBT
Long-term debt consists of (in thousands):
December 31, September 30,
1996 1997
------------ -------------
(unaudited)
Secured Term A note payable, interest
payable monthly at various rates,
maturing December 31, 2000 (see below) $ 33,600 --
Secured Term B note payable, interest
payable monthly at various rates,
maturing December 31, 2001 (see below) 34,500 --
Secured revolving line of credit of
$25,000, interest payable monthly at
various rates, due December 31, 2000
(see below) 9,000 --
11.3% subordinated notes (see below) 35,502 --
-------- -----
112,602 --
Less current portion 6,900 --
-------- -----
$105,702 $--
======== =====
In October 1995, Fiberite entered into a financing arrangement with a
consortium of banks which consisted of a $40.0 million term note, a $35.0
million term note, and a $25.0 million revolving line of credit (LOC) which may
be used for cash borrowings and letters of credit. These loans are
collateralized by substantially all the assets of Fiberite and guaranteed by
Holdings. The term notes and the LOC provide for various borrowing rate options
including borrowing rates based on a fixed spread over the Bank of America
Illinois
20
<PAGE>
reference rate (as defined in the term note agreement). A commitment fee of .5%
per annum is paid on the unused portion of the LOC. The weighted average
interest rate for fiscal 1996 for these borrowings was 8.51%. For fiscal 1996,
the average daily balance of the LOC was $12.3 million, and the highest
outstanding balance was $16.5 million.
On October 6, 1995, Fiberite Holdings issued approximately $66 million
aggregate principal amount of Subordinated Notes with net proceeds of
approximately $30 million. The Subordinated Notes were issued at a discount of
principal and do not pay periodic cash payments of interest. Interest accrues on
the debt balance at a rate of 11.3% per year until scheduled maturity on October
6, 2002.
The terms of the term notes, LOC, and subordinated notes contain, among other
provisions, restrictions on the transfer of funds from Fiberite to Holdings,
requirements for maintaining defined levels of working capital, net worth,
capital expenditures, and other financial ratios. At December 31, 1996, Fiberite
received from the consortium of banks waivers related to noncompliance with
certain covenants. The notes become immediately due and payable in the event of
any change in control of Fiberite.
Maturities of long-term debt as of are as follows (in thousands):
December 31, 1996
1997............................................ $ 6,900
1998............................................ 8,500
1999............................................ 10,100
2000............................................ 19,600
2001............................................ 32,000
Thereafter...................................... 35,502
---------
$112,602
=========
Upon the change in control which occurred as a result of the sale of the Company
to Stamford Capital FHI Acquisition Corp in August 1997, the notes became due
and were repaid with the proceeds from the sale. See Note 17.
(11) COMMITMENTS AND CONTINGENCIES
Fiberite is involved in legal proceedings of a character normally
incidental to its business, including substantial claims and pending actions
against Fiberite seeking recovery of alleged damages for asbestos related
claims. Fiberite is indemnified by ICI American Holdings Inc. for a percentage
of these claims. As of December 31, 1996, Fiberite has accrued liabilities of
$1.0 million to reflect potential losses in conjunction with various legal
proceedings. The outcome of these proceedings is not determinable at this time
although Fiberite intends to vigorously defend these actions. It is the opinion
of management that the legal proceedings will not result in a liability greater
than the amount recorded.
21
<PAGE>
RAW MATERIALS
Fiberite purchases most of the raw materials used in production. Several
key materials are available from relatively few sources, and in many cases the
cost of product qualification makes it impractical to develop multiple sources
of supply. The unavailability of these materials, which Fiberite does not
anticipate, could have a material adverse effect on sales and earnings.
LEASES
Fiberite has various noncancellable operating leases, primarily for real
estate, vehicles, and office equipment. Total lease expense for fiscal 1996 was
$686,000. Future minimum lease payments under noncancellable operating leases
are as follows (in thousands):
December 31, 1996
1997.......................................... $255
1998.......................................... 236
1999.......................................... 183
2000.......................................... 55
----
$729
====
U.S. GOVERNMENT CLAIMS
Fiberite performs on a variety of defense subcontracts and is subject to
U.S. Government audits and reviews of negotiations, subcontract performance,
cost classifications, accounting and general practices relating to government
contracts. The Defense Contract Audit Agency reviews cost accounting and
business practices of Fiberite. There are currently no outstanding claims or
assessments against Fiberite.
