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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
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/ / 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.
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(Exact name of registrant as specified in its charter)
Delaware 22-3268660
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Five Garret Mountain Plaza
West Paterson, New Jersey 07424
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (973) 357-3100
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on
------------------- Which Registered
Common Stock, par value ---------------------------
$.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
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 report(s) and (2) has been subject to such filing
requirements for the past 90 days. Yes x No _____.
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
The aggregate market value of common equity held by non-affiliates of the
registrant as of January 29, 1998, based upon the closing price of registrant's
common stock ($51 1/16) on such date as reported on the composite transaction
reporting system including transactions on the New York Stock Exchange was
$2,290,317,189.
The number of shares outstanding of each of the registrant's classes of common
stock, as of January 29, 1998 was 45,199,363 shares of Common Stock, par value
$.01 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Part of Form 10-K
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Portions of Proxy Statement for 1998 Annual Meeting Parts III, IV
of Common Stockholders to be filed prior to April 30, 1998.
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PART I
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Item 101. Business
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The Company is a vertically integrated specialty chemicals company which
focuses on value-added specialty products. The Company develops,
manufactures and markets specialty chemicals, specialty materials and
building block chemicals serving a broad group of end users, including
aerospace, plastics, coatings, mining, paper, water treatment and
automotive industries. The Company has manufacturing facilities in eight
countries and sells its products worldwide. The Company had net sales of
$1,290.6 million and earnings from operations of $119.2 million in 1997.
In addition, the Company has a 50% interest in each of five
unconsolidated associated companies with aggregate net sales of $596.5
million and earnings from operations of $45.4 million in 1997. The
Company reported $12.3 million of equity in earnings of these associated
companies in 1997.
The Company's management regularly reviews the business portfolio of the
Company in terms of strategic fit and financial performance and may from
time-to-time dispose of products or product lines and/or acquire
additional products or technologies. During 1997, the Company acquired
substantially all of the assets and liabilities of Fiberite, Inc.
("Fiberite") for $344 million in cash and divested substantially all of
the assets and liabilities of its acrylic fibers product line for
approximately $94.8 million in cash and certain other consideration with
a value of approximately $15 million. On February 13, 1998, the Company
confirmed that it is in negotiations with Dyno Industrier ASA ("Dyno") to
acquire Dyno's amino coatings resins business, consisting primarily of
Dyno's 50% interest in Dyno-Cytec, one of the Company's unconsolidated
associated companies, for a purchase price of approximately $60 million.
On January 26, 1998 the Company announced that it is exploring all
strategic options to enhance the value of its wholly-owned subsidiary
Conap, Inc., including the possible divestiture of Conap, Inc. No
assurances can be given as to the results of the negotiations with Dyno
or the assessment of strategic options for Conap.
The Company sells products in three general product categories:
specialty chemicals, specialty materials and building block chemicals.
Specialty chemicals principally include water treating, paper and mining
chemicals, coatings and resin products, polymer additives and surfactants
and specialty monomers. Specialty materials principally include
aerospace materials. Building block chemicals principally include
acrylonitrile, acrylamide, melamine and methanol.
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.
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SPECIALTY CHEMICALS
The specialty chemicals product category, which represented revenues of
approximately $728.3 million in 1997 and $744.7 million in 1996, or
approximately 56.4% and 59.1%, respectively, of the Company's net sales
in such years, include primarily water treating, paper and mining
chemicals, coatings and resin products and polymer additives.
Set forth below are the Company's primary specialty chemical product
lines, major products and their principal applications.
<TABLE>
<CAPTION>
PRODUCT LINE MAJOR PRODUCTS PRINCIPAL APPLICATIONS
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<S> <C> <C>
Water treating chemicals(1) Organic flocculants - Industrial and municipal water treatment
plants
Paper Chemicals (1) Sizing agents, strength resins, - Paper manufacturing
retention aids, flocculants
Mining Chemicals(1) Reagents, Polymers - Mineral ore and alumina processing
Coatings and resin Melamine cross-linkers, - High performance automotive, coil, can
products(1)(2) urethanes and wood coatings; radial tire adhesion
promoters.
Polymer additives Ultraviolet absorbers
and stabilizers, - Plastics, coatings and fibers
antioxidants
Surfactants and Specialty Surfactants and specialty - Emulsion polymers and coatings
Monomers crosslinking monomers
Other Phosphine and phosphine - Electronics, chemical catalysts, and
derivatives mineral separation
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</TABLE>
(1) Some sales of this product line are made by Mitsui Cytec, Ltd. ("Mitsui
Cytec"), an unconsolidated associated company owned 50% by Mitsui Chemicals
Inc.
(2) Some sales of this product line are made by Dyno-Cytec K.S. ("Dyno-Cytec"),
an unconsolidated associated company owned 50% by Dyno. The Company is
currently in negotiations with Dyno to acquire Dyno's amino coatings resins
business, consisting primarily of Dyno's 50% interest in Dyno-Cytec.
WATER TREATING, PAPER AND MINING CHEMICALS
The Company's water treating, paper and mining chemicals are comprised
primarily of organic flocculants, sizing agents and other specialty paper
additives and mining reagents. Organic flocculants are synthetic water
soluble polymers utilized primarily in liquid-solid separation processes
(i.e., separating solid waste or particulate matter from water). The
Company manufactures organic flocculants at five plants in North America
and two in Europe. In addition, Mitsui Cytec manufactures and markets
organic flocculants in Japan. The Company manufactures all basic forms of
organic flocculants in hundreds of variations, designed to industry and
customer specific application requirements. The primary applications of
these products are municipal and industrial wastewater treatment, paper
manufacturing and mineral processing.
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Water treatment is the largest application for organic flocculants, which
are used as coagulants in the treatment of municipal drinking water and
industrial influent water supplies, as sludge conditioners for municipal
waste water treatment, and as treatments in industrial waste streams to
remove suspended solids. Competition is generally intense in wastewater
treatment applications, particularly for municipal accounts, where
contracts are generally awarded on a competitive bid basis, and for those
industrial applications where service is not an important factor.
The Company is one of the leading suppliers of organic flocculants to the
U.S. paper industry. Organic flocculants are used as performance aids in
the manufacturing of paper and as part of environmental wastewater
management. In addition to flocculants, paper chemical products include
wet and dry strength resins, alkaline and surface sizing agents and other
specialty additives. The Company is the leading global supplier of
alkenyl succinic anhydride-based paper sizing used in alkaline
papermaking. Alkaline papermaking processes are considered more
environmentally friendly, and also permit the use of lower cost paper
fillers while maintaining sheet strength. The Company also sells the
specialized flocculants used to treat the large volumes of water required
to wash and remove inks in paper recycling mills. Overall demand for
paper chemicals is cyclical, varying with paper industry production.
The Company's mining chemical products include organic flocculants and
reagents, and are primarily used in applications to separate minerals
from raw ores. The Company also manufactures and sells specialty
reagents with leading positions in cobalt/nickel separation and copper
sulfide recovery applications. Demand for mining chemicals is cyclical
and varies with industry conditions for the particular minerals with
respect to which the Company's products have processing applications.
The Company generally competes in the water treating, paper and mining
chemicals areas on the basis of cost, performance and service. In many
applications, the Company's products are positioned in the middle of the
market where the Company competes both against companies which offer
higher levels of service or a broader line of products at generally
higher prices and against companies which offer lower levels of service
or product performance at generally lower prices. Each of the Company's
water treating, paper and mining chemical product lines is marketed
through a specialized sales and technical services staff and also through
distributors and resellers.
COATINGS AND RESIN PRODUCTS
The Company manufactures and markets melamine cross-linking resins
("Resins"), primarily under the CYMEL(/R/) trademark, for industrial
coatings applications. The Company produces Resins using melamine, one of
the Company's building block chemicals. The Company, through associated
companies in Europe and Japan, and directly elsewhere, sells Resins
worldwide to manufacturers producing coatings for automotive, marine,
wood and metal finishings, and appliances, containers, coils and general
industrial maintenance coatings. The Company believes that it is one of
the largest global suppliers of Resins. In addition, the Company
manufactures a line of adhesion promoters under the CYREZ(/R/) trademark.
These products are used globally in the rubber industry, the major
application being in the manufacture of steel belted radial tires to
enhance the bonding of the steel and polyester cords to the rubber.
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POLYMER ADDITIVES
The Company is a significant global supplier to the plastics industry of
specialty additives which protect plastics from the ultraviolet radiation
of sunlight and from oxidation. Typical end use applications of the
Company's products include a wide variety of polyolefins which are used
in toys, lawn furniture and automotive applications, fibers for carpets,
spandex applications, engineered plastics and automotive coatings.
Demand for light stabilizers and high performance antioxidants for
plastics and coatings has been growing primarily due to increasing
manufacturer and consumer expectations for the service life of plastics
and coatings and the replacement of metal and other materials with
plastics in certain automotive applications and in outdoor toys and lawn
furniture. Ciba Specialty Chemicals AG is the dominant competitor in
this segment. The Company has commenced a capital investment program to
improve manufacturing efficiency, expand capacity and improve the
consistency and quality of its polymer additive products at its Willow
Island manufacturing facilities in Belmont, West Virginia and its Botlek
plant in the Netherlands. The Company expects the capacity additions
included as part of this program, two million pounds of additional
benzotriazole capacity at its Botlek plant and approximately 600,000
pounds of hindered amine light stabilizer capacity at the Willow Island
plant, to be complete by the middle of 1998 and early 1999, respectively.
SURFACTANTS AND SPECIALTY MONOMERS
The Company is a leading global supplier of acrylamide based specialty
monomers and sulfosuccinate surfactants. These products are used in
emulsion polymers, paints, paper coatings, printing inks, varnishes,
agricultural chemicals, adhesives, textiles, mining chemicals, laundry
dry cleaning compounds, nonwoven binders, thermoplastic molded
components, multipurpose cleaning solutions, and antistatic softening
agents. The Company expects to complete a major expansion of its
surfactants manufacturing facility at its Willow Island plant by the end
of 1998. The new facility will provide additional capacity and will
allow the Company to close its Linden, New Jersey plant.
OTHER SPECIALTY CHEMICALS
The Company sells other specialty chemicals for a variety of
applications. The major products in this category are oil field
chemicals and phosphine chemicals. The Company also is the largest
supplier of ultra-high purity phosphine gas, used in semiconductor
manufacturing operations, and has significant positions in various
phosphine derivative products.
SPECIALTY MATERIALS
The specialty materials product category, which represented revenues of
approximately $297.0 million in 1997 and $320.5 million in 1996, or
approximately 23.0% and 25.4%, respectively, of the Company's net sales
in such years, now includes primarily aerospace materials. On January
31, 1997, the Company sold substantially all the assets and liabilities
of its acrylic fiber product line, which accounted for approximately 1%,
11% and 10% of the Company's 1997, 1996 and 1995 net sales. On September
30, 1997, the Company acquired substantially all the assets and
liabilities of Fiberite, Inc (the "Fiberite Acquisition"). The assets
acquired included all of Fiberite's businesses except its satellite
materials business. The majority of the Fiberite operations were
combined with Cytec Engineered Materials Inc., a wholly owned subsidiary,
which was renamed Cytec Fiberite Inc.
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Set forth below are the Company's primary specialty materials product
lines, major products and their principal applications.
<TABLE>
<CAPTION>
PRODUCT LINE MAJOR PRODUCTS PRINCIPAL APPLICATIONS
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<S> <C> <C>
Aerospace materials Structural adhesives, advanced - Commercial and military aviation,
composites high performance automobiles, sporting
goods.
Thermoset molding Polyester, vinyl ester,
Compounds phenolic, epoxy and specialty - Automotive engine, electrical, and
molding compounds electronic components, appliances.
Acrylic plastics and methyl Acrylic plastic molding
Methacrylate(1) compounds - Automotive, appliances, signs
Methyl methacrylate - Acrylic sheet and molding compounds
Refinery and styrene Hydroprocessing catalysts, - Oil refining
catalysts(2) reforming catalysts
Styrene catalysts - Styrene manufacturing
Other Amino molding - Electrical components, dinnerware
compounds(3)
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</TABLE>
(1) Product line manufactured and sold exclusively by CYRO Industries ("CYRO"),
an unconsolidated associated company owned 50% by a subsidiary of Huls AG.
(2) Product line manufactured and sold exclusively by Criterion Catalyst Company
L.P. ("Criterion Catalyst"), an unconsolidated associated company owned 50%
by subsidiaries of Royal Dutch Petroleum Company and The "Shell" Transport
and Trading Company, Public Limited Company.
(3) Product line manufactured and sold principally by AC Molding Compounds
("ACMC"), an unconsolidated associated company owned 50% by Creative
Moldings Ltd.
AEROSPACE MATERIALS
The Company is the major global supplier of aerospace structural
adhesives. With the Fiberite Acquisition, the Company became one of two
major suppliers of aerospace advanced composite materials. Advanced
composites are exceptionally strong and lightweight materials
manufactured by impregnating fabrics and tapes made from high performance
fibers with epoxy, bismaleimide, phenolic, polyimide and other resins
formulated or purchased by the Company. Advanced composites accounted
for approximately 11%, 5% and 5% of the Company's 1997, 1996 and 1995 net
sales. The increased percentage in 1997 was due primarily to the
Fiberite Acquisition.
The primary applications for both aerospace adhesives and advanced
composites are commercial and military aerospace programs. Sales are
dependent to a large degree on the commercial and military aircraft build
rate and the number of applications and aircraft programs for which the
Company is a qualified supplier. Every current major aircraft program in
the Western world has qualified and uses the Company's structural
adhesives and many also use the Company's advanced composites. Advanced
composites generally account for a higher percentage of the structural
weight on military aircraft than on commercial aircraft. They also
account for a higher percentage of the structural weight on newer design
commercial aircraft than older design commercial aircraft
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as technology progresses and manufacturers design planes to achieve
greater fuel efficiency. Advanced composites made from carbon fibers and
epoxy or bismaleimide resins are primarily used for structural aircraft
applications such as wing, tail and rudder components, engine housings,
and fuselage components while advanced composites made from fiberglass
fibers and phenolic resins are primarily used for interior aircraft
applications such as sidewall, ceiling and floor panels and storage and
cargo bins. The Company's structural adhesives and advanced composites
also have various applications in industrial and sporting goods.
The Company purchases from third parties both the fibers, usually carbon,
aramid or glass, and the base resins used in the manufacture of
composites.
The Company markets aerospace materials through a global sales and
technical service staff which services commercial aircraft manufacturers
and their subcontractors and also markets to U.S. and European defense
programs.
ACRYLIC PLASTICS AND METHYL METHACRYLATE
CYRO, an unconsolidated associated company, manufactures and sells
acrylic sheet and molding compound products, primarily under the
ACRYLITE (/R/) trademark. CYRO operates primarily in North America and
manufactures its acrylic products at four locations in the U.S. and at
one location in Canada. The Company's partner in CYRO, Huls A.G., has an
affiliate, Rohm GmbH, which manufactures methyl methacrylate ("MMA") and
acrylic sheet products and molding compounds in Europe and makes its
technological expertise available to CYRO.
CYRO also manufactures MMA, most of which CYRO uses as a raw material in
the manufacture of acrylic sheet and molding compounds and the remainder
of which is sold to third parties. CYRO's world-scale MMA manufacturing
facilities are an integrated part of the Company's Fortier facility,
consuming substantially all the hydrocyanic acid produced by the Company
in connection with the manufacture of acrylonitrile. CYRO expanded its
MMA annual production capacity by approximately 25% in 1995 to 250
million pounds; at the same time the Company expanded its acrylonitrile
plant at the Fortier facility, increasing the supply of hydrocyanic acid
available to CYRO. CYRO further expanded its MMA annual production
capacity to approximately 278 million pounds at the end of 1997. The
Company anticipates that over the near term it will also sell to CYRO for
the production of MMA approximately 25% of the Company's share of
methanol production at the Fortier facility.
REFINERY AND STYRENE CATALYSTS
Criterion Catalyst, an unconsolidated associated company, manufactures
primarily hydroprocessing catalysts, which are used in the refining of
crude oil. Criterion Catalyst also manufactures reforming catalysts
which are used in producing gasoline and other catalysts used in the
manufacture of styrene, a raw material for many plastics. Criterion
Catalyst is the largest global supplier of hydroprocessing catalysts.
The market for hydroprocessing catalysts expanded rapidly in recent years
as legislation in the United States and many other countries has
required, or provided tax incentives for, removal of sulfur from diesel
and gas fuel and as "sour" crude oil with more sulfur has constituted a
larger percentage of overall world crude supply. Accordingly, Criterion
Catalyst significantly expanded its worldwide manufacturing capacity in
hydroprocessing catalysts during 1996 and 1997. Criterion Catalyst is
currently seeking to address operational inefficiencies which followed
its expansion program, as well as an unfavorable product mix and downturn
in demand, particularly in the U.S. reforming business.
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THERMOSET MOLDING COMPOUNDS AND OTHER SPECIALTY MATERIALS
The Company sells other specialty materials for a variety of
applications, which utilize the Company's proprietary technology and are
targeted to niche markets. The major products in this category are
thermoset molding compounds, which serve in numerous automotive,
electrical and consumer appliance applications, as well as urethane
systems and precision parts produced by the Company's subsidiary, Conap,
Inc. Additionally, the Company's associated company, A. C. Molding
Compounds, is the largest manufacturer of amino molding compounds in the
United States. Amino molding compounds are mature products, the primary
markets for which are electrical components and dinnerware, where price
competition is intense.
BUILDING BLOCK CHEMICALS
The building block chemicals product category represented revenues of
approximately $265.3 million in 1997 and $194.4 million in 1996, or
approximately 20.6% and 15.4%, respectively, of the Company's net sales
in each year. The primary reason for the increase in sales was that the
Company's sales of acrylonitrile to the purchaser of its acrylic fibers
product line are included in net sales in 1997 while the internal usage
of acrylonitrile in the production of acrylic fibers by the Company
through January 31, 1997 was not.
Building Block chemicals are manufactured primarily at the Company's
world-scale, highly integrated Fortier facility. The Fortier facility is
located on the Mississippi River near New Orleans, Louisiana and has
ready access to all major forms of transportation and supplies of raw
materials.
The Company manufactures building block chemicals that can be used as raw
materials in its specialty chemicals product category. The Company
utilizes manufacturing joint ventures and long-term sales contracts to
reduce market risks and to assist the Company in obtaining world-scale
production economics.
The Company used nearly a third of its production of its building block
chemicals, measured by value, in the manufacture of specialty chemicals,
specialty materials and other building block chemicals in 1997. Prior to
the sale of its acrylic fibers product line in January, 1997, the
internal usage, measured by value, was more than one half. The Company
believes this integration, particularly within the Fortier facility,
provides the Company with a cost-effective, reliable and high quality
supply of significant raw materials. The integration between the
Company's building block chemicals and the Company's specialty chemicals
also reduces the Company's exposure to the commodity chemicals pricing
cycles that characterize the market for building block chemicals. When
building block prices decrease, margins in the Company's specialty
chemicals product lines manufactured from the Company's building block
chemicals tend to increase and when building block prices increase,
margins in such specialty chemicals product lines tend to decrease.
ACRYLONITRILE
The Company anticipates that over the near term it will use internally
approximately 25% of its current acrylonitrile annual production capacity
of 475 million pounds to produce acrylamide and that more than 50% will
be sold pursuant to two long term supply-agreements expiring in 2002 and
2005, one of which provides for a cost based price subject to increases
based partially on market pricing and the other of which provides for a
market based price. During the second quarter of 1995, the Company
completed an expansion of its acrylonitrile plant at the Fortier
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facility to increase the plant's annual production capacity by
approximately 35% or 125 million pounds. The profitability of producing
acrylonitrile is influenced by supply and demand, by the cost of
propylene, which is the largest component of the cost of producing
acrylonitrile, and by manufacturing efficiency (i.e., yield and co-
product recovery). Hydrocyanic acid is produced as a co-product of the
acrylonitrile process. Substantially, all of the hydrocyanic acid
produced by the Company is sold to CYRO as a raw material for MMA. See
Item 3, "Legal Proceedings."
ACRYLAMIDE
The Company anticipates that over the near term it will use internally
approximately 40% of its acrylamide annual production capacity of 180
million pounds primarily for the production of polyacrylamides. The
remainder of the Company's production is sold to third parties. The
Company manufactures acrylamide at its Fortier facility and also at its
Botlek facility in the Netherlands. The Company is one of the largest
producers and users of acrylamide in the world.
MELAMINE
The Company operates a melamine manufacturing plant with annual
production capacity of 155 million pounds at the Fortier facility for
American Melamine Industries ("AMEL"), a manufacturing joint venture
which is owned 50% by a subsidiary of DSM N.V. The Company anticipates
that over the near term it will use internally approximately 70% of its
50% share of AMEL's annual melamine production, primarily for the
production of Resins. The remainder of the Company's share of production
is sold to third parties. AMEL is one of two North American
manufacturers of melamine.
METHANOL
The Company operates a methanol manufacturing plant with annual
production capacity of 190 million gallons at the Fortier facility for
Fortier Methanol Company, a manufacturing joint venture which is 70%
owned by Methanex Corporation. The Company anticipates that over the
near term it will sell to CYRO for the production of MMA approximately
25% of the Company's share of methanol production. The remainder of the
Company's share of methanol production is sold to Methanex Corporation
under a long term contract based on market prices.
OTHER BUILDING BLOCK CHEMICALS
The Company also manufactures and sells ammonia and sulfuric acid. The
Company operates an ammonia plant with annual production capacity of
440,000 tons at the Fortier facility for Avondale Ammonia Company, a
manufacturing joint venture which is 50% owned by LaRoche Industries.
The Company anticipates that during 1998, partly due to a scheduled
turnaround for the ammonia plant, it will use internally approximately
all of the Company's share of the ammonia production from such joint
venture for the production of acrylonitrile by the Company and the
production of melamine by AMEL. Any balance of the Company's share of
ammonia not used internally is sold to LaRoche Industries under a long
term contract at market based prices.
The Company sells sulfuric acid to third parties and also toll converts
substantially all of CYRO's spent sulfuric acid arising from the
manufacture of MMA under a long term service contract.
Some of the Company's building block chemicals show marked seasonality,
such as ammonia, the prices of which fluctuate with agricultural planting
seasons as well as the cost of natural gas which
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constitutes the major portion of the cost to manufacture ammonia. Prices
of building block chemicals also are sensitive to the stages of economic
cycles, energy prices and currency exchange rates, as well as to periods
of insufficient and excess capacity. The production of building block
chemicals is generally capital intensive, which may cause strong downward
pressure on prices in poor market environments as producers tend to
operate their plants at capacity even in poor market environments. This
situation may be exacerbated by the uncertain economic environment in
Asia, which in the past has accounted for a significant portion of both
supply and demand for various building block chemicals including
acrylonitrile. The Company sells building block chemicals to third
parties through a direct sales force and distributors.
COMPETITION
The Company operates in a highly competitive marketplace. It competes
against a number of other companies in each of its product lines,
although none of such companies competes with the Company in all of its
product lines. The Company's competitors are both larger and smaller
than the Company in terms of resources and market shares. Competition is
generally based on product performance, reputation for quality, price and
customer service and support. The degree and nature of competition
depends on the type of product involved.
In general, the Company competes by maintaining a broad range of
products, focusing its resources on products in which it has a
competitive advantage and fostering its reputation for quality products,
competitive prices and excellent customer service and support. Through
research and development, the Company seeks to increase margins by
introducing value-added products and products based on proprietary
technologies.
CUSTOMERS AND SUPPLIERS
Due to the diversity of product lines in which the Company competes, no
significant portion of the Company's sales or earnings is generated by
one customer, and the Company is not overly reliant on contracts with any
one public, private or governmental entity. See, however, the discussion
under "Building Block Chemicals - Acrylonitrile" above with respect to
two long-term sales contracts for acrylonitrile and Note 5 of the Notes
to the Consolidated Financial Statements in Item 8 regarding sales to
CYRO and other associated companies.
With respect to suppliers, the Company's vertical integration (i.e., its
manufacture of intermediates used to manufacture specialty chemicals)
protects it from being reliant on other companies for many significant
intermediates. The only significant raw materials required to
manufacture the Company's building block chemicals are natural gas,
propylene, oxygen and sulfur, which are readily available from several
suppliers. The Company generally attempts to retain multiple sources for
high volume raw materials, other than its own building block chemicals,
in order to minimize its reliance on any one supplier. The Company
sources its requirements of alkenyl succinic anhydride from a single
supplier under a long term exclusive supply agreement and sources its
requirements of cationic monomers from a single supplier under a long
term agreement. Alkenyl succinic anhydride and cationic monomers are
important raw materials in the water treating, paper and mining product
line. The Company is dependent on a limited number of suppliers for
carbon fibers which are used in many of the Company's advanced composite
products. Availability of certain carbon fibers has been very limited in
the past year. While supply availability has been improving as suppliers
have added capacity, there can be no assurances of sufficient supply
availability to meet the Company's current or increased demand.
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A number of the Company's customers operate in cyclical industries such
as the aerospace, automotive and paper industries. As a result, demand
for the Company's products from customers in such industries is also
cyclical. In addition, the profitability of sales of certain of the
Company's building block chemicals is cyclical due to the cyclicality
typically experienced with respect to the amount of industry wide
capacity dedicated to producing such chemicals.
INTERNATIONAL
The Company operates on a worldwide basis with manufacturing plants
located in seven countries (other than the United States). Export sales
to unaffiliated customers from the United States were $144.9 million for
1997, $161.5 million for 1996 and $158.8 million for 1995, or
approximately 11%, 13% and 12%, respectively of net sales in such years.
The Company markets its products internationally through Company sales
offices, distributors and the associated companies described above.
Foreign operations (exclusive of United States export sales) accounted
for approximately 28%, 26% and 25% in 1997, 1996 and 1995, respectively,
of net sales to unaffiliated customers.
The Company has had the goal for several years of increasing its
international sales (foreign source and export) to 50% of its total sales
by 1999. Both the acquisition of Fiberite and the divestiture of the
acrylic fibers product line had the effect of increasing the percentage
of the Company's sales made domestically and, as a result, will delay the
Company's achievement of this goal.
International operations are subject to various risks which are not
present in domestic operations, including political instability, the
possibility of expropriation, restrictions on royalties, dividends and
currency remittances, instabilities of foreign currencies, requirements
for governmental approvals for new ventures and local participation in
operations such as local equity ownership and workers' councils. The
Company does not believe that there is currently any material likelihood
of a material adverse effect on the Company in connection with its
existing foreign operations. The Company has taken steps to mitigate the
effects of the financial crisis in Asia, and based on the extent of the
crisis at this time, hopes it will not have a serious long term impact on
the Company.
RESEARCH AND PROCESS DEVELOPMENT
The Company conducts research and development activities in its facility
in Stamford, Connecticut as well as in several of its production
facilities. During the years ended December 31, 1997, 1996, and 1995, the
Company expended an aggregate of approximately $44.7 million, $40.2
million and $44.2 million, respectively, on Company-sponsored research
and development activities. The decrease in 1996 was the result of a
reduction, completed in late 1995, in non-value-added overhead costs at
the Company"s research facilities.
TRADEMARKS AND PATENTS
Upon the completion of all transfers from Cyanamid and from Fiberite, the
Company and its associated companies will have more than 2,500 United
States and foreign patents and trademark applications and registrations
for more than 160 product names. The Company believes the loss of patent
or trademark protection on any one product or process would not have a
material adverse effect on the Company. While the existence of a patent
is prima facie evidence of its
-11-
<PAGE>
validity, the Company cannot assure that any of the Company's patents
will not be challenged, and it cannot predict the outcome of any
challenge.
EMPLOYEES
Approximately 5,200 employees are engaged in the operations of the
Company, excluding employees of associated companies. Approximately
2,200 of the Company's employees are covered by union contracts. The
Company believes that its relations with both employees and the related
International Union leaderships are good. Three union contracts covering
approximately 1% of the Company's unionized employees working at three
separate Company facilities expire in the ordinary course prior to the
end of 1998. Additionally, the Coordinated Bargaining Benefit Agreement
which defines the negotiated employee benefits such as health, welfare,
pension and savings plans with all of the Company's U.S. unionized
employees expires in December 2000. Although the Company expects that it
will reach agreement with the unions with respect to these union
contracts, there can be no assurance that this will occur.
OPERATING RISKS
The Company's revenues are dependent on the continued operation of its
various manufacturing facilities. The operation of chemical
manufacturing plants involves many risks, including the breakdown,
failure or substandard performance of equipment, natural disasters, and
the need to comply with directives of, and maintain all necessary permits
from, government agencies. In addition, the Company's operations can be
adversely effected by raw material supply disruptions, labor force
shortages or work stoppages and events impeding or increasing the cost of
transporting the Company's products. The occurrence of material
operational problems, including but not limited to the above events, may
have a material adverse effect on the productivity and profitability of a
particular manufacturing facility, or with respect to certain facilities,
the Company as a whole, during the period of such operational
difficulties.
The Company's operations are also subject to various hazards incident to
the production of industrial chemicals, including the use, handling,
processing, storage and transportation of certain hazardous materials.
These hazards can cause personal injury and loss of life, severe damage
to and destruction of property and equipment, environmental damage and
suspension of operations. Claims arising from any future catastrophic
occurrence at one of the Company's locations may result in the Company
being named as a defendant in lawsuits asserting potentially large
claims. See Item 3, "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,
-12-
<PAGE>
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.
Note 9 of the Notes to the Consolidated Financial Statements in Item 8 is
incorporated by reference herein.
See Item 3, "Legal Proceedings."
