Exhibit 99.2
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CONTACT: Crompton Corporation
Investors: William Kuser 203-573-2213
Media: Mary Ann Dunnell 203-573-3034
Crompton Reports Second Quarter Results
MIDDLEBURY, Conn.--(BUSINESS WIRE)--July 31, 2003--Crompton
Corporation (NYSE: CK) reported today a second quarter net loss of
$9.1 million, or eight cents per share, compared to a net loss of $6.3
million, or six cents per share, in the second quarter of 2002. As a
result of the previously announced agreement to sell the
OrganoSilicones business to General Electric Company, the accompanying
financial statements reflect the OrganoSilicones business as a
discontinued operation. Second quarter 2003 earnings from discontinued
operations of $10.3 million, or nine cents per share, were equivalent
to the prior year. The loss from continuing operations of $19.4
million, or 17 cents per share, compared to a loss of $16.9 million,
or 15 cents per share, for the second quarter of 2002. The loss from
continuing operations for the second quarter of 2003 included pre-tax
charges of $12.4 million for antitrust legal costs and $2.7 million
for previously announced facility closures, severance and related
costs. The loss from continuing operations for the second quarter of
2002 included pre-tax charges of $34.7 million for the loss on the
sale of the Company's industrial specialties business and $6.4 million
for facility closures, severance and related costs. The second quarter
losses from continuing operations for 2003 and 2002 included pre-tax
overhead expenses previously absorbed by the OrganoSilicones business
of $4.6 million and $3.5 million, respectively.
Second quarter sales from continuing operations of $532.9 million
were seven percent below the prior year due primarily to the
divestiture of the industrial specialties business in June 2002. A
five percent increase in foreign currency translation was offset
primarily by a reduction in unit volume.
"This was a tough quarter for the chemical industry as a whole and
for Crompton in particular," said Vincent A. Calarco, chairman,
president and chief executive officer. "The combined impact of higher
raw material and energy costs, reduced unit volume from a generally
weaker global economic environment and lower selling prices had a
significant negative impact on our earnings. In keeping with our
practice of aggressive cost containment, we are implementing a cost
reduction program to eliminate, at a minimum, overhead expenses
previously absorbed by the OrganoSilicones business.
"Going forward, we will continue to focus on growing sales by
providing innovative products that meet customer needs; maintaining a
cost competitive position; and reducing debt. As external factors
improve, we are operationally leveraged to translate top-line growth
into improved results and improved cash flow from operations."
For the first six months of 2003, the Company reported a net loss
of $3.3 million, or three cents per share, compared to a net loss of
$298.5 million, or $2.63 per share, for 2002. Earnings from
discontinued operations for the first six months of 2003 were $23.3
million, or 20 cents per share, compared to $18.8 million, or 16 cents
per share, in 2002. The loss from continuing operations of $26.1
million, or 23 cents per share, for the first half of 2003 compared to
a loss of $18.3 million, or 16 cents per share, in 2002. The loss from
continuing operations for the first six months of 2003 included
pre-tax charges of $20.9 million for antitrust legal costs and $3.5
million for previously announced facility closures, severance and
related costs. The loss from continuing operations for the first six
months of 2002 included pre-tax charges of $34.7 million for the loss
on the sale of the company's industrial specialties business and $6.4
million for facility closures, severance and related costs. The loss
from continuing operations for the first six months of 2003 and 2002
included pre-tax overhead expenses previously absorbed by the
OrganoSilicones business of $7.2 million and $6.2 million,
respectively. The net loss for the first half of 2003 and 2002
included a cumulative effect of accounting change of $401 thousand and
$299 million, respectively. The Company will incur additional legal
costs in future periods in connection with the governmental
investigations and the related civil litigation, but we expect that
those costs will be lower in each of the third and fourth quarters
than the pre-tax total of $12.4 million incurred in the second
quarter.
Second quarter operating results for the Company's reporting
segments are summarized as follows:
Polymer Products
Polymer additives sales of $294.6 million were up two percent from
the prior year due to favorable foreign currency translation of five
percent, offset in part by a decline in unit volume of two percent and
lower selling prices of one percent. Plastic additives sales increased
five percent due mainly to favorable foreign currency translation.