(12) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, receivables, accounts payable and accrued
liabilities and other payables approximate fair value because of the short
maturity of these financial instruments. The term notes and the revolving line
of credit bear interest at a rate indexed to variable market rates, therefore,
the carrying amounts of the outstanding borrowings approximate fair value.
Fair value estimates are made at a specific point in time based on relevant
market information and information about the financial instruments. These
estimates are subjective in nature and involve uncertainties and judgment and
therefore cannot be determined with precision. Changes in assumptions could
significantly affect these estimates.
22
<PAGE>
(13) COLLECTIVE BARGAINING AGREEMENTS
Of Fiberite's approximately 713 active United States employees as of
December 31, 1996, 5% are covered under collective bargaining agreements
negotiated with the Teamster's Union and 37% are covered under a collective
bargaining agreement negotiated with the United Steel Workers Union. Agreements
with the Teamster's Union expire in December, 1997 and October, 1998, and the
agreement with the United Steel Workers Union expires in March, 1998. Employees
in Germany are covered under a collective bargaining agreement with the Chemical
Industries Union which expires in February, 1998.
(14) STOCK OPTIONS
Fiberite granted incentive stock options to certain key management
employees pursuant to Fiberite's 1995 Long Term Incentive and Share Award Plan
(the Option Plan). Options granted under the Option Plan are subject to
individual vesting schedules, but must be exercised within ten years of the date
of grant. In 1996, 44,000 shares, of the 906,000 shares available under the plan
were issued. Certain of these options would have been exercisable based on
performance criteria resulting in a new measurement date. During April 1996,
40,000 shares were issued when the fair market value of Fiberite's stock was
determined to be approximately $5 per share. Additionally, in December 1996,
material modifications, consisting of the removal of defined performance
criteria were made to incentive options resulting in a new measurement date for
approximately 294,000 shares when the fair market value of the shares was
determined to be approximately $12 per share. In the absence of a market for
Fiberite's common stock in 1996, the fair market value of Fiberite's common
stock at the grant date was determined by using a valuation methodology
consistent with those applied by investment banking companies. Accordingly,
consistent with APB Opinion No. 25, compensation expense of approximately $3.6
million has been recognized during fiscal 1996 related to the variable features
of these options.
During 1995, Fiberite sold restricted stock at the fair market value to
Carlisle pursuant to Fiberite's Restricted Stock Purchase Agreement (the
Restricted Stock Plan). These shares were subject to vesting provisions based on
defined performance criteria. In December 1996, material modifications,
consisting of the removal of defined performance criteria were made to options
resulting in a new measurement date for approximately 522,000 shares when the
fair market value of the shares was determined to be approximately $12 per
share. In the absence of a market for Fiberite's common stock in 1996, the fair
market value of Fiberite's common stock was determined by using a valuation
methodology consistent with those applied by investment banking companies.
Accordingly, consistent with APB Opinion No. 25, compensation expense has been
recognized in the amount of $6.0 million during fiscal 1996 related to the
variable features of these restricted shares.
Fiberite adopted SFAS No. 123 for disclosure purposes in 1996. The fair
value of each option grant estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for the option grants in 1995 and 1996, respectively: risk-free
interest rates of 5.80% and 6.16%;
23
<PAGE>
expected dividend yields of 0.00 percent; expected life of 3.6 and 2.3 years;
expected volatility of 44.51%. Using these assumptions, Fiberite's net loss
would have been as follows (amounts in thousands):
Fiscal
1996
--------
Net loss:
As reported $ (9,978)
--------
Pro forma (10,043)
--------
A summary of options granted under the Option Plan and changes during the
year is presented below:
December 31,
1996
--------------------------------
Options Weighted
(in Averaged
thousands) Exercise Price
---------- --------------
Outstanding at beginning of year 765.0 $ .50
Granted 44.0 .50
Exercised 0.0 -
Forfeited 0.0 -
Expired 0.0 -
Canceled 0.0 -
------ ------
Outstanding at end of year 809.0 -
====== ======
Exercisable at year end 386.8 .50
Weighted average fair value of
options granted $7.21
(15) MAJOR CUSTOMERS
The majority of Fiberite's operations are conducted within one business
segment. Sales made to the commercial and military aerospace markets comprised
80.2% of Fiberite's total sales 1996. Net sales to one group of related
companies exceeded 10% of Fiberite's total net sales. Sales to this group fiscal
1996 were $32.4 million. Aggregate receivables from this group at December 31,
1996 were $4.9 million.
