Crompton Reports Fourth Quarter and Full Year Results; Continues to Ma

    Business Editors

    MIDDLEBURY, Conn.--(BUSINESS WIRE)--Feb. 3, 2005--Crompton Corporation (NYSE: CK) reported a fourth quarter net loss of $55.9 million, or 49 cents per share, compared to a net loss of $58 million, or 52 cents per share, in the fourth quarter of 2003.
    The net loss for the fourth quarter of 2004 of $55.9 million, or 49 cents per share, included pre-tax charges for antitrust costs of $96.9 million (including a charge of $93.1 million in connection with the expected settlement of three direct purchaser class action lawsuits), facility closures, severance and related costs of $17.1 million, an $8 million charge related to an environmental matter, and pre-tax gains of $2.0 million related to the earlier divestment of our 50% interest in the Gustafson joint venture and $4.3 million related to higher equity income resulting from an income tax adjustment for our Rubicon joint venture.
    The net loss for the fourth quarter of 2003 of $58 million, or 52 cents per share, included pre-tax charges for antitrust costs of $51.5 million (including a charge of $45.2 million relating to the settlement of U.S. and Canadian antitrust fines), and facility closures, severance and related costs of $5.5 million.
    Fourth quarter net sales of $639.3 million were 14 percent above the prior year with nine percent due to improved selling prices, three percent due to the favorable impact of foreign currency translation, and two percent due to improved unit volume.
    "We have made significant strides towards meeting key objectives," said Robert L. Wood, chairman, president and chief executive officer. "We recently announced a major expected settlement of antitrust-related litigation, and improved our margins by raising prices and reducing costs. However, our reported earnings continue to suffer from a number of legacy issues that we are working to put behind us. In addition, our work on pricing is far from complete as we expect further significant increases in raw material and energy costs in 2005.
    "We also completed our organizational redesign, which will result in a $50 million improvement in earnings this year. Cash from operations increased in the fourth quarter compared to the prior year, and our recent refinancing, combined with improved earnings from operations, is providing us the flexibility to move forward in putting antitrust matters behind us so that we can, over time, focus on reducing our debt. By setting clear goals for our organization and executing well, we made considerable progress in 2004. We have plans and strategies in place to continue to improve our business platform and our earnings, all with the objective of building the world's best specialty chemicals company."
    For the year ended December 31, 2004, the Company reported a net loss of $34.6 million, or 30 cents per share, compared to net earnings of $19 million, or 17 cents per share, for the year ended December 31, 2003.
    The net loss for the year ended December 31, 2004 included an after-tax gain on the sale of discontinued operations of $2.1 million, or two cents per share, resulting from a purchase price adjustment settlement and other matters related to the July 31, 2003 sale of our OrganoSilicones business unit. The net loss from continuing operations for the year ended December 31, 2004 of $36.7 million, or 32 cents per share, included pre-tax divestment gains of $96.6 million primarily from the sale of our 50% interest in the Gustafson seed treatment joint venture, higher equity income of $4.3 million resulting from an income tax adjustment for our Rubicon joint venture, and pre-tax charges for antitrust costs of $113.7 million, facility closures, severance and related costs of $63.1 million, a loss on the early extinguishment of debt of $20.1 million in connection with our refinancing completed on August 16, 2004, supplemental executive retirement costs of $8.1 million and an $8 million charge related to an environmental matter.
    Net earnings for the year ended December 31, 2003 included an after-tax gain on the sale of discontinued operations of $111.7 million, or 99 cents per share, resulting from the sale of our OrganoSilicones business unit, after-tax earnings from discontinued operations of $26.3 million, or 23 cents per share, and a cumulative effect of accounting change of $0.4 million. The loss from continuing operations for the year ended December 31, 2003 of $118.7 million, or $1.05 per share, included pre-tax charges for antitrust costs of $77.7 million, a loss on the early extinguishment of debt of $24.7 million and facility closures, severance and related costs of $19.6 million.
    The tax rate for the year ended December 31, 2004 was a benefit of 56 percent compared to a benefit of 23 percent for the year ended December 31, 2003. The 2004 effective tax rate was impacted by reserve adjustments largely due to the resolution of prior years' tax audits, offset in part by the $98.1 million of antitrust settlements in 2004, which are partially deductible. The 2003 effective tax rate reflected $45.2 million of antitrust fines that were not deductible for tax purposes.
    Net sales for the year ended December 31, 2004 of $2.5 billion were 17 percent above the $2.2 billion in the year ended December 31, 2003. This increase was due to improved unit volume of five percent, sales attributable to the GE Specialty Chemicals business that the Company acquired on July 31, 2003 of five percent, improved selling prices of four percent, and favorable foreign currency translation of three percent.
    Fourth quarter operating results for the Company's reporting segments are summarized as follows:

