Securities and Exchange Commission, Washington, D.C. 20549
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Annual Report on Form 10-K for the year ended December 31, 2000.
Filed pursuant to Section 13 of the Securities Exchange Act of 1934.
Commission file number 1-1463
Union Carbide Corporation
2000 10-K
Union Carbide Corporation Tel. (203) 794-2000
39 Old Ridgebury Road State of incorporation: New York
Danbury, Connecticut 06817-0001 IRS identification number: 13-1421730
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [_] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].
At February 28, 2001, 1,000 shares of common stock were outstanding, all of
which were held by the registrant's parent, The Dow Chemical Company.
The registrant meets the conditions set forth in General Instructions I(1)(a)
and (b) of Form 10-K and is therefore filing this form with a reduced disclosure
format.
Documents incorporated by reference:
NONE
Table of Contents
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Part I
Item 1. Business........................................................................................... 3
Item 2. Properties......................................................................................... 7
Item 3. Legal Proceedings.................................................................................. 11
Item 4. Submission of Matters to a Vote of Security Holders................................................ 11
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.............................. 11
Item 6. Selected Financial Data............................................................................ 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 12
Item 7a. Quantitative and Qualitative Disclosures About Market Risk......................................... 20
Item 8. Financial Statements and Supplementary Data........................................................ 21
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............... 48
Part III
Item 10. Directors and Executive Officers of the Registrant................................................. 48
Item 11. Executive Compensation............................................................................. 48
Item 12. Security Ownership of Certain Beneficial Owners and Management..................................... 48
Item 13. Certain Relationships and Related Transactions..................................................... 48
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.................................... 49
Signatures..................................................................................................... 51
Exhibit Index.................................................................................................. 52
Forward-Looking Information
All statements in this Annual Report on Form 10-K that do not reflect historical
information are forward-looking statements, within the meaning of the Private
Securities Litigation Reform Act of 1995 (as amended). Forward-looking
statements include statements concerning the accounting and tax treatment of the
merger with The Dow Chemical Company ("Dow" and, with regard to the merger, the
"Dow Merger"); plans; capital expenditures; environmental accruals; anticipated
future events; interest rate and currency risk management; ongoing and planned
capacity additions and other expansions; joint ventures; Management's Discussion
and Analysis of Financial Condition and Results of Operations, and any other
statements that do not reflect historical information. Such forward-looking
statements are subject to risks and uncertainties. Important factors that could
cause actual results to differ materially from those discussed in such forward-
looking statements include the supply/demand balance for the corporation's
products; changes in industry production capacities and operating rates;
currency exchange rates; global economic conditions; competitive technology
positions; failure by the corporation to achieve technology objectives; achieve
cost reduction targets or complete projects on schedule and on budget, and
inability to obtain new customers or retain existing ones. Some of these factors
are discussed further in Part I, Item 1: Business.
-2-
Part I
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Item 1. Business
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Union Carbide Corporation (the "corporation" or "Union Carbide") is a worldwide
chemicals and polymers company. In addition to its consolidated operations, the
corporation participates in partnerships and corporate joint ventures (together,
"joint ventures").
On February 6, 2001, the corporation merged with a subsidiary of The Dow
Chemical Company ("Dow"). As a result of the merger, each share of Union Carbide
common stock outstanding immediately prior to the merger was exchanged for 1.611
shares of Dow common stock and Union Carbide became a wholly-owned subsidiary of
Dow. The merger received clearance from the United States ("U.S.") Federal Trade
Commission, the European Commission and the Canadian Competition Bureau, subject
to the divestiture of certain assets and the licensing of certain technology.
The transaction is intended to qualify as a tax-free reorganization for U.S.
Federal income tax purposes and is expected to be accounted for under the
pooling-of-interests method of accounting.
At December 31, 2000, 11,346 people were employed in the manufacturing
facilities, laboratories and offices of the corporation and its consolidated
subsidiaries around the world.
Segments
Union Carbide operates in two business segments of the chemicals and plastics
industry, Specialties & Intermediates ("S&I") and Basic Chemicals & Polymers
("BC&P"). The profitability of the BC&P segment of the chemicals and plastics
industry is highly cyclical, whereas that of the S&I segment is less cyclical.
Consequently, the corporation's results are subject to the swings of the
business cycle in both the highly volatile BC&P segment and the less volatile
S&I segment.
Specialties & Intermediates
The S&I segment, which accounted for 68 percent of customer revenues in 2000,
produces a broad range of products, including specialty polyolefins used in wire
and cable insulation and jacketing; surfactants for industrial cleaners;
catalysts for the manufacture of polymers; acrolein and derivatives; water-
soluble polymers; cellulose-, glucose- and lanolin-based materials for personal
care products; specialty coatings; acrylic and vinyl acrylic latex used in
paints and adhesives; solvents; vinyl acetate and acrylic monomers; ethylene
propylene rubber; catalysts for the manufacture of ethylene oxide and ethylene
glycol, and ethylene oxide derivatives. This segment also licenses olefins-based
technologies and offers other specialized technology licensing and services.
The S&I segment's principal products and services are grouped as follows:
The Specialty Polymers and Products group manufactures and markets numerous
specialty products. Many of its technologies are targeted for sharply defined
market segments.
Water Soluble Polymers produces polymers used in a wide range of applications
for their unique properties in aqueous systems. Key product lines include
CELLOSIZE hydroxyethyl cellulose, POLYOX water soluble resins and a variety of
cellulose-, glucose- and lanolin-based materials supplied to the personal care
industry by Amerchol Corporation, a Union Carbide subsidiary. Key markets for
Water Soluble Polymers include paints, pharmaceuticals, oil-field drilling
fluids, paper, construction materials and industrial adhesives and binders.
-3-
Performance Polymers produces coatings and plastic materials, including UCAR
solution vinyl resins, used in coatings for beverage and food cans, bottle
caps and closures; maintenance coatings on bridges, storage tanks and
oceangoing vessels; printing inks for vinyl shower curtains, wallpaper,
furniture and magnetic recording tape; and TONE caprolactone-based materials,
used in fabric coatings, orthopedic cast and splint materials, automotive
primers and topcoats, plus biodegradable bags for compostable materials. Other
products include cycloaliphatic epoxides for electric utility equipment, such
as insulators and transformers; CYRACURE products for ultraviolet-cured
coatings and inks; FLEXOL plasticizers, made from soybean and linseed oils,
used to keep plastic products soft and pliable, and polyvinyl acetate resins,
used in such widely diverse applications as chewing gum, molded automotive
body parts, bathroom fixtures, business-machine housings, coatings and
adhesives.
Specialty Industrial Products produces acrolein and derivatives, important in
a range of products from biocides to animal feed supplements; ethylidene
norbornene ("ENB"), used in the production of ethylene propylene rubber
roofing and automotive parts; and specialty ketones, used as solvents and
intermediates in herbicide, drug and vitamin manufacture.
UCAR Emulsion Systems is a global business making water-based emulsions used as
key components in decorative and industrial paints, adhesives, textile products
and construction products, such as caulks and sealants. They include UCAR
POLYPHOBE rheology modifiers, used to thicken and control the flow properties of
coatings and adhesives, and UCAR latex, used as binders and to impart adhesion
and durability in the types of products listed above.
Specialty Polyolefins manufactures a variety of performance polyolefin products
marketed worldwide. Chief among these are polyolefin-based compounds for high-
performance insulation, semiconductives and jacketing systems for power
distribution, telecommunications and flame-retardant wire and cable. Other
Specialty Polyolefins products are used in adhesives, laminating film and
flexible hose and tubing.
UNIPOL Systems develops and licenses UNIPOL Process technology--the industry's
most versatile method of manufacturing polyethylene and polypropylene. The
business also develops new process technology for the manufacture of other
olefins-based polymers, such as ELASTOFLO ethylene propylene rubber, which the
business produces and markets to rubber products manufacturers, and sells
catalysts to UNIPOL Process licensees worldwide. Licensing of UNIPOL PE and PP
processes, as well as development of new polyethylene technologies, is handled
through Univation Technologies, LLC, a joint venture of Union Carbide and
ExxonMobil Chemical Company. Additionally, this group licenses the METEOR
Process, a highly efficient and cost-effective technology for the production of
ethylene oxide and ethylene glycol.
Industrial Performance Chemicals manufactures and sells a broad range of
ethylene oxide derivatives and formulated glycol products for specialty
applications. Ethylene oxide derivatives include CARBOWAX polyethylene glycols,
which are nontoxic, biodegradable, water-soluble products with a wide range of
applications in the pharmaceutical, personal care, household, textile
processing, wood preservation, ceramic and industrial markets; ethanolamines,
for detergents, personal care products such as bath soap, agricultural products
and natural gas conditioning and refining; ethyleneamines, for fuel, lubricant
and motor-oil additives, adhesives, corrosion inhibitors, cleaning materials and
many other industrial uses, and TRITON and TERGITOL specialty and commodity
surfactants, for use in institutional, industrial and household cleaning
products, formulations for personal care products, industrial processes for
textiles, paper, paints and coatings and many other products. Other ethylene
oxide derivatives products include UCON fluids and lubricants, for use in brake
fluids and fire-resistant hydraulic fluids used in heavy-duty machinery and off-
highway equipment and in automotive air-conditioning systems with non-ozone-
depleting coolants; alkyl alkanolamines, for water-treating chemicals,
surfactants, fabric softeners, pharmaceuticals and natural-gas and boiler-water
conditioning, and gas-treating chemicals, including SELEXOL and UCARSOL
solvents, used to increase efficiency in removing carbon dioxide and sulfur
compounds from natural and refinery gases. Formulated glycol products include
UCAR aircraft and runway deicing and anti-icing fluids, which remove or prevent
formation of ice, snow and frost on aircraft and runway surfaces; UCARTHERM
heat-transfer fluids, which are used as corrosion-inhibiting heat transfer media
in heating, ventilation and refrigeration systems, and NORKOOL industrial
products, used as cleaners and corrosion-inhibiting coolants and in gas
compressor stations, generators and large engines.
-4-
Solvents, Intermediates & Monomers supplies one of the chemical industry's
broadest product lines to the paints and coatings market and also serves the
cosmetics and personal care, adhesives, household and institutional products,
pharmaceuticals and agricultural markets. Products include oxo aldehydes, acids
and alcohols, used as chemical intermediates and industrial solvents and in
herbicides, plasticizers, paint dryers, jet-turbine lubricants, lube oil
additives, perfumes and food and feed preservatives; esters, which serve as
solvents in industrial coatings and printing inks and in the manufacturing
processes for pharmaceuticals and polymers; CARBITOL and CELLOSOLVE solvents,
used in high-technology coatings applications, such as primers and industrial
finishes for the automotive, packaging and furniture markets, as jet-fuel
additives and as grease cutters for household and industrial cleaners and in
UCON and EMKADIXOL brake fluids, and ketones, including methyl isobutyl ketone,
used as solvents for vinyl resins, industrial lacquers and pharmaceuticals and
as intermediates for dyes and rubber chemicals. Other products include monomers,
such as vinyl acetate and acrylic esters, widely used in the production of latex
paints, paper coatings, adhesives, textile binders and floor and shoe polishes;
alcohols, such as ethanol and isopropanol, which act as solvents and
intermediates in materials used to produce coatings, inks, herbicides, petroleum
additives and synthetic lubricants and also widely used as solvents for personal
care products, such as perfumes, deodorants and hair sprays, and in the
preparation of mouthwashes, detergents, disinfectants and polishes, and the
UNICARB System, a pollution-reducing technology that can cut costs and reduce
volatile organic compounds in spray-applied coatings by up to 80 percent.
Basic Chemicals & Polymers
The BC&P segment converts various hydrocarbon feedstocks, principally liquefied
petroleum gases and naphtha, into the basic building-block chemicals ethylene
and propylene (also known as olefins), which are in turn converted to
polyethylene (the world's most widely used plastic), polypropylene (one of the
world's fastest-growing plastics), and ethylene oxide and ethylene glycol (used
to make polyester fiber, film and resin, and automotive antifreeze). This
segment provides ethylene, propylene, ethylene oxide, ethylene glycol and
various other derivatives to the S&I segment.
The BC&P segment's principal products are grouped as follows:
The Hydrocarbons group manufactures over three-quarters of the corporation's
ethylene requirements and about one-third of its propylene requirements.
Ethylene and propylene are the key raw materials for many of the corporation's
businesses.
The Ethylene Oxide/Glycol group is the leading producer of ethylene oxide and
ethylene glycol. Ethylene oxide is a chemical intermediate primarily used in the
manufacture of ethylene glycol, polyethylene glycol, glycol ethers,
ethanolamines, surfactants and other performance chemicals and polymers; di- and
triethylene glycol, used in a variety of applications, including boat
construction, shoe manufacturing, natural gas-drying and other moisture-removing
applications and plasticizers for safety glasses; and tetraethylene glycol, used
predominantly in the production of plasticizers for automotive windows. Ethylene
glycol is used extensively in the production of polyester fiber, resin and film,
automotive antifreeze and engine coolants, and aircraft anti-icing and deicing
fluids.
The UNIPOL Polymers group is a leading manufacturer of polyethylene, the world's
most widely used plastic. This group produces and markets linear low-, medium-
and high-density polyethylenes, used in high-volume applications such as
housewares; milk, water, bleach and detergent bottles; grocery sacks; trash
bags; packaging; water and gas pipe, and FLEXOMER very low-density polyethylene
resins, used as impact modifiers in other polymers and to produce flexible hose
and tubing, frozen-food bags and stretch wrap. All polyethylene resins marketed
by this group are produced in UNIPOL Process manufacturing facilities.
The Polypropylene Resins business manufactures and sells polypropylene, one of
the world's largest-volume, fastest-growing plastics. End-use applications
include carpeting and upholstery; apparel; packaging films; food containers,
such as dairy-products cups; housewares and appliances; heavy-duty tapes and
ropes, and automobile interior panels and trim.
-5-
Other
In addition to its business segments, the corporation's Other segment includes
its noncore operations and financial transactions other than derivatives
designated as hedges, which are included in the same segment as the item being
hedged.
Raw Materials and End Markets
All products and services are marketed throughout the world by the corporation's
direct sales force, which is augmented, where appropriate, by a network of Union
Carbide authorized distributors.
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Union Carbide's leading end markets as a percentage of sales are:
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Packaging and consumer plastics 23
Paints, coatings and adhesives 21
Wire and cable 11
Textile 7
Household and personal care 7
Automotive, including antifreeze 5
Agriculture and food 4
Oil and gas 2
Industrial cleaners 2
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The corporation believes it has contracts or commitments for, or readily
available sources of, hydrocarbon feedstocks and fuel supplies to meet its
anticipated needs in all major product areas. The corporation's operations are
dependent upon the availability of hydrocarbon feedstocks and fuels, which are
purchased from diverse domestic and international sources, including independent
oil and gas producers as well as integrated oil companies.
The availability and price of hydrocarbon feedstocks, energy and finished
products are subject to plant interruptions and outages and to market and
political conditions in the U.S. and elsewhere. Operations and products at times
may be adversely affected by legislation, government regulations, shortages or
international or domestic events.
The business segments of the corporation are not dependent to a significant
extent upon a single customer or a few customers.
The corporation does not produce against a backlog of firm orders; production is
geared primarily to the level of incoming orders and to projections of future
demand. Inventories of finished products, work in process and raw materials are
maintained to meet delivery requirements of customers and Union Carbide's
production schedules.
Patents, Trademarks, Research and Development
The corporation owns a large number of United States and foreign patents that
relate to a wide variety of products and processes, has pending a substantial
number of patent applications throughout the world and is licensed under a
number of patents. These patents expire at various times over the next 20 years.
In the aggregate, such patents and patent applications are material to Union
Carbide's competitive position. No one patent is considered to be material. The
corporation also has a large number of trademarks. The UNION CARBIDE and UNIPOL
trademarks are material; no other single trademark is material.
Essentially all of the corporation's research and development activities are
company-sponsored. The principal research and development facilities of the
corporation are indicated in the discussion of Properties (Item 2) of this
Annual Report on Form 10-K. In addition to the facilities specifically indicated
therein, product development and process technology laboratories are maintained
at some plants. The corporation expensed $152 million in 2000 and $154 million
in 1999 on company-sponsored research activities to develop new products,
processes, or services, or to improve existing ones. Certain of the
corporation's joint ventures conduct research and development within their
business fields.
Environment
See Costs Relating to Protection of the Environment, beginning on page 16 of
this Annual Report on Form 10-K, and Note 16 to the consolidated financial
statements on pages 43 and 44.
-6-
Insurance
The corporation's policy is to obtain public liability and other insurance
coverage on terms and conditions and at a cost that management considers fair
and reasonable. The corporation's management believes it has a prudent risk
management policy in effect and it periodically reviews its insurance coverage
as to scope and amount and makes adjustments as deemed necessary. There is no
assurance, however, that Union Carbide will not incur losses beyond the limits,
or outside the coverage, of its insurance. Such insurance is subject to
substantial corporate retentions.
Competition
Each of the major product and service areas in which the corporation
participates is highly competitive. In some instances competition comes from
manufacturers of the same products and in other cases from functional
competition. Some of the corporation's competitors, such as companies
principally engaged in petroleum operations, have more direct access to
hydrocarbon feedstocks and some have greater financial resources than the
corporation.
The S&I segment is characterized by differentiated products and is less subject
to external changes in supply/demand relationships than the BC&P segment. In the
S&I segment, competition is based primarily on product functionality and
quality, with the more unique products commanding more significant price
premiums. Products manufactured by the S&I segment may compete with a few
competitors in many products or with many competitors in selected products. In
all, approximately 24 other major specialty chemical companies manufacture
products competitive with those of the S&I segment.
The BC&P segment is characterized by large-volume commodity products and is
subject to external changes in supply/demand relationships, including changes in
the strength of the overall economy, customer inventory levels, industry
manufacturing capacity and operating rates and raw material feedstock costs.
Participants in this segment compete for business primarily on the basis of
price and efficient delivery systems. The BC&P segment competes with at least 12
other major producers of basic chemicals.
