Crompton Reports Third 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 third quarter net earnings of $80.2 million, or $.72 per share, compared to net earnings of $12.6 million or $.11 per share, in the third quarter of 2002. Discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. for the current quarter included a gain of $111.7 million, or $1.00 per share, relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the sale of the organosilicones business ("OSi") on July July: see month. 31, 2003, and OSi earnings of $3.1 million, or three 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. for the month of July. Discontinued operations for the third quarter of 2002 included OSi earnings of $14.9 million, or $.13 per share. 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 of $34.5 million, or $.31 per share, compared to a loss of $2.3 million, or two cents per share, for the third quarter of 2002. The loss from continuing operations for the third quarter of 2003 included pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charges of $24.7 million for 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, $10.6 million 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 and $5.4 million 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. legal and related costs. The loss from continuing operations for the third quarter of 2002 included pre-tax charges of $4.4 million for facility closures, severance and related costs. Third quarter sales from continuing operations of $559.2 million were 10 percent above the prior year with five 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, three 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 and the remainder due to the excess of improved unit volume over slightly lower selling prices. "While we are pleased with the positive impact of the OSi transaction and our significant debt reduction during the quarter, we remain concerned about the persistent Permanent. See persistent data, persistent name and persistent object. persistent - persistence effect of high raw material and energy prices - together they are the primary factors negatively impacting results," said Vincent A. Calarco, chairman, president and chief executive officer. "In this regard, we have taken proactive measures In antiterrorism, measures taken in the preventive stage of antiterrorism designed to harden targets and detect actions before they occur. to reduce overhead costs overhead costs see fixed costs. and improve efficiencies with the $40 million cost reduction program announced today." Nine month sales from continuing operations of $1.62 billion were one percent above the prior year while net earnings of $77 million, or $.68 per share, compared to a net loss of $285.9 million, or $2.52 per share, for 2002. Discontinued operations for the current nine months included a gain on the sale of the OSi business of $111.7 million, or $.99 per share, and OSi earnings of $26.3 million, or $.23 per share. Discontinued operations for the nine months of 2002 included OSi earnings of $33.7 million, or $.29 per share. The loss from continuing operations of $60.6 million, or $.54 per share, compared to a loss of $20.6 million, or $.18 per share, for the nine months of 2002. The loss from continuing operations for the nine months of 2003 included pre-tax charges of $26.3 million for antitrust legal and related costs, $24.7 million for early extinguishment of debt and $14.1 million for facility closures, severance and related costs. The loss from continuing operations for the nine months of 2002 included pre-tax charges of $34.7 million for the loss on the sale of the industrial specialties business and $10.8 million for facility closures, severance and related costs. 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 $311.2 million were up nine percent from the prior year due primarily to the acquisition of GE's specialty chemicals business on July 31, 2003. Excluding the acquired business, the impact of favorable foreign currency translation of three percent was offset by a decline in unit volume of two percent and lower selling prices of one percent. Plastic additives sales were up 21% mainly as a result of the recent acquisition. Rubber additives sales declined 13% due mainly to reduced unit volume and lower selling prices. 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 each rose two percent due primarily to favorable foreign currency translation. 