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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, 1999
/ / 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. [X]
There were 41,277,504 shares of common stock outstanding on February 1, 2000.
Non-affiliates held 40,900,591 of these shares with an aggregate market value
of $1,035,296,210 based on the closing price (25 5/16) 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 2000 Annual Meeting Parts III, IV
of Common Stockholders, dated March 29, 2000.
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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 2000 and beyond, the accretiveness of acquisitions,
pricing trends and forces within the industry, the completion dates of and
expenditures for capital projects, expected sales growth, cost reduction
strategies and their results, 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 regarding 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; the results of and recoverability of investments in
associated companies 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 global specialty chemicals and materials company which
focuses on value-added products. The Company serves major markets for
water and wastewater treatment, mineral processing, paper manufacturing
and recycling, automotive and industrial coatings, plastics, adhesives,
aerospace adhesives and composites, and chemical intermediates. The
Company has manufacturing facilities in nine countries and sells its
products worldwide. The Company had net sales of $1,412.5 million and
earnings from operations of $185.0 million in 1999. In addition, the
Company has a 50% interest in each of four unconsolidated associated
companies. The associated companies had aggregate net sales of $521.4
million and gross profit of $116.4 million in 1999. The Company reported
$5.6 million of equity in earnings from associated companies in 1999.
The Company operates in four segments: water and industrial process
chemicals, performance products, specialty materials and building block
chemicals. Water and industrial process chemicals principally include
water treating chemicals, mining chemicals, paper chemicals and phosphine
chemicals. Performance products principally include specialty resins,
surfactants and specialty monomers and polymer additives. Specialty
materials principally include aerospace materials and, before January
1999, molding compounds. Building block chemicals principally include
acrylonitrile, acrylamide, ammonia, hydrocyanic acid, melamine and
sulfuric acid. The Company recently reviewed the current performance and
long term potential of each of its businesses as well as the capital
requirements of each business and the potential of each business to add
economic value. As a result of the review, the Company has characterized
its businesses as platform businesses and value businesses. Platform
businesses are those businesses with a
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competitive advantage to grow organically and by extension through
strategic acquisitions. The Company expects these businesses to have
sales growth over a business cycle considerably in excess of growth in
gross domestic product. The Company also expects its platform businesses
will need investment in research and development and possibly in capital
to increase global capacity to support sales growth. Value businesses are
those businesses without the same growth characteristics and which are
expected to build sales and profit growth through greater focus on
manufacturing productivity. Value businesses will be expected to provide
significant positive cash flow and to increase their economic value with
a greater focus on asset management. The Company's platform businesses
are specialty resins, water treating chemicals, mining chemicals,
phosphine chemicals and specialty materials. The Company's value
businesses are polymer additives, surfactants and specialty monomers, and
building block chemicals.
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 four
acquisitions and one divestiture during 1999 and three acquisitions and
two divestitures during 1998. See Note 2 of the Notes to the Consolidated
Financial Statements included in Item 8.
Unless indicated otherwise, the term "Company", with respect to periods
beginning on or after December 17, 1993, the effective date of the
transfer of substantially all of the assets and liabilities of the
chemicals businesses of American Cyanamid Company ("Cyanamid") to the
Company (the "Spin-off"), refers collectively to Cytec Industries Inc.
and its subsidiaries, and with respect to periods prior to the Spin-off,
the term refers to the chemicals businesses of Cyanamid. Cyanamid was
acquired by American Home Products Corporation in November 1994. Cytec
was incorporated as an independent public company in December 1993.
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Water and Industrial Process Chemicals Segment
The water and industrial process chemicals segment had revenues of
approximately $372.8 million in 1999 and $349.4 million in 1998, or
approximately 26.4% and 24.2%, respectively, of the Company's net sales
in such years.
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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<S> <C> <C>
Water treating chemicals(1) flocculants, - Water and wastewater
coagulants, filter treatment, oil field
aids, drilling mud drilling
additives, biocides
Mining chemicals(1) Reagents, promoters, - Mineral, sulfide ore,
collectors, frothers, alumina and coal
flocculants, defoamers, processing
dispersants, filter aids
Paper chemicals (1) Sizing agents, wet and - Paper manufacturing
dry strength resins, and recycling
coating resins,
retention, drainage/and
formation polymers,
flocculants
Phosphine Chemicals Phosphine and phosphine - Metal and mineral
derivatives, including separation, catalysts
mineral extractants, electronics, chemical,
catalysts, chemical pharmaceutical and
and pharmaceutical agricultural uses
intermediates, electronics,
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."
Water Treating Chemicals
Cytec's water treating chemicals product line consists primarily of the
manufacture and sale of flocculants for use as coagulants in the
treatment of municipal drinking water and industrial influent water
supplies, as sewage conditioners for municipal wastewater treatment, and
as treatments in industrial waste streams to remove suspended solids.
Flocculants are synthetic water soluble polymers utilized primarily in
liquid-solid separation processes (i.e., separating solid waste or
particulate matter from water). Increased demand for clean water,
environmental regulations and regional and global economic development
have increased demand for the Company's water treating chemicals.
Competition is generally intense in wastewater treatment applications,
particularly for municipal accounts, where contracts generally are
awarded on a competitive bid basis, and for those industrial applications
where technical service is not an important factor. The Company markets
its water treating chemicals through a specialized sales and technical
services staff and also through distributors and resellers.
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Mining Chemicals
Cytec's mining chemicals product line consists principally of reagents,
promoters, collectors, frothers and flocculants, and are used primarily
in applications to separate minerals from raw ores. The Company has
leading positions in the copper processing industry, particularly in the
flotation of sulfide ores, and in the alumina processing industry, where
its patented HxPams are particularly effective at the flocculation of
"red mud". The Company also manufactures and sells phosphine chemicals
specialty reagents with leading positions in cobalt/nickel separation and
copper sulfide recovery applications. The Company has expanded its
product offerings through the acquisitions of three mining chemicals
businesses in the past two years: the minerals processing reagents
product line from Baker Petrolite Corporation in 1998 and Inspec Mining
Chemicals S.A., a subsidiary of LaPorte plc, and the industrial minerals
product line of Nottingham Company in 1999. 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's mining chemicals product lines are marketed
primarily through a specialized sales and technical services staff.
Paper Chemicals
Cytec's paper chemicals product line is primarily focused on the printing
and writing, tissue and towel, paperboard and newsprint segments of the
paper and board industry. Cytec's major product lines are internal and
surface sizing agents, wet and dry strength resins, retention aids and
flocculants. The Company is the leading global supplier of alkenyl
succinic anhydride-based internal paper sizing used in alkaline
papermaking. 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. The Company markets its paper chemicals through a
specialized sales and technical services staff and also through
distributors and resellers. Overall demand for paper chemicals is
cyclical, varying with paper industry production. The Company announced
in March, 2000 that it has retained an investment banker to assist it in
reviewing all strategic options for its paper chemicals product line.
Phosphine Chemicals
The Company manufactures and sells phosphine gas and phosphine
derivatives for a variety of applications. The Company is the largest
supplier of ultra-high purity phosphine gas, used in semiconductor
manufacturing operations, and has significant positions in various
phosphine derivative products. In 1999, the Company acquired the assets
of BOC Gases' global phosphine fumigants product line. Sales of
phosphine fumigants will be dependent upon obtaining and maintaining
necessary registrations and approvals from applicable regulatory
agencies. The Company received regulatory approval from the United
States Environmental Protection Agency to market phosphine fumigants for
non-food applications at the end of 1999.
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Performance Products Segment
The performance products segment had revenues of approximately $442.4 in
1999 and $403.4 in 1998, or approximately 31.3% and 27.9%, 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:
<TABLE>
<CAPTION>
PRODUCT LINE MAJOR PRODUCTS PRINCIPAL APPLICATIONS
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<S> <C> <C>
Specialty resins (1) Melamine cross-linkers, - High performance automotive,
urea crosslinkers, appliance, metal container and metal
urethane chemicals coil coatings, paint finishes for
plastic, wood and metal; radial
tire adhesion promoters
Surfactants and Specialty Surfactants and acrylamide- - Emulsion polymers and coatings
Monomers based specialty
crosslinking monomers
Polymer additives Ultraviolet light absorbers - Plastics, coatings, fibers
and stabilizers,
antioxidants
</TABLE>
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(1) Sales of this product line are also made by Mitsui Cytec. See "Associated
Companies."
Specialty Resins
The Company manufactures and markets amino coating resins ("Resins"),
primarily under the CYMEL(R) trademark, primarily for industrial coatings
applications. Many of the Company's Resins are manufactured using
melamine, one of the Company's building block chemicals. Since 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 further expanded its Resins business with the
acquisition of the amino coatings resins business of BIP Limited in
October 1999. The Company believes that it is the largest global
supplier of Resins. In addition, the Company manufactures a line of
adhesion promoters under the CYREZ(R) trademark and also manufactures and
sells urethane chemicals and urethane systems and precision parts.
Adhesion promoters 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's urethane systems and parts are sold primarily for use in
electrical applications. The Company markets Resins through a global
sales and technical service staff directly to large customers and through
distributors to smaller customers.
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Polymer Additives
The Company is a significant global supplier to the plastics industry of
specialty additives which protect plastics from the ultraviolet radiation
of sunlight and from oxidation. Typical end use applications of the
Company's products include a wide variety of polyolefins which are used
in agricultural films, 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.
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 surfactants manufacturing capacity.
Specialty Materials Segment
The specialty materials segment had revenues of approximately $434.5
million in 1999 and $492.2 million in 1998, or approximately 30.8% and
34.1%, respectively, of the Company's net sales in such years. The
decrease was due both to the divestiture of the molding compounds and
certain other product lines and decreased volumes, partially offset by
the acquisition of The American Materials & Technologies Corporation
("AMT") in the fourth quarter of 1998. The specialty materials segment
principally manufactures and sells aerospace materials that are used
mainly in commercial and military aviation and launch vehicles,
satellites, aircraft brakes, automobiles and recreational products.
Aerospace Materials
The Company is the major global supplier of aerospace structural
adhesives and one of two major suppliers of aerospace advanced composite
materials. Advanced composites are exceptionally strong and lightweight
materials manufactured by impregnating fabrics and tapes made from high
performance fibers with epoxy, bismaleimide, phenolic, polyimide and
other resins formulated or purchased by the Company. Advanced composites
accounted for approximately 25%, 26% and 11% of the Company's 1999, 1998,
and 1997 net sales, respectively. The increase in percentage
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from 1997 to 1998 was due primarily to acquisition of substantially all
of the assets of Fiberite, Inc. other than its satellite materials
business (the "Fiberite Acquisition") in September 1997.
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 were
approximately $176.5 million or 12.5% of consolidated net sales in 1999
and approximately $200.0 million, or 13.8% of 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
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.
Building Block Chemicals Segment
The building block chemicals segment had revenues (net sales to external
customers) of approximately $162.8 million in 1999 and $199.3 million in
1998, or approximately 11.5% and 13.8%, 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
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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 1999. 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. 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 Industries ("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
American Melamine Industries ("AMEL"), a manufacturing joint venture
which is owned 50% by a subsidiary of DSM N.V., operates a melamine
manufacturing plant with annual production capacity of approximately 160
million pounds at the Fortier facility The Company anticipates that over
the near term it will use internally approximately more than 80% 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.
Other Building Block Chemicals
Fortier Methanol Company, a manufacturing joint venture which was 70%
owned by Methanex Corporation, operated a methanol plant at the Fortier
facility. The plant was idled in March 1999 for economic reasons and in
December 1999, the Company sold its share of the assets of the joint
venture to Methanex Corporation.
The Company also manufactures and sells ammonia and sulfuric acid.
Avondale Ammonia Company, a manufacturing joint venture which is 50%
owned by LaRoche Industries, operates
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an ammonia plant with annual production capacity of 440,000 tons at the
Fortier facility. The Company anticipates that during 2000, 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. LaRoche Industries
announced on March 10, 2000 that it would not make a scheduled March 15,
2000 bond interest payment of $8.3 million on certain of its outstanding
notes while it continued to develop a financial restructuring plan. The
Company continues to evaluate the effect of LaRoche's financial condition
on the joint venture operations.
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. 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.
Acrylic Plastics and Methyl Methacrylate
CYRO manufactures and sells acrylic sheet and molding compound products,
primarily under the ACRYLITE(R) trademark. CYRO operates primarily in
North America and manufactures its acrylic products at four locations in
the U.S. and at one location in Canada. The Company's partner in CYRO,
Huls A.G., has an affiliate, Rohm GmbH, which manufactures 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 to approximately 278 million pounds at the
end of 1997 and to approximately 290 million pounds at the end of 1999.
Refinery and Styrene Catalysts
Criterion Catalyst Company L.P. 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 one of
the largest global supplier of
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hydroprocessing catalysts. The Company is in discussions with its partner
on the future of this joint venture and has indicated its preference to
sell its position.
Other
Mitsui Cytec manufactures and sells in Japan specialty resins and
manufactures in Japan and sells throughout Asia certain 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 is the largest manufacturer of amino molding
compounds in North America. Amino molding compounds are mature products,
the primary markets for which are electrical components and dinnerware,
where price competition is intense. AC Molding Compounds acquired the
PMC business of Borden Chemicals in September 1999, including a plant in
Dallas, Texas, and is in the process of relocating and consolidating its
manufacturing operations to the Dallas plant.
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 technical service and customer 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, and sulfur, which
are readily available from several suppliers. The Company generally
attempts to retain multiple sources for high volume raw materials, other
than its own building block chemicals, in order to minimize its reliance
on any one supplier. The Company sources its requirements of alkenyl
succinic anhydride from a
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single supplier under a long term exclusive supply agreement and sources
its requirements of cationic monomers from a single supplier under a long
term agreement. Alkenyl succinic anhydride and cationic monomers are
important raw materials in the water treating, mining chemicals and paper
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 eight countries (other than the United States). Export sales
to unaffiliated customers from the United States were $152.9 million for
1999, $152.9 million for 1998 and $144.9 million for 1997 or
approximately 11% of net sales in each year.
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 33%, 28% and 28% in 1999, 1998 and 1997, 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. The Company's 1997 acquisition of Fiberite and the 1997
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
During 1999, 1998, and 1997, the Company expended an aggregate of
approximately $43.8 million, $42.9 million and $44.7 million,
respectively, on Company-sponsored research and development activities.
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Trademarks and Patents
The Company has more than 2,500 United States and foreign patents and
also has 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 4,850 employees are engaged in the operations of the
Company, excluding employees of associated companies. Approximately
2,250 of the Company's employees are covered by union contracts. The
Company believes that its relations with both employees and the related
union leaderships are good. Union contracts at eight facilities covering
approximately 50% of the Company's unionized employees expire in the
ordinary course prior to the end of 2000, the most material of which is
the contract at the Company's Wallingford 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 Operations-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."
-13-
<PAGE>
Environmental Matters
The Company is subject to various federal, state and foreign laws and
regulations which impose stringent requirements for the control and
abatement of air and water pollutants and contaminants and the
manufacture, transportation, storage, handling and disposal of hazardous
substances, hazardous wastes, pollutants and contaminants.
In particular, under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and various other federal and
state laws, a current or previous owner or operator of a facility may be
liable for the removal or remediation of hazardous materials at the
facility. Such laws typically impose liability without regard to whether
the owner or operator knew of, or was responsible for, the presence of
such hazardous materials. In addition, pursuant to the Resource
Conservation and Recovery Act ("RCRA") and state laws governing the
generation, transportation, treatment, storage or disposal of solid and
hazardous wastes, owners and operators of facilities may be liable for
removal or remediation, or other corrective action at areas where
hazardous materials have been released at a facility. The costs of
removal, remediation or corrective action may be substantial, and the
presence of hazardous materials in the environment at any of the
Company's facilities, or the failure to abate such materials promptly or
properly, may adversely affect the Company's ability to operate such
facilities. CERCLA and analogous state laws also impose liability for
investigative, removal and remedial costs on persons who dispose of or
arrange for the disposal of hazardous substances at facilities owned or
operated by third parties. Liability for investigative, removal and
remedial costs under such laws is retroactive, strict, and joint and
several.
The Clean Air Act and similar state laws govern the emission of
pollutants into the atmosphere. The Federal Water Pollution Control Act
and similar state laws govern the discharge of pollutants into the waters
of the United States. RCRA and similar state laws govern the generation,
transportation, treatment, storage, and disposal of solid and hazardous
wastes. Finally, the Toxic Substances Control Act regulates the
manufacture, processing, and distribution of chemical substances and
mixtures, as well as the disposition of certain hazardous substances.
The costs of compliance with such laws and regulations promulgated
thereunder may be substantial, and regulatory standards under such
statutes tend to evolve towards more stringent requirements, which might,
from time-to-time, make it uneconomic or impossible to continue operating
a facility. Non-compliance with such requirements at any of the
Company's facilities could result in substantial civil penalties or the
inability of the Company to operate all or part of the facility.
In addition, certain state and federal laws govern the abatement,
removal, and disposal of asbestos-containing materials and the
maintenance of underground storage tanks and equipment which contains or
is contaminated by polychlorinated biphenyls.
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 23 principal manufacturing and research facilities
located in the United States, the United Kingdom, The Netherlands,
Mexico, Canada, Colombia, Germany, Norway and Chile. Capital spending,
exclusive of acquisitions, for the years ended 1999, 1998 and 1997 was
approximately $77.4 million, $103.8 million and $91.4 million,
respectively. Capital expenditures in 1998 and 1997 were higher than in
1999 due primarily to three larger projects: 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 and the
expansion of emulsion polyacrylamide capacity at the Mobile plant. The
Company recently approved capital expenditures of $23 million to expand
the water soluble polymer capacity of its Water and Industrial Process
Chemicals segment, including a 40% expansion of polyacrylamide emulsion
capacity at the Company's Mobile Alabama plant and a 65% expansion of dry
polyacrylamide capacity at the Company's Bradford, England plant.
Capital expenditures in 2000 are expected to be in the range of $100
million to $105 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 employees neighboring communities and 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 SEGMENT
---------------------------- -----------------------------------------
<S> <C>
Anaheim, California......................... Specialty materials
Atequiza, Mexico............................ Water and industrial process chemicals
Antofogasta, Chile.......................... Water and industrial process chemicals
Avondale (Fortier), Louisiana............... Building block chemicals
Belmont (Willow Island), West Virginia...... Performance products
Bogota, Colombia............................ Performance products
Botlek, The Netherlands..................... Water and industrial process chemicals; Performance products
Building block chemicals
Bradford, England........................... Water and industrial process chemicals
Greenville, Texas........................... Specialty materials
Havre de Grace, Maryland.................... Specialty materials
Kalamazoo, Michigan......................... Water and industrial process chemicals; Performance products
Lillestrom, Norway.......................... Performance products
Longview, Washington........................ Water and industrial process chemicals
Mobile, Alabama............................. Water and industrial process chemicals
Oestringen, Germany......................... Specialty materials
Olean, New York............................. Performance products
Orange, California.......................... Specialty materials
Stamford, Connecticut....................... Water and industrial process chemicals; Performance products
Wallingford, Connecticut.................... Performance products
Welland, Ontario............................ Water and industrial process chemicals
Winona, Minnesota........................... Specialty materials
Woodbridge, New Jersey...................... Water and industrial process chemicals
Wrexham, Wales.............................. Specialty materials
</TABLE>
The Company owns all of the foregoing facilities and their sites except
for the land at the Botlek and Lillestrom facilities which are leased
under long term leases. In addition, the Company
-15-
<PAGE>
leases its corporate headquarters in West Paterson, New Jersey and its
regional headquarters in Singapore.
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 34 cases pending in state courts in
Brazoria, Harrison, Jefferson and Nueces counties, Texas and in the U.S.
District Court for the Eastern District of Texas in which many plaintiffs
seek damages for injuries allegedly due to exposure to benzene,
butadiene, asbestos or other chemicals. Three of the cases involve
several hundred plaintiffs, while the remainder involve substantially
fewer plaintiffs. All of these cases involve multiple defendants. The
Company believes that its involvement in all but seven of these cases
results from its former 50% ownership of Jefferson Chemical Company,
which the Company disposed of in 1975. It is not known at this time how
many plaintiffs eventually will assert claims against the Company.
The Company is a defendant in nine suits pending in California Superior
Court in Orange, 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.
In December, 1998 the trial 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 Louisiana Court of Appeals for the 5th Circuit affirmed that
decision. The case continues as a non-class action on behalf of the
other named plaintiffs.
The Company is also the defendant in two class actions filed in Jefferson
Parish Court, Louisiana, on behalf of persons who allegedly sustained
injury as a result of an explosion and fire at the Company's Fortier
facility on February 21, 1996. The Company has conducted limited
discovery in these cases and, therefore, has little information on
whether, or to what extent, most members of the alleged class actually
suffered any injury.
-16-
<PAGE>
The Company is also the defendant in six 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 classes
actually suffered any injury.
The Company is one of several alleged processors of lead, lead pigments
and/or lead-based paints named as defendants in ten cases pending in
state and federal courts in the states of New York, Ohio, Maryland, Rhode
Island, Missouri, California and Wisconsin. The suits have been brought
by governmental entities and individual plaintiffs, on behalf of
themselves and others. The suits variously seek damages for the cost of
removing lead-based paints from buildings; for personal injuries
allegedly caused by ingestion of lead-based paints; the cost of
monitoring, detecting and abating lead paint; the cost of educating the
public about lead paint; compensatory and punitive damages; the cost of
providing health care and special education to children harmed by lead
poisoning; and plaintiffs' attorneys' fees. The Company is named a
defendant as the alleged successor to MacGregor Lead Company from which
the Company purchased certain assets in 1971. The Company denies it is a
successor to MacGregor Lead Company.
