Crompton Reports Third Quarter Results: Price Improvement Outpaced Raw Material and Energy Cost Increases.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:
See: New York Stock Exchange : CK) reported a third quarter net loss of $40.7 million, or 35 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 net earnings of $80.2 million, or 72 cents per share, in the third quarter of 2003. The third quarter 2004 net loss 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. gain on the sale of discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. of $2.1 million, or two cents per share, resulting from a purchase price adjustment settlement and other matters related to the July July: see month. 31, 2003 sale of the Company's OrganoSilicones business unit. Third quarter 2003 net earnings included an after-tax gain on sale of discontinued operations of $111.7 million, or $1.00 per share, and after-tax earnings from discontinued operations of $3.1 million, or three cents per share, also related to the divested OrganoSilicones business unit. The loss from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the third quarter of 2004 of $42.9 million, or 37 cents per share, included pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charges 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 of $40.4 million, a loss on the early extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt of $20.1 million in connection with our refinancing Refinancing An extension and/or increase in amount of existing debt. completed on August 16, 2004, 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. costs of $8.4 million (including a payment of $5.0 million under an antitrust class action settlement), a $3.0 million product liability charge related to a divestment divestment to strip one's investment from an entity. made in the first quarter, and supplemental executive retirement costs of $1.7 million. The loss from continuing operations for the third quarter of 2003 of $34.5 million, or 31 cents per share, included pre-tax charges for a loss on the early extinguishment of debt of $24.7 million, facility closures, severance and related costs of $10.6 million and antitrust costs of $5.4 million. Third quarter net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of $639.4 million were 14 percent above the prior year with five percent due to improved selling prices, four percent due to improved unit volume, three percent attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the acquisition of 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 on July 31, 2003, and two percent due to the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impact of foreign currency translation. "Our determined pricing efforts resulted in price increases that more than offset higher raw material and energy costs in the third quarter," said Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. L. Wood, Chairman, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Crompton Cromp·ton , Samuel 1753-1827. British inventor of the spinning mule (1779). . "While rising raw material and energy costs continue to be a challenge, we will continue to increase our prices to achieve satisfactory margins. "We are also making excellent progress on the organizational redesign re·de·sign tr.v. re·de·signed, re·de·sign·ing, re·de·signs To make a revision in the appearance or function of. re we announced in July. Staffing of the streamlined organization is underway and results will be announced in coming weeks. Going forward, we will have a leaner lean 1 v. leaned, lean·ing, leans v.intr. 1. To bend or slant away from the vertical. 2. , more efficient organization and will benefit from cost reductions of $50 million annually beginning in 2005." For the first nine months of 2004, the Company reported net earnings of $21.3 million, or 19 cents per share, compared to net earnings of $77.0 million, or 68 cents per share, for the first nine months of 2003. Net sales for the first nine months of 2004 were $1.9 billion compared to $1.6 billion in the first nine months of 2003. Net earnings for the first nine months of 2004 included an after-tax gain on the sale of discontinued operations of $2.1 million, or two cents per share. Net earnings for the first nine months of 2003 included an after-tax gain on the sale of discontinued