Exhibit 99.1
[CROMPTON LOGO]
NEWS
CONTACTS:
Investors: William Kuser (203) 573-2213
Media: Mary Ann Dunnell (203) 573-3034
CROMPTON REPORTS SECOND QUARTER RESULTS; ANNOUNCES $50 MILLION RESTRUCTURING
PROGRAM
MIDDLEBURY, CT - July 22, 2004 - Crompton Corporation (NYSE: CK) reported second
quarter net earnings of $1.1 million, or one cent per share, compared to a net
loss of $9.1 million, or eight cents per share, in the second quarter of 2003.
Second quarter 2004 net earnings included pre-tax charges for antitrust costs of
$4.4 million and facility closures, severance and related costs of $3.3 million.
Second quarter 2003 net earnings included after-tax earnings from discontinued
operations of $10.3 million, or nine cents per share, and pre-tax charges for
antitrust costs of $12.4 million and facility closures, severance and related
costs of $2.7 million.
Second quarter sales of $646.7 million were 21 percent above the prior year with
eight percent attributable to the acquisition of the GE Specialty Chemical
business on July 31, 2003, nine percent due to improved unit volume, two percent
due to the favorable impact of foreign currency translation, and two percent due
to improved selling prices.
"In 2003, our raw material and energy costs increased approximately $63 million
from the prior year while our selling prices decreased approximately $14
million," said Robert L. Wood, chairman, president and chief executive officer.
"In 2004, we have passionately focused on pricing discipline and are beginning
to see meaningful results. However, to date, positive pricing actions have not
kept pace with the surge in costs of some of our key raw materials. In the
second quarter of 2004, our raw material and energy costs increased $14 million
from the prior year while our selling prices increased $8 million. In addition
to the high cost of natural gas, crude and benzene that have impacted others in
our industry, our second quarter costs for tin and soybean oil increased $8
million over last year and are expected to be $30 million higher on an
annualized basis this year. In response, we are intensifying our pricing efforts
and further reducing our administrative cost structure in order to restore
historical margins.
"We expect to implement restructuring actions later this quarter designed to
yield annual pre-tax savings of at least $50 million with the benefit to be
achieved in 2005. Based on these savings, we expect to incur a one-time
restructuring charge that should not exceed $50 million. It is expected that the
bulk of the savings will come from streamlining the organization and its work
processes," Wood said.
For the first half of 2004, the Company reported net earnings of $62.0 million,
or 54 cents per share, compared to a net loss of $3.3 million, or three cents
per share, for 2003. Net sales for the first half of 2004 were $1.27 billion
compared to $1.06 billion in the first half of 2003. First half 2004 net
earnings included pre-tax divestment gains of $94.6 million primarily from the
sale of our 50% interest in the Gustafson seed treatment joint venture and
pre-tax charges for supplemental executive retirement costs of $5.9 million,
antitrust costs of $8.4 million and facility closures, severance and related
costs of $5.7 million. First half 2003 net earnings included after-tax earnings
from discontinued operations of $23.3 million, or 20 cents per share, cumulative
effect of accounting change of $401 thousand, pre-tax charges for antitrust
costs of $20.9 million and facility closures, severance and related costs of
$3.5 million.
-2-
Second quarter operating results for the Company's reporting segments are
summarized as follows:
POLYMER PRODUCTS
Polymer additives sales of $369.8 million were up 26% from the prior year, 15%
of which was due to the acquisition of GE's Specialty Chemicals business on July
31, 2003 with the remainder attributable to higher unit volume of six percent,
increased selling prices of three percent and favorable foreign currency
translation of two percent. Plastic additives sales were up 38% due primarily to
the Specialty Chemicals business acquisition, increased unit volume and higher
selling prices. Rubber additives sales increased 14% mainly as a result of
higher unit volume. Urethane additives sales were up five percent due mainly to
favorable foreign currency translation.
Petroleum additives sales rose 10% due primarily to an increase in selling
prices and higher unit volume. Operating profit of $7.9 million was up 14% from
the prior year due mainly to higher selling prices and savings from cost
reduction programs, offset in part by higher raw material and energy costs.
