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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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
CYTEC INDUSTRIES INC.
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(Exact name of registrant as specified in its charter)
Delaware 22-3268660
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Five Garret Mountain Plaza
West Paterson, New Jersey 07424
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (973) 357-3100
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
------------------- which registered
Common Stock, par value --------------------------
$.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
----------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports and (2) has been subject to such filing
requirements for the past 90 days. Yes x No .
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
There were 43,255,148 shares of common stock outstanding on February 1, 1999.
Non-affiliates held 42,909,562 of these shares with an aggregate market value of
$976,186,370 based on the closing price (22 3/4) of such stock on such date.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Part of Form 10-K
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Portions of Proxy Statement for 1999 Annual Meeting Parts III, IV
of Common Stockholders, dated March 22, 1999.
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COMMENTS ON FORWARD-LOOKING STATEMENTS
A number of the statements made by the Company in this Annual Report on Form 10-
K, or in other documents, including, but not limited to, the Company's Annual
Report to Stockholders, its press releases and in its other periodic reports to
the Securities and Exchange Commission, may be regarded as "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995.
Forward-looking statements include, among others, statements concerning the
Company's outlook for 1999 and beyond, the accretiveness of acquisitions,
pricing trends and forces within the industry, the completion dates of capital
projects, expected sales growth, cost reduction strategies and their results,
long-term goals of the Company and other statements of expectations, beliefs,
future plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts.
All predictions as to future results contain a measure of uncertainty and
accordingly, actual results could differ materially. Among the factors that
could cause a difference are: changes in the general economy; changes in demand
for the Company's products or in the costs and availability of its raw
materials; the actions of competitors; the success of our customers' demands for
price decreases; technological change; changes in employee relations, including
possible strikes; government regulations; litigation, including its inherent
uncertainty; difficulties in plant operations and materials transportation;
environmental matters; and other unforeseen circumstances. A number of these
factors are discussed in this and other of the Company's filings with the
Securities and Exchange Commission.
PART I
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Item 1. Business
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The Company is a vertically integrated specialty chemicals and materials
company which focuses on value-added products. The Company develops,
manufactures and markets specialty materials, water and industrial
process chemicals, performance products, and building block chemicals to
serve a broad group of end users, including the aerospace, plastics,
coatings, mining, paper, water treatment and automotive industries. The
Company has manufacturing facilities in eight countries and sells its
products worldwide. The Company had net sales of $1,444.5 million and
earnings from operations of $185.5 million in 1998. In addition, the
Company has a 50% interest in each of four unconsolidated associated
companies and had a 50% interest in a fifth, the Dyno-Cytec joint
venture, through July 31, 1998. The associated companies had aggregate
net sales of $583.0 million and gross profit of $153.3 million in 1998.
The Company reported $20.3 million of equity in earnings from associated
companies in 1998.
The Company operates in four segments: specialty materials, water and
industrial process chemicals, performance products and building block
chemicals. Specialty materials principally include aerospace materials
and, before 1999, molding compounds. Water and industrial process
chemicals principally include paper, water treating and mining chemicals
and phosphine chemicals. Performance products principally include
specialty resins, polymer additives, surfactants and specialty monomers
and urethane systems. Building block chemicals principally include
acrylonitrile, acrylamide, melamine, methanol, ammonia, and sulfuric
acid.
The Company's management regularly reviews the business portfolio of the
Company in terms of strategic fit and financial performance and may from
time-to-time dispose of products or product lines and/or acquire
additional products or technologies. The Company completed three
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acquisitions and two divestitures during 1998 and one acquisition and one
divestiture during 1997. See Note 2 of the Notes to the Consolidated
Financial Statements included in Item 8.
Subsequent to year end 1998, the Company also acquired Nottingham Co.'s
specialty chemical industrial minerals product line for approximately
$4.0 million and sold all but one of its engineered molding compounds
product lines for approximately $4.3 million.
Unless indicated otherwise, the term "Company", with respect to periods
beginning on or after December 17, 1993, the effective date of the
transfer of substantially all of the assets and liabilities of the
chemicals businesses of American Cyanamid Company ("Cyanamid") to the
Company (the "Spin-off"), refers collectively to Cytec Industries Inc.,
and its subsidiaries, and with respect to periods prior to the Spin-off,
the term refers to the chemicals businesses of Cyanamid. Cyanamid was
acquired by American Home Products Corporation in November 1994. Cytec
was incorporated as an independent public company in December 1993.
Specialty Materials Segment
The specialty materials segment had revenues of approximately $492.2
million in 1998 and $264.3 million in 1997, or approximately 34.1% and
20.5%, respectively, of the Company's net sales in such years. Most of
this increase was due to the acquisition by the Company of substantially
all the assets and liabilities of Fiberite, Inc (the "Fiberite
Acquisition") on September 30, 1997. The assets acquired included all of
Fiberite's businesses except its satellite materials business. The
majority of the Fiberite operations were combined with Cytec Engineered
Materials Inc., a wholly owned subsidiary, which was renamed Cytec
Fiberite Inc. On October 9, 1998 the Company completed its acquisition of
The American Materials & Technologies Corporation ("AMT"), a manufacturer
and marketer of advanced composite materials. After its acquisition,
AMT's advanced composites product line was integrated into Cytec Fiberite
and its graphite golf shaft business was sold.
Since the Company sold its acrylic fibers product line in January 1997,
its bulk molding compounds product line in November 1998 and all but one
of its engineered molding compounds product lines in January 1999, the
specialty materials segment now includes primarily aerospace materials.
The Company's acrylic fiber product line accounted for approximately 0%,
1% and 11% of the Company's 1998, 1997 and 1996 net sales.
Set forth below are the Company's primary specialty materials product
lines, major products and their principal applications.
<TABLE>
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PRODUCT LINE MAJOR PRODUCTS PRINCIPAL APPLICATIONS
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<S> <C> <C>
Aerospace materials Structural adhesives, - Commercial and military aviation,
advanced composites. high performance automobiles, selected
recreational products, satellite structure,
aircraft composite brakes.
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</TABLE>
Aerospace Materials
The Company is the major global supplier of aerospace structural
adhesives. With the Fiberite Acquisition, the Company became one of two
major suppliers of aerospace advanced composite
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materials. Advanced composites are exceptionally strong and lightweight
materials manufactured by impregnating fabrics and tapes made from high
performance fibers with epoxy, bismaleimide, phenolic, polyimide and
other resins formulated or purchased by the Company. Advanced composites
accounted for approximately 26%, 11% and 5% of the Company's 1998, 1997,
and 1996 net sales. The increase in percentage from 1996 to 1997 and from
1997 to 1998 was due primarily to the Fiberite Acquisition.
The primary applications for both aerospace adhesives and advanced
composites are commercial and military aerospace programs. Sales are
dependent to a large degree on the commercial and military aircraft build
rate and the number of applications and aircraft programs for which the
Company is a qualified supplier. Every major commercial and military
airframe program in the Western world has qualified and uses the
Company's products. Sales to The Boeing Company and its subcontractors
for commercial and military aerospace and other components are estimated
to aggregate approximately $200 million, or 13.8% of the Company's
consolidated net sales in 1998. Loss of sales to The Boeing Company and
its subcontractors could have a material impact on the Company's
financial results.
Advanced composites generally account for a higher percentage of the
structural weight on military aircraft than on commercial aircraft. They
also account for a higher percentage of the structural weight on newer
design commercial aircraft than older design commercial aircraft as
technology progresses and manufacturers design planes to achieve greater
fuel efficiency. Advanced composites made from carbon fibers and epoxy
or bismaleimide resins are primarily used for structural aircraft
applications such as wing, tail and rudder components, engine housings,
and fuselage components while advanced composites made from fiberglass
fibers and phenolic resins are primarily used for interior aircraft
applications such as sidewall, ceiling and floor panels and storage and
cargo bins. The Company's structural adhesives and advanced composites
also have various applications in industrial and selected recreational
products. In addition, the Company's ablatives are used in manufacturing
rocket nozzles and the Company's carbon/carbon braking products are used
in manufacturing aircraft and other high performance brakes.
The Company purchases from third parties both the fibers, usually carbon,
aramid or glass, and the base resins used in the manufacture of
composites. See "Customers and Suppliers" and Item 3, "Legal
Proceedings."
The Company markets aerospace materials through a global sales and
technical service staff which services commercial aircraft manufacturers
and their subcontractors and also markets to U.S. and European defense
programs.
Water and Industrial Process Chemicals Segment
The water and industrial process chemicals segment had revenues of
approximately $349.4 million in 1998 and $351.3 million in 1997, or
approximately 24.2% and 27.2%, respectively, of the Company's net sales
in such years.
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Set forth below are the Company's primary product lines and major
products in the water and industrial process chemicals segment, and their
principal applications.
<TABLE>
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PRODUCT LINE MAJOR PRODUCTS PRINCIPAL APPLICATIONS
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Paper chemicals (1) Sizing agents, strength - Paper manufacturing and recycling
resins, retention,
drainage/formation aids,
flocculants
Water treating chemicals(1) Organic flocculants, - Water and wastewater treatment, oil
coagulants, filter aids, field drilling
drilling mud additives and
biocides
Mining chemicals(1) Reagents, proprietary - Mineral, sulfide ore, alumina and
promoters, collectors, coal processing
frothers, flocculants,
defoamers, solvent
extractants, dispersants,
filter aids
Phosphine chemicals Phosphine and phosphine - Metal and mineral separation,
derivatives, including catalysts, electronics; chemical,
metal extractants, pharmaceutical and agricultural uses
catalysts, chemical
intermediates, flame
retardants
</TABLE>
(1) Sales of this product line are also made by Mitsui Cytec, Ltd. ("Mitsui
Cytec"), an unconsolidated associated company owned 50% by Mitsui Chemicals
Inc. See "Associated Companies."
Paper, Water Treating and Mining Chemicals
The Company's paper, water treating and mining chemicals are comprised
primarily of organic flocculants, sizing agents and other specialty paper
additives and mining reagents. Organic flocculants are synthetic water
soluble polymers utilized primarily in liquid-solid separation processes
(i.e., separating solid waste or particulate matter from water). The
Company manufactures organic flocculants at five plants in North America
and two in Europe. In addition, Mitsui Cytec manufactures and markets
organic flocculants in Japan. The Company manufactures all basic forms of
organic flocculants in hundreds of variations, designed to industry and
customer specific application requirements. The primary applications of
these products are municipal and industrial wastewater treatment, paper
manufacturing and mineral processing.
Water treatment is the largest application for organic flocculants, which
are used as coagulants in the treatment of municipal drinking water and
industrial influent water supplies, as sludge conditioners for municipal
waste water treatment, and as treatments in industrial waste streams to
remove suspended solids. Competition is generally intense in wastewater
treatment applications, particularly for municipal accounts, where
contracts are generally awarded on a competitive bid basis, and for those
industrial applications where service is not an important factor.
The Company is one of the leading suppliers of organic flocculants to the
U.S. paper industry. Organic flocculants are used as performance aids in
the manufacturing of paper and as part of environmental wastewater
management. In addition to flocculants, paper chemical products include
wet and dry strength resins, retention/drainage/formation aids, alkaline
and surface sizing agents and other specialty additives. The Company is
the leading global supplier of alkenyl succinic anhydride-based paper
sizing used in alkaline papermaking.
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Alkaline papermaking processes are considered more environmentally
friendly, and also permit the use of lower cost paper fillers while
maintaining sheet strength. The Company also sells the specialized
flocculants used to treat the large volumes of water required to wash and
remove inks in paper recycling mills. Overall demand for paper chemicals
is cyclical, varying with paper industry production.
The Company's mining chemical products include organic flocculants and
reagents, and are primarily used in applications to separate minerals
from raw ores. The Company also manufactures and sells phosphine
chemicals specialty reagents with leading positions in cobalt/nickel
separation and copper sulfide recovery applications. Demand for mining
chemicals is cyclical and varies with industry conditions for the
particular minerals with respect to which the Company's products have
processing applications. The Company has extended its mining chemicals
product line to include frothers and defoamers, products acquired in
connection with the Company's acquisition of the OrePrep minerals
processing product line from Baker Petrolite Corporation in June 1998 and
Nottingham Co.'s specialty chemical industrial minerals product line in
January 1999.
The Company generally competes in the water treating, paper and mining
chemicals areas on the basis of cost, performance and service. In many
applications, the Company's products are positioned in the middle of the
market where the Company competes both against companies which offer
higher levels of service or a broader line of products at generally
higher prices and against companies which offer lower levels of service
or product performance at generally lower prices. Each of the Company's
water treating, paper and mining chemical product lines is marketed
through a specialized sales and technical services staff and also through
distributors and resellers.
Other Water and Industrial Process Chemicals
The Company sells other specialty chemicals for a variety of
applications. The major products in this category are oil field
chemicals and phosphine chemicals. The Company also is the largest
supplier of ultra-high purity phosphine gas, used in semiconductor
manufacturing operations, and has significant positions in various
phosphine derivative products.
Performance Products Segment
The performance products segment had revenues of approximately $403.4 in
1998 and $395.1 in 1997, or approximately 27.9% and 30.6%, respectively,
of the Company's net sales in such years. Set forth below are the
Company's primary performance products product lines, major products and
their principal applications:
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<TABLE>
<CAPTION>
PRODUCT LINE MAJOR PRODUCTS PRINCIPAL APPLICATIONS
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<S> <C> <C>
Specialty resins (1) Melamine cross-linkers, - High performance automotive, coil, can
urea crosslinkers, and wood coatings; radial tire adhesion
urethane chemicals, promoters.
ultraviolet absorbers for
coatings
Polymer additives Ultraviolet absorbers - Plastics, coatings, fibers
and stabilizers,
antioxidants
Surfactants and Specialty Surfactants and specialty - Emulsion polymers and coatings
Monomers crosslinking monomers
</TABLE>
(1) Sales of this product line are also made by Mitsui Cytec. See "Associated
Companies."
Specialty Resins
The Company manufactures and markets melamine cross-linking resins
("Resins"), primarily under the CYMEL' trademark, for industrial coatings
applications. The Company produces Resins using melamine, one of the
Company's building block chemicals. After its acquisition of Dyno
Industrier ASA's 50% interest in Dyno-Cytec in July 1998, the Company now
sells Resins worldwide except in Japan, where Resins are manufactured and
sold by Mitsui Cytec, to manufacturers producing coatings for automotive,
marine, wood and metal finishings, and appliances, containers, coils and
general industrial maintenance coatings. The Company believes that it is
one of the largest global suppliers of Resins. In addition, the Company
manufactures a line of adhesion promoters under the CYREZ' trademark.
These products are used globally in the rubber industry, the major
application being in the manufacture of steel belted radial tires to
enhance the bonding of the steel and polyester cords to the rubber. The
Company markets Resins through a global sales and technical service staff
directly to large customers and through distributors to smaller
customers.
Polymer Additives
The Company is a significant global supplier to the plastics industry of
specialty additives which protect plastics from the ultraviolet radiation
of sunlight and from oxidation. Typical end use applications of the
Company's products include a wide variety of polyolefins which are used
in toys, lawn furniture and automotive applications, fibers for carpets,
spandex applications, engineered plastics and automotive coatings.
Demand for light stabilizers and high performance antioxidants for
plastics and coatings has been growing primarily due to increasing
manufacturer and consumer expectations for the service life of plastics
and coatings and the replacement of metal and other materials with
plastics in certain automotive applications and in outdoor toys and lawn
furniture. Ciba Specialty Chemicals AG is the dominant competitor in
this segment. The Company completed two capacity expansions in the
polymer additives product line in 1998: a new benzotriazole light
stabilizer plant in Botlek, The Netherlands and an expanded hindered
amine light stabilizer plant in Willow Island, West Virginia.
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Surfactants and Specialty Monomers
The Company is a leading global supplier of acrylamide based specialty
monomers and sulfosuccinate surfactants. These products are used in
emulsion polymers, paints, paper coatings, printing inks, varnishes,
agricultural chemicals, adhesives, textiles, mining chemicals, laundry
dry cleaning compounds, nonwoven binders, thermoplastic molded
components, multipurpose cleaning solutions, and antistatic softening
agents. The Company completed a major expansion of its surfactants
manufacturing facility at its Willow Island plant during 1998 which
allowed the Company to close its Linden, New Jersey plant even as it
increased overall manufacturing capacity for these products.
Other
The Company also manufactures and sells urethane systems and precision
parts through its subsidiary CONAP, Inc., primarily for use in electrical
components.
Building Block Chemicals Segment
The building block chemicals segment had revenues of approximately $199.3
million in 1998 and $265.3 million in 1997, or approximately 13.8% and
20.6%, respectively, of the Company's net sales in each year. The
decline in sales resulted from both decreased selling prices and volumes.
Building Block chemicals are manufactured primarily at the Company's
world-scale, highly integrated Fortier facility. The Fortier facility is
located on the Mississippi River near New Orleans, Louisiana and has
ready access to all major forms of transportation and supplies of raw
materials.
The Company manufactures building block chemicals that can be used as raw
materials in its water and industrial process chemicals and performance
products segments. The Company utilizes manufacturing joint ventures and
long-term sales contracts to reduce market risks and to assist the
Company in obtaining world-scale production economics.
The Company used approximately a third of its production of its building
block chemicals in the manufacture of certain water and industrial
process chemicals, performance products, and other building block
chemicals in 1998. The Company believes this integration, particularly
within the Fortier facility, provides the Company with a cost-effective,
reliable and high quality supply of significant raw materials.
Acrylonitrile
The Company anticipates that over the near term it will use internally
approximately 25% of its current acrylonitrile annual production capacity
of 475 million pounds to produce acrylamide and that up to more than 50%
will be sold pursuant to two long term supply-agreements expiring in 2002
and 2005, one of which provides for a cost based price and the other of
which provides for a market based price. Acrylonitrile sales volumes
remain depressed due to a combination of high supply and weak demand for
both acrylonitrile and its primary derivatives, acrylic fiber and ABS
plastics, primarily in Asia, which has also caused volumes sold under one
of the two long term supply agreements to drop sharply. The
acrylonitrile plant is operating at a reduced rate and will continue
production at the low rate until market conditions improve. During the
second quarter of 1995, the Company completed an expansion of its
acrylonitrile plant at the Fortier facility to
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increase the plant's annual production capacity by approximately 35% or
125 million pounds. The profitability of producing acrylonitrile is
influenced by supply and demand, by the cost of propylene, which is the
largest component of the cost of producing acrylonitrile, and by
manufacturing efficiency (i.e., yield and co-product recovery).
Hydrocyanic acid is produced as a co-product of the acrylonitrile
process. Substantially, all of the hydrocyanic acid produced by the
Company is sold to CYRO as a raw material for methyl methacrylate
("MMA").
Acrylamide
The Company anticipates that over the near term it will use internally
approximately 40% of its acrylamide annual production capacity of 200
million pounds primarily for the production of polyacrylamides. The
remainder of the Company's production is sold to third parties. The
Company manufactures acrylamide at its Fortier facility and also at its
Botlek facility in the Netherlands. The Company is one of the largest
producers and users of acrylamide in the world.
Melamine
The Company operates a melamine manufacturing plant with annual
production capacity of 155 million pounds at the Fortier facility for
American Melamine Industries ("AMEL"), a manufacturing joint venture
which is owned 50% by a subsidiary of DSM N.V. The Company anticipates
that over the near term it will use internally approximately 70% of its
50% share of AMEL's annual melamine production, primarily for the
production of Resins. The remainder of the Company's share of production
is sold to third parties. AMEL is one of two North American
manufacturers of melamine. AMEL has approved plans to expand the
production capacity of its melamine plant by approximately 15 million
pounds at a capital cost of approximately $20 million. Half the increase
in capacity and half the cost will be for the Company's account. The
Company expects the new capacity to come on line by the end of 1999.
Methanol
The Company operates a methanol manufacturing plant with annual
production capacity of 190 million gallons at the Fortier facility for
Fortier Methanol Company, a manufacturing joint venture which is 70%
owned by Methanex Corporation. The Company anticipates that over the
near term it will sell to CYRO for the production of MMA approximately 15
million gallons of methanol per year, equivalent to approximately 25% of
the Company's share of methanol production. The remainder of the
Company's share of methanol production is sold to Methanex Corporation
under a contract based on market prices. Fortier Methanol Company shut
down the methanol plant on March 1, 1999 for market related reasons.
Other Building Block Chemicals
The Company also manufactures and sells ammonia and sulfuric acid. The
Company operates an ammonia plant with annual production capacity of
440,000 tons at the Fortier facility for Avondale Ammonia Company, a
manufacturing joint venture which is 50% owned by LaRoche Industries.
The Company anticipates that during 1999, it will use internally
approximately 80% of the Company's share of the ammonia production from
such joint venture for the production of acrylonitrile by the Company and
the production of melamine by AMEL. Any balance of the Company's share
of ammonia not used internally is sold to LaRoche Industries under a long
term contract at market based prices.
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The Company sells sulfuric acid to third parties and also toll converts
substantially all of CYRO's spent sulfuric acid arising from the
manufacture of MMA under a long term service contract.
Some of the Company's building block chemicals show marked seasonality,
such as ammonia, the prices of which can fluctuate with agricultural
planting. Prices of building block chemicals also are sensitive to the
stages of economic cycles, energy prices and currency exchange rates, as
well as to periods of insufficient and excess capacity. The production of
building block chemicals is generally capital intensive, which may cause
strong downward pressure on prices in poor market environments as
producers tend to operate their plants at capacity even in poor market
environments. This situation may be exacerbated by the uncertain
economic environment in Asia, which in the past has accounted for a
significant portion of both supply and demand for various building block
chemicals including acrylonitrile. The Company sells building block
chemicals to third parties through a direct sales force and distributors.
Associated Companies
The Company has a 50% interest in each of four unconsolidated associated
companies after the acquisition of the other 50% of the Dyno-Cytec joint
venture in July 1998.
Acrylic Plastics and Methyl Methacrylate
CYRO Industries, an unconsolidated associated company, manufactures and
sells acrylic sheet and molding compound products, primarily under the
ACRYLITE' trademark. CYRO operates primarily in North America and
manufactures its acrylic products at four locations in the U.S. and at
one location in Canada. The Company's partner in CYRO, Huls A.G., has an
affiliate, Rohm GmbH, which manufactures MMA and acrylic sheet products
and molding compounds in Europe and makes its technological expertise
available to CYRO.
CYRO also manufactures MMA, most of which CYRO uses as a raw material in
the manufacture of acrylic sheet and molding compounds and the remainder
of which is sold to third parties. CYRO's world-scale MMA manufacturing
facilities are an integrated part of the Company's Fortier facility,
consuming substantially all the hydrocyanic acid produced by the Company
in connection with the manufacture of acrylonitrile. CYRO expanded its
MMA annual production capacity by approximately 25% in 1995 to 250
million pounds; at the same time the Company expanded its acrylonitrile
plant at the Fortier facility, increasing the supply of hydrocyanic acid
available to CYRO. CYRO further expanded its MMA annual production
capacity to approximately 278 million pounds at the end of 1997 and is in
the process of expanding its production capacity to approximately 290
million pounds by the end of 1999. The Company anticipates that over the
near term it will also sell to CYRO for the production of MMA
approximately 15 million gallons of methanol a year, equivalent to
approximately 25% of the Company's share of methanol production at the
Fortier facility.
Refinery and Styrene Catalysts
Criterion Catalyst Company L.P., an unconsolidated associated company,
manufactures primarily hydroprocessing catalysts, which are used in the
refining of crude oil. Criterion Catalyst also manufactures reforming
catalysts which are used in producing gasoline and other catalysts used
in the manufacture of styrene, a raw material for many plastics.
Criterion Catalyst is the largest global supplier of hydroprocessing
catalysts. The market for hydroprocessing catalysts expanded rapidly in
recent years as legislation in the United States and many other countries
has required,
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or provided tax incentives for, removal of sulfur from diesel and gas
fuel and as "sour" crude oil with more sulfur has constituted a larger
percentage of overall world crude supply. Accordingly, Criterion Catalyst
significantly expanded its worldwide manufacturing capacity in
hydroprocessing catalysts during 1996 and 1997.
Other
Mitsui Cytec, an unconsolidated associated company, manufactures and
sells in Japan specialty resins and manufactures in Japan and sells
throughout Asia certain organic flocculants. The Company has licensed
certain of its technology to Mitsui Cytec on an exclusive basis in Japan
and on an exclusive and non-exclusive basis in other parts of Asia.
A.C. Molding Compounds, an unconsolidated associated company is the
largest manufacturer of amino molding compounds in the United States and
Canada. Amino molding compounds are mature products, the primary markets
for which are electrical components and dinnerware, where price
competition is intense.
Competition
The Company operates in a highly competitive marketplace. It competes
against a number of other companies in each of its product lines,
although none of such companies competes with the Company in all of its
product lines. The Company's competitors are both larger and smaller
than the Company in terms of resources and market shares. Competition is
generally based on product performance, reputation for quality, price and
customer service and support. The degree and nature of competition
depends on the type of product involved.
In general, the Company competes by maintaining a broad range of
products, focusing its resources on products in which it has a
competitive advantage and fostering its reputation for quality products,
competitive prices and excellent customer service and support. Through
research and development, the Company seeks to increase margins by
introducing value-added products and products based on proprietary
technologies.
Customers and Suppliers
Due to the diversity of product lines in which the Company competes, no
customer accounts for more than 10% of the Company's net sales other than
The Boeing Company and its subcontractors as discussed under "Specialty
Materials - Aerospace Materials." See also the discussion under
"Building Block Chemicals - Acrylonitrile" above with respect to two
long-term sales contracts for acrylonitrile and Note 5 of the Notes to
the Consolidated Financial Statements in Item 8 regarding sales to CYRO
and other associated companies.
With respect to suppliers, the Company's vertical integration (i.e., its
manufacture of intermediates used to manufacture certain water and
industrial process chemicals and performance products) protects it from
being reliant on other companies for many significant intermediates. The
only significant raw materials required to manufacture the Company's
building block chemicals are natural gas, propylene, oxygen and sulfur,
which are readily available from several suppliers. The Company
generally attempts to retain multiple sources for high volume raw
materials, other than its own building block chemicals, in order to
minimize its
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reliance on any one supplier. The Company sources its requirements of
alkenyl succinic anhydride from a single supplier under a long term
exclusive supply agreement and sources its requirements of cationic
monomers from a single supplier under a long term agreement. Alkenyl
succinic anhydride and cationic monomers are important raw materials in
the paper, water treating and mining chemicals product lines. The Company
is dependent on a limited number of suppliers for carbon fibers which are
used in many of the Company's advanced composite products. Availability
of certain carbon fibers has occasionally been quite limited, although
availability has recently been adequate as suppliers have added capacity.
A number of the Company's customers operate in cyclical industries such
as the aerospace, automotive and paper industries. As a result, demand
for the Company's products from customers in such industries is also
cyclical. In addition, the profitability of sales of certain of the
Company's building block chemicals is cyclical due to the cyclicality
typically experienced with respect to the amount of industry wide
capacity dedicated to producing such chemicals.
International
The Company operates on a worldwide basis with manufacturing plants
located in seven countries (other than the United States). Export sales
to unaffiliated customers from the United States were $152.9 million for
1998, $144.9 million for 1997 and $161.5 million for 1996, or
approximately 11%, 11% and 13%, respectively of net sales in such years.
The Company markets its products internationally through Company sales
offices, distributors and one associated company as described above.
Foreign operations (exclusive of United States export sales) accounted
for approximately 28%, 28% and 26% in 1998, 1997 and 1996, respectively,
of net sales to unaffiliated customers.
The Company has had the goal for several years of increasing its
international sales (foreign source and export) to 50% of its total sales
by 1999. Both the acquisition of Fiberite and the divestiture of the
acrylic fibers product line had the effect of increasing the percentage
of the Company's sales made domestically and, as a result, will delay the
Company's achievement of this goal.
International operations are subject to various risks which are not
present in domestic operations, including political instability, the
possibility of expropriation, restrictions on royalties, dividends and
currency remittances, instabilities of foreign currencies, requirements
for governmental approvals for new ventures and local participation in
operations such as local equity ownership and workers' councils. The
Company does not believe that there is currently any material likelihood
of a material adverse effect on the Company in connection with its
existing foreign operations.
Research and Process Development
The Company conducts research and development activities in its facility
in Stamford, Connecticut as well as in several of its production
facilities. During 1998, 1997, and 1996, the Company expended an
aggregate of approximately $42.9 million, $44.7 million and $40.2
million, respectively, on Company-sponsored research and development
activities.
12
<PAGE>
Trademarks and Patents
The Company has more than 2,500 United States and foreign patents and
trademark applications and registrations for more than 165 product names.
The Company believes the loss of patent or trademark protection on any
one product or process would not have a material adverse effect on the
Company. While the existence of a patent is prima facie evidence of its
validity, the Company cannot assure that any of the Company's patents
will not be challenged, and it cannot predict the outcome of any
challenge.
Employees
Approximately 5,100 employees are engaged in the operations of the
Company, excluding employees of associated companies. Approximately
2,300 of the Company's employees are covered by union contracts. The
Company believes that its relations with both employees and the related
International Union leaderships are good. Union contracts at four
facilities covering approximately 16% of the Company's unionized
employees expire in the ordinary course prior to the end of 1999, the
most material of which is the contract at the Company's Botlek facility.
Additionally, the Coordinated Bargaining Benefit Agreement which defines
the negotiated employee benefits such as health, welfare, pension and
savings plans with all of the Company's U.S. unionized employees expires
in December 2000. Although the Company expects that it will reach
agreement with the unions with respect to these union contracts, there
can be no assurance that this will occur.
Operating Risks
The Company's revenues are dependent on the continued operation of its
various manufacturing facilities. The operation of chemical
manufacturing plants involves many risks, including the breakdown,
failure or substandard performance of equipment, natural disasters, and
the need to comply with directives of, and maintain all necessary permits
from, government agencies. In addition, the Company's operations can be
adversely affected by raw material supply disruptions, labor force
shortages or work stoppages and events impeding or increasing the cost of
transporting the Company's products. The occurrence of material
operational problems, including but not limited to the above events, may
have a material adverse effect on the productivity and profitability of a
particular manufacturing facility, or with respect to certain facilities,
the Company as a whole, during the period of such operational
difficulties. See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operation-Other" for a discussion of
certain risks relating to Year 2000 and Euroconversion issues.
The Company's operations are also subject to various hazards incident to
the production of industrial chemicals, including the use, handling,
processing, storage and transportation of certain hazardous materials.
These hazards can cause personal injury and loss of life, severe damage
to and destruction of property and equipment, environmental damage and
suspension of operations. Claims arising from any future catastrophic
occurrence at one of the Company's locations may result in the Company
being named as a defendant in lawsuits asserting potentially large
claims. See Item 3, "Legal Proceedings."
Environmental Matters
The Company is subject to various federal, state and foreign laws and
regulations which impose stringent requirements for the control and
abatement of air and water pollutants and contaminants
13
<PAGE>
and the manufacture, transportation, storage, handling and disposal of
hazardous substances, hazardous wastes, pollutants and contaminants.
In particular, under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and various other federal and
state laws, a current or previous owner or operator of a facility may be
liable for the removal or remediation of hazardous materials at the
facility. Such laws typically impose liability without regard to whether
the owner or operator knew of, or was responsible for, the presence of
such hazardous materials. In addition, pursuant to the Resource
Conservation and Recovery Act ("RCRA") and state laws governing the
generation, transportation, treatment, storage or disposal of solid and
hazardous wastes, owners and operators of facilities may be liable for
removal or remediation, or other corrective action at areas where
hazardous materials have been released at a facility. The costs of
removal, remediation or corrective action may be substantial, and the
presence of hazardous materials in the environment at any of the
Company's facilities, or the failure to abate such materials promptly or
properly, may adversely affect the Company's ability to operate such
facilities. CERCLA and analogous state laws also impose liability for
investigative, removal and remedial costs on persons who dispose of or
arrange for the disposal of hazardous substances at facilities owned or
operated by third parties. Liability for investigative, removal and
remedial costs under such laws is retroactive, strict, and joint and
several.
The Clean Air Act and similar state laws govern the emission of
pollutants into the atmosphere. The Federal Water Pollution Control Act
and similar state laws govern the discharge of pollutants into the waters
of the United States. RCRA and similar state laws govern the generation,
transportation, treatment, storage, and disposal of solid and hazardous
wastes. Finally, the Toxic Substances Control Act regulates the
manufacture, processing, and distribution of chemical substances and
mixtures, as well as the disposition of certain hazardous substances.
The costs of compliance with such laws and regulations promulgated
thereunder may be substantial, and regulatory standards under such
statutes tend to evolve towards more stringent requirements, which might,
from time-to-time, make it uneconomic or impossible to continue operating
a facility. Non-compliance with such requirements at any of the
Company's facilities could result in substantial civil penalties or the
inability of the Company to operate all or part of the facility.
In addition, certain state and federal laws govern the abatement,
removal, and disposal of asbestos-containing materials and the
maintenance of underground storage tanks and equipment which contains or
is contaminated by polychlorinated biphenyls.
Note 9 of the Notes to the Consolidated Financial Statements in Item 8 is
incorporated by reference herein.
See Item 3, "Legal Proceedings."
14
<PAGE>
Item 2. Properties
----------
The Company operates 24 principal manufacturing and research facilities
located in the United States, the United Kingdom, The Netherlands,
Mexico, Canada, Colombia, Germany and Norway. Capital spending, exclusive
of acquisitions, for the years ended 1998, 1997 and 1996 was
approximately $103.8 million, $91.4 million and $72.5 million,
respectively, on an historical basis. Capital expenditures in 1998 and
1997 were higher than in 1996 due primarily to two large projects in the
performance products segment: the benzotriazole light stabilizer plant in
The Netherlands and the expansion of the surfactants plant in West
Virginia, both of which were completed in 1998. Capital expenditures in
1999 are expected to be in the range of $80 million to $85 million. Such
capital expenditures are intended to provide necessary capacity, to
improve the efficiency of production units, to modernize or replace older
facilities, or to install equipment for protection of the environment.
