<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
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OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
--------------
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
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CYTEC INDUSTRIES INC.
---------------------
(Exact name of registrant as specified in its charter)
Delaware 22-3268660
------------------------ ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Five Garret Mountain Plaza
West Paterson, New Jersey 07424
--------------------------------------
(Address of principal executive offices)
973-357-3100
-------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 45,346,877 shares of Common
-------------
Stock, par value $.01 per share were outstanding at March 31, 1998.
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
INDEX
Page
Part I - Financial Information
Item 1. Consolidated Financial Statements 3
Consolidated Statements of Income 3
Consolidated Statements of Comprehensive Income 4
Consolidated Balance Sheets 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
Part II - Other Information
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 20
Item 6. Exhibits and Reports on Form 8-K 21
Exhibit Index 22
2
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. - Consolidated Financial Statements
---------------------------------
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Millions of dollars, except share and per share amounts)
Three Months
Ended
March 31,
--------------
1998 1997
------ ------
Net sales $368.2 $306.5
Manufacturing cost of sales 258.4 235.0
Selling and technical services 38.2 34.6
Research and process development 10.9 10.3
Administrative and general 12.3 11.0
Amortization of acquisition intangibles 2.2 0.2
------ ------
Earnings from operations 46.2 15.4
Other income (expense), net 2.9 24.6
Equity in earnings of associated companies 5.1 4.5
Interest expense, net 4.7 0.2
------ ------
Earnings before income taxes 49.5 44.3
Income tax provision 18.3 17.4
------ ------
Net earnings $ 31.2 $ 26.9
====== ======
Earnings per common share
Basic $ 0.69 $ 0.59
Diluted $ 0.66 $ 0.56
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Millions of dollars)
Three Months Ended
March 31,
--------------------
1998 1997
--------- ---------
Net earnings $31.2 $26.9
Other comprehensive income:
Foreign currency translation adjustments (0.3) (6.2)
----- -----
Comprehensive income $30.9 $20.7
===== =====
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
CYTEC INDUSTRIES INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions of dollars, except share and per share amounts)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1998 1997
---------- -------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 29.3 $ 6.4
Accounts receivable, less allowance for doubtful accounts
of $10.1 and $10.0 in 1998 and 1997, respectively 242.7 226.9
Inventories 135.6 131.9
Deferred income taxes 79.3 70.7
Other current assets 20.6 16.9
Total current assets ----------- --------
507.5 452.8
Equity in net assets of and advances to associated companies 145.6 141.1
Plants, equipment and facilities, at cost 1,277.5 1,278.0
Less: accumulated depreciation (646.4) (648.3)
----------- --------
Net plant investment 631.1 629.7
Acquisition intangibles,
net of accumulated amortization 291.8 295.6
Deferred income taxes 86.3 82.2
Other assets 24.3 12.7
----------- --------
$ 1,686.6 $1,614.1
=========== ========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable 107.8 $ 116.3
Accrued expenses 233.7 239.0
Income taxes payable 53.7 19.7
----------- --------
Total current liabilities 395.2 375.0
Long-term debt 343.4 324.0
Other noncurrent liabilities 523.2 527.7
Put options 10.1 --
Stockholders' equity
Preferred stock, 20,000,000 shares authorized, issued and
outstanding 4,000 shares, Series C, $.01 par value, at
liquidation value of $25 per share 0.1 0.1
Common stock, $.01 par value per share, 150,000,000 shares
authorized, issued 48,144,447 in 1998 and 48,181,264 in 1997 0.5 0.5
Additional paid-in capital 190.5 203.9
Retained earnings 362.6 331.5
Unearned compensation (4.9) (3.5)
Accumulated translation adjustments (7.2) (6.9)
Treasury stock at cost, 2,797,570 shares in 1998 and 3,044,589
shares in 1997 (126.9) (138.2)
----------- --------
Total stockholders' equity 414.7 387.4
----------- --------
$ 1,686.6 $1,614.1
=========== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions of dollars)
<TABLE>
<CAPTION>
Three Months Ended
--------------------
March 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash flows provided by (used for) operating activities
Net earnings $ 31.2 $ 26.9
Non-cash items included in net earnings:
Equity in undistributed net earnings of associated companies (5.1) (0.4)
Depreciation 19.1 18.9
Amortization 3.3 0.7
Deferred income taxes (12.9) 6.3
Gain on sale of business - (22.3)
Other (0.5) -
Changes in operating assets and liabilities
Accounts receivable (15.7) (20.0)
Inventories (3.6) 1.5
Accounts payable (8.4) (3.8)
Accrued expenses (5.4) 3.3
Income taxes payable 37.8 26.4
Other assets (9.5) (7.2)
Other liabilities (4.6) (17.3)
------ ------
Net cash flows provided by operating activities 25.7 13.0
------ ------
Cash flows provided by (used for) investing activities
Additions to plants, equipment and facilities (24.7) (14.2)
Proceeds received on sale of assets - 94.8
Change in other assets - 7.0
------ ------
Net cash flows (used for) provided by investing activities (24.7) 87.6
------ ------
Cash flows provided by (used for) financing activities
Proceeds from the exercise of stock options 2.1 2.9
Purchase of treasury stock - (11.6)
Change in long-term debt 19.4 (82.0)
0.5 -
Proceeds received on sale of put options ------ ------
22.0 (90.7)
Net cash flows provided by (used for) financing activities ------ ------
Effect of exchange rate changes on cash and cash equivalents (0.1) (0.9)
------ ------
Increase in cash and cash equivalents 22.9 9.0
Cash and cash equivalents, beginning of period 6.4 20.4
------ ------
Cash and cash equivalents, end of period $ 29.3 $ 29.4
====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
6
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of dollars, except share and per share amounts)
(1) Basis of Presentation
---------------------
The unaudited consolidated financial statements included herein have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission for reporting on Form 10-Q. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The statements should be read in
conjunction with the consolidated financial statements and notes to the
consolidated financial statements contained in the Company's 1997 Annual Report
on Form 10-K.
In the opinion of management, the consolidated financial statements included
herein reflect all adjustments necessary for a fair statement of the information
presented as of March 31, 1998 and for the three month periods ended March 31,
1998 and 1997. Such adjustments are of a normal, recurring nature. The
statement of income for the three month period ended March 31, 1998 is not
necessarily indicative of the results to be expected for the full year.
Certain reclassifications have been made to the consolidated statement of income
for the three month period ended March 31, 1997 to conform to the 1998
presentation.
(2) Acquisitions
------------
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 include all of the businesses of Fiberite, except for their
satellite materials business. The Fiberite Acquisition was accounted for under
the purchase method of accounting.
(3) Restructuring of Operations
---------------------------
Cash payments of $4.2 were made during the three months ended March 31, 1998,
related to the restructuring charges of $38.4 (pre-tax) incurred during 1997.
The reserve related to these restructurings at March 31, 1998 was $25.8. There
have been no changes in the estimated completion date of the payouts related to
the restructuring plan.
7
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of dollars, except share and per share amounts)
(4) Earnings Per Share
------------------
Basic earnings per common share excludes dilution and was computed by dividing
net earnings by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share uses the same numerator as basic while the
denominator is based on the weighted-average number of common shares outstanding
adjusted for all additional common shares that would have been outstanding if
potentially dilutive common shares had been issued.
The following represents the reconciliation of the numerators and denominators
of the basic and diluted EPS computations for net earnings for the three month
periods ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
For the Three Months Ended
March 31 1998 1997
---- ----
Weighted Avg Per Weighted Avg. Per
Income Shares Share Income Shares Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ---------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
- ---------
Net earnings $31.2 45,457,981 $0.69 $26.9 45,566,789 $0.59
Effect of dilutive securities
- -----------------------------
Options - 1,912,197 - - 2,091,567 -
Performance/Restricted stock - 42,160 - - 88,490 -
Diluted EPS
- -----------
Net earnings plus
assumed conversions $31.2 47,412,338 $0.66 $26.9 47,746,846 $0.56
</TABLE>
(5) Recently Issued Statements Of Financial Accounting Standards
------------------------------------------------------------
In February 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," which became effective for the
Company for the annual period beginning January 1, 1998. SFAS No.132 requires
additional information about the changes in the benefit obligation and fair
value of plan assets during the period, while standardizing the disclosure
requirements for pensions and other postretirement benefits. The Company will
include such disclosures in its Annual Report on Form 10-K for the year ended
December 31, 1998.
In June 1997, the Financial Accounting Standards Board released Statement No.
130, "Reporting Comprehensive Income" ("SFAS 130") and Statement No. 131,
"Disclosures About Segments of an Enterprise and Related Information" ("SFAS
131"). Both statements became effective for the Company beginning January 1,
1998. These statements require disclosure of certain components of changes in
equity and certain information about operating segments and geographic areas of
operation. The Company adopted SFAS 130 in the first quarter of 1998 (See
"Consolidated Statement of Comprehensive Income"). The Company has also adopted
SFAS 131 which does not require interim period reporting in the year of
adoption. The Company is
8
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of dollars, except share and per share amounts)
completing its evaluation of the disclosure requirements of SFAS 131 and will
begin such disclosures in its Form 10-K filing for the year ended December 31,
1998. These statements do not have any effect on the results of operations or
financial position of the Company.