Urethane and petroleum additives sales rose 11 percent and seven
percent, respectively, due primarily to favorable foreign currency
translation and increased demand. Rubber additives sales declined 15
percent mainly as a result of lower selling prices and reduced unit
volume. Operating profit of $6.9 million was down 72 percent from the
prior year due primarily to higher raw material costs, an unfavorable
sales mix, lower selling prices, an environmental charge of $1.3
million and the absence of a prior year vendor settlement credit of
$1.2 million.
Polymers sales of $70.3 million were down three percent from the
second quarter of 2002 as a result of lower selling prices of five
percent and reduced unit volume of one percent, partially offset by
favorable foreign currency translation of three percent. EPDM sales
declined two percent mainly as a result of the negative impact of
industry overcapacity on selling prices, offset in part by higher unit
volume and favorable foreign currency translation. Urethanes sales
were down four percent due mainly to reduced demand, partially offset
by favorable foreign currency translation. Operating profit of $4.9
million was down 61 percent from the prior year mainly as a result of
lower EPDM selling prices, higher raw material costs and reduced unit
volume in urethanes.
Polymer processing equipment sales of $40.6 million were down nine
percent from the prior year due to reduced demand for capital
equipment, offset in part by five percent improvements in both selling
prices and foreign currency translation. Operating profit of $1.0
million was up $3.7 million from the prior year due primarily to lower
operating expenses and favorable selling prices, partially offset by
lower unit volume. The backlog at the end of June was $75 million,
down $1 million from the end of 2002.
Specialty Products
Crop protection sales of $71.6 million were up one percent from
the prior year due to favorable foreign currency translation of five
percent, offset by a decline in unit volume of four percent. Operating
profit of $14.2 million was down 31 percent from the second quarter of
2002 mainly as a result of lower unit volume, an unfavorable sales mix
resulting from increased sales of resale products and the absence of a
prior year vendor settlement credit of $1.6 million.
Other sales of $59.4 million were down 41 percent from the prior
year due mainly to the divestment of the industrial specialties
business in June 2002. Refined products sales were up two percent as
higher selling prices and favorable foreign currency translation more
than offset lower unit volume. The operating loss of $.6 million was
unfavorable versus the prior year by $2.7 million due primarily to the
divestiture of the industrial specialties business and increased
environmental-related expenses of $2.6 million, partially offset by
higher selling prices.
General corporate expense of $6.2 million included in the attached
Segment Sales and Operating Profit decreased $5.6 million from the
second quarter of 2002 due primarily to the gain on the Company's
equity derivative contract that matured in May, 2003.
Discontinued Operations
Sales included in discontinued operations of $113.3 million were
down four percent from the prior year due to a decline in selling
prices of six percent and lower volume of four percent, offset in part
by favorable foreign currency translation of six percent. Earnings
from discontinued operations of $10.3 million (net of income taxes of
$3.5 million) were 3% lower than the prior year of $10.6 million (net
of income taxes of $2.6 million), mainly as a result of reduced
selling prices and lower unit volume, partially offset by lower
operating expenses and the absence of a prior year pre-tax charge for
facility closures, severance and related costs of $2.9 million.
###
Forward Looking Statements
Certain statements made in this release are forward-looking
statements that involve risks and uncertainties, including, but not
limited to, general economic conditions, the outcome and timing of
antitrust investigations and related civil lawsuits to which the
Company is subject, pension and other post-retirement benefit plan
assumptions, energy and raw material prices and availability,
production capacity, changes in interest rates and foreign currency
exchange rates, changes in technology, market demand and customer
requirements, the enactment of more stringent environmental laws and
regulations, and other risks and uncertainties detailed in the
Company's filings with the Securities and Exchange Commission. These
statements are based on our estimates and assumptions and on currently
available information. The forward-looking statements include
information concerning our possible or assumed future results of
operations, and the Company's actual results may differ significantly
from the results discussed. Forward-looking information is intended to
reflect opinions as of the date this release was issued and such
information will not necessarily be updated by the Company.