24
<PAGE>
Fiberite is a subcontractor to various U.S. Government prime contractors
such as Bell Helicopter, Lockheed Martin, Thiokol, and Boeing. Net sales under
these contracts in 1996 were $71.4 million.
(16) FOREIGN OPERATIONS
The following table sets forth information about the relative size of the
Company's operations in the United States and Europe (in thousands):
Fiscal
1996
--------
Sales to unaffiliated customers:
United States $195,263
Europe 23,564
--------
Transfers between geographic
areas:
United States 7,214
Europe -
--------
Eliminations:
United States (7,214)
Europe -
--------
(7,214)
--------
Total Sales $218,827
========
Operating Income:
United States $ 857
Europe (60)
--------
Total operation income $ 797
--------
Identifiable assets, at end of
period:
United States $159,447
Europe 14,391
--------
Eliminations:
United States (12,650)
Europe -
--------
(12,650)
--------
Total assets $161,188
========
(17) SUBSEQUENT EVENTS (UNAUDITED)
On August 29, 1997 Stamford FHI Acquisition Corp. ("Stamford") acquired the
stock of Fiberite Holdings, Inc. for approximately $361 million. The net assets
of Fiberite Holdings, Inc. were recorded by Stamford at Fiberite's book value as
such value was determined to approximate fair market value. Accordingly all
excess purchase price was recorded as goodwill. Subsequent to the acquisition,
Stamford merged into Fiberite
25
<PAGE>
Holdings, Inc. and Fiberite Holdings, Inc. then merged into its wholly owned
subsidiary, Fiberite, Inc. In connection with Stamford's purchase of Fiberite,
all of Fiberite's outstanding debt was redeemed. Stamford financed its purchase
of Fiberite primarily with bank debt.
On September 5, 1997, Cytec and another buyer paid $192 million under
their contracts with Stamford to purchase substantially all of Fiberite's assets
which is reflected at September 30, 1997 as additional paid in capital. The
proceeds were used by Fiberite to reduce its outstanding bank debt. On September
30, 1997, and not reflected in the foregoing financial statements, Cytec
Industries Inc. acquired substantially all of the assets and liabilities of
Fiberite, Inc. for $344 million in cash of which $173 million had been
previously paid.
The accompanying September 30, 1997 unaudited balance sheet reflects the
acquisition by Stamford and the related bank debt and investment by Cytec have
been pushed down to the Fiberite balance sheet.
The accompanying September 30, 1997 unaudited statement of operations
represents the historical basis of Fiberite adjusted for the effects of the
Stamford acquisition.
The accompanying September 30, 1997 unaudited statement of cash flows represents
the historical basis of Fiberite. The investment and financing transactions
related to the Stamford acquisition are as follows (in thousands):
Payment for acquisitions $(361,000)
Proceeds from issuance of debt 361,000
Repayment of debt (191,500)
Capital contribution 191,500
26
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
ITEM 7. Financial Statements, Pro Forma Financial Statements and Exhibits
(b) Unaudited Pro Forma Condensed Consolidated Financial Information
The following are the unaudited consolidated pro forma statements of operations
and notes thereto of Cytec Industries Inc. (the "Company") for the year ended
December 31, 1996, and the nine months ended September 30, 1997 and 1996. The
consolidated financial statements present the historical statements of
operations of the Company, adjusted to give effect to the Fiberite Acquisition
as if it had occurred on January 1, 1997 and January 1, 1996, respectively,
along with the pro forma adjustments necessary to arrive at the pro forma
condensed consolidated statements of operations of the Company. These pro forma
financial statements replace the more limited pro forma financial information
provided in the Company's quarterly report on Form 10-Q for the quarter ended
September 30, 1997.