Polymers sales of $83.2 million increased 18% from the prior year due to higher
unit volume of 15%, favorable foreign currency translation of two percent and
improved selling prices of one percent. EPDM and Urethanes sales were up 22% and
15%, respectively, due primarily to higher unit volume. Operating profit of
$11.6 million was up $6.8 million from the second quarter of 2003 due mainly to
higher unit volume and selling prices, lower costs attributable to increased
plant throughput and cost saving initiatives, offset in part by higher raw
material and energy costs.
Polymer processing equipment sales of $45.9 million rose 13% from the prior year
due to an increase in unit volume of 14% and favorable foreign currency
translation of three percent, offset in part by unfavorable pricing of four
percent. Operating profit of $1.5 million was up 54% from the prior year mainly
as a result of higher unit volume, offset in part by unfavorable pricing. The
backlog at the end of June of $82 million was up $20 million from year-end 2003.
SPECIALTY PRODUCTS
Crop protection sales of $86.2 million were up 20% from the second quarter of
2003 due to higher unit volume of 17% and favorable foreign currency translation
of three percent. Operating profit of $21.3 million increased 50% from the prior
year mainly as a result of higher unit volume, a favorable sales mix and the
impact of cost saving initiatives, offset in part by the loss of $2.1 million of
equity income due to the March 31, 2004 sale of the Company's share of the
Gustafson seed treatment joint venture.
Refined products sales of $65.3 million increased 10% from the prior year due to
higher unit volume of six percent, improved pricing of two percent and favorable
foreign currency translation of two percent. Operating profit of $1.0 million
was up $1.6 million from the second quarter of 2003 due primarily to lower
environmental-related expenses, favorable pricing and increased unit volume,
offset in part by higher raw material costs.
###
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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, the ability to obtain selling price
increases, the ability to obtain and timing of new financing, 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, the ability to realize expected cost savings under the Company's
cost reduction initiatives, the amount of any additional earn-out payments from
GE, and other risks and uncertainties detailed in the Company's filings with the
Securities and Exchange Commission. These statements are based on the Company's
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.
-4-
CROMPTON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
SECOND QUARTER AND SIX MONTHS ENDED 2004 AND 2003
(In thousands, except per share data)
SECOND QUARTER SIX MONTHS ENDED
--------------------------- ---------------------------------
2004 2003 2004 2003
------------ ------------ --------------- ---------------
Net sales $ 646,740 $ 532,901 $ 1,271,087 $ 1,064,873
Cost of products sold 482,624 394,637 954,880 779,595
Selling, general and admin. 92,179 84,757 188,599 172,100
Depreciation and amortization 30,986 27,379 61,840 54,498
Research and development 13,065 12,726 24,862 24,786
Equity income (66) (2,228) (9,693) (7,842)
Facility closures, severance and related costs 3,278 2,686 5,689 3,505
Antitrust costs 4,350 12,386 8,403 20,875
------------ ------------ --------------- ---------------
Operating profit 20,324 558 36,507 17,356
Interest expense 17,162 25,559 35,087 52,274
Other (income) expense, net 3,098 3,827 (89,812) 4,040
------------ ------------ --------------- ---------------
Earnings (loss) from continuing operations
before income taxes and cumulative effect
of accounting change 64 (28,828) 91,232 (38,958)
Income tax expense (benefit) (1,020) (9,426) 29,195 (12,838)
------------ ------------ --------------- ---------------
Earnings (loss) from continuing operations
before cumulative effect of accounting change 1,084 (19,402) 62,037 (26,120)
Earnings from discontinued operations -- 10,292 -- 23,257
Cumulative effect of accounting change -- -- -- (401)
------------ ------------ --------------- ---------------