Union Carbide is a major marketer of petrochemical products throughout the
world. Products that the corporation markets are largely produced in the U.S.,
while products marketed by the corporation's joint ventures are principally
produced outside the U.S. Competitive products are produced throughout the
world. The corporation's international operations face competition from local
producers and global competitors and a number of risks inherent in carrying on
business outside the U.S., including regional and global economic conditions,
risks of nationalization, expropriation, restrictive action by local governments
and changes in currency exchange rates.
Other
For a summary of business and geographic segment data, see Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Note 6 to the consolidated financial statements, beginning on pages 12 and 32,
respectively, of this Annual Report on Form 10-K.
For a summary of the corporation's joint ventures, see those sections of
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note 8 to the consolidated financial statements, beginning on
pages 12 and 35, respectively, of this Annual Report on Form 10-K.
Item 2. Properties
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In management's opinion, current facilities, together with planned expansions,
will provide adequate production capacity to meet the corporation's planned
business activities. Capital expenditures are discussed on page 18 of this
Annual Report on Form 10-K.
Listed on the following pages are the principal manufacturing facilities
operated by the corporation worldwide. Research and engineering facilities are
noted within each of the domestic and international descriptions below. Most of
the domestic properties are held in fee. The corporation maintains numerous
domestic sales offices and warehouses, the majority of which are leased premises
whose lease terms are scheduled to expire in five years or less. All principal
international manufacturing properties are either owned or held under long-term
leases. International administrative offices, technical service laboratories,
sales offices and warehouses are owned in some instances and held under
relatively short-term leases in other instances. The corporation's headquarters
is located in Danbury, Connecticut, and is leased.
-7-
Principal domestic manufacturing facilities and the principal products
manufactured there are as follows:
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Location City Principal Product(s)
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Specialties & Intermediates Segment
California Torrance Latexes
Georgia Tucker Latexes
Illinois Alsip Latexes
Louisiana Greensburg Hydroxyethyl cellulose derivatives
Louisiana Norco (Cypress Plant) Polypropylene catalysts
Louisiana Taft Acrolein and derivatives, acrylic monomers,
caprolactone, UV-curing resins, cycloaliphatic epoxides,
glycol ethers, polyethylene glycols, ethyleneamines,
surfactants, ethanolamines, oxo alcohols, epoxidized
soybean oil
Louisiana Taft (Star Plant) Polyethylene catalysts
New Jersey Bound Brook Polyethylene compounds for wire and cable
New Jersey Edison Lanolin and glucose derivatives
New Jersey Somerset Latexes
Puerto Rico Bayamon Latexes
Texas Garland Latexes
Texas Seadrift Ethanolamines, glycol ethers, ethylene-propylene
rubber, polyethylene compounds for wire and cable,
polyethylene catalysts, polypropylene catalyst precursor
Texas Texas City Organic acids and esters, alcohols, aldehydes,
ketones, vinyl acetate, solution vinyl resins, heat
transfer fluids
West Virginia Institute Caprolactone derivatives, polyethylene glycol,
hydroxyethyl cellulose, polyethylene oxide,
surfactants, ethylidene norbornene, glutaraldehyde,
ethylene oxide catalysts, acetone and derivatives
West Virginia South Charleston Alkyl alkanolamines, miscellaneous specialty
products, polyalkylene glycols, surfactants, specialty
ketones, polyvinyl acetate resins, heat transfer fluids,
aircraft deicing fluids, vinyl methyl ether
Basic Chemicals & Polymers Segment
Louisiana Norco (Cypress Plant) Polypropylene
Louisiana Taft Ethylene oxide and ethylene glycol, olefins
Louisiana Taft (Star Plant) Polyethylene
Texas Seadrift Ethylene oxide and ethylene glycol, olefins, polyethylene,
polypropylene
Texas Texas City Olefins
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Research and development for the S&I segment is carried on at technical centers
in Bound Brook and Somerset, New Jersey; Tarrytown, New York; Cary, North
Carolina; Houston and Texas City, Texas and South Charleston, West Virginia.
Research and development for the BC&P segment is carried on at technical centers
in Bound Brook and Somerset, New Jersey; Houston, Texas and South Charleston,
West Virginia. Process and design engineering for both segments is conducted at
technical centers in South Charleston, West Virginia, and in Houston, Texas, in
support of domestic and foreign projects.
-8-
Principal international manufacturing facilities and the principal products
manufactured there are as follows:
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Country City Principal Product(s)
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Specialties & Intermediates Segment
Argentina San Lorenzo Latex
Belgium Vilvoorde Lanolin derivatives
Belgium Zwijndrecht Hydroxyethyl cellulose
Brazil Aratu Hydroxyethyl cellulose
Brazil Cabo Vinyl acetate
Brazil Cubatao Polyethylene
Canada Sarnia Latex
Indonesia Jakarta Latex
Malaysia Seremban Latex
People's Republic of China Guangdong Latex, hydroxyethyl cellulose derivatives
People's Republic of China Shanghai Latex
Philippines Batangas Latex
Thailand Rayong Latex
United Arab Emirates Dubai Latex
United Kingdom Wilton Glycol ethers, ethanolamines
Basic Chemicals & Polymers Segment
Canada Joffre* Ethylene
Canada Prentiss Ethylene glycol, polyethylene
United Kingdom Wilton Ethylene oxide and ethylene glycol
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* Under operating agreement with Nova Chemicals Corporation.
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Research and development for the S&I segment is carried on at international
facilities in Zwijndrecht, Belgium; Cubatao, Brazil; Montreal East, Canada;
Jurong, Singapore; and Meyrin (Geneva), Switzerland.
Joint Venture Locations
Principal locations of the corporation's partnerships and corporate investments
carried at equity and the principal products manufactured by those entities are
as follows:
Specialties & Intermediates:
UOP LLC ("UOP") -- a U.S.-based joint venture with Honeywell International,
Inc., accounted for as a partnership, which is a leading worldwide supplier of
process technology, catalysts, molecular sieves and adsorbents to the
petrochemical and gas-processing industries. UOP LLC has manufacturing
facilities in Mobile, Alabama; Des Plaines and McCook, Illinois; Shreveport,
Louisiana; Tonawanda, New York; Leverkusen, Germany; Reggio di Calabria,
Italy; and Brimsdown, United Kingdom. UOP has several joint ventures with
manufacturing sites in Hiratsuka and Yokkaichi, Japan and Shanghai, China.
Research and development is performed at locations in Des Plaines, Illinois
and Mobile, Alabama.
Nippon Unicar Company Limited ("NUC") -- a Japan-based producer of
polyethylene and specialty polyethylene compounds and specialty silicone
products. This joint venture with Tonen Chemical Corporation has manufacturing
facilities in Kawasaki and Komatsu, Japan.
Aspell Polymeres SNC ("Aspell") -- a France-based partnership with Elf Atochem
S.A., a subsidiary of Atofina, a subsidiary of TotalFinaElf S.A., in which the
corporation operates the wire and cable compounding business. This partnership
has a manufacturing facility in Gonfreville, France.
World Ethanol Company ("World Ethanol") -- a U.S.-based partnership with
Archer Daniels Midland Company that supplies ethanol worldwide. This
partnership has manufacturing facilities in Texas City, Texas and Peoria,
Illinois.
-9-
Univation Technologies, LLC ("Univation") -- a U.S.-based joint venture,
accounted for as a partnership, with ExxonMobil Chemical Company, a division
of Exxon Mobil Corporation, for the licensing of polyethylene technology.
Univation conducts research, development and commercialization activities on
process technology and single-site and other advanced catalysts for the
production of polyethylene. The venture also licenses UNIPOL technology. The
company's headquarters is located in Houston, Texas. Research and development
and engineering are performed at locations in Bound Brook, New Jersey;
Baytown, Texas; Houston, Texas; and South Charleston, West Virginia. A
catalyst manufacturing facility is located in Mont Belvieu, Texas.
Asian Acetyls Co., Ltd. ("ASACCO") -- a South Korea-based producer of vinyl
acetate monomer used primarily in the production of emulsion resins by
customers in the coatings and adhesives industries. This corporate joint
venture with BP Chemicals and Samsung Fine Chemicals Company has a
manufacturing facility in Ulsan, South Korea.
OPTIMAL Chemicals (Malaysia) Sdn Bhd ("OPTIMAL-S&I") -- a Malaysia-based
corporate joint venture with Petroliam Nasional Berhad ("PETRONAS") that is
building a facility for the production of ethylene and propylene derivatives
within a world-scale, integrated chemical complex in Kerteh, Terengganu,
Malaysia. This corporate joint venture, along with two joint ventures in the
corporation's Basic Chemicals & Polymers segment, OPTIMAL Olefins (Malaysia)
Sdn Bhd and OPTIMAL Glycols (Malaysia) Sdn Bhd, form the OPTIMAL Group.
Basic Chemicals & Polymers:
Polimeri Europa S.r.l. ("Polimeri Europa") -- an Italy-based producer of
olefins and polyethylene resins. This corporate joint venture with EniChem
S.p.A. ("EniChem") of Italy operates facilities at Brindisi, Ferrara, Gela,
Priolo and Ragusa, Italy; Dunkirk, France, and Oberhausen, Germany. The
venture is headquartered in Milan, Italy. On February 9, 2001, the corporation
entered into an agreement to transfer its shares in Polimeri Europa to
EniChem. This transfer is subject to approval by the European Commission.
EQUATE Petrochemical Company K.S.C. ("EQUATE") -- a Kuwait-based corporate
joint venture with Petrochemical Industries Company and Boubyan Petrochemical
Company that manufactures ethylene, polyethylene and ethylene glycol at its
world-scale petrochemicals complex in Shuaiba, Kuwait.
Petromont and Company, Limited Partnership ("Petromont") -- a Canada-based
olefins and polyethylene resins producer owned jointly with Ethylec Inc. This
partnership has manufacturing facilities at Montreal and Varennes, Quebec,
Canada.
Alberta & Orient Glycol Company Limited ("A&OG") -- a Canada-based corporate
joint venture with Mitsui & Co., Ltd., Japan, and Far Eastern Textile Ltd.,
Taiwan. This producer of ethylene glycol has a manufacturing facility in
Prentiss, Alberta, Canada.
OPTIMAL Olefins (Malaysia) Sdn Bhd and OPTIMAL Glycols (Malaysia) Sdn Bhd
("OPTIMAL-BC&P") --Malaysia-based corporate joint ventures (part of the
OPTIMAL Group) with PETRONAS that are building an ethane/propane cracker and
an ethylene glycol facility within a world-scale, integrated chemical complex
in Kerteh, Terengganu, Malaysia.
-10-
Item 3. Legal Proceedings
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See Note 16 of Notes to Financial Statements on pages 43 and 44 of this Annual
Report on Form 10-K.
As initially reported in the corporation's Quarterly Report on Form 10-Q for the
period ended September 30, 2000, the corporation was served with an
administrative Complaint and Notice of Opportunity for Hearing ("Complaint") by
the U.S. Environmental Protection Agency, Region 6, alleging violations of
reporting requirements under section 112 of the Federal Clean Air Act at the
corporation's Taft facility in Hahnville, Louisana. The Complaint sought civil
penalties of $159,840.00. On January 18, 2001, the Complaint was withdrawn.
Item 4. Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------------------------
Omitted pursuant to General Instruction I of Form 10-K.
Part II
- -------------------------------------------------------------------------------
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
- -------------------------------------------------------------------------------
Prior to the Dow Merger on February 6, 2001, the principal market for the
corporation's common stock was the New Stock Exchange, under the symbol "UK."
The stock was also listed on the Chicago and Pacific stock exchanges in the U.S.
There were 40,235 common stockholders of record on December 31, 2000. Effective
upon the Dow Merger, there is no longer a public trading market for the
corporation's common stock, as the corporation became a wholly-owned subsidiary
of Dow.
Annual and quarterly market and dividend information can be found on page 47 of
this Annual Report on Form 10-K.
-11-
Item 6. Selected Financial Data
- -------------------------------------------------------------------------------
Omitted pursuant to General Instruction I of Form 10-K.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
- -------------------------------------------------------------------------------
Pursuant to General Instruction I (2)(a) of Form 10-K, this section includes
only management's narrative analysis of the results of operations between 2000,
the most recent fiscal year presented, and 1999, the fiscal year immediately
preceding it.
On February 6, 2001, the corporation merged with a subsidiary of The Dow
Chemical Company ("Dow"). As a result of the merger, each share of Union Carbide
common stock outstanding immediately prior to the merger was exchanged for 1.611
shares of Dow common stock and Union Carbide became a wholly-owned subsidiary of
Dow. The merger received clearance from the United States ("U.S.") Federal Trade
Commission, the European Commission and the Canadian Competition Bureau, subject
to the divestiture of certain assets and the licensing of certain technology.
The transaction is intended to qualify as a tax-free reorganization for U.S.
Federal income tax purposes and is expected to be accounted for under the
pooling-of-interests method of accounting. The following discussion does not
reflect the effects of the merger.
Results of Operations
- ------------------------------------------------------------------------------------------------------------------
Millions of dollars (except per share figures or as otherwise indicated),
for the year ended December 31, 2000 1999
- ------------------------------------------------------------------------------------------------------------------
Net sales $6,526 $5,870
Operating profit /(a)/ 220 555
Interest expense 158 133
Income before provision for income taxes 62 422
Income before cumulative effect of change in accounting principle 162 311
Net income 162 291
- ------------------------------------------------------------------------------------------------------------------
Per share -- basic
Income before cumulative effect of change in accounting principle $ 1.20 $ 2.33
Net income 1.20 2.18
Per share -- diluted
Income before cumulative effect of change in accounting principle 1.18 2.27
Net income 1.18 2.13
- ------------------------------------------------------------------------------------------------------------------
Customer volume (millions of pounds) 16,721 16,763
Unit variable margin (cents/pound) 13.6 15.3
Fixed cost per pound of products sold (cents/pound) 10.1 10.2
- ------------------------------------------------------------------------------------------------------------------
(a) See Note 6 to the consolidated financial statements for a discussion of the
special items included in operating profit.
Union Carbide operates in two business segments. Specialties & Intermediates
("S&I") converts basic and intermediate chemicals into a diverse portfolio of
chemicals and polymers serving industrial customers in many markets. This
segment also provides technology services, including licensing, to the oil and
petrochemicals industries. Basic Chemicals & Polymers ("BC&P") converts
hydrocarbon feedstocks, principally liquefied petroleum gas and naphtha, into
ethylene or propylene used to manufacture polyethylene, polypropylene, ethylene
oxide and ethylene glycol for sale to third-party customers, as well as
ethylene, propylene, ethylene oxide, ethylene glycol and various other
derivatives for consumption by the S&I segment. In comparison with those of S&I,
the revenues and operating profit of BC&P tend to be more cyclical and very
sensitive to a number of external variables, including overall economic demand,
hydrocarbon feedstock costs, industry capacity increases and plant operating
rates.
In addition to its business segments, the corporation's Other segment includes
its noncore operations and financial transactions other than derivatives
designated as hedges, which are included in the same segment as the item being
hedged.
-12-
Summary - Consolidated Results
During 2000, the chemical industry experienced very difficult conditions.
Significant increases in raw material and energy costs, particularly in the
latter part of the year, could not be recaptured in the selling price of most
products due to competitive market pressures. Consolidated net sales rose 11.2
percent from the prior year. This increase reflected an overall increase of 11.4
percent in average customer selling prices combined with relatively flat
customer volume. By contrast, raw material and energy costs, primarily for
ethane, propane and natural gas, increased by approximately 30 percent. Unit
variable margin (net sales, or, with regard to segment unit variable margins,
segment revenues, less variable manufacturing and distribution costs divided by
customer volume) decreased by 1.7 cents per pound, or 11.1 percent. Fixed costs,
as well as fixed cost per pound of products sold (fixed manufacturing and
distribution costs, plus research and development and selling, administrative
and other expenses, divided by customer volume), remained at levels consistent
with the prior year. Included in fixed costs was an increase in domestic pension
credit of $90 million over the prior year, partially offset by costs associated
with the start-up of the olefins and polyethylene units in Canada in the second
half of the year. The increase in domestic pension credit was the result of
amortization of investment gains and changes in actuarial assumptions reflecting
long-term investment returns on pension plan assets. Depreciation and
amortization increases reflected additional expense associated with the new
Canadian plants.
Partnership results declined from income of $11 million in 1999 to a loss of $40
million in 2000. Current year results include a nonrecurring charge of $31
million from UOP LLC ("UOP") related primarily to losses associated with certain
customer contracts coupled with restructuring charges. Additionally, results
from the corporation's Petromont and Company, Limited Partnership ("Petromont")
reflected poor market conditions, similar to those experienced by the
corporation. The reductions in UOP and Petromont results were partially offset
by lower losses of the Aspell Polymeres SNC ("Aspell") partnership in France.
Other income - net in 2000 included an $18 million gain on shares received and
sold in connection with the demutualization of Metropolitan Life Insurance
Company ("Met Life"), a provider of certain employee benefit programs for the
corporation, and $18 million of interest income related to tax refunds. Other
income - net in 1999 included $50 million related to two favorable litigation
settlements related to the licensing business.
The most dramatic improvement came from the corporation's corporate investments
carried at equity, which increased earnings by $121 million over the prior year.
The majority of the improvement represented significantly better performance at
EQUATE Petrochemical Company K.S.C. ("EQUATE") and Polimeri Europa S.r.l.
("Polimeri Europa"), which was somewhat offset by preoperating expenses of the
Malaysian joint ventures.
Interest expense increased to $158 million in 2000 from $133 million in 1999.
The increase represents a greater average outstanding debt balance in 2000
compared with the prior year, coupled with an increase in average interest rates
associated with an increase in short-term borrowings. This increase was only
partially offset by an increase in capitalized interest in 2000, which
principally related to the Canadian construction projects that were completed
and began production in the second half of 2000.
The effective tax rate was 25.8 percent in 2000, compared with 25.6 percent in
1999. Generally, the corporation's effective tax rate is less than the statutory
Federal income tax rate because of research and experimentation and foreign
sales corporation tax credits. In 2000, the effective tax rate was increased by
additional taxes due on dividends received from foreign sources.