The Company's major facilities and the principal product lines produced
or service provided at each such facility are as follows:
<TABLE>
<CAPTION>
FACILITY PRINCIPAL PRODUCT LINE
- -------------------------------------- ---------------------------------------------------------
<S> <C>
Anaheim, California Aerospace materials
Atequiza, Mexico Paper, water treating and mining chemicals
Avondale (Fortier), Louisiana Building block chemicals; MMA
Belmont (Willow Island), West Virginia Polymer additives; specialty resins; surfactants
Bogota, Colombia Specialty resins
Botlek, The Netherlands Paper, water treating and mining chemicals; polymer additives;
building block chemicals; surfactants; specialty monomers
Bradford, England Paper, water treating and mining chemicals
Culver City, California Aerospace materials
Greenville, Texas Aerospace materials
Havre de Grace, Maryland Aerospace materials
Kalamazoo, Michigan Paper, water treating and mining chemicals; specialty resins
Lillestrom, Norway Specialty resins
Longview, Washington Paper, water treating and mining chemicals
Mobile, Alabama Paper, water treating and mining chemicals
Oestringen, Germany Aerospace materials
Olean, New York Urethane systems
Orange, California Aerospace materials
Stamford, Connecticut Research
Tempe, Arizona Aerospace materials, research
Wallingford, Connecticut Specialty resins; acrylic plastics; amino molding
compounds; specialty monomers
Welland, Ontario Phosphine chemicals
Winona, Minnesota Aerospace materials
Woodbridge, New Jersey Paper, water treating and mining chemicals
Wrexham, Wales Aerospace materials
</TABLE>
The Company owns all of the foregoing facilities and their sites except
for the sites for the Botlek and Lillestrom facilities which are leased
under long term leases. In addition, the Company leases its corporate
headquarters in West Paterson, New Jersey and its regional headquarters
in Singapore.
15
<PAGE>
Item 3. Legal Proceedings
-----------------
In connection with the Spin-off, the Company assumed from Cyanamid
substantially all liabilities for legal proceedings relating to
Cyanamid's chemicals businesses, other than any legal proceedings related
to remediation of Cyanamid's Bound Brook facility. In connection with
the Fiberite Acquisition, the Company assumed responsibility for certain
liabilities related to Fiberite's business. As a result, although
Cyanamid or Fiberite is the named defendant in cases commenced prior to
the Spin-off or the Fiberite Acquisition, respectively, the Company is
the party in interest and is herein described as the defendant.
The Company is a defendant in 26 cases pending in state courts in
Jefferson, Brazoria, and Tarrant counties, Texas and in the U.S. District
Court for the Eastern District of Texas in which many plaintiffs seek
damages for injuries allegedly due to exposure to benzene, butadiene,
asbestos or other chemicals. Four of the cases involve several hundred
plaintiffs, while the remainder involve substantially fewer plaintiffs.
All of these cases involve multiple defendants. The Company is also one
of multiple defendants in one case (originally brought in Texas by
multiple plaintiffs who claimed they were injured due to exposure to
asbestos) which has been transferred by the Judicial Panel for Multi-
District Litigation to the United States District Court for the Eastern
District of Pennsylvania, for coordination of pre-trial activities,
primarily discovery. The Company believes that its involvement in all
but five of these cases results from its former ownership of 50% of
Jefferson Chemical Company, which the Company disposed of in 1975. It is
not known at this time how many plaintiffs eventually will assert claims
against the Company.
The Company is one of many defendants in suits filed by approximately 23
former employees of Boeing-Vertol in state and federal courts in
Pennsylvania alleging exposure to asbestos-containing products. Of these
suits, 21 are inactive because plaintiffs have not yet developed any
symptoms and two are active.
The Company is a defendant in four suits pending in California Superior
Courts in Alameda and San Francisco Counties, which were filed by or on
behalf of individuals allegedly injured as a result of exposure to
asbestos containing products. Another suit in which the Company is a
defendant 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. Trial of the claims of six plaintiffs (out of a group
of 32 randomly selected members of the class) was completed in July 1998.
On December 8, 1998 the trial court issued its Reasons for Judgment and
on December 21, 1998 the Court signed a Judgment recalling the Court's
prior Class Action Certification Order and dismissing all Class Action
claims in the case. The Judgment also dismissed, with prejudice, the
claims of the six named plaintiffs whose cases had been tried in July.
The case continues as a non-class action on behalf of the other named
plaintiffs. Plaintiffs have appealed the Court's Judgment.
16
<PAGE>
The Company is 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 also the defendant in three class actions filed in St.
Charles Parish Court, Louisiana on behalf of persons who allegedly
sustained injury as a result of an exotherm and fire at the Company's
Fortier facility on January 5, 1999. The Company 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 defendants in six suits filed in New Jersey
State Courts in Middlesex County 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.
Three 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. A fourth case
involving the Allied Textile site has been brought in New Jersey Superior
Court, Middlesex County, against the company and several other defendants
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.
The Company also has been named as one of several defendants in twenty-
three suits filed in Louisiana state courts in St. Bernard and Orleans
Parishes by individuals who claim that they, or those whom they
represent, were injured as a result of exposure to asbestos while working
at various sites, including the Company's Fortier, Louisiana plant.
In January 1999 the Company received a subpoena to testify before, and
provide documents to, a grand jury in the U.S. District Court for the
Central District of California. The subpoena relates to a Grand Jury
Investigation of the carbon fiber and prepreg industry. The Company has
no reason to believe that it is a target of the grand jury investigation.
See also "Environmental Matters" under "Business" in Item 1, and Note 9
of the Notes to the Consolidated Financial Statements in Item 8, which
are incorporated by reference herein.
In addition to liabilities with respect to the specific cases described
previously, because the production of certain chemicals involves the use,
handling, processing, storage and transportation of hazardous materials,
and because certain of the Company's products constitute or contain
hazardous materials, the Company has been subject to claims of injury
from direct exposure to such materials and from indirect exposure when
such materials are incorporated into other companies' products. There
can be no assurance that, as a result of past or future operations, there
will not be additional claims of injury by employees or members of the
public due to exposure, or alleged exposure, to such materials.
Furthermore, the Company also has exposure to present and future claims
with respect to workplace exposure, workers' compensation and other
matters, arising from events both prior to and after the Spin-off. There
can be no assurance as to the actual amount of these liabilities or the
timing thereof.
17
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
In January 1999, the Company signed an agreement with Cyanamid providing
that Cyanamid would irrevocably waive certain financial covenants
contained in the Company's Series C Cumulative Preferred Stock ("Series C
Stock") so that, in addition to restricted payments otherwise permitted
under the Series C Stock, the Company may make up to $100.0 million in
special restricted payments solely for the purpose of repurchasing
Company common stock. No other matters were submitted to a vote or
consent of security holders of any class during the fourth quarter of
1998.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
---------------------------------------------------------------------
The Common Stock of the Company is listed on the New York Stock Exchange.
On February 1, 1999, there were approximately 16,700 holders of record of
the Common Stock of the Company.
The high and low stock prices for each quarter during 1998 and 1997 were:
<TABLE>
<CAPTION>
1Q 2Q 3Q 4Q
<S> <C> <C> <C> <C>
1998
High $55 1/16 $ 58 5/16 $ 45 1/8 $ 27 5/8
Low 45 1/2 41 15/16 15 7/8 15 1/8
1997
High $42 1/4 $ 40 1/4 $ 50 3/8 $50 15/16
Low 36 7/8 33 7/8 37 5/16 44
</TABLE>
No dividends have been paid on the Common Stock of the Company since its
inception, and the Company currently contemplates that it will not pay cash
dividends on the Common Stock in the foreseeable future. In addition, the
Company is restricted from paying dividends in excess of certain amounts
determined in accordance with the terms of its Series C Stock. See Note 15
of the Notes to the Consolidated Financial Statements in Item 8, which is
incorporated by reference herein.
18
<PAGE>
Item 6. Selected Financial Data
-----------------------
Five-Year Summary
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statements of income data:
Net sales $1,444.5 $1,290.6 $1,259.6 $1,260.1 $1,101.3
Manufacturing cost of sales 1,006.6 930.9 898.1 912.2 817.9
Research and process development 42.9 44.7 40.2 44.2 40.0
Other operating expenses 209.5 195.8 186.1 181.6 176.0
- -----------------------------------------------------------------------------------------------------------------------------
Earnings from operations 185.5 119.2(2) 135.2 122.1 67.4
Other income (expense), net 14.5(1) 23.9(3) 9.0 4.6 5.7
Equity in earnings of associated companies 20.3 12.3 24.8 24.6 16.4
Interest income (expense), net (22.4) (5.7) (2.1) 5.4 7.5
Income tax provision (benefit) 73.2 36.1(4) 66.8 (125.5)(5) 40.9
Net earnings 124.7 113.6 100.1 282.2 56.1
Dividends on preferred stock (10.7) (14.6)
Excess of repurchase price over related book value of Series A
Stock and Series B Stock (195.2)
Net earnings available for common stockholders $ 124.7 $ 113.6 $ 100.1 $ 76.3 $ 41.5
- -----------------------------------------------------------------------------------------------------------------------------
NET EARNINGS PER COMMON SHARE
Basic $ 2.79 $ 2.50 $ 2.13 $ 1.98 $ 1.12
Diluted $ 2.68 $ 2.39 $ 2.03 $ 1.50 $ .88
- -----------------------------------------------------------------------------------------------------------------------------
Other data (At end of period, unless otherwise noted):
Additions to plants, equipment and facilities
(Annual) $ 103.8 $ 91.4 $ 72.5 $ 97.2 $ 116.1
Current assets 477.6 452.8 416.3 404.0 439.0
Current liabilities 394.4 375.0 312.8 317.7 320.1
Working capital 83.2 77.8 103.5 86.3 118.9
Plants, equipment and facilities 1,363.0 1,278.0 1,339.7 1,317.2 1,247.5
Net depreciated cost 667.5 629.7 582.2 605.7 586.7
Total assets 1,730.6 1,614.1 1,261.1 1,293.8 1,199.4
Long-term debt 419.5 324.0 89.0 66.0
Other noncurrent liabilities 485.7 527.7 544.9 567.2 596.1
Redeemable preferred stock 199.9
Total stockholders' equity 431.0 387.4 314.4 342.9 83.3
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
(1) Includes a gain of $4.4 related to the sale of the bulk molding compounds
product line in the fourth quarter of 1998.
(2) Includes restructuring and other charges of $18.6 and $23.8 recorded in the
first and fourth quarters of 1997 respectively.
(3) Includes a gain of $22.3 related primarily to the sale of the acrylic fibers
product line in the first quarter of 1997. In addition to the charges discussed
in Note 2 above, charges of $9.0 were recorded in the fourth quarter of 1997 to
reduce the carrying amount of certain assets.
(4) Includes the reversal of the remaining $24.4 of a previously established tax
valuation allowance (see Note 5 below) in the fourth quarter of 1997.
(5) Includes the reversal of $193.0 of a previously established tax valuation
allowance in the fourth quarter of 1995.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial Statements
in Item 8. Dollars are in millions, except share and per share amounts.
GENERAL
During 1998 the Company completed the following acquisitions and dispositions:
On June 24, 1998, the Company acquired assets of the OrePrep minerals
processing product line ("OrePrep") from Baker Petrolite Corporation for
approximately $9.0. OrePrep supplies mineral processing reagents and services to
the mining industry. The acquired product line was integrated into the Company's
existing mining chemicals product line.
On July 31, 1998, the Company completed the purchase from Dyno Industrier ASA
of Oslo, Norway, of Dyno's global amino coating resins business (the "Dyno
Business"), which consisted primarily of Dyno's 50% interest in Dyno-Cytec, a
European joint venture, for approximately $55.7. Payment of the purchase price
was funded under the Company's revolving credit facility (the "Credit
Facility"). The acquired business produces and sells crosslinking resins for
coating applications primarily in Europe from a single manufacturing plant in
Lillestrom, Norway. The acquired business was integrated into the Company's
existing specialty resins product line.
19
<PAGE>
On October 9, 1998, the Company completed its acquisition of The American
Materials & Technologies Corporation ("AMT") in a stock transaction designed to
qualify as a tax-free reorganization. Under the terms of the transaction, each
AMT share was converted into the right to receive 0.3098 of a share of Cytec
common stock. In the transaction, the Company issued from Treasury 1,248,620
shares of common stock. In addition, outstanding options and warrants to acquire
AMT stock were converted into a total of 259,308 incentive and nonqualified
stock options at a weighted average exercise price of $10.07 per share and
75,901 warrants that allow the holders to purchase the Company's common stock at
a weighted average price of $25.14 per share. The cost of the acquisition was
approximately $26.8, including the shares issued, options and warrants converted
and previous shares acquired, plus the assumption of approximately $5.4 in debt.
AMT manufactures and markets advanced composite materials for customers in the
aerospace, defense, transportation and other industries. The acquired business
was integrated into the Company's existing specialty materials product line. On
October 26, 1998, the Company sold the assets of the AMT graphite golf shaft
business for approximately $6.2.
All three acquisitions have been accounted for under the purchase method of
accounting.
On November 23, 1998, the Company completed the sale of its bulk molding
compounds product line to Bulk Molding Compounds, Inc. of West Chicago, Illinois
for $17.0 in cash, resulting in a pretax gain of $4.4. The business acquired by
Bulk Molding Compounds, Inc. included Cytec's manufacturing, laboratory and
sales facility located at Perrysburg, Ohio. Sales for this product line in 1998,
1997 and 1996 were $24.9, $26.6 and $26.4, respectively, and are included in the
Specialty Materials operating segment.
During 1997 the Company completed the following acquisition and disposition:
On September 30, 1997, the Company completed the acquisition of substantially
all of the assets and liabilities of Fiberite, Inc. ("Fiberite"). The assets and
liabilities were acquired for $344.0 from Stamford FHI Acquisition Corp., which
purchased Fiberite on August 29, 1997. The assets acquired included all of
Fiberite's business except its satellite materials business. The Fiberite
operations have been integrated into the Company's specialty materials product
line. The Fiberite acquisition was accounted for under the purchase method of
accounting.
On January 31, 1997, the Company completed the sale of its acrylic fibers
product line to a subsidiary of Sterling Chemicals, Inc. The assets transferred
included the Company's plant located near Pensacola, Florida. The Company
received approximately $94.8 in cash and received certain other consideration,
including the assumption by Sterling of certain contingent and other liabilities
with a value of approximately $15.0. The Company recorded a pretax gain of
approximately $22.3 from this transaction.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). This statement,
which becomes effective for the Company beginning January 1, 2000, establishes
accounting and operating standards for hedging activities and derivative
instruments, including certain derivative instruments embedded in other
contracts. The Company is reviewing the potential impact, if any, of SFAS 133 on
its consolidated results of operation, financial position or cash flows.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information"("SFAS 131"). The statement became effective
for the Company beginning January 1, 1998. SFAS 131 requires disclosure of
certain information about operating segments, geographic areas of operation and
major customers. The Company has adopted SFAS 131 in 1998 and has restated the
information for 1997 and 1996 in order to conform to the 1998 presentation. SFAS
131 has no impact on the Company's consolidated results of operations, financial
position or cash flows. The Company has four reportable segments (Water and
Industrial Process Chemicals, Performance Products, Specialty Materials and
Building Block Chemicals).
The Water and Industrial Process Chemicals segment produces paper, water,
mining and phosphine chemicals that are mainly used in water and wastewater
treatment, paper manufacturing and mineral processing and separation. The
principal markets for these products are global, with approximately 48% of sales
in the United States.
The Performance Products segment produces specialty resins, polymer additives,
surfactants and specialty monomers that are used in serving the coatings,
adhesives and plastics markets. The principal markets for these products are
global with approximately 59% of sales in the United States.
The Specialty Materials segment manufactures and sells aerospace materials
that are mainly used in commercial and military aviation and launch vehicles,
automobiles, recreational products, satellites and aircraft brakes. Net sales
for this business segment are approximately 72% U.S. based. For 1997 and 1998
the segment also included the Bulk and Engineered Molding Compounds businesses
which, except for one minor product line, have since been divested.
20
<PAGE>
The Building Block Chemicals segment manufactures acrylonitrile, acrylamide,
ammonia, hydrocyanic acid, melamine, methanol and sulfuric acid. Approximately
one-third of the Company's total production of building block chemicals are used
in the manufacture of many of the Company's other products with the remainder
sold to third parties.
See Note 17 to the Consolidated Financial Statements, and further discussions
in Management's Discussion and Analysis of Financial Condition and Results of
Operation for more information on the Company's segments.
21
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship that certain items in
the Company's Consolidated Statements of Income bear to net sales:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Manufacturing cost of sales 69.7 72.1 71.3
Gross profit 30.3 27.9 28.7
Selling and technical services 10.6 11.3 11.2
Research and process development 3.0 3.5 3.2
Administrative and general 3.2 3.7 3.5
Amortization of acquisition intangibles 0.7 0.2 0.1
Earnings from operations(1) 12.8 9.2 10.7
- --------------------------------------------------------------------------------
Net earnings(2) 8.6 8.8 7.9
</TABLE>
(1) Percentages in 1997 include the effect of restructuring and other charges of
(3.3%).
(2) 1997 includes an after-tax gain of 1.1% primarily relating to the
divestiture of the acrylic fibers product line and the effect of a reversal of a
tax valuation allowance of 1.9%.
NET SALES BY BUSINESS SEGMENT
The Company's net sales by business segment are set forth below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Water and Industrial Process Chemicals $ 349.4 $ 351.3 $ 340.9
Performance Products 403.4 395.1 386.3
Specialty Materials(1) 492.2 264.3 159.2
Building Block Chemicals(2) 199.3 265.3 194.4
Other(3) 0.2 14.6 178.8
- -------------------------------------------------------------------------------
$1,444.5 $1,290.6 $1,259.6
</TABLE>
(1) On November 23, 1998, the Company completed the sale of its bulk molding
compounds product line, which had sales of $24.9, $26.6 and $26.4 in 1998, 1997
and 1996, respectively. On January 21, 1999, the Company completed the sale of
its remaining molding compounds product line, which had sales of $14.1 and $3.3,
in 1998 and 1997, respectively.
(2) Approximately one-third of the Company's 1998 and 1997 production of
building block chemicals was used internally in the manufacture of other Company
products. In 1996 more than one-half of such production was used internally.
Such internal usage is not reflected in Building Block Chemicals net sales. The
decrease in internal usage is the result of the sale of the acrylic fibers
product line in January 1997. Sales of acrylonitrile to the purchaser of the
acrylic fibers product line are included above in net sales of Building Block
Chemicals for 1998 and 1997. In prior years, these sales were recorded as
internal transfers.
(3) 1997 and 1996 includes acrylic fibers sales of $11.9 and $136.1,
respectively. The acrylic fibers product line was sold on January 31, 1997.
The Company has a 50% interest in each of four unconsolidated associated
companies: CYRO Industries, Criterion Catalyst, Mitsui-Cytec and AC Molding
Compounds and had a 50% interest in the former Dyno-Cytec joint venture through
July 31, 1998. The aggregate net sales of unconsolidated associated companies
was $583.0 in 1998, $596.5 in 1997 and $600.7 in 1996.
YEAR ENDED DECEMBER 31, 1998, COMPARED WITH YEAR ENDED DECEMBER 31, 1997
Net sales for 1998 were $1,444.5, which were approximately 11.9% higher in
comparison with 1997 net sales of $1,290.6. The increase is mainly attributable
to sales generated as a result of the acquisitions of Fiberite, the OrePrep
product line and the Dyno Business. Included in 1997 are sales of $11.9 from the
acrylic fibers product line that was divested on January 31, 1997. Sales outside
of the United States for the full year 1998 were 38.3% of total sales, a
decrease of 1.0% when compared with 1997 international sales. This was primarily
a result of the inclusion of Fiberite sales, which are principally U.S. based.
Sales in the Asia/Pacific region were down 5.5% for the year. The decrease was
mainly due to the region's financial crisis and to the effect of adverse
exchange rate fluctuations. Overall sales to this region were about 9.3% of
total Cytec sales.
Water and Industrial Process Chemicals net sales decreased $1.9 or 0.5%. Sales
volumes were up 1.8%, while selling prices and exchange rates were down 0.5% and
1.7%, respectively. The increase in international sales volumes was partially
offset by a decrease in paper and water treating chemical U.S. sales volumes.
Performance Products net sales increased $8.3 or 2.1%. Excluding sales as a
result of the purchase of the Dyno Business acquisition, sales were down $6.4 or
1.6%. The decrease was mainly attributable to polymer additives. Lower prices in
the United States and Europe and lower volumes in Asia were primarily
responsible for the polymer additives decrease.
22
<PAGE>
Specialty Materials net sales increased $227.9 or 86.2%. This was primarily
due to sales generated as a result of the Fiberite acquisition. Including pro
forma Fiberite sales in 1997, sales increased $27.4 or 5.9%. The pro forma sales
increase was primarily due to higher build rates in the commercial aircraft
sector. The Company's largest Specialty Materials customer has experienced
delays and cancellations of commercial aircraft orders as a result of the
financial crisis in the Asia/Pacific region. However, the Company expects the
decrease in sales to its largest customer to be offset by an increase in sales
to other customers and sales generated as a result of the AMT acquisition.
Building Block Chemicals net sales decreased $66.0 or 24.9%. Selling prices
and volumes were down 13.4% and 11.3%, respectively. Selling prices for
acrylonitrile and methanol continued downward, and are expected to remain at
these low levels well into 1999. Acrylonitrile volumes remain depressed due to a
combination of high supply and weak demand, primarily in Asia. The acrylonitrile
plant is operating at a reduced rate and will continue production at the lower
rate until market conditions improve. Costs for propylene, the key raw material
for production of acrylonitrile, are down, substantially offsetting the impact
of lower selling prices. The methanol market remains weak, and on March 1, 1999,
the plant was shut down for market related reasons.
Manufacturing cost of sales for the full year decreased from 72.1% of sales to
69.7%. Included in 1997 were the unfavorable effects of restructuring and other
charges totaling $34.6 relating primarily to manufacturing sites at Fortier,
Louisiana; Willow Island, West Virginia; Botlek, The Netherlands; and Linden,
New Jersey. Excluding the restructuring and other charges in 1997, the
manufacturing cost of sales increased 0.3% in 1998 due to a decrease in
operating capacity resulting from severe weather conditions primarily at the
Building Block Chemicals Fortier facility in Louisiana, and to adverse exchange
rate fluctuations, which affected all segments. In addition, the startup of the
Performance Products benzotriazole light stabilizer plant increased expenses.
Partially offsetting this was a reduction of retiree medical expenses and stock
based employee compensation of $7.8.
Selling and technical service expenses increased $8.0 or 5.5%. Included in
1997 are restructuring and other charges of $3.2 relating to sales force and
customer service restructuring and costs associated with the integration of
Fiberite. Excluding these charges, selling and technical service expenses
increased 7.9%, reflecting the impact of the acquisitions made during the year.
Partially offsetting this was a reduction of retiree medical expenses and stock
based employee compensation of $2.3.
Research and process development expenses for 1998 decreased $1.8 or 4.0%.
Included in 1997 are restructuring and other charges of $2.0 of which $1.0
related to the reduction of corporate research and development overhead and $1.0
related to the write-off of in-process research and development acquired from
Fiberite. Excluding these charges, research and development expenses increased
0.5%. Included in research and development is a reduction of retiree medical
expenses and stock based employee compensation of $1.9.
Administrative and general expenses decreased $1.1 or 2.3%. Included in 1997
are restructuring and other charges of $2.6 relating to corporate headquarters
restructuring and costs for reorganizing the legal entity structure in Europe.
Excluding these charges, administrative and general expenses increased 3.3%,
primarily reflecting the acquisitions. Included in administrative and general in
1998 is a reduction of retiree medical expenses and stock based employee
compensation of $4.2.
Amortization of acquisition intangibles increased $6.8 due to intangibles
resulting from the acquisitions made during the year and in the latter part of
1997.
Other income, net, decreased $9.4. Included in 1998 is a gain of $4.4 related
to the sale of the bulk molding compounds product line. Included in 1997 was a
$22.3 gain related to divested product lines and charges of $9.0 for reducing
the carrying amount of the Company's subsidiary CONAP, Inc. to net realizable
value and expected losses on certain other assets being held for sale. Excluding
these items other income in 1998 was comparable to 1997.
Equity in earnings of associated companies, all of which are 50% owned,
represents the Company's before-tax share of its associates' earnings. Such
earnings increased $8.0 mainly due to higher sales and improved operations for
Criterion Catalyst partially offset by lower earnings from CYRO Industries and
the result of consolidating the operating results of the Dyno-Cytec joint
venture effective August 1, 1998.
Interest expense, net, increased as a result of the increase in long-term debt
associated with the acquisition of Fiberite, stock repurchases and the
acquisition of the Dyno Business. Net interest expense for 1998 was $22.4
compared with $5.7 in 1997.
The income tax provision in 1998 was 37%, compared with 39% (excluding the
impact of nonrecurring items) in 1997. This was primarily due to improved tax
planning for foreign and state taxes as well as benefits from increased sales
through the Company's foreign sales corporation.
23
<PAGE>
Net earnings for 1998 were $124.7, or $2.68 per diluted common share, compared
with $113.6, or $2.39 per diluted common share, for 1997. Included in 1998 is a
gain of $4.4 ($2.8 after-tax, or $0.06 per diluted common share), relating to
the sale of the bulk molding compounds product line. Excluding this gain, the
diluted earnings per share for 1998 was $2.62. Included in 1997 is a favorable
tax valuation allowance reversal of $24.4, or $0.51 per diluted common share, an
after-tax gain primarily related to the sale of the acrylic fibers product line
of $13.6, or $0.29 per diluted common share and an unfavorable after-tax charge
relating to restructuring and other charges of $34.3, or $0.72 per diluted
common share. Excluding these items, the diluted earnings per share for 1997 was
$2.31. After adjusting 1998 and 1997 for the effects of these items net earnings
increased $0.31 per diluted common share or 13.4%, and reflects the positive
effects of the acquisitions made during the year, the reduced tax rate and the
effect of the Company's common stock repurchase program.
24
<PAGE>
YEAR ENDED DECEMBER 31, 1997, COMPARED WITH YEAR ENDED DECEMBER 31, 1996
Net sales for 1997 were $1,290.6, which was 2.5% higher in comparison with
1996 net sales of $1,259.6. Included in 1996 are sales from the divested acrylic
fibers and aluminum sulfate product lines and the discontinued technical
chemicals product line. Included in 1997 are sales of acrylonitrile to the
purchaser of the acrylic fibers line and sales of $66.9 generated as a result of
the purchase of Fiberite as of September 30, 1997. Excluding the above from 1996
and 1997 results, sales increased 7.2%. Sales outside of the United States for
the full year 1997 were 39%, which was flat compared with 1996 international
sales. This was primarily a result of the acrylic fibers divestiture and the
inclusion in the fourth quarter of Fiberite sales, which are principally U.S.
based. Excluding Fiberite, sales outside of the United States were 41% with the
growth primarily in European and Latin American regions.
Sales in the Asia/Pacific region, excluding the effect of divested businesses,
were up 8% for the year, but down slightly in the fourth quarter. Fourth quarter
results were partly due to the region's financial crisis and to the effect of
unusual weather that caused certain customers' mines to be shut down. Overall
sales to this region were about 11% of total Cytec sales with approximately half
of these sales at risk to currency fluctuations.
Water and Industrial Process Chemicals net sales increased $10.4 or 3.1%.
Sales volumes were up 6.6%, while selling prices and exchange rates were down
0.5% and 2.8%, respectively. Sales volume increased in all product lines with
mining and water treatment chemicals having the largest increase. Paper
chemicals had a 3.7% sales volume increase with the largest increase in the
Asia/Pacific region.
Performance Products net sales increased $8.8 or 2.3%. Sales volumes were up
5.0%, while selling prices and exchange rates were down 1.1% and 1.8%,
respectively. All product lines experienced increased sales volumes with the
exception of CONAP, which had lower sales to distributors. Polymer additives
experienced the largest sales volume increase principally as a result of
increased sales in Asia.
Specialty Materials net sales increased $105.1 or 66.0%. Sales rose
principally due to the acquisition of Fiberite and the strong performance of
aerospace materials products in the commercial aircraft sector.
Building Block Chemicals net sales increased $70.9 or 36.5%. Included in 1997
were acrylonitrile sales of $47.6 to the purchaser of the acrylic fibers product
line that were treated as internal transfers prior to the divestiture. Excluding
these sales, the net increase for the year was 12.0%. Both acrylonitrile and
methanol sales volumes were higher. The methanol facility was shut down in
January 1996 due to high natural gas costs and during the second quarter of 1996
for mechanical repairs to the reactor.
Restructuring charges of $38.4 were recorded in 1997. The Company does not
charge these costs to its operating segments but accumulates them on a corporate
basis. The breakdown of these costs by segment is as follows:
<TABLE>
<CAPTION>
SPECIALTY CHEMICALS
BUILDING
WATER & INDUSTRIAL PERFORMANCE SPECIALTY BLOCK
PROCESS CHEMICALS PRODUCTS MATERIALS CHEMICALS TOTAL
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Manufacturing cost of sales $13.2 $15.9 $0.7 $2.8 $32.6
Selling and technical services 1.0 1.0 0.2 -- 2.2
Research and process development 0.5 0.5 -- -- 1.0
Administrative and general 1.3 1.3 -- -- 2.6
- ------------------------------------------------------------------------------------------------
Total $16.0 $18.7 $0.9 $2.8 $38.4
</TABLE>
Manufacturing cost of sales for the full year increased from 71.3% of sales to
72.1%. Included in 1997 were the unfavorable effects of restructuring and other
charges totaling $34.6 relating primarily to manufacturing sites at Fortier,
Louisiana; Willow Island, West Virginia; Botlek, The Netherlands; and Linden,
New Jersey. Excluding the total restructuring and other charges of $34.6 in
1997, the cost of sales improved to 69.4%. This was the result of an improved
product sales mix, the effect of improving plant efficiency and continuing cost
reduction programs. Partially offsetting these were higher costs for raw
materials and the adverse impact of fluctuations in foreign exchange rates.
Selling and technical service expenses increased $4.5 or 3.2%. Included in
1997 are restructuring and other charges of $3.2 relating to sales force and
customer service restructuring and costs relating to the integration of
Fiberite. Excluding these charges, selling and technical service expenses
increased 1.0%, reflecting increased sales efforts in international markets and
the support of domestic sales growth in the Specialty Chemical segments.
Research and process development expenses for the full year 1997 increased
$4.5 or 11.2%. Included in 1997 are restructuring and other charges of $2.0 of
which $1.0 related to the reduction of corporate research and development
overhead and $1.0 related to the write-off of in-process research and
development acquired from Fiberite. Excluding these charges, research and
development expenses increased 6.2%, reflecting continued effort in technical
programs in the Specialty Chemical segments.
25
<PAGE>
Administrative and general expenses increased $3.4 or 7.8%. Included in 1997
are restructuring and other charges of $2.6 relating to corporate headquarters
restructuring and costs for reorganizing the legal entity structure in Europe.
Excluding these charges, administrative and general expenses increased 1.8%.
Amortization of acquisition intangibles increased $1.8 due to intangibles
associated with the Fiberite acquisition.
Other income, net, improved $14.9. Included in 1997 was a $22.3 gain related
to divested product lines and charges of $9.0 for reducing the carrying amount
of the Company's subsidiary CONAP, Inc. to net realizable value and expected
losses on certain other assets being held for sale.
Equity in earnings of associated companies, all of which are 50% owned,
represents the Company's before-tax share of its associates' earnings. Such
earnings decreased $12.5 mainly due to a decline in earnings at Criterion
Catalyst resulting from a less favorable product mix, lower selling prices and
operating inefficiencies.
Interest expense, net, increased as a result of long-term debt associated with
the acquisition of Fiberite. Also included is a charge of $1.0 for up-front
costs to fund the acquisition of Fiberite.
The income tax provision in 1997 includes a favorable reversal of the tax
valuation allowance of $24.4. The effective tax rate for the year also includes
the impact of a portion of the restructuring and other charges for which no tax
benefit was attributable. In 1996 the rate included a one-time benefit related
to a noncash transaction in the fourth quarter. Excluding these nonrecurring
items for each year, the effective tax rate was 39% in 1997, compared with 41%
in 1996. This reduction was due to improved tax planning and increased sales by
the Company's foreign sales corporation.
Net earnings for the full year 1997 were $113.6, or $2.39 per diluted common
share, compared with $100.1, or $2.03 per diluted common share, for the
comparable period of 1996. Included in 1997 net earnings was an unfavorable
after-tax charge of $34.3, or $0.72 per diluted common share, relating to
restructuring and other charges explained in the line item analysis above. Also
included in 1997 was the favorable reversal of the tax valuation allowance of
$24.4, or $0.51 per diluted common share, and an after-tax gain from the first
quarter of 1997 of $13.6, or $0.29 per diluted common share, primarily relating
to the acrylic fibers product line divestiture. Excluding these items, the
diluted earnings per share for 1997 was $2.31. This represents an increase of
$0.28 per diluted common share, compared with the full year 1996, and reflects
higher earnings and the effect of the Company's common stock repurchase program.
LIQUIDITY AND FINANCIAL CONDITION
At December 31, 1998, the Company's cash balance was $1.7, a decrease of $4.7
from year-end 1997.
Net cash flows provided by operating activities totaled $152.3 for the year
ended December 31, 1998, compared with $131.7 in the same period of 1997.
Significant factors in this increase were higher earnings and the Company's
decision to prefund $25.0 of its postretirement benefits liability in 1997,
compared with $4.0 of such prefunding payments in 1998, through contributions to
its Voluntary Employee Benefit Association (VEBA) Trust accounts by utilizing
some of the proceeds from the sale of the acrylic fibers product line. Payments
against restructuring reserves were $12.9 in 1998, as compared with $8.4 in
1997. At December 31, 1998, the liability to be paid was $17.6, essentially all
of which is for employee-related costs. The spending is expected to be
substantially completed by the end of 1999 with the exception of certain long-
term payouts for employee severance.
Environmental remediation spending for the years ended December 31, 1998, 1997
and 1996, was $23.8, $26.1 and $26.8, respectively. The Company expects similar
levels in 1999, though there can be no assurances that the Company's annual cash
expenditures will not be higher in the future.
While it is not feasible to predict the outcome of all pending environmental
suits and claims, it is reasonably possible that there will be a necessity for
future provisions for environmental costs which, in management's opinion, will
not have a material adverse effect on the consolidated financial position of the
Company, but could be material to the consolidated results of operations of the
Company in any one accounting period. The Company cannot estimate any additional
amount of loss or range of loss in excess of the recorded amount. Moreover,
environmental liabilities are paid over an extended period, and the timing of
such payments cannot be predicted with any confidence. See Note 9 of the Notes
to the Consolidated Financial Statements with respect to environmental matters.
The Company is also a party to various other claims and routine litigation
arising in the normal course of its business. Based on the advice of counsel,
management believes that the resolution of such claims and litigation will not
have a material adverse effect on the financial position of the Company, but
could be material to the consolidated results of operations of the Company in
any one accounting period.
26
<PAGE>
Net cash flows used for investing activities totaled $146.9, compared with
$337.6 in 1997. Included in 1997 was funding for the Fiberite acquisition of
$344.0, which was partially offset by proceeds of $94.8 associated with the sale
of the acrylic fibers products line. Included in 1998 was funding of $55.7 for
acquisition of the Dyno Business. Capital expenditures for the year ended
December 31, 1998, of $103.8 were higher than for the corresponding period in
1997 due primarily to certain large construction projects in the Performance
Products segment, such as the benzotriazole light stabilizer plant in Botlek,
The Netherlands, and the expansion of the surfactants plant in Willow Island,
West Virginia. Capital expenditures for the year 1999 are expected to be in the
range of $80.0 to $85.0.
