U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
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 No. 0-30270
Crompton Corporation
(Exact name of registrant as specified in its charter)
Delaware 52-2183153
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
199 Benson Road
Middlebury, Connecticut 06749
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(203) 573-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $0.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Act).
Yes [x] No
The aggregate market value of the voting stock held by non-
affiliates of the registrant, computed as of February 28, 2003,
was $536,903,925.
The number of shares of Common Stock of the registrant
outstanding as of February 28, 2003, was 114,281,040.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for fiscal year ended
December 31, 2002 ........ Parts I, II and IV
Proxy Statement for Annual Meeting of Stockholders
on April 29, 2003 ........ Part III
Page
PART I
Item 1. Business 1
Polymer Products 2
Specialty Products 6
Item 2. Properties 14
Item 3. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of
Security Holders 19
Executive Officers of the Registrant 19
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 21
Item 6. Selected Financial Data 22
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 22
Item 7A. Quantitative and Qualitative Disclosures
about Market Risk 22
Item 8. Financial Statements and Supplementary Data 22
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 22
PART III
Item 10. Directors and Executive Officers of the
Registrant 22
Item 11. Executive Compensation 23
Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters 23
Item 13. Certain Relationships and Related Transactions 24
Item 14. Controls and Procedures 24
PART IV
Item 15. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 24
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Crompton Corporation (together with its consolidated
subsidiaries, the "Corporation" or "Registrant"), formerly known as CK
Witco Corporation, was incorporated in Delaware in 1999 in connection
with the merger of Crompton & Knowles Corporation and Witco
Corporation on September 1, 1999 (the "Merger").
Crompton & Knowles Corporation ("Crompton & Knowles") was
incorporated in Massachusetts in 1900. Crompton & Knowles engaged in
the manufacture and sale of specialty chemicals beginning in 1954 and,
beginning in 1961, in the manufacture and sale of polymer processing
equipment. Crompton & Knowles substantially expanded both its
specialty chemical and its polymer processing equipment businesses
through a number of acquisitions in both the United States and Europe,
including the acquisition in 1996 of Uniroyal Chemical Company, Inc.,
("Uniroyal") a multinational manufacturer of performance chemicals,
including rubber chemicals and additives for plastics and lubricants,
crop protection chemicals, and polymers, which include Royalene(R) EPDM
rubber and Adiprene(R)/Vibrathane(R) urethane prepolymers.
Witco Corporation ("Witco") was incorporated in Delaware in 1958
as Witco Chemical Company, Inc., at which time it succeeded by merger
to the business of Witco Chemical Company, an Illinois corporation
formed in 1920. Witco was a global manufacturer and marketer of
specialty chemical products for use in a wide variety of industrial
and consumer applications. In 1995, Witco acquired OSi Specialties
Holding Company, an entity engaged in the manufacture of silicone
surfactants, organofunctional silanes, specialty fluids and amine
catalysts with manufacturing and blending facilities throughout the
world. In 1998, Witco acquired Ciba Specialty Chemicals Inc.'s
("Ciba") worldwide polyvinyl chloride heat stabilizers business and
related assets and Ciba acquired Witco's global epoxy systems and
adhesives business and related assets.
In June 2002, the Corporation sold its industrial specialties
business to Akzo Nobel Surface Chemistry LLC. During the fourth
quarter of 2002, the Corporation relocated its corporate headquarters
to its facility in Middlebury, CT.
(b) Financial Information About Industry Segments
Information as to the sales, operating profit, depreciation and
amortization, assets, capital expenditures and equity method
investments attributable to each of the Corporation's business
segments during each of its last three fiscal years is set forth in
the Notes to Consolidated Financial Statements on pages 52 through 54
of the Corporation's 2002 Annual Report to Stockholders, and such
information is incorporated herein by reference.
The Corporation's businesses are grouped into two units, "Polymer
Products" and "Specialty Products." Polymer Products consists of
separate reporting segments for Polymer Additives (plastic additives,
rubber additives, urethane additives and petroleum additives),
Polymers (EPDM and urethane polymers) and Polymer Processing Equipment
(Davis-Standard). Specialty Products consists of separate reporting
segments for OrganoSilicones (silanes and specialty silicones), Crop
Protection (specialty actives and the Gustafson Joint Venture) and
Other (refined products and industrial specialties.)
On April 12, 2002, the Corporation announced certain
modifications within its financial reporting segments to reflect the
current management and operating structure in its portfolio of
businesses. First, a reclassification of Petroleum Additives from the
"Other" category to the Polymer Additives segment. This change
reflected the similarity of product and product-enhancing
characteristics of these additives, as well as shared manufacturing
processes and facilities. Second, a reclassification of Industrial
Specialities (divested in June 2002) from the Crop Protection segment
to the "Other" category. Third, a reclassification of Glycerine and
Fatty Acids from the "Other" category into Plastic Additives (included
in the "Polymer Additives" segment.) This change recognized that
glycerine and fatty acids are a by-product of in-house production for
use in the plastic additives business. Fourth, a reclassification of
trilene (a minor product line with less than $4.0 million in annual
sales) from petroleum additives (included in the Polymer Additives
segment) to EPDM (included in the Polymers segment.) The former
classification was predicated on the product's use in lubricant
applications, while the new designation is consistent with the
chemistry of trilene, which is a liquid form of EPDM.
(c) Narrative Description of Business
Products and Services
The Corporation manufactures and markets a wide variety of
polymer and specialty products. Most of the Corporation's products
are sold to industrial customers for use as additives, ingredients or
intermediates that impart particular characteristics to the customers'
end products. The Corporation's products are currently marketed in
more than 120 countries and serve a wide variety of end use markets
including tires, agriculture, automobiles, textiles, plastics,
lubricants, petrochemicals, leather, construction, recreation, mining,
paper, packaging, home furnishings, personal care and appliances. The
principal products and services offered by the Corporation are
described below.
POLYMER PRODUCTS
Polymer Additives
The Polymer Additives business supplies a number of specialty
chemicals to the plastics, rubber, coatings/adhesives and industrial
lubricants industries. The Polymer Additives business had net sales
for fiscal 2002 of $1,110.8 million.
Plastic Additives
The Corporation is a global leader in supplying a broad line of
additives to the plastics industry. These additives are often
specially developed and formulated for a customer's specific
manufacturing requirements. The Corporation manufactures stabilizers,
lubricants, plasticizers and peroxide catalysts, and markets UV
stabilizers and antistats, which are used in the manufacture of PVC
resins and compounds for applications such as pipes, fittings, siding,
flooring, window profiles and packaging materials. In addition, the
Corporation is a manufacturer and supplier of polymerization
inhibitors, polymerization catalysts and initiators, antioxidants,
lubricants, chemical foaming agents, polymer modifiers and chemical
intermediates as additives for the olefins and styrenics industries
for use in the manufacture of resins and compounds that are employed
in a broad spectrum of applications used in packaging, automobiles,
construction, furniture and appliances. The Corporation also produces
organotin compounds for the production of PVC stabilizers, biocides
for commercial marine paints and industrial wood preservatives, and
pharmaceuticals, and for use as a catalyst in the production of
polymers and in certain glass applications.
As a by-product of in-house production for use in the plastic
additives business, the Corporation produces fatty acids, glycerine
as a co-product, and derivatives of fatty acids (esters, stearates and
amides). These products modify surfaces either as direct lubricants or
emulsifiers or as intermediates for ingredients that modify surfaces.
Fatty acids are used as lubricants in polymers (rubber and plastic),
in personal care products and in curing systems for rubber.
Glycerine is used to improve smoothness and provide lubrication in
pharmaceutical and personal care applications.
Net sales of plastic additives during fiscal 2002, 2001 and 2000
were 23.2%, 21.7% and 21.4% of the Corporation's net sales,
respectively.
Rubber Additives
This product line of the Polymer Additives business contains over
55 different chemicals for use in processing rubber. These products
include accelerators, antioxidants, antiozonants, chemical foaming
agents and specialty waxes. Accelerators are used for curing natural
and synthetic rubber, and have a wide range of activation
temperatures, curing ranges and use forms. Antiozonants protect
rubber compounds from flex cracking and ozone, oxygen and heat
degradation. Antioxidants provide rubber compounds with protection
against oxygen, light and heat. Foaming agents produce gas by thermal
decomposition or via a chemical reaction with other components of a
polymer system and are mixed with rubber to produce sponge rubber
products. Waxes inhibit static atmospheric ozone cracking in rubber.
Tire manufacturers accounted for approximately 62% of the
Corporation's rubber additives sales in fiscal 2002, with the balance
of such sales going to industrial rubber goods, which includes
numerous manufacturers of hoses, belting, sponge and a wide variety of
other engineered rubber products. The Corporation believes it is the
third largest producer of rubber additives in the world.
Urethane Additives
The Urethane Additives business is comprised of three product
groupings that offer technologically advanced materials to a diverse
and global customer base: Fomrez(R) saturated polyester polyols,
Witcobond(R) polyurethane dispersions, and Witcothane(R) polyurethane
systems. Polyester polyols are employed in industrial applications
such as flexible foam for seating, thermoplastic urethanes for
structural parts, adhesives and coatings. The polyurethane
dispersions are sold to a larger and more diverse customer base
primarily for coating applications such as flooring, fiberglass sizing
and textiles. The polyurethane systems business, which supplies
products primarily for use by the shoe sole industry, is a highly
service intensive business.
Baxenden Chemicals Limited, the Corporation's 53.5% owned
subsidiary (Croda Inc. owns 46.5%), is engaged in the manufacture and
marketing of isocyanate derivatives, polyester polyols and specialty
polymer systems used in a wide range of applications. The major
markets served by Baxenden are automotive, construction, surface
coatings, leather and textile finishing. Sub-markets include
coatings, adhesives, sealants, elastomers and insulation for the above
markets. Baxenden is focused on specialty polymer and resin chemistry
and novel curing mechanisms for such polymers. The core technology is
urethane and acrylic chemistry and also includes novel polyesters and
esterification processes.
Petroleum Additives
The Corporation is a global manufacturer and marketer of high-
performance additive components used in transport and industrial
lubricant applications. The component product line includes Hybase(R)
overbased calcium sulfonates and Lobase(R) neutral calcium sulfonates
used in motor oils and marine lubricants. These sulfonates are oil
soluble surfactants and their properties include detergency and
corrosion protection to help lubricants keep car, truck and ship
engines clean with minimal wear. Also in the product line are barium
and sodium sulfonates which provide corrosion protection and
emulsification in metalworking fluids. Other key products are the
Naugalube(R) antioxidants widely used by the Corporation's customers in
engine oils, gear oils, industrial oils and greases and Synton(R) high
viscosity poly alpha olefins (PAO) used in the production of synthetic
lubricants for automotive, aviation and industrial applications (e.g.
compressor oils and gear oils). Products under development include
new friction modifiers and antiwear additives to meet customers'
performance requirements in automotive applications.