-13-
Segment Analysis - Specialties & Intermediates
- ------------------------------------------------------------------------------------------------------------------
Millions of dollars, except as indicated 2000 1999
- ------------------------------------------------------------------------------------------------------------------
Segment revenues $ 4,492 $ 4,182
Cost of sales, exclusive of depreciation and amortization 3,673 3,100
Gross margin 819 1,082
Depreciation and amortization 269 262
Partnership income (loss) (36) 6
- ------------------------------------------------------------------------------------------------------------------
Operating profit 270 607
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from corporate investments carried at equity $ (4) $ (1)
- ------------------------------------------------------------------------------------------------------------------
Customer volume (millions of pounds) 8,998 8,946
Unit variable margin (cents/pound) 18.9 22.5
Fixed cost per pound of products sold (cents/pound) 13.2 13.9
- ------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 175 $ 291
Investments, advances and acquisitions 96 64
Segment assets 4,432 4,603
- ------------------------------------------------------------------------------------------------------------------
S&I segment revenues increased 7.4 percent, reflecting a 6.2 percent increase in
average customer selling prices and relatively stable volume as compared with
1999. Although average customer selling prices rose from the prior year, those
increases were unable to offset the significant rise in raw material and energy
costs from the prior year, thus causing unit variable margin to decline by 3.6
cents per pound, or 16.0 percent. Fixed cost per pound of products sold declined
slightly, principally due to reductions in fixed manufacturing and distribution
costs. Operating profit for 2000 included a $12 million gain on shares received
and sold in connection with the demutualization of Met Life. Operating profit
for 1999 included $50 million from two favorable litigation settlements related
to the licensing business.
Joint Ventures
- -----------------------------------------------------------------------------------------------------------------------
Combined UCC's Proportionate Share /(a)/
- -----------------------------------------------------------------------------------------------------------------------
Millions of dollars 2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
Net sales $ 1,859 $ 2,000 $ 914 $ 990
Cost of sales 1,274 1,334 623 657
Depreciation 119 104 61 47
Income from operations 22 92 8 53
Interest expense 47 40 23 19
Provision for income taxes 30 61 21 30
- -----------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (56) $ (7) $ (40) $ 5
- -----------------------------------------------------------------------------------------------------------------------
UCC share of dividends & distributions $ 32 $ 64
- -----------------------------------------------------------------------------------------------------------------------
Total assets $ 1,944 $ 2,086 $ 936 $ 923
Total third-party debt 722 786 325 330
Net assets 595 606 313 314
- -----------------------------------------------------------------------------------------------------------------------
(a) Includes U.S. Generally Accepted Accounting Principles adjustments made by
the corporation, such as goodwill and related amortization, and adjustments
needed to conform the accounting policies of the joint ventures to those of
UCC.
The most significant joint ventures included in the S&I segment are UOP; Nippon
Unicar Company Limited ("NUC"); Aspell; World Ethanol Company ("World Ethanol");
Univation Technologies, LLC ("Univation"); Asian Acetyls Co., Ltd. ("ASACCO"),
and OPTIMAL Chemicals (Malaysia) Sdn Bhd ("OPTIMAL-S&I"). A description of each
venture is located in Part I, Item 2: Properties, located under the heading
"Joint Venture Locations" on pages 9 and 10 of this Annual Report on Form 10-K.
S&I's share of partnership results declined from income of $6 million in 1999 to
a loss of $36 million in 2000. Included in the 2000 results was a nonrecurring
charge of $31 million from UOP related primarily to losses associated with
certain customer contracts coupled with restructuring charges. The reduction in
UOP results was somewhat offset by lower losses at Aspell.
-14-
Segment Analysis - Basic Chemicals & Polymers
- -----------------------------------------------------------------------------------------------------------------------
Millions of dollars, except as indicated 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
Segment revenues $ 2,453 $ 1,976
Cost of sales, exclusive of depreciation and amortization 2,242 1,765
Gross margin 211 211
Depreciation and amortization 154 146
Partnership income (loss) (4) 5
- -----------------------------------------------------------------------------------------------------------------------
Operating profit (loss) $ (33) $ (21)
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from corporate investments carried at equity $ 127 $ 3
- -----------------------------------------------------------------------------------------------------------------------
Customer volume (millions of pounds) 7,723 7,817
Unit variable margin (cents/pound) 7.9 7.2
Fixed cost per pound of products sold (cents/pound) 6.4 5.8
- -----------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 284 $ 473
Investments, advances and acquisitions 149 85
Segment assets 3,706 3,137
- -----------------------------------------------------------------------------------------------------------------------
The year 2000 reflected a very difficult environment for the basic chemicals and
polymers business. Although segment revenues increased 24.1 percent from the
prior year and average customer selling price increased 23.6 percent, customer
volume declined by 1.2 percent. The dramatic increase in the cost of raw
materials and energy, especially in the latter part of 2000, more than offset
the increases in average customer selling prices. Fixed cost per pound of
products sold reflected an increase in the cost of manufacturing and
distribution, coupled with a reduction in customer volume. Increases in current
year depreciation and amortization represented additional depreciation
associated with the start-up of the olefins and polyethylene units in Canada
during the second half of the year. Operating profit for the year included a $6
million gain on shares received and sold in connection with the demutualization
of Met Life, a provider of certain employee benefit programs.
Joint Ventures
- -----------------------------------------------------------------------------------------------------------------------
Combined UCC's Proportionate Share /(a)/
- -----------------------------------------------------------------------------------------------------------------------
Millions of dollars 2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
Net sales $ 2,847 $ 2,135 $ 1,393 $ 1,047
Cost of sales 2,187 1,649 1,079 815
Depreciation 215 244 73 93
Income from operations 372 155 203 100
Interest expense 132 157 62 78
Provision for income taxes 39 26 19 13
- -----------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 203 $ (27) $ 123 $ 8
- -----------------------------------------------------------------------------------------------------------------------
UCC share of dividends & distributions $ 10 $ 11
- -----------------------------------------------------------------------------------------------------------------------
Total assets $ 3,657 $ 3,548 $ 1,549 $ 1,508
Total third-party debt 1,035 1,241 468 581
Net assets 1,739 1,232 695 442
- -----------------------------------------------------------------------------------------------------------------------
(a) Includes U.S. Generally Accepted Accounting Principles adjustments made by
the corporation, such as goodwill and related amortization, and adjustments
needed to conform the accounting policies of the joint ventures to those of
UCC.
The most significant joint ventures included in the BC&P segment are Polimeri
Europa, EQUATE, Petromont, Alberta & Orient Glycol Company Limited ("A&OG") and
OPTIMAL Olefins (Malaysia) Sdn Bhd and OPTIMAL Glycols (Malaysia) Sdn Bhd
("OPTIMAL-BC&P"). A description of each venture is located in Part I, Item 2:
Properties, located under the heading "Joint Venture Locations" on page 10 of
this Annual Report on Form 10-K.
-15-
BC&P's share of partnership income (loss), declined from income of $5 million in
1999 to a loss of $4 million in 2000, primarily related to difficult market
conditions faced by Petromont. Petromont experiences similar market conditions
as those of the corporation's U.S. operations. BC&P's share of income from
corporate investments carried at equity increased from $3 million in 1999 to
$127 million in 2000, principally the result of improved performance at EQUATE
and Polimeri Europa, which was partially offset by preoperating expenses
associated with the OPTIMAL-BC&P joint ventures. Although earnings in the
chemical industry are being negatively impacted by rising raw material costs,
EQUATE benefits from having advantaged raw material supply contracts. Polimeri
Europa's performance in 2000 reflects better industry margins and volumes in
Europe than in 1999.
Joint Venture Commitments
The corporation severally guaranteed up to $122 million at December 31, 2000 of
EQUATE's debt and working capital financing needs. The corporation has also
severally guaranteed certain sales volume targets until EQUATE's sales
capabilities are proved. In addition, the corporation has pledged its shares in
EQUATE as security for EQUATE's debt. The corporation has political risk
insurance coverage for its equity investment and a majority of its guarantee of
EQUATE's debt.
Other
- -------------------------------------------------------------------------------
Millions of dollars,
for the year ended December 31, 2000 1999
- -------------------------------------------------------------------------------
Operating profit (loss) $9 $ (31)
- -------------------------------------------------------------------------------
The Other segment includes profit and loss from noncore activities and certain
financial transactions. Operating loss for 1999 included environmental expenses
of $27 million related to a discontinued business.
Costs Relating to Protection of the Environment
Worldwide costs relating to environmental protection continue to be significant,
due primarily to stringent laws and regulations and to the corporation's
commitment to industry initiatives such as RESPONSIBLE CARE, as well as to its
own internal standards. In 2000, worldwide expenses related to environmental
protection for compliance with Federal, state and local laws regulating solid
and hazardous wastes and discharge of materials to air and water, as well as for
waste site remedial activities, totaled $104 million. Expenses in 1999 were $118
million. In addition, worldwide capital expenditures relating to environmental
protection, including those for new capacity and cost reduction and replacement,
in 2000 totaled $34 million compared with $35 million in 1999.
The corporation, like other companies in the U.S., periodically receives notices
from the U.S. Environmental Protection Agency and from state environmental
agencies, as well as claims from other companies, alleging that the corporation
is a potentially responsible party ("PRP") under the Comprehensive Environmental
Response, Compensation and Liability Act and equivalent state laws (hereafter
referred to collectively as "Superfund") for past and future cleanup costs at
hazardous waste sites at which the corporation is alleged to have disposed of,
or arranged for treatment or disposal of, hazardous substances. The corporation
is also undertaking environmental investigation and remediation projects at
hazardous waste sites located on property currently and formerly owned by the
corporation pursuant to Superfund, as well as to the Resource Conservation and
Recovery Act and equivalent state laws.
There are approximately 105 hazardous waste sites at which management believes
it is probable or reasonably possible that the corporation will incur liability
for investigation and/or remediation costs. The corporation has established
accruals for those hazardous waste sites where it is probable that a loss has
been incurred and the amount of the loss can reasonably be estimated. The
reliability and precision of the loss estimates are affected by numerous
factors, such as the stage of site evaluation, the allocation of responsibility
among PRPs and the assertion of additional claims. The corporation adjusts its
accruals as new remediation requirements are defined, as information becomes
available permitting reasonable estimates to be made, and to reflect new and
changing facts.
-16-
At December 31, 2000, the corporation's accruals for environmental remediation
totaled $183 million ($208 million in 1999). Approximately 40 percent of the
accrual (45 percent in 1999) pertains to estimated future expenditures for site
investigation and cleanup, and approximately 60 percent (55 percent in 1999)
pertains to estimated future expenditures for closure and postclosure
activities. See Note 16 to the financial statements on pages 43 and 44 of this
Annual Report on Form 10-K for a discussion of the environmental sites for which
the corporation has remediation responsibility. In addition, the corporation had
environmental loss contingencies of $71 million at December 31, 2000.
Estimates of future costs of environmental protection are necessarily imprecise,
due to numerous uncertainties. These include the impact of new laws and
regulations, the availability and application of new and diverse technologies,
the identification of new hazardous waste sites at which the corporation may be
a PRP and, in the case of Superfund sites, the ultimate allocation of costs
among PRPs and the final determination of the remedial requirements. While
estimating such future costs is inherently imprecise, taking into consideration
the corporation's experience to date regarding environmental matters of a
similar nature and facts currently known, the corporation estimates that
worldwide expenses related to environmental protection, expressed in 2000
dollars, should average about $105 million annually over the next five years.
Worldwide capital expenditures for environmental protection, also expressed in
2000 dollars, are expected to average about $65 million annually over the same
period. The increase in the anticipated capital expenditures level from the
prior year is the result of new legislative requirements. Management anticipates
that future annual costs for environmental protection after 2005 will continue
at levels comparable to the five-year average estimates. Subject to the inherent
imprecision and uncertainties in estimating and predicting future costs of
environmental protection, it is management's opinion that any future annual
costs for environmental protection in excess of the five-year average estimates
stated here, plus those costs anticipated to continue thereafter, would not have
a material adverse effect on the corporation's consolidated financial position.
Litigation
The corporation and its consolidated subsidiaries are involved in a number of
legal proceedings and claims with both private and governmental parties. These
cover a wide range of matters, including, but not limited to: product liability;
trade regulation; governmental regulatory proceedings; health, safety and
environmental matters; employment; patents; contracts, and taxes. In some of
these legal proceedings and claims, the cost of remedies that may be sought or
damages claimed is substantial. While it is impossible at this time to determine
with certainty the ultimate outcome of any such legal proceedings and claims,
management believes that adequate provisions have been made for probable losses
with respect thereto and that such ultimate outcome, after provisions therefor,
will not have a material adverse effect on the consolidated financial position
of the corporation, but could have a material effect on consolidated results of
operations in a given quarter or year. Should any losses be sustained in
connection with any of such legal proceedings and claims in excess of provisions
therefor, they will be charged to income when determinable.
Accounting Changes
1999 through 2000
In 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin
("SAB") 101, "Revenue Recognition in Financial Statements," which summarizes the
staff's views regarding the application of generally accepted accounting
principles to selected revenue recognition issues. The corporation adopted the
provisions of SAB 101 on October 1, 2000, the effect of which was not material
to the corporation's financial position or results of operations.
Effective January 1, 1999, the corporation adopted the provisions of the
American Institute of Certified Public Accountants' Statement of Position
("SOP") 98-5, "Reporting on the Costs of Start-Up Activities." This SOP requires
the expensing of certain costs, such as preoperating expenses and organizational
costs associated with an entity's start-up activities. In accordance with this
SOP's provisions, on January 1, 1999, the corporation recognized a charge of $27
million ($20 million after-tax) as a cumulative effect of change in accounting
principle, the majority of which represented formation costs associated with the
corporation's joint ventures.
Also effective January 1, 1999, the corporation prospectively adopted the
provisions of SOP 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use." The effect of this adoption was not material to
the corporation's financial position or results of operations in the period of
adoption.
-17-
Subsequent to 2000
In 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." It requires that
an entity recognize all derivative instruments as either assets or liabilities
in the statement of financial position and measure those instruments at fair
value. Changes in the fair value of those derivatives will be reported in
earnings or other comprehensive income, depending on the uses of the derivatives
and whether they qualify for hedge accounting. This Statement, as amended by
Statement No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133," and
Statement No. 138, "Accounting for Derivative Instruments and Certain Hedging
Activities -- an amendment of FASB Statement No. 133," is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. Due to the
corporation's limited use of financial instruments to manage its exposure to
market risks, primarily related only to changes in foreign currency exchange
rates, the adoption of Statement No. 133 on January 1, 2001, did not have a
material effect on the corporation's financial position or results of
operations.
Liquidity, Capital Resources and Other Financial Data
Cash Flow from Operations
Cash flow from operations decreased by $99 million to $460 million in 2000.
Declines in the current year were primarily the result of a decline in net
income and lower net noncash charges to net income, partially offset by a
decrease in working capital requirements.
Cash Flow Used for Investing
Cash flow used for investing includes capital expenditures, investments,
advances and acquisitions, and purchases of, and proceeds from the sale of,
securities and assets.
Capital expenditures were $459 million in 2000 compared with $764 million in
1999. Major capital projects funded during 2000 and 1999 included work at a new
olefins facility built jointly with Nova Chemicals Corporation, and a
polyolefins project, both of which started up during 2000, in Alberta, Canada.
Over the past two years, 68 percent of capital expenditures was directed to new
capacity, 27 percent to cost reduction and replacement and 5 percent to
environmental, safety and health facilities. Of these expenditures, 42 percent
were in the U.S. and Puerto Rico. At December 31, 2000, the cost of completing
authorized construction projects was estimated to be $235 million, of which $35
million is covered by firm commitments. Future construction expenditures are
anticipated to be sourced through operating cash flows.
Increases in investments, advances and acquisitions principally relates to the
corporation's funding of the OPTIMAL Group, which the corporation and PETRONAS
formed to build and operate a 600,000 metric-tons-per-year ethylene plant, a
385,000 metric-tons-per-year ethylene oxide/glycol plant and a multiple
specialties and intermediates derivatives facility in Kerteh, Terengganu,
Malaysia. The joint ventures' primary marketing focus will be in Southeast Asia.
The corporation anticipates funding its approximate $500 million share of the
cost of the complex through its 2001 planned start-up date with internally
generated funds and debt. At December 31, 2000, the corporation had invested
approximately $349 million, and was firmly committed to an additional $35
million.
The corporation generated additional cash flow from investing of $68 million
from the net sales and purchases of available-for-sale securities in 2000
compared with 1999.
-18-
Cash Flow from Financing
Cash flow from/used for financing includes stockholder and minority interest
dividends and funds used to buy back common stock, offset in part by net
proceeds from short- and long-term debt and sales of common stock pursuant to
the corporation's dividend reinvestment plan, its employee savings and
investment programs and its long-term incentive plans.
Cash flow from financing in 2000 totaled $196 million compared with $324 million
in 1999. Cash flow from financing in 2000 includes net borrowings of $388
million, excluding the repayment of the Floating Rate Notes of $110 million, and
cash received from the issuance of common stock of $32 million, offset by cash
dividends paid of $121 million. Cash flow from financing in 1999 includes net
proceeds of $250 million from the issuance of 6.70% Public Notes due in 2009 and
net increases in debt, excluding this issuance, of $183 million, partially
offset by cash dividends paid of $120 million.
In August 1999, the board of directors rescinded the corporation's authorization
to repurchase up to 60 million shares of the corporation's common stock. Since
inception of its share repurchase authorization in 1993 through August 1999, the
corporation repurchased 56.4 million shares for $2.033 billion, at an average
effective price of $36.01 per share. In addition to the above repurchases, in
2000 and 1999 stock was reacquired from employees to satisfy tax withholding
requirements on restricted shares issued under employee benefit plans.