Item 2. Properties
----------
The Company operates 28 manufacturing and research facilities located in
the United States, the United Kingdom, The Netherlands, Mexico, Canada,
Colombia, France and Germany. Capital spending, exclusive of
acquisitions, for the years ended 1997, 1996 and 1995 was approximately
$91.4 million, $72.5 million and $97.2 million, respectively, on an
historical basis. Capital expenditures for 1997 were higher than in 1996
due primarily to certain large projects in specialty chemicals product
lines, such as the benzotriazole light stabilizer plant in the
Netherlands and the expansion of the surfactants plant in West Virginia.
Capital expenditures for 1995 were higher than in 1996 due primarily to
the acrylonitrile capacity expansion. Capital expenditures in 1998 are
expected to be in the range of $90.0 million to $100.0 million. Such
capital expenditures are intended either to provide necessary capacity,
to improve the efficiency of production units, to modernize or replace
older facilities, or to install equipment for protection of the
environment.
-13-
<PAGE>
The Company's major facilities and the principal product lines produced
or service provided at each such facility are as follows:
<TABLE>
<CAPTION>
<S> <C>
FACILITY PRINCIPAL PRODUCT LINE
- -------------------------------------- ---------------------------------------------------------
Anaheim, California........................ Aerospace materials
Atequiza, Mexico........................... Water treating, paper and mining chemicals
Avondale (Fortier), Louisiana.............. Building block chemicals; MMA
Belmont (Willow Island), West Virginia..... Polymer additives; coatings and resin products; surfactants
Bogota, Colombia........................... Coatings and resin products
Botlek, The Netherlands.................... Water treating, paper and mining chemicals; polymer additives;
building block chemicals; surfactants; specialty monomers
Bradford, England.......................... Water treating, paper and mining chemicals
Courcelles-Les-Lens, France................ Thermoset molding compounds
Delano, Pennsylvania....................... Thermoset molding compounds
Greenville, Texas.......................... Aerospace materials
Havre de Grace, Maryland................... Aerospace materials
Kalamazoo, Michigan........................ Water treating, paper and mining chemicals; coatings and resin
products
Linden (Warners), New Jersey............... Surfactants
Longview, Washington....................... Water treating, paper and mining chemicals
Mobile, Alabama............................ Water treating, paper and mining chemicals
Newark, Delaware........................... Aerospace materials
Oestringen, Germany........................ Aerospace materials
Olean, New York............................ Urethane systems
Orange, California......................... Aerospace materials
Perrysburg, Ohio........................... Thermoset molding compounds
Stamford, Connecticut...................... Research
Tempe, Arizona............................. Aerospace materials, research
Wallingford, Connecticut................... Coatings and resin products; acrylic plastics; amino molding
compounds; specialty monomers
Welland, Ontario........................... Phosphine chemicals
Winona, Minnesota.......................... Aerospace materials; thermoset molding compounds
Woodbridge, New Jersey..................... Water treating, paper and mining chemicals
Wrexham, Wales............................. Aerospace materials
</TABLE>
The Company owns all of the foregoing facilities and their sites except
for the sites for the Botlek and Courcelles-les-Lens facilities which are
leased under long term leases. In addition, the Company leases its
corporate headquarters in West Paterson, New Jersey and its regional
headquarters in Coral Gables, Florida and Singapore. The Company intends
to close its Linden, New Jersey and its Newark, Delaware plants by the
end of 1998. Most manufacturing operations at these plants will be
relocated to other plants.
Item 3. Legal Proceedings
-----------------
In connection with the Spin-off, the Company assumed from Cyanamid
substantially all liabilities for legal proceedings relating to
Cyanamid's chemicals businesses, other than any legal proceedings related
to remediation of Cyanamid's Bound Brook facility. In connection with
the Fiberite Acquisition, the Company assumed responsibility for certain
liabilities related to Fiberite's business. As a result, although
Cyanamid or Fiberite is the named defendant in cases commenced prior to
the Spin-off or the Fiberite Acquisition, respectively, the Company is
the party in interest and is herein described as the defendant.
-14-
<PAGE>
The Company is a defendant in 14 cases pending in state courts in
Jefferson, Harris, Harrison, Hidalgo and Tarrant counties, Texas and in
the U.S. District Court for the Eastern District of 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 is also one of multiple defendants in three cases
(originally brought in Texas by multiple plaintiffs who claimed they were
injured due to exposure to asbestos) which have been transferred by the
Judicial Panel for Multi-District Litigation to the United States
District Court for the Eastern District of Pennsylvania, for coordination
of pre-trial activities, primarily discovery. The Company believes that
its involvement in all but five of these cases results from its former
ownership of 50% 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 23
former employees of Boeing-Vertol in state and federal courts in
Pennsylvania alleging exposure to asbestos-containing products. Of these
suits, 21 are inactive because plaintiffs have not yet developed any
symptoms and two are active.
The Company is a defendant in four suits pending in California Superior
Courts in Los Angeles, Orange and San Francisco Counties, which were
filed by individuals or the personal representatives of individuals or
the personal representatives of individuals allegedly injured as a result
of exposure to asbestos containing products. Fiberite is a defendant in
seven such suits. One of the suits in which both the Company and Fiberite
are defendants and one suit in which only Fiberite is a defendant have
been removed to Federal Court and transferred by the Judicial Panel for
Multi-District Litigation to the United States District Court for the
Eastern District of Pennsylvania. These cases involve multiple
defendants.
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
from the Fortier facility in 1992. 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 conducted limited
discovery in these cases and, therefore, has little information on
whether, or to what extent, most 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 four cases pending in
state and federal courts in the states of New York and Ohio. The first
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
-15-
<PAGE>
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. In all three 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 fourth 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 compensatory and punitive damages for injuries allegedly
caused by exposure to lead-based paints.
The Company is one of several defendants in nine suits filed in New
Jersey State Courts in Bergen, Middlesex and Monmouth Counties by, or on
behalf of the estates of , individuals who allegedly contracted cancer as
a result of exposure to chemicals constituting, or contained in, products
sold by the Company. Four of these cases involve individuals who worked
at the Allied Textile Printers Plant in Paterson, New Jersey, and who
allegedly contracted bladder cancer as a result of exposure to benzidine
dyes. The Company also has been named as one of several defendants in an
action brought in New Jersey Superior Court, Middlesex County, on behalf
of a class consisting of former employees of Allied Textile. Plaintiffs
in this action seek to compel defendants to establish a medical
monitoring program for the benefit of former employees of Allied Textile
who may have been exposed to benzidine containing dyes or other
carcinogenic chemicals in the course of their employment. Defendants are
alleged to have supplied such dyes and/or chemicals to Allied Textile.
Fiberite, Inc. and the Company are defendants in an antitrust action
brought by Culver City Composites in September 1997 against Fiberite,
Inc. in the U.S. District Court for the Central District of California.
The principal cause of action alleges that Fiberite has monopolized a
market consisting of the supply of a specific product to Boeing
Corporation by bundling that product with another product for which
Fiberite is the sole qualified supplier. The complaint also alleges
certain other acts of unfair competition.
Web Converting of Atlanta, Inc. filed a complaint in the United States
District Court in Dallas, Texas against Cytec Fiberite regarding
activities of Fiberite prior to the acquisition of Fiberite assets by
Cytec. These activities, however, bear on a manufacturing process that
Cytec Fiberite continues to use. The complaint alleges that Fiberite
misappropriated information from Web relating to a process for the
manufacture of slit tape prepreg. No specific damage amount is set
forth. An answer to the complaint was filed on January 15, 1998,
essentially denying all allegations.
In August 1997, the EPA issued a Notice of Violation to the Company, its
contractor and subcontractors alleging certain violations of the asbestos
air regulations which apply to the demolition activities at the Company's
Marietta, Ohio plant. The allege violations result from the alleged
failure of the contractor and its subcontractors to perform the
demolition in accordance with the terms of the agreement between the
Company and the contractor.
In February 1996, in an action brought against the Louisiana Department
of Environmental Quality ("DEQ") by the Louisiana Environmental Action
Network ("LEAN"), 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
-16-
<PAGE>
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. The
DEQ then reissued the Decision in accordance with the greater explanatory
requirements of the Court of Appeals judgment, and the plaintiffs
appealed. In January 1998, the District Court upheld DEQ's re-issued
decision to grant the Company an exemption, thereby allowing the
continued use of the deepwells at the Fortier facility. LEAN has two
months from the date judgment is entered to appeal. 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.
See also "Environmental Matters" under "Business" in Item 1, and Note 9
of the Notes to the Consolidated Financial Statements in Item 8, 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 and after the Spin-off. There
can be no assurance as to the actual amount of these liabilities or the
timing thereof.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of security holders of any class
during the fourth quarter of 1997.
-17-
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
-----------------------------------------------------------------
Matters
-------
The Common Stock of the Company is listed on the New York Stock
Exchange. On January 29, 1998, there were approximately 18,000 holders
of record of the Common Stock of the Company.
The high and low stock prices for each quarter during 1997 and 1996, which were
restated to reflect the three-for-one stock split, were:
<TABLE>
<S> <C> <C> <C> <C>
1Q 2Q 3Q 4Q
1997
High $42 1/4 $40 1/4 $50 3/8 $50 15/16
Low 36 7/8 33 7/8 37 5/16 44
1996
High 29 11/24 31 5/12 39 1/2 40 7/8
Low 20 3/8 27 25 1/3 34 3/8
</TABLE>
No dividends have been paid on the Common Stock of the Company since its
inception, and the Company currently contemplates that it will not pay cash
dividends on the Common Stock in the foreseeable future. In addition, the
Company is restricted from paying dividends in excess of certain amounts
determined in accordance with the terms of its Series C Preferred Stock. See
Note 15 of the Notes to the Consolidated Financial Statements in Item 8,
which is incorporated by reference herein.
Item 6. Selected Financial Data
-----------------------
Five-Year Summary
<TABLE>
<CAPTION>
(Dollars in millions, except per share amounts) 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statements of income data:
Net sales $1,290.6 $1,259.6 $1,260.1 $1,101.3 $1,008.1
Manufacturing cost of sales 930.9 898.1 912.2 817.9 959.9
Research and process development 44.7 40.2 44.2 40.0 42.7
Selling and technical services, administrative and
general and amortization of acquisition intangibles 195.8 186.1 181.6 176.0 177.5
- --------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) from operations 119.2(1) 135.2 122.1 67.4 (172.0)(2)
Other income (expense), net 23.9(3) 9.0 4.6 5.7 (0.9)
Equity in earnings of associated companies 12.3 24.8 24.6 16.4 23.8
Interest income (expense), net (5.7) (2.1) 5.4 7.5 (0.5)
Income tax provision (benefit) 36.1(4) 66.8 (125.5)(5) 40.9 136.1(6)
- --------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before cumulative effect of
accounting changes $ 113.6 100.1 282.2 56.1 (285.7)
Cumulative effect of accounting changes - - - - (219.8)(7)
Net earnings (loss) $ 113.6 100.1 282.2 56.1 (505.5)
Dividends on preferred stock - - (10.7) (14.6) (0.6)
Excess of repurchase price over related book value of
Series A Stock and Series B Stock - - (195.2) - -
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-18-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Net earnings (loss) available for common stockholders $ 113.6 $ 100.1 $ 76.3 $ 41.5 $ (506.1)
- --------------------------------------------------------------------------------------------------------------------------------
Net earnings per common share
Basic $ 2.50 $ 2.13 $ 1.98 $ 1.12 $ -
Diluted $ 2.39 $ 2.03 $ 1.50 $ .88 $ -
- --------------------------------------------------------------------------------------------------------------------------------
Other data
(At end of period, unless otherwise noted):
Additions to plants, equipment and facilities
for the year ended December 31 $ 91.4 $ 72.5 $ 97.2 $ 116.1 $ 110.6
Current assets 452.8 416.3 404.0 439.0 331.0
Current liabilities 375.0 312.8 317.7 320.1 262.1
Working capital 77.8 103.5 86.3 118.9 68.9
Plants, equipment and facilities 1,278.0 1,339.7 1,317.2 1,247.5 1,333.3
Net depreciated cost 629.7 582.2 605.7 586.7 581.4
Total assets 1,614.1 1,261.1 1,293.8 1,199.4 1,082.1
Long-term debt 324.0 89.0 66.0 - -
Other noncurrent liabilities 527.7 544.9 567.2 596.1 588.8
Redeemable preferred stock - - - 199.9 199.9
Total stockholders' equity 387.4 314.4 342.9 83.3 31.4
- --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
(1) Includes restructuring and other charges of $18.6 and $23.8 recorded in the
first and fourth quarters of 1997 respectively.
(2) Includes provisions for environmental remediation of $162.3 recorded in the
third quarter of 1993 and the ongoing effect of a change in accounting
principle related to postretirement benefit expenses of $24.0.
(3) Includes a gain of $22.3 related primarily to the sale of the Acrylic
Fibers product line in the first quarter of 1997. In addition to the charges
discussed in Note 1 above, charges of $9.0 were recorded in the fourth quarter
of 1997 to reduce the carrying amount of certain assets held for sale.
(4) Includes the reversal of the remaining $24.4 of the previously established
tax valuation allowance (see Notes 5 and 6 below) in the fourth quarter of
1997.
(5) Includes the reversal of $193.0 of the previously established tax valuation
allowance (See Note 6 below) in the fourth quarter of 1995.
(6) In addition to the charges discussed in Note 2 above, a valuation allowance
of $193.5 was recorded as part of the 1993 income tax provision relating to
certain deferred tax assets existing as of December 31, 1993. An additional
allowance of $12.7 was also established in the fourth quarter of 1993 relating
to certain liabilities transferred to the Company by Cyanamid at the time of
the spin-off. This additional allowance did not affect the income tax
provision. Subsequent adjustments in 1994 and 1995 to the tax basis of certain
assets and liabilities assumed from Cyanamid at the time of the spin-off
increased the valuation allowance by $11.2 but did not affect the income tax
provision in either year.
(7) Includes a charge of $230.4 related to the adoption of SFAS No. 106,
"Accounting for Postretirement Benefits Other Than Pensions" and a benefit of
$10.6 related to the adoption of SFAS No. 109, "Accounting for Income Taxes."
-19-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
Management's
Discussion and
Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial Statements
in Item 8. Dollars are in millions, except share and per share amounts.
-20-
<PAGE>
GENERAL
On September 30, 1997, the Company completed its acquisition of substantially
all of the assets and liabilities of Fiberite. The assets and liabilities were
acquired for $344.0 from Stamford FHI Acquisition Corp., which purchased
Fiberite on August 29, 1997. The assets acquired include all of Fiberite's
businesses except its satellite materials business. The majority of the Fiberite
operations were combined with Cytec Engineered Materials Inc., a wholly owned
subsidiary, which was renamed Cytec Fiberite Inc.
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" ("SFAS 130"). SFAS 130 establishes standards for reporting
and display of comprehensive income and its components in the financial
statements. SFAS 130 is effective for fiscal years beginning after December 15,
1997. Reclassification of financial statements for earlier periods provided for
comparative purposes is required. The adoption of SFAS 130 will have no impact
on the Company's consolidated results of operations, financial position or cash
flows.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes standards
for the way public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS 131 is effective for financial statements for fiscal years beginning after
December 15, 1997, and the Company will comply beginning with year-end 1998
results. Financial statement disclosures for prior periods are required to be
restated. The Company is in the process of evaluating the disclosure
requirements. The adoption of SFAS 131 will have no impact on the Company's
consolidated results of operations, financial position or cash flows.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship that certain items in
the Company's Consolidated Statements of Income bear to net sales:
Years Ended December 31,
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
Net sales 100.0% 100.0% 100.0%
Manufacturing cost of sales 72.1 71.3 72.4
- --------------------------------------------------------------------------------
Gross profit 27.9 28.7 27.6
Selling and technical services 11.3 11.2 10.8
Research and process development 3.5 3.2 3.5
Administrative and general 3.7 3.5 3.6
Amortization of acquisition intangibles 0.2 0.1 ---
Earnings from operations(1) 9.2 10.7 9.7
- --------------------------------------------------------------------------------
Net earnings(2) 8.8 7.9 22.4
Excess of repurchase price over related book value
of Series A Stock and Series B Stock - - (15.5)
Dividends on preferred stock - - (0.8)
Net earnings available for common stockholders 8.8% 7.9% 6.1%
- --------------------------------------------------------------------------------
(1) Percentages in 1997 include the effect of restructuring and other charges
of (3.3%).
(2) Includes 1.1% after tax for a gain in 1997 primarily relating to the
divestiture of the Acrylic Fibers product line and the effect
of reversals of the tax valuation allowance of 1.9% and 15.2% in 1997 and 1995,
respectively.
NET SALES BY PRODUCT CATEGORY
The Company's net sales by product category are set forth below.
Years Ended December 31,
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
Specialty Chemicals $ 728.3 $ 744.7 $ 731.0
Specialty Materials(1) 297.0 320.5 305.6
Building Block Chemicals(2) 265.3 194.4 223.5
$1,290.6 $1,259.6 $1,260.1
- --------------------------------------------------------------------------------
(1) On January 31, 1997, the Company sold its Acrylic Fibers product line which
had sales of $11.9, $138.7 and $136.1 in 1997, 1996 and 1995, respectively. On
September 30, 1997, the Company acquired substantially all of the assets and
liabilities of Fiberite. Sales of the acquired Fiberite business for the fourth
quarter of 1997 were $66.9.
(2) Nearly one-third of the Company's 1997 production of building block
chemicals was used internally in the manufacture of specialty chemicals,
specialty materials and other building block chemicals. Such internal usage is
not reflected in net sales of building block chemicals. In 1996 and 1995, more
than one-half of such production was used internally. The decrease in internal
usage is the result of the sale of the Acrylic Fibers product line in January
1997. Sales of acrylonitrile to the purchaser of the Acrylic Fibers product
line are included above in net sales of Building Block Chemicals for 1997. In
prior years, these sales were recorded as internal transfers.
The Company has a 50% interest in each of five unconsolidated associated
companies with aggregate net sales of $596.5 in 1997, $600.7 in 1996 and $601.3
in 1995, of which approximately 14.8%, 16.2% and 18.0% were sales of specialty
chemicals in 1997, 1996 and 1995, respectively, and approximately 85.2%, 83.8%
and 82.0% were sales of specialty materials in 1997, 1996 and 1995,
respectively.
YEAR ENDED DECEMBER 31, 1997, COMPARED WITH YEAR ENDED DECEMBER 31, 1996
Net sales for 1997 were $1,290.6, which was 2.5% higher in comparison with 1996
net sales of $1,259.6. Included in 1996 are sales from the divested Acrylic
Fibers and Aluminum Sulfate product lines and the discontinued Technical
Chemicals product line. Included in 1997 are sales of acrylonitrile to the
purchaser of the Acrylic Fibers line and sales of $66.9 generated as a result of
the purchase of Fiberite as of September 30, 1997. Excluding the above from 1996
and 1997 results, sales increased 7.2%. Sales outside of the United States for
the full year 1997 were 39%, which was flat compared with 1996 international
sales. This was primarily a result of the Acrylic Fibers divestiture and the
inclusion in the fourth quarter of Fiberite sales, which are principally U.S.
based. Excluding Fiberite, sales outside of the United States increased to 41%
with the growth primarily in European and Latin America markets.
Sales in the Asia/Pacific region, excluding the effect of divested businesses,
were up 8% for the year, but down slightly in the fourth quarter. Fourth quarter
results were partly due to the region's financial crisis and to the effect of
unusual weather that caused certain customer mines to be shut down. Overall
sales to this region were about 11% of total Cytec sales with approximately half
of these sales at risk to currency fluctuations. The Company has taken steps to
mitigate the effects of the financial crisis in Asia and based on the extent of
that crisis at this time, hopes it will not have a serious long-term impact on
the Company.
Specialty Chemicals net sales decreased $16.4 or 2%. Excluding the divested
Aluminum Sulfate and Technical Chemicals product lines, net sales were higher by
3%. Selling volumes were up 6% overall with the largest percentage increases in
Phosphine Chemicals, Mining Chemicals and Polymer Additives. Selling price
pressures impacted sales negatively by about 1%, and foreign exchange rates also
unfavorably impacted sales by about 2% primarily due to the strength of the U.S.
dollar against European currencies.
Specialty materials net sales decreased $23.5. Excluding the sales of the
divested Acrylic Fibers product line, sales rose 57% principally due to the
continued strong performance of Aerospace Materials products in the commercial
aircraft sector and the acquisition of Fiberite.
Building Block net sales increased $70.9 or 37%. Included in 1997 were
acrylonitrile sales of $47.6 to the purchaser of the Acrylic Fibers business
that were treated as internal transfers prior to the divestiture. Excluding
these sales, the net year-to-year increase for the full year was 12%. Both
acrylonitrile and methanol sales volumes were higher. The methanol facility was
shut down in January 1996 due to high natural gas costs and during the second
quarter of 1996 for mechanical repairs to the reactor.
-21-
<PAGE>
Manufacturing cost of sales for the full year increased from 71.3% of sales to
72.1%. Included in 1997 were the unfavorable effects of restructuring and other
charges totaling $34.6 and relating primarily to manufacturing sites at Fortier,
Louisiana; Willow Island, West Virginia; Botlek, the Netherlands; and Linden,
New Jersey. Excluding the total restructuring and other charges of $34.6 in
1997, the cost of sales improved to 69.4%. This was the result of an improved
product sales mix, the effect of improving plant efficiency and due to
continuing cost reduction programs. Partially offsetting these were higher costs
for raw materials and the negative impact of fluctuations in foreign exchange
rates.
Selling and technical services expenses increased $4.5 or 3.2%. included in 1997
are restructuring and other charges of $3.2 relating to sales force and customer
service restructuring and costs relating to the integration of Fiberite.
Excluding these charges, selling and technical services expenses increased 1%,
reflecting increased sales efforts in international markets and support of
domestic sales growth in several specialty segments.
Research and process development expenses for the full year 1997 increased $4.5
or 11%. Included in 1997 are restructuring and other charges of $2.0 relating to
the reduction of corporate research and development overhead and the write-off
of in-process R&D acquired from Fiberite. Excluding these charges, research and
development expenses increased 6%, reflecting continued effort in technical
programs in the Specialty Chemicals product lines.
Administrative and general expenses increased $3.4 or 7.8%. Included in 1997 are
restructuring and other charges of $2.6 relating to corporate headquarters
restructuring and costs for reorganizing the legal entity structure in Europe.
Excluding these charges, administrative and general expenses increased 1.8%.
Amortization of acquisition intangibles increased $1.8 due to amortization of
goodwill associated with the Fiberite acquisition.
Other income, net, improved $14.9. Included in 1997 was a $22.3 gain related to
divested product lines and charges of $9.0 for reducing the carrying amount of
the Company's subsidiary Conap, Inc. to net realizable value and expected losses
on certain other assets being held for sale.
Equity in earnings of associated companies, all of which are 50% owned,
represents the Company's before-tax share of its associates' earnings. Such
earnings decreased $12.5 mainly due to a decline in earnings at Criterion
Catalyst resulting from a less favorable product mix, lower selling prices and
operating inefficiencies.
Interest income (expense), increased as a result of long-term debt associated
with the acquisition of Fiberite. Also included is a charge of $1.0 for up-front
costs to fund the acquisition of Fiberite.
The income tax provision in 1997 includes a favorable reversal of the tax
valuation allowance of $24.4 million. The Fiberite acquisition, in conjunction
with the continued positive earnings trend of the Company, makes it more likely
than not that the Company will generate sufficient taxable income to realize its
net deferred income tax assets. The effective tax rate for the year also
includes the impact of a portion of the restructuring and other charges for
which no tax benefit was attributable. in 1996, the rate included a one-time
benefit related to a non-cash transaction in the fourth quarter. Excluding these
non-recurring items for each year, the effective tax rate was 39% in 1997,
compared with 41% in 1996. this reduction was due to improved tax planning and
increased sales by the Company's foreign sales corporation.
Net earnings for the full year 1997 were $113.6, or $2.39 per diluted common
share, compared with $100.1, or $2.03 per diluted common share, for the
comparable period of 1996. Included in 1997 net earnings was an unfavorable
after-tax charge of $34.3, or $0.72 per diluted common share, relating to
restructuring and other charges explained in the line item analysis above. Also
included in 1997 was the favorable reversal of the tax valuation allowance of
$24.4, or $0.51 per diluted common share, and an after-tax gain from the first
quarter of 1997 of $13.6, or $0.29 per diluted common share, primarily relating
to the Acrylic Fibers product line divestiture. Excluding these items, the
diluted earnings per share for 1997 was $2.31. This represents an increase of
$0.28 per diluted common share, compared with the full year 1996, and reflects
higher earnings and the effect of the Company's common stock repurchase program.
-22-
<PAGE>
YEAR ENDED DECEMBER 31, 1996, COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Net sales for 1996 were $1,259.6, which was essentially flat in comparison with
1995 net sales of $1,260.1. The Company's specialty product lines grew 2.8%
principally on higher sales volumes. Building Block Chemicals net sales
decreased 13.0% as a result of lower selling prices and selling volumes in
certain products.
International net sales grew to 39.1% of total net sales in 1996, up from 37.9%
of total net sales in 1995. On a regional basis, sales in the United States
declined primarily due to decreased methanol sales resulting from lower selling
prices and volumes plus the effect of divested and discontinued products in
1996. Earnings from operations were up significantly in the United States as a
result of cost reduction programs and an improved product mix. Also included in
1995 results for the region were start-up costs associated with the expanded
acrylonitrile facility. Sales and earnings from operations in the Asia/Pacific
region were down principally due to lower exports of acrylic fibers and lower
acrylonitrile selling prices.
Specialty Chemicals net sales increased $13.7, or 1.9%, with the increase spread
among all regions of the world. Also affecting net sales in 1996 was the effect
of divesting certain minor product lines that had a negative impact on the year-
to-year comparison in net sales. The most significant sales increase was in
Paper Chemicals, where sales increased principally in North America as a result
of a rebound in paper industry production and new business. European and Latin
American sales also had modest increases for the year. Mining Chemicals net
sales improved in most regions as new customers converted to higher technology
products. Polymer Additives net sales increased primarily in the North American
and Asia/Pacific regions. Selling prices were up less than 1.0% for Specialty
Chemicals in 1996.
Specialty Materials net sales increased $14.9 or 4.9%. Aerospace Materials net
sales increased 9.3% due to sales volume increases with existing accounts and
new customers. In addition, aircraft build rates started to improve in late
1996. Acrylic Fibers net sales increased 2.0%, but sales volume was up 11.0%.
Selling prices for Acrylic Fibers were down especially for export sales.
Building Block Chemicals net sales decreased $29.1, or 13.0%, primarily due to
acrylonitrile and methanol. Acrylonitrile sales volume was up due to the
expanded plant being in service for a full year, but this was more than offset
by lower selling prices. Methanol sales decreased as a result of lower selling
prices in the first half of 1996. In addition, methanol sales volumes were down
in the first half of 1996 as a result of production downtime due to repairs as
well as a shutdown in January 1996 due to poor economic conditions caused by low
selling prices coupled with high natural gas costs.
Manufacturing cost of sales improved to 71.3% of net sales, up from 72.4% of net
sales for 1995. Much of the improvement resulted from cost reduction programs,
improved plant efficiencies in batch operation facilities and an improved
product mix as the Company divested or de-emphasized low margin products. Raw
materials were generally lower with the exception of natural gas, which was
significantly higher than the year ago period. Selling prices were slightly
higher in the specialty businesses with the exception of export acrylic fibers,
where prices were down significantly.
Selling and technical services expenses increased $5.0 and increased as a
percent of net sales to 11.2%, up from the 10.8% of net sales experienced in
1995. The 1996 amount reflected the full year effect of certain investments the
Company made in this area during 1995. In particular, investments in the
international regions increased, but were partially offset by reduced expenses
in North America, where the Company was able to rationalize its costs.
Research and process development expenses decreased $4.0 and were 3.2% of net
sales in 1996. The decrease was the result of a reduction completed in late 1995
in non-value-added overhead costs at our research facilities. Technical spending
as it relates to our product lines increased from the prior year as planned.
Administrative and general expenses decreased $0.8 in 1996 and decreased as a
percent of net sales to 3.5% from 3.6% in 1995.
Other income, net, increased $4.4 principally as a result of gains on certain
real estate transactions, other income from royalties, and technology sales and
fees.
Interest income (expense), decreased $7.5 due to higher levels of debt
outstanding primarily as a result of the Company's stock repurchase program
coupled with reduced interest income on lower cash balances maintained during
the year.
-23-
<PAGE>
The income tax provision for 1996 reflected an effective tax rate of 40.0%. This
was a decrease of approximately 3.0%, excluding the effect of a tax valuation
reversal in 1995. The lower effective rate was the result of a focused tax
strategy designed to reduce, where applicable, the Company's tax burden. In
addition, a one-time benefit of $1.4 was recorded in the fourth quarter to
recognize the tax effect of a noncash transaction completed in December 1996.
Excluding the effect of this one-time benefit, the tax rate was 41%.
Equity in earnings of associated companies increased $1.0 from 1995. Increased
earnings were reported by CYRO Industries, reflecting the capacity expansions
completed in the second half of 1995 plus lower raw material costs. Earnings of
Dyno-Cytec improved over the prior year as a result of higher sales and lower
raw material costs. Partially offsetting the above were reduced earnings from
Criterion Catalyst Company. Criterion's lower earnings were the result of
several factors: the purchase of high cost intermediate product from third
parties due to capacity constraints, start-up costs related to capacity
expansions and lower hydroprocessing catalyst selling prices.
