SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-30270
CROMPTON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 52-2183153
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One American Lane, Greenwich, Connecticut 06831-2559
(Address of principal executive offices) (Zip Code)
(203) 552-2000
(Registrant's telephone number,
including area code)
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.
YES X NO
The number of shares of common stock outstanding is as follows:
Class Outstanding at April 28, 2000
Common Stock - $.01 par value 113,866,407
CROMPTON CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Accompanying Notes
Consolidated Statements of Operations (Unaudited) - First
quarter ended 2000 and 1999
Consolidated Balance Sheets - March 31, 2000 (Unaudited)
and December 31, 1999
Consolidated Statements of Cash Flows (Unaudited) - First
quarter ended 2000 and 1999
Notes to Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure of Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
CROMPTON CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
First quarter ended 2000 and 1999
(In thousands of dollars, except per share data)
2000 1999
Net sales $ 769,018 $ 396,292
Cost of products sold 517,716 247,295
Selling, general and administrative 112,444 60,590
Depreciation and amortization 45,764 18,837
Research and development 22,442 11,308
Equity income (7,545) (7,055)
Operating profit 78,197 65,317
Interest expense 28,221 13,154
Other expense (income) (a) 1,349 (40,706)
Earnings before income taxes 48,627 92,869
Income taxes 18,954 33,666
Net earnings $ 29,673 $ 59,203
Basic earnings per common share $ .26 $ .87
Diluted earnings per common share $ .26 $ .86
Dividends declared per common share $ .05 $ -
(a) 1999 includes a gain of $42,060 ($26,813 after-tax) from the sale of the
specialty ingredients business.
See accompanying notes to consolidated financial statements.
CROMPTON CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2000 (Unaudited) and December 31, 1999
(In thousands of dollars)
March 31, December 31,
2000 1999
ASSETS
CURRENT ASSETS
Cash $ 19,038 $ 10,543
Accounts receivable 424,956 411,536
Inventories 546,394 523,363
Other current assets 174,044 174,311
Total current assets 1,164,432 1,119,753
NON-CURRENT ASSETS
Property, plant and equipment 1,245,406 1,262,345
Cost in excess of acquired net assets 960,602 969,625
Other assets 344,887 374,895
$ 3,715,327 $ 3,726,618
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 41,807 $ 81,162
Accounts payable 286,504 330,591
Accrued expenses 385,776 422,252
Income taxes payable 96,525 121,366
Other current liabilities 30,906 22,599
Total current liabilities 841,518 977,970
NON-CURRENT LIABILITIES
Long-term debt 1,494,696 1,309,812
Postretirement health care liability 214,235 216,797
Other liabilities 431,076 462,127
STOCKHOLDERS' EQUITY
Common stock 1,194 1,191
Additional paid-in capital 1,051,809 1,047,518
Accumulated deficit (176,408) (200,374)
Accumulated other comprehensive income (72,733) (61,238)
Treasury stock at cost (70,060) (27,185)
Total stockholders' equity 733,802 759,912
$ 3,715,327 $ 3,726,618
See accompanying notes to consolidated financial statements.
CROMPTON CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
First quarter ended 2000 and 1999
(In thousands of dollars)
Increase (decrease) in cash 2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 29,673 $ 59,203
Adjustments to reconcile net earnings to net
cash provided by (used in) operations:
Gain on sale of specialty ingredients - (42,060)
Depreciation and amortization 45,764 18,837
Equity income (7,545) (7,055)
Changes in assets and liabilities, net (58,916) (82,102)
Net cash provided by (used in) operations 8,976 (53,177)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of specialty ingredients - 103,000
Capital expenditures (29,858) (12,471)
Merger related expenditures (39,657) -
Other investing activities (16,977) 1,862
Net cash (used in) provided by investing activities (86,492) 92,391
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on senior notes 593,754 -
Proceeds (payments) on long-term borrowings (406,212) 39,843
Payments on short-term borrowings (39,361) (5,736)
Repurchases of accounts receivable (13,776) -
Treasury stock acquired (43,463) (67,516)
Dividends paid (5,707) -
Other financing activities 858 169
Net cash provided by (used in) financing activities 86,093 (33,240)
CASH
Effects of exchange rate changes on cash (82) 160
Change in cash 8,495 6,134
Cash at the beginning of period 10,543 12,104
Cash at the end of period $ 19,038 $ 18,238
See accompanying notes to consolidated financial statements.