The Company is one of several defendants in six suits filed in New Jersey
State Courts in Essex and Middlesex Counties by, or on behalf of the
estates of, individuals who allegedly contracted cancer as a result of
exposure to chemicals constituting, or contained in, products sold by the
Company. Two 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
third 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 31 suits
filed in Louisiana state courts in St. Bernard, Orleans, Webster and
Jefferson 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. As a result of the
Grand Jury Investigation, the Company is a defendant in an antitrust
class action filed in the U.S. District Court for the Central District of
California on behalf of purchasers of carbon fiber, which the complaint
defined to include prepregs manufactured from carbon fiber. The complaint
alleges that the defendants, manufacturers of carbon fiber and/or
prepregs manufactured therefrom, conspired to fix the prices of their
products.
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.
-17-
<PAGE>
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 past events.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable
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 January 31, 2000, there were approximately 15,600 holders of record
of the Common Stock of the Company.
The high and low stock prices for each quarter during 1999 and 1998 were:
<TABLE>
<CAPTION>
1Q 2Q 3Q 4Q
<S> <C> <C> <C> <C>
1999
High $26 13/16 $31 1/2 $29 15/16 $28
Low 20 21 3/8 21 3/4 21 3/8
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
</TABLE>
The Company has not paid a cash dividend on its common stock and does not
expect to pay one 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.
From time to time in connection with its stock repurchase program, the
Company has sold unregistered put options entitling the holders to sell
shares of the Company's common stock to the Company. See Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Financial Condition.
-18-
<PAGE>
Item 6. Selected Financial Data
-----------------------
<TABLE>
<CAPTION>
Five-Year Summary
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statements of income data:
Net sales $1,412.5 $1,444.5 $1,290.6 $1,259.6 $1,260.1
Manufacturing cost of sales 970.8 1,006.6 930.9 898.1 912.2
Research and process development 43.8 42.9 44.7 40.2 44.2
Other operating expenses 212.9 209.5 195.8 186.1 181.6
- --------------------------------------------------------------------------------------------------------------------------
Earnings from operations 185.0 185.5 119.2(3) 135.2 122.1
Other income (expense), net 9.3 14.5(2) 23.9(4) 9.0 4.6
Equity in earnings of associated companies 5.6 20.3 12.3 24.8 24.6
Interest income (expense), net (26.9) (22.4) (5.7) (2.1) 5.4
Income tax provision (benefit) 51.7(1) 73.2 36.1(5) 66.8 (125.5)(6)
Net earnings 121.3 124.7 113.6 100.1 282.2
Dividends on preferred stock - - - - (10.7)
Excess of repurchase price over related book
value of Series A Stock and Series B Stock - - - - (195.2)
Net earnings available for common stockholders $ 121.3 $ 124.7 $ 113.6 $ 100.1 $ 76.3
- --------------------------------------------------------------------------------------------------------------------------
Net earnings per common share
Basic $ 2.83 $ 2.79 $ 2.50 $ 2.13 $ 1.98
Diluted $ 2.73 $ 2.68 $ 2.39 $ 2.03 $ 1.50
- --------------------------------------------------------------------------------------------------------------------------
Other data (At end of period, unless:
otherwise noted)
Additions to plants, equipment and facilities
(Annual) $ 77.4 $ 103.8 $ 91.4 $ 72.5 $ 97.2
Current assets 491.1 477.6 452.8 416.3 404.0
Current liabilities 366.1 394.4 375.0 312.8 317.7
Working capital 125.0 83.2 77.8 103.5 86.3
Plants, equipment and facilities 1,352.6 1,363.0 1,278.0 1,339.7 1,317.2
Net depreciated cost 655.7 667.5 629.7 582.2 605.7
Total assets 1,759.9 1,730.6 1,614.1 1,261.1 1,293.8
Long-term debt 422.5 419.5 324.0 89.0 66.0
Other noncurrent liabilities 465.5 485.7 527.7 544.9 567.2
Total stockholders' equity 505.8 431.0 387.4 314.4 342.9
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
(1) Includes a credit of $8.0 related to the utilization of prior years' tax
credits.
(2) Includes a gain of $4.4 related to the sale of the bulk molding compounds
product line in the fourth quarter of 1998.
(3) Includes restructuring and other charges of $18.6 and $23.8 recorded in the
first and fourth quarters of 1997 respectively.
(4) 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 3 above, charges of $9.0 were recorded in the fourth quarter of 1997 to
reduce the carrying amount of certain assets.
(5) Includes the reversal of the remaining $24.4 of a previously established tax
valuation allowance (see Note 6 below) in the fourth quarter of 1997.
(6) 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. Dollars are in millions, except share and per share amounts.
GENERAL
During 1999 the Company completed the following acquisition and disposition
transactions:
On January 25, 1999, the Company acquired assets of the Nottingham Company's
industrial minerals product line for $4.0. The purchase price exceeded the fair
value of the identifiable assets acquired by $0.5. which 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 Water and Industrial Process Chemicals segment.
On August 11, 1999, the Company acquired assets of the BOC Gases' global
phosphine fumigants product line for $3.5. The purchase price exceeded the fair
value of the identifiable assets acquired by $1.2, which will be amortized on a
straight-line basis over a period of up to 20 years. The terms of the
acquisition provide for up to two additional payments aggregating up to $1.0 to
be paid upon approval by the U.S. Environmental Protection Agency of certain
fumigant registrations and for
-19-
<PAGE>
additional consideration to be paid if the acquired product line's net sales
exceed certain targeted levels. The contingency for payment of $0.3 of
additional consideration was met during the first quarter of 2000 and was
recorded as additional goodwill. All additional payments are payable in cash and
will be recorded as additional goodwill when the contingencies for payment have
been met. The acquired business was integrated into the Company's Water and
Industrial Process Chemicals segment.
On September 16, 1999, the Company acquired Inspec Mining Chemicals S.A.
("IMC") from Laporte plc for $25.1, net of $0.8 cash received. The purchase
price exceeded the fair value of the identifiable assets acquired by $19.0,
which will be amortized on a straight-line basis over a period of up to 40
years. The acquisition, which included two manufacturing operations and a
research and development center located in Chile, was integrated into the
Company's Water and Industrial Process Chemicals segment.
On October 29, 1999, the Company acquired the amino coatings resins business
of BIP Limited ("BIP") for approximately $37.2 in cash plus future consideration
with a value equivalent to approximately $8.3. The purchase price exceeded the
fair value of the identifiable assets acquired by $36.7, which 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 Performance Products segment. BIP will retain
its manufacturing plant in Oldbury, United Kingdom, where it will continue to
manufacture certain amino coatings resins for Cytec for at least one year.
All four acquisitions have been recorded under the purchase method of
accounting with the purchase prices allocated to the assets received and
liabilities assumed, based on their estimated fair values. The results of
operations for the acquired businesses are included from the dates of
acquisition in the Consolidated Financial Statements. Amounts recorded as
excesses of the purchase price over the identifiable assets acquired
("goodwill") are included in Acquisition Intangibles in the Consolidated Balance
Sheet.
On January 21, 1999, the Company sold substantially all of the assets of its
engineered molding compounds business, excluding land, buildings and one product
line, to Rogers Corporation of Manchester, Connecticut, for $4.3.
During 1998 the Company completed the following acquisition and disposition
transactions:
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 purchase price exceeded the fair value of the
identifiable assets acquired by $8.3. The acquired product line was integrated
into the Company's Water and Industrial Process Chemicals segment.
On July 31, 1998, the Company purchased from Dyno Industrier ASA of Oslo,
Norway, Dyno's global amino coatings resins business (the "Dyno Business"),
which consisted primarily of Dyno's 50% interest in Dyno-Cytec, a European joint
venture, for approximately $55.7 in cash. The purchase price exceeded the fair
value of the identifiable assets acquired by $32.0. The acquired business was
integrated into the Company's Performance Products segment.
On October 9, 1998, the Company acquired The American Materials & Technologies
Corporation ("AMT"), a manufacturer of advanced composite materials, in a stock
transaction designed to qualify as a tax-free reorganization. In the
transaction, the Company issued from Treasury Stock 1,243,663 shares of its
common stock to AMT shareholders. In addition, outstanding options and warrants
to acquire AMT stock were converted into 335,209 Cytec options and warrants with
a weighted average exercise price of $10.48 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. The purchase price exceeded the fair value of the
identifiable assets acquired by $24.4. The acquired business was integrated into
the Company's Specialty Materials segment. 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 with the purchase prices allocated to the assets received and
liabilities assumed, based on their estimated fair values. The results of
operations for the acquired businesses are included from the dates of
acquisition in the Consolidated Financial Statements. Amounts recorded as
goodwill are included in Acquisition Intangibles in the Consolidated Balance
Sheets and will be amortized on a straight-line basis over a period of up to 40
years.
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. Sales for this product line were
$24.9 and $26.6 in 1998 and 1997, respectively.
-20-
<PAGE>
During 1997 the Company completed the following acquisition and disposition
transactions:
On September 30, 1997, the Company acquired substantially all of the assets
and liabilities of Fiberite, Inc. ("Fiberite") for $344.0. The assets acquired
included all of Fiberite's business except its satellite materials business. The
purchase price exceeded the fair value of the identifiable assets acquired by
$269.7, which is included in Acquisition Intangibles in the Consolidated Balance
Sheets and which 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 segment. 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. ("Sterling"). The
assets transferred included the Company's plant located near Pensacola, Florida.
The Company received approximately $94.8 in cash and 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"). SFAS 133
established accounting and reporting standards for hedging activities and
derivative instruments, including certain derivative instruments embedded in
other contracts. As originally issued, SFAS 133 would have been effective for
the Company beginning January 1, 2000. However, in July 1999, the FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133," which delays the
effective date of SFAS 133 by one year. SFAS 133 will now become effective for
the Company beginning January 1, 2001. The Company is reviewing the potential
impact, if any, of SFAS 133 on its consolidated results of operations and
financial position.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship that certain items
in the Company's Consolidated Statements of Income bear to net sales:
Years Ended December 31, 1999 1998 1997
- -----------------------------------------------------------------
Net sales 100.0% 100.0% 100.0%
Manufacturing cost of sales 68.7 69.7 72.1
Gross profit 31.3 30.3 27.9
Selling and technical services 10.6 10.6 11.3
Research and process development 3.1 3.0 3.5
Administrative and general 3.7 3.2 3.7
Amortization of acquisition intangibles 0.8 0.7 0.2
Earnings from operations(1) 13.1 12.8 9.2
- -----------------------------------------------------------------
Net earnings(2) 8.6 8.6 8.8
(1) Percentage in 1997 includes the effect of restructuring and other charges of
(3.3%).
(2) Percentage in 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 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 water treating,
mining, paper and phosphine chemicals that are used mainly in water and
wastewater treatment, mineral processing and separation and paper manufacturing.
The Performance Products segment produces specialty resins, surfactants and
specialty monomers and polymer additives that are used primarily in coatings,
adhesives and plastics applications. The Specialty Materials segment
manufactures and sells aerospace materials that are used mainly in commercial
and military aviation and launch vehicles, automobiles, recreational products,
satellites and aircraft brakes. The segment also includes the Bulk and
Engineered Molding Compounds businesses which, except for one minor product
line, were divested in 1998 and 1999, respectively. The Building Block Chemicals
segment manufactures acrylonitrile, acrylamide, ammonia, hydrocyanic acid,
melamine and sulfuric acid. These chemicals are used in the manufacture of many
of the Company's other products with the remainder sold to third parties.
Internal usage is not reflected in net sales of Building Block Chemicals.
-21-
<PAGE>
The Company's net sales by business segment are set forth below.
Years Ended December 31, 1999 1998 1997
- ----------------------------------------------------------------------
Water and Industrial Process Chemicals $ 372.8 $ 349.4 $ 351.3
Performance Products 442.4 403.4 395.1
Specialty Materials(1) 434.5 492.2 264.3
Building Block Chemicals 162.8 199.3 265.3
Other(2) - 0.2 14.6
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$1,412.5 $1,444.5 $1,290.6
(1) On November 23, 1998, the Company completed the sale of its bulk molding
compounds product line, which had sales of $24.9 and $26.6 in 1998 and 1997,
respectively. On January 21, 1999, the Company completed the sale of its
engineered molding compounds product line, which had sales of $14.1 and $3.3, in
1998 and 1997, respectively.
(2) 1997 includes acrylic fibers sales of $11.9. The acrylic fibers product
line was sold on January 31, 1997.
For more information on the Company's segments see Note 17 to the Consolidated
Financial Statements and further discussions in the Segment Results section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
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
were $521.4 in 1999, $583.0 in 1998 and $596.5 in 1997.
YEAR ENDED DECEMBER 31, 1999, COMPARED WITH YEAR ENDED DECEMBER 31, 1998
Net sales for 1999 were $1,412.5, compared with $1,444.5 for 1998. The
decrease was due mainly to $57.7 of lower sales in the Specialty Materials
segment and $36.5 of lower sales in the Building Block Chemicals segment. This
decrease was partially offset by sales increases in the Water and Industrial
Process Chemicals and Performance Products segments of $23.4 and $39.0,
respectively, (see Segment Results discussion below).
Net sales in the United States were $799.9 for 1999, compared with $890.6 for
1998. International net sales were $612.6 for 1999, or 43.4% of total sales,
compared with $553.9, or 38.3% of total sales, in 1998.
In the North America region, (i.e., United States and Canada) net sales were
$863.4 for 1999, down 8.8% from the prior year. The decrease was due mainly to a
4.4% decrease in selling volumes (primarily in the Building Block Chemicals and
Specialty Materials segments) and lower selling prices, which were down about
4.2%.
In the Europe/Mideast/Africa region, net sales were $323.0 for 1999, up 7.1%
from the prior year. The increase was due mainly to a 12.7% increase in selling
volumes. Selling volumes increased in the Performance Products and Water and
Industrial Process Chemicals segments. The increase in the Performance Products
segment was due mainly to the July 1998 acquisition of the Dyno Business and the
October 1999 acquisition of BIP. The increase in selling volumes was partially
offset by lower selling prices, which were down about 3.8%, and the adverse
effect of exchange rate changes, which reduced sales by another 1.8%.
In the Asia/Pacific region, net sales were $151.1 for 1999, up 12.3% from the
prior year. The increase was due mainly to a 13.4% increase in selling volumes
(primarily in the Performance Products and Water and Industrial Process
Chemicals segments) and the favorable effect of exchange rate changes, which
increased sales another 2.1%. This increase was partially offset by lower
selling prices, which were down about 3.2%.
In the Latin America region, net sales were $75.0 for 1999, up 19.6% from the
prior year. The increase was due mainly to a 23.2% increase in selling volumes,
of which approximately 0ne-third was from the acquisition of IMC. The increase
in selling volumes was partially offset by the adverse effect of exchange rate
changes, which reduced sales about 2.5%, and lower selling prices, which reduced
sales by another 1.1%.
Manufacturing cost of sales was $970.8 for 1999 and included a net
restructuring credit of $1.5. Excluding this credit, manufacturing cost of sales
was 68.8% of net sales, which as a percentage of sales was down slightly when
compared with $1,006.6, or 69.7%, of net sales for last year. Manufacturing
costs as a percentage of net sales continued to benefit in 1999 from
manufacturing rationalization, restructuring benefits, improved product mix, and
lower raw material costs. Partially
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offsetting these benefits were the adverse effects of price and selling volume
decreases in the Building Block Chemicals and Specialty Materials segments as
well as price reductions in the Water and Industrial Process Chemicals and
Performance Products segments.
Selling and technical service expenses were $150.0 for 1999 and included a
restructuring charge of $0.3. Excluding this charge, selling and technical
service expenses decreased $3.7, which reflects the benefits of the Company's
efforts to contain costs in this area.
Research and process development expenses were $43.8 for 1999 and included a
restructuring charge of $1.7. Excluding this charge, research and process
development expenses decreased $0.8, primarily reflecting the Company's
decentralization of research to business units and restructuring initiatives at
the Stamford, Connecticut, research facility. Partially offsetting the decrease
were higher patent costs for 1999.
Administrative and general expenses were $51.7 for 1999, an increase of $5.1
from 1998. Included in 1999 was a charge of $2.5 for external costs associated
with tax planning, higher costs associated with certain litigation and a net
restructuring charge of $0.1.
Amortization of acquisition intangibles increased $1.7 due to the additional
intangibles resulting from the acquisitions of the Nottingham Company's
industrial minerals product line in January 1999, the BOC Gases' global
phosphine fumigants product line in August 1999, IMC in September 1999 and BIP's
amino coatings resins business in October 1999. In addition, 1999 included a
full year of amortization for the Dyno Business and AMT, which were acquired in
July and October 1998, respectively.
Other income, net, was $9.3 for 1999, a decrease of $5.2 from 1998. Included
in 1999 were gains of $4.5 from the sale of land, $2.2 from royalty income and
$1.6 from the sale of certain product lines. In 1998, other income, net,
included gains of $4.4 related to the sale of the bulk molding compounds product
line, $3.0 of other investment income and $3.8 on certain investments in
unaffiliated companies.
Equity in earnings of associated companies, which represents the Company's
before-tax share of its 50% owned associates' earnings, was down $14.7 primarily
due to lower sales and earnings by Criterion Catalyst. Industry over-capacity
and difficult economic conditions in the refining industry affected operations
at Criterion Catalyst. The result has been much lower selling prices and an
adverse product mix for hydrotreating catalysts. CYRO Industries earnings were
also down as selling prices and margins for certain of its products remain low.
In 1998 equity earnings included $2.1 representing the former Dyno-Cytec joint
venture's results prior to the purchase of the remaining 50% ownership in and
subsequent consolidation of the venture in July 1998.
Interest expense, net, was $26.9 for 1999 and increased $4.5 from 1998,
reflecting a full year of interest expense associated with the long-term debt
securities issued during 1998.
The income tax provision was $51.7 for 1999 and included a credit of $8.0
related to the utilization of prior years' tax credits. Excluding the impact of
this item, the Company reduced its underlying effective tax rate for the year to
34.5%, down from the 37.0% rate for 1998.
Net earnings for 1999 were $121.3, or $2.73 per diluted share, compared with
$124.7, or $2.68 per diluted share, for 1998. Diluted earnings per share in 1999
included a credit of $0.18 per diluted share related to the reduction in income
tax expense from the utilization of prior years' tax credits, which is partially
offset by a charge of $0.04 per diluted share for tax planning expenses. In
addition, diluted earnings per share in 1999 included a $0.01 charge related to
the net effect of restructuring activities. Excluding these three items, diluted
earnings per share were $2.60 for 1999. Diluted earnings per share in 1998
included a gain of $0.06 per diluted share from the sale of the bulk molding
compounds business. Excluding this gain, the diluted earnings per share in 1998
were $2.62.
SEGMENT RESULTS
Water and Industrial Process Chemicals sales increased 6.7% to $372.8, and
earnings from operations increased 29.0% to $44.0. The sales increase was
primarily in mining chemicals. Overall, selling volumes were up 10.1%, of which
approximately 3.3% were from the acquisitions of IMC and the Nottingham
Company's industrial minerals product lines. The increase in selling volumes was
partially offset by lower selling prices, which were down about 2.6%, and the
adverse effect of exchange rate changes, which reduced sales another 0.8%. The
improved earnings from operations were primarily the result of leverage from
higher sales, lower raw material prices and reduced operating costs.
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Performance Products sales increased 9.7% to $442.4, and earnings from
operations increased 24.2% to $54.9. Overall, selling volumes were up 14.4%, of
which approximately 9.5% were from amino coatings resins sales generated as a
result of the July 1998 acquisition of the Dyno Business and the October 1999
acquisition of BIP. The remaining 4.9% increase in selling volumes was due
mainly to stronger sales volumes in the polymer additives product line. The
increase in selling volumes was partially offset by lower selling prices, which
were down about 4.6%, and the adverse effect of exchange rate changes, which
reduced sales another 0.2%. The improved earnings from operations were primarily
the result of higher sales volumes and to a lesser extent lower raw material
prices and reduced operating costs.
Specialty Materials sales were $434.5, a decrease of 11.7% from the previous
year. Earnings from operations, however, improved 5.3% to $85.3. Approximately
8.2% of the sales decrease was due to the divestiture of the molding compounds
and certain other product lines, partially offset by the acquisition of AMT in
the fourth quarter of 1998 which added approximately 3.7% to sales. Excluding
the effect of acquisitions and divestitures, selling volumes were down 5.2% as a
result of the decline in the commercial aircraft build rates and were partially
offset by new product introductions, new applications and new qualifications for
the Company's products. Selling prices decreased 1.8%, but the decrease was
largely offset by lower raw material costs. Earnings from operations benefited
from the rationalization of manufacturing facilities and the removal of
structural costs consistent with reduced commercial aircraft build rates.
Building Block Chemicals sales were $162.8, an 18.3% decrease. Earnings from
operations were $6.8, compared with $35.7 in 1998. For the segment overall,
selling prices, primarily for acrylonitrile, were down 9.7%, and volumes and
exchange rates were down another 7.9% and 0.7%, respectively. Selling prices for
acrylonitrile, which were weak for the first six months of 1999, began to
improve during the second half of the year, driven mostly by unanticipated
global acrylonitrile production outages and the growing demand from Asian
acrylic fiber markets. However, costs for propylene, the key raw material for
acrylonitrile, increased at a faster rate, and as a result, acrylonitrile
margins remained low. In addition, lower selling prices and volumes of
acrylamide and melamine, downtime at the acrylonitrile plant and other operating
difficulties negatively impacted earnings. In December 1999, the Company sold to
Methanex Corporation its 30% interest in the methanol manufacturing joint
venture. The methanol plant had been shut down since March 1999 due to poor
economics.
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 was mainly attributable
to sales generated as a result of the acquisitions of Fiberite, the OrePrep
product line and the Dyno Business. Included in 1997 were 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.