(6) Inventories
-----------
Components of inventories at March 31, 1998 and December 31, 1997 were as
follows:
March 31, December 31,
1998 1997
---------- -------------
Finished goods $ 74.3 $ 77.5
Work in process 25.1 19.0
Raw materials & supplies 79.2 78.4
------ ------
178.6 174.9
Less reduction in LIFO cost (43.0) (43.0)
------ ------
$135.6 $131.9
====== ======
(7) Equity in Earnings of Associated Companies
------------------------------------------
Summarized financial information for the Company's equity in earnings of
associated companies is as follows:
Three Months
------------
Ended
-----
March 31,
--------
1998 1997
---- ----
Net sales $154.3 $147.3
Gross profit 43.1 36.1
Net income 15.6 10.8
The Company's share of earnings
of associated companies $ 5.1 $ 4.5
9
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of dollars, except share and per share amounts)
(8) Long-Term Debt
--------------
At March 31, 1998 and December 31, 1997, the Company's long-term debt consisted
of the following:
March 31, December 31,
--------- ------------
1998 1997
---- ----
Credit Facility $ 84.0 $123.0
Fiberite Acquisition Facility 60.0 200.0
Public Debt 199.4 -
Other - 1.0
------ ------
$343.4 $324.0
====== ======
On March 18, 1998, the Company sold an aggregate of $200.0 principal amount of
senior debt securities, consisting of (i) $100.0 principal amount of 6.50% Notes
due March 15, 2003 and (ii) $100.0 principal amount of 6.75% Notes due March 15,
2008. The securities were offered under the Company's $300.0 shelf registration
statement. The Company received an aggregate of approximately $198.2 in proceeds
from the sale before deducting expenses associated with the sale. The proceeds
were used to pay down $140.0 of the Company's 364-day Credit Agreement which
originally provided financing for the acquisition of substantially all the
assets of Fiberite (the "Fiberite Acquisition Facility"), with the remainder
used to reduce borrowings under the Company's revolving credit facility (the
"Credit Facility").
(9) Contingent Liabilities
----------------------
The Company is subject to substantial costs arising out of environmental laws
and regulations, which include obligations to remove or limit the effects on the
environment of the disposal or release of certain wastes or substances at
various sites. Liability for investigative, removal and remedial costs under
certain federal and state laws is retroactive, strict and joint and several. The
Company is currently a party to, or otherwise involved in, legal proceedings
directed at the cleanup of approximately 65 Superfund sites. Since the laws
pertaining to these sites provide for joint and several liability, a
governmental plaintiff could seek to recover all remediation costs at a waste
disposal site from any of the potentially responsible parties ("PRPs") for such
site, including the Company, despite the involvement of other PRPs. In some
cases, the Company is one of several hundred identified PRPs, while in others it
is the only one or one of only a few. Generally, where there are a number of
financially solvent PRPs, liability has been apportioned, or the Company
believes, based on its experience with such matters, that liability will be
apportioned based on the type and amount of waste disposed by each PRP at such
disposal site and the number of financially solvent PRPs. The Company is 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
environmental-related expenditures cannot be quantified with a reasonable degree
of accuracy. In addition, from time to time in the ordinary course of its
business, the Company is informed of, and receives inquiries with respect to,
new sites which may contain environmental contamination for which the Company
may be responsible.
10
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of dollars, except share and per share amounts)
It is the Company's policy to accrue and charge against earnings, environmental
cleanup costs when it is probable that a liability has been incurred and an
amount is reasonably estimable. As assessments and cleanups proceed, these
accruals are reviewed periodically and adjusted, if necessary, as additional
information becomes available. These accruals can change substantially due to
such factors as additional information on the nature or extent of contamination,
methods of remediation required, and other actions by governmental agencies or
private parties. Cash expenditures often lag behind the period in which an
accrual is recorded by a number of years.
In accordance with the above policies, as of March 31, 1998 and December 31,
1997, the aggregate environmental related accruals were $158.3 and $161.6,
respectively, of which $25.0 was included in accrued expenses in 1998 and 1997,
with the remainder included in other noncurrent liabilities. Environmental
remediation spending for the three months ended March 31, 1998 and 1997 was $3.2
and $5.0, respectively. All accruals have been recorded without giving effect to
any possible future insurance proceeds. Various environmental matters are
currently being litigated and potential insurance recoveries are unknown at this
time but are considered unlikely.
While it is not feasible to predict the outcome of all pending environmental
suits and claims, it is reasonably possible that there will be a necessity for
future provisions for environmental costs which, in management's opinion, will
not have a material effect on the financial position of the Company, but could
be material to the results of operations of the Company in any one accounting
period. The Company cannot estimate any additional amount of loss or range of
loss in excess of the recorded amounts. Moreover, environmental liabilities are
paid over an extended period and the timing of such payments cannot be predicted
with any confidence.
The Company is also a party to various other claims and routine litigation
arising in the normal course of its business. Based on the advice of counsel,
management believes that the resolution of such claims and litigation will not
have a material adverse effect on the financial position of the Company, but
could be material to the results of operations of the Company in any one
accounting period.
(10) Other Financial Information
---------------------------
Taxes paid for the three months ended March 31, 1998 and 1997 were approximately
$1.8 and $1.5, respectively. Interest paid for the three months ended March 31,
1998 and 1997 was approximately $5.6 and $1.0, respectively.
The Company's ratio of earnings to fixed charges for the three months ended
March 31, 1998 was 7.4. For purposes of computing the ratio of earnings to fixed
charges (a) earnings consist of earnings before income taxes which include the
Company's share of pre-tax equity in earnings of associated companies, plus
fixed charges less capitalized interest and (b) fixed charges consist of
interest on long-term debt, plus the portion of rentals representative of an
interest factor plus the Company's share of such charges of associated
companies.
11
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of dollars, except share and per share amounts)
In April 1997, the Company began a stock repurchase program for approximately
10% of the outstanding shares, or 4.5 million shares. Through March 31, 1998,
the Company had repurchased 938,050 shares at a cost of $36.2 under this
program. Depending on the level, price and timing of repurchases, borrowings may
be required.
During the first quarter of 1998, in connection with the Company's stock
repurchase program, the Company wrote put options on 200,000 shares of its
common stock for which it received premiums of approximately $0.5 in cash. These
put options entitle the holders to sell shares of the Company's common stock to
the Company on certain dates at specified prices. At March 31, 1998, 200,000
options were outstanding with strike prices of $48.93 and $52.30 per share. The
options expire at various dates, are exercisable only at maturity and are all
settleable in cash at the Company's option. The maximum potential repurchase
obligation of $10.1 has been reclassified from stockholders' equity to put
options.
(11) Subsequent Event
----------------
On May 11, 1998, the Company sold $120.0 principal amount of 6.846% MandatOry
Par Put Remarketed Securities/SM*/ ("MOPPRS"/SM*/) due May 11, 2025 in a public
offering. The MOPPRS/SM/ are senior unsecured obligations subject to mandatory
tender on May 11, 2005 (the "Remarketing Date") and were offered under the
Company's remaining available shelf registration. The Company received an
aggregate of approximately $123.8 in proceeds from the sale before deducting
expenses associated with the sale. $104.0 of the net proceeds were used (i) to
repay approximately $84.0 of indebtedness outstanding under the Credit Facility,
(ii) to repay $20.0 of indebtedness outstanding under the Fiberite Acquisition
Facility, and the remainder will be used for general corporate purposes.
If Merrill Lynch, as Remarketing Dealer (the "Remarketing Dealer"), elects to
remarket the MOPPRS/SM/, the MOPPRS/SM/ will be subject to mandatory tender to
the Remarketing Dealer at 100% of the principal amount, thereof, for remarketing
on the Remarketing Date. The interest rate to maturity to the Company on the
Remarketing Date will be equal to 5.951% plus an applicable spread. If the
Remarketing Dealer for any reason does not purchase all tendered MOPPRS/SM/ on
the Remarketing Date or elects not to remarket the MOPPRS/SM/, the Company will
be required to repurchase the MOPPRS/SM/ from the beneficial owners, thereof, at
100% of the principal amount, thereof, plus accrued interest, if any.
In conjunction with the sale of the MOPPRS/SM/, the Company made payments
aggregating $4.9 in the second quarter of 1998 to settle its Rate Lock
Agreements on $100.0 of 30-year debt.
* Service Mark of Merrill Lynch & Co., Inc.
12
<PAGE>
(Millions of dollars, except share and per share amounts)
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
- ---------------------
First Quarter of 1998 versus First Quarter 1997
- -----------------------------------------------
Net sales for the first quarter of 1998 were $368.2 as compared to the $306.5 in
the first quarter of 1997. The quarter reflected approximately $72.7 of sales
generated as a result of the purchase of Fiberite on September 30, 1997.
Included in the first quarter of 1997 are sales totaling $13.6 from the divested
Acrylic Fibers and Aluminum Sulfate product lines and from the discontinued
Technical Chemicals product line.
Sales for the first quarter 1998 outside of the United States represented 36% of
total revenue compared to 41% last year. The decrease was the result of the
increased Fiberite sales, mostly U.S. based, and the effect of exchange rate
changes due to the strength of the U.S. dollar versus international currencies,
particularly Asia-Pacific. International sales were also negatively impacted in
Latin America in our Mining Chemicals product line where low copper prices have
caused customers to reduce the use of the Company's products.
Asia-Pacific sales represent 9% of total Cytec sales thus the impact at present
of the slowdown, although negative, is not significant. A longer term economic
slowdown in that region, however, could inhibit Cytec's growth.
Specialty Chemicals sales decreased $4.5, or 2.5%. The negative impact of
foreign exchange rates was approximately 3% of sales with selling prices
essentially flat. Sales volume, before the effects of exchange, was up 1% led by
the Water Treatment, Coating Resins, Polymer Additives and Phosphines product
lines. Weak paper recycling and low metal prices in the mining industry,
principally copper, caused certain customers to reduce operations resulting in
lower sales in those product lines. Excluding sales of divested and
discontinued product lines, sales decreased $3.1 or 1.7%. In view of the rate
of growth in sales volume in the first quarter, the Company does not expect
historical levels of Specialty Chemicals sales volume growth to be achieved for
the full year.
Specialty Materials sales increased $70.6, or 106%, due primarily to the
generation of sales as a result of the Fiberite purchase. Excluding this and
sales of the divested Acrylic Fibers business in January 1997, sales were up
$9.8 or 18.0% reflecting continued strength of the Aerospace commercial aircraft
sector.