CROMPTON CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
MERGER OF EQUALS
On September 1, 1999, the shareholders of Crompton and Knowles Corporation
(Crompton) and Witco Corporation (Witco) approved a tax-free stock-for-stock
merger of equals of Crompton and Witco (the "Merger"). The terms of the Merger
provided that (a) Crompton merge with and into Crompton Corporation, formerly
known as CK Witco Corporation (the "Company") and (b) immediately thereafter,
Witco merge with and into the Company, so that the Company is the surviving
corporation. Also, under the terms of the Merger, each share of Crompton's
common stock was automatically converted into one share of the Company's common
stock, and each share of Witco's common stock was exchanged for 0.9242 shares of
the Company's common stock.
The merger was accounted for as a purchase and accordingly, the results of
operations of Witco have been included in the consolidated financial statements
from the date of acquisition. An allocation of the purchase price resulted in
cost in excess of the estimated fair value of acquired net assets (goodwill) of
approximately $834 million. This is being amortized on a straight-line basis
over forty years.
As a result of the Merger, the Company recorded merger related accruals as a
component of goodwill, of which $110.7 million remained at December 31, 1999.
During the first quarter of 2000, these accruals were reduced by payments of
$39.7 million and non-cash charges of $2 million. The payments related
primarily to severance and related accruals.
Also, as a result of the Merger the Company recorded other accruals, of which
$20 million remained at December 31, 1999. During the first quarter of 2000,
payments of $1.3 million were made against these other accruals.
PRO FORMA FINANCIAL INFORMATION
The following pro forma unaudited results of operations for the first quarter
ended 1999 assumes the Merger had been consummated as of January 1, 1999.
(In thousands of dollars, except per share data) 1999
Net sales $ 891,066
Net earnings $ 66,973
Net earnings per common share: Basic $ 0.55
Net earnings per common share: Diluted $ 0.55
Weighted average shares outstanding: Basic 121,181
Weighted average shares outstanding: Diluted 122,683
PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The information in the foregoing consolidated financial statements is unaudited,
but reflects all of the adjustments which, in the opinion of management, are
necessary for a fair presentation of the results of operations for the interim
periods presented.
Included in accounts receivable are allowances for doubtful accounts of $26.2
million at March 31, 2000 and $23.4 million at December 31, 1999.
Accumulated depreciation amounted to $474.9 million at March 31, 2000 and $448.3
million at December 31, 1999.
Accumulated amortization of cost in excess of acquired net assets amounted to
$54.4 million at March 31, 2000 and $49.4 million at December 31, 1999.
It is suggested that the interim consolidated financial statements be read in
conjunction with the consolidated financial statements and notes included in the
Company's 1999 Annual Report on Form 10-K.
Effective with the Merger, the Company adopted a fiscal year ending on December
31. Prior to the Merger, Crompton's fiscal year ended on the last Saturday in
December.
COMMON STOCK
As of March 31, 2000, there were 119,372,359 common shares issued and
113,855,747 common shares outstanding at $.01 par value.
INVENTORIES
Components of inventories are as follows:
March 31, December 31,
(In thousands) 2000 1999
Finished goods $ 415,908 $ 410,513
Work in process 29,576 27,394
Raw materials and supplies 100,910 85,456
$ 546,394 $ 523,363
EARNINGS PER COMMON SHARE
The computation of basic earnings per common share is based on the weighted
average number of common shares outstanding. The computation of diluted earnings
per common share is based on the weighted average number of common and common
equivalent shares outstanding. The following is a reconciliation of the shares
used in the computations:
(In thousands) First quarter ended
2000 1999
Weighted average common shares outstanding 114,334 67,717
Effect of dilutive stock options and
other equivalents 1,815 1,502
Weighted average common and common equivalent
shares outstanding 116,149 69,219
BUSINESS SEGMENT DATA
(In thousands) First quarter ended
2000 1999
Net Sales
Polymer Products
Polymer Additives $ 257,833 $ 99,745
Polymers 81,416 78,735
Polymer Processing Equipment 69,081 88,147
Eliminations (3,544) -
404,786 266,627
Specialty Products
OrganoSilicones 127,035 -
Crop Protection 105,462 65,718
