Document 8RgLxbR0pB8r4XRNO5b58opbK

CYANAMID ANNUAL REPORT of dollars in net earnings would be lost. Cyanamia and other U.S. companies continue to alert Congress and the public to the damaging effects of such legislation. Stockholders are urged to examine the issues and com municate their views to their legislators in Washington. On December 31, Clifford D. Siverd completed a distinguished 40-year career with the company and retired as chairman of the board and chief executive officer. Since he became chief executive in 1967, both sales and earnings more than doubled. We are grate ful that Mr. Siverd has agreed to continue as a mem ber of the board of directors. He has been designated chairman of the finance committee. Morgan V. Hunter joined Cyanamid in August as a senior vice president and member of the executive committee, and J. Clifford Blauvelt, formerly a vice president, was elected at the year's end to be a senior vice president and member of the executive committee. We deeply regret the deaths in 1975 of former Cyanamid directors George R. Martin and Anthony C. McAuliffe. Mr. Martin, who organized Cyanamid's Law Division, retired as executive vice president and chair man of the executive committee in December, 1962, after 35 years of service. General McAuliffe joined Cyanamid in 1956 upon his retirement from military service as Commander in Chief of the United States Army in Europe. He was a corporate vice president when he retired from the company in July, 1963. As your new chief executive, I am keenly aware of the talent and dedication of Cyanamid's employees and the support of stockholders, customers and sup pliers--all of whom played important roles in our per formance during the year. They are among the key building blocks for Cyanamid's future, and a prime source of confidence as we look forward to the chal lenges of 1976 and beyond. For the Board o1 Directors Forty years ago, Cyanamid was a small but growing company. Sales in 1935 totaled $53.4 million, and earnings were $4.1 mil lion. I n 1 935 Clifford D. Siverd graduated from Johns Hopkins University with a degree in chemistry and joined the United Color and Pigment Com pany as a process control engineer. In 1944 while Mr. Siverd was serving in World War II in the China-Burma-India theater, Cyanamid acquired United Color and Pigment. He returned from the war to resume a career that was to take him to the top. From 1960 to 1965, he headed up the company's Agricultural Division. In 1965 he was named a vice president with responsibility for the Agricultural and Consumer Products Divisions. He was elected a di rector in 1966 and a member of what is now the Executive Committee in 1967. He was named pres ident and chief executive officer the same year, and five years later became chairman of the Board of Directors. During Mr. Siverd's tenure as chief executive, sales climbed from $937 million to $1.9 billion, and earn ings rose from $70 million to $147.7 million. In that same period, Cyanamid grew into one of the world's largest, diversified producers of chemicals and chem ical-related products. Cyanamid stockholders and employees have ben efited from Mr. Siverd's outstanding contributions. His stewardship has carried Cyanamid to its present position of strength, and with his retirement as chair man and chief executive officer on December 31, 1975, his legacy is a future abundant with promise. CY0005533 'AF OF DIRECTORS Ian K. MacGregor (left), chairman ol the board and chief executive officer of AMAX Inc., with Dr. James G. Affleck, Cyanamid chairman of the board, president and chief executive officer. A George L. Schultz (left), chairman of the board of Shulton, Inc., with Borden R. Putnam (center) and George W. Russell, both senior vice presidents of Cyanamid. L. Emery Katzenbach (left) chairman of White Weld Holdings Inc., with Clifford D. Slverd, retired chairman of the board and chief executive officer of Cyanamid. James F. Bourland (left) and Nolan B. Sommer (center), Cyana mid senior vice presidents, with William L. Wearly, board chair man and chief executive officer of Ingersoll-Rand Company. CY0005534  Sales and earnings increased. Research targets: central nervous system and cardiovascular diseases; anti-arthritic and anti-infective drugs. New antipsychotic drug, Loxitane, well received. New Canadian plant completed; other units underway in West Germany, United Kingdom. Worldwide medical sales showed a good increase in 1975, and earnings were also higher despite substantial foreign ex change losses. Cyanamid's long-term progress in the medical segment is highly dependent on our research productivity. Over the past few years, we have significantly increased the financial support behind Lederle re search, and further increases are plan ned for the future. In the sterile room at Lederle Laboratories In Pearl River, New York, Frank DePalma (wearing mask) fills disposable syringes with tetanus vaccine. Supervisor Wilhelmina Walk commu At the same time, new-product objec nicates through an intercom. Air in room is kept sterile by constant laminar (low filtering. tives have been redirected. Lederie's efforts are now focused on such major