The Company believes that, based on internal cash generation and current
levels of liquid assets, it will be able to fund operating cash requirements and
planned capital expenditures in 1999.
Net cash flows used for financing activities totaled $10.5, compared with
$194.2 provided by financing activities in 1997. Long-term debt increased
primarily due to the purchase of treasury stock and the acquisitions of the
OrePrep product line and the Dyno Business. In 1998 the Company purchased a
total of 3,561,950 shares of treasury stock at a cost of $113.4. This completed
the 10% stock repurchase program authorized in February 1997. In 1997, 1,234,250
shares were repurchased at a cost of $47.8. 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 an aggregate of 400,000 shares of the Company's common stock to the
Company on certain dates at specified prices, subject to the Company's right, in
lieu of purchasing such shares, to pay the holder of the put the excess of the
strike price over the then market price of the shares in either cash or
additional shares of the Company's common stock. The Company received premiums
of approximately $1.0 on the sale of such options. During the year, 200,000 of
the put options expired unexercised, and the Company purchased the remaining
200,000 shares of the Company's common stock subject to the options for an
aggregate of $11.0.
The Company signed an agreement on April 8, 1997, with American Cyanamid
Company ("Cyanamid"), a subsidiary of American Home Products Corporation, to
revise certain of the financial covenants contained in its Series C Cumulative
Preferred Stock. Under the revised terms, the Company must maintain a debt-to-
equity ratio of no more than 2-to-1 and a minimum fixed charge coverage ratio of
not less than 3-to-1 for the average of the fixed charge coverage ratios for the
four consecutive fiscal quarters most recently ended and must not incur more
than $150.0 of debt unless the Company's equity is in excess of $200.0. If the
Company has more than $200.0 in equity, then it may incur additional debt as
long as its ratio of debt-to-equity is not more than 1.5-to-1. At December 31,
1998, the Company had $429.8 of debt and $430.9 in equity as defined in the
Series C Stock covenants and, under the revised terms, would have had the
ability to incur up to an additional $216.6 in debt.
The Company on January 22, 1999, signed an agreement with Cyanamid providing
that Cyanamid would irrevocably waive certain financial covenants contained in
the Series C Cumulative Preferred Stock so that, in addition to restricted
payments otherwise permitted under the Series C Cumulative Preferred Stock,
which at December 31, 1998, were limited to $17.7, Cytec may make up to $100.0
in special restricted payments solely for the purpose of repurchasing Cytec's
common stock. On January 25, 1999, the Company's Board of Directors approved a
program to spend up to $100.0 to repurchase shares of outstanding common stock.
The repurchases will be made from time to time on the open market or in private
transactions and will be utilized for stock option plans, benefit plans and
other corporate purposes.
On August 21, 1998, the Company amended and restated its Credit Facility,
primarily to add a new lender to its existing bank group. At December 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. There was $100.0 of outstanding borrowings under the Credit Facility
at December 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 terms, covenants and conditions of the Credit Facility at
December 31, 1998. On August 21, 1998, the Company replaced its $200.0, 364-Day
Fiberite Acquisition Facility with a new $200.0, 364-Day Facility (the "364-Day
Facility"). The 364-Day Facility, which provides for unsecured revolving loans
for general corporate purposes, including, without limitation, for purposes of
making acquisitions, matures on August 20, 1999, and contains a two-year term-
out option. The interest rate on funds borrowed under the Credit Facility and
the 364-Day Facility floats based on LIBOR. As of December 31, 1998, there were
no outstanding borrowings under the 364-Day Facility.
27
<PAGE>
The Company sold an aggregate of $320.0 principal amount of senior debt
securities in public offerings in the first six months of 1998, consisting of
(i) $100.0 principal amount of 6.50% Notes due March 15, 2003, (ii) $100.0
principal amount of 6.75% Notes due March 15, 2008 and (iii) $120.0 principal
amount of 6.846% MOPPRSSM due May 11, 2025. The securities were offered under
the Company's shelf registration statement that has now been fully utilized. The
Company received an aggregate of approximately $322.0 in proceeds from the sales
before deducting expenses associated with the sales. The proceeds were used to
(1) repay $160.0 of indebtedness under the Fiberite Acquisition Facility, (2)
repay $141.5 of indebtedness under the Credit Facility and (3) the remainder was
used for general corporate purposes.
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
$11.2 to settle Rate Lock Agreements ($9.6 of which was paid during the first
half of 1998 and the remainder in 1997), which payments will be amortized or
recognized over the life of the 6.50% Notes, 6.75% Notes and 6.846% MOPPRS as an
increase in interest expense of such Notes.
During 1998 and 1997 the Company made contributions to its VEBA Trust accounts
to fund certain employee and retiree health care benefits. The balance in the
VEBA Trust accounts at December 31, 1998, and 1997 was $51.0 and $47.9,
respectively.
The impact of inflation on the Company is considered insignificant since the
rate of inflation has remained relatively low in recent years and investments in
areas of the world where inflation poses a risk have been significantly hedged
to mitigate the effects of inflation.
OTHER
Year 2000. The Company has conducted a comprehensive review of its information
technology systems ("IT Systems") and its process control and other systems that
use micro-controllers ("Non-IT Systems") to identify the systems that could be
affected by the "Year 2000" issue. The Year 2000 issue results from computer
programs using two digits rather than four to define the applicable year. Any of
the Company's systems that have time-sensitive software features may recognize a
date using "00" in the last two places as the year 1900 rather than the year
2000. If not addressed, this could result in a system failure or
miscalculations, and in the case of Non-IT systems that are noncompliant, could
have a material adverse impact on the integrity and safety of the Company's
chemical manufacturing processes.
The Company has developed a phased program to address its Year 2000 issues. The
first phase, which consisted of identifying the Company's IT and Non-IT Systems,
has been completed. The second phase consisted of determining whether those
systems were Year 2000 compliant, primarily based on certifications from the
vendors of such systems, and developing cost estimates to remediate noncompliant
systems. The second phase is also complete. The Company's current estimate is
that it will incur external costs in the range of $6.0 to $7.0 to remediate
noncompliant systems, of which $2.1 has been spent to date, and of which the
remaining funds mostly consist of: (i) funds committed but not yet spent; (ii)
the cost of non-mission critical systems and equipment; and (iii) the cost of
testing. This estimate may change materially as the Company reviews the results
of its work in the first two phases on a plant-by-plant basis using both
internal and external resources and as the Company continues to implement
required remediation. The Company does not track its internal costs in
connection with Year 2000 issues, but does not believe they are material. The
third phase of the Company's program is ongoing and consists of remediating
noncompliant systems that are critical to the Company's operations. The
Company's goal is to largely complete the third phase by the end of the first
quarter of 1999. The Company then plans to test critical systems and to
remediate, if appropriate, noncritical systems by the end of the second quarter
of 1999.
The Company has not yet developed any contingency plans for addressing any
problems in completing implementation of all necessary remediation by the year
2000, but plans to commence development of such plans in the first quarter of
1999. The Company has begun to address the Year 2000 status of its material
customers and suppliers by seeking verification that their systems and processes
are, or by December 31, 1999, will be, Year 2000 compliant. These efforts may
need to be refined as more information becomes available. The Company also is
reviewing the Year 2000 compliance efforts of the four associated companies in
which it has a 50% equity interest.
28
<PAGE>
Failure to complete any necessary remediation by the Year 2000 may have a
material adverse impact on the consolidated operations of the Company. Failure
of third parties, such as customers, suppliers or government agencies to
remediate Year 2000 problems in their IT and Non-IT Systems (which cannot be
controlled or corrected by the Company) or any general economic slowdown due to
Year 2000 problems could also have a material adverse impact on the consolidated
operations of the Company. Possible consequences as a result of the Company,
customers, suppliers or government agencies not being fully Year 2000 compliant
include temporary plant closings, delays in the delivery of finished products,
delays in the receipt of raw materials and invoice and collection errors. These
consequences could have a material adverse impact on the Company's consolidated
results of operations, financial condition and cash flows. As part of its
contingency plan, the Company plans to address these potential consequences and
mitigate the adverse effect any such disruptions may have on the Company's
operations.
Euro Conversion. On January 1, 1999, 11 of the 15 member countries of the
European Union (the "participating countries") established fixed conversion
rates between their existing sovereign currencies (the "legacy currencies") and
the euro. The participating countries have agreed to adopt the euro as their
common legal currency on that date. As of January 1, 1999, a newly created
European Central Bank has begun to control monetary policy, including money
supply and interest rates for the participating countries. The legacy currencies
are scheduled to remain legal tender in the participating countries as
denominations of the euro between January 1, 1999, and January 1, 2002 (the
"transition period"). During the transition period, public and private parties
may pay for goods and services using either the euro or the participating
country's legacy currency on a "no compulsion, no prohibition" basis. The
Company's principal plants in Europe are in The Netherlands, the United Kingdom,
Norway and Germany, and the Company has sales offices and generates sales
throughout Europe. The Netherlands and Germany are participating countries,
whereas the United Kingdom and Norway are not currently participating countries.
Effective January 1, 1999, the Company is in a position to trade in euros. The
Company has initiated and is evaluating on an ongoing basis the effects, if any,
of the euro conversion upon its business. Factors being considered include, but
are not limited to: the possible impact of the euro conversion on revenues,
expenses and income from continuing operations; the impact on cash management
and treasury management functions; the competitive implications of increased
price transparency; the ability to adapt information technology to accommodate
euro-denominated transactions; the market risks with respect to financial
instruments; the continuity of material contracts; and the potential tax
consequences.
The Company does not believe that the initial remeasurement of the euro as the
functional currency for those operations within the participating countries will
result in any gains or losses since conversion rates to the euro for
participating countries have been irrevocably fixed as of January 1, 1999. The
Company believes that some information systems modifications are required in
order for them to be euro compliant. The Company, however, does not currently
believe that the euro conversion will have a material operational or financial
impact.
29
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion provides forward-looking quantitative and qualitative
information about the Company's potential exposures to market risk arising from
changes in foreign currency rates, commodity prices and interest rates. Actual
results could differ materially from those projected in this forward-looking
analysis. The Company's exposure to market risk from equity price changes was
immaterial at December 31, 1998.
Market risk represents the potential loss arising from adverse changes in the
value of financial instruments. The risk of loss is assessed based on the
likelihood of adverse changes in fair values, cash flows or future earnings.
In the ordinary course of business, the Company is exposed to various market
risks, including fluctuations in foreign currency rates, commodity prices and
interest rates. To manage the exposure related to these risks, the Company may
engage in various derivative transactions in accordance with Company-established
policies. The Company neither holds nor issues financial instruments for trading
purposes. Moreover, the Company enters into financial instrument transactions
either through regulated future exchanges or with major financial institutions,
thereby limiting exposure to credit- and performance-related risks.
Foreign Exchange Rate Risk The risk of adverse exchange rate fluctuations is
mitigated by the fact that there is no concentration of foreign currency
exposure. In addition, the Company enters into foreign exchange forward
contracts primarily to hedge currency fluctuations of transactions denominated
in foreign currencies. At December 31, 1998, the principal transactions hedged
were short-term intercompany loans and intercompany trade accounts receivable
and payable. The maturity dates of the foreign exchange contracts are less than
six months and strongly correlate to the maturity date of the underlying
transaction. The foreign exchange gains or losses and the offsetting losses or
gains of the hedged transaction are marked to market and reflected in net
earnings.
At December 31, 1998, the Company had net foreign exchange contracts to
purchase various currencies, principally British pounds and Dutch guilders, for
$21.4 and to sell various currencies, principally Dutch guilders and German
marks for $11.3. The differences between fair value of all outstanding contracts
at year-end and the contract amounts were immaterial. Assuming that year-end
exchange rates between the underlying currencies of all outstanding foreign
exchange contracts and the various hedged currencies were to adversely change by
a hypothetical 10%, the change in the fair value of all outstanding contracts at
year-end would be a decrease of approximately $2.8. However, since these
contracts hedge foreign currency denominated transactions, any change in the
fair value of the contracts would be offset by changes in the underlying value
of the transaction being hedged.
At December 31, 1998, non-derivative financial instruments subject to foreign
exchange rate risk consisted primarily of $10.3 in foreign currency denominated
short-term debt. Assuming that year-end exchange rates were to adversely change
by a hypothetical 10%, the increase in the fair value would be approximately
$1.0.
Commodity Price Risk Occasionally, the Company utilizes futures contracts,
predominantly involving natural gas, to manage its exposure to price risk
associated with the production of ammonia, methanol and other building block
chemical products. The maturity of these contracts correlate highly to the
actual purchases of the commodity. The contracts are principally settled through
actual delivery of the physical commodity and have the effect of securing
predetermined prices that the Company pays for the underlying commodity.
Accordingly, while these contracts limit the Company's exposure to increases in
commodity prices, they also limit the potential benefit the Company might have
otherwise received from decreases in commodity prices.
At December 31, 1998, the Company had $4.6 net natural gas futures contracts
with January, February and March 1999 delivery dates outstanding. Based on year-
end prices, the Company had a net unrealized loss of $1.0. Assuming that year-
end prices were to adversely change by a hypothetical 10%, the incremental
increase in cost of goods sold would be approximately $0.4.
Interest Rate Risk At December 31, 1998, the financial liabilities of the
Company exposed to changes in interest rates consisted mainly of $10.3 in
foreign currency denominated short-term borrowings and $100.0 variable rate
borrowings outstanding under the Credit Facility. The Company is also party to
an interest rate swap agreement that converts $20.0 of variable rate interest
obligations on the Company's Credit Facility to fixed rate interest obligations.
Assuming that a hypothetical increase of 1% in interest rates and all other
variables, i.e., foreign exchange rates and debt levels, were to remain
constant, interest expense would increase $0.9 per year. Included in long-term
debt is also $319.5 of fixed rate public debt, which is not subject to interest
rate risk.
30
<PAGE>
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31,
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS) 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 1.7 $ 6.4
Accounts receivable, less allowance for doubtful accounts of
$9.2 in 1998 and $10.0 in 1997 241.3 226.9
Inventories 140.5 131.9
Deferred income taxes 72.9 70.7
Other current assets 21.2 16.9
- ---------------------------------------------------------------------------------------------------------
Total current assets 477.6 452.8
- ---------------------------------------------------------------------------------------------------------
Equity in net assets of and advances to associated companies 147.4 141.1
Plants, equipment and facilities, at cost 1,363.0 1,278.0
Less accumulated depreciation (695.5) (648.3)
- ---------------------------------------------------------------------------------------------------------
Net plant investment 667.5 629.7
- ---------------------------------------------------------------------------------------------------------
Acquisition intangibles, net of accumulated amortization of
$18.3 in 1998 and $9.5 in 1997 349.5 295.6
Deferred income taxes 62.6 82.2
Other assets 26.0 12.7
- ---------------------------------------------------------------------------------------------------------
Total assets $1,730.6 $1,614.1
- ---------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities
Short-term borrowings $ 10.3 $ --
Accounts payable 99.9 116.3
Accrued expenses 243.9 239.0
Income taxes payable 40.3 19.7
- ---------------------------------------------------------------------------------------------------------
Total current liabilities 394.4 375.0
- ---------------------------------------------------------------------------------------------------------
Long-term debt 419.5 324.0
Other noncurrent liabilities 485.7 527.7
- --------------------------------------------------------------------------------------------------------
Stockholders' equity
Cumulative preferred stock, 20,000,000 shares authorized; issued and outstanding
4,000 shares, Series C, $.01 par value at liquidation value of $25 share 0.1 0.1
Common Stock, $.01 par value per share, 150,000,000 shares authorized;
issued 48,142,961 shares in 1998, 48,181,264 shares in 1997 0.5 0.5
Additional paid-in capital 162.4 203.9
Retained earnings 456.2 331.5
Unearned compensation (1.7) (3.5)
Accumulated translation adjustments (5.1) (6.9)
Treasury stock, at cost, 4,952,881 shares in 1998, 3,044,589 shares in 1997 (181.4) (138.2)
- ---------------------------------------------------------------------------------------------------------
Total stockholders' equity 431.0 387.4
- ---------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,730.6 $1,614.1
- ---------------------------------------------------------------------------------------------------------
</TABLE>
CONTINGENT LIABILITIES AND COMMITMENTS (NOTES 4 AND 9)
See accompanying Notes to Consolidated Financial Statements.
31
<PAGE>
Consolidated Statements of Income
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $1,444.5 $1,290.6 $1,259.6
Manufacturing Cost of Sales 1,006.6 930.9 898.1
Selling and technical services 153.4 145.4 140.9
Research and Process Development 42.9 44.7 40.2
Administrative and general 46.6 47.7 44.3
Amortization of acquisition intangibles 9.5 2.7 0.9
- ---------------------------------------------------------------------------------------------------------
Earnings from operations 185.5 119.2 135.2
Other Income, Net 14.5 23.9 9.0
Equity in earnings of associated companies 20.3 12.3 24.8
Interest expense, net 22.4 5.7 2.1
- ---------------------------------------------------------------------------------------------------------
Earnings before income taxes 197.9 149.7 166.9
Income tax provision 73.2 36.1 66.8
Net earnings $ 124.7 $ 113.6 $ 100.1
- ---------------------------------------------------------------------------------------------------------
Earnings per common share
Basic $ 2.79 $ 2.50 $ 2.13
Diluted $ 2.68 $ 2.39 $ 2.03
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
Consolidated Statements of Comprehensive Income
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(DOLLARS IN MILLIONS) 1998 1997 1996
<S> <C> <C> <C>
Net earnings $124.7 $113.6 $100.1
Other comprehensive income, net of tax:
Foreign currency translation adjustments 1.8 (15.7) (1.5)
Additional minimum pension liability 5.4
- ---------------------------------------------------------------------------------------------------------
Comprehensive income $126.5 $ 97.9 $104.0
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
32
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(DOLLARS IN MILLIONS) 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows provided by (used for) operating activities
Net earnings $ 124.7 $ 113.6 $ 100.1
Noncash items included in net earnings:
Equity in undistributed earnings of associated companies (13.8) 0.1 (14.6)
Depreciation 78.0 73.1 79.7
Amortization 9.2 5.7 9.3
Deferred income taxes 19.2 3.2 23.7
Gain on dispositions of businesses and other assets (6.9) (22.3) --
Other (0.2) 6.7 --
Changes in operating assets and liabilities:
Accounts receivable 3.9 (16.7) 7.6
Inventories 1.1 (9.5) (18.4)
Accounts payable (25.2) (9.9) 3.7
Accrued expenses (19.5) 13.8 (3.2)
Income taxes payable 26.1 18.5 10.5
Other assets (8.6) (2.2) (5.9)
Other liabilities (35.7) (42.4) (21.7)
- ---------------------------------------------------------------------------------------------------------
Net cash flows provided by operating activities 152.3 131.7 170.8
- ---------------------------------------------------------------------------------------------------------
Cash flows provided by (used for) investing activities
Additions to plants, equipment and facilities (103.8) (91.4) (72.5)
Proceeds from dispositions of businesses and other assets 25.9 95.7 13.5
Acquisition of business (73.8) (344.0) --
Return of capital by investees -- -- 25.0
Change in other assets 4.8 2.1 (7.0)
- ---------------------------------------------------------------------------------------------------------
Net cash flows used for investing activities (146.9) (337.6) (41.0)
- ---------------------------------------------------------------------------------------------------------
Cash flows provided by (used for) financing activities
Purchase of treasury stock (113.4) (47.8) (148.7)
Change in short-term borrowings 10.3 -- --
Proceeds from issuance of long-term debt 322.0 -- --
Change in long-term borrowings (224.3) 235.0 23.0
Proceeds from exercise of stock options 3.3 6.0 2.5
Proceeds received on sale of put options 1.0 1.0 1.7
Debt issuance cost (9.4) -- --
- ---------------------------------------------------------------------------------------------------------
Net cash flows provided by (used for) financing activities (10.5) 194.2 (121.5)
- ---------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents 0.4 (2.3) 0.1
- ---------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (4.7) (14.0) 8.4
Cash and cash equivalents, beginning of year 6.4 20.4 12.0
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 1.7 $ 6.4 $ 20.4
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
33
<PAGE>
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Additional Minimum Accumulated
Preferred Common Paid-In Retained Unearned Pension Translation Treasury
(DOLLARS IN MILLIONS) STOCK STOCK CAPITAL EARNINGS COMPENSATION LIABILITY ADJUSTMENTS STOCK TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
1995 $0.1 $0.2 $222.6 $117.8 $(2.6) $(5.4) $ 10.3 $ (0.1) $ 342.9
Net earnings -- -- -- 100.1 -- -- -- -- 100.1
Award of, and changes in,
performance and
restricted stock -- -- 7.7 -- (8.2) -- -- 0.1 (0.4)
Amortization of
performance and
restricted stock -- -- -- -- 8.4 -- -- -- 8.4
Three-for-one stock split -- 0.3 (0.3) -- -- -- -- --
Purchase of treasury stock -- -- -- -- -- -- -- (148.7) (148.7)
Exercise of employee stock
options -- -- (8.5) -- -- -- -- -- --
Proceeds received from
stock options and
put options -- -- 4.2 -- -- -- -- -- 4.2
Tax benefit on stock
options -- -- 4.0 -- -- -- -- -- 4.0
Additional minimum pension
liability -- -- -- -- -- 5.4 -- -- 5.4
Translation adjustment -- -- -- -- -- -- (1.5) -- (1.5)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
1996 0.1 0.5 229.7 217.9 (2.4) -- 8.8 (140.2) 314.4
Net earnings -- -- -- 113.6 -- -- -- -- 113.6
Award of, and changes in,
performance and
restricted stock -- -- (2.3) -- (4.1) -- -- 6.4 --
Amortization of
performance and
restricted stock -- -- -- -- 3.0 -- -- -- 3.0
Purchase of treasury stock -- -- -- -- -- -- -- (47.8) (47.8)
Exercise of employee stock
options -- -- (43.4) -- -- -- -- 43.4 --
Proceeds received from
stock options and
put options -- -- 7.0 -- -- -- -- -- 7.0
Tax benefit on stock
options -- -- 12.9 -- -- -- -- -- 12.9
Translation adjustment -- -- -- -- -- -- (15.7) -- (15.7)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
1997 0.1 0.5 203.9 331.5 (3.5) -- (6.9) (138.2) 387.4
Net earnings -- -- -- 124.7 -- -- -- -- 124.7
Award of, and changes in,
performance and
restricted stock -- -- (4.5) -- 2.1 -- -- 1.3 (1.1)
Amortization of
performance and
restricted stock -- -- -- -- (0.3) -- -- -- (0.3)
Purchase of treasury stock -- -- -- -- -- -- -- (113.4) (113.4)
Issuance of treasury stock
for acquisition -- -- (29.5) -- -- -- -- 51.8 22.3
Exercise of employee stock
options -- -- (17.1) -- -- -- -- 17.1 --
Proceeds received from
stock options and
put options -- -- 4.3 -- -- -- -- -- 4.3
Tax benefit on stock
options -- -- 5.3 -- -- -- -- -- 5.3
Translation adjustment -- -- -- -- -- -- 1.8 -- 1.8
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
1998 $0.1 $0.5 $162.4 $456.2 $(1.7) $ -- $ (5.1) $(181.4) $ 431.0
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
34
<PAGE>
Notes to Consolidated Financial Statements
(Dollars in millions, except share and per share amounts, unless otherwise
indicated)
1. SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation. The financial statements include the accounts of
the Company and its subsidiaries on a consolidated basis. All significant
intercompany transactions and balances have been eliminated. Prior to 1996,
operations outside of the United States and Canada were generally included on a
fiscal year basis ended November 30. European operations were brought to a
December 31 fiscal year-end in 1996 and substantially all of the remaining
operations were brought to a December 31 fiscal year-end in 1997. The effect of
the change to current month reporting for these operations is reflected in other
income for 1997 and 1996 and is not material to the results of operations. The
equity method of accounting is used for investments in associated companies (all
50% owned).
Foreign Currency Translation. For most of the Company's international
operations, all elements of financial statements are translated into U.S.
dollars using current exchange rates with translation adjustments accumulated in
stockholders' equity. For international operations in what are considered
hyperinflationary economies, certain financial statement amounts are translated
at historical exchange rates with all other assets and liabilities translated at
current exchange rates and the resulting translation adjustments for these
operations recorded in earnings.
Depreciation and Amortization. Depreciation is provided primarily on a
straight-line composite method over the estimated useful lives of various
classes of assets. When such depreciable assets are sold or otherwise retired
from service, their costs, less amounts realized on sale or salvage, are charged
or credited to the accumulated depreciation account. Expenditures for
maintenance and repairs are charged to current operating expenses. Acquisitions,
additions and betterments either to provide necessary capacity, improve the
efficiency of production units and modernize, or replace older facilities or to
install equipment for protection of the environment are capitalized. Intangibles
resulting from business acquisitions are carried at cost and amortized on a
straight-line basis over a period of up to 40 years, unless, in the opinion of
management, their lives are limited. The Company capitalizes interest costs
incurred during the period of construction of plant and equipment. The interest
cost capitalized in 1998, 1997 and 1996 was immaterial to the consolidated
financial statements.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of.
Long-lived assets and intangibles are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the assets to the future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
the cost to sell.
Cash and Cash Equivalents. Securities with maturities of three months or less
when purchased are considered to be cash equivalents.
Financial Instruments. The carrying values of financial instruments
(principally cash and cash equivalents, accounts receivable, certain other
assets, accounts payable and long-term debt) included in the Company's
consolidated balance sheets approximated their fair values at December 31, 1998
and 1997. Fair values were determined through a combination of management
estimates and information obtained from independent third parties using the
latest available market data. The Company also uses derivative, or off balance
sheet, financial instruments to manage exposure to fluctuations in interest
rates, foreign exchange rates and certain raw material prices. Derivative
financial instruments utilized by the Company include interest rate swaps,
interest rate lock agreements, foreign currency exchange contracts, put options
indexed to the Company's stock and forward commodity contracts. The Company does
not hold or issue derivative financial instruments for trading or speculative
purposes.
35
<PAGE>
Foreign exchange forward contracts are utilized by the Company to hedge short-
term intercompany loans and intercompany trade accounts receivables and payables
that are denominated in a currency other than the functional currency of the
business. The Company's criteria to qualify for hedge accounting is that the
instrument must relate to a foreign currency asset or liability whose terms have
been identified, be in the same currency as the hedged item and reduce the risk
of exchange movement on the Company's operations. The foreign exchange gains or
losses and the offsetting losses or gains of the hedged transaction are marked
to market and reflected in net earnings.
Forward pricing of natural gas purchases is periodically established with
suppliers for the purpose of hedging the cost of anticipated natural gas
purchases. These contracts are principally settled through actual delivery of
the physical commodity and have the effect of securing predetermined prices the
Company pays for the underlying commodity. Gains or losses on these contracts
are reflected in the cost of the commodity as it is purchased.
Inventories. Inventories are carried at the lower of cost or market. Cost is
determined on the last-in, first-out (LIFO) method for substantially all
inventories in the United States with all other inventories determined on the
first-in, first-out (FIFO) or average cost method.
Income Taxes. Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis and operating loss and tax credit carryforwards. A valuation allowance is
provided when it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in earnings in the period that includes the enactment date.
If repatriation of the undistributed earnings of the Company's foreign
subsidiaries and associated companies is anticipated, then income taxes are
provided for such earnings.
Postretirement and Postemployment Benefits. The Company sponsors
postretirement and postemployment benefit plans. The net periodic costs are
recognized for these plans as employees render the services necessary to earn
the related benefits.
Stock-Based Compensation. The Company grants options at a price equal to the
market price of the stock at the date of grant and no compensation expense is
recorded. Compensation cost for performance and restricted stock is recorded
based on the quoted market price of the Company's common stock at the end of the
period through the date of vesting. The fair value of the stock is charged to
stockholders' equity and amortized to expense over the performance periods.
Compensation cost for stock appreciation rights payable in cash is amortized to
expense over the maturity period.
Risks and Uncertainties. The Company is engaged primarily in the manufacture
and sale of a highly diversified line of chemical products throughout the world.
The Company's revenues are dependent on the continued operation of its various
manufacturing facilities. The operation of chemical manufacturing plants
involves many risks, including the breakdown, failure or substandard performance
of equipment, natural disasters and the need to comply with directives of
governmental agencies. The occurrence of operational problems, including, but
not limited to, the above events, may have a material adverse effect on the
productivity and profitability of a particular manufacturing facility, or with
respect to certain facilities, or the Company as a whole during the period of
such operational difficulties.
The Company's operations are also subject to various hazards incidental to the
production of industrial chemicals, including the use, handling, processing,
storage and transportation of certain hazardous materials. These hazards can
cause personal injury and loss of life, severe damage to and destruction of
property and equipment, environmental damage and suspension of operations.
Claims arising from any future catastrophic occurrence involving the Company may
result in the Company being named as a defendant in lawsuits potentially
asserting large claims.
The Company performs ongoing credit evaluations of its customers' financial
condition and generally requires no collateral from its customers. The Company
is exposed to credit losses in the event of nonperformance by counterparties on
foreign exchange contracts and other risk management instruments. The
counterparties to these transactions are major financial institutions, thus the
Company considers the risk of default to be minimal. The Company does not
require collateral or other security to support the financial instruments with
credit risk.
36
<PAGE>
In conformity with generally accepted accounting principles, the management of
the Company has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosures of contingent
liabilities and pro forma compensation expense to prepare the Company's
consolidated financial statements. Actual results could differ from these
estimates.
2. ACQUISITIONS AND DISPOSITIONS
During 1998 the Company completed the following acquisitions and dispositions:
On June 24, 1998, the Company acquired assets of the OrePrep minerals
processing product line ("OrePrep") from Baker Petrolite Corporation for
approximately $9.0. The acquisition resulted in an excess of the purchase price
over the assets acquired of $8.3, which is included in Acquisition Intangibles
in the Consolidated Balance Sheet and will be amortized on a straight-line basis
over a period of up to 40 years. OrePrep supplies mineral processing reagents
and services to the mining industry. The acquired product line was integrated
into the Company's existing mining chemicals product line.
On July 31, 1998, the Company completed the purchase from Dyno Industrier ASA
of Oslo, Norway, of Dyno's global amino coatings resin business (the "Dyno
Business"), which consisted primarily of Dyno's 50% interest in Dyno-Cytec, a
European joint venture, for approximately $55.7. Payment of the purchase price
was funded under the Company's Credit Facility. The acquisition resulted in an
excess of the purchase price over the assets acquired of $40.7, which is
included in Acquisition Intangibles in the Consolidated Balance Sheet and will
be amortized on a straight-line basis over a period of up to 40 years. The
acquired business produces and sells cross-linking resins for coating
applications primarily in Europe from a single manufacturing plant in
Lillestrom, Norway. The acquired business was integrated into the Company's
existing specialty resins product line.
On October 9, 1998, the Company completed its acquisition of The American
Materials & Technologies Corporation ("AMT") in a stock transaction designed to
qualify as a tax-free reorganization. Under the terms of the transaction, each
AMT share was converted into the right to receive 0.3098 of a share of Cytec
common stock. In the transaction, the Company issued from Treasury 1,248,620
shares of common stock. In addition, outstanding options and warrants to acquire
AMT stock were converted into a total of 259,308 incentive and nonqualified
stock options, at a weighted average exercise price of $10.07 per share, and
75,901 warrants that allow the holders to purchase the Company's common stock at
a weighted average price of $25.14 per share. The cost of the acquisition was
approximately $26.8, including the shares issued, options and warrants converted
and previous shares acquired, plus the assumption of approximately $5.4 in debt.
AMT manufactures and markets advanced composite materials for customers in the
aerospace, defense, transportation and other industries. The acquisition
resulted in an excess of the purchase price over the assets acquired of $23.6,
which is included in Acquisition Intangibles in the Consolidated Balance Sheet
and will be amortized on a straight-line basis over a period of up to 40 years.
The acquired business was integrated into the Company's existing specialty
materials product line. On October 26, 1998, the Company sold the assets of the
AMT graphite golf shaft business for approximately $6.2 in cash.
All three acquisitions have been accounted for under the purchase method of
accounting. Consolidated results of operations have been included from the date
of acquisition. Consolidated results of operations for 1998 or 1997 would not
have been materially different if any of the acquisitions had occurred on
January 1, 1997. Accordingly, pro forma sales, net earnings and earnings per
share disclosures have not been provided.
On November 23, 1998, the Company completed the sale of its bulk molding
compounds business to Bulk Molding Compounds, Inc. of West Chicago, Illinois for
$17.0 in cash, resulting in a pretax gain of $4.4. The business acquired by Bulk
Molding Compounds, Inc. included Cytec's manufacturing, laboratory and sales
facility located at Perrysburg, Ohio.
During 1997 the Company completed the following acquisition and disposition:
37
<PAGE>
On September 30, 1997, the Company completed the acquisition of substantially
all of the assets and liabilities of Fiberite, Inc. ("Fiberite"). The assets and
liabilities were acquired for $344.0 from Stamford FHI Acquisition Corp., which
purchased Fiberite on August 29, 1997. The assets acquired included all of
Fiberite's business except its satellite materials business. The acquisition
resulted in an excess of the purchase price over the assets acquired of $276.5,
which is included in Acquisition Intangibles in the Consolidated Balance Sheet
and will be amortized on a straight-line basis over a period of up to 40 years.
The Fiberite operations have been integrated into the Company's specialty
materials product line. The Fiberite acquisition was accounted for under the
purchase method of accounting. Unaudited pro forma consolidated results of
operations for 1997, reflecting the Fiberite acquisition as if it had occurred
on January 1, 1997, would be as follows: net sales, $1,491.1; net earnings,
$111.5; and diluted earnings per share, $2.34.
On January 31, 1997, the Company completed the sale of its acrylic fibers
product line to a subsidiary of Sterling Chemicals, Inc. The assets transferred
included the Company's plant located near Pensacola, Florida. The Company
received approximately $94.8 in cash and received certain other consideration,
including the assumption by Sterling of certain contingent and other liabilities
with a value of approximately $15.0. The Company recorded a pretax gain of
approximately $22.3 from this transaction.
3. RESTRUCTURING OF OPERATIONS
In 1997 the Company recorded pretax restructuring charges in the amount of
$38.4. The restructuring costs were charged to the Consolidated Statement of
Income as follows: manufacturing cost of sales, $32.6; selling and technical
services, $2.2; research and process development, $1.0; and administrative and
general, $2.6. The components of the restructuring charges include: $28.6 for
employee related costs; $3.8 for fixed asset write-offs at the Company's
facility in Botlek, The Netherlands; $1.2 for plant closure costs; and $4.8 for
other actions. The personnel reduction primarily represents severance costs
associated with the elimination of approximately 415 positions worldwide. As of
December 31, 1998, approximately 285 positions have been eliminated.