Net earnings (loss) $ 1,084 $ (9,110) $ 62,037 $ (3,264)
============ ============ =============== ===============
Basic and diluted earnings (loss) per common share:
Earnings (loss) from continuing operations
before cumulative effect of accounting change $ 0.01 $ (0.17) $ 0.54 $ (0.23)
Earnings from discontinued operations -- 0.09 -- 0.20
Cumulative effect of accounting change -- -- -- --
------------ ------------ --------------- ---------------
Net earnings (loss) $ 0.01 $ (0.08) $ 0.54 $ (0.03)
============ ============ =============== ===============
Weighted average shares outstanding - basic 114,574 112,639 114,550 113,389
============ ============ =============== ===============
Weighted average shares outstanding - diluted 114,775 112,639 114,805 113,389
============ ============ =============== ===============
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CROMPTON CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2004 AND DECEMBER 31, 2003
(In thousands of dollars)
JUNE 30, 2004 DECEMBER 31, 2003
----------------- ------------------
ASSETS
CURRENT ASSETS
Cash $ 55,178 $ 39,213
Accounts receivable 246,207 210,190
Inventories 383,287 390,199
Other current assets 147,300 170,852
----------------- ------------------
Total current assets 831,972 810,454
----------------- ------------------
NON-CURRENT ASSETS
Property, plant and equipment 730,473 774,612
Cost in excess of acquired net assets 417,263 418,607
Other assets 476,523 525,509
----------------- ------------------
$ 2,456,231 $ 2,529,182
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 8,102 $ 60,695
Current portion of long-term debt 349,514 --
Accounts payable 213,597 232,127
Accrued expenses 242,706 267,472
Income taxes payable 139,409 130,284
Other current liabilities 15,316 10,667
----------------- ------------------
Total current liabilities 968,644 701,245
----------------- ------------------
NON-CURRENT LIABILITIES
Long-term debt 400,033 754,018
Pension and post-retirement health care liabilities 566,039 566,966
Other liabilities 193,390 204,244
STOCKHOLDERS' EQUITY
Common stock 1,192 1,192
Additional paid-in capital 1,033,622 1,034,027
Accumulated deficit (539,574) (590,157)
Accumulated other comprehensive loss (122,303) (96,463)
Treasury stock at cost (44,812) (45,890)
----------------- ------------------
Total stockholders' equity 328,125 302,709
----------------- ------------------
$ 2,456,231 $ 2,529,182
================= ==================
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CROMPTON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED 2004 AND 2003
(In thousands of dollars)
SIX MONTHS ENDED
----------------------------------------
Increase (decrease) to cash 2004 2003
- ----------------------------- ----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 62,037 $ (3,264)
Adjustments to reconcile net earnings (loss)
to net cash (used in) provided by operations:
Gain on sale of Gustafson joint venture (90,938) --
Cumulative effect of accounting change, net of tax -- 401
Depreciation and amortization 61,840 72,407
Equity income (9,693) (7,842)
Changes in assets and liabilities, net:
Accounts receivable (59,090) 3,688
Accounts receivable - securitization 11,105 14,641
Inventories (2,251) (4,832)
Accounts payable (15,924) (26,095)
Other 19,097 (17,959)
----------------- -----------------
Net cash (used in) provided by operations (23,817) 31,145
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from divestments 137,696 --
Capital expenditures (29,495) (32,721)
Other investing activities 309 (154)
----------------- -----------------
Net cash provided by (used in) investing activities 108,510 (32,875)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
(Payments)/proceeds from domestic credit facility (57,000) 192,800
Proceeds from short-term borrowings 574 5,855
Payments on long term borrowings -- (164,687)
Dividends paid (11,455) (11,433)
Treasury stock acquired -- (22,080)
Other financing activities (80) 1,036
----------------- -----------------
Net cash (used in) provided by financing activities (67,961) 1,491
----------------- -----------------
CASH
Effect of exchange rates on cash (767) 1,664