The pro forma data includes adjustments that are based on available information
and certain assumptions that the Company believes are reasonable. Pro forma
information is presented for informational purposes only and is not necessarily
indicative of future earnings or of what past earnings would have been if the
Fiberite Acquisition had been consummated at the beginning of the respective
periods or as of any date for which such pro forma information is presented. In
preparing the pro forma financial information, the Company believes it has
utilized reasonable methods to conform the basis of presentation. The pro forma
information reflects preliminary estimates of the allocation of the purchase
price and is subject to final determination. The pro forma financial statements
and accompanying notes should be read in conjunction with the historical
financial statements of the Company and Fiberite.
27
<PAGE>
Cytec Industries Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 1996
(In millions, except per share data)
<TABLE>
<CAPTION>
Fiberite (3) Pro Pro
Cytec (1) Fiberite (2) Acquisition Fiberite Forma Forma
Historical Historical Adjustments Adjusted Combined Adjust Totals
---------- ----------- ----------- -------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 1,259.6 $ 218.8 $ (14.8) $ 204.0 $1,463.6 1,463.6
Manufacturing cost of sales 898.1 176.1 (10.1) 166.0 1,064.1 $ (5.6)(4) 1,058.5
Selling and technical services 140.9 7.5 (0.8) 6.7 147.6 147.6
Research and process development 40.2 8.9 (0.6) 8.3 48.5 48.5
Administrative and general 44.3 22.7 (0.5) 22.2 66.5 66.5
Amortization of intangibles 0.9 2.9 - 2.9 3.8 4.4 (5) 8.2
------- ------ -------- -------- ------- ------ -------
Earnings (loss) from operations 135.2 0.7 (2.8) (2.1) 133.1 1.2 134.3
Other income (expense), net 9.1 - - - 9.1 - 9.1
Equity in earnings of associated companies 24.7 - - - 24.7 - 24.7
------- ------ ------- -------- ------- ------- -------
Earnings (loss) before interest and income
taxes 169.0 0.7 (2.8) (2.1) 166.9 1.2 168.1
Interest income (expense), net (2.1) (10.7) (0.1) (10.8) (12.9) (13.3)(6) (26.2)
-------- ------- -------- -------- ------- ------- -------
Earnings (loss) before income taxes 166.9 (10.0) (2.9) (12.9) 154.0 (12.1) 141.9
Income tax provision 66.8 - 66.8 (10.1)(7) 56.7
------- ------ -------- -------- ------ ------- -------
Net earnings (loss) $ 100.1 $(10.0)(8) $ (2.9) $ (12.9) $ 87.2 $ (2.0) $ 85.2
======= ======= ======== ======== ======= ======= =======
Net earnings per common share:
Primary $ 2.01 $ 1.71
Share base for earnings per share:
Primary 49.7 49.7
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations
28
<PAGE>
Cytec Industries Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Nine Months Ended September 30, 1997
(In millions, except per share data)
<TABLE>
<CAPTION>
Fiberite (3) Pro Pro
Cytec (1) Fiberite (2) Acquisition Fiberite Forma Forma
Historical Historical Adjustments Adjusted Combined Adjust Totals
---------- ---------- ----------- -------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales 931.1 $ 214.1 $ (13.6) $ 200.5 $1,131.6 $ 1,131.6
Manufacturing Cost of sales 666.0 171.5 (10.3) 161.2 827.2 $ (5.0)(4) 822.2
Selling and technical services 103.9 7.2 (0.5) 6.7 110.6 110.6
Research and process development 31.6 7.3 (0.4) 6.9 38.5 38.5
Administrative and general 32.6 11.5 (0.3) 11.2 43.8 43.8
Amortization of intangibles 0.6 2.8 - 2.8 3.4 2.6(5) 6.0
------ ------ -------- ------ ------- ------ -------