Polymer additives are sold through a specialized sales force,
including technical service professionals who address customer
inquiries and problems. The technical service professionals generally
have degrees in chemistry and/or chemical engineering and are
knowledgeable in specific product application fields. The sales and
technical service professionals identify and focus on customers'
growth opportunities, working not only with the customers'
headquarters staff, but also with their research and development and
manufacturing personnel on a worldwide basis.
Polymers
The Polymers business, which had net sales for fiscal 2002 of
$271.0 million, has two principal product lines: Adiprene(R)/Vibrathane(R)
urethane prepolymers and Royalene(R) EPDM rubber.
EPDM
Ethylene-propylene-diene rubber ("EPDM") is commonly known as
"crackless rubber" because of its ability to withstand sunlight and
ozone without cracking. EPDM's application end uses include various
automobile components, single-ply roofing, hoses, electrical
insulation, tire sidewalls, mechanical seals and gaskets, oil
additives and plastic modifiers. The Corporation produces and markets
more than 30 different EPDM polymer variations.
The Corporation believes it is one of the three largest suppliers
of EPDM polymers in the world, and the largest North American producer
of EPDM. The Corporation's success in this business has been due to
several factors, including product performance, low cost
manufacturing, customized products, and outstanding technical and
customer service supported by a highly qualified staff of technical
service specialists with extensive field and rubber processing
experience, which have earned the Corporation a reputation for
excellence and strong customer loyalty.
Royalene(R) products are primarily sold through a dedicated sales
force; however, in certain geographic areas outside the United States,
Royalene(R) products are sold through distributors.
Urethane Polymers
The Corporation believes that it is the leading manufacturer of
high performance liquid castable urethane prepolymers in the world.
Among the most common applications using these prepolymers are solid
industrial tires, printing rollers, industrial rolls,
abrasion-resistant mining products such as chutes, hoppers and slurry
transport systems, mechanical goods and a variety of sports equipment
and other consumer items. The Corporation competes effectively in
this business by providing efficient customer service and technical
assistance through a highly regarded technical service staff and a
proven ability to develop new products and technologies for its
customers. Over 150 grades of urethane prepolymers are commercially
available from the Corporation.
Adiprene(R)/Vibrathane(R) urethane prepolymers are sold directly
by a dedicated sales force in the United States, Canada and Australia
and through direct sales distributorships in Europe, Latin America and
the Far East. Adiprene(R)/Vibrathane(R) customers are serviced worldwide
by a dedicated technical staff. Technical service personnel support
field sales, while a research and development staff is dedicated to
support new product and process development to meet rapidly changing
customer needs. Technical support is a critical component of the
product offering.
Polymer Processing Equipment
The Corporation's wholly owned subsidiary, Davis-Standard
Corporation, manufactures and sells polymer processing equipment,
which includes extruders, electronic controls, and integrated
extrusion systems, and offers specialized service and modernization
programs for in-place polymer processing systems. The polymer
processing equipment business had net sales for fiscal 2002 of $172.7
million.
Integrated polymer processing systems, which include extruders in
combination with controls and other equipment, are used to process
polymers into various products such as plastic sheet and profiles used
in appliances, automobiles, home construction, and furniture;
extruded shapes used as house siding, furniture trim, and substitutes
for wood molding; and cast and blown film used to package many
consumer products. Integrated extrusion systems are also used to
compound engineered polymers, to recycle and reclaim plastics, to coat
paper, cardboard and other materials used as packaging, and to apply
plastic or rubber insulation to power cables for electrical utilities
and to wire for the communications, construction, automotive, and
appliance industries. Industrial blow molding equipment produced by
the Corporation is sold to manufacturers of non-disposable plastic
items such as tool cases and beverage coolers.
The Corporation is a leading producer of polymer processing
equipment for the polymers industry and competes with domestic and
foreign producers of such products. The Corporation is one of a
number of producers of this type of polymer processing machinery.
In the United States, most of the Corporation's sales of polymer
processing equipment are made by its own dedicated sales force. In
other parts of the world, and for export sales from the United States,
the Corporation's sales of such equipment are made largely through
agents.
SPECIALTY PRODUCTS
OrganoSilicones
The OrganoSilicones business manufactures and sells over 500
silicone-based chemical intermediate products to manufacturers of
fiberglass, reinforced plastics, polyurethane foam, textiles,
coatings, automotive components, adhesives, rubber, pharmaceuticals,
thermoplastics, sealants and electrical products throughout the world.
The OrganoSilicones business had net sales for fiscal 2002 of $456.6
million.
Regardless of form, most silicones share a combination of
properties, including electrical resistance, ability to maintain
performance across a broad range of temperatures, resistance to aging,
water repellence, lubricating characteristics and relative chemical
and physical inertness. The versatility of silicone-based
intermediates has led to a wide variety of applications across a broad
spectrum of industries in all major countries.
Silanes
The Corporation is a leading producer of organofunctional
silanes. Depending on their major organofunctional group (amino,
epoxy, methacryl, sulfur, vinyl, etc.), silanes can act as coupling
agents or cross-linkers. As a coupling agent, they have the unique
ability to bond organic materials to inorganic materials and are used
in a variety of end use products, including fiberglass and rubber
sealants. As cross-linkers, silanes have become the standard in the
manufacture of thermoplastics where they promote the cross-linking of
polyolefins in applications such as wire and cable.
There continue to be opportunities for silanes in the tire
industry, especially in Europe where there has been a growing demand
for sulfur-functional silanes, which are necessary when silica is used
in place of carbon black in tire tread. Silica-tires provide
improved handling, safety and other environmental benefits by lowering
fuel consumption.
Specialty Silicones
Silicone fluids have several distinctive properties, which
include chemical and physical inertness, good low-temperature
performance, high compressibility, low-surface tension, stable
viscosity with a change in the temperature or rate of shear, and
thermal and oxidative stability. In addition to allowing these
products to bond with various materials, these properties also offer
improved antistatic, lubricity, and water-repellency performance.
With these distinctive properties, silicone fluids serve a variety of
end markets including the textile market where silicone fluids serve
as textile softeners and wetting modifiers; the personal care market
for hair and skin care products; the pharmaceutical market where they
serve as a protective barrier in creams and lotions; the paper and
pulp industry where they act as antifoams, surfactants, or release
agents; and the automotive and furniture industries where silicone
fluids are used in polishes and coatings because of their low-surface
tension, lubricating properties, and water repellency.
In the early 1950's the OrganoSilicones business (while part of
Union Carbide Corporation) invented the use of silicone surfactants in
the manufacture of urethane foam. This fundamental technological
advance facilitated a lower-cost, continuous manufacturing method,
resulting in accelerated growth in the urethane foam industry. The
largest end markets for urethane additives are flexible, molded and
rigid polyurethane foams in which urethane additives are used to
control cell size and stabilize the foam.
The Corporation markets its OrganoSilicone products worldwide
primarily directly through its own sales force.
Crop Protection
The Crop Protection business manufactures and markets a wide
variety of agricultural chemicals for many major food crops, including
grains, fruits, nuts and vegetables, and many non-food crops, such as
tobacco, cotton, turf, flax and ornamental plants. The business
focuses its efforts mainly on products used on high-value cash crops,
such as ornamentals, nuts, citrus and tree and vine fruits as opposed
to commodity crops such as soybeans and corn. The Crop Protection
business had net sales for fiscal 2002 of $240.1 million.
Specialty Actives
The Specialty Actives business offers four major crop protection
chemical product lines: fungicides, miticides and insecticides,
growth regulants, and herbicides. Each product line is composed of
numerous formulations for specific crops and geographic regions.
The Corporation has a substantial presence in its targeted
segments of the agrichemicals market due to its strategy of focusing
research, product development, and sales and marketing on highly
profitable market niches that are less sensitive to competitive
pricing pressures than commodity segments of the market. While the
products of the Specialty Actives business represent a relatively
small percentage of the grower's overall costs, these products are
often critical to the success or failure of the crops being treated.
In addition, product line extensions, attention to application
effectiveness and customer service are important factors in developing
strong customer loyalty.
In Australia, the Corporation's subsidiary, Hannaford Seedmaster
Services Pty. Ltd., provides seed treatment chemicals and treating
services to the local market as well as agricultural chemicals for
various crop and non-crop uses.
The Crop Protection business, under the Uniroyal name, promotes
seed treatment chemicals in all regions of the world other than North
America and Australia, and enjoys a substantial position in the
international seed treatment market. The Corporation anticipates
continuing growth in seed treatment, which is environmentally
attractive because it involves very localized use of agricultural
chemicals and very low use rates compared to broad foliar or soil
treatment.
The Crop Protection business markets its products in North
America through a direct sales force selling to a distribution network
consisting of more than one hundred distributors and direct customers.
In the international market, the Crop Protection business' direct
sales force services over 300 distributors, dealers and agents.
Gustafson Joint Venture
In November 1998, the Corporation formed joint ventures with
Bayer Corporation to serve the agricultural seed treatment markets in
North America based on Gustafson, Inc. ("Gustafson"), formerly a
wholly owned subsidiary, which is a leading producer of seed treatment
formulations and equipment. Bayer acquired a 50 percent interest in
the Gustafson seed treatment business.
Gustafson has a leading share of the North American commercial
seed treatment formulation market and is recognized as a technological
leader in this market. Gustafson is engaged directly and through
cooperative ventures in developing and formulating seed treatment
systems, offering a broad line of chemical formulations which contain
fungicides, insecticides and seed conditioning aids in addition to
commercial seed treating equipment. Gustafson's expertise enables it
to develop and produce formulations consisting of multiple components
to obtain optimum efficacy against seed and soil disease pathogens and
insects.
For the last several years, Gustafson has maintained a
developmental program in the field of naturally occurring biological
control agents targeted for disease. Gustafson has focused its
efforts on naturally occurring organisms as opposed to genetically
engineered organisms.
Other
The Other businesses of the Corporation, with net sales for
fiscal 2002 of $310.7 million included two principal product lines:
Refined Products and Industrial Specialties. The Industrial
Specialties business was sold to Akzo Nobel Surface Chemistry LLC in
June 2002.