Manufacturing cost of sales for the full year decreased from 72.1% of net
sales to 69.7%. Included in 1997 were the unfavorable effects of restructuring
and other charges totaling $34.6 related 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 were restructuring and other charges of $3.2 related 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 were 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 was a reduction of retiree medical
expenses
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and stock-based employee compensation of $1.9.
Administrative and general expenses decreased $1.1 or 2.3%. Included in 1997
were 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 1998 was a reduction of
retiree medical expenses and stock-based employee compensation of $4.2.
Amortization of acquisition intangibles increased $6.8 due to intangibles that
resulted from the acquisitions made during the year and in the latter part of
1997.
Other income, net, decreased $9.4. Included in 1998 were gains of $4.4 related
to the sale of the bulk molding compounds product line, $3.0 of other investment
income and $3.8 on certain investments in unaffiliated companies. 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 for expected losses on certain other assets that were 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 and were 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.
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 was a
gain of $4.4 ($2.8 after-tax, or $0.06 per diluted common share) related 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 was 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
related 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.
SEGMENT RESULTS
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.
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%. This increase was
primarily due to higher build rates in the commercial aircraft sector.
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 throughout the year and the
acrylonitrile plant operated at a reduced rate. Costs for propylene, the key raw
material for production of acrylonitrile, was also down, substantially
offsetting the impact of lower selling prices.
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LIQUIDITY AND FINANCIAL CONDITION
At December 31, 1999, the Company's cash balance was $12.0, an increase of
$10.3 from year-end 1998.
Net cash flows provided by operating activities totaled $199.2 for the year
ended December 31, 1999, compared with $152.3 for the year ended December 31,
1998. The most significant factor affecting this increase was the Company's
lower working capital levels. Payments against restructuring reserves were $16.6
in 1999, compared with $12.9 in 1998. At December 31, 1999, the restructuring
liability to be paid was $6.5. The spending is expected to be completed by the
end of 2000, with the exception of certain long-term payouts for employee
severance.
Environmental remediation spending for the years ended December 31, 1999, 1998
and 1997 was $18.6, $23.8 and $26.1, respectively. Postretirement Benefits Other
Than Pension ("OPEB") spending for the years ended December 31, 1999, 1998 and
1997 was $27.7, $25.2 and $43.9, respectively. OPEB spending for 1997 includes
$25.0 of prefunding of the Company's postretirement benefit liability, through
contributions to its Voluntary Employees Benefit Association (VEBA) Trust
accounts. The Company expects spending for environmental remediation and OPEB in
2000 to be similar to 1999 levels, though there can be no assurance that the
Company's annual cash expenditures for environmental remediation or OPEB will
not be higher in the future. See Note 9 and Note 12 of the Notes to the
Consolidated Financial Statements with respect to environmental matters and
OPEB.
Net cash flows used for investing activities totaled $140.4 for the year ended
December 31, 1999, compared with $146.9 for the year ended December 31, 1998.
Included in 1999 was funding of $69.8 for the acquisitions of the Nottingham
Company's industrial minerals product line ($4.0), the BOC Gases' global
phosphine fumigants product line ($3.5), IMC ($25.1) and BIP ($37.2) and a $5.0
loan to Criterion Catalyst. The Company has agreed to make additional loans to
Criterion Catalyst up to a maximum of $50.0 if Criterion Catalyst is not in
compliance with certain covenants in its principal credit agreement. Also
included in 1999 were proceeds of $5.9 received from the sale of the molding
compounds product lines and $5.9 from the sale of other assets. Funding for
capital additions was $77.4 for the year ended December 31, 1999, compared with
$103.8 in 1998. Capital additions for the year ended December 31, 1998, included
three large construction projects in the Performance Products and Water and
Industrial Process Chemicals segments: the Benzotriazole light stabilizer plant
in Botlek, The Netherlands; the expansion of the surfactants plant at the Willow
Island, West Virginia, facility and the expansion of emulsion capacity in
Mobile, Alabama. The Company expects capital spending for the year 2000 to be in
the range of $100.0 to $105.0.
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 2000.
Net cash flows used for financing activities totaled $47.5 for the year ended
December 31, 1999, compared with $10.5 for the year ended December 31, 1998. In
1999 the Company purchased 1,784,045 shares of Treasury Stock at a cost of
$42.5, while in 1998 the Company purchased 3,561,950 shares of Treasury Stock at
a cost of $113.4. Also included in 1998 was an increase in long-term debt of
$97.7, the proceeds of which were used to purchase Treasury Stock and to acquire
OrePrep and an increase in short-term debt of $10.3, related to foreign currency
denominated short-term borrowings. During 1999 the $10.3 of foreign currency
denominated short-term borrowings were paid off.
In connection with the Company's stock repurchase program, during the year
ended December 31, 1999, the Company sold an aggregate of 800,000 put options to
three institutional investors in a series of private placements exempt from
registration under Section 4(2) of the Securities Act of 1933. The put options
entitled the holders to sell an aggregate of 800,000 shares of the Company's
common stock to the Company at exercise prices ranging from $21.00 to $22.50 per
share. During the year, 350,000 of the put options expired unexercised. The
remaining 450,000 put options expire on various dates in February and April
2000. The Company received premiums of approximately $1.2 on the sale of such
put options. Subsequent to December 31, 1999, the Company sold an additional
100,000 put options that expire in July 2000 and 100,000 put options that expire
in August 2000 at exercise prices of $23.083 per share and $23.552 per share,
respectively. The Company has received premiums of approximately $0.2 on the
sale of such put options. In lieu of purchasing the shares from the put option
holders, the Company has the right to elect settlement by paying the holders of
the put options 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, (i.e.,
net cash or net share settlement).
On April 8, 1997, the Company signed an agreement with American Cyanamid
Company ("Cyanamid"), a wholly owned subsidiary of American Home Products
Corporation, to revise certain of the financial covenants contained in its
Series C Cumulative Preferred Stock ("Series C Stock") held by Cyanamid. 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
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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, 1999, the Company had $422.5
of debt and $505.7 of 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
$336.1 in debt.
On January 22, 1999, the Company signed an agreement with Cyanamid providing
that Cyanamid would irrevocably waive certain financial covenants contained in
the Company's Series C Stock so that, in addition to restricted payments
otherwise permitted under the Series C Stock, which at December 31, 1999, were
limited to $55.2, the Company may make up to $100.0 in special restricted
payments solely for the purpose of repurchasing its common stock. As indicated
above, through December 31, 1999, the Company had repurchased 1,784,045 shares
at a cost of $42.5 under its $100.0 stock repurchase program. At December 31,
1999, $112.7 was available for stock repurchases under the agreements with
Cyanamid. The Company expects the timing of its share repurchases to be balanced
with the related financing requirements of its long-term growth strategies,
including research and development, global expansion, capital expenditures and
opportunities for acquisitions arising from consolidation in the specialty
chemicals and specialty materials industry.
At December 31, 1999, 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 $103.0 of outstanding borrowings
under the Credit Facility at December 31, 1999. 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, 1999.
On August 20, 1999, the Company replaced its prior 364-day credit facility
with a new 364-day credit facility, which provides up to $200.0 in unsecured
revolving loans for general corporate purposes. Three new lenders were added
while two withdrew from the consortium of U.S. and non-U.S. banks participating
in the 364-day credit facility. The 364-day credit facility matures on August
19, 2000, and contains a one-year term-out option. The interest rate on funds
borrowed floats based on the London Interbank Offered Rate ("LIBOR"). There were
no outstanding borrowings under the 364-day facility at December 31, 1999.
The Company also has an aggregate of $35.0 in credit potentially available for
short-term uses under three uncommitted credit facilities and a U.S. dollar
equivalent of approximately $16.0 available under a foreign denominated over-
draft facility. There were no outstanding borrowings under these facilities at
December 31, 1999.
During the first six months of 1998, the Company sold an aggregate of $320.0
principal amount of senior debt securities in public offerings, 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% MandatOry Par Put Remarketed SecuritiesSM ("MOPPRSSM") due May
11, 2025. The securities were offered under the Company's shelf registration
statement, which 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 primarily to refinance the
Fiberite Acquisition.
The Company is party to four interest rate swap agreements with an aggregate
notional value of $82.0. Two of the swap agreements with maturity dates during
2001 have virtually offsetting terms. Another swap agreement effectively
converts variable rate interest obligations on the Company's Credit Facility to
6.25% fixed rate obligations. The maturity date of this swap agreement is
November 1, 2001. The fourth interest rate swap agreement was entered into on
May 14, 1999, matures in March 2008 and effectively converts $25.0 of the
Company's 6.75% fixed rate borrowings due on March 15, 2008, to a floating rate.
The fair value of the swap agreements is not recognized in the financial
statements. Interest rate differentials paid or received under the agreements
are recorded as adjustments to interest expense. For further discussion about
the interest rate swap agreements and other financial instruments see Note 4 to
the Consolidated Financial Statements and further discussions in the
Quantitative and Qualitative Disclosures About Market Risk section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Commencing in September 1997, the Company entered into a series of rate lock
agreements to hedge against the risk of an increase in treasury rates related to
the Company's offering of $300.0 in long-term debt securities. The Company made
payments aggregating approximately $11.2 to settle the rate lock agreements
($9.6 of which was paid during the first half of 1998 and the remainder in
1997), which will be amortized over the life of the 6.50% Notes, 6.75% Notes and
6.846% MOPPRSSM as an increase in interest expense of such Notes.
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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 incurred external costs of approximately $5.0 to
successfully remediate noncompliant systems in order to make them Year 2000
compliant. The Company did not and does not expect to experience any significant
Year 2000 system failures. However, since the Company has not used all
components of all systems since year end, a system failure remains a technical
possibility. The Company did not track its internal costs in connection with
Year 2000 issues, but does not believe they are material
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 adopted the euro as their common legal
currency on that date. Effective January 1, 1999, a newly created European
Central Bank assumed control of 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 and Norway, and the
Company has sales offices and generates sales throughout Europe. The Netherlands
is a participating country, whereas the United Kingdom and Norway are not
currently participating countries.
Since January 1, 1999, the Company has been in a position to conduct business
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 introduction of the euro notes and coins
as well as the withdrawal of participating currency notes and coins, which is
scheduled to begin January 1, 2002, will result in any gains or losses since
conversion rates to the euro for participating countries were irrevocably fixed
as of January 1, 1999. The Company believes that some information systems
modifications are required at the end of the transition period 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.
Item 7A. 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, interest rates and equity
price changes. Actual results could differ materially from those projected in
this forward-looking analysis.
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
or speculative purposes. Moreover, the Company enters into financial instrument
transactions primarily with major financial institutions or highly-rated
counterparties, 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, 1999, 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
-28-
<PAGE>
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, 1999, the Company had net foreign exchange contracts to
purchase $6.5 of various currencies, primarily Dutch guilders and German marks
and to sell $5.8 of various currencies, primarily British pounds for U.S.
dollars. The Company also had contracts to sell Dutch guilders with a value
equivalent to $13.4 for British pounds and contracts to purchase Norwegian krone
with a value equivalent to $4.3 for other European currencies. 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 $3.4. 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.
Commodity Price Risk. The Company selectively utilizes natural gas derivative
contracts including forward contracts, which are principally settled through
actual delivery of the physical commodity, and other hedging arrangements,
predominantly cash-settled swap transactions, to manage its exposure to price
risk associated with the production of ammonia and other building block chemical
products. The maturity of these contracts correlate highly to the actual
purchases of the commodity and have the effect of securing predetermined prices
that the Company pays for the underlying commodity. While these contracts are
structured to 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. Realized gains and losses on these contracts
are included in the cost of the commodity upon settlement of the contract, with
amounts paid or received on early termination deferred on the balance sheet
until such time.
At December 31, 1999, the Company had $2.8 net natural gas forward commodity
and cash-settled swap contracts outstanding. Based on year-end prices, the
Company had a net unrealized loss of $0.4. Assuming that year-end prices were to
adversely change by a hypothetical 10%, the incremental increase in cost of
goods sold would be approximately $0.2.
Interest Rate Risk At December 31, 1999, the financial liabilities of the
Company exposed to changes in interest rates consisted primarily of long-term
debt, which had a carrying value of $422.5 (fixed rate public debt of $319.5 and
variable rate credit facility borrowings of $103.0) and a fair value of
approximately $399.1. Additionally the Company was party to two interest rate
swap agreements that effectively change the characteristics of the long-term
debt. One of the interest rate swap agreements converts $25.0 of the Company's
$319.5 fixed rate public debt to variable rate debt and the other interest rate
swap agreement converts $20.0 of variable rate credit facility borrowings to
fixed rate interest obligations. For fixed rate debt, interest rate changes
affect fair value but do not impact earnings or cash flows. Conversely, for
variable rate debt, interest rate changes generally do not affect fair value but
do impact the future earnings and cash flows, assuming other factors are held
constant.
At December 31, 1999, after adjusting for the effects of interest rate swap
agreements, the Company had fixed rate long-term debt of $314.5 and variable
rate long-term debt of $108.0. Assuming a hypothetical increase of 1% in
interest rates and all other variables (such as debt levels) were to remain
constant, interest expense on variable rate long-term debt would increase $1.1
per year and the fair market value of the fixed rate long-term debt would
decrease $12.5.
Equity Price Risk In connection with the Company's stock repurchase program,
the Company selectively utilizes freestanding put option contracts that are
indexed to the Company's stock. In lieu of purchasing the shares from the put
option holders, the Company has the right to elect settlement by paying the
holders of the put options 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, (i.e., net cash or net share settlement). The put option contracts are
initially measured at fair value and reported in Stockholders' Equity.
Subsequent changes in fair value are not recognized in the financial statements.
At December 31, 1999, the Company had 450,000 put options outstanding that
expire on various dates in February and April 2000 and entitled the holders to
sell an aggregate of 450,000 shares of the Company's common stock to the Company
at exercise prices ranging from $21.00 to $22.125 per share. The Company
received premiums of approximately $0.5 on the sale of such put options. The put
options outstanding at December 31, 1999, had exercise prices that were less
than the Company's stock price as of that date. Assuming that the Company's
stock price were to adversely change by a hypothetical 10% or greater from its
year-end closing price, the Company could be subject to purchasing the 450,000
shares of common stock for a maximum of $9.6, which would be recognized as an
adjustment to Stockholders' Equity.
-29-
<PAGE>
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------------------------
December 31,
1999 1998
(Dollars in millions, except share and per share amounts)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 12.0 $ 1.7
Accounts receivable, less allowance for doubtful accounts of
$9.3 in 1999 and $9.2 in 1998 248.5 241.3
Inventories 139.5 140.5
Deferred income taxes 61.7 72.9
Other current assets 29.4 21.2
- ----------------------------------------------------------------------------------------------------
Total current assets 491.1 477.6
- ----------------------------------------------------------------------------------------------------
Investment in associated companies 146.4 147.4
Plants, equipment and facilities, at cost 1,352.6 1,363.0
Less: accumulated depreciation (696.9) (695.5)
- ----------------------------------------------------------------------------------------------------
Net plant investment 655.7 667.5
- ----------------------------------------------------------------------------------------------------
Acquisition intangibles, net of accumulated amortization of
$25.9 in 1999 and $18.3 in 1998 395.2 349.5
Deferred income taxes 48.8 62.6
Other assets 22.7 26.0
- ----------------------------------------------------------------------------------------------------
Total assets $1,759.9 $1,730.6
- ----------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities
Short-term borrowings $ - $ 10.3
Accounts payable 118.5 99.9
Accrued expenses 198.4 243.9
Income taxes payable 49.2 40.3
- ----------------------------------------------------------------------------------------------------
Total current liabilities 366.1 394.4
- ----------------------------------------------------------------------------------------------------
Long-term debt 422.5 419.5
Other noncurrent liabilities 465.5 485.7
- ----------------------------------------------------------------------------------------------------
Stockholders' equity
Preferred stock, 20,000,000 shares authorized; issued and outstanding
4,000 shares, Series C Cumulative, $.01 par value at liquidation value of
$25 per share 0.1 0.1
Common stock, $.01 par value per share, 150,000,000 shares authorized;
issued 48,132,640 in 1999 and 48,142,961 in 1998 0.5 0.5
Additional paid-in capital 159.8 162.4
Retained earnings 577.5 456.2
Unearned compensation (1.9) (1.7)
Accumulated translation adjustments (14.3) (5.1)
Treasury stock, at cost, 6,522,967 shares in 1999,
and 4,952,881 shares in 1998 (215.9) (181.4)
- ----------------------------------------------------------------------------------------------------
Total stockholders' equity 505.8 431.0
- ----------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,759.9 $1,730.6
- ----------------------------------------------------------------------------------------------------
Contingent Liabilities and Commitments (Notes 4 and 9)
- ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-30-
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Years ended December 31,
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(Dollars in millions, except per share amounts)
Net sales $1,412.5 $1,444.5 $1,290.6
Manufacturing cost of sales 970.8 1,006.6 930.9
Selling and technical services 150.0 153.4 145.4
Research and process development 43.8 42.9 44.7
Administrative and general 51.7 46.6 47.7
Amortization of acquisition intangibles 11.2 9.5 2.7
- -------------------------------------------------------------------------------------------------------------
Earnings from operations 185.0 185.5 119.2
Other income, net 9.3 14.5 23.9
Equity in earnings of associated companies 5.6 20.3 12.3
Interest expense, net 26.9 22.4 5.7
- -------------------------------------------------------------------------------------------------------------
Earnings before income taxes 173.0 197.9 149.7
Income tax provision 51.7 73.2 36.1
Net earnings $ 121.3 $ 124.7 $ 113.6
- -------------------------------------------------------------------------------------------------------------
Earnings per common share
Basic $ 2.83 $ 2.79 $ 2.50
Diluted $ 2.73 $ 2.68 $ 2.39
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-31-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Years ended December 31,
(Dollars in millions) 1999 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows provided by (used for) operating activities
Net earnings $ 121.3 $ 124.7 $ 113.6
Noncash items included in net earnings:
Dividends from associated companies greater (less) than earnings 0.2 (13.8) 0.1
Depreciation 81.9 78.0 73.1
Amortization 13.2 9.2 5.7
Deferred income taxes 24.3 19.2 3.2
Gain on sale of assets (4.2) (6.9) (22.3)
Other (0.5) (0.2) 6.7
Changes in operating assets and liabilities:
Accounts receivable (8.7) 3.9 (16.7)
Inventories 3.3 1.1 (9.5)
Accounts payable 19.9 (25.2) (9.9)
Accrued expenses (29.0) (19.5) 13.8
Income taxes payable 9.8 26.1 18.5
Other assets (0.6) (8.6) (2.2)
Other liabilities (31.7) (35.7) (42.4)
- --------------------------------------------------------------------------------------------------
Net cash flows provided by operating activities 199.2 152.3 131.7
- --------------------------------------------------------------------------------------------------
Cash flows provided by (used for) investing activities
Additions to plants, equipment and facilities (77.4) (103.8) (91.4)
Proceeds received on sale of assets 11.8 25.9 95.7
Acquisition of businesses, net of cash received (69.8) (73.8) (344.0)
Change in other assets (5.0) 4.8 2.1
- --------------------------------------------------------------------------------------------------
Net cash flows used for investing activities (140.4) (146.9) (337.6)
- --------------------------------------------------------------------------------------------------
Cash flows provided by (used for) financing activities
Proceeds from the exercise of stock options and warrants 1.1 3.3 6.0
Purchase of treasury stock (42.5) (113.4) (47.8)
Change in short-term borrowings (10.3) 10.3 -
Change in long-term debt 3.0 97.7 235.0
Debt issuance costs - (9.4) -
Proceeds received on sale of put options 1.2 1.0 1.0
- --------------------------------------------------------------------------------------------------
Net cash flows (used for) provided by financing activities (47.5) (10.5) 194.2
- --------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (1.0) 0.4 (2.3)
- --------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 10.3 (4.7) (14.0)
Cash and cash equivalents, beginning of period 1.7 6.4 20.4
- --------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 12.0 $ 1.7 $ 6.4
- --------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-32-
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Years ended December 31, 1999, 1998 and 1997
Additional Accumulated
Preferred Common Paid-In Retained Unearned Translation Treasury
(Dollars in millions) Stock Stock Capital Earnings Compen. Adjustments Stock
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ 0.1 $ 0.5 $ 229.7 $217.9 $ (2.4) $ 8.8 $(140.2)
Net earnings - - 113.6 - - -
Other comprehensive income:
Translation adjustments - - - - (15.7) -
Comprehensive income
Award of, and changes in, performance
and restricted stock - (2.3) - (4.1) - 6.4
Amortization of performance and
restricted stock - - - 3.0 - -
Purchase of treasury stock - - - - - (47.8)
Exercise of stock options - (37.4) - - - 43.4
Proceeds received on sale of put options - 1.0 - - - -
Tax benefit on stock options - 12.9 - - - -
- -----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 $ 0.1 $ 0.5 $ 203.9 $331.5 $ (3.5) $ (6.9) $(138.2)
Net earnings - - 124.7 - - -
Other comprehensive income:
Translation adjustments - - - - 1.8 -
Comprehensive income
Award of, and changes in, performance
and restricted stock - (4.5) - 2.1 - 1.3
Amortization of performance and
restricted stock - - - (0.3) - -
Purchase of treasury stock - - - - - (113.4)
Issuance pursuant to acquisition - (29.5) - - - 51.8
Exercise of stock options - (13.8) - - - 17.1
Proceeds received on sale of put options - 1.0 - - - -
Tax benefit on stock options - 5.3 - - - -
- -----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 $ 0.1 $ 0.5 $ 162.4 $456.2 $ (1.7) $ (5.1) $(181.4)
Net earnings - - 121.3 - - -
Other comprehensive income:
Translation adjustments - - - - (9.2) -
Comprehensive income - - - - - -
Award of, and changes in, performance
and restricted stock - (0.7) - (1.6) - 2.6
Amortization of performance and
restricted stock - - - 1.4 - -
Compensation costs on variable
stock option award - 0.7 - - - -
Purchase of treasury stock - - - - - (42.5)
Adjustment to shares issued pursuant
to acquisition - 0.6 - - - (0.2)
Exercise of stock options and warrants - (4.5) - - - 5.6
Proceeds received on sale of put options - 1.2 - - - -
Tax benefit on stock options - 0.1 - - - -
- -----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 $ 0.1 $ 0.5 $ 159.8 $577.5 $ (1.9) $ (14.3) $(215.9)
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------
(Dollars in millions) Total
- -----------------------------------------------------
<S> <C>
Balance at December 31, 1996 $314.4
Net earnings 113.6
Other comprehensive income:
Translation adjustments (15.7)
------
Comprehensive income 97.9
Award of, and changes in, performance
and restricted stock -
Amortization of performance and
restricted stock 3.0
Purchase of treasury stock (47.8)
Exercise of stock options 6.0
Proceeds received on sale of put options 1.0
Tax benefit on stock options 12.9
- -----------------------------------------------------
Balance at December 31, 1997 $387.4
Net earnings 124.7
Other comprehensive income:
Translation adjustments 1.8
-----
Comprehensive income 126.5
Award of, and changes in, performance
and restricted stock (1.1)
Amortization of performance and
restricted stock (0.3)
Purchase of treasury stock (113.4)
Issuance pursuant to acquisition 22.3
Exercise of stock options 3.3
Proceeds received on sale of put options 1.0
Tax benefit on stock options 5.3
- -----------------------------------------------------
Balance at December 31, 1998 $431.0
Net earnings 121.3
Other comprehensive income:
Translation adjustments (9.2)
------
Comprehensive income 112.1
Award of, and changes in, performance
and restricted stock 0.3
Amortization of performance and
restricted stock 1.4
Compensation costs on variable
stock option award 0.7
Purchase of treasury stock (42.5)
Adjustment to shares issued pursuant
to acquisition 0.4
Exercise of stock options and warrants 1.1
Proceeds received on sale of put options 1.2
Tax benefit on stock options 0.1
- -----------------------------------------------------
Balance at December 31, 1999 $505.8
- -----------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-33-
<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 1997
operations outside of the United States, Canada and Europe were generally
included on a fiscal year basis ended November 30. Substantially all of the
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 is not material to the results of operations. The equity
method of accounting is used for investments in associated companies (all 50%
owned). Certain reclassifications have been made to prior years' data in order
to conform with the current year's presentation.