Approximately 85 additional positions were eliminated in early 1999 and the
remainder will be substantially completed by the end of 1999.
Cash payments of $12.9 and $8.4 were made during 1998 and 1997, respectively.
At December 31, 1998, the liability to be paid was $17.6 essentially all of
which is for employee related costs. The spending is expected to be
substantially completed by the end of 1999 with the exception of certain long-
term payouts for employee severance.
4. FINANCIAL INSTRUMENTS
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
$11.2 to settle Rate Lock Agreements ($9.6 of which was paid during the first
half of 1998 and the remainder in 1997), which payments will be amortized or
recognized over the life of the 6.50% Notes, 6.75% Notes and 6.846% MandatOry
Par Put Remarketed Securities 2 ("MOPPRS") as an increase in interest expense of
such Notes. See also Note 8.
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 an aggregate of 400,000 shares of the
Company's common stock to the Company on certain dates at specified prices,
subject to the Company's right, in lieu of purchasing such shares, to pay the
holder of the put the excess of the strike price over the then market price of
the shares in either cash or additional shares of the Company's common stock.
The Company received premiums of approximately $1.0 on the sale of such options.
During 1998, 200,000 of the put options expired unexercised and the Company
purchased the remaining 200,000 shares of the Company's common stock subject to
the options for an aggregate of $11.0.
38
<PAGE>
At December 31, 1998, the Company had net foreign exchange contracts to
purchase various currencies, principally British pounds and Dutch guilders, for
$21.4 and to sell various currencies, principally Dutch guilders and German
marks, for $11.3. All contracts are for periods of six months or less. At
December 31, 1997, the Company had net foreign exchange contracts to sell $12.4
of primarily European currencies for U.S. dollars and to sell Dutch guilders
with a value equivalent to $17.5 for other European currencies. The fair values
of existing foreign currency exchange contracts, based on exchange rates at
December 31, 1998 and 1997, approximated the above contract values.
At December 31, 1998, the Company had $4.6 net forward commodity contracts
outstanding. The maturity of these contracts correlates highly to the actual
purchases of the commodity. Forward commodity contracts outstanding at December
31, 1997, were not material to the Company's consolidated financial statements.
The Company is party to three interest rate swap agreements each with notional
values of approximately $20.0 and maturity dates during 2001. One of the swaps
converts variable rate interest obligations on the Company's Credit Facility to
6.25% fixed rate interest obligations. The other two agreements have virtually
offsetting terms.
5. EQUITY IN NET ASSETS OF AND ADVANCES TO ASSOCIATED COMPANIES
The Company has a 50% interest in each of four associated companies: CYRO
Industries, Criterion Catalyst, Mitsui-Cytec, and AC Molding Compounds, and had
a 50% interest in the former Dyno-Cytec joint venture through July 31, 1998.
The aggregate cost of investments in associated companies accounted for under
the equity method was $40.4 at December 31, 1998 and 1997. Summarized financial
information for the Company's investments in and advances to associated
companies as of and for the years ended December 31, 1998, 1997 and 1996, is as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------
<S> <C> <C> <C>
Net sales $583.0 $596.5 $600.7
Gross profit 153.3 145.2 154.1
Net earnings 44.0 25.6 52.2
Company's share of earnings 20.3 12.3 24.8
- ----------------------------------------------------------
Current assets 270.3 308.8 292.3
Noncurrent assets 343.4 333.5 304.4
Total assets 613.7 642.3 596.7
- ----------------------------------------------------------
Current liabilities 175.0 172.4 144.9
Noncurrent liabilities 127.3 172.9 153.4
Equity 311.4 297.0 298.4
Total liabilities and equity 613.7 642.3 596.7
- ----------------------------------------------------------
Company's share of equity $155.7 $148.5 $149.2
</TABLE>
Sales to associated companies (primarily CYRO Industries) amounted to $34.4,
$35.9, and $40.0 in 1998, 1997 and 1996, respectively. Purchases from associated
companies were immaterial.
39
<PAGE>
6. INVENTORIES
At December 31, 1998 and 1997, LIFO inventories comprised approximately 56% and
59% of consolidated inventories, respectively.
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Finished goods $ 87.6 $ 77.5
Work in progress 16.0 19.0
Raw materials and supplies 75.4 78.4
- ------------------------------------------------------------------------------
179.0 174.9
Less reduction to LIFO cost (38.5) (43.0)
- ------------------------------------------------------------------------------
Total inventories $ 140.5 $ 131.9
7. PLANTS, EQUIPMENT AND FACILITIES
At December 31, 1998 and 1997, plant, equipment and facilities consisted of the
following:
1998 1997
- ------------------------------------------------------------------------------
Land and land improvements $ 41.6 $ 42.6
Buildings 167.1 155.0
Machinery and equipment 1,086.5 1,008.7
Construction in progress 67.8 71.7
- ------------------------------------------------------------------------------
Plants, equipment and facilities, at cost $1,363.0 $1,278.0
8. LONG-TERM DEBT
At December 31, 1998 and 1997, long-term debt consisted of the following:
1998 1997
- ------------------------------------------------------------------------------
Credit Facility $ 100.0 $ 123.0
364-Day Facility
Fiberite Acquisition Facility -- 200.0
Public Debt 319.5 --
Other -- 1.0
- ------------------------------------------------------------------------------
Long-term debt $ 419.5 $ 324.0
</TABLE>
The weighted average interest rate on long-term debt for 1998 and 1997 was
6.69% and 6.05%, respectively.
On August 21, 1998, the Company amended and restated its Credit Facility,
primarily to add a new lender to its existing bank group. At December 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. There was $100.0 of outstanding Revolving Loans under the Credit
Facility at December 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 terms, covenants and conditions of the Credit
Facility at December 31, 1998.
On August 21, 1998, the Company replaced its $200.0, 364-Day Fiberite
Acquisition Facility with a new $200.0, 364-Day Facility (the "364-Day
Facility"). The 364-Day Facility, which provides for unsecured revolving loans
for general corporate purposes, including, without limitation, for purposes of
making acquisitions, matures on August 20, 1999, and contains a two-year term-
out option. The interest rate on funds borrowed under the Credit Facility and
the 364-Day Facility floats based on London Interbank Offered Rate ("LIBOR"). As
of December 31, 1998, there were no outstanding borrowings under the 364-Day
Facility.
40
<PAGE>
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 364-Day Fiberite Acquisition Facility, 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 Credit Facility.
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 statement. The Company received an aggregate of
approximately $123.8 in proceeds from the sale before deducting associated
expenses. $104.0 of the net proceeds were used to repay approximately $84.0 of
indebtedness outstanding under the Credit Facility and approximately $20.0 of
indebtedness outstanding under the Fiberite Acquisition Facility, and the
remainder was used for general corporate purposes.
Except in limited circumstances, the MOPPRS will be subject to mandatory
tender to Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Remarketing
Dealer at 100% of the principal amount thereof, for remarketing on the
Remarketing Date. The interest rate on the MOPPRS from the Remarketing Date to
maturity will be 5.951% plus an applicable spread. If the Remarketing Dealer for
any reason does not purchase all tendered MOPPRS on the Remarketing Date or
elects not to remarket the MOPPRS, the Company will be required to repurchase
the MOPPRS from the beneficial owners thereof on the Remarketing Date at 100% of
the principal amount thereof plus accrued interest, if any.
Under the terms of the instrument most restrictive of additional borrowings by
the Company, the Company's Series C Cumulative Preferred Stock ("Series C
Stock"), the Company was limited to borrowing no more than an additional $216.6
at December 31, 1998. See Note 15.
9. ENVIRONMENTAL MATTERS AND OTHER CONTINGENT LIABILITIES AND COMMITMENTS
The Company is subject to substantial costs arising out of environmental laws
and regulations, which include obligations to remove or limit the effects on the
environment of the disposal or release of certain wastes or substances at
various sites. Liability for investigative, removal and remedial costs under
certain federal and state laws is retroactive, strict and joint and several. The
Company is currently a party to, or otherwise involved in, legal proceedings
directed at the cleanup of approximately 60 Superfund sites. Since the laws
pertaining to these sites provide for joint and several liability, a
governmental plaintiff could seek to recover all remediation costs at a waste
disposal site from any one of the potentially responsible parties ("PRPs") for
such site, including the Company, despite the involvement of other PRPs. In some
cases, the Company is one of several hundred identified PRPs, while in others it
is the only one or one of only a few. Generally, where there are a number of
financially solvent PRPs, liability has been apportioned, or the Company
believes, based on its experience with such matters, that liability will be
apportioned based on the type and amount of waste disposed by each PRP at such
disposal site and the number of financially solvent PRPs. The Company is also
conducting remediation at, or is otherwise responsible for, a number of non-
Superfund sites. Proceedings involving environmental matters, such as alleged
discharge of chemicals or waste material into the air, water or soil, are
pending against the Company in various states. In many cases, future
environment-related expenditures cannot be quantified with a reasonable degree
of accuracy. In addition, from time to time in the ordinary course of its
business, the Company is informed of, and receives inquiries with respect to,
new sites that may contain environmental contamination for which the Company may
be responsible.
It is the Company's policy to accrue and charge against earnings,
environmental cleanup costs when it is probable that a liability has been
incurred and an amount is reasonably estimable. As assessments and cleanups
proceed, these accruals are reviewed periodically and adjusted, if necessary, as
additional information becomes available. These accruals can change
substantially due to such factors as additional information on the nature or
extent of contamination, methods of remediation required, and other actions by
governmental agencies or private parties. Cash expenditures often lag behind the
period in which an accrual is recorded by a number of years.
41
<PAGE>
In accordance with the above policies, as of December 31, 1998 and 1997, the
aggregate environment-related accruals were $136.1 and $161.6, respectively, of
which $25.0 was included in accrued expenses in each period with the remainder
included in other noncurrent liabilities. Environmental remediation spending for
the years ended December 31, 1998, 1997 and 1996, was $23.8, $26.1 and $26.8,
respectively. All accruals have been recorded without giving effect to any
possible future insurance proceeds.
While it is not feasible to predict the outcome of all pending environmental
suits and claims, it is reasonably possible that future provisions will be
necessary for environmental costs that, in management's opinion, will not have a
material adverse effect on the consolidated financial position of the Company,
but could be material to the consolidated 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 consolidated financial position of the
Company, but could be material to the consolidated results of operations of the
Company in any one accounting period.
Rental expense under property and equipment leases was $12.8 in 1998, $11.5 in
1997 and $9.5 in 1996. Estimated future minimum rental expenses under property
and equipment leases that have initial or remaining noncancelable lease terms in
excess of one year as of December 31, 1998, are:
<TABLE>
<CAPTION>
Operating
Leases
- -----------------------------------------
<S> <C>
1999 $11.7
2000 8.7
2001 6.9
2002 4.0
2003 1.1
Thereafter 0.6
- -----------------------------------------
Total minimum lease payments $33.0
</TABLE>
At December 31, 1998 and 1997, the Company had $10.9 and $11.2, respectively,
of letters of credit outstanding for environmental and insurance related
matters.
10. INCOME TAXES
The income tax provision for the years ended December 31, 1998, 1997 and 1996,
is based on earnings before income taxes as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------
<S> <C> <C> <C>
Domestic $154.1 $116.3 $142.1
Foreign 43.8 33.4 24.8
- --------------------------------------------------------------
Total $197.9 $149.7 $166.9
</TABLE>
The components of the provision for the years ended December 31, 1998, 1997 and
1996, are composed of the following:
1998 1997 1996
- --------------------------------------------------------------
Current:
Federal $ 37.0 $ 18.6 $ 30.4
Foreign 18.0 10.8 7.4
Other, principally state 3.4 4.3 2.2
Total $ 58.4 $ 33.7 $ 40.0
- --------------------------------------------------------------
Deferred:
Federal $ 13.2 $ 1.6 $ 20.5
Foreign (2.1) 0.7 1.3
Other, principally state 3.7 0.1 5.0
Total $ 14.8 $ 2.4 $ 26.8
- --------------------------------------------------------------
Total income tax provision $ 73.2 $ 36.1 $ 66.8
42
<PAGE>
Domestic and foreign earnings of consolidated companies before income taxes
include all earnings derived from operations in the respective U.S. and foreign
geographic areas, whereas provisions (benefits) for income taxes include all
income taxes payable to (receivable from) U.S., foreign and other governments as
applicable, regardless of the situs in which the taxable income (loss) is
generated. The temporary differences which give rise to a significant portion of
deferred tax assets and liabilities as of December 31, 1998 and 1997, are as
follows:
<TABLE>
<CAPTION>
1998 1997
- -------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for bad debts $ 2.9 $ 3.2
Employee benefit accruals 17.7 9.8
Insurance accruals 12.9 11.8
Operating accruals 19.5 17.0
Inventory 6.1 7.8
Environmental accruals 51.4 59.7
Postretirement obligations 131.5 139.8
Other 17.9 16.9
Deferred tax assets 259.9 266.0
- -------------------------------------------------------
Deferred tax liabilities:
Plants, equipment and facilities (109.9) (101.1)
Other (14.5) (12.0)
Deferred tax liabilities (124.4) (113.1)
- -------------------------------------------------------
Net deferred tax assets $ 135.5 $ 152.9
</TABLE>
Beginning in 1997, no provision has been made for U.S. or additional foreign
taxes on the undistributed earnings of foreign subsidiaries since the Company
intends to reinvest these earnings. Foreign tax credits would be available to
substantially reduce or eliminate any amount of additional U.S. tax that might
be payable on these earnings in the event of distribution or sale.
The Fiberite Acquisition, in conjunction with the continued positive earnings
trend of the Company, makes it more likely than not that the Company will
generate sufficient taxable income to realize its net deferred income tax
assets. Accordingly, in the fourth quarter of 1997, the Company reversed the
remaining tax valuation allowance of $24.4.
A reconciliation between the Company's effective tax rate and the U.S. federal
income tax rate is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax rate 35.0% 35.0% 35.0%
Valuation allowance adjustment -- (16.3) --
Income subject to other than the
federal income tax rate (0.9) 0.7 0.2
State taxes, net of federal benefits 3.1 3.9 2.6
Other charges, net (0.2) 0.8 2.2
- ------------------------------------------------------------
Effective tax rate 37.0% 24.1% 40.0%
</TABLE>
11. RETIREMENT PLANS
The Company has defined benefit pension plans that cover employees in the United
States and a number of foreign countries. The following provides a
reconciliation of benefit obligations, plan assets, and funded status of the
plans:
<TABLE>
<CAPTION>
1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
Change in benefit obligation
Benefit obligation at January 1 $ 286.1 $ 225.8
Service cost 10.2 8.7
Interest cost 20.9 17.6
Amendments (3.5)
Acquisitions 1.2 25.2
Curtailments (2.4)
Translation difference (0.5) (0.6)
Actuarial loss 14.7 16.2
Employee contributions 0.2 0.2
Benefits paid (7.8) (4.6)
Benefit obligation at December 31 $ 321.5 $ 286.1
- -------------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at January 1 $ 252.3 $ 194.6
</TABLE>
43
<PAGE>
<TABLE>
<S> <C> <C>
Actual return on plan assets 40.6 30.3
Company contributions 13.4 12.8
Employee contributions 0.2 0.2
Acquisitions 1.2 19.6
Translation difference (0.5) (0.6)
Benefits paid (7.8) (4.6)
Fair value of plan assets at December 31 $ 299.4 $ 252.3
- ------------------------------------------------------------------------------------
Projected benefit obligation over plan assets $ 22.1 $ 33.8
Unrecognized actuarial loss (18.4) (24.5)
Unrecognized prior service cost 1.3 (2.5)
Unrecognized net transition obligation 1.5 1.7
- ------------------------------------------------------------------------------------
Accrued pension cost recognized in the
consolidated balance sheet $ 6.5 $ 8.5
</TABLE>
Assumptions as of December 31:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 6.75% 7.0% 7.5%
Expected return on plan assets 9.0% 9.0% 9.0%
Rate of future compensation
increase 3.010.0% 3.010.0% 4.010.0%
</TABLE>
Net periodic pension expense includes the following components:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 10.2 $ 8.7 $ 9.1
Interest cost on projected benefit
obligation 20.7 17.6 15.6
Expected return on plan assets (22.1) (18.1) (15.6)
Net amortization and deferral 2.7 1.1 2.0
- --------------------------------------------------------------------------------------------------
Net periodic pension expense $ 11.5 $ 9.3 $ 11.1
</TABLE>
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for pension plans with accumulated benefit obligations in
excess of plan assets were $133.4, $112.6 and $95.5, respectively, as of
December 31, 1998, and $112.0, $85.5 and $69.1, respectively, as of December 31,
1997. The prepaid benefit costs recognized in the consolidated balance sheet as
of December 31, 1998 and 1997 were $10.6 and $7.9, respectively, and the accrued
benefit liability recognized in the consolidated balance sheet as of December
31, 1998 and 1997 was $17.1 and $16.4, respectively. The additional minimum
pension liability recognized net of tax in 1996 was $5.4.
The Company sponsors an employee savings and profit sharing plan.The savings
plan portion generally matches 75% of employee contributions up to 4% of
compensation. Profit sharing contributions are based on the Company's
performance and are at the discretion of the Board of Directors. Savings plan
matching contributions were $4.2, $3.9 and $4.3 for 1998, 1997 and 1996,
respectively. Profit sharing contributions were approximately $5.0 in 1998 and
$4.6 and $7.6 in 1997 and 1996, respectively.
12. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company sponsors postretirement and postemployment benefit plans. The
postretirement plans provide medical and life insurance benefits to retirees who
meet minimum age and service requirements. The postemployment plans provide
salary continuation, disability related benefits, severance pay and continuation
of health costs during the period after employment but before retirement.
The following provides a reconciliation of benefit obligations, plan assets,
and funded status of the plans:
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------------------
<S> <C> <C>
Change in benefit obligation
Benefit obligation at January 1 $309.5 $318.2
Service cost 1.4 1.2
Interest cost 18.5 21.1
Amendments (17.0) --
Acquisitions 10.3
Curtailments -- (4.0)
</TABLE>
44
<PAGE>
<TABLE>
<S> <C> <C>
Translation difference (0.3) 0.3
Actuarial gain (13.5) (18.5)
Employee contributions 0.9 0.7
Benefits paid (20.9) (19.8)
Benefit obligation at December 31 $278.6 $309.5
- ----------------------------------------------------------------
Change in plan assets
Fair value of plan assets at January 1 $ 38.0 $ 11.5
Actual return on plan assets 3.3 1.7
Company contributions 25.2 43.9
Employee contributions 0.9 0.7
Benefits paid (20.9) (19.8)
Fair value of plan assets at December 31 $ 46.5 $ 38.0
- ----------------------------------------------------------------
Accumulated postretirement benefit obligation
over fair value of plan assets $232.1 $271.5
Unrecognized actuarial loss 47.5 35.3
Unrecognized negative prior service cost 61.5 49.8
- ----------------------------------------------------------------
Accrued benefit cost $341.1 $356.6
</TABLE>
The accrued postretirement benefit cost recognized in the Company's
consolidated balance sheets at December 31, 1998 and 1997, includes $20.0 and
$20.0, respectively, in accrued expenses and $321.1 and $336.6, respectively, in
other noncurrent liabilities.
45
<PAGE>
Net periodic postretirement benefit costs for the years ended December 31,
1998, 1997 and 1996, included the following components:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 1.4 $ 1.2 $ 1.6
Interest cost 18.5 21.1 22.3
Expected return on plan assets (2.7) (1.7) (0.8)
Net amortization and deferral (7.4) (5.1) (4.4)
Curtailment gain -- (9.3) --
- -------------------------------------------------------
Total cost $ 9.8 $ 6.2 $18.7
</TABLE>
Measurement of the accumulated postretirement benefit obligations ("APBO")
was based on actuarial assumptions, including a discount rate of 6.75%, 7.00%
and 7.50% at December 31, 1998, 1997 and 1996, respectively. The assumed rate of
future increases in the per capita cost of health care benefits (health care
cost trend rate) is 8.35% in 1999, decreasing evenly over four years to 4.75%
and remaining at that level thereafter. The health care cost trend rate has a
significant effect on the reported amounts of APBO and related expense. For
example, increasing the health care cost trend rate by one percentage point in
each year would increase the APBO at December 31, 1998, and the 1998 aggregate
service and interest cost by approximately $26.2 and $1.9, respectively, and
decreasing the health care cost trend rate by one percentage point in each year
would decrease the APBO at December 31, 1998 and the 1998 aggregate service and
interest cost by approximately $23.8 and $1.8, respectively.
13. OTHER FINANCIAL INFORMATION
Accrued expenses at December 31, 1998 and 1997, included the following:
<TABLE>
<CAPTION>
1998 1997
- -------------------------------------------------------
<S> <C> <C>
Pensions and other employee benefits $ 34.6 $ 30.0
Other postretirement employee benefits 20.0 20.0
Salaries and wages 11.7 12.5
Environmental 25.0 25.0
Restructuring 17.6 30.0
Other 135.0 121.5
- --------------------------------------------------------
$243.9 $239.0
</TABLE>
Cash payments during the years ended December 31, 1998, 1997 and 1996,
included interest of $21.0, $6.2, and $4.0, respectively. Income taxes paid in
1998, 1997 and 1996 were $40.2, $30.4 and $49.2, respectively. Income taxes paid
include foreign taxes of $13.4, $6.6 and $10.7 in 1998, 1997 and 1996,
respectively.
Included in accounts receivable at December 31, 1998 and 1997, are
miscellaneous receivables of approximately $37.2 and $32.4, respectively.
Included in interest expense, net for the years ended December 31, 1998, 1997
and 1996, is interest income of $2.3, $2.2 and $1.9, respectively.
Other income, net, was $14.5, $23.9 and $9.0 for 1998, 1997 and 1996,
respectively. Included in 1998 was a gain of $4.4 relating to the sale of the
bulk molding compounds product line, $3.0 of other investment income and a gain
of $3.8 on certain investments in unaffiliated companies. Included in 1997 was a
gain of $22.3 related to divested product lines and charges of $9.0 for
reducing the carrying amount of the Company's subsidiary CONAP, Inc. to net
realizable value and expected losses on certain other assets being held for
sale. Included in 1996 were gains of $4.0 resulting from certain real estate
transactions.
14. STOCKHOLDERS' EQUITY
On December 17, 1993 (the "Effective Date"), Cytec Industries Inc. was formed
and became an independent public company. American Cyanamid Company ("Cyanamid")
distributed all of the Company's common stock to existing Cyanamid stockholders.
Cyanamid retained 100% of the preferred stock issued by the Company of which
only the Series C Stock remains outstanding.
46
<PAGE>
Stock Split. In June 1996 the Company declared a three-for-one stock split of
the Company's common stock effected in the form of a stock dividend. All share
and per share data, including stock option information, but excluding treasury
shares, through the date of the distribution of the stock dividend on July 23,
1996, have been restated to reflect the stock split.
Common Stock. The Company is authorized to issue 150 million shares of common
stock with a par value of $.01 per share, of which 43,190,080 shares were
outstanding at December 31, 1998. At December 31, 1998, the Company had reserved
approximately 10,376,736 shares for issuance under the 1993 Stock Award and
Incentive Plan described below (the "1993 Plan").
Stock Award and Incentive Plan. The 1993 Plan is administered by a committee
of the Board of Directors (the "Committee"). The 1993 Plan provides for grants
of a variety of awards, such as stock options (including incentive stock options
and nonqualified stock options), stock appreciation rights (including limited
stock appreciation rights), restricted stock (including performance shares),
restricted stock units, deferred stock awards and dividend equivalents, deferred
cash awards and interest equivalents, and other stock or cash-based awards, to
be made to selected employees and independent contractors of the Company and its
subsidiaries and affiliates at the discretion of the Committee. In addition,
automatic formula grants of restricted stock and nonqualified stock options are
awarded to non-employee directors.
The stock option component of the 1993 Plan provides for the granting of
nonqualified stock options to officers, directors and certain key employees at
100% of the market price on the date the option was granted. Options are
generally exercisable in cumulative installments of 33 1/3% per year commencing
one year after the date of grant and annually thereafter, with contract lives of
generally 10 years from the date of grant. A summary of the status of the
Company's stock options as of December 31, 1998, 1997 and 1996, and changes
during the year ended on those dates is presented below.
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares Under Option:
Outstanding at beginning of year 4,818,683 $16.29 4,906,196 $10.18 4,487,037 $ 6.86
Granted 631,025 47.61 883,425 40.25 876,130 25.14
Converted pursuant to AMTacquisition 259,308 10.07 -- -- -- --
Exercised (381,764) 8.61 (934,688) 6.45 (429,059) 5.78
Forfeited (46,907) 38.67 (36,250) 27.50 (27,912) 14.12
Outstanding at end of year 5,280,345 $19.90 4,818,683 $16.29 4,906,196 $10.18
- --------------------------------------------------------------------------------------------------------
Options exercisable at year-end 3,864,092 $12.48 3,225,120 $ 8.73 2,374,586 $ 6.39
</TABLE>
The fair value of each stock option granted during 1998, 1997 and 1996 is
estimated on the date of grant using the Black-Scholes option pricing model with
the following assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected life (years) 6.0 6.0 6.0
Expected volatility 42.80% 45.66% 30.69%
Expected dividend yield
Risk-free interest rate 5.50% 6.41% 5.87%
- ----------------------------------------------------------------------------------------------------------------------------------
Weighted average fair value of options granted during the year $23.71 $21.52 $10.65
</TABLE>
47
<PAGE>
The following table summarizes information about stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Range of Exercise Prices Outstanding Life (Years) Price Exercisable Price
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 2.77-10.00 2,373,482 5.43 $ 5.49 2,342,162 $ 5.47
11.67-22.88 637,561 5.18 13.20 635,061 13.16
25.08-37.75 816,930 7.16 25.18 578,381 25.16
37.88-47.31 873,547 8.16 40.30 294,488 40.19
47.81-57.44 578,825 9.08 48.12 14,000 47.94
- -----------------------------------------------------------------------------------------------------------------------------------
$ 2.77-57.44 5,280,345 6.52 $19.90 3,864,092 $12.48
</TABLE>
The Company has issued performance stock, a form of restricted stock, with
restrictions related to the Company's financial performance for the applicable
periods. Awards made in 1996, 1997 and 1998 were for the 1998, 1999 and 2000
performance periods, respectively. Restrictions lapse on the stock upon the
attainment of performance criteria established by the Committee that under
certain circumstances, may be revised. The amount of unearned compensation
recognized as expense/(income) was ($0.3) in 1998, $3.0 in 1997 and $8.4 in
1996, respectively. A summary of restricted stock award activity is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------
<S> <C> <C> <C>
Outstanding awards
beginning of year 151,838 131,304 357,936
New awards granted 42,906 90,725 58,107
Shares with restrictions lapsed (53,995) (49,956) (255,123)
Restricted shares forfeited (28,520) (20,235) (29,616)
Outstanding awards end of year 112,229 151,838 131,304
- -------------------------------------------------------------------
Weighted average market value of
new awards on award date $47.61 $41.10 $ 23.26
</TABLE>
"Shares with restrictions lapsed" in each period above include shares deferred
by certain participants. The Company issued these participants equivalent
deferred stock awards that will be distributed in the form of shares of common
stock, generally, following termination of employment.
In late 1995 the Company implemented a stock appreciation plan for all
eligible active employees that excluded those employees who customarily receive
stock options. The stock appreciation units represent a potential payout to
employees, in cash, of the difference between the base price of the Company's
stock of $20.00 per share and the lesser of the price at term or $33.33. The
stock appreciation units mature 50% at December 31, 1997, and December 31, 1999.
In December 1996 the plan was amended to provide for the immediate payout of
five hundred dollars per participant which represented 25% of the total maximum
payout. A second 25% payout was made in December 1997. The compensation cost
related to this plan was $2.0 and $2.2 in 1997 and 1996, respectively.
As discussed in Note 2, in connection with the AMT acquisition, the Company
issued from Treasury 1,248,620 shares of common stock. In addition, outstanding
options and warrants to acquire AMT stock were converted into a total of 259,308
incentive and nonqualified stock options, at a weighted average exercise price
of $10.07 per share and 75,901 warrants that allow the holders to purchase the
Company's common stock at a weighted average price of $25.14 per share.
A summary of changes in common stock issued and treasury stock for the years
ended December 31, 1998, 1997 and 1996 is presented below:
<TABLE>
<CAPTION>
Common Treasury
Stock Stock
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at December 31, 1995 48,315,193 6,917
Purchase of treasury stock 3,033,000
Issuance pursuant to stock option plan 235,389 (153,676)
Award of performance stock
and restricted stock 50,652 (2,485)
Forfeitures and performance
stock deferrals (223,551) (271)
- ---------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 48,377,683 2,883,485
Purchase of treasury stock -- 1,234,250
</TABLE>
48
<PAGE>
<TABLE>
<S> <C> <C>
Issuance pursuant to stock option plan -- (934,688)
Award of performance stock
and restricted stock -- (90,725)
Forfeitures and performance
stock deferrals (196,419) (47,733)
- ---------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 48,181,264 3,044,589
Purchase of treasury stock -- 3,561,950
Issuance pursuant to stock option plan -- (381,764)
Award of performance stock
and restricted stock -- (42,906)
Forfeitures and performance
stock deferrals (38,303) 19,632
Issuance of treasury stock for
Acquisition -- (1,248,620)
- ---------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 48,142,961 4,952,881
Shares held in treasury prior to July 23,1996, were not subject to the stock split.
</TABLE>
The compensation costs that have been charged against income for restricted
stock awards and stock appreciation plan were noted above. Set forth below are
the Company's net earnings and earnings per share, presented both "as reported"
and "pro forma," as if compensation cost had been determined consistent with the
fair value provisions of SFAS No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"):
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings :
As reported $124.7 $113.6 $100.1
Pro forma 120.0 107.7 98.0
Basic earnings per share:
As reported $ 2.79 $ 2.50 $ 2.13
Pro forma 2.68 2.37 2.09
Diluted earnings per share:
As reported $ 2.68 $ 2.39 $ 2.03
Pro forma 2.58 2.26 1.98
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not
necessarily indicative of future amounts.
15. PREFERRED STOCK REDEEMABLE AND NONREDEEMABLE
The Company is authorized to issue 20 million shares of preferred stock with a
par value of $.01 per share in one or more classes or series with rights and
privileges as adopted by the Board of Directors. As of the Effective Date, the
Company had issued to Cyanamid, a subsidiary of American Home Products
Corporation, 8 million shares of preferred stock, of which only the Series C
Stock remains outstanding.
The Series C Stock, of which 4,000 shares are issued and outstanding, is
perpetual, has a liquidation and redemption value of $0.1, an annual dividend of
$1.83 per share (7.32%) and is redeemable at the Company's option, but not
before December 16, 1999, under certain limited circumstances. Shares of Series
C Stock are not transferable except to a subsidiary of Cyanamid. The Series C
Stock provides Cyanamid with the right to elect one director to the Company's
Board of Directors and contains certain covenants requiring the Company to
satisfy its environmental remediation obligations, retiree health care and life
insurance obligations and certain pension contribution obligations in a timely
and proper manner. It also contains certain other covenants requiring the
Company to maintain specified financial ratios and restricting the Company from
taking certain actions, including paying dividends on its common stock in
certain circumstances, merging or consolidating or selling all or substantially
all of the Company's assets or incurring indebtedness in violation of certain
covenants, without the consent of Cyanamid as the holder of the Series C Stock.
In the event that the Company fails to comply with certain of such covenants,
Cyanamid, as the holder of the Series C Stock, will have additional rights which
may include approval of the Company's capital expenditures and in certain more
limited circumstances, appointing additional directors to the Company's Board of
Directors, which together with Cyanamid's existing representative, would
constitute a majority of the Company's Board of Directors.
49
<PAGE>
The Company on April 8, 1997, signed an agreement with Cyanamid to revise
certain of the financial covenants contained in its Series C Stock. Under the
revised terms, the Company must maintain a debt-to-equity ratio of no more than
2-to-1 and a minimum fixed charge coverage ratio of not less than 3-to-1 for the
average of the fixed charge coverage ratios for the four consecutive fiscal
quarters most recently ended and must not incur more than $150.0 of debt unless
the Company's equity is in excess of $200.0. If the Company has more than $200.0
in equity, then it may incur additional debt as long as its ratio of debt-to-
equity is not more than 1.5-to-1. At December 31, 1998, the Company had $429.8
of debt and $430.9 of equity as defined in the Series C Stock covenant and,
under the revised terms, would have the ability to incur up to an additional
$216.6 in debt.
The Company on January 22, 1999, signed an agreement with Cyanamid providing
that Cyanamid would irrevocably waive certain financial covenants contained in
the Series C Stock so that, in addition to restricted payments otherwise
permitted under the Series C Stock, which at December 31, 1998, were limited to
$17.7, Cytec may make up to $100.0 in special restricted payments solely for the
purpose of repurchasing Cytec's common stock.
50
<PAGE>
16. EARNINGS PER SHARE
The following represents the reconciliation of the numerators and denominators
of the basic and diluted EPS computations for net earnings available for common
stockholders for the years ended December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
Per Per Per
Income Shares Share Income Shares Share Income Shares Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS
Net earnings $124.7 44,714,788 $2.79 $113.6 45,450,139 $2.50 $100.1 47,002,324 $2.13
Effect of dilutive
securities
Options -- 1,663,768 -- -- 1,992,762 -- -- 2,106,281 --
Performance/
Restricted stock -- 95,954 -- -- 108,783 -- -- 239,031 --
Put options -- 3,840 -- -- 2,132 -- -- 440 --
Warrants -- 1,763 -- -- -- -- -- -- --
Diluted EPS
Net earnings $124.7 46,480,113 $2.68 $113.6 47,553,816 $2.39 $100.1 49,348,076 $2.03
</TABLE>
At December 31, 1998 there were 2,333,762 options outstanding with a weighted
average exercise price of $35.86 that were excluded from the above calculation
because their inclusion would have had an antidulitive effect on EPS.
17. OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREAS
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 supercedes SFAS No.
14, "Financial Reporting for Segments of a Business Enterprise," and changes the
way the Company reports information about its operating segments, geographic
areas of operations and major customers. The Company adopted SFAS 131 in 1998
and has restated the information for 1997 and 1996 in order to conform to the
1998 presentation.
Business Segments The Company has four reportable segments (Water and Industrial
Process Chemicals, Performance Products, Specialty Materials and Building Block
Chemicals).
The Water and Industrial Process Chemicals segment produces paper, water,
mining and phosphine chemicals that are mainly used in water and wastewater
treatment, paper manufacturing and mineral processing and separation. The
principal markets for these products are global, with approximately 48% of sales
in the United States.
The Performance Products segment produces specialty resins, polymer additives,
surfactants and specialty monomers that are used in serving the coatings,
adhesives and plastics markets. The principal markets for these products are
global with approximately 59% of sales in the United States.