Building Block sales decreased $4.4, or 7.2% due mainly to lower methanol and
acrylonitrile selling prices. Lower selling prices resulted in a 12% sales
decline while volume was up 6%. The cost of propylene, the major raw material
in acrylonitrile, was down sharply, offsetting much of the impact of lower
selling prices. Selling prices were especially lower for methanol. This fact
coupled with
13
<PAGE>
(Millions of dollars, except share and per share amounts)
the recent rise in natural gas costs has resulted in the methanol plant being
idled beginning March, 1998, and is expected to remain idled until market
conditions improve. The shutdown of the methanol plant is not expected to have
a material impact on the Company.
Manufacturing cost of sales decreased from 76.7% in 1997 to 70.2% in 1998. 1997
manufacturing costs included restructuring charges of $18.6 relating primarily
to manufacturing sites located in Botlek, the Netherlands and Linden, New
Jersey. Excluding this charge, manufacturing cost of sales in 1997 was 70.6%.
Manufacturing costs in 1998 benefitted from continued plant efficiencies, the
results of restructuring and an improved product mix.
Selling and technical service spending increased $3.6, mainly due to the impact
of Fiberite, as well as reflecting additional sales effort in several Specialty
Chemicals segments in support of more international focus.
Research and process development costs increased $0.6 mostly due to the Fiberite
acquisition. Patent expenses, also included in research and process
development, increased moderately due to continued efforts to develop new and
maintain existing patents in the Specialty Chemicals businesses.
Administrative and general expenses increased $1.3 mostly due to the addition of
Fiberite, although as a ratio to sales, administrative expenses declined from
3.6% to 3.3%.
The amortization of acquisition intangibles expense increase reflects the
goodwill associated with the Fiberite acquisition.
Other income (expense), net of $24.6 in 1997 reflects a $22.3 gain from the
sales of divested product lines.
Equity in earnings of associated companies increased $0.6 due to stronger sales
for Criterion Catalyst.
Interest expense, net increased as a result of long-term debt associated with
the acquisition of Fiberite. Interest expense for the period was $5.1 compared
to $0.8 in the same period of last year.
The income tax provision was reduced to a rate of 37% from 39% in 1997. This
was primarily due to improved tax planning in the foreign and state tax area as
well as benefits from increased sales through the Company's foreign sales
corporation.
Net earnings increased to $31.2, up 16% from the $26.9 million for the same
period last year. Included in the 1997 net earnings is an after tax charge of
$11.3 relating to the restructuring charges mentioned earlier and an after tax
gain of $13.6 relating to the divestitures mentioned above. Earnings per share
increased to $0.66 from the prior year period of $0.56 on a diluted basis.
14
<PAGE>
(Millions of dollars, except share and per share amounts)
Liquidity and Financial Condition
- ---------------------------------
At March 31, 1998, the Company's cash balance was $29.3, an increase of $22.9
from year-end 1997.
Net cash flows from operating activities totaled $25.7, compared to $13.0 in the
same period of 1997. A significant factor affecting this increase was the
Company's decision in 1997 to pre-fund $15.0 of its postretirement benefits
liability through contributions to its Voluntary Employee Benefit Association
(VEBA) utilizing some of the proceeds from the sale of the Acrylic Fibers
product line. In 1998, the Company contributed $1.5 to its retiree VEBA.
Net cash flows used for investing activities totaled $24.7 which compares to the
$87.6 of net cash flows provided in the like period of 1997. Included in 1997
are proceeds of $94.8 associated with the sale of the Acrylic Fibers product
line and $7.0 associated with the sale of other investments. Capital additions
were $10.5 higher than the same period last year due to two large construction
projects in the specialty product lines - the Benzotriazole light stabilizer
plant in Botlek, the Netherlands, and the expansion of the surfactants plant in
Willow Island, West Virginia. For the full year 1998, the Company estimates
capital spending of approximately $95.0.
The Company believes that based on internal cash generation it will be able to
fund operating cash requirements and planned capital expenditures through the
balance of 1998.
Net cash flows provided by financing activities totaled $22.0 which compares to
$90.7 of net cash flows used for financing activities for the same period in
1997. During the first quarter of 1997, 296,200 shares of treasury stock were
purchased at a cost of $11.6, while the balance of proceeds from the sale of the
Acrylic Fibers business were used to pay down debt. In 1998, long-term debt
increased $19.4 which was more than offset by higher cash balances being
maintained in the first quarter.
On March 18, 1998, the Company sold an aggregate of $200.0 principal amount of
senior debt securities, consisting of (i) $100.0 principal amount of 6.50% Notes
due March 15, 2003 and (ii) $100.0 principal amount of 6.75% Notes due March 15,
2008 in a public offering. The securities were offered under the Company's
$300.0 shelf registration statement. The Company received an aggregate of
approximately $198.2 in proceeds from the sale before deducting expenses
associated with the sale. The proceeds were used to pay down $140.0 of the
Fiberite Acquisition Facility, with the remainder used to reduce borrowings
under the Credit Facility.
In connection with the Fiberite Acquisition and in contemplation of the offering
of long-term debt securities, the Company entered into a series of rate lock
agreements (the "Rate Lock Agreements") with several banks commencing in
September 1997. Pursuant to the Rate Lock Agreements, the Company hedged
against the risk of an increase in treasury rates above the rates on the dates
it entered into the rate lock agreements on an aggregate of $300.0 in debt for
periods of up to 30 years. The Company made payments aggregating approximately
$6.3 to settle Rate Lock Agreements relating to the $200.0 principal amount of
long-term securities sold during the first quarter ($4.7 of which was paid
during the first quarter and the remainder in 1997), which payments will be
amortized or recognized over the life of the 6.50% and 6.75% Notes as an
increase in interest expense of
15
<PAGE>
(Millions of dollars, except share and per share amounts)
such Notes.
On May 11, 1998, the Company sold $120.0 principal amount of 6.846% MOPPRS_ due
May 11, 2025 in a public offering. The MOPPRS_ are senior unsecured obligations
subject to mandatory tender on May 11, 2005 (the "Remarketing Date") and were
offered under the Company's remaining available shelf registration. The Company
received an aggregate of approximately $123.8 in proceeds from the sale before
deducting expenses associated with the sale. $104.0 of the net proceeds were
used (i) to repay approximately $84.0 of indebtedness outstanding under the
Credit Facility, (ii) to repay $20.0 of indebtedness outstanding under the
Fiberite Acquisition Facility, and the remainder will be used for general
corporate purposes. In conjunction with the sale of the MOPPRS_, the Company
made payments aggregating $4.9 in the second quarter of 1998 to settle its Rate
Lock Agreements on $100.0 of 30-year debt, which payments will be amortized or
recognized over the life of the securities as an increase in interest expense of
such securities.
During the first quarter of 1998, in connection with the Company's stock
repurchase program, the Company wrote put options on 200,000 shares of its
common stock for which it received premiums of approximately $0.5 in cash.
These put options entitled the holders to sell shares of the Company's common
stock to the Company on certain dates at specified prices. At March 31, 1998,
200,000 options were outstanding with strike prices of $48.93 and $52.30 per
share. Subsequent to March 31, 1998, the Company has (i) sold put options on an
aggregate of 200,000 shares of its common stock in exchange for proceeds of
approximately $0.5 and (ii) put options on an aggregate of 100,000 shares of its
common stock have expired unexercised.
Under the Series C Cumulative Preferred Stock agreement with American Cyanamid
Company, a subsidiary of American Home Products Corporation, the Company must
maintain a debt to equity ratio of no more than 2-to-1, a minimum fixed charge
coverage ratio of not less than 3-to-1 for the average of the fixed charge
coverage ratios for the four consecutive fiscal quarters most recently ended,
and must not incur more than $150.0 of debt unless the Company's equity is in
excess of $200.0. If the Company has more than $200.0 in equity, then the
Company may incur additional debt as long as its ratio of debt to equity is not
more than 1.5-to-1. At March 31, 1998, the Company had $343.4 of debt and $414.6
in equity as defined in the Series C Stock covenants and had the ability to
incur up to an additional $278.5 in debt.
At March 31, 1998, the Company's Credit Facility provided for unsecured
revolving loans ("Revolving Loans") of up to $200.0. The revolving loans are
available for the general corporate purposes of the Company and its
subsidiaries, including, without limitation, for purposes of making acquisitions
permitted under the Credit Facility. Under the terms of the Credit Facility,
the Company had an additional $116.0 available for borrowing at March 31, 1998.
The Credit Facility, which is scheduled to mature on July 28, 2002, contains
covenants customary for such facilities. The Company was in compliance with all
material terms, covenants and conditions of the Credit Facility at March 31,
1998. As noted above, all of the approximately $84.0 of indebtedness outstanding
under the Credit Facility was repaid on May 11, 1998.
At March 31, 1998, there was $60.0 of outstanding borrowings under the Fiberite
Acquisition Facility. The 364-day facility which contains a two-year term-out
option will expire on September 22, 1998. The Company had an additional $140.0
available for borrowing at March 31, 1998 to finance only acquisitions approved
by the lenders. As noted above, $20.0 of indebtedness outstanding under the
Fiberite Acquisition Facility was repaid on May 11, 1998.
16
<PAGE>
(Millions of dollars, except share and per share amounts)
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.
Moreover, failure of third parties, such as customers and suppliers, to rectify
Year 2000 problems in their own systems (something that the Company is unable to
predict, correct or quantify) could have a material adverse impact on the
operation of the Company.
Comments on Forward-Looking Statements
- --------------------------------------
A number of the statements made by the Company in this Management's Discussion
and Analysis, or in other documents, including but not limited to the Company's
Annual Report to Stockholders, its press releases and its periodic reports to
the Securities and Exchange Commission, may be regarded as "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995.