Foreign Currency Translation For most of the Company's international
operations, all elements of financial statements are translated into U.S.
dollars using current exchange rates with translation adjustments accumulated in
stockholders' equity. For international operations in economies that are
considered hyperinflationary 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 are 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, 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 1999, 1998 and 1997 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 undiscounted 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 Financial instruments reflected in the consolidated
balance sheets include cash and cash equivalents, accounts receivable, certain
other assets, short-term debt, accounts payable, long-term debt and certain
other liabilities. 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 financial instruments in accordance with
Company-established policies 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, commodity
contracts (including forward contracts and other hedging arrangements)
predominantly cash-settled swap transactions and put options indexed to the
Company's stock. The Company does not hold or issue derivative financial
instruments for trading or speculative purposes. Moreover, the Company enters
into financial instrument transactions primarily with major financial
institutions or highly-rated counterparties, thereby limiting exposure to
credit- and performance-related risks.
The Company uses fixed and floating interest rate swap agreements to
synthetically obtain lower cost borrowings and to alter its exposure to the
impact of changing interest rates on the consolidated results of operations and
future cash outflows for interest. The fair value of the swap agreements is not
recognized in the financial statements. Interest rate differentials paid or
received under the agreements are recorded as adjustments to interest expense.
-34-
<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, have a maturity
date that strongly correlates to the maturity date of the underlying transaction
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.
The Company selectively utilizes natural gas derivative contracts including
forward contracts, which are principally settled through actual delivery of the
physical commodity, and other hedging arrangements, predominantly cash-settled
swap transactions, to manage its exposure to price risk associated with the
production of ammonia and other building block chemical products. The maturity
of these contracts correlate highly to the actual purchases of the commodity and
have the effect of securing predetermined prices that the Company pays for the
underlying commodity. While these contracts are structured to limit the
Company's exposure to increases in commodity prices, they can also limit the
potential benefit the Company might have otherwise received from decreases in
commodity prices. Realized gains and losses on these contracts are included in
the cost of the commodity upon settlement of the contract, with amounts paid or
received on early termination deferred on the balance sheet until such time.
In connection with the Company's stock repurchase program, the Company
selectively utilizes freestanding put option contracts that are indexed to the
Company's stock. In lieu of purchasing the shares from the put option holders,
the Company has the right to elect settlement by paying the holders of the put
options 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, (i.e., net
cash or net share settlement). The put option contracts are initially measured
at fair value and reported in Stockholders' Equity. Subsequent changes in fair
value are not recognized in the financial statements.
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.
Revenue Recognition Revenue is generally recognized upon shipment of goods to
customers.
Earnings Per Share Basic earnings per common share excludes dilution and is
computed by dividing net earnings by the weighted-average number of common
shares outstanding (which includes shares outstanding, less performance and
restricted shares for which vesting criteria have not been met) plus deferred
stock awards, weighted for the period outstanding. Diluted earnings per common
share is computed by dividing net earnings by the sum of the weighted-average
number of common shares outstanding for the period adjusted (i.e., increased)
for all additional common shares that would have been outstanding if potentially
dilutive common shares had been issued and any proceeds of the issuance had been
used to repurchase common stock at the average market price during the quarter.
The proceeds used to repurchase common stock are assumed to be the sum of the
amount to be paid to the Company upon exercise of options, the amount of
compensation cost attributed to future services and not yet recognized and the
amount of income taxes that would be credited to or deducted from capital upon
exercise.
-35-
<PAGE>
Stock-Based Compensation The Company continues to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations under which no compensation cost is generally recognized
for stock options granted, since the Company grants options at a price equal to
the market price of the stock at the date of grant. Compensation cost for
restricted stock is recorded based on the market value on the date of grant and
compensation cost for performance stock is recorded based on the quoted market
price of the Company's common stock at the end of each period through the date
of vesting. The fair value of restricted and performance stock is charged to
stockholders' equity and amortized to expense over the requisite vesting
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 and materials
throughout the world. The Company's revenues are dependent on the continued
operation of its various manufacturing facilities. The operation of
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 materially
adverse effect on the productivity and profitability of a particular
manufacturing facility, or with respect to certain facilities, the Company as a
whole during the period of such operational difficulties.
The Company's operations are also subject to various hazards incidental to the
production, use and sale 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.
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 1999 the Company completed the following acquisition and disposition
transactions:
On January 25, 1999, the Company acquired assets of the Nottingham Company's
industrial minerals product line for $4.0. The purchase price exceeded the fair
value of the identifiable assets acquired by $0.5, which 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 Water and Industrial Process Chemicals segment.
On August 11, 1999, the Company acquired assets of the BOC Gases' global
phosphine fumigants product line for $3.5. The purchase price exceeded the fair
value of the identifiable assets acquired by $1.2, which will be amortized on a
straight-line basis over a period of up to 20 years. The terms of the
acquisition provide for up to two additional payments aggregating up to $1.0 to
be paid upon approval by the U.S. Environmental Protection Agency of certain
fumigant registrations and for additional consideration to be paid if the
acquired product line's net sales exceed certain targeted levels. The
contingency for payment of $0.3 of additional consideration was met during the
first quarter of 2000 and was recorded as additi0nal goodwill. All additional
payments are payable in cash and will be recorded as additional goodwill when
the contingencies for payment have been met. The acquired business was
integrated into the Company's Water and Industrial Process Chemicals segment.
On September 16, 1999, the Company acquired Inspec Mining Chemicals S.A. from
Laporte plc for $25.1, net of $0.8 cash received. The purchase price exceeded
the fair value of the identifiable assets acquired by $19.0, which will be
amortized on a straight-line basis over a period of up to 40 years. The
acquisition, which included two manufacturing operations and a research and
development center located in Chile, was integrated into the Company's Water and
Industrial Process Chemicals segment.
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<PAGE>
On October 29, 1999, the Company acquired the amino coatings resins business
of BIP Limited for approximately $37.2 in cash plus future consideration with a
value equivalent to approximately $8.3. The purchase price exceeded the fair
value of the identifiable assets acquired by $36.7, which 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 Performance Products segment. BIP will retain its
manufacturing plant in Oldbury, United Kingdom, where it will continue to
manufacture certain amino coatings resins for Cytec for at least one year.
All four acquisitions have been recorded under the purchase method of
accounting with the purchase prices allocated to the assets received and
liabilities assumed, based on their estimated fair values. The results of
operations for the acquired businesses are included from the dates of
acquisition in the Consolidated Financial Statements. Amounts recorded as
excesses of the purchase price over the identifiable assets acquired
("goodwill") are included in Acquisition Intangibles in the Consolidated Balance
Sheet. Goodwill, net of accumulated amortization, totaled $343.9 at December 31,
1999. Consolidated results of operations for 1999 or 1998 would not have been
materially different if any of the acquisitions had occurred on January 1, 1998.
Accordingly, pro forma sales, net earnings and earnings per share disclosures
have not been provided.
On January 21, 1999, the Company sold substantially all of the assets of its
engineered molding compounds business, excluding land, buildings and one product
line to Rogers Corporation of Manchester, Connecticut, for $4.3.
During 1998 the Company completed the following acquisition and disposition
transactions:
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 purchase price exceeded the fair value of the
identifiable assets acquired by $8.3. The acquired product line was integrated
into the Company's Water and Industrial Process Chemicals segment.
On July 31, 1998, the Company purchased from Dyno Industrier ASA of Oslo,
Norway, Dyno's global amino coatings resin business, which consisted primarily
of Dyno's 50% interest in Dyno-Cytec, a European joint venture, for
approximately $55.7 in cash. The purchase price exceeded the fair value of the
identifiable assets acquired by $32.0. The acquired business was integrated into
the Company's Performance Products segment.
On October 9, 1998, the Company acquired The American Materials & Technologies
Corporation ("AMT"), a manufacturer of advanced composite materials, in a stock
transaction designed to qualify as a tax-free reorganization. In the
transaction, the Company issued from Treasury Stock 1,243,663 shares of its
common stock to AMT shareholders. In addition, outstanding options and warrants
to acquire AMT stock were converted into 335,209 Cytec options and warrants with
a weighted average exercise price of $10.48 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. The purchase price exceeded the fair value of the
identifiable assets acquired by $24.4. The acquired business was integrated into
the Company's Specialty Materials segment. 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 with the purchase prices allocated to the assets received and
liabilities assumed, based on their estimated fair values. The results of
operations for the acquired businesses are included from the dates of
acquisition in the Consolidated Financial Statements. Amounts recorded as
goodwill are included in Acquisition Intangibles in the Consolidated Balance
Sheets and will be amortized on a straight-line basis over a period of up to 40
years. Goodwill, net of accumulated amortization, totaled $323.8 at December 31,
1998. 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. Sales for this product line were
$24.9 and $26.6 in 1998 and 1997, respectively.
During 1997 the Company completed the following acquisition and disposition
transactions:
On September 30, 1997, the Company acquired substantially all of the assets
and liabilities of Fiberite, Inc. ("Fiberite") for $344.0. The assets acquired
included all of Fiberite's business except its satellite materials business. The
purchase price exceeded the fair value of the identifiable assets acquired by
$269.7, which is included in Acquisition Intangibles in the Consolidated Balance
Sheets and which will be amortized on a straight-line basis over a period of up
to 40 years. The
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<PAGE>
Fiberite operations have been integrated into the Company's Specialty Materials
segment. 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,
are 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. ("Sterling"). The
assets transferred included the Company's plant located near Pensacola, Florida.
The Company received approximately $94.8 in cash and 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
related primarily to (i) restructurings at Botlek, The Netherlands; Linden, New
Jersey; Fortier, Louisiana and Willow Island, West Virginia, manufacturing
sites; (ii) restructuring at its corporate headquarters; (iii) costs to realign
its legal entity structure in Europe and (iv) redundant costs associated with
manufacturing sites after integrating Fiberite. 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, 1999, approximately
361 eliminations requiring severance payments were completed. An additional 12
eliminations from the original plan requiring severance will be substantially
completed by mid-year 2000.
As of December 31, 1999, payments and write-offs of $31.7 were made for these
charges. In the fourth quarter of 1999, the Company reduced this restructuring
accrual due to incurring lower costs than expected for the shutdown of the
Warner's, New Jersey facility and incurring fewer personnel reductions by
filling unanticipated open positions. As a result, the Company recognized a
restructuring credit of $3.0 in the Consolidated Statement of Income as follows:
manufacturing cost of sales, $2.7 and administrative and general, $0.3. At
December 31, 1999, the liability to be paid was $3.7, essentially all of which
is for the remaining personnel reductions and for certain long-term payouts for
employee severance, primarily in Europe. The Company anticipates that, except
for these long-term payouts, all of the remaining restructuring costs will be
paid in 2000.
Also in the fourth quarter of 1999, the Company recorded restructuring charges
of $3.6, primarily related to the consolidation of certain Specialty Materials
manufacturing and research activities and the Fortier, Louisiana, methanol plant
shutdown and related personnel reductions. The restructuring costs were charged
to the Consolidated Statement of Income as follows: manufacturing cost of sales,
$1.2; selling and technical services, $0.3; research and process development,
$1.7; and administrative and general, $0.4. The components of the restructuring
charges include: employee severence costs, $3.1 and shut-down costs, $0.5. The
personnel reduction primarily represents severance costs associated with the
elimination of approximately 72 positions worldwide. As of December 31, 1999,
approximately 10 positions have been eliminated and the remainder are expected
to be completed by the end of 2000. Cash payments of $0.8 were made for these
charges during the fourth quarter of 1999, with a liability of $2.8 remaining as
of December 31, 1999.
4) FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, accounts receivable, certain
other assets, accounts payable, short-term debt and certain other liabilities
included in the Company's Consolidated Balance Sheets approximated their fair
values at December 31, 1999 and 1998. The Company had an aggregate of $35.0 in
credit potentially available for short-term uses under three uncommitted credit
facilities and a U.S. dollar equivalent of approximately $16.0 available under a
foreign denominated overdraft facility. There were no outstanding borrowings
under these facilities at December 31, 1999 and $10.3 outstanding at December
31, 1998. The fair values of long-term debt were $399.1 at December 31, 1999,
and $412.2 at December 31, 1998.
Commencing in September 1997, the Company entered into a series of rate lock
agreements to hedge against the risk of an increase in treasury rates related to
the Company's offering of $300.0 in long-term debt securities. The Company made
payments aggregating approximately $11.2 to settle the rate lock agreements
($9.6 of which was paid during the first half of 1998 and the remainder in
1997), which will be amortized over the life of the 6.50% Notes, 6.75% Notes and
6.846%
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<PAGE>
MandatOry Par Put Remarketed SecuritiesSM ("MOPPRSSM") as an increase in
interest expense of such Notes. See also Note 8.
At December 31, 1999, the Company was party to four interest rate swap
agreements with an aggregate notional value of $82.0. Two of the swap agreements
with maturity dates during 2001 have virtually offsetting terms. Another swap
agreement effectively converts variable rate interest obligations on the
Company's Credit Facility to 6.25% fixed rate obligations. The maturity date of
this swap agreement is November 1, 2001. The fourth interest rate swap agreement
was entered into on May 14, 1999, matures in March 2008 and effectively converts
$25.0 of the Company's 6.75% fixed rate borrowings due on March 15, 2008, to a
floating rate.
At December 31, 1999, the Company had net foreign exchange contracts to
purchase $6.5 of various currencies, primarily Dutch guilders and German marks
and to sell $5.8 of various currencies, primarily British pounds for U.S.
dollars. The Company also had contracts to sell Dutch guilders with a value
equivalent to $13.4 for British pounds and contracts to purchase Norwegian krone
with a value equivalent to $4.3 for other European currencies. 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. The fair values of existing
foreign exchange contracts, based on exchange rates at December 31, 1999 and
1998, approximated the above contract values.
At December 31, 1999, the Company had $2.8 net natural gas forward commodity
and cash-settled swap contracts outstanding. At December 31, 1998, the Company
had $4.6 net natural gas forward commodity contracts outstanding. Based on year-
end prices, the fair value of natural gas derivative contracts were $2.4 and
$3.6 at December 31, 1999 and 1998, respectively.
In connection with the Company's stock repurchase program, during the year
ended December 31, 1999, the Company sold an aggregate of 800,000 put options to
three institutional investors in a series of private placements exempt from
registration under Section 4(2) of the Securities Act of 1933. The put options
entitled the holders to sell an aggregate of 800,000 shares of the Company's
common stock to the Company at exercise prices ranging from $21.00 to $22.50 per
share. During the year, 350,000 of the put options expired unexercised. The
remaining 450,000 put options expire on various dates in February and April
2000. The Company received premiums of approximately $1.2 on the sale of such
put options. Subsequent to December 31, 1999, the Company sold an additional
100,000 put options that expire in July 2000 and 100,000 put options that expire
in August 2000 at exercise prices of $23.083 per share and $23.552 per share,
respectively. The Company has received premiums of approximately $0.2 on the
sale of such put options. The put options outstanding at December 31, 1999, had
exercise prices that were less than the Company's stock price as of that date.
See also Note 14.
5) 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 $41.8 and $40.4 at December 31, 1999 and 1998,
respectively. Summarized financial information for the Company's investments in
associated companies as of and for the years ended December 31, 1999, 1998 and
1997, is as follows:
1999 1998 1997
- ------------------------------------------------------
Net sales $521.4 $583.0 $596.5
Gross profit 116.4 153.3 145.2
Net earnings 11.4 44.0 25.6
Company's share of earnings 5.6 20.3 12.3
- ------------------------------------------------------
Current assets 280.5 270.3 308.8
Noncurrent assets 354.9 343.4 333.5
Total assets 635.4 613.7 642.3
- ------------------------------------------------------
Current liabilities 206.3 175.0 172.4
Noncurrent liabilities 126.1 127.3 172.9
Equity 303.0 311.4 297.0
Total liabilities and equity 635.4 613.7 642.3
- ------------------------------------------------------
Company's share of equity $151.5 $155.7 $148.5
Sales to associated companies (primarily CYRO Industries) amounted to $25.2,
$34.4 and $35.9 in 1999, 1998 and 1997, respectively. Purchases from associated
companies were immaterial.
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<PAGE>
Included in Other Assets at December 31, 1999 was a $5.0 note due January 31,
2002 from Criterion Catalyst, an associated company. The Company has agreed to
make additional loans to Criterion Catalyst up to a maximum of $50.0 if
Criterion Catalyst is not in compliance with certain covenants in its principal
credit agreement.
6) INVENTORIES
<TABLE>
<CAPTION>
At December 31, 1999 and 1998, LIFO inventories comprised approximately 66% of consolidated inventories.
1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $ 89.0 $ 87.6
Work in progress 17.3 16.0
Raw materials and supplies 65.9 75.4
- ----------------------------------------------------------------------------------------------------------------------------------
172.2 179.0
Less reduction to LIFO cost (32.7) (38.5)
- ----------------------------------------------------------------------------------------------------------------------------------
Total inventories $ 139.5 $ 140.5
</TABLE>
7) PLANTS, EQUIPMENT AND FACILITIES
At December 31, 1999 and 1998, plant, equipment and facilities consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land and land improvements $ 39.9 $ 41.6
Buildings 167.3 167.1
Machinery and equipment 1,093.4 1,086.5
Construction in progress 52.0 67.8
- ----------------------------------------------------------------------------------------------------------------------------------
Plants, equipment and facilities, at cost $1,352.6 $1,363.0
</TABLE>
8) LONG-TERM DEBT
<TABLE>
<CAPTION>
At December 31, 1999 and 1998, long-term debt consisted of the following:
1999 1998
<S> <C> <C>
Credit Facility $ 103.0 $ 100.0
Public Debt 319.5 319.5
- ----------------------------------------------------------------------------------------------------------------------------------
Long-term debt $ 422.5 $ 419.5
</TABLE>
The weighted average interest rate on long-term debt for 1999 and 1998 was 6.77%
and 6.69%, respectively.
At December 31, 1999, 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 $103.0 of outstanding borrowings
under the Credit Facility at December 31, 1999. 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, 1999.
On August 20, 1999, the Company replaced its prior 364-day credit facility
with a new 364-day credit facility, which provides up to $200.0 in unsecured
revolving loans for general corporate purposes. Three new lenders were added
while two withdrew from the consortium of U.S. and non-U.S. banks participating
in the 364-day credit facility. The 364-day credit facility matures on August
19, 2000, and contains a one-year term-out option. The interest rate on funds
borrowed floats based on the LIBOR. There were no outstanding borrowings under
the 364-day facility at December 31, 1999 and 1998.
During the first six months of 1998, the Company sold an aggregate of $320.0
principal amount of senior debt securities in public offerings, 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, which 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 primarily to refinance the Fiberite Acquisition.
Except in limited circumstances, the MOPPRSSM 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/SM/ from the Remarketing Date
to maturity will be 5.951% plus an applicable spread.