CROMPTON CORPORATION
Consolidated Statements of Operations
Second quarter and six months ended 2003 and 2002
(In thousands, except per share data)
Second Quarter Six Months Ended
----------------- ---------------------
2003 2002 2003 2002
-------- -------- ---------- ----------
Net sales $532,901 $571,489 $1,064,873 $1,102,571
Cost of products sold 394,637 398,097 779,595 778,234
Selling, general and admin. 84,757 90,401 172,100 177,529
Depreciation and amortization 27,379 29,072 54,498 58,670
Research and development 12,726 14,388 24,786 27,663
Equity income (2,228) (1,997) (7,842) (4,261)
Facility closures, severance
and related costs 2,686 6,380 3,505 6,380
Antitrust legal costs 12,386 - 20,875 -
-------- -------- ---------- ----------
Operating profit 558 35,148 17,356 58,356
Interest expense 25,559 26,092 52,274 52,230
Other expense, net 3,827 38,946 4,040 37,385
-------- -------- ---------- ----------
Loss from continuing
operations before income
taxes and cumulative effect
of accounting change (28,828) (29,890) (38,958) (31,259)
Income tax benefit (9,426) (13,036) (12,838) (12,952)
-------- -------- ---------- ----------
Loss from continuing
operations before cumulative
effect of accounting change (19,402) (16,854) (26,120) (18,307)
Earnings from discontinued
operations 10,292 10,560 23,257 18,768
Cumulative effect of
accounting change - - (401) (298,981)
-------- -------- ---------- ----------
Net loss $ (9,110)$ (6,294)$ (3,264)$ (298,520)
======== ======== ========== ==========
Basic and Diluted earnings
(loss) per common share:
Loss from continuing
operations before
cumulative effect of
accounting change $ (0.17)$ (0.15)$ (0.23)$ (0.16)
Earnings from discontinued
operations 0.09 0.09 0.20 0.16
Cumulative effect of
accounting change - - - (2.63)
-------- -------- ---------- ----------
Net loss $ (0.08)$ (0.06)$ (0.03)$ (2.63)
======== ======== ========== ==========
Weighted average shares
outstanding 112,639 113,512 113,389 113,394
======== ======== ========== ==========
CROMPTON CORPORATION
Consolidated Balance Sheets
June 30, 2003 and December 31, 2002
(In thousands of dollars)
June 30, December 31,
2003 2002
---------- ----------
ASSETS
CURRENT ASSETS
Cash $ 18,366 $ 16,941
Accounts receivable 192,293 183,329
Inventories 382,569 353,556
Other current assets 91,755 112,950
Assets held for sale 383,097 392,887
---------- ----------
Total current assets 1,068,080 1,059,663
---------- ----------
NON-CURRENT ASSETS
Property, plant and equipment 705,158 695,962
Cost in excess of acquired net assets 586,115 584,633
Other assets 500,701 500,557
---------- ----------
$2,860,054 $2,840,815
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 9,684 $ 3,694
Accounts payable 253,708 268,593
Accrued expenses 234,939 260,718
Income taxes payable 83,446 116,111
Other current liabilities 15,156 15,670
Liabilities held for sale 28,181 29,273
---------- ----------
Total current liabilities 625,114 694,059
---------- ----------
NON-CURRENT LIABILITIES
Long-term debt 1,286,709 1,253,149
Postretirement health care liability 192,004 193,996
Other liabilities 501,397 499,728
STOCKHOLDERS' EQUITY
Common stock 1,192 1,192
Additional paid-in capital 1,045,094 1,048,304
Accumulated deficit (601,252) (586,555)
Accumulated other comprehensive loss (111,820) (200,426)
Treasury stock at cost (78,384) (62,632)
---------- ----------
Total stockholders' equity 254,830 199,883
---------- ----------
$2,860,054 $2,840,815
========== ==========
CROMPTON CORPORATION
Consolidated Statements of Cash Flows
Six months ended 2003 and 2002
(In thousands of dollars)
Six Months Ended
---------------------
Increase (decrease) to cash 2003 2002
- --------------------------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (3,264)$ (298,520)
Adjustments to reconcile net loss to net
cash provided by operations:
Cumulative effect of accounting change, net of
tax 401 298,981
Loss on sale of business unit - 34,705
Depreciation and amortization 72,407 76,024
Equity income (7,842) (4,261)
Changes in assets and liabilities, net:
Accounts receivable 3,688 (75,225)
Accounts receivable - securitization 14,641 39,193
Inventories (4,832) 32,474
Accounts payable (26,095) 18,707
Other (17,959) 10,478
---------- ----------
Net cash provided by operations 31,145 132,556
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of business unit - 80,000
Capital expenditures (32,721) (36,048)
Other investing activities (154) 1,090
---------- ----------
Net cash (used in) provided by investing
activities (32,875) 45,042
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (payments) on long-term borrowings 28,113 (144,102)
Proceeds (payments) on short-term borrowings 5,855 (26,918)
Dividends paid (11,433) (11,343)
Treasury stock acquired (22,080) -
Other financing activities 1,036 3,908
---------- ----------
Net cash provided by (used in) financing
activities 1,491 (178,455)
---------- ----------
CASH
Effect of exchange rates on cash 1,664 153
---------- ----------
Change in cash 1,425 (704)
Cash at beginning of period 16,941 21,506
---------- ----------
Cash at end of period $ 18,366 $ 20,802
========== ==========
Note - Certain reclassifications have been made to the prior year to
conform with this year's presentation, including the
classification of accounts receivable - securitization as part
of net cash provided by operations rather than as part of net
cash provided by (used in) financing activities.
