Crompton's Second Quarter Earnings Before Special Items Exceed Expectations.Business Editors GREENWICH Greenwich, borough, Greater London, England Greenwich (grĭn`īj, grĕn`–), outer borough (1991 pop. 200,800) of Greater London, SE England, on the Thames River. Manufactures include telephone equipment and underwater cable. , Conn.--(BUSINESS WIRE)--July 23, 2002 Crompton Corporation Crompton Corporation, formerly Crompton and Knowles, is a chemical research, production, sales and distribution company headquartered in Middlebury, Connecticut. The company produces specialty chemicals used for polymers, fire suppressants and retardants, pool and spa water (NYSE NYSE See: New York Stock Exchange :CK) reported today second quarter earnings before special items of $20.7 million, or 18 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. , 50% better than the 12 cents per share in the second quarter of 2001 and 20% better than the First Call consensus of 15 cents per share. Versus 2001, a reconciliation schedule of sales and earnings per share before special items has been included in the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. statement of operations See Income statement. . Special items for the quarter included an after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. loss of $21.1 million, or 19 cents per share, on the sale of the company's industrial specialties business and an after-tax charge of $5.9 million, or 5 cents per share, for facility closures, severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and related costs. Including special items, the company reported a second quarter loss of $6.3 million, or 6 cents per share. Second quarter sales of $689.7 million were $34.3 million or five percent below the prior year. The shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. was primarily due to last year's fourth quarter sale of the company's industrial colors business ($9.8 million), lower polymer polymer (pŏl`əmər), chemical compound with high molecular weight consisting of a number of structural units linked together by covalent bonds (see chemical bond). processing equipment sales ($13.5 million) and lower sales for the divested industrial specialties business ($9.5 million). Compared to the first quarter of 2002, sales for the second quarter were seven percent higher, reflecting improved business conditions across most businesses. "After almost two years of very difficult operating conditions, we are pleased to report our second consecutive quarter of improved operating results and significant progress in achieving our divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). and debt reduction objectives," said Vincent A. Calarco, chairman, president and chief executive officer. "We completed the sale of our industrial specialties business at the end of June June: see month. and used those proceeds, coupled with other funds, to reduce debt by $167 million during the quarter. "We are encouraged by trends in consumer demand, residential construction and U.S. automotive production. However, the current environment remains difficult from a pricing standpoint The Standpoint is a newspaper published in the British Virgin Islands. It was originally published under the name Pennysaver, largely as a shopping-coupon promotional newspaper, but since emerged as one of the most influential sources of journalism in the and the depressed Depressed A description of a market, security, or product that is experiencing weak demand and lowering prices. Notes: A depressed market, security, or product implies that prices and volume are low. There are many reasons for a depressed market, security, or product. level of capital equipment spending has continued to adversely affect our polymer processing equipment business. With half of the year behind us, we are now refining refining, any of various processes for separating impurities from crude or semifinished materials. It includes the finer processes of metallurgy, the fractional distillation of petroleum into its commercial products, and the purifying of cane, beet, and maple sugar our 2002 estimate of earnings to a range of 50 to 60 cents per share". The company completed its evaluation of goodwill in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. provisions of FASB Statement FASB Statement A standard set by the Financial Accounting Standards Board regarding a financial accounting and reporting method. Essentially, FASB statements determine the acceptable accounting practices that Certified Public Accountants use in reporting No. 142. As a result, the company recorded a charge of $299 million, or $2.58 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a to January January: see month. 1, 2002. The charge is reflected in year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. results as a cumulative effect of an accounting change. Of the $299 million charge, $84 million relates to the divested industrial specialties business and represents 100 percent of the goodwill attributed to that business. A further $65 million relates to 100 percent of the goodwill attributed to the refined products business which is currently a candidate for divestiture. The remaining $150 million of the charge represents 43 percent of the goodwill attributed to the plastic additives business. The plastic additives business has been one of the businesses most affected by adverse external factors over the last two years. Although the business is rebounding and returning to growth, it is doing so from levels lower than those which existed in 1999 when the original goodwill allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as was completed. For the first 6 months of 2002, the company reported net earnings before special items of $27.5 million, or 24 cents per share, compared to $29.7 million, or 26 cents per share, for the first half of 2001. Including special items and the cumulative effect of accounting change of $299 million, or $2.58 per diluted share, the loss for the first six months of 2002 was $298.5 million, or $2.58 per diluted share, compared to earnings of $29.7 million, or 26 cents per share, in the first half of 2001. Six month sales of $1.33 billion were $127 million or nine percent below the first half of 2001. Second quarter operating results for Crompton Cromp·ton , Samuel 1753-1827. British inventor of the spinning mule (1779). Corporation's reporting segments are summarized below. Polymer