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<PAGE>
If the Remarketing Dealer for any reason does not purchase all tendered
MOPPRS/SM/ on the Remarketing Date or elects not to remarket the MOPPRSSM, the
Company will be required to repurchase the MOPPRSSM 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 $336.1
at December 31, 1999. 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 55 Superfund sites. Since the laws
pertaining to these sites provide for joint and several liability, a
governmental plaintiff could seek to recover all remediation costs at a waste
disposal site from any of the potentially responsible parties ("PRPs") for such
site, including the Company, despite the involvement of other PRPs. In some
cases, the Company is one of several hundred identified PRPs, while in others it
is the only one or one of only a few. Generally, where there are a number of
financially solvent PRPs, liability has been apportioned, or the Company
believes, based on its experience with such matters, that liability will be
apportioned based on the type and amount of waste disposed by each PRP at such
disposal site and the number of financially solvent PRPs. The Company is also
conducting remediation at, or is otherwise responsible for, a number of non-
Superfund sites. Proceedings involving environmental matters, such as alleged
discharge of chemicals or waste material into the air, water or soil, are
pending against the Company in various states. In many cases, future
environmental related expenditures cannot be quantified with a reasonable degree
of accuracy. In addition, from time to time in the ordinary course of its
business, the Company is informed of, and receives inquiries with respect to,
new sites which may contain environmental contamination for which the Company
may be responsible.
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 estimatable. As assessments and cleanups
proceed, these accruals are reviewed periodically and adjusted, if necessary, as
additional information becomes available. These accruals can change
substantially due to such factors as additional information on the nature or
extent of contamination, methods of remediation required, and other actions by
governmental agencies or private parties. Cash expenditures often lag behind the
period in which an accrual is recorded by a number of years.
In accordance with the above policies, as of December 31, 1999 and December
31, 1998, the aggregate environmental related accruals were $122.9 and $136.1,
respectively. Of these amounts, the environmental related accruals included in
accrued expenses were $20.0 as of December 31, 1999, and $25.0 as of December
31, 1998, with the remainder included in other noncurrent liabilities.
Environmental remediation spending for the years ended December 31, 1999, 1998
and 1997, was $18.6, $23.8 and $26.1, 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 there will be a necessity for
future provisions for environmental costs that, in management's opinion, will
not have a materially 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 materially adverse effect on the financial position of the Company, but
could be material to the results of operations of the Company in any one
accounting period.
Rental expense under property and equipment leases was $12.3 in 1999, $12.8 in
1998 and $11.5 in 1997. 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, 1999, are:
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<PAGE>
Operating
Leases
- ------------------------------------------------------------------------------
2000 $11.2
2001 7.8
2002 4.3
2003 2.0
2004 0.6
Thereafter 0.5
- ------------------------------------------------------------------------------
Total minimum lease payments $26.4
=====
At December 31, 1999 and 1998, the Company had $11.8 and $10.9, 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, 1999, 1998 and 1997,
is based on earnings before income taxes as follows:
1999 1998 1997
- --------------------------------------------------------------------------------
Domestic $110.1 $154.1 $116.3
Foreign 62.9 43.8 33.4
- --------------------------------------------------------------------------------
Total $173.0 $197.9 $149.7
The components of the provision for the years ended December 31, 1999, 1998 and
1997, are composed of the following:
1999 1998 1997
- --------------------------------------------------------------------------------
Current:
Federal $ 4.8 $ 37.0 $ 18.6
Foreign 21.0 18.0 10.8
Other, principally state 1.0 3.4 4.3
Total $ 26.8 $ 58.4 $ 33.7
- --------------------------------------------------------------------------------
Deferred:
Federal $ 21.9 $ 13.2 $ 1.6
Foreign (2.3) (2.1) 0.7
Other, principally state 5.3 3.7 0.1
Total $ 24.9 $ 14.8 $ 2.4
- --------------------------------------------------------------------------------
Total income tax provision $ 51.7 $ 73.2 $ 36.1
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<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, 1999 and 1998, are as
follows:
1999 1998
- --------------------------------------------------------------------
Deferred tax assets:
Allowance for bad debts $ 2.3 $ 2.9
Employee benefit accruals 16.7 17.7
Insurance accruals 12.9 12.9
Operating accruals 20.3 19.5
Inventory 5.2 6.1
Environmental accruals 45.2 51.4
Postretirement obligations 126.8 131.5
Other 16.5 17.9
Deferred tax assets 245.9 259.9
- --------------------------------------------------------------------
Deferred tax liabilities:
Plants, equipment and facilities (122.7) (109.9)
Other (12.7) (14.5)
Deferred tax liabilities (135.4) (124.4)
Net deferred tax assets $ 110.5 $ 135.5
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 any amount of additional U.S. tax that might be payable on
these earnings in the event of distribution or sale.
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.
In the third quarter of 1999, the Company recognized an $8.0 reduction in
income tax expense related to the utilization of additional prior years' tax
credits. Excluding the impact of this nonrecurring item, the Company's effective
tax rate for 1999 was 34.5%.
A reconciliation between the Company's effective tax rate and the U.S. federal
income tax rate is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax rate 35.0% 35.0% 35.0%
Research and experimental credit (1.8) - -
Prior period tax credits (4.6) - -
Valuation allowance adjustment - - (16.3)
Income subject to other than the federal income tax rate (2.6) (0.9) 0.7
State taxes, net of federal benefits 2.2 3.1 3.9
Other charges, net 1.7 (0.2) 0.8
- ---------------------------------------------------------------------------------
Effective tax rate 29.9% 37.0% 24.1%
</TABLE>
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<PAGE>
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>
1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Change in benefit obligation
Benefit obligation at January 1 $ 321.5 $ 286.1
Service cost 10.1 10.2
Interest cost 21.8 20.9
Amendments 0.1 (3.5)
Acquisitions - 1.2
Translation difference 0.1 (0.5)
Actuarial (gain) loss (37.0) 14.7
Employee contributions 0.2 0.2
Benefits paid (11.6) (7.8)
Benefit obligation at December 31 $ 305.2 $ 321.5
- ----------------------------------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at January 1 $ 299.4 $ 252.3
Actual return on plan assets 44.9 40.6
Company contributions 13.7 13.4
Employee contributions 0.2 0.2
Acquisitions - 1.2
Translation difference 0.2 (0.5)
Benefits paid (11.6) (7.8)
Fair value of plan assets at December 31 $ 346.8 $ 299.4
- ----------------------------------------------------------------------------------------------------------
Projected benefit obligation (under) over plan assets $ (41.6) $ 22.1
Unrecognized actuarial gain (loss) 41.2 (18.4)
Unrecognized prior service cost 1.4 1.3
Unrecognized net transition obligation 1.4 1.5
- ----------------------------------------------------------------------------------------------------------
Accrued pension cost recognized in the consolidated balance sheets $ 2.4 $ 6.5
Assumptions as of December 31:
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
Discount rate 7.75% 6.75% 7.0%
Expected return on plan assets 9.25% 9.0% 9.0%
Rate of future compensation increase 4.0-10.0% 3.0-10.0% 3.0-10.0%
Net periodic pension expense includes the following components:
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
Service cost $ 10.1 $ 10.2 $ 8.7
Interest cost on projected benefit obligation 21.8 20.7 17.6
Expected return on plan assets (24.2) (22.1) (18.1)
Net amortization and deferral 1.8 2.7 1.1
- ----------------------------------------------------------------------------------------------------------
Net periodic pension expense $ 9.5 $ 11.5 $ 9.3
</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 $12.2, $9.9 and $0, respectively, as of December 31, 1999,
and $133.4, $112.6 and $95.5, respectively, as of December 31, 1998. The prepaid
benefit costs recognized in the consolidated balance sheets as of December 31,
1999 and 1998 were $7.2 and $10.6, respectively, and the accrued benefit
liability recognized in the consolidated balance sheets as of December 31, 1999
and 1998 was $9.6 and $17.1, respectively.
The Company sponsors employee savings and profit sharing plans. 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 $4.6, $4.2 and $3.9 for 1999, 1998 and 1997,
respectively. Profit sharing contributions were approximately $3.6, $5.0 and
$4.6 in 1999, 1998 and 1997, respectively.
-44-
<PAGE>
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>
1999 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Change in benefit obligation
Benefit obligation at January 1 $278.6 $309.5
Service cost 1.4 1.4
Interest cost 17.3 18.5
Amendments (1.2) (17.0)
Translation difference (0.2) (0.3)
Actuarial gain (5.4) (13.5)
Employee contributions 1.0 0.9
Benefits paid (23.4) (20.9)
------ ------
Benefit obligation at December 31 $268.1 $278.6
- --------------------------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at January 1 $ 46.5 $ 38.0
Actual return on plan assets 2.7 3.3
Company contributions 27.7 25.2
Employee contributions 0.9 0.9
Benefits paid (23.4) (20.9)
------ ------
Fair value of plan assets at December 31 $ 54.4 $ 46.5
- --------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation over fair value of plan assets $213.7 $232.1
Unrecognized actuarial gain 50.3 47.5
Unrecognized negative prior service cost 57.2 61.5
- --------------------------------------------------------------------------------------------------
Accrued benefit cost $321.1 $341.1
------ ------
</TABLE>
The accrued postretirement benefit cost recognized in the Company's
Consolidated Balance Sheets at December 31, 1999 and 1998, includes $20.0 in
accrued expenses and $301.1 and $321.1, respectively, in other noncurrent
liabilities.
Net periodic postretirement benefit costs for the years ended December 31,
1999, 1998 and 1997, included the following components:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Service cost $ 1.4 $ 1.4 $ 1.2
Interest cost 17.3 18.5 21.1
Expected return on plan assets (3.2) (2.7) (1.7)
Net amortization and deferral (7.8) (7.4) (5.1)
Curtailment gain - - (9.3)
- -----------------------------------------------------------------------------------------------
Total cost $ 7.7 $ 9.8 $ 6.2
</TABLE>
Measurement of the accumulated postretirement benefit obligations ("APBO") was
based on actuarial assumptions, including a discount rate of 7.75%, 6.75% and
7.00% at December 31, 1999, 1998 and 1997, respectively and an expected return
on plan assets of 7.0% at December 31, 1999, 1998 and 1997. The assumed rate of
future increases in the per capita cost of health care benefits (health care
cost trend rate) is 8.0% in 2000, decreasing evenly over five years to 5.5% 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, 1999, and the 1999 aggregate
service and interest cost by approximately $25.0 and $1.8, respectively, and
decreasing the health care cost trend rate by one percentage point in each year
would decrease the APBO at December 31, 1999 and the 1999 aggregate service and
interest cost by approximately $22.7 and $1.6, respectively.
-45-
<PAGE>
13) OTHER FINANCIAL INFORMATION
Accrued expenses at December 31, 1999 and 1998, included the following:
1999 1998
- ------------------------------------------------------------------------------
Pensions and other employee benefits $ 34.5 $ 34.6
Other postretirement employee benefits 20.0 20.0
Salaries and wages 9.3 11.7
Environmental 20.0 25.0
Restructuring 6.5 17.6
Other 108.1 135.0
- ------------------------------------------------------------------------------
$198.4 $243.9
------ ------
Cash payments during the years ended December 31, 1999, 1998 and 1997,
included interest of $27.8, $21.0 and $6.2, respectively. Income taxes paid in
1999, 1998 and 1997 were $28.7, $40.2 and $30.4, respectively. Income taxes paid
include foreign taxes of $16.8, $13.4 and $6.6 in 1999, 1998 and 1997,
respectively.
Included in accounts receivable at December 31, 1999 and 1998, are
miscellaneous receivables of approximately $35.5 and $37.2, respectively.
Included in interest expense, net, for the years ended December 31, 1999, 1998
and 1997, is interest income of $2.0, $2.3 and $2.2, respectively.
Other income, net, was $9.3, $14.5 and $23.9 for the years ended December 31,
1999, 1998 and 1997, respectively. Included in 1999 were gains of $4.5 from the
sale of land, $2.2 from royalty income and $1.6 from the sale of certain product
lines. Included in 1998 were gains of $4.4 related to the sale of the bulk
molding compounds product line, $3.0 of other investment income and $3.8 on
certain investments in unaffiliated companies. Included in 1997 were gains 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 for expected losses on certain other assets that were held for sale.
14) COMMON STOCK
The Company is authorized to issue 150 million shares of common stock with a
par value of $.01 per share, of which 41,609,673 shares were outstanding at
December 31, 1999. A summary of changes in common stock issued and treasury
stock for the years ended December 31, 1999, 1998 and 1997 is presented below.
Common Treasury
Stock Stock
----------- -----------
Balance at December 31, 1996 48,377,683 2,883,485
Purchase of treasury stock - 1,234,250
Issuance pursuant to stock option plan - (934,688)
Award of performance stock and restricted stock - (90,725)
Forfeitures and deferrals of stock awards (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 deferrals of stock awards (38,303) 19,632
Issuance pursuant to acquisition - (1,248,620)
---------- ----------
Balance at December 31, 1998 48,142,961 4,952,881
Purchase of treasury stock - 1,784,045
Issuance pursuant to stock option plan - (148,693)
Award of performance stock and restricted stock - (84,903)
Forfeitures and deferrals of stock awards (10,321) 22,425
Issuance pursuant to warrant exercise - (7,745)
Adjustment to shares issued pursuant to acquisition - 4,957
---------- ----------
Balance at December 31, 1999 48,132,640 6,522,967
========== ==========
-46-
<PAGE>
On January 25, 1999, the Company announced a program to spend up to $100.0 to
repurchase shares of its outstanding common stock. Through December 31, 1999,
the Company had repurchased 1,784,045 shares at a cost of $42.5 under this
program. See also Note 15.
Stock Award and Incentive Plan The 1993 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. At December 31, 1999, the Company had
reserved approximately 10,217,194 shares for issuance under the 1993 Plan.
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 331 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.
As discussed in Note 2, in connection with the AMT acquisition, the Company
issued from Treasury Stock 1,243,663 shares of its common stock to AMT
shareholders. In addition, outstanding options and warrants to acquire AMT stock
were converted into 335,209 Cytec options and warrants with a weighted average
excercise price of $10.48 per share.
A summary of the status of the Company's stock options as of December 31,
1999, 1998 and 1997, and changes during the years ended on those dates is
presented below.
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
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 5,276,173 $ 19.90 4,811,258 $16.30 4,896,446 $10.18
Granted 1,193,409 21.00 631,025 47.61 883,425 40.25
Issued pursuant to acquisition - - 259,308 6.18 - -
Exercised (148,693) 6.81 (381,764) 8.61 (934,688) 6.45
Forfeited (81,483) 30.30 (43,654) 41.68 (33,925) 27.64
Outstanding at end of year 6,239,406 $ 20.28 5,276,173 $19.90 4,811,258 $16.30
- ------------------------------------------------------------------------------------------------------------------------------------
Options exercisable at end of year 4,434,989 $ 16.56 3,864,809 $12.48 3,220,320 $ 8.74
</TABLE>
The following table summarizes information about stock
options outstanding and exercisable at December 31,
1999:
<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 2,223,464 4.32 $ 5.45 2,210,591 $ 5.44
11.66-22.88 1,699,812 7.63 17.79 657,169 13.55
23.31-37.75 902,400 6.51 25.41 802,763 25.17
37.87-47.32 851,605 7.15 40.18 567,845 40.19
47.81-57.44 562,125 8.08 48.13 196,621 48.12
- ----------------------------------------------------------------------------------------------------------------------------
$2.77-57.44 6,239,406 6.26 $20.28 4,434,989 $16.56
--------- ---- ------ --------- ------
</TABLE>
As provided under the 1993 Plan, the Company has also issued restricted stock
and performance stock. Restricted shares are subject to certain restrictions on
ownership and transferability that lapse upon vesting. Performance share payouts
are based on the attainment of certain performance objectives related to the
Company's financial performance and may vary depending on the degree to which
the performance objectives are met. Performance shares awarded in 1997, 1998 and
1999 relate to the 1999, 2000 and 2001 performance periods, respectively. The
total amount of stock-based compensation
-47-
<PAGE>
expense/(income) recognized for restricted stock and performance stock was $1.4
in 1999, ($0.3) in 1998 and $3.0 in 1997. A summary of restricted stock and
performance stock activity is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding awards - beginning of year 112,229 151,838 131,304
New awards granted 84,903 42,906 90,725
Shares with restrictions lapsed(1) (31,368) (53,995) (49,956)
Restricted shares forfeited (9,378) (28,520) (20,235)
Outstanding awards - end of year 156,386 112,229 151,838
- ------------------------------------------------------------------------------------------
Weighted average market value of new awards on award date $20.64 $47.61 $ 41.10
</TABLE>
(1) 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.
The compensation costs that have been charged against income for restricted
stock and performance stock awards have been 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>
1999 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings :
As reported $121.3 $124.7 $113.6
Pro forma 117.8 120.0 107.7
Basic earnings per share:
As reported $ 2.83 $ 2.79 $ 2.50
Pro forma 2.75 2.68 2.37
Diluted earnings per share:
As reported $ 2.73 $ 2.68 $ 2.39
Pro forma 2.65 2.58 2.26
The effects of applying SFAS 123 in this pro forma disclosure are not necessarily indicative of
future amounts.
</TABLE>
The fair value of each stock option granted during 1999, 1998 and 1997 is
estimated on the date of grant using the Black-Scholes option pricing model with
the following assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected life (years) 6.0 6.0 6.0
Expected volatility 43.47% 42.80% 45.66%
Expected dividend yield - - -
Risk-free interest rate 6.58% 5.50% 6.41%
Weighted average fair value of options granted during the year $10.95 $23.71 $21.52
</TABLE>
In late 1995 the Company implemented a stock appreciation plan for all
eligible active employees not eligible to participate in the stock option
program. 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, which is December 14,
2000, or $33.33. The stock appreciation units matured in 50% increments at
December 14, 1997, and December 14, 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. Should the stock price close at or above $33.33, an immediate
final payout will be made. Otherwise, a final payment will be made on December
14, 2000 provided that the closing stock price on that day is greater than
$26.66. The compensation cost related to this plan was $2.0 in 1997.
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 December 17, 1993, the
Company had issued to American Cyanamid Company ("Cyanamid"), a wholly-owned
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, has an annual
dividend of $1.83 per share (7.32%) and is redeemable at the Company's option
under certain limited circumstances. Shares of Series C Stock are not
transferable except to a subsidiary of Cyanamid. The Series C Stock
-48-
<PAGE>
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.
On April 8, 1997, the Company signed an agreement with Cyanamid to revise
certain of the financial covenants contained in its Series C Stock held by
Cyanamid. 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,
1999, the Company had $422.5 of debt and $505.7 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 $336.1 in debt.
On January 22, 1999, the Company 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, 1999, were limited to
$55.2, the Company may make up to $100.0 in special restricted payments solely
for the purpose of repurchasing its common stock. Through December 31, 1999, the
Company had purchased 1,784,045 shares at a cost of $42.5 under its $100.0 stock
repurchase program. At December 31, 1999, $112.7 was available for stock
repurchases under the agreements with Cyanamid.
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, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998
Per Per
Income Shares Share Income Shares Share Income
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator)
Basic EPS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net earnings $121.3 42,890,159 $ 2.83 $ 124.7 44,714,788 $ 2.79 $113.6
Effect of dilutive
securities
Options - 1,507,357 - 1,663,768 -
Performance/Restricted stock - 103,353 - 95,954 -
Put options - - - 3,840 -
Warrants - 4,395 - 1,763 -
Diluted EPS
Net earnings $121.3 44,505,264 $ 2.73 $ 124.7 46,480,113 $ 2.68 $113.6
<CAPTION>
1997
Per
Shares Share
(Denominator) Amount
Basic EPS
- --------------------------------------------------
<S> <C> <C>
Net earnings 45,450,139 $2.50
Effect of dilutive
securities
Options 1,992,762
Performance/Restricted stock 108,783
Put options 2,132
Warrants -
Diluted EPS
Net earnings 47,553,816 $2.39
</TABLE>
At December 31, 1999, there were 2,370,660 options and 61,960 warrants
outstanding with weighted average exercise prices of $35.95 and $28.41,
respectively, that were excluded from the above calculation because their
inclusion would have had an antidilutive effect on EPS.
17) OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREAS
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 water treating,
mining, paper and phosphine chemicals that are used mainly in water and
wastewater treatment, mineral processing and separation and paper manufacturing.
The Performance Products segment produces specialty resins, surfactants and
specialty monomers and polymer additives that are used primarily in coatings,
adhesives and plastics applications. The Specialty Materials segment
manufactures and sells aerospace materials that are used mainly in commercial
and military aviation and launch vehicles, automobiles, recreational products,
satellites and aircraft brakes. The segment also includes the Bulk and
Engineered Molding Compounds businesses, which, except for one minor product
line, have since been divested in 1997 and 1998, respectively. The Building
Block Chemicals segment manufactures acrylonitrile, acrylamide, ammonia,
hydrocyanic acid, melamine and sulfuric acid. These
-49-
<PAGE>
chemicals are used in the manufacture of many of the Company's other products
with the remainder sold to third parties. Internal usage is not reflected in net
sales of Building Block Chemicals.
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.