    Polymer Products

    Polymer additives sales of $366.3 million were up 13% from the prior year due to improved pricing of 11% and favorable foreign currency translation of three percent, offset in part by a one percent decline in unit volume. Plastic additives sales increased 15% due mainly to higher selling prices. Rubber and urethane additives sales each rose two percent mainly as a result of higher selling prices and favorable foreign currency translation, partially offset by lower unit volume. Petroleum additives sales were up 25% due primarily to improved pricing and higher unit volume. Operating profit of $20.4 million for polymer additives was up $21.3 million from the fourth quarter of 2003 primarily as a result of favorable pricing and lower operating costs mainly attributable to cost saving programs, offset in part by higher raw material costs.
    Polymers sales of $87.7 million increased 21% from the prior year due to an increase in selling prices of 11%, higher unit volume of eight percent and favorable foreign currency translation of two percent. EPDM sales were up 29% due mainly to favorable pricing and higher unit volume. Urethanes sales rose 13% mainly as a result of higher unit volume. Operating profit for polymers of $16.0 million was up $8.4 million from the prior year due primarily to improved pricing, savings related to cost reduction initiatives and increased unit volume, offset in part by higher raw material and energy costs.
    Polymer processing equipment sales of $54.7 million were up 17% from the prior year due to higher unit volume of 13%, favorable foreign currency translation of three percent and a one percent improvement in pricing. Operating profit for polymer processing equipment of $3.3 million was down 5% from the fourth quarter of 2003 as the impact of higher unit volume and favorable pricing was more than offset by higher costs, including warranty and product performance reserves. The backlog at the end of December of $86 million was up $24 million from the end of 2003.

    Specialty Products

    Crop protection sales of $69.6 million rose 14% from the prior year due to higher unit volume of nine percent, favorable foreign currency translation of three percent and a two percent improvement in selling prices. Operating profit for crop protection of $9.8 million was down $4.3 million or 31% from the prior year due to the absence of prior year Gustafson equity income of $6.4 million, offset by higher unit volume and favorable pricing.
    Refined products sales of $65.0 million increased 10% from the prior year due to improved pricing of 10% and favorable foreign currency translation of two percent, partially offset by a two percent decline in unit volume. The operating loss for refined products of $37 thousand was favorable by $2.9 million versus the fourth quarter of 2003 due primarily to improved pricing and lower operating costs mainly relating to the absence of expenses resulting from a prior year plant shutdown and cost saving initiatives, offset in part by higher raw material costs.

    The Company will post informational slides to the Investor Relations section of its Web site that investors may wish to refer to during Crompton's teleconference and live audio webcast on February 3, 2005 at 9:00 a.m. EST. The dial-in number for the call is (612) 332-0725. Replay of the call will be available for two weeks starting at 12:30 p.m. on February 3. To access the replay, call (320) 365-3844 and enter access code 765572.

    Crompton Corporation, with annual sales of $2.5 billion, is a producer and marketer of specialty chemicals and polymer products and equipment. Additional information concerning Crompton Corporation is available at www.cromptoncorp.com.

    Forward-Looking Statements

    Certain statements made in this release are forward-looking statements that involve risks and uncertainties, including, but not limited to, general economic conditions, the outcome and timing of antitrust investigations and related civil lawsuits to which the Company is subject, the ability to obtain selling price increases, pension and other post-retirement benefit plan assumptions, energy and raw material prices and availability, production capacity, changes in interest rates and foreign currency exchange rates, changes in technology, market demand and customer requirements, the enactment of more stringent environmental laws and regulations, the ability to realize expected cost savings under the Company's cost reduction initiatives, the amount of any additional earn-out payments from GE, the ability to reduce the Company's debt levels, and other risks and uncertainties detailed in the Company's filings with the Securities and Exchange Commission. These statements are based on the Company's estimates and assumptions and on currently available information. The forward-looking statements include information concerning our possible or assumed future results of operations, and the Company's actual results may differ significantly from the results discussed. Forward-looking information is intended to reflect opinions as of the date this release was issued and such information will not necessarily be updated by the Company.

