Crompton Reports First Quarter Results.Business Editors MIDDLEBURY Middlebury College is a liberal-arts college in Middlebury, Vermont, founded in 1800. Middlebury is the name of some places in the United States of America:
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 first quarter net earnings of $5.8 million, or five 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. , compared to a net loss of $292.2 million, or $2.52 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, in the first quarter of 2002. Earnings for the first quarter of 2003 included 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. special charges for antitrust Antitrust The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade. investigation costs ($5.2 million), previously announced 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 ($0.5 million), and a cumulative effect of accounting change for implementing 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. 143 "Accounting for Asset Retirement Obligations Asset Retirement Obligations provide for future disposal of assets as required by SFAS 143 [1]. Firms must recognize the ARO liability in the period it was acquired, generally acquisition. " ($0.4 million). The net loss for the first quarter of 2002 included a cumulative effect of accounting change for goodwill 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. of $299 million. Net earnings before such special items were $11.9 million, or 10 cents per share, in the first quarter of 2003 versus $6.8 million, or six cents per share, in the first quarter of 2002. Earnings before special items is not a measure of performance calculated 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 generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). See the attached supplementary schedules for a reconciliation of the non-GAAP financial measures referred to herein to their most directly comparable GAAP financial measures. First quarter sales of $649.8 million were one percent above the prior year. Adjusting for divested operations, sales increased seven percent as increased unit volume of four percent and favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. foreign currency translation of five percent more than offset the impact of lower selling prices of two percent. "We are pleased with our first quarter results, especially considering the continued sluggish economic environment," said Vincent A. Calarco, chairman, president and chief executive officer. "We benefited from an increase in unit volume, lower operating costs operating costs npl → gastos mpl operacionales , and favorable foreign currency translation, while higher raw material costs and lower selling prices in certain businesses were partial offsets." "We are also pleased with last week's announcement of the agreement to sell our OrganoSilicones business to General Electric Company. The purchase price under the agreement is for $645 million in cash, plus the GE 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. business with an agreed upon Adj. 1. agreed upon - constituted or contracted by stipulation or agreement; "stipulatory obligations" stipulatory noncontroversial, uncontroversial - not likely to arouse controversy value of $160 million, and an earn-out Earn-out Refers to an additional payment in a merger or acquisition that is not part of the original acquisition cost, which is based on the acquired company's future earnings relative to a level determined by the merger agreement. of $105 million at a minimum and $250 million at a maximum payable quarterly over a three-year period. The closing of the transaction is subject to regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approvals and certain other conditions. On a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis, assuming the minimum earn-out, the transaction would have been accretive to 2002 earnings by $.03 per share. For 2003, the transaction appears at this time to be slightly dilutive, however, we do not expect it to impact our overall earnings outlook for the year." First quarter operating results for the company's reporting segments are summarized as follows: 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). Products Polymer additives sales of $301.6 million were up 13 percent from the prior year as a result of an increase in unit volume of nine percent and favorable foreign currency translation of six percent, partially offset by a two percent decline in selling prices. Plastic, urethane urethane (yoor´ithān´), n ethyl carbamate used as an anesthetic agent for laboratory animals, formerly used as a hypnotic in humans. and petroleum additives sales rose 17 percent, 19 percent and five percent, respectively, due primarily to increased demand and favorable foreign currency translation. Rubber additives sales were up three percent due mainly to increased demand and favorable foreign currency translation, offset in part by lower selling 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 $13.5 million was up 16 percent from the prior year due mainly to higher unit volume and reduced manufacturing costs, offset in part by increased raw material costs and lower selling prices. Polymers sales of $68.2 million were up one percent from the prior year as a three percent increase in unit volume and favorable foreign currency translation of three percent, more than offset a five percent decline in selling prices. 