Forward-looking statements include, among others, statements concerning the
Company's outlook for 1998 and beyond, the accretiveness of acquisitions,
pricing trends and forces within the industry, the completion dates of, and
expenditures for, capital projects, expected sales growth, cost reduction
strategies and their results, the effect of the Asian economic slowdown, long-
term goals of the Company, possible further restructurings, plans and
expectations regarding the Fiberite Acquisition 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. Specific new or enhanced
uncertainties as a result of the Fiberite Acquisition include the Company's
ability to achieve, and the rate at which it achieves, cost reductions and other
planned synergies, the build rates in the commercial and military aerospace
industries, and the impact of competitive products and pricing. A number of
these factors are discussed in the Company's filings with the Securities and
Exchange Commission.
17
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
-----------------
In connection with the Spin-off, the Company assumed from Cyanamid substantially
all liabilities for legal proceedings relating to Cyanamid's chemicals
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 relating to
Fiberite's business. As a result, although Cyanamid or Fiberite is the named
defendant in cases relating to events prior to the Spin-off or the Fiberite
Acquisition, respectively, the Company is the party in interest and is herein
described as the defendant.
The Company is a defendant in twenty-one cases pending in state courts in
Jefferson, Harris, Harrison 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. Three 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 pretrial activities,
primarily discovery. The Company believes that its involvement in all but seven
of these cases results from its former 50% ownership of Jefferson Chemical
Company, which the Company disposed of in 1975. It is not known at this time
how many plaintiffs eventually will assert claims against the Company.
The Company is one of many defendants in suits filed by approximately 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 2 are active.
The Company is a defendant in three suits pending in California Superior Courts
in Los Angeles and San Francisco Counties, which were filed by individuals or
the personal representatives of individuals allegedly injured as a result of
exposure to asbestos containing products. Fiberite is a defendant in three such
suits pending in San Francisco County. One suit in which both the Company and
Fiberite are defendants has 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
Company's 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.
18
<PAGE>
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 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.
19
<PAGE>
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 alleged 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.
See also the first four paragraphs of "Environmental Matters" under Item 1 of
the Company's 1997 Annual Report on Form 10-K, and Note 9 of the Notes to
Consolidated Financial Statements (unaudited) in Part I, item (1), which are
incorporated by reference herein.
In addition to liabilities with respect to the specific cases described
previously, because the production of certain chemicals involves the use,
handling, processing, storage and transportation of hazardous materials, and
because certain of the Company's products constitute or contain hazardous
materials, the Company has been subject to claims of injury from direct exposure
to such materials and from indirect exposure when such materials are
incorporated into other companies' products. There can be no assurance that, as
a result of past or future operations, there will not be additional claims of
injury by employees or members of the public due to exposure, or alleged
exposure, to such materials.
Furthermore, the Company also has exposure to present and future claims with
respect to workplace exposure, workers' compensation and other matters, arising
from events both prior to and after the Spin-off. There can be no assurance as
to the actual amount of these liabilities or the timing thereof.
Item 2. Changes in Securities
---------------------
(c) During the first quarter of 1998, in connection with the Company's stock
repurchase program, the Company sold put options to an institutional investor in
a series of private placements exempt from registration under Section 4(2) of
the Securities Act of 1933. The put options entitled the holder to sell 200,000
shares of the Company's common stock to the Company on certain dates at
specified prices. The Company received premiums of approximately $0.5 on the
sale of such options. At March 31, 1998, 200,000 options were outstanding with
strike prices ranging between $48.93 and $52.30 per share. The maximum
potential repurchase obligation of $10.1 has been reclassified from
stockholders' equity to put options.
20
<PAGE>
Item 6.Exhibits and Reports on Form 8-K
- ---------------------------------------
(a). Exhibits
--------
See Exhibit Index on page 23 for exhibits filed with this quarterly report on
From 10-Q
(b).
Reports on Form 8-K
- -------------------
One report on Form 8-K was filed reporting events during the quarter ended March
31, 1998 as follows: A report dated March 18, 1998 reporting the sale of $200.0
million of the Company's senior debt securities in a public offering.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CYTEC INDUSTRIES INC.
(REGISTRANT)
BY:/s/James P. Cronin
------------------------
James P. Cronin
Executive Vice President and Chief Financial Officer
May 14, 1998
21
<PAGE>
Exhibit Index
-------------
4.1 Indenture, dated as of March 15, 1998 between the Company and PNC Bank,
National Association, as Trustee (incorporated by reference to exhibit 4.1
to the Company's current report on Form 8-K dated March 18, 1998).
4.2 Supplemental Indenture, dated as of May 11, 1998 between the Company and
PNC Bank, National Association, as Trustee.
4.3 6.50% Global Note due March 15, 2003 (incorporated by reference to exhibit
4.2 to the Company's current report on Form 8-K dated March 18, 1998).
4.4 6.75% Global Note due March 15, 2008 (incorporated by reference to exhibit
4.3 to the Company's current report on Form 8-K dated March 18, 1998).
4.5 6.846% MandatOry Par Put Remarketed Securities due May 11, 2025
10.1 Letter Amendment, dated February 19, 1993, among CYRO Industries, Cyanamid
Plastics, Inc. and Rohacryl, Inc., to the CYRO Partnership Agreement.
10.2 Amendment No. 1 to AMEL Joint Venture Agreement, dated April 30, 1987, by
and between Cyanamid Melamine, Inc. and DCP Melamine North America, Inc.
10.3 Amendment No. 2 to AMEL Joint Venture Agreement, dated May 1, 1994, by and
between Cytec Melamine, Inc. and DSM Melamine Americas, Inc.
10.4 Amendment No. 3 to AMEL Joint Venture Agreement, dated January 30, 1995,
by and between Cytec Melamine, Inc. and DSM Melamine Americas, Inc.
12 Computation of Ratio of Earnings to Fixed Charges for the three months
ended March 31, 1998 and 1997
27 Financial Data Schedule
99 Material incorporated by reference from Annual Report on Form 10-K
<PAGE>
Exhibit 4.2
FIRST SUPPLEMENTAL INDENTURE
This FIRST SUPPLEMENTAL INDENTURE ("First Supplemental Indenture") dated
as of May 11, 1998, between CYTEC INDUSTRIES INC., a Delaware corporation (the
"Company"), and PNC BANK, NATIONAL ASSOCIATION, a national banking association
organized and existing under the laws of the United States (the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, an Indenture (the "Indenture") dated as of March 15, 1998, between
the Company and the Trustee provides for the issuance from to time of the
Company's debentures, notes, bonds or other evidences of indebtedness to be
issued in one or more series unlimited as to principal amount (the
"Securities"), which terms shall include any Securities issued under the
Indenture after the date hereof;
WHEREAS the Company proposes by this First Supplemental Indenture to
supplement and amend the Indenture to add an additional obligation of the
Trustee; and
WHEREAS the Company has requested that the Trustee execute and deliver this
First Supplemental Indenture and has certified that requirements necessary to
make this First Supplemental Indenture a valid instrument in accordance with its
terms have been satisfied, and that the execution and delivery of this First
Supplemental Indenture has been duly authorized in all respects.
NOW, THEREFORE, the Company and the Trustee hereby agree that the following
sections of this First Supplemental Indenture supplement and amend the Indenture
with respect to that series of Securities which consists of MandatOry Par Put
Remarketed Securities ("MOPPRS") due May 11, 2025.
SECTION 1.01. Article VII of the Indenture is hereby supplemented and amended,
solely with respect to that series of Securities which consists of MOPPRS, by
adding the following new SECTION 7.01(i):
"(i) When the Remarketing Dealer (as defined in the Remarketing
Agreement) gives notice to the Trustee
<PAGE>
on the Notification Date (as defined in the Remarketing Agreement) of its
election to remarket the MOPPRS pursuant to Section 4(c) of the Remarketing
Agreement, dated as of May 11, 1998 (the "Remarketing Agreement"), between
the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated, the
Trustee shall give notice in the Company's name and at the Company's
expense on the Notification Date of such election (the "Company Notice") to
The Depository Trust Company and its successors and each holder of the
MOPPRS; provided that, in all cases, the text of such Company Notice shall
--------
be prepared by the Company and information regarding beneficial owners
shall be provided to the Trustee by the Company to the extent necessary to
comply with applicable law and to effect such notification."
IN WITNESS WHEREOF, the parties have caused this First Supplemental
Indenture to be duly executed as of the date first written above.
CYTEC INDUSTRIES INC.,
by: /s/J. P. Cronin
--------------------------------
Name: J. P. Cronin
Title: Executive Vice President and
Chief Financial Officer
Attest:
/s/Roy Smith
- --------------------------
Title:Assistant Secretary
PNC BANK, NATIONAL ASSOCIATION,
by: /s/J. Salovitch - Miller
---------------------------
Name: J. Salovitch - Miller
Title: Vice President
Attest:
/s/Suzanne Vikorin
- ---------------------
Title:
<PAGE>
EXHIBIT 4.5
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (ADTC), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS MOPPRS IS A GLOBAL SECURITY AS REFERRED TO IN THE INDENTURE
HEREINAFTER REFERENCED. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART
FOR THE INDIVIDUAL MOPPRS REPRESENTED HEREBY, TRANSFERS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR
TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO HEREIN.
<PAGE>
Registered $120,000,000
No. R-1 CUSIP No.: 232820AD2
CYTEC INDUSTRIES INC.
6.846% MandatOry Par Put Remarketed Securities/SM*/ (AMOPPRS")
due May 11, 2025
CYTEC INDUSTRIES INC., a Delaware corporation (the ACompany), promises to
pay to Cede & Co., or its registered assigns, the principal amount of ONE
HUNDRED TWENTY MILLION DOLLARS ($120,000,000) on May 11, 2025.
Interest Payment Dates: May 11 and November 11, commencing November 11,
1998.
Record Dates: April 26 and October 27.
Additional provisions of this Security are set forth on the other side of
this Security. Such additional provisions shall for all purposes have the same
effect as if set forth at this place.