The Specialty Materials segment manufactures and sells aerospace materials
that are mainly used in commercial and military aviation and launch vehicles,
automobiles, recreational products, satellites and aircraft brakes. Net sales
for this business segment are approximately 72% U.S. based. For 1997 and 1998
the segment also included the Bulk and Engineered Molding Compounds businesses,
which, except for one minor product line, have since been divested.
The Building Block Chemicals segment manufactures acrylonitrile, acrylamide,
ammonia, hydrocyanic acid, melamine, methanol and sulfuric acid. Approximately
one-third of the Company's total production of building block chemicals are used
in the manufacture of many of the Company's other products with the remainder
sold to third parties.
The accounting policies of the reportable segments are the same as those
described in Note 1 of the Notes to Consolidated Financial Statements. All
intersegment sales prices are cost based. The Company evaluates the performance
of its operating segments based on earnings from operations of the respective
segment.
51
<PAGE>
Summarized segment information for the years 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
Water and
Industrial Building
Process Performance Specialty Block Total
Chemicals Products Materials Chemicals Segments
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
1998
Net sales to external customers $349.4 $403.4 $492.2 $199.3 $1,444.3
Intersegment net sales -- -- -- 38.4 38.4
- ----------------------------------------------------------------------------------------------
Total net sales 349.4 403.4 492.2 237.7 1,482.7
Earnings from operations 34.1 44.2 81.0 35.7 195.0
Percentage of sales 9.8% 11.0% 16.5% 15.0% 13.2%
Total assets 220.4 411.2 536.0 247.7 1,415.3
Capital expenditures 28.1 48.6 10.2 16.9 103.8
Depreciation and amortization 17.5 24.3 18.7 26.7 87.2
- ----------------------------------------------------------------------------------------------
Net sales to external customers $351.3 $395.1 $264.3 $265.3 $1,276.0
Intersegment net sales 48.4 48.4
- ----------------------------------------------------------------------------------------------
Total net sales 351.3 395.1 264.3 313.7 1,324.4
Earnings from operations 29.1 42.9 45.1 47.3 164.4
Percentage of sales 8.3% 10.9% 17.1% 15.1% 12.4%
Total assets 188.7 324.4 530.4 254.8 1,298.3
Capital expenditures 28.1 41.5 6.1 15.7 91.4
Depreciation and amortization 16.5 24.1 6.2 26.6 73.4
- ----------------------------------------------------------------------------------------------
1996
Net sales to external customers $340.9 $386.3 $159.2 $194.4 $1,080.8
Intersegment net sales 85.8 85.8
- ----------------------------------------------------------------------------------------------
Total net sales 340.9 386.3 159.2 280.2 1,166.6
Earnings from operations 30.5 43.6 29.5 26.6 130.2
Percentage of sales 8.9% 11.3% 18.5% 9.5% 11.2%
Total assets 187.8 302.6 84.8 278.2 853.4
Capital expenditures 17.1 26.5 4.6 17.9 66.1
Depreciation and amortization 15.4 24.9 3.5 25.5 69.3
</TABLE>
The following table provides a reconciliation of selected segment information
to corresponding amounts contained in the Company's Consolidated Financial
Statements:
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales:
Net sales from reportable segments $1,482.7 $1,324.4 $1,166.6
Other revenues(a) 0.2 14.6 178.8
Elimination of intersegment revenue (38.4) (48.4) (85.8)
Total consolidated net sales $1,444.5 $1,290.6 $1,259.6
- -----------------------------------------------------------------------------
Earnings from operations:
Earnings from reportable segments $ 195.0 $ 164.4 $ 130.2
Corporate unallocated(b) (9.5) (45.2) 5.0
Total consolidated earnings from operations $ 185.5 $ 119.2 $ 135.2
- -----------------------------------------------------------------------------
Total assets:
Assets from reportable segments $1,415.3 $1,298.3
Other assets 315.3 315.8
- -----------------------------------------------------------------------------
Total consolidated assets $1,730.6 $1,614.1
</TABLE>
(a) 1997 and 1996 includes acrylic fibers sales of $11.9 and $136.1,
respectively. The acrylic fibers product line was sold on January 31, 1997.
(b) 1997 includes $42.4 of restructuring and other charges.
Operations by Geographic Areas. Net sales to unaffiliated customers presented
below are based upon the sales destination that is consistent with management's
view of the business.
U.S. exports included in net sales are also based upon the sales destination
and represent direct sales of U.S.-based entities to unaffiliated customers
outside of the United States.
Earnings from operations are also based upon destination and consist of total
net sales less operating expenses.
52
<PAGE>
Identifiable assets are those assets used in the Company's operations in each
geographic area. Unallocated assets are primarily miscellaneous receivables,
construction in progress, and cash and cash equivalents.
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
United States $ 890.6 $ 782.6 $ 766.6
Other Americas 117.8 117.7 110.9
Europe, Mideast, Africa 301.5 247.8 219.7
Asia/Pacific Rim 134.6 142.5 162.4
Total $1,444.5 $1,290.6 $1,259.6
- ---------------------------------------------------------------------
U.S. exports included in net
sales above
Other Americas $ 38.5 $ 36.3 $ 34.6
Europe, Mideast, Africa 43.5 32.9 25.5
Asia/Pacific Rim 70.9 75.7 101.4
Total $ 152.9 $ 144.9 $ 161.5
- ---------------------------------------------------------------------
Earnings from operations(1)
United States $ 108.7 $ 75.0 $ 90.6
Other Americas 18.6 17.2 19.7
Europe, Mideast, Africa 46.0 15.1 21.3
Asia/Pacific Rim 12.2 11.9 3.6
Total $ 185.5 $ 119.2 $ 135.2
- ---------------------------------------------------------------------
Identifiable assets
United States $ 943.9 $ 928.8
Other Americas 106.2 106.9
Europe, Mideast, Africa 191.3 123.7
Asia/Pacific Rim 23.3 18.5
Total $1,264.7 $1,177.9
- ---------------------------------------------------------------------
Equity in net assets of and advances
to associated companies 147.4 141.1
Unallocated assets 318.5 295.1
- ---------------------------------------------------------------------
Total assets $1,730.6 $1,614.1
</TABLE>
(1) Earnings from operations in 1997 includes restructuring and other charges of
$26.4 and $16.0 in the United States and Europe, respectively.
Major Customers. U.S. and European sales to Boeing Company and subcontractors
for commercial and military aerospace and other components are approximately
$200.0 or 13.8% of consolidated net sales in 1998. Sales to Boeing Company and
subcontractors are included in the Specialty Materials operating segment. Loss
of sales to Boeing Company and subcontractors could have a material impact on
the Company's financial results.
18. SUBSEQUENT EVENTS
On January 25, 1999, the Company's Board of Directors approved a program to
spend up to $100.0 to repurchase shares of outstanding common stock. The
repurchases will be made from time to time on the open market or in private
transactions and will be utilized for stock option plans, benefit plans and
other corporate purposes.
53
<PAGE>
Management Statement
Your management has prepared and is responsible for the accompanying
Consolidated Financial Statements. These statements have been prepared in
conformity with generally accepted accounting principles appropriate in the
circumstances and necessarily include some amounts based on management's
estimates and judgments. All financial information in this annual report is
consistent with that in the Consolidated Financial Statements.
The Company's accounting systems include internal controls designed to provide
reasonable assurance of the reliability of its financial records and the proper
safeguarding and use of its assets. Such controls are based on established
policies and procedures and are implemented by trained, skilled personnel with
an appropriate segregation of duties. The internal controls are complemented by
the Company's internal auditors, who conduct regular and extensive internal
audits.
The Company's independent auditors, KPMG LLP, have audited the Consolidated
Financial Statements. They have indicated in their report that their audits were
conducted in accordance with generally accepted auditing standards.
The Board of Directors exercises its responsibility for these Consolidated
Financial Statements through its Audit Committee, composed solely of
nonmanagement directors, which meets periodically with management, the internal
auditors and the independent auditors to review internal accounting control,
auditing and financial reporting matters. The independent auditors and the
internal auditors have full and free access to the Audit Committee.
/s/ David Lilley /s/ James P. Cronin
David Lilley James P. Cronin
Chairman, President and Chief Executive Officer Executive Vice President and
Chief Financial Officer
West Paterson, NJ
January 25, 1999
Independent Auditors' Report
The Board of Directors and Stockholders,
Cytec Industries Inc.:
We have audited the accompanying consolidated balance sheets of Cytec Industries
Inc. and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of income, comprehensive income, stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
54
<PAGE>
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cytec
Industries Inc. and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
Short Hills, NJ
January 25, 1999
55
<PAGE>
Quarterly Data
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 1Q 2Q 3Q 4Q YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998
Net sales $368.2 $365.8 $358.1 $352.4 $1,444.5
Gross profit(1) 109.7 115.2 105.0 108.0 437.9
Net earnings 31.2 34.5 27.0 32.0 124.7
Earnings per common share(2)
Basic $ .69 $ .76 $ .61 $ .73 $ 2.79
Diluted $ .66 $ .73 $ .59 $ .71 $ 2.68
- -----------------------------------------------------------------------------------------------------------------------------------
1997
Net sales $306.5 $315.5 $309.0 $359.6 $1,290.6
Gross profit(1) 71.5 96.4 97.2 94.6 359.7
Net earnings 26.9 27.8 28.2 30.7 113.6
Earnings per common share(2)
Basic $ .59 $ .61 $ .63 $ .68 $ 2.50
Diluted $ .56 $ .59 $ .60 $ .65 $ 2.39
</TABLE>
(1) Gross profit is derived by subtracting manufacturing cost of sales from net
sales.
(2) The sum of the quarters may not equal the full year basic and diluted
earnings per share since each period is calculated separately.
Item 9. Changes in and Disagreements With Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
- --------------------
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
Executive Officers
Set forth below is certain information concerning the executive officers
of the Company. Each such person was first elected to the indicated
office with the Company on December 17, 1993 unless otherwise specified,
and serves at the pleasure of the Board of Directors of the Company.
<TABLE>
<CAPTION>
Name Age Positions
- ----------------------------------------------------------------------------------------
<S> <C> <C>
D. D. Fry 60 Mr. Fry was Chairman of the Board, Chief Executive Officer and
President of the Company from its inception until he was succeeded by
David Lilley as President on January 8, 1997, as CEO on May 11, 1998
and as Chairman of the Board until his retirement on January 25, 1999.
Mr. Fry remains a director of the Company.
D. Lilley 52 Mr. Lilley was elected President and Chief Executive Officer of the
Company effective May 11, 1998, having previously served as President
and Chief Operating Officer of the Company from January 8, 1997. Mr.
Lilley was elected to the additional position of Chairman of the Board
on January 25, 1999. From 1994 until January 7, 1997, he was a Vice
President of American Home Products Corporation, responsible for its
Global Medical Device business. Prior to that time, he was Vice
President and a member of the Executive Committee of Cyanamid.
J. P. Cronin 45 Mr. Cronin is Executive Vice President and Chief Financial Officer of
the Company, having previously served as Vice President and Chief
Financial Officer of the Company from its inception until he was
elected an Executive Vice President in September 1996.
E.F.Jackman 53 Mr. Jackman is Vice President, General Counsel and Secretary of the
Company.
J. W. Hirsch 56 Mr. Hirsch is Vice President, Employee Resources of the Company.
D.M. Drillock 41 Mr. Drillock was elected Controller of the Company in December 1995,
having previously served as Controller in a non-officer capacity since
December 1993.
</TABLE>
56
<PAGE>
<TABLE>
<S> <C> <C>
T. P. Wozniak 45 Mr. Wozniak is Treasurer of the Company.
</TABLE>
The remainder of the information required by this Item is incorporated by
reference from the "Election of Directors" section of the Registrant's
definitive Proxy Statement for its 1999 Annual Meeting of Common
Stockholders, dated March 22, 1999.
Item 11. Executive Compensation
----------------------
The information required by this Item is incorporated by reference from
the "Executive Compensation," the "Employment and Severance
Arrangements," the "Compensation under Retirement Plans," the
"Compensation of Directors," the "Compensation and Management Development
Committee Report," the Performance Graph," and the "Compensation
Committee Interlocks and Insider Participation" sections of the
Registrant's definitive Proxy Statement for its 1999 Annual Meeting of
Common Stockholders, dated March 22, 1999.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The information required by this Item is incorporated by reference from
the "Cytec Stock Ownership by Directors & Officers" and the "Security
Ownership of Certain Beneficial Owners" sections of the Registrant's
definitive Proxy Statement for its 1999 Annual Meeting of Common
Stockholders, dated March 22, 1999.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The information required by this Item is incorporated by reference from
the "Certain Relationships and Related Transactions" section of the
Registrant's definitive Proxy Statement for its 1999 Annual Meeting of
Common Stockholders, dated March 22, 1999.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
----------------------------------------------------------------
(a)(1) List of Financial Statements:
Cytec Industries Inc. and Subsidiaries Consolidated Financial
Statements (See Item 8):
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Income for the Years Ended
December 31, 1998, 1997, and 1996
Consolidated Statements of Comprehensive Income for the Years Ended
December 31, 1998, 1997, and 1996
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997, and 1996
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1998, 1997, and 1996
Notes to Consolidated Financial Statements
(a)(2) Cytec Industries Inc. and Subsidiaries Financial Statement
Schedules for the Years Ended December 31, 1998, 1997, and 1996
Independent Auditors' Report
Schedule II - Valuation and Qualifying Accounts
No schedule other than Schedule II is included in this Annual Report on
Form 10-K because the conditions under which any other schedule is
required to be filed are absent or because the information required is
shown in the financial statements or notes thereto.
(a)(3) Exhibits. The Exhibit Index filed with this Annual Report on Form
10-K is incorporated by reference herein.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the
three months ended December 31, 1998.
57
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CYTEC INDUSTRIES INC.
---------------------
(Registrant)
DATE: March 29, 1999 By: /s/ D. Lilley
---------------------------------------
D. Lilley
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
DATE: March 29, 1999 /s/ D. Lilley
------------------------------------------
D. Lilley
Chairman and Chief Executive Officer
DATE: March 29, 1999 /s/ J. P. Cronin
------------------------------------------
J. P. Cronin, Executive Vice President,
Chief Financial and Accounting Officer
*______________________________
F. W. Armstrong, Director
*______________________________
G. A. Burns, Director
*______________________________
D. D. Fry, Director
* By: /s/ E. F. Jackman
-----------------------------------------
Attorney in Fact
*______________________________
L. L. Hoynes, Jr., Director
*______________________________
W. P. Powell, Director
*______________________________
J. R. Satrum, Director
Date: March 29, 1999
58
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors and Stockholders
Cytec Industries Inc.:
Under date of January 25, 1999, we reported on the consolidated balance sheets
of Cytec Industries Inc. and subsidiaries as of December 31, 1998 and 1997, and
the related consolidated statements of income, comprehensive income,
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1998. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedule as listed in the accompanying index.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
KPMG LLP
Short Hills, New Jersey
January 25, 1999
59
<PAGE>
SCHEDULE II
-----------
Valuation Allowances
(Millions of dollars)
<TABLE>
<CAPTION>
Addition or (deductions) Other
Balance Charged or (credited) to Additions or Balance
Description 12/31/97 expenses (deductions) 12/31/98
<S> <C> <C> <C> <C>
Reserves deducted
From related assets:
Doubtful accounts $ 10.0 $ 0.2 $ (1.0)/1/ $ 9.2
Total investments
and advances and
Other Assets $ 23.0 $ 1.5/2/ (2.8)/3/ (1.9)/4/ $ 19.8
</TABLE>
1) Principally bad debts written off, less recoveries.
2) Provision against unconsolidated equity investments.
3) Liquidation of certain investments in unaffiliated companies, which had been
fully reserved
4) Reclassification of allowances related to unconsolidated equity investments
and reserve against the stated liquidation value of preferred stock received
as a dividend.
<TABLE>
<CAPTION>
Addition or (deductions) Other
Balance Charged or (credited) to Additions or Balance
Description 12/31/96 expenses (deductions) 12/31/97
Reserves deducted
From related assets:
<S> <C> <C> <C> <C>
Doubtful accounts $ 11.1 $ (1.1)/1/ $ 10.0
Total investments
and advances and
Other Assets $ 7.2 $ 4.9/2/ $ 10.9/3/ $ 23.0
</TABLE>
1) Principally bad debts written off, less recoveries.
2) Provision against equity investments in Criterion Catalyst, an unconsolidated
associated company.
3) Reserve against the stated liquidation value of preferred stock received as
considation in conjunction with the sale of the acrylic fiber product line.
60
<PAGE>
<TABLE>
<CAPTION>
Addition or (deductions) Other
Balance Charged or (credited) to Additions or Balance
Description 12/31/95 expenses (deductions) 12/31/96
Reserves deducted
From related assets:
<S> <C> <C> <C> <C>
Doubtful accounts $ 11.6 $ (0.5)/1/ $ 11.1
Total investments
and advances and
Other Assets $ 7.2 $ 7.2
</TABLE>
1) Principally bad debts written off, less recoveries.
61
<PAGE>
Exhibit Index
-------------
Exhibit No. Description
----------- -----------
2.1(a) Transfer and Distribution Agreement dated as of December 17, 1993
between American Cyanamid Company ("Cyanamid") and the
Registrant (incorporated by reference to exhibit 2.1(a) to
Registrant's annual report on Form 10-K for the year ended
December 31, 1993).
2.1(b) Transfer and Distribution Agreement Amendment, dated April 8,
1997 between Cyanamid and the Registrant (incorporated by
reference to exhibit 2.1(a) to Registrant's quarterly report
on Form 10-Q for the quarter ended March 31, 1997).
2.1(c) Transfer and Distribution Agreement Second Amendment, dated as of
January 22, 1999 between Cyanamid and the Registrant.
2.2(a) Preferred Stock Repurchase Agreement (incorporated by reference
to exhibit 2(b) to Registrant's registration statement on
Form S-3, registration number 33-97328)
2.2(b) Amendment No. 1 to Preferred Stock Repurchase Agreement
(incorporated by reference to exhibit 2(c) to Registrant's
registration statement on Form S-3, registration number
33-97328).
2.3(c) Second Amendment to the Purchase Agreement, dated as of September
29, 1997 (incorporated by reference to exhibit 2.3 to
Registrant's current report on Form 8-K dated September 30,
1997).
3.1(a) Certificate of Incorporation (incorporated by reference to
exhibit 3.1(a) to Registrant's quarterly report on Form 10-Q
for the quarter ended September 30, 1996).
3.1(b) Certificate of Amendment to Certificate of Incorporation dated
May 13, 1997 (incorporated by reference to exhibit 3.1(a) to
Registrant's quarterly report on Form 10-Q for the quarter
ended June 30, 1997).
3.1(c) Conformed copy of the Registrant's certificate of incorporation,
as amended (incorporated by reference to exhibit 3(c) to
Registrant's registration statement on Form S-8,
registration number 333-45577).
3.2 By-laws (incorporated by reference to exhibit 3.2 to Registrant's
quarterly report on Form 10-Q for the quarter ended
September 30, 1996)
4.1 Form of Common Stock Certificate (incorporated by reference
to exhibit 4.1 to Registrant's registration statement on
Form 10).
4.2 Certificate of Designations, Preferences and Rights of Series C
Preferred Stock (incorporated by reference to exhibit 4.4 to
Registrant's annual report on Form 10-K for the year ended
December 31, 1993). Reference is also made to exhibits
2.1(b), 2.1(c), 2.2(a) and 2.2(b).
<PAGE>
4.3 Form of Series C Preferred Stock Certificate (incorporated by
reference to exhibit 4.7 to Registrant's registration statement
on Form 10).
4.4(a) Indenture, dated as of March 15, 1998 between the Registrant
and PNC Bank, National Association as Trustee (incorporated
by reference to Exhibit 1 of Registrant's current report on
Form 8-K, dated March 18, 1998).
4.4(b) Supplemental Indenture, dated as of May 11, 1998 between the
Registrant and PNC Bank National Association, as Trustee
(incorporated by reference to Exhibit 4.1 to Registrant's
quarterly report on Form 10-Q for the quarter ended March
31, 1998).
4.5 6.50% Global Note due March 15, 2003 (incorporated by
reference to Exhibit 2 of Registrant's current report on
Form 8-K dated March 18, 1998).
4.6 6.75% Global Note due March 15, 2008 (incorporated by reference
to Exhibit 3 of Registrant's current report on Form 8-K dated
March 18, 1998).
4.7 6.846% Mandatory Par Put Remarketed Securities due May 11,
2025 (incorporated by reference to Exhibit 4.5 to
Registrant's quarterly report on Form 10-Q for the quarter
ended March 31, 1998).
10.1 Environmental Matters Agreement, dated as of December 17, 1993,
between Cyanamid and the Registrant (incorporated by
reference to exhibit 10.1 to Registrant's annual report on
Form 10-K for the year ended December 31, 1993).
10.2 OPEB Matters Agreement, dated as of December 17, 1993, between
Cyanamid and the Registrant (incorporated by reference to
exhibit 10.2 to Registrant's annual report on Form 10-K for
the year ended December 31, 1993).
10.3 Intellectual Property Agreements, each dated as of December 17,
1993 and each between Cyanamid and Cytec Technology Corp.
(consisting of (i) Assignment of U.S. Patents, (ii)
Assignment of U.S. Patent Applications, (iii) Assignment of
Foreign Patents and Patent Applications, (iv) Assignment of
Records of Invention, (v) Exclusive Patent and Knowhow
License, (vi) Option Agreement for Non-Exclusive Patent and
Knowhow License, (vii) Non-Exclusive Patent and Knowhow
License, (viii) Agreement re access to CL File and (ix)
Assignment of Knowhow)(incorporated by reference to exhibit
10.7 to Registrant's annual report on Form 10-K for the year
ended December 31, 1993).
10.4 Trademarks and Copyrights Transfer Agreement, Assignment and
Bill of
<PAGE>
Sale, dated as of December 17, 1993, among Cyanamid, Cytec
Technology Corp. and the Registrant (incorporated by reference to
exhibit 10.8 to Registrant's annual report on Form 10-K for the
year ended December 31, 1993).
10.5 Aminonitrile Manufacturing Services Agreement, dated as of
December 17, 1993, between Cyanamid and the Registrant
(incorporated by reference to exhibit 10.9(a) to Registrant's
annual report on Form 10-K for the year ended December 31,
1993).
10.6 Third Amended and Restated Credit Agreement, dated as of August
21, 1998 among the Registrant, the banks named therein and
Citibank N.A., as Administrative Agent, The Chase Manhattan
Bank, as Syndication Agent, and First Union National Bank, as
Documentation Agent (incorporated by reference to exhibit 10.1
to Registrant's quarterly report on form 10-Q for the quarter
ended September 30, 1998).
10.7 364 - Day Credit Agreement, dated as of August 21, 1998 among the
Registrant, the banks named therein and Citibank N.A., as
Administrative Agent, The Chase Manhattan Bank, as Syndication
Agent, and First Union National Bank, as Documentation Agent
(incorporated by reference to exhibit 10.2 to Registrant's
quarterly report on Form 10-Q for the quarter ended September 30,
1998).
10.8(a) Partnership Agreement (the "CYRO Partnership Agreement") between
Cyanamid Plastics, Inc., and Rohacryl, Inc., dated July 1,
1976 (incorporated by reference to exhibit 10.17 to
Registrant's registration statement on Form 10).
10.8(b) Letter amendment, dated February 19, 1993, among CYRO
Industries, Cyanamid Plastics Inc. and Rohacryl Inc. to the
CYRO Partnership Agreement (incorporated by reference to
Exhibit 10.1 to the Registrant's quarterly report on Form
10-Q for the quarter ended March 31, 1998).
10.9(a) Joint Venture Agreement (the "AMEL Joint Venture Agreement")
between Cyanamid Melamine, Inc., and DCP Melamine North America,
Inc., dated April 15, 1986 (incorporated by reference to exhibit
10.18(a) to Registrant's registration statement on Form 10).
10.9(b) Amendment No. 1 to AMEL Joint Venture Agreement, dated April 30,
1987, by and between Cyanamid Melamine Inc. and DCP Melamine
North America, Inc. (incorporated by reference to Exhibit 10.2 to
Registrant's quarterly report on Form 10-Q for the quarter ended
March 31, 1998).
10.9(c) Amendment No. 2 to AMEL Joint Venture Agreement, dated May 1,
1994, by and between DSM Melamine Americas, Inc. and Cytec
Melamine Inc. (incorporated by reference to Exhibit 10.3 to
Registrant's quarterly report on Form 10-Q for the quarter ended
March 31, 1998).
10.9(d) Amendment No. 3 to AMEL Joint Venture Agreement, dated January
30,
<PAGE>
1995 by and between Cytec Melamine Inc. and DSM Melamine
Americas, Inc. (incorporated by reference to Exhibit 10.4 to
Registrant's quarterly report on Form 10-Q for the quarter ended
March 31, 1998).
10.9(e) Agreement dated April 15, 1986 between Cyanamid and DSM Chemische
Production BV, as amended October 24, 1994 (incorporated by
reference to exhibit 10.18(b) to Registrant's annual report on
Form 10-K for the year ended December 31, 1994.)
10.10 Joint Venture Agreement between Cyanamid Methanol, Inc. and MG
Fortier, Inc. (incorporated by reference to Exhibit 10(i) to
Registrant's quarterly report on Form 10-Q for the quarter ended
September 30, 1994).
10.11 Master Agreement between the Registrant, et. al. and Shell Oil
Company, et. al., dated April 1, 1988 (incorporated by reference
to exhibit 10.15 to Registrant's registration statement on
Form 10).
10.12 Limited Partnership Agreement between Mivida Corporation, et. al.
and Shell Polymers and Catalysts Enterprises, Inc., et. al.,
dated April 1, 1988 (incorporated by reference to exhibit 10.16
to Registrant's registration statement on Form 10).
10.13 Executive Compensation Plans and Arrangements
10.13(a) 1993 Stock Award and Incentive Plan, as amended (incorporated by
reference to Exhibit I to the Registrant's definitive Proxy
Statement for its 1997 Annual Meeting of Common Stockholders
filed pursuant to Regulation 14A.)
10.13(b) Form of Performance Stock Award/Performance Cash Award Grant
Letter.
10.13(c) Rule No. 1 under 1993 Stock Award and Incentive Plan as amended
through January 25, 1999.
10.13(d) Form of Stock Option Grant Letter.
10.13(e) Rule No. 2, as amended through January 27, 1997, under 1993 Stock
Award and Incentive Plan (incorporated by reference to exhibit
10.13(e) to Registrant's annual report on Form 10-K for the year
ended December 31, 1996).
10.13(f) Rule No. 3 under 1993 Stock Award and Incentive Plan, as
amended through April 9, 1998.
10.13(g) Executive Income Continuity Plan, as amended through January
25, 1999.
10.13(h) Key Manager Income Continuity Plan, as amended through January
25, 1999.
10.13(i) Employee Income Continuity Plan, as amended through May 13, 1996
<PAGE>
(incorporated by reference to exhibit 10.13(i) to Registrant's
quarterly report on Form 10-Q for the quarter ended June 30,
1996).
10.13(j) Cytec Excess Retirement Benefit Plan (incorporated by reference
to exhibit 10(D) to Registrant's quarterly report on Form 10-Q
for the quarter ended September 30, 1994).
10.13(k) Cytec Supplemental Employees Retirement Plan, as amended through
May 13, 1996 (incorporated by reference to exhibit 10.13(k) to
Registrant's quarterly report on Form 10-Q for the quarter ended
June 30, 1996).
10.13(l) Cytec Executive Supplemental Employees Retirement Plan, as
amended (incorporated be reference to exhibit 10.13(l) to
Registrant's annual report on Form 10-K for the year ended
December 31, 1997).
10.13(m) Cytec Compensation Tax Equalization Plan (incorporated by
reference to exhibit 10(G) to Registrant's quarterly report on
Form 10-Q for the quarter ended September 30, 1994).
10.13(n) Cytec Supplemental Savings and Profit Sharing Plan, as amended
through December 8, 1997 (incorporated by reference to exhibit
10.13(n) to Registrant's annual report on Form 10-K for the year
ended December 31, 1997).
10.13(o) Consulting Agreement between the Registrant and D.D. Fry, dated
January 25, 1999 as revised and restated March 3, 1999.
10.13(p) Trust Agreement effective as of December 15, 1994 between the
Registrant and First Fidelity Bank, N.A. (incorporated by
reference to exhibit 10.13(p) to Registrant's quarterly export on
Form 10-Q for the quarter ended March 31, 1995).
10.13(q) Deferred Compensation Plan (incorporated by reference to exhibit
10.13(q) to Registrant's annual report on Form 10-K for the year
ended December 31, 1995).
10.13(r) Deferred Compensation Agreement with F. W. Armstrong
(incorporated by reference to exhibit 10.13(r) to Registrant's
annual report on Form 10-K for the year ended December 31, 1995).
10.13(s) Restricted Stock Award Agreement - David Lilley dated January 7,
1997 (incorporated by reference to exhibit 10.13(o) to
Registrant's quarterly report on Form 10-Q for the quarter ended
March 31, 1997).
10.13(t) Cytec Industries Inc. Estate Enhancement Plan including form of
agreement, form of death benefit agreement, and form of election
to forego compensation and enrollment form (incorporated by
reference to Exhibit 10.13(u) to Registrant's annual report on
Form 10-K for the year ended December 31, 1997).
<PAGE>
10.13(u) Stock option, dated January 25, 1999, issued to D. D. Fry.
10.14 Asset Purchase Agreement dated as of December 23, 1996 between
Sterling Fibers, Inc., Sterling Chemicals, Inc., Sterling
Chemicals Holdings, Inc., Cytec Acrylic Fibers Inc., Cytec
Technology Corp. and Cytec Industries Inc. (incorporated by
reference to exhibit 10.23 to Registrant's annual report on Form
10-K for the year ended December 31, 1996).
12 Computation of Ratio of Earnings to Fixed Charges
21 Subsidiaries of the Company
23 Consent of KPMG LLP
24(a-f) Powers of Attorney of F. W. Armstrong, G. W. Burns, D. D. Fry,
L. L. Hoynes, Jr., W. P. Powell and J. R. Satrum.
27 Financial Data Schedule
<PAGE>
EXHIBIT 2.1(c)
TRANSFER AND DISTRIBUTION AGREEMENT SECOND AMENDMENT dated as of January 22,
1999 between American Cyanamid Company, a Maine corporation and wholly-owned
subsidiary of American Home Products Corporation ("CYANAMID"), and Cytec
Industries Inc., a Delaware corporation ("CYTEC").
WHEREAS: The parties previously entered into that certain Transfer and
Distribution Agreement dated December 17, 1993 (the "TDA"), which provided for
the spin-off of CYTEC from CYANAMID and which contains certain financial
covenants;
WHEREAS: Pursuant to the TDA, CYTEC issued to CYANAMID (and CYANAMID continues
to own beneficially and of record) all of the authorized shares of CYTEC's
Series C Preferred Stock (the "Series C Preferred"), which contains certain
financial covenants;
WHEREAS: CYANAMID previously granted CYTEC certain waivers and consents under
the TDA and the Series C Preferred in that certain Preferred Stock Repurchase
Agreement dated as of August 17, 1995, as amended, and that certain Transfer and
Distribution Agreement Amendment dated as of April 8, 1997, which waivers and
consents remain
<PAGE>
in full force and effect after the execution and delivery of this amendment
except to the extent explicitly amended hereby; and
WHEREAS: For good and valuable consideration, the receipt and sufficiency of
which is acknowledged, the parties wish to amend the TDA and the Series C
Preferred in certain additional respects;
NOW THEREFORE, the parties hereby agree as follows:
1. Amendments to TDA. The TDA is amended as follows:
- -- -----------------
(a) The definition of "Restricted Payments" set forth in Section 1.1
("General") is amended to read in full as follows:
"Restricted Payments: any of (i) the declaration or payment of any
-------------------
dividend, or the payment (or incurrence of any liability to make a
payment) of any other distribution, direct or indirect, on account of any
shares of any class of capital stock of CYTEC (other than dividends on
the CYTEC Preferred Stock, dividends on any redeemable preferred stock,
or dividends to the extent paid in shares of any class to holders of such
class and other than dividends paid (other than by CYTEC) to CYTEC or one
of its subsidiaries) or (ii) any payment of distribution (or incurrence
of any liability to make a payment or distribution) on account of any
redemption, retirement, purchase or other acquisition, direct or
indirect, of any shares of any class of capital stock of CYTEC or its
subsidiaries or Affiliates now or hereafter outstanding (other than
redemption of the Series C Preferred Stock as permitted by the terms
thereof, redemption or repurchase of any preferred stock or hybrid
security that is treated as "Debt" under clause (vii) of the definition
of "Debt" contained herein, and other than any purchase contemplated by
Section 4.3), or of any warrants, options or of other rights (other than
stock options or other forms of compensation payable to CYTEC's
directors, officers and employees or, prior to Employee Transfer Date,
its prospective employees) to acquire any such shares of capital stock,
<PAGE>
provided, however, that Restricted Payments shall not include Special
Restricted Payments."
(b) Section 1.1 ("General") is amended by adding a new paragraph between
the existing paragraphs labeled "Securities Act" and "Standstill Agreement,"
-------------- ---------------------
which new paragraph shall read in full as follows:
"Special Restricted Payments: the first $100 million of any payments
----------------------------
(or incurrence of any liability to make a payment) by CYTEC or its
subsidiaries occurring from and after January 1, 1999 on account of
any purchase or other acquisition, direct or indirect, of any shares
of CYTEC Common Stock, or of any warrants, options or of other rights
(other than stock options or other forms of compensation payable to
CYTEC's directors, officers and employees) to acquire any shares of
CYTEC Common Stock "
(c) Subsection (b) of Section 6.12 ("Financial Covenants") is amended to
read in full as follows:
"(b) (i) Neither CYTEC nor its subsidiaries shall, without the prior
written consent of ACY, make any Restricted Payments unless all
accrued dividends on the CYTEC Preferred Stock have been paid and only
if, in the aggregate, such Restricted Payments from and after the
Effective Date do not exceed the sum of (x) 30% of CYTEC's cumulative
consolidated after-tax net income determined after subtracting (i) all
dividends paid or payable on the CYTEC Preferred Stock and (ii) income
resulting from the reversal of valuation allowances for deferred tax
assets not currently realized, in each case from and after the
Effective Date and through the end of the quarter most recently ended
(which net income shall be determined from CYTEC's audited financial
statements, where available, or from CYTEC's unaudited financial
statements for its quarter most recently ended) and (y) 100% of the
net cash proceeds received by CYTEC from the issuance of shares of
CYTEC Common Stock
<PAGE>
from and after the Effective Date (excluding shares issuable upon
conversion of the Series B Preferred Stock)."