Dividends on preferred stock were essentially eliminated as the Company
repurchased all of its Series A Cumulative Adjustable Preferred Stock ("Series A
Stock") and Series B Cumulative Convertible Preferred Stock ("Series B Stock")
in the second half of 1995. Dividends on the outstanding Series C Cumulative
Preferred Stock ("Series C Stock") were negligible.
Net earnings available for common stockholders increased $23.8, or 31.2%, over
the prior year.
LIQUIDITY AND FINANCIAL CONDITION
At December 31, 1997, the Company's cash balance was $6.4, a decrease of $14.0
from year-end 1996.
Net cash flows provided by operating activities totaled $131.7 for the year
ended December 31, 1997, compared with $170.8 in the same period of 1996. A
significant factor in this decrease was the Company's decision to prefund $25.0
million of its post-retirement benefits liability through contributions to its
Voluntary Employee Benefit Association (VEBA) Trust accounts utilizing some of
the proceeds from the sale of the Acrylic Fibers product line. In addition,
accounts receivable increased due to the higher level of sales in the fourth
quarter of 1997 compared to the fourth quarter of 1996. This was primarily due
to the acquisition of Fiberite, which was offset in part by the effect of
divesting certain product lines.
Environmental remediation spending for the years ended December 31, 1997, 1996
and 1995, was $26.1, $26.8 and $22.1, respectively. The Company expects similar
levels in 1998, though there can be no assurances that the Company's annual cash
expenditures will not be higher in the future.
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 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. The Company cannot estimate any additional amount of loss or
range of loss in excess of the recorded amount. Moreover, environmental
liabilities are paid over an extended period, and the timing of such payments
cannot be predicted with any confidence. See Note 9 of the Notes to the
Consolidated Financial Statements with respect to environmental matters.
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.
Net cash flows used for investing activities totaled $337.6, compared with $41.0
in 1996. Included in 1997 was funding for the Fiberite acquisition of $344.0,
which was partially offset by proceeds of $94.8 associated with the sale of the
Acrylic Fibers products line. Capital expenditures for the year ended December
31, 1997, of $91.4 were higher than for the corresponding period in 1996 due
primarily to certain large projects in the Specialty Chemicals product lines,
such as the benzotriazole light stabilizer plant in Botlek, the Netherlands, and
the expansion of the surfactants plant in Willow Island, West Virginia. Capital
expenditures for the year 1998 are expected to be in the range of $90.0 to
$100.0.
During 1996 the Company received $25.0 from its associated company, CYRO
Industries, as a return of capital. CYRO Industries financed the distribution in
part by bank borrowings of $40.0. Also during the fourth quarter of 1996, the
Company sold the majority of the assets of its Aluminum Sulfate business and
received approximately $11.0 in cash proceeds before taxes.
-24-
<PAGE>
The Company believes that, based on internal cash generation and current
levels of liquid assets, it will be able to fund operating cash requirements and
planned capital expenditures in 1998.
Net cash flows provided by financing activities totaled $194.2, compared with
$121.5 used for financing activities in 1996. Long-term debt increased due to
the funding of the Fiberite acquisition and the aforementioned VEBA
contributions and were partly offset by net proceeds from the sale of the
Acrylic Fibers product line. In 1997 the Company purchased a total of 1,234,250
shares of treasury stock at a cost of $47.8. This included 296,200 shares that
completed the 10% stock repurchase program started in the first quarter of 1996
and 938,050 shares acquired under a new 10% stock repurchase program authorized
in February 1997. At December 31, 1997, the remaining shares authorized to be
repurchased were approximately 3.6 million. In 1996 approximately 3,033,000
shares were repurchased at a cost of $148.7. In connection with the repurchase
program, the Company wrote put options on 600,000 shares of its common stock
during 1997, for which it received premiums of approximately $1.0. All options
expired at no cost to the Company during 1997.
The Company signed an agreement on April 8, 1997, with American Cyanamid
Company, 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 and 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
$150.0 of debt unless the Company's equity is in excess of $200.0. If the
Company has more than $200.0 in equity, then it 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 December 31, 1997, the Company had $324.0
of debt and $387.3 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
$257.0 in debt.
In June 1995, the Company executed a five-year (due on June 1, 2000) $150.0
unsecured revolving credit facility agreement (the "Credit Agreement"). In July
1997, the Company renegotiated its existing bank Credit Agreement to increase
the maximum available for borrowing from $150.0 to $200.0, extend the maturity
from June 2000 to July 2002 and expand the existing syndicate of banks. 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 Agreement, repurchases of the Company's
common stock and contributions to the Company's VEBA Trust accounts. Under the
terms of the Credit Agreement, the Company has an additional $77.0 available for
borrowing at December 31, 1997. The Credit Agreement contains covenants
customary for such facilities. The Credit Agreement also provides that it is an
event of default if any person acquires more than 20% of the voting power of all
voting stock of the Company. The Company was in compliance with all material
terms, covenants and conditions of the Credit Agreement at December 31, 1997.
Other debt was $1.0 at both December 31, 1997, and 1996.
On September 23, 1997, the Company executed a 364-day revolving credit
facility with a two-year term-out option to provide up to $200.0 of financing
for the Fiberite acquisition. At December 31, 1997, $200.0 was borrowed under
the facility. The Company anticipates repayment of all amounts drawn under the
facility with the proceeds from one or more offerings of debt securities under
its existing shelf registration statement for $300.0 of senior debt securities.
The Company has an effective shelf registration statement on file with the
Securities and Exchange Commission covering $300.0 of senior debt securities
which may be offered by the Company from time to time and which, at the
Company's discretion, could be converted to permit the issuance of up to $360.0
of such securities. The Company anticipates one or more offerings will be made
in 1998 under this registration statement with most or all of the proceeds to be
used for the repayment of debt incurred for the Fiberite acquisition.
During 1997 and 1996, the Company made contributions to its VEBA accounts to
fund certain employee and retiree health care benefits. The balance in the VEBA
trusts at December 31, 1997, and 1996 was $47.9 and $25.2, respectively.
-25-
<PAGE>
The Company had foreign currency contracts at December 31, 1997, and 1996. The
contracts are utilized by the Company to hedge certain foreign currency
denominated receivables and payables and are not used for speculation. All
contracts are for periods of six months or less. At December 31, 1997, the
Company had net contracts to sell $12.4 of primarily European currencies for
U.S. dollars and to sell Dutch guilders with a value equivalent to $17.5 for
other European currencies. At December 31, 1996, the Company had net contracts
to sell $14.7 of primarily European currencies for U.S. dollars and to sell
Dutch guilders with a value equivalent to $10.4 for other European currencies.
In addition, the Company occasionally hedges to reduce its exposure to future
price changes for natural gas used in the Company's manufacturing activities.
The maturity of these contracts correlates highly to the actual purchases of the
commodity. The forward commodity contracts outstanding at December 31, 1997, and
1996, were not material to the Company's consolidated financial statements.
As of December 31, 1997, the Company was party to six interest rate lock
agreements, each with notional values of $50.0, all of which were entered into
with major financial institutions in anticipation of future offerings of debt
securities during 1998 under the Company's existing shelf registration for
$300.0 of senior debt securities. The weighted average interest rates locked
into for the respective five, ten and thirty year tenors, which correspond to
the expected maturities of the anticipated debt offerings, were 5.83%, 5.95% and
6.26%, respectively, as of December 31, 1997. The notional amounts of the
interest rate locks do not represent amounts exchanged by the parties and are
not a measure of the Company's exposure to credit or market risks. Notional
amounts are not included in the consolidated balance sheet. At December 31,
1997, the fair value of the interest rate locks represented an increase to
interest expense of $8.0 to be reflected as an adjustment to interest expense
over the length of the anticipated debt offering.
The impact of inflation on the Company is considered insignificant since the
rate of inflation has remained relatively low in recent years.
OTHER
The Company is conducting a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue and is
developing an implementation plan to resolve the issue. The Year 2000 issue is
the result of computer programs being written using two digits rather than four
to define the applicable year. Any of the Company's programs that have time-
sensitive software may recognize a date using "00" in the last two places as the
year 1900 rather then the year 2000. This could result in a major system failure
or miscalculations. Based on the portion of the systems review completed to
date, the Company presently believes that, with modifications to existing
software and converting to new software, the Year 2000 issue will not pose
significant operational problems for the Company's computer systems as so
modified and converted. However, if such modifications and conversions are not
completed or if problems are not discovered and rectified on a timely basis, the
Year 2000 issue may have a material impact on the operations of the Company.
COMMENTS ON FORWARD-LOOKING STATEMENTS
- --------------------------------------------------------------------------------
A number of the statements made by the Company in this Management's Discussion
and Analysis and elsewhere in this Annual Report on Form 10-K, or in other
documents, including but not limited to the Company's Annual Report to
Stockholders, its press releases and its other 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.
-26-
<PAGE>
Forward-looking statements include, among others, statements concerning the
Company's outlook for 1998, the accretiveness of acquisitions, pricing trends
and forces within the industry, the completion dates of capital projects,
expected sales growth, 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; changes in demand
for the Company's products or in the costs and availability of its raw
materials; the actions of competitors; the success of our customers;
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.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
- -------------------------------------------------------------------------------------------------------------------------
(Dollars in millions, except share and per share amounts) 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- -------------------------------------------------------------------------------------------------------------------------
Current assets
Cash and cash equivalents $ 6.4 $ 20.4
Accounts receivable, less allowance for doubtful accounts of $10.0 in 1997 and $11.1 in 1996 226.9 206.5
Inventories 131.9 105.6
Deferred income taxes 70.7 65.1
Other current assets 16.9 18.7
Total current assets 452.8 416.3
Equity in net assets of and advances to associated companies 141.1 143.7
- -------------------------------------------------------------------------------------------------------------------------
Plants, equipment and facilities, at cost 1,278.0 1,339.7
Less accumulated depreciation (648.3) (757.5)
Net plant investment 629.7 582.2
- -------------------------------------------------------------------------------------------------------------------------
Acquisition intangibles, net of accumulated amortization of $9.5 in 1997 and $6.8 in 1996 295.6 17.1
Deferred income taxes 82.2 89.6
Other assets 12.7 12.2
Total assets $1,614.1 $1,261.1
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------------------
Current liabilities
Accounts payable $ 116.3 $ 101.3
Accrued expenses 239.0 205.1
Income taxes payable 19.7 6.4
Total current liabilities 375.0 312.8
- -------------------------------------------------------------------------------------------------------------------------
Long-term debt 324.0 89.0
Other noncurrent liabilities 527.7 544.9
- -------------------------------------------------------------------------------------------------------------------------
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 share 0.1 0.1
Common Stock $.01 par value per share, 150,000,000 shares authorized,
issued 48,181,264 shares in 1997, 48,377,683 shares in 1996 0.5 0.5
Additional paid-in capital 203.9 229.7
Retained earnings 331.5 217.9
</TABLE>
-27-
<PAGE>
<TABLE>
<S> <C> <C>
Unearned compensation (3.5) (2.4)
Accumulated translation adjustments (6.9) 8.8
Treasury stock, at cost, 3,044,589 shares in 1997, 2,883,485 shares in 1996 (138.2) (140.2)
Total stockholders' equity 387.4 314.4
Total liabilities and stockholders' equity $1,614.1 $1,261.1
Contingent Liabilities and Commitments (Notes 4 and 9)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
Consolidated Statements of Income
<TABLE>
<CAPTION>
Years Ended December 31,
- -------------------------------------------------------------------------------------------------------------------------
(Dollars in millions, except per share amounts) 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $1,290.6 $1,259.6 $1,260.1
Manufacturing cost of sales 930.9 898.1 912.2
Selling and technical services 145.4 140.9 135.9
Research and process development 44.7 40.2 44.2
Administrative and general 47.7 44.3 45.1
Amortization of acquisition intangibles 2.7 0.9 0.6
- -------------------------------------------------------------------------------------------------------------------------
Earnings from operations 119.2 135.2 122.1
Other income, net 23.9 9.0 4.6
Equity in earnings of associated companies 12.3 24.8 24.6
Interest income (expense) (5.7) (2.1) 5.4
- -------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 149.7 166.9 156.7
Income tax provision (benefit) 36.1 66.8 (125.5)
- -------------------------------------------------------------------------------------------------------------------------
Net earnings $ 113.6 100.1 282.2
Dividends on preferred stock - - (10.7)
Excess of repurchase price over related book value of
Series A Stock and Series B Stock - - (195.2)
Net earnings available for common stockholders $ 113.6 $ 100.1 $ 76.3
- -------------------------------------------------------------------------------------------------------------------------
Earnings per common share
Basic $ 2.50 $ 2.13 $ 1.98
Diluted $ 2.39 $ 2.03 $ 1.50
- -------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31,
- -------------------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows provided by (used for) operating activities
Net earnings $ 113.6 $ 100.1 $ 282.2
Noncash items included in net earnings:
Equity in undistributed earnings of associated companies 0.1 (14.6) (17.2)
Depreciation 73.1 79.7 83.0
Amortization 5.7 9.3 6.9
Deferred income taxes 3.2 23.7 (181.6)
Gain on sale of business (22.3) - -
Other 6.7 - -
</TABLE>
-28-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Changes in operating assets and liabilities:
Accounts receivable (16.7) 7.6 6.3
Inventories (9.5) (18.4) (12.4)
Accounts payable (9.9) 3.7 4.8
Accrued expenses 13.8 (3.2) (9.4)
Income taxes payable 18.5 10.5 (4.2)
Other assets (2.2) (5.9) 11.1
Other liabilities (42.4) (21.7) (8.7)
Net cash flows provided by operating activities 131.7 170.8 160.8
- -------------------------------------------------------------------------------------------------------------------------
Cash flows provided by (used for) investing activities
Additions to plants, equipment and facilities (91.4) (72.5) (97.2)
Proceeds from dispositions of businesses and sale of assets 95.7 13.5 -
Acquisition of business (344.0) - -
Return of capital by investees - 25.0 -
Change in other assets 2.1 (7.0) 11.4
Net cash flows used for investing activities (337.6) (41.0) (85.8)
- -------------------------------------------------------------------------------------------------------------------------
Cash flows provided by (used for) financing activities
Purchase of treasury stock (47.8) (148.7) -
Change in long-term borrowings 235.0 23.0 66.0
Proceeds from exercise of stock options 6.0 2.5 1.3
Proceeds received on sale of put options 1.0 1.7 -
Proceeds from stock offering, net of discounts and expenses - - 181.2
Purchase of Series A Stock - - (90.0)
Purchase of Series B Stock - - (305.1)
Dividend payments on preferred stock - - (14.4)
Net cash flows provided by (used for) financing activities 194.2 (121.5) (161.0)
Effect of exchange rate changes on cash and cash equivalents (2.3) 0.1 0.3
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (14.0) 8.4 (85.7)
Cash and cash equivalents, beginning of year 20.4 12.0 97.7
Cash and cash equivalents, end of year $ 6.4 $ 20.4 $ 12.0
- -------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Years Ended December 31, 1997, 1996 and 1995,
- ------------------------------------------------------------------------------------------------------------------------------------
Additional Minimum Accumulated
Preferred Common Paid-In Retained Unearned Pension Translation Treasury
(Dollars in millions) Stock Stock Capital Earnings Compensation Liability Adjustments Stock Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994 $0.1 $0.1 $ 34.2 $ 41.5 $(4.1) $ - $ 11.6 $ (0.1) $ 83.3
Net earnings - - - 282.2 - - - - 282.2
Dividends on preferred
stock - - - (10.7) - - - - (10.7)
Award of, and changes in,
performance and
restricted stock - - 4.9 - (4.9) - - - -
Amortization of
performance
and restricted stock - - - - 6.4 - - - 6.4
Issuance of common stock
from stock offering - 0.1 181.1 - - - - - 181.2
Excess of repurchase
price over
related book value of
Series A
Stock and Series B Stock - - - (195.2) - - - - (195.2)
</TABLE>
-29-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Proceeds received from
stock options - - 1.3 - - - - - 1.3
Tax benefit on stock
options - - 1.1 - - - - - 1.1
Additional minimum
pension liability - - - - - (5.4) - - (5.4)
Translation adjustment - - - - - - (1.3) - (1.3)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
1995 0.1 0.2 222.6 117.8 (2.6) (5.4) 10.3 (0.1) 342.9
Net earnings - - - 100.1 - - - - 100.1
Award of, and changes in,
performance and
restricted stock - - 7.7 - (8.2) - - 0.1 (0.4)
Amortization of
performance and
restricted stock - - - - 8.4 - - - 8.4
Three-for-one stock split 0.3 (0.3) - - - - - -
Purchase of treasury stock - - - - - - - (148.7) (148.7)
Exercise of employee
stock options - - (8.5) - - - - 8.5 -
Proceeds received from
stock
options and put options - - 4.2 - - - - - 4.2
Tax benefit on stock
options - - 4.0 - - - - - 4.0
Additional minimum
pension liability - - - - - 5.4 - - 5.4
Translation adjustment - - - - - - (1.5) - (1.5)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
1996 0.1 0.5 229.7 217.9 (2.4) - 8.8 (140.2) 314.4
Net earnings - - - 113.6 - - - - 113.6
Award of, and changes in,
performance and
restricted stock - - (2.3) - (4.1) - - 6.4 -
Amortization of
performance and
restricted stock - - - - 3.0 - - - 3.0
Purchase of treasury stock - - - - - - - (47.8) (47.8)
Exercise of employee
stock options - - (43.4) - - - - 43.4 -
Proceeds received from
stock - - - - - - - - -
options and put options - - 7.0 - - - - - 7.0
Tax benefit on stock
options - - 12.9 - - - - - 12.9
Translation adjustment - - - - - - (15.7) - (15.7)
Balance at December 31,
1997 $0.1 $0.5 $203.9 $ 331.5 $(3.5) $ - $ (6.9) $(138.2) $ 387.4
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
Notes to Consolidated Financial Statements
(Dollars in millions, except share amounts, unless otherwise indicated)
1. SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation. The financial statements include the accounts of
the Company and its subsidiaries on a consolidated basis. All significant
intercompany transactions and balances have been eliminated. Prior to 1996,
operations outside of the United States and Canada were generally included on a
fiscal year basis ended November 30. European operations were brought to a
December 31 fiscal year-end in 1996 and substantially all of the remaining
operations were brought to a December 31 fiscal year-end in 1997. The effect of
the change to current month reporting for these operations is reflected in other
income for 1997 and 1996 and is not material to the results of operations. The
equity method of accounting is used for investments in associated companies (all
50% owned). Certain reclassifications have been made to prior years' data in
order to conform with the current year's presentation.
Foreign Currency Translation. For most of the Company's international
operations, all elements of financial statements are translated into U.S.
dollars using current exchange rates with translation adjustments accumulated in
stockholders' equity. For international operations in what are considered hyper-
inflationary economies, certain financial statement amounts are translated at
historical exchange rates with all other assets and liabilities translated at
current exchange rates and the resulting translation adjustments for these
operations recorded in earnings.
-30-
<PAGE>
Depreciation and Amortization. Depreciation is provided primarily on a straight-
line composite method over the estimated useful lives of various classes of
assets. When such depreciable assets are sold or otherwise retired from service,
their costs, less amounts realized on sale or salvage, are charged or credited
to the accumulated depreciation account. Expenditures for maintenance and
repairs are charged to current operating expenses. Acquisitions, additions and
betterments either to provide necessary capacity, improve the efficiency of
production units and modernize or replace older facilities or to install
equipment for protection of the environment are capitalized. Intangibles
resulting from business acquisitions are carried at cost and amortized over a
period of up to 40 years, unless, in the opinion of management, their lives are
limited or they have sustained a permanent diminution in value, in which case
they are either immediately charged to operations or amortized over lesser
periods. The Company capitalizes interest costs incurred during the period of
construction of plant and equipment. The interest cost capitalized in 1997, 1996
and 1995 was immaterial to the financial statements.
Cash and Cash Equivalents. Securities with maturities of three months or less
when purchased are considered to be cash equivalents.
Financial Instruments. The carrying values of financial instruments (principally
cash and cash equivalents, accounts receivable, certain other assets, accounts
payable and long-term debt) included in the Company's consolidated balance
sheets approximated their fair values at December 31, 1997 and 1996. Fair values
were determined through a combination of management estimates and information
obtained from independent third parties using the latest available market data.
The Company also uses derivative, or off balance sheet, financial instruments to
manage exposure to fluctuations in interest rates, foreign exchange rates and
certain raw material prices. Derivative financial instruments currently utilized
by the Company include interest rate swaps, interest rate lock agreements,
foreign currency exchange contracts and forward commodity contracts. The Company
does not hold or issue derivative financial instruments for trading or
speculative purposes.
Interest rate swap agreements are used to manage the interest rate exposure of
the Company's debt portfolio and involve the exchange of fixed and floating
rate interest payments periodically over the life of the agreements without the
exchange of the underlying principal amounts. The interest differential to be
paid or received on the Company's notional obligations is accrued as interest
rates change and recognized as an adjustment to interest expense.
Interest rate lock agreements are used to manage the interest rate exposure on
the Company's anticipated future offerings of debt securities under the
Company's existing shelf registration statement. The rate lock agreements
involve securing fixed interest rate payments without the exchange of the
underlying principal amounts. The interest differential to be paid or received
on the rate lock agreements will be reflected as an adjustment to interest
expense over the life of the anticipated debt offerings.
Foreign currency exchange contracts are utilized by the Company to hedge
receivables and payables, primarily intercompany accounts denominated in a
currency other than the functional currency of the business. All contracts are
marked to market on a current basis and gains/losses are included in earnings.
Forward pricing of natural gas purchases is periodically established with
suppliers and/or financial institutions for the purpose of hedging the cost of
anticipated natural gas purchases. Gains and losses on these contracts are
reflected in the cost of the commodity as it is purchased.
Inventories. Inventories are carried at the lower of cost or market. Cost is
determined on the last-in, first-out (LIFO) method for substantially all
inventories in the United States with all other inventories determined on the
first-in, first-out (FIFO) or average cost method.
Income Taxes. Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis and operating loss and tax credit carryforwards. A valuation allowance is
provided when it is more likely than not that some portion or all of the
deferred tax assets will not be realized. 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. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
If repatriation of the undistributed earnings of the Company's foreign
subsidiaries and associated companies is anticipated, then income taxes are
provided for such earnings.
Postretirement and Postemployment Benefits. The Company sponsors postretirement
and postemployment benefit plans. The net periodic costs are recognized for
these plans as employees render the services necessary to earn the related
benefits.
-31-
<PAGE>
Earnings Per Share. In February 1997, the Financial Accounting Standards Board
(the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share" ("SFAS 128"). SFAS 128 became effective for financial
statements for both interim and annual periods ending after December 15, 1997.
It also required all prior period earnings per share data presented to be
restated. Under SFAS 128, basic earnings per share are based on earnings after
preferred stock dividend requirements, and in addition in 1995, basic earnings
per share were based on the excess of the repurchase price over the related book
value of Series A Stock and Series B Stock. The resulting net earnings available
for common stockholders is divided by the weighted average number of shares of
common stock outstanding (based on 45,450,139 in 1997, 47,002,324 in 1996 and
38,500,933 in 1995). Diluted earnings per share uses the same numerator as
basic, except that in 1995, the Series B Stock (through the date of redemption)
was assumed to be converted into common stock as of the beginning of each period
presented, and the related dividend was added back to the basic earnings. The
denominator is based on the weighted average number of shares of common stock
outstanding adjusted for dilutive common stock equivalents (based on 47,553,816
in 1997, 49,348,076 in 1996 and 54,543,687 in 1995). SFAS128 also requires
reconciliations of the numerators and denominators of the basic and diluted
earnings per sharecomputations. See Note 16.
Stock-Based Compensation. Effective as of January 1, 1996, the Company adopted
SFAS No. 123, "Accounting For Stock-Based Compensation" ("SFAS 123"). SFAS 123
encourages, but does not require, companies to record compensation cost for
stock-based employee compensation plans at fair value. The Company has chosen to
continue to account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting For
Stock Issued to Employees," and related interpretations. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price at the date of the grant over the amount an employee must
pay to acquire the stock. Because the Company grants options at a price equal to
the market price of the stock at the date of grant, no compensation expense is
recorded.
Compensation cost for performance and restricted stock is recorded based on
the quoted market price of the Company's common stock at the end of the period
through the date of vesting. The fair value of the stock is charged to
stockholders' equity and amortized to expense over the performance periods.
Compensation cost for stock appreciation rights payable in cash is amortized to
expense over the maturity period. The Company, as required, has provided pro
forma disclosures of compensation expense as determined under the provisions of
SFAS 123. See Note 14.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of. Long-
lived assets and certain identifiable intangibles are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of the assets to the future net
cash flows expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less the cost to sell.
Risks and Uncertainties. The Company is engaged primarily in the manufacture and
sale of a highly diversified line of chemical products throughout the world. The
Company's revenues are dependent on the continued operation of its various
manufacturing facilities. The operation of chemical manufacturing plants
involves many risks, including the breakdown, failure or substandard performance
of equipment, natural disasters and the need to comply with directives of
government agencies. The occurrence of material operational problems, including
but not limited to the above events, may have a materially adverse effect on the
productivity and profitability of a particular manufacturing facility, or with
respect to certain facilities, the Company as a whole, during the period of such
operational difficulties.
The Company's operations are also subject to various hazards incidental to the
production of industrial chemicals, including the use, handling, processing,
storage and transportation of certain hazardous materials. These hazards can
cause personal injury and loss of life, severe damage to and destruction of
property and equipment, environmental damage and suspension of operations.
Claims arising from any future catastrophic occurrence involving the Company may
result in the Company being named as a defendant in lawsuits potentially
asserting large claims.
The Company performs ongoing credit evaluations of its customers' financial
condition and generally requires no collateral from its customers. No single
customer accounted for more than 10% of the Company's net sales in 1997. The
Company is exposed to credit losses in the event of nonperformance by
counterparties on interest rate swaps and locks and other risk management
instruments. The counterparties to these transactions are major financial
institutions, thus the Company considers the risk of default to be minimal. The
Company does not require collateral or other security to support the financial
instruments with credit risk.
In conformity with generally accepted accounting principles, management of the
Company has made a number of estimates and assumptions relating to the reporting
of assets and liabilities and the disclosures of contingent liabilities and pro
forma compensation expense to prepare the Company's consolidated financial
statements. Actual results could differ from these estimates.
-32-
<PAGE>
2. ACQUISITIONS, DISPOSITIONS AND OTHER TRANSACTIONS
On September 30, 1997, the Company acquired substantially all of the assets and
liabilities of Fiberite, Inc. ("Fiberite"), a leading worldwide supplier of
advanced composite materials for aerospace, industrial and recreational
applications, for $344.0 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 included all of the businesses of Fiberite, except for their
satellite materials business. Sales for the full year 1997 for the acquired
businesses, including the period prior to the acquisition, were approximately
$267.4. The Fiberite Acquisition has been accounted for under the purchase
method of accounting, and the results of operations are 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.
The financial statements reflect a preliminary allocation of the purchase price.
This has resulted in an excess of purchase price over assets acquired of $276.5,
which is included in Acquisition Intangibles in the consolidated balance sheet
and will be amortized on a straight-line basis over 40 years.
The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company and Fiberite as if the
acquisition had occurred on January 1, 1996.
Years Ended December 31,
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Net sales $1,491.1 $1,463.6
Net earnings 111.5 85.2
Diluted earnings per share 2.34 1.73
- --------------------------------------------------------------------------------
These unaudited pro forma results have been prepared for comparative purposes
only and include adjustments related to depreciation expense, amortization
expense, interest expense and the related income tax effects of these
adjustments. The following table presents a summary of unaudited pro forma
adjustments, as noted above, relating to the Fiberite Acquisition and their
impact on unaudited pro forma net earnings and respective diluted earnings per
share:
Years Ended December 31,
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Fiberite earnings (loss) before income taxes* $ 2.9 $(12.9)
Depreciation adjustment to
align with Cytec's useful lives 5.0 5.6
Goodwill amortization, net of Fiberite historical (2.6) (4.4)
Interest expense, net of Fiberite historical (8.7) (13.3)
Pro-forma impact on earnings before income taxes (3.4) (25.0)
Pro-forma impact on net earnings (2.1) (14.9)
Diluted earnings per share impact $(0.05) $(0.30)
- --------------------------------------------------------------------------------
*Included in Fiberite's earnings before taxes for the year ended December 31,
1996, are charges for $9.9 related to stock compensation and for the year ended
December 31, 1997, $3.0 of expenses related to an initial public offering and
other transactions which were not completed.
The pro forma information presented above does not purport to be indicative of
the results of operations which actually would have resulted had the combination
been in effect on January 1, 1996. In addition, the pro forma information is not
intended to be a projection of future results and does not reflect synergies
expected to result from the integration of Fiberite and the Company.
On January 31, 1997, the Company completed the sale of its Acrylic Fibers
product line to a subsidiary of Sterling Chemicals, Inc. The assets transferred
included the Company's plant located near Pensacola, Florida. The Company
received approximately $94.8 in cash and received certain other consideration,
including the assumption by Sterling of certain contingent and other liabilities
with a value of approximately $15.0. The Company recorded a pretax gain of
approximately $22.3 from this transaction. The Acrylic Fibers product line
contributed approximately 11% and 10% of the Company's net sales in 1996 and
1995, respectively.
On December 6, 1996, the Company completed the sale of the majority of the
assets of its Aluminum Sulfate product line to GEO Specialty Chemicals, Inc., of
Cleveland, Ohio. The transaction included seven manufacturing plants in the
Southeast and a kaolin calcining plant and associated reserves in Andersonville,
Georgia. The Company received cash proceeds of approximately $11.0 from the
sale. This transaction did not have a material effect on the Company's 1996
operating results.