Refined Products
The Refined Products business is engaged in the manufacture and
marketing of a wide range of high purity hydrocarbon products,
including white oils and ink oils, petrolatums, microcrystalline
waxes, cable compounds, and refrigeration oils and compressor
lubricants, serving numerous global markets predominantly requiring
food grade quality. The business' products serve as lubricants,
emollients, moisture barriers, plasticizers and carriers and are
characterized by their chemical inertness and high quality. Refined
Products are used in four major market segments: polymers
(including polystyrene, polyolefin, thermoplastic elastomers and
PVC applications), personal care, refrigeration oils and
telecommunication cables, as well as additional minor markets.
In 1998, Petro-Canada Lubricants of Mississauga, Ontario, Canada,
became Refined Products' supplier for most grades of paraffinic white
oils used in certain applications and Refined Products became Petro-
Canada's exclusive distributor of these white oils in North America,
Latin America and Asia Pacific. The Refined Products sales, marketing
and distribution organization services Refined Products' and Petro-
Canada's paraffinic white mineral oil customers for a variety of
applications.
The Corporation markets its refined products primarily directly
through its own sales force.
* * *
Sources of Raw Materials
Chemicals, steel, castings, parts, machine components and other
raw materials required in the manufacture of the Corporation's
products are generally available from a number of sources, some of
which are foreign. The Corporation uses significant amounts of
petrochemical feedstocks in many of its chemical manufacturing
processes. Large increases in the cost of petrochemical feedstocks,
particularly for sustained periods of time, or other raw materials
could adversely affect the Corporation's operating margins.
While temporary shortages of raw materials used by the Corporation
may occur occasionally, such raw materials are currently readily
available. However, their continuing availability and price are
subject to domestic and world market and political conditions and
regulations. Major requirements for key raw materials are typically
purchased pursuant to multi-year contracts. The Corporation is not
dependent on any one supplier for a material amount of its raw
material requirements; however, the OrganoSilicones business
purchases, in the aggregate, approximately 50% of its raw materials
from Dow Corning Corporation and The Dow Chemical Company under
various long-term agreements, which expire at various times
through 2010.
The Corporation holds a 50% interest in Rubicon Inc. ("Rubicon"),
a manufacturing joint venture between Uniroyal and Huntsman
Corporation, located in Geismar, Louisiana, which supplies both
Huntsman and the Corporation with aniline, and the Corporation with
diphenylamine ("DPA"). The Corporation believes that its aniline and
DPA needs in the foreseeable future will be met by production from
Rubicon.
Patents and Licenses
The Corporation has over 3,500 United States and foreign patents
and pending applications and has trademark protection for
approximately 700 product names. Patents, trade names, trademarks,
know-how, trade secrets, formulae, and manufacturing techniques
assist in maintaining the competitive position of certain of the
Corporation's products. Patents, formulae, and know-how are of
particular importance in the manufacture of a number of specialty
chemicals manufactured and sold by the Corporation, and patents and
know-how are also significant in the manufacture of certain wire
insulating and polymer processing machinery product lines. The
Corporation is licensed to use certain patents and technology owned
by other companies, including some foreign companies, to manufacture
products complementary to its own products, for which it pays
royalties in amounts not considered material to the consolidated
results of the enterprise. Products to which the Corporation has such
rights include certain crop protection chemicals and polymer
processing machinery.
While the existence of a patent is prima facie evidence of its
validity, the Corporation cannot assure that any of its patents will
not be challenged nor can it predict the outcome of any such
challenge. The Corporation believes that no single patent, trademark,
or other individual right is of such importance, however, that
expiration or termination thereof would materially affect its
business.
Seasonal Business
With the exception of the Crop Protection business, the sales of
which are influenced by agricultural growing seasons, no material
portion of any segment of the business of the Corporation is
significantly seasonal.
Customers
The Corporation does not consider any reporting segment of its
business dependent on a single customer or a few customers, the loss
of any one or more of whom would have a material adverse effect on the
reporting segment. No one customer's business accounts for more than
ten percent of the Corporation's gross revenues nor more than ten
percent of its earnings before taxes.
Backlog
Because machinery production schedules range from about 60 days
to 10 months, backlog is significant to the Corporation's polymer
processing equipment business. Firm backlog of customers' orders for
this business at the end of 2002 totaled approximately $76 million
compared with $83 million at the end of 2001. It is expected that
most of the 2002 backlog will be shipped during 2003. Orders for
specialty chemicals and polymers are generally filled from inventory
stocks and thus are excluded from backlog.
Competitive Conditions
The Corporation is a major manufacturer of polymer products and
specialty products. Competition varies by product and by geographic
region, except that in rubber chemicals the market is fairly
concentrated. In that market, the Corporation and its two principal
competitors together account for approximately 43% of total worldwide
sales. In addition, the EPDM market is fairly concentrated. The
Corporation and its two principal competitors together account for
approximately 64% of sales within North America and approximately 50%
worldwide.
Product performance, quality, technical and customer service, and
price are all important factors in competing in the polymer product
and specialty product businesses.
Research and Development
The Corporation conducts research and development on a worldwide
basis at a number of facilities, including field stations that are
used for crop protection research and development activities.
Research and development expenditures by the Corporation totalled
$81.9 million for the year 2002, $82.3 million for the year 2001, and
$84.6 million for the year 2000.
Environmental Matters
Chemical companies are subject to extensive environmental laws
and regulations concerning, among other things, emissions to the air,
discharges to land, surface, subsurface strata and water and the
generation, handling, storage, transportation, treatment and disposal
of waste and other materials and are also subject to other federal,
state and local laws and regulations regarding health and safety
matters.
Environmental Regulation. The Corporation believes that its
business, operations and facilities have been and are being operated
in substantial compliance in all material respects with applicable
environmental and health and safety laws and regulations, many of
which provide for substantial fines and criminal sanctions for
violations. The ongoing operations of chemical manufacturing plants,
however, entail risks in these areas and there can be no assurance
that material costs or liabilities will not be incurred. In addition,
future developments, such as increasingly strict requirements of
environmental and health and safety laws and regulations and
enforcement policies thereunder, could bring into question the
handling, manufacture, use, emission or disposal of substances or
pollutants at facilities owned, used or controlled by the Corporation
or the manufacture, use or disposal of certain products or wastes by
the Corporation and could involve potentially significant
expenditures. To meet changing permitting and regulatory standards,
the Corporation may be required to make significant site or
operational modifications, potentially involving substantial
expenditures and reduction or suspension of certain operations. The
Corporation incurred $15.6 million of costs for capital projects and
$47.1 million for operating and maintenance costs related to
environmental compliance at its facilities during fiscal 2002. In
fiscal 2003, the Corporation expects to incur approximately $19.5
million of costs for capital projects and $42.7 million for operating
and maintenance costs related to environmental compliance at its
facilities. During fiscal 2002, the Corporation spent $17.7 million
to clean up previously utilized waste disposal sites and to remediate
current and past facilities. The Corporation expects to spend
approximately $25.2 million during fiscal 2003 to clean up such waste
disposal sites and current and past facilities.
Beginning in 2003, European environmental regulations will limit
the use of lead-based heat stabilizers that until now have been
essential to the manufacture of polyvinyl chloride construction pipe.
As an alternative to these lead-based products, the Corporation has
patented new technology for an organic-based, heavy-metal-free
product. Capacity has been added at the Corporation's Lampertheim,
Germany plant to produce this product. In October 2001, the
International Maritime Organization passed a regulation banning the
use of TBTO in paints for ships. The regulation goes into effect one
year after 25% of the member nations representing at least 25% of the
world's shipping tonnage adopt the regulation. The Corporation
manufactures TBTO at its Bergkamen, Germany plant. Sales of this
product were not material in 2002.
Pesticide Regulation. The Corporation's Crop Protection business
is subject to regulation under various federal, state, and foreign
laws and regulations relating to the manufacture, sales and use of
pesticide products.
In August, 1996, Congress enacted the Food Quality Protection Act
of 1996 ("FQPA"), which made significant changes to the Federal
Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), governing U.S.
sale and use of pesticide products, and the Federal Food, Drug, and
Cosmetic Act ("FFDCA"), which limits pesticide residues on food. FQPA
facilitated registrations and reregistrations of pesticides for
special (so called "minor") uses under FIFRA and authorized collection
of maintenance fees to support pesticide reregistrations.
Coordination of regulations implementing FIFRA and FFDCA is now
required. Food safety provisions of FQPA establish a single standard
of safety for pesticide residue on raw and processed foods; require
that information be provided through large food retail stores to
consumers about the health risks of pesticide residues and how to
avoid them; preempt state and local food safety laws if they are
based on concentrations of pesticide residues below recently
established federal residue limits (called "tolerances"); and ensure
that tolerances protect the health of infants and children.
FFDCA, as amended by FQPA, authorizes the EPA to set a tolerance
for a pesticide in or on food at a level which poses "a reasonable
certainty of no harm" to consumers. The EPA is required to review all
tolerances for all pesticide products by August 2006. Some of the
Corporation's products are currently under review and other products
will be reviewed under this standard in the future.
The European Commission ("EC") has established procedures whereby
all existing active ingredient pesticides will be reviewed. This EC
regulation became effective in 1993 and will result in a review of all
commercial products. The initial round of reviews covered ninety
products, four of which are the Corporation's products. Other of the
Corporation's products will be reviewed in future years and all data
from the Corporation pertaining to its products must be submitted for
review by mid-2003. The process may lead to full reregistration in
member states of the EC or may lead to some restrictions, if adverse
data is discovered.
Employees
The Corporation had 6,777 employees on December 31, 2002.
Available Information
The Corporation's internet website address is
www.cromptoncorp.com. The Corporation makes available free of charge
on or through its internet website the Corporation's Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-
K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon
as reasonably practicable after the Corporation electronically files
such material with, or furnishes it to, the Securities and Exchange
Commission.
Geographic Information
The information with respect to sales and property, plant and
equipment attributable to each of the major geographic areas served by
the Corporation for each of the Corporation's last three fiscal years,
set forth in the Notes to Consolidated Financial Statements on page 54
of the Corporation's 2002 Annual Report to Stockholders, is
incorporated herein by reference.
The Corporation considers that the risks relating to operations
of its foreign subsidiaries are comparable to those of other U.S.
companies which operate subsidiaries in developed countries. All of
the Corporation's international operations are subject to fluctuations
in the relative values of the currencies in the various countries in
which its activities are conducted and other risks inherent in
conducting business internationally.