"(ii) Neither CYTEC nor its subsidiaries shall, without the prior
written consent of ACY, make any Special Restricted Payments (as
defined in Section 11 hereof) unless all accrued dividends on the
Series C Preferred Stock have been paid."
(d) Subsection (d) of Section 6.12 ("Financial Covenants") is amended to read
in full as follows:
"(d) In the event that CYTEC violates any of the covenants set forth
in paragraphs (a) or (b) of this Section 6.13, then so long as CYTEC
is in violation, (i) CYTEC shall promptly (but in any event within 90
days) prepare a capital budget for itself and its subsidiaries for the
following 12 months which shall require ACY's approval, and (ii) CYTEC
and its subsidiaries shall not, without the prior written consent of
ACY, incur any Debt (except for (x) borrowings under the Credit
Agreement or borrowings under any Replacement Credit Facility and (y)
borrowings of not more than $10 million of Debt other than the Debt
referred to in clause (x)), make any Restricted Payments or Special
Restricted Payments, make any acquisitions or divestitures of stock or
assets which would represent in the aggregate 1% or more of CYTEC's
consolidated total assets (other than (A) acquisitions of raw
materials, inventory, equipment and other assets in the ordinary
course of business or (B) divestitures of finished products and
obsolete or worn out equipment and other divestitures in the ordinary
course of business), merge, consolidate, liquidate or dissolve. Until
the budget referred to in clause (i) of the preceding sentence is
approved or until CYTEC is no longer in violation as aforesaid,
whichever is earlier, CYTEC and its subsidiaries shall not make
capital expenditures without the written consent of ACY, provided
CYTEC shall not be prohibited from making expenditures previously
contracted for or required to comply with environmental, occupational
safety and health and other applicable laws, which expenditures shall
count toward the amount allowed to be expended under the newly
prepared
<PAGE>
budget once approved. Following approval of such budget by the holders
of the Series C Preferred Stock and until CYTEC is no longer in
violation as aforesaid, any capital expenditures other than pursuant
to such budget or in excess of the budgeted amounts shall require the
approval of ACY, provided that CYTEC shall not be prohibited from
making expenditures previously contracted for or required to comply
with environmental, occupational safety and health and other
applicable laws which expenditures shall count toward the amount
allowed to be expended under the newly prepared budget."
"(e) Subsection (e) of Section 6.12 ("Financial Covenants") is amended to
read in full as follows:
"(e) In the event that any of the financial maintenance covenants set
forth in Section 6.13(c) hereof are violated, then CYTEC shall within
thirty (30) days from the date of such violation prepare and deliver
to ACY a plan intended to cure such violation within ninety (90) days
from the date of such violation. During such time as CYTEC is in
violation of such covenants, CYTEC shall not, without the prior
written consent of ACY, incur any Debt (except for (x) borrowings
under the Credit Agreement or borrowings under any Replacement Credit
Facility and (y) borrowings of not more than $10 million of Debt other
than the Debt referred to in clause (x)) or make any Restricted
Payments or Special Restricted Payments. In the event that the plan
is not delivered within such thirty-day period or the violation has
not been cured within such ninety-day period, (i) CYTEC shall promptly
(but in any event within 90 days) prepare a capital budget for itself
and its subsidiaries for the following 12 months which shall require
ACY's approval, and (ii) CYTEC and its subsidiaries shall not, without
the prior written consent of ACY, incur any Debt (except for (x)
borrowings under the Credit Agreement or borrowings under any
Replacement Credit Facility and (y) borrowings of not more than $10
million of Debt other than the Debt referred to in clause (x) ), make
any Restricted Payments or Special Restricted Payments, make any
acquisitions or divestitures of stock or assets which would represent
in the
<PAGE>
aggregate 1% or more CYTEC's consolidated total assets (other
than (A) acquisitions of raw materials, inventory, equipment and other
assets in the ordinary course of business or (B) divestitures of
finished products and obsolete or worn out equipment and other
divestitures in the ordinary course of business), merge, consolidate,
liquidate or dissolve. Until the budget referred to in clause (i) of
the preceding sentence is approved CYTEC and its subsidiaries shall
not make capital expenditures, provided that CYTEC shall not be
prohibited from making expenditures previously contracted for or
required to comply with environmental, occupational safety and health
and other applicable laws, which expenditures shall count toward the
amount allowed to be expended under the newly prepared budget once
approved. Following approval of such budget by ACY, any capital
expenditures other than pursuant to such budget or in excess of the
budgeted amounts shall require the approval of ACY, provided that
CYTEC shall not be prohibited from making expenditures previously
contracted for or required to comply with environmental, occupational
safety and health and other applicable laws which expenditures shall
count toward the amount allowed to be expended under the newly
prepared budget."
(e) The third paragraph of Section 8.18 ("Annual Funding Amount") is
amended to read in full as follows:
"At any time that there exists any amount of Deferred Funding
Obligations, neither CYTEC nor any of its subsidiaries shall, without
the prior written consent of ACY, make any Restricted Payments or
Special Restricted Payments."
2. Amendments to Series C Preferred. The Certificate of Designations,
- -- --------------------------------
Preferences and Rights of Series C Cumulative Preferred Stock of Cytec
Industries Inc. dated December 17, 1993 is amended as follows:
<PAGE>
(a) Paragraph (b) of Section 9 ("Financial Covenants") is amended to
read in full as follows:
Financial Covenants:
-------------------
"(b) (i) Neither the Corporation nor any of its subsidiaries shall,
without the prior written consent of the holders of the Series C
Preferred Stock, make any Restricted Payments (as defined in Section
11 hereof) unless all accrued dividends on the Series A Preferred
Stock, the Series B Preferred Stock and the Series C Preferred Stock
have been paid and only if, in the aggregate, such Restricted Payments
from and after the Effective Date do not exceed the sum of (x) 30% of
the Corporation's cumulative consolidated after-tax net income
determined after subtracting (i) all dividends paid or payable on the
Series A Preferred Stock, the Series B Preferred Stock and the Series
C Preferred Stock and (ii) income resulting from the reversal of
valuation allowances for deferred tax assets not currently realized,
in each case from and after the Effective Date and through the end of
the quarter most recently ended and (which net income shall be
determined from the Corporation's audited financial statements, where
available, or from the Corporation's unaudited financial statements
for its quarter most recently ended) and (y) 100% of the net cash
proceeds received by the Corporation from the issuance of shares of
Common Stock from and after the Effective Date and through the end of
the quarter most recently ended (excluding shares issuable upon
conversion of the Series B Preferred Stock)."
"(ii) Neither the Corporation nor any of its subsidiaries shall,
without the prior written consent of the holders of the Series C
Preferred Stock, make any Special Restricted Payments (as defined in
Section 11 hereof) unless all accrued dividends on the Series C
Preferred Stock have been paid."
(b) Paragraph (d) of Section 9 ("Financial Covenants") is amended to
read in full as follows:
<PAGE>
"(d) In the event that the Corporation violates any of the covenants
set forth in paragraphs (a) or (b) of this Section 9, then so long as
the Corporation is in violation, (i) the Corporation shall promptly
(but in any event within 90 days) prepare a capital budget for itself
and its subsidiaries for the following 12 months which shall require
the approval of the holders of the Series C Preferred Stock, and (ii)
the Corporation and its subsidiaries shall not, without the prior
written consent of the holders of the Series C Preferred Stock, incur
any Debt (except for (x) borrowings under the Credit Agreement or
borrowings under any Replacement Credit Facility and (y) borrowings of
not more than $10 million of Debt other than the Debt referred to in
clause (x)), make any Restricted Payments or Special Restricted
Payments, make any acquisitions or divestitures of stock or assets
which would represent in the aggregate 1% or more of the Corporation's
consolidated total assets (other than (A) acquisitions of raw
materials, inventory, equipment and other assets in the ordinary
course of business or (B) divestitures of finished products and
obsolete or worn out equipment and other divestitures in the ordinary
course of business), merge, consolidate, liquidate or dissolve. Until
the budget referred to in clause (i) of the preceding sentence is
approved by the holders of the Series C Preferred Stock or until the
Corporation is no longer in violation as aforesaid, whichever is
earlier, the Corporation and its subsidiaries shall not make capital
expenditures without the written consent of the holders of the Series
C Preferred Stock, provided that the Corporation shall not be
prohibited from making expenditures previously contracted for or
required to comply with environmental, occupational safety and health
and other applicable laws, which expenditures shall count toward the
amount allowed to be expended under the newly prepared budget once
approved. Following approval of such budget by the holders of the
Series C Preferred Stock and until the Corporation is no longer in
violation as aforesaid, any capital expenditures other than pursuant
to such budget or in excess of the budgeted amounts shall require the
approval of the holders of the Series C Preferred Stock, provided that
the Corporation shall not be prohibited from making expenditures
previously contracted for or required to comply with environmental,
occupational safety and health and other applicable laws
<PAGE>
which expenditures shall count toward the amount allowed to be
expended under the newly prepared budget."
(c) Paragraph (e) of Section 9 ("Financial Covenants") is amended to
read in full as follows:
"(e) In the event that any of the financial maintenance covenants set
forth in paragraph (c) of this Section 9 are violated, then the
Corporation shall within thirty (30) days from the date of such
violation prepare and deliver to the holders of the Series C Preferred
Stock a plan intended to cure such violation within ninety (90) days
from the date of such violation. During such time as the Corporation
is in violation of such covenants, the Corporation shall not, without
the prior written consent of the holders of the Series C Preferred
Stock, incur any Debt (except for (x) borrowings under the Credit
Agreement or borrowings under any Replacement Credit Facility and (y)
borrowings of not more than $10 million of Debt other than the Debt
referred to in clause (x)) or make any Restricted Payments or Special
Restricted Payments. In the event that the plan is not delivered
within such thirty-day period or the violation has not been cured
within such ninety-day period, (i) the Corporation shall promptly (but
in any event within 90 days) prepare a capital budget for itself and
its subsidiaries for the following 12 months which shall require the
approval of the holders of the Series C Preferred Stock, and (ii) the
Corporation and its subsidiaries shall not, without the prior written
consent of the holders of the Series C Preferred Stock, incur any Debt
(except for (x) borrowings under the Credit Agreement or borrowings
under any Replacement Credit Facility and (y) borrowings of not more
than $10 million of Debt other than the Debt referred to in clause
(x)), make any Restricted Payments or Special Restricted Payments,
make any acquisitions or divestitures of stock or assets which would
represent in the aggregate 1% or more of the Corporation's
consolidated total assets (other than (A) acquisitions of raw
materials, inventory, equipment and other assets in the ordinary
course of business or (B) divestitures of finished products and
obsolete or worn out equipment and other divestitures in the ordinary
course of business), merge, consolidate, liquidate or dissolve. Until
the budget referred to in clause (i) of the preceding sentence is
<PAGE>
approved by the holders of the Series C Preferred Stock, the
Corporation and its subsidiaries shall not make capital expenditures
without the written consent of the holders of the Series C Preferred
Stock, provided that the Corporation shall not be prohibited from
making expenditures previously contracted for or required to comply
with environmental, occupational safety and health and other
applicable laws, which expenditures shall count toward the amount
allowed to be expended under the newly prepared budget once approved.
Following approval of such budget by the holders of the Series C
Preferred Stock, any capital expenditures other than pursuant to such
budget or in excess of the budgeted amounts shall require the approval
of the holders of the Series C Preferred Stock, provided that the
Corporation shall not be prohibited from making expenditures
previously contracted for or required to comply with environmental,
occupational safety and health and other applicable laws which
expenditures shall count toward the amount allowed to be expended
under the newly prepared budget."
(d) The third paragraph of Section 10(c) ("Pension Covenants") is
amended to read in full as follows:
"At any time that there exists any amount of Deferred Funding
Obligations, neither the Corporation nor any of its subsidiaries
shall, without the prior written consent of the holders of Series C
Preferred Stock, make any Restricted Payments or Special Restricted
Payments."
(e) The definition of "Restricted Payments" set forth in Section 11
("Definitions") is amended to read in full as follows:
"`Restricted Payments' shall mean any of (i) the declaration or
payment of any dividend, or the payment (or incurrence of any
liability to make a payment) of any other distribution, direct or
indirect, on account of any shares of any class of capital stock of
the Corporation (other than dividends on the Series A Preferred Stock,
dividends on the Series B Preferred Stock, dividends on the Series C
Stock, dividends on any redeemable preferred stock, or dividends to
the extend paid
<PAGE>
in shares of any class to holders of such class and other than
dividends paid (other than by the Corporation) to the Corporation or
one of its subsidiaries) or (ii) any payment or distribution (or
incurrence of any liability to make a payment or distribution) on
account of any redemption, retirement, purchase or other acquisition,
direct or indirect, of any shares of any class of capital stock of the
Corporation or its subsidiaries or affiliates now or hereafter
outstanding (other than redemption or repurchase of the Series A
Preferred Stock and/or the Series B Preferred Stock, and redemption of
the Series C Preferred Stock as permitted by the terms governing such
Series of Preferred Stock, redemption or repurchase of any preferred
stock or hybrid security that is treated as "Debt" under clause (vii)
of the definition of "Debt" contained herein, and other than any
purchase contemplated by Section 4.3 of the TDA), or of any warrants,
options or of other rights (other than stock options or other forms of
compensation payable to the Corporation's directors, officers and
employees or, prior to the Employee Transfer Date (as defined in the
TDA), its prospective employees) to acquire any such shares of capital
stock, provided, however, that Restricted Payments shall not include
Special Restricted Payments.
(f) Section 11 (Definitions") is amended by adding a new paragraph
after the existing paragraph labeled "Settlement Agreement," which new
paragraph shall read in full as follows:
"`Special Restricted Payments' shall mean the first $100 million of
any payments (or incurrence of any liability to make a payment) by the
Corporation or any of its subsidiaries occurring from and after
January 1, 1999 on account of any purchase or other acquisition,
direct or indirect, of any shares of the Common Stock, or of any
warrants, options or of other rights (other than stock options or
other forms of compensation payable to the Corporation's directors,
officers and employees) to acquire any shares of the Common Stock."
<PAGE>
3. Waivers, etc. To the extent, if any, that the foregoing amendments to the
- -- -------------
terms of the Series C Preferred may be ineffective, each party hereby
irrevocably grants to the other (in the case of CYANAMID, on its own behalf and
on behalf of any subsequent holder of the Series C Preferred) all consents,
waivers and approvals under the terms of the Series C Preferred as are necessary
to effectuate the intent of Section 2, above.
4. Successors and Assigns. This Agreement may not be assigned without the
- -- ----------------------
consent of the other party. All covenants and agreements contained in this
Agreement by or on behalf of any of any of the parties hereto shall bind and
inure to the benefit of the respective successors and permitted assigns of the
parties hereto whether so expressed or not.
5. Notices. All notices, requests, demands and other communications under
- -- -------
this Agreement shall be in writing and shall be deemed to have been duly given,
(a) On the date of service if served personally on the party to whom notice is
given,
(b) On the day of transmission if sent via facsimile transmission, provided
<PAGE>
telephonic confirmation of receipt is obtained promptly after completion of
transmission,
(c) On the business day after delivery to an overnight courier service or the
Express mail service maintained by the United States Postal Service, provided
receipt of delivery has been confirmed, or
(d) On the fifth day after mailing, provided receipt of delivery is confirmed,
if mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, properly addressed and return receipt
requested to the party as follows:
If to Cytec:
Cytec Industries Inc.
5 Garret Mountain Plaza
West Paterson, NJ 07424
Attn: Secretary
If to CYANAMID:
American Cyanamid Company
c/o American Home Products Corporation
Five Giralda Farms
Madison, NJ 07940
Attn: General Counsel
Any party may change its address by giving the other party written notice
of
<PAGE>
its new address in the manner set forth above.
6. Descriptive Headings. The descriptive headings of the several sections of
- -- --------------------
this Agreement are inserted for reference only and shall not limit or otherwise
affect the meaning hereof.
7. Governing Law. Except for the Series C Preferred, which is governed by
- -- -------------
Delaware law, this Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New Jersey.
8. Counterparts. This Agreement may be executed simultaneously in any
- -- ------------
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
9. Severability. In the event that any one or more of the provisions contained
- -- ------------
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be in any way impaired thereby.
<PAGE>
10. Entire Agreement. This Agreement is intended by the parties hereto as a
- --- ----------------
final and complete expression of their agreement and understanding in respect to
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings, written or oral, between the parties, other than
as provided in the third WHEREAS clause of this Agreement, with respect to such
subject matter.
11. Amendment. This Agreement may not be amended except by a written
- --- ---------
instrument executed by the parties hereto.
12. No Third Party Beneficiaries. Nothing in this Agreement shall convey any
- --- ----------------------------
rights upon any person or entity which is not a party or an assignee of a party
to this Agreement.
IN WITNESS HEREOF, the parties have caused this Agreement to be executed
and delivered as of the date first above written.
AMERICAN CYANAMID COMPANY CYTEC INDUSTRIES INC.
By: /s/ Gerald A. Jobilian By: /s/ E. F. Jackman
-------------------------------- --------------------
Name: Gerald A. Jibilian E. F. Jackman
Title: Vice President and Vice President
Assistant Secretary
<PAGE>
Exhibit 10.13(b)
E
PERFORMANCE STOCK AWARD & PERFORMANCE CASH AWARD UNDER
THE CYTEC INDUSTRIES INC.
1993 STOCK AWARD AND INCENTIVE PLAN
January 25, 1999
[Employee's Name and Address]
Shares of Performance Stock:_____
Performance Cash Award:$_____
Performance Period: January 1, 2001 to December 31, 2001
Dear Employee:
As a key employee of Cytec Industries Inc. (the "Company"), or of a subsidiary
or affiliate of the Company, you have been granted by the Compensation and
Management Development Committee (the "Committee") of the Board of Directors for
the one-year performance period indicated above a performance stock award of the
number of shares of the Common Stock, par value of $.01 per share, of the
Company indicated above ("Performance Stock"). In addition, as indicated above,
you have been awarded a performance cash award, the base amount of which
(before adjustments for EPS and stock price differential) is equal to the number
of shares of Performance Stock set forth above times approximately $__ per share
("Performance Cash"). These awards are subject to the terms and conditions
hereof and of the Company's 1993 Stock Award and Incentive Plan (the "Plan").
Performance Stock is awarded pursuant to Section 6(d) of the Plan and
Performance Cash is awarded pursuant to Section 6(i) of the Plan.
The Company will cause a certificate for the Performance Stock to be issued
and registered in your name. Physical possession of the Performance Stock shall
be retained by the Company until it vests, as herein provided. A certificate
for any shares that vest will be forwarded to you at your address appearing on
the Company's stock register after vesting has occurred. Performance Cash, to
the extent it becomes payable, will be paid as soon as practicable after
determination that the Award is payable.
Certain restrictions with respect to these awards include, but are not limited
to, the following:
<PAGE>
(1) You shall execute in blank (undated), and return to the Secretary of the
Committee, the enclosed stock power, which the Company will use to reclaim the
Performance Stock if the conditions to vesting are not met. Any Performance
Stock that fails to vest as herein provided shall be forfeited. Any Performance
Stock forfeited hereunder shall revert to the Company. By your acceptance of the
Performance Stock you hereby irrevocably authorize the Company to complete the
stock power herein referred to and to deliver the stock power along with the
certificate for such Performance Stock to the Company's Transfer Agent so as to
effectuate any forfeiture provided for herein.
(2) Subject to Paragraphs (7), (8) and (10) below, and subject to the
attainment of performance goals as hereinafter provided, the awards of
Performance Stock and Performance Cash shall vest effective as of January 1,
2002; provided that such vesting shall be subject to the further requirement
--------
that the Committee certify that the performance goals have been met.
(3) Performance goals, and the related payout matrix, for this award of
Performance Stock and for this award of Performance Cash have been set by the
Committee and will be advised to you in writing. The performance goals are based
on year 2001 EPS, 1999-2001 cumulative Cash Flow and 1999-2001 stock price
differential. The performance goals provide: (i) for the partial vesting of
Performance Stock in the event that the EPS performance goal is substantially,
but not fully, achieved; and (ii) for partial, full, or greater than full
vesting of the amount of Performance Cash specified at the head of this
agreement if the Cash Flow performance goal is achieved and depending on the
extent to which the EPS performance goal for full vesting of Performance Stock
is exceeded and depending on the extent and direction of Company stock price
changes.
(4) The Performance Stock and the Performance Cash may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of; and neither the
right to receive Common Stock, nor any interest therein or under the Plan, may
be assigned; and any attempted assignment shall be void.
(5) Except as limited by this Agreement or the Plan, you shall have, as
holder of non-forfeited shares of the Performance Stock, all of the rights of a
common stockholder of the Company, including the right to vote and receive
dividends. Nevertheless, stock of the Company distributed in connection with a
stock split, stock dividend, recapitalization or other similar transaction shall
be deemed to be Performance Stock and shall be subject to restrictions and a
risk of forfeiture to the same extent as the Performance Stock with respect to
which such stock has been distributed. Performance Cash shall not bear any
interest.
(6) You may satisfy your mandatory federal and state income tax withholding
obligations with respect to any Performance Stock that vests (subject to
Committee acceptance, as set forth below, and subject to compliance with Rule
16b-3 under the Securities Exchange
<PAGE>
Act of 1934 if you are an executive officer of the Company) by requesting the
Company to withhold the number of shares of such Performance Stock having a fair
market value as of the date of vesting equal to (i) the aggregate mandatory
federal and state income tax withholding obligations with respect to all of your
Performance Stock under this Award which vests on such date minus (ii) the
amount of your Performance Cash under this Award which vests on such date (net
of withholding), it hereby being agreed that (x) the net amount of such
Performance Cash will be utilized in satisfying such mandatory withholding
obligations before any Performance Stock is withheld and (y) the fair market
value of any Performance Stock that is withheld will be determined on the same
basis that the value of the Performance Stock is determined for federal income
tax withholding purposes. Your request must be submitted in writing to the
Committee, on forms approved by the Secretary to the Committee, no later than
December 1, 2001. The Committee shall have sole discretion to determine whether
or not to accept your request, and failure by the Committee to accept your
request on or prior to the date of vesting shall constitute a denial of your
request.
(7) If your employment with the Company or a subsidiary terminates on or prior
to the end of the performance period, all unvested shares of Performance Stock
and all unvested Performance Cash shall be forfeited, except as provided in
paragraphs (8) and (9), below, or except as the Committee shall otherwise
determine.
(8) If your employment with the Company or a subsidiary or affiliate
terminates by reason of your (i) death, (ii) disability as defined in the
Company's Long-Term Disability Plan, (iii) retirement on or after your 60th
birthday, or (iv) under other circumstances determined by the Committee to be
not contrary to the best interest of the Company, then, if such termination
occurs in 2001, your Performance Stock award and your Performance Cash award
shall not be forfeited by reason of such termination of employment; and if your
employment so terminates in 2000, two-thirds of said awards shall not be so
forfeited; and if your employment so terminates in 1999, one-third of said
awards shall not be so forfeited. Nothing contained in this paragraph shall
preclude the Company (with the approval of the Committee) and you from agreeing
in writing as to the portions of your awards which are not forfeited by reason
of the termination of your employment.
(9) As provided in the Plan, and in the Committee's "Target Document," upon
the occurrence of a "change in control" all unvested (and not previously
forfeited) shares of Performance Stock and all unvested (and not previously
forfeited) Performance Cash shall immediately vest. Upon such occurrence, the
vested shares of Performance Stock shall be delivered to you promptly and the
vested Performance Cash shall be paid to you promptly.
(10) The Committee's Rules of General Application, as in effect on the date
hereof, provide that under certain circumstances, in lieu of vesting, an award
of Performance Stock will be forfeited and you will be issued, instead, an
equivalent Deferred Stock Award.
<PAGE>
(11) Nothing in this award shall confer on you any right to continue in the
employ of the Company or any of its subsidiaries or affiliates or interfere in
any way with the right of the Company or any subsidiary or affiliate to
terminate your employment at any time.
The Company reserves the right to require that stock certificates issuable to
you in connection with the Performance Stock award be delivered to you only
within the United States.
The Common Stock issued to you hereunder may not be resold by you except
pursuant to an effective registration statement under the Securities Act of 1933
or pursuant to an exemption from registration, such as Rule 144.
You agree to pay the Company promptly, on demand, any withholding taxes due in
respect of the Awards made hereunder. The Company may deduct such withholding
taxes from any amounts owing to you by the Company or by any of its subsidiaries
or affiliates.
Once Performance Stock and/or Performance Cash vests as herein provided, it
shall no longer be deemed to be Performance Stock or Performance Cash, as the
case may be, and your rights thereto shall not be subject to the restrictions of
this Agreement or of the Plan.
In the event of any conflict between the terms of this Agreement and the
provisions of the Plan, the provisions of the Plan shall govern.
If you accept the terms and conditions set forth in this Agreement, please
execute the enclosed copy of this letter where indicated and return it as soon
as possible, along with the enclosed stock power.
Very truly yours,
CYTEC INDUSTRIES INC.
BY:______________________
J. W. Hirsch
Secretary - Compensation
and Management
Development Committee
Enc.
ACCEPTED:
____________________________
Employee Name:
Social Security No.
Date:
<PAGE>
Exhibit 10.13(c)
[As amended 1/25/99]
RULES OF GENERAL APPLICATION UNDER
THE CYTEC INDUSTRIES INC. 1993
STOCK AWARD AND INCENTIVE PLAN
Rule 1. This Rule applies to Performance Stock Awards and related Performance
- ------
Cash Awards granted to Executive Officers of the Corporation by the Compensation
and Management Development Committee (the "Committee") with respect to the 1999,
2000 and 2001 Performance Periods.
(a) Definitions. As used in this Rule, the following terms shall have the
-----------
following respective meanings;
(i) "Performance Period" means January 1-December 31, 1999, January 1-
December 31, 2000 or January 1-December 31, 2001, as the context
requires.
(ii) "Plan" means the 1993 Stock Award and Incentive Plan of the
Corporation.
(iii) Terms defined in the Plan and used, but not defined, in this
Rule shall have the respective meanings ascribed thereto in the Plan.
(b) Payout Targets - Performance Stock Awards. Subject to paragraph (e)
-----------------------------------------
below ("Deferred Stock Awards"), and subject to the terms of the
Performance Stock Award and Performance Cash Award Grant Letters,
restrictions on Performance Stock Awards shall lapse if and to the extent
that the EPS performance targets set forth in a separate document
(hereinafter called the "Target Document") entitled "Performance Stock/Cash
Awards - 1999, 2000, 2001 Performance Periods - Executive Officers" are
met. The Target Document shall be identified by the signature of the
Secretary to the Committee and filed with the records of the Committee.
(c) Payout Targets - Performance Cash Awards. Subject to paragraph (e)
----------------------------------------
below, and subject to the terms of the Performance Stock Award and
Performance Cash Award grant letters, recipients of Performance Stock
Awards shall be paid cash bonuses, called Performance Cash Awards, which
shall be in amounts awarded by the Committee and shall vest at the same
time as the related Performance Stock Award becomes nonforfeitable, based
on attainment of EPS, Cash Flow and (for the year 2000 and 2001 Performance
Periods) Market Value performance criteria set forth in the Target
Document. As provided in the Target Document, under certain circumstances,
the amount of Performance Cash that vests may exceed the
<PAGE>
nominal amount of the award, as set forth in the Grant Letter.
(d) Exclusions. [Not used]
----------
(e) Deferred Stock Awards. (i) The Committee may, prior to the beginning of
---------------------
the Performance Period with respect to a Performance Stock Award, offer a
Participant who has been granted such an award the opportunity to elect to
defer all or a specified portion of such award in the form of a Deferred
Stock Award. If a Participant elects deferral in accordance with the
procedures established by the Committee, then, effective as of the date on
which the related award of Performance Stock is to vest, the total award
(or such lesser percentage of such total award as shall have been elected
by the Participant and accepted by the Committee) shall be forfeited, and
the Participant will be issued instead a Deferred Stock Award, as defined
in Section 6(h) of the Plan, equal to the number of shares of Performance
Stock so forfeited. Such Deferred Stock Award shall accrue Dividend
Equivalents which will be deferred in the form of additional Deferred Stock
based on the Closing Price of the Corporation's Common Stock in the New
York Stock Exchange Consolidated Tape on the date on which the related
dividend is paid on the Corporation's Common Stock.
(ii) Deferred Stock resulting from deferral of Dividend Equivalents will
likewise bear Dividend Equivalents.
(f) Executive Committee. The Executive Committee is authorized to set (and
-------------------
change) performance targets for Performance Stock and Performance Cash
granted to employees who are not "Executive Officers" of the Corporation;
provided that such performance targets shall be reported to the Committee.
The targets so reported shall be deemed approved and ratified by the
Committee, unless the Committee rejects them at its first meeting following
such report.
(g) Additional Bonuses. The foregoing long-term incentive awards are not
------------------
intended to be exclusive, and the Corporation may grant any other
additional forms of compensation, including but not limited to annual
incentive compensation, stock options, special recognition awards, stock
appreciation rights or any other form of compensation whatsoever.
<PAGE>
Exhibit 10.13(d)
E-1
NONQUALIFIED STOCK OPTION UNDER
1993 STOCK AWARD AND INCENTIVE PLAN
[Date]
Number of Shares:
Purchase Price:
Dear Employee:
As a key employee of Cytec Industries Inc. (the "Company"), or of a
subsidiary of the Company, you have been granted by the Compensation and
Management Development Committee (the "Committee") of the Company's Board of
Directors a non-qualified stock option to purchase not more than the aggregate
number of shares of the Common Stock of the par value of $.01 each of the
Company ("Common Stock") set forth above at the per share purchase price set
forth above, all subject to the terms and conditions hereof and of the Company's
1993 Stock Award and Incentive Plan, as amended (the "Plan").
The date of grant of this option is the date of this letter, which is the
date on which the Committee voted to grant the option. The purchase price
represents 100% of the Fair Market Value per share of the Common Stock on the
date of the grant, as determined under the Plan.
Upon receipt by the Company of notification of exercise of option in the
form prescribed from time to time by the Committee and upon receipt of the
purchase price per share multiplied by the number of shares being purchased
pursuant to such exercise, the Company will cause a certificate or certificates
for such shares then purchased to be delivered to the person entitled thereto.
A copy of the Plan, under which this option is granted to you, is available
at the office of the Secretary to the Committee, and your attention is directed
to all the provisions of the Plan.
Certain restrictions with respect to this option include, but are not
limited to, the following:
(1) This option must be exercised if at all and to the extent exercised,
no later than ten years from the date of grant, and then only (except as
provided in paragraphs (5), (6) and (7) below) if you are then an employee of
the Company or of a company which on the date of exercise is a subsidiary or
Affiliate (as defined in the Plan) of the Company.
<PAGE>
(2) This option shall be exercisable in cumulative installments as
follows: to the extent of not more than one-third of the number of shares
subject hereto, at any time after the expiration of the first year of the term
hereof; to the extent of not more than an additional one-third of such shares,
at any time after the expiration of the second year of such term; and to the
extent of the remainder of such shares, at any time after the expiration of the
third year of such term; provided that, as specified in Section 7 of the Plan,
this option shall be immediately exercisable in full upon a Change of Control
(as defined in the Plan).
(3) This option is not transferable otherwise than by will or by the laws
of descent and distribution or, if then permitted under Rule 16b-3 under the
Securities Exchange Act of 1934, pursuant to a qualified domestic relations
order as defined under the Internal Revenue Code and it may be exercised during
your lifetime, only by you or your guardian or legal representative.
Notwithstanding the prior sentence, you may transfer this option, in whole or in
part, to (i) your spouse, (ii) your child or children, (iii) your grandchild or
grandchildren or (iv) a trust for any of the foregoing; provided that the
transfer shall be subject to all of the terms of the Plan and this grant letter
and, in addition, (A) the transferred option may not be retransferred except to
you, (B) you remain liable for all withholding taxes payable on account of this
option, (C) the Company may place transfer restrictions against any shares of
Common Stock issued to a transferee upon exercise of this option in order to
assure compliance with the Securities Act of 1933, as amended, (D) you give
prompt written notice of the transfer to the Secretary of the Committee
including name, address, tax I.D. number and date of birth of the transferee,
number of shares subject to the transfer, and such other information as the
Company may require and (E) this option shall be exercisable by the transferee
only to the extent that it would be exercisable by you if it had not been so
transferred.
(4) In the event of termination of your employment, this option, to the
extent not theretofore exercised, shall forthwith terminate unless such
termination of employment shall be by reason of a cause described in paragraph
(5), (6) or (7) below, in which case the provisions of paragraph (5), (6) or (7)
below, as the case may be, shall be applicable.
(5) In the event that your employment with the Company or a subsidiary of
the Company terminates by reason of (i) your death, (ii) your disability or
(iii) your retirement on or after your 55th birthday, and the date of such
termination is eight months or more after the date of grant of this option, this
option may be exercised by you, by your estate, by any transferee under
Paragraph 3 above, or by any person who acquires the right to exercise this
option by reason of your death, until the fifth anniversary of the date of
termination of your employment (subject to the installment exercise provisions
of Paragraph 2, above), but not after ten years from the date of grant, to the
extent of the total number of shares subject to this option.
<PAGE>
(6) In the event that the Company or a subsidiary of the Company terminates
your employment by reason of a job elimination, and the date of termination is
eight months or more after the date of grant of this option, this option may be
exercised (subject to the installment exercise provisions of Paragraph 2, above)
but not after ten years from the date of grant, to the extent of the full number
of shares subject to this option.
(7) In the event that the Company or a subsidiary of the Company terminates
your employment (except as provided in paragraph 6, above, in which case
paragraph 6 applies, and except for dishonesty or other good cause, in which
case this option expires), you may exercise this option at any time within one
year after any such termination, but not before the expiration of the first
year, nor after ten years, from the date of grant, to the extent of the number
of shares subject to this option which were purchasable by you at the date of
such termination of your employment.
(8) The Company, with the approval of an officer, may, at any time and
without cause, suspend the exercisability of this option if it becomes aware of
information that indicates that there may be grounds to terminate your
employment for dishonesty or other good cause. If upon conclusion of the
investigation the Company determines that it has not discovered grounds to
terminate your employment for dishonesty or other good cause, the suspension
shall be terminated.
(9) Nothing in this option shall confer on you any right to continue in
the employ of the Company or any of its subsidiaries or affiliates or interfere
in any way with the right of the Company or any subsidiary or affiliate to
terminate your employment at any time.
(10) Subject to such limitations, if any, as the Committee may establish,
you may satisfy your mandatory federal and state income tax withholding
obligations resulting from the exercise of this option by requesting the Company
to withhold shares of Common Stock having a fair market value, as determined
under the Plan, equal to the withholding obligations. In order to prevent
fractional shares, the number of shares withheld shall be rounded up to the
nearest whole share, with the value of the fraction, at the option of the
Company, being either paid to you in cash or retained as additional optional
withholding.