- ---------------------
* AMandatOry Par Put Remarketed Securities and AMOPPRS are service marks of
Merrill Lynch & Co., Inc.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Dated:
CYTEC INDUSTRIES INC.,
By:
-------------------------------
Title:
-------------------------------
Title:
Dated:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
PNC BANK, NATIONAL ASSOCIATION,
as Trustee, certifies that this is one of the
Securities referred to in the Indenture.
By:
--------------------------------
Authorized Signatory
<PAGE>
6.846% MandatOry Par Put Remarketed SecuritiesK (AMOPPRS)K**
due May 11, 2025
1. Interest.
--------
Cytec Industries Inc., a Delaware corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred to, being
herein called the ACompany), promises to pay interest on the principal amount
of this MOPPRS at a rate of 6.846% per annum to but excluding May 11, 2005 (the
"Remarketing Date"). If, pursuant to the Remarketing Agreement, dated May 11,
1998 between Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
ARemarketing Dealer) and the Company (the "Remarketing Agreement"), the
Remarketing Dealer elects to remarket the MOPPRS, then, except as otherwise set
forth herein, (i) the MOPPRS shall be subject to mandatory tender to the
Remarketing Dealer for remarketing on the Remarketing Date, on the terms and
subject to the conditions set forth herein, and (ii) on and after the
Remarketing Date, such MOPPRS shall bear interest at the rate determined by the
Remarketing Dealer in accordance with the procedures set forth in Section 7
hereof (the "Interest Rate to Maturity"). The Company will pay interest
semiannually on May 11 and November 11 of each year, commencing November 11,
1998. Interest on the MOPPRS will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from May 11, 1998.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment.
-----------------
The Company will pay interest on the MOPPRS (except defaulted
interest) to the Persons who are registered holders of MOPPRS at the close of
business on the April 26 or October 27 next preceding the interest payment date
even if MOPPRS are canceled after the record date and on or before the interest
payment date. Holders must surrender MOPPRS to a Paying Agent to collect
principal payments. The Company will pay principal and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts. Payments in respect of the MOPPRS represented by a Global
Security (including principal, premium and interest) may be made by wire
transfer of immediately available funds to the accounts specified by The
Depository Trust Company. The Company will make all payments in respect of a
certificated MOPPRS (including principal, premium and interest) by mailing a
check to the Registered address of each Holder thereof; provided, however, that
payments on a
- ----------------------
** AMandatOry Par Put Remarketed Securities and (AMOPPRS) are service marks of
Merrill Lynch & Co., Inc.
4
<PAGE>
certificated MOPPRS will be made by wire transfer to a U.S. dollar
account maintained by the payee with a bank in the United States if such Holder
elects payment by wire transfer by giving written notice to the Trustee or the
Paying Agent to such effect designating such account no later than 30 days
immediately preceding the relevant due date for payment (or such other date as
the Trustee may accept in its discretion).
3. Paying Agent and Registrar.
---------------------------
Initially, PNC Bank, National Association, a national banking
association (ATrustee), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent, Registrar or co-registrar without
notice. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture.
-- ---------
The Company issued the MOPPRS under an Indenture dated as of March 15,
1998 (AIndenture), between the Company and the Trustee. The terms of the
MOPPRS include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.C.
77aaa-77bbb) as in effect on the date of the Indenture (the AAct). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The MOPPRS are subject to all such terms, except as
modified pursuant to Section 9.2 of the Indenture, and Holders are referred to
the Indenture and the Act for a statement of those terms.
The MOPPRS are general unsecured obligations of the Company limited to
$120,000,000 aggregate principal amount (subject to Section 2.11 of the
Indenture).
5. Purchase on the Remarketing Date; Purchase and Settlement.
---------------------------------------------------------
(a) If the Remarketing Dealer gives notice to the Company and the Trustee
on a Business Day not later than five Business Days prior to the Remarketing
Date of its intention to purchase all then issued and outstanding MOPPRS for
remarketing (the "Notification Date"), such principal amount of MOPPRS shall be
subject to mandatory tender to the Remarketing Dealer on the Remarketing Date,
in accordance with Section 5(b) below, except as set forth in this Section and
Section 6 below. The purchase price of such MOPPRS shall be equal to 100% of
the principal amount thereof. Upon purchase, the Remarketing Dealer shall have
the option, in its sole discretion, to elect to remarket the MOPPRS in
accordance with the Remarketing Agreement for its own account at varying prices
to be determined by the Remarketing Dealer at the time of each sale. If the
Remarketing Dealer makes such election, the obligation of the Remarketing Dealer
to purchase the MOPPRS on the Remarketing Date shall be subject to the
conditions set forth in the Remarketing Agreement. No Holder or actual
purchaser of the MOPPRS ("Beneficial Owner") shall have any rights or claims
under the
5
<PAGE>
Remarketing Agreement or against the Company or the Remarketing Dealer
as a result of the Remarketing Dealer not purchasing such MOPPRS.
(b) Following the Notification Date, the tender and purchase of the MOPPRS
provided for in Section 5(a) above shall be effected as follows, subject to
Sections 8 and 9 below:
(i) All of the tendered MOPPRS subject to remarketing shall be
automatically delivered to the account of the Trustee, by book-entry
through DTC or any successor thereto pending payment of the purchase price
therefor, on the Remarketing Date.
(ii) The Remarketing Dealer shall make or cause the Trustee to make
payment to the DTC Participant by book-entry through DTC in accordance with
the procedure of DTC, by the close of business, New York City time, on the
Remarketing Date, against delivery through DTC of such Beneficial Owner's
MOPPRS that have been purchased for remarketing by the Remarketing Dealer.
The Company shall make or cause the Trustee to make payment of interest to
each Beneficial Owner of the MOPPRS on the Remarketing Date by book-entry
through DTC by the close of business, New York City time, on such date.
6. Maintenance of Book-Entry System. The repurchase and settlement
--------------------------------
procedures set forth in Section 5(b) above, including provisions for payment by
purchasers of MOPPRS in the remarketing or for payment to selling Beneficial
Owners of repurchased MOPPRS, shall be subject to modification, notwithstanding
any provision to the contrary set forth in Article IX of the Indenture, to the
extent required by DTC or, if the book-entry system is no longer available for
the MOPPRS at the time of the remarketing and if agreed to by the Remarketing
Dealer in accordance with the Remarketing Agreement, to the extent required to
facilitate the tendering and remarketing of MOPPRS in certificated form. In
addition, the Remarketing Dealer may, notwithstanding any provision to the
contrary set forth in Article IX of the Indenture and with the consent of the
Company, which consent shall not be unreasonably withheld, modify the settlement
procedures set forth herein in order to facilitate the settlement process.
7. Determination of Interest Rate to Maturity; Notification Thereof.
----------------------------------------------------------------
Subject to the Remarketing Dealer's election to remarket the MOPPRS as provided
in Section 5(a), by 3:30 p.m., New York City time, on the third Business Day
immediately preceding the Remarketing Date (the "Determination Date"), the
Remarketing Dealer shall determine the Interest Rate to Maturity to the nearest
one hundred-thousandth (0.00001) of one percent per annum. The Interest Rate to
Maturity shall be equal to the sum of 5.951% (the "Base Rate") and the
Applicable Spread (as defined below), which will be based on the Dollar Price
(as defined below) of the MOPPRS.
6
<PAGE>
The "Applicable Spread" shall be the lowest bid indication, expressed as a
spread (in the form of a percentage or in basis points) above the Base Rate,
obtained by the Remarketing Dealer on the Determination Date from the bids
quoted by five Reference Corporate Dealers (as defined below) for the entire
aggregate principal amount of the MOPPRS at the Dollar Price, but assuming (i)
an issue date that is the Remarketing Date, with settlement on such date without
accrued interest, (ii) a maturity date equal to the Stated Maturity Date of the
MOPPRS and (iii) a stated annual interest rate, payable semiannually on each
Interest Payment Date, equal to the Base Rate plus the spread bid by the
applicable Reference Corporate Dealer. If fewer than five Reference Corporate
Dealers bid as described above, then the Applicable Spread shall be the lowest
of such bid indications obtained as described above. The Interest Rate to
Maturity announced by the Remarketing Dealer, absent manifest error, shall be
binding and conclusive upon the Beneficial Owners and Holders of the MOPPRS, the
Company and the Trustee.
"Comparable Treasury Issues" means the United States Treasury security or
securities selected by the Remarketing Dealer as having an actual or
interpolated maturity or maturities of thirty years.
"Comparable Treasury Price" means, with respect to the Remarketing Date,
(a) the offer prices for the Comparable Treasury Issues (expressed in each case
as a percentage of its principal amount) on the Determination Date, as set forth
on "Telerate Page 500" (or such other page as may replace Telerate Page 500) or
(b) if such page (or any successor page) is not displayed or does not contain
such offer prices on such Determination Date, (i) the average of the Reference
Treasury Dealer Quotations for such Remarketing Date, after excluding the
highest and lowest of such Reference Treasury Dealer Quotations, or (ii) if the
Remarketing Dealer obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Reference Treasury Dealer Quotations.
"Telerate Page 500" means the display designated as "Telerate Page 500" on Dow
Jones Markets Limited (or such other page as may replace Telerate Page 500 on
such service) or such other services displaying the offer prices specified in
(a) above as may replace Dow Jones Markets Limited.
"Dollar Price" means, with respect to the MOPPRS, the present value
determined by the Remarketing Dealer, as of the Remarketing Date, of the
Remaining Scheduled Payments (as defined below) discounted to the Remarketing
Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Treasury Rate (as defined below)..