Debt Ratios
Total debt outstanding at year end for each of the past two years was:
- -----------------------------------------------------------------------------------------------------------------------
Millions of dollars 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
Domestic $ 2,665 $ 2,568
International 261 83
- -----------------------------------------------------------------------------------------------------------------------
Total $ 2,926 $ 2,651
- -----------------------------------------------------------------------------------------------------------------------
Year-end ratios of total debt to total capital were:
- -----------------------------------------------------------------------------------------------------------------------
2000 1999
- -----------------------------------------------------------------------------------------------------------------------
Debt Ratio 52.1% 49.9%
- -----------------------------------------------------------------------------------------------------------------------
Total debt consists of short-term debt, long-term debt and the current portion
of long-term debt. Total capital consists of total debt plus minority
stockholders' equity in consolidated subsidiaries and stockholders' equity.
-19-
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
- ----------------------------------------------------------------------------
Interest Rate and Currency Risk Management
The corporation selectively uses financial instruments to manage its exposure to
market risk related to changes in foreign currency exchange rates and interest
rates. The corporation does not hold derivative financial instruments for
trading purposes. See Notes 1 and 9 to the consolidated financial statements on
pages 27 and 36 of this Annual Report on Form 10-K for more information about
these instruments.
At December 31, 2000, the corporation held open foreign currency forward
contracts and purchased options with net notional amounts of $131 million and an
unrealized net loss of $4 million (net notional amount of $253 million and an
unrealized net loss of less than $1 million at December 31, 1999).
The corporation used sensitivity analysis to evaluate the potential effect of
movements in foreign currency exchange rates and interest rates on the
consolidated financial statements. Based on this analysis, a hypothetical 10
percent weakening in the U.S. dollar across all currencies would have resulted
in a $16 million net loss at December 31, 2000 (less than $1 million net gain at
December 31, 1999). Alternatively, a hypothetical 10 percent strengthening in
the U.S. dollar across all currencies would have resulted in an $11 million net
gain at December 31, 2000 ($5 million net gain at December 31, 1999). These
gains and losses would generally be offset by fluctuations in underlying
currency transactions. The corporation held long-term debt of $1,755 million, of
which $15 million was variable-rate debt, at December 31, 2000 (total long-term
debt of $1,869 million of which $125 million was variable-rate debt at December
31, 1999). A 10 percent increase in market interest rates would have decreased
the net fair market value of fixed-rate debt instruments by $105 million at
December 31, 2000 ($102 million at December 31, 1999), and a 10 percent decrease
in market interest rates would have increased the net fair market value of
fixed-rate debt instruments by $118 million at December 31, 2000 ($120 million
at December 31, 1999).
Foreign Operations
A portion of the financial results of each of the corporation's segments is
derived from activities conducted outside the U.S. and denominated in currencies
other than the U.S. dollar. Because the financial results of the corporation are
reported in U.S. dollars, they are affected by changes in the value of the
various foreign currencies in relation to the U.S. dollar. Exchange rate risks
are lessened, however, by the diversity of the corporation's foreign operations
and the fact that international activities are not concentrated in any single
non-U.S. currency. In addition, the effects of a strengthening U.S. dollar could
cause pricing pressures on worldwide chemical markets that could result in
declines in the corporation's sales volumes. The corporation is subject to other
risks customarily associated with doing business in foreign countries, including
local labor and economic conditions, unfavorable changes in foreign tax laws and
possible controls on repatriation of earnings and capital. Future losses
associated with such risks, if any, cannot be predicted.
-20-
Item 8. Financial Statements and Supplementary Data
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
Union Carbide Corporation and Subsidiaries
Millions of dollars, at December 31, 2000 1999
- ---------------------------------------------------------------------------------------------------------
Assets
Cash and cash equivalents $ 63 $ 41
Notes and accounts receivable 1,034 1,132
Inventories 750 680
Other current assets 329 297
- ------------------------------------------------------------------------------------------------
Total Current Assets 2,176 2,150
- ------------------------------------------------------------------------------------------------
Property, plant and equipment 9,361 9,057
Less: Accumulated depreciation 4,840 4,536
- ------------------------------------------------------------------------------------------------
Net Fixed Assets 4,521 4,521
- ------------------------------------------------------------------------------------------------
Companies carried at equity 1,008 756
Other investments and advances 97 75
- ------------------------------------------------------------------------------------------------
Total Investments and Advances 1,105 831
- ------------------------------------------------------------------------------------------------
Other assets 544 455
- ------------------------------------------------------------------------------------------------
Total Assets $ 8,346 $ 7,957
================================================================================================
Liabilities and Stockholders' Equity
Accounts payable $ 342 $ 329
Short-term debt and current portion of long-term debt 1,178 782
Other accrued liabilities 780 678
- ------------------------------------------------------------------------------------------------
Total Current Liabilities 2,300 1,789
- ------------------------------------------------------------------------------------------------
Long-term debt 1,748 1,869
Postretirement benefit obligation 434 438
Other long-term obligations 557 603
Deferred credits 613 599
Minority stockholders' equity in consolidated subsidiaries 40 42
Stockholders' equity
Common stock
Authorized - 500,000,000 shares
Issued - 158,994,683 shares
(157,571,933 shares in 1999) 159 158
Additional paid-in capital 217 165
Other equity adjustments (3) (1)
Accumulated other comprehensive loss (224) (160)
Retained earnings 3,572 3,530
Unearned employee compensation - ESOP (47) (56)
Treasury stock, at cost - 23,431,939 shares
(23,428,229 shares in 1999) (1,020) (1,019)
- ------------------------------------------------------------------------------------------------
Total Stockholders' Equity 2,654 2,617
- ------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 8,346 $ 7,957
================================================================================================
The Notes to Financial Statements on pages 26 through 44 should be read in
conjunction with this statement.
-21-
CONSOLIDATED STATEMENT OF INCOME
Union Carbide Corporation and Subsidiaries
- --------------------------------------------------------------------------------------------------------------------------
Millions of dollars (except per share figures),
for the year ended December 31, 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
Net Sales $ 6,526 $ 5,870 $ 5,659
Cost of sales, exclusive of depreciation and amortization 5,531 4,609 4,294
Research and development 152 154 143
Selling, administrative and other expenses 247 257 304
Depreciation and amortization 423 408 389
Partnership income (loss) (40) 11 33
Other income - net 87 102 241
- -------------------------------------------------------------------------------------------------------------------------
Income Before Interest Expense and Provision for Income Taxes 220 555 803
- -------------------------------------------------------------------------------------------------------------------------
Interest expense 158 133 114
- -------------------------------------------------------------------------------------------------------------------------
Income Before Provision for Income Taxes 62 422 689
- -------------------------------------------------------------------------------------------------------------------------
Provision for income taxes 16 108 217
- -------------------------------------------------------------------------------------------------------------------------
Income of Consolidated Companies and Partnerships 46 314 472
- -------------------------------------------------------------------------------------------------------------------------
Minority interest 7 5 3
Income (loss) from corporate investments carried at equity 123 2 (66)
- -------------------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of Change in Accounting Principle 162 311 403
- -------------------------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting principle - (20) -
- -------------------------------------------------------------------------------------------------------------------------
Net Income $ 162 $ 291 $ 403
=========================================================================================================================
Earnings per Share
- -------------------------------------------------------------------------------------------------------------------------
Basic -
Income Before Cumulative Effect of Change in Accounting Principle $ 1.20 $ 2.33 $ 2.98
Cumulative effect of change in accounting principle - (0.15) -
Net Income $ 1.20 $ 2.18 $ 2.98
- -------------------------------------------------------------------------------------------------------------------------
Diluted -
Income Before Cumulative Effect of Change in Accounting Principle $ 1.18 $ 2.27 $ 2.91
Cumulative effect of change in accounting principle - (0.14) -
Net Income $ 1.18 $ 2.13 $ 2.91
=========================================================================================================================
Cash Dividends Declared per Common Share $ 0.90 $ 0.90 $ 0.90
=========================================================================================================================
The Notes to Financial Statements on pages 26 through 44 should be read in
conjunction with this statement.
-22-
CONSOLIDATED STATEMENT OF CASH FLOWS
Union Carbide Corporation and Subsidiaries
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents
Millions of dollars, for the year ended December 31, 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
Operations
Income before cumulative effect of change in accounting principle $ 162 $ 311 $ 403
Noncash charges (credits) to net income
Depreciation and amortization 423 408 389
Deferred income taxes 18 106 118
Equity in (earnings) losses of joint ventures, net of dividends received (41) 62 156
Other (76) 58 6
Decrease (increase) in working capital/(a)/ 30 (297) (86)
Long-term assets and liabilities (56) (89) (58)
- ------------------------------------------------------------------------------------------------------------------------------
Cash Flow from Operations/(b)/ 460 559 928
- ------------------------------------------------------------------------------------------------------------------------------
Investing
Capital expenditures (459) (764) (782)
Investments, advances and acquisitions, excluding cash acquired (245) (149) (111)
Proceeds from available-for-sale securities 177 42 39
Purchase of available-for-sale securities (117) (50) (47)
Sale of fixed and other assets 10 30 11
- ------------------------------------------------------------------------------------------------------------------------------
Cash Flow Used for Investing (634) (891) (890)
- ------------------------------------------------------------------------------------------------------------------------------
Financing
Change in short-term debt (3 months or less) 399 397 (23)
Proceeds from short-term debt 17 2 22
Repayment of short-term debt (23) (20) (14)
Proceeds from long-term debt - 285 358
Repayment of long-term debt (115) (231) (4)
Issuance of common stock 32 51 41
Purchase of common stock (1) (51) (276)
Payment of dividends (121) (120) (122)
Other 8 11 10
- ------------------------------------------------------------------------------------------------------------------------------
Cash Flow from (Used for) Financing 196 324 (8)
- ------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents - - (1)
Change in cash and cash equivalents 22 (8) 29
- ------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning-of-year 41 49 20
- ------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end-of-year $ 63 $ 41 $ 49
==============================================================================================================================
Cash (received) paid for interest and income taxes:
Interest (net of amount capitalized) $ 151 $ 153 $ 117
Income taxes (18) 40 43
==============================================================================================================================
(a) Net change in certain components of working capital (excluding noncash transactions):
(Increase) decrease in current assets
Notes and accounts receivable $ 106 $ (188) $ 77
Inventories (70) (14) (63)
Other current assets 28 (19) (3)
Decrease in payables and accruals (34) (76) (97)
- ------------------------------------------------------------------------------------------------------------------------------
Decrease (increase) in working capital $ 30 $ (297) $ (86)
==============================================================================================================================
(b) Includes tax benefits of $13 million, $29 million and $14 million for 2000,
1999 and 1998, respectively, arising from nonqualified stock option
exercises.
The Notes to Financial Statements on pages 26 through 44 should be read in
conjunction with this statement.
-23-
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Union Carbide Corporation and Subsidiaries
- ------------------------------------------------------------------------------------------------------------------------------
Shares Additional
----------------------- Common Paid-in
Millions of dollars (shares in thousands) Common Treasury Stock Capital
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 154,610 (17,666) $ 155 $ 47
- -------------------------------------------------------------------------------------------------------------------------
Net Issued:
For the Dividend Reinvestment and Stock Purchase Plan 58 161 4
For employee savings and incentive plans 384 1,207 28
Common stock repurchase program (6,074)
Comprehensive income
Net income
Other comprehensive income (loss), net of income taxes
Unrealized gains on securities, net of reclassification adjustments
Foreign currency translation adjustments
Other comprehensive loss
Comprehensive income
Cash dividends on common stock
Tax on unallocated ESOP shares
Shares allocated to ESOP participants
Net restricted stock -- Long-Term Incentive Program 6
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 155,052 (22,366) $ 155 $ 79
- -------------------------------------------------------------------------------------------------------------------------
Net Issued:
For the Dividend Reinvestment and Stock Purchase Plan 174 8
For employee savings and incentive plans 2,276 22 3 75
Common stock repurchase program (1,018)
Comprehensive income
Net income
Other comprehensive income (loss), net of income taxes
Unrealized gains on securities, net of reclassification adjustments
Foreign currency translation adjustments
Other comprehensive loss
Comprehensive income
Cash dividends on common stock
Tax on unallocated ESOP shares
Shares allocated to ESOP participants
Net restricted stock -- Long-Term Incentive Program 70 (66) 3
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 157,572 (23,428) $ 158 $ 165
- -------------------------------------------------------------------------------------------------------------------------
Net Issued:
For the Dividend Reinvestment and Stock Purchase Plan 206 9
For employee savings and incentive plans 1,076 21 1 35
Comprehensive income
Net income
Other comprehensive income (loss), net of income taxes
Unrealized gains on securities, net of reclassification adjustments
Foreign currency translation adjustments
Other comprehensive loss
Comprehensive income
Cash dividends on common stock
Tax on unallocated ESOP shares
Shares allocated to ESOP participants
Net restricted stock -- Long-Term Incentive Program 141 (25) 8
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000 158,995 (23,432) $ 159 $ 217
=========================================================================================================================
The Notes to Financial Statements on pages 26 through 44 should be read in
conjunction with this statement.
-24-
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated Unearned
Other Other Employee Total
Equity Comprehensive Comprehensive Retained Compensation Treasury Stockholders'
Adjustments Income Loss Earnings - ESOP Stock Equity
- ---------------------------------------------------------------------------------------------------------------------------------
$ (3) $ (101) $ 3,074 $ (80) $ (744) $ 2,348
- ---------------------------------------------------------------------------------------------------------------------------------
6 10
42 70
(273) (273)
$ 403 403
5
(8)
---------
(3) (3)
---------
$ 400 400
=========
(122) (122)
2 2
13 13
1 1
- ---------------------------------------------------------------------------------------------------------------------------------
$ (2) $ (104) $ 3,357 $ (67) $ (969) $ 2,449
- ---------------------------------------------------------------------------------------------------------------------------------
8
78
(47) (47)
$ 291 291
1
(57)
---------
(56) (56)
---------
$ 235 235
=========
(120) (120)
2 2
11 11
1 (3) 1
- ---------------------------------------------------------------------------------------------------------------------------------
$ (1) $ (160) $ 3,530 $ (56) $(1,019) $ 2,617
- ---------------------------------------------------------------------------------------------------------------------------------
9
36
$ 162 162
2
(66)
--------
(64) (64)
--------
$ 98 98
========
(121) (121)
1 1
9 9
(2) (1) 5
- ---------------------------------------------------------------------------------------------------------------------------------
$ (3) $ (224) $ 3,572 $ (47) $(1,020) $ 2,654
=================================================================================================================================
-25-
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
Index Page
- -----------------------------------------------------------------------------
1. Summary of Significant Accounting Policies 26
2. Other Comprehensive Income (Loss) 29
3. Supplementary Balance Sheet Detail 30
4. Supplementary Income Statement Detail 31
5. Earnings per Share 31
6. Business and Geographic Segment Information 32
7. Income Taxes 34
8. Joint Ventures 35
9. Financial Instruments 36
10. Long-Term Debt 37
11. Leases 38
12. Incentive Plans 38
13. Retirement Programs 40
14. Stockholders' Equity 42
15. Employee Stock Ownership Plan 42
16. Commitments and Contingencies 43
17. Subsequent Event - The Dow Merger 44
- -----------------------------------------------------------------------------
NOTE 1
Summary of Significant Accounting Policies
Nature of Operations - Union Carbide Corporation is engaged in two segments of
the chemicals and plastics industry, Specialties & Intermediates and Basic
Chemicals & Polymers. See Note 6.
On February 6, 2001, the corporation merged with a subsidiary of The Dow
Chemical Corporation ("Dow" and, with regard to the merger, the "Dow Merger").
See Note 17.
Principles of Consolidation - The consolidated financial statements include the
accounts of all significant subsidiaries. All significant intercompany
transactions have been eliminated in consolidation. Investments in 20 percent-
to 50 percent-owned partnerships and corporate investments ("joint ventures")
are reported under the equity method of accounting. Other investments are
generally carried at cost.
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles, which require the corporation to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Accounting Changes - 1998 through 2000 - In 1999, the Securities and Exchange
Commission issued Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in
Financial Statements," which summarizes the staff's views regarding the
application of generally accepted accounting principles to selected revenue
recognition issues. The corporation adopted the provisions of SAB 101 on October
1, 2000, the effect of which was not material to the corporation's financial
position or results of operations.
Effective January 1, 1999, the corporation adopted the provisions of the
American Institute of Certified Public Accountants' Statement of Position
("SOP") 98-5, "Reporting on the Costs of Start-Up Activities." This SOP requires
the expensing of certain costs, such as preoperating expenses and organizational
costs associated with an entity's start-up activities. In accordance with this
SOP's provisions, on January 1, 1999, the corporation recognized a charge of $27
million ($20 million after-tax) as a cumulative effect of change in accounting
principle, the majority of which represented formation costs associated with the
corporation's joint ventures.
-26-
Also effective January 1, 1999, the corporation prospectively adopted the
provisions of SOP 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use." The effect of this adoption was not material to
the corporation's financial position or results of operations in the period of
adoption.
In 1998, the corporation adopted Statement of Financial Accounting Standards
("Statement") No. 130, "Reporting Comprehensive Income," Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information," and
Statement No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits."
Accounting Changes - Subsequent to 2000 - In 1998, the Financial Accounting
Standards Board issued Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities." It requires that an entity recognize all derivative
instruments as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Changes in the fair value
of those derivatives will be reported in earnings or other comprehensive income,
depending on the uses of the derivatives and whether they qualify for hedge
accounting. This Statement, as amended by Statement No. 137, "Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of FASB Statement No. 133," and Statement No. 138, "Accounting for Derivative
Instruments and Certain Hedging Activities -- an amendment of FASB Statement No.
133," is effective for all fiscal quarters of fiscal years beginning after June
15, 2000. Due to the corporation's limited use of financial instruments to
manage its exposure to market risks, primarily related only to changes in
foreign currency exchange rates, the adoption of Statement No. 133 on January 1,
2001, did not have a material effect on the corporation's financial position or
results of operations.