Your exercise of this option, in whole or in part, constitutes your
agreement (i) to pay the Company promptly, on demand, any withholding taxes due
in respect of the exercise of this stock option and (ii) that the Company, its
subsidiaries and affiliates may deduct an amount equal to such withholding taxes
from any amounts owing to you by the Company and/or any of such subsidiaries or
affiliate.
The Company reserves the right to require this option to be exercised only
within the United States and to require stock certificates issuable to you upon
such exercise to be delivered
<PAGE>
only within the United States to you or to such person who is appropriately
authorized by you.
Prior to the earliest time that this option may be exercised by you, the
Company will deliver to you a prospectus which meets the requirements of the
Securities Act of 1933, as amended, and which further describes the Plan and
options granted thereunder.
In no event is the grant of this option to you to be deemed, directly or
indirectly, a recommendation by the Company that you at any time exercise this
option.
<PAGE>
In the event of any conflict between the terms of this option and the
provisions of the Plan, the provisions of the Plan shall govern.
Very truly yours,
CYTEC INDUSTRIES INC.
BY:______________________
J. W. Hirsch
Secretary-Compensation
and Management
Development Committee
Enc.
<PAGE>
Exhibit 10.13(f)
As Amended and Restated 4/9/98
RULES OF GENERAL APPLICATION UNDER
THE CYTEC INDUSTRIES INC. 1993
STOCK AWARD AND INCENTIVE PLAN
Rule 3. This Rule applies to Performance Stock Awards and related Performance
Cash Awards granted by the Compensation and Management Development Committee
(the "Committee") with respect to the 1998, 1999 and 2000 Performance Periods to
persons (as listed on Exhibits A and B to a separate document entitled "Award
Targets Non-Officers", such separate document being hereinafter called the
"Target Document") who are not, as of the date of grant, Executive Officers of
the Corporation. This rule is adopted by the Executive Committee pursuant to
Paragraph (f) of Rule No. 1 under the Plan.
(a) Definitions. As used in this Rule, the following terms shall have the
following respective meanings:
(i) "EBIT" means, with respect to any business unit for any fiscal year
constituting a Performance Period, the earnings before interest and taxes of
such business unit, determined on a basis consistent with the accounting
principles used in determining EBIT in the Corporation's audited financial
statements for such year; provided, that in the event of an acquisition by a
business unit of another company or business, pro forma financing charges as
determined by the Executive Committee, representing a financing charge for the
purchase price, will be subtracted from the business unit's actual EBIT in
determining EBIT for purposes of the Target Document; provided, further, that
the setting of new EBIT targets will not be affected by such financing charges.
(ii) "Performance Period" means January 1-December 31, 1998, January 1-December
31, 1999, or January 1-December 31, 2000, as the context requires.
(iii) "Plan" means the 1993 Stock Award and Incentive Plan of the Corporation,
as amended.
(iv) Terms defined in the Plan and used, but not defined, in this rule shall
have the respective meanings ascribed thereto in the Plan.
(b) Staff Personnel. Set forth on Exhibit A to the Target Document are the
names of certain Participants who have been granted Performance Stock Awards and
Performance Cash Awards. Subject to Paragraph (d) below ("Right to Change
Targets") and subject to Paragraph (e) below ("Deferred Stock Awards"), and
subject to the terms of the Performance Stock Award and Performance Cash Award
Grant Letters, lapsing of the restrictions on the Performance Stock Awards and
payment of the cash provided for in
<PAGE>
the related Performance Cash Awards for the 1998, 1999 and 2000 Performance
Periods for these Participants, as applicable, shall be governed, as to 100% of
such Awards, by the targets established under Rule No. 1 under the Plan, as
adopted by the Committee ("Rule No. 1"), such targets being adopted by the
Executive Committee for purposes of this Rule and incorporated herein by
reference.
(c) Business Group Personnel. Set forth on Exhibit B to the Target Document are
the names and business units of certain other Participants who have been granted
Performance Stock Awards and Performance Cash Awards. As to these Participants,
Performance Stock Awards and related Performance Cash Awards for the 1998, 1999
and 2000 Performance Periods shall each be divided into two portions: the "30%
Portion," consisting of 30% of each Award (rounded up to the nearest whole
dollar or the nearest whole share, as the case may be), and the "70% Portion,"
consisting of the remaining portion of each such Award. Subject to Paragraph
(d) below ("Right to Change Targets") and subject to Paragraph (e) below
("Deferred Stock Awards"), and subject to the terms of the Performance Stock
Award and Performance Cash Award Grant Letters:
(i) Payout Targets - 30% Portion. Lapsing of the restrictions on the 30%
Portion of these Performance Stock Awards and payment of the cash provided for
in the related 30% Portion of the Performance Cash Awards shall be governed by
the targets established under Rule No. 1, which are incorporated herein by
reference; and
(ii) Payout Targets - 70% Portion. Lapsing of restrictions on the 70% Portion
of these Performance Stock Awards and payment of the cash provided for in the
related 70% Portion of the Performance Cash Awards shall occur if and to the
extent that the respective business unit EBIT targets set forth on Exhibit B to
the Target Document are met. If business unit EBIT is, in any fiscal year,
greater than any applicable minimum amount shown on Exhibit B to the Target
Document for such fiscal year, and less than the applicable maximum amount,
then, in the case of the 70% Portion for a Participant named on such Exhibit B,
the actual number of shares of Common Stock that shall vest, and the actual
payout on the Performance Cash Award, shall be pro-rated. Any resulting
fractional shares that vest shall be rounded up to the nearest whole share. The
amount payable in respect of any Performance Cash Award shall be paid as soon as
practicable after determination that the Award is payable.
(d) Right to Change Targets. The Executive Committee (or, in the case of any
Grantee who subsequently becomes an Executive Officer of the Corporation, the
Committee) reserves the right from time to time in its sole discretion to change
the EBIT, EPS and Cash Flow Targets set forth in the Target Document, or
incorporated herein by reference, to take into account developments in the
Corporation's business, or in the business of any one or more business units,
and/or to take into account changes in the structure of any business unit or of
any Participant's responsibilities which were not fully contemplated at the time
the targets were set or last revised; provided that any such change must be made
at or prior to the end of the Performance Period to which the target relates.
(e) Deferred Stock Awards. (i) If, as of the date on which any Performance
Stock Award
<PAGE>
is to vest, any Participant's compensation for such year is such that it would
exceed the maximum amount which is deductible by the Corporation under Section
162(m) of the Internal Revenue Code, the number of shares constituting such
Performance Stock Award, to the extent of such excess amount, shall be forfeited
and the Participant will be issued a Deferred Stock Award as defined in Section
6(h) of the Plan, equal to the number of shares so forfeited. Such Deferred
Stock Award shall accrue Dividend Equivalents which will be deferred in the form
of additional Deferred Stock Awards based on the Closing Price of the
Corporation's Common Stock in the New York Stock Exchange Consolidated Tape on
the date on which the related dividend is paid on the Corporation's Common
Stock.
(ii) The Committee may, prior to the beginning of the Performance Period with
respect to a Performance Stock Award (or during such Performance Period, with
respect to a Performance Stock Award granted during such Performance Period or
not more than one month prior thereto), offer a Participant who has been granted
such an award the opportunity to elect to defer all or a specified portion of
such award in the form of a Deferred Stock Award. If a Participant elects
deferral in accordance with the procedures established by the Committee, then,
effective as of the date on which the related award of Performance Stock is to
vest, the total award (or such lesser percentage of such total award as shall
have been elected by the Participant and accepted by the Committee) shall be
forfeited, and the Participant will be issued instead a Deferred Stock Award, as
defined in Section 6(h) of the Plan, equal to the number of shares of
Performance Stock so forfeited. Such Deferred Stock Award shall accrue Dividend
Equivalents which will be deferred in the form of additional Deferred Stock
based on the Closing Price of the Corporation's Common Stock in the New York
Stock Exchange Consolidated Tape on the date on which the related dividend is
paid on the Corporation's Common Stock. In the event that the Participant
qualifies for a Deferred Stock Award under either this sub-paragraph or under
sub-paragraph (e)(i) of this Rule No. 3, the Deferred Stock Award provided for
under this sub-paragraph shall be granted first, before any Deferred Stock Award
shall be granted under said sub-paragraph (e)(i).
(iii) Deferred Stock resulting from deferral of Dividend Equivalents will
likewise bear Dividend Equivalents.
(f) Performance Cash Awards.
(i) As provided in the Target Document, under certain circumstances the amount
of Performance Cash that vests may exceed the nominal amount of the award, as
set forth in the Grant Letter. Beginning with the Year 2000 Performance Period,
the nominal percentage of Performance Cash that vests, as set forth in the
Target Document, is multiplied by the applicable Market Value index set forth in
the target document established under Rule No. 1 in order to determine the
actual amount of Performance Cash that vests.
(ii) In the case of a "Change in Control," the amount of a Performance Cash
Award that vests in respect of any Performance Period for which a greater than
100% payout is
<PAGE>
possible is as follows: the full potential amount of the Award (i.e. the Award
at the 200% payout level) is deemed to be the size of the Award, and shall be
multiplied by the applicable Market Value index (determined as provided in Rule
No. 1) in order to determine the amount of Performance Cash that so vests.
(g) Committee Approval. The targets set forth herein and in the Target
Document, to the extent not previously reported to the Committee, will be
reported to the Committee and, pursuant to Paragraph (f) of Rule No. 1, will be
deemed approved and ratified by such Committee. Changes made to targets (see
paragraph (d) above) may be so reported after the close of the Performance
Period without affecting the validity of any change.
(h) Additional Bonuses. The foregoing long-term incentive awards are not
intended to be exclusive, and the Corporation may grant any other additional
forms of compensation, including but not limited to annual incentive
compensation, stock options, special recognition awards, stock appreciation
rights or any other form of compensation whatsoever.
<PAGE>
Exhibit 10.13(g)
CYTEC INDUSTRIES INC.
---------------------
Executive Income Continuity Plan
--------------------------------
As Revised through January 25, 1999
-----------------------------------
1. Purpose. The purpose of this Executive Income Continuity Plan (this
-------
Plan) is to retain the services of executives in the senior management group of
Cytec Industries Inc. and its subsidiaries and to reinforce and encourage the
continuing attention, dedication and loyalty of these executives without the
distraction of concern over the possibility of involuntary or constructive
termination of employment resulting from unforeseen developments, by providing
income continuity for a limited period.
2. Definitions. Unless the context otherwise requires, the following
-----------
terms shall have the meanings respectively indicated:
(a) "Board of Directors" shall mean the board of directors of Cytec
Industries Inc.
(b) "Cause" shall mean (A) the willful and continued failure by a Plan
Member substantially to perform his duties with the Company (other than any
such failure resulting from his incapacity due to physical or mental
illness), after a demand for substantial performance is delivered to him by
the Company which specifically identifies the manner in which the Company
believes that he has not substantially performed his duties, or (B) the
willful engaging by him in conduct demonstrably injurious to the Company.
For purposes of this definition, no act, or failure to act, on the part of
a Plan Member shall be considered "willful" unless done, or omitted to be
done, by him without reasonable belief that his action or omission was in
the best interests of the Company and was lawful.
(c) A "Change in Control" shall be deemed to have occurred if: (i)
any "person", as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (other
than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, or any company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20% or
more (except as specifically provided below) of the combined voting power
of the Company's then outstanding securities; or
<PAGE>
(ii) there occurs any transaction or action which results in the
individuals who at the beginning of a period commencing 24 hours prior to
the commencement of the transaction were members of the Board of Directors,
together with individuals subsequently elected to the Board upon the
recommendation of a majority of the continuing directors, ceasing to
constitute at least a majority thereof; or (iii) the stockholders or the
Board of Directors of the Company approve a definitive agreement to merge
or consolidate the Company with or into another corporation (including any
such transaction in which the Company is the surviving corporation), or to
sell or otherwise dispose of all or substantially all of its assets, or to
adopt a plan of liquidation of the Company. Notwithstanding clause (i)
above, beneficial ownership by a financial institution of securities of the
Company representing 20% or more of the combined voting power of the
Company's then outstanding securities shall not constitute a Change in
Control if, at the first Board of Directors meeting occurring five days or
more after the Company receives written notice of such event, and prior to
the occurrence of an event described in clause (ii) above, the Board of
Directors adopts a resolution to the effect that such ownership does not
constitute a Change in Control; provided that (x) such a resolution shall
not remain in effect for any further five percent (5%) increase in such
financial institution's beneficial ownership, unless the Board of Directors
so determines in accordance with a further resolution adopted by the Board
of Directors in accordance with the procedures set forth in this sentence,
(y) such resolution may be revoked by the Board of Directors at any time,
and (z) the Board of Directors may place any additional or more stringent
conditions on its determination that such event does not constitute a
Change in Control.
(d) "Company" shall mean Cytec Industries Inc. and, except for the
purposes of paragraph (c) of this Section, shall include any of its
subsidiaries which employs members of this Plan.
(e) "Compensation Committee" shall mean the Compensation
and Management Development Committee as constituted from time to time of
the Board of Directors, or such other body as shall have similar authority
and responsibility.
(f) "Date of Termination" shall mean (A) if the employment of a Plan
Member is terminated by his death, the date of his death, (B) if such
employment is terminated by his Retirement, the date of such Retirement,
(C) if such employment is terminated for Disability, upon the expiration of
his continuous service credits as determined by the Company, (D) if his
employment is terminated by him for Good Reason, the date specified in the
Notice of Termination, and (E) if his employment is terminated for any
other reason, the date on which Notice of Termination is given; provided
that if
<PAGE>
within 30 days after any Notice of Termination is given the party receiving
such notice notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute
is finally resolved, either by mutual written agreement of the parties or
by a final judgment, order or decree of a court of competent jurisdiction
(the time for appeal therefrom having expired and no appeal having been
perfected).
(g) "Disability" shall mean inability of a Plan Member due to sickness
or injury to perform the duties pertaining to his occupation with the
Company, as determined in accordance with the Company's Long-Term
Disability Plan and personnel policies.
(h) "Good Reason" shall mean:
(A) a change in assignment resulting in the assignment to a Plan
Member of substantially reduced responsibilities compared with those
assigned to him prior to such change, or any change in his status,
authority or position which represents a demotion (actual or de facto)
-- -----
from his status, authority or position immediately prior to such
change, except in connection with the termination of his employment
because of death or Retirement, by the Company for Disability or
Cause, or by him other than for a Good Reason enumerated in any of the
following subparagraphs of this Paragraph (h);
(B) the assignment to a Plan Member of duties inconsistent with
his responsibilities prior to such assignment, unless such new duties
are consistent with a position of equal or greater status, authority,
and position;
(C) a reduction in the base salary of a Plan Member as the same
may be increased from time to time;
(D) a failure to continue the I.C. Plan (or a plan providing
substantially similar benefits) as the same may be modified from time
to time but in a form not less favorable than as of the date of
adoption of this Plan, or a failure to continue a Plan Member as a
participant in the I.C. Plan on a basis consistent with the basis on
which the I.C. Plan is administered as of such date;
(E) a failure to pay a Plan Member any portion of his current or
deferred compensation within seven (7) days of the date such
compensation is due;
(F) the relocation of the principal executive offices of the
Company to a location more than 50 miles from the location of the
present executive offices or outside of New Jersey, or requiring a
Plan Member to be
<PAGE>
based anywhere other than the principal executive offices (or, if a
Plan Member is not based at such executive offices, requiring such
Plan Member to be based at another location not within 25 miles of
such location) except for required travel on business to an extent
substantially consistent with his duties and responsibilities, or in
the event of consent to any such relocation of the base location of a
Plan Member the failure to pay (or provide reimbursement for) all
expenses of such Plan Member incurred relating to a change of
principal residence in accordance with the applicable personnel
policies of the Company in effect as of the date of adoption of this
Plan;
(G) the failure to continue in effect any benefit or compensation
plan (including but not limited to the Retirement Plan, the Long-Term
Disability Plan, the I.C. Plan, stock option and performance
stock/cash features of the 1993 Stock Award and Incentive Plan (or of
any subsequent and/or substitute plan)), the Employees Savings and
Profit Sharing Plan (including the Supplemental Savings and Profit
Sharing Plan), pension plan (including but not limited to, the
Supplemental, Executive Supplemental, and Excess Retirement Plans),
life insurance plan, health and accident plan, disability or vacation
plan in which a Plan Member is participating, or the taking of any
action which would adversely affect participation (including the Plan
Member's eligibility to participate, the amount of his benefits, and
the level of his participation relative to other participants) in or
materially reduce benefits under any of such plans, or the failure to
fund any "Rabbi Trust" created for the payment of any of the
foregoing benefits, when, and to the extent, required by the terms of
any such trust, unless such action is required pursuant to law or
unless substantially similar benefits are continued in the aggregate
under other plans, programs or arrangements;
(H) the failure to obtain the assumption of or an agreement to
carry out the terms of this Plan by any successor as contemplated in
Section 10; or
(I) any purported termination of a Plan Member's employment which
is not effected pursuant to a Notice of Termination as herein
defined.
(i) "I.C. Plan" means the existing system of annual cash bonuses
payable to Company employees (including Plan Members), pursuant to which
annual target bonuses are established based upon job levels and payments of
bonuses as a percentage of such targets are made based upon Company,
business group and individual performance.
<PAGE>
(j) "Notice of Termination" shall mean a notice which indicates the
specific basis for termination of employment relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide
such basis.
(k) "Plan Member" shall mean a person who is employed by
the Company on a full-time basis and for a regular fixed compensation
(other than on a retainer or compensation for temporary employment) and who
is included in the membership
of this Plan as provided in Section 3.
(l) "Officers" shall mean the chairman, any vice chairman, president,
and any vice president of Cytec Industries Inc. chosen by the Board of
Directors.
(m) "Retirement" shall mean termination of employment in accordance
with the provisions of the Retirement Plan; provided, however, that
termination of employment by a Plan Member before his Normal Retirement
Date (as defined in such Plan) for Good Reason shall not be deemed to be
Retirement for purposes of this Plan even though such Plan Member may be
eligible for and elect to receive retirement benefits thereunder.
(n) "Retirement Plan" means any qualified defined benefit pension plan
of the Company or its subsidiaries under which the Plan Member has accrued
a retirement benefit (whether or not vested).
(o) "Service", as used in Section 5 of this Plan, shall mean service
as a full time employee of the Company or one of its subsidiaries and, in
the case of any person who became such an employee on January 1, 1994,
shall include any period of service ending December 31, 1993 as a full time
employee of American Cyanamid Company or one of its subsidiaries.
(p) "Special Change in Control" shall have the same meaning as "Change
in Control" except that the reference to "20%" in clause (i) of the
definition of "Change in Control" shall be replaced with "50%".
The masculine pronoun wherever used herein shall include the feminine
except as the context specifically indicates.
3. Membership. All Officers shall be Plan Members. The Compensation
----------
Committee may designate any other employee as a Plan Member. After an employee
becomes a Plan Member, his membership shall continue until his death or
Retirement, termination of his employment by the Company for Cause or
Disability, or termination of his employment by such Plan Member other than for
Good Reason.
4. Termination of Employment. Each Plan Member shall be entitled to
-------------------------
receive the income continuation payments provided for in Section 5 upon
termination of his employment, unless such
<PAGE>
termination is (a) because of his death, Disability or Retirement, (b) by the
Company for Cause, or (c) by such Plan Member other than for Good Reason.
5. Income Continuation. (a) Subject to the provisions of Section 7, upon
-------------------
termination of the employment pursuant to Section 4 of a Plan Member who is an
Officer or who, on the Date of Termination, has at least one year of Service,
the Company shall pay to him the sum of his annual base salary at the rate in
effect at the time Notice of Termination is given plus his Annual Bonus
(excluding Performance Stock/Cash Awards) under the I.C. Plan based on such
rate, in equal monthly installments over a period of 12 months following the
Date of Termination; provided that in the case of Notice of Termination given
--------
after a Change in Control, the payments shall consist of twice his annual base
salary plus twice his Annual Bonus, payable over a 24 month period; and provided
--------
further that in the case of Notice of Termination given after a Special Change
- -------
in Control, the payments shall consist of twice his annual base salary plus
twice his Annual Bonus, payable in a single lump sum payment at the time of the
Notice of Termination. As used in this Section 5, "Annual Bonus" means the
greater of (i) the annual target bonus under the I.C. Plan attributable to the
Plan Member or (ii) said annual target bonus times a fraction equivalent to the
average percentage of said annual target bonus paid to said Plan Member for each
of the two preceding fiscal years of the Company (or for such lesser period of
time as such Plan Member participated in the I.C. Plan).
(b) Subject to the provisions of Section 7, upon termination of the
employment pursuant to Section 4 of any other Plan Member, the Company shall pay
to him the sum of his annual base salary at the rate in effect at the time
Notice of Termination is given plus his Annual Bonus (excluding Performance
Stock/Cash Awards) under the I.C. Plan based on such rate, in equal monthly
installments over a period of 12 months following the Date of Termination;
provided that in the case of Notice of Termination given after a Special Change
in Control, the payments shall be payable in a single lump sum payment at the
time of the Notice of Termination.
(c) Except for the lump sum payments, which shall be paid immediately as
provided above, all payments under paragraphs (a) and (b) shall be made on the
first day of each month commencing with the first day of the first month after
the Date of Termination. Notwithstanding the foregoing, (i) no payment shall be
made with respect to any period beyond the date of a Plan Member's 65th
birthday, (ii) no payment shall be made with respect to any period (A) beyond
the date of a Plan Member's 60th birthday, or (B) (if Notice of Termination is
given prior to a Change in Control) beyond such earlier date as such Plan Member
retires under the Executive Supplemental Employees' Retirement Plan, if, in
either case, such Plan Member is a full member of such plan and is entitled to
retire on such date without having his benefits thereunder reduced by an early
retirement discount, and (iii) there shall be deducted from any payments
required hereunder (x)
<PAGE>
any payments made with respect to any required notice period under any
employment agreement between a Plan Member and the Company or one of its
subsidiaries and (y) any payments received by the Plan Member under the
Company's Long Term Disability Plan or under any short term disability plan or
program of the Company during the period with respect to which income
continuation is computed hereunder.
6. Other Payments. Subject to the provisions of Section 7, upon
--------------
termination of the employment of a Plan Member pursuant to Section 4, the
Company shall, in addition to the payments provided for in Section 5, pay to
him:
(a) all relocation payments described in Section 2(h)(F)
and all legal fees and expenses incurred by him as a result of such
termination (including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to obtain or
enforce any right or benefit provided by this Plan or in connection with
any tax audit or proceeding to the extent attributable to the application
of Section 4999 of the Internal Revenue Code of 1986, as amended, to any
payment or benefit provided hereunder); and
(b) during the period of two years following the Date of
Termination, all reasonable expenses incurred by him in seeking comparable
employment with another employer to the extent not otherwise reimbursed to
him, including, without limitation, the fees and expenses of a reputable
out placement organization, and reasonable travel, telephone and office
expenses.
7. Competitive Employment. The Company, at its option, may discontinue
----------------------
any payments being made to any Plan Member pursuant to Section 5 or Section 6 if
such Plan Member engages in the operation or management of any business in the
United States of America, whether as owner, stockholder, partner, officer,
consultant, employee or otherwise, which at such time is in competition with any
business of the Company in any field with which such Plan Member was involved
during the last two years of his employment by the Company. Ownership by such
Plan Member of five percent or less of the shares of stock of any company listed
on a national securities exchange or having at least 100 stockholders shall not
make such Plan Member a "stockholder" within the meaning of that term as used in
this Section.
8. Maintenance of Other Benefit Plans. The Company shall maintain in
----------------------------------
full force and effect, for the continued benefit of each Plan Member entitled to
receive payments pursuant to Section 5, for two years following his Date of
Termination, all employee benefit plans and programs or arrangements (including
Comprehensive Medical and Dental Insurance, Group Life Insurance, and Financial
Planning and Tax Preparation and Counseling Services, but not including
disability) in which he was entitled to participate at the time the Notice of
Termination was given, provided that if his
<PAGE>
continued participation is not permitted under the general terms and provisions
of such plans and programs, the Company shall provide equivalent benefits.
9. No Mitigation. No Plan Member shall be required to mitigate the
-------------
amount of any payment provided for under this Plan by seeking other employment
or otherwise, nor shall the amount of any payment so provided for be reduced by
any compensation earned by any Plan Member as the result of employment by
another employer, by retirement benefits or by offset against any amount claimed
to be owed by him to the Company.
10. Successors. The Company will require any successor (whether direct or
----------
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and assets of the Company, by a written
agreement, to expressly assume and agree to carry out the provisions of this
Plan in the same manner and to the same extent that the Company would be
required to carry them out if no such succession had occurred.
11. Notice. Any notice expressly provided for under this Plan shall be in
------
writing, shall be given either manually or by mail, telegram, telex, telefax or
cable, and shall be deemed sufficiently given, if and when received by the
Company at its offices at 5 Garret Mountain Plaza, West Paterson, New Jersey
07424 Attention: Secretary, or by any Plan Member at his address on the records
---------------------
of the Company, or if an when mailed by registered mail, postage prepaid, return
receipt requested, addressed to the Company or the Plan Member to be notified at
such address. Either the Company or any Plan Member may, by notice to the
other, change its address for receiving notices.
12. Funding. All payments provided for under this Plan for Plan Members
-------
(including those who have retired) shall not be funded or secured, and no trust
shall be created hereunder. Payments under the Plan shall become fully vested
and nonforfeitable upon the termination of a Plan Member's employment except for
termination where a Plan Member would not be entitled to income continuation
payments as provided in Section 4 and except as provided in Section 7.
13. Amendment and Termination. The Board of Directors may at any time or
-------------------------
from time to time amend or terminate this Plan; provided, however, that no such
amendment or termination may adversely affect any vested benefits hereunder;
and, provided further, that after a Change in Control, this Plan may not be
amended or terminated without the consent of all persons who were Plan Members
as of the date of such Change in Control (including those who have retired).
In addition, no amendment or termination made within one year before a
Change in Control and made while a Prospective Change in Control is pending may
adversely affect any benefit that might at any time be or become owing hereunder
to a person
<PAGE>
who, immediately prior to the commencement of such Prospective Change in
Control, was a Plan Member, without the consent of such person (other than a
benefit to any such person who is the person, or part of the group, making the
offer, or negotiating to make the offer, which constitutes the Prospective
Change in Control).
As used herein, the term "Prospective Change in Control" means (i) any
offer presented, directly or indirectly, to the Board of Directors of the
Company which, if consummated, would constitute a Change in Control or (ii) any
negotiation with the Board of Directors or any committee or representative
thereof to make such an offer (including the unilateral announcement of the
terms on which such an offer would be made).
14. Governing Law. This Plan, and the rights and obligations of the
-------------
Company and the Plan Members hereunder, shall be construed and governed in
accordance with the law of the State of New Jersey.
15. Partial Invalidity. If any provision of this Plan is determined to be
------------------
invalid or unenforceable, such invalidity or unenforceability shall not affect
the remaining provisions of this Plan, which shall remain in effect in
accordance with its terms.
EXICPLN-1-26-99
<PAGE>
Exhibit 10.13(h)
CYTEC INDUSTRIES INC.
---------------------
Key Manager Income Continuity Plan
----------------------------------
As Revised through January 25, 1999
-----------------------------------
1. Purpose. The purpose of this Key Manager Income Continuity Plan (this
-------
Plan) is to retain the services of executives in the senior management group of
Cytec Industries Inc. and its subsidiaries and to reinforce and encourage the
continuing attention, dedication and loyalty of these executives without the
distraction of concern over the possibility of involuntary or constructive
termination of employment resulting from unforeseen developments, by providing
income continuity for a limited period.
2. Definitions. Unless the context otherwise requires, the following
-----------
terms shall have the meanings respectively indicated:
(a) "Board of Directors" shall mean the board of directors of Cytec
Industries Inc.
(b) "Cause" shall mean (A) the willful and continued failure by a Plan
Member substantially to perform his duties with the Company (other than any such
failure resulting from his incapacity due to physical or mental illness), after
a demand for substantial performance is delivered to him by the Company which
specifically identifies the manner in which the Company believes that he has not
substantially performed his duties, or (B) the willful engaging by him in
conduct demonstrably injurious to the Company. For purposes of this definition,
no act, or failure to act, on the part of a Plan Member shall be considered
"willful" unless done, or omitted to be done, by him without reasonable belief
that his action or omission was in the best interests of the Company and was
lawful.
(c) A "Change in Control" shall be deemed to have occurred if: (i) any
"person", as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company,
any trustee or other fiduciary holding securities under an employee benefit plan
of the Company, or any company owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more (except as specifically
provided below) of the combined voting power of the Company's then outstanding
securities; or (ii) there occurs any transaction or action which results in the
individuals who at the beginning of a period commencing 24 hours prior to the
commencement of the transaction were members of the Board of Directors, together
with individuals
<PAGE>
subsequently elected to the Board upon the recommendation of a majority of the
continuing directors, ceasing to constitute at least a majority thereof; or
(iii) the stockholders or the Board of Directors of the Company approve a
definitive agreement to merge or consolidate the Company with or into another
corporation (including any such transaction in which the Company is the
surviving corporation), or to sell or otherwise dispose of all or substantially
all of its assets, or to adopt a plan of liquidation of the Company.
Notwithstanding clause (i) above, beneficial ownership by a financial
institution of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities shall not
constitute a Change in Control if, at the first Board of Directors meeting
occurring five days or more after the Company receives written notice of such
event, and prior to the occurrence of an event described in clause (ii) above,
the Board of Directors adopts a resolution to the effect that such ownership
does not constitute a Change in Control; provided that (x) such a resolution
--------
shall not remain in effect for any further five percent (5%) increase in such
financial institution's beneficial ownership, unless the Board of Directors so
determines in accordance with a further resolution adopted by the Board of
Directors in accordance with the procedures set forth in this sentence, (y) such
resolution may be revoked by the Board of Directors at any time, and (z) the
Board of Directors may place any additional or more stringent conditions on its
determination that such event does not constitute a Change in Control.
(d) "Company" shall mean Cytec Industries Inc. and, except for the purposes
of paragraph (c) of this Section, shall include any of its subsidiaries which
employs members of this Plan.
(e) "Compensation Committee" shall mean the Compensation and Management
Development Committee as constituted from time to time of the Board of
Directors, or such other body as shall have similar authority and
responsibility.
(f) "Date of Termination" shall mean (A) if the employment of a Plan Member
is terminated by his death, the date of his death, (B) if such employment is
terminated by his Retirement, the date of such Retirement, (C) if such
employment is terminated for Disability, upon the expiration of his continuous
service credits as determined by the Company, (D) if his employment is
terminated by him for Good Reason, the date specified in the Notice of
Termination, and (E) if his employment is terminated for any other reason, the
date on which Notice of Termination is given; provided that if within 30 days
after any Notice of Termination is given the party receiving such notice
notifies the other party that a dispute exists concerning the termination, the
Date of Termination shall be the date on which the dispute is finally resolved,
either by mutual written agreement of the parties or by a final judgment, order
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
<PAGE>
(g) "Disability" shall mean inability of a Plan Member due to sickness or
injury to perform the duties pertaining to his occupation with the Company, as
determined in accordance with the Company's Long-Term Disability Plan and
personnel policies.
(h) "Executive Committee" shall mean the Executive Committee of Cytec
Industries Inc. as elected from time to time by the Board of Directors, or such
other body as shall have similar authority and responsibility.
(i) "Good Reason" shall mean:
(A) a change in assignment resulting in the assignment to
a Plan Member of substantially reduced responsibilities compared with
those assigned to him prior to such change, or any change in his
status, authority or position which represents a demotion (actual or
de facto) from his status, authority or position immediately prior to
-- -----
such change, except in connection with the termination of his
employment because of death or Retirement, by the Company for
Disability or Cause, or by him other than for a Good Reason enumerated
in any of the following subparagraphs of this Paragraph (i);
(B) the assignment to a Plan Member of duties inconsistent with his
responsibilities prior to such assignment, unless such new duties are
consistent with a position of equal or greater status, authority, and
position;
(C) a reduction in the base salary of a Plan Member as the same may be
increased from time to time;
(D) a failure to continue the I.C. Plan (or a plan providing
substantially similar benefits) as the same may be modified from time
to time but in a form not less favorable than as of the date of
adoption of this Plan, or a failure to continue a Plan Member as a
participant in the I.C. Plan on a basis consistent with the basis on
which the I.C. Plan is administered as of such date;
(E) a failure to pay a Plan Member any portion of his current or
deferred compensation within seven (7) days of the date such
compensation is due;
(F) the relocation of the principal executive offices of the Company
to a location more than 50 miles from the location of the present
executive offices or outside of New Jersey, or requiring a Plan Member
to be based anywhere other than the principal executive offices (or,
if a Plan Member is not based at such executive offices, requiring
such Plan Member to be based at another location not within 50 miles
of such location) except for required travel on business to an extent
substantially
<PAGE>
consistent with his duties and responsibilities, or in the event of
consent to any such relocation of the base location of a Plan Member
the failure to pay (or provide reimbursement for) all expenses of such
Plan Member incurred relating to a change of principal residence in
accordance with the applicable personnel policies of the Company in
effect as of the date of adoption of this Plan;
(G) the failure to continue in effect any benefit or compensation plan
(including but not limited to the Retirement Plan, the Long-Term
Disability Plan, the I.C. Plan, stock option and performance
stock/cash features of the 1993 Stock Award and Incentive Plan (or of
any subsequent and/or substitute plan)), the Employees Savings and
Profit Sharing Plan (including the Supplemental Savings and Profit
Sharing Plan), pension plan (including but not limited to, the
Supplemental, Executive Supplemental, and Excess Retirement Plans),
life insurance plan, health and accident plan, disability or vacation
plan in which a Plan Member is participating, or the taking of any
action which would adversely affect participation (including the Plan
Member's eligibility to participate, the amount of his benefits, and
the level of his participation relative to other participants) in or
materially reduce benefits under any of such plans, or the failure to
fund any "Rabbi Trust" created for the payment of any of the
foregoing benefits, when, and to the extent, required by the terms of
any such trust, unless such action is required pursuant to law or
unless substantially similar benefits are continued in the aggregate
under other plans, programs or arrangements;
(H) the failure to obtain the assumption of or an agreement to carry
out the terms of this Plan by any successor as contemplated in Section
10; or
(I) any purported termination of a Plan Member's employment (other
than in connection with the sale or other disposition of a Plan
Member's business unit where the Plan Member becomes an employee of,
or consultant to, the acquiror, as provided in Section 4) which is not
effected pursuant to a Notice of Termination as herein defined.
(j) "I.C. Plan" means the existing system of annual cash bonuses
payable to Company employees (including Plan Members), pursuant to which annual
target bonuses are established based upon job levels and payments of bonuses as
a percentage of such targets are made based upon Company, business group and
individual performance.
(k) "Notice of Termination" shall mean a notice which indicates the
specific basis for termination of employment relied
<PAGE>
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide such basis.