Summarized segment information for the years 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Water and
Industrial Building
Process Performance Specialty Block Total
Chemicals Products Materials Chemicals Segments
1999
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales to external customers $372.8 $442.4 $434.5 $162.8 $1,412.5
Intersegment net sales - - - 42.0 42.0
- ----------------------------------------------------------------------------------------------
Total net sales 372.8 442.4 434.5 204.8 1,454.5
Earnings from operations 44.0 54.9 85.3 6.8 191.0
Percentage of sales 11.8% 12.4% 19.6% 3.3% 13.1%
Total assets 267.3 436.1 494.4 245.1 1,442.9
Capital expenditures 19.0 18.8 13.9 20.0 71.7
Depreciation and amortization 18.3 30.5 17.7 27.0 93.5
- ----------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------
1997
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
</TABLE>
-50-
<PAGE>
The following table provides a reconciliation of selected segment information
to corresponding amounts contained in the Company's Consolidated Financial
Statements:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
Net sales from reportable segments $1,454.5 $1,482.7 $1,324.4
Other revenues - 0.2 14.6
Elimination of intersegment revenue (42.0) (38.4) (48.4)
-------- -------- --------
Total consolidated net sales $1,412.5 $1,444.5 $1,290.6
- -----------------------------------------------------------------------------
Earnings from operations:
Earnings from reportable segments $ 191.0 $ 195.0 $ 164.4
Corporate unallocated (6.0) (9.5) (45.2)
-------- -------- --------
Total consolidated earnings from operations $ 185.0 $ 185.5 $ 119.2
- -----------------------------------------------------------------------------
Total assets:
Assets from reportable segments $1,442.9 $1,415.3
Other assets 317.0 315.3
- ------------------------------------------------------------------
Total consolidated assets $1,759.9 $1,730.6
-------- --------
</TABLE>
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 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. 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>
1999 1998 1997
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
United States $ 799.9 $ 890.6 $ 782.6
Other Americas 138.5 117.8 117.7
Asia/Pacific Rim 151.1 134.6 142.5
Europe, Mideast, Africa 323.0 301.5 247.8
-------- -------- --------
Total $1,412.5 $1,444.5 $1,290.6
- ------------------------------------------------------------------------
U.S. exports included in net sales above
Other Americas $ 43.8 $ 38.5 $ 36.3
Asia/Pacific Rim 66.9 70.9 75.7
Europe, Mideast, Africa 42.2 43.5 32.9
-------- -------- --------
Total $ 152.9 $ 152.9 $ 144.9
- ------------------------------------------------------------------------
Earnings from operations(1)
United States $ 88.9 $ 109.0 $ 75.0
Other Americas 26.6 18.8 17.2
Asia/Pacific Rim 12.7 12.4 11.9
Europe, Mideast, Africa 56.8 45.3 15.1
-------- -------- --------
Total $ 185.0 $ 185.5 $ 119.2
- ------------------------------------------------------------------------
Identifiable assets
United States $ 958.8 $ 943.9
Other Americas 144.2 106.2
Asia/Pacific Rim 30.2 23.3
Europe, Mideast, Africa 204.7 191.3
-------- --------
Total $1,337.9 $1,264.7
- --------------------------------------------------------------
Investment in associated companies 146.4 147.4
Unallocated assets 275.6 318.5
-------- --------
Total assets $1,759.9 $1,730.6
======== ========
</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. Sales to Boeing Company and its subcontractors for
commercial and military aerospace and other components were approximately $176.5
or 12.5% of consolidated net sales in 1999 and approximately $200.0 or 13.8% of
consolidated net sales in 1998. Sales to Boeing Company and subcontractors are
included in the Specialty Materials
-51-
<PAGE>
operating segment. Loss of sales to Boeing Company and subcontractors could have
a material impact on the Company's financial results.
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 auditor function which conducts 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
representatives of the internal auditor function have full and free access to
the Audit Committee.
David Lilley James P. Cronin
Chairman, President and Chief Executive Officer Executive Vice President and
Chief Financial Officer
West Paterson, New Jersey
January 24, 2000
-52-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders,
Cytec Industries Inc.:
We have audited the accompanying consolidated balance sheets of Cytec
Industries Inc. and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cytec
Industries Inc. and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
Short Hills, New Jersey
January 24, 2000
-53-
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY DATA (Unaudited)
(Dollars in millions, except per share amounts) 1Q 2Q 3Q 4Q Year
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999
Net Sales $355.3 $359.1 $344.0 $354.1 $1,412.5
Gross profit(1) 105.3 112.1 107.7 116.6 441.7
Net earnings 28.2 28.0 35.2 29.9 121.3
Earnings per common share(2)
Basic $ .65 $ .65 $ .82 $ .71 $ 2.83
Diluted $ .63 $ .63 $ .79 $ .68 $ 2.73
- -------------------------------------------------------------------------------------------
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
</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 serves at the pleasure of the Board of
Directors of the Company.
<TABLE>
<CAPTION>
Name Age Positions
<S> <C> <C>
D. Lilley 53 Mr. Lilley is Chairman of the Board, President and Chief Executive Officer of the
Company. He was elected Chairman in January 1999 and 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. From 1994 until January 7,
1997, he was a Vice President of American Homes Products Corporation, responsible for
its Global Medical Device business.
J. P. Cronin 46 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 in 1993 until he was elected an Executive Vice President in September
1996.
M. S. Andrekovich 38 Mr. Andrekovich was elected Vice President, Human Resources of the Company in September
1999. From 1996 until he joined the Company, Mr. Andrekovich was group vice president,
human resources for the motor and power generation groups of Magnetek Corporation and
for more than one year prior thereto he was group human resources manager with Nordson
Corporation.
</TABLE>
-54-
<PAGE>
<TABLE>
<S> <C> <C>
W. N. Avrin 44 Mr. Avrin was elected Vice President, Corporate and Business Development of the Company
in December 1999, having previously served the same role for one year in a non-officer
capacity. From 1997 through 1998, Mr. Avrin was vice president and general manager of
Cytec's paper, water treating and mining chemicals business and from 1994 until 1997,
Mr. Avrin was vice president and general manager, Latin America.
W. F. Cleary 53 Mr. Cleary was elected Vice President, Investor Relations of the Company in July, 1999.
Previous to joining the Company, Mr. Cleary was vice president, investor and corporate
relations for Ametek Corporation for more than five years.
D. M. Drillock 42 Mr. Drillock was elected Controller of the Company in December 1995, having previously
served as Controller in a non-officer capacity since December 1993.
E. F. Jackman 54 Mr. Jackman is Vice President, General Counsel and Secretary of the Company and has held
this position for more than five years.
T. P. Wozniak 46 Mr. Wozniak is Treasurer of the Company and has held this position for more than five
years.
</TABLE>
Directors
----------
Set forth below is certain information concerning Mr. Burns, a director
of the Company scheduled to retire from the Board on May 8, 2000.
Age Positions
G. A Burns 74 Mr. Burns has been a director of the Company since its
inception in 1993. Before his retirement from CPC
International Inc., he served as Executive Vice
President, Chief President Chief Financial Officer and
Director of CPC.
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 2000 Annual Meeting of Common
Stockholders, dated March 29, 2000.
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 2000 Annual Meeting of
Common Stockholders, dated March 29, 2000.
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 2000 Annual Meeting of Common
Stockholders, dated March 29, 2000.
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 2000 Annual Meeting of
Common Stockholders, dated March 29, 2000.
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):
-55-
<PAGE>
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1999 and 1998
Consolidated Statements of Income for the Years Ended
December 31, 1999, 1998, and 1997
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998, and 1997
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1999, 1998, and 1997
Notes to Consolidated Financial Statements
(a)(2) Cytec Industries Inc. and Subsidiaries Financial Statement
Schedules for the Years Ended December 31, 1999, 1998, and 1997
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 consolidated 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, 1999.
-56-
<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 30, 2000 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 30, 2000 /s/ D. Lilley
----------------------------------
D. Lilley
Chairman and Chief Executive Officer
DATE: March 30, 2000 /s/ J.P. Cronin
------------------------------------
J. P. Cronin, Executive Vice President,
Chief Financial and Accounting Officer
*
------------------------------
J. E. Akitt, Director
*
------------------------------
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 30, 2000
-57-
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors and Stockholders
Cytec Industries Inc.
Under date of January 24, 2000, we reported on the consolidated balance sheets
of Cytec Industries Inc. and subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1999. 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
Short Hills, New Jersey
January 24, 2000
-58-
<PAGE>
SCHEDULE II
-----------
<TABLE>
<CAPTION>
Valuation Allowances
(Millions of dollars)
Addition or
(deductions)
Charged or
(credited) Other
Balance to Additions or Balance
Description 12/31/98 expenses (deductions) 12/31/99
<S> <C> <C> <C> <C>
Reserves deducted
from related assets:
Doubtful accounts $ 9.2 $ 1.0 $(0.9) /1/ $ 9.3
Total investments
and advances and
other assets $ 19.8 $(4.7) /2/ $ 2.4 /3/ $ 17.5
</TABLE>
1) Principally bad debts written off, less recoveries.
2) Liquidation of certain investments held by unconsolidated associated
companies, which had been fully reserved.
3) Reclassification of reserve.
<TABLE>
<CAPTION>
Addition or
(deductions)
Charged or
(credited) Other
Balance 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/ $(1.9) /4/ $ 19.8
$(2.8) /3/
</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 reserve.
-59-
<PAGE>
<TABLE>
<CAPTION>
Addition or
(deductions)
Charged or
(credited) Other
Balance to Additions or Balance
Description 12/31/96 expenses (deductions) 12/31/97
<S> <C> <C> <C> <C>
Reserves deducted
from related assets:
Doubtful accounts $ 11.1 $(1.1) /1/ $ 10.0
Total investments
and advances and
other assets $ 7.2 $4.9 /2/ $10.9 /3/ $ 23.0
</TABLE>
1) Principally bad debts written off, less recoveries.
2) Provision against unconsolidated equity investments.
3) Reserve against the stated liquidation value of preferred stock received as
consideration in conjunction with the sale of the acrylic fiber product
line.
-60-
<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).
-61-
<PAGE>
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).
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).
-62-
<PAGE>
10.4 Trademarks and Copyrights Transfer Agreement, Assignment and
Bill of Sale, dated as of December 17, 1993, among Cyanamid,
Cytec Technology Corp. and the Registrant (incorporated by
reference to exhibit 10.8 to Registrant's annual report on
Form 10-K for the year ended December 31, 1993).
10.5 Aminonitrile Manufacturing Services Agreement, dated as of
December 17, 1993, between Cyanamid and the Registrant
(incorporated by reference to exhibit 10.9(a) to
Registrant's annual report on Form 10-K for the year ended
December 31, 1993).
10.6 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 20, 1999
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
10.7 to Registrant's quarterly report on Form 10-Q for the
quarter ended September 30, 1999).
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).
-63-
<PAGE>
10.9(d) Amendment No. 3 to AMEL Joint Venture Agreement, dated
January 30, 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 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).
10.11 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).
10.12 Executive Compensation Plans and Arrangements
10.12(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.)
10.12(b) Form of Performance Stock Award/Performance Cash Award Grant
Letter.
10.12(c) Rule No. 1 under 1993 Stock Award and Incentive Plan as
amended through January 24, 2000.
10.12(d) Form of Stock Option Grant Letter (incorporated by reference
to exhibit 10.13(d) of Registrant's annual report on Form
10-K for the year ended December 31, 1998).
10.12(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).
10.12(f) Rule No. 3 under 1993 Stock Award and Incentive Plan, as
amended through March 10, 2000.
10.12(g) Executive Income Continuity Plan, as amended through January
25, 1999 (incorporated by reference to exhibit 10.13(g) to
Registrant's annual report on form 10-K for the year ended
December 31, 1998).
-64-
<PAGE>
10.12(h) Key Manager Income Continuity Plan, as amended through
January 25, 1999 (incorporated by reference to exhibit
10.13(b) to Registrant's annual report on Form 10-K for the
year ended December 31, 1998).
10.12(i) Employee Income Continuity Plan, as amended through May 13,
1996 (incorporated by reference to exhibit 10.13(i) to
Registrant's quarterly report on Form 10-Q for the quarter
ended June 30, 1996).
10.12(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).
10.12(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).
10.12(l) Cytec Executive Supplemental Employees Retirement Plan, as
amended through October 14, 1999 (incorporated by reference
to exhibit 10.13(k) to Registrant's quarterly report on Form
10-Q for the quarter ended September 30, 1999).
10.12(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).
10.12(n) Cytec Supplemental Savings and Profit Sharing Plan, as
amended through December 29, 1999.
10.12(o) Consulting Agreement between the Registrant and D.D. Fry,
dated January 25, 1999 as revised and restated March 3, 1999
(incorporated by reference to exhibit 10.13(o) to
Registrant's annual report on Form 10-K for the year ended
December 31, 1998).
10.12(p) Amended and Restated Trust Agreement effective as of
December 15, 1994 between the Registrant and Vanguard
Fiduciary Trust Company, as successor trustee.
10.12(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).
10.12(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).
10.12(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).
-65-
<PAGE>
10.12(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).
10.12(u) Stock option, dated January 25, 1999, issued to D. D. Fry
(incorporated by reference to exhibit 10.13(u) to
Registrant's annual report on Form 10-K for the year ended
December 31, 1998).
10.12(v) Letter Agreement, dated September 1, 1999, between the
Company and J.W. Hirsch (incorporated by reference to
Exhibit 10.13(v) to Registrant's quarterly report on Form
10-Q for the quarter ended September 30, 1999).
12 Computation of Ratio of Earnings to Fixed Charges
21 Subsidiaries of the Company (incorporated by reference to
Exhibit 21 to Registrant's annual report on Form 10-K for
the year ended December 31, 1998).
23 Consent of KPMG LLP
24(a-f) Powers of Attorney of J. E. Akitt, F. W. Armstrong, G. A.
Burns, L. L. Hoynes, Jr., W. P. Powell and J. R. Satrum.
27 Financial Data Schedule
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<PAGE>
Exhibit 10.12(b)
PERFORMANCE STOCK AWARD UNDER
THE CYTEC INDUSTRIES INC.
1993 STOCK AWARD AND INCENTIVE PLAN
January 24, 2000
[Employee's Name and Address]
Shares of Performance Stock:_____
Performance Period: January 1, 2002 to December 31, 2002
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"). This award is 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.
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.
Certain restrictions with respect to this award include, but are not limited
to, the following:
(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.
<PAGE>
Performance Stock Award -
January 24, 2000
(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 shall vest effective as of January 1, 2003; 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 have been set by the Committee and will be advised to you in
writing. The performance goals are based on year 2002 EPS. The performance
goals provide for the partial vesting of Performance Stock in the event that the
EPS performance goal is substantially, but not fully, achieved.
(4) The Performance Stock 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.
(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 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 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, it hereby being agreed that 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, 2002. 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.
2
<PAGE>
Performance Stock Award -
January 24, 2000
(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 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 2002, your Performance Stock award shall not be forfeited by reason of
such termination of employment; and if your employment so terminates in 2001,
two-thirds of said award shall not be so forfeited; and if your employment so
terminates in 2000, one-third of said award 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 portion of your award
which is 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 shall immediately vest. Upon such
occurrence, the vested shares of Performance Stock shall be delivered 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.
(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.
3
<PAGE>
Performance Stock Award -
January 24, 2000
Once Performance Stock vests as herein provided, it shall no longer be deemed
to be Performance Stock, and your rights thereto shall not be subject to the
restrictions of this Agreement or of the Plan.
In the event of any conflict between the terms of this Agreement and the
provisions of the Plan, the provisions of the Plan shall govern.
If you accept the terms and conditions set forth in this Agreement, please
execute the enclosed copy of this letter where indicated and return it as soon
as possible, along with the enclosed stock power.
Very truly yours,
CYTEC INDUSTRIES INC.
BY:______________________
M. S. Andrekovich
Secretary - Compensation
and Management
Development Committee
Enc.
ACCEPTED:
____________________________
Employee Name:
Social Security No.
Date:
4
<PAGE>
Exhibit 10.12(c)
[As amended 1/24/00]
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 2000,
2001 and 2002 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, 2000, January 1-
December 31, 2001 or January 1-December 31, 2002, 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 (d)
-----------------------------------------
below ("Deferred Stock Awards"), and subject to the terms of the
Performance Stock Award and Performance Cash Award Grant Letters
(Performance Stock Award Grant Letters for the 2002 Performance Period),
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 - 2000, 2001, 2002 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 for the 2000 and 2001 Performance Periods 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 Market Value performance criteria set forth in the Target Document. As
provided in the Target Document, under certain circumstances, the amount of
Performance Cash that vests may exceed the nominal amount of the award, as
set forth in the Grant Letter.
<PAGE>
2
(d) 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.
(e) Executive Committee. The Executive Committee is authorized to set (and
-------------------
change) performance targets for Performance Stock awards and Performance
Cash awards 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.
(f) 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 10.12(f)
As Amended and Restated 3/10/2000
RULES OF GENERAL APPLICATION UNDER
THE CYTEC INDUSTRIES INC. 1993
STOCK AWARD AND INCENTIVE PLAN
Rule 3. This Rule applies to Performance Stock Awards granted by the
- ------
Compensation and Management Development Committee (the "Committee") with respect
to the 2000, 2001 and 2002 Performance Periods and related Performance Cash
Awards granted with respect to the 2000 and 2001 Performance Periods to persons
who are not, as of the date of grant, Executive Officers of the Corporation. The
names of such persons who have been granted awards with respect to the 2000 and
2001 Performance Periods are listed on Exhibits A and B to a separate document
entitled "Award Targets - Non-Officers", such separate document being
hereinafter called the "Target Document". This rule is adopted by the Executive
Committee pursuant to Paragraph (e) 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 (unless the
proforma financing charge was considered by the Executive Committee in
setting the EBIT target); 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, 2000, January
1-December 31, 2001, or January 1-December 31, 2002, as the context
requires.
(iii) "Plan" means the 1993 Stock Award and Incentive Plan of the
Corporation, as amended.
<PAGE>
(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) Performance Targets (2002 et seq.) Beginning with the 2002 Performance
----------------------------------
Period and subject to paragraph (e) below ("Right to Change Targets") and
subject to paragraph (f) below ("Deferred Stock Awards"), and subject to
the terms of the Performance Stock Award Grant Letters, restrictions on
Performance Stock Awards made to persons who, on the date of grant, are not
Executive Officers of the Corporation shall lapse if and to the extent that
the EPS performance targets established under Rule No. 1 are achieved, such
targets being adopted by the Executive Committee for purposes of this Rule
and incorporated herein by reference.
(c) Staff Personnel (2000 and 2001). 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
(e) below ("Right to Change Targets") and subject to Paragraph (f) 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 the related Performance Cash Awards for the 2000 and 2001
Performance Periods for these Participants, as applicable, shall be
governed (except to the extent otherwise specified on Exhibit A), 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.
(d) Business Group Personnel (2000 and 2001). 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 (except to the extent otherwise
specified on Exhibit B), Performance Stock Awards and related Performance
Cash Awards for the 2000 and 2001 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 (e) below ("Right to Change
Targets") and subject to Paragraph (f) 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
<PAGE>
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.
(e) 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.
(f) Deferred Stock Awards. (i) If, as of the date on which any Performance
---------------------
Stock Award 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
<PAGE>
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 (f)(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 (f)(i).
(iii) Deferred Stock resulting from deferral of Dividend Equivalents will
likewise bear Dividend Equivalents.
(g) 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. For the Year 2000 and 2001
Performance Periods, 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 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.
<PAGE>
(h) 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 (e) of Rule No. 1,
will be deemed approved and ratified by such Committee. Changes made to
targets (see paragraph (e) above) may be so reported after the close of the
Performance Period without affecting the validity of any change.
(i) 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 10.12(n)
CYTEC SUPPLEMENTAL SAVINGS AND PROFIT SHARING PLAN
(As restated effective December 29, 1999)
Effective as of November 1, 1994, Cytec Industries Inc. (the "Company")
established the Cytec Supplemental Savings and Profit Sharing Plan (the
"Supplemental Savings Plan"). The Supplemental Savings Plan was restated in its
entirety effective May 13, 1996 and amended effective January 1, 1997 and
January 1, 1998. The Company is again restating the Supplemental Savings Plan
in its entirety effective December 29, 1999 to incorporate the preceding
amendments, to increase the deferral amount, to expand the distribution options,
to offer withdrawal options, and to permit Members to choose the earnings
crediting rate for their account with reference to specified investment
vehicles. Additionally, the restatement incorporates a provision effective
December 1, 1999 which allows Eligible Employees to become Members within thirty
days after their first date of employment.
The Supplemental Savings Plan is intended to constitute an unfunded pension
plan maintained primarily for a select group of management or highly compensated
employees which is exempt from Parts 2, 3, and 4 of Title I of the Employee
Retirement Income Security Act of 1974, as amended. The purpose of the
Supplemental Savings Plan is to provide certain employees whose annual base pay
exceeds the limit of Section 401(a)(17) of the Internal Revenue Code of 1986, as
amended, with the ability to defer up to 15% of their annual base pay and to
receive the full employer matching contribution and profit sharing contribution
which would otherwise be limited by the maximum compensation cap or the limit on
annual additions.
<PAGE>
The Supplemental Savings Plan is not a qualified plan under the Code and
benefits are paid by or on behalf of the Company.
ARTICLE I
Definitions
1.1 "Account Balance" means the sum of the Member's salary deferrals,
matching contributions, profit sharing contributions and earnings credited
thereon in accordance with the terms of this Plan.
1.2 "Administrator" means the Vice President of Human Resources of the
Company, or any other person or committee selected from time to time by the
Board of Directors.
1.3 "Board of Directors" means the Board of Directors of Cytec Industries
Inc.
1.4 "Change in Control" has the same meaning as under the Employees'
Retirement Plan.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "Company" means Cytec Industries Inc.
1.7 "Compensation" means compensation as defined in the Savings Plan
without consideration of the limit on compensation under Section 401(a)(17) of
the Code.
1.8 "Eligible Employee" means, effective December 1, 1999, any person
employed by the Employer who has thirty (30) days of service with the Employer
and whose annual rate of base pay as of the later of their date of hire or
December 1 of the preceding year is equal to or greater than the limit on
compensation under Section 401(a)(17) of the Code.
1.9 "Employees' Retirement Plan" means the Cytec Salaried and
Nonbargaining Employees' Retirement Plan, as amended from time to time.
2
<PAGE>
1.10 "Employer" means the Company, D Aircraft Products, Inc., Cytec
Fiberite Inc., any successors thereto, and any of the Company's subsidiaries
which adopts the Plan with the consent of the Board of Directors.
1.11 "Member" means an Eligible Employee who becomes a Member pursuant to
Article II.
