<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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 1-12372
---------
CYTEC INDUSTRIES INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-3268660
------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Five Garret Mountain Plaza
West Paterson, New Jersey 07424
--------------------------------------
(Address of principal executive offices)
201-357-3100
--------------------------------------------------
(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: 45,529,037 shares of Common
Stock, par value $.01 per share were outstanding at March 31, 1997.
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
INDEX
Page
Part I - Financial Information
Item 1. Consolidated Financial Statements
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-14
Part II - Other Information
Item 1. Legal Proceedings 15-17
Item 6. Exhibits and Reports on Form 8-K 18
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. - Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Millions of Dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1997 1996
---- ----
<S> <C> <C>
Net sales $306.5 $304.5
Manufacturing cost of sales 235.0 217.6
Selling and technical services 34.6 34.9
Research and process development 10.3 10.3
Administrative and general 11.0 11.1
------- -------
Earnings from operations 15.6 30.6
Other income (expense), net 24.4 1.3
Equity in earnings of associated companies 4.5 6.6
Interest income (expense), net (0.2) (0.5)
------- -------
Earnings before income taxes 44.3 38.0
Income tax provision 17.4 15.4
------- -------
Net earnings $ 26.9 $ 22.6
======= =======
Earnings per common share $0.56 $0.44
Weighted average shares outstanding (including 47,876,000 51,188,000
common stock equivalents)
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions of Dollars, except share and per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $29.4 $20.4
Accounts receivable, less allowance for doubtful accounts of
$10.0 and $11.1 in 1997 and 1996, respectively 199.3 206.5
Inventories 87.7 105.6
Deferred income taxes 62.9 65.1
Other current assets 22.3 18.7
-------- --------
Total current assets 401.6 416.3
Equity in net assets of and advances to associated companies 143.2 143.7
Plants, equipment and facilities, at cost 1,183.1 1339.7
Less: accumulated depreciation (655.7) (757.5)
-------- --------
Net plant investment 527.4 582.2
Intangibles resulting from business acquisitions,
net of accumulated amortization 16.8 17.1
Deferred income taxes 86.0 89.6
Other assets 6.8 12.2
-------- --------
$1,181.8 $1,261.1
======== ========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $94.7 $101.3
Accrued expenses 202.6 205.1
Income taxes payable 27.0 6.4
-------- --------
Total current liabilities 324.3 312.8
Long-term debt 7.0 89.0
Other noncurrent liabilities 517.7 544.9
Stockholders' equity
Preferred stock, 20,000,000 shares authorized, issued and outstanding 4,000
shares, Series C, $.01 par value, at
liquidation value of $25 per share 0.1 0.1
Common stock, $.01 par value per share,75,000,000 shares
authorized,issued 48,181,264 in 1997 and 48,377,683 in 1996 0.5 0.5
Additional paid-in capital 215.5 229.7
Retained earnings 244.8 217.9
Unearned compensation (4.1) (2.4)
Accumulated translation adjustments 2.6 8.8
Treasury stock at cost, 2,652,227 shares in 1997 and 2,883,485
shares in 1996 (126.6) (140.2)
-------- --------
Total stockholders' equity 332.8 314.4
-------- --------
$1,181.8 $1,261.1
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions of dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows provided by (used for) operating activities
Net earnings $26.9 $22.6
Non-cash items included in net earnings:
Equity in undistributed net earnings of associated companies (0.4) (6.0)
Depreciation 18.9 20.4
Amortization 0.7 1.0
Deferred income taxes 6.3 6.0
Gain on sale of business (22.3) -
Changes in operating assets and liabilities, net of effects
from sale of businesses
Accounts receivable (20.0) 4.7
Inventories 1.5 (11.0)
Accounts payable (3.8) (7.6)
Accrued expenses 3.3 2.9
Income taxes payable 26.4 16.9
Other assets (7.2) (7.8)
Other liabilities (17.3) (1.9)
------ ------
Net cash flows provided by operating activities 13.0 40.2
------ ------
Cash flows provided by (used for) investing activities
Additions to plants, equipment and facilities (14.2) (12.9)
Proceeds received on sale of assets 94.8 -
Change in other assets 7.0 -
------ ------
Net cash provided by (used for)investing activities 87.6 (12.9)
------ ------
Cash flows provided by (used for) financing activities
Proceeds from the exercise of stock options 2.9 1.3
Purchase of treasury stock (11.6) (31.1)
Change in long-term debt (82.0) 3.0
Proceeds received on sale of put warrants - 1.4
------ ------
Net cash flows used for financing activities (90.7) (25.4)
------ ------
Effect of exchange rate changes on cash and cash equivalents (0.9) (0.2)
------ ------
Increase in cash and cash equivalents 9.0 1.7
Cash and cash equivalents, beginning of period 20.4 12.0
------ ------
Cash and cash equivalents, end of period $ 29.4 $ 13.7
====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of Dollars, except share and per share amounts)
(1) Basis of Presentation
The unaudited consolidated financial statements included herein have 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 consolidated financial
statements and notes to the consolidated financial statements contained in
the Company's 1996 Annual Report on Form 10-K.
In the opinion of management, the consolidated financial statements
included herein reflect all adjustments necessary for a fair statement of
the information presented as of March 31, 1997 and for the three month
periods ended March 31, 1997 and 1996. Such adjustments are of a normal,
recurring nature. The statement of income for the three month period ended
March 31, 1997 is not necessarily indicative of the results to be expected
for the full year.
Certain reclassifications have been made to the Consolidated Statements of
Income for the three month period ended March 31, 1996 to conform to the
1997 presentation.
Unless indicated otherwise, the term "Company", with respect to periods
beginning on or after December 17, 1993, the effective date of the
transfer of substantially all of the assets and liabilities of the
chemicals businesses of American Cyanamid Company ("Cyanamid") to the
Company (the "Spin-off"), refers collectively to Cytec Industries Inc.,
and its subsidiaries, and with respect to periods prior to the Spin-off,
the term refers to the chemicals businesses of Cyanamid. Cyanamid was
acquired by American Home Products Corporation in November 1994. Cytec was
incorporated as an independent public company in December 1993.
(2) Earnings Per Share
In June, 1996 the Company announced a 3 for 1 stock split of the Company's
common stock payable in the form of a stock dividend. The stock dividend
was paid July 23, 1996 to stockholders of record as of the close of
business on July 2, 1996. Earnings per share calculations for all periods
presented were restated to reflect the 3 for 1 stock split.
Earnings per common share was computed by dividing net income by shares
that would be outstanding assuming exercise of dilutive stock options
which are considered to be common stock equivalents. The number of common
shares that would be issued from the exercise of stock options has been
reduced by the number of common shares that could be purchased from the
proceeds at the average market price of the Company's stock during the
periods such options were outstanding.
6
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of Dollars, except share and per share amounts)
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share," ("FASB 128") which is required to
be adopted on December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per share
and to restate all prior periods. Under the new requirements, primary
earnings per share is replaced by a new measure called basic earnings per
share which excludes the dilutive effect of common stock equivalents. The
impact of the new Statement would result in a basic earnings per share
which is $.03 and $.02 higher than primary earnings per share for the
three months ended March 31, 1997 and 1996, respectively. The impact of
FASB 128 on the calculation of fully diluted earnings per share for these
quarters is not expected to be material.