(l) "Plan Member" shall mean a person who is employed by the Company
on a full-time basis and for a regular fixed compensation (other than on a
retainer or compensation for temporary employment) and who is included in the
membership of this Plan as provided in Section 3.
(m) "Retirement" shall mean termination of employment in accordance
with the provisions of the Retirement Plan; provided, however, that termination
of employment by a Plan Member before his Normal Retirement Date (as defined in
such Plan) for Good Reason shall not be deemed to be Retirement for purposes of
this Plan even though such Plan Member may be eligible for and elect to receive
retirement benefits thereunder.
(n) "Retirement Plan" means any qualified defined benefit pension plan
of the Company or its subsidiaries under which the Plan Member has accrued a
retirement benefit (whether or not vested).
(o) "Service", as used in Section 5 of this Plan, shall mean service
as a full time employee of the Company or one of its subsidiaries and, in the
case of any person who became such an employee on January 1, 1994, shall include
any period of service ending December 31, 1993 as a full time employee of
American Cyanamid Company or one of its subsidiaries.
(p) "Special Change in Control" shall have the same meaning as "Change
in Control" except that the reference to "20%" in clause (i) of the definition
of "Change in Control" shall be replaced with "50%".
The masculine pronoun wherever used herein shall include the feminine
except as the context specifically indicates.
3. Membership. The Executive Committee may designate any employee who is
----------
not a member of the Executive Income Continuity Plan and who is grade 15 or
above as a Plan Member. Any such designation may be revoked at any time prior
to a Change in Control in the absolute discretion of the Executive Committee,
but may not be revoked thereafter for any reason. Subject to the foregoing,
after an employee becomes a Plan Member, his membership shall continue until his
death or Retirement, termination of his employment by the Company for Cause or
Disability, termination of his employment by such Plan Member other than for
Good Reason, or until such time, if any, as he becomes a member of the Executive
Income Continuity Plan.
4. Termination of Employment. Each Plan Member shall be entitled to
-------------------------
receive the income continuation payments provided for in Section 5 upon
termination of his employment, unless such termination is (a) because of his
death, Disability or
<PAGE>
Retirement, (b) by the Company for Cause, or (c) by such Plan Member other than
for Good Reason; provided that a Plan Member shall not be entitled to any income
continuation payments if the termination of his employment occurs in connection
with the sale or other disposition by the Company of the business unit within
which he is employed and he becomes, in connection with such sale or other
disposition, or within six months thereof, either (i) an employee of the
acquiror or (ii) a consultant to the acquiror earning consulting fees
substantially similar to (or higher than) his base salary and incentive
compensation from the Company.
5. Income Continuation. (a) Subject to the provisions of Section 6, upon
-------------------
termination of the employment pursuant to Section 4 of a Plan Member, the
Company shall pay to the Plan Member the sum of his annual base salary at the
rate in effect at the time Notice of Termination is given plus his Annual Bonus
(excluding Performance Stock/Cash Awards) under the I.C. Plan based on such
rate, in equal monthly installments over a period of 12 months following the
Date of Termination, on the first day of each month; provided that in the case
--------
of Notice of Termination given after a Change in Control, the payments shall
consist of twice his annual base salary plus twice his Annual Bonus, payable
over a 24 month period; and provided further that in the case of Notice of
----------------
Termination given after a Special Change in Control, the payments shall consist
of twice his annual base salary plus twice his Annual Bonus, payable in a single
lump sum payment at the time of the Notice of Termination. As used in this
Section 5, "Annual Bonus" means the greater of (i) the annual target bonus under
the I.C. Plan attributable to the Plan Member or (ii) said annual target bonus
times a fraction equivalent to the average percentage of said annual target
bonus paid to said Plan Member for each of the two preceding fiscal years of the
Company (or for such lesser period of time as such Plan Member participated in
the I.C. Plan).
(b) Except for the lump sum payments, which shall be paid immediately as
provided above, all payments under paragraph (a) shall be made on the first day
of each month commencing with the first day of the first month after the Date of
Termination. Notwithstanding the foregoing, (i) no payment shall be made with
respect to any period beyond the date of a Plan Member's 65th birthday, (ii) no
payment shall be made with respect to any period (A) beyond the date of a Plan
Member's 60th birthday, or (B) (if Notice of Termination is given by a Plan
Member prior to a Change in Control) beyond such earlier date as such Plan
Member retires under the Executive Supplemental Employees' Retirement Plan, if,
in either case, such Plan Member is a full member of such plan and is entitled
to retire on such date without having his benefits thereunder reduced by an
early retirement discount, and (iii) there shall be deducted from any payments
required hereunder (x) any payments made with respect to any required notice
period under any employment agreement between a Plan Member and the Company or
one of its subsidiaries and (y) any payments received by the Plan Member under
the Company's Long Term Disability Plan or under any
<PAGE>
short term disability plan or program of the Company during the period with
respect to which income continuation is computed hereunder.
6. Competitive Employment. The Company, at its option, may discontinue
----------------------
any payments being made to any Plan Member pursuant to Section 5 if such Plan
Member engages in the operation or management of any business in the United
States of America, whether as owner, stockholder, partner, officer, consultant,
employee or otherwise, which at such time is in competition with any business of
the Company in any field with which such Plan Member was involved during the
last two years of his employment by the Company. Ownership by such Plan Member
of five percent or less of the shares of stock of any company listed on a
national securities exchange or having at least 100 stockholders shall not make
such Plan Member a "stockholder" within the meaning of that term as used in this
Section.
7. Maintenance of Other Benefit Plans. The Company shall maintain in
----------------------------------
full force and effect, for the continued benefit of each Plan Member entitled to
receive payments pursuant to Section 5, for one year following his Date of
Termination, all employee benefit plans and programs or arrangements (including
Comprehensive Medical and Dental Insurance, Group Life Insurance, and Financial
Planning and Tax Preparation and Counseling Services, but not including
disability) in which he was entitled to participate at the time the Notice of
Termination was given, provided that if his continued participation is not
permitted under the general terms and provisions of such plans and programs, the
Company shall provide equivalent benefits.
8. Outplacement. Subject to Section 6, upon termination of a Plan Member
------------
pursuant to Section 4, the Company shall, in addition to the payments provided
for in Section 5, provide, during the twelve months following the Date of
Termination, the services of a reputable outplacement organization, including
telephone and office expenses incurred in seeking new employment.
9. No Mitigation. No Plan Member shall be required to mitigate the
-------------
amount of any payment provided for under this Plan by seeking other employment
or otherwise, nor shall the amount of any payment so provided for be reduced by
any compensation earned by any Plan Member as the result of employment by
another employer, by retirement benefits or by offset against any amount claimed
to be owed by him to the Company.
10. Successors. The Company will require any successor (whether direct or
----------
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and assets of the Company, by a written
agreement, to expressly assume and agree to carry out the provisions of this
Plan in the same manner and to the same extent that the Company would be
required to carry them out if no such succession had occurred.
<PAGE>
11. Notice. Any notice expressly provided for under this Plan shall be in
------
writing, shall be given either manually or by mail, telegram, telex, telefax or
cable, and shall be deemed sufficiently given, if and when received by the
Company at its offices at 5 Garret Mountain Plaza, West Paterson, New Jersey
07424 Attention: Secretary, or by any Plan Member at his address on the records
---------------------
of the Company, or if an when mailed by registered mail, postage prepaid, return
receipt requested, addressed to the Company or the Plan Member to be notified at
such address. Either the Company or any Plan Member may, by notice to the
other, change its address for receiving notices.
12. Funding. All payments provided for under this Plan for Plan Members
-------
(including those who have retired) shall not be funded or secured, and no trust
shall be created hereunder. Payments under the Plan shall become fully vested
and nonforfeitable upon the termination of a Plan Member's employment within two
years after a Change in Control, except for a termination where the Plan Member
would not be entitled to income continuation payments as provided in Section 4.
13. Amendment and Termination. The Board of Directors may at any time or
-------------------------
from time to time amend or terminate this Plan, including but not limited to the
reduction or termination after the termination of a Plan Member's employment of
any non-vested benefit hereunder; provided, however, that no such amendment or
termination may adversely affect any vested benefits hereunder; and, provided
further, that after a Change in Control, this Plan may not be amended without
the consent of all persons who were Plan Members as of the date of such Change
in Control (including those who have retired).
In addition, no amendment or termination made within one year before a
Change in Control and made while a Prospective Change in Control is pending may
adversely affect any benefit that might at any time be or become owing hereunder
to a person who, immediately prior to the commencement of such Prospective
Change in Control, was a Plan Member, without the consent of such person (other
than a benefit to any such person who is the person, or part of the group,
making the offer, or negotiating to make the offer, which constitutes the
Prospective Change in Control).
As used herein, the term "Prospective Change in Control" means (i) any
offer presented, directly or indirectly, to the Board of Directors of the
Company which, if consummated, would constitute a Change in Control or (ii) any
negotiation with the Board of Directors or any committee or representative
thereof to make such an offer (including the unilateral announcement of the
terms on which such an offer would be made).
14. Governing Law. This Plan, and the rights and obligations of the
-------------
Company and the Plan Members hereunder, shall be construed and governed in
accordance with the law of the State of New Jersey.
<PAGE>
15. Partial Invalidity. If any provision of this Plan is determined to be
------------------
invalid or unenforceable, such invalidity or unenforceability shall not affect
the remaining provisions of this Plan, which shall remain in effect in
accordance with its terms.
<PAGE>
Revised and Restated March 3, 1999 Exhibit 10.13(o)
A G R E E M E N T
- - - - - - - - -
THIS CONSULTING AGREEMENT, made as of the 25th day of January, 1999,
between CYTEC INDUSTRIES INC., a corporation organized and existing under the
laws of the state of Delaware, having its executive offices at 5 Garret Mountain
Plaza, West Paterson, NJ 07424, ("CLIENT"), and DARRYL D. FRY, residing at 116
Delaware Lane, Franklin Lakes, NJ 07417 ("CONSULTANT");
W I T N E S S E T H:
- - - - - - - - - -
The parties hereto mutually agree as follows:
1. CLIENT retains CONSULTANT on the terms and conditions hereinafter stated
as consultant and advisor to the Executive Committee of CLIENT in connection
with the following areas: M&A; business strategy; and such other related matters
as CLIENT may from time to time deem appropriate. CONSULTANT hereby accepts such
retainer and agrees to act as such consultant and advisor. In performing
services hereunder, CONSULTANT shall function as an independent contractor and
not as an employee or agent of CLIENT. CONSULTANT represents that he is not and
will not become a party to any agreement which would conflict with this
Consulting Agreement in any way or which would prevent him from performing his
obligations under this Consulting Agreement. CONSULTANT further represents that
he will not do any act which would prevent or inhibit him from performing his
obligations hereunder. CONSULTANT agrees to devote such time to the performance
of services hereunder as is reasonably requested by the Executive Committee of
CLIENT.
<PAGE>
All services to be rendered by CONSULTANT shall be rendered at such times and
places, as CLIENT's Executive Committee may reasonably request; provided that
CONSULTANT shall not be required to provide more than ninety (90) days of
services in any annual period consisting of February 1, 1999 to January 25, 2000
or January 26, 2000 to January 25, 2001; and provided, further, that CONSULTANT
shall not be required to render services following a "special change in control"
(as defined in CLIENT's Executive Income Continuity Plan), unless CONSULTANT is
the person, or part of the group to whom control is transferred.
2. The term of this Consulting Agreement shall commence on February 1,
1999, and shall continue until January 25, 2001, unless sooner terminated by the
earlier death of CONSULTANT.
3. In full payment for CONSULTANT's services hereunder, CONSULTANT has
been granted by the Compensation and Management Development Committee of
CLIENT's Board of Directors a nonqualified stock option dated January 25, 1999
under CLIENT's 1993 Stock Award and Incentive Plan. Such option has been granted
in consideration of (i) his continued employment with Cytec Industries Inc.
through the previously agreed date of termination of his employment and (ii)
thereafter, the performance of the consulting services provided for herein. In
addition, CLIENT shall reimburse CONSULTANT for such reasonable expenses as are
needed to carry out the consulting services. Such reimbursement shall be made
promptly upon receipt of CONSULTANT's statements therefor.
<PAGE>
4. CONSULTANT is engaged by the CLIENT only for the purposes and to the
extent set forth in this Agreement and, accordingly, nothing in this Agreement
shall be considered to create the relationship of employer-employee between
CLIENT and CONSULTANT. CONSULTANT shall be solely responsible for any and all
city, state and federal income taxes, social security withholding taxes, and any
other self-employment tax obligation to which CONSULTANT may be subject.
CONSULTANT's services hereunder shall not qualify for participation in any
plans, arrangements or distributions by CLIENT pertaining to, or in connection
with, any pension, stock, bonus, profit-sharing, welfare or similar benefit plan
offered by CLIENT to its employees (other than the stock option specified in
paragraph 3), and CONSULTANT shall have no right or power to enter into any
contract or commitment on behalf of CLIENT.
5. In connection with the performance of his services hereunder,
CONSULTANT shall be indemnified by CLIENT to the same extent he would be
indemnified under Article VIII of CLIENT's By-Laws if the services provided for
hereunder had been rendered by him in the capacity of officer, director or
employee of CLIENT. Neither party hereto shall be obligated to enter into any
renewal or extension of this Consulting Agreement except upon such terms and
conditions as shall be mutually agreeable to the parties hereto, all as shall be
fully set forth in a formal written instrument signed by the parties hereto.
6. This Consulting Agreement constitutes the entire understanding between
the parties hereto relating to the subject
<PAGE>
matter hereof and may be amended only by a written instrument executed by both
parties and specifically stating that it is an amendment of this Consulting
Agreement. This Agreement does not supersede, however, post-employment
obligations contained in CONSULTANT's prior employment agreement with CLIENT.
7. CONSULTANT understands that in the performance of his services
hereunder he may obtain knowledge of "confidential information", as hereinafter
defined, relating to the business of CLIENT (or any of its subsidiary or
affiliated companies). As used herein, "confidential information" means any
information (including, without limitation, any formula, pattern, device, plan,
process or compilation of information) which (i) is, or is designed to be, used
in the business of CLIENT (or any of its subsidiary or affiliated companies) or
results from its or their research and/or development activities, (ii) is
private or confidential in that it is not generally known or available to the
public and (iii) gives CLIENT (or any of its subsidiary or affiliated companies)
an opportunity to obtain an advantage over competitors who do not know or use
it. CONSULTANT shall not, without the written consent of an officer of CLIENT,
either during the term of this Consulting Agreement or thereafter, (a) use or
disclose any such confidential information outside CLIENT (or any of its
subsidiary or affiliated companies), (b) publish any article with respect
thereto, or (c) except in the performance of his services hereunder, remove or
aid in the removal from the premises of CLIENT any such confidential information
or any property or material which relates thereto.
<PAGE>
8. Any notice or request expressly provided for or permitted under this
Consulting Agreement shall be in writing, shall be given either manually or by
mail, e-mail, facsimile message, or other written means and shall be deemed
sufficiently given if and when received by the party to be notified at its
address first set forth in this Consulting Agreement or if and when mailed by
registered or certified mail, postage prepaid, addressed to such party at such
address. Either party may, by notice to the other, change its address for
receiving such notices and requests.
9. This Consulting Agreement shall inure to the benefit of any assigns,
successors in business, or nominees of CLIENT and, except with respect to the
consulting services to be performed by CONSULTANT, shall be binding upon the
heirs, executors, administrators and legal representatives of CONSULTANT.
10. This Consulting Agreement shall be construed in accordance with and
governed by the law of the State of New Jersey.
IN WITNESS WHEREOF, this Consulting Agreement has been executed as of the
date first above written.
CYTEC INDUSTRIES INC.
/s/ D. D. Fry By:/s/ E. F. Jackman
- ----------------------------- --------------------
D. D. Fry Name: E. F. Jackman
SSN: ###-##-#### Title: Vice President
<PAGE>
Exhibit 10.13(u)
DF
NONQUALIFIED STOCK OPTION UNDER
1993 STOCK AWARD AND INCENTIVE PLAN
January 25, 1999
FRY, DARRYL D. Number of Shares: 75,000
###-##-#### Purchase Price: $20.4375
Dear Employee:
As a key employee of Cytec Industries Inc. (the "Company"), or of a
subsidiary of the Company, you have been granted by the Compensation and
Management Development Committee (the "Committee") of the Company's Board of
Directors a non-qualified stock option to purchase not more than the aggregate
number of shares of the Common Stock of the par value of $.01 each of the
Company ("Common Stock") set forth above at the per share purchase price set
forth above, all subject to the terms and conditions hereof and of the Company's
1993 Stock Award and Incentive Plan, as amended (the "Plan").
The date of grant of this option is the date of this letter, which is the
date on which the Committee voted to grant the option. The purchase price
represents 100% of the Fair Market Value per share of the Common Stock on the
date of the grant, as determined under the Plan.
Upon receipt by the Company of notification of exercise of option in the
form prescribed from time to time by the Committee and upon receipt of the
purchase price per share multiplied by the number of shares being purchased
pursuant to such exercise, the Company will cause a certificate or certificates
for such shares then purchased to be delivered to the person entitled thereto.
A copy of the Plan, under which this option is granted to you, is available
at the office of the Secretary to the Committee, and your attention is directed
to all the provisions of the Plan.
Certain restrictions with respect to this option include, but are not
limited to, the following:
(1) This option must be exercised if at all and to the extent exercised,
no later than ten years from the date of grant.
(2) This option shall expire on the date of termination of your employment
with the Company, unless you enter into, and perform, a Consulting Agreement, in
form and substance satisfactory to the Company providing for the performance by
you of reasonable
<PAGE>
consulting services requested by the Company (not to exceed 90 days in any
annual period) in the areas of M&A, business strategy and such related areas as
the Company reasonably may request; the term of such Consulting Agreement to
expire January 25, 2001, unless sooner terminated by your death or disability.
(3) This option shall be exercisable in cumulative installments as follows:
to the extent of not more than one-half of the number of shares subject hereto,
at any time after the expiration of the first year of the term hereof; and to
the extent of the remainder of such shares, at any time after the expiration of
the second year of such term; provided that, as specified in Section 7 of the
Plan, this option shall be immediately exercisable in full upon a Change of
Control (as defined in the Plan).
(4) This option is not transferable otherwise than by will or by the laws
of descent and distribution or, if then permitted under Rule 16b-3 under the
Securities Exchange Act of 1934, pursuant to a qualified domestic relations
order as defined under the Internal Revenue Code and it may be exercised during
your lifetime, only by you or your guardian or legal representative.
Notwithstanding the prior sentence, you may transfer this option, in whole or in
part, to (i) your spouse, (ii) your child or children, (iii) your grandchild or
grandchildren or (iv) a trust for any of the foregoing; provided that the
transfer shall be subject to all of the terms of the Plan and this grant letter
and, in addition, (A) the transferred option may not be retransferred except to
you, (B) you remain liable for all withholding taxes payable on account of this
option, (C) the Company may place transfer restrictions against any shares of
Common Stock issued to a transferee upon exercise of this option in order to
assure compliance with the Securities Act of 1933, as amended, (D) you give
prompt written notice of the transfer to the Secretary of the Committee
including name, address, tax I.D. number and date of birth of the transferee,
number of shares subject to the transfer, and such other information as the
Company may require and (E) this option shall be exercisable by the transferee
only to the extent that it would be exercisable by you if it had not been so
transferred.
(5) If your combined employment/consultantcy expires before the second
anniversary of the date of grant, this option, to the extent not theretofore
exercised shall forthwith terminate unless such termination shall be by reason
of a cause described in paragraph (6) below, in which case the provisions of
paragraph (6) below shall be applicable. Following the second anniversary of
the date of grant and performance by you of the Consulting Agreement referenced
above, this option shall be deemed fully earned and, unless sooner exercised,
shall remain in effect until the tenth anniversary of the date of grant.
(6) In the event that your combined employment/consultantcy with the
Company terminates prior to the second anniversary of the date of grant of this
option by reason of (i) your death or (ii) your disability, this option may be
exercised by you, by your estate, by any transferee under Paragraph 4 above, or
by any person who acquires the right to exercise this option by reason of your
<PAGE>
death, until the fifth anniversary of the date of such termination of your
employment or consultantcy (subject to the installment exercise provisions of
Paragraph 3, above), but not after ten years from the date of grant, to the
extent of the total number of shares subject to this option multiplied by a
fraction, (x) the numerator of which is the number of full or partial calendar
quarters (but not more than eight) elapsed from the date of this option to the
date on which you become unable to perform services and (y) the denominator of
which is eight.
(7) Subject to such limitations, if any, as the Committee may establish,
you may satisfy your mandatory federal and state income tax withholding
obligations resulting from the exercise of this option by requesting the Company
to withhold shares of Common Stock having a fair market value, as determined
under the Plan, equal to the withholding obligations. In order to prevent
fractional shares, the number of shares withheld shall be rounded up to the
nearest whole share, with the value of the fraction, at the option of the
Company, being either paid to you in cash or retained as additional optional
withholding.
(8) Your exercise of this option, in whole or in part, constitutes your
agreement (i) to pay the Company promptly, on demand, any withholding taxes due
in respect of the exercise of this stock option and (ii) that the Company, its
subsidiaries and affiliates may deduct an amount equal to such withholding taxes
from any amounts owing to you by the Company and/or any of such subsidiaries or
affiliates.
The Company reserves the right to require this option to be exercised only
within the United States and to require stock certificates issuable to you upon
such exercise to be delivered only within the United States to you or to such
person who is appropriately authorized by you.
Prior to the earliest time that this option may be exercised by you, the
Company will deliver to you a prospectus which meets the requirements of the
Securities Act of 1933, as amended, and which further describes the Plan and
options granted thereunder.
In no event is the grant of this option to you to be deemed, directly or
indirectly, a recommendation by the Company that you at any time exercise this
option.
In the event of any conflict between the terms of this option and the
provisions of the Plan, the provisions of the Plan shall govern.
Very truly yours,
CYTEC INDUSTRIES INC.
BY:______________________
J. W. Hirsch
Secretary-Compensation
and Management
Enc. Development Committee
<PAGE>
Cytec Industries Inc.
Computation of Ratio of Earnings to Fixed Charges
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Earnings before income taxes and equity
in earnings of associated companies 177.6 137.4 142.1
Add:
Distributed income of associated companies 6.5 11.6 9.1
Amortization of capitalized interest 0.1 - -
Fixed charges 31.0 13.6 8.2
Less:
Capitalized interest (1.5) (0.6) -
----- ----- -----
Earnings as adjusted 213.7 162.0 159.4
Fixed charges:
Interest on indebtedness including
amortized premiums, discounts and
deferred financing costs 26.2 8.5 4.0
Portion of rents representative
of the interest factor 4.8 5.1 4.2
----- ----- -----
Fixed charges 31.0 13.6 8.2
----- ----- -----
Ratio of earnings to fixed charges 6.9 11.9 19.5
----- ----- -----
</TABLE>
<PAGE>
Exhibit 21
CYTEC INDUSTRIES INC.
Subsidiaries
Subsidiaries are 100% owned, unless otherwise designated
Subsidiaries
------------
<TABLE>
<CAPTION>
State of Country
Name: of Organization
- ------------------------ -------------------
<S> <C>
Aviatrix Corporation Delaware
BCC Cytec (Belgium) Delaware .
Holding Co.
CONAP, Inc. Delaware
Cyquim de Colombia S.A. Delaware
Cytec Acrylic Fibers Delaware
Inc.
Cytec Aerospace Far Delaware
East Corp.
Cytec Ammonia Inc. Delaware
Cytec Australia Australia
Holdings Pty. Limited
Cytec Australia Limited Delaware
Cytec Brewster Delaware
Phosphates Inc.
Cytec Canada Inc. Ontario .
</TABLE>
<PAGE>
Subsidiaries
------------
<TABLE>
<CAPTION>
State of Country
Name: of Organization
- ------------------------ -------------------
<S> <C>
Cytec Coordination Belgium
Center N.V.
Cytec (CRP) France France
S.A.R.L.
Cytec de Argentina S.A. Delaware .
Cytec de Chile S.A. Delaware
Cytec de Mexico S.A. de Mexico
C.V.
Cytec de Puerto Rico, Puerto Rico
Inc.
Cytec Deutschland GmbH Germany
Cytec do Brasil Ltd. Delaware
Cytec do Brasil Ltda. Brazil
Cytec Fiberite GmbH Germany
Cytec Fiberite Inc. Delaware
Cytec Fiberite Limited England
Cytec Global Holdings Delaware
Inc.
Cytec Hong Kong Limited Hong Kong
Cytec Industries B.V. Netherlands
Cytec Industries Europe Netherlands
C.V.
Cytec Industries France France
S.A.R.L.
</TABLE>
<PAGE>
Subsidiaries
------------
<TABLE>
<CAPTION>
State of Country
Name: of Organization
- ------------------------ -------------------
<S> <C>
Cytec Industries Italia Italy
S.r.l.
Cytec Industries Pte. Singapore
Ltd.
Cytec Industries UK England
Limited
Cytec International Barbados
Sales Corp.
Cytec International Jamaica
Sales Corporation
Limited
Cytec Japan Limited Delaware
Cytec Korea Inc. Delaware
Cytec Manufacturing B.V. Netherlands
Cytec Melamine Inc. New Jersey
Cytec Methanol Inc. Delaware
Cytec Molding Compounds Delaware
Inc.
Cytec Netherlands (CRP) Netherlands
B.V.
Cytec Netherlands (CRP) Netherlands
C.V.
Cytec Norge (GP) AS Norway
Cytec Norge KS Norway
Cytec Overseas Corp. Delaware
</TABLE>
<PAGE>
Subsidiaries
------------
<TABLE>
<CAPTION>
State of Country
Name: of Organization
- ------------------------ -------------------
<S> <C>
Cytec Plastics Inc. Delaware
Cytec Realty Corp. Delaware
Cytec Specialty Resins Norway
AS
Cytec Taiwan Corp. Delaware
Cytec Technology Corp. Delaware
Cytec UK Holdings England
Limited
D Aircraft Products, California
Inc.
Dyno-Cytec Iberica SL Spain
Fiberite France S.A.R.L. France
Fortier Cytec LLC Delaware
GSC Products, Inc. Delaware
Holland LP I Co. Delaware
Melcoat (M) Sdn. Bhd. Malaysia
Mivida Corporation Delaware
Netherlands (Cytec) GP Delaware
Inc.
Piney River Recovery Delaware
Corp.
Quimicos Cyquim, C.A. Venezuela
Rotterdam LP II Co. Delaware
The American Materials Delaware
& Technologies
Corporation
</TABLE>
<PAGE>
Exhibit 23
Accountants' Consent
The Board of Directors
Cytec Industries Inc.:
We consent to incorporation by reference in the registration statements on Form
S-8 (Nos. 33-80710, 33-83576, 33-85666, 333-62287, 333-11121 and 333-45577) and
in the registration statement on Form S-3 (Nos. 333-52011 and No. 333-3808) of
Cytec Industries Inc. of our reports dated January 25, 1999, relating to the
consolidated balance sheets of Cytec Industries Inc. and subsidiaries as of
December 31, 1998 and 1997 and the related consolidated statements of income,
comprehensive income, stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1998, and the related schedule,
which reports appear in the December 31, 1998 annual report on Form 10-K of
Cytec Industries Inc.
/s/ KPMG LLP
KPMG LLP
Short Hills, New Jersey
March 29, 1999
<PAGE>
Exhibit 24.(A)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director or an
officer, or both, of Cytec Industries Inc., a Delaware corporation ("Cytec"),
does hereby make, constitute and appoint D. Lilley, J. P. Cronin and E. F.
Jackman, the address of each of which is in care of Cytec, 5 Garret Mountain
Plaza, West Paterson, New Jersey 07424, and each of them, the true and lawful
attorney for the undersigned, with full power of substitution and revocation to
each for the undersigned, and in the name, place and stead of the undersigned,
to sign in any and all capacities and to file or cause to be filed, an annual
report on Form 10-K with the Securities and Exchange Commission, pursuant to the
Securities Exchange Act of 1934, as amended, and any and all amendments to such
Form 10-K, hereby giving to each of such attorneys full power to do everything
whatsoever required or necessary to be accomplished in and about the premises as
fully as the undersigned could do if personally present, hereby ratifying and
confirming all that such attorney or substitutes or any of them shall lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has set his hand as of this 24 day of
March, 1999.
/s/ Frederick W. Armstrong
--------------------------
Frederick W. Armstrong
<PAGE>
Exhibit 24.(B)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director or an
officer, or both, of Cytec Industries Inc., a Delaware corporation ("Cytec"),
does hereby make, constitute and appoint D. Lilley, J. P. Cronin and E. F.
Jackman, the address of each of which is in care of Cytec, 5 Garret Mountain
Plaza, West Paterson, New Jersey 07424, and each of them, the true and lawful
attorney for the undersigned, with full power of substitution and revocation to
each for the undersigned, and in the name, place and stead of the undersigned,
to sign in any and all capacities and to file or cause to be filed, an annual
report on Form 10-K with the Securities and Exchange Commission, pursuant to the
Securities Exchange Act of 1934, as amended, and any and all amendments to such
Form 10-K, hereby giving to each of such attorneys full power to do everything
whatsoever required or necessary to be accomplished in and about the premises as
fully as the undersigned could do if personally present, hereby ratifying and
confirming all that such attorney or substitutes or any of them shall lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has set his hand as of this 29 day of
March, 1999.
/s/ Gene A. Burns
-----------------
Gene A. Burns
<PAGE>
Exhibit 24.(C)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director or an
officer, or both, of Cytec Industries Inc., a Delaware corporation ("Cytec"),
does hereby make, constitute and appoint D. Lilley, J. P. Cronin and E. F.
Jackman, the address of each of which is in care of Cytec, 5 Garret Mountain
Plaza, West Paterson, New Jersey 07424, and each of them, the true and lawful
attorney for the undersigned, with full power of substitution and revocation to
each for the undersigned, and in the name, place and stead of the undersigned,
to sign in any and all capacities and to file or cause to be filed, an annual
report on Form 10-K with the Securities and Exchange Commission, pursuant to the
Securities Exchange Act of 1934, as amended, and any and all amendments to such
Form 10-K, hereby giving to each of such attorneys full power to do everything
whatsoever required or necessary to be accomplished in and about the premises as
fully as the undersigned could do if personally present, hereby ratifying and
confirming all that such attorney or substitutes or any of them shall lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has set his hand as of this 29 day of
March, 1999.
/s/ Louis L. Hoynes, Jr.
------------------------
Louis L. Hoynes, Jr.
<PAGE>
Exhibit 24.(D)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director or an
officer, or both, of Cytec Industries Inc., a Delaware corporation ("Cytec"),
does hereby make, constitute and appoint D. Lilley, J. P. Cronin and E. F.
Jackman, the address of each of which is in care of Cytec, 5 Garret Mountain
Plaza, West Paterson, New Jersey 07424, and each of them, the true and lawful
attorney for the undersigned, with full power of substitution and revocation to
each for the undersigned, and in the name, place and stead of the undersigned,
to sign in any and all capacities and to file or cause to be filed, an annual
report on Form 10-K with the Securities and Exchange Commission, pursuant to the
Securities Exchange Act of 1934, as amended, and any and all amendments to such
Form 10-K, hereby giving to each of such attorneys full power to do everything
whatsoever required or necessary to be accomplished in and about the premises as
fully as the undersigned could do if personally present, hereby ratifying and
confirming all that such attorney or substitutes or any of them shall lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has set his hand as of this 29 day of
March, 1999.
/s/ William P. Powell
---------------------
William P. Powell
<PAGE>
Exhibit 24.(E)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director or an
officer, or both, of Cytec Industries Inc., a Delaware corporation ("Cytec"),
does hereby make, constitute and appoint D. Lilley, J. P. Cronin and E. F.
Jackman, the address of each of which is in care of Cytec, 5 Garret Mountain
Plaza, West Paterson, New Jersey 07424, and each of them, the true and lawful
attorney for the undersigned, with full power of substitution and revocation to
each for the undersigned, and in the name, place and stead of the undersigned,
to sign in any and all capacities and to file or cause to be filed, an annual
report on Form 10-K with the Securities and Exchange Commission, pursuant to the
Securities Exchange Act of 1934, as amended, and any and all amendments to such
Form 10-K, hereby giving to each of such attorneys full power to do everything
whatsoever required or necessary to be accomplished in and about the premises as
fully as the undersigned could do if personally present, hereby ratifying and
confirming all that such attorney or substitutes or any of them shall lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has set his hand as of this 28 day of
March, 1999.
/s/ D. D. Fry
-------------
D. D. Fry
<PAGE>
Exhibit 24.(F)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director or an
officer, or both, of Cytec Industries Inc., a Delaware corporation ("Cytec"),
does hereby make, constitute and appoint D. Lilley, J. P. Cronin and E. F.
Jackman, the address of each of which is in care of Cytec, 5 Garret Mountain
Plaza, West Paterson, New Jersey 07424, and each of them, the true and lawful
attorney for the undersigned, with full power of substitution and revocation to
each for the undersigned, and in the name, place and stead of the undersigned,
to sign in any and all capacities and to file or cause to be filed, an annual
report on Form 10-K with the Securities and Exchange Commission, pursuant to the
Securities Exchange Act of 1934, as amended, and any and all amendments to such
Form 10-K, hereby giving to each of such attorneys full power to do everything
whatsoever required or necessary to be accomplished in and about the premises as
fully as the undersigned could do if personally present, hereby ratifying and
confirming all that such attorney or substitutes or any of them shall lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has set his hand as of this 29 day of
March, 1999.
/s/ Jerry R. Satrum
-------------------
Jerry R. Satrum
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from SEC Form 10-K and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<CAPTION>
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<S> <C>
<EXCHANGE-RATE> 1
<CASH> 1,700
<SECURITIES> 0
<RECEIVABLES> 241,300
<ALLOWANCES> 9,200
<INVENTORY> 140,500
<CURRENT-ASSETS> 477,600
<PP&E> 1,363,000
<DEPRECIATION> (695,500)
<TOTAL-ASSETS> 1,730,600
<CURRENT-LIABILITIES> 394,400
<BONDS> 319,500
0
100
<COMMON> 500
<OTHER-SE> 430,400
<TOTAL-LIABILITY-AND-EQUITY> 1,730,600
<SALES> 1,444,500
<TOTAL-REVENUES> 1,444,500
<CGS> 1,006,600
<TOTAL-COSTS> 1,259,000
<OTHER-EXPENSES> (14,500)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,400 <F1>
<INCOME-PRETAX> 197,900 <F2>
<INCOME-TAX> 73,200
<INCOME-CONTINUING> 124,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 124,700
<EPS-PRIMARY> 2.79
<EPS-DILUTED> 2.68
<FN>
<F1> This number represents interest expense, net
<F2> This number includes equity in net income of associated companies of
$20,300 for the year ended December 31, 1998.
</FN>
</TABLE>