operations of $111.7 million, or 99 cents per share and after-tax earnings from discontinued operations of $26.3 million, or 23 cents per share. Net earnings from continuing operations for the first nine months of 2004 of $19.2 million, or 17 cents per share, included pre-tax divestment gains of $94.6 million primarily from the sale of our 50% interest in the Gustafson A derivative of the name Gustav, Gustafson, Gustafsson, Gustavson, and/or Gustavsson, is a group of fairly common surnames of Swedish origin, and may refer to any of the following people: Gustafson Third 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 $366.2 million increased 18% from the prior year, of which five percent was attributable to the acquisition of GE's Specialty Chemicals business on July 31, 2003, with the balance due to improved pricing of six percent, higher unit volume of five percent and favorable foreign currency translation of two percent. Plastic additives sales rose 22% mainly as a result of higher selling prices, the Specialty Chemicals business acquisition and higher unit volume. Rubber additives sales were up 11% due mainly to higher unit volume. 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 up five percent due primarily to favorable foreign currency translation and improved pricing, offset in part by lower unit volume. Petroleum additives sales rose 18% due mainly to higher unit volume and improved pricing. 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 $13.0 million was up $8.1 million from the third quarter of 2003 due mainly to favorable pricing and savings attributable to cost reduction initiatives, offset in part by higher raw material costs. Polymers sales of $81.9 million were up 10% from the prior year due to an increase in selling prices of seven percent, favorable foreign currency translation of two percent and higher unit volume of one percent. 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 rose six percent due mainly to improved pricing, offset in part by lower unit volume. Urethanes sales increased 14% mainly as a result of higher unit volume and favorable foreign currency translation. Operating profit of $13.5 million was up $7.1 million from the prior year due primarily to improved pricing, lower costs resulting mainly from cost saving initiatives and lower depreciation, and higher Urethanes unit volume, offset in part by higher raw material and energy costs. Polymer processing equipment sales of $41.0 million increased seven percent from the third quarter of 2003 due to higher unit volume of eight percent and favorable foreign currency translation of two percent, offset in part by unfavorable pricing of three percent. Operating profit of $0.4 million was up $0.7 million from the prior year due mainly to higher unit volume, offset in part by unfavorable pricing. 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 September of $87 million was $25 million higher than at the end of 2003. 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 Crop protection sales of $88.3 million rose 13% from the prior year due to higher unit volume of eight percent, increased selling prices of three percent and favorable foreign currency translation of two percent. Operating profit of $26.1 million was up 54% from the prior year due mainly to increased unit volume, improved pricing and the absence of the Company's share of a prior year Gustafson joint venture loss. Refined products sales of $65.4 million were up eight percent from the prior year due to improved pricing of six percent and favorable foreign currency translation of two percent. Operating profit of $1.4 million was up $1.6 million from the third quarter of 2003 due primarily to favorable pricing and lower operating costs operating costs npl → gastos mpl operacionales , offset in part by higher raw material costs. The Company will post informational slides to the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of its Web site that investors may wish to refer to during Crompton's teleconference and live audio webcast on October October: see month. 28, at 9:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . The dial-in number for the call is (612) 288-0329. Crompton Corporation, with annual sales of $2.2 billion, is a producer and marketer of specialty chemicals and polymer products and equipment. Additional information concerning Crompton Corporation is available at www.cromptoncorp.com. 