CROMPTON CORPORATION Consolidated Statements of Operations Fourth quarter and twelve months ended 2004 and 2003 (In thousands of dollars, except per share data)

Fourth Quarter Twelve months ended ------------------ --------------------- 2004 2003 2004 2003 --------- -------- ---------- ----------

Net sales $ 639,278 $560,981 $2,549,762 $2,185,043

Cost of products sold 485,669 426,243 1,907,226 1,616,092 Selling, general and admin. 82,678 89,422 364,062 353,026 Depreciation and amortization 33,030 30,553 126,086 115,369 Research and development 12,122 13,914 49,577 51,467 Equity income (4,271) (6,400) (14,109) (13,169) Facility closures, severance and related costs 17,050 5,489 63,115 19,560 Antitrust costs 96,907 51,456 113,736 77,716 --------- -------- ---------- ----------

Operating loss (83,907) (49,696) (59,931) (35,018) Interest expense 22,775 16,715 78,441 89,653 Loss on early extinguishment of debt - - 20,063 24,699 Other (income) expense, net 7,577 (2,071) (75,036) 5,383 --------- -------- ---------- ----------

Loss from continuing operations before income taxes and cumulative effect of accounting change (114,259) (64,340) (83,399) (154,753) Income tax benefit (58,342) (6,311) (46,667) (36,102) --------- -------- ---------- ----------

Loss from continuing operations before cumulative effect of accounting change (55,917) (58,029) (36,732) (118,651) Earnings from discontinued operations - - - 26,314 Gain on sale of discontinued operations - - 2,142 111,692 Cumulative effect of accounting change - - - (401) --------- -------- ---------- ----------

Net earnings (loss) $ (55,917)$(58,029)$ (34,590)$ 18,954 ========= ======== ========== ==========

Basic and diluted earnings (loss) per common share: Loss from continuing operations before cumulative effect of accounting change $ (0.49)$ (0.52)$ (0.32)$ (1.05) Earnings from discontinued operations - - - 0.23 Gain on sale of discontinued operations - - 0.02 0.99 Cumulative effect of accounting change - - - - --------- -------- ---------- ---------- Net earnings (loss) $ (0.49)$ (0.52)$ (0.30)$ 0.17 ========= ======== ========== ==========

Weighted average shares outstanding 115,121 112,166 114,736 112,531 ========= ======== ========== ==========

CROMPTON CORPORATION Consolidated Balance Sheets December 31, 2004 and 2003 (In thousands of dollars)

December December 31, 31, 2004 2003 ---------- ---------- ASSETS

CURRENT ASSETS Cash $ 158,700 $ 39,213 Accounts receivable 242,435 210,190 Inventories 427,933 390,199 Other current assets 167,270 170,852 ---------- ---------- Total current assets 996,338 810,454 ---------- ----------

NON-CURRENT ASSETS Property, plant and equipment 734,529 774,612 Cost in excess of acquired net assets 407,975 418,607 Other assets 539,867 525,509 ---------- ----------

$2,678,709 $2,529,182 ========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES Short-term borrowings $ 4,294 $ 60,695 Accounts payable 231,473 232,127 Accrued expenses 342,161 267,472 Income taxes payable 107,686 130,284 Other current liabilities 23,555 10,667 ---------- ---------- Total current liabilities 709,169 701,245 ---------- ----------

NON-CURRENT LIABILITIES Long-term debt 862,251 754,018 Pension and post-retirement health care liabilities 566,759 566,966 Other liabilities 211,550 204,244

STOCKHOLDERS' EQUITY Common stock 1,192 1,192 Additional paid-in capital 1,032,282 1,034,027 Accumulated deficit (647,678) (590,157) Accumulated other comprehensive loss (22,372) (96,463) Treasury stock at cost (34,444) (45,890) ---------- ---------- Total stockholders' equity 328,980 302,709 ---------- ----------

$2,678,709 $2,529,182 ========== ==========

CROMPTON CORPORATION Consolidated Statements of Cash Flows Twelve months ended 2004 and 2003 (In thousands of dollars)