continuing medical problems as central nervous system and cardiovascular dis eases. Researchers are working to im prove on past Lederle advances in antiinfective and anti-arthritic drugs as well. loxapine succinate, which manages the manifestations of schizophrenia. This product was introduced in the United States in May and in Denmark and Puerto Rico during the last quarter of the year. A number of Asian, European and Latin is now the world's largest selling anti tuberculosis drug. We completed a new plant to increase capacity for these and other medical products in Canada at the end of 1975, and are constructing an other new production facility inWest Ger We are a major factor in the surgical American introductions are scheduled for many, slated for operation late in 1976. sutures field. Worldwide sales of Dexon, our pioneering synthetic absorbable su ture, continued to register substantial ad vances in 1975. New versions of this product for ophthalmic and other spe cialty surgical uses were introduced. Pro duction capacity for Dexon was more than doubled with a new Puerto Rican plant in 1974, facilitating this year's gain in sales volume. One of the latest drugs to reach the market from Lederle research is Loxitane 1976. A new synthetic drug plant is being built in Gosport, England, to produce this and other psychotropic drugs for the European market. Required clinical trials for Loxitane in the treatment of other psy choses are well along. Sales of Minocin minocycline, our semi-synthetic broad-spectrum anti biotic, continued on the increase in 1975, as did sales of Myambutol ethambutol. The latter, a Lederle research develop ment brought to market eight years ago, Our major effort in the medical field is to discover and develop new, improved products for the treatment of human ill nesses. Additionally, to keep pace with the changing practices of doctors and pharmacists, we introduced in 1975 a line of standard products which are es tablished ethical drugs commonly pre scribed generically. This new line carries the Lederle name and reputation for quality. Each product is manufactured to Lederle specifica Medical 1975 1974 1973 1972 1971 tions, under Lederle's quality control supervision. As the U.S. government pre Worldwide sales ($ in millions) % Total sales (approx.) *400 *351 *309 *273 *256 21 20 21 20 20 pares to establish regulations regarding drugs supplied to Medicare and Medi caid recipients, our broad line of stand Earnings ($ in millions--approx.)* % Total earnings (approx.)* * 25 * 22 * 36 * 35 * 35 17 15 29 34 41 ard products should be important to the doctor and the pharmacist. Overseas, we have introduced such products in Paki 'Includes earnings from Associated Companies. See Finan* cial Review section on page 16 for additional information. stan and will bring them to a number of other Asian markets in 1976 4 CY0005535 Medical technologist Richard Person, at Good Samaritan Hospital, Suffern, N.Y., works with Reagin Screen Test, Lederle's new, inexpensive screening test for syphillis. In hospital operating room in Stockholm, Sweden, Dexon sutures are prepared for use In surgery. Developed by Lederle's Davis & Geek Department, Dexon--the first synthetic absorb able suture--registered sales increases last year due to growing worldwide acceptance. This electronic capsule-weighing machine run by Lederle employee Warren Dejarnet helps insure proper dosage by rejecting capsules which do not meet specifications. Each year, Lederle finances some 40 medical symposia sponsored by hospitals or universities to keep doctors abreast of recent medical developments. At this symposium in Pennsylvania, Dr. James B. Lee of Buffalo General Hospital talks about prostaglandins, a new group of drugs. CY0005536 5 .n n I ULTURE Agricultural sales and earnings up more than 20%. Demand for fertilizers and pesticides unprecedented. Fertilizer supply now in better balance with demand; prices have declined. Research geared to herbicides, insecticides, and animal health and feed products. EPA approved major new herbicide, Prowl. Plant being built at Hannibal, Missouri. Plant for another new herbicide, Avenge, being built at Botlek in Holland. Three insecticide plants under construction in United States and Brazil. Puerto Rican plant for levamisole dewormer completed. The agricultural business continued to boom in 1975. Sales and earnings were up more than 20% from last year's rec ords because of the unprecedented de mand for fertilizers and pesticides. We hold worldwide positions in these mar kets as well as in animal health and feed products. Our animal products business was up slightly despite a decline in the numbers of cattle and swine on feed. Market share was increased for most major products. Fertilizers have been Cyanamid's lead ing performer for the past two years. Fer tilizer prices skyrocketed because of a combination of factors. There were inten Agricultural Worldwide sales ($ in millions) Cyanamid entered the $400-million U.S. corn and cotton herbicide market in 1975 with Prowl. To Introduce ittothe agricultural press, a press conference was held in this Iowa cornfield. Ferried to the cornfield by