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, 2001
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 30, 2001
Common Stock - $.01 par value 113,103,569
CROMPTON CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2001
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Accompanying Notes
Consolidated Statements of Operations (Unaudited) - First
quarter ended 2001 and 2000 2
Consolidated Balance Sheets - March 31, 2001 (Unaudited)
and December 31, 2000 3
Consolidated Statements of Cash Flows (Unaudited) - First
quarter ended 2001 and 2000 4
Notes to Consolidated Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosure of Market Risk 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
CROMPTON CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
First quarter ended 2001 and 2000
(In thousands of dollars, except per share data)
2001 2000
Net sales $ 737,936 $ 769,018
Cost of products sold 514,587 517,716
Selling, general and administrative 106,639 112,444
Depreciation and amortization 46,924 45,764
Research and development 20,564 22,442
Equity income (5,987) (7,545)
Operating profit 55,209 78,197
Interest expense 28,754 28,221
Other expense 1,815 1,349
Earnings before income taxes 24,640 48,627
Income taxes 8,870 18,954
Net earnings $ 15,770 $ 29,673
Basic earnings per common share $ .14 $ .26
Diluted earnings per common share $ .14 $ .26
Dividends declared per common share $ .05 $ .05
See accompanying notes to consolidated financial statements.
CROMPTON CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2001 (Unaudited) and December 31, 2000
(In thousands of dollars)
March 31, December 31,
2001 2000
ASSETS
CURRENT ASSETS
Cash $ 3,950 $ 20,777
Accounts receivable 334,280 323,097
Inventories 566,265 552,386
Other current assets 166,315 180,635
Total current assets 1,070,810 1,076,895
NON-CURRENT ASSETS
Property, plant and equipment 1,165,144 1,182,087
Cost in excess of acquired net assets 931,784 938,792
Other assets 327,633 330,553
$ 3,495,371 $ 3,528,327
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 32,546 $ 27,429
Accounts payable 335,560 234,955
Accrued expenses 266,971 306,680
Income taxes payable 116,054 127,950
Other current liabilities 20,660 18,449
Total current liabilities 771,791 715,463
NON-CURRENT LIABILITIES
Long-term debt 1,413,076 1,479,394
Postretirement health care liability 205,874 206,469
Other liabilities 359,120 373,025
STOCKHOLDERS' EQUITY
Common stock 1,194 1,194
Additional paid-in capital 1,050,607 1,051,371
Accumulated deficit (123,745) (133,864)
Accumulated other comprehensive income (107,987) (86,221)
Treasury stock at cost (74,559) (78,504)
Total stockholders' equity 745,510 753,976
$ 3,495,371 $ 3,528,327
See accompanying notes to consolidated financial statements.
CROMPTON CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
First quarter ended 2001 and 2000
(In thousands of dollars)
Increase (decrease) in cash 2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 15,770 $ 29,673
Adjustments to reconcile net
earnings to net cash provided by
operations:
Depreciation and amortization 46,924 45,764
Equity income (5,987) (7,545)
Changes in assets and liabilities, net (177) (58,916)
Net cash provided by operations 56,530 8,976
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (36,624) (29,858)
Merger related expenditures (1,441) (39,657)
Other investing activities 7,038 (16,977)
Net cash used in investing activities (31,027) (86,492)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on senior notes - 593,754
Payments on long-term borrowings (63,336) (406,212)
Proceeds (payments) on short-term
borrowings 5,171 (39,361)
Proceeds from sale (repurchases)
of accounts receivable 17,265 (13,776)
Treasury stock acquired - (43,463)
Dividends paid (5,651) (5,707)
Other financing activities 4,614 858
Net cash (used in) provided by
financing activities (41,937) 86,093
CASH
Effects of exchange rate changes
on cash (393) (82)
Change in cash (16,827) 8,495
Cash at the beginning of period 20,777 10,543
Cash at the end of period $ 3,950 $ 19,038
See accompanying notes to consolidated financial statements.
CROMPTON CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
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
$20.9 million at March 31, 2001 and $22.1 million at December 31, 2000.
Accumulated depreciation amounted to $592.7 million at March 31, 2001 and
$562.6 million at December 31, 2000.
Accumulated amortization of cost in excess of acquired net assets amounted
to $80.1 million at March 31, 2001 and $73.8 million at December 31, 2000.
Accumulated amortization of patents, trademarks and other intangibles
included in other assets amounted to $151.5 million at March 31, 2001 and
$148.4 million at December 31, 2000.