Earnings from operations 96.4 13.8 (2.1) 11.7 108.1 2.4 110.5
Other income (expense), net 29.9 - - - 29.9 - 29.9
Equity in earnings of associated companies 9.8 - - - 9.8 - 9.8
------ ------ ------- ------- ------- ------- -------
Earnings before interest and income taxes 136.1 13.8 (2.1) 11.7 147.8 2.4 150.2
Interest income (expense), net (0.1) (8.8) - (8.8) (8.9) (8.7)(6) (17.6)
------ ------- ------ ------- ------- ------- -------
Earnings before income taxes 136.0 5.0 (2.1) 2.9 138.9 (6.3) 132.6
Income tax provision 53.0 1.3 (0.5) 0.8 53.8 (2.1)(7) 51.7
------ ------ ------- ------ ------ ------- ------
Net earnings $ 83.0 $ 3.7 (8) $ (1.6) $ 2.1 $ 85.1 $ (4.2) $ 80.9
====== ===== ======= ====== ====== ======= ======
Net earnings per common share:
Primary $ 1.75 $ 1.70
Share base for earnings per share:
Primary 47.5 47.5
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations
29
<PAGE>
Cytec Industries Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Nine Months Ended September 30, 1996
(In millions, except per share data)
<TABLE>
<CAPTION>
Fiberite (3) Pro Pro
Cytec (1) Fiberite (2) Acquisition Fiberite Forma Forma
Historical Historical Adjustments Adjusted Combined Adjust Totals
---------- ---------- ----------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 944.3 $ 163.1 $ (11.2) $ 151.9 $1,096.2 $ 1,096.2
Manufacturing Cost of sales 673.7 130.0 (7.4) 122.6 796.3 $(4.9) (4) 791.4
Selling and technical services 104.9 4.4 (0.6) 3.8 108.7 108.7
Research and process development 29.7 8.0 (0.4) 7.6 37.3 37.3
Administrative and general 33.1 16.8 (0.4) 16.4 49.5 49.5
Amortization of intangibles 0.6 2.2 - 2.2 2.8 3.2 (5) 6.0
------- ---- ------- ------- ------- ------- ------
Earnings (loss) from operations 102.3 1.7 (2.4) (0.7) 101.6 1.7 103.3
Other income (expense), net 5.0 - - - 5.0 - 5.0
Equity in earnings of associated companies 19.0 - - 19.0 - 19.0
------- ------- ------- ------ ------- ------ ------
Earnings (loss) before interest and income 126.3 1.7 (2.4) (0.7) 125.6 1.7 127.3
taxes
Interest income (expense), net (1.6) (8.3) - (8.3) (9.9) (9.8)(6) (19.7)
------- ------- ------ ------- -------- ------- ------
Earnings (loss) before income taxes 124.7 (6.6) (2.4) (9.0) 115.7 (8.1) 107.6
Income tax provision 50.8 - - - 50.8 (7.0) (7) 43.8
------- ------- ------- ------ ------- ------ ------
Net earnings (loss) $ 73.9 $ (6.6)(8) $ (2.4) $ (9.0) $ 64.9 $(1.1) $ 63.8
======= ======= ======= ======= ======= ====== =======
Net earnings per common share:
Primary $ 1.48 $ 1.27
Share base for earnings per share
Primary 50.1 50.1
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations
30
<PAGE>
Cytec Industries Inc. and Subsidiaries
Notes To Unaudited Pro Forma Condensed Consolidated Statements of Operations
(dollars in millions)
The Company consummated the Fiberite Acquistion on September 30, 1997. The
assets acquired include all of the businesses of Fiberite, except for its
satellite materials business. The Fiberite Acquisition has been accounted for
under the purchase method of accounting and the results of operations will be
included in the Company's consolidated statement of income beginning October 1,
1997. The aggregate purchase price, which was financed primarily through the
issuance of debt, was allocated based on estimated fair values at the date of
acquisition, which resulted in an excess of purchase price over assets acquired
of $263.5. This amount will be amortized on a straight-line basis over 40 years.