Other 131,735 63,947
364,232 129,665
Total Net Sales $ 769,018 $ 396,292
(In thousands) First quarter ended
2000 1999
Operating Profit
Polymer Products
Polymer Additives $ 22,337 $ 12,477
Polymers 19,319 22,303
Polymer Processing Equipment 4,252 11,169
45,908 45,949
Specialty Products
OrganoSilicones 21,768 -
Crop Protection 23,977 23,137
Other 7,034 6,947
52,779 30,084
General corporate expense including
amortization (20,490) (10,716)
Total Operating Profit $ 78,197 $ 65,317
COMPREHENSIVE INCOME (LOSS)
An analysis of the Company's comprehensive income follows:
First quarter ended
(In thousands)
2000 1999
Net earnings $ 29,673 $ 59,203
Other comprehensive income (expense):
Foreign currency translation adjustments (11,530) (11,904)
Other 35 -
Comprehensive income $ 18,178 $ 47,299
The components of accumulated other comprehensive income (loss) at March 31,
2000 and December 31, 1999 are as follows:
March 31, December 31,
(In thousands) 2000 1999
Foreign currency translation adjustments $ (71,132) $ (59,602)
Other (1,601) (1,636)
Accumulated other comprehensive
income (loss) $ (72,733) $ (61,238)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FIRST QUARTER RESULTS
Overview
Consolidated net sales of $769 million for the first quarter of 2000 increased
$372.7 million from the comparable period in 1999. After adjusting 1999 net
sales to exclude $38.7 million from the divestiture of the textile colors
business, and to include $426.7 million from Witco continuing operations for the
first quarter of 1999, net sales decreased 2%. This decrease is primarily the
result of lower sales in the Polymer Processing Equipment business and negative
foreign currency impact. International sales, including U.S. exports, were 48%
of total sales, up from 44% in the first quarter of 1999.
Net earnings for the first quarter were $29.7 million, or $0.26 per common share
diluted as compared to net earnings of $59.2 million, or $0.86 per common share
diluted in the first quarter of 1999. Earnings before after-tax special items
were $29.7 million, or $0.26 per common share diluted, as compared with $32.4
million, or $0.47 per common share diluted, in the first quarter of 1999.
Gross margin as a percentage of sales decreased to 32.7% in the first quarter
of 2000 from 37.6% in the first quarter of 1999. The decrease is primarily due
to the impact of including Witco results. Consolidated operating profit of
$78.2 million increased 19.7% versus the first quarter of 1999. The increase
in operating profit is primarily due to the inclusion of Witco results, offset
by a $3.7 million decrease due to the divestiture of the textile colors
business.
First quarter ended
(In thousands)
1999 1999
1999 Witco Textile 1999
As Continuing Colors As
2000 Reported Operations Business Adjusted
Net Sales
Polymer Products
Polymer Additives $ 257,833 $ 99,745 $ 158,577 $ - $ 258,322
Polymers 81,416 78,735 - - 78,735
Polymer Processing
Equipment 69,081 88,147 - - 88,147
Eliminations (3,544) - - - -
404,786 266,627 158,577 - 425,204
Specialty Products
OrganoSilicones 127,035 - 114,989 - 114,989
Crop Protection 105,462 65,718 42,535 - 108,253
Other 131,735 63,947 110,613 (38,715) 135,845
364,232 129,665 268,137 (38,715) 359,087
Total Net Sales $ 769,018 $ 396,292 $ 426,714 $ (38,715) $ 784,291
First quarter ended
(In thousands)
1999 1999
1999 Witco Textile 1999
As Continuing Colors As
2000 Reported Operations Business Adjusted
Operating Profit
Polymer Products
Polymer Additives $ 22,337 $ 12,477 $ 10,287 $ - $ 22,764
Polymers 19,319 22,303 - - 22,303
Polymer Processing
Equipment 4,252 11,169 - - 11,169
45,908 45,949 10,287 - 56,236
Specialty Products
OrganoSilicones 21,768 - 15,963 - 15,963
Crop Protection 23,977 23,137 4,942 - 28,079
Other 7,034 6,947 4,728 (3,666) 8,009
52,779 30,084 25,633 (3,666) 52,051
General corporate
expense including
amortization (20,490) (10,716) (13,754) - (24,470)
Total Operating
Profit $ 78,197 $ 65,317 $ 22,166 $ (3,666) $ 83,817
Polymer Products
Polymer additives sales of $257.8 million were essentially unchanged from
adjusted first quarter 1999 sales of $258.3 million. Plastic additives sales
increased 2%, despite a negative foreign currency impact of 5%, primarily due
to continuing high demand for PVC. Rubber chemicals sales decreased 8%
primarily as a result of lower pricing. Urethane chemicals sales rose 5%
primarily due to greater demand, partially offset by negative foreign currency
translation of 3%. Operating profit of $22.3 million was down 2% from an
adjusted $22.8 million in 1999 primarily as a result of lower selling prices in
rubber chemicals.