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 $4.9 million was down 81% from the third quarter of 2002 due mainly to increased costs, lower selling prices and an unfavorable sales mix sales mix See product mix. , partially offset by profit from the newly acquired business. Higher costs were mainly attributable to increased raw material/energy costs, higher allocated overhead and other expenses, and 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 cost saving initiatives. The higher allocated overhead expenses were primarily due to a reallocation Noun 1. reallocation - a share that has been allocated again allocation, allotment - a share set aside for a specific purpose 2. reallocation of costs previously absorbed Absorbed 1. In a general business sense, when a cost is treated as an expense instead of being passed on to the customer in the form of higher prices. 2. In underwriting, when an issue has been completely sold to the public. 3. by the OSi business sold on July 31, 2003. Polymers sales of $74.7 million were up 11% from the prior year due to increased unit volume of 15% and favorable foreign currency translation of two percent, offset in part by reduced selling prices of six 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 20% mainly as a result of higher unit volume, offset in part by lower selling prices. Urethanes sales were up two percent due primarily to favorable foreign currency translation. Operating profit of $6.4 million was down 40% from the prior year mainly as a result of lower EPDM selling prices and increased raw material/energy costs, offset in part by higher EPDM unit volume. Polymer processing equipment sales of $38.2 million were up five percent from the third quarter of 2002 due to favorable foreign currency translation of four percent and improved pricing of two percent, offset in part by reduced unit volume of one percent. 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 $.3 million was favorable versus the prior year by $6.1 million due mainly to the absence of a prior year warranty An assurance, promise, or guaranty by one party that a particular statement of fact is true and may be relied upon by the other party. Warranties are used in a variety of commercial situations. In many instances a business may voluntarily make a warranty. claim settlement, lower operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. and favorable 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 September September: see month. 2003 of $70 million was down $6 million from the end of 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 Crop protection sales of $77.9 million were up 17% from the prior year due to higher unit volume of 13%, favorable foreign currency translation of three percent and increased selling prices of one percent. Operating profit of $17.0 million rose 12% from the prior year mainly as a result of increased unit volume, partially offset by the absence of prior year non-recurring income and higher allocated overhead expenses. Other sales of $60.6 million were up seven percent from the third quarter of 2002 due to a three percent improvement in both selling prices and foreign currency translation and higher unit volume of one percent. The operating loss of $.2 million was unfavorable versus the prior year by $2.0 million due primarily to increased raw material costs and higher allocated overhead expenses, offset in part by increased selling prices. Discontinued Operations Third quarter discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: earnings in 2003 included one month of OSi results versus three months in 2002. Such earnings from discontinued operations were $3.1 million (net of income taxes of $1.0 million) in 2003 and $14.9 million (net of income taxes of $3.7 million) in 2002. Earnings from discontinued operations include no 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 of general overhead expenses. Crompton Corporation, with annual sales from continuing operations of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $2.1 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, 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
Third quarter and nine months ended 2003 and 2002
(In thousands, except per share data)
Third Quarter Nine Months Ended
---------------------- ------------------------
2003 2002 2003 2002
-------- -------- --------- ---------
Net sales $ 559,189 $ 507,936 $ 1,624,062 $ 1,610,507
Cost of products sold 410,254 349,377 1,189,849 1,127,611
Selling, general and
admin. 91,504 87,875 263,604 265,404
Depreciation and
amortization 30,318 27,232 84,816 85,902
Research and
development 12,767 13,258 37,553 40,921
Equity (income) loss 1,073 793 (6,769) (3,468)
Facility closures,
severance and
related costs 10,566 4,420 14,071 10,800
Antitrust legal and
related costs 5,385 - 26,260 -
---------- ---------- ----------- -----------
Operating profit
(loss) (2,678) 24,981 14,678 83,337
Interest expense 20,664 25,201 72,938 77,431
Loss on early
extinguishment of
debt 24,699 - 24,699 -
Other expense, net 3,414 3,192 7,454 40,577
---------- ---------- ----------- -----------
Loss from continuing
operations before
income taxes and