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 were down eight percent due mainly to lower selling prices resulting from industry overcapacity o·ver·ca·pac·i·ty n. Too great a capacity for production of commodities or delivery of services in relation to actual need: the problem of overcapacity in many large industries. . Urethanes sales were up 11 percent due primarily to increased demand and favorable foreign currency translation. Operating profit of $9.3 million was up seven percent from the prior year due primarily to increased unit volume and the absence of unfavorable prior year variances attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to reduced plant throughput The speed with which a computer processes data. It is a combination of internal processing speed, peripheral speeds (I/O) and the efficiency of the operating system and other system software all working together. 1. , offset in part by reduced selling prices and higher raw material costs in the EPDM business. Polymer processing equipment sales of $41.1 million were down 17 percent from the first quarter of 2002 as 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. capital equipment demand was offset in part by favorable foreign currency translation of four percent and improved selling prices of two percent. Despite lower sales, operating profit of $1.1 million was $1.0 million higher than the prior year mainly as a result of lower operating costs and improved selling prices. The 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 March was $76 million, equal to year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2002. 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 $117.8 million were up four percent from the prior year due to favorable foreign currency translation of seven percent and higher unit volume of three percent, partially offset by a six percent decline in selling prices. Operating profit of $14.0 million was up 98 percent from the prior year mainly as a result of increased unit volume and lower costs, offset in part by reduced selling prices. Crop protection sales of $60.4 million were up 15 percent from the first quarter of 2002 due to a nine percent increase in unit volume mainly attributable to increased domestic and European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. demand and favorable foreign currency translation of six percent. Operating profit of $19.7 million was up 36 percent from the prior year primarily as a result of increased unit volume and higher joint venture equity income of $3.3 million, offset in part by an unfavorable sales mix sales mix See product mix. . Other sales of $64.4 million were 34 percent lower than the prior year due primarily to the 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). of the industrial specialties business in June June: see month. 2002. Sales for the remaining refined products business were up 12 percent due to favorable foreign currency translation, higher selling prices and increased unit volume. Operating profit of $0.4 million was down 87 percent from the first quarter of 2002 due mainly to the divestment divestment to strip one's investment from an entity. of industrial specialties and higher refined products raw material costs that were partially recovered through increased selling prices. The Company's news releases and other information, including certain financial and statistical information presented during its periodic earnings conference calls, are available on the Company's investor relations Investor relations The process by which the corporation communicates with its investors. page at www.cromptoncorp.com. The Company will conduct its first quarter conference call at 1:30 p.m. Eastern Time on April 29, 2003. The telephone number is 719-457-2629. Live audio is available on the Company's investor relations page at www.cromptoncorp.com. Replay of the conference call will be available for two weeks beginning at 5:00 p.m. Eastern Time on April 29, 2003, by calling 719-457-0820, access code 497118. Crompton Corporation is a $2.5 billion global producer and marketer of specialty chemicals and polymer products and equipment. Additional information concerning Crompton Corporation is available at www.cromptoncorp.com. Adjusted Financial Measures The Company uses certain non-GAAP financial measures which eliminate the effect of certain special items. One non-GAAP financial measure used is net earnings excluding antitrust investigation costs and facility closures, severance and related costs. These special items may be recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. . Another non-GAAP financial measure used is operating results excluding the impact of the Company's divested operations. The Company believes the non-GAAP financial measures used in this earnings release provide useful information to both management and investors by excluding certain costs and the impact of divested operations that the Company believes are not indicative indicative: see mood. of its core operating results. The Company believes that these special items may obscure OBSCURE - "A Formal Description of the Specification Language OBSCURE", J. Loeckx, TR A85/15, U Saarlandes, Saarbrucken, 1985. trends that are important in evaluating the Company's continuing operating activities. In addition, since the Company has historically reported such non-GAAP financial measures to the investment community, the Company believes that the inclusion of such measures provides consistency Consistency can refer to:
Readers should not consider these non-GAAP financial measures in isolation or as a substitute for the Company's reported financial results under GAAP. The attached supplementary schedules containing a reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures should be used as a supplement to GAAP results to assist the reader in better understanding the operational performance of the Company. Supplementary schedules include the "Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Statement of Operations See Income statement. Adjusted for Special Items and Divested Operations," "Segment Sales and Operating Profit," and "Major Factors Affecting Results." Forward Looking Statements 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, the completion of the announced transaction, the outcome and timing of antitrust investigations to which the Company is subject, pension and other post-retirement benefit plan assumptions, 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 our estimates and assumptions and on currently available information. The forward-looking statements include information concerning our possible or assumed future results of operations, 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
First quarter ended 2003 and 2002
(In thousands, except per share data)
First Quarter
-------------------
2003 2002
--------- ---------
Net sales $ 649,751 $ 644,838
Cost of products sold 459,188 458,863
Selling, general and admin. 98,928 97,209
Depreciation and amortization 36,408 38,079
Research and development 18,438 20,218
Equity income (5,614) (2,264)
Facility closures, severance and
related costs 849 -
Antitrust investigation costs 8,489 -
--------- ---------
Operating profit 33,065 32,733
Interest expense 26,715 26,138
Other income, net (902) (2,293)
--------- ---------
Earnings before income taxes
and cumulative effect of
accounting change 7,252 8,888
Income taxes 1,005 2,133
--------- ---------
Earnings before cumulative
effect of accounting change 6,247 6,755
Cumulative effect of accounting change (401) (298,981)
--------- ---------
Net earnings (loss) $ 5,846 $(292,226)
========= =========
Basic earnings (loss) per common share:
Earnings before cumulative
effect of accounting change $ 0.05 $ 0.06
Cumulative effect of accounting
change - (2.63)
--------- ---------
Net earnings (loss) $ 0.05 $ (2.57)
========= =========
Weighted average shares
outstanding 114,146 113,274
========= =========
Diluted earnings (loss) per common share:
Earnings before cumulative
effect of accounting change $ 0.05 $ 0.06
Cumulative effect of accounting
change - (2.58)
--------- ---------
Net earnings (loss) $ 0.05 $ (2.52)
========= =========
Weighted average shares
outstanding 114,331 115,801
========= =========
CROMPTON CORPORATION
Consolidated Balance Sheets
March 31, 2003 and December 31, 2002
(In thousands of dollars)
March 31, December
2003 31, 2002
---------- ----------
ASSETS
CURRENT ASSETS
Cash $ 25,441 $ 16,941
Accounts receivable 213,670 185,983
Inventories 477,547 460,116
Other current assets 94,204 114,094
---------- ----------
Total current assets 810,862 777,134
---------- ----------
NON-CURRENT ASSETS
Property, plant and equipment 936,141 942,516
Cost in excess of acquired net assets 585,170 584,633
Other assets 542,097 536,532
---------- ----------
$2,874,270 $2,840,815
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 6,537 $ 5,727
Accounts payable 321,743 276,133
Accrued expenses 230,928 267,849
Income taxes payable 123,057 116,111
Other current liabilities 16,966 15,670
---------- ----------
Total current liabilities 699,231 681,490
---------- ----------
NON-CURRENT LIABILITIES
Long-term debt 1,239,165 1,261,847
Postretirement health care liability 193,128 193,996
Other liabilities 505,230 503,599
STOCKHOLDERS' EQUITY
Common stock 1,192 1,192
Additional paid-in capital 1,045,393 1,048,304
Accumulated deficit (586,424) (586,555)
Accumulated other comprehensive loss (165,736) (200,426)
Treasury stock at cost (56,909) (62,632)
---------- ----------
Total stockholders' equity 237,516 199,883
---------- ----------
$2,874,270 $2,840,815
========== ==========
CROMPTON CORPORATION
Consolidated Statements of Cash Flows
First quarter ended 2003 and 2002
(In thousands of dollars)
First Quarter
-------------------
Increase (decrease) to cash 2003 2002
-------------------------------------------------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 5,846 $(292,226)
Adjustments to reconcile net earnings (loss) to
net cash provided by (used in) operations:
Cumulative effect of accounting change, net of
tax 401 298,981
Facility closures, severance and related costs 849 -
Antitrust investigation costs 8,489 -
Depreciation and amortization 36,408 38,079
Equity income (5,614) (2,264)
Changes in assets and liabilities, net:
Accounts receivable (23,259) (55,348)
Inventories (5,864) 29,696
Accounts payable 41,969 25,950
Other (14,859) (52,735)
--------- ---------
Net cash provided by (used in) operations 44,366 (9,867)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (14,639) (16,836)
Other investing activities (98) 323
--------- ---------
Net cash used in investing activities (14,737) (16,513)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
(Payments) proceeds on debt (24,829) 5,182
Proceeds from sale of accounts receivable 8,126 14,111
Dividends paid (5,715) (5,666)
Other financing activities 880 1,628
--------- ---------
Net cash (used in) provided by financing
activities (21,538) 15,255
--------- ---------
CASH
Effect of exchange rates on cash 409 (554)
--------- ---------
Change in cash 8,500 (11,679)
Cash at beginning of period 16,941 21,506
--------- ---------
Cash at end of period $ 25,441 $ 9,827
========= =========
SUPPLEMENTARY
SCHEDULE I
-------------
CROMPTON CORPORATION
Consolidated Statements of Operations Adjusted for Special Items and
Divested Operations
First quarter ended 2003 and 2002
(In thousands, except per share data)
The following supplementary schedules I, II and III contain a
reconciliation of the non-GAAP financial measures contained in this
earnings release to their most directly comparable GAAP financial
measures (see note (c) below).