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<PAGE>
3. RESTRUCTURING OF OPERATIONS
During the first quarter of 1997, the Company recorded a $18.6 pre-tax charge
for restructuring related primarily to manufacturing sites in Botlek, the
Netherlands, and Linden, New Jersey. During the fourth quarter of 1997, the
Company recorded a $19.8 pre-tax charge relating to restructuring the Company's
Fortier, Louisiana, and Willow Island, West Virginia, manufacturing sites;
restructuring at its corporate headquarters; costs to realign its legal entity
structures in Europe and redundant costs associated with its manufacturing sites
after integrating Fiberite. The restructuring costs above were charged to the
consolidated statement of income as follows: manufacturing cost of sales, $32.6;
selling and technical services, $2.2; research and process development, $1.0;
and administrative and general, $2.6.
The components of the restructuring charges include: $28.6 for employee
related costs; $3.8 for fixed asset write-offs at its site in Botlek, the
Netherlands; $1.2 for plant closure costs and $4.8 for other actions. The
personnel reduction primarily represents severance costs associated with the
elimination of approximately 415 positions worldwide.
Due to timing of the pay-outs, a majority of the liability remains to be paid.
At December 31, 1997, the liability to be paid was $30.0. The spending is
expected to be essentially completed by the end of 1999.
The Company also recorded $14.4 of charges related to the restructuring of
sites acquired as part of the Fiberite Acquisition. These charges were included
as part of the purchase price allocation with the offset included as part of
goodwill. The components of the restructuring charges include: $8.5 for employee
related costs, $5.6 for plant and sales office closure costs and $0.3 for other
actions. The personnel reduction primarily represents severance costs associated
with the elimination of approximately 140 personnel worldwide. At December
31,1997, the liability remaining to be paid was $10.8. The spending is expected
to be essentially completed by the end of 1999.
4. FINANCIAL INSTRUMENTS
As of December 31, 1997, the Company was party to six interest rate lock
agreements each with notional values of $50.0, all of which were entered into
with major financial institutions in anticipation of future offerings of debt
securities during 1998, under the Company's existing shelf registration
statement for $300.0 of senior debt securities. The weighted average interest
rates locked into for the respective five, ten and thirty year tenors, which
correspond to the expected maturities of the anticipated debt offerings, were
5.83%, 5.95% and 6.26%, respectively, as of December 31, 1997. The notional
amounts of the interest rate locks do not represent amounts exchanged by the
parties and are not a measure of the Company's exposure to credit or market
risks. Notional amounts are not included in the consolidated balance sheet. At
December 31, 1997, the fair value of the interest rate locks represented an
increase to interest expense of $8.0 to be reflected as an adjustment to
interest expense over the length of the anticipated debt offering.
As of December 31, 1997, the Company was party to three interest rate swap
agreements each with notional values of $20.0 and maturity dates during 2001.
One of the swaps is related to the debt on the Company's consolidated balance
sheet and effectively changed its variable rate interest obligation to a fixed
rate interest obligation. The fixed rate was set at 6.25%. The two remaining
swaps are related to the Company's unconsolidated pro rata share of debt
incurred by the CYRO Industries joint venture. The first of these swaps pays
Cytec 6.71% and changed its fixed interest rate exposure to a floating interest
rate and was subsequently offset by a swap that converted the variable interest
rate exposure back to a fixed rate of 6.37%. The variable interest rate employed
on each of the swaps is equal to a one-month London Interbank Offered Rate
("LIBOR") plus a margin. The latter two swaps are marked to market on a current
basis. The notional amounts of interest rate swaps do not represent amounts
exchanged by the parties and are not a measure of the Company's exposure to
credit or market risk. The amounts exchanged are calculated on the basis of the
notional amounts and the other terms of the agreements. Notional amounts are not
included in the consolidated balance sheet. The fair value of the interest rate
swaps were immaterial to the Company's consolidated financial statements.
As of December 31, 1997, the Company had net contracts to sell $12.4 of
primarily European currencies for U.S. dollars and to sell Dutch guilders with a
value equivalent of $17.5 for other European currencies. All contracts are for
periods of six months or less. At December 31, 1996, the Company had net
contracts to sell $14.7 of primarily European currencies for U.S. dollars and to
sell Dutch guilders with a value equivalent of $10.4 for other European
currencies. The fair values of existing foreign currency exchange contracts,
based on exchange rates at December 31, 1997 and 1996, approximated the above
contract values.
Forward commodity contracts outstanding at December 31, 1997 and 1996, were
not material to the Company's consolidated financial statements.
5. EQUITY IN NET ASSETS OF AND ADVANCES TO ASSOCIATED COMPANIES
The Company has a 50% interest in each of five associated companies: CYRO
Industries, Criterion Catalyst Company, Mitsui Cytec, Dyno-Cytec and AC Molding
Compounds.
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<PAGE>
The aggregate cost of investments in associated companies accounted for under
the equity method was $40.4 at December 31, 1997 and 1996. Summarized financial
information for the Company's investments in and advances to associated
companies as of and for the years ended December 31, 1997, 1996 and 1995, is as
follows:
Years Ended December 31,
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
Net sales $596.5 $600.7 $601.3
Gross profit 145.2 154.1 146.8
Net earnings 25.6 52.2 50.9
The Company's share
of earnings 12.3 24.8 24.6
Current assets 308.8 292.3 268.7
Noncurrent assets 333.5 304.4 265.2
Total assets 642.3 596.7 533.9
- --------------------------------------------------------------------------------
Current liabilities 172.4 144.9 114.9
Noncurrent liabilities 172.9 153.4 103.3
Equity 297.0 298.4 315.7
Total liabilities and equity 642.3 596.7 533.9
The Company's share of equity $148.5 $149.2 $157.9
- --------------------------------------------------------------------------------
Sales to associated companies (primarily CYRO Industries) amounted to $35.9,
$40.0 and $34.0 in 1997, 1996 and 1995, respectively. Purchases from associated
companies were immaterial.
6. INVENTORIES
At December 31, 1997 and 1996, LIFO inventories comprised approximately 59% of
consolidated inventories.
1997 1996
- --------------------------------------------------------------------------------
Finished goods $ 77.5 $ 85.7
Work in progress 19.0 16.9
Raw materials and supplies 78.4 53.7
- --------------------------------------------------------------------------------
174.9 156.3
Less reduction to LIFO cost (43.0) (50.7)
Total inventories $ 131.9 $ 105.6
- --------------------------------------------------------------------------------
7. PLANTS, EQUIPMENT AND FACILITIES
At December 31, 1997 and 1996, plant, equipment and facilities consisted of the
following:
1997 1996
- --------------------------------------------------------------------------------
Land and land improvements $ 42.6 $ 42.6
Buildings 155.0 143.8
Machinery and equipment 1,008.7 1,093.3
Construction in progress 71.7 60.0
Plants, equipment and facilities, at cost $1,278.0 $1,339.7
- --------------------------------------------------------------------------------
8. LONG-TERM DEBT
At December 31, 1997 and 1996, long-term debt consisted of the following:
-35-
<PAGE>
1997 1996
- --------------------------------------------------------------------------------
Credit Agreement $ 123.0 $ 88.0
Fiberite Acquisition Facility 200.0 ---
Other 1.0 1.0
Long-term debt $ 324.0 $ 89.0
- --------------------------------------------------------------------------------
The Company's $200.0 Second Amended and Restated Credit Agreement (the "Credit
Agreement") provides for unsecured revolving loans of up to $200.0 for general
corporate purposes, including, without limitation, for purposes of making
acquisitions, repurchases of the Company's common stock and contributions to the
Company's VEBA Trust accounts. The Credit Agreement terminates, and any then
outstanding loans will be due, in July 2002. At December 31, 1997, the Company
had $77.0 available for borrowing under the Credit Agreement. The interest rate
on funds borrowed under the Credit Agreement floats based on LIBOR and averaged
6.00% in 1997 and 5.92% in 1996. The Company renegotiated the Credit Agreement
in July 1997 to increase the maximum amount available for borrowing to $200.0
from $150.0 and to extend the maturity to July 2002 from June 2000.
The Company's $200.0, 364-Day Credit Agreement with a two-year term-out option
(the "Fiberite Acquisition Facility") provides for unsecured revolving loans of
up to $200.0 for the purpose of financing the acquisition of substantially all
the assets of Fiberite. The Fiberite Acquisition Facility terminates, and any of
the outstanding loans will be due, in September 1998 unless the Company elects
to convert the loans to a term loan due no later than two years after the date
of such conversion. The interest rates on funds borrowed under the Fiberite
Acquisition Facility floats based on LIBOR and averaged 6.11% in 1997.
The Credit Agreement and the Fiberite Acquisition Facility contain restrictive
covenants customary for such facilities, including compliance with a leverage
ratio and a fixed charge coverage ratio. Both agreements also provide that it is
an event of default if any person acquires more than 20% of the voting power of
all voting stock of the Company. The Company was in compliance with all material
terms of each agreement at December 31, 1997.
Under the terms of the instrument most restrictive of additional borrowings by
the Company, the Company's Series C Cumulative Preferred Stock ("Series C
Stock"), the Company was limited to borrowing no more than an additional $257.0
at December 31, 1997. See Note 15.
9. ENVIRONMENTAL MATTERS AND OTHER CONTINGENT LIABILITIES AND COMMITMENTS
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 one 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 also
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
environment-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.
-36-
<PAGE>
In accordance with the above policies, as of December 31, 1997 and 1996, the
aggregate environment-related accruals were $161.6 and $177.5, respectively, of
which $25.0 was included in accrued expenses in each period with the remainder
included in other noncurrent liabilities. Environmental accruals for Fiberite
accounted for $5.5 of the total balance as of December 31, 1997. Environmental
remediation spending for the years ended December 31, 1997, 1996 and 1995, was
$26.1, $26.8 and $22.1, 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 there will be a necessity for future
provisions for environmental costs that, in management's opinion, 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. 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.
-37-
<PAGE>
Rental expense under property and equipment leases was $11.5 in 1997, $9.5 in
1996 and $10.4 in 1995. Estimated future minimum rental expenses under property
and equipment leases that have initial or remaining noncancelable lease terms in
excess of one year as of December 31, 1997, are:
Operating
Leases
- --------------------------------------------------------------------------------
1998 $10.9
1999 7.7
2000 6.1
2001 4.7
2002 2.1
Thereafter 0.3
Total minimum lease payments $31.8
- --------------------------------------------------------------------------------
At December 31, 1997 and 1996, the Company had $11.2 and $13.9, respectively,
of letters of credit outstanding for environmental and insurance related
matters.
10. INCOME TAXES
The income tax provision (benefit) for the years ended December 31, 1997, 1996
and 1995, is based on earnings before income taxes as follows:
1997 1996 1995
- --------------------------------------------------------------------------------
Domestic $116.3 $142.1 $134.5
Foreign 33.4 24.8 22.2
Total $149.7 $166.9 $156.7
- --------------------------------------------------------------------------------
The components of the provision (benefit) for the years ended December 31,
1997, 1996 and 1995, are composed of the following:
1997 1996 1995
- --------------------------------------------------------------------------------
Current:
Federal $18.6 $30.4 $ 35.9
Foreign 10.8 7.4 9.5
Other, principally state 4.3 2.2 6.8
Total $33.7 $40.0 $ 52.2
- --------------------------------------------------------------------------------
Deferred:
Federal $ 1.6 $20.5 $(158.1)
Foreign 0.7 1.3 1.1
Other, principally state 0.1 5.0 (20.7)
Total $ 2.4 $26.8 $(177.7)
Total income tax
provision (benefit) $36.1 $66.8 $(125.5)
- --------------------------------------------------------------------------------
Domestic and foreign earnings of consolidated companies before income taxes
include all earnings derived from operations in the respective U.S. and foreign
geographic areas, whereas provisions (benefits) for income taxes include all
income taxes payable to (receivable from) U.S., foreign and other governments as
applicable, regardless of the situs in which the taxable income (loss) is
generated. The temporary differences which give rise to a significant portion of
deferred tax assets and liabilities as of December 31, 1997 and 1996, are as
follows:
1997 1996
- --------------------------------------------------------------------------------
Deferred tax assets:
Allowance for bad debts $ 3.2 $ 4.7
Employee benefit accruals 9.8 6.9
Insurance accruals 11.8 9.8
Operating accruals 17.0 23.7
-38-
<PAGE>
Inventory 7.8 8.8
Environmental accruals 59.7 66.9
Postretirement obligations 139.8 157.0
Other 16.9 12.0
Gross deferred tax assets 266.0 289.8
Valuation allowance - (24.4)
Net deferred tax assets 266.0 265.4
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Plants, equipment and facilities (101.1) (99.3)
Other (12.0) (11.4)
Gross deferred tax liabilities (113.1) (110.7)
Net deferred tax assets $ 152.9 $ 154.7
- --------------------------------------------------------------------------------
Beginning in 1997, no provision has been made for U.S. or additional foreign
taxes on the undistributed earnings of foreign subsidiaries since the Company
intends to reinvest these earnings. Foreign tax credits would be available to
substantially reduce or eliminate any amount of additional U.S. tax that might
be payable on these earnings in the event of distribution or sale.
In 1995, the Company made a partial reversal of the valuation allowance of
$193.0. The Fiberite Acquisition, in conjunction with the continued positive
earnings trend of the Company, makes it more likely than not that the Company
will generate sufficient taxable income to realize its net deferred income tax
assets. Accordingly, in the fourth quarter of 1997, the Company reversed the
remaining tax valuation allowance of $24.4.
A reconciliation between the Company's effective tax rate and the U.S. federal
income tax rate is as follows:
1997 1996 1995
- --------------------------------------------------------------------------------
Federal income tax rate 35.0% 35.0% 35.0%
Valuation allowance adjustment (16.3) - (123.0)
Income subject to other than the
federal income tax rate 0.7 0.2 1.5
State taxes, net of
federal benefits 3.9 2.6 4.2
Equity in earnings of
foreign affiliates 0.1 0.1 0.5
Tax on undistributed
foreign earnings - - 0.2
Other charges, net 0.7 2.1 1.5
Effective tax rate 24.1% 40.0% (80.1%)
- --------------------------------------------------------------------------------
11. RETIREMENT PLANS
The Company has defined benefit pension plans that cover employees in the United
States and a number of foreign countries. In connection with the Fiberite
Acquisition on September 30, 1997, the Company assumed responsibility for
Fiberite's two defined benefit pension plans covering all salaried employees and
all hourly employees not covered by union plans. The projected benefit
obligation at September 30, 1997, for Fiberite was $25.6 offset
by plan assets approximating $20.0. Such amounts are included in the funded
status of the plan. The Company has the right to amend these plans.
Net periodic pension expense for the years ended December 31, 1997, 1996 and
1995, included the following components:
1997 1996 1995
- --------------------------------------------------------------------------------
Service cost $ 8.6 $ 9.0 $ 7.4
Interest cost on projected
benefit obligation (PBO) 17.4 15.5 14.2
Actual (return) loss on plan assets (30.1) (20.8) (23.5)
Net amortization and deferral 13.3 7.3 10.5
Net periodic pension expense $ 9.2 $ 11.0 $ 8.6
- --------------------------------------------------------------------------------
-39-
<PAGE>
The funded status as of December 31, 1997 and 1996, for the Company's retirement
plans are shown below.
Funded Status 1997 1996
- --------------------------------------------------------------------------------
Actuarial present value
of benefit obligations:
Vested benefit obligation $ 238.8 $ 174.3
Accumulated benefit
obligation 254.1 188.5
Projected benefit
obligation 283.7 221.6
Plan assets at fair value,
primarily marketable
securities 249.3 192.0
Projected benefit
obligation over plan
assets 34.4 29.6
Unrecognized net loss (25.9) (24.1)
Unrecognized prior
service cost (2.5) (3.3)
Unrecognized transition
asset 1.6 2.2
Accrued pension cost
recognized
on the Company's balance sheet $ 7.6 $ 4.4
- --------------------------------------------------------------------------------
The following table sets forth the major assumptions used to determine the
above information:
1997 1996 1995
- --------------------------------------------------------------------------------
Assumed discount rate 7.0% 7.50% 7.25%
Assumed rates for future
compensation increases 3.0-10.0% 4.0-10.0% 3.0-10.0%
Expected long-term rate
of return on plan assets 9.0% 9.0% 9.0%
- --------------------------------------------------------------------------------
12. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company sponsors postretirement and postemployment benefit plans. The
postretirement plans provide medical and life insurance benefits to retirees who
meet minimum age and service requirements. The postemployment plans provide
salary continuation, disability related benefits, severance pay and continuation
of health costs during the period after employment but before retirement.
In connection with the Fiberite Acquisition on September 30, 1997, the Company
assumed sponsorship of Fiberite's postretirement benefit plan covering all
qualified retired employees. The total accumulated postretirement benefit
obligation at December 31, 1997, was $10.8 and was unfunded. The Company has the
right to amend this plan.
Net periodic postretirement benefit costs for the years ended December 31,
1997, 1996 and 1995, included the following components:
1997 1996 1995
- --------------------------------------------------------------------------------
Service cost $ 1.2 $ 1.6 $ 1.7
Interest cost 21.1 22.1 26.3
Actual return on plan assets (1.7) (0.5) (0.6)
Net amortization and deferral (5.1) (4.7) (4.5)
Total cost $15.5 $18.5 $22.9
- --------------------------------------------------------------------------------
The accumulated postretirement benefit obligation of $10.3 at September 30,
1997, related to the Fiberite Acquisition is included in the funded status of
the plan. In addition, the Company recognized a $9.3 curtailment gain related to
the Acrylic Fibers divestiture as the liability was assumed by the purchaser.
-40-
<PAGE>
The accrued postretirement benefit cost recognized in the Company's
consolidated balance sheets at December 31, 1997 and 1996, includes $20.0 and
$20.0, respectively, in accrued expenses and $336.6 and $364.7, respectively, in
other noncurrent liabilities. The following table presents the plan's funded
status at December 31, 1997 and 1996:
Funded Status 1997 1996
- --------------------------------------------------------------------------------
Accumulated postretirement benefit
obligation:
Retirees and surviving spouses $272.8 $271.5
Fully eligible active plan participants 22.8 38.0
Other active plan participants 13.9 8.7
- --------------------------------------------------------------------------------
Total accumulated postretirement
benefit obligation 309.5 318.2
Fair value of plan assets 38.0 11.5
- --------------------------------------------------------------------------------
Accumulated postretirement benefit
obligation over fair value of plan assets 271.5 306.7
Unrecognized net gain 35.3 18.9
Unrecognized negative prior service cost 49.8 59.1
Accrued postretirement benefit cost $356.6 $384.7
- --------------------------------------------------------------------------------
Measurement of the accumulated postretirement benefit obligations ("APBO") was
based on actuarial assumptions, including a discount rate of 7.0%, 7.50% and
7.25% at December 31, 1997, 1996 and 1995, respectively. The assumed rate of
future increases in the per capita cost of health care benefits (health care
cost trend rate) is 9.25% in 1998, decreasing evenly over 5 years to 4.75% and
remaining at that level thereafter. The health care cost trend rate has a
significant effect on the reported amounts of APBO and related expense. For
example, increasing the health care cost trend rate by one percentage point in
each year would increase the APBO at December 31, 1997, and the 1997 aggregate
service and interest cost by approximately $29.4 and $2.2, respectively.
13. OTHER FINANCIAL INFORMATION
Accrued expenses at December 31, 1997 and 1996, included the following:
1997 1996
- --------------------------------------------------------------------------------
Pensions and other employee benefits $ 30.0 $ 27.7
Other postretirement employee benefits 20.0 20.0
Salaries and wages 12.5 7.8
Environmental 25.0 25.0
Restructuring 40.8 -
Other 110.7 124.6
$239.0 $205.1
- --------------------------------------------------------------------------------
Cash payments during the years ended December 31, 1997, 1996 and 1995,
included interest of $6.2, $4.0 and $0.5, respectively. Income taxes paid in
1997, 1996 and 1995 were $30.4, $49.2 and $57.2, respectively. Income taxes paid
include foreign taxes of $6.6, $10.7 and $7.2 in 1997, 1996 and 1995,
respectively.
Included in accounts receivable at December 31, 1997 and 1996, are
miscellaneous receivables of approximately $32.4 and $32.2, respectively.
14. STOCKHOLDERS' EQUITY
On December 17, 1993 (the "Effective Date"), Cytec Industries Inc. was formed
and became an independent public company. American Cyanamid Company ("Cyanamid")
distributed all of the Company's common stock to existing Cyanamid stockholders.
Cyanamid retained 100% of the preferred stock issued by the Company. In 1995 the
Company repurchased all of its Series A Cumulative Adjustable Preferred Stock
("Series A Stock") and Series B Cumulative Convertible Preferred Stock ("Series
B Stock"). During 1994 Cyanamid was acquired by American Home Products
Corporation.
-41-
<PAGE>
Stock Split. In June 1996 the Company declared a three-for-one stock split of
the Company's common stock effected in the form of a stock dividend. All share
and per share data, including stock option information, but excluding treasury
shares, through the date of the distribution of the stock dividend on July 23,
1996, have been restated to reflect the stock split.
Common Stock. The Company is authorized to issue 150 million shares of common
stock with a par value of $.01 per share, of which 45,136,675 shares were
outstanding at December 31, 1997. At December 31, 1997, the Company had reserved
approximately 11,420,937 shares for issuance under the 1993 Stock Award and
Incentive Plan described below (the "1993 Plan").
Stock Award and Incentive Plan. The 1993 Plan is administered by a committee of
the Board of Directors (the "Committee"). The 1993 Plan provides for grants of a
variety of awards, such as stock options (including incentive stock options and
nonqualified stock options), stock appreciation rights (including limited stock
appreciation rights), restricted stock (including performance shares),
restricted stock units, deferred stock awards and dividend equivalents, deferred
cash awards and interest equivalents, and other stock or cash-based awards, to
be made to selected employees and independent contractors of the Company and its
subsidiaries and affiliates at the discretion of the Committee. In addition,
automatic formula grants of restricted stock and nonqualified stock options are
awarded to non-employee directors.
The stock option component of the 1993 Plan provides for the granting of
nonqualified stock options to officers, directors and certain key employees at
100% of the market price on the date the option was granted. Options are
generally exercisable in cumulative installments of 33-1/3% per year commencing
one year after the date of grant and annually thereafter, with contract lives of
generally 10 years from the date of grant. A summary of the status of the
Company's stock options as of December 31, 1997, 1996 and 1995, and changes
during the year ended on those dates is presented below.
<TABLE>
<CAPTION>
1997 1996 1995
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Shares Under Option:
Outstanding at beginning of year 4,906,196 $10.18 4,487,037 $ 6.86 3,924,900 $ 5.44
Granted 883,425 40.25 876,130 25.14 850,800 13.16
Exercised (934,688) 6.45 (429,059) 5.78 (245,877) 5.47
Forfeited (36,250) 27.50 (27,912) 14.12 (42,786) 9.62
Outstanding at end of year 4,818,683 $16.29 4,906,196 $10.18 4,487,037 $ 6.86
Options exercisable at year-end 3,225,120 $ 8.73 2,374,586 $ 6.39 1,239,306 $ 5.46
Weighted average fair value of
options granted during the year $21.52 $10.65 $ 5.94
- ---------------------------------------------------------------------------------------------------
</TABLE>
The fair value of each stock option granted during 1997, 1996 and 1995 is
estimated on the date of grant using the Black-Scholes option pricing model with
the following assumptions:
1997 1996 1995
- --------------------------------------------------------------------------------
Expected life (years) 6.0 6.0 6.0
Expected volatility 45.66% 30.69% 30.69%
Expected dividend yield - - -
Risk-free interest rate 6.41% 5.87% 7.11%
- --------------------------------------------------------------------------------
-42-
<PAGE>
The following table summarizes information about stock options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Range of Exercise Prices Outstanding Life Price Exercisable Price
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 4.75-10.00 2,398,513 6.12 years $ 5.43 2,398,513 $ 5.43
11.67-19.58 719,438 7.14 years 13.17 494,412 13.17
25.08-37.75 824,532 8.13 years 25.17 314,995 25.16
37.88-47.31 876,200 9.15 years 40.25 17,200 40.19
4.75-47.31 4,818,683 7.17 years $16.29 3,225,120 $ 8.73
- ---------------------------------------------------------------------------------------------------
</TABLE>
The Company has issued performance stock, a form of restricted stock, with
restrictions related to the Company's financial performance for the applicable
periods. Awards made in 1995, 1996 and 1997 were for the 1997, 1998 and 1999
performance periods, respectively. Restrictions lapse on the stock upon the
attainment of performance criteria established by the Committee which, under
certain circumstances, may be revised. The amount of unearned compensation
recognized as expense was $3.0 in 1997, $8.4 in 1996 and $6.4 in 1995,
respectively. A summary of restricted stock award activity is as follows:
1997 1996 1995
- --------------------------------------------------------------------------------
Outstanding awards
beginning of year 131,304 357,936 568,872
New awards granted 90,725 58,107 74,226
Shares with restrictions
lapsed (49,956) (255,123) (252,825)
Restricted shares forfeited (20,235) (29,616) (32,337)
Outstanding awards
end of year 151,838 131,304 357,936
Weighted average market
value of stock
on award date $41.10 $23.26 $13.13
- --------------------------------------------------------------------------------
"Shares with restrictions lapsed" in each period above include shares deferred
by certain participants. The Company issued these participants equivalent
deferred stock awards which will be distributed in the form of shares of common
stock, generally, following termination of employment.
In late 1995 the Company implemented a stock appreciation plan for all
eligible active employees that excluded those employees who customarily receive
stock options. The stock appreciation units represent a potential payout to
employees, in cash, of the difference between the base price of the Company's
stock of $20.00 per share and the lesser of the price at term or $33.33. The
stock appreciation units mature 50% at December 31, 1997, and December 31, 1999.
In December 1996 the plan was amended to provide for the immediate payout of
five hundred dollars per participant which represented 25% of the total maximum
payout. A second 25% payout was made in December, 1997. The compensation cost
related to this plan was $2.0 and $2.2 in 1997 and 1996, respectively, and was
immaterial in 1995.
A summary of changes in common stock issued and treasury stock for the years
ended December 31, 1997, 1996 and 1995, follows:
Common Treasury
Stock Stock
- --------------------------------------------------------------------------------
Balance at December 31, 1994 37,663,927 6,917
Issuance pursuant to public offering 10,363,500 -
Issuance pursuant to stock option plan 245,877 -
Award of performance stock,
net of forfeitures 41,889 -
- --------------------------------------------------------------------------------
Balance at December 31, 1995 48,315,193 6,917
Purchase of treasury stock - 3,033,000
-43-
<PAGE>
Issuance pursuant to stock option plan 235,389 (153,676)
Award of performance stock
and restricted stock 50,652 (2,485)
Forfeitures and performance
stock deferrals (223,551) (271)
- --------------------------------------------------------------------------------
Balance at December 31, 1996 48,377,683 2,883,485
Purchase of treasury stock - 1,234,250
Issuance pursuant to stock option plan - (934,688)
Award of performance stock
and restricted stock - (90,725)
Forfeitures and performance
stock deferrals (196,419) (47,733)
Balance at December 31, 1997 48,181,264 3,044,589
- --------------------------------------------------------------------------------
Shares held in treasury prior to July 23, 1996, were not subject to the stock
split.
The compensation costs that have been charged against income for restricted
stock awards and stock appreciation plan were noted above. Set forth below are
the Company's net earnings and earnings per share, presented both "as reported"
and "pro forma," as if compensation cost had been determined consistent with the
provisions of SFAS 123:
1997 1996 1995
- --------------------------------------------------------------------------------
Net earnings available for
common stockholders:
As reported $113.6 $100.1 $76.3
Pro forma 107.7 98.0 75.3
Basic earnings per share:
As reported $ 2.50 $ 2.13 $1.98
Pro forma 2.37 2.09 1.96
Diluted earnings per share:
As reported $ 2.39 $ 2.03 $1.50
Pro forma 2.26 1.98 1.47
- --------------------------------------------------------------------------------
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply for awards prior to 1995,
and the Company anticipates granting additional awards in future years.
15. PREFERRED STOCK REDEEMABLE AND NON-REDEEMABLE
The Company is authorized to issue 20 million shares of preferred stock with a
par value of $.01 per share in one or more classes or series with rights and
privileges as adopted by the Board of Directors. As of the effective date, the
Company had issued to Cyanamid 8 million shares of preferred stock having an
aggregate liquidation and redemption value of $200.0, which included shares of
Series A Stock, par value $.01 per share; Series B Stock, par value $.01 per
share and Series C Stock, par value $.01 per share. During 1995 the Company
repurchased all of its outstanding Series A Stock and Series B Stock (see
"Preferred Stock Repurchase" below).
The Series C Stock, of which 4,000 shares are issued and outstanding, is
perpetual, has a liquidation and redemption value of $0.1, an annual dividend of
$1.83 per share (7.32%) and is redeemable at the Company's option under certain
limited circumstances. Shares of Series C Stock are not transferable except to a
subsidiary of Cyanamid. The Series C Stock provides Cyanamid with the right to
elect one director to the Company's Board of Directors and contains certain
covenants requiring the Company to satisfy its environmental remediation
obligations, retiree health care and life insurance obligations and certain
pension contribution obligations in a timely and proper manner. It also contains
certain other covenants requiring the Company to maintain specified financial
ratios and restricting the Company from taking certain actions, including paying
dividends on its common stock in certain circumstances, merging or consolidating
or selling all or substantially all of the Company's assets or incurring
indebtedness in violation of certain covenants, without the consent of Cyanamid
as the holder of the Series C Stock. In the event that the Company fails to
comply with certain of such covenants, Cyanamid, as the holder of the Series C
Stock, will have additional rights which may include approval of the Company's
capital expenditures and in certain more limited circumstances, appointing
additional directors to the Company's Board of Directors, which together with
Cyanamid's existing representative, would constitute a majority of the Company's
Board of Directors. The Company agreed with Cyanamid in the preferred stock
repurchase agreement that it would not redeem the Series C Stock prior to
December 16, 1999.