1.12 "Plan" means this Cytec Supplemental Savings and Profit Sharing Plan,
as set forth herein, as amended from time to time.
1.13 "Plan Year" means each twelve (12) consecutive month period
commencing each January 1 and ending on the following December 31.
1.14 "Savings Plan" means the Cytec Employees' Savings and Profit Sharing
Plan, as amended from time to time.
1.15 "Special Change in Control" shall have the same meaning as "Change in
Control" except that the reference to "20" in subsection (i) of the definition
of "Change in Control" in the Employees' Retirement Plan shall be replaced with
"50%."
1.16 "Valuation Date" means each day on which the New York Stock Exchange
is open for the trading of securities.
1.17 "Years of Service" means Years of Service as defined under the
Savings Plan.
1.18 For purposes of this Plan, unless the context requires otherwise, the
masculine includes the feminine, the singular the plural, and vice-versa. Any
reference to a "Section" or "Article" shall mean the indicated section or
article of this Plan unless otherwise specified.
ARTICLE II
Participation
3
<PAGE>
2.1 Election. An Eligible Employee will become a Member effective as of
---------
the date a profit sharing contribution is credited to his account pursuant to
Article IV or the date he elects to defer a portion of his Compensation to this
Plan pursuant to Article III.
2.2 Continuance of Participation. After an Eligible Employee becomes a
-----------------------------
Member of this Plan, his membership shall continue until his death, the
termination of his employment, or the date his Employer ceases to be a member of
the controlled group of corporations which include the Company; provided that
termination of membership shall not affect the Eligible Employee's right to be
credited with any matching and profit sharing contributions to be made with
respect to his period of employment.
ARTICLE III
Savings Contributions
3.1 Deferral Election. During the sixty day period prior to the
------------------
commencement of each Plan Year, a Member may elect to defer up to 15% of his
Compensation less the amount contributed by the Member to the Savings Plan for
that Plan Year whether made on a before-tax or after-tax basis. An Employee who
is hired during the Plan Year and qualifies as an Eligible Employee may submit
his initial deferral election with respect to the Plan to the Administrator
within thirty (30) days of his date of hire. A Member may not modify his
deferral election during the Plan Year other than to revoke his election for the
balance of the Plan Year. A Member's initial deferral election shall be deemed
to apply to all succeeding calendar years until changed by the Member during a
subsequent election period; provided, however, that if a Member takes a hardship
withdrawal from the Savings Plan which subjects the Member to the requirement
that elective deferrals to all plans maintained by the Employer be discontinued,
the
4
<PAGE>
Member's deferral election will be treated as revoked under this Plan for the
applicable twelve month period.
3.2 Matching Contribution. With respect to any Member who is eligible to
----------------------
receive matching contributions under the Savings Plan and who makes a deferral
election pursuant to Section 3.1, the Company shall credit to his account a
matching contribution equal to 75% of the first 4% contributed by the Member to
the Savings Plan and this Plan, whether made on a before-tax or after-tax
basis, less the amount of matching contribution allocated to the Member under
the Savings Plan for the Plan Year. Matching contributions under this Section
shall be credited at the same time the monthly matching contributions are
contributed to the Savings Plan.
ARTICLE IV
Profit Sharing Contributions
Each Eligible Employee who has not made a deferral election pursuant to
Section 3.1 and each Member shall receive a Profit Sharing Contribution equal to
the amount of the profit sharing contribution that would have been made on the
Member's behalf under the Savings Plan if he is eligible to receive profit
sharing contributions under the Savings Plan, without respect to the limitations
imposed by the Code for that Plan Year under Sections 401(a)(17) and 415, minus
the amount actually contributed on his behalf under the Savings Plan for that
Plan Year.
ARTICLE V
Member Accounts
5.1 Establishment; Crediting of Amounts Deferred. An account will be
--------------------------------------------
established for each Member to reflect the amount credited to a Member as a
deferral pursuant to Section 3.1 on the approximate date on which such amounts
would have been paid to the Member but for the
5
<PAGE>
Member's election to defer receipt hereunder, as well as the amount of matching
contribution and profit sharing contribution which is credited to the Member's
Account Balance pursuant to Section 3.2 and Article IV respectively. The amounts
of hypothetical income and appreciation and depreciation in value of such
Account Balance will be credited and debited to, or otherwise reflected in, such
Account Balance on a daily basis. Unless otherwise determined by the
Administrator, amounts credited to an Account Balance shall be deemed invested
in a hypothetical investment as of the date of deferral, the matching
contribution or the profit sharing contribution.
5.2 Hypothetical Investment Options. Amounts credited to a Member's
-------------------------------
Account Balance shall be deemed to be invested, at the Member's direction, in
one or more investment options as may be specified from time to time by the
Administrator on Appendix A. The Administrator may change or discontinue any
hypothetical investment option available under the Plan in its discretion;
provided, however, that, subject to the authority of the Administrator to
disregard the directions of any Member, each affected Member is given the
opportunity, without limiting or otherwise impairing any other right of such
Member regarding changes in investment directions, to redirect the allocation of
his or her Account deemed invested in the discontinued investment option among
the other hypothetical investment options, including any replacement option.
5.3 Allocation and Reallocation of Hypothetical Investments. A Member may
-------------------------------------------------------
allocate amounts credited to his or her Account Balance to one or more of the
hypothetical investment options authorized under the Plan. Subject to the rules
established by the Administrator, a Member may reallocate amounts credited to
his or her Account Balance as of any Valuation Date up to ten (10) times per
calendar quarter, in accordance with the directions
6
<PAGE>
provided by the Administrator for making such change no later than the date
specified by the Administrator for effecting a change as of a particular
valuation date. The Administrator may, in its discretion, restrict allocation
into or reallocation by specified Members into or out of specified investment
options or specify minimum amounts that may be allocated or reallocated by
Members.
5.4. Trusts. The Company may, in its discretion, establish one or more
------
Trusts (including sub-accounts under such Trusts), and initially deposit therein
amounts of cash or other property not exceeding the amount of the Company's
obligations with respect to a Member's Account established under this Section 5.
In such case, the amounts of income, appreciation and depreciation in value of
such Account Balance shall be determined by the Administrator, based upon the
hypothetical investment elections made by Members. Other provisions of the Plan
notwithstanding, the timing of allocations and reallocations of assets in such
Account Balance, and the investment options available with respect to such
Account Balance, may be varied to reflect the timing of actual investments of
the assets of such Trust and the actual investments available to such Trust, all
as determined in the sole discretion of the Administrator. The Trust's
investment vehicles may include such other assets as may be selected from time
to time.
ARTICLE VI
Vesting
A Member's Account Balance attributable to matching and profit sharing
contributions shall vest in accordance with the rules of the Savings Plan;
provided, however, that in the event of a Change in Control a Member shall
immediately become fully vested in his Account Balance. Account Balances
attributable to a Members' salary deferrals under Section 3.1 shall be fully
vested at all times.
7
<PAGE>
ARTICLE VII
Death Benefits
Upon the death of the Member, his entire Account Balance shall become fully
vested and shall be paid to his designated beneficiary. If the Member fails to
designate a beneficiary, the Account Balance shall he distributed to the
Member's estate.
ARTICLE VIII
Form and Time of Distribution
8.1 Time of Payment. Distribution will be made in installments in
----------------
accordance with the installment method selected by the Member under Section
8.2., unless the Member's Account Balance is subject to immediate distribution
in accordance with the exception for small Account Balances set forth in Section
8.3.
8.2 Form of Distribution. The Member's Account Balance shall be
---------------------
distributed in installments in accordance with the Member's election over a
period of five years or fifteen years following the Member's termination of
employment or retirement. The Member may choose between five annual
installments payable on the anniversary date of the Member's termination of
employment or retirement, or sixty quarterly installments payable on the last
day of each calendar quarter. In the event the Member chooses to have his
Account Balance distributed in quarterly installments, each payment shall equal
the Member's Account Balance as of the end of the applicable quarter divided by
the number of installment payments remaining in the sixty quarter period, less
any applicable withholding. In the event the Member chooses to have his Account
Balance distributed in annual installments, each payment shall equal the
Member's Account Balance as of the end of the applicable twelve month period
divided by the number of
8
<PAGE>
installment payments remaining in the five year period, less any applicable
withholding. A Member may, by written request to the Administrator, request
acceleration of all remaining installments at any time after payments commence
and prior to receipt of the last installment.
The Administrator shall solicit an installment election from every Member
by January 31, 2000. Eligible Employees who become Members after that date
shall make an installment election within the thirty day period after they
become Members. A Member may change his installment election up until the
twelve month period preceding the date of termination or retirement. Changes
made during the twelve month period preceding termination or retirement will be
ignored.
8.3 Lump Sum Distribution of Small Amounts. If the Member's Account
--------------------------------------
Balance as of the date of his termination of employment or retirement is under
$40,000, the Administrator shall immediately distribute the Member's Account
Balance to him in a lump sum, less any applicable withholding, notwithstanding
the terms of the Member's installment election pursuant to Section 8.2.
8.4 Special Change in Control. Notwithstanding Section 8.1, if there
--------------------------
occurs a Special Change in Control, the Member's Account Balance as of the date
of such Special Change in Control (or, if later, as of the date of distribution)
will be distributed immediately in a single lump sum. Such distribution will
include hypothetical income, appreciation and depreciation computed in
accordance with Section 5.2 through the Valuation Date preceding the date of
distribution. Such distribution shall not affect the Member's continuing
membership in this Plan under Section 2.2.
9
<PAGE>
ARTICLE IX
Withdrawals
9.1 Hardship Distributions. Other provisions of the Plan notwithstanding,
----------------------
if, upon the written application of a Member, the Administrator determines that
the Member has suffered a hardship within the meaning of the Savings Plan, then
the Administrator may authorize a hardship distribution hereunder. A
distribution hereunder will be made on account of hardship only if the
distribution is both made on account of an immediate and heavy financial need of
the Member, and the distribution amount is necessary to satisfy the financial
need, all as determined by the Administrator using the Treasury Regulations as a
guide, and the distribution amount is at least $5,000.
9.2 Non-Scheduled In-Service Distributions. Other provisions of the Plan
--------------------------------------
notwithstanding, a Member may at any time request a distribution of some or all
of his or her vested Account (with a minimum distribution amount of $5,000) for
any reason. In such event, however, ten percent (10%) of the amount taken as a
withdrawal from the Member's Account Balance will be forfeited and not paid to
the Member, and the Member may make no further deferrals for a twelve month
period measured from the date of the withdrawal. Withdrawals made pursuant to
this Section 9.2 will be paid as soon as administratively practicable following
approval of the Administrator.
10
<PAGE>
ARTICLE X
Administration
10.1 Administrator. The Administrator shall supervise the daily
--------------
management and administration of the Plan. The Administrator shall serve
without compensation.
10.2 Responsibilities and Powers of the Administrator.
-------------------------------------------------
The Administrator shall have the responsibility:
(a) To administer the Plan in accordance with the terms hereof, and to
exercise all powers specifically conferred upon the Administrator
hereby or necessary to carry out the provisions thereof;
(b) To keep all records relating to Members of the Plan and such other
records as are necessary for proper operation of the Plan; and
(c) To construe this Plan, which construction shall be conclusive,
correct any defects, supply omissions, and reconcile inconsistencies
to the extent necessary to effectuate the Plan.
10.3 Operation of the Administrator
------------------------------
In carrying out the Administrator's functions hereunder:
(a) The Administrator may adopt rules and regulations necessary for
the administration of the Plan and which are consistent with the
provisions hereof;
(b) Written records shall be kept of all acts and decisions;
(c) The Administrator may also delegate, in writing, any of its
responsibilities and powers to an individual(s) who is not a
fiduciary;
(d) The Administrator shall have the right to hire, at the expense of
the Employer, such professional assistants and consultants as he, in
his sole discretion, deems necessary or advisable, including, but not
limited to, accountants, actuaries, consultants, counsel and such
clerical assistance as is necessary for proper discharge of his
duties; and
(e) The Administrator will furnish statements to each Member
reflecting the amount credited to a Member's Account and transactions
therein not less frequently than once each calendar quarter.
11
<PAGE>
10.4 Claim and Appeal Procedure. The Administrator shall provide adequate
---------------------------
notice in writing to any Member or to any Beneficiary ("Claimant") whose claim
for benefits under the Plan has been denied. The Administrator's notice to the
Claimant shall set forth:
(a) The specific reason for the denial;
(b) Specific references to pertinent Plan provisions upon which the
Administrator based its denial;
(c) A description of any additional material and information that is
needed;
(d) That any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Administrator within seventy-
five (75) days after receipt of the Administrator's notice of denial
of benefits. The Administrator's notice must further advise the
Claimant that his failure to appeal the action to the Administrator in
writing within the seventy-five (75) day period will render the
Administrator's determination final, binding and conclusive; and .
(e) The name and address to whom the Claimant may forward his appeal.
If the Claimant should appeal to the Administrator, he, or his duly
authorized representative, may submit, in writing, whatever issues and comments
he or his duly authorized representative feels are pertinent. The Claimant, or
his duly authorized representative, may review pertinent Plan documents. The
Administrator shall re-examine all facts to the appeal and make a final
determination as to whether the denial of benefits is justified under the
circumstances. The Administrator shall advise the Claimant of its decision
within sixty (60) days of the Claimant's written request for review, unless
special circumstances (such as a hearing) would make the rendering of a decision
within the sixty (60) day limit unfeasible, but in no event shall the
Administrator render a decision respecting a denial for a claim of benefits
later than one hundred twenty (120) days after its receipt of a request for
review.
10.5 Indemnification. In addition to any other indemnification that a
----------------
fiduciary, including but not limited to the Administrator, is entitled to, the
Employer shall indemnify such fiduciary from all claims for liability, loss or
damage (including payment of expenses in
12
<PAGE>
connection with defense against such claim) arising from any act or failure to
act which constitutes a breach of such individual's fiduciary responsibilities
with respect to this Plan under any aspects of the law.
ARTICLE XI
Miscellaneous
11.1 Benefits Payable by the Employer. All benefits payable under this
---------------------------------
Plan constitute an unfunded obligation of the Employer. Payments shall be made,
as due, from the general funds of the Employer or, if applicable, from a grantor
trust established by the Employer. The Employer, at its option, may maintain one
or more bookkeeping reserve accounts to reflect its obligations under the Plan
and may make such investments as it may deem desirable to assist it in meeting
its obligations under the Plan. Any such investments shall be assets of the
Employer subject to claims of its general creditors. No person eligible for a
benefit under this Plan shall have any right, title to or interest in any such
investments.
11.2 Amendment or Termination.
-------------------------
(a) The Board of Directors reserves the right to amend, modify, or restate
or terminate the Plan; provided, however, that no such action by the Board of
Directors shall reduce a Member's Account Balance as of the time thereof. The
provisions of this Section prohibiting an action by the Board of Directors which
would reduce a Member's Account Balance cannot be amended without the consent of
all Members (including those who have retired). Any amendment to the Plan shall
be made in writing by the Board of Directors, with or without a meeting, or
shall be made in writing by the Administrator, to the extent that the Board of
Directors has specifically delegated the authority to make such amendment to the
Administrator.
13
<PAGE>
(b) If the Plan is terminated, a determination shall be made of each
Member's Account Balance as of the Plan termination date (determined in
accordance with Section 11.2(a)). The amount of such benefits shall be
immediately payable to each Member.
11.3 Status of Employment. Nothing herein contained shall be construed
---------------------
as conferring any rights upon any Member or any person for a continuation of
employment, nor shall it be construed as limiting in any way the right of the
Employer to discharge any Member or to treat him without regard to the effect
which such treatment might have upon him as a Member of the Plan.
11.4 Payments to Minors and Incompetents. If a Member or beneficiary
------------------------------------
entitled to receive any benefits hereunder is a minor or is deemed by the
Administrator or is adjudged to be legally incapable of giving valid receipt and
discharge for such benefits, they will be paid to the duly appointed guardian of
such minor or incompetent legally appointed person as the Administrator might
designate. Such payment shall, to the extent made, be deemed a complete
discharge of any liability for such payment under the Plan.
11.5 Tax Withholding. The Company and any subsidiary or affiliated
---------------
entity shall have the right to deduct from amounts otherwise payable in
settlement of an Account Balance and any sums that federal, state, local or
foreign tax law requires to be withheld with respect to such payment.
11.6 Limitation. A Member and his or her Beneficiary shall assume
----------
all risk in connection with any decrease in value of the Account Balance and
neither the Company or any subsidiary or affiliated entity, the Committee nor
the Administrator shall be liable or responsible therefor.
14
<PAGE>
11.7 Construction. The captions and numbers preceding the sections
------------
of the Plan are included solely as a matter of convenience of reference and are
not to be taken as limiting or extending the meaning of any of the terms and
provisions of the Plan. Whenever appropriate, words used in the singular shall
include the plural or the plural may be read as the singular, and male
references shall include female and neuter, and vice versa.
11.8 Severability. In the event that any provision of the Plan shall
------------
be declared illegal or invalid for any reason, said illegality or invalidity
shall not affect the remaining provisions of the Plan but shall be fully
severable, and the Plan shall be construed and enforced as if said illegal or
invalid provision had never been inserted herein.
11.9 Status. The establishment and maintenance of, or allocations
------
and credits to, the Account Balance of any Member shall not vest in any Member
any right, title or interest in and to any specific assets or benefits except at
the time or times and upon the terms and conditions and to the extent expressly
set forth in the Plan and in accordance with the terms of the Trust.
11.10 Inalienability of Benefits. The right of any person to any benefit
--------------------------
or payment under the Plan shall not be subject to voluntary or involuntary
transfer, alienation or assignment, and, to the fullest extent permitted by law,
shall not be subject to attachment, execution, garnishment, sequestration or
other legal or equitable process. In the event a person who is receiving or is
entitled to receive benefits under the Plan attempts to assign, transfer or
dispose of such right, or if an attempt is made to subject said right to such
process, such assignment, transfer or disposition shall be null and void.
11.11 Governing Law. Except to the extent pre-empted by federal law, the
-------------
provisions of the Plan will be construed according to the laws of the State of
New Jersey.
15
<PAGE>
APPENDIX A
Effective December 29, 1999, the following Investment Options have been
selected by the Administrator for the hypothetical investment of a Member's
Account Balance:
Vanguard Prime Money Market Fund
Vanguard LIFEStrategy Fund Conservative Growth Portfolio
Vanguard LIFEStrategy Fund Growth Portfolio
Vanguard Balanced Index Fund
Vanguard Index Trust - 500 Portfolio
Vanguard Explorer Fund
Vanguard International Growth Portfolio
16
<PAGE>
Exhibit 10.12(p)
AMENDED AND RESTATED
--------------------
TRUST AGREEMENT
---------------
THIS TRUST AGREEMENT was made as of the 15th day of December, 1994, by and
between Cytec Industries Inc. (the "Grantor"), a corporation organized and
existing under the laws of the state of Delaware, and First Fidelity Bank NA, as
trustee and is amended and restated as set forth herein as of this 29th day of
December, 1999 between Grantor and Vanguard Fiduciary Trust Company, a trust
company incorporated under Chapter 10 of the Pennsylvania Banking Code (the
"Trustee"), as successor trustee.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Board of Directors of the Grantor, prior to executing this
Trust Agreement, adopted the Cytec Supplemental Savings and Profit Sharing Plan
(as amended from time to time, the "Plan"); and
WHEREAS, the Grantor now desires to create and establish a fund hereunder,
and to set forth the terms and conditions under which the fund is to be
administered; and
WHEREAS, the fund established hereunder will be used exclusively to pay to
participants of the Plan the benefits to which they are entitled under the Plan
except to the extent otherwise set forth in Sections VI, VII and VIII hereof;
NOW, THEREFORE, the Grantor, in consideration of the premises and covenants
and agreements herein contained, and other good and valuable consideration,
subject to the terms and conditions hereof, does hereby adopt this Trust
Agreement with the Trustee,
1
<PAGE>
TO HAVE AND TO HOLD any and all cash and other property, which may be
transferred to the Trustee, IN TRUST NEVERTHELESS, for the uses and purposes and
subject to the duties and powers hereinafter set forth:
SECTION I
RELATION TO THE PLAN
--------------------
All of the provisions of the Plan are hereby incorporated by reference to
the extent that they do not conflict with this Trust Agreement.
SECTION II
DEFINITIONS
-----------
2.1 "CIPF" shall mean the Cytec Industries Inc. Committee on Investment of
Pension Funds and any successor body designated by the Grantor's Board of
Directors to manage the pension plan assets.
2.2 "Code" means the Internal Revenue Code of 1986, as amended.
2.3 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
2.4 "Grantor" shall mean Cytec Industries Inc., and any successors or assigns
of such entity.
2.5 "Participant" shall mean any individual entitled to benefits under the
Plan.
2.6 "Plan" shall mean the Cytec Supplemental Savings and Profit Sharing Plan,
as amended from time to time.
2
<PAGE>
2.7 "Trustee" shall mean Vanguard Fiduciary Trust Company, or its successor in
interest.
2.8 "Trust Fund" shall have the meaning set forth in Section IV.
2.9 Whenever used herein, and to the extent appropriate, the masculine,
feminine or neuter gender shall include the other two genders, the singular
shall include the plural and the plural shall include the singular.
SECTION III
GRANTOR TRUST
-------------
The Trust is intended to be a trust of which the Grantor is treated as
the owner for federal income tax purposes in accordance with the provisions of
Sections 671 through 679 of the Code, and it is not intended that the Plan
hereunder qualify under Section 401(a) of the Code.