The financial statements reflect a preliminary allocation of the purchase price
as the purchase price allocation has not been finalized.
The unaudited pro forma condensed consolidated financial statements have been
adjusted for the items set forth below. Certain of such adjustments reflect
management's preliminary estimates of the fair value of the assets acquired and
liabilities assumed relating to the Fiberite Acquisition.
(1) Represents the historical statements of operations for the
Company for the respective period as indicated in the heading on
each respective page.
(2) Represents the historical statements of operations for Fiberite
for the respective period as indicated in the heading on each
respective page, including the satellite materials business not
purchased by the Company as part of the Fiberite Acquisition.
(3) Represents the adjustments to remove the results of operations of
the satellite materials business not purchased by the Company as
part of the Fiberite Acquisition.
(4) To adjust Fiberite depreciation and amortization expense for (1)
adjustment of purchased property, plant and equipment to fair
market value and (2) alignment with the Company's depreciation
periods and methods.
(5) Adjustment to reflect amortization expense on goodwill and
acquired intangibles, partially offset by the elimination of
Fiberite's historical amortization expense of intangibles and the
reclass of certain items.
(6) Adjustments to eliminate Fiberite's historical interest expense
and to reflect borrowings to finance the Fiberite Acquisition.
Fiberite's historical interest expense was $10.8 for the year
ended December 31, 1996 and $8.8 and $8.3 for the nine months
ended September 30, 1997 and 1996, respectively. Assuming
borrowings of $344.0 at a weighted average interest rate of 7%,
interest expense resulting from the Fiberite Acquisition would
have been $24.1 for the year ended December 31, 1996 and $18.1
for each of the nine month periods ended September 30, 1997 and
1996. A change of 1/8 of 1% in the assumed rate would result in a
corresponding change of $0.4 in annual interest expense.
31
<PAGE>
Cytec Industries Inc. and Subsidiaries
Notes To Unaudited Pro Forma Condensed Consolidated Statements Of Operations
(cont.)
(7) Adjustment to tax provision based on Fiberite's pre-tax income
(loss) and tax effect of notes (2) through (6).
(8) Included in Fiberite's earnings before taxes for the year ended
December 31, 1996 and the nine months ended September 30, 1996 is
a charge for $9.9 related to stock compensation. Included in
Fiberite's earnings before taxes for the nine months ended
September 30, 1997 are $3.0 of expenses related to an initial
public offering and other transactions which were not completed.
32
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
Exhibits:
Number Name
- ------ ----
2.1 Asset Purchase Agreement by and among Stamford FHI Acquisition
Corp., Fiberite, Inc., Fiberite Holdings, Inc. and Cytec
Industries, Inc. dated as of August 25, 1997 (the "Asset Purchase
Agreement") (previously filed)
2.2 Amendment to the Asset Purchase Agreement, dated as of August 28,
1997 (previously filed)
2.3 Second Amendment to the Asset Purchase Agreement, dated as of
September 29, 1997 (previously filed)
23.1 Consent of Arthur Andersen LLP (related to the consolidated
financial statements of Fiberite Holdings, Inc. and Subsidiaries)
99.1 Agreement, dated September 8, 1997 between the Company and
S.M.Crum
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.
CYTEC INDUSTRIES INC.
(REGISTRANT)
BY:/s/James P. Cronin
-----------------------------------------
James P. Cronin
Executive Vice President and Chief Financial Officer
December 12, 1997
33
<PAGE>
EXHIBIT INDEX
Number Name
- ------ ----
2.1 Asset Purchase Agreement by and among Stamford FHI Acquisition
Corp., Fiberite, Inc., Fiberite Holdings, Inc. and Cytec
Industries, Inc. dated as of August 25, 1997 (the "Asset Purchase
Agreement") (previously filed)
2.2 Amendment to the Asset Purchase Agreement, dated as of August 28,
1997 (previously filed)
2.3 Second Amendment to the Asset Purchase Agreement, dated as of
September 29, 1997 (previously filed)
23.1 Consent of Arthur Andersen LLP (related to the consolidated
financial statements of Fiberite Holdings, Inc. and Subsidiaries)
99.1 Agreement, dated September 8, 1997 between the Company and
S.M.Crum
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated February 19, 1997, included in this Form 8-K, into Cytec
Industries Inc.'s previously filed Registration Statements on Form S-8 (File
No. 33-80710, No. 33-83576, No. 33-85666 and No. 333-11121) and Registration
Statement on Form S-3 (File No.333-3808). It should be noted that we have not
audited any financial statements of Fiberite Holdings, Inc. subsequent to
December 31, 1996, or performed any audit procedures subsequent to the date of
our report.