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 2000 Annual Report on Form 10-K.
MERGER ACCRUALS
As a result of the merger of Crompton and Knowles Corporation and Witco
Corporation on September 1, 1999 (the "Merger"), the Company recorded
merger related accruals as a component of goodwill, of which $25.3 million
remained at December 31, 2000. During the first three months of 2001,
these accruals were reduced by payments of $1.4 million. The payments
related primarily to severance and related accruals.
Also, as a result of the Merger, the Company recorded other accruals, of
which $7.1 million remained at December 31, 2000. During the first three
months of 2001, payments of $0.3 million were made against these other
accruals.
COMMON STOCK
As of March 31, 2001, there were 119,372,359 common shares issued and
113,093,889 common shares outstanding at $.01 par value.
INVENTORIES
Components of inventories are as follows:
(In thousands) March 31, December 31,
2001 2000
Finished goods $ 432,390 $ 421,200
Work in process 28,302 29,610
Raw materials and supplies 105,573 101,576
$ 566,265 $ 552,386
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
2001 2000
Weighted average common shares outstanding 112,969 114,334
Effect of dilutive stock options and other
equivalents 3,211 1,815
Weighted average common and common equivalent
shares outstanding 116,180 116,149
COMPREHENSIVE INCOME (LOSS)
An analysis of the Company's comprehensive income (loss) follows:
(In thousands) First quarter ended
2001 2000
Net earnings $ 15,770 $ 29,673
Other comprehensive income (expense)
Foreign currency translation adjustments (21,464) (11,530)
Other (302) 35
Comprehensive income (loss) $ (5,996) $ 18,178
The components of accumulated other comprehensive income (loss) at March
31, 2001 and December 31, 2000 are as follows:
March 31, December 31,
(In thousands) 2001 2000
Foreign currency translation adjustments $(105,297) $ (83,833)
Other (2,690) (2,388)
Accumulated other comprehensive income
(loss) $(107,987) $ (86,221)
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments
and Hedging Activities," and SFAS No 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities" (the "Statements").
In accordance with the transition provisions of the Statements, the Company
recorded an after-tax gain of $346,000 to recognize at fair value all
derivatives that are designated as fair value hedging instruments. The pre-
tax gain of $567,000 is included in other expense in the statement of
operations. The Company also recorded a loss of $234,000 as a component of
accumulated other comprehensive income to recognize at fair value all
derivatives that are designated as cash flow hedging instruments.
The Company's activities expose its earnings, cash flows and financial
position to a variety of market risks, including the effects of changes in
foreign currency exchange rates and interest rates. The Company maintains
a foreign currency risk-management strategy that uses derivative
instruments to mitigate risk against foreign currency movements. The
Company uses foreign currency forward exchange contracts and swaps to hedge
these risks. The Company also maintains an interest-rate risk-management
strategy that uses derivative instruments to manage interest rate
volatility. The Company's specific goals are (1) to manage interest-rate
sensitivity and (2) to lower (where possible) the cost of its borrowed
funds.
The Company used an interest rate swap contract as a fair value hedge to
convert $300 million of its fixed rate Senior Notes into variable rate
debt. On March 24, 2001, the swap contract was terminated and the Company
received cash proceeds of $21.9 million in settlement of the contract,
which represented the market value of the contract on the date of
termination. In accordance with SFAS No. 133 and SFAS No 138, as they
relate to fair value hedge accounting, the $21.9 million has been recorded
as an increase to the carrying amount of the Senior Notes and will be
amortized to earnings over the life of the notes. For the quarter ended
March 31, 2001, the difference between the change in the market value of
the fair-value hedge contracts and the change in the market value of the
hedged items was not significant.
The Company uses interest rate swap contracts, which expire in 2003, as
cash flow hedges to convert its Dutch Guilder-denominated variable rate
debt to fixed rate debt. For the quarter ended March 31, 2001, the Company
recorded a loss of $356,000 as a component of accumulated other
comprehensive income to recognize the change in fair value of all
derivatives that are designated as cash-flow hedging instruments.
The Company also has exposure to changes in foreign currency exchange rates
resulting from transactions entered into by the Company and its foreign
subsidiaries in currencies other than their local currency (primarily trade
payables and receivables). The Company manages these transactional
currency risks on a consolidated basis, which allows it to net its trade
payable and receivable exposure. The Company is also exposed to currency
risk on intercompany transactions (including long-term intercompany loans).