Foreign Currency Translation - Unrealized gains and losses resulting from
translating foreign subsidiaries' assets and liabilities into U.S. dollars
generally are recognized as part of Other comprehensive income (loss), as
described in Note 2, and are included in Accumulated other comprehensive loss on
the Consolidated Balance Sheet until such time as the subsidiary is sold or
substantially or completely liquidated. Translation gains and losses relating to
those operations located in Latin American countries where hyperinflation exists
and to international operations using the United States ("U.S.") dollar as their
functional currency are included in the Consolidated Statement of Income.
Financial Instruments - Financial instruments are used to hedge financial risk
caused by fluctuating interest and currency rates. Prior to the adoption of
Statement No. 133 the amounts paid or received on interest rate risk
instruments that hedge debt were accrued and recognized over the lives of the
instruments. Gains and losses on foreign currency risk instruments used to hedge
firm commitments were deferred and recognized as part of the related foreign
currency transactions. Gains on foreign currency purchased options used to hedge
the identified cash flows of anticipated transactions were deferred and matched
against the cash flows of the foreign currency transactions as they occurred.
Except as noted above, foreign currency instruments that are designated to
offset fluctuations in the dollar value of foreign currency accounts receivable
and payable and from earnings fluctuations in anticipated foreign currency cash
flows are marked to market and the results recognized immediately in Other
income-net.
Cash Equivalents - The corporation considers as cash equivalents all highly
liquid investments that are readily convertible to known amounts of cash and are
so near their maturity that they present insignificant risk of changes in value
because of changes in interest rates.
Inventories - Inventories are stated at cost or market, whichever is lower.
These amounts do not include depreciation and amortization, the impact of which
is not significant to the financial statements.
Approximately 68 percent of inventory amounts before application of the LIFO
method at December 31, 2000 (68 percent at December 31, 1999) have been valued
on the LIFO basis; the "average cost" method is used for the balance. It is
estimated that if inventories had been valued at current costs, they would have
been approximately $338 million and $293 million higher than reported at
December 31, 2000 and 1999, respectively.
Fixed Assets - Fixed assets are carried at cost. Expenditures for replacements
are capitalized, and the replaced items are retired. Gains and losses from the
sale of property are included in income. Depreciation is calculated on a
straight-line basis. The corporation and its subsidiaries generally use
accelerated depreciation methods for tax purposes where appropriate. Costs for
planned major maintenance are expensed as incurred.
-27-
Patents, Trademarks and Goodwill - Amounts paid for purchased patents,
trademarks and newly acquired businesses in excess of the fair value of the net
assets of such businesses have been charged to patents, trademarks and goodwill.
The portion of such amounts determined to be attributable to patents is
amortized over their remaining lives, while trademarks and goodwill are
amortized over the estimated period of benefit, generally 5 to 20 years.
Revenue Recognition - Sales of products and services, and related costs and
allowances, are recognized when title to product transfers to the purchaser, as
services are rendered, or in relation to licensee production levels.
Shipping and Handling Costs - Shipping and handling costs incurred by the
corporation are included in Cost of sales.
Research and Development - Research and development costs are charged to expense
as incurred. Depreciation expense applicable to research and development
facilities and equipment is included in Depreciation and amortization in the
Consolidated Statement of Income ($11 million in 2000, $10 million in 1999 and
$11 million in 1998).
Income Taxes - Provisions have been made for deferred income taxes based on
differences between financial statement and tax bases of assets and liabilities
using currently enacted tax rates and regulations.
Environmental Costs - Environmental expenditures are expensed or capitalized as
appropriate, depending on their future economic benefit. Expenditures relating
to an existing condition caused by past operations and having no future economic
benefits are expensed. Environmental expenditures include site investigation,
physical remediation, operation and maintenance, and legal and administrative
costs. Environmental accruals are established for sites where it is probable
that a loss has been incurred and the amount of the loss can reasonably be
estimated. Where the estimate is a range and no amount within the range is a
better estimate than any other amount, the corporation accrues the minimum
amount in the range and includes the balance of the range in its reported
contingencies.
Retirement Programs - The cost of pension benefits under the non-contributory
defined benefit retirement program of Union Carbide Corporation (see Note 13) is
determined by an independent actuarial firm using the projected unit credit
actuarial cost method. Contributions to this program are made in accordance with
the regulations of the Employee Retirement Income Security Act of 1974. The cost
of postretirement benefits is recognized on the accrual basis over the period in
which employees become eligible for benefits.
Incentive Plans - The corporation measures compensation expense for certain
employee stock purchases and the stock option portion of the Long-Term Incentive
Plan using the intrinsic value-based method of accounting prescribed by
Accounting Principles Board Opinion 25, and makes pro forma disclosures of net
income and earnings per share as if the fair value-based method of accounting
defined in Statement No. 123 had been applied. Compensation expense is
recognized for other stock-based incentives issued under the Long-Term Incentive
Plan and other programs.
Reclassifications - Certain amounts presented in the Consolidated Statement of
Stockholders' Equity have been reclassified to conform to the current year's
presentation.
-28-
NOTE 2
Other Comprehensive Income (Loss)
Comprehensive income is defined as any change in the corporation's equity from
transactions and other events originating from non-owner sources. For the
corporation, those changes consist of reported net income, changes in the
unrealized appreciation or depreciation of the corporation's available-for-sale
securities and changes in unrealized foreign currency translation adjustments.
The following summary presents the components of comprehensive income, other
than net income:
- ------------------------------------------------------------------------------------------------------------------------
Income
Tax
Millions of dollars Pre-tax Effect After-tax
=====================================================================================================================
Balance at December 31, 1997 $ (99) $ 2 $ (101)
=====================================================================================================================
Foreign currency translation adjustments (8) - (8)
- ---------------------------------------------------------------------------------------------------------------------
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period - - -
Reclassification adjustment for (gains) losses realized in net income 7 2 5
- ---------------------------------------------------------------------------------------------------------------------
Total of unrealized gains on securities 7 2 5
=====================================================================================================================
Balance at December 31, 1998 $ (100) $ 4 $ (104)
=====================================================================================================================
Foreign currency translation adjustments (57) - (57)
- ---------------------------------------------------------------------------------------------------------------------
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period 11 4 7
Reclassification adjustment for (gains) losses realized in net income (10) (4) (6)
- ---------------------------------------------------------------------------------------------------------------------
Total of unrealized gains on securities 1 - 1
=====================================================================================================================
Balance at December 31, 1999 $ (156) $ 4 $ (160)
=====================================================================================================================
Foreign currency translation adjustments (66) - (66)
- ---------------------------------------------------------------------------------------------------------------------
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period 12 4 8
Reclassification adjustment for (gains) losses realized in net income (9) (3) (6)
- ---------------------------------------------------------------------------------------------------------------------
Total of unrealized gains on securities 3 1 2
=====================================================================================================================
Balance at December 31, 2000 $ (219) $ 5 $ (224)
=====================================================================================================================
-29-
NOTE 3
Supplementary Balance Sheet Detail
- ----------------------------------------------------------------------------------------------
Millions of dollars, at December 31, 2000 1999
- ----------------------------------------------------------------------------------------------
Notes and accounts receivable
Trade $ 908 $ 951
Other 137 200
- ----------------------------------------------------------------------------------------------
1,045 1,151
- ----------------------------------------------------------------------------------------------
Less: Allowance for doubtful accounts 11 19
- ----------------------------------------------------------------------------------------------
$ 1,034 $ 1,132
==============================================================================================
Inventories
Raw materials and supplies $ 193 $ 152
Work in process 52 45
Finished goods 505 483
- ----------------------------------------------------------------------------------------------
$ 750 $ 680
==============================================================================================
Other current assets
Prepaid expenses $ 113 $ 65
Net current deferred income tax assets 142 137
Other 74 95
- ----------------------------------------------------------------------------------------------
$ 329 $ 297
==============================================================================================
Property, plant and equipment
Land and improvements $ 395 $ 361
Buildings 453 433
Machinery and equipment 7,869 7,441
Construction in progress and other 644 822
- ----------------------------------------------------------------------------------------------
$ 9,361 $ 9,057
==============================================================================================
Other assets
Deferred charges $ 201 $ 213
Prepaid benefit cost 130 37
Insurance recovery receivables 122 109
Long-term receivables 32 25
Patents, trademarks and goodwill 59 71
- ----------------------------------------------------------------------------------------------
$ 544 $ 455
==============================================================================================
Other accrued liabilities
Accrued accounts payable $ 428 $ 333
Payrolls 63 62
Environmental remediation costs 50 53
Postretirement benefit obligation 36 41
Other 203 189
- ----------------------------------------------------------------------------------------------
$ 780 $ 678
==============================================================================================
Other long-term obligations
Environmental remediation costs $ 133 $ 155
Product liability costs 122 110
Impairment of unused office space 74 94
Postemployment benefits 57 57
Other 171 187
- ----------------------------------------------------------------------------------------------
$ 557 $ 603
==============================================================================================
Accumulated other comprehensive loss
Foreign currency translation adjustments /(a)/ $ (234) $ (168)
Unrealized gains on available-for-sale securities, net of tax/(b)/ 10 8
- ----------------------------------------------------------------------------------------------
$ (224) $ (160)
==============================================================================================
(a) The corporation does not record deferred income tax on foreign currency
translation adjustments.
(b) Net of $5 million and $4 million of deferred income tax at December 31,
2000 and 1999, respectively.
-30-
NOTE 4
Supplementary Income Statement Detail
- -----------------------------------------------------------------------------------------------------------------------
Millions of dollars, for the year ended December 31, 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
Selling, administrative and other expenses
Selling $ 86 $ 94 $ 99
Administrative 85 90 107
Other expenses 76 73 98
- -----------------------------------------------------------------------------------------------------------------------
$ 247 $ 257 $ 304
=======================================================================================================================
Other income (expense) - net
Investment and interest income $ 50/(a)/ $ 36 $ 26
Gain from the demutualization of Metropolitan Life Insurance Company 18 - -
Settlements of licensing business litigation - 50 189
Foreign currency adjustments (5) (3) (20)
Other 24 19 46
- -----------------------------------------------------------------------------------------------------------------------
$ 87 $ 102 $ 241
=======================================================================================================================
Interest expense
Interest incurred/(b)/ $ 209 $ 176 $ 157
Less: Interest capitalized and other adjustments 51 43 43
- -----------------------------------------------------------------------------------------------------------------------
$ 158 $ 133 $ 114
=======================================================================================================================
(a) Includes $18 million of interest income related to tax refunds.
(b) Includes $12 million in 2000, 1999 and 1998, representing the interest
component of certain leases.
NOTE 5
Earnings per Share
Basic and diluted earnings per share (EPS) are calculated as follows:
- ----------------------------------------------------------------------------------------------------------------------
Millions of dollars (except share and per share amounts),
for the year ended December 31, 2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of change in accounting principle $ 162 $ 311 $ 403
Cumulative effect of change in accounting principle - (20) -
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 162 $ 291 $ 403
======================================================================================================================
Basic -
Weighted average shares outstanding for basic calculation 134,846,440 133,342,112 135,028,100
- ----------------------------------------------------------------------------------------------------------------------
Earnings per share -
Income before cumulative effect of change in accounting principle $ 1.20 $ 2.33 $ 2.98
Cumulative effect of change in accounting principle - (0.15) -
Net income $ 1.20 $ 2.18 $ 2.98
- ----------------------------------------------------------------------------------------------------------------------
Diluted -
Weighted average shares outstanding for basic calculation 134,846,440 133,342,112 135,028,100
Add: Effect of stock options 2,644,767 3,316,207 3,381,795
- ----------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding for diluted calculation 137,491,207 136,658,319 138,409,895
- ----------------------------------------------------------------------------------------------------------------------
Earnings per share -
Income before cumulative effect of change in accounting principle $ 1.18 $ 2.27 $ 2.91
Cumulative effect of change in accounting principle - (0.14) -
Net income $ 1.18 $ 2.13 $ 2.91
======================================================================================================================
-31-
NOTE 6
Business and Geographic Segment Information
The corporation has two operating segments, Specialties & Intermediates ("S&I")
and Basic Chemicals & Polymers ("BC&P"). The S&I segment includes the
corporation's specialty chemicals and polymers product lines, licensing, and
solvents and chemical intermediates. The BC&P segment includes the corporation's
ethylene and propylene manufacturing operations as well as the production of
first-level ethylene and propylene derivatives--polyethylene, polypropylene,
ethylene oxide and ethylene glycol. Each operating segment is a strategic
business unit that offers products and services with different functionalities.
They are managed separately because of the significant differences that exist in
their products and services and in the methods required to produce, market and
distribute them. In addition to its operating segments, the corporation's Other
segment includes its noncore operations and financial transactions other than
derivatives designated as hedges, which are included in the same segment as the
item being hedged.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. Sales of the BC&P segment include
intersegment sales, principally ethylene oxide, which are made at the estimated
market value of the products transferred. Sales of the S&I segment include
intersegment sales related to licensing fees, at their market value, and
catalyst sales, at their estimated market value. Administrative costs are
allocated between the segments via a formula based on sales.
Other costs and shared assets are principally allocated on the basis of pounds
produced, gross fixed asset values or headcount, as appropriate. The corporation
evaluates performance based on Income Before Interest Expense and Provision for
Income Taxes ("operating profit").
Sales are attributed to countries based on customer ship-to addresses. Long-
lived assets are principally composed of Net Fixed Assets, Companies carried at
equity, and certain Other assets. Investments of the corporation are assigned to
the country in which the investee has its principal offices. Net sales and long-
lived assets by country and geographic area were as follows:
Net Sales
- ------------------------------------------------------------------------------------------------
Millions of dollars, for the year ended December 31, 2000 1999 1998
- ------------------------------------------------------------------------------------------------
United States, including Puerto Rico $ 3,951 $ 3,509 $ 3,355
- ------------------------------------------------------------------------------------------------
Canada 272 283 211
Europe & Middle East 841 834 802
Latin America 456 382 408
Far East & Other 1,006 862 883
- ------------------------------------------------------------------------------------------------
Total International Operations $ 2,575 $ 2,361 $ 2,304
- ------------------------------------------------------------------------------------------------
Net Sales $ 6,526 $ 5,870 $ 5,659
================================================================================================
Total Assets
- ------------------------------------------------------------------------------------------------
Millions of dollars, at December 31, 2000 1999 1998
- ------------------------------------------------------------------------------------------------
Long-lived assets
- ------------------------------------------------------------------------------------------------
United States, including Puerto Rico $ 4,105 $ 4,229 $ 4,290
- ------------------------------------------------------------------------------------------------
Canada 897 704 284
Europe & Middle East 546 406 401
Latin America 51 79 91
Far East & Other 424 267 127
- ------------------------------------------------------------------------------------------------
Total International Operations $ 1,918 $ 1,456 $ 903
- ------------------------------------------------------------------------------------------------
Total Long-lived assets 6,023 5,685 5,193
- ------------------------------------------------------------------------------------------------
Current and other assets $ 2,323 $ 2,272 $ 2,098
- ------------------------------------------------------------------------------------------------
Total Assets $ 8,346 $ 7,957 $ 7,291
- ------------------------------------------------------------------------------------------------
-32-
- -----------------------------------------------------------------------------------------------------------------------
Millions of dollars S&I BC&P Other Eliminations Totals
- -----------------------------------------------------------------------------------------------------------------------
2000
- -----------------------------------------------------------------------------------------------------------------------
Net sales $ 4,462 $ 2,064 $ - $ - $ 6,526
Intersegment revenues 30 389 - - 419
Segment revenues 4,492 2,453 - - 6,945
Depreciation and amortization 269 154 - - 423
Partnership income (loss) (36) (4) - - (40)
Operating profit (loss) 270 (33) 9 (26) 220
Interest expense - - 158 - 158
Income (loss) from corporate investments carried at equity (4) 127 - - 123
Segment assets 4,432 3,706 232 (24) 8,346
Companies carried at equity 313 695 - - 1,008
Expenditures for segment assets 271 433 - - 704
- -----------------------------------------------------------------------------------------------------------------------
1999
- -----------------------------------------------------------------------------------------------------------------------
Net sales $ 4,182 $ 1,688 $ - $ - $ 5,870
Intersegment revenues - 288 - - 288
Segment revenues 4,182 1,976 - - 6,158
Depreciation and amortization 262 146 - - 408
Partnership income 6 5 - - 11
Operating profit (loss) 607 (21) (31) - 555
Interest expense - - 133 - 133
Income (loss) from corporate investments carried at equity (1) 3 - - 2
Segment assets 4,603 3,137 217 - 7,957
Companies carried at equity 314 442 - - 756
Expenditures for segment assets 355 558 - - 913
- -----------------------------------------------------------------------------------------------------------------------
1998
- -----------------------------------------------------------------------------------------------------------------------
Net sales $ 4,139 $ 1,520 $ - $ - $ 5,659
Intersegment revenues - 282 - - 282
Segment revenues 4,139 1,802 - - 5,941
Depreciation and amortization 247 142 - - 389
Partnership income 27 6 - - 33
Operating profit (loss) 833 20 (50) - 803
Interest expense - - 114 - 114
Income (loss) from corporate investments carried at equity 1 (67) - - (66)
Segment assets 4,403 2,686 202 - 7,291
Companies carried at equity 298 326 - - 624
Expenditures for segment assets 480 413 - - 893
=======================================================================================================================
Operating profit for 2000 includes an $18 million gain on shares received and
sold in connection with the demutualization of Metropolitan Life Insurance
Company, a provider of certain employee benefit programs for the corporation, of
which $12 million and $6 million were recognized by the S&I and BC&P segments,
respectively.
The operating profit of the S&I segment for 1999 includes a nonrecurring net
gain of $50 million related to the favorable settlement of licensing business
litigation in the second and third quarters of 1999.
The operating profit of the S&I segment for 1998 includes a nonrecurring net
gain of $189 million related to favorable settlements of licensing business
litigation and a $53 million reduction in earnings related to losses associated
with Aspell Polymeres SNC.