-44-
<PAGE>
The Company on April 8, 1997, signed an agreement with Cyanamid 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 and 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 $150.0 of debt unless the Company's equity is in excess of $200.0. If the
Company has more than $200.0 in equity, then it 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
$200.0, then it could not incur additional indebtedness if it would cause the
ratio of debt-to-equity to exceed .75-to-1.
Preferred Stock Repurchase. In August 1995, the Company entered into a preferred
stock repurchase agreement with Cyanamid pursuant to which the Company agreed to
repurchase all outstanding shares of its Series A Stock and its Series B Stock
from Cyanamid. The Company repurchased the Series A Stock on August 23, 1995,
for $90.0 plus $1.2 of accrued dividends. On November 7, 1995, the Company
repurchased the Series B Stock for $305.1 plus $0.6 of accrued dividends, which
was financed by the proceeds of a stock offering of 9.6 million shares of the
Company's common stock, $100.0 in borrowings under the Company's Credit Facility
and available cash.
The Series A Stock had an aggregate liquidation value of $95.5 and an
aggregate annual dividend of $8.4. The Series B Stock had an aggregate
liquidation value of $104.4 and an aggregate annual dividend of $6.3. It was
also convertible at a conversion price of $6.26 per share into 16,660,611 shares
of common stock or approximately 29.6% of the common stock outstanding on a
diluted basis (assuming conversion of the Series B Stock) prior to the
repurchase.
After the repurchase, the shares of the Series A Stock and Series B Stock were
retired and assumed the status of authorized but unissued shares of preferred
stock, and the Company is not currently authorized to issue any additional
shares of Series A Stock or Series B Stock.
16. EARNINGS PER SHARE
The following represents the reconciliation of the numerators and denominators
of the basic and diluted EPS computations for net earnings available for common
stockholders for the years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
For the year ended
December 31, 1997 1996 1995
Per Per Per
Income Shares Share Income Shares Share Income Shares Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net earnings $113.6 $100.1 $282.2
Less: Excess of
repurchase price
over related book
valueo f
Series A Stock and
Series B Stock - - (195.2)
Less: Preferred stock
dividends - - (10.7)
- ------------------------------------------------------------------------------------------------------------------------------------
-------- -------- --------
Basic EPS
Net earnings available
for common
stockholders $113.6 45,450,139 $2.50 $100.1 47,002,324 $2.13 $ 76.3 38,500,933 $1.98
--------- --------- ---------
Effect of dilutive
securities
Options - 1,992,762 - 2,106,281 - 1,542,112
Performance/Restricted
stock - 108,783 - 239,031 - 375,341
Put options - 2,132 - 440 -
Preferred stock - - - - 5.3 14,125,301
- ------------------------------------------------------------------------------------------------------------------------------------
-------- --------
Diluted EPS
Net earnings avail-
able for common stock-
holders plus assumed
conversions $113.6 47,553,816 $2.39 $100.1 49,348,076 $2.03 $ 81.6 54,543,687 $1.50
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17. OPERATIONS BY GEOGRAPHIC AREAS
Net sales to unaffiliated customers presented below are based upon the sales
destination that is consistent with management's view of the business.
U.S. exports included in net sales are also based upon the sales destination
and represent direct sales of U.S.-based entities to unaffiliated customers
outside of the United States.
Earnings from operations are also based upon destination and consist of total
net sales less operating expenses.
-45-
<PAGE>
Identifiable assets are those assets used in the Company's operations in each
geographic area. Unallocated assets are primarily miscellaneous receivables,
construction in progress, and cash and cash equivalents.
Operations by Geographic Areas
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
United States $ 782.6 $ 766.6 $ 782.2
Other Americas 117.7 110.9 100.3
Europe, Mideast, Africa 247.8 219.7 207.1
Asia/Pacific Rim 142.5 162.4 170.5
Total $1,290.6 $1,259.6 $1,260.1
- --------------------------------------------------------------------------------------------------
U.S. exports included in net sales above
Other Americas $ 36.3 $ 34.6 $ 28.3
Europe, Mideast, Africa 32.9 25.5 21.8
Asia/Pacific Rim 75.7 101.4 108.7
Total $ 144.9 $ 161.5 $ 158.8
- --------------------------------------------------------------------------------------------------
Earnings from operations*
United States $ 75.0 $ 90.6 $ 51.7
Other Americas 17.2 19.7 13.2
Europe, Mideast, Africa 15.1 21.3 22.3
Asia/Pacific Rim 11.9 3.6 34.9
Total $ 119.2 $ 135.2 $ 122.1
- --------------------------------------------------------------------------------------------------
Other income, net $ 23.9 $ 9.0 $ 4.6
Equity in earnings of associated companies 12.3 24.8 24.6
- --------------------------------------------------------------------------------------------------
Interest income (expense), net (5.7) (2.1) 5.4
Earnings before income taxes $ 149.7 $ 166.9 $ 156.7
Identifiable assets
United States $ 928.8 $ 574.1 $ 591.1
Other Americas 106.9 106.1 101.2
Europe, Mideast, Africa 123.7 117.4 108.1
Asia/Pacific Rim 18.5 21.6 19.1
Total $1,177.9 $ 819.2 $ 819.5
- --------------------------------------------------------------------------------------------------
Equity in net assets of and advances to associated companies 141.1 143.7 155.1
Unallocated assets 295.1 298.2 319.2
Total assets $1,614.1 $1,261.1 $1,293.8
- --------------------------------------------------------------------------------------------------
</TABLE>
*Earnings from operations in 1997 includes restructuring and other charges of
$26.4 and $16.0 in the United States and Europe, respectively.
-46-
<PAGE>
Management Statement
Your management has prepared and is responsible for the accompanying
Consolidated Financial Statements. These statements have been prepared in
conformity with generally accepted accounting principles appropriate in the
circumstances and necessarily include some amounts based on management's
estimates and judgments. All financial information in this annual report is
consistent with that in the Consolidated Financial Statements.
The Company's accounting systems include internal controls designed to provide
reasonable assurance of the reliability of its financial records and the proper
safeguarding and use of its assets. Such controls are based on established
policies and procedures and are implemented by trained, skilled personnel with
an appropriate segregation of duties. The internal controls are complemented by
the Company's internal auditors, who conduct regular and extensive internal
audits.
The Company's independent auditors, KPMG Peat Marwick LLP, have audited the
Consolidated Financial Statements. Their audits were conducted in accordance
with generally accepted auditing standards as indicated in their report.
The Board of Directors exercises its responsibility for these financial
statements through its Audit Committee, composed solely of nonmanagement
directors, which meets periodically with management, the internal auditors and
the independent auditors to review internal accounting control, auditing and
financial reporting matters. The independent auditors and the internal auditors
have full and free access to the Audit Committee.
Darryl D. Fry
Chairman and Chief Executive Officer
David Lilley
President and Chief Operating Officer
James P. Cronin
Executive Vice President and Chief Financial Officer
West Paterson, NJ
January 26, 1998
-47-
<PAGE>
Independent Auditors' Report
The Board of Directors
and Stockholders
Cytec Industries Inc.:
We have audited the accompanying consolidated balance sheets of Cytec Industries
Inc. and subsidiaries, as of December 31, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the years in the three-year period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cytec
Industries Inc. and subsidiaries at December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Short Hills, NJ
January 26, 1998
-48-
<PAGE>
Quarterly Data
<TABLE>
<CAPTION>
(Dollars in millions, except per share amounts) 1Q 2Q 3Q 4Q Year
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
Net sales $306.5 $315.5 $309.0 $359.6 $1,290.6
Gross profit(1) 71.5 96.4 97.1 94.6 359.7
Net earnings(2) 26.9 27.8 28.2 30.7 113.6
Earnings per common share(3)
Basic $ .59 $ .61 $ .63 $ .68 $ 2.50
Diluted $ .56 $ .59 $ .60 $ .65 $ 2.39
- ----------------------------------------------------------------------------------------------
1996
Net sales $304.5 $318.1 $321.7 $315.3 $1,259.6
Gross profit(1) 86.9 91.7 92.1 90.8 361.5
Net earnings(2) 22.6 25.4 26.0 26.1 100.1
Earnings per common share(3)
Basic $ .47 $ .53 $ .56 $ .57 $ 2.13
Diluted $ .45 $ .51 $ .53 $ .54 $ 2.03
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) Gross profit is derived by subtracting manufacturing cost of sales from net
sales.
(2) Net earnings include restructuring and other charges of $11.3 and $23.0 in
the first and fourth quarters, respectively. In addition, the first quarter
includes a one-time gain of $13.6 primarily related to the sale of the Acrylic
Fibers product line, and the fourth quarter includes the $24.4 effect of the
reversal of the tax valuation allowance.
(3) The sum of the quarters may not equal the full year basic and diluted
earnings per share since each period is calculated separately.
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
None.
-49-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
EXECUTIVE OFFICERS
Set forth below is certain information concerning the executive officers
of the Company. Each such person was first elected to the indicated
office with the Company on December 17, 1993 unless otherwise specified,
and serves at the pleasure of the Board of Directors of the Company.
<TABLE>
<CAPTION>
Name Age Positions
- ----------- --- --------------------------------------------------------------------
<S> <C> <C>
D. D. Fry 59 Mr. Fry is Chairman of the Board and Chief Executive Officer of the
Company, having also served as President of the Company from its
inception until January 7, 1997. From January 1991 to December 1993,
he was an Executive Vice President of Cyanamid and President of the
Chemicals Group of Cyanamid.
D. Lilley 51 Mr. Lilley was elected President and Chief Operating Officer and a
member of the Board of Directors effective January 8, 1997. From 1994
until that date, he was a Vice President of American Home Products
Corporation, responsible for the Global Medical Device business.
Prior to that time, he was Vice President and a member of the
Executive Committee of Cyanamid.
J. P. Cronin 44 Mr. Cronin is Executive Vice President and Chief Financial Officer of
the Company, having previously served as Vice President and Chief
Financial Officer of the Company from its inception until he was
elected an Executive Vice President in September 1996. From October
1992 to December 1993, he was Controller and Chief Financial Officer
of the Chemicals Group of Cyanamid.
E.F.Jackman 52 Mr. Jackman is Vice President, General Counsel and Secretary of the
Company. From July 1992 to December 1993, he was General Counsel of
the Chemicals Group of Cyanamid.
H. Porosoff 51 Mr. Porosoff was elected Vice President and Chief Technology Officer
of the Company in June 1995. From December 1993 to June 1995, he was
Vice President, Research and Development of the Company. From March
1992 to December 1993, he was Vice President and Director of Research
for the Chemicals Group of Cyanamid. Mr. Porosoff retired in January
1998.
J. W. Hirsch 55 Mr. Hirsch is Vice President, Employee Resources of the Company. From
January 1991 to December 1993, he was the Personnel Director of the
Chemicals Group of Cyanamid.
K. Shah 49 Mr. Shah was elected Vice President - Corporate Planning and Business
Development and Investor Relations of the Company in December 1995,
having previously served as Director, Corporate Planning and Business
-50-
<PAGE>
</TABLE>
<TABLE>
<S> <C> <C>
Development and Investor Relations since December 1993. Prior to
1993, he served the Chemicals Group of Cyanamid since 1979 in a number
of capacities (primarily planning and business development) including
as Director, Planning and Business Development of the Chemicals Group
from 1991 to 1993.
D.M. Drillock 40 Mr. Drillock was elected Controller of the Company in December 1995,
having previously served as Controller in a non-officer capacity since
December 1993. Prior to that time, he served the Chemicals Group of
Cyanamid as Division Controller.
T. P. Wozniak 44 Mr. Wozniak is Treasurer of the Company, having joined the Company in
November 1993. Prior to joining the Company, he served since 1987 as
Assistant Treasurer of AMAX Inc.
</TABLE>
On January 26, 1998, Darryl Fry informed the Board of Directors of his
intention to retire as Chairman of the Board at the age of 60 in January
1999 and to relinquish his Chief Executive Officer responsibilities on
May 11, 1998 at the time of the Company's annual meeting of shareholders.
Accordingly, the Board announced its intent to appoint David Lilley to
the additional position of Chief Executive Officer on May 11, 1998.
The remainder of the information required by this Item is incorporated by
reference from the "Election of Directors" section of the Registrant's
definitive Proxy Statement for its 1998 Annual Meeting of Common
Stockholders to be filed pursuant to Regulation 14A before April 30,
1998.
Item 11. Executive Compensation
----------------------
The information required by this Item is incorporated by reference from
the "Executive Compensation," the "Employment and Severance
Arrangements," the "Compensation under Retirement Plans" and the
"Compensation of Directors" sections of the Registrant's definitive Proxy
Statement for its 1998 Annual Meeting of Common Stockholders to be filed
pursuant to Regulation 14A before April 30, 1998.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The information required by this Item is incorporated by reference from
the "Security Ownership of Management" section of the Registrant's
definitive Proxy Statement for its 1998 Annual Meeting of Common
Stockholders to be filed pursuant to Regulation 14A before April 30,
1998.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The information required by this Item is incorporated by reference from
the "Certain Relationships and Related Transactions" section of the
Registrant's definitive Proxy Statement for its 1998 Annual Meeting of
Common Stockholders to be filed pursuant to Regulation 14A before April
30, 1998.
-51-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
----------------------------------------------------------------
(a)(1) List of Financial Statements:
Cytec Industries Inc. and Subsidiaries Consolidated Financial
Statements (See Item 8):
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Income for the Years Ended
December 31, 1997, 1996, and 1995
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996, and 1995
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1997, 1996, and 1995
Notes to Consolidated Financial Statements
(a)(2) Cytec Industries Inc. and Subsidiaries Financial Statement
Schedules for the Years Ended December 31, 1997, 1996, and 1995
Independent Auditors' Report
Schedule II - Valuation and Qualifying Accounts
All schedules, other than indicated above, are omitted because of the
absence of the conditions under which they are required or because the
information required is shown in the financial statements or notes
thereto.
(a)(3) Exhibits:
Exhibit No. Description
----------- -----------
2.1(a) Transfer and Distribution Agreement dated as of December 17,
1993 between American Cyanamid Company ("Cyanamid") and the
Registrant (incorporated by reference to exhibit 2.1(a) to
Registrant's annual report on Form 10-K for the year ended
December 31, 1993).
2.1(b) Transfer and Distribution Agreement Amendment, dated April
8, 1997 between Cyanamid and the Registrant (incorporated by
reference to exhibit 2.1(a) to Registrant's quarterly report
on Form 10-Q for the quarter ended March 31, 1997).
2.2(a) Preferred Stock Repurchase Agreement (incorporated by
reference to exhibit 2(b) to Registrant's registration
statement on Form S-3, registration number 33-97328)
-52-
<PAGE>
2.2(b) Amendment No. 1 to Preferred Stock Repurchase Agreement
(incorporated by reference to exhibit 2(c) to Registrant's
registration statement on Form S-3, registration number 33-
97328).
2.3(a) Asset Purchase Agreement ("Purchase Agreement") by and among
Stamford FHI Acquisition Corp., Fiberite, Inc., Fiberite
Holdings, Inc. and Cytec Industries Inc. (incorporated by
reference to exhibit 2.1 to Registrant's report on Form 8-K
dated September 30, 1997).
2.3(b) Amendment to the Purchase Agreement, dated as of August 28,
1997 (incorporated by reference to exhibit 2.2 to
Registrant's current report on Form 8-K dated September 30,
1997).
2.3(c) Second Amendment to the Purchase Ageement, dated as of
September 29, 1997 (incorporated by reference to exhibit 2.3
to Registrant's current report on Form 8-K dated September
30, 1997).
3.1(a) Certificate of Incorporation (incorporated by reference to
exhibit 3.1(a) to Registrant's quarterly report on Form 10-Q
for the quarter ended September 30, 1996)
3.1(b) Certificate of Amendment to Certificate of Incorporation
dated May 13, 1997 (incorporated by reference to exhibit
3.1(a) to Registrant's quarterly report on Form 10-Q for the
quarter ended June 30, 1997).
3.1(c) Conformed copy of the Registrant's certificate of
incorporation, as amended (incorporated by reference to
exhibit 3(c) to Registrant's registration statement on Form
S-8, registration number 333-45577).
3.2 By-laws (incorporated by reference to exhibit 3.2 to
Registrant's quarterly report on Form 10-Q for the quarter
ended September 30, 1996)
4.1 Form of Common Stock Certificate (incorporated by reference
to exhibit 4.1 to Registrant's registration statement on
Form 10).
4.2 Certificate of Designations, Preferences and Rights of
Series C Preferred Stock (incorporated by reference to
exhibit 4.4 to Registrant's annual report on Form 10-K for
the year ended December 31, 1993). Reference is also made to
exhibits 2.1(b), 2.2(a) and 2.2(b).
4.3 Form of Series C Preferred Stock Certificate (incorporated
by reference to exhibit 4.7 to Registrant's registration
statement on Form 10).
10.1 Environmental Matters Agreement, dated as of December 17,
1993, between Cyanamid and the Registrant (incorporated by
reference to exhibit 10.1 to Registrant's annual report on
Form 10-K for the year ended December 31, 1993).
10.2 OPEB Matters Agreement, dated as of December 17, 1993,
between Cyanamid and the
-53-
<PAGE>
Registrant (incorporated by reference to exhibit 10.2 to
Registrant's annual report on Form 10-K for the year ended
December 31, 1993).
10.3 Intellectual Property Agreements, each dated as of December
17, 1993 and each between Cyanamid and Cytec Technology
Corp. (consisting of (i) Assignment of U.S. Patents, (ii)
Assignment of U.S. Patent Applications, (iii) Assignment of
Foreign Patents and Patent Applications, (iv) Assignment of
Records of Invention, (v) Exclusive Patent and Knowhow
License, (vi) Option Agreement for Non-Exclusive Patent and
Knowhow License, (vii) Non-Exclusive Patent and Knowhow
License, (viii) Agreement re access to CL File and (ix)
Assignment of Knowhow)(incorporated by reference to exhibit
10.7 to Registrant's annual report on Form 10-K for the year
ended December 31, 1993).
10.4 Trademarks and Copyrights Transfer Agreement, Assignment and
Bill of Sale dated as of December 17, 1993, among Cyanamid,
Cytec Technology Corp. and the Registrant (incorporated by
reference to exhibit 10.8 to Registrant's annual report on
Form 10-K for the year ended December 31, 1993).
10.5 Aminonitrile Manufacturing Services Agreement, dated as of
December 17, 1993, between Cyanamid and the Registrant
(incorporated by reference to exhibit 10.9(a) to
Registrant's annual report on Form 10-K for the year ended
December 31, 1993).
10.6 Second Amended and Restated Credit Agreement, dated as of
July 29, 1997 (incorporated by reference to exhibit 10.12 to
Registrant's quarterly report on form 10-Q for the quarter
ended June 30, 1997).
10.7(a) 364 - Day Credit Agreement, dated as of September 23, 1997
among Cytec, the Banks named therein and Citibank, N.A. as
agent (incorporated by reference to exhibit 10.13 to
Registrant's quarterly report on Form 10-Q for the quarter
ended September 30, 1997).
10.7(b) Assignment and acceptance dated October 7, 1997 by and
between Citibank, NA and Corestates Bank N.A. relating to an
interest in the 364-Day Credit Agreement and a schedule
listing the 5 other banks signing the same form of agreement
and their interests (incorporated by reference to exhibit
10.14 to Registrant's quarterly report on Form 10-Q for the
quarter ended September 30, 1997).
10.8 Partnership Agreement between Cyanamid Plastics, Inc., and
Rohacryl, Inc., dated July 1, 1976 (incorporated by
reference to exhibit 10.17 to Registrant's registration
statement on Form 10).
10.9(a) Joint Venture Agreement between Cyanamid Melamine, Inc., and
DCP Melamine North America, Inc., dated April 15, 1986
(incorporated by reference to exhibit 10.18(a) to
Registrant's registration statement on Form 10).
-54-
<PAGE>
10.9(b) Agreement dated April 15, 1986 between Cyanamid and DSM
Chemische Production BV, as amended October 24, 1994
(incorporated by reference to exhibit 10.18(b) to
Registrant's annual report on Form 10-K for the year ended
December 31, 1994.)
10.10 Joint Venture Agreement between Cyanamid Methanol, Inc. and
MG Fortier, Inc. (incorporated by reference to Exhibit 10(i)
to Registrant's quarterly report on Form 10-Q for the
quarter ended September 30, 1994).
10.11 Master Agreement between the Registrant, et. al. and Shell
Oil Company, et. al., dated April 1, 1988 (incorporated by
reference to exhibit 10.15 to Registrant's registration
statement on Form 10).
10.12 Limited Partnership Agreement between Mivida Corporation,
et. al. and Shell Polymers and Catalysts Enterprises, Inc.,
et. al., dated April 1, 1988 (incorporated by reference to
exhibit 10.16 to Registrant's registration statement on Form
10).
10.13 Executive Compensation Plans and Arrangements
10.13(a) 1993 Stock Award and Incentive Plan, as amended
(incorporated by reference to Exhibit I to the Registrant's
definitive Proxy Statement for its 1997 Annual Meeting of
Common Stockholders filed pursuant to Regulation 14A.)
10.13(b) Form of Performance Stock Award/Performance Cash Award Grant
Letter (incorporated by reference to exhibit 10.13(b) to
Registrant's annual report on Form 10-K for the year ended
December 31, 1996).
10.13(c) Rule No. 1 under 1993 Stock Award and Incentive Plan as
amended through January 26, 1998.
10.13(d) Form of Stock Option Grant Letter (incorporated by reference
to exhibit 10.13(d) to Registrant's annual report on
Form 10-K for the year ended December 31, 1996).
10.13(e) Rule No. 2, as amended through January 27, 1997, under 1993
Stock Award and Incentive Plan (incorporated by reference to
exhibit 10.13(e) to Registrant's annual report on Form 10-K
for the year ended December 31, 1996).
10.13(f) Rule No. 3 under 1993 Stock Award and Incentive Plan, as
amended through March 22, 1996 (incorporated by reference to
exhibit 10.13(f) to Registrant's annual report on Form 10-K
for the year ended December 31, 1995).
-55-
<PAGE>
10.13(g) Executive Income Continuity Plan, as amended through October
17, 1996 (incorporated by reference to exhibit 10.13(g) to
Registrant's quarterly report on Form 10-Q for the quarter
ended September 30, 1996).
10.13(h) Key Manager Income Continuity Plan, as amended through
October 17, 1996 (incorporated by reference to exhibit
10.13(h) to Registrant's quarterly report on Form 10-Q for
the quarter ended September 30, 1996).
10.13(i) Employee Income Continuity Plan, as amended through May 13,
1996 (incorporated by reference to exhibit 10.13(i) to
Registrant's quarterly report on Form 10-Q for the quarter
ended June 30, 1996).
10.13(j) Cytec Excess Retirement Benefit Plan (incorporated by
reference to exhibit 10(D) to Registrant's quarterly report
on Form 10-Q for the quarter ended September 30, 1994).
10.13(k) Cytec Supplemental Employees Retirement Plan, as amended
through May 13, 1996 (incorporated by reference to exhibit
10.13(k) to Registrant's quarterly report on Form 10-Q for
the quarter ended June 30, 1996).
10.13(l) Cytec Executive Supplemental Employees Retirement Plan, as
amended.
10.13(m) Cytec Compensation Tax Equalization Plan (incorporated by
reference to exhibit 10(G) to Registrant's quarterly report
on Form 10-Q for the quarter ended September 30, 1994).
10.13(n) Cytec Supplemental Savings and Profit Sharing Plan, as
amended through December 8, 1997.
10.13(o) Trust Agreement effective as of January 1, 1994 between
Cytec Industries Inc. and First Fidelity Bank N.A.
(incorporated by reference to exhibit 10.13(o) to
Registrant's quarterly report on Form 10-Q for the quarter
ended March 31, 1995.)
10.13(p) Trust Agreement effective as of December 15, 1994 between
the Registrant and First Fidelity Bank, N.A. (incorporated
by reference to exhibit 10.13(p) to Registrant's quarterly
export on Form 10-Q for the quarter ended March 31, 1995).
10.13(q) Deferred Compensation Plan (incorporated by reference to
exhibit 10.13(q) to Registrant's annual report on Form 10-K
for the year ended December 31, 1995).
10.13(r) Deferred Compensation Agreement with F. W. Armstrong
(incorporated by reference to exhibit 10.13(r) to
Registrant's annual report on Form 10-K for the year ended
December 31, 1995).
-56-
<PAGE>
10.13(s) Restricted Stock Award Agreement - David Lilley dated
January 7, 1997 (incorporated by reference to exhibit
10.13(o) to Registrant's quarterly report on Form 10-Q for
the quarter ended March 31, 1997).
10.13(t) Agreement dated September 8, 1997, between the Company and
S. M. Crum (incorporated by reference to exhibit 99.1 to
Registrant's current report on From 8-K dated September 30,
1997).
10.13(u) Cytec Industries Inc. Estate Enhancement Plan including form
of agreement, form of death benefit agreement, and form of
election to forego compensation and enrollment form.
10.14 Asset Purchase Agreement dated as of December 23, 1996
between Sterling Fibers, Inc., Sterling Chemicals, Inc.,
Sterling Chemicals Holdings, Inc., Cytec Acrylic Fibers
Inc., Cytec Technology Corp. and Cytec Industries Inc.
(incorporated by reference to exhibit 10.23 to Registrant's
annual report on Form 10-K for the year ended December 31,
1996).
10.15(a) Joint Venture Agreement dated as of February 23, 1984 among
Cyanamid Overseas Corporation and Dyno Industrier A.S.
(incorporated by reference to exhibit 10-15(a) to
Registrant's quarterly report on Form 10-Q for the quarter
ended March 31, 1994).
10.15(b) Amendment to Joint Venture Agreement dated as of December
16, 1993, among Cyanamid Overseas Corporation, Dyno
Industrier A.S. and Cytec Overseas Corporation (incorporated
by reference to exhibit 10.15(b) to Registrant's
quarterly report on Form 10-Q for the quarter ended March
31, 1994).
12 Computation of Ratio of Earnings to Fixed Charges
21 Subsidiaries of the Company
23 Consent of KPMG Peat Marwick LLP (related to the
consolidated financial statements of Cytec Industries Inc.
and Subsidiaries)
24(a-f) Powers of Attorney of F. W. Armstrong, G. W. Burns, D.
Lilley, L. L. Hoynes, Jr., W. P. Powell, and J. R. Satrum
27 Financial Data Schedule
(b) Reports on Form 8-K: Amendment No. 1 to the Registrant's current
report on Form 8-K dated September 30, 1997, was filed during the
quarter ended December 31, 1997. The report related to the
Registrant's acquisition of substantially all of the assets of
Fiberite, Inc. and included the following financial statements:
-57-
<PAGE>
(i) Financial Statements of Businesses Acquired.
Report of Fiberite Holdings, Inc.'s Independent Public
Accountants
Consolidated Balance Sheets of Fiberite Holdings, Inc. as of
December 31, 1996 and September 30, 1997 (unaudited).
Consolidated Statements of Operations of Fiberite Holdings,
Inc. for the year ended December 31, 1996 and the nine
months ended September 30, 1997 (unaudited) and 1996
(unaudited).
Consolidated Statement of Stockholders' Equity of Fiberite
Holdings, Inc. for year ended December 31, 1996.
Consolidated Statements of Cash Flows of Fiberite Holdings,
Inc. for the year ended December 31, 1996 and the nine
months ended September 30, 1997 (unaudited) and 1996
(unaudited).
(ii) 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.
-58-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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)
DATE: March 9, 1998 By: D. D. Fry
--------------------------------
D. D. Fry
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
DATE: March 9, 1998 D. D. Fry
--------------------------------
D. D. Fry
Chairman and Chief Executive Officer
F. W. Armstrong, Director }
G. A. Burns, Director }
D. Lilley, Director } By: E. F. Jackman
------------------------------
Attorney in Fact
L. L. Hoynes, Jr., Director }
W. P. Powell, Director }
J. R. Satrum, Director }
DATE: March 9, 1998 J. P. Cronin
----------------------------------------
J. P. Cronin, Executive Vice President,
Chief Financial and Accounting Officer
-59-
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
Cytec Industries Inc.
Under date of January 26, 1998 we reported on the consolidated balance sheets of
Cytec Industries Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1997, as
contained in the 1997 annual report to stockholders. These consolidated
financial statements and our report thereon are included in the annual report on
Form 10-K for the year 1997. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedules as listed in the accompanying index.
These financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Short Hills, New Jersey
January 26, 1998
-60-
<PAGE>
Schedule II
Cytec Industries Inc.