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. Certain statements made in this release are forward-looking statements that involve risks and uncertainties, including, but not limited to, general economic conditions, the outcome and timing of antitrust investigations and related civil lawsuits to which the Company is subject, the ability to obtain selling price increases, 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, the ability to realize expected cost savings under the Company's cost reduction initiatives, the amount of any additional 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. payments from GE, and other risks and uncertainties detailed in the Company's filings with the Securities and Exchange Commission. These statements are based on the Company's 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
Third quarter and nine months ended 2004 and 2003
(In thousands of dollars, except per share data)
Third Quarter Nine months ended
----------------- ---------------------
2004 2003 2004 2003
-------- -------- ---------- ----------
Net sales $639,397 $559,189 $1,910,484 $1,624,062
Cost of products sold 466,677 410,254 1,421,557 1,189,849
Selling, general and admin. 92,785 91,504 281,384 263,604
Depreciation and amortization 31,216 30,318 93,056 84,816
Research and development 12,593 12,767 37,455 37,553
Equity (income) loss (145) 1,073 (9,838) (6,769)
Facility closures, severance
and related costs 40,376 10,566 46,065 14,071
Antitrust costs 8,426 5,385 16,829 26,260
-------- -------- ---------- ----------
Operating profit (loss) (12,531) (2,678) 23,976 14,678
Interest expense 20,579 20,664 55,666 72,938
Loss on early extinguishment
of debt 20,063 24,699 20,063 24,699
Other (income) expense, net 7,199 3,414 (82,613) 7,454
-------- -------- ---------- ----------
Earnings (loss) from
continuing operations
before income taxes and
cumulative effect
of accounting change (60,372) (51,455) 30,860 (90,413)
Income tax expense (benefit) (17,520) (16,953) 11,675 (29,791)
-------- -------- ---------- ----------
Earnings (loss) from
continuing operations
before cumulative effect
of accounting change (42,852) (34,502) 19,185 (60,622)
Earnings from discontinued
operations - 3,057 - 26,314
Gain on sale of discontinued
operations 2,142 111,692 2,142 111,692
Cumulative effect of
accounting change - - - (401)
-------- -------- ---------- ----------
Net earnings (loss) $(40,710)$ 80,247 $ 21,327 $ 76,983
======== ======== ========== ==========
Basic and diluted earnings
(loss) per common share:
Earnings (loss) from
continuing operations
before cumulative effect
of accounting change $ (0.37)$ (0.31)$ 0.17 $ (0.54)
Earnings from discontinued
operations - 0.03 - 0.23
Gain on sale of discontinued
operations 0.02 1.00 0.02 0.99
Cumulative effect of
accounting change - - - -
-------- -------- ---------- ----------
Net earnings (loss) $ (0.35)$ 0.72 $ 0.19 $ 0.68
======== ======== ========== ==========
Weighted average shares
outstanding - basic 114,719 111,208 114,607 112,654
======== ======== ========== ==========
Weighted average shares
outstanding - diluted 114,719 111,208 114,791 112,654
======== ======== ========== ==========
CROMPTON CORPORATION
Consolidated Balance Sheets
September 30, 2004 and December 31, 2003
(In thousands of dollars)
September 30, December 31,
2004 2003
---------------------------
CURRENT ASSETS
Cash $ 136,933 $ 39,213
Accounts receivable 212,198 210,190
Inventories 397,135 390,199
Other current assets 156,905 170,852
------------- -------------
Total current assets 903,171 810,454
------------- -------------
NON-CURRENT ASSETS
Property, plant and equipment 722,517 774,612
Cost in excess of acquired net assets 418,688 418,607
Other assets 497,259 525,509
------------- -------------
$ 2,541,635 $ 2,529,182
============= =============
CURRENT LIABILITIES
Short-term borrowings $ 3,496 $ 60,695
Accounts payable 202,634 232,127
Accrued expenses 267,040 267,472
Income taxes payable 132,106 130,284
Other current liabilities 17,533 10,667
------------- -------------
Total current liabilities 622,809 701,245
------------- -------------
NON-CURRENT LIABILITIES
Long-term debt 862,024 754,018
Pension and post-retirement health care
liabilities 549,446 566,966