(3) Inventories
Components of inventories at March 31, 1997 and December 31, 1996 were as
follows:
March 31, December 31,
1997 1996
--------- ------------
Finished goods $ 64.2 $ 85.7
Work in process 17.1 16.9
Raw materials & supplies 49.3 53.7
-------- --------
130.6 156.3
Less reduction in LIFO cost (42.9) (50.7)
-------- --------
$ 87.7 $ 105.6
======== ========
(4) Equity in Earnings of Associated Companies
Summarized financial information for the Company's equity in earnings of
associated companies is as follows:
Three Months
Ended March 31,
-------------------------
1997 1996
-------- --------
Net sales $ 147.3 $ 143.2
Gross profit 36.1 37.4
Net income 10.8 14.3
The Company's share of earnings of
associated companies $ 4.5 $ 6.6
======== ========
7
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of Dollars, except share and per share amounts)
(5) Contingent Liabilities
The Company is subject to substantial costs arising out of environmental
laws and regulations, which include obligations to remove or limit the
effects on the environment of the disposal or release of certain wastes or
substances at various sites. Liability for investigative, removal and
remedial costs under certain federal and state laws is retroactive,strict
and joint and several. The Company is currently a party to, or otherwise
involved in, legal proceedings directed at the cleanup of approximately 65
Superfund sites. Since the laws pertaining to these sites provide for
joint and several liability, a governmental plaintiff could seek to
recover all remediation costs at a waste disposal site from any of the
potentially responsible parties ("PRPs") for such site, including the
Company, despite the involvement of other PRPs. In some cases, the Company
is one of several hundred identified PRPs, while in others it is the only
one or one of only a few. Generally, where there are a number of
financially solvent PRPs, liability has been apportioned, or the Company
believes, based on its experience with such matters, that liability will
be apportioned based on the type and amount of waste disposed by each PRP
at such disposal site and the number of financially solvent PRPs. The
Company is conducting remediation at, or is otherwise responsible for, a
number of non-Superfund sites. Proceedings involving environmental
matters, such as alleged discharge of chemicals or waste material into the
air, water or soil, are pending against the Company in various states. In
many cases, future environmental-related expenditures cannot be quantified
with a reasonable degree of accuracy. In addition, from time to time in
the ordinary course of its business, the Company is informed of, and
receives inquiries with respect to, new sites which may contain
environmental contamination for which the Company may be responsible.
It is the Company's policy to accrue and charge against earnings,
environmental cleanup costs when it is probable that a liability has been
incurred and an amount is reasonably estimable. As assessments and
cleanups proceed, these accruals are reviewed periodically and adjusted,
if necessary, as additional information becomes available. These accruals
can change substantially due to such factors as additional information on
the nature or extent of contamination, methods of remediation required,
and other actions by governmental agencies or private parties. Cash
expenditures often lag behind the period in which an accrual is recorded
by a number of years.
In accordance with the above policies, as of March 31, 1997 and December
31, 1996, the aggregate environmental related accruals were $173.8 and
$177.5, respectively, of which $25.0 was included in accrued expenses in
1997 and 1996, with the remainder included in other noncurrent
liabilities. Environmental remediation spending for the three months ended
8
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of Dollars, except share and per share amounts)
March 31, 1997 and 1996 was $5.0 and $3.1, respectively. All accruals have
been recorded without giving effect to any possible future insurance
proceeds. Various environmental matters are currently being litigated and
potential insurance recoveries are unknown at this time but are considered
unlikely.
While it is not feasible to predict the outcome of all pending
environmental suits and claims, it is reasonably possible that there will
be a necessity for future provisions for environmental costs which, in
management's opinion, will not have a material effect on the financial
position of the Company, but could be material to the results of
operations of the Company in any one accounting period. The Company cannot
estimate any additional amount of loss or range of loss in excess of the
recorded amounts. Moreover, environmental liabilities are paid over an
extended period and the timing of such payments cannot be predicted with
any confidence.
The Company is also a party to various other claims and routine litigation
arising in the normal course of its business. Based on the advice of
counsel, management believes that the resolution of such claims and
litigation will not have a material adverse effect on the financial
position of the Company, but could be material to the results of
operations of the Company in any one accounting period.
(6) Other Financial Information
Taxes paid for the three months ended March 31, 1997 and 1996 were
approximately $1.5 and $2.1, respectively. Interest paid for the three
months ended March 31, 1997 and 1996 was approximately $1.0 and $.4,
respectively.
The Company's ratio of earnings to fixed charges for the three months
ended March 31, 1997 was 14.6. For purposes of computing the ratio of
earnings to fixed charges (a) earnings consist of earnings before income
taxes which include the Company's share of pre-tax equity in earnings of
associated companies, plus fixed charges less capitalized interest and (b)
fixed charges consist of interest on long-term debt, plus the portion of
rentals representative of an interest factor plus the Company's share of
such charges of associated companies.
9
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
(Millions of Dollars, except share and per share amounts)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
First Quarter of 1997 versus First Quarter 1996
Net sales for the first quarter of 1997 were $306.5 as compared to the
$304.5 in the first quarter of 1996. Sales for the quarter were impacted
by the divestiture of the acrylic fiber product line on January 31, 1997.
The Company also exited the alum product line and the technical chemicals
product line in the last quarter of 1996. Excluding those three product
lines from 1996 and 1997 results, 1997 sales increased 12%.
Specialty Chemicals sales increased $7.9, or 4.4% excluding the effect of
divested product line sales. The Paper and Mining Chemicals product lines
had the largest increases as their higher technology products continue to
perform well. Selling prices were flat quarter to quarter and the Company
expects pricing pressure to continue throughout 1997. Foreign exchange
negatively impacted sales by approximately 1.5%, principally in Europe due
to the stronger dollar.
Specialty Materials sales increased $7.3, or 13.6% excluding the effect of
the divested acrylic fiber product line sales. This is attributable to the
Aerospace Materials product lines as a result of the improving aerospace
industry commercial aircraft build rates.
Building Block sales increased $16.4, or 26.8%. Included in sales for the
first quarter of 1997 is $8.4 of sales of acrylonitrile to the purchaser
of the acrylic fiber business which prior to the sale was treated as an
internal transfer. Sales of Building Blocks were favorably affected by
higher selling prices and improving plant operations, particularly in
methanol and acrylonitrile. The effect of higher selling prices improved
sales by 2.6% although the foreign exchange effect of the stronger dollar,
principally in Europe, decreased sales approximately 1.6%.
Manufacturing cost of sales increased to 76.7% of net sales as compared to
71.5% in the like period of 1996. Included in manufacturing costs for the
quarter are restructuring charges of $18.6 relating primarily to
manufacturing sites located in Botlek, The Netherlands and Linden, New
Jersey. Excluding this charge, manufacturing cost of sales improved 0.9%
to 70.6% of net sales when compared to the same period last year. This is
the result of an improved product sales mix and the effect of improving
plant efficiency and continuing cost reduction programs. Partially
offsetting those improvements are higher raw material costs, primarily
propylene, natural gas, and formaldehyde. The impact of the stronger
dollar also depressed margins although this was mitigated somewhat by the
Company's manufacturing presence in Europe.