-33-
NOTE 7
Income Taxes
The following is a summary of the U.S. and non-U.S. components of Income Before
Provision for Income Taxes:
- ---------------------------------------------------------------------------------------------------------------------------------
Millions of dollars, for the year ended December 31, 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. $ 30 $ 329 $ 646
Non-U.S. 32 93 43
- ---------------------------------------------------------------------------------------------------------------------------------
$ 62 $ 422 $ 689
=================================================================================================================================
The following is an analysis of income tax expense:
- ---------------------------------------------------------------------------------------------------------------------------------
Millions of dollars, for the year 2000 1999 1998
ended December 31, Current Deferred Current Deferred Current Deferred
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. Federal income taxes (credits) $ (40) $ 28 $ (31) $ 99 $ 100 $ 86
U.S. business and research and experimentation
tax credits - (21) - (23) (27) -
U.S. state and local taxes (credits) based on income 3 10 (5) 26 6 31
Non-U.S. income taxes 35 1 38 4 20 1
- ---------------------------------------------------------------------------------------------------------------------------------
(2) 18 2 106 99 118
- ---------------------------------------------------------------------------------------------------------------------------------
Provision for income taxes $ 16 $ 108 $ 217
=================================================================================================================================
The tax effects of temporary differences that gave rise to significant portions
of the deferred tax assets and deferred tax liabilities are as follows:
- -----------------------------------------------------------------------------------------------------------------------
2000 1999
Deferred Deferred Deferred Deferred
Millions of dollars, at December 31, Assets Liabilities Assets Liabilities
- -----------------------------------------------------------------------------------------------------------------------
Depreciation and amortization $ - $ 750 $ - $ 733
Postretirement and postemployment benefits 220 - 209 -
Environmental and litigation related costs 76 - 86 -
Sale/leaseback and related deferrals 63 - 81 -
Other(a) 224 179 247 219
- -----------------------------------------------------------------------------------------------------------------------
Gross deferred tax assets and liabilities 583 929 623 952
- -----------------------------------------------------------------------------------------------------------------------
Net deferred tax liability $ 346 $ 329
=======================================================================================================================
(a) Includes approximately $125 million of tax credits, at December 31, 2000
($0 in 1999), primarily for research and experimentation and foreign tax,
which will expire between 2004 and 2020.
Net noncurrent deferred tax liabilities of $488 million ($466 million in 1999)
are included in Deferred credits on the Consolidated Balance Sheet. Net current
deferred income tax assets of $142 million ($137 million in 1999) are included
in Other current assets. In 2000 and 1999, there were no benefits from non-U.S.
net operating loss carryforwards.
Undistributed earnings of affiliates intended to be reinvested indefinitely
amounted to approximately $498 million at December 31, 2000 ($511 million at
December 31, 1999). Determination of deferred taxes related to these earnings is
not practicable.
An analysis of the difference between Provision for income taxes and the amount
computed by applying the statutory Federal income tax rate to Income Before
Provision for Income Taxes is as follows:
- -----------------------------------------------------------------------------------------------------------------------
Percentage of Pre-Tax Income
For the year ended December 31, 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
Tax at statutory Federal rate 35.0% 35.0% 35.0%
- -----------------------------------------------------------------------------------------------------------------------
Taxes related to operations outside the U.S. 61.3 (2.6) 0.7
U.S. state and local taxes based on income 12.9 3.3 3.4
Foreign sales corporation (37.1) (3.8) (1.5)
Business credits (33.9) (5.4) (3.9)
Other, net (12.4) (0.9) (2.2)
- -----------------------------------------------------------------------------------------------------------------------
Consolidated effective income tax rate 25.8% 25.6% 31.5%
=======================================================================================================================
-34-
NOTE 8
Joint Ventures
The following are financial summaries of 33 percent- to 50 percent-owned joint
ventures included in Companies carried at equity.
The corporation's most significant joint ventures classified as partnerships
include UOP LLC; Petromont and Company, Limited Partnership; Aspell Polymeres
SNC; World Ethanol Company and Univation Technologies, LLC.
- -------------------------------------------------------------------------------------------------------------------
Partnerships
Millions of dollars 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Net sales /(a)/ $ 1,682 $ 1,815 $ 1,905
Cost of sales 1,124 1,179 1,210
Depreciation 116 100 116
Partnership income (loss) (68) 14 154
- -------------------------------------------------------------------------------------------------------------------
UCC share of partnership income (loss) $ (40) /(b)/ $ 11 $ 33 /(c)/
===================================================================================================================
Current assets $ 686 $ 867 $ 799
Noncurrent assets 819 893 937
- -------------------------------------------------------------------------------------------------------------------
Total assets 1,505 1,760 1,736
- -------------------------------------------------------------------------------------------------------------------
Current liabilities 310 488 430
Noncurrent liabilities 821 721 828
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 1,131 1,209 1,258
- -------------------------------------------------------------------------------------------------------------------
Net assets 374 551 478
- -------------------------------------------------------------------------------------------------------------------
UCC equity $ 224 $ 278 $ 286
===================================================================================================================
(a) Includes $166 million net sales to the corporation in 2000 ($154 million in
1999 and $140 million in 1998).
(b) Includes a nonrecurring charge of $31 million from UOP LLC.
(c) Includes $53 million of losses associated with Aspell Polymeres SNC.
The corporation's joint ventures classified as corporate investments include
Polimeri Europa S.r.l.; EQUATE Petrochemical Company K.S.C.; Nippon Unicar
Company Limited; Alberta & Orient Glycol Company Limited; Asian Acetyls Co.,
Ltd.; the OPTIMAL Group (consisting of OPTIMAL Chemicals (Malaysia) Sdn Bhd,
OPTIMAL Olefins (Malaysia) Sdn Bhd and OPTIMAL Glycols (Malaysia) Sdn Bhd), and
several smaller entities.
- -------------------------------------------------------------------------------------------------------------------
Corporate Investments
Millions of dollars 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Net sales /(a)/ $ 3,024 $ 2,320 $ 2,151
Cost of sales 2,337 1,804 1,732
Depreciation 218 248 256
Net income (loss) 215 (48) (195)
- -------------------------------------------------------------------------------------------------------------------
UCC share of net income (loss) $ 123 $ 2 $ (66)
===================================================================================================================
Current assets $ 1,039 $ 1,318 $ 1,037
Noncurrent assets 3,057 2,556 2,932
- -------------------------------------------------------------------------------------------------------------------
Total assets 4,096 3,874 3,969
- -------------------------------------------------------------------------------------------------------------------
Current liabilities 755 855 963
Noncurrent liabilities 1,381 1,732 2,371
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 2,136 2,587 3,334
- -------------------------------------------------------------------------------------------------------------------
Net assets 1,960 1,287 635
- -------------------------------------------------------------------------------------------------------------------
UCC equity /(b)/ $ 784 $ 478 $ 338
===================================================================================================================
(a) Includes $187 million net sales to the corporation in 2000 ($152 million in
1999 and $157 million in 1998).
(b) At December 31, 2000, the corporation's investment in EQUATE Petrochemical
Company K.S.C. was $125 million ($143 million in 1999) less than its
proportionate share of the company's underlying equity. Such amount is being
amortized into income over its remaining seven year life.
Dividends and distributions received from joint ventures aggregated $42 million
in 2000 ($75 million in 1999 and $123 million in 1998).
-35-
NOTE 9
Financial Instruments
Fair values of financial instruments are estimated by using a method that
indicates the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
The fair values of the financial instruments included on the Consolidated
Balance Sheet were estimated as follows:
Cash, Short-Term Receivables and Accounts Payable - At December 31, 2000 and
1999, the carrying amounts approximate fair values because of the short maturity
of these instruments.
Foreign Currency Instruments - Outstanding foreign currency forward contracts
and options used as a means of offsetting fluctuations in the dollar value of
other foreign currency accounts receivable and payable and earnings fluctuations
from anticipated foreign currency cash flows totaled $131 million at December
31, 2000 ($186 million at December 31, 1999) (U.S. dollar equivalent). There
were unrealized losses net of $4 million and $1 million on these contracts at
December 31, 2000 and 1999, respectively, which were generally offset by changes
in the U.S. dollar value equivalents of underlying foreign currency
transactions.
In addition to the above, at December 31, 1999, the corporation held foreign
currency options in the amount of $67 million (U.S. dollar equivalent) to hedge
a commitment to lend money to fund construction of operating facilities at
specific future dates by one of its foreign subsidiaries. Such options matured
in 2000. The premiums on the options and any gains or losses were capitalized as
part of a loan to the corporation's foreign subsidiary, and will be amortized to
income as an adjustment to the effective interest yield of such loan over its
repayment term. At December 31, 2000, a $2 million net gain ($3 million gain at
December 31, 1999) had been capitalized.
The fair value of foreign currency forward contracts is determined by using
current forward exchange rates. The fair value of foreign exchange options is
estimated using pricing models, which take into account the present value of
estimated future cash flows.
Investments - The corporation's investments in joint ventures and companies
carried under the cost method generally involve entities for which it is not
practicable to determine fair values.
Long-Term Receivables - The fair values of long-term receivables are calculated
using current interest rates and consideration of underlying collateral where
appropriate. The fair values approximate the carrying values of $32 million and
$25 million included in Other assets on the Consolidated Balance Sheet at
December 31, 2000 and 1999, respectively.
Debt - The corporation periodically uses various types of financial instruments,
including interest rate swaps and forward rate agreements, to manage exposure to
financial market risk caused by interest rate fluctuations. The corporation held
no such instruments at December 31, 2000 or December 31, 1999.
Carrying Amounts and Fair Values - The carrying amounts and fair values of the
corporation's Other investments and advances, long-term receivables and debt
financial instruments at December 31, 2000 and 1999, are summarized in the table
below. Fair values are based on quoted market values, where available, or
discounted cash flows (principally long-term debt).
- -------------------------------------------------------------------------------------------------------------------
Millions of dollars, at December 31, 2000 1999
- -------------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Assets (Liabilities) Amount Value Amount Value
- -------------------------------------------------------------------------------------------------------------------
Investments and receivables $ 129 $ 129 $ 100 $ 100
Short- and long-term debt (2,926) (2,981) (2,651) (2,592)
===================================================================================================================
-36-
NOTE 10
Long-Term Debt
- -------------------------------------------------------------------------------------------------------------------
Millions of dollars, at December 31, 2000 1999
- -------------------------------------------------------------------------------------------------------------------
6.25% Notes due 2003 $ 250 $ 250
6.70% Notes due 2009 250 250
6.75% Notes due 2003 125 125
6.79% Debentures due 2025 /(a)/ 250 250
7.50% Debentures due 2025 150 150
7.75% Debentures due 2096 /(b)/ 200 200
7.875% Debentures due 2023 175 175
8.75% Debentures due 2022 /(c)/ 117 117
Floating Rate Public Notes due 2000 - 110
Pollution control and other facility obligations 238 238
Other debt - various maturities and interest rates - 4
- -------------------------------------------------------------------------------------------------------------------
1,755 1,869
- -------------------------------------------------------------------------------------------------------------------
Less: Payments to be made within 1 year 7 -
- -------------------------------------------------------------------------------------------------------------------
$ 1,748 $ 1,869
===================================================================================================================
(a) Holders may request redemption of these debentures from the corporation on
June 1, 2005.
(b) The maturity may be shortened under certain circumstances to preserve the
deductibility of interest payments for Federal income tax purposes.
(c) Redeemable at the option of the corporation on or after August 1, 2002.
At December 31, 2000, the corporation had a credit agreement with a group of
banks permitting the corporation to borrow up to $1 billion at any time through
January 2002 with the option, subject to certain conditions, to increase the
available credit by $250 million and to extend the maturity date of the
agreement to maintain a five-year term. The credit agreement permitted the
corporation to borrow funds under several different programs, including the
euro-dollar, Certificate of Deposit ("CD"), Base Rate or Money Market London
Interbank Offered Rate ("LIBOR") programs. Maturity dates for these programs
ranged from 30 days to twelve months. The interest rate for each of these
programs was contingent on the euro-dollar, CD rate, Federal funds rate or LIBOR
and was determined based on a calculation included in the agreement. The
corporation paid an annual facility fee based on the rating of the corporation's
long-term debt securities by either Moody's Investors Service Inc. or Standard &
Poor's Ratings Services, as indicated in the agreement. As of December 31, 2000,
there were no outstanding amounts against this agreement.
The corporation's indentures under which notes and debentures are issued contain
covenants normal for these types of instruments. These covenants place certain
limits on the corporation's ability to sell assets, engage in sale-leaseback
transactions, incur debt or create liens on assets.
Pollution control and other facility obligations represent state, commonwealth
and local governmental bond financing of pollution control and other facilities
and are treated for accounting and tax purposes as debt of the corporation.
These tax-exempt obligations mature at various dates from 2001 through 2023 and
had an average annual interest rate of 7.0 percent in 2000 (7.1 percent in
1999). The corporation's weighted average interest rate on short-term borrowings
outstanding as of December 31, 2000 was 7.1 percent (6.0 percent at December 31,
1999).
Payments due on long-term debt in each of the four years following 2001 are:
2002, $13 million; 2003, $380 million; 2004, $23 million and 2005, $15 million.
-37-
NOTE 11
Leases
Leases that meet any of the criteria for capitalization have been classified and
accounted for as capital leases. For operating leases, primarily involving
facilities and distribution equipment, the future minimum rental payments under
leases with remaining noncancelable terms in excess of one year are:
- -------------------------------------------------------------------------------------------------------------------
Millions of dollars, for the year ended December 31,
- -------------------------------------------------------------------------------------------------------------------
2001 $ 91
2002 93
2003 84
2004 78
2005 64
Subsequent to 2005 124
- -------------------------------------------------------------------------------------------------------------------
Total minimum payments 534
- -------------------------------------------------------------------------------------------------------------------
Future sublease rentals 59
- -------------------------------------------------------------------------------------------------------------------
Net minimum rental commitments $ 475
===================================================================================================================
The present value of the net minimum rental payments amounts to $367 million, of
which $148 million pertains to the corporation's headquarters lease. Total lease
and rental payments (net of sublease rental income of $11 million in 2000, $10
million in 1999 and $9 million in 1998) were $73 million for 2000, $66 million
for 1999 and $64 million for 1998.
NOTE 12
Incentive Plans
The 1997 Union Carbide Long-Term Incentive Plan for key employees provides for
granting incentive and nonqualified stock options; exercise payment rights;
grants of stock, including restricted stock, and performance awards. Holders of
options may be granted the right to receive payments of amounts equal to the
regular cash dividends paid to holders of the corporation's common stock during
the period an option is outstanding. The number of shares granted or subject to
options cannot exceed 8.5 million under the Plan. Option prices are equal to the
closing price of the corporation's common stock on the date of the grant, as
listed on the New York Stock Exchange Composite Transactions. Options generally
become exercisable two years after such date. Options may not have a duration of
more than ten years. The option price may be settled in cash, common shares of
the corporation currently owned by a participant, withholding stock shares from
the exercise or a combination of these alternatives. Restricted stock award
shares are entitled to vote and dividends are credited to the holder's account,
but these shares are generally nontransferable for varying periods after the
grant date. Once the vesting conditions are met, the shares become fully
transferable. Performance awards may be paid in common stock, cash or other
forms of property. No dividend-equivalent payment rights, exercise payment
rights or performance awards were granted in 2000, 1999 or 1998.
Prior plans still have options outstanding, whose terms are generally similar to
nonqualified stock options under the 1997 Plan.
Changes in outstanding fixed price options were as follows:
- -------------------------------------------------------------------------------------------------------------------
2000 1999 1998
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares in thousands Shares Price Shares Price Shares Price
- -------------------------------------------------------------------------------------------------------------------
Outstanding at January 1 12,671 $ 34.40 12,792 $ 28.36 12,533 $ 25.48
Granted 1,833 45.19 1,749 60.44 1,514 43.88
Exercised (544) 14.82 (1,829) 16.80 (1,141) 15.60
Canceled or expired (179) 54.58 (41) 45.33 (114) 46.21
- -------------------------------------------------------------------------------------------------------------------
Outstanding at December 31 13,781 $ 36.34 12,671 $ 34.40 12,792 $ 28.36
- -------------------------------------------------------------------------------------------------------------------
Options exercisable at December 31 10,318 9,422 9,874
===================================================================================================================
Options were exercised during 2000 and 1999 at prices ranging from $6.70 to
$46.31 per share ($6.70 to $40.38 per share during 1998).
-38-
The following table summarizes information about fixed price option shares
outstanding at December 31, 2000:
- -------------------------------------------------------------------------------------------------------------------
Weighted Average
Shares Remaining Weighted Average
Shares in thousands Outstanding Contractual Life Exercise Price
- -------------------------------------------------------------------------------------------------------------------
Range of Exercise Prices
$ 6.70 to $16.75 2,538 1.6 $ 13.41
$21.62 to $39.88 3,035 3.4 24.97
$40.38 to $45.62 5,262 /(a)/ 7.7 44.01
$46.31 to $60.44 2,946 /(b)/ 8.0 54.13
- -------------------------------------------------------------------------------------------------------------------
13,781
===================================================================================================================
(a) At December 31, 2000, 3.429 million options were exercisable at an average
price of $43.38.
(b) At December 31, 2000, 1.316 million options were exercisable at an average
price of $46.31.
Had compensation cost related to the fixed price options been recorded at fair
value on the dates of grant in accordance with Statement No. 123, the effect on
the corporation's net income and EPS amounts would have been as follows:
- -------------------------------------------------------------------------------------------------------------------
Millions of dollars (except per share figures),
for the year ended December 31, 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Net income
As reported $ 162 $ 291 $ 403
Pro forma $ 142 $ 274 $ 388
- -------------------------------------------------------------------------------------------------------------------
Basic EPS
As reported $ 1.20 $ 2.18 $ 2.98
Pro forma $ 1.05 $ 2.06 $ 2.87
- -------------------------------------------------------------------------------------------------------------------
Diluted EPS
As reported $ 1.18 $ 2.13 $ 2.91
Pro forma $ 1.03 $ 2.01 $ 2.80
===================================================================================================================
The Black-Scholes Option Pricing Model was used to estimate the fair values of
options granted during 2000, 1999 and 1998. The assumptions used for these
grants included a six-year average expected life for 2000 and 1999 (seven-year
average for 1998), and zero-coupon U.S. government risk free interest rates of
5.49%, 6.14%, and 4.41%, current dividend yields of 1.99%, 1.49% and 2.22%, and
volatility of 30.39%, 30.00%, and 29.47% for the years ended December 31, 2000,
1999 and 1998, respectively. The weighted average fair values of options granted
during the years 2000, 1999 and 1998 were $14.72, $21.57, and $15.15,
respectively.