cumulative effect
of accounting change (51,455) (3,412) (90,413) (34,671)
Income tax benefit (16,953) (1,112) (29,791) (14,064)
---------- ---------- ----------- -----------
Loss from continuing
operations before
cumulative effect of
accounting change (34,502) (2,300) (60,622) (20,607)
Earnings from
discontinued
operations 3,057 14,888 26,314 33,656
Gain on sale of
discontinued
operations 111,692 - 111,692 -
Cumulative effect of
accounting change - - (401) (298,981)
---------- ---------- ----------- -----------
Net earnings (loss) $ 80,247 $ 12,588 $ 76,983 $ (285,932)
========== ========== =========== ===========
Basic and diluted earnings
(loss) per common share:
Loss from continuing
operations before
cumulative effect
of accounting
change $ (0.31) $ (0.02) $ (0.54) $ (0.18)
Earnings from
discontinued
operations 0.03 0.13 0.23 0.29
Gain on sale of
discontinued
operations 1.00 - 0.99 -
Cumulative effect
of accounting
change - - - (2.63)
---------- ---------- ----------- -----------
Net earnings (loss)$ 0.72 $ 0.11 $ 0.68 $ (2.52)
========== ========== =========== ===========
Weighted average
shares outstanding 111,208 113,692 112,654 113,494
========== ========== =========== ===========
CROMPTON CORPORATION
Consolidated Balance Sheets
September 30, 2003 and December 31, 2002
(In thousands of dollars)
September 30, December 31,
2003 2002
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 49,784 $ 16,941
Accounts receivable 200,651 183,329
Inventories 394,508 353,556
Other current assets 149,456 112,950
Assets held for sale - 392,887
----------- -----------
Total current assets 794,399 1,059,663
----------- -----------
NON-CURRENT ASSETS
Property, plant and equipment 759,634 695,962
Cost in excess of acquired net assets 421,059 584,633
Other assets 471,212 500,557
----------- -----------
$ 2,446,304 $ 2,840,815
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 6,114 $ 3,694
Accounts payable 242,484 268,593
Accrued expenses 267,910 260,718
Income taxes payable 120,319 116,111
Other current liabilities 13,193 15,670
Liabilities held for sale - 29,273
----------- -----------
Total current liabilities 650,020 694,059
----------- -----------
NON-CURRENT LIABILITIES
Long-term debt 780,274 1,253,149
Postretirement health care liability 196,009 193,996
Other liabilities 498,040 499,728
STOCKHOLDERS' EQUITY
Common stock 1,192 1,192
Additional paid-in capital 1,044,871 1,048,304
Accumulated deficit (526,565) (586,555)
Accumulated other comprehensive loss (119,617) (200,426)
Treasury stock at cost (77,920) (62,632)
----------- -----------
Total stockholders' equity 321,961 199,883
----------- -----------
$ 2,446,304 $ 2,840,815
=========== ===========
CROMPTON CORPORATION
Consolidated Statements of Cash Flows
Nine months ended 2003 and 2002
(In thousands of dollars)
Nine Months Ended
------------------------
Increase (decrease) to cash 2003 2002
---------------------------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 76,983 $ (285,932)
Adjustments to reconcile net earnings (loss)
to net cash (used in) provided by operations:
Cumulative effect of accounting change, net
of tax 401 298,981
Gain on sale of discontinued operations (111,692) -
Loss on sale of business unit - 34,705
Loss on early extinguishment of debt 24,699 -
Depreciation and amortization 105,534 112,222
Equity income (6,769) (3,468)
Changes in assets and liabilities, net:
Accounts receivable 50,410 (4,178)
Accounts receivable - securitization (18,767) 9,723
Inventories 10,047 36,430
Accounts payable (70,747) (20,617)
Other (78,127) (17,250)
----------- -----------
Net cash (used in) provided by operations (18,028) 160,616
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of businesses 643,115 80,000
Capital expenditures (55,104) (60,534)
Other investing activities (250) (1,039)
----------- -----------
Net cash provided by investing activities 587,761 18,427
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term borrowings (477,627) (144,530)
Proceeds (payments) on short-term borrowings 961 (22,837)
Premium paid on early extinguishment of debt (23,804) -
Dividends paid (16,993) (17,009)
Treasury stock acquired (22,080) -
Other financing activities 1,137 5,232
----------- -----------
Net cash used in financing activities (538,406) (179,144)
----------- -----------
CASH
Effect of exchange rates on cash 1,516 (655)
----------- -----------
Change in cash 32,843 (756)
Cash at beginning of period 16,941 21,506
----------- -----------
Cash at end of period $ 49,784 $ 20,750
=========== ===========
Note - Certain reclassifications have been made to the prior year to
conform with this year's presentation, including the
classification of accounts receivable - securitization as part
of net cash provided by operations rather than as part of net
cash provided by (used in) financing activities.