The Company purchases foreign currency forward contracts to hedge its
transaction exposure. These contracts are generally settled on a monthly
basis. Realized and unrealized gains and losses on foreign currency
forward contracts are recognized in earnings to offset the impact of
valuing recorded foreign currency trade payables, receivables and
intercompany transactions. The Company has not designated these derivatives
as hedges, although it believes these instruments reduce the Company's
exposure to foreign currency risk.
BUSINESS SEGMENT DATA
(In thousands) First quarter ended
2001 2000
Net Sales
Polymer Products
Polymer Additives $ 244,857 $ 257,833
Polymers 81,502 81,416
Polymer Processing Equipment 58,746 69,081
Eliminations (3,924) (3,544)
381,181 404,786
Specialty Products
OrganoSilicones 111,890 127,035
Crop Protection 105,380 105,462
Other 139,485 131,735
356,755 364,232
Total Net Sales $ 737,936 $ 769,018
(In thousands) First quarter ended
2001 2000
Operating Profit
Polymer Products
Polymer Additives $ 12,812 $ 22,337
Polymers 14,998 19,319
Polymer Processing Equipment 1,057 4,252
28,867 45,908
Specialty Products
OrganoSilicones 11,370 21,768
Crop Protection 26,024 23,977
Other 8,740 7,034
46,134 52,779
General corporate expense,
including amortization (19,792) (20,490)
Total Operating Profit $ 55,209 $ 78,197
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FIRST QUARTER RESULTS
Overview
Consolidated net sales of $737.9 million for the first quarter of 2001
decreased 4% from the comparable period in 2000. This decrease was
primarily the result of a 2% negative foreign currency impact, primarily
the Euro, and the slowing domestic economy. International sales, including
U.S. exports, were 49% of total sales, up from 48% in the first quarter of
2000.
Net earnings for the first quarter were $15.8 million, or $0.14 per common
share, as compared to net earnings of $29.7 million, or $0.26 per common
share, in the first quarter of 2000.
Gross margin as a percentage of sales was 30.3% for the first quarter of
2001 as compared to 32.7% for the first quarter of 2000. The decrease was
primarily due to an increase in raw material and energy costs and
unfavorable foreign currency impact, partially offset by a pension
curtailment gain (relating to certain plant employees) of $4.7 million.
Consolidated operating profit decreased 29.4% versus the first quarter of
2000.
Polymer Products
Polymer additives sales of $244.9 million declined from the prior year by
5%, of which 2% was due to foreign currency translation and 1% was due to
lower pricing. Plastic additives sales decreased 6% due to lower selling
prices and lower foreign currency translation. Rubber chemicals sales were
up slightly as increased selling prices offset lower foreign currency
translation. Urethane chemical sales declined 10% primarily as a result of
lower unit volume and lower foreign currency translation. Operating profit
of $12.8 million was 43% lower than the first quarter of 2000 mainly due to
higher raw material and energy costs, lower selling prices and unfavorable
foreign currency impact.
Polymer sales of $81.5 million increased slightly from the first quarter of
2000 as favorable pricing of 3% was offset primarily by lower foreign
currency translation. EPDM sales declined 3% as reduced demand in the
domestic roofing and automotive markets offset improved pricing. Urethane
polymer sales were up 4% due to a combination of higher unit volume and
increased selling prices, offset partially by lower foreign currency
translation. Operating profit of $15.0 million was down 22% from the first
quarter of 2000 due primarily to higher raw material and energy costs.
Polymer processing equipment sales of $58.7 million were 15% below the
first quarter of 2000 due mainly to lower unit volume. Operating profit of
$1.1 million declined 75% versus the prior year due primarily to the
shortfall in sales. Backlog at the end of March totaled $104 million, down
slightly from the $105 million at the end of 2000.
Specialty Products
OrganoSilicones sales of $111.9 million declined 12% from the prior year
due mainly to the slowdown in the domestic economy and lower foreign
currency translation of 2%. Operating profit of $11.4 million was 48%
lower than the first quarter of 2000 due primarily to lower sales and
higher product costs, including energy.
Crop protection sales of $105.4 million were down slightly compared to the
first quarter of 2000 as improved unit volume was offset by lower foreign
currency translation of 3%. Operating profit of $26 million rose 9% over
the prior year due mainly to a pension curtailment gain and improved unit
volume, partially offset by higher raw material and energy costs.