----------------- -----------------
Change in cash 15,965 1,425
Cash at beginning of period 39,213 16,941
----------------- -----------------
Cash at end of period $ 55,178 $ 18,366
================= =================
-7-
CROMPTON CORPORATION
SEGMENT SALES AND OPERATING PROFIT
SECOND QUARTER AND SIX MONTHS ENDED 2004 AND 2003
(In thousands of dollars)
SECOND QUARTER SIX MONTHS ENDED
------------------------------- -----------------------------------
2004 2003 2004 2003
------------- ------------- --------------- ---------------
NET SALES
Polymer Products
Polymer Additives $ 369,759 $ 294,562 $ 733,102 $ 596,136
Polymers 83,183 70,282 164,395 138,465
Polymer Processing Equipment 45,926 40,640 84,354 81,748
Eliminations (3,681) (3,523) (7,629) (7,176)
------------- ------------- --------------- ---------------
495,187 401,961 974,222 809,173
------------- ------------- --------------- ---------------
Specialty Products
Crop Protection 86,224 71,581 162,698 131,961
Refined Products 65,329 59,359 134,167 123,739
------------- ------------- --------------- ---------------
151,553 130,940 296,865 255,700
------------- ------------- --------------- ---------------
Total net sales $ 646,740 $ 532,901 $ 1,271,087 $ 1,064,873
============= ============= =============== ===============
OPERATING PROFIT
Polymer Products
Polymer Additives $ 7,897 $ 6,914 $ 16,845 $ 20,427
Polymers 11,641 4,875 21,836 14,149
Polymer Processing Equipment 1,508 982 (256) 2,060
------------- ------------- --------------- ---------------
21,046 12,771 38,425 36,636
------------- ------------- --------------- ---------------
Specialty Products
Crop Protection 21,329 14,203 49,770 33,854
Refined Products 974 (605) (1,206) (157)
------------- ------------- --------------- ---------------
22,303 13,598 48,564 33,697
------------- ------------- --------------- ---------------
General corporate expense (15,397) (6,172) (36,390) (21,381)
Unabsorbed overhead expense from
discontinued operations -- (4,567) -- (7,216)
Facility closures, severance and
related costs (3,278) (2,686) (5,689) (3,505)
Antitrust costs (4,350) (12,386) (8,403) (20,875)
------------- ------------- --------------- ---------------
Total operating profit $ 20,324 $ 558 $ 36,507 $ 17,356
============= ============= =============== ===============
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CROMPTON CORPORATION SUPPLEMENTARY SCHEDULE
MAJOR FACTORS AFFECTING OPERATING RESULTS
SECOND QUARTER AND SIX MONTHS ENDED 2004 VERSUS 2003
(In millions of dollars)
The following table summarizes the major factors contributing to the changes in
second quarter and six months operating results versus the prior year:
SECOND QUARTER SIX MONTHS ENDED
--------------------------- ----------------------------
PRE-TAX PRE-TAX
NET EARNINGS NET EARNINGS
SALES (LOSS) SALES (LOSS)
------------- ------------ ------------- -------------
2003 $ 532.9 $ (28.8)* $ 1,064.9 $ (39.0)*
2003 Facility closures, severance
and related costs -- 2.7 -- 3.5
2003 Antitrust costs -- 12.4 -- 20.9
------------- ------------ ------------- -------------
532.9 (13.7) 1,064.9 (14.6)
GE Specialty Chemicals business acquired 7/31/03 44.9 1.6 88.9 3.3
Improved unit volume/mix 47.9 11.5 69.9 21.0
Higher selling prices 8.2 8.2 12.9 12.9
Foreign currency impact 12.8 0.7 34.5 (1.3)
Cost savings -- 12.6 -- 26.4
Higher raw materials/energy costs -- (13.8) -- (33.6)
Lower interest expense -- 8.4 -- 17.2
Equity derivative contract gain - 2003 -- (5.6) -- (1.5)
Unfavorable manufacturing absorption variances -- (1.4) -- (5.0)
Other -- (0.7) -- (8.2)
------------- ------------ ------------- -------------
646.7 7.8 1,271.1 16.6
2004 Facility closures, severance and related costs -- (3.3) -- (5.7)
2004 Antitrust costs -- (4.4) -- (8.4)
2004 Supplemental executive retirement costs -- -- -- (5.9)
2004 Divestment gains, primarily Gustafson -- -- -- 94.6
------------- ------------ ------------- -------------
2004 $ 646.7 $ 0.1 $ 1,271.1 $ 91.2
============= ============ ============= =============
* Represents the pre-tax loss from continuing operations before cumulative
effect of accounting change and earnings from discontinued operations.