helicopter, reporters met in a circus tent and were lodged in 50 motor homes. sified efforts by farmers to boost food supplies, coupled with fears of impend ing shortages on the one hand, and in sufficient industry fertilizer capacity fol lowing many years of poor profitability, on the other. Supply has come into better balance with demand since the spring 1975 fertilizer application season, and prices have declined. Long-term profitability in this business 1975 1974 1973 1972 1971 *524 *425 *289 *256 *228 is highly dependent on an advantageous raw materials position. Phosphate mining operations are conducted by Brewster Phosphates, a partnership in which we own 75%. Brewster provides us with a low-cost source of phosphate, and we are devoting a sizeable amount of capi tal to open a new Florida mine which will approximately double the partnership's phosphate rock capacity. Shipments from the new mine are scheduled to begin in 1977. We also have an advantageous raw material position in nitrogen, so that the costs of our total fertilizer operations are among the lowest in the industry. % Total sales (approx.) Earnings ($ in millions--approx.)* % Total earnings (approx.)* * Includes earnings from Associated Companies. See Finan cial Review section on page 16 lor additional information. 27 * 95 64 24 * 73 50 20 * 33 26 19 * 23 23 18 * 15 17 The key to our long-term growth in agriculture is high technology. We are now entering the billion-dollar global herbicide'market and are further developing our other pesticide and animal health products businesses. 6 CY0005537 Phosphate ore mined In Florida is loaded by conveyor belts from this terminal at Tampa Bay onto barges for U.S. fertilizer markets or into ships for delivery overseas. Ore is mined by Brewster Phosphates in which Cyanamid Is a 75% partner with Kerr-McGee Corp. Cyanamid's development of the injectable form of Ripercol L levamisole, shown In use in Guatemala, greatly simplifies adminis- tration of this deworming agent for cattle. Ripercol L effectively controls both lung and gastrointestinal worms. 7 CY0005538 In late July, the U.S. Environmental Protection Agency registered Prowl, one of our newly-developed herbicides, for use on corn and cotton. Approval for use on soybeans is expected for the 1977 season. A large plant under construction at Hannibal, Missouri, to supply world wide needs, is scheduled to begin opera tions in 1977. Meanwhile, Prowl is being manufactured by contract suppliers. This product, sold as Stomp* or Herbadox* in markets abroad, is registered for use on a variety of major crops in Argentina, Brazil, Chile, France, New Zealand, Spain and West Germany. Another new herbicide, Avenge, con trols wild oats in wheat, barley and other small grains, its major markets are in the United Kingdom, Europe and Canada. Registration in the United States is ex pected in 1976. We will complete a new plant for Avenge in 1976 at Botlek, Hol land. The following year, a large facility for the manufacture of Thimet and Counter, Cyanamid insecticides that control insects attacking corn and other crops, will begin operations at Hannibal, Missouri. Additional plants are under construc tion at Linden, New Jersey, and Resende, Brazil, for Malathion insecticide, exten sively used in many countries to protect crops and control insect vectors in pub lic health programs. Both units are sched uled for completion early in 1977. In the animal health field, production capacity has been increased for levamisole, a major Cyanamid product and the leading dewormer for swine, cattle and sheep in the United States and Latin America. Construction of a new plant for this product was completed late in 1975, at Manati in Puerto Rico, and our Brazil ian plant for levamisole was expanded during the year. Thus we have a significant number of major new plants scheduled to begin operations within the next 18 months. These units will transform recent Cyana mid research advances into commercial products vitally needed to help increase the world's food supply. As these plants come on stream, they will provide us with firm, new prospects for agricultural growth in the years ahead. Trademark This new Cyanamid plant in Manati, Puerto Rico, was completed late in 1975. It produces Tramisole levamisole, a leading dewormer for cattle, swine and sheep. This plant is adjacent to Lederle's new Dexon suture plant which was opened in Manati in 1974. Merchandising materials for Cyanamid's Counter soil insecticide are distributed to farm supply stores by a fleet of these "Counter Caravan" trucks. Cyanamid representative Jay Foss (left) discusses rootworm control with Russell Ness of Anderson Farm Service in Yorkville, Illinois. CY0005539  Sales down slightly, eamings significantly lower. Chemicals severely affected by the global recession. U.S. improvement under way. Overseas recovery expected in late 1976. Demand for water-treating chemicals and Cymel resins for water-based paints boosted by worldwide pollution control efforts. New beta naphthol complex in West Virginia makes Cyanamid the world's largest, most efficient producer of this intermediate. Sulfuric acid plants feature modern process to