Other sales of $139.5 million increased 6% from the first quarter of 2000
primarily as a result of improved pricing. Petroleum additives sales were
up 10% due mainly to higher selling prices and improved product mix.
Refined products sales rose 15% due primarily to recovery of higher raw
material and energy costs through increased selling prices. Industrial
colors and glycerine/fatty acids sales decreased 11% and 14%, respectively,
due mainly to declines in unit volume. Operating profit of $8.7 million
was up 24% from the first quarter of 2000 as improved pricing and product
mix more than offset higher raw material and energy costs.
Other
Selling, general and administrative expenses of $106.6 million decreased
$5.8 million, or 5%, versus the first quarter of 2000 primarily as a result
of cost savings initiatives. Depreciation and amortization increased 3% as
a result of a higher fixed asset base. Research and development costs
decreased 8% primarily as a result of cost savings initiatives. Interest
expense of $28.8 million increased 2% mainly due to the inclusion of the
8.5% Senior Notes issued in March 2000. The effective tax rate of 36%
decreased from 39%, primarily as a result of a shift in earnings to
jurisdictions with more favorable tax rates.
LIQUIDITY AND CAPITAL RESOURCES
The March 31, 2001 working capital balance of $299 million decreased $62.4
million from the year-end 2000 balance of $361.4 million, and the current
ratio decreased to 1.4 from 1.5. The decreases in working capital and the
current ratio were mainly due to an increase in accounts payable. Days
sales in receivables decreased to 41 days for the first quarter of 2001,
versus 44 days for the first quarter of 2000, primarily due to the impact
of accounts receivable securitization programs and an increased focus on
collection efforts. Inventory turnover decreased to 3.6, compared to 3.8
for the same period of 2000, primarily as a result of the slowing domestic
economy.
Net cash provided by operations of $56.5 million increased $47.5 million
from $9 million in the first quarter of 2000. The increase was primarily
the result of the increase in accounts payable, partially offset by the
increase in accounts receivable and the decrease in accrued expenses. Net
cash provided by operations and proceeds from the sales of accounts
receivable and the equity interest in Yorkshire Group PLC were used
primarily to reduce borrowings under the Company's revolving credit
facilities, finance capital expenditures, and make dividend payments. The
Company's debt to total capital ratio decreased slightly to 66% from 67% at
year-end 2000. The Company's future liquidity needs are expected to be
financed from operations.
The Company has a 364-day senior unsecured revolving credit facility of
$192 million available through October 2001 and a five-year senior
unsecured credit facility of $400 million available 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
$175 million at March 31, 2001 and carried a weighted average interest rate
of 5.97%.
In addition, the Company has available accounts receivable securitization
programs to sell up to $200 million of domestic accounts receivable to
agent banks. As of March 31, 2001, $185 million of domestic accounts
receivable had been sold under these programs. In addition, the Company's
European subsidiaries have accounts receivable securitization programs to
sell up to $33 million of accounts receivable. As of March 31, 2001, $33
million of receivables had been sold under these programs.
On March 24, 2001, the Company terminated the $300 million variable
interest rate swap contract related to its 8.5% Senior Notes. The Company
received $21.9 million of cash proceeds from the settlement of the
contract, which represented the market value of the contract on the date of
termination. These proceeds were used to pay down debt. In accordance
with SFAS No. 133 and SFAS No 138, as they relate to fair value hedge
accounting, the $21.9 million has been recorded as an increase to the
carrying amount of the Senior Notes and will be amortized to earnings over
the life of the notes.
On March 28, 2001, the Company sold its equity interest in Yorkshire Group
PLC for $7 million. The sale resulted in a pre-tax loss of $1.5 million
(included in other expense). These proceeds were used to pay down debt.
The Company is continuing to work on the divestitures of both its Refined
Products and Industrial Specialties businesses. Despite the difficult
economic environment, the Company expects its efforts to be successful
during the second quarter of 2001, with the proceeds primarily to be used
to pay down debt.
Capital expenditures for the first three months of 2001 amounted to $36.6
million as compared to $29.9 million during the same period of 2000. The
increase is primarily due to the facility expansion in the Sistersville,
West Virginia plant for the production of silanes. Capital expenditures
are expected to approximate $155 million in 2001, primarily related to the
Company's replacement needs and expansion and improvement of domestic and
foreign facilities.