Polymers sales of $81.4 million increased 3% from $78.7 million in the first
quarter of 1999. EPDM sales were up 1% primarily as a result of higher pricing,
reflecting a partial recovery of increased raw material costs. Urethane sales
rose 6% primarily due to greater demand attributable to continuing growth of
U.S. industrial production and strong sales to golf ball manufacturers.
Operating profit of $19.3 million decreased 13% from $22.3 million in the prior
year primarily due to higher EPDM raw material costs and start up costs at our
new nitrile rubber joint venture facility in Mexico.
Polymer processing equipment sales of $69.1 million declined 22% from $88.1
million in the first quarter of 1999. The decrease was primarily due to the
recent down cycle which the plastics machinery market has experienced over the
last three quarters. Operating profit of $4.3 million was $6.9 million behind
1999 primarily due to the decline in sales volume. While shipments did not
recover to last year's level, orders rebounded with the backlog reaching a
record $131 million, up 16% from year end 1999.
Specialty Products
OrganoSilicones sales of $127 million increased 10% from first quarter 1999
adjusted sales of $115 million. The business benefited from improved demand and
market share in key markets such as "greentyre", automotive clearcoat and
personal care, partially offset by negative foreign currency impact of 2%.
Silane sales reached record levels on the strength of continued "greentyre"
growth. Operating profit of $21.8 million was 36% above an adjusted $16 million
in the first quarter of 1999, reflecting the higher sales volume and cost
reductions.
Crop protection sales of $105.5 million were 3% below an adjusted $108.3
million in the first quarter of 1999. Prior year sales were bolstered by a
heavy mite infestation in Australia. Operating profit of $24 million was 15%
behind an adjusted $28.1 million in the first quarter of 1999, primarily due to
the sales decline and an unfavorable product mix which included higher sales of
surfactants and lower active ingredients sales.
Other sales of $131.7 million decreased 3% from adjusted first quarter 1999
sales of $135.8 million. Petroleum additives sales declined 2% primarily due
to lower volume, much of which was associated with the closure of the Gretna
manufacturing facility. Refined products sales were down 5% of which 3% related
to negative foreign currency translation. Industrial colors sales rose 6%
primarily due to continued strength and increased market share in the paper
market. Glycerine/fatty acids sales declined 4%. Operating profit of $7
million was 12% lower than the adjusted $8 million in the first quarter of 1999
primarily due to the decline in sales volume and higher raw material costs.
Other
Selling, general and administrative expenses of $112.4 million increased 86%
versus the first quarter of 1999 primarily due to the inclusion of Witco
operations, partially offset by the impact of the divestiture of the textile
colors business. Depreciation and amortization (up 143%) and research and
development costs (up 98%) also increased primarily as a result of the inclusion
of Witco operations. Interest expense of $28.2 million increased 115% as a
result of the increase in debt, which is primarily due to the inclusion of Witco
operations. Other expense of $1.3 million remained essentially unchanged from
1999 after excluding the gain of $42.1 million from the divestiture of the
specialty ingredients business. The effective tax rate of 39% increased from
36.3% in the comparable quarter of 1999, primarily due to the inclusion of Witco
operations.
On April 19, 2000 the Company announced that it was exploring strategic
alternatives, including the possible sale, for its Refined Products business.
This business produces and markets highly refined hydrocarbon products and had
sales in excess of $230 million in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The March 31, 2000 working capital balance of $322.9 million increased $181.1
million from the year-end 1999 balance of $141.8 million, while the current
ratio increased to 1.38 from 1.14. The increases in working capital and the
current ratio were primarily due to the decrease in total current liabilities,
including short-term borrowings. Days sales in receivables for the first
quarter of 2000 remained unchanged at 44 days versus the same period in 1999.
Inventory turnover increased to 3.8, compared to 2.9 in the same quarter of
1999, primarily the result of the Merger.