Twelve Months Ended ------------------- Increase (decrease) in cash 2004 2003 ---------------------------------------------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings (loss) $ (34,590)$ 18,954 Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operations: Gain on sale of Gustafson joint venture (92,938) - Cumulative effect of accounting change - 401 Gain on sale of discontinued operations (2,142) (111,692) Loss on early extinguishment of debt 20,063 24,699 Depreciation and amortization 126,086 136,087 Equity income (14,109) (13,169) Changes in assets and liabilities, net: Accounts receivable 5,090 75,407 Accounts receivable - securitization (9,530) (38,051) Inventories (17,127) 39,421 Accounts payable (7,040) (82,220) Other 62,513 (64,667) --------- --------- Net cash provided by (used in) operations 36,276 (14,830) --------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES Net proceeds from divestments 151,219 633,427 Capital expenditures (65,231) (87,591) Other investing activities 253 1,707 --------- --------- Net cash provided by investing activities 86,241 547,543 --------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES (Payments to) proceeds from domestic credit facility (57,000) 32,000 Payments on short-term borrowings (349,956) (1,824) Payments on long-term borrowings (140,006) (478,380) Proceeds from long-term borrowings 597,499 - Premium paid on early extinguishment of debt (19,044) (23,804) Payments for debt issuance costs (23,113) - Dividends paid (22,931) (22,556) Treasury stock acquired - (22,080) Other financing activities 8,606 2,323 --------- --------- Net cash used in financing activities (5,945) (514,321) --------- ---------

CASH Effect of exchange rates on cash 2,915 3,880 --------- ---------

Change in cash 119,487 22,272 Cash at beginning of period 39,213 16,941 --------- ---------

Cash at end of period $ 158,700 $ 39,213 ========= =========

CROMPTON CORPORATION Segment Sales and Operating Loss Fourth quarter and twelve months ended 2004 and 2003 (In thousands of dollars)

Fourth Quarter Twelve Months Ended ----------------- --------------------- 2004 2003 2004 2003 -------- -------- ---------- ---------- NET SALES Polymer Products Polymer Additives $366,288 $324,682 $1,465,610 $1,232,022 Polymers 87,705 72,519 333,986 285,669 Polymer Processing Equipment 54,694 46,611 180,009 166,539 Eliminations (4,004) (2,810) (14,968) (13,302) -------- -------- ---------- ---------- 504,683 441,002 1,964,637 1,670,928 -------- -------- ---------- ----------

Specialty Products Crop Protection 69,603 61,048 320,594 270,870 Refined Products 64,992 58,931 264,531 243,245 -------- -------- ---------- ---------- 134,595 119,979 585,125 514,115 -------- -------- ---------- ----------

Total net sales $639,278 $560,981 $2,549,762 $2,185,043 ======== ======== ========== ==========

OPERATING PROFIT Polymer Products Polymer Additives $ 20,350 $ (907)$ 50,206 $ 24,392 Polymers 15,955 7,515 51,290 28,018 Polymer Processing Equipment 3,259 3,427 3,360 5,164 -------- -------- ---------- ---------- 39,564 10,035 104,856 57,574 -------- -------- ---------- ----------

Specialty Products Crop Protection 9,785 14,130 85,695 64,963 Refined Products (37) (2,915) 126 (3,283) -------- -------- ---------- ---------- 9,748 11,215 85,821 61,680 -------- -------- ---------- ----------

General corporate expense (19,262) (14,001) (73,757) (48,551) Unabsorbed overhead expense from discontinued operations - - - (8,445) Facility closures, severance and related costs (17,050) (5,489) (63,115) (19,560) Antitrust costs (96,907) (51,456) (113,736) (77,716)

-------- -------- ---------- ---------- Total operating loss $(83,907)$(49,696)$ (59,931)$ (35,018) ======== ======== ========== ==========

CROMPTON CORPORATION SUPPLEMENTARY SCHEDULE I Major Factors Affecting Operating Results ------------------------ Fourth quarter and twelve months ended 2004 versus 2003 (In millions of dollars)

The following table summarizes the major factors contributing to the changes in fourth quarter and twelve months operating results versus the prior year:

Fourth Quarter Twelve Months Ended ---------------- ---------------------- Pre-tax Pre-tax Net Earnings Net Earnings Sales (Loss) Sales (Loss) ------- -------- --------- ------------

2003 $561.0 $(64.3)* $ 2,185.0 $(154.8)* 2003 Facility closures, severance and related costs - 5.5 - 19.6 2003 Antitrust costs - 51.5 - 77.7 2003 Loss on early extinguishment of debt - - - 24.7 ------- -------- --------- ------------ 561.0 (7.3) 2,185.0 (32.8)