ACCOUNTING DEVELOPMENTS
Effective January 1, 2001, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," and SFAS No 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities." For further details, see the Derivative Instruments and
Hedging Activities footnote included in the Notes to Consolidated Financial
Statements (Unaudited) section of this Form 10-Q.
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 (each a "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,
2001, the Company's reserves for environmental remediation activities
totaled $159.9 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. 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 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
December 31, 2001, transactions may be conducted in either the Euro or the
participating countries national currency. However, by January 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, including, but not limited to,
general economic conditions, energy and raw material prices and
availability, production capacity, changes in interest rates and foreign
currency exchange rates, changes in technology, market demand and customer
requirements, the enactment of more stringent environmental laws and
regulations, and other risks and uncertainties detailed in the Company's
filings with the Securities and Exchange Commission. These statements are
based on currently available information and the Company's actual results
may differ significantly from the results discussed. Forward-looking
information is intended to reflect opinions as of the date this
Form 10-Q was issued and such information will not necessarily be updated
by the Company.
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, 2000.
The fair market value of long-term debt is subject to interest rate risk.
The Company's long-term debt amounted to $1,413 million at March 31, 2001.
The fair market value of such debt was $1,408 million, which has been
determined primarily based on quoted market prices.
On March 24, 2001, the Company terminated the $300 million variable
interest rate swap contract related to its 8.5% Senior Notes. The Company
received $21.9 million of cash proceeds from the settlement of the
contract, which represented the market value of the contract on the date of
termination. In accordance with SFAS No. 133 and SFAS No 138, as they
relate to fair value hedge accounting, the $21.9 million has been recorded
as an increase to the carrying amount of the Senior Notes and will be
amortized to earnings over the life of the notes.
There have been no other significant changes in market risk since December
31, 2000.
PART II. OTHER INFORMATION:
ITEM 1. Legal Proceedings
(i) Reference is made to Item 3 of the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 2000 for information relating
to the Vertac Chemical Corporation site in Jacksonville, Arkansas. On April
10, 2001, the United States Court of Appeals for the Eighth Circuit
("Court") (i) reversed a decision in favor of the United States and against
Hercules Incorporated ("Hercules") with regard to the issue of divisibility
of harm and remanded the case back to the trial court for a trial on the
issue; (ii) affirmed the finding of arranger liability against Uniroyal
Chemical Co./Cie ("Uniroyal"); and (iii) set aside the findings of
contribution between Hercules and Uniroyal by the trial court pending a
decision upon remand. The Court also deferred ruling on all constitutional
issues raised by Hercules and Uniroyal pending subsequent findings by the
trial court. Uniroyal has filed a petition for rehearing by the full Court
on the Court's finding of arranger liability against Uniroyal.
(ii) 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 pertaining
to the Registrant as a defendant in two similar actions pending in
California state courts and arising out of the Registrant's involvement in
the polybutylene resin manufacturing business in the 1970's. In December
2000, the Registrant settled the action, Alameda County Water District v.
Mobil Oil Corporation, et al., for the amount of $1,900,000, and in April
2001, the Registrant agreed to settle the action, Marin Municipal Water
District v. Shell Oil Company, et al., for the amount of $525,000.
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of the Stockholders was held on April 24, 2001.
(b) Proxies for the Annual Meeting were solicited pursuant to Regulation A
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 I directors to serve for a term expiring in 2004:
FOR WITHHELD
Leo I. Higdon, Jr. 95,313,492 shares 1,394,112 shares
C. A. Piccolo 95,279,231 shares 1,428,373 shares
Bruce F. Wesson 95,271,586 shares 1,436,018 shares
2. To approve the adoption of the Crompton Corporation 2001 Employee Stock
Purchase Plan:
FOR AGAINST ABSTAINED
95,114,659 shares 1,338,033 shares 254,912 shares
3. Approval of the selection by the Board of Directors of KPMG LLP as
Independent Auditors for 2001:
FOR AGAINST ABSTAINED
93,490,403 shares 3,125,078 shares 92,123 shares
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
10 Form of 2001-2002 Long Term Incentive Award
Agreement, dated as of January 31, 2001, by
and between the Registrant and various of its
executive officers (filed herewith).
(b) No reports on Form 8-K were filed during the quarter
for which this report is filed.
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 14, 2001 Peter Barna
Senior Vice President and
Chief Financial Officer
/s/ Barry J. Shainman
Date: May 14, 2001 Barry J. Shainman
Secretary