Other liabilities 195,974 204,244
STOCKHOLDERS' EQUITY
Common stock 1,192 1,192
Additional paid-in capital 1,033,139 1,034,027
Accumulated deficit (586,025) (590,157)
Accumulated other comprehensive loss (93,753) (96,463)
Treasury stock at cost (43,171) (45,890)
------------- -------------
Total stockholders' equity 311,382 302,709
------------- -------------
$ 2,541,635 $ 2,529,182
============= =============
CROMPTON CORPORATION
Consolidated Statements of Cash Flows
Nine months ended 2004 and 2003
(In thousands of dollars)
Nine Months Ended
-----------------------
Increase (decrease) in cash 2004 2003
---------------------------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 21,327 $ 76,983
Adjustments to reconcile net earnings
to net cash used in operations:
Gain on sale of Gustafson joint venture (90,938) -
Cumulative effect of accounting change - 401
Gain on sale of discontinued operations (2,142) (111,692)
Loss on early extinguishment of debt 20,063 24,699
Depreciation and amortization 93,056 105,534
Equity income (9,838) (6,769)
Changes in assets and liabilities, net:
Accounts receivable (7,162) 50,410
Accounts receivable - securitization 1,859 (18,767)
Inventories (9,911) 10,047
Accounts payable (28,724) (70,747)
Other (3,339) (78,127)
----------- -----------
Net cash used in operations (15,749) (18,028)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from divestments 142,270 643,115
Capital expenditures (43,983) (55,104)
Other investing activities 281 (250)
----------- -----------
Net cash provided by investing activities 98,568 587,761
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on domestic credit facility (57,000) -
(Payments to) proceeds from short-term
borrowings (350,441) 961
Payments on long term borrowings (140,006) (477,627)
Proceeds from long-term borrowings 597,499 -
Premium paid on early extinguishment of debt (19,044) (23,804)
Dividends paid (17,192) (16,993)
Treasury stock acquired - (22,080)
Other financing activities 1,276 1,137
----------- -----------
Net cash (used in) provided by financing
activities 15,092 (538,406)
----------- -----------
CASH
Effect of exchange rates on cash (191) 1,516
----------- -----------
Change in cash 97,720 32,843
Cash at beginning of period 39,213 16,941
----------- -----------
Cash at end of period $ 136,933 $ 49,784
=========== ===========
CROMPTON CORPORATION
Segment Sales and Operating Profit (Loss)
Third quarter and nine months ended 2004 and 2003
(In thousands of dollars)
Third Quarter Nine Months Ended
----------------- ---------------------
2004 2003 2004 2003
-------- -------- ---------- ----------
NET SALES
Polymer Products
Polymer Additives $366,220 $311,204 $1,099,322 $ 907,340
Polymers 81,886 74,685 246,281 213,150
Polymer Processing
Equipment 40,961 38,180 125,315 119,928
Eliminations (3,335) (3,316) (10,964) (10,492)
-------- -------- ---------- ----------
485,732 420,753 1,459,954 1,229,926
-------- -------- ---------- ----------
Specialty Products
Crop Protection 88,293 77,861 250,991 209,822
Refined Products 65,372 60,575 199,539 184,314
-------- -------- ---------- ----------
153,665 138,436 450,530 394,136
-------- -------- ---------- ----------
Total net sales $639,397 $559,189 $1,910,484 $1,624,062
======== ======== ========== ==========
OPERATING PROFIT
Polymer Products
Polymer Additives $ 13,011 $ 4,872 $ 29,856 $ 25,299
Polymers 13,499 6,354 35,335 20,503
Polymer Processing
Equipment 357 (323) 101 1,737
-------- -------- ---------- ----------
26,867 10,903 65,292 47,539
-------- -------- ---------- ----------
Specialty Products
Crop Protection 26,140 16,979 75,910 50,833
Refined Products 1,369 (211) 163 (368)
-------- -------- ---------- ----------
27,509 16,768 76,073 50,465
-------- -------- ---------- ----------
General corporate expense (18,105) (13,169) (54,495) (34,550)
Unabsorbed overhead expense
from discontinued operations - (1,229) - (8,445)
Facility closures, severance
and related costs (40,376) (10,566) (46,065) (14,071)
Antitrust costs (8,426) (5,385) (16,829) (26,260)
-------- -------- ---------- ----------
Total operating profit
(loss) $(12,531)$ (2,678)$ 23,976 $ 14,678
======== ======== ========== ==========
CROMPTON CORPORATION
Major Factors Affecting Operating Results
Third quarter and nine months ended 2004 versus 2003
(In millions of dollars)