"Reference Corporate Dealers" means each of the Remarketing Dealer and four
other leading dealers of publicly traded debt securities of the Company in the
City of New York to be chosen by the Company (with the consent of the
Remarketing Dealer, which consent shall not be unreasonably withheld), and their
respective successors; provided that, in lieu of one such dealer, the Company
may, with the consent of the Remarketing Dealer, select an institutional
investor. If (i) the Company does not provide the Remarketing Dealer with the
names of four other Reference Corporate Dealers by the close of business on the
Business Day
7
<PAGE>
preceding the Determination Date or (ii) the Remarketing Dealer does not
consent, by the close of the business on the Business Day preceding the
Determination Date, to the four other Reference Corporate Dealers selected by
the Company by such time, the Remarketing Dealer shall have the right to select
such four other Reference Corporate Dealers, which selection shall be binding
upon the parties. Notwithstanding the foregoing, if after the date hereof the
Company becomes aware of any MOPPRS offering (a AReference MOPPRS Transaction)
lead-managed by Merrill Lynch, Pierce, Fenner & Smith Incorporated (or any
successor) in which the Remarketing Dealer consented in the remarketing
agreement entered into in connection with such Reference MOPPRS Transaction or
otherwise (the AReference Remarketing Terms) to the inclusion among the class
of persons selected to quote bids on the MOPPRS for purposes of the remarketing
process in such Reference Remarketing Transaction of one or more institutional
investors, the Company may designate one institutional investor in the place of
one Reference Corporate Dealer under the Remarketing Agreement to the same
extent and subject to the same terms and conditions as set forth in the
Reference Remarketing Terms.
"Reference Treasury Dealer" means each of Credit Suisse First Boston
Corporation, Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated, Salomon Brothers Inc and SBC
Warburg Dillon Read Inc. and their respective successors; provided, however,
that if any of the foregoing or their affiliates shall cease to be a primary
U.S. Government securities dealer in The City of New York (a "Primary Treasury
Dealer"), the Remarketing Dealer shall substitute therefor another Primary
Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and the Remarketing Date, the offer prices for the
Comparable Treasury Issues (expressed in each case as a percentage of its
principal amount) quoted in writing to the Remarketing Dealer by such Reference
Treasury Dealer by 3:30 p.m New York City time, on the Determination Date.
"Remaining Scheduled Payments" means, with respect to the MOPPRS, the
remaining scheduled payments of the principal thereof and interest thereon,
calculated at the Base Rate only, that would be due after the Remarketing Date
to and including the Stated Maturity Date.
"Treasury Rate" means, with respect to the Remarketing Date, the rate per
annum equal to the semiannual equivalent yield to maturity or interpolated (on a
day count basis) yield to maturity of the Comparable Treasury Issues, assuming a
price for the Comparable Treasury Issues (expressed as a percentage of its
principal amount), equal to the Comparable Treasury Price for the Remarketing
Date.
8. Repurchase. In the event that (i) the Remarketing Dealer for any
----------
reason does not notify the Company of the Interest Rate to Maturity by 4:00
p.m., New York City time, on the Determination Date, or (ii) prior to the
Remarketing Date, the Remarketing Dealer has
8
<PAGE>
resigned and no successor has been appointed on or before the Determination
Date, or (iii) since the Notification Date, a material adverse change or any
development or event (whether taken on its own or in combination with other
adverse events arising out of the same circumstances occurring prior to the
Notification Date) likely to result in a prospective material adverse change in
the condition of the Company and its subsidiaries, considered as one enterprise,
shall have occurred or an Event of Default, or any event which, with the giving
of notice or passage of time, or both, would constitute an Event of Default,
with respect to the MOPPRS shall have occurred and be continuing, or any other
event constituting a termination event under the Remarketing Agreement shall
have occurred, or (iv) the Remarketing Dealer for any reason does not elect to
remarket the MOPPRS or (v) the Remarketing Dealer for any reason does not
purchase all tendered MOPPRS on the Remarketing Date, then the Company will
repurchase the entire principal amount of the MOPPRS on the Remarketing Date at
a price equal to 100% of the principal amount of the MOPPRS, plus all accrued
and unpaid interest, if any, on the MOPPRS to the Remarketing Date. In any such
case, payment will be made by the Company to the DTC Participant of each
Beneficial Owner of the MOPPRS, by book-entry through DTC by 1:00 p.m., New York
City time, on the Remarketing Date against delivery through DTC of such
Beneficial Owner's MOPPRS.
9. Redemption. (a) Notwithstanding any election by the Remarketing
----------
Dealer to remarket MOPPRS on the Remarketing Date, the purchase of the MOPPRS by
the Remarketing Dealer on such date as set forth in Section 5(b) above shall be
subject to the right of the Company to redeem the MOPPRS from the Remarketing
Dealer as provided in Section 9(b) below.
(b) The Company, in its sole and absolute discretion, shall have the
right, upon notice to the Remarketing Dealer and the Trustee not later than the
Business Day immediately preceding the Determination Date, to irrevocably elect
to redeem the aggregate principal amount of the MOPPRS, in whole but not in
part, from the Remarketing Dealer on the Remarketing Date at the Optional
Redemption Price. The "Optional Redemption Price" shall be the greater of (i)
100% of the principal amount of the MOPPRS and (ii) the sum of the present
values of the Remaining Scheduled Payments thereon, as determined by the
Remarketing Dealer, discounted to the Remarketing Date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate, plus in either case accrued and unpaid interest from the Remarketing Date
on the principal amount being redeemed to, but excluding, the date of
redemption. If the Company elects to redeem the MOPPRS, it shall pay to the
Remarketing Dealer the Optional Redemption Price therefor in same-day funds by
wire transfer to an account designated by the Remarketing Dealer on the
Remarketing Date.
10. Denominations; Transfer; Exchange.
---------------------------------
The MOPPRS are in registered form without coupons in denominations of
$1,000 and whole multiples of $1,000. A Holder may transfer or exchange MOPPRS
in accordance with
9
<PAGE>
the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements or transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture.
5. Persons Deemed Owners.
-- ---------------------
The registered Holder of this MOPPRS may be treated as the owner of it
for all purposes.
11. Unclaimed Money.
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
6. Discharge and Defeasance.
-- ------------------------
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the MOPPRS and the Indenture with respect
to the MOPPRS. If the Company deposits with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the MOPPRS
to redemption or maturity, as the case may be.
14. Amendment, Waiver.
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture with respect to the MOPPRS or the MOPPRS may be amended with the
written consent of the Holders of at least a majority in principal amount
outstanding of the MOPPRS and (ii) any default or non-compliance with any
provision with respect to the MOPPRS may be waived with the written consent of
the Holders of a majority in principal amount outstanding of the MOPPRS.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Holder, the Company and the Trustee may amend the Indenture or the MOPPRS to
cure any ambiguity, omission, defect or inconsistency, or to comply with Article
V of the Indenture, or to provide for uncertificated Securities in addition to
or in place of certificated Securities, or to add guarantees with respect to the
MOPPRS or to secure the MOPPRS, or to add additional covenants or surrender
rights and powers conferred on the Company, or to comply with any request of the
SEC in connection with qualifying the Indenture under the Act, or to make any
change that does not adversely affect the rights of any Holder, or to evidence
and provide for the acceptance of appointment of a successor Trustee or separate
Trustee (or to change any provisions of the Indenture relating to such
appointment).
10
<PAGE>
15. Defaults and Remedies.
----------------------
Under the Indenture, Events of Default include a (i) default in the
payment of any interest upon any of the MOPPRS for 30 days or more after such
payment is due; (ii) default in the payment of the principal of and premium, if
any, on any of the MOPPRS when due; (iii) default by the Company in the
performance, or breach, of any of its other covenants in the Indenture which
will not have been remedied by the end of a period of 60 days after written
notice to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in principal amount of the outstanding MOPPRS; (iv)
failure to pay when due the principal of, or acceleration of, any indebtedness
for money borrowed by the Company or a Subsidiary in excess of $50.0 million
principal amount, if such indebtedness is not discharged, or such acceleration
is not annulled, by the end of a period of 30 days after written notice to the
Company by the Trustee or to the Company and the Trustee by the Holders of at
least 25% in principal amount of the outstanding MOPPRS; and (v) certain events
of bankruptcy, insolvency or reorganization of the Company.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the MOPPRS may declare all the
MOPPRS to be due and payable immediately. Certain events of bankruptcy or
insolvency are Events of Default which will result in the MOPPRS being due and
payable immediately upon the occurrence of such Events of Default.
Holders may not enforce the Indenture or the MOPPRS except as provided
in the Indenture. The Trustee may refuse to enforce the Indenture or the MOPPRS
unless it receives reasonable indemnity or security. Subject to certain
limitations, Holders of a majority in principal amount of the MOPPRS may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from Holders notice of any continuing Default (except a Default in payment of
principal or interest) if it determines that withholding notice is in the
interest of the Holders.
7. Trustee Dealings with the Company.
-- ---------------------------------
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of MOPPRS and may otherwise deal with and collect obligations owed to it
by the Company and may otherwise deal with the company with the same rights it
would have if it were not Trustee.
8. No Recourse Against Others.
-- --------------------------
A director, officer, employee or stockholder, as such, of the Company
or the Trustee shall not have any liability for any obligations of the Company
under the MOPPRS or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a MOPPRS, each
Holder waives and releases all such liability. The waiver and release are part
of the consideration for the issue of the MOPPRS.
11
<PAGE>
9. Authentication.
-- --------------
This MOPPRS shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on this MOPPRS.
19. Abbreviations.
-------------
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/T/M/A (=Uniform Transfers to Minors
Act).
20. Governing Law.
-------------
THIS MOPPRS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
21. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the MOPPRS and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders. No representation is made as
to the accuracy of such numbers either as printed on the MOPPRS or as contained
in any notice of redemption and reliance may be placed only on the other
indentification numbers placed thereon.
12
<PAGE>
- --------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this MOPPRS, fill in the form below:
I or we assign and transfer this MOPPRS to
(Print or type assignee's name, address and zip code)
(Insert assignee's Soc. Sec. or Tax I.D. No.)
and irrevocably appoint agent to transfer this MOPPRS on
--------------
the books of the Company. The agent may substitute another to act for
him.