SECTION IV
INVESTMENT AND APPLICATION OF
-----------------------------
TRUST FUND AND INCOME
---------------------
The Trustee shall receive, hold and manage the property and the income
and proceeds earned and appreciation or losses accrued with respect thereto at
any time forming a part of the Trust Fund. Notwithstanding anything else herein
to the contrary, the CIPF shall have the power to manage and control all or a
portion of the Trust Fund and the Trustee shall separate into one or more
separate accounts or subaccounts those assets as to which the CIPF has
discretion and control. The Trustee shall have no investment duties,
responsibilities or
3
<PAGE>
liabilities as to such separate accounts or subaccounts and shall be under no
duty to question any direction of the CIPF with respect to the portion of the
Trust Fund managed by the CIPF, to review any property held in such separate
account or to evaluate the performance of the CIPF, and the Trustee shall be
fully protected in acting in accordance with the directions of the CIPF or, if
the CIPF so directs with respect to any particular account or subaccount, the
directions of any Participant in the Plan, or for failing to act in the absence
of such directions. It is also contemplated that the CIPF may from time to time
appoint one or more investment managers to manage specified portions of the
Trust Fund. Upon appointment of each such investment manager, the CIPF shall so
notify the Trustee, shall provide the Trustee a copy of the written agreement
between the CIPF and the investment manager and instruct the Trustee in writing
to separate into a separate account those assets as to which each such
investment manager has discretion and control. The Trustee shall have no
investment duties, responsibilities or liabilities as to each such separate
account and shall be under no duty to question any direction of the investment
manager with respect to the portion of the property managed by such investment
manager, to review any property held in such separate account or to evaluate the
performance of any investment manager, and the Trustee shall be fully protected
in acting in accordance with the directions of an investment manager or for
failing to act in the absence of such directions.
Furthermore, upon receipt of written direction by the CIPF, the
Trustee shall (i) transfer and deliver such part of the assets of the Trust Fund
as may be specified in such writing to any investment manager so appointed and
(ii) accept the transfer back to it of any such assets at any time held by an
investment manager. If any assets are so transferred to the custody of an
4
<PAGE>
investment manager, such investment manager shall undertake and be responsible
for all the custodial duties therefor and such assets shall remain for all
purposes a part of the Trust Fund and, as such, subject to all the terms and
provisions of this Agreement. The Trustee shall have no duty or responsibility
as to the custody or safekeeping of such assets or as to the investment or
reinvestment of the same, except that the Trustee shall require such statements
and reports from such investment manager as may be necessary to enable the
Trustee or the CIPF to carry out their recordkeeping and reporting duties under
this Agreement.
The Trustee is hereby expressly required to use the Trust Fund for the
purpose of making payments owed to the Participants in accordance with the
provisions of the Plan and with documents executed pursuant thereto: provided,
however, that the Trustee shall have the right to deduct and withhold from all
such payments any taxes required by law to be withheld with respect to such
payments and may also make payments from the Trust Fund in accordance with the
provisions of Sections VI, VII and VIII hereof. In the event that the Trustee
withholds any taxes pursuant to the preceding sentence, the Trustee shall
coordinate with the Grantor as to the payment of such withholding taxes to the
appropriate taxing authorities, and the Grantor will be responsible for filing
all required information returns with the appropriate taxing authorities with
respect to such withholdings. The act of the Trustee shall be conclusive on all
matters relating to the investment of the Trust Fund, except for such investment
decisions implemented pursuant to the direction of the CIPF in accordance with
Section V. Distributions from the Trust Fund to the Participants will be made
in accordance with the forms of distribution selected by the Participants under
the terms of the Plan.
5
<PAGE>
SECTION V
INVESTMENT AND ADMINISTRATIVE POWERS
------------------------------------
5.1 General Powers - Subject to the provisions of Sections 404, 406 and 407 of
--------------
ERISA and Section IV hereof, the Trustee shall have the authority to manage and
control the Trust Fund.
5.2 Investment Powers and Authority of Trustee, CIPF and investment managers -
------------------------------------------------------------------------
The Trustee, CIPF and investment managers shall each have the following powers
and authority:
a. General Investment Powers - To invest and reinvest the principal
-------------------------
and income of the Trust Fund and keep the Trust Fund invested, without
distinction between principal and income;
b. Power to Participate in Mutual Funds - To purchase or subscribe
------------------------------------
for shares of a mutual fund or regulated investment company, including a mutual
fund or regulated investment company for which the Trustee or its affiliates
serve as investment adviser;
c. Purchase of Property - To purchase or subscribe for any property,
--------------------
and to retain the same in the Trust Fund;
d. Sale, Exchange, Conveyance and Transfer of Property - To sell,
---------------------------------------------------
exchange, convey, transfer or otherwise dispose of, any property held by it, by
private contract or at public auction, and no person dealing with the Trustee
shall be bound to see to the application of the purchase money or to inquire
into the validity, expediency or propriety of any such sale or other
disposition; and
6
<PAGE>
e. Retention of Cash - To keep such portion of the Trust Fund in
-----------------
cash or cash equivalents as may be deemed to be in the best interest of the
Trust Fund created hereby.
5.3 Administrative Powers and Authority of Trustee - The Trustee shall have the
----------------------------------------------
following powers and authority:
a. Exercise of Owner's Rights - To vote upon any stocks, bonds, or
--------------------------
other securities; to give general or special proxies or powers of attorney with
or without power of substitution; to exercise any conversion privileges,
subscription rights or other options, and to make any payments incidental
thereto; to oppose, consent to, or otherwise participate in, corporate
reorganizations or other changes affecting corporate securities, and to delegate
discretionary powers, and to pay any assessments or charges in connection
therewith; to abandon any property determined by it to be worthless; and
generally to exercise any of the powers of an owner with respect to Property
held as part of the Trust Fund;
b. Right to Borrow - To borrow or raise monies for the purposes of
---------------
the Trust Fund from anyone (other than a "party in interest" as defined in
Section 3(14) of ERISA), including itself, in such amount, and upon such terms
and conditions, as the Trustee in its discretion may deem advisable, and to
secure the repayment thereof by pledging all, or any part of, the Trust Fund;
c. Settlement of Claims and Debts - To settle, compromise or submit
------------------------------
to arbitration any claims, debts or damages due or owing to or from the Trust
Fund, to commence or defend suits or legal or administrative proceedings, and to
represent the Trust Fund in all suits and legal and administrative proceedings;
7
<PAGE>
d. Registration of Investments - To register any investment held as
---------------------------
part of the Trust Fund in its own name or in the name of a nominee and to hold
any investment in bearer form, but the books and records of the Trustee shall at
all times show that all such investments are part of the Trust Fund;
e. Employment of Agents and Counsel - To employ suitable agents and
--------------------------------
counsel (who may be counsel for the Grantor), and to pay from the Trust Fund,
unless otherwise paid, their reasonable expenses and compensation;
f. Execution of Instruments - To make, execute, acknowledge and
------------------------
deliver any and all documents of transfer and conveyance and any and all other
instruments that may be necessary or appropriate to carry out the powers herein
granted; and
g. Any Necessary Act - To do all such acts, take part in all
-----------------
such proceedings, and exercise all such rights and privileges, although not
specifically mentioned herein, as may be necessary or proper for the
accomplishment of the purposes for which the Trust Fund was established.
SECTION VI
COMPENSATION AND EXPENSES
-------------------------
6.1 Trustee Compensation and Expense - The expenses incurred by the
--------------------------------
Trustee in the performance of its duties, including fees for legal services
rendered to the Trustee, such compensation to the Trustee as may be agreed upon
from time to time between the Grantor and the Trustee, and all other proper
charges and disbursements of the Trustee, shall be deducted from and charged
against the Trust Fund, unless otherwise paid.
8
<PAGE>
6.2 Investment Expenses - Any expenses directly relating to the
-------------------
investments of the Trust Fund, such as brokerage commissions, registration
charges, etc, shall be deducted from and charged against the Trust Fund, unless
otherwise paid.
6.3 Taxes - Any taxes which may be imposed upon the Trust Fund or the
-----
income and/or capital gains therefrom shall be deducted from and charged against
the Trust Fund, unless otherwise paid.
6.4 Charges Against Trust Fund - The Trustee may not charge the Trust
--------------------------
and shall not be entitled to any reimbursement with regard to any taxes,
expenses and costs arising from the negligent exercise by the Trustee of its
duties or a breach by the Trustee of its fiduciary duty to the Participants
hereunder.
SECTION VII
RESTRICTIONS ON USE OF THE TRUST FUND
-------------------------------------
The assets forming the Trust Fund shall be devoted exclusively to the
funding of the Participants benefits under the Plan, and shall in no part and in
no event be given or contributed to or inure to the benefit of any private
person or corporation other than the Participants and the Grantor in accordance
with the provisions of the applicable Plan and documents executed pursuant to
such Plan. Notwithstanding the above sentence, if, after the Participants have
received all benefits to which they are entitled under the Plan, assets remain
in the Trust Fund, then such excess assets shall be returned to the Grantor or
its successor.
SECTION VIII
NOTIFICATION IN THE EVENT OF INSOLVENCY OR BANKRUPTCY
------------------------------------------------------
8.1 Cessation of Payments - The Trustee shall cease payment of
---------------------
benefits to the
9
<PAGE>
Participants if the Grantor is Insolvent. The Grantor shall be considered to be
Insolvent for purposes of this Trust Agreement if (i) the Grantor is unable to
pay its debts as they become due, or (ii) the Grantor is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
8.2 Notification of Insolvency - The Board of Directors and the Chief
--------------------------
Executive Officer of the Grantor shall have the duty to inform the Trustee in
writing of the Grantor's Insolvency. If a person claiming to be a creditor of
the Grantor alleges in writing to the Trustee that the Grantor has become
Insolvent, then the Trustee shall determine whether the Grantor is Insolvent
and, pending such determination, the Trustee shall discontinue payment of
benefits to the Participants. Unless the Trustee has actual knowledge of the
Grantor's Insolvency, or has received notice from the Grantor or a person
claiming to be a creditor alleging that the Grantor is Insolvent, the Trustee
shall have no duty to inquire as to whether the Grantor is Insolvent. The
Trustee may in all events rely on such evidence concerning the Grantor's
solvency as may be furnished to the Trustee that provides the Trustee with a
reasonable basis for making a determination concerning the Grantor's solvency.
8.2 Discontinuance of Payments - If at any time the Trustee has
--------------------------
determined that the Grantor is Insolvent, then the Trustee shall discontinue
payments to the Participants and shall hold the Trust Fund for the benefit of
the Grantor's general creditors. Nothing in this Trust Agreement shall in any
way diminish any rights of the Participants to pursue their rights as general
creditors of the Grantor with respect to the benefits due under the Plan. The
Trustee shall resume the payment of Plan benefits to the participants in
accordance with this Trust Agreement only after the Trustee has determined that
the Grantor is not Insolvent (or is no
10
<PAGE>
longer Insolvent). Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust Fund pursuant to this
Section, and subsequently resumes such payments, the first payment following
such discontinuance shall include the aggregate amount of all payments due to
the Participants under the terms of the Plan for the period of such
discontinuance, less the aggregate amount of any payments paid to the
Participants by the Grantor in lieu of the payments provided for hereunder
during any such period of discontinuance.
SECTION IX
CONTRIBUTIONS TO TRUST FUND
---------------------------
The Grantor shall contribute to the Trust Fund on a quarterly basis
(which contributions shall generally be made within 30 days of the end of a
calendar quarter) such amounts as are necessary to ensure that the total value
of the Trust Fund is equal to the total Account Balances payable under the Plan.
The Trustee shall provide quarterly reports to the Grantor which provide
accurate statements of the value of the Trust Fund. The Trustee shall have no
responsibility for determining or collecting any contribution owed to the Trust
Fund by the Grantor, nor shall the Trustee be responsible for the adequacy of
the Trust Fund to meet and discharge any and all liabilities of the Plan. In
the event that the Trust Fund is insufficient to pay the full amount of the
Participant' benefits under the Plan, the Grantor shall be responsible for
satisfying such Plan benefits in full.
11
<PAGE>
SECTION X
INTERESTS OF THE PARTICIPANTS
-----------------------------
The Participants' benefits under the Plan are not assignable by them
or their beneficiaries, either by voluntary or involuntary assignment or by
operation of law. No part of any benefits under the Plan may be paid over,
loaned, sold, assigned, transferred, discounted, pledged as collateral for a
loan, or in any other way encumbered or alienated until such time as
distributions are authorized under the Plan and documents executed pursuant to
such Plan. The Participants shall be unsecured, general creditors of the
Grantor.
Nothing herein contained shall be construed as creating any absolute
or unconditional trust, express or implied, for the benefit of the Participants.
SECTION XI
INDEMNIFICATION
---------------
11.1 Indemnification - The Grantor agrees to indemnify and hold the
---------------
Trustee harmless from and against any liability that it may incur in the
administration of the Trust Fund and performing its duties under this Trust
Agreement, unless arising from the Trustee's own negligence, misconduct or
failure to satisfy the terms of this Agreement. The Trustee shall not be
required to give any bond or other security for the faithful performance of its
duties under this Trust.
11.2 Directions from Grantor - Except as otherwise herein
-----------------------
specifically provided, any action by the Grantor pursuant to any of the
provisions of this Trust shall be evidenced by (1) a resolution of its Board of
Directors certified to the Trustee over the signature of its Secretary
12
<PAGE>
or Assistant Secretary or other duly authorized agent under the corporate seal
(if there be one), or (2) appropriate written authorization of any person or
committee to which the Grantor's Board of Directors has delegated the authority
to take such action; and the Trustee can assume that any such action is in
accordance with the provisions of the Plan and shall be fully protected in
acting in accordance with any such resolution or other authorization. Any
actions hereunder taken by a person or committee to which the Grantor's Board of
Directors has delegated the authority to take such action shall be deemed to
have been taken by the Board of Directors. Until changed in accordance with the
procedure set forth above, the Trustee shall take direction as to the payment to
Participants of benefits under the Plan from the Vice President - Human
Resources of the Grantor, who shall be identified as an authorized signer with
the Trustee and whose signature shall be provided to the Trustee and updated
from time to time.
SECTION XII
APPOINTMENT OF SUCCESSOR TRUSTEE
--------------------------------
The Trustee may at any time resign the office of Trustee upon giving
forty-five (45) days notice to the Grantor. In the event of a vacancy in the
office of the Trustee by resignation, disqualification, or otherwise, the
Grantor shall fill such vacancy by appointing another qualified trust company or
other banking institution to serve as Trustee. In no event may an individual or
individuals serve hereunder as Trustee. The Grantor may remove the Trustee at
any time upon giving written notice to the Trustee.
13
<PAGE>
SECTION XIII
IRREVOCABILITY OF TRUST
-----------------------
This Trust shall be irrevocable and shall be continued and maintained
as long as may be necessary, desirable or convenient for the full and complete
administration of the Trust Fund as provided for herein or as may be hereafter
changed or modified.
SECTION XIV
AMENDMENT OF TRUST AGREEMENT
----------------------------
This Trust or any of the terms hereof may be changed or amended by the
Trustee and the Grantor by an instrument in writing duly executed by the Trustee
and the Grantor (through action of its Board of Directions); provided, however,
that no change or amendment shall effect any revocation, in whole or in part, of
the Trust hereby created, or alter the provisions for distribution upon the
termination of the Trust, or provide for the payment of benefits or other funds
for purposes other than the payment of benefits under the Plan to the
Participants, nor shall any amendment hereto change to the liability or
responsibility of the Trustee without the Trustee's consent.
14
<PAGE>
SECTION XV
MISCELLANEOUS
-------------
15.1 Applicable Law - This Trust shall be governed by and construed
--------------
in accordance with the laws of the Commonwealth of Pennsylvania, except to the
extent preempted by ERISA. The Trustee shall not be required to render an
accounting with respect to its investment of the Trust Fund in any court other
than a court in the State of Pennsylvania.
15.2 Construction - All section headings herein have been inserted
------------
for convenience of reference only and shall in no way modify, restrict or affect
the meaning or interpretation of any of the terms or provisions of this Trust
Agreement. This Trust Agreement is intended to be a complete and exclusive
statement of the agreement of the parties hereto, supersedes all previous
agreements or understandings for the Plan among them, and may not be modified or
terminated orally. If any provision of this Trust Agreement shall be invalid and
unenforceable, the remaining provisions hereof shall subsist and be carried into
effect.
SECTION XVI
RECEIPT OF TRUST FUNDS
----------------------
The Trustee, by joining in the execution of this instrument, signifies
its acceptance of the Trust Fund and agrees to hold such cash and other property
as may be contributed under the Trust as herein provided.
15
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Trust Agreement to be
duly signed by its appointed officer and its corporate seal to be hereunto
affixed and attested to by its Secretary or Assistant Secretary and the Trustee
has caused this Trust Agreement to be duly signed by its appointed officer and
its corporate seal to be hereunto affixed and attested to by its Secretary or
Assistant Secretary as of the 29th day of December, 1999.
GRANTOR
(Corporate Seal) CYTEC INDUSTRIES INC.
ATTEST:
By ______________________ By _______________________
R. Smith T. P. Wozniak
Assistant Secretary Treasurer
TRUSTEE
(Corporate Seal) VANGUARD FIDUCIARY TRUST
ATTEST: COMPANY
By _______________________ By ________________________
16
<PAGE>
STATE OF NEW JERSEY )
) SS:
COUNTY OF PASSAIC )
I DO HEREBY CERTIFY that on the ____ day of December, 1999 before me,
a Notary Public of the State of New Jersey, personally appeared T. P. Wozniak,
to me known, who, being by me duly sworn, did depose and say that he is the
Treasurer of Cytec Industries Inc., the corporation described in and which
executed the foregoing instrument as Grantor therein set forth; that he well
knows the seal of said corporation, that the seal affixed to said instrument is
such corporate seal, and that it was so affixed by virtue of authority under the
bylaws of said corporation, and he thereupon acknowledged that said instrument
is the voluntary act and deed of said corporation, made by virtue of authority
granted by the Board of Directors of said corporation.
Witness my hand and official seal hereto affixed, the day and year
above written.
_________________________
17
<PAGE>
STATE OF PENNSYLVANIA )
) SS:
COUNTY OF )
I DO HEREBY CERTIFY that on the ____ day of December, 1999 before me,
a Notary Public of the State of Pennsylvania, personally appeared
______________, to me known, who, being by me duly sworn, did depose and say
that he is the ____________of Fiduciary Trust Company, the corporation described
in and which executed the foregoing instrument as Trustee therein set forth;
that he well knows the seal of said corporation, that the seal affixed to said
instrument is such corporate seal, and that it was so affixed by virtue of
authority from the Board of Directors of said corporation; and he thereupon
acknowledged that said instrument is the voluntary act and deed of said
corporation, made by virtue of such authority.
Witness my hand and official seal hereto affixed, the day and year
above written.
__________________________
18
<PAGE>
Exhibit 12
----------
Cytec Industries Inc.
Computation of Ratio of Earnings to Fixed Charges
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Earnings before income taxes and equity
in earnings of associated companies 167.4 177.6 137.4
Add:
Distributed income of associated companies 5.8 6.5 11.6
Amortization of capitalized interest 0.2 0.1 -
Fixed charges 33.8 31.0 13.6
Less:
Capitalized interest (0.8) (1.5) (0.6)
----- ----- -----
Earnings as adjusted 206.4 213.7 162.0
Fixed charges:
Interest on indebtedness including
amortized premiums, discounts and
deferred financing costs 29.7 26.2 8.5
Portion of rents representative
of the interest factor 4.1 4.8 5.1
----- ----- -----
Fixed charges 33.8 31.0 13.6
----- ----- -----
Ratio of earnings to fixed charges 6.1 6.9 11.9
----- ----- -----
</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 statements on Form S-3 (Nos. 333-3808 and 333-52011) of
Cytec Industries Inc. of our reports dated January 24, 2000, relating to the
consolidated balance sheets of Cytec Industries Inc. and subsidiaries as of
December 31, 1999 and 1998 and the related consolidated statements of income,
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1999, and the related schedule, which reports appear
in the December 31, 1999 annual report on Form 10-K of Cytec Industries Inc.
KPMG LLP
Short Hills, New Jersey
March 30, 2000
<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 25th day of
March, 2000.
/s/ J.E. Akitt
--------------
J. E. Akitt
<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 25th day of
March, 2000.
/s/ F.W. Armstrong
------------------
F. W. Armstrong
<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 24th day of
March, 2000.
/s/ G.A. Burns
------------------
G. A. Burns
<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 27th day of
March, 2000.
/s/ L.L. Hoynes, Jr.
--------------------
L. L. Hoynes, Jr.
<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 27th day of
March, 2000.
/s/ W. P. Powell
----------------
W. P. Powell
<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 24th day of
March, 2000.
/s/ J.R. Satrum
---------------
J. R. Satrum
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-K
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 12,000
<SECURITIES> 0
<RECEIVABLES> 257,800
<ALLOWANCES> 9,300
<INVENTORY> 139,500
<CURRENT-ASSETS> 491,100
<PP&E> 1,352,600
<DEPRECIATION> (696,900)
<TOTAL-ASSETS> 1,759,900
<CURRENT-LIABILITIES> 366,100
<BONDS> 319,500
0
100
<COMMON> 500
<OTHER-SE> 505,200
<TOTAL-LIABILITY-AND-EQUITY> 1,759,900
<SALES> 1,412,500
<TOTAL-REVENUES> 1,412,500
<CGS> 970,800
<TOTAL-COSTS> 1,227,500
<OTHER-EXPENSES> (9,300)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,900<F1>
<INCOME-PRETAX> 173,000<F2>
<INCOME-TAX> 51,700
<INCOME-CONTINUING> 121,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 121,300
<EPS-BASIC> 2.83
<EPS-DILUTED> 2.73
<FN>
<F1>This number represents interest expense, net
<F2>This number includes equity in earnings of associated companies of $5,600
for the twelve months ended December 31, 1999.
</FN>
</TABLE>