In 1997, the board of directors approved the 1997 Union Carbide Corporation EPS
Incentive Plan for a limited number of senior managers. The plan required these
senior managers to put an amount equivalent to a portion of one year's annual
base pay at risk, up to 100 percent, should diluted earnings per share not equal
or exceed $4.00 in the year 2000. The amounts at risk were deducted from
compensation over three years and converted to units equivalent to common stock
using a $47.75 share price, the closing price of the corporation's common stock
on the date the plan was approved by the board of directors. Participants were
credited with dividend-equivalents in the form of additional units. The plan was
designed to grant awards if the corporation achieved $4.00 or more diluted
earnings per share performance during 1999 and 2000 or, at the discretion of the
Compensation & Management Development Committee of the board of directors (the
"Committee"), should a change in control or certain actions or events occur
which significantly affected the corporation's ability to reach the earnings per
share performance goals during the performance period. Awards under the Plan
were granted by the Committee and subsequently paid in 2001.
-39-
NOTE 13
Retirement Programs
The noncontributory defined benefit retirement program of Union Carbide
Corporation ("U.S. Retirement Program") covers substantially all U.S. employees
and certain employees in other countries. Pension benefits are based primarily
on years of service and compensation levels prior to retirement. Pension
coverage for employees of the corporation's non-U.S. consolidated subsidiaries
is provided through separate plans, to the extent deemed appropriate.
Obligations under such plans are principally provided for by depositing funds
with trustees.
The corporation provides health care and life insurance benefits ("Other
Benefits") for eligible retired employees and their eligible dependents. These
benefits are provided through various insurance companies and health care
providers. The health care plans are contributory, with participants'
contributions adjusted annually; the life insurance plans are non-contributory.
The corporation's significant retirement programs are its U.S. and Canadian
plans. The funded status, actuarial assumptions, health care cost trends and
components of net periodic benefit costs of these plans combined are as follows:
- -----------------------------------------------------------------------------------------------------------------------
Pension Benefits Other Benefits
Millions of dollars, for the year ended December 31, 2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets, beginning-of-year $ 4,440 $ 4,311 $ 8 $ 14
Actual gain (loss) on plan assets 289 308 (1) 2
Foreign currency exchange rate changes (5) 10 - -
Employer contribution - - - 1
Benefits paid (205) (189) (7) (9)
- -----------------------------------------------------------------------------------------------------------------------
Fair value of plan assets, end-of-year $ 4,519 $ 4,440 $ - $ 8
=======================================================================================================================
Change in benefit obligation
Benefit obligation, beginning-of-year $ 3,161 $ 3,472 $ 431 $ 443
Service cost 61 65 12 13
Interest cost 224 204 30 26
Amendments/curtailments - (1) 17 -
Plan participants' contributions - - 25 23
Foreign currency exchange rate changes (3) 6 - -
Actuarial loss (gain) 109 (384) 10 (16)
Benefits paid/(a)/ (208) (201) (62) (58)
- -----------------------------------------------------------------------------------------------------------------------
Benefit obligation, end-of-year $ 3,344 $ 3,161 $ 463 $ 431
- -----------------------------------------------------------------------------------------------------------------------
Funded status $ 1,175 $ 1,279 $ (463) $ (423)
=======================================================================================================================
(a) Includes nonfunded plan benefits paid directly by the corporation.
The funded status is composed of the following elements:
- -----------------------------------------------------------------------------------------------------------------------
Pension Benefits Other Benefits
Millions of dollars, at December 31, 2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
Unrecognized net actuarial gain (loss) $ 1,044 $ 1,244 $ (32) $ (20)
Unrecognized transition asset 5 17 - -
Unrecognized prior service (cost) credit (6) (10) 38 70
Prepaid benefit cost 132 38 1 6
Accrued benefit cost - (10) (470) (479)
- -----------------------------------------------------------------------------------------------------------------------
Funded status $ 1,175 $ 1,279 $ (463) $ (423)
=======================================================================================================================
The Other Benefits benefit obligation is net of $85 million at December 31, 2000
($91 million at December 31, 1999), which is reimbursed to the corporation in
part by previously owned businesses under ongoing benefit-sharing agreements.
-40-
Benefit obligations are valued using the 1994 Uninsured Pensioner Mortality
Table. The actuarial assumptions used were as follows:
- --------------------------------------------------------------------------------------------------------------------
Pension Benefits Other Benefits
At December 31, 2000 1999 2000 1999
- --------------------------------------------------------------------------------------------------------------------
Discount rate for determining benefit obligation 7.00% 7.25% 7.00% 7.25%
Expected long-term rate of return on plan assets 8.75% 9.50% -% 8.00%
Rate of increase in compensation levels 4.75% 5.00% -% -%
====================================================================================================================
Health care costs are projected to increase as follows:
- --------------------------------------------------------------------------------------------------------------------
Medicare Medicare
Pre-Medicare Supplement Plan Alternative Plan
- --------------------------------------------------------------------------------------------------------------------
Immediate 6.50% 6.70% 9.50%
Ultimate 5.50% 5.50% 5.50%
Year ultimate trend is reached 2004 2004 2006
====================================================================================================================
- --------------------------------------------------------------------------------------------------------------------
Millions of dollars, for the Pension Benefits Other Benefits
year ended December 31, 2000 1999 1998 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------
Components of net periodic benefit costs
Service cost $ 61 $ 65 $ 60 $ 12 $ 13 $ 14
Interest cost 224 204 205 30 26 30
Expected return on plan assets (357) (269) (242) - (1) (1)
Amortization of transition obligation (12) (12) (12) - - -
Amortization of prior service costs (credits) 3 3 3 (15) (24) (29)
Recognized net actuarial gains (22) - (1) (1) - -
- --------------------------------------------------------------------------------------------------------------------
Net periodic benefit (credits) costs $ (103) $ (9) $ 13 $ 26 $ 14 $ 14
====================================================================================================================
The accounting for the health care plans anticipates future cost-sharing changes
to the written plan that are consistent with the corporation's expressed intent
to control these costs. On July 1, 1998, the corporation adopted certain
amendments, which became effective between January 1, 1999 and January 1, 2001.
These amendments encourage retirees to transfer their health care coverage into
lower costing plans and usually to choose generic drugs. Effective January 1,
1999, certain retirees pay a greater percentage of premium contributions. In
addition, the plan provides that the corporation's per individual subsidy for
pre-Medicare and Medicare medical coverage is capped at two times its subsidy to
the company-sponsored plans in 2000.
The corporation funded, in part, postretirement benefits for certain retirees
who retired prior to December 31, 1988. At December 31, 2000, all funds
available for these benefits have been paid.
At December 31, 2000, the effect on the accumulated postretirement benefit
obligation of a one-percentage-point change in assumed health care cost trend
rates would be as follows:
- --------------------------------------------------------------------------------------------------------------------
2000 1999
1 Percentage Point 1 Percentage Point
Millions of dollars Increase Decrease Increase Decrease
- --------------------------------------------------------------------------------------------------------------------
Effect on total of service and interest cost components $ 2 $ (2) $ 2 $ (2)
Effect on postretirement benefit obligation $ 19 $ (18) $ 18 $ (20)
====================================================================================================================
Deferred Compensation
The corporation provides an unfunded, nonqualified deferred compensation plan to
certain key employees, offering them an election to defer a portion of their
gross pay. The corporation's obligation to employees is adjusted to reflect
changes in the market values of employees' investment choices. With limited
exceptions, participants' deferred account balances are scheduled for payment at
or after full retirement.
-41-
NOTE 14
Stockholders' Equity
Each outstanding share of common stock has identical rights in voting on
corporate matters, dividends when declared, liquidation and other corporate
matters.
On August 31, 1999, Rights entitling each holder of common stock to purchase a
share of common stock from the corporation, under certain circumstances, expired
unused.
On August 3, 1999, the board of directors rescinded the corporation's
authorization to repurchase shares under the common stock repurchase
authorization, subsequent to that date. Since inception of its share repurchase
authorization in 1993 through August 3, 1999, the corporation repurchased 56.4
million shares (1.0 million shares during 1999) out of a total authorization of
60 million shares, at an average effective price of $36.01 per share.
NOTE 15
Employee Stock Ownership Plan
The Union Carbide Corporation Employee Stock Ownership Plan ("ESOP") is an
integral part of the Savings and Investment Program (the "Program") for
employees. Substantially all full-time employees in the U.S. are eligible to
participate in the ESOP through the allocation of shares of the corporation's
common stock ("ESOP shares") equivalent to the corporation's matching
contribution of 75 percent of eligible employee contributions to the Program. In
addition, eligible employees can receive the equivalent of up to twenty days pay
in ESOP shares through the corporation's ESOP profit sharing plan. Participants'
accounts are also allocated ESOP shares with a market value equal to the amount
of dividends paid on their allocated shares.
Under this plan, the corporation loaned $325 million to the ESOP, which used the
proceeds to purchase the ESOP shares. The receivable from the ESOP is reflected
as Unearned employee compensation - ESOP, a reduction of stockholders' equity.
Dividends on shares held by the ESOP are paid to the ESOP and, together with
company contributions, are used, in part, by the ESOP to make debt service
payments on the loan. Shares are released for allocation to participants based
on the ratio of the current year's debt service to the sum of the principal and
interest payments over the life of the loan.
Expense associated with the ESOP is recognized as incurred using the cost method
and was $2 million in 2000 ($5 million in 1999 and $7 million in 1998). At
December 31, 2000, 13.1 million common shares held by the ESOP were outstanding,
7.8 million of which were allocated to employees' accounts. During 2000, 1.0
million ESOP shares were allocated to employees' accounts.
-42-
NOTE 16
Commitments and Contingencies
Purchase Agreements - The corporation has two major agreements (three in 1999
and 1998) for the purchase of ethylene-related products and two other purchase
agreements in the U.S. and Canada. Total purchases under these agreements were
$171 million, $229 million and $196 million in 2000, 1999 and 1998,
respectively. The net present value of the fixed and determinable portion of
obligations under these purchase commitments at December 31, 2000 (at current
exchange rates, where applicable) is presented in the following table:
- -------------------------------------------------------------------------------
Millions of dollars, for the year ended December 31,
- -------------------------------------------------------------------------------
2001 $ 32
2002 28
2003 24
2004 19
2005 13
2006 through 2014 67
- -------------------------------------------------------------------------------
Total $ 183
===============================================================================
Environmental - The corporation is subject to loss contingencies resulting from
environmental laws and regulations, which include obligations to remove or
remediate the effects on the environment of the disposal or release of certain
wastes and substances at various sites. The corporation has established accruals
in current dollars for those hazardous waste sites where it is probable that a
loss has been incurred and the amount of the loss can reasonably be estimated.
The reliability and precision of the loss estimates are affected by numerous
factors, such as different stages of site evaluation, the allocation of
responsibility among potentially responsible parties and the assertion of
additional claims. The corporation adjusts its accruals as new remediation
requirements are defined, as information becomes available permitting reasonable
estimates to be made and to reflect new and changing facts.
At December 31, 2000, the corporation had established environmental remediation
accruals in the amount of $183 million ($208 million in 1999). These accruals
have two components, estimated future expenditures for site investigation and
cleanup and estimated future expenditures for closure and postclosure
activities. In addition, the corporation had environmental loss contingencies of
$71 million at December 31, 2000.
The corporation has sole responsibility for the remediation of approximately 40
percent of its environmental sites for which accruals have been established.
These sites are well advanced in the investigation and cleanup stage. The
corporation's environmental accruals at December 31, 2000 included $150 million
for these sites ($165 million at December 31, 1999), of which $40 million ($51
million at December 31, 1999) was for estimated future expenditures for site
investigation and cleanup and $110 million ($114 million at December 31, 1999)
was for estimated future expenditures for closure and postclosure activities. In
addition, $54 million of the corporation's environmental loss contingencies at
December 31, 2000 related to these sites. The three sites with the largest total
potential cost to the corporation are nonoperating sites. Of the above accruals,
these sites accounted for $48 million ($60 million at December 31, 1999), of
which $10 million ($21 million at December 31, 1999) was for estimated future
expenditures for site investigation and cleanup and $38 million ($39 million at
December 31, 1999) was for estimated future expenditures for closure and
postclosure activities. In addition, $36 million of the above environmental loss
contingencies related to these sites.
The corporation does not have sole responsibility at the remainder of its
environmental sites for which accruals have been established. All of these sites
are in the investigation and cleanup stage. The corporation's environmental
accruals at December 31, 2000 included $33 million for estimated future
expenditures for site investigation and cleanup at these sites ($43 million at
December 31, 1999). In addition, $17 million of the corporation's environmental
loss contingencies related to these sites. The largest two of these sites are
nonoperating sites. Of the above accruals, these sites accounted for $11 million
($14 million at December 31, 1999) for estimated future expenditures for site
investigation and cleanup. In addition, $2 million of the above environmental
loss contingencies related to these sites.
-43-
Worldwide expenses related to environmental protection for compliance with
Federal, state and local laws regulating solid and hazardous wastes and
discharge of materials to air and water, as well as for waste site remedial
activities, totaled $104 million in 2000, $118 million in 1999 and $91 million
in 1998.
Other - The corporation severally guaranteed up to $122 million at December 31,
2000 of EQUATE's debt and working capital financing needs. The corporation has
also severally guaranteed certain sales volume targets until EQUATE's sales
capabilities are proved. In addition, the corporation has pledged its shares in
EQUATE as security for EQUATE's debt. The corporation has political risk
insurance coverage for its equity investment and a majority of its guarantee of
EQUATE's debt.
The corporation and its consolidated subsidiaries had additional contingent
obligations at December 31, 2000, totaling $70 million, of which $26 million
related to guarantees of debt.
Litigation - The corporation and its consolidated subsidiaries are involved in a
number of legal proceedings and claims with both private and governmental
parties. These cover a wide range of matters, including, but not limited to:
product liability; trade regulation; governmental regulatory proceedings;
health, safety and environmental matters; employment; patents; contracts, and
taxes. In some of these legal proceedings and claims, the cost of remedies that
may be sought or damages claimed is substantial.
The corporation has recorded nonenvironmental litigation accruals of $139
million and related insurance recovery receivables of $122 million. At December
31, 2000, the corporation had net nonenvironmental litigation loss contingencies
of $74 million.
While it is impossible at this time to determine with certainty the ultimate
outcome of any legal proceedings and claims referred to in this note, management
believes that adequate provisions have been made for probable losses with
respect thereto and that such ultimate outcome, after provisions therefor, will
not have a material adverse effect on the consolidated financial position of the
corporation, but could have a material effect on consolidated results of
operations in a given quarter or year. Should any losses be sustained in
connection with any of such legal proceedings and claims in excess of provisions
therefor, they will be charged to income when determinable.
NOTE 17
Subsequent Event - The Dow Merger
On February 6, 2001, the corporation merged with a subsidiary of Dow. As a
result of the merger, each share of Union Carbide common stock outstanding
immediately prior to the merger was exchanged for 1.611 shares of Dow common
stock and Union Carbide became a wholly-owned subsidiary of Dow. The merger
received clearance from the U.S. Federal Trade Commission, the European
Commission and the Canadian Competition Bureau, subject to the divestiture of
certain assets and the licensing of certain technology. Contemporaneous with the
merger, certain rights vested and stock units equivalent to Union Carbide common
stock were converted into units equivalent of Dow common stock under various
employee benefit and incentive plans, such as the ESOP Plan, the 1997 Union
Carbide Long-Term Incentive Plan and the deferred compensation plan.
On February 9, 2001, the corporation entered into an agreement to transfer its
shares in Polimeri Europa to EniChem S.p.A. This transfer is subject to approval
by the European Commission.
On February 23, 2001, the corporation cancelled its $1 billion major bank credit
agreement. Further, as noted in the corporation's Proxy Statement dated October
5, 1999 as filed with the U.S. Securities and Exchange Commission, it is
expected that the corporation will incur a one-time charge for severance and
other restructuring costs, although it is not currently possible to determine
the magnitude of such costs since their extent and nature are still being
considered by management. The transaction is intended to qualify as a tax-free
reorganization for U.S. Federal income tax purposes and is expected to be
accounted for under the pooling-of-interests method of accounting.
-44-
Management's Statement of Responsibility for Financial Statements
Union Carbide Corporation's financial statements are prepared by management,
which is responsible for their fairness, integrity and objectivity. The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles and, accordingly, include amounts that
are estimates and judgments. All historical financial information in this Annual
Report on Form 10-K is consistent with the accompanying financial statements.
The corporation maintains accounting systems, including internal accounting
controls monitored by a staff of internal auditors, that are designed to provide
reasonable assurance of the reliability of financial records and the protection
of assets. The concept of reasonable assurance is based on recognition that the
cost of a system must not exceed the related benefits. The effectiveness of
those systems depends primarily upon the careful selection of financial and
other managers, clear delegation of authority and assignment of accountability,
inculcation of high business ethics and conflict-of-interest standards, policies
and procedures for coordinating the management of corporate resources and the
leadership and commitment of top management.
The corporation's financial statements are audited by KPMG LLP, independent
certified public accountants, in accordance with generally accepted auditing
standards. These standards provide for the auditors to consider the
corporation's internal control structure to the extent they deem necessary in
order to issue their opinion on the financial statements.
The Audit Committee of the board of directors, which consists solely of
nonemployee directors, is responsible for overseeing the functioning of the
accounting system and related controls and the preparation of annual financial
statements. The Audit Committee recommends to the board of directors the
selection of the independent auditors, which is submitted to the stockholders
for ratification. The Audit Committee periodically meets with the independent
auditors, management and internal auditors to review and evaluate their
accounting, auditing and financial reporting activities and responsibilities.
The independent and internal auditors have full and free access to the Audit
Committee and meet with the committee, with and without management present.