Products Polymer additives sales of $287.7 million were essentially unchanged from the prior year as a two percent increase in unit volume and favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. foreign currency translation of one percent were offset by a three percent decline in prices. Plastic and petroleum additives sales increased three percent and five percent, respectively, due mainly to greater demand in several key markets, partially offset by lower prices. Urethane urethane (yoor´ithān´), n ethyl carbamate used as an anesthetic agent for laboratory animals, formerly used as a hypnotic in humans. additives sales were down eight percent due primarily to the loss of some low margin business on the basis of price and weakness in the fiberglass fiberglass, thread made from glass. It is made by forcing molten glass through a kind of sieve, thereby spinning it into threads. Fiberglass is strong, durable, and impervious to many caustics and to extreme temperatures. market. Rubber additives sales declined seven percent due equally to lower unit volume and prices. Operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. of $24.3 million was up 55 percent from the prior year due primarily to reduced product In model theory, a branch of mathematical logic, the reduced product is a construction that generalizes both direct product and ultraproduct. costs, including raw material and energy, partially offset by lower selling prices. Polymers sales of $72.5 million were down eight percent from the prior year as a result of a decline in prices and unit volume of five percent and three percent, respectively. EPDM EPDM Ethylene-Propylene-Diene-Monomer EPDM Enterprise Product Data Management EPDM Ethylene Propylene Dimonomer (industrial/commercial piping/plumbing components) EPDM Engineering Product Data Management sales declined 18 percent as weak global demand continues to keep unit volume and selling prices below prior year levels. Urethane polymer sales rose six percent due mainly to continued penetration The successful unauthorized breach of a security perimeter. See penetration test. of the golf ball market. Operating profit of $12.4 million was up 13 percent versus the second quarter of 2001 as the elimination of last year's loss on the divested nitrile nitrile: see rubber. joint venture and reduced raw material and energy costs, more than offset the impact of lower unit volume and lower selling prices. Polymer processing equipment sales of $44.7 million declined 23 percent from the prior year due to a 25% decline in unit volume, driven by extremely low demand for capital equipment, offset in part by favorable foreign currency translation of 2%. Despite the lower sales, the operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $2.7 million was favorable versus the prior year by $1.6 million due to the successful implementation of cost reduction initiatives. Backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. at the end of June was $65 million, down $18 million from the end of 2001. Specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. Products OrganoSilicones sales of $118.2 million rose nine percent from the prior year due to a 13 percent increase in unit volume, driven by an increase in European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. demand for sulphur Sulphur, city, United States Sulphur, city (1990 pop. 20,125), Calcasieu parish, SW La.; inc. 1914. It is a trade center for an area producing natural gas, oil, and timber as well as sorghum, soybeans, cattle, and crawfish. silanes and other products, and a favorable foreign currency translation of one percent, offset in part by a five percent decrease in prices. Despite higher sales, operating profit of $12.1 million was down 12 percent from the prior year due primarily to lower selling prices and an unfavorable sales mix sales mix See product mix. . Crop protection sales of $70.5 million were down seven percent from the prior year due to a decline in unit volume primarily in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and
Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . A combination of drought conditions "Drought Conditions" is episode 126 of The West Wing. PlotSenator Rafferty, a new presidential candidate garnered much media attention with a ground-breaking speech about health care. (Canada), high customer inventory levels, competitive pricing and poor crop economics all contributed to the shortfall. Operating profit of $20.6 million declined 29 percent from the prior year as a result of lower unit volume, an unfavorable sales mix and lower joint venture equity income of $1.0 million. Other sales of $100.1 million declined 16 percent from the prior year with eight percent due to the divested colors business and the remainder due to lower unit volume of 19 percent in the industrial specialties business (divested June 28, 2002) and higher unit volume of two percent in the refined products business. Operating profit of $2.1 million was down 53 percent from the prior year due primarily to the colors divestment divestment to strip one's investment from an entity. and the impact of lower industrial specialties sales. Crompton Corporation is a $2.7 billion global producer and marketer of specialty chemicals A Specialty chemical is a chemical produced for a specialized use. They are produced in lower volume than bulk chemicals, of which petrochemicals, made from oil feedstocks, are the most common. However, both are produced in a chemical plant. and polymer products and equipment. Certain statements made in this release are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve risks and uncertainties, including, but not limited to, general economic conditions, energy and raw material prices and availability, production capacity, changes in interest rates and foreign currency exchange rates, changes in technology, market demand and customer requirements, the enactment of more stringent environmental laws and regulations, and other risks and uncertainties detailed in the Company's filings with the Securities and Exchange Commission. These statements are based on currently available information and the Company's actual results may differ significantly from the results discussed. Forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information is intended to reflect opinions as of the date this release was issued and such information will not necessarily be updated by the Company.