ITEM 2. PROPERTIES
The following table sets forth information as to the principal
operating properties and other significant properties of the
Corporation and its subsidiaries. All properties are owned in fee
except where otherwise indicated:
Location Facility Reporting Segment
UNITED STATES
Alabama
Bay Minette Plant Polymer Additives
Connecticut
Bethany Research Center Crop
Greenwich Corporate Offices* Corporate Offices
Middlebury Corporate Offices,
Research Center* Corporate Headquarters
Naugatuck Research Center Polymer Additives,
Polymers
Pawcatuck Office, Plant, Polymer Processing
Laboratory Equipment
Machine Shop,
Tech Center
Illinois
Mapleton Plant Polymer Additives
Louisiana
Geismar Plant Crop, Polymer
Additives, Polymers,
Other
Taft Plant Polymer Additives
Gretna Plant Other
New Jersey
Perth Amboy Plant Polymer Additives
Somerville Office, Plant, Polymer Processing
Machine Shop Equipment
New York
Tarrytown Research Center* Polymer Additives,
OrganoSilicones,
Other
North Carolina
Gastonia Plant Crop, Polymer
Additives, Polymers
Ohio
Dublin Research Center Crop, Other
Pennsylvania
Petrolia Plant Other
Tennessee
Memphis Plant Polymer Additives,
Other
Texas
Marshall Plant Polymer Additives
West Virginia
Sistersville Plant, Research Center OrganoSilicones
South Charleston Administrative, Sales OrganoSilicones
Office*
INTERNATIONAL
Australia
Regency Park,
S.A. Office, Machine Shop* Crop
Seven Hills Office, Laboratory* Polymers
Belgium
Antwerp Plant* OrganoSilicones
Brussels Office* Crop, Polymer
Additives,
Polymers, Other
Brazil
Itatiba Plant OrganoSilicones
Rio Claro Plant Crop, Polymer
Additives, Polymers,
OrganoSilicones
Canada
Elmira Plant Crop, Polymer
Additives, Polymers
Guelph Research Center Crop, Polymer
Additives, Polymers
Scarborough Plant* Polymer Additives
West Hill Plant Polymer Additives
France
Dannemarie Office Polymer Processing
Equipment
Germany
Bergkamen Plant* Polymer Additives
Erkrath Office, Plant, Machine
Shop, Laboratory Polymer Processing
Equipment
Haan Office and Machine Polymer Processing
Shop Equipment
Lampertheim Plant Polymer Additives
Italy
Latina Plant Crop, Polymer
Additives, Polymers
Termoli Plant OrganoSilicones
Korea
Ansan Plant Polymer Additives,
OrganoSilicones
Mexico
Altamira Plant Polymer Additives
Cuautitlan Plant Polymer Additives,
OrganoSilicones
The Netherlands
Ankerwag Plant Crop
Amsterdam Plant Polymer Additives,
Other
Haarlem Plant Polymer Additives,
Other
Koog aan de Zaan Plant Polymer Additives,
Other
Republic of China
Kaohsiung Plant** Polymer Additives
Singapore Administrative,
Research, Sales
Office* Polymer Additives,
Polymers,
OrganoSilicones,
Other
Switzerland
Meyrin Administrative,
Research, Sales
Office* Crop, Polymer
Additives,
OrganoSilicones,
Other
Thailand
Mapthaphut Plant* Polymer Additives,
OrganoSilicones
United Kingdom
Accrington Plant*** Polymer Additives
Birmingham Office, Plant,
Machine Shop Polymer Processing
Equipment
Droitwich Plant*** Polymer Additives
Evesham Research Center Crop
Langley Office* Crop, Polymer
Additives, Polymers,
Other
____________________________
* Facility leased by the Corporation.
** Facility owned by Uniroyal Chemical Taiwan Ltd., which is 80%
owned by Uniroyal.
*** Facility owned by Baxenden Chemicals Limited, which is 53.5%
owned by the Corporation.
All facilities are considered to be in good operating condition, well
maintained, and suitable for the Corporation's requirements.
ITEM 3. LEGAL PROCEEDINGS
The Corporation is involved in claims, litigation, administrative
proceedings and investigations of various types in a number of
jurisdictions. A number of such matters involve, or may 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.
Environmental Liabilities. Each quarter, the Corporation
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 Corporation and the anticipated
time frame over which payments toward the remediation plan will occur.
The total amount accrued for such environmental liabilities at
December 31, 2002, was $128.8 million. The Corporation estimates the
potential liabilities to range from $116 million to $142 million at
December 31, 2002. It is reasonably possible that the Corporation'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 Corporation and some of its subsidiaries have been identified
by federal, state or local governmental agencies, and by other
potentially responsible parties (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. Because these regulations have been
construed to authorize joint and several liability, the EPA could seek
to recover all costs involving a waste disposal site from any one of
the PRP's for such site, including the Corporation, despite the
involvement of other PRP's. In many cases, the Corporation is one of
several hundred PRPs so identified. In a few instances, the
Corporation is one of only a handful of PRPs. In certain instances,
a number of other financially responsible PRP's are also involved, and
the Corporation expects that any ultimate liability resulting from
such matters will be apportioned between the Corporation and such
other parties. In addition, the Corporation is involved with
environmental remediation and compliance activities at some of its
current and former sites in the United States and abroad. The more
significant of these matters are described below.
.. Laurel Park -The EPA, the State of Connecticut, and the Laurel
Park Coalition (consisting of Uniroyal and a number of other parties)
have entered into a Consent Decree governing the design and
implementation of the selected remedy for the Laurel Park site.
Remedial construction began at the Laurel Park site in July 1996, and
was completed in 1998. Operation and maintenance activities at the
site are ongoing.
Litigation brought by the Laurel Park Coalition seeking
contribution to the costs from the owner/operators of the site and
later from other identified generator parties has resulted in
substantial recoveries from a number of parties. In December 2000 and
January 2001, the United States District Court for the District of
Connecticut ("District Court") issued final judgment allowing recovery
against various municipalities by the Laurel Park Coalition in the
aggregate amount of approximately $1,044,000, and declaring that the
defendants at the Laurel Park site are liable for certain stated
percentages of future response costs. As a result of a settlement
with one municipality, the aggregate amount of the outstanding
judgment has been reduced to approximately $761,000. In October
2002, the United States Second Circuit Court of Appeals ("Second
Circuit") generally affirmed the recoveries adopted by the District
Court with respect to the municipal defendants. In November 2002, the
municipal defendants filed a Petition for Rehearing En Banc with the
Second Circuit which was denied in January 2003. Immediately
following this denial, the same defendants filed a Motion to Stay
Mandate for 90 days to allow them to petition the United States
Supreme Court for a writ of certiorari.
.. Vertac - Uniroyal and its Canadian subsidiary, Uniroyal Chemical
Co./Cie (formerly known as Uniroyal Chemical Ltd./Ltee) were joined
with others as defendants in consolidated civil actions brought in the
United States District Court, Eastern District of Arkansas, Western
Division ("Court") by the United States of America, the State of
Arkansas and Hercules Incorporated ("Hercules"), relating to a Vertac
Chemical Corporation site in Jacksonville, Arkansas. Uniroyal has
been dismissed from the litigation. On May 21, 1997, the Court
entered an order finding that Uniroyal Chemical Co./Cie is jointly and
severally liable to the United States, and finding that Hercules and
Uniroyal Chemical Co./Cie are liable to each other in contribution.
On October 23, 1998, the Court entered an order granting the United
States' motion for summary judgment against Uniroyal Chemical Co./Cie
and Hercules as to the amount of its claimed removal and remediation
costs of $102.9 million at the Vertac site. Trial on the allocation
of these costs as between Uniroyal Chemical Co./Cie and Hercules
was concluded on November 6, 1998, and on February 3, 2000, the Court
entered an Order finding Uniroyal Chemical Co./Cie liable to the
United States for approximately $2,300,000 and liable to Hercules in
contribution for approximately $700,000. On April 10, 2001, the
United States Court of Appeals for the Eighth Circuit ("Appeals
Court") (i) reversed a decision in favor of the United States and
against Hercules with regard to the issue of divisibility of harm and
remanded the case back to the Court for a trial on the issue; (ii)
affirmed the finding of arranger liability against Uniroyal Co./Cie;
and (iii) set aside the findings of contribution between Hercules and
Uniroyal Co./Cie by the Court pending a decision upon remand. The
Appeals Court also deferred ruling on all constitutional issues raised
by Hercules and Uniroyal Co./Cie pending subsequent findings by the
Court. On June 6, 2001, the Appeals Court denied Uniroyal Co./Cie's
petition for rehearing by the full Appeals Court on the Appeals
Court's finding of arranger liability against Uniroyal Co./Cie and on
December 10, 2001, Uniroyal Co./Cie's Petition for a Writ of
Certiorari to the United States Supreme Court with regard to the issue
of its arranger liability was denied. On December 12, 2001, the Court
concluded hearings pursuant to the April 10, 2001 remand by the
Appeals Court and briefing on the issue of divisibility was completed
in January 2003. A decision from the Court is expected during the
second quarter of 2003.
The Corporation intends to assert all meritorious legal defenses
and all other equitable factors which are available to it with respect
to the above matters. The resolution of these matters could have a material
adverse effect on its consolidated results of operations in any given
year or other reporting period if a number of these matters are resolved
unfavorably.
.. Antitrust Investigations and Related Matters - Antitrust
Investigations - The Corporation and certain of its subsidiaries,
together with other domestic and foreign companies, are currently the
subject of coordinated criminal investigations being conducted by the
United States Department of Justice (the "DOJ") and the Canadian
Competition Bureau (the "CCB") and a coordinated civil investigation
being conducted by the European Commission (together with the DOJ and
the CCB, the "Governmental Authorities") with respect to possible
antitrust violations relating to the sale and marketing of certain
rubber processing chemicals, ethylene propylene diene monomer (EPDM)
and heat stabilizers. The investigations concern possible
anticompetitive practices, including price fixing and customer or
market allocations, undertaken by the Corporation and such
subsidiaries and certain of their officers and employees. According
to reports in the press, The Japan Fair Trade Commission (the "JFTC")
is conducting an investigation regarding heat stabilizers, impact
modifiers and processing aids for plastic. The Corporation has not
been contacted by the JFTC. The Corporation is actively cooperating
with the Governmental Authorities regarding such investigations.
Since inception of the investigations, the Corporation has been
conducting its own internal investigation with the assistance of
special counsel. Neither the Corporation, any of its subsidiaries,
nor any individual has, to date, been charged in connection with the
investigations.