CROMPTON CORPORATION
Segment Sales and Operating Profit (Loss)
Third quarter and nine months ended 2003 and 2002
(In thousands of dollars)
Third Quarter Nine Months Ended
---------------------- ------------------------
2003 2002 2003 2002
---------- ---------- ----------- -----------
NET SALES
Polymer Products
Polymer Additives $ 311,204 $ 285,030 $ 907,340 $ 839,941
Polymers 74,685 67,197 213,150 207,152
Polymer Processing
Equipment 38,180 36,275 119,928 130,732
Eliminations (3,316) (3,918) (10,492) (11,208)
---------- ---------- ----------- -----------
420,753 384,584 1,229,926 1,166,617
---------- ---------- ----------- -----------
Specialty Products
Crop Protection 77,861 66,656 209,822 189,666
Other 60,575 56,696 184,314 254,224
---------- ---------- ----------- -----------
138,436 123,352 394,136 443,890
---------- ---------- ----------- -----------
Total net sales $ 559,189 $ 507,936 $ 1,624,062 $ 1,610,507
========== ========== =========== ===========
OPERATING PROFIT
Polymer Products
Polymer Additives $ 4,872 $ 25,999 $ 25,299 $ 61,954
Polymers 6,354 10,542 20,503 31,623
Polymer Processing
Equipment (323) (6,384) 1,737 (9,004)
---------- ---------- ----------- -----------
10,903 30,157 47,539 84,573
---------- ---------- ----------- -----------
Specialty Products
Crop Protection 16,979 15,154 50,833 50,239
Other (211) 1,798 (368) 7,409
---------- ---------- ----------- -----------
16,768 16,952 50,465 57,648
---------- ---------- ----------- -----------
General corporate
expense (13,169) (14,785) (34,550) (38,927)
Unabsorbed overhead
expense from
discontinued
operations (1,229) (2,923) (8,445) (9,157)
Facility closures,
severance and
related costs (10,566) (4,420) (14,071) (10,800)
Antitrust legal and
related costs (5,385) - (26,260) -
---------- ---------- ----------- -----------
Total operating
profit (loss) $ (2,678) $ 24,981 $ 14,678 $ 83,337
========== ========== =========== ===========
CROMPTON CORPORATION SUPPLEMENTARY SCHEDULE
Major Factors Affecting Results ----------------------
Third quarter and nine months ended 2003 versus 2002
(In millions of dollars)
The following table summarizes the major factors contributing to
the third quarter and nine month changes in net sales and pre-tax loss
from continuing operations versus the prior year:
Third Quarter Nine Months Ended
---------------------- ------------------------
Net Pre-tax Net Pre-tax
Sales Loss Sales Loss
Continuing Continuing Continuing Continuing
Operations Operations Operations Operations
---------- ---------- ----------- -----------
2002 $ 507.9 $ (3.4) $ 1,610.5 $ (34.7)
2002 Facility
closures, severance
and related costs - 4.4 - 10.8
2002 Loss on sale of
Industrial
Specialties - - - 34.7
---------- ---------- ----------- -----------
507.9 1.0 1,610.5 10.8
Divested - Industrial
Specialties - - (81.8) (3.4)
Acquired - GE
Specialty Chemicals 25.7 3.2 25.7 3.2
Unit volume/mix 13.4 4.6 14.8 (0.3)
Lower selling prices (2.5) (2.5) (10.3) (10.3)
Foreign currency
translation 14.7 (1.2) 65.2 1.6
Costs savings - 5.8 - 20.3
Raw materials/energy - (17.8) - (46.2)
Absorption variances - - - 12.4
Legal and environmental - (2.5) - (14.0)
Interest expense - 4.5 - 4.5
Other - (5.9) - (3.9)
---------- ---------- ----------- -----------
559.2 (10.8) 1,624.1 (25.3)
2003 Facility
closures, severance
and related costs - (10.6) - (14.1)
2003 Antitrust legal
and related costs - (5.4) - (26.3)
2003 Loss on early
extinguishment of
debt - (24.7) - (24.7)
---------- ---------- ----------- -----------
2003 $ 559.2 $ (51.5) $ 1,624.1 $ (90.4)
========== ========== =========== ===========
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