Net cash provided by operations of $9 million increased $62.2 million from the
net cash used in operations of $53.2 million in the first quarter of 1999,
mainly due to a $48.2 million income tax payment in 1999 related to the 1998
Gustafson gain. Cash provided by operations and the proceeds from the issuance
of the 8.5% Senior Notes were used primarily to reduce borrowings under the
Company's revolving credit agreements, repurchase common shares, finance capital
expenditures, pay merger costs, make dividend payments and repurchase accounts
receivable under the Company's accounts receivable programs. The Company's debt
to total capital ratio increased to 68% from 65% at year-end 1999, primarily as
a result of the repurchase of common shares. The Company's liquidity needs are
expected to be financed from operations.
On March 7, 2000, the Company issued $600 million of Senior Notes due 2005 with
a coupon rate of 8.5%. Effective March 24, 2000, the Company swapped $300
million of this amount into a variable interest rate contract (three month LIBOR
plus fixed spread of 1.2225%) that expires on March 15, 2005. The rate on the
swap contract was 7.5% at March 31, 2000.
On March 10, 2000, the Company amended the amount of its $1 billion senior
unsecured revolving credit facility to $600 million. Of this amount, $200
million is available through October 2000 and $400 million through October 2004.
Borrowings on these facilities are at various rate options to be determined on
the date of borrowing. Borrowings under these agreements amounted to $275
million at March 31, 2000 and carried a weighted average interest rate of
6.85%.
In addition, the Company has available accounts receivable securitization
programs to sell up to $182 million of domestic accounts receivable to agent
banks. As of March 31, 2000, $151 million of domestic accounts receivable had
been sold under these programs.
In November 1999, the Board of Directors approved a share repurchase program for
10% of the common shares then outstanding, or approximately 11.9 million
shares. During the first quarter of 2000, the Company repurchased 3.3
million common shares, and from November 1999 to date, has repurchased 5.5
million shares at an average price of $12.70 per share.
Capital expenditures for the first quarter of 2000 amounted to $29.9 million as
compared to $12.5 million during the same period of 1999. The increase is
primarily due to the Merger. Capital expenditures are expected to approximate
$175 million in 2000, primarily related to the Company's replacement needs and
improvement of domestic and foreign facilities.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." In June 1999, the FASB issued SFAS No. 137
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133" which delays the effective date of
SFAS No. 133 to fiscal years beginning after June 15, 2000. The Company plans
to adopt the provisions of this statement in the first quarter of 2001. The
Company has not yet determined what the effect of SFAS No. 133 will be on
earnings and financial position.
ENVIRONMENTAL MATTERS
The Company is involved in claims, litigation, administrative proceedings and
investigations of various types in a number of jurisdictions. A number of such
matters involve claims for a material amount of damages and relate to or allege
environmental liabilities, including clean-up costs associated with hazardous
waste disposal sites, natural resource damages, property damage and personal
injury. The Company and some of its subsidiaries have been identified by
federal, state or local governmental agencies, and by other potentially
responsible parties (PRP) under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or comparable state
statutes, as a PRP with respect to costs associated with waste disposal sites
at various locations in the United States. In addition, the Company is involved
with environmental remediation and compliance activities at some of its current
and former sites in the United States and abroad.
The Company continually evaluates and reviews estimates for future remediation
and other costs to determine appropriate environmental reserve amounts. For
each site, a determination is made of the specific measures that are believed
to be required to remediate the site, the estimated total cost to carry out the
remediation plan, the portion of the total remediation costs to be borne by the
Company and the anticipated time frame over which payments toward the
remediation plan will occur. As of March 31, 2000, the Company's reserves for
environmental remediation activities totaled $188.6 million. It is reasonably
possible that the Company's estimates for environmental remediation liabilities
may change in the future should additional sites be identified, further
remediation measures be required or undertaken, the interpretation of current
laws and regulations be modified or additional environmental laws and
regulations be enacted.
The Company intends to assert all meritorious legal defenses and all other
equitable factors which are available to it with respect to the above matters.
The Company believes that the resolution of these environmental matters will not
have a material adverse effect on its consolidated financial position or
liquidity. While the Company believes it is unlikely, the resolution of these
environmental matters could have a material adverse effect on the Company's
consolidated results of operations or cash flows in any given year if a
significant number of these matters are resolved unfavorably.
Euro Conversion
On January 1, 1999, certain member countries of the European Union adopted the
Euro as their common legal currency. Between January 1, 1999 and July 1, 2002,
transactions may be conducted in either the Euro or the participating countries
national currency. However, by July 1, 2002, the participating countries will
withdraw their national currency as legal tender and complete the conversion to
the Euro.
The Company conducts business in Europe and does not expect the conversion to
the Euro to have an adverse effect on its competitive position or consolidated
financial position.