protect environment. New unit completed at Savannah, Georgia; another being built near New Orleans, Louisiana. Our specialty chemicals provide signifi cant cost, quality or performance advan tages to customers in virtually all indus tries. Major markets include the automo tive, dyes, mining, paint, paper, petrole um, pigments, plastics, rubber, textiles and water-treatment fields. Chemicals are correlated with the gen eral economies of the many nations in which Cyanamid operates. During 1974, sales and earnings moved sharply up ward until the fourth quarter, when they dropped abruptly. Chemical sales did not fully recover until the fourth quarter of 1975. Cyanamid ended 1974 with record per formance in specialty chemicals. For Cyanamid's Superfloe* RM30 red mud flocculant is used in this washer at Alcan Jamaica's plant near Mandeville, Jamaica. The flocculant speeds up the settling process in which alumina Is separated from bauxite ore residue, one of the early steps in the manufacture of aluminum. 1975, worldwide sales were down slight ly and earnings were significantly lower. Our-domestic business has shown im provement since the third quarter up swing in the U.S. economy, and overseas recovery is anticipated in the latter part of 1976. Specialty Chemicals Worldwide sales ($ in millions) % Total sales (approx.) Eamings ($ in millions-approx.)* % Total earnings (approx.)* 'Includes earnings from Associated Companies. See Finan cial Review section on page 16 for additional information. 1975 *512 27 * 22 15 1974 *530 30 * 37 25 1973 *419 28 * 24 20 1972 *388 29 * 19 19 1971 *372 29 * 13 15 Our product research and production technology efforts in specialty chemicals are geared toward developing competi tive advantages. Prime examples are beta naphthol (BN) and a derivative, beta oxy naphthoic acid (BON). Primarily used for dyes and color pigments, these products represent large markets for the company. We expended $2 million and lour years of research to develop the first largely CY0005540 9 Many manufacturers of outdoor pool and patio furniture make table tops from Cyanamid's Acrylite acrylic sheet. continuous processes for these products. A plant costing more than $20 million, utilizing these processes, began opera tions at the Willow Island, West Virginia, complex at the end of 1975. This plant makes Cyanamid the world's largest and most efficient producer of both products, BN and BON. Another example of innovation in spe cialty chemicals is our high-technology series of Cymel 300 melamine resins. These make it possible for water to re place organic solvents in the newer water-based industrial paints. The first products were introduced in 1959, but this line is just now coming into wide spread use because of the nation's con cern with pollution control and the need to conserve energy supplies. Traditional When you flex one of our Cyalume lightsticks, the glass ampule inside the plastic tube breaks, and the activated chemicals provide safe light for up to 12 hours. industrial paints are made with organic solvents which escape into the atmos phere when the paints are applied, con tributing some 500 million gallons of sol vents yearly to air pollution. Cyanamid will complete construction of a multi-mil lion dollar plant for the Cymel 300 resins at Kalamazoo, Michigan, in mid-1975. The plant will complement present pro duction units at Wallingford, Connecticut. This new plant at Mobile, Alabama, was opened in 1975 to produce Alphasize 20 sizing, an important papermaking chemical. These Japanese automobiles are ready for the final heat-curing stage in the painting process, The primer paint used has a water base rather than an organic solvent base, which gives a higher quality finish. The water base formulation is made possible by our Cymel resins. 10 CY0005541 In still another high-technology field, Cyanamid's water-treating products pros pered in spite of the downturn in global chemical markets during 1975 and offer strong growth prospects for the future. These are polyacrylamide and polyamine organic fiocculants -- chemicals which help alleviate environmental problems and improve processes for the utilization of mineral and water resources. Cyanamid is now expanding capacity for one of their major building blocks, acrylamide monomer, utilizing a newly developed and highly efficient catalytic process. A 30-million-pound plant at-Linden, New Jersey, is being replaced with a 60-million-pound facility, and capacity is also being doubled at a recently com pleted 10-million-pound monomer unit at Fortier, Louisiana. Both projects should be completed by mid-1977. A new plant is being built at Botlek, Holland, that will replace an older facility, in 1978, increas ing capacity by 50%. While the emphasis is on specialty products, we are not neglecting our basic chemicals. Sulfuric acid is the world's most widely used basic industrial chemi cal. Cyanamid produces it to satisfy large captive needs, as well as for the merchant market. Prior to 1970, our sulfuric acid plants were becoming outmoded by new technology and increasingly rigorous pollution-control regulations. That year, we closed down two units at Linden, New