First Quarter
----------------------------
Adjusted
2002
2003 2002 (b)
--------- --------- --------
Net sales $ 649,751 $ 644,838 $604,740
Cost of products sold 459,188 458,863 429,179
Selling, general and admin. 98,928 97,209 91,926
Depreciation and amortization 36,408 38,079 35,804
Research and development 18,438 20,218 19,070
Equity income (5,614) (2,264) (2,264)
--------- --------- --------
Operating profit before special items 42,403 32,733 $ 31,025
========
Interest expense 26,715 26,138
Other income, net (902) (2,293)
--------- ---------
Earnings before income taxes and
special items 16,590 8,888
Income taxes 4,645 2,133
--------- ---------
Earnings before after-tax special items 11,945 6,755
Facility closures, severance and
related costs (a) (519) -
Antitrust investigation costs (a) (5,179) -
Cumulative effect of accounting change (401) (298,981)
--------- ---------
Net earnings (loss) $ 5,846 $(292,226)
========= =========
Diluted earnings (loss) per common share:
Earnings before after-tax
special items $ 0.10 $ 0.06
========= =========
Net earnings (loss) $ 0.05 $ (2.52)
========= =========
(a) The pre-tax amounts of these special items are shown on the
"Consolidated Statements of Operations."
(b) Adjusted 2002 excludes the first quarter operating results of the
industrial specialties business (sold June 28, 2002).
(c) Readers should not consider the non-GAAP financial measures in
isolation or as a substitute for the Company's reported financial
results under GAAP. The supplementary schedules should be used as
a supplement to GAAP results to assist the reader in better
understanding the operational performance of the Company. For a
further explanation regarding the use of non-GAAP financial
measures, see the Adjusted Financial Measures section included on
page 3 of this release.
CROMPTON CORPORATION SUPPLEMENTARY
Segment Sales and Operating Profit SCHEDULE II
First quarter ended 2003 and 2002 -------------
(In thousands of dollars)
First Quarter
--------------------------
Adjusted
2002
2003 2002 (a)
-------- -------- --------
NET SALES
Polymer Products
Polymer Additives $301,574 $267,235 $267,235
Polymers 68,183 67,480 67,480
Polymer Processing Equipment 41,108 49,805 49,805
Eliminations (3,653) (3,319) (3,319)
-------- -------- --------
407,212 381,201 381,201
-------- -------- --------
Specialty Products
OrganoSilicones 117,779 113,756 113,756
Crop Protection 60,380 52,472 52,472
Other 64,380 97,409 57,311
-------- -------- --------
242,539 263,637 223,539
-------- -------- --------
Total net sales $649,751 $644,838 $604,740
======== ======== ========
OPERATING PROFIT
Polymer Products
Polymer Additives $ 13,513 $ 11,631 $ 11,631
Polymers 9,274 8,649 8,649
Polymer Processing Equipment 1,078 80 80
-------- -------- --------
23,865 20,360 20,360
-------- -------- --------
Specialty Products
OrganoSilicones 13,979 7,051 7,051
Crop Protection 19,651 14,470 14,470
Other 448 3,481 1,773
-------- -------- --------
34,078 25,002 23,294
-------- -------- --------
General corporate expense (15,540) (12,629) (12,629)
-------- -------- --------
42,403 32,733 $ 31,025
========
Facility closures, severance and
related costs (849) -
Antitrust investigation costs (8,489) -
-------- --------
Total operating profit $ 33,065 $ 32,733
======== ========
(a) Adjusted 2002 excludes the first quarter operating results of the
industrial specialties business (sold June 28, 2002).
CROMPTON CORPORATION SUPPLEMENTARY
Major Factors Affecting Results SCHEDULE III
First Quarter 2003 versus 2002 -------------
(In millions, except per share data)
The following table summarizes the major factors contributing to
the first quarter change in sales and after-tax earnings before
special items and cumulative effect of accounting change versus the
prior year:
First Quarter
--------------------------
After-
Net tax EPS
Sales Earnings (Diluted)
------- -------- ---------
2002 before special items * $644.8 $ 6.8 $0.06
Divested operations (40.1) (1.2) (0.01)
Unit volume/mix 22.9 5.7 0.05
Lower selling prices (12.3) (8.9) (0.08)
Foreign currency translation 34.5 2.8 0.02
Costs savings - 8.4 0.07
Raw materials/energy - (6.8) (0.06)
Absorption variances - 7.2 0.06
Other - (2.1) (0.01)
------- -------- ---------
2003 before special items * $649.8 $11.9 $0.10
======= ======== =========
* Refer to Supplementary Schedule I in this release.
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