----------------------------------------------------------------------
Date: Your Signature:
--------- ---------------------------------------
----------------------------------------------------------------------
Sign exactly as your name appears on the other side of this MOPPRS.
SIGNATURE(S) GUARANTEED:
----------------------------------------------------------
Signature(s) must be guaranteed by a member of an approved
Signature Guarantee Medallion Program
EXHIBIT4.5.DOC
13
<PAGE>
(CYRO LETTERHEAD) EXHIBIT 10.1
February 19, 1993
To The Committee of Partnership Representatives
of CYRO Industries
Gentlemen:
Under the terms of CYRO's 1976 Partnership Agreement, the purposes of the
Partnership are stated as:
"the manufacture and sale in the Western Hemisphere (i.e., North America,
South America, Central America the Caribbean, Bermuda and Hawaii) of methyl
methacrylate monomer and products of methyl methacrylate-based plastics and the
toll manufacture and sale of polycarbonate-based plastics, directly or through
other wholly-owned entities. The Partnership will not engage in any other
business or activity without the consent of both Partners evidenced by an
---------
amendment to this Agreement."
- ---------------------------
In the 1980's, CYRO secured approval of the Partners to enter into the direct
manufacture of polycarbonate double skinned sheet and later the direct
manufacture of polycarbonate monolithic sheet products. The purpose of this
letter is to record that fact and serve as an official amendment to the
Partnership Agreement.
Sincerely,
/s/M.A. Taylor
Approved:
On behalf of Cyanamid Plastics, Inc.
/s/ W.A. Liffers 2/19/93
- ---------------------------------------
Mr. W.A. Liffers Date
Approved:
On behalf of Rohacryl, Inc.
/s/ Nothnagel 2/19/93
- -------------------------------------
Dr. K. Nothnagel Date
RS/gc
<PAGE>
EXHIBIT 10.2
AMENDMENT TO
JOINT VENTURE AGREEMENT
-----------------------
AGREEMENT dated April 30, 1987, by and between CYANAMID MELAMINE, INC., a
New Jersey corporation ("Cyanamid"), and DCP MELAMINE NORTH AMERICA, Inc., a
Delaware corporation ("DCPNA").
WHEREAS, the parties have entered into a Joint Venture Agreement, dated
April 15, 1986, and now desire to amend and supplement said Agreement, it is
hereby agreed that:
1. Article 18. ENVIRONMENTAL of the Joint Venture Agreement is amended to read
as follows:
(a) Cyanamid represents to DCPNA and the JV that, to the best of its
knowledge,
(1) the Site is not in violation of any environmental law, and
(2) there is on the Site no latent soil or groundwater condition,
which, during the term of the Management Agreement, would
violate any environmental law or create an unreasonable risk of
personal injury or property damage, and
(3) there is on Site no soil or groundwater condition, which would
cause a reasonable party, if it were in DCPNA's position and, if
such condition was or would become known to it, not to approve
the Joint Venture Agreement.
<PAGE>
(b) Cyanamid shall, at the commencement of the Connection Period, make the same
representation as in Article 18(a) or make known to DCPNA in writing and
detail the reasons why such representation cannot be made by Cyanamid at such
time, and in such case the parties shall together review the then prevailing
situation and shall try in good faith to agree on a mutually acceptable
solution.
(c) Cyanamid shall retain responsibility for any soil or groundwater condition
which violates any environmental law except to the extent that Cyanamid
demonstrates that the condition was the result of any activity or operation
performed by or on behalf of the JV (in which case the condition shall be
the responsibility of the JV). The JV or Cyanamid shall have the
responsibility of defending any claim, demand, cause of action or
proceeding to the extent that the condition involved is its responsibility.
If Cyanamid or the JV is required to defend against a third party, it shall
be entitled to receive from the other all cooperation and assistance
reasonably required for the defense.
(d) With regard to environmental matters other than soil or groundwater
condition, Cyanamid shall retain responsibility for demonstrated non-
compliance with any applicable environmental law which occurred at the Site
prior to the commencement of the Connection Period to the extent caused by
events which occurred prior to the commencement of the Connection Period.
After the commencement of the Connection Period, the JV shall have
responsibility for non-compliance with any applicable environmental law
caused by events subsequent to the commencement of the Connection Period
including any additional contribution to any pre-existing condition. The
JV or Cyanamid shall assume the defense of
<PAGE>
any claim, demand, cause of action or proceeding to the extent it is based
upon its non-compliance.
(e) For the purpose of Section 18(a) best knowledge means the knowledge which
is or has been with present or former personnel of Cyanamid specifically or
generally responsible for environmental matters or technical or legal
advisors or consultants on environmental matters.
(f) As used in this Agreement, the term "environmental law" shall mean any
Federal, state, local, or other environmental statute, rule, regulation,
or governmental order including, but not limited to, the Resource
Conservation and Recovery Act, 42 U.S.C. S-6901 et. seq., the Federal Water
--------
Pollution Control Act, 33 U.S.C. S-1251 et. seq., the Comprehensive
---------
Environmental Response, Compensation and Liability Act, 42 U.S.C. S-9601
et. seq., and the Louisiana Environmental Quality act, 30 La. Rev. Stat.
--------
S-1051, et. seq., in each case, as amended, and the rules and regulations
--------
promulgated thereunder.
2. Article 17(b) of the Joint Venture Agreement is amended to add as new
sentences at the end of Article 17(b) the following:
"It is the intention of the parties that the provisions of 17(b) are not
applicable to the specific contractual obligations between the parties or
their affiliates. For example, it does not apply to the obligations
created by Article 5(f) or by Article 18(c) and (d) of the Joint Venture
Agreement."
3. Article 5 (d) of the Joint Venture Agreement is amended to add, after the
first sentence thereof, the following:
<PAGE>
The property and equipment described in Exhibits A & B attached does not
include any UTI designed property or equipment and it is the intention of the
parties not to transfer any such UTI designed property equipment.
Cyanamid shall not transfer title to the presently operating effluent
treatment system, known as Phase III, but at the Joint Venture's request shall
maintain and operate the system for treatment of effluent provided the JV pays
the costs of operation and maintenance calculated as if title to such equipment
has been transferred to the JV and in accordance with the principles of the
Management Assistance Agreement. Cyanamid may terminate its obligation to
maintain and operate such system upon two years prior notice, such notice not to
be given prior to the Operation Date.
4. Article 5(f) of the Joint Venture Agreement is amended to add after
paragraph (xi) at thereof, the following:
(xii) The JV's obligations under Article 5(f)(xi) and DCP's obligations to
supply improvements or information under Article 5(f)(ii), (iii), (vi)
and (vii) shall cease five years after DCP (or an affiliate to which it
has assigned its interest in the JV) has ceased to be an Associate of the
Joint Venture, or upon a manufacturer of melamine or a licensor of
melamine production technology becoming an Associate of the Joint
Venture, whichever occurs sooner. Additionally, DCP would, at the JV's
request and if same could not reasonably be provided by the JV, ACC or a
third party, use its best efforts to provide basic process engineering
necessary to implement such improvements at reasonable terms and
conditions.
<PAGE>
(xiii) DCP's obligations under Article 5(f)(iv), (v), (viii), and (ix) shall
cease when DCP (or an affiliate to which it has assigned its interest in the JV,
ceases to be an Associate of the JV.
5. Article 19(d)(ii) of the Joint Venture Agreement is amended to add at
the end thereof:
"unless different values are denoted in the Technology License Agreement".
6. Article 19(d)(iii) of the Joint Venture Agreement is amended to read as
follows:
(iii) DCP agrees to provide the necessary engineering and to compensate the
JV for costs or damages incurred upon a Failure of a Test Run as further
defined in Article V of the Technology License Agreement.
This Agreement is to be construed, and the respective rights and duties of the
parties are to be determined, according to the law of the State of
New Jersey.
IN WITNESS WHEREOF, the parties have executed this Amendment to the Joint
Venture Agreement as of the day and year first above written.
DCP MELAMINE NORTH AMERICA, INC. CYANAMID MELAMIN, INC.
By:/s/ Van Waer By: /s/ A.J. Castello
-------------- -------------------------
President President
EXHIBIT10.2.DOC
<PAGE>
EXHIBIT 10.3
AMENDMENT TO THE
JOINT VENTURE AGREEMENT DATED APRIL 15, 1986
THIS AMENDMENT, effective as of the 1ST day of MAY, 1994, to the Joint
Venture Agreement dated April 15, 1986 by and between CYTEC MELAMINE INC.
(formerly, Cyanamid Melamine, Inc.), a New Jersey corporation ("CYTEC") and DSM
MELAMINE AMERICAS, INC. (formerly, DCP Melamine North America, Inc.), a Delaware
corporation ("DMA"):
WITNESS:
WHEREAS, American Cyanamid Company, with the consent of DSM Chemicals &
Fertilizers, B.V. (formerly, DSM Chemische Producten B.V.), transferred its
interest in Cyanamid Meamine, Inc. (now known as Cytec Melamine Inc.) to Cytec
Industries Inc.; and
WHEREAS, the parties wish to reflect these changes and to amend the
procedures for managing their joint venture, American Melamine Industries
("AMEL");
NOW THEREFORE, in consideration of the premises and of the mutual covenants
herinafter set forth, the parties agree as follows:
1. All references to Cyanamid Melamine, Inc. and Cyanamid in the Joint
Venture Agreement shall be changed to Cytec Melamine Inc. and Cytec,
respectively, to reflect the change in name of Cyanamid Melamine, Inc.
<PAGE>
2. All references to DCP Melamine North America, Inc. and DCPNA in the
Joint Venture Agreement shall be changed to DSM Melamine Americas, Inc. and DMA,
respectively, to reflect the change in name of DCP Melamine North America, Inc.
3. Article 9 of the Joint Venture Agreement shall be amended to read, in
its entirety, as follows:
9. Representation and Meetings.
---------------------------
(a) Management Committee. The JV shall be managed by a Management
--------------------
Committee comprised of four (4) voting members, two (2) ex-officio, non-voting
members, and one non-voting secretary.