CROMPTON CORPORATION
Consolidated Statements of Operations
Second quarter and six months ended 2002 and 2001
(In thousands, except per share data)
Second Quarter Six Months Ended
------------------------ -------------------------
2002 2001 2002 2001
----------- ------------ ------------- -----------
Net sales $ 689,734 $ 724,032 $ 1,334,572 $ 1,461,968
Cost of
products sold 474,559 503,002 933,422 1,017,589
Selling, general
and admin. 100,988 105,066 198,197 211,705
Depreciation and
amortization 37,945 46,793 76,024 93,717
Research and
development 21,417 20,669 41,635 41,233
Equity income (1,997) (1,821) (4,261) (7,808)
---------- ---------- ----------- ------------
Operating profit 56,822 50,323 89,555 105,532
Interest expense 26,092 27,731 52,230 56,485
Other expense 3,435 882 1,142 2,697
---------- ---------- ----------- ------------
Earnings before
income taxes and
special items 27,295 21,710 36,183 46,350
Income taxes 6,551 7,816 8,684 16,686
---------- ---------- ----------- ------------
Earnings before
after-tax
special items 20,744 13,894 27,499 29,664
Loss on sale
of business (21,117) - (21,117) -
Facility closures,
severance and
related costs (5,921) - (5,921) -
Cumulative effect of
accounting change - - (298,981) -
---------- ---------- ----------- ------------
Net earnings (loss) $ (6,294) $ 13,894 $ (298,520) $ 29,664
========== ========== =========== ============
Basic earnings
(loss) per
common share:
Earnings before
after-tax
special items $ 0.18 $ 0.12 $ 0.24 $ 0.26
====== ====== ======== ==========
Net earnings (loss) $(0.06) $ 0.12 $ (2.63) $ 0.26
====== ====== ======== ==========
Weighted average
shares
outstanding 113,512 113,113 113,394 113,041
========= ========= ========== ===========
Diluted earnings
(loss) per
common share:
Earnings before
after-tax
special items $ 0.18 $ 0.12 $ 0.24 $ 0.26
====== ====== ======== ==========
Net earnings (loss) $(0.06) $ 0.12 $ (2.58) $ 0.26
====== ====== ======== ==========
Weighted average
shares
outstanding 113,512 116,104 115,877 116,142
========= ========= ========== ===========
Note - The following table summarizes the major factors
contributing to the second quarter change in sales and
earnings per share before special items versus the prior year:
Net Sales
(millions) EPS
------------ ----------
Second quarter - 2001 $ 724.0 $ 0.12
Divested operations (9.8) -
Volume/mix (12.0) (0.05)
Price and foreign currency translation (12.5) (0.11)
Accounting change - goodwill amortization - 0.06
Cost savings - 0.08
Raw materials and energy - 0.12
Adjustment of environmental reserve in 2001 - (0.03)
Other - (0.01)
------------ ----------
Second quarter - 2002 $ 689.7 $ 0.18
============ ==========
CROMPTON CORPORATION
Segment Sales and Operating Profit
Second quarter and six months ended 2002 and 2001
(In thousands of dollars)
Second Quarter Six Months Ended
-------------------- -------------------------
2002 2001 2002 2001
-------- --------- ---------- ----------
NET SALES
Polymer Products
Polymer Additives $287,676 $287,538 $ 554,911 $ 596,477
Polymers 72,475 78,436 139,955 160,698
Polymer Processing
Equipment 44,652 58,116 94,457 116,862
Eliminations (3,971) (2,750) (7,290) (6,674)
--------- --------- ----------- -----------
400,832 421,340 782,033 867,363
--------- --------- ----------- -----------
Specialty Products
OrganoSilicones 118,245 108,587 232,001 220,477
Crop Protection 70,538 75,562 123,010 135,636
Other 100,119 118,543 197,528 238,492
--------- --------- ----------- -----------
288,902 302,692 552,539 594,605
--------- --------- ----------- -----------
Total net sales $689,734 $724,032 $1,334,572 $1,461,968
========= ========= =========== ===========
OPERATING PROFIT
Polymer Products
Polymer Additives $ 24,324 $ 15,672 $ 35,955 $ 34,373
Polymers 12,432 10,976 21,081 25,265
Polymer Processing
Equipment (2,700) (4,282) (2,620) (3,225)
--------- --------- ----------- -----------