/s/ Arthur Andersen LLP
Phoenix, Arizona,
November 24, 1997
<PAGE>
Exhibit 99.1
September 8, 1997
Mr. S. M. Crum
21 Pheasant Run
Kinnelon, NJ 07405
Dear Steve:
This letter is provided in order to induce you to continue working for Cytec
following your resignation, at your request, during the fourth quarter of 1997
as a corporate officer of Cytec Industries Inc. and as a member of the Executive
Committee and the Cytec Leadership Team.
You will be designated a "vice president" by the Executive Committee but will
not be considered a corporate officer. You will be providing general operational
assistance to the Company with particular emphasis on mergers and acquisitions
and report to the CEO. You will also serve on the boards of some of the
Company's joint ventures and be available for other duties of an executive
nature. It is understood that following your resignation as a corporate officer
that your work schedule will be less than full-time and that the actual schedule
will be determined between you and the CEO.
The Company will provide the following, subject to your continuing compliance
with the confidentiality and other provisions of your employment agreement.
o Base Salary and ICP
You will remain an employee through December 31, 2000. Your current salary of
$272,000 will not be reduced, and you will continue at not less than this base
salary through December 31, 2000. You will continue to be eligible for incentive
compensation at a target level of 41% of the mid-point of salary level 22. Your
incentive compensation payments (which will continue through calendar year 2000)
will be determined consistent with the formula applied to corporate officers.
o Stock Options
You will not receive further stock option grants. As a result of your continued
employment, all of your current options will have vested (by December, 2000)
under the terms of the respective grants.
<PAGE>
Mr. S. M. Crum
September 8, 1997
Page 2
o Performance Stock/Performance Cash
You will not receive additional grants of Performance Stock/Performance Cash,
but awards previously made to you for the 1997, 1998, and 1999 performance
periods will not be reduced by reason of your changed responsibilities and will
be subject to vesting as provided in the award agreements for the respective
performance periods.
o Income Continuity
Since your change in responsibilities would be voluntary and deemed not to be
"Good Reason" under the definition in the Executive Income Continuity Plan, the
change would not entitle you to terminate employment with an income continuity
benefit. Nevertheless, this does not affect your ability to receive an income
continuity benefit following any "Change in Control."
o Directors' and Officers' Insurance
In your continued responsibilities as a Board member for Cytec subsidiaries or
joint ventures, you would continue to be included in the Company's directors'
and officers' liability coverage.
o Excess Long Term Disability
Your current coverage will be maintained and will be paid for by you through
payroll deduction while you remain an employee.
o Excess Liability Insurance
Personal Excess Liability Insurance will continue, with the same coverage
limits, while you remain an employee until December, 2000. The limit of coverage
is $5,000,000.
o Tax Preparation and Financial Counseling
You will continue with the Ayco financial counseling and tax preparation
services through December, 2000, including preparation of your tax returns for
the year 2000.
o Security Service
The Company will continue to provide security services through December 31,
2000.
<PAGE>
Mr. S. M. Crum
September 8, 1997
Page 3
o Country Club Membership
You will retain for business purposes membership in the Fiddler's Elbow Country
Club through December 31, 2000.
o Limousine Services
You will continue for business purposes to have access to the Company limousine
through December 31, 2000.
I am sending you a separate letter covering items which you are automatically
entitled to as an employee of Cytec.
Sincerely,
/s/ J. W. Hirsch
----------------
J. W. Hirsch
/s/ S. M. Crum
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S. M. Crum
9/8/97
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Date
1615.jwh