The following table summarizes the major factors contributing to the
changes in third quarter and nine months operating results versus the
prior year:
Third Quarter Nine Months Ended
--------------- ----------------------
Pre-tax Pre-tax
Net Earnings Net Earnings
Sales (Loss) Sales (Loss)
--------------- ----------------------
2003 $559.2 $(51.5)*$1,624.1 $(90.4)
2003 Facility closures,
severance and related costs - 10.6 - 14.1
2003 Antitrust costs - 5.4 - 26.3
2003 Loss on early
extinguishment of debt - 24.7 - 24.7
--------------- ----------------------
559.2 (10.8) 1,624.1 (25.3)
GE Specialty Chemicals business
acquired 7/31/03 14.7 3.0 103.6 6.3
Improved unit volume/mix 24.6 9.0 94.5 30.0
Higher selling prices 28.9 28.9 41.8 41.8
Foreign currency impact 12.0 0.4 46.5 (0.9)
Cost savings - 14.4 - 40.8
Higher raw materials/energy
costs - (26.5) - (60.1)
Lower interest expense - 0.1 - 17.3
Equity derivative contract gain
- 2003 - - - (1.5)
Gustafson product liability
claim - (3.0) - (3.0)
Legal and environmental costs - (1.8) - 1.1
Unfavorable manufacturing
absorption variances - (1.5) - (6.5)
Other - (2.0) - (13.1)
--------------- ----------------------
639.4 10.2 1,910.5 26.9
2004 Facility closures,
severance and related costs - (40.4) - (46.1)
2004 Antitrust costs - (8.4) - (16.8)
2004 Loss on early
extinguishment of debt - (20.1) - (20.1)
2004 Supplemental executive
retirement costs - (1.7) - (7.6)
2004 Divestment gains, primarily
Gustafson - - - 94.6
--------------- ----------------------
2004 $639.4 $(60.4)*$1,910.5 $30.9
=============== ======================
* Represents the earnings (loss) from continuing operations before
income taxes and cumulative effect of accounting change.
CROMPTON CORPORATION
Consolidated Statements of Cash Flows
Third quarter and second quarter ended 2004 and 2003
(In thousands of dollars)
Third Quarter Second Quarter
Ended Ended
----------------- ----------------------
Increase (decrease) in cash 2004 2003 2004 2003
--------------------------- ------- --------- -------- -------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net earnings (loss) $ (40,710)$ 80,247 $ 1,084 $ (9,110)
Adjustments to reconcile
net earnings (loss)
to net cash (used in)
provided by operations:
Gain on sale of
discontinued operations (2,142) (111,692) - -
Loss on early
extinguishment of debt 20,063 24,699 - -
Depreciation and
amortization 31,216 33,127 30,986 35,999
Equity income (145) 1,073 (66) (2,228)
Changes in assets and
liabilities, net:
Accounts receivable 51,928 46,722 (16,448) 26,947
Accounts receivable -
securitization (9,246) (33,408) 31,438 6,515
Inventories (7,660) 14,879 2,224 1,032
Accounts payable (12,800) (44,652) (14,117) (68,064)
Other (22,436) (60,168) 3,357 (12,438)
--------- --------- -------- -------------
Net cash (used in)
provided by operations 8,068 (49,173) 38,458 (21,347)
--------- --------- -------- -------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Net proceeds from
divestments 4,574 643,115 8,180 -
Capital expenditures (14,488) (22,383) (12,855) (18,082)
Other investing
activities (28) (96) (110) (56)
--------- --------- -------- -------------
Net cash (used in)
provided by investing
activities (9,942) 620,636 (4,785) (18,138)
--------- --------- -------- -------------
CASH FLOWS FROM FINANCING
ACTIVITIES
(Payments to) proceed from
domestic credit facility - (192,800) (7,600) 217,800
(Payments to) proceeds from
short-term borrowings (351,015) (4,894) (153) 5,424
Payments on long term
borrowings (140,006) (312,940) - (164,427)
Proceeds from long-term
borrowings 597,499 - - -
Premium paid on early
extinguishment of debt (19,044) (23,804) - -
Dividends paid (5,737) (5,560) (5,728) (5,718)
Treasury stock acquired - - - (22,080)
Other financing
activities 1,356 101 (251) 156
--------- --------- -------- -------------
Net cash (used in)
provided by financing
activities 83,053 (539,897) (13,732) 31,155
--------- --------- -------- -------------
CASH
Effect of exchange rates
on cash 576 (148) (629) 1,255
--------- --------- -------- -------------
Change in cash 81,755 31,418 19,312 (7,075)
Cash at beginning of
period 55,178 18,366 35,866 25,441
--------- --------- -------- -------------
Cash at end of period $ 136,933 $ 49,784 $ 55,178 $ 18,366
========= ========= ======== =============
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