34,056 22,366 54,416 56,413
--------- --------- ----------- -----------
Specialty Products
OrganoSilicones 12,135 13,760 19,186 25,130
Crop Protection 20,615 28,974 35,085 54,865
Other 2,130 4,555 5,611 8,248
--------- --------- ----------- -----------
34,880 47,289 59,882 88,243
--------- --------- ----------- -----------
General corporate
expense (12,114) (19,332) (24,743) (39,124)
--------- --------- ----------- -----------
Total operating
profit $ 56,822 $ 50,323 $ 89,555 $ 105,532
========= ========= =========== ===========
CROMPTON CORPORATION
Consolidated Balance Sheets
June 30, 2002 and December 31, 2001
(In thousands of dollars)
June 30, 2002 December 31, 2001
--------------- -------------------
ASSETS
CURRENT ASSETS
Cash $ 20,802 $ 21,506
Accounts receivable 223,554 188,133
Inventories 446,075 491,693
Other current assets 141,662 113,742
----------- -------------
Total current assets 832,093 815,074
----------- -------------
NON-CURRENT ASSETS
Property, plant and
equipment 934,246 1,021,983
Cost in excess of acquired
net assets 600,159 897,404
Other assets 423,949 497,727
------------ -------------
$2,790,447 $ 3,232,188
============ =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 4,508 $ 29,791
Accounts payable 261,339 234,985
Accrued expenses 296,339 285,329
Income taxes payable 85,848 111,905
Other current liabilities 13,481 20,608
------------ -------------
Total current
liabilities 661,515 682,618
------------ -------------
NON-CURRENT LIABILITIES
Long-term debt 1,255,800 1,392,833
Postretirement health
care liability 197,261 199,583
Other liabilities 396,800 409,613
STOCKHOLDERS' EQUITY
Common stock 1,192 1,192
Additional paid-in capital 1,049,030 1,051,257
Accumulated deficit (590,213) (280,350)
Accumulated other
comprehensive income (115,657) (151,839)
Treasury stock at cost (65,281) (72,719)
------------ -------------
Total stockholders' equity 279,071 547,541
------------ -------------
$2,790,447 $ 3,232,188
============ =============
CROMPTON CORPORATION
Consolidated Statements of Cash Flows
Six months ended 2002 and 2001
(In thousands of dollars)
Six Months Ended
------------------------
Increase (decrease) to cash 2002 2001
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (298,520) $ 29,664
Adjustments to reconcile net
earnings (loss) to net
cash provided by operations:
Cumulative effect of
accounting change 298,981 -
Loss on sale of business 34,705 -
Facility closures, severance and
related costs 9,283 -
Depreciation and amortization 76,024 93,717
Equity income (4,261) (7,808)
Changes in assets and
liabilities, net:
Accounts receivable (75,225) (20,552)
Inventories 32,474 (21,329)
Accounts payable 18,707 80,459
Other 1,195 (58,822)
----------- -----------
Net cash provided by operations 93,363 95,329
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of business (a) 80,000 -
Capital expenditures (36,048) (76,635)
Other investing activities 1,090 2,925
----------- -----------
Net cash provided by (used in)
investing activities 45,042 (73,710)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on debt (171,020) (35,930)
Proceeds from sale of
accounts receivable 39,193 9,221
Dividends paid (11,343) (11,308)
Other financing activities 3,908 3,680
----------- -----------
Net cash used in
financing activities (139,262) (34,337)
----------- -----------
CASH
Effect of exchange rates on cash 153 (1,011)
----------- -----------
Change in cash (704) (13,729)
Cash at beginning of period 21,506 20,777
----------- -----------
Cash at end of period $ 20,802 $ 7,048
=========== ===========
(a) The Industrial Specialties business (excluding retained
receivables and payables valued at approximately $10 million)
was sold during the second quarter for $95 million, including
cash proceeds of $80 million and a note receivable of $15
million due February 2003.
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