---------------------
Valuation and Qualifying Accounts
---------------------------------
Year-ended December 31, 1997
----------------------------
(Millions of dollars)
---------------------
<TABLE>
<CAPTION>
Additions or (deductions) Other
Balance charged or (credited) to Additions or Balance
Description 12/31/96 expenses (deductions) 12/31/97
- ----------------------------- -------- ------------------------ ------------ ---------
<S> <C> <C> <C> <C>
Reserves deducted
from related assets:
Doubtful
accounts $ 11.1 $ - $(1.1) (1) $ 10.0
Total investments
and advances and
other assets $ 7.2 4.9(2) 10.9(3) $ 23.0
Additions or (deductions) Other
Balance charged or (credited) to Additions or Balance
Description 12/31/95 expenses (deductions) 12/31/96
- ----------------------------- -------- ------------------------ ------------ ---------
Reserves deducted
from related assets:
Doubtful
accounts $ 11.6 - $(0.5) (1) $ 11.1
Total investments
and advances and
other assets $ 7.2 - - $ 7.2
Additions or (deductions) Other
Balance charged or (credited) to Additions or Balance
Description 12/31/94 expenses (deductions) 12/31/95
- ----------------------------- -------- ------------------------ ------------ ---------
Reserves deducted
from related assets:
Doubtful
accounts $ 11.6 - - $ 11.6
Total investments
and advances and
other assets $ 7.2 - - $ 7.2
</TABLE>
(1) Principally bad debts written off, less recoveries and exchange
(2) Provision against equity investment in Criterion Catalyst, an
unconsolidated associated company.
(3) Reserve against the stated liquidation value of preferred stock received as
consideration in conjunction with the sale of the acrylic fiber product
line.
-61-
<PAGE>
EXHIBIT INDEX
-------------
Page Herein
------------------
2.1(a)
2.1(b) *
2.2(a) *
2.2(b) *
2.3(a) *
2.3(b) *
2.3(c) *
3.1(a) *
3.1(b) *
3.1(c) *
3.2 *
4.1 *
4.2 *
4.3 *
10.1 *
10.2 *
10.3 *
10.4 *
10.5 *
10.6 *
10.7(a) *
10.7(b) *
10.8 *
10.9(a) *
10.9(b) *
10.10 *
10.11 *
10.12 *
10.13(a) *
10.13(b) *
10.13(c)
10.13(d) *
10.13(e) *
10.13(f) *
10.13(g) *
10.13(h) *
10.13(i) *
10.13(j) *
10.13(k) *
10.13(l)
10.13(m) *
10.13(n)
10.13(o) *
10.13(p) *
10.13(q) *
10.13(r) *
10.13(s) *
10.13(t) *
10.13(u)
10.14 *
10.15(a) *
10.15(b) *
-62-
<PAGE>
Page Herein
----------------
12
21
23
24 (a-f)
27
* Denotes exhibit incorporated by reference
-63-
<PAGE>
Exhibit 10.13(c)
[As amended 1/26/98]
RULES OF GENERAL APPLICATION UNDER
THE CYTEC INDUSTRIES INC. 1993
STOCK AWARD AND INCENTIVE PLAN
Rule 1. This Rule applies to Performance Stock Awards and related Performance
- ------
Cash Awards granted to Executive Officers of the Corporation by the Compensation
and Management Development Committee (the "Committee") with respect to the 1998,
1999 and 2000 Performance Periods.
(a) Definitions. As used in this Rule, the following terms shall have the
-----------
following respective meanings; provided that with respect to Performance
--------
Stock Awards and Performance Cash Awards granted in 1997 and thereafter,
"Cash Flow" and "EPS" shall have the meaning ascribed thereto in the Plan;
(i) "Cash Flow" means, with respect to any fiscal year constituting a
Performance Period, the consolidated increase (decrease) in cash, cash
equivalents and related marketable securities of the Corporation, as
set forth in the Corporation's audited financial statements for such
year, adjusted to exclude the impact of financing activity, cash
dividends paid to common stockholders and purchases of treasury stock.
(ii) "EPS" means, with respect to any fiscal year constituting a
Performance Period, the consolidated fully-diluted earnings per common
share of the Corporation, as set forth in the Corporation's audited
financial statement for such year, subject to paragraph (d).
(iii) "Performance Period" means January 1-December 31, 1998, January
1-December 31, 1999 or January 1-December 31, 2000, as the context
requires.
(iv) "Plan" means the 1993 Stock Award and Incentive Plan of the
Corporation.
(v) Terms defined in the Plan and used, but not defined, in this rule
shall have the respective meanings ascribed thereto in the Plan.
-64-
<PAGE>
(b) Payout Targets - Performance Stock Awards. Subject to paragraph (e)
-----------------------------------------
below ("Deferred Stock Awards"), and subject to the terms of the
Performance Stock Award and Performance Cash Award Grant Letters,
restrictions on Performance Stock Awards shall lapse if and to the extent
that the EPS performance targets set forth in a separate document
(hereinafter called the "Target Document") entitled "Performance Stock/Cash
Awards - 1998, 1999, 2000 Performance Periods - Executive Officers" are
met. The Target Document shall be identified by the signature of the
Secretary to the Committee and filed with the records of the Committee.
(c) Payout Targets - Performance Cash Awards. Subject to paragraph (e)
----------------------------------------
below, and subject to the terms of the Performance Stock Award and
Performance Cash Award grant letters, recipients of Performance Stock
Awards shall be paid cash bonuses, called Performance Cash Awards, which
shall be in amounts awarded by the Committee and shall vest at the same
time as the related Performance Stock Award becomes nonforfeitable, based
on attainment of EPS, Cash Flow and (for the year 2000 Performance Period)
Market Value performance criteria set forth in the Target Document. As
provided in the Target Document, under certain circumstances, the amount of
Performance Cash that vests may exceed the nominal amount of the award, as
set forth in the Grant Letter.
(d) Exclusions. In computing EPS for the 1998 Performance Periods, there
----------
shall be excluded (i) the impact of accounting changes mandated by
Generally Accepted Accounting Principles, (ii) restatement of prior period
financial results, and (iii) the impact of "extraordinary items" (as
defined in Generally Accepted Accounting Principles).
(e) Deferred Stock Awards. (i) The Committee may, prior to the beginning of
---------------------
the Performance Period with respect to a Performance Stock Award, offer a
Participant who has been granted such an award the opportunity to elect to
defer all or a specified portion of such award in the form of a Deferred
Stock Award. If a Participant elects deferral in accordance with the
procedures established by the Committee, then, effective as of the date on
which the related award of Performance Stock is to vest, the total award
(or such lesser percentage of such total award as shall have been elected
by the Participant and accepted by the Committee) shall be forfeited, and
the Participant will be issued instead a Deferred Stock Award, as defined
in Section 6(h) of the Plan, equal to the number of shares of Performance
Stock so forfeited. Such Deferred Stock Award shall accrue
-65-
<PAGE>
Dividend Equivalents which will be deferred in the form of additional
Deferred Stock based on the Closing Price of the Corporation's Common Stock
in the New York Stock Exchange Consolidated Tape on the date on which the
related dividend is paid on the Corporation's Common Stock.
(ii) Deferred Stock resulting from deferral of Dividend Equivalents will
likewise bear Dividend Equivalents.
(f) Executive Committee. The Executive Committee is authorized to set (and
-------------------
change) performance targets for Performance Stock and Performance Cash
granted to employees who are not "Executive Officers" of the Corporation;
provided that such performance targets shall be reported to the Committee.
The targets so reported shall be deemed approved and ratified by the
Committee, unless the Committee rejects them at its first meeting following
such report.
(g) Additional Bonuses. The foregoing long-term incentive awards are not
------------------
intended to be exclusive, and the Corporation may grant any other
additional forms of compensation, including but not limited to annual
incentive compensation, stock options, special recognition awards, stock
appreciation rights or any other form of compensation whatsoever.
-66-
<PAGE>
1/26/98
Exhibit 10.13(l)
CYTEC EXECUTIVE SUPPLEMENTAL EMPLOYEES' RETIREMENT PLAN
-------------------------------------------------------
(As amended January 26, 1998)
Effective as of January 1, 1994, Cytec Industries Inc. (the "Company")
hereby establishes the Cytec Executive Supplemental Employees' Retirement Plan
(the "Plan"). The Plan is intended to constitute an unfunded pension plan
maintained primarily for a select group of management or highly compensated
employees which is exempt from Parts 2, 3, and 4 of Title I of the Employee
Retirement Income Security Act of 1974, as amended. The Plan is not a qualified
plan under the Code and benefits are paid by or on behalf of the Company.
The Plan replaces the American Cyanamid Company and Subsidiaries
Supplemental Employees' Retirement Plan (the "Cyanamid SERP") for those
employees of the Company who were covered by the Cyanamid SERP on December 31,
1993. Pursuant to the Transfer and Distribution Agreement dated December 17,
1993 between American Cyanamid Company and Cytec Industries Inc., the Plan
assumes the liabilities such attributable to employees of the Company covered by
the Cyanamid SERP on December 31, 1993 who
-67-
<PAGE>
became employees of the Company on January 1, 1994.
-68-
<PAGE>
ARTICLE I
Definitions
1.1 "Actuarial Equivalent" means an amount or benefit of equal value based
--------------------
on the interest rate used by the Pension Benefit Guaranty Corporation for
purposes of determining the present value of lump sum distributions on plan
terminations, as the same is in effect from time to time, and the 1971 TPF&C
Forecast Mortality Table (or, at the discretion of the Pension Administration
Committee, the most recent version of such table) with employee ages set back
one year and beneficiary ages set back five years.
1.2 "Company" means Cytec Industries Inc.
-------
1.3 "Board of Directors" means the Board of Directors of Cytec Industries
------------------
Inc.
1.4 "Cause" means (a) the willful and continued failure by a Member
-----
substantially to perform his duties with the Employer (other than any such
failure resulting from his incapacity due to physical or mental illness) after a
demand for substantial performance is delivered to him by the Employer which
specifically identifies the manner in which the Employer believes that he has
not substantially performed his duties, or (b) the willful engaging by him in
conduct demonstrably injurious to the Employer. For purposes of this
definition, no act, or failure to act, on the part of the Member shall be
considered "willful" unless done, or omitted to be done, by him without
reasonable
-69-
<PAGE>
belief that his action or omission was in the best interests of the Employer and
was lawful.
1.5 "Change in Control" has the same meaning as under the Employees'
-----------------
Retirement Plan.
1.6 "Compensation Committee" means the Compensation and Management
----------------------
Development Committee of the Board of Directors.
1.7 "Compensation" means base compensation as defined in the Employees'
------------
Retirement Plan plus actual cash bonuses paid to a Member pursuant to the IC
Plan up to 1/3 of base Compensation, except to the extent Section 3.1 requires
use of Target ICP, without consideration of the limit on compensation under
Section 401(a)(17) of the Internal Revenue Code of 1986, as amended, and
including all Compensation which would have otherwise been paid but for the fact
that receipt is deferred to a subsequent year; provided, however, that deferred
Compensation paid in a subsequent year shall not again be included as
Compensation for purposes of computing benefits hereunder and; provided further
that for purposes of determining Compensation for the year of a Member's
termination of employment, for the year that the Member commences Plan Benefits
on account of Total and Permanent Disability, and for any projected Years of
Service, reference to a Member's "salary or wages" (in Section 1.14 of the
Employees' Retirement Plan) at September 1 or at the "prior September 1" shall
be deemed to refer, instead, to a Member's final salary rate immediately prior
to termination of employment.
1.8 "Cyanamid Excess Plan" means the American Cyanamid Company and
--------------------
Subsidiaries ERISA Excess Retirement Plan as in effect on December 31, 1993.
-70-
<PAGE>
1.9 "Cyanamid SERP" means the American Cyanamid Company and Subsidiaries
-------------
Supplemental Employees Retirement Plan as in effect on December 31, 1993.
1.10 "Eligible Employee" means any officer or other key employee employed
-----------------
by an Employer who is a participant in the Employees' Retirement Plan and has at
least ten Years of Service.
1.11 "Employees' Retirement Plan" means the Cytec Salaried and
--------------------------
Nonbargaining Employees' Retirement Plan, as amended from time to time.
1.12 "Employer" means the Company, D Aircraft Products, Inc., Cytec
--------
Fiberite Inc., any successor thereto, and any of the Company's subsidiaries
which adopts the Plan with the consent of the Board of Directors.
1.13 "Excess Plan" means the Cytec Excess Retirement Benefit Plan.
-----------
1.14 "Executive Committee" means the Executive Committee of the Company as
-------------------
provided for in the resolutions adopted by the Board of Directors.
1.15 "Good Reason" has the same meaning as under the Executive Income
-----------
Continuity Plan.
1.16 "Grandfathered Participant" means an Eligible Employee included on the
-------------------------
Grandfathered Participant Schedule adopted by the Compensation Committee who (a)
had an accrued benefit under the Cyanamid SERP on December 31, 1993, or (b) the
Compensation Committee elects to grandfather status and grants an accrued
benefit under this Plan equal to the benefit the Eligible Employee would have
had under the Cyanamid SERP on December 31, 1993 if the Eligible Employee had
been a member of the Cyanamid
-71-
<PAGE>
SERP on such date.
1.17 "IC Plan" means the existing system of annual cash bonuses payable to
-------
Company employees pursuant to which annual target bonuses are established based
upon job levels and payments of bonuses as a percentage of such targets are made
based upon Company, business group and individual performance.
1.18 "Member" means an Eligible Employee who becomes a Member pursuant to
------
Article II.
1.19 "Normal Retirement Date" means the Normal Retirement Date as defined
----------------------
in the Employees' Retirement Plan.
1.20 "Officer" means the Chairman, any Vice Chairman, President, and any
-------
Vice President, Treasurer and Controller of Cytec Industries Inc. chosen by its
Board of Directors.
1.21 "Past Service Plan" means the Cytec Past Service Retirement Plan.
-----------------
1.22 "Pension Administration Committee" means the Pension Administration
--------------------------------
Committee created by the Board of Directors, and any successor thereto.
1.23 "Pension Plan Benefit" means the aggregate annual retirement benefit
--------------------
payable to or on account of a Member from the Retirement Plans.
1.24 "Plan" means this Cytec Executive Supplemental Employees' Retirement
----
Plan, as set forth herein, as amended from time to time.
1.25 "Plan Benefit" means the amount of a Member's annual retirement
------------
benefit computed in accordance with the terms of this Plan.
1.26 "Plan Year" means each twelve (12) consecutive month
---------
-72-
<PAGE>
period commencing each January 1 and ending on the following December 31.
1.27 "Retirement Plans" means the Past Service Plan and the Employees'
----------------
Retirement Plan.
1.28 "SERP" means the Cytec Supplemental Employees' Retirement Plan.
----
1.29 "Special Change in Control" shall have the same meaning as "Change in
-------------------------
Control", except that the reference to "20%" in subsection (i) of the definition
of "Change in Control" in the Employees' Retirement Plan shall be replaced with
"50%".
1.30 "Target ICP" shall mean target incentive compensation under the IC
----------
Plan applicable to the job level of such Member as of the date the Member
retires, irrespective of the amount, if any, of such compensation actually
received by the Member.
1.31 "Total and Permanent Disability" means that a Member has been found
------------------------------
Totally and Permanently Disabled under the Past Service Plan and/or the
Employees' Retirement Plan.
1.32 "Years of Service" means Years of Service as defined under the
----------------
Employees' Retirement Plan, which includes Years of Service credited for
purposes of the Past Service Plan.
1.33 For purposes of this Plan, unless the context requires otherwise, the
masculine includes the feminine, the singular the plural, and vice-versa. Any
reference to a "Section" or "Article" shall mean the indicated section or
article of this Plan unless otherwise specified.
-73-
<PAGE>
ARTICLE II
Participation
2.1 Election
--------
An Eligible Employee will become a Member effective as of the date the
Compensation Committee approves the election of the Eligible Employee to
participate in the Plan. A Grandfathered Participant will become a Member
effective as of the date the Compensation Committee approves his election to
Grandfathered Participant status; provided, however, a Grandfathered Participant
-------- -------
will not accrue any benefits under this Plan in excess of those set forth on the
Grandfathered Participant Schedule. If the Compensation Committee approves the
election of a Grandfathered Participant to participate in the Plan as a full
Member, the Grandfathered Participant shall cease to be a Grandfathered
Participant and shall not be entitled to the benefit set forth on the
Grandfathered Participant Schedule, but shall instead accrue benefits in
accordance with the formula set forth in Section 3.1 for Members who are not
Grandfathered Participants.
2.2 Change in Control
-----------------
Upon the occurrence of a Change in Control, each Officer (including an
Officer who has not yet completed ten (10) Years of Service) shall become,
automatically, a full Member, and any Officer who was previously a Grandfathered
Participant shall cease to be a Grandfathered Participant and shall be entitled
to the Plan Benefit under Section 3.1 to Members who are not Grandfathered
Participants.
2.3 Continuance of Participation
----------------------------
After an individual becomes a Member of this Plan, his
-74-
<PAGE>
membership shall continue until his death, the termination by the Member of his
employment other than by retirement hereunder, the termination by the Company of
his employment for Cause, or the date his Employer ceases to be a member of the
controlled group of corporations which includes the Company; provided that after
a Change in Control his membership shall continue until his death or until the
termination of his employment for Cause.
ARTICLE III
Plan Benefit
3.1 Amount of Plan Benefit
----------------------
The amount of a Member's Plan Benefit shall be equal to A plus B plus C,
except that a Member who is only a Grandfathered Participant shall be entitled
only to the Plan Benefit specified in D, as follows:
A. 1.33% x the Member's Compensation for each Year of Service after
December 31, 1993, including Target ICP for those years that
Target ICP exceeded 1/3 base Compensation and which is in excess
of the amount payable under Section 3.1(b)(2) of the Employees'
Retirement Plan and under the provisions of the Excess Plan and
the SERP which provide for the related excess and supplemental
benefits; plus
B. 1.33% x the number of projected Years of Service to age 65 (not
to exceed 5) x the Member's final year of Compensation, including
Target ICP; plus
C. 1.67% x years of Service credited under the American Cyanamid
Company Employees' Retirement Plan as of December 31, 1993 x
final average Compensation including Target ICP, where final
average Compensation equals
-75-
<PAGE>
the Member's average annual Compensation including Target ICP
based on the three calendar years out of the last ten calendar
years prior to January 1, 2004 which yields the highest average;
minus the sum of the Member's accrued benefits under the Past
Service Plan and under the "roll-up" formula of Section 3.1(b)(1)
of the Employees' Retirement Plan (including any portion of such
"roll-up" benefit which is payable under the Excess Plan and/or
the SERP), before Social Security offset; or
D. In the case of a Member who is only a Grandfathered Participant,
the Grandfathered Participant's accrued benefit, if any, as
reflected on the Grandfathered Participant Schedule.
There is no reduction under paragraphs A, B, C or D above for early
commencement for benefits commencing on or after a Member's attainment of age 60
or commencing at any earlier date if a Member's employment is terminated within
two years after a "Change in Control" as defined in the Employees' Retirement
Plan; provided that such Member's employment is terminated either (i) by the
--------
Employer or (ii) by the Member for Good Reason. The amounts payable pursuant to
paragraphs A, B, C or D are subject to reduction for commencement prior to age
60 in accordance with the terms of the Employees' Retirement Plan, except as
provided in the prior sentence in the case of a Change in Control, or unless the
Committee, in its discretion, decides not to apply the early retirement
reduction factors to all or any component of the Member's benefit.
For purposes of preventing a reduction for early commencement of benefits
when and as provided above, there shall
-76-
<PAGE>
be added to the amounts payable to a Member (other than a Grandfathered
Participant) under paragraph A, B, or C above, or to the amounts payable to a
Grandfathered Participant under Paragraph D, above, respectively, the amount of
any reduction for early commencement in such Member's benefits under the related
provisions of the Past Service Plan, the Employees' Retirement Plan, the Excess
Plan and the SERP, as the case may be, which occurs at an age where such a
reduction does not occur under this Section 3.1.
For purposes of Paragraphs A, B and C above, a Member shall have five
projected Years of Service (except that service shall not be projected beyond
age 65), except that prior to a "Change in Control", in the case of a Member who
is an executive officer of the Company at the time of his retirement, the
Compensation Committee may, in its discretion, decrease the number of projected
Years of Service to be taken into account, and in the case of any other Member,
the Executive Committee may, in its discretion, decrease the number of projected
Years of Service to be taken into account.
3.2 Benefits Upon Reemployment
--------------------------
If a Member is rehired after he is entitled to a Plan Benefit, his Plan
Benefit shall not be paid during such period of reemployment prior to Normal
Retirement Date, but shall commence or resume not sooner than the first day of
the month following his subsequent retirement or separation and the Plan Benefit
payable after his subsequent retirement or separation shall be the benefits
earlier applicable, plus any additional benefits computed in accordance with
Section 3.1 insofar as additional
-77-
<PAGE>
employment entitled him to additional benefits.
3.3 Total and Permanent Disability Benefit
--------------------------------------
An Officer who ceases active employment as a result of Total and Permanent
Disability shall automatically become a Member hereunder. A Member who ceases
active employment as a result of Total and Permanent Disability shall be
entitled to a Plan Benefit computed in accordance with Section 3.1(A), (B), and
(C) if applicable, reduced by the amount of any loss-of-time payments to which
the Member might be entitled under workers' compensation laws, and excluding any
portion of a Plan Benefit based on projected Years of Service unless approved by
the Committee or after a Change in Control. Plan Benefits hereunder shall not
be reduced on account of early commencement. The Plan Benefit under this
Section 3.3 shall be paid beginning at the same time and in the same form as the
Member's disability retirement benefit under the Employees' Retirement Plan;
provided, however, that upon the later of the Member's (i) date of retirement or
(ii) the first day of the month following the Member's attainment of age 60, the
Member may select an optional form of payment as set forth in Section 6.2 of
this Plan.
ARTICLE IV
Vesting
A Member's Plan Benefit shall be fully vested at all times; provided,
however, that Plan Benefits hereunder are subject to divestment and shall be
forfeited if the Member's employment with the Employer is terminated for Cause.
-78-
<PAGE>
ARTICLE V
Death Benefits
5.1 Standard Death Benefit
----------------------
A Member may elect any preretirement survivor annuity option pursuant to
Article VII of the Employees' Retirement Plan. If a Member does not make a
separate preretirement annuity election under this Plan, the preretirement
survivor annuity election of the Member under the Employees' Retirement Plan
shall determine how the Plan Benefit hereunder is paid in the event of the
Member's death prior to retirement.
If a Member dies prior to retiring and at such time has a preretirement
survivor annuity election in effect under this Plan, (or under the Employees'
Retirement Plan if no election is made under this Plan), the Member's surviving
spouse or contingent annuitant as designated in the preretirement survivor
annuity election shall receive a benefit calculated pursuant to Section 3.1
adjusted in accordance with the option elected by the Member, as if such Member
had retired on the date of his death (irrespective of whether such Member was
eligible to retire on such date) and had survived to the first day of the month
immediately following his 60th birthday (if such date is subsequent to his
actual date of death).
5.2 Special Death Benefit
---------------------
If a Grandfathered Participant, an Officer or an Eligible Employee
designated by the Compensation Committee or the Executive Committee as eligible
for benefits pursuant to this Section dies, and if, on the date of the death of
such Employee, (i) the sum of his age and Years of Service under the Employees'
-79-
<PAGE>
Retirement Plan equal 65, (ii) there is in effect with respect to such Employee
a payment option under the Employees' Retirement Plan pursuant to which payments
are to be made, on account of the death of such Employee while an Employee, to
the surviving spouse of such Employee, and (iii) such spouse survives such
Employee, there shall be payable to such surviving spouse a benefit calculated
in accordance with Section 3.1 as if the Employee had elected a joint and 50%
survivor annuity option under the Employees' Retirement Plan, had retired on the
date of his death (irrespective of whether such Employee was eligible to retire
on such date) and had survived to the first day of the month immediately
following his 60th birthday (if such date is subsequent to his actual date of
death).
ARTICLE VI
Form and Time of Payment
6.1 Time of Payment
---------------
A Member's Plan Benefit payable under Sections 3.1 or 3.2 of this Plan will
be paid beginning at the same time as the Member's Pension Plan Benefit under
the Employees' Retirement Plan, except as provided in Section 6.3. A Member may
retire under this Plan on the first day of any month following the date he
becomes a Member, provided that his employment with the Employer has been
terminated for other than Cause. Except as provided in Section 6.3, payment of
the Member's Plan Benefit shall commence on the later of (i) the date of his
retirement, or (ii) the first day of the month following his 60th birthday (55th
birthday if the Member's employment is terminated within two years after a
Change in
-80-
<PAGE>
Control, either by the Member for Good Reason or by the Employer) or such
earlier date (but not prior to attainment of age 55) as shall have been approved
by the Compensation Committee for any Member who is an executive officer of the
Company at any time during the calendar year in which he retires or by the
Executive Committee for any other Member.
6.2 Form of Payment
---------------
Except as provided in Section 6.3, a Member may elect to have his Plan
Benefit paid in any of the optional forms offered under Article VI of the
Employees' Retirement Plan. For such purpose, the Member may designate a
different form of payment, joint annuitant and/or beneficiary under this Plan
than under the Employees' Retirement Plan. The amount of the Plan Benefit shall
be adjusted and determined in accordance with those provisions of the Employees'
Retirement Plan governing optional forms.
6.3 Special Change in Control
-------------------------
If there occurs a Special Change in Control, then notwithstanding any
election hereunder or under the Employees' Retirement Plan, the Company shall
pay forthwith to the Member in a single lump sum an amount equal to the full
amount of the Actuarial Equivalent as of the date of such payment of such
Member's (i) Plan Benefit hereunder, (ii) SERP Benefit under the SERP, and (iii)
Excess Benefit under the Excess Plan, such payments under clause (ii) and (iii)
being made in consideration of the relinquishment by the Member of the related
benefits under the SERP and the Excess Plan. Notwithstanding Section 1.1 of
this Plan, or of the SERP or of the Excess Plan, as the case may be, "Actuarial
Equivalent," for purposes of this Section 6.3 shall
-81-
<PAGE>
be based on a single life using (A) an interest rate (on the day preceding the
Member's last day of employment) equal to sixty (60%) percent of the average of
(i) the 10-year Treasury Bond yield plus eight-tenths of one percent per annum,
and (ii) the 30-year Treasury Bond yield plus 1.5% per annum; and (B) the
mortality table (including the set back of ages) specified in Section 1.1.
ARTICLE VII
Administration
7.1 Pension Administration Committee
--------------------------------
The Pension Administration Committee shall supervise the daily management
and administration of the Plan. The members of the Pension Administration
Committee shall serve without compensation.
7.2 Responsibilities and Powers of the Pension Administration Committee and
-----------------------------------------------------------------------
Compensation Committee
- ----------------------
(a) The Pension Administration Committee shall have the responsibility:
(i) To administer the Plan in accordance with the terms hereof, and to
exercise all powers specifically conferred upon the Pension Administration
Committee hereby or necessary to carry out the provisions thereof; and
(ii) To keep all records relating to Members of the Plan and such other
records as are necessary for proper operation of the Plan.
(b) The Compensation Committee shall be responsible for construing this
Plan, which construction shall be conclusive, correcting any defects, supplying
omissions, and reconciling inconsistencies to the extent necessary to effectuate
the Plan.
7.3 Operation of the Pension Administration Committee
-------------------------------------------------
-82-
<PAGE>
In carrying out the Pension Administration Committee's functions hereunder:
(a) The Pension Administration Committee may adopt rules and regulations
necessary for the administration of the Plan and which are consistent with the
provisions hereof.
(b) All acts and decisions of the Pension Administration Committee shall be
approved by a majority of the members of the Pension Administration Committee
and shall apply uniformly to all Members in like circumstances. Written records
shall be kept of all acts and decisions.
(c) The Pension Administration Committee may authorize one or more of its
members to act on its behalf. The Pension Administration Committee may also
delegate, in writing, any of its responsibilities and powers to an individual(s)
who is not a Pension Administration Committee member.
(d) The Pension Administration Committee shall have the right to hire, at
the expense of the Employer, such professional assistants and consultants as it,
in its sole discretion, deems necessary or advisable, including, but not limited
to, accountants, actuaries, consultants, counsel and such clerical assistance as
is necessary for proper discharge of its duties.
7.4 Indemnification
---------------
In addition to any other indemnification that a fiduciary, including but
not limited to a member of the Pension Administration Committee, the
Compensation Committee or the Executive Committee, is entitled to, the Employer
shall indemnify such fiduciary from all claims for liability, loss or damage
(including payment of expenses in connection with defense against
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such claim) arising from any act or failure to act which constitutes a breach of
such individual's fiduciary responsibilities with respect to this Plan under any
aspects of the law.
ARTICLE VIII
Miscellaneous
8.1 Benefits Payable by the Employer
--------------------------------
All benefits payable under this Plan constitute an unfunded obligation of
the Employer. Payments shall be made, as due, from the general funds of the
Employer. The Employer, at its option, may maintain one or more bookkeeping
reserve accounts to reflect its obligations under the Plan and may make such
investments as it may deem desirable to assist it in meeting with obligations.
Nothing contained in this Section 8.1 shall limit the ability of the Employer to
pay benefits hereunder through a Rabbi Trust. Any such investments shall be
assets of the Employer subject to claims of its general creditors. No person
eligible for a benefit under this Plan shall have any right, title to interest
in any such investments.
8.2 Amendment or Termination
------------------------
(a) The Board of Directors reserves the right to amend, modify, or restate
or terminate the Plan; provided, however, that no such action by the Board of
Directors shall reduce a Member's Plan Benefit accrued as of the time thereof.
The provisions of this Section prohibiting an action by the Board of Directors
which would reduce a Member's accrued Plan Benefit cannot be amended without the
consent of all Members (including those who
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have retired). Any amendment to the Plan shall be made in writing by the Board
of Directors, with or without a meeting, or shall be made in writing by the
Pension Administration Committee, the Compensation Committee, or the Executive
Committee, to the extent that Board of Directors has specifically delegated the
authority to make such amendment to the Plan the Pension Administration
Committee, the Compensation Committee or the Executive Committee.
(b) If the Plan is terminated, a determination shall be made of each
Member's Plan Benefit as of the Plan termination date (determined in accordance
with Section 8.2(a)). The amount of such benefits shall be payable to the
Member at the time it would have been payable under Article VI if the Plan had
not been terminated. No interest shall be credited on a Plan Benefit.