It is the Corporation's understanding that the investigations by
the Governmental Authorities are, as previously stated, focused on
rubber processing chemicals, including accelerators, antioxidants and
antiozonants (with 2002 sales of $206 million), EPDM (with 2002 sales
of $135 million), and heat stabilizers, including tin-based
stabilizers and precursors, mixed metal stabilizers and epoxidized
soybean oil (ESBO) (with 2002 sales of approximately $220 million).
With respect to rubber chemicals, the Corporation has held
preliminary discussions with the DOJ regarding a possible plea to
violations of antitrust laws. At this time, the Corporation cannot
predict the outcome of those discussions, including the timing or the
terms of any agreement with the DOJ or the amount of any fines that
may be imposed. Moreover, at this time, the Corporation cannot
determine the extent to which criminal or civil fines or other
sanctions might be imposed by the other Governmental Authorities. The
Corporation has met and is continuing to meet with the Governmental
Authorities in an attempt to resolve all matters relating to the
investigations.
With respect to EPDM and heat stabilizers, the Corporation and
its affiliates that are subject to the investigations have received
from each of the Governmental Authorities verbal or written assurances
of conditional amnesty from prosecution and fines. The European
Commission's grant of conditional amnesty with respect to heat
stabilizers is presently limited to tin-based stabilizers and their
precursors, but the Corporation expects to be granted conditional
amnesty by the European Commission with respect to mixed metal
stabilizers and ESBO in the near future. The assurances of conditional
amnesty are conditioned upon several factors, including continued
cooperation with the Governmental Authorities.
As previously stated, the Corporation is conducting a continuing
internal investigation of the matters under investigation by the
Governmental Authorities, including a review as to any improper or
criminal conduct by current and former officers and employees of the
Corporation and its affected subsidiaries. Further, the Corporation
and its special counsel assisting in the investigation are reviewing
all other areas of the Corporation's business and products to
determine compliance with applicable antitrust law and with the
Corporation's antitrust guidelines and policies. In connection with
the investigations, a senior officer of the Corporation has been
placed on paid administrative leave.
The resolution of any possible antitrust violations against the
Corporation and certain of its subsidiaries and the resolution of any
civil claims now pending or hereafter asserted against them may have a
material adverse effect on the Corporation's financial condition,
results of operations and prospects. No assurances can be given
regarding the outcome or timing of these matters. Through December
31, 2002, the Corporation has incurred $6.3 million (pre-tax) of
antitrust investigation costs, and expects to continue to incur
substantial costs until all antitrust investigations are concluded.
The Corporation has named a compliance officer who will report to
the Chief Executive Officer and the Chairman of the Audit Committee.
The primary duties of the compliance officer will be to administer the
Corporation's compliance program in accordance with policies and
procedures adopted by the Board of Directors of the Corporation.
State Class Actions - The Corporation and certain of its
subsidiaries along with other companies, have been named as defendants
in twenty putative indirect purchaser class action lawsuits filed
during the period from October, 2002 through December, 2002 in state
courts in seventeen states and in the District of Columbia. The
putative class in each of the actions comprises all persons within
each of the applicable states and the District of Columbia who
purchased tires other than for resale that were manufactured using
rubber processing chemicals sold by the defendants since 1994.
The complaints principally allege that the defendants agreed to fix,
raise, stabilize and maintain the price of rubber processing chemicals
used as part of the tire manufacturing process in violation of state
antitrust and consumer protection laws and that this illegal conspiracy
caused injury to individuals who paid more to purchase tires as a result
of such anticompetitive activities. The plaintiffs seek, among other
things, treble damages of an unspecified amount, interest and attorneys'
fees and costs. The Corporation and its defendant subsidiaries have
filed or intend to file motions to dismiss on substantive and personal
jurisdictional grounds or answers with respect to each of these
actions.
These actions are in early procedural stages of litigation and,
accordingly, the Corporation cannot predict their outcome. The
Corporation and its defendant subsidiaries believe that they have
substantial defenses to these actions and intend to defend vigorously
all such actions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Corporation are as follows:
Vincent A. Calarco, age 60, has served as Chairman, President and
Chief Executive Officer of the Registrant since 1999. Mr. Calarco
served as President and Chief Executive Officer of Crompton & Knowles
from 1985 to 1999, and Chairman of the Board from 1986 to 1999. Mr.
Calarco has been a member of the Board of Directors of the Registrant
since 1999 and was a member of the Board of Directors of Crompton &
Knowles from 1985 to 1999.
Robert W. Ackley, age 61, has served as Executive Vice President,
Polymer Processing Equipment of the Registrant since 1999. Mr. Ackley
served as Vice President, Polymer Processing Equipment, of Crompton &
Knowles from 1998 to 1999 and as President of Davis-Standard
Corporation (prior to 1995, Davis-Standard Division) since 1983.
Peter Barna, age 59, has served as Senior Vice President and Chief
Financial Officer of the Registrant since 1999. Mr. Barna served as
Senior Vice President and Chief Financial Officer of Crompton &
Knowles in 1999 and as Vice President-Finance of Crompton & Knowles
from 1996 to 1999. Mr. Barna was the Principal Accounting Officer of
Crompton & Knowles from 1986 to 1999 and its Treasurer from 1980 to
1996.
John T. Ferguson II, age 56, has served as Senior Vice President and
General Counsel of the Registrant since 1999 and served as Secretary
of the Registrant from 1999 to 2000. Mr. Ferguson served as Vice
President of Crompton & Knowles from 1996 to 1999, and General Counsel
and Secretary of Crompton & Knowles from 1989 to 1999. Mr. Ferguson
served as a member of the Board of Directors of the Registrant in
1999.
Gerald H. Fickenscher, age 59, has served as Regional Vice President,
Europe, Africa & Middle East of the Registrant since 1999. Mr.
Fickenscher served as President, Dyes & Chemicals International
Operations, of Crompton & Knowles from 1994 to 1999.
Mary L. Gum, PhD., age 55, has served as Executive Vice President, OSi
Specialties & Urethanes, of the Registrant since 2002. Dr. Gum served
as Executive Vice President, OSi, from 1999 to 2002; Vice President of
Silanes, OSi, from 1997 to 1999 and as Vice President of Specialty
Fluids, OSi, from 1995 to 1997.
Edward L. Hagen, PhD., age 61, has served as Senior Vice President,
Strategy & Development of the Registrant since 2001. Dr. Hagen served
as Regional Vice President-Asia/Pacific of Uniroyal from 1995 to 2001.
Marvin H. Happel, age 63, has served as Senior Vice President,
Organization & Administration of the Registrant since 1999. Mr.
Happel served as Vice President-Organization and Administration of
Crompton & Knowles from 1996 to 1999 and Vice President-Organization
from 1986 to 1996.
Alfred F. Ingulli, age 61, has served as Executive Vice President,
Crop Protection, of the Registrant from 1999. Mr. Ingulli served as
Vice President, Crop Protection, of Crompton & Knowles from 1998 to
1999 and as Executive Vice President, Crop Protection of Uniroyal
since 1994.
John R. Jepsen, age 47, has served as Vice President and Treasurer of
the Registrant since 1999. Mr. Jepsen served as Treasurer of Crompton
& Knowles from 1998 to 1999. Mr. Jepsen served with the International
Paper Company as Assistant Treasurer, International from 1996 to 1998
and, prior to that, as Director of Corporate Finance from 1986 to
1996.
Walter K. Ruck, age 60, has served as Senior Vice President,
Operations, of the Registrant since 1999. Mr. Ruck has served as Vice
President, Operations, of Uniroyal since 1998; and served as Vice
President, Manufacturing, of Uniroyal from 1997 to 1998. He served as
Regional Vice President, Americas of Uniroyal from 1995 to 1997 and
Regional Vice President of Uniroyal from 1994 to 1995.
Barry J. Shainman, age 60, has served as Secretary of the Registrant
since 2000 and has served as Assistant General Counsel of the
Registrant since 1999. Mr. Shainman served as Secretary of Uniroyal
from 1998 to 2000 and has served as Senior Corporate Counsel of
Uniroyal since 1990.
William A. Stephenson, age 55, has served as Executive Vice President,
Plastics & Petroleum Additives, of the Registrant since 2001. Mr.
Stephenson served as Executive Vice President, Urethanes and Petroleum
Additives from 1999 to 2001; Vice President, Specialty Additives and
Urethanes, of Crompton & Knowles from 1998 to 1999 and has served as
Executive Vice President, Specialties of Uniroyal since 1994.
Michael F. Vagnini, age 46, has served as Vice President and
Controller of the Registrant since 2002; Corporate Controller of the
Registrant from 1999 to 2002 and Corporate Controller of Crompton &
Knowles from 1998 to 1999. Mr. Vagnini has served as Corporate
Controller of Uniroyal since 1995.
The term of office of each of the above-named executive officers
is until the first meeting of the Board of Directors following the
next annual meeting of stockholders and until the election and
qualification of his or her successor.
There is no family relationship between any of such officers, and
there is no arrangement or understanding between any of them and any
other person pursuant to which any such officer was selected as an
officer.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information concerning the range of market prices for the
Corporation's Common Stock on the New York Stock Exchange and the
amount of dividends per share paid thereon during the past two
years, set forth in the Notes to Consolidated Financial Statements
on page 54 of the Corporation's 2002 Annual Report to Stockholders,
is incorporated herein by reference.
The number of registered holders of Common Stock of the
Corporation on December 31, 2002, was 5,981.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the Corporation for each of its
last five fiscal years, set forth under the heading "Five Year
Selected Financial Data" on page 56 of the Corporation's 2002 Annual
Report to Stockholders, is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's discussion and analysis of the Corporation's
financial condition and results of operations, set forth under the
heading "Management's Discussion and Analysis of Financial Condition
and Results of Operations" on pages 16 through 29 of the Corporation's
2002 Annual Report to Stockholders, is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk and risk management policy is summarized under the
heading "Management's Discussion and Analysis of Financial Conditions
and Results of Operations" on pages 23 and 24 of the Corporation's
2002 Annual Report to Stockholders and is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Corporation, notes thereto, and
supplementary data, appearing on pages 30 through 56 of the
Corporation's 2002 Annual Report to Stockholders, are incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information called for by this item concerning directors of the
Corporation is included in the definitive proxy statement for the
Corporation's Annual Meeting of Stockholders to be held on April 29,
2003, under the captions "Election of Three Directors", "Board of
Directors" and "Section 16(a) Beneficial Ownership Reporting
Compliance", which is to be filed with the Commission pursuant to
Regulation 14A of the Securities Exchange Act of 1934, and such
information is incorporated herein by reference.
There is no family relationship between any of such directors,
and there is no arrangement or understanding between any of them and
any other person pursuant to which any such director was selected as
a director or nominee.
Information called for by this item concerning Executive Officers
is included in Part I pursuant to General Instruction G to Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information called for by this item is included in the definitive
proxy statement for the Corporation's Annual Meeting of Stockholders
to be held on April 29, 2003, under the caption "Officers" and
Directors' Compensation", which is to be filed with the Commission
pursuant to Regulation 14A, and such information is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information called for by this item is included in the definitive
proxy statement for the Corporation's Annual Meeting of Stockholders
to be held on April 29, 2003, under the captions "Principal Holders of
Voting Securities" and "Security Ownership of Management", which is to
be filed with the Commission pursuant to Regulation 14A, and such
information is incorporated herein by reference.
The following table gives information about shares of the
Corporation's common stock that may be issued upon the exercise of
options, warrants and rights under the Corporation's equity
compensation plans as of December 31, 2002:
Equity Compensation Plan Information
Number of
securities
remaining
available
for future
Number of issuance
securities to Weighted- under equity
be issued upon average compensation
exercise of exercise price plans
outstanding of outstanding (excluding
options, options, securities
warrants and warrants and reflected in
rights rights column (a))
(a) (b) (c)
Plan Category
Equity compensation
plans approved by
security
holders(1) 12,152,236 $11.0453 7,913,790(2)
Equity compensation
plans not approved
by security
holders(3) 987,167 7.6886 1,833
Total 13,139,403 $10.7931 7,915,623
___________
(1) Includes Crompton Corporation 2001 Employee Stock Purchase Plan;
Crompton Corporation 1998 Long Term Incentive Plan; Crompton
Corporation 1988 Long Term Incentive Plan; and 1993 Stock Option Plan
for Non-Employee Directors.
(2) Includes 1,767,488 shares of common stock available for future
issuance as of December 31, 2002, for the Crompton Corporation 2001
Employee Stock Purchase Plan.
(3) Includes Crompton Corporation 2001 Employee Stock Option Plan.
Crompton Corporation 2001 Employee Stock Option Plan
On October 23, 2001, the Corporation's Board of Directors approved the
Crompton Corporation 2001 Employee Stock Option Plan ("2001 Plan").
The 2001 Plan authorizes the Board of Directors to grant up to 1
million non-qualified stock options to key non-officer employees.
Options under the 2001 Plan will be granted at prices not less than
100% of the fair market value of the underlying common shares on the
date of grant and will expire not more than 10 years and one month
from the date of grant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
ITEM 14. CONTROLS AND PROCEDURES
Within 90 days of the filing date of this annual report, an
evaluation was performed under the supervision and with the
participation of the Corporation's management, including the
Corporation's Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of the Corporation's
disclosure controls and procedures. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the
design and operation of the Corporation's disclosure controls and
procedures are effective.
There have been no significant changes in the Corporation's
internal controls or in other factors that could significantly affect
these controls subsequent to the evaluation date.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial statements and Independent Auditors' Report, as
required by Item 8 of this form, which appear on pages 30
through 55 of the Corporation's 2002 Annual Report to
Stockholders and are incorporated herein by reference:
(i) Consolidated Statements of Operations for the years ended
December 31, 2002, 2001, and 2000;
(ii) Consolidated Balance Sheets for the years ended
December 31, 2002 and 2001;
(iii) Consolidated Statements of Cash Flows for the years
ended December 31, 2002, 2001, and 2000;
(iv) Consolidated Statements of Stockholders' Equity for the
years ended December 31, 2002, 2001 and 2000;
(v) Notes to Consolidated Financial Statements; and
(vi) Independent Auditors' Report of KPMG LLP.
2. Independent Auditors' Report and Consent, and Financial
Statement Schedule II, Valuation and Qualifying Accounts,
required by Regulation S-X. Pages S-1 and S-2 hereof.
3. The following exhibits are either filed herewith or
incorporated herein by reference to the respective reports
and registration statements identified in the parenthetical
clause following the description of the exhibit:
Exhibit No. Description
2.0 Agreement and Plan of Reorganization dated as of May 31,
1999, by and among Crompton & Knowles Corporation, Park Merger
Co. and Witco Corporation (incorporated by reference to
Appendix A to the Joint Proxy Statement-Prospectus dated July
28, 1999, as part of the Registrant's Registration Statement
on Form S-4, Registration No. 333-83901, dated July 28, 1999
("Joint Proxy Statement-Prospectus S-4 Registration
Statement")).
2.1 Amendment No. 1 to Agreement and Plan of Reorganization
dated as of July 27, 1999, by and among Crompton & Knowles
Corporation, CK Witco Corporation (formerly known as Park
Merger Co.) and Witco Corporation (incorporated by reference
to Appendix A-1 to the Joint Proxy Statement-Prospectus S-4
Registration Statement).
2.2 Agreement and Plan of Merger dated April 30, 1996, by and
among Crompton & Knowles, Tiger Merger Corp. and Uniroyal
Chemical Corporation (AUCC@) (incorporated by reference to
Exhibit 2 to the Crompton & Knowles Form 10-Q for the period
ended March 31, 1996).
2.3 Purchase Agreement between the Registrant (and its
affiliates named therein) and Akzo Nobel Surface Chemistry
L.L.C. (and its affiliates named therein), dated as of June
28, 2002 (incorporated by reference to Exhibit 2.1 to the
Registrant's Form 10-Q for the period ended June 30, 2002
("June 30, 2002 10-Q")).
2.4 Limited Liability Company Agreement by and between
Gustafson, Inc. and Trace Chemicals, Inc., effective as of
September 23, 1998, (incorporated by reference to Exhibit 2.1
to the Crompton & Knowles Form 8-K/A dated January 21, 1999
("Form 8-K/A")).
2.5 First Amendment to Limited Liability Company Agreement by
and among GT Seed Treatment Inc. (f/k/a Gustafson, Inc.),
Ecart Inc. (f/k/a Trace Chemicals, Inc.) and Bayer
Corporation, dated as of November 20, 1998, (incorporated by
reference to Exhibit 2.2 to Form 8-K/A).
2.6 Purchase Agreement by and among the Crompton & Knowles,
Uniroyal, Trace Chemicals, Inc. and Gustafson, Inc. as
Sellers, and Bayer Corporation, as Purchaser, and Gustafson
LLC, as the Company, dated as of November 20, 1998,
(incorporated by reference to Exhibit 2.3 to Form 8-K/A).
2.7 Purchase Agreement by and between Uniroyal Chemical Co./Cie
and Bayer Inc., effective as of November 20, 1998,
(incorporated by reference to Exhibit 2.4 to Form 8-K/A).
2.8 Partnership Agreement of Gustafson Partnership by and
between Uniroyal Chemical Co./Cie and Bayer Inc., effective as
of November 20, 1998, (incorporated by reference to Exhibit
2.5 to Form 8-K/A).
2.9 Joint Venture Agreement and Shareholders Agreement dated
September 18, 1998, by and between Uniroyal and GIRSA S.A. de
C.V. (incorporated by reference to Exhibit 2.6 to the
Crompton & Knowles Form 10-K for the fiscal year ended
December 26, 1998 ("1998 Form 10-K")).
2.10 Stock Purchase Agreement dated as of December 8, 1998, by
and among Crompton & Knowles and Ingredient Technology
Corporation, as Sellers, and Chr. Hansen Inc., as Purchaser
(incorporated by reference to Exhibit 2.7 to the 1998 Form 10-
K).
3(i)(a)Amended and Restated Certificate of Incorporation of the
Registrant dated September 1, 1999 (incorporated by reference
to Exhibit 3(i)(a) to the Registrant's Form 10-K for the
fiscal year ended December 31, 2001 ("2001 Form 10-K")).
3(i)(b)Certificate of Amendment of Amended and Restated
Certificate of Incorporation of the Registrant dated April
27, 2000 (incorporated by reference to Exhibit 3(i)(b) to
the Registrant's 2001 Form 10-K).
3(i)(c)Certificate of Change of Location of Registered Office and
of Registered Agent dated May 18, 2000 (incorporated by
reference to Exhibit 3(i)(c) to the Registrant's 2001 Form
10-K).
3(ii) By-laws of the Registrant (incorporated by reference to
Exhibit 3(ii) to the Registrant's 2001 Form 10-K).
4.1 Rights Agreement dated as of September 2, 1999, by and
between the Registrant and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent (incorporated by reference to Form
8-A dated September 28, 1999).
4.2 Form of $600 Million 364-Day Credit Agreement dated as of
October 28, 1999, by and among the Registrant, certain
subsidiaries of the Registrant, various banks,
The Chase Manhattan Bank, as Syndication Agent, Citibank,
N.A., as Administrative Agent and Bank of America, N.A. and
Deutsche Bank Securities Inc., as Co-Documentation Agents
(incorporated by reference to Exhibit 4.1 to the 10-Q for
the quarter ended September 30, 1999 ("September 30, 1999 10-Q")).
4.3 Form of $125 Million Amended and Restated 364-Day Credit
Agreement dated as of September 24, 2001, among the
Registrant, certain subsidiaries of the Registrant, various
banks, The Chase Manhattan Bank, as Syndication Agent,
Citibank, N.A., as Administrative Agent, Bank of American,
N.A., as Documentation Agent and J.P. Morgan Securities Inc.,
as Lead Arranger and Sole Bookrunner (incorporated by
reference to Exhibit 4.1 to the 10-Q for the quarter ended
September 30, 2001 ("September 30, 2000 10-Q")).
4.4 First Amendment dated as of December 21, 2001, to the
Amended and Restated 364-Day Credit Agreement dated as of
October 28, 1999, (as amended and restated in the form of the
Amended and Restated Credit Agreement as of September 24,
2001) among the Registrant, certain subsidiaries of the
Registrant, various banks, J.P. Morgan Bank (formerly known as
The Chase Manhattan Bank), as Syndication Agent, Citicorp USA,
Inc. (as successor to Citibank, N.A.), as Administrative
Agent, and Bank of America, N.A. and Deutsche Bank Alex Brown
Inc., as Co-Documentation Agents (incorporated by reference to
Exhibit 4.7 to the Registrant's 2001 Form 10-K).
4.5 Waiver No. 1 dated as of June 30, 2001, to the 364-Day
Credit Agreement dated as of October 28, 1999 as amended as of
October 26, 2000, among the Registrant, certain subsidiaries
of the Registrant, various banks, The Chase Manhattan Bank, as
Syndication Agent, Citibank, N.A., as Administrative Agent and
Bank of America, N.A. and Deutsche Bank Securities Inc., as Co-
Documentation Agents (incorporated by reference to Exhibit No.
4.1 to the 10-Q for the quarter ended June 30, 2001 ("June 30,
2001 10-Q")).
4.6 Form of $400 Million Five-Year Credit Agreement dated as of
October 28, 1999, by and among the Registrant, certain
subsidiaries of the Registrant, various banks, The Chase
Manhattan Bank, as Syndication Agent, Citibank, N.A., as
Administrative Agent and Bank of America, N.A. and Deutsche
Bank Securities Inc., as Co-Documentation Agents (incorporated
by reference to Exhibit 4.2 to the September 30, 1999 10-Q).
4.7 First Amendment dated as of September 24, 2001, to the Five-
Year Credit Agreement dated as of October 28, 1999, by and
among the Registrant, certain subsidiaries of the Registrant,
various banks, The Chase Manhattan Bank, as Syndication Agent,
Citibank, N.A., as Administrative Agent, Bank of America, N.A.
and Deutsche Bank Alex Brown Inc., as Co-Documentation Agents,
and J.P. Morgan Securities Inc., as Lead Arranger and Sole
Bookrunner (incorporated by reference to the September 30,
2001 10-Q).
4.8 Second Amendment dated as of December 21, 2001, to the Five-
Year Credit Agreement dated as of October 28, 1999, by and
among the Registrant, certain subsidiaries of the Registrant,
various banks, J.P. Morgan Chase Bank (formerly known as The
Chase Manhattan Bank), as Syndication Agent, Citicorp USA,
Inc. (as successor to Citibank, N.A.), as Administrative Agent
and Bank of America, N.A. and Deutsche Bank Alex Brown Inc.,
as Co-Documentation Agents (incorporated by reference to
Exhibit 4.11 to the Registrant's 2001 Form 10-K).
4.9 Third Amendment dated as of May 8, 2002, to the Five-Year
Credit Agreement dated as of October 28, 1999, by and among
the Registrant, certain subsidiaries of the Registrant,
various banks, J. P. Morgan Chase (formerly known as The Chase
Manhattan Bank), as Syndication Agent, Citicorp USA, Inc. (as
successor to Citibank, N.A.), as Administrative Agent and Bank
of America, N.A. and Deutsche Bank Securities Inc. (formerly
known as Deutsche Bank Alex Brown Inc.), as Co-Documentation
Agents (incorporated by reference to the Registrant's June 30,
2002 10-Q).
4.10 Waiver No. 1 dated as of June 30, 2001, to the Five-Year
Credit Agreement dated as of October 28, 1999, by and among
the Registrant, certain subsidiaries of the Registrant,
various banks, The Chase Manhattan Bank, as Syndication Agent,
Citibank, N.A., as Administrative Agent and Bank of America,
N.A. and Deutsche Bank Securities Inc., as Co-Documentation
Agents (incorporated by reference to Exhibit 4.2 to the June
30, 2001 Form 10-Q).
4.11 Form of Indenture, dated as of March 1, 2000, by and between
the Registrant and Citibank, N.A., relating to $600 Million
of 8 1/2% Senior Notes due 2005, including as Annex A thereto,
Form of Senior Note Pledge Agreement by and among the
Registrant, certain foreign subsidiaries of the Registrant,
and Citibank, N.A., as Collateral Agent (incorporated by
reference to Exhibit 4.13 of the 1999 Form 10-K).
4.12 Form of Purchase Agreement, dated as of March 2, 2000, by
and among the Registrant, as Seller, and Merrill Lynch, ABN
AMRO Incorporated, Banc of America Securities LLC, Chase
Securities Inc., Deutsche Bank Securities Inc., Goldman, Sachs
& Co. and Salomon Smith Barney Inc. (together, the "Initial
Purchasers"), relating to $600 Million of 8 1/2% Senior Notes
due 2005 (incorporated by reference to Exhibit 4.14 of the
1999 Form 10-K).
4.13 Form of Indenture, dated as of February 1, 1993, by and
between Witco and the Chase Manhattan Bank, N.A., as Trustee,
relating to Witco's 6.60% Notes due 2003, 7.75% Debentures due
2023, 6 1/8% Notes due 2006 and 6 7/8% Debentures due 2026,
including form of securities (incorporated by reference to
Post-Effective Amendment No. 2 to the Registration Statement
on Form S-3, Registration No. 33-58066, filed March 19, 1993).
4.14 Form of First Supplemental Indenture, dated February 1,
1996, by and among Witco, Chase Manhattan Bank, N.A., the
Initial Trustee, and Fleet National Bank of Connecticut, the
Note Trustee, relating to Witco's 6 1/8% Notes due 2006 and 6
7/8% Notes due 2026 (incorporated by reference to
Registration Statement on Form S-3, Registration Number 33-
65203, filed January 25, 1996).
4.15 Form of $600 Million of 8.50% Senior Notes due 2005, dated
June 9, 2000, registered for public trading with the U.S.
Securities and Exchange Commission and issued in exchange for
identical securities sold in March 2000, which were not
registered for public trading (incorporated by reference to
Exhibit 4 of the Registrant's Form 10-Q for the quarter ended
June 30, 2000).
10.1+ Supplemental Medical Reimbursement Plan (incorporated by
reference to Exhibit 10(n) to the Crompton & Knowles Form 10-K
for the fiscal year ended December 27, 1980).
10.2+ Supplemental Dental Reimbursement Plan (incorporated by
reference to Exhibit 10(o) to the Crompton & Knowles Form 10-K
for the fiscal year ended December 27, 1980).
10.3+ Form of Employment Agreement dated as of July 29, 2002, by and
between the Registrant and various of its executive officers
(incorporated by reference to Exhibit 10.1 to the Registrant's
Form 10-Q for the period ended September 30, 2002 ("September
30, 2002 Form 10-Q")).
10.4+ Form of Employment Agreement dated as of August 21, 1996,
between a subsidiary of the Registrant and three executive
officers of the Registrant (incorporated by reference to
Exhibit 10.28 to the UCC/Uniroyal Form 10-K for the fiscal
year ended September 28, 1996).
10.5+ Form of Supplemental Retirement Agreement dated as of
August 21, 1996, between a subsidiary of the Registrant and
two executive officers of the Registrant (incorporated by
reference to Exhibit 10.29 to the UCC/Uniroyal Form 10-K for
the fiscal year ended September 28, 1996).
10.6+ Form of Supplemental Retirement Agreement dated as of
August 21, 1996, between a subsidiary of the Registrant and
two executive officers of the Registrant (incorporated by
reference to Exhibit 10.30 to the UCC/Uniroyal Form 10-K for
the fiscal year ended September 28, 1996).
10.7+ Supplemental Retirement Agreement Trust Agreement dated
October 20, 1993, between Crompton & Knowles and Shawmut
Bank, N.A. (incorporated by reference to Exhibit 10(l) to
the Crompton & Knowles Form 10-K for the fiscal year ended
December 25, 1993).
10.8(i)+ Crompton Corporation Benefit Equalization Plan, amended as
of April 30, 2002 (incorporated by reference to Exhibit 10.1
to the Registrant's Form 10-Q for the period ended March 31,
2002 ("March 31, 2002 Form 10-Q").
10.8(ii)+ Crompton Corporation Amended Benefit Equalization Plan,
dated October 22, 2002 (incorporated by reference to Exhibit
10.2 to the Registrant's September 30, 2002 Form 10-Q).
10.9+ Amended Benefit Equalization Plan Trust Agreement dated
October 20, 1993, between Crompton & Knowles and Shawmut
Bank, N.A. (incorporated by reference to Exhibit 10(n) to
the Crompton & Knowles Form 10-K for the fiscal year ended
December 25, 1993).
10.10+ Amended Crompton Corporation 1988 Long Term Incentive Plan
(incorporated by reference to Exhibit 10.10+ to the
Registrant's 2001 Form 10-K).
10.11 Trust Agreement dated as of May 15, 1989, between Crompton
& Knowles and Shawmut Worcester County Bank, N.A. and First
Amendment thereto dated as of February 8, 1990
(incorporated by reference to Exhibit 10(w) to the Crompton
& Knowles Form 10-K for the fiscal year ended December 30,
1989).
10.12+ Restricted Stock Plan for Directors of Crompton & Knowles
approved by the stockholders on April 9, 1991 (incorporated
by reference to Exhibit 10(z) to the Crompton & Knowles Form
10-K for the fiscal year ended December 28, 1991).
10.13+ Amended 1993 Stock Option Plan for Non-Employee Directors
(incorporated by reference to Exhibit 10.21 to the Crompton &
Knowles Form 10-K for the fiscal year ended December 26,
1998).
10.14+ UCC Purchase Right Plan, as amended and restated as of
March 16, 1995 (incorporated by reference to Exhibit 10.1 to
the UCC Form 10-Q for the period ended April 2, 1995 ("UCC
April 1995 Form 10-Q")).
10.15+ UCC 1993 Stock Option Plan (incorporated by reference to
Exhibit 28.1 to UCC's Registration Statement No. 33-62030 on
Form S-8, filed on May 4, 1993).
10.16+ Form of Amendment No. 2 to the UCC 1993 Stock Option Plan
(incorporated by reference to Exhibit 10.2 to the UCC April
1995 Form 10-Q).
10.17+ Form of Executive Stock Option Agreement, dated as of
November 15, 1993 (incorporated by reference to Exhibit
10.22 to the UCC 1994 Form 10-K).
10.18+ Form of Amended and Restated 1996 - 1998 Long Term Performance
Award Agreement entered into in 1996 between Crompton &
Knowles or one of its subsidiaries and thirteen of the
executive officers of Crompton & Knowles
(incorporated by reference to Exhibit 10.27 to the Crompton &
Knowles Form 10-K for the fiscal year ended December 27,
1997).
10.19 Second Amended and Restated Lease Agreement between the
Middlebury Partnership, as Lessor, and Uniroyal, as Lessee,
dated as of August 28, 1997 (incorporated by reference to
Exhibit 10 to the UCC/Uniroyal 10-Q for the quarter ended
September 27, 1997).
10.20 Form of Receivables Sale Agreement, dated as of December
11, 1998, by and among Crompton & Knowles, as Initial
Collection Agent, Crompton & Knowles Receivables
Corporation, as Seller, ABN AMRO Bank N.V., as Agent, the
Enhancer, and the Liquidity Provider, and Windmill Funding
Corporation (incorporated by reference to Exhibit 10.291 to
the Crompton & Knowles Form 10-K for the fiscal year ended
December 26, 1998).