(1) Voting Members. Each Associate shall be represented at the
--------------
meetings by two (2) voting members designated in advance by each respective
Associate as Committee members. Each Committee member shall have one vote
on all matters, in person or by proxy. No actions at any meeting or
requiring the consent of each Associate shall be valid without the
affirmative vote of at least three (3) Committee members, except as
otherwise provided in Section 9(c).
(2) Non-voting Members. The General Manager of the JV, appointed
------------------
pursuant to Section 9(c) hereinafter, and the Technical Assistant provided
by DSM Chemicals & Fertilizers B.V. (formerly, DSM Chemische Producten
B.V.)("DCF") pursuant to Article III of the Technology License Agreement
dated April 30, 1987 by and between AMEL
<PAGE>
and DCF, shall both serve as ex-officio, non-voting members of the
Management Committee.
(3) Committee Secretary. Each Associate may also be represented at
-------------------
each meeting of the Management Committee by one (1) attorney who shall have
no vote. On an annual basis, alternating each September, one Associate
shall furnish an attorney who shall function as secretary to the Committee
and who shall prepare minutes of the proceedings of the Management
Committee and insure that compliance with antitrust regulations is
maintained throughout each meeting.
(4) Committee Chairman. The Associate furnishing the Committee
------------------
secretary shall also designate one of its voting representatives to serve
as Chairman of the Committee for the annual term beginning in September and
ending the following August. The Chairman shall function primarily to
conduct each meeting of the Committee according to a pre-agreed agenda, and
may call a special meeting of the Committee whenever either Associate so
requests.
(b) Meetings. The Management Committee shall hold meetings at such times
--------
as the Associates may agree, so long as adequate advance notice is given of such
meetings or such notice is otherwise waived by each Associate or each Committee
member. Attendance at any meeting by a Committee member shall be deemed to be a
waiver by such member of any objection as to the adequacy of the notice for such
meeting. All meetings of the Management Committee shall be held at the Fortier
Facility in Jefferson Parish, Louisiana, unless otherwise agreed. Other than
the voting and non-voting members of the Committee, no persons shall be
<PAGE>
allowed to attend Committee meetings unless (i) providing a report to the
Committee, and then only for the duration of the report and any discussion
period thereafter, or (ii) as otherwise agreed between the Associates.
(c) General Manager. The Management Committee shall appoint a General
---------------
Manager of the JV who will be responsible for the management of the JV and will
operate the Improved Plant in accordance with the Management Agreement. The
General Manager shall serve at the pleasure of the Management Committee and may
be removed by vote of any two (2) of the four (4) voting Management Committee
members. The General Manager shall, following appointment, become an employee
of the JV for purposes of operating the JV and will report and be responsible to
the Management Committee with regard to all matters pertaining to the operation
of the Improved Plant. The General Manager shall also be or become an employee
of Cytec Industries Inc. and will report and be responsible to the Manager of
the Fortier Facility with regard to all matters generally affecting the Fortier
Facility including, without limitation, safety, environmental, personnel, etc.
He shall furnish copies of all his reports to the Management Committee and to
the manager of the Fortier Facility and shall keep them fully informed of all
developments. He shall receive his compensation and benefits from Cytec
Industries Inc. or its Affiliate, the cost of which will be part of the costs
paid by the JV under the Management Agreement.
(d) Removal. A Management Committee member may be removed only by the
-------
Associate which designated him. A vacancy shall be filled by the Associate
which designated the person last holding the vacant position. Neither Associate
shall designate as a Committee
<PAGE>
member any person with sales, marketing or pricing responsibility related to
melamine. It is intended that in the context of a production joint venture,
persons with only technical, financial or production responsibilities shall be
designated by either Associate.
4. The Joint Venture Agreement shall otherwise continue in force and
effect according to its terms and conditions as herein amended, which Agreement
is hereby ratified.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Amendment, by and through
their respective authorized representative, effective as of the date first
set forth above.
DSM MELAMINE AMERICAS, INC. ("DMA")
By: /s/ Ben B. McCloud
----------------------------
Ben B. McCloud, President
Attest:
/s/ W.P. Bivins
-------------------------------
W.P. Bivins, Secretary
CYTEC MELAMINE INC.
By: /s/ J.B. Reid
--------------------------------
Name/Title: J.B. Reid, Vice President
Attest:
/s/ E.F. Jackman
--------------------------------------
E.F. Jackman, Secretary
<PAGE>
EXHIBIT 10.4
AMENDMENT NO. 3
to
Joint Venture Agreement
by and between
Cytec Melamine Inc. (formerly Cyanmid Melamine, Inc.)
and
DSM Melamine Americas, Inc. (formerly DCP Melamine North America, Inc.)
AMENDMENT NO.DOC
This Amendment No. 3 to the Joint Venture Agreement made and entered into this
30TH day of January, 1995 and effective as of January 1, 1994 by and between
<PAGE>
Cytec Melamine Inc.
and
DSM Melamine Americas, Inc.
WITNESSETH THAT
WHEREAS
- -the parties hereto are parties to a Joint Venture Agreement dated April 15,
1986,
- -the parties wish to revise Section 5 (f) (X) 1) because the "Wage Index"
referred therein is defined as the index of Compensation Per Hour for the
Nonfarm Business Sector which is no longer reported by the Bureau of Labor
Statistics' Employment and Earnings Report.
NOW, THEREFORE, the parties hereby have agreed as follows:
1. Definitions
- ---------------
Terms defined in the Joint Venture Agreement shall have the same meaning in this
Amendment No. 3 to the Joint Venture Agreement.
2. Section 5 (f) (X) 1) of the Joint Venture Agreement
- -------------------------------------------------------
Lines 9 through 13 shall be restated as follows:
"The Wage Index referred to above is defined as the index of Industrial
Analytical Ratios for the nonfarm Business Sector, All Persons, as published by
the Bureau of Labor Statistics, U.S. Department of Labor, Office of Productivity
and Technology, Washington, D.C. 20212-001."
AS WITNESS the hands of the duly authorized representatives of the parties
hereto the day and year first before written.
<PAGE>
CYTEC MELAMINE INC. DSM MELAMINE AMERICAS, INC.
By: /s/ J. Barry Reid By: /s/ B.B. McCloud
----------------- ----------------
Name: J. Barry Reid Name: B.B. McCloud
Title: President Title: President
EXHIBIT10.4.DOC
<PAGE>
Exhibit 12
Cytec Industries Inc.
Computation of Ratio of Earnings to Fixed Charges
(Dollar amounts in millions)
Three
Months Ended
------------
3/31/98 3/31/98
------- -------
Earnings (loss) before income taxes 52.2 45.2
Add:
Interest on indebtedness
net of capitalized interest 6.4 1.6
Portion of rents representative
of the interest factor 1.7 1.3
----- -----
Earnings as adjusted 60.3 48.1
Fixed charges:
Interest on indebtedness 6.5 1.8
Portion of rents representative
of the interest factor 1.7 1.3
----- -----
Fixed charges 8.2 3.1
----- -----
Ratio of earnings to fixed charges 7.4 15.5
----- -----
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM-10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 29,300
<SECURITIES> 0
<RECEIVABLES> 242,700
<ALLOWANCES> 10,100
<INVENTORY> 135,600
<CURRENT-ASSETS> 507,500
<PP&E> 1,277,500
<DEPRECIATION> (646,400)
<TOTAL-ASSETS> 1,686,600
<CURRENT-LIABILITIES> 395,200
<BONDS> 199,400
0
100
<COMMON> 500
<OTHER-SE> 414,100
<TOTAL-LIABILITY-AND-EQUITY> 1,686,600
<SALES> 368,200
<TOTAL-REVENUES> 368,200
<CGS> 258,400
<TOTAL-COSTS> 322,000
<OTHER-EXPENSES> (2,900)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,700 <F1>
<INCOME-PRETAX> 49,500 <F2>
<INCOME-TAX> 18,300
<INCOME-CONTINUING> 31,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,200
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.66
<FN>
<F1> THIS NUMBER REPRESENTS INTEREST EXPENSE, NET
<F2> THIS NUMBER INCLUDES EQUITY IN NET INCOME OF ASSOCIATED COMPANIES OF
$5,100,000 FOR THE THREE MONTHS ENDED MARCH 31, 1998.
</FN>
</TABLE>
<PAGE>
EXHIBIT 99
Pursuant to Rule 12b-23 under the Securities and Exchange Act, the following
exhibit containing text from the Company's Annual Report on Form 10-K is filed
as to matters incorporated by reference in Part II, Item 1 ("Legal
Proceedings").
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state and foreign laws and
regulations which impose stringent requirements for the control and abatement of
air and water pollutants and contaminants and the manufacture, transportation,
storage, handling and disposal of hazardous substances, hazardous wastes,
pollutants and contaminants.
In particular, under the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") and various other federal and state laws, a current or
previous owner or operator of a facility may be liable for the removal or
remediation of hazardous materials at the facility. Such laws typically impose
liability without regard to whether the owner or operator knew of, or was
responsible for, the presence of such hazardous materials. In addition,
pursuant to the Resource Conservation and Recovery Act ("RCRA") and state laws
governing the generation, transportation, treatment, storage or disposal of
solid and hazardous wastes, owners and operators of facilities may be liable for
removal or remediation, or other corrective action at areas where hazardous
materials have been released at a facility. The costs of removal, remediation
or corrective action may be substantial, and the presence of hazardous materials
in the environment at any of the Company's facilities, or the failure to abate
such materials promptly or properly, may adversely affect the Company's
abilities 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.
<PAGE>
In addition, certain state and federal laws govern the abatement, removal, and
disposal of asbestos-containing materials and the maintenance of underground
storage tanks equipment which contains or is contaminated by polychlorinated
biphenyls.
RS/gc
EXHIBIT99.DOC