8.3 Status of Employment
--------------------
Nothing herein contained shall be construed as conferring any rights upon
any Member or any person for a continuation of employment, nor shall it be
construed as limiting in any way the right of the Employer to discharge any
Member or to treat him without regard to the effect which such treatment might
have upon him as a Member of the Plan.
8.4 Payments to Minors and Incompetents
-----------------------------------
If a Member or beneficiary entitled to receive any benefits hereunder is a
minor or is deemed by the Pension Administration Committee or is adjudged to be
legally incapable of giving valid receipt and discharge for such benefits, they
will be paid to the duly appointed guardian of such minor or incompetent or to
such other legally appointed person as the Pension Administration
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Committee might designate. Such payment shall, to the extent made, be deemed a
complete discharge of any liability for such payment under the Plan.
8.5 Authorized Payments
-------------------
The Pension Administration Committee may at any time and from time to time
require, as a condition precedent to making or authorizing the payment of any
benefit hereunder, evidence of the prospective payee's right to receive such
payment. Without limiting the generality of the foregoing, the Pension
Administration Committee may require evidence of the date of birth of any
Member, contingent annuitant or beneficiary, or of survival of a contingent
annuitant or beneficiary.
8.6 Inalienability of Benefits
--------------------------
The right of any person to any benefit or payment under the Plan shall not
be subject to voluntary or involuntary transfer, alienation or assignment, and,
to the fullest extent permitted by law, shall not be subject to attachment,
execution, garnishment, sequestration or other legal or equitable process. In
the event a person who is receiving or is entitled to receive benefits under the
Plan attempts to assign, transfer or dispose of such right, or if an attempt is
made to subject said right to such process, such assignment, transfer or
disposition shall be null and void.
8.7 Adjustment of Benefits
----------------------
If the date of birth or other data deemed by the Pension Administration
Committee to be vital, with respect to any Member, contingent annuitant or
beneficiary shall be misstated, the Pension Administration Committee may limit
the amount and date of
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payment of benefits to any such person, his contingent annuitant and/or other
beneficiary (whether or not such person shall have theretofore retired in
accordance with the Plan) to the reduced benefits which would be payable in
accordance with the correct information. In such case, payments of benefits made
subsequent to the date of discovery of any such misstatement shall be adjusted
for any excess or deficiency (based upon the correct facts) in the amount of
benefits theretofore paid to such person, his contingent annuitant and/or other
beneficiary.
8.8 Commuting of Benefits
---------------------
Notwithstanding any other provision of the Plan, the Pension Administration
Committee may, in its sole discretion, commute into one or more payments the
Plan Benefit of any Member (i) the present value of which, calculated by using
the interest rate then used by the Pension Benefit Guaranty Corporation for
purposes of determining the present value of the lump sum distribution on plan
terminations, is not more than $3,500, or (ii) to any Member's contingent
annuitant or other beneficiary upon the request of and the showing of need by
such contingent annuitant or other beneficiary.
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8.9 Governing Law
-------------
Except to the extent pre-empted by federal law, the provisions of the Plan
will be construed according to the laws of the State of New Jersey.
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Exhibit 10.13(n)
CYTEC SUPPLEMENTAL SAVINGS AND PROFIT SHARING PLAN
--------------------------------------------------
(As amended May 13, 1996 and December 8, 1997)
Effective as of November 1, 1994, Cytec Industries Inc. (the "Company")
hereby establishes the Cytec Supplemental Savings and Profit Sharing Plan. The
Cytec Supplemental Savings and Profit Sharing Plan is intended to constitute an
unfunded pension plan maintained primarily for a select group of management or
highly compensated employees which is exempt from Parts 2, 3, and 4 of Title I
of the Employee Retirement Income Security Act of 1974, as amended. The purpose
of the Cytec Supplemental Savings and Profit Sharing Plan is to provide certain
participants in the Cytec Employees' Savings and Profit Sharing Plan whose
compensation exceeds the limit of Section 401(a)(17) of the Internal Revenue
Code of 1986, as amended, with the ability to receive the full employer matching
contribution and profit sharing contribution which would otherwise be limited by
the maximum compensation cap or the limit on annual additions. The Cytec
Supplemental Savings and Profit Sharing Plan is not a qualified plan under the
Code and benefits are paid by or on behalf of the Company.
ARTICLE I
Definitions
1.1 "Account Balance" means the sum of the Member's salary deferrals,
-----------------
matching contributions, profit sharing contributions and interest credited
thereon in accordance with the terms of this Plan.
1.2 "Administrator" means the Vice President of Employee Resources of
---------------
the Company, or any other person or committee selected from time to time by the
Board of Directors.
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1.3 "Board of Directors" means the Board of Directors of Cytec
--------------------
Industries Inc.
1.4 "Change in Control" has the same meaning as under the Employees'
-------------------
Retirement Plan.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
------
1.6 "Company" means Cytec Industries Inc.
---------
1.7 "Compensation" means compensation as defined in the Savings Plan
--------------
without consideration of the limit on compensation under Section 401(a)(17) of
the Code.
1.8 "Eligible Employee" means any person employed by the Employer who
-------------------
is a participant in the Savings Plan and whose Compensation exceeded the limit
on compensation under Section 401(a)(17) of the Code during the calendar year.
1.9 "Employees' Retirement Plan" means the Cytec Salaried and
----------------------------
Nonbargaining Employees' Retirement Plan, as amended from time to
time.
1.10 "Employer" means the Company, D Aircraft Products, Inc., Cytec
----------
Engineered Materials Inc., any successor thereto, and any of the Company's
subsidiaries which adopts the Plan with the consent of the Board of Directors.
1.11 "Member" means an Eligible Employee who becomes a Member pursuant
--------
to Article II.
1.12 "Plan" means this Cytec Supplemental Savings and Profit Sharing
------
Plan, as set forth herein, as amended from time to time.
1.13 "Plan Year" means each twelve (12) consecutive month period
----------
commencing each January 1 and ending on the following December 31.
1.14 "Savings Plan" means the Cytec Employees' Savings and Profit
--------------
Sharing Plan, as amended from time to time.
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1.15 "Special Change in Control" shall have the same meaning as
---------------------------
"Change in Control" except that the reference to "20%" in subsection (i) of the
definition of "Change in Control" in the Employees' Retirement Plan shall be
replaced with "50%."
1.16 "Years of Service" means Years of Service as defined under
------------------
the Savings Plan.
1.17 For purposes of this Plan, unless the context requires
otherwise, the masculine includes the feminine, the singular the plural, and
vice-versa. Any reference to a "Section" or "Article" shall mean the indicated
section or article of this Plan unless otherwise specified.
ARTICLE II
Participation
2.1 Election
--------
An Eligible Employee will become a Member effective as of the date a profit
sharing contribution is credited to his account pursuant to Article IV or he
elects to defer a portion of his Compensation to this Plan pursuant to Article
III.
2.2 Continuance of Participation
----------------------------
After an Eligible Employee becomes a Member of this Plan, his membership
shall continue until his death, the termination of his employment, or the date
his Employer ceases to be a member of the controlled group of corporations which
include the Company; provided that termination of membership shall not affect
the Eligible Employee's right to be credited with any matching and profit
sharing contributions to be made with respect to his period of employment.
ARTICLE III
Savings Contributions
3.1 Deferral Election
-----------------
During the sixty day period prior to the commencement of each Plan
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Year or during the period designated by the Administrator prior to November 1,
1994, a Member may elect to defer up to 4% of his Compensation less the first 4%
of the Member's contributions to the Savings Plan for that Plan Year whether
made on a before-tax or after-tax basis. A Member may not modify his deferral
election during the Plan Year other than to revoke his election for the balance
of the Plan Year. A Member's initial deferral election shall be deemed to apply
to all succeeding calendar years until changed by the Member during a subsequent
election period.
3.2 Matching Contribution
---------------------
With respect to any Member who makes a deferral election pursuant to
Section 3.1, the Company shall credit to his account a matching contribution
equal to 75% of the amount contributed by the Member pursuant to Section 3.1.
Matching contributions under this Section shall be credited at the same time the
monthly matching contributions are contributed to the Savings Plan.
ARTICLE IV
Profit sharing Contributions
Each Eligible Employee who has not made a deferral election pursuant to
Section 3.1 and each Member shall receive a Profit Sharing Contribution equal to
the amount of the profit sharing contribution that would have been made on the
Member's behalf under the Savings Plan without respect to the limitations
imposed by the Code for that Plan Year under Sections 401(a)(17) and 415, minus
the amount actually contributed on his behalf under the Savings Plan for that
Plan Year.
ARTICLE V
Interest Credits
Any amounts credited to a Participant's Account Balance under Articles III
and IV shall be credited with interest from the date the amount is credited to
the Participant's account to the date the Member receives a
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final distribution of his Account Balance. Interest shall be computed on Account
Balances as of the last day of each calendar quarter and shall be credited as of
such dates based upon the average daily balance during the quarter and the 10
year Treasury Note rate in effect on the last business day of the quarter, plus
1%.
ARTICLE VI
Vesting
A Member's Account Balance attributable to matching and profit sharing
contributions shall vest in accordance with the rules of the Savings Plan;
provided, however, that in the event of a Change in Control a Member shall
immediately become fully vested in his Account Balances. Account Balances
attributable to a Member's salary deferrals under Section 3.1 shall be fully
vested at all times.
ARTICLE VII
Death Benefits
Upon the death of the Member, his entire Account Balance shall
become fully vested and shall be paid to his designated beneficiary. If the
Member fails to designate a beneficiary, the Account Balance shall be
distributed to the Member's estate.
ARTICLE VIII
Form and Time of Payment
8.1 Time of Payment
---------------
The Member's Account Balance shall be distributed in sixty quarterly
installments following retirement, on the final day of each calendar quarter.
Each payment shall equal the Member's Account Balance as of the end of the
applicable quarter divided by the number of installment payments remaining in
the sixty quarter period, less any applicable withholding, provided that a
shorter installment period will be utilized in order to assure that no
installment, other than the final installment, will be less
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than $1000. A Member may, by written request to the Administrator, request
acceleration of all remaining installments at any time after retirement and
prior to receipt of the last installment.
8.2 Special Change in Control
-------------------------
Notwithstanding Section 8.1, if there occurs a Special Change in Control,
the Member's Account Balance as of the date of such Special Change in Control
(or, if later, as of the date of distribution) will be distributed immediately
in a single lump sum. Such distribution will include interest, computed at the
rate set forth in Article V based on the actual proportion of the calendar
quarter completed as of the date of distribution and as if the date of
distribution were the last business day of such calendar quarter. Such
distribution shall not affect the Member's continuing membership in this Plan
under Section 2.2.
ARTICLE IX
Administration
9.1 Administrator
-------------
The Administrator shall supervise the daily management and administration
of the Plan. The Administrator shall serve without compensation.
9.2 Responsibilities and Powers of the Administrator and Compensation
---------------------------------------------------- ------------
Committee
- ---------
The Administrator shall have the responsibility:
(a) To administer the Plan in accordance with the terms hereof, and to
exercise all powers specifically conferred upon the Administrator hereby or
necessary to carry out the provisions thereof;
(b) To keep all records relating to Members of the Plan and such other
records as are necessary for proper operation of the Plan; and (c) To
construe this Plan, which construction shall be conclusive, correct any defects,
supply omissions, and reconcile inconsistencies to the extent necessary to
effectuate the Plan.
9.3 Operation of the Administrator
------------------------------
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In carrying out the Administrator's functions hereunder:
(a) The Administrator may adopt rules and regulations necessary for the
administration of the Plan and which are consistent with the provisions hereof;
(b) Written records shall be kept of all acts and decisions;
(c) The Administrator may also delegate, in writing, any of its
responsibilities and powers to an individual(s) who is not a fiduciary; and
(d) The Administrator shall have the right to hire, at the expense
of the Employer, such professional assistants and consultants as he, in his sole
discretion, deems necessary or advisable, including, but not limited to,
accountants, actuaries, consultants, counsel and such clerical assistance as is
necessary for proper discharge of his duties.
9.4 Indemnification
---------------
In addition to any other indemnification that a fiduciary, including but
not limited to the Administrator, is entitled to, the Employer shall indemnify
such fiduciary from all claims for liability, loss or damage (including payment
of expenses in connection with defense against such claim) arising from any act
or failure to act which constitutes a breach of such individual's fiduciary
responsibilities with respect to this Plan under any aspects of the law.
ARTICLE X
Miscellaneous
10.1 Benefits Payable by the Employer
--------------------------------
All benefits payable under this Plan constitute an unfunded obligation of
the Employer. Payments shall be made, as due, from the general funds of the
Employer or, if applicable, from a grantor trust established by the Employer.
The Employer, at its option, may maintain one or more bookkeeping reserve
accounts to reflect its obligations under the Plan and may make such investments
as it may deem desirable to assist it in meeting with obligations. Any such
investments shall be assets of the Employer
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subject to claims of its general creditors. No person eligible for a benefit
under this Plan shall have any right, title to interest in any such investments.
10.2 Amendment or Termination
------------------------
(a) The Board of Directors reserves the right to amend, modify, or restate
or terminate the Plan; provided, however, that no such action by the Board of
Directors shall reduce a Member's Account Balance as of the time thereof. The
provisions of this Section prohibiting an action by the Board of Directors which
would reduce a Member's Account Balance cannot be amended without the consent of
all Members (including those who have retired). Any amendment to the Plan shall
be made in writing by the Board of Directors, with or without a meeting, or
shall be made in writing by the Administrator, to the extent that Board of
Directors has specifically delegated the authority to make such amendment to the
Administrator.
(b) If the Plan is terminated, a determination shall be made of each
Member's Account Balance as of the Plan termination date (determined in
accordance with Section 10.2(a)) . The amount of such benefits shall be
immediately payable to the Member.
10.3 Status of Employment
--------------------
Nothing herein contained shall be construed as conferring any rights upon
any Member or any person for a continuation of employment, nor shall it be
construed as limiting in any way the right of the Employer to discharge any
Member or to treat him without regard to the effect which such treatment might
have upon him as a Member of the Plan.
10.4 Payments to Minors and Incompetents
-----------------------------------
If a Member or beneficiary entitled to receive any benefits hereunder is a
minor or is deemed by the Administrator or is adjudged to be legally incapable
of giving valid receipt and discharge for such benefits, they will be paid to
the duly appointed guardian of such minor or incompetent or to such other
legally appointed person as the Administrator might
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designate. Such payment shall, to the extent made, be deemed a complete
discharge of any liability for such payment under the Plan.
10.5 Inalienability of Benefits
--------------------------
The right of any person to any benefit or payment under the Plan shall not
be subject to voluntary or involuntary transfer, alienation or assignment, and,
to the fullest extent permitted by law, shall not be subject to attachment,
execution, garnishment, sequestration or other legal or equitable process. In
the event a person who is receiving or is entitled to receive benefits under the
Plan attempts to assign, transfer or dispose of such right, or if an attempt is
made to subject said right to such process, such assignment, transfer or
disposition shall be null and void.
10.6 Governing Law
-------------
Except to the extent preempted by federal law, the provisions of the Plan
will be construed according to the laws of the State of New Jersey.
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Exhibit 10.13(u)
Cytec Industries Inc.
Estate Enhancement Plan
1. PURPOSE
The purpose of the Cytec Industries Inc. Estate Enhancement Plan (the
"Plan") is to provide Officers (as defined herein) of Cytec Industries Inc.
(the "Company") insurance coverage pursuant to a split-dollar life
insurance arrangement.
2. DEFINITIONS
For purposes of this Plan, the following terms have the meanings set forth
below:
2.01 AGREEMENT means the Agreement executed by the Participant (or
Assignee) and the Company implementing the terms of this Plan.
2.02 ALTERNATIVE DEATH BENEFIT means the death benefit payable by the
Company pursuant to a Participant's (or Assignee's) Alternative Death
Benefit Election.
2.03 ALTERNATIVE DEATH BENEFIT AMOUNT means, with respect to a
Participant, an amount that, after subtracting any Company federal,
state, and local income tax savings resulting from the deductibility
of the payment for corporate tax purposes of the Alternate Death
Benefit Amount and, after adding any Company federal, state and local
income tax costs resulting from the receipt of what otherwise would
have been the Participant's Coverage Amount, is equal to the
Participant's Coverage Amount. The Alternative Death Benefit Amount
shall be determined at the time the payment is to be made, based on
the Company's federal, state and local income tax rate (calculated at
the marginal tax rate then applicable to the Company, but net of any
federal deduction for state and local taxes) at the time of the
payment, and shall be determined by the Company.
2.04 ALTERNATIVE DEATH BENEFIT ELECTION means an election made by a
Participant or Assignee pursuant to Section 9 of the Plan.
2.05 ASSIGNEE means that person or entity designated as such in the
Agreement.
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2.06 CHANGE IN CONTROL means a Change in Control of Company, as such term
is defined in the Cytec Industries Inc. 1993 Stock Award and
Incentive Plan, as amended from time to time, or any successor plan
to such Plan.
2.07 CLOSING PRICE OF THE COMPANY'S COMMON STOCK means (i) the closing
sales price per share of Company Common Stock on the national
securities exchange on which such stock is principally traded, for
the last preceding date on which there was a sale of such stock on
such exchange (or, if there is no such preceding date, on the first
succeeding date), or (ii) if the shares of such stock are not then
listed on a national securities exchange, the average of the closing
bid and asked prices for the shares of such stock in the over-the-
counter market for the last preceding date on which there was a sale
of such stock in such market, or (iii) if the shares of such stock
are not then listed on a national securities exchange or traded in an
over-the-counter market, such value as the Committee, in its sole
discretion, shall determine.
2.08 COMMITTEE means the Compensation and Management Development Committee
of the Board of Directors of Company, or any successor thereto.
2.09 COMPANY means Cytec Industries Inc.
2.10 COMPANY DEATH BENEFIT means the portion of the Policy's death benefit
payable to Company, as provided in Section 8.
2.11 COMPENSATION means the Participant's annual bonus or Performance
Stock Awards, Performance Cash Awards, Deferred Stock Awards, or
Deferred Cash Awards under the Cytec Industries Inc. 1993 Stock Award
and Incentive Plan and Deferred Income under the Deferred
Compensation Plan.
2.12 EFFECTIVE DATE means July 17, 1997.
2.13 EMPLOYEE means an employee or former employee of the Company who is
eligible to participate in the Plan.
2.14 INSURER means, with respect to a Participant's Policy, the insurance
company issuing the Policy on the Participant's life (or on the lives
of the Participant and a Participant's spouse, in the case of a
Survivorship Policy) pursuant to the provisions of the Plan.
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2.15 OFFICER means an executive officer of the Company and also includes a
former executive officer whose participation is approved by the
Committee or the Executive Committee.
2.16 PARTICIPANT means an eligible Employee who elects to participate in
the Plan.
2.17 PARTICIPANT'S COVERAGE AMOUNT means the portion of the Policy's death
benefit payable to the beneficiary(ies) of the Participant (or
Assignee), as provided in Section 8.
2.18 POLICY means the life insurance coverage acquired on the life of the
Participant (or on the lives of the Participant and the Participant's
spouse, in the case of a Survivorship Policy) by the Company.
2.19 POLICY OWNER means the Company.
2.20 POLICY VESTING DATE means the last date on which a Participant would
forego Compensation pursuant to an election made by the Participant
to forego Compensation.
2.21 PREMIUM means, with respect to a Policy on the life of a Participant
(or the lives of a Participant and the Participant's spouse, if the
Policy is a Survivorship Policy), the amount the Company is
obligated, pursuant to the terms of the Plan, to pay to the Insurer
with respect to such Policy.
2.22 SURVIVORSHIP POLICY means a Policy insuring the lives of the
Participant and a Participant's spouse, with the death benefit
payable at the death of the last survivor of the Participant and his
or her spouse.
3. PARTICIPATION
3.01 ELIGIBILITY. All Officers of Company shall be eligible to
participate in the Plan.
3.02 ELECTION TO FOREGO COMPENSATION. As a condition of participating in
the Plan, each Participant shall be required to make an election, in
a form satisfactory to the Company, in which the Participant shall
commit to forego the receipt of a specified amount of Compensation
for such period of time as provided for in the Agreement, with such
election to remain in effect until the first to occur of: (a) the
completion of the commitment to forego Compensation (which may be
immediate in the case of an election, for example, to
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forego an existing Deferred Stock Award); or, (b) the date on which
the Participant terminates employment with the Company for any reason.
The Participant shall make such election by execution of an "Election
to Forego Compensation and Enrollment Form" prior to the Policy's
effective date. Any foregone Compensation shall, depending upon the
Participant's election, reduce the Participant's interest in amounts
that would otherwise become payable under the Cytec Industries Inc.
1993 Stock Award and Incentive Plan, the Deferred Compensation Plan
and/or the Participant's right to receive any annual bonus he might be
granted for that period. The amounts that a Participant agrees to
forego pursuant to such election, unless precluded by tax or other
laws to the contrary, shall be included in determining a Participant's
compensation for purposes of any pension benefit plans and welfare
benefit plans maintained by the Company to the same extent as if such
Compensation had not been foregone.
4. AMOUNT AND TYPE OF COVERAGE
The amount and type of coverage provided under the Policy shall be that
amount and type specified in the Agreement.
5. PAYMENT OF PREMIUMS
5.01 COMPANY PAYMENTS. The Company shall pay, pursuant to the Election to
Forego Compensation and Enrollment Form, Premiums equal to the
Compensation actually foregone by a Participant. With respect to any
foregone Compensation attributable to existing Deferred Stock Awards,
Deferred Cash Awards and/or Deferred Income, the Premiums shall be
paid no later than thirty (30) days following the receipt by the
Company of a premium bill for the Policy. With respect to any
foregone Performance Stock Awards or Performance Cash Awards, the
Premiums shall be paid no later than thirty (30) days following the
date
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such award would have vested, but for the election to forego such
Compensation, and, with respect to any Performance Stock Awards, the
amount of such Premium shall be based upon the Closing Price of the
Company's Common Stock as of such vesting date. With respect to any
foregone annual bonuses, the Premiums shall be paid no later than
thirty (30) days following the date such bonus would otherwise have
been paid, but for the election to forego such Compensation.
5.02 PARTICIPANT PAYMENTS. Unless otherwise provided in an Agreement, a
Participant (or Assignee) shall not be required to pay any portion of
the Premium due on the Policy. However, if the Participant's
Election to Forego Compensation is no longer in effect under Section
3.02 because of the Participant's termination of employment, then,
unless the termination is due to the Participant's death and the
Policy death benefit becomes payable as a result of the Participant's
death, the Participant (or Assignee or other successor in interest)
may, within sixty (60) days after the Participant's termination of
employment, elect to pay to Company as a premium payment the
difference (or some portion thereof) between the Compensation the
Participant elected to forego and the amount of Compensation actually
foregone by the Participant up to such date (hereinafter referred to
as the "Participant Special Contribution").
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5.03 TERMINATION EVENTS. Except as provided in Section 5.04, the
Company's obligation to pay Premiums with respect to a Policy shall
terminate:
a. Automatically upon the death of the Participant (or upon the
death of the survivor of the Participant and the Participant's
spouse, if the Policy is a Survivorship Policy).
b. Automatically (unless the Committee takes written action to the
contrary), if the Participant terminates employment with the
Company for any reason other than death or retirement prior to
the Policy Vesting Date.
c. Upon the mutual written agreement of the Company and Participant
(or Assignee).
5.04 IRREVOCABLE OBLIGATION. The Company's obligation to pay Policy
Premiums equal to the actually foregone Compensation shall be
irrevocable while such person is employed by Company, and shall
remain irrevocable thereafter unless the Participant terminates
employment with Company for any reason other than death or retirement
prior to the Policy Vesting Date.
6. POLICY OWNERSHIP
6.01 OWNERSHIP. The Company shall be the owner of any Policy and shall be
entitled to exercise the rights of ownership, except that the
following rights shall be exercisable by the Participant (or Assignee
if one is designated in the Agreement): (i) the right to designate
the beneficiary(ies) to receive payment of that portion of the death
benefit under such Policy equal to the Participant's Coverage Amount
unless there is an Alternative Death Benefit Election in effect; and
(ii) the right to assign any part or all of the Participant's rights
under the Policy to any person, entity or trust. The Company shall
not borrow from, hypothecate, withdraw cash value from, surrender in
whole or in part, cancel, or in any other manner encumber a Policy
without the prior written consent of the Participant (or Assignee if
one is designated in the Agreement). The Company shall not take any
other action with respect to a Policy that may reduce the
Participant's Coverage Amount without the prior written consent of
the Participant (or Assignee).
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<PAGE>
Notwithstanding the foregoing, if the Company becomes insolvent, then
notwithstanding the foregoing provisions of this Section 6.01 or any
other provision in the Plan, but subject to the foregoing limitation,
the Company's creditors shall have the right to exercise all rights
of ownership of the Policy, including, but not limited to, the right
to borrow from, hypothecate, withdraw cash value from, surrender in
whole or in part, cancel, or in any other manner encumber a Policy.
The Company shall be considered "insolvent" for purposes of this Plan
if (i) the Company is unable to pay its debts as they become due, or
(ii) the Company is subject to a pending proceeding as a debtor under
the United States Bankruptcy Code.
6.02 POSSESSION OF POLICY. The Company shall keep possession of the
Policy. The Company agrees to make the Policy available to the
Participant (or Assignee) or to the Insurer at such times, and on
such terms, as the Company determines for the sole purposes of
endorsing or filing any change of beneficiary or assignment on the
Policy.
6.03 INVESTMENT OF CASH VALUES. If the Policy provides the Policy owner
with a choice of investment funds for the cash values, the Company
shall invest the cash values in the funds selected by and in the
proportions specified by the Participant (or Assignee if one is
designated in the Agreement). The Company agrees to make any
investment election within thirty (30) days of receipt of a notice
setting forth a written investment request by the Participant (or
Assignee).
7. ADJUSTMENT OF POLICY
If the amount of Compensation actually foregone by a Participant as of the
Participant's Policy Vesting Date is less than the amount the Participant
elected to forego (either because an amount which becomes payable to a
Participant is less than anticipated by a Participant, or for any other
reason), or if the Participant terminates employment with the Company prior
to the Participant's Policy Vesting Date (unless the termination of
employment is due to the death of the Participant and the Policy death
benefit becomes payable as a result of the Participant's death), then:
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a. The Company's obligation to pay premiums with respect to a
Participant's Policy shall terminate as provided in Sections 5.03 and
5.04.
b. The Participant's obligation to forego further Compensation pursuant
to an election made under Section 3.02 shall terminate.
c. The Policy's face amount shall be reduced to an amount determined by
multiplying the initial face amount by a fraction, the numerator of
which is the amount of Premiums paid by the Company plus any
Participant Special Contribution under Section 5.02, and the
denominator of which is the total Compensation the Participant elected
to forego. The Participant (or Assignee) and the Company agree to
execute an amendment to the Agreement and to complete any forms
reasonably required by the Insurer to implement these changes.
8. DEATH BENEFIT
Upon the death of the Participant (or the death of the survivor of the
Participant and the Participant's spouse, if the Policy is a Survivorship
Policy), the death benefit under the Policy shall be divided as follows:
a. The Company shall be entitled to receive as the Company Death Benefit
an amount equal to the greater of: (i) the Policy's cash surrender
value immediately prior to the death of the Participant (or the death
of the survivor of the Participant and the Participant's spouse, if
the Policy is a Survivorship Policy) and before any surrender charges;
or (ii) the cumulative Premiums paid by the Company under the Policy.
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b. The beneficiary(ies) of the Participant (or Assignee) shall be
entitled to receive the Participant's Coverage Amount, which shall
consist of the excess, if any, of the Policy's death benefit over the
Company Death Benefit.
The Company agrees to execute an endorsement to the Policy issued to it by
the Insurer providing for the division of the Policy's death benefit in
accordance with the provisions of this Section.
Notwithstanding the provisions of this Section, if the Policy's death
benefit becomes payable while there is an Alternative Death Benefit
Election in effect pursuant to Section 9, then the entire Policy's death
benefit shall be paid to the Company.
9. ALTERNATIVE DEATH BENEFIT ELECTION
9.01 A Participant (or Assignee if one is designated in the Agreement) may
elect an Alternative Death Benefit in lieu of the insurance benefit
provided under the Plan. The Alternative Death Benefit shall be paid
by the Company from the general funds of the Company, and shall not
constitute an insurance benefit. It shall be paid by the Company to
Participant's (or Assignee's) beneficiary(ies) at the time
Participant's death benefit would have been paid (at Participant's
death for single life coverage, or at the death of the survivor of the
Participant and the Participant's spouse for survivorship coverage).
The amount of the payment shall be equal to the Alternative Death
Benefit Amount. As long as an Alternative Death Benefit Election is
in effect, the beneficiary(ies) of the Participant (or Assignee) shall
receive only the Alternative Death Benefit, and shall not be entitled
to receive any portion of any death benefits that would become payable
under the Participant's Policy, and the Participant (or Assignee)
shall cooperate with the Company in effecting a change of beneficiary
of the Participant's Policy to achieve such result, and such Alternate
Death Benefit Election shall not be effective until the change in
beneficiary has been so accomplished.
9.02 The Participant (or Assignee) shall file with the Company a
designation of beneficiary form, and the
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Company shall be fully protected in paying Alternate Death Benefit
Amount to beneficiaries in accordance with such form. In the event of
any dispute as to the right of the designated beneficiary or
beneficiaries (and others claiming by, through or under the
Participant or his spouse) to receive the Alternate Death Benefit,
without derogating the Company's protection under the prior sentence,
(i) the Company may place the Alternate Death Benefit Amount in
escrow, pending the outcome of any dispute, and (ii) the costs and
expenses of the Company in connection with such dispute, including but
not limited to the costs of any escrow and reasonable attorneys' fees,
shall be payable from such Alternate Death Benefit Amount.