10.201 Amended and Restated Receivables Sale Agreement, dated as of
January 18, 2002, among Crompton & Knowles Receivables
Corporation, as the Seller, the Registrant, as the Initial
Collection Agent, ABN AMRO Bank N.V., as the Agent, certain
liquidity providers, ABN AMRO Bank, N.V., as the Enhancer, and
Amsterdam Funding Corporation (incorporated by reference to
Exhibit 10.201 to the Registrant's 2001 Form 10-K).
10.202 First Amendment dated as of January 17, 2003, to the Amended
and Restated Receivables Sale Agreement, dated as of January
18, 2002, among Crompton & Knowles Receivables Corporation, as
the Seller, the Registrant, as the Initial Collection Agent,
ABN AMRO Bank N.V., as the Agent, certain liquidity providers,
ABN AMRO Bank, N.V., as the Enhancer, and Amsterdam Funding
Corporation (filed herewith*).
10.203 Form of Receivables Purchase Agreement, dated as of December
11, 1998, by and among Crompton & Knowles, as Initial
Collection Agent, and certain of its subsidiaries, as Sellers,
Crompton & Knowles Receivables Corporation, as Buyer, and ABN
AMRO Bank N.V., as Agent (incorporated by reference to
Exhibit 10.292 to the Crompton & Knowles Form 10-K for the
fiscal year ended December 26, 1998).
10.204 Amendment Number 1 dated as of December 9, 1999, to the
Receivables Purchase Agreement, dated as of December 11, 1998,
by and among CK Witco Corporation (as successor by merger to
Crompton & Knowles), as Initial Collection Agent, and certain
of its subsidiaries, as Sellers, Crompton & Knowles
Receivables Corporation, as Buyer, and ABN AMRO Bank N.V., as
Agent (incorporated by reference to Exhibit 10.265 to Form 10-
K for the fiscal year ended December 31, 2000 ("2000 Form 10-
K").
10.205 Amendment Number 2 dated as of November 20, 2000, to the
Receivables Purchase Agreement, dated as of December 11, 1998,
by and among the Registrant (as successor to Crompton &
Knowles), as Initial Collection Agent, and certain of its
subsidiaries, as Sellers, Crompton & Knowles Receivables
Corporation, as Buyer, and ABN AMRO Bank N.V., as Agent
(incorporated by reference to Exhibit 10.266 to the 2000 Form
10-K).
10.206 Amendment Number 3 dated as of February 1, 2001, to the
Receivables Purchase Agreement dated as of December 11, 1998,
by and among the Registrant (as successor to Crompton &
Knowles), as Initial Collection Agent, and certain of its
subsidiaries, as Sellers, Crompton & Knowles Receivables
Corporation, as Buyer, and ABN AMRO Bank N.V., as Agent
(incorporated by reference to Exhibit 10.267 to the 2000 Form
10-K).
10.207 Letter Agreement dated as of January 18, 2002, to the
Receivables Purchase Agreement dated as of December 11, 1998,
by an among the Registrant (as successor to Crompton &
Knowles), as Initial Collection Agent, and certain of its
subsidiaries, as Sellers, Crompton & Knowles Receivables
Corporation, as Buyer, and Crompton Sales Company, Inc. and
ABN AMRO Bank N.V., as Agent (incorporated by reference to
Exhibit 10.206 to the Registrant's 2001 Form 10-K).
10.21+ Amended Crompton Corporation 1998 Long Term Incentive Plan
(incorporated by reference to Exhibit 10.21 to the
Registrant's 2001 Form 10-K).
10.22+ Amended and Restated Employment Agreement by and between
Crompton & Knowles and Vincent A. Calarco dated May 31, 1999
(incorporated by reference to Exhibit 10.1 to the Crompton &
Knowles Form 10-Q for the quarter ended June 26, 1999).
10.23+ Form of Merger Synergy Restricted Stock Agreement, dated as of
October 19, 1999, by and between the Registrant and various of
its executive officers (incorporated by reference to Exhibit
10.32 to the 1999 Form 10-K).
10.24+ Form of Supplemental Retirement Agreement, dated as of October
21, 1999, by and between the Registrant and various of its
executive officers (incorporated by reference to Exhibit 10.35
of the 1999 Form 10-K).
10.25+ 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 (incorporated by reference
to Exhibit 10 to the 10-Q for the quarter ended March 31,
2001).
10.26+ Form of 2001 Management Incentive Plan dated as of March 20,
2001, by and between the Registrant and various key management
personnel (incorporated by reference to Exhibit 10.26+ to the
Registrant's 2001 Form 10-K).
10.27+ Form of 2002 Management Incentive Plan dated as of February 8,
2002, by and between the Registrant and various key management
personnel (incorporated by reference to Exhibit 10.27+ to the
Registrant's 2001 Form 10-K).
10.28+ Form of 2002-2004 Long-Term Incentive Award Agreement, dated
as of March 26, 2002, by and between the Registrant and
various of its executive officers (incorporated by reference
to Exhibit 10.1 to the Registrant's March 31, 2002 Form 10-Q).
13 2002 Annual Report to Stockholders of the Registrant. (Not
to be deemed filed with the Securities and Exchange Commission
except those portions expressly incorporated by reference into
this report on Form 10-K.) (filed herewith*).
21 Subsidiaries of the Registrant (filed herewith*).
23 Consent of independent auditors. (See Item 15(a)2 herein.)
(filed herewith*).
24 Power of attorney from directors and executive officers of
the Registrant authorizing signature of this report.
(Original on file at principal executive offices of
Registrant.) (filed herewith*).
99.1 Certification of Periodic Financial Reports by the
Registrant's Chief Executive Officer (filed herewith*).
99.2 Certification of Periodic Financial Reports by the
Registrant's Chief Financial Officer (filed herewith*).
* Copies of these Exhibits are annexed to this report on Form 10-K
provided to the Securities and Exchange Commission and the New York
Stock Exchange.
+ This Exhibit is a compensatory plan, contract or arrangement in
which one or more directors or executive officers of the Registrant
participate.
(b) Reports on Form 8-K filed in fourth quarter 2002
During the fiscal fourth quarter of 2002, the Registrant filed a
Current Report on Form 8-K dated December 12, 2002, reporting on items
5 and 7, and a Current Report on Form 8-K dated October 8, 2002,
reporting on items 5 and 7.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
Date: March 20, 2003 By: /s/Peter Barna
Peter Barna
Senior Vice President &
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the date
indicated.
Name Title
Vincent A. Calarco* Chairman of the Board, President,
and Director
(Principal Executive Officer)
Peter Barna* Senior Vice President
(Chief Financial Officer)
Michael F. Vagnini* Vice President and Controller
(Principal Accounting Officer)
Robert A. Fox* Director
Roger L. Headrick* Director
Leo I. Higdon, Jr.* Director
C. A. Piccolo* Director
Bruce F. Wesson* Director
Patricia K. Woolf* Director
Date: March 20, 2003 *By:/s/Peter Barna
Peter Barna
as attorney-in-fact
CROMPTON CORPORATION
Certifications
I, Vincent A. Calarco certify that:
1. I have reviewed this annual report on Form 10-K of Crompton
Corporation;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this annual report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: March 20, 2003 /s/Vincent A. Calarco
President and
Chief Executive Officer
CROMPTON CORPORATION
Certifications
I, Peter Barna, certify that:
1. I have reviewed this annual report on Form 10-K of Crompton
Corporation;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this annual report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: March 20, 2003 /s/Peter Barna
Senior Vice President and
Chief Financial Officer
Independent Auditors' Report and Consent
The Board of Directors and Stockholders
Crompton Corporation:
Under date of January 31, 2003, we reported on the
consolidated balance sheets of Crompton Corporation and
subsidiaries (the Company) as of December 31, 2002 and 2001,
and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the years in
the three-year period ended December 31, 2002, which are
incorporated by reference in this Form 10-K for the year
2002. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the
related consolidated financial statement schedule included
in this Form 10-K for the year 2002. This financial
statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on
this financial statement schedule based on our audit.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
We consent to the incorporation by reference in the
registration statements (Nos. 33-21246, 33-42280, 33-
67600, 333-62429, 333-87035, 333-60422, 333-71030, 333-71032
and 333-87886) on Form S-8 of Crompton Corporation of our
report, dated January 31, 2003, with respect to the
consolidated balance sheets of Crompton Corporation and
subsidiaries as of December 31, 2002 and 2001, and the
related consolidated statements of operations, stockholders'
equity and cash flows for each of the years in the three-
year period ended December 31, 2002, which report is
incorporated by reference in the December 31, 2002 Annual
Report on Form 10-K of Crompton Corporation.
Our report refers to the adoption of Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible
Assets.
/s/KPMG LLP
Stamford, Connecticut
March 17, 2002
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Schedule II
CROMPTON CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In thousands of dollars)
Additions
Balance at charged to Adjustments Balance
beginning costs and at end
of year expenses Recurring Other of year
Fiscal Year ended
December 31, 2002:
Allowance for
doubtful accounts $ 16,896 $ 5,157 $(6,127)(1) $ 0 $ 15,926
Accumulated
amortization
of cost in
excess of
acquired net
assets N/A (2)
Accumulated
amortization
of other
intangible
assets 160,867 12,775 1,218(3) (754)(4) 174,106
Fiscal Year ended
December 31, 2001:
Allowance for
doubtful accounts $ 22,134 $ 4,499 $(8,864)(1) $(873)(5) $ 16,896
Accumulated
amortization
of cost in
excess of
acquired net
assets 73,796 26,056 (220)(3) (2,568)(6) 97,064
Accumulated
amortization
of other
intangible
assets 148,388 12,804 (244)(3) (81)(7) 160,867
Fiscal Year ended
December 31, 2000:
Allowance for
doubtful accounts $ 23,356 $ 3,773 $(4,995)(1) $ 0 $ 22,134
Accumulated
amortization
of cost in
excess of
acquired net
assets 49,403 26,465 (155)(3) (1,917)(4) 73,796
Accumulated
amortization
of other
intangible
assets 135,539 12,805 (98)(3) 142(4) 148,388
(1) Represents accounts written off as uncollectible (net of
recoveries), and the translation effect
of accounts denominated in foreign currencies.
(2) Effective with the January 1, 2002 implementation of FASB
Statement No. 142, Goodwill is no longer amortized.
(3) Represents the translation effect of intangible assets denominated
in foreign currencies.
(4) Represents primarily intangible asset retirements.
(5) Represents the disposition of the industrial colors business.
(6) Represents primarily impairment of goodwill related to the rubber
chemicals and trilene businesses.
(7) Represents primarily the disposition of the industrial colors
business partially offset by the impairment of intangible assets
relating to the rubber chemicals business.
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