CROMPTON CORPORATION
Segment Sales and Operating Profit
Second quarter and six months ended 2003 and 2002
(In thousands of dollars)
Second Quarter Six Months Ended
----------------- ---------------------
2003 2002 2003 2002
-------- -------- ---------- ----------
NET SALES
Polymer Products
Polymer Additives $294,562 $287,676 $ 596,136 $ 554,911
Polymers 70,282 72,475 138,465 139,955
Polymer Processing Equipment 40,640 44,652 81,748 94,457
Eliminations (3,523) (3,971) (7,176) (7,290)
-------- -------- ---------- ----------
401,961 400,832 809,173 782,033
-------- -------- ---------- ----------
Specialty Products
Crop Protection 71,581 70,538 131,961 123,010
Other 59,359 100,119 123,739 197,528
-------- -------- ---------- ----------
130,940 170,657 255,700 320,538
-------- -------- ---------- ----------
Total net sales $532,901 $571,489 $1,064,873 $1,102,571
======== ======== ========== ==========
OPERATING PROFIT
Polymer Products
Polymer Additives $ 6,914 $ 24,324 $ 20,427 $ 35,955
Polymers 4,875 12,432 14,149 21,081
Polymer Processing Equipment 982 (2,700) 2,060 (2,620)
-------- -------- ---------- ----------
12,771 34,056 36,636 54,416
-------- -------- ---------- ----------
Specialty Products
Crop Protection 14,203 20,615 33,854 35,085
Other (605) 2,130 (157) 5,611
-------- -------- ---------- ----------
13,598 22,745 33,697 40,696
-------- -------- ---------- ----------
General corporate expense (6,172) (11,809) (21,381) (24,142)
Unabsorbed overhead expense
from discontinued operations (4,567) (3,464) (7,216) (6,234)
Facility closures, severance
and related costs (2,686) (6,380) (3,505) (6,380)
Antitrust legal costs (12,386) - (20,875) -
-------- -------- ---------- ----------
Total operating profit $ 558 $ 35,148 $ 17,356 $ 58,356
======== ======== ========== ==========
CROMPTON CORPORATION SUPPLEMENTARY SCHEDULE
Major Factors Affecting Results ----------------------
Second quarter and six months ended 2003 versus 2002
(In millions of dollars)
The following table summarizes the major factors contributing to the
second quarter and six month changes in net sales and pre-tax loss
from continuing operations versus the prior year:
Second Quarter Six Months Ended
--------------------- ---------------------
Net Pre-tax Net Pre-tax
Sales Loss Sales Loss
Continuing Continuing Continuing Continuing
Operations Operations Operations Operations
---------- ---------- ---------- -----------
2002 $ 571.5 $ (29.9) $ 1,102.6 $ (31.3)
2002 Facility closures,
severance and related
costs - 6.4 - 6.4
2002 Loss on sale of
Industrial Specialties - 34.7 - 34.7
--------- --------- --------- ---------
571.5 11.2 1,102.6 9.8
Divested operations (41.7) (1.7) (81.8) (3.4)
Unit volume/mix (18.8) (10.9) 1.4 (4.9)
Lower selling prices (2.0) (2.0) (7.8) (7.8)
Foreign currency
translation 23.9 0.9 50.5 2.8
Costs savings - 8.6 - 14.5
Raw materials/energy - (18.2) - (28.4)
Absorption variances - 2.8 - 12.4
Other - (4.4) - (9.6)
--------- --------- --------- ---------
532.9 (13.7) 1,064.9 (14.6)
2003 Facility closures,
severance and related
costs - (2.7) - (3.5)
2003 Antitrust legal costs - (12.4) - (20.9)
--------- --------- --------- ---------
2003 $ 532.9 $ (28.8) $ 1,064.9 $ (39.0)
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