/s/ William H. Joyce /s/ John K. Wulff
William H. Joyce John K. Wulff
Chairman, President and Chief Executive Officer Vice-President, Chief Financial
Officer and Controller
Danbury, Conn.
January 22, 2001
-45-
Independent Auditors' Report
[LOGO OF KPMG LLP]
To the Stockholders and Board of Directors of Union Carbide Corporation:
We have audited the accompanying consolidated balance sheet of Union Carbide
Corporation and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 2000. These
consolidated financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Union Carbide
Corporation and subsidiaries at December 31, 2000 and 1999, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America.
/s/ KPMG LLP
KPMG LLP
Stamford, Conn.
January 22, 2001, except as to Note 17, which is as of February 6, 2001
-46-
QUARTERLY DATA
Union Carbide Corporation and Subsidiaries
- -----------------------------------------------------------------------------------------------------------------------------------
Millions of dollars 1Q 2Q 3Q 4Q Year
- -----------------------------------------------------------------------------------------------------------------------------------
2000
Net sales $ 1,617 $ 1,674 $ 1,637 $ 1,598 $ 6,526
Cost of sales 1,314 1,354 1,421 1,442 5,531
Gross profit 303 320 216 156 995
Depreciation and amortization 102 102 100 119 423
Operating profit (loss) 116 /(a)/ 163 /(b)/ 34 (93) /(a)(c)/ 220
Net income (loss) 97 130 29 (94) 162
- -----------------------------------------------------------------------------------------------------------------------------------
1999
Net sales $ 1,402 $ 1,418 $ 1,498 $ 1,552 $ 5,870
Cost of sales 1,032 1,105 1,232 1,240 4,609
Gross profit 370 313 266 312 1,261
Depreciation and amortization 104 95 103 106 408
Operating profit 179 145 /(d)/ 123 /(d)/ 108 555
Income before cumulative effect of change in
accounting principle 77 63 77 94 311
Cumulative effect of change in accounting principle (20) - - - (20)
Net income 57 63 77 94 291
===================================================================================================================================
(a) Includes $15 million in the first quarter and $3 million in the fourth
quarter of interest income from tax refunds.
(b) Includes an $18 million gain on shares received and sold in connection with
the demutualization of Metropolitan Life Insurance Company, a provider of
certain employee benefit programs for the corporation.
(c) Includes a nonrecurring charge of $31 million from the corporation's UOP LLC
partnership.
(d) Includes $12 million in the second quarter and $38 million in the third
quarter of favorable litigation settlements related to the licensing
business.
- -----------------------------------------------------------------------------------------------------------------------------------
Dollars per common share 1Q 2Q 3Q 4Q Year
- -----------------------------------------------------------------------------------------------------------------------------------
2000
Basic -
Net income (loss) $ 0.72 $ 0.96 $ 0.22 $ (0.70) $ 1.20
Diluted -
Net income (loss) 0.71 0.94 0.22 (0.70) 1.18
Cash dividends declared 0.225 0.225 0.225 0.225 0.90
Market price - high /(a)/ 68.4375 63.5625 52.8125 55.7500 68.4375
Market price - low /(a)/ 44.5000 46.7500 35.2500 30.5625 30.5625
===================================================================================================================================
1999
Basic -
Income before cumulative effect of change in
accounting principle $ 0.57 $ 0.47 $ 0.58 $ 0.70 $ 2.33
Cumulative effect of change in accounting principle (0.14) - - - (0.15)
Net income 0.43 0.47 0.58 0.70 2.18
Diluted -
Income before cumulative effect of change in
accounting principle 0.56 0.46 0.57 0.68 2.27
Cumulative effect of change in accounting principle (0.14) - - - (0.14)
Net income 0.42 0.46 0.57 0.68 2.13
Cash dividends declared 0.225 0.225 0.225 0.225 0.90
Market price - high /(a)/ 47.7500 56.8750 65.8750 67.7500 67.7500
Market price - low /(a)/ 37.1250 45.3125 44.3750 52.7500 37.1250
===================================================================================================================================
(a) Prices are based on New York Stock Exchange Composite Transactions.
-47-
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
- --------------------------------------------------------------------------------
The corporation has not had any disagreements covered by this item with KPMG
LLP, its independent auditors.
Part III
- --------------------------------------------------------------------------------
Item 10. Directors and Executive Officers of the Registrant
- --------------------------------------------------------------------------------
Omitted pursuant to General Instruction I of Form 10-K.
Item 11. Executive Compensation
- --------------------------------------------------------------------------------
Omitted pursuant to General Instruction I of Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------------------------
Omitted pursuant to General Instruction I of Form 10-K.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------------------------------
Omitted pursuant to General Instruction I of Form 10-K.
-48-
Part IV
- --------------------------------------------------------------------------------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- --------------------------------------------------------------------------------
(a) The following documents are filed as part of this report:
1. The Consolidated Financial Statements and Notes to Financial Statements
and the Independent Auditors' Report, dated January 22, 2001, are
included in Item 8 of Part II.
2. The following schedule should be read in conjunction with the
Consolidated Financial Statements in Item 8 of this Annual Report on
Form 10-K. Schedules other than that listed have been omitted because
they are not applicable.
- --------------------------------------------------------------------------------
Page in this
Annual Report
on Form 10-K
- --------------------------------------------------------------------------------
Schedule II - Valuation and Qualifying Accounts,
three years ended December 31, 2000 50
- --------------------------------------------------------------------------------
The Report on Financial Statement Schedule of KPMG LLP appears on page 50 of
this Annual Report on Form 10-K.
(b) The corporation filed the following Current Reports on Form 8-K for the
three months ended December 31, 2000.
1. Current Report on Form 8-K dated October 12, 2000, contained the
corporation's press release dated October 12, 2000.
2. Current Report on Form 8-K dated October 30, 2000, contained the
corporation's press release dated October 30, 2000.
3. Current Report on Form 8-K dated December 22, 2000, contained a Letter
Agreement, dated December 22, 2000, with reference to the Agreement and
Plan of Merger, dated as of August 3, 1999, among Union Carbide
Corporation, a New York corporation, The Dow Chemical Company, a
Delaware corporation, and Transition Sub Inc., a Delaware corporation.
(c) Exhibits - See Exhibit Index on pages 52 through 54 for exhibits filed with
this Annual Report on Form 10-K.
-49-
Report of Independent Auditors
- --------------------------------------------------------------------------------
The Board of Directors
Union Carbide Corporation
Under date of January 22, 2001, except as to Note 17, which is as of February 6,
2001, we reported on the consolidated balance sheets of Union Carbide
Corporation and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the years in the three-year period ended December 31, 2000, as contained on
pages 21 through 44 in this Annual Report on Form 10-K. In connection with our
audits of the aforementioned consolidated financial statements, we also have
audited the related financial statement schedule as listed in Item 14(a)2. This
financial statement schedule is the responsibility of the corporation's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
KPMG LLP
Stamford, Conn.
January 22, 2001, except as to Note 17, which is as of February 6, 2001
====================================================================================================================
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Union Carbide Corporation and Consolidated Subsidiaries
- --------------------------------------------------------------------------------------------------------------------
Allowance for Doubtful Accounts
Deductions
-----------------
Items
determined to be
Additions uncollectible,
------------------------------ less recovery
Balance at Charged to Reclassified of amounts Balance at
Beginning costs and from other previously end of
Millions of dollars, of period expenses accounts written off period
- --------------------------------------------------------------------------------------------------------------------
Year ended December 31, 2000 $19 $- $- $8 $11
Year ended December 31, 1999 $22 $2 $- $5 $19
Year ended December 31, 1998 $11 $3 $8 $- $22
- --------------------------------------------------------------------------------------------------------------------
-50-
Signatures
- --------------------------------------------------------------------------------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the corporation has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Union Carbide Corporation
March 8, 2001
/s/ John K. Wulff
by: John K. Wulff
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the corporation and
in the capacities indicated on March 8, 2001.
/s/ Geoffery E. Merzei /s/ Alfonso Escudero
Geoffery E. Merszei Alfonso Escudero
Director Director
-51-
Exhibit Index
- --------------------------------------------------------------------------------
Exhibit No.
2.1 Agreement and Plan of Merger (the "Merger Agreement") dated as of
August 3, 1999 among the corporation, The Dow Chemical Company
("TDCC") and Transition Sub Inc. (See Exhibit 2 of the
corporation's Current Report on Form 8-K dated August 3, 1999).
2.1.1 Letter Agreement dated March 28, 2000, between TDCC and the
corporation, extending the termination date of the Merger
Agreement for an additional one hundred and twenty-five days.
2.1.2 Letter Agreement, dated July 21, 2000, between TDCC and the
corporation, with reference to the Merger Agreement (See Exhibit
99 of the corporation's Current Report on Form 8-K dated July 24,
2000).
2.1.3 Letter Agreement, dated September 27, 2000, between TDCC and the
corporation, with reference to the Merger Agreement (See Exhibit
99 of the corporation's Current Report on Form 8-K dated September
27, 2000).
2.1.4 Letter Agreement, dated December 22, 2000, between TDCC and the
corporation, with reference to the Merger Agreement (See Exhibit
99 of the corporation's Current Report on Form 8-K dated December
22, 2000).
2.2 Stock Option Agreement dated as of August 3, 1999 between the
corporation and The Dow Chemical Company (See Exhibit 99.1 to the
corporation's Current Report on Form 8-K dated August 3, 1999).
3.1.1 Amended and Restated Certificate of Incorporation as filed June
25, 1998 (See Exhibit 3 of the Corporation's June 30, 1998 form
10-Q).
3.1.2 Certificate of Merger of Transition Sub Inc. into Union Carbide
Corporation under Section 904 of the Business Corporation Law
effective February 6, 2001.
3.2 By-Laws of the corporation, amended and restated as of
February 6, 2001.
4.1 Indenture dated as of June 1, 1995, between the corporation and
the Chase Manhattan Bank (formerly Chemical Bank), Trustee (See
Exhibit 4.1.2 to the corporation's Form S-3 effective October 13,
1995, Reg. No. 33-60705).
4.2 The corporation will furnish to the Commission upon request any
other debt instrument referred to in item 601(b)(4)(iii)(A) of
Regulation S-K.
10.1 Indemnity Agreement dated as of December 8, 1997, between the
corporation and James F. Flynn. The Indemnity Agreement filed with
the Commission is substantially identical in all material
respects, except as to the parties thereto and dates thereof, with
Indemnity Agreements between the corporation and each other person
who is a director or executive officer of the corporation (See
Exhibit 10.1 of the corporation's 1997 Form 10-K).
10.2.1 1988 Union Carbide Long-Term Incentive Plan (See Exhibit 10.2.1 of
the corporation's 1998 Form 10-K).
10.2.2 Amendment to the 1988 Union Carbide Long-Term Incentive Plan
effective June 1, 1989 (See Exhibit 10.2.2 of the corporation's
1999 Form 10-K).
10.2.3 Amendment to the 1988 Union Carbide Long-Term Incentive Plan
effective August 1, 1989 (See Exhibit 10.2.3 of the corporation's
1999 Form 10-K).
10.2.4 Resolutions adopted by the Board of Directors of the corporation
on February 26, 1992, with respect to stock options granted under
the 1988 Union Carbide Long-Term Incentive Plan (See Exhibit
10.2.4 of the corporation's 1997 Form 10-K).
10.2.5 Resolutions adopted by the Compensation and Management Development
Committee of the Board of Directors of the corporation on June 30,
1992, with respect to the 1988 Union Carbide Long-Term Incentive
Plan (See Exhibit 10.2.5 of the corporation's 1997 Form 10-K).
10.2.6 Amendment to the 1988 Union Carbide Long-Term Incentive Plan
effective October 1, 1997 (See Exhibit 10.2.6 of the corporation's
1997 Form 10-K).
-52-
Exhibit Index (cont'd.)
- --------------------------------------------------------------------------------
Exhibit No.
10.3.1 1983 Union Carbide Bonus Deferral Program (See Exhibit 10.4.1 of
the corporation's 1996 Form 10-K).
10.3.2 Amendment to the 1983 Union Carbide Bonus Deferral Program
effective January 1, 1992 (See Exhibit 10.3.2 of the corporation's
1997 Form 10-K).
10.4.1 1984 Union Carbide Cash Bonus Deferral Program (See Exhibit 10.5.1
of the corporation's 1996 Form 10-K).
10.4.2 Amendment to the 1984 Union Carbide Cash Bonus Deferral Program
effective January 1, 1986 (See Exhibit 10.5.2 of the corporation's
1996 Form 10-K).
10.4.3 Amendment to the 1984 Union Carbide Cash Bonus Deferral Program
effective January 1, 1992 (See Exhibit 10.4.3 of the corporation's
1997 Form 10-K).
10.5.1 Union Carbide Corporation Equalization Benefit Plan, Amended and
Restated effective January 1, 1998 (See Exhibit 10.5 of the
corporation's 1999 Form 10-K).
10.5.2 First Amendment to the Union Carbide Corporation Equalization
Benefit Plan effective as of January 1, 2001.
10.6.1 Union Carbide Corporation Supplemental Retirement Income Plan,
Amended and Restated January 1, 1998 (See Exhibit 10.6 of the
corporation's 1999 Form 10-K).
10.6.2 First Amendment to the Union Carbide Corporation Supplemental
Retirement Income Plan effective as of January 1, 2001.
10.7 Union Carbide Non-Employee Director's Compensation Deferral
Program, Amended and Restated effective as of February 6, 2001.
10.8 Severance Compensation Agreement, dated February 10, 1998, between
the corporation and Ron J. Cottle. The Severance Compensation
Agreement filed with the Commission is substantially identical in
all material respects, except as to the parties thereto and dates
thereof, with Agreements between the corporation and other
officers and employees of the corporation (See Exhibit 10.8 of the
corporation's 1997 Form 10-K).
10.9 Resolution adopted by the Board of Directors of the corporation on
November 30, 1988, with respect to an executive life insurance
program for officers and certain other employees (See Exhibit 10.9
of the corporation's 1998 Form 10-K).
10.10 1997 Union Carbide Variable Compensation Plan effective July 1,
1997 (See Exhibit 10.10 of the corporation's 1997 Form 10-K).
10.11.1 Union Carbide Corporation Benefits Protection Trust, amended and
restated effective August 29, 1997 (See Exhibit 10.11.1 of the
corporation's 1997 Form 10-K).
10.11.2 Amendment to the Union Carbide Corporation Benefits Protection
Trust effective November 1, 1997 (See Exhibit 10.11.2 of the
corporation's 1997 Form 10-K).
10.11.3 Second Amendment to the Union Carbide Corporation Benefits
Protection Trust effective February 1, 2001.
10.12 Resolutions adopted by the Board of Directors of the corporation
on February 24, 1988, with respect to the purchase of annuities to
cover liabilities of the corporation under the Equalization
Benefit Plan for Participants of the Retirement Program Plan for
Employees of Union Carbide Corporation and its Participating
Subsidiary Companies and the Supplemental Retirement Income Plan
(See Exhibit 10.12 of the corporation's 1999 Form 10-K).
10.13 Resolutions adopted by the Board of Directors of the corporation
on June 28, 1989, with respect to the purchase of annuities to
cover liabilities of the corporation under the Supplemental
Retirement Income Plan (See Exhibit 10.13 of the corporation's
1999 Form 10-K).
-53-
Exhibit Index (cont'd.)
- --------------------------------------------------------------------------------
Exhibit No.
10.14.1 Union Carbide Corporation Enhanced Retirement Income Plan,
effective January 1, 1998 (See Exhibit 10.14 of the corporation's
1999 Form 10-K).
10.14.2 First Amendment to the Union Carbide Corporation Enhanced
Retirement Income Plan effective as of January 1, 2001.
10.15.1 1994 Union Carbide Long-Term Incentive Plan (See Exhibit 10.15.1
of the corporation's 1999 Form 10-K).
10.15.2 Amendment to the 1994 Union Carbide Long-Term Incentive Plan
effective October 1, 1997 (See Exhibit 10.15.2 of the
corporation's 1997 Form 10-K).
10.16 Union Carbide Compensation Deferral Program Amended and Restated
as of February 6, 2001.
10.17 Excess Long-Term Disability Plan effective January 1, 1994 (See
Exhibit 10.17 of the corporation's 1999 Form 10-K).
10.18.1 1995 Union Carbide Performance Incentive Plan.
10.18.2 Resolutions adopted by the Board of Directors of the corporation
on February 23, 2000, with respect to the reapproval of the
performance goals under the 1995 Union Carbide Performance
Incentive Plan.
10.19.1 1997 Union Carbide Long-Term Incentive Plan (See Appendix A of the
corporation's proxy statement filed with the Commission March 12,
1997, file number: 001-01463).
10.19.2 Amendment to the 1997 Union Carbide Long-Term Incentive Plan
effective April 23, 1997 (See Exhibit 10.19.2 of the corporation's
1997 Form 10-K).
10.19.3 Resolutions adopted by the Board of Directors of the Corporation
on February 23, 2000 with respect to the number of shares
authorized for awards under the 1997 Union Carbide Long-Term
Incentive Plan.
10.20 1997 Stock Option Plan for Non-Employee Directors of Union Carbide
Corporation (See Appendix B of the corporation's proxy statement
filed with the Commission March 12, 1997, file number: 001-01463).
10.21 1997 Union Carbide Corporation EPS Incentive Plan (See Exhibit
10.21 of the corporation's 1997 Form 10-K).
10.22 The Mid-Career Hire Plan for Employees of Union Carbide
Corporation and Its Participating Subsidiary Companies, effective
December 3, 1996 (See Exhibit 10.22 of the corporation's 1997 Form
10-K).
23 Consent of KPMG LLP.
Wherever an exhibit listed above refers to another exhibit or document (e.g.,
"See Exhibit 6 of . . ."), that exhibit or document is incorporated herein by
such reference.
A copy of any exhibit listed above may be obtained on written request to the
Secretary's Department, Union Carbide Corporation, 39 Old Ridgebury Road,
Danbury, CT 06817-0001. The charge for furnishing any exhibit is 25 cents per
page plus mailing costs.
-54-