FORWARD-LOOKING STATEMENTS
Certain statements made in this Form 10-Q are forward looking statements that
involve risks and uncertainties. These statements are based on currently
available information and the Company's actual results may differ significantly
from the results discussed. Investors are cautioned that there can be no
assurances that the actual results will not differ materially from those
suggested in such forward-looking statements.
ITEM 3. Quantitative and Qualitative Disclosure of Market Risk
Refer to the Market Risk & Risk Management Policies section of Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's annual report on Form 10-K for the year ended December
31, 1999.
The fair market value of long-term debt is subject to interest rate risk. The
Company's long-term debt amounted to $1,494.7 million at March 31, 2000. The
fair market value of such debt was $1,469.1 million, and with respect to notes,
has been determined based on quoted market prices.
On March 7, 2000, the Company issued $600 million of Senior Notes due 2005 with
a coupon rate of 8.5%. Effective March 24, 2000, the Company swapped $300
million of this amount into a variable interest rate contract (three month LIBOR
plus fixed spread of 1.2225%) that expires on March 15, 2005. The rate on the
swap contract was 7.5% at March 31, 2000.
There have been no other significant changes in market risk since December 31,
1999.
PART II. OTHER INFORMATION:
ITEM 1. Legal Proceedings
Reference is made to Item 3 of the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1999, for information relating to
the Beacon Heights and Laurel Park Coalitions. On April 13, 2000, the United
States District Court for the District of Connecticut ruling in response to
Motions to Alter and Amend and for Reconsideration and Rehearing of its prior
ruling, allowed recovery by the Beacon Heights Coalition in the amount of
approximately $5,071,000, inclusive of interest, and allowed recovery by the
Laurel Park Coalition in the amount of approximately $1,000,000, exclusive of
interest. At the Court's request, the Laurel Park Coalition is in the
process of supplementing the record concerning interest. Prior to the April
13, 2000 Court ruling, the Beacon Heights Coalition and the Laurel Park
Coalition settled their claims with one municipal defendant.
ITEM 4. Submission of Matter to a Vote of Security Holders
(a) The Annual Meeting of the Stockholders was held on April 25, 2000.
(b) Proxies for the Annual Meeting were solicited pursuant to Regulation
14A under the Securities Exchange Act of 1934, there was no
solicitation in opposition to the nominees for the Board of
Directors as listed in the Proxy Statement, and all of such nominees
were elected.
(c) A brief description of each matter voted upon at the Annual Meeting,
and the results of voting, are as follows:
1. Election of Class III directors to serve for a term expiring
in 2003:
FOR WITHHELD
Vincent A. Calarco 101,371,808 shares 1,113,776 shares
Roger L. Headrick 101,489,832 shares 995,752 shares
Patricia K. Woolf, Ph.D. 101,506,567 shares 979,017 shares
Election of Class II directors to serve for a term expiring in
2002:
FOR WITHHELD
Robert A. Fox 101,492,635 shares 992,949 shares
Harry G. Hohn 101,455,789 shares 1,029,795 shares
Election of Class I directors to serve for a term expiring in
2001:
FOR WITHHELD
Leo I. Higdon, Jr. 101,517,123 shares 968,461 shares
C. A. Piccolo 101,519,139 shares 966,445 shares
Bruce F. Wesson 101,512,868 shares 972,716 shares
2. Approval of the recommendation to amend and restate the
Certificate of Incorporation to change the name of the
Corporation to Crompton Corporation.
FOR AGAINST ABSTAINED
99,771,946 shares 2,558,071 shares 155,567 shares
3. Approval of the selection by the Board of KPMG LLP as
Independent Auditors for 2000.
FOR AGAINST ABSTAINED
101,704,924 shares 663,965 shares 116,695 shares
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
3(i)(a)* Certificate of Amendment of Amended and Restated
Certificate of Incorporation of CK Witco Corporation
3(i)(b)* Amended and Restated Certificate of Incorporation of
CK Witco Corporation
27* Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
* A copy of this Exhibit is annexed to this report on Form 10-Q provided to
the Securities and Exchange Commission.
CROMPTON CORPORATION
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CROMPTON CORPORATION
(Registrant)
/s/ Peter Barna
Date: May 12, 2000
Peter Barna
Senior Vice President and Chief
Financial Officer
/s/ Barry J. Shainman
Date: May 12, 2000
Barry J. Shainman
Secretary