GE Specialty Chemicals business acquired 7/31/03 - - 103.6 6.3 Improved unit volume/mix 12.4 7.4 107.1 37.4 Higher selling prices 51.7 51.7 93.5 93.5 Foreign currency translation impact 14.2 (1.5) 60.6 (2.4) Cost savings - 15.0 - 55.8 Higher raw materials/energy costs - (42.7) - (102.8) Interest expense impact - (6.1) - 11.2 Lower Gustafson equity income - (6.4) - (3.2) Higher Rubicon equity income - 4.3 - 4.3 Gustafson product liability claim - - - (3.0) Higher management incentive plan expense (1.3) (8.4) Higher legal and environmental expense (6.4) (5.3) Unfavorable foreign exchange - (7.6) - (6.3) Sarbanes-Oxley compliance and audit fees (3.3) (4.5) Manufacturing absorption variance impact - 4.3 - (2.2) Other - (2.0) - (12.6) ------- -------- --------- ------------ 639.3 (1.9) 2,549.8 25.0

2004 Facility closures, severance and related costs - (17.0) - (63.1) 2004 Antitrust costs - (96.9) - (113.7) 2004 Loss on early extinguishment of debt - - - (20.1) 2004 Supplemental executive retirement costs - (0.5) - (8.1) 2004 Divestment gains, primarily Gustafson - 2.0 - 96.6

------- -------- --------- ------------ 2004 $639.3 $(114.3)* $2,549.8 $(83.4)* ======= ======== ========= ============

* Represents the loss from continuing operations before income taxes and cumulative effect of accounting change.

CROMPTON CORPORATION SUPPLEMENTARY SCHEDULE II Consolidated Statements of Cash Flows ------------------------- Fourth quarter and third quarter ended 2004 and 2003 (In thousands of dollars)

Fourth Quarter Ended Third Quarter Ended -------------------- -------------------- Increase (decrease) in cash 2004 2003 2004 2003 ---------------------------- -------- -------- --------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings (loss) $(55,917)$(58,029)$ (40,710)$ 80,247 Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operations: Gain on sale of Gustafson joint venture (2,000) - - - Gain on sale of discontinued operations - - (2,142) (111,692) Loss on early extinguishment of debt - - 20,063 24,699 Depreciation and amortization 33,030 30,553 31,216 33,127 Equity income (4,271) (6,400) (145) 1,073 Changes in assets and liabilities, net: Accounts receivable 12,252 24,997 51,928 46,722 Accounts receivable - securitization (11,389) (19,284) (9,246) (33,408) Inventories (7,216) 29,374 (7,660) 14,879 Accounts payable 21,684 (11,473) (12,800) (44,652) Other 43,746 13,460 (330) (60,168) -------- -------- --------- ------------- Net cash provided by (used in) operations 29,919 3,198 30,174 (49,173) -------- -------- --------- -------------

CASH FLOWS FROM INVESTING ACTIVITIES Net proceeds from divestments 8,949 (9,688) 4,574 643,115 Capital expenditures (21,248) (32,487) (14,488) (22,383) Other investing activities (28) 1,957 (28) (96) -------- -------- --------- ------------- Net cash (used in) provided by investing activities (12,327) (40,218) (9,942) 620,636 -------- -------- --------- -------------

CASH FLOWS FROM FINANCING ACTIVITIES (Payments to) proceeds from domestic credit facility - 32,000 - (192,800) (Payments to) proceeds from short-term borrowings 485 (2,785) (351,015) (4,894) Payments on long-term borrowings - (753) (140,006) (312,940) Proceeds from long-term borrowings - - 597,499 - Payments for debt issuance costs (1,007) (22,106) - Premium paid on early extinguishment of debt - - (19,044) (23,804) Dividends paid (5,739) (5,563) (5,737) (5,560) Treasury stock acquired - - - - Other financing activities 7,330 1,186 1,356 101 -------- -------- --------- ------------- Net cash provided by (used in) financing activities 1,069 24,085 60,947 (539,897) -------- -------- --------- -------------

CASH Effect of exchange rates on cash 3,106 2,364 576 (148) -------- -------- --------- -------------

Change in cash 21,767 (10,571) 81,755 31,418 Cash at beginning of period 136,933 49,784 55,178 18,366 -------- -------- --------- -------------

Cash at end of period $158,700 $ 39,213 $ 136,933 $ 49,784 ======== ======== ========= =============

--30--VP/ny*

CONTACT: Crompton Corporation Investors: William Kuser, 203-573-2213 or Media: Mary Ann Dunnell, 203-573-3034

KEYWORD: CONNECTICUT INDUSTRY KEYWORD: CHEMICALS/PLASTICS MANUFACTURING EARNINGS SOURCE: Crompton Corporation

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