10
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
(Millions of Dollars, except share and per share amounts)
Selling and technical service expenses decreased $0.3 when compared to the
same quarter last year, but excluding the effect of divested product lines
dollars were up slightly. Sales and technical service spending should
continue to increase slightly during the year as the Company continues to
focus additional sales effort in the international areas.
Research and process development costs were flat although spending on
technical programs is up quarter to quarter and is on plan for 1997.
Patent costs, which are included in research and process development
expenses, are down as the prior year included certain litigation expenses.
Administrative and general expenses decreased slightly and are expected to
decline moderately throughout 1997 as overheads associated with the
divested product lines are shed.
Other income (expense), net improved $23.1. This includes a $22.3 gain
from the sales of divested product lines.
Equity in earnings of associated companies decreased $2.1 primarily due to
lower earnings at Criterion Catalyst. This is the result of internal
problems, an unfavorable product mix and lower selling prices. The
internal problems are manufacturing and administrative inefficiencies
relating to an infrastructure that has not been able to keep up with
Criterion's growth. Criterion has put in place a plan to address these
issues.
Interest income (expense), net improved $0.3 as a result of lower interest
expense. This was the result of using proceeds from the sale of the
acrylic fiber product line to reduce outstanding debt levels.
The income tax provision was reduced to a rate of 39% from last year's
41%. This was due to improved tax planning in the state tax area as well
as benefits from increased sales through the Company's foreign sales
corporation.
Net earnings increased to $26.9, or 19% from the $22.6 million from the
same period last year. Included in this is an after tax charge of $11.3
relating to the restructuring charges mentioned earlier and an after tax
gain of $13.6 relating to the divestitures mentioned above. Earnings per
share increased to $0.56 from the prior year period of $0.44. This is
attributable to the higher earnings and the effect of the Company's first
10% stock repurchase program which was completed in the first quarter of
1997.
11
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
(Millions of Dollars, except share and per share amounts)
Liquidity and Financial Condition
At March 31, 1997, the Company's cash balance was $29.4, an increase of
$9.0 from year end 1996.
Net cash flows from operating activities totaled $13.0, compared to $40.2
in the same period of 1996. A significant factor affecting this decrease
was the company's decision to fund $15 million of its post-retirement
benefits liability through a contribution to its Voluntary Employee
Benefit Association (VEBA) utilizing some of the proceeds from the Acrylic
Fibers product line sale. Accounts receivable increased due to higher
level of sales after adjusting for divested product lines. Also affecting
cash was an increase of $4.0 for performance based payments to employees
as a result of the Company's overall performance in 1996. In addition,
included in 1996 cash flow from operations is a receipt of approximately
$8.0 related to a raw material swap imbalance.
Net cash flows provided by investing activities totaled $87.6 which
compares to the $12.9 million of net cash flows used for investing
activities in the like period of 1996. Included in 1997 are proceeds of
$94.8 million associated with the sale of the acrylic fibers business and
$7.0 associated with the sale of other investments. Capital additions were
slightly higher than the same period last year but this is expected to
increase over the remainder of the year as certain large projects in the
Specialty Chemicals product lines, such as the Benzotriazole light
stabilizer plant in Botlek and the expansion of the surfactant plant in
Willow Island, enter the construction phase. For the full year 1997 the
Company continues to estimate capital spending in the range of $80-$85.
The Company believes that based on internal cash generation it will be
able to fund operating cash requirements and planned capital expenditures.
Net cash flows used for financing activities totaled $90.7 compared to
$25.4 for the same period in 1996. During the quarter an additional
296,200 shares of treasury stock were purchased at a cost of $11.6
million. This completed the 10% stock repurchase program started in the
first quarter of 1996. In addition, $82.0 of proceeds from the sale of the
Acrylic Fibers business were used to pay down debt.
In January 1997, the Board of Directors approved a new stock repurchase
program for approximately 10% of the outstanding shares or 4.5 million
shares. Through April 30, 1997, only modest repurchases have been made
under this authorization.
The Company filed an amendment with the Securities and Exchange Commission
on April 8, 1997, to make effective a shelf registration statement
covering $300.0 of senior debt securities. The registration was originally
filed with the Securities and Exchange Commission during 1996. Net
proceeds from any sale of these securities would be used for general
12
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
(Millions of Dollars, except share and per share amounts)
corporate purposes, which may include acquisitions, repayment of
indebtedness and other liabilities, share repurchases, additions to
working capital and capital expenditures.
The Company on April 8, 1997 signed an agreement with Cyanamid, a
subsidiary of American Home Products Corporation, to revise certain of the
financial covenants contained in its Series C Cumulative Preferred stock.
Under the revised terms the Company must maintain a debt to equity ratio
of no more than 2-to-1, a minimum fixed charge coverage ratio of not less
than 3-to-1 for the average of the fixed charge coverage ratios for the
four consecutive fiscal quarters most recently ended and must not incur
more than $150 of debt unless the Company's equity is in excess of $200.
If the Company has more than $200 in equity then the Company may incur
additional debt as long as its ratio of debt to equity is not more than
1.5-to-1. Prior to the revised agreement, the Company was to maintain a
minimum fixed charge coverage ratio of no less than 2-to-1 and, if the
Company's equity was in excess of $200, then it could not incur additional
indebtedness if it would cause the ratio of debt to equity to exceed
.75-to-1. At March 31, 1997, the Company had $7.0 of debt and $332.7 in
equity as defined in the Series C Stock covenants and, under the revised
terms, would have had the ability to incur up to an additional $492.1 in
debt.
The Company has a revolving credit facility (the "Credit Facility") with
its existing syndicate of banks to provide for unsecured revolving loans
("Revolving Loans") of up to $150.0. The revolving loans are available for
the general corporate purposes of the Company and its subsidiaries,
including, without limitation, for purposes of making acquisitions
permitted under the Credit Facility. Under the terms of the Credit
Facility, the Company has an additional $144.0 available for borrowing at
March 31, 1997. The Credit Facility which matures on June 1, 2000,
contains covenants customary for such facilities. The Company was in
compliance with all material terms, covenants and conditions of the Credit
Facility at March 31, 1997.
Comments on Forward-Looking Statements
A number of the statements made by the Company in this Management's
Discussion and Analysis, or in other documents, including but not limited
to the Company's Annual Report to Stockholders, its press releases and its
periodic reports to the Securities and Exchange Commission, may be
regarded as "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.
13
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
(Millions of Dollars, except share and per share amounts)
Forward-looking statements include, among others, statements concerning
the Company's outlook for 1997 and beyond, pricing trends and forces
within the industry, cost reduction strategies and their results,
long-term goals of the Company and other statements of expectations,
beliefs, future plans and strategies, anticipated events or trends, and
similar expressions concerning matters that are not historical facts.
All predictions as to future results contain a measure of uncertainty and,
accordingly, actual results could differ materially. Among the factors
that could cause a difference are: changes in the general economy, in
demand for the Company's products or in the costs and availability of its
raw materials; the actions of competitors; technological change; changes
in employee relations, including possible strikes; government regulations;
litigation, including its inherent uncertainty; difficulties in plant
operations and materials transportation; environmental matters; and other
unforeseen circumstances. A number of these factors are discussed in the
Company's filings with the Securities and Exchange Commission.
14
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
Part II - Other Information
Item 1. Legal Proceedings
In connection with the Spin-off, the company assumed from Cyanamid
substantially all liabilities for legal proceedings relating to Cyanamid's
chemicals business, other than any legal proceedings related to
remediation of Cyanamid's Bound Brook Facility. As a result, although
Cyanamid is the named defendant in cases commenced prior to the Spin-off,
the Company is the party in interest and is herein described as the
defendant.
The company is a defendant in eleven cases pending in state courts in
Jefferson, Dallas, Harrison, Hidalgo and Fort Bend counties, Texas in
which many plaintiffs seek damages for injuries allegedly due to exposure
to benzene, butadiene, asbestos or other chemicals. Four of the cases
involve several hundred plaintiffs, while the remainder involve
substantially fewer plaintiffs; all of these cases involve multiple
defendants. The Company believes that its involvement in all but four of
these cases results from its former 50% ownership of Jefferson Chemical
Company, which the Company disposed of in 1975. It is not known at this
time how many plaintiffs eventually will assert claims against the
Company.
The Company is one of many defendants in suits filed by approximately 26
former employees of Boeing-Vertol in state and federal courts in
Pennsylvania alleging exposure to asbestos-containing products. Of these
suits, 14 are inactive because plaintiffs have not yet developed any
symptoms and 12 are active. Most of these suits are still in the discovery
stage.
The Company is the defendant in a class action filed in Jefferson Parish
Court, Louisiana on behalf of persons residing in the city of Kenner,
Louisiana claiming damages allegedly caused by a sulfur dioxide emission
on August 11, 1992 from the Company's Fortier facility. Prior to
consolidation and certification of the class, the original 29 cases had
been remanded to state court following a federal court ruling that the
plaintiffs did not individually assert damages in excess of the federal
jurisdictional amount of $50,000.
The Company is also the defendant in two class actions filed in Jefferson
Parish Court, Louisiana, on behalf of persons who allegedly sustained
injury as a result of an explosion and fire at the Company's Fortier
facility on February 21, 1996. The Company has not yet conducted any
discovery in these cases and, therefore, has no information on whether, or
to what extent, any members of the alleged class actually suffered any
injury.
The Company is one of several alleged processors of lead, lead pigments
and/or lead-based paints named as defendants in five cases pending in
state and federal courts in the states of New York and Ohio. The first
15
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
suit, filed in New York Supreme Court, New York County, by the City of New
York, the New York Housing Authority, and the New York City Health and
Hospitals Corporation, seeks damages for the cost of removing lead-based
paints from New York City-owned buildings. The second suit, filed in New
York Supreme Court, Erie County, was brought on behalf of two minor
children, who seek damages for personal injuries allegedly caused by
ingestion of lead-based paints. The third suit is a class action pending
in the United States District Court for the Southern District of New York
in which two minor children have intervened and filed a complaint against
the Company and six other alleged processors of lead, lead pigments and/or
lead-based paints seeking injunctive relief, consisting of orders
requiring the defendants to contribute to court-administered funds to (i)
pay for medical monitoring of class members; (ii) provide abatement of
lead-based paint hazards in dwellings in the city of New York where class
members reside; and (iii) provide notification to class members. The
fourth case was brought in New York Supreme Court, Erie County, by a
single plaintiff who claims to have been injured due to the presence of
lead-based paints in buildings in which he resided. In all four cases, the
Company is named a defendant as the alleged successor to the MacGregor
Lead Company, from which the Company purchased certain assets in 1971. The
fifth case is a class action brought against the Company and ten other
defendants in the Court of Common Pleas in Cuyahoga County, Ohio on behalf
of children with blood levels of lead greater than 20 micrograms per
deciliter. The plaintiffs seek damages for injuries allegedly caused by
exposure to lead-based paints.
The EPA has brought an administrative action against the Company, alleging
certain violations of the boiler and industrial furnace regulations which
apply to the industrial furnace at the Company's Kalamazoo plant. The
EPA's complaint demands approximately $420,000 in penalties, primarily for
paperwork violations. In summary disposition proceedings, the
administrative Law Judge ruled in favor of the Company in two of the
original six counts of the complaint; the remaining counts are being
adjudicated.
In February 1996, in an action brought against the Louisiana Department of
Environmental Quality ("DEQ") by the Louisiana Environmental Acton
Network, the Louisiana Court of Appeals vacated and set aside a decision
(the "Decision") of the DEQ granting the Company an exemption from
Louisiana hazardous waste land disposal restrictions in order to operate
five waste disposal deep wells at the Fortier facility. The Court ruled
that the Decision was inadequate because it did not contain basic and
ultimate findings and articulate a rational connection between those
findings and the issuance of the exemption. The court remanded the action
to the DEQ for the issuance of findings to support approval of the
exemption. Subsequently, the DEQ reissued the Decision in accordance with
the greater explanatory requirements of the Court of Appeals judgment, and
the plaintiffs have now appealed. Use of the deep wells is essential to
continued operation of the acrylonitrile plant at the Fortier facility.
The Company continues to operate the deep wells.
16
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
See also the first four paragraphs of "Environmental Matters" under Item 1
of the Company's 1996 Annual Report on Form 10-K, and Note 5 of the Notes
to Consolidated Financial Statements (unaudited) in Part I, item (1),
which are incorporated by reference herein.
In addition to liabilities with respect to the specific cases described
previously, because the production of certain chemicals involves the use,
handling, processing, storage and transportation of hazardous materials,
and because certain of the Company's products constitute or contain
hazardous materials, the Company has been subject to claims of injury from
direct exposure to such materials and from indirect exposure when such
materials are incorporated into other companies' products. There can be no
assurance that as a result of past or future operations, there will not be
additional claims of injury by employees or members of the public due to
exposure, or alleged exposure, to such materials. Furthermore, the Company
also has exposure to present and future claims with respect to workplace
exposure, workers' compensation and other matters, arising from events
both prior to an after the Spin-off. There can be no assurance as to the
actual amount of these liabilities or the timing thereof.
17
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
2.1(a) Transfer and Distribution Agreement Amendment
dated April 8, 1997
10.13(o) Restricted Stock Award Agreement - David Lilley
11(a) Earnings Per Share computations for the three
months ended March 31, 1997
11(b) Earnings Per Share computations for the three
months ended March 31, 1996
12 Computation of Ratio of Earnings to Fixed Charges
for the three months ended March 31, 1997 and 1996
27 Financial Data Schedule
99(a) Material incorporated by reference from Annual
Report on Form 10-K
(b). No reports on Form 8-K were filed for the quarter ended March 31,
1997.
SIGNATURES
Pursuant to the requirements of the Securities and 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
May 7, 1997
18
<PAGE>
Exhibit 2.1(a)
TRANSFER AND DISTRIBUTION AGREEMENT AMENDMENT dated as of April 8, 1997
between American Cyanamid Company, a Maine corporation and wholly-owned
subsidiary of American Home Products Corporation ("CYANAMID"), and Cytec
Industries Inc., a Delaware corporation ("CYTEC").
WHEREAS: The parties previously entered into that certain Transfer and
Distribution Agreement dated December 17, 1993 (the "TDA"), which provided for
the spinoff of CYTEC from CYANAMID and which contains certain financial
covenants;
WHEREAS: Pursuant to the TDA, CYTEC issued to CYANAMID (and CYANAMID continues
to own beneficially and of record) all of the authorized shares of CYTEC's
Series C Preferred Stock (the "Series C Preferred"), which contains certain
financial covenants;
WHEREAS: CYANAMID previously granted CYTEC certain waivers and consents under
the TDA and the Series C Preferred in that certain Preferred Stock Repurchase
Agreement dated as of August 17, 1995, as amended, which waivers and consents
remain in full force and effect after the execution and delivery of this
amendment; and
WHEREAS: For good and valuable consideration, the receipt and sufficiency of
which is acknowledged, the parties wish to amend the TDA and the Series C
Preferred in certain additional respects;
NOW THEREFORE, the parties hereby agree as follows:
19
<PAGE>
1. Amendments to TDA. The TDA is amended as follows:
(a) Subsection (a) of Section 6.12 ("Financial Covenants") is amended to
read as follows:
"Neither CYTEC nor its subsidiaries shall, without the prior written
consent of ACY, incur any Debt (except for (x) borrowings under the Credit
Agreement or borrowings under any credit facility or facilities of not
more than $100 million, in the aggregate, which has replaced, or was
entered into in lieu of, the Credit Agreement, or any replacement Credit
Facility (a "Replacement Credit Facility") and (y) borrowing of not more
than $10 million of Debt other than the Debt referred to in clause (x)),
(i) if CYTEC is in default of any of the financial covenants set forth in
Section 6.12(c), or (ii) if at the time CYTEC has less than $200 million
of Equity (excluding the CYTEC Preferred Stock) and such incurrence of
Debt would result in CYTEC and its consolidated subsidiaries having (x) a
ratio of Debt to Equity (with the CYTEC Preferred Stock being treated as
neither Debt nor Equity for purposes of calculating the ratio) of more
than 2:1 or (y) Debt in excess of $150 million, or (iii) if at the time
CYTEC has $200 million or more of Equity (excluding the CYTEC Preferred
Stock) and such incurrence of Debt would result in CYTEC and its
consolidated subsidiaries having a ratio of Debt to Equity (with the CYTEC
Preferred Stock being treated as neither Debt nor Equity for purposes of
calculating the ratio) of more than 1.5:1. Notwithstanding the foregoing,
it shall not be a violation of the foregoing covenant if the Debt to
Equity ratio referred to in clause (ii)(x) above exceeds 2:1 if the only
Debt of the Corporation and its subsidiaries existing at such time is (x)
the Credit Agreement and borrowings thereunder or any Replacement Credit
Facility and borrowings thereunder and (y) borrowings of not more than $10
million of Debt other than the Debt referred to in clause (x)."
(b) Subsection (c) of Section 6.12 ("Financial Covenants") is amended to
read as follows:
"Except with the written consent of ACY, CYTEC and its consolidated
subsidiaries shall at all times (or, with respect to clauses (ii) and
(iii), at all times following the first anniversary of the Effective Date)
maintain: (i) a ratio of Debt to Equity of not more than 2:1 (with the
CYTEC Preferred Stock being treated as neither Debt nor Equity for
purposes of calculating the ratio), provided that it shall not be a
violation of the foregoing covenant if the Debt to Equity ratio exceeds
2:1 if the only Debt of the Corporation and its subsidiaries existing at
such time is (x) the Credit Agreement and borrowings thereunder or any
Replacement Credit Facility and borrowings thereunder and (y) not more
than $10 million of Debt other than the Debt referred to in clause (x);
(ii) Equity of not less than $200 million (with the CYTEC Preferred Stock
not being treated as Equity); and (iii) a fixed charge coverage ratio
20
<PAGE>
of not less than 3:1 for the average of the Fixed Charge Coverage Ratios
for the four consecutive fiscal quarters most recently then ended, with
the ratio being defined as the ratio of (A) consolidated earnings of CYTEC
before interest, taxes, depreciation, amortization and cash expenditures
for environmental Liabilities and Liabilities reflected in the OPEB
Matters Agreement to (B) the sum of the amount of cash expenditures for
interest, environmental Liabilities, Liabilities reflected in the OPEB
Matters Agreement and dividends accrued or paid on the CYTEC Preferred
Stock (the "Fixed Charge Coverage Ratio"). The maintenance covenants in
this Section 6.12(c) shall be measured quarterly on a historical basis."
(c) The definition of "Debt" set forth in Section 1.1 ("General") is
amended to read as follows:
"Debt: without duplication, all (i) obligations for borrowed money, (ii)
obligations evidenced by bonds, notes, debentures or similar instruments,
(iii) obligations to pay the deferred purchase price of property or
services (except trade accounts payable in the ordinary course of
business), (iv) obligations as lessee which are capitalized in accordance
with GAAP or which have a term in excess of five years (except obligations
as lessee under leases existing as of the Effective Date), (v) obligations
for the payment of money in connection with any letter of credit
transaction, provided that obligations secured by a letter of credit shall
not be included in Debt to the extent such amounts have been accrued on
CYTEC's balance sheet, (vi) guarantees, direct or indirect, of
indebtedness of others or (vii) any redeemable preferred stock or hybrid
security which must be, or at the option of the holder may be required to
be, repaid or refinanced at the end of a term and which is not classified
as equity under GAAP. For purposes of this Agreement, in calculating the
amount of "Debt" of CYTEC and its subsidiaries at any time, the entire
$100 million of the Credit Agreement or any Replacement Credit Facility
(as defined herein) shall be counted, regardless of whether any or all of
such amount has been borrowed by CYTEC or its subsidiaries at such time."
(d) The definition of "Equity" set forth in Section 1.1 ("General") is
amended to read as follows:
"Equity: the stockholders' equity of CYTEC and its subsidiaries (excluding
any redeemable preferred stock), as shown on its consolidated financial
statements."
(e) The definition of "Restricted Payments" set forth in Section 1.1
("General") is amended to read as follows:
"Restricted Payments: any of (i) the declaration or payment of any
dividend, or the payment (or incurrence of any liability to make a
payment) of any other distribution, direct or indirect, on account
21
<PAGE>
of any shares of any class of capital stock of CYTEC (other than dividends
on the CYTEC Preferred Stock, dividends on any redeemable preferred stock,
or dividends to the extent paid in shares of any class to holders of such
class and other than dividends paid (other than by CYTEC) to CYTEC or one
of its subsidiaries) or (ii) any payment or distribution (or incurrence of
any liability to make a payment or distribution) on account of any
redemption, retirement, purchase or other acquisition, direct or indirect,
of any shares of any class of capital stock of CYTEC or its subsidiaries
or Affiliates now or hereafter outstanding (other than redemption of the
Series C Preferred Stock as permitted by the terms thereof, redemption or
repurchase of any preferred stock or hybrid security that is treated as
"Debt" under clause (vii) of the definition of "Debt" contained herein,
and other than any purchase contemplated by Section 4.3), or of any
warrants, options or of other rights (other than stock options or other
forms of compensation payable to CYTEC's directors, officers and employees
or, prior to Employee Transfer Date, its prospective employees) to acquire
any such shares of capital stock."
2. Amendments to Series C Preferred. The Certificate of Designations,
Preferences and Rights of Series C Cumulative Preferred Stock of Cytec
Industries Inc. dated December 17, 1993 is amended as follows:
(a) Subsection (a) of Section 9 ("Financial Covenants") is amended to read
as follows:
Financial Covenants: "(a) Neither the Corporation nor any of its
subsidiaries shall, without the prior written consent of the holders of
the Series C Preferred Stock, incur any Debt (as defined in Section 11
hereof) (except for (x) borrowings under the Credit Agreement or
borrowings under any Replacement Credit Facility and (y) borrowings of not
more than $10 million of Debt other than the Debt referred to in clause
(x)), (i) if the Corporation is in default of any of the financial
covenants set forth in paragraph (c) of this Section 9, or (ii) if at the
time the Corporation has less than $200 million of Equity (excluding the
Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock and any other redeemable preferred stock of the
Corporation) and such incurrence of Debt would result in the Corporation
and its consolidated subsidiaries having (x) a ratio of Debt to Equity
(with the Series C Preferred Stock being treated as neither Debt nor
Equity for purposes of calculating the ratio) of more than 2:1 or (y) Debt
in excess of $150 million, or (iii) if at the time the Corporation has
$200 million or more of Equity (excluding the Series A Preferred Stock,
the Series B Preferred Stock, the Series C Preferred Stock and any other
redeemable preferred stock of the Corporation) and such incurrence of Debt
22
<PAGE>
would result in the Corporation and its consolidated subsidiaries having a
ratio of Debt to Equity (with the Series C Preferred Stock being treated
as neither Debt nor Equity for purposes of calculating the ratio) of more
than 1.5:1. Notwithstanding the foregoing, it shall not be a violation of
the foregoing covenant if the Debt to Equity ratio referred to in clause
(ii)(x) above exceeds 2:1 if the only Debt of the Corporation and its
subsidiaries existing at such time is (x) the Credit Agreement and
borrowings thereunder or any Replacement Credit Facility and borrowings
thereunder and (y) borrowings of not more than $10 million of Debt other
than the Debt referred to in clause (x)."
(b) Subsection (c) of Section 9 ("Financial Covenants") is amended to read
as follows:
"(c) Except with the written consent of the holders of the Series C
Preferred Stock, the Corporation and its consolidated subsidiaries shall
at all times (or, with respect to clauses (ii) and (iii), at all times
following the first anniversary of the Effective Date) maintain: (i) a
ratio of Debt to Equity of not more than 2:1 (with the Series C Preferred
Stock being treated as neither Debt nor Equity for purposes of calculating
the ratio); provided, that, it shall not be a violation of the foregoing
covenant if the Debt to Equity ratio exceeds 2:1 if the only Debt of the
Corporation and its subsidiaries existing at such time is (x) the Credit
Agreement and borrowings thereunder and (y) not more than $10 million of
Debt other than the Debt referred to in clause (x); (ii) Equity of not
less than $200 million (with the Series C Preferred Stock being treated as
neither Debt nor Equity); and (iii) a Fixed Charge Coverage Ratio of not
less than 3:1 for the average of the Fixed Charge Coverage Ratios for the
four consecutive fiscal quarters most recently then ended. The maintenance
covenants in this Section 9(c) shall be measured quarterly on a historical
basis."
(c) The definition of "Debt" set forth in Section 11 ("Definitions") is
amended to read as follows:
""Debt" shall mean, without duplication, all (i) obligations for borrowed
money, (ii) obligations evidenced by bonds, notes, debentures or similar
instruments, (iii) obligations to pay the deferred purchase price of
property or services (except trade accounts payable in the ordinary course
of business), (iv) obligations as lessee under leases which are
capitalized in accordance with GAAP or which have a term in excess of 5
years (except obligations as lessee under leases existing as of the
Effective Date), (v) obligations for the payment of money in connection
with any letter of credit transaction, provided that obligations to pay
money secured by a letter of credit shall not be included in Debt to the
extent such obligations have been accrued on the Corporation's balance
sheet, (vi) guarantees, direct or indirect, of indebtedness of others, and
23
<PAGE>
(vii) any redeemable preferred stock or hybrid security which must be, or
at the option of the holder may be required to be, repaid or refinanced at
the end of a term and which is not classified as equity under GAAP. For
purposes of Section 9 hereof, in calculating the amount of "Debt" of the
Corporation and its subsidiaries at any time, the entire $100 million of
the Credit Agreement or any Replacement Credit Facility shall be counted,
regardless of whether any or all of such amount has been borrowed by the
Corporation or its subsidiaries at such time."
(d) The definition of "Equity" set forth in Section 11 ("Definitions") is
amended to read as follows:
""Equity" shall mean the stockholders' equity of the Corporation and its
subsidiaries (excluding any redeemable preferred stock), as shown on its
consolidated financial statements."
(e) The definition of "Restricted Payment" set forth in Section 11
("Definitions") is amended to read as follows:
""Restricted Payments" shall mean any of (i) the declaration or payment of
any dividend, or the payment (or incurrence of any liability to make a
payment) of any other distribution, direct or indirect, on account of any
shares of any class of capital stock of the Corporation (other than
dividends on the Series A Preferred Stock, dividends on the Series B
Preferred Stock, dividends on the Series C Preferred Stock, dividends on
any redeemable preferred stock, or dividends to the extent paid in shares
of any class to holders of such class and other than dividends paid (other
than by the Corporation) to the Corporation or one of its subsidiaries) or
(ii) any payment or distribution on account of any redemption, retirement,
purchase or other acquisition, direct or indirect, of any shares of any
class of capital stock of the Corporation or its subsidiaries or
affiliates now or hereafter outstanding (other than redemption or
repurchase of the Series A Preferred Stock and/or the Series B Preferred
Stock, and redemption of the Series C Preferred Stock as permitted by the
terms governing such Series of Preferred Stock, redemption or repurchase
of any preferred stock or hybrid security that is treated as "Debt" under
clause (vii) of the definition of "Debt" contained herein, and other than
any purchase contemplated by Section 4.3 of the TDA), or of any warrants,
options or of other rights (other than stock options or other forms of
compensation payable to the Corporation's directors, officers and
employees or, prior to the Employee Transfer Date (as defined in the TDA),
its prospective employees) to acquire any such shares of capital stock."
3. Waivers, etc. To the extent, if any, that the foregoing amendments to
the terms of the Series C Preferred may be ineffective, each party hereby
24
<PAGE>
irrevocably grants to the other (in the case of CYANAMID, on its own
behalf and on behalf of any subsequent holder of the Series C Preferred)
all consents, waivers and approvals under the terms of the Series C
Preferred as are necessary to effectuate the intent of Section 2, above.
4. Successors and Assigns. This Agreement may not be assigned without the
consent of the other party. All covenants and agreements contained in the
Agreement by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and permitted assigns of
the parties hereto whether so expressed or not.
5. Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly
given,
(a) On the date of service if served personally on the party to whom
notice is given,
(b) On the day of transmission if sent via facsimile transmission,
provided telephonic confirmation of receipt is obtained promptly after
completion of transmission,
(c) On the business day after delivery to an overnight courier service or
the Express mail service maintained by the United States Postal Service,
provided receipt of delivery has been confirmed, or
(d) On the fifth day after mailing, provided receipt of delivery is
confirmed, if mailed to the party to whom notice is to be given, by first
class mail, registered or certified, postage prepaid, properly addressed
and return receipt requested to the party as follows:
If to CYTEC:
Cytec Industries Inc.
5 Garret Mountain Plaza
West Paterson, NJ 07424
Attn: Secretary
25
<PAGE>
If to CYANAMID:
American Cyanamid Company
c/o American Home Products Corporation
Five Giralda Farms
Madison, NJ 07940
Attn: General Counsel
Any party may change its address by giving the other party written notice of
its new address in the manner set forth above.
6. Descriptive Headings. The descriptive headings of the several sections of
this Agreement are inserted for reference only and shall not limit or
otherwise affect the meaning hereof.
7. Governing Law. Except for the Series C Preferred, which is governed by
Delaware law, this Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New Jersey.
8. Counterparts. This Agreement may be executed simultaneously in any number
of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
9. Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in
any way impaired thereby.
10. Entire Agreement. This Agreement is intended by the parties hereto as a
final and complete expression of their agreement and understanding in
respect to the subject matter contained herein. This Agreement supersedes
all prior agreements and understandings, written or oral, between the
parties with respect to such subject matter.
26
<PAGE>
11. Amendments. This Agreement may not be amended except by a written
instrument executed by the parties hereto.
12. No Third Party Beneficiaries. Nothing in this Agreement shall convey any
rights upon any person or entity which is not a party or an assignee of a
party to this Agreement.
IN WITNESS HEREOF, the parties have caused this Agreement to be executed
and delivered as of the date first above written.
AMERICAN CYANAMID COMPANY CYTEC INDUSTRIES INC.
BY BY
------------------------ --------------------
Name: E. F. Jackman
Title: Vice President
27
<PAGE>
Exhibit 10.13(o)
RESTRICTED STOCK AWARD UNDER
THE CYTEC INDUSTRIES INC.
1993 STOCK AWARD AND INCENTIVE PLAN
January 7, 1997
David Lilley
719 Clove Lane
Franklin Lakes, New Jersey 07417
Shares of Restricted Stock: 42,000
Dear Mr. Lilley:
As a key employee of Cytec Industries Inc. (the "Company"), you have
been granted by the Compensation and Management Development Committee (the
"Committee") of the Board of Directors an award of Restricted Stock equal to the
number of shares of the Common Stock, par value of $.01 per share, of the
Company indicated above ("Restricted Stock"). The shares will be issued from
Treasury Stock. This award is subject to the terms and conditions hereof and of
the Company's 1993 Stock Award and Incentive Plan (the "Plan").
The Company will cause certificates for the Restricted Stock to be
issued and registered in your name. Physical possession of each certificate
representing the Restricted Stock shall be retained by the Company until the
shares vest, as herein provided. A certificate for any shares that vest will be
forwarded to you at your address appearing on the Company's stock register after
vesting has occurred.
Certain restrictions with respect to this award include, but are not
limited to, the following:
(1) Subject to the terms of this Agreement and the Plan, the Restricted
Stock will vest as follows:
Date Shares Vesting
---- --------------
January 7, 2000 14,000
January 7, 2001 14,000
January 7, 2002 14,000
28
<PAGE>
(2) You shall execute in blank (undated), and return to the Secretary
of the Committee, the enclosed stock powers, which the Company will use to
reclaim any Restricted Stock that fails to vest. Any Restricted Stock that fails
to vest shall be forfeited and shall revert to the Company. By your acceptance
of the Restricted Stock you irrevocably authorize the Company to complete the
stock powers and to deliver the stock powers along with the certificates for the
Restricted Stock to the Company's Transfer Agent so as to effectuate any
forfeiture provided for herein.
(3) Except as limited by this Agreement or the Plan, you shall have, as
holder of non-forfeited shares of the Restricted Stock, all of the rights of a
common stockholder of the Company, including the right to vote and receive
dividends. Nevertheless, stock of the Company distributed in respect of such
Restricted Stock in connection with a stock split, stock dividend,
recapitalization or other similar transaction shall be deemed to be Restricted
Stock and shall be subject to restrictions and a risk of forfeiture to the same
extent as the Restricted Stock with respect to which such stock is distributed.
(4) If your employment with the Company or a subsidiary terminates on
or prior to the date of vesting, all unvested shares of Restricted Stock shall
be forfeited, except as provided in paragraphs (5) and (6), below, or except as
the Committee shall otherwise determine.
(5) If your employment with the Company or a subsidiary terminates by
reason of (i) your death, (ii) your disability, or (iii) under circumstances
determined by the Committee to be not contrary to the best interests of the
Company, then your Restricted Stock award shall not be forfeited by reason of
such termination of employment.
(6) As provided in the Plan, upon the occurrence of a "change in
control" all unvested (and not previously forfeited) shares of Restricted Stock
shall immediately vest. Upon such occurrence, the vested shares of Restricted
Stock shall be delivered to you promptly.
(7) On or prior to the respective dates indicated below, you may elect
that all or part of any instalment indicated below be forfeited as of the date
it normally would vest and that you be issued, in lieu thereof, a Deferred Stock
Award for the equivalent number of shares:
<TABLE>
<CAPTION>
Date Installment Date by which Deferral
Scheduled to Vest Request Must be Made
----------------- --------------------
<S> <C>
January 7, 2000 December 1, 1998
January 7, 2001 December 1, 1999
January 7, 2002 December 1, 2000
</TABLE>
If you elect deferral, as indicated above, then effective as of the date on
which the related award of Restricted Stock otherwise would vest, the total
award (or such lesser percentage of such total award as shall have been elected
by you and accepted by the Committee) shall be forfeited, and you will be issued
instead a Deferred Stock Award, as defined in Section 6(h) of the Plan, equal to
the number of shares of Restricted Stock so forfeited. Such Deferred Stock Award
shall accrue Dividend Equivalents which will be deferred in the form of
additional Deferred Stock based on the Closing Price of the Company's
29
<PAGE>
Common Stock on the New York Stock Exchange Consolidated Tape on the date on
which the related dividend is paid on the Company's Common Stock. Deferred
Stock resulting from deferral of Dividend Equivalents will likewise bear
Dividend Equivalents.
(8) You may satisfy your mandatory federal and state income tax
withholding obligations with respect to any Restricted Stock that vests (subject
to Committee acceptance, as set forth below, and subject to compliance with Rule
16b-3 under the Securities Exchange Act of 1934 if you are then an executive
officer of the Company) by requesting the Company to withhold the number of
shares of such Restricted Stock having a fair market value as of the date of
vesting equal to the aggregate mandatory federal and state income tax
withholding obligations with respect to all of your Restricted Stock under this
award which vests on such date. The fair market value of Restricted Stock will
be determined on the same basis that the value of the Restricted Stock is
determined for federal income tax withholding purposes. Your request must be
submitted in writing to the Committee, on forms approved by the Secretary to the
Committee, no later than the December 1 of the year prior to the date of
vesting. The Committee shall have sole discretion to determine whether or not to
accept your request, and failure by the Committee to accept your request on or
prior to the date of vesting shall constitute a denial of your request.
(9) The Restricted Stock may not be sold, assigned, transferred,
pledged, hypothecated or otherwise disposed of; and neither the right to receive
stock, nor any interest therein or under the Plan, may be assigned; and any
attempted assignment shall be void.
(10) Nothing in this award shall confer on you any right to continue in
the employ of the Company or any of its subsidiaries or affiliates or interfere
in any way with the right of the Company or any subsidiary or affiliate to
terminate your employment at any time.
The Company reserves the right to require that stock certificates
issuable to you in connection with the Restricted Stock award be delivered to
you only within the United States.
The stock issued to you hereunder may not be resold by you except
pursuant to an effective registration statement under the Securities Act of 1933
or pursuant to an exemption from registration, such as Rule 144.
You agree to pay the Company promptly, on demand, any withholding taxes
due in respect of the awards made hereunder. The Company may deduct such
withholding taxes from any amounts owing to you by the Company.
Once Restricted Stock vests as herein provided, it shall no longer be
deemed to be Restricted Stock, and your rights thereto shall not be subject to
the restrictions of this Agreement or of the Plan.
In the event of any conflict between the terms of this Agreement and
the provisions of the Plan, the provisions of the Plan shall govern.
If you accept the terms and conditions set forth in this Agreement,
please execute the enclosed copy of this letter where indicated and return it
30
<PAGE>
as soon as possible, along with the enclosed stock power.
Very truly yours,
CYTEC INDUSTRIES INC.
BY:________________________
J. W. Hirsch
Secretary - Compensation
and Management
Development Committee
Enc.
ACCEPTED:
____________________________
David Lilley
S.S. No. ###-##-####
Date: January 15, 1997
31
<PAGE>
Exhibit 11 (a)
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
Earnings Per Share Computations
(Unaudited)
(Millions of Dollars, except share and per share amounts)
Three Months Ended
March 31, 1997
---------------------------
Primary Fully Diluted
------- -------------
Net earnings available for common stockholders $26.9 $26.9
===== =====
Weighted average number of shares of common
stock outstanding during the period exclusive
of the following: 45.7 45.7
Common stock equivalents:
Restricted stock .1 .1
Non qualified stock options 2.1 2.1
Adjusted weighted average number of shares of
common stock outstanding during the period 47.9 47.9
===== =====
Earnings per share $0.56 $0.56
===== =====
See Note 2 of the Notes to the Consolidated Financial Statements
included herein for explanation of earnings per share.
32
<PAGE>
Exhibit 11 (b)
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
Earnings Per Share Computations
(Unaudited)
(Millions of Dollars, except share and per share amounts)
Three Months Ended
March 31, 1996
-----------------------------
Primary Fully Diluted
------- --------------
Net earnings available for common stockholders $22.6 $22.6
====== =====
Weighted average number of shares of common
stock outstanding during the period exclusive
of the following: 49.0 49.0
Common stock equivalents:
Restricted stock .1 .1
Non qualified stock options 2.1 2.1
Adjusted weighted average number of shares of
common stock outstanding during the period 51.2 51.2
===== ====
Earnings per share $0.44 $0.44
===== =====
See Note 2 of the Notes to the Consolidated Financial Statements
included herein for explanation of earnings per share.
33
<PAGE>
Exhibit 12
Cytec Industries Inc.
Computation of Ratio of Earnings to Fixed Charges
(Dollar amounts in millions)
Three Three
Months Ended Months Ended
3/31/97 3/31/96
------------- -------------
Earnings (loss) before income taxes 45.1 39.1
Add:
Interest on indebtedness net of
capitalized interest 1.8 1.4
Portion of rents representative of
the interest factor 1.3 1.4
---- ----
Earnings as adjusted 48.2 41.9
Fixed charges:
Interest on indebtedness 2.0 1.6
Portion of rents representative of
the interest factor 1.3 1.4
---- ----
Fixed charges 3.3 3.0
---- ----
Ratio of earnings to fixed charges 14.6 14.0
---- ----
34
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM-10Q AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 29,400
<SECURITIES> 0
<RECEIVABLES> 199,300
<ALLOWANCES> 10,000
<INVENTORY> 87,700
<CURRENT-ASSETS> 401,600
<PP&E> 1,183,100
<DEPRECIATION> (655,700)
<TOTAL-ASSETS> 1,181,800
<CURRENT-LIABILITIES> 324,300
<BONDS> 0
0
100
<COMMON> 500
<OTHER-SE> 332,200
<TOTAL-LIABILITY-AND-EQUITY> 1,181,800
<SALES> 306,500
<TOTAL-REVENUES> 306,500
<CGS> 235,000
<TOTAL-COSTS> 290,900
<OTHER-EXPENSES> (24,400)<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 200<F2>
<INCOME-PRETAX> 44,300<F3>
<INCOME-TAX> 17,400
<INCOME-CONTINUING> 26,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,900
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0.56
<FN>
<F1>This number includes gain on sale of businesses of $22,300,000 for the three
months ended March 31, 1997.
<F2>This number represents interest expense, net.
<F3>This number includes equity in net income of associated companies of $4,500,000
for the three months ended March 31, 1997.
</FN>
</TABLE>
<PAGE>
Exhibit 99(a)
Pursuant to Rule 12b-23 under the Securities and Exchange Act, the following
Exhibit containing text from the Company's Annual Report on Form 10-K is filed
as to matters incorporated by reference in Part II, Item 1 ("Legal
Proceedings").
Environmental Matters
The Company is subject to various federal, state and foreign laws and
regulations which impose stringent requirements for the control and abatement of
air and water pollutants and contaminants and the manufacture, transportation,
storage, handling and disposal of hazardous substances, hazardous wastes,
pollutants and contaminants.
In particular, under the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") and various other federal and state laws, a current or
previous owner or operator of a facility may be liable for the removal or
remediation of hazardous materials at the facility. Such laws typically impose
liability without regard to whether the owner or operator knew of, or was
responsible for, the presence of such hazardous materials. In addition, pursuant
to the Resource Conservation and Recovery Act ("RCRA") and state laws governing
the generation, transportation, treatment, storage or disposal of solid and
hazardous wastes, owners and operators of facilities may be liable for removal
or remediation, or other corrective action at areas where hazardous materials
have been released at a facility. The costs of removal, remediation or
corrective action may be substantial, and the presence of hazardous materials in
the environment at any of the Company's facilities, or the failure to abate such
materials promptly or properly, may adversely affect the Company's ability to
operate such facilities. CERCLA and analogous state laws also impose liability
for investigative, removal and remedial costs on persons who dispose of or
arrange for the disposal of hazardous substances at facilities owned or operated
by third parties. Liability for investigative, removal and remedial costs under
such laws is retroactive, strict, and joint and several.
The Clean Air Act and similar state laws govern the emission of pollutants into
the atmosphere. The Federal Water Pollution Control Act and similar state laws
govern the discharge of pollutants into the waters of the United States. RCRA
and similar state laws govern the generation, transportation, treatment,
storage, and disposal of solid and hazardous wastes. Finally, the Toxic
Substances Control Act regulates the manufacture, processing, and distribution
of chemical substances and mixtures, as well as the disposition of certain
hazardous substances. The costs of compliance with such laws and regulations
promulgated thereunder may be substantial, and regulatory standards under such
statutes tend to evolve towards more stringent requirements, which might, from
time-to-time, make it uneconomic or impossible to continue operating a facility.
Non-compliance with such requirements at any of the Company's facilities could
result in substantial civil penalties or the inability of the Company to operate
all or part of the facility.
In addition, certain state and federal laws govern the abatement, removal, and
disposal of asbestos-containing materials and the maintenance of underground
storage tanks and equipment which contains or is contaminated by polychlorinated
biphenyls.
37