10. CHANGE IN CONTROL
If there is a Change in Control:
a. the Plan and the Company's obligation to pay Policy Premiums hereunder
equal to a Participant's foregone Compensation shall become irrevocable
for all Participants in the Plan at the time of the Change in Control;
and
b. the Company immediately shall transfer the ownership of all
Participants' Policies to an irrevocable trust to: (i) pay any Premiums
projected to be payable on all Policies after the Change in Control and
(ii) pay any Alternative Death Benefit that becomes payable under
Section 9 of this Plan.
The occurrence of a Change in Control shall not preclude a Participant (or
Assignee) from thereafter making or revoking an Alternative Death Benefit
Election.
Notwithstanding the creation and funding of an irrevocable trust in
accordance with the provisions of this Section, the Company or its
successor shall continue to be responsible for the Premium costs associated
with the Participants' Policies (to the extent set forth herein) and for
any Alternative Death Benefits payable under Section 9 if such amounts are
not paid by the trust for any reason, or if the trust's assets become
insufficient to pay any required amounts.
11. COMPANY DEFAULT
11.01 COMPANY DEFAULT. A Company Default shall be
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deemed to have occurred with respect to a Policy if the Company fails
to pay a Premium on the Policy as required under the terms of the
Agreement within thirty (30) days after the due date for such
Premium, or if, except pursuant to a request made by the Company's
creditors as permitted by Section 6.01, the Company processes or
attempts to process a policy loan, or a complete or partial
surrender, or a cash value withdrawal without prior written approval
from Participant (or Assignee).
11.02 RIGHTS UPON COMPANY DEFAULT. In the event of a Company Default as
described in Section 11.01, the Participant (or Assignee if one is
designated in the Agreement) shall have the right to require the
Company to transfer its interest in the Participant's Policy to the
Participant (or Assignee). The Participant (or Assignee) may
exercise this right by notifying the Company, in writing, within
sixty (60) days after the Company Default occurs. Upon receipt of
such notice, within thirty (30) days (unless such Company Default has
previously been cured), the Company shall transfer its rights in the
Policy to the Participant (or Assignee) and the Company shall
thereafter have no rights with respect to such Policy. A
Participant's (or Assignee's) failure to exercise its rights under
this Section shall not be deemed to release the Company from any of
its obligations under the Plan, and shall not preclude the
Participant (or Assignee) from seeking other remedies with respect to
the Company Default. Also, a Participant's (or Assignee's) failure
to exercise its rights under this Section will not preclude the
Participant (or Assignee) from exercising such rights upon a later
Company Default.
12. GOVERNING LAWS & NOTICES
12.01 GOVERNING LAW. This Plan shall be governed by and construed in
accordance with the substantive law of the State of New Jersey
without giving effect to the choice of law rules of the State of New
Jersey.
12.02 NOTICES. All notices hereunder shall be in writing and sent by
first class mail with postage prepaid. Any notice to the Company
shall be addressed
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<PAGE>
to the Attention of Vice President - Employee Resources at Cytec
Industries Inc., Five Garret Mountain Plaza, West Paterson, NJ 07424.
Any notice to the Participant (or Assignee) shall be addressed to the
Participant (or Assignee) at the address following such party's
signature on his or her Agreement. Any party may change its address
by giving written notice of such change to the other party pursuant
to this Section.
13. MISCELLANEOUS PROVISIONS
13.01 This Plan and any Agreement executed hereunder shall not be deemed
to constitute a contract of employment between an Employee and the
Company, or a Participant and Company, nor shall any provision
restrict the right of Company to discharge an Employee or
Participant, or to restrict the right of an Employee or Participant
to terminate employment.
13.02 The masculine pronoun includes the feminine and the singular
includes the plural where appropriate for valid construction.
13.03 In order to be eligible to participate in this Plan, the Participant
(and, in the case of a Survivorship Policy, the Participant's spouse)
shall cooperate with the Insurer by furnishing any and all
information requested by the Insurer in order to facilitate the
issuance of the policy, including furnishing such medical information
and taking such physical examinations as the Insurer may deem
necessary. In the absence of such cooperation, the Company shall
have no further obligation to the Participant to allow him or her to
participate in the Plan.
13.04 If a Participant (or a Participant's spouse, if the Policy is a
Survivorship Policy) commits suicide within two years of the
Participant's Policy's issue, or if the Participant (or Participant's
spouse, if the Policy is a Survivorship Policy) makes any material
misstatement of information or nondisclosure of medical history
pertaining to the Policy's issue and dies within two years of the
Policy's issue, then the only benefits payable to the
beneficiary(ies) of such Participant (or Assignee, where applicable)
shall be
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<PAGE>
an amount equal to the Premiums paid under the Policy, or, if less,
the amount the Company receives on cancellation of the Policy.
13.05 In the event of any inconsistency between the terms of this Plan as
described herein and the terms of any Policy purchased hereunder or
any related Agreement, the terms of such Policy or Agreement shall be
controlling as to that Participant, Assignee (if any), successor-in-
interest (if any) and the beneficiary or beneficiaries.
13.06 It is the duty of the Participant and his financial advisors to
review the terms of the Policy, to notify the Company if the terms of
the insurance and/or the issuer of the Policy are not acceptable and
to assure that the terms of the Policy conform to the provisions of
this Plan and the Agreement. Each Participant acknowledges and
agrees, on his own behalf and on behalf of his spouse, beneficiaries,
heirs, legatees, assigns, legal representatives and other successors
(collectively "Successors"), that the Company, its officers,
directors and/or employees, shall not have any responsibility for the
terms of the Policy, the solvency of the issuer of the Policy, the
performance or non-performance of the insurer, or any other condition
that may cause the funds under the Policy not to be paid as and when
contemplated by the Participant and/or his Successors; all such risks
being hereby assumed by the Participant and such successors in
consideration of the Company making this Plan available.
13.07 The Participant agrees and acknowledges that the Company shall not
be obligated to pay any Premiums in excess of amounts of Compensation
actually foregone by the Participant. Accordingly, if the Company,
acting in good faith and consistent with the terms of the Plan, has
paid Premiums in excess of the amounts actually foregone by a
Participant, or if the terms of the Participant's Policy require the
payment of any premiums in excess of amounts paid by the Company
pursuant to the Company's obligations under the Plan, the
Participant, as a condition to participation, irrevocably agrees that
the Company may deduct any
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<PAGE>
such Premium amount from other amounts legally owing to the
Participant and/or his successors, whether or not such amounts
constitute "Compensation." Any amounts so deducted by the Company
shall be considered to be a Participant Special Contribution made
pursuant to 5.02 of the Plan, except that any Policy adjustment which
has already occurred under Section 7c shall not be modified if the
change would results in an increase in the Policy face amount. The
provisions of this Section 13.07 shall apply only if a Premium is
required to be paid under the terms of the Participant's Policy, and
not merely because there is optional premium which would have been
payable in accordance with the original anticipated Policy premium
schedule.
13.08 An election by a Participant, in his Election to Forego
Compensation, to forego Compensation other than then-existing
Deferred Stock Awards, Deferred Cash Awards or Deferred Income, shall
require the prior approval of the Committee or of the Executive
Committee.
14. AMENDMENT, TERMINATION, ADMINISTRATION, AND SUCCESSORS
14.01 AMENDMENT. The Plan may be modified or amended by the Company at
any time, but an amendment which is adverse to a Participant (or
Assignee) will not apply to such Participant (or Assignee) unless
such Participant (or Assignee) consents, in writing, to the
amendment.
14.02 TERMINATION. The Company may terminate the Plan at any time, but any
such termination will not affect the rights of any Participant (or
Assignee) unless such Participant (or Assignee) consents, in writing,
to such termination.
14.03 ADMINISTRATION. This Plan shall be administered by the Committee.
The Committee, in its sole discretion, shall have the authority to
make, amend, interpret, and enforce all rules and regulations for the
administration of the Plan, and to decide or resolve all questions,
including interpretation of the Plan, as may arise in connection with
the Plan. In the administration of this Plan, the Committee may
employ agents and delegate to them or to others
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<PAGE>
(including Employees) such administrative duties as it sees fit. The
Committee may consult with counsel, who may be counsel to the
Company. The decision or action of the Committee (or its designee)
with respect to any question arising out of, or in connection with,
the administration, interpretation and application of this Plan shall
be final and conclusive and binding upon all persons having any
interest in the Plan.
14.04 SUCCESSORS. The terms and conditions of this Plan shall inure to
the benefit of and bind the Company and the Participant and their
successors, assignees (including any Assignee), and representatives.
The Company shall have the right to assign absolutely and irrevocably
its rights, title and interest in a Policy without the consent of the
Participant (or Assignee).
15. CLAIMS PROCEDURE
Any controversy or claim arising out of or relating to this Plan shall be
filed with the Committee which shall make all determinations concerning
such claim. Any decision by the Committee denying such claim shall be in
writing and shall be delivered to all parties in interest in accordance
with the notice provisions of Section 12.02 herein. Such decision shall
set forth the reasons for denial in plain language. Pertinent provisions
of the Plan shall be cited and, where appropriate, an explanation as to how
the claimant can perfect the claim will be provided. This notice of denial
of benefits will be provided within ninety (90) days of the Committee's
receipt of the claim for benefits. If the Committee fails to notify the
claimant of its decision regarding the claim, the claim shall be considered
denied, and the claimant then shall be permitted to proceed with an appeal
as provided for in this Section.
A claimant who has been completely or partially denied a benefit shall be
entitled to appeal this denial of his/her claim by filing a written
statement of his/her position with the Committee no later than sixty (60)
days after receipt of the written notification of such denial. The
Committee shall schedule an opportunity for a full and fair review of the
issue within thirty (30) days of receipt of the appeal. The decision on
review shall set forth specific reasons for the decision, and shall cite
specific references to the pertinent Plan provisions on which the decision
is based.
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<PAGE>
Following the review of any additional information submitted by the
claimant, either through the hearing process or otherwise, the Committee
shall render a decision on the review of the denied claim in the following
manner:
a. The Committee shall make its decision regarding the merits of the
denied claim within sixty (60) days following receipt of the request
for review (or within 120 days after such receipt, in a case where
there are special circumstances requiring extension of time for
reviewing the appealed claim). The Committee shall deliver the
decision to the claimant in writing. If an extension of time for
reviewing the appealed claim is required because of special
circumstances, written notice of the extension shall be furnished to
the claimant prior to the commencement of the extension. If the
decision on review is not furnished within the prescribed time, the
claim shall be deemed denied on review.
b. The decision on review shall set forth specific reasons for the
decision, and shall cite specific references to the pertinent Plan
provisions on which the decision is based.
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Cytec Industries Inc.
Estate Enhancement Plan
Agreement
An Agreement is hereby entered into between Cytec Industries Inc. (the
"Company"), and _________________ (the "Participant"), by and through
[Participant's Assignee] (the "Assignee"), to be effective ____________. The
Agreement is incident to Participant's election for coverage under the Company
Estate Enhancement Plan (the "Plan"). Assignee and Company hereby certify,
acknowledge and agree as follows:
1. Company and Assignee shall cause to be issued by the Insurer a Survivorship
Policy (the "Policy") insuring the lives of Participant and his or her
spouse pursuant to the provisions of the Plan.
2 The Policy shall be owned by Company as provided in the Plan.
3. The Policy shall be issued by ________________ with an "Option B" death
benefit and an initial face amount of $_____________.
4. The Policy's effective date shall be ________________.
5. Subject to the terms of the Plan, Company agrees to pay premiums equal to
the Participant's foregone Compensation.
6. Assignee has read and understands the provisions of the Plan, and agrees
that all terms and conditions specified in the Plan are hereby incorporated
by reference as though fully set forth herein and form a part of this
Agreement.
<TABLE>
<S> <C>
- ------------------------------------------------ ------------------------------------------------
Name of Assignee Signature of Assignee
------------------------------------------------
Date
Address of Assignee: ------------------------------------------------
------------------------------------------------
------------------------------------------------
- ------------------------------------------------ ------------------------------------------------
Name of Company Representative Signature of Company
Representative
------------------------------------------------
Date
Consent and Acknowledgment of Participant:
</TABLE>
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<PAGE>
The undersigned Participant has read and understands the terms of the Plan and
this Agreement, consents to the terms of this Agreement and the Plan, and agrees
to be bound by and subject to the terms of this Agreement to the same extent as
if Participant had been a party to this Agreement.
- ---------------------------- ---------------------------------------------
Date Signature of Participant
---------------------------------------------
Signature of Spouse (if Survivorship Policy)
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<PAGE>
Cytec Industries Inc.
Estate Enhancement Plan
Death Benefit Agreement
An Agreement is hereby entered into as of the _______ day of _______________,
1997, by and between Cytec Industries Inc. (the "Company") , and
_______________, (the "Participant").
W I T N E S S E T H T H A T:
------------------------------
WHEREAS, the Participant is an officer or former officer of the Company; and
WHEREAS, the Participant wishes to provide a death benefit for certain
beneficiaries in the event of his death; and
WHEREAS, the Company is willing to provide such death benefit in recognition of
the Participant's service as an officer or former officer of the Company; and
WHEREAS, the Participant and the Company wish to provide the terms and
conditions upon which the Company will provide such death benefit.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. TERMS. The following terms shall have the meaning specified in
------
this Section.
1.1 "Death Benefit" means an amount equal to the Equity Value of the
Insurance Policy.
1.2 "Equity Value" means the portion of the Insurance Policy death
benefit received by the Company in excess of the premiums paid by
the Company with respect to the Insurance Policy.
1.3 "Insurance Policy" means the Policy of life insurance insuring the
lives of the Insureds, which is described in Exhibit A attached
hereto.
1.4 "Participant's Beneficiary" shall mean the beneficiary selected to
receive the death benefit in accordance with Section 3 hereof.
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Section 2. DEATH BENEFIT OBLIGATION AND PAYMENT. Upon the death of the
------------------------------------
Insureds, the Company shall pay the Death Benefit to the
Participant's Beneficiary within thirty (30) days of the receipt by
the Company of the proceeds of the Insurance Policy.
SECTION 3. ELECTION OF BENEFICIARY. The Participant shall select a beneficiary
-----------------------
or beneficiaries to receive the Death Benefit by completing Exhibit
B hereto. [Once such beneficiary has been designated, such
designation is irrevocable.] The Company shall not have any
liability for making payment in accordance with such selection, all
such liability being waived by the Participant and his spouse on
behalf of their heirs, legatees, successors and assigns.
SECTION 4. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New Jersey.
SECTION 5. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the Company and the Participant, and their
respective legal representatives, executors, administrators, heirs,
beneficiaries, and permitted successors, assigns, and transferees.
SECTION 6. AMENDMENT. This Agreement may not be amended, altered or modified
---------
except by a written instrument signed by the parties hereto, or
their respective successors or assigns, and may not be otherwise
terminated excepted as provided herein.
SECTION 7. COUNTERPARTS. This Agreement may be executed simultaneously in
------------
two or more counterparts, each of which shall be deemed an original
and all of which, when taken together, constitute one and the same
document. The signature of any party to any counterpart shall be
deemed a signature to, and may be appended to, any other
counterpart.
IN WITNESS WHEREOF, the parties have signed this Agreement effective as of the
date first written above.
- ---------------------------------------------
Name of Company Representative
- --------------------------------------------- -----------------------------
Signature of Company Representative Date
- ---------------------------------------------
Name of Participant
- --------------------------------------------- -----------------------------
Signature of Participant Date
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<PAGE>
EXHIBIT A
DESCRIPTION OF INSURANCE POLICY
INSUREDS:
- ---------
INSURER POLICY NUMBER FACE AMOUNT DATE OF ISSUE
- ------------- ------------------- ----------------- -------------------
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<PAGE>
EXHIBIT B
CYTEC INDUSTRIES INC.
DEATH BENEFIT AGREEMENT
BENEFICIARY DESIGNATION FORM
All payments required to be made under Section 2 of the DEATH BENEFIT AGREEMENT
between Cytec Industries Inc. and ________________ shall be made to the
following person(s):
Name of designated beneficiary:
---------------------------------------
Address of designated beneficiary:
---------------------------------------
---------------------------------------
If the above-designated beneficiary does not survive me, the payments will be
made to the following successor beneficiary:
Name of designated beneficiary:
---------------------------------------
Address of designated beneficiary:
---------------------------------------
---------------------------------------
---------------------------------------
Signature of Participant
---------------------------------------
Date
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<PAGE>
Exhibit 12
CYTEC INDUSTRIES INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar amounts in millions)
Years Ended
December 31,
------------
1997 1996
---- ----
Earnings (loss) before income taxes 150.2 168.3
Add:
Interest on indebtedness
Net of capitalized interest 10.9 6.4
Portion of rents representative
Of the interest factor 6.4 5.4
Earnings as adjusted 167.5 180.1
Fixed charges:
Interest on indebtedness 12.5 8.0
Portion of rents representative
Of the interest factor 6.4 5.4
Fixed charges 18.9 13.4
Ratio of earnings to fixed charges 8.9 13.4
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EXHIBIT 21
CYTEC INDUSTRIES INC.
SUBSIDIARY LISTING
THE FOLLOWING IS A LISTING OF THE NAMES OF THE SUBSIDIARIES OF CYTEC INDUSTRIES
INC. AT DECEMBER 31, 1997. SUBSIDIARIES ARE 100% OWNED, UNLESS OTHERWISE
DESIGNATED.
Subsidiaries
------------
STATE OR COUNTRY
N A M E : OF ORGANIZATION
- --------- -----------------
AVIATRIX CORPORATION DELAWARE
BCC CYTEC (BELGIUM) DELAWARE
HOLDING CO.
CONAP, INC. DELAWARE
CYQUIM DE COLOMBIA DELAWARE
S.A.
CYTEC ACRYLIC FIBERS INC. DELAWARE
CYTEC AEROSPACE FAR DELAWARE
EAST CORP.
CYTEC AMMONIA INC. DELAWARE
CYTEC AUSTRALIA LIMITED DELAWARE
CYTEC AUSTRALIA HOLDINGS AUSTRALIA
PTY. LIMITED
CYTEC BREWSTER PHOSPHATES DELAWARE
INC.
CYTEC CANADA INC. ONTARIO
CYTEC COORDINATION CENTER BELGIUM
N.V.
CYTEC DE ARGENTINA DELAWARE
S.A.
CYTEC DE CHILE S.A. DELAWARE
CYTEC DE MEXICO S.A. MEXICO
DE C.V.
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<PAGE>
SUBSIDIARIES PAGE 2
--------------- ------
CYTEC DE PUERTO RICO, INC. PUERTO RICO
CYTEC DO BRASIL LTD. DELAWARE
CYTEC DO BRASIL LTDA. BRAZIL
CYTEC FIBERITE INC. DELAWARE
CYTEC FIBERITE EUROPE GMBH GERMANY
CYTEC FIBERITE LIMITED ENGLAND
CYTEC GLOBAL HOLDINGS INC. DELAWARE
CYTEC HONG KONG LIMITED HONG KONG
CYTEC INDUSTRIES B.V. NETHERLANDS
CYTEC INDUSTRIES EUROPE C.V. NETHERLANDS
CYTEC INDUSTRIES FRANCE FRANCE
S.A.R.L.
CYTEC INDUSTRIES ITALIA ITALY
S.R.L.
CYTEC MANUFACTURING B.V. NETHERLANDS
CYTEC INDUSTRIES PTE. LTD. SINGAPORE
CYTEC INDUSTRIES ENGLAND
UK LIMITED
CYTEC INTERNATIONAL BARBADOS
SALES CORP.
CYTEC INTERNATIONAL JAMAICA
SALES CORPORATION LIMITED
CYTEC JAPAN LIMITED DELAWARE
CYTEC KOREA INC. DELAWARE
CYTEC MELAMINE INC. NEW JERSEY
CYTEC METHANOL INC. DELAWARE
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<PAGE>
SUBSIDIARIES PAGE 3
--------------- ------
CYTEC MOLDING COMPOUNDS DELAWARE
INC.
CYTEC OVERSEAS CORP. DELAWARE
CYTEC PLASTICS INC. DELAWARE
CYTEC REALTY CORP. DELAWARE
CYTEC TAIWAN CORP. DELAWARE
CYTEC TECHNOLOGY CORP. DELAWARE
CYTEC UK HOLDINGS ENGLAND
LIMITED
D AIRCRAFT PRODUCTS, INC. CALIFORNIA
FIBERITE FRANCE, S.A.R.L. FRANCE
HOLLAND LP I CO. DELAWARE
MIVIDA CORPORATION DELAWARE
NETHERLANDS (CYTEC) GP INC. DELAWARE
PINEY RIVER RECOVERY DELAWARE
CORP.
QUIMICOS CYQUIM, C.A. VENEZUELA
ROTTERDAM LP II CO. DELAWARE
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<PAGE>
Exhibit 23
ACCOUNTANT'S CONSENT
--------------------
The Board of Directors
Cytec Industries Inc.:
We consent to incorporation by reference in the registration statements on Form
S-8 (Nos. 33-80710, 33-83576, 33-85666, 333-11121 and 333-45577) and in the
registration statement on Form S-3 (No. 333-3808) of Cytec Industries Inc. of
our reports dated January 28, 1998, relating to the consolidated balance sheets
of Cytec Industries and subsidiaries as of December 31, 1997 and 1996 and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1997, and the
related schedules, which reports appear in the December 31, 1997 annual report
on Form 10-K of Cytec Industries Inc.
KPMG Peat Marwick LLP
Short Hills, New Jersey
March 9, 1998
658efj.leg
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<PAGE>
Exhibit 24(a)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director or an
officer, or both, of Cytec Industries Inc., a Delaware corporation ("Cytec"),
does hereby make, constitute and appoint J. P. Cronin, D. D. Fry and E. F.
Jackman, the address of each of which is in care of Cytec, 5 Garret Mountain
Plaza, West Paterson, New Jersey 07424, and each of them, the true and lawful
attorney for the undersigned, with full power of substitution and revocation to
each for the undersigned, and in the name, place and stead of the undersigned,
to sign in any and all capacities and to file or cause to be filed, an annual
report on Form 10-K with the Securities and Exchange Commission, pursuant to the
Securities Exchange Act of 1934, as amended, and any and all amendments to such
Form 10-K, hereby giving to each of such attorneys full power to do everything
whatsoever required or necessary to be accomplished in and about the premises as
fully as the undersigned could do if personally present, hereby ratifying and
confirming all that such attorneys or substitutes or any of them shall lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has set his hand this 28 day of
January, 1998.
/s/Frederick W. Armstrong
-------------------------
Frederick W. Armstrong
-125-
<PAGE>
Exhibit 24(b)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director or an
officer, or both, of Cytec Industries Inc., a Delaware corporation ("Cytec"),
does hereby make, constitute and appoint J. P. Cronin, D. D. Fry and E. F.
Jackman, the address of each of which is in care of Cytec, 5 Garret Mountain
Plaza, West Paterson, New Jersey 07424, and each of them, the true and lawful
attorney for the undersigned, with full power of substitution and revocation to
each for the undersigned, and in the name, place and stead of the undersigned,
to sign in any and all capacities and to file or cause to be filed, an annual
report on Form 10-K with the Securities and Exchange Commission, pursuant to the
Securities Exchange Act of 1934, as amended, and any and all amendments to such
Form 10-K, hereby giving to each of such attorneys full power to do everything
whatsoever required or necessary to be accomplished in and about the premises as
fully as the undersigned could do if personally present, hereby ratifying and
confirming all that such attorneys or substitutes or any of them shall lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has set his hand this 28 day of
January, 1998.
/s/Gene A. Burns
----------------
-126-
<PAGE>
Exhibit 24(c)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director or an
officer, or both, of Cytec Industries Inc., a Delaware corporation ("Cytec"),
does hereby make, constitute and appoint J. P. Cronin, D. D. Fry and E. F.
Jackman, the address of each of which is in care of Cytec, 5 Garret Mountain
Plaza, West Paterson, New Jersey 07424, and each of them, the true and lawful
attorney for the undersigned, with full power of substitution and revocation to
each for the undersigned, and in the name, place and stead of the undersigned,
to sign in any and all capacities and to file or cause to be filed, an annual
report on Form 10-K with the Securities and Exchange Commission, pursuant to the
Securities Exchange Act of 1934, as amended, and any and all amendments to such
Form 10-K, hereby giving to each of such attorneys full power to do everything
whatsoever required or necessary to be accomplished in and about the premises as
fully as the undersigned could do if personally present, hereby ratifying and
confirming all that such attorneys or substitutes or any of them shall lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has set his hand this 28 day of
January, 1998.
/s/Louis L. Hoynes, Jr.
-----------------------
-127-
<PAGE>
Exhibit 24(d)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director or an
officer, or both, of Cytec Industries Inc., a Delaware corporation ("Cytec"),
does hereby make, constitute and appoint J. P. Cronin, D. D. Fry and E. F.
Jackman, the address of each of which is in care of Cytec, 5 Garret Mountain
Plaza, West Paterson, New Jersey 07424, and each of them, the true and lawful
attorney for the undersigned, with full power of substitution and revocation to
each for the undersigned, and in the name, place and stead of the undersigned,
to sign in any and all capacities and to file or cause to be filed, an annual
report on Form 10-K with the Securities and Exchange Commission, pursuant to the
Securities Exchange Act of 1934, as amended, and any and all amendments to such
Form 10-K, hereby giving to each of such attorneys full power to do everything
whatsoever required or necessary to be accomplished in and about the premises as
fully as the undersigned could do if personally present, hereby ratifying and
confirming all that such attorneys or substitutes or any of them shall lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has set his hand this 28 day of
January, 1998.
/s/William P. Powell
--------------------
-128-
<PAGE>
Exhibit 24(e)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director or an
officer, or both, of Cytec Industries Inc., a Delaware corporation ("Cytec"),
does hereby make, constitute and appoint J. P. Cronin, D. D. Fry and E. F.
Jackman, the address of each of which is in care of Cytec, 5 Garret Mountain
Plaza, West Paterson, New Jersey 07424, and each of them, the true and lawful
attorney for the undersigned, with full power of substitution and revocation to
each for the undersigned, and in the name, place and stead of the undersigned,
to sign in any and all capacities and to file or cause to be filed, an annual
report on Form 10-K with the Securities and Exchange Commission, pursuant to the
Securities Exchange Act of 1934, as amended, and any and all amendments to such
Form 10-K, hereby giving to each of such attorneys full power to do everything
whatsoever required or necessary to be accomplished in and about the premises as
fully as the undersigned could do if personally present, hereby ratifying and
confirming all that such attorneys or substitutes or any of them shall lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has set his hand this 20th day of
January, 1998.
/s/Jerry R. Satrum
------------------
-129-
<PAGE>
Exhibit 24(f)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director or an
officer, or both, of Cytec Industries Inc., a Delaware corporation ("Cytec"),
does hereby make, constitute and appoint J. P. Cronin, D. D. Fry and E. F.
Jackman, the address of each of which is in care of Cytec, 5 Garret Mountain
Plaza, West Paterson, New Jersey 07424, and each of them, the true and lawful
attorney for the undersigned, with full power of substitution and revocation to
each for the undersigned, and in the name, place and stead of the undersigned,
to sign in any and all capacities and to file or cause to be filed, an annual
report on Form 10-K with the Securities and Exchange Commission, pursuant to the
Securities Exchange Act of 1934, as amended, and any and all amendments to such
Form 10-K, hereby giving to each of such attorneys full power to do everything
whatsoever required or necessary to be accomplished in and about the premises as
fully as the undersigned could do if personally present, hereby ratifying and
confirming all that such attorneys or substitutes or any of them shall lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has set his hand this 9 day of
March, 1998.
/s/David Lilley
---------------
-130-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 6400
<SECURITIES> 0
<RECEIVABLES> 226900
<ALLOWANCES> 10000
<INVENTORY> 131900
<CURRENT-ASSETS> 452800
<PP&E> 1278000
<DEPRECIATION> 648300
<TOTAL-ASSETS> 1614100
<CURRENT-LIABILITIES> 375000
<BONDS> 0
0
100
<COMMON> 500
<OTHER-SE> 386800
<TOTAL-LIABILITY-AND-EQUITY> 1614100
<SALES> 1290600
<TOTAL-REVENUES> 1290600
<CGS> 930900
<TOTAL-COSTS> 1171400
<OTHER-EXPENSES> (23900)<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5700<F2>
<INCOME-PRETAX> 149700<F3>
<INCOME-TAX> 36100<F4>
<INCOME-CONTINUING> 113600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 113600
<EPS-PRIMARY> 2.50
<EPS-DILUTED> 2.39
<FN>
<F1>THIS NUMBER INCLUDES GAIN ON SALE OF BUSINESSES OF $22,300,000 FOR THE YEAR
ENDED DECEMBER 31, 1997.
<F2>THIS NUMBER REPRESENTS INTEREST (INCOME)/EXPENSE, NET
<F3>THIS NUMBER INCLUDES EQUITY IN EARNINGS OF ASSOCIATED COMPANIES OF $12,300,000
FOR THE YEAR ENDED DECEMBER 31, 1997. ALSO INCLUDES RESTRUCTURING AND OTHER
CHARGES OF $42,400,000.
<F4>THIS NUMBER INCLUDES THE REVERSAL OF THE REMAINING $24,400,000 OF THE
PREVIOUSLY ESTABLISHED TAX VALUATION ALLOWANCE.
</FN>
</TABLE>