Jersey, and replaced them with a modern plant utilizing an entirely new process which established new sulfur-emission standards for the industry. In mid-1975, we replaced two old units at Savannah, Georgia, with a plant similar to the Linden facility. At the year's end, we began construction of a facility which will cost more than $20 million at our Fortier complex near New Orleans, Lou isiana. This plant will bring our sulfuric acid capacity, featuring the new tech nology, to about one million tons per year in 1979. In the construction of jet planes, including these Boeing 747's, adhesives and corrosion-resis tant primers made by Cyanamid are used to bond aluminum skin to the honeycomb core of wing flaps and other movable control surfaces, engine covers, and passenger and landing gear doors. This new organic flocculant plant at Kalamazoo, Michigan, went on-stream in 1975. The plant makes solution polyacrylamide, used by municipalities in water clarification and waste treat ment operations. Another new plant at Kalamazoo, to make Cymel 300 resins, will open in 1976. 11 CY0005542 CONSUMER PROC UC Sales up, earnings sharply lower. Worldwide recession affected decorative laminates and fibers businesses. Shulton performed well. Christmas sales especially strong. Higher earnings for Breck hair-care and Pine-Sol household products. Cyanamid's consumer products group includes decorative laminates, wall cov erings, synthetic fibers, household prod ucts, toiletries, fragrances and hair-care products. Worldwide sales of this segment in creased slightly in 1975. Earnings, how ever, were significantly below a year ago, due to the effects of the worldwide reces sion on the decorative laminate and fib ers businesses. Earnings for Creslan acrylic fibers for home furnishings and apparel were down worldwide, although our fibers business in the United States has shown vigorous improvement since mid-year, along with the textile industry. Our U.S. performance for Formica brand decorative laminates was better than last year, but heavy start-up costs were experienced in our new melamine component panel business. These panels were developed for vertical surfacing in The versatility of new Formica* brand melamine component panels is demonstrated in this attractive wall system. The panels are manufactured at Formica's new facilities at Frankfort, Indiana, and Tarboro, North Carolina. competition with wood, and we expect them to become major products in the furniture, kitchen cabinet and mobile home industries in future years. Foreign exchange losses in the Latin American operations and a lengthy strike in Canada brought foreign laminate earn ings down sharply. The laminate busi ness and most of the fibers business in Europe are handled by associated com panies, in which we have a 40% interest. These companies were particularly hard hit by the recession. In contrast, Cyanamid's Shulton sub sidiary performed well during 1975, with a particularly strong Christmas sales sea- Consumer Products 1975 Worldwide sales ($ in millions) *492 % Total sales (approx.) 25 Earnings ($ in millions-approx.)* *6 % Total earnings (approx.)* 4 `Includes earnings (loss) from Associated Companies. See Financial Review section on page 16 for additional information. 1974 *474 26 * 14 10 1973 *455 31 * 32 25 1972 *442 32 * 25 24 1971 *427 33 * 23 27 This Venezuelan supermarket shopper has a choice of three Cyanamid products: PineSol, Furia* liquid ammoniated cleaner, and Liptol*, a new disinfectant-cleaner. 12 CY0005543 L'Airdu Temps by Nina Ricci (left rear), a long-popular perfume, was joined in 1975 by Farouche by Nina Ricci, a successful new entry. New Shulton products joining standby Old Spice (right rear) in 1975 were Old Spice roll-on anti-perspirant deodorant and Pocket Cologne* flasks. T,.om.,k Breck salesman Richard Rezza sets up a supermarket aisle display featuring Miss Breck Lasting Hold, our new non-aerosol hair spray. Sales have been above expectations. son. There were continuing gains in sales and earnings for Shulton's Old Spice brand toiletries, Nina Ricci fragrances for women and Pierre Cardin* men's toiletries. Earnings increased for Breck haircare products and Pine-Sol* household products. Pine-Sol, the largest selling liquid cleaner in the United States, con tinued to outpace its competition. With the exception of hair spray products, sales of the line of Breck shampoo, creme rinse and other hair-care special ties were lower in 1975, primarily due to poor performance in the first four months. Sales were on the upswing for the re mainder of the year. A new non-aerosol hair spray, Miss Breck Lasting Hold, was introduced nationally in the third quarter. Sales, to . date, have been above expectations. Non aerosols are gaining in popularity and accounting for an increasing portion of the hair spray market. Breck Clean Rinse, a new oil-free creme rinse, made its nationwide debut at the beginning of 1976, following a suc cessful introduction on the West Coast in mid-1975. * Trademark It takes a tough fabric to stand up to Mean Joe Greene of the Super Bowl-winning Pittsburgh Steeiers and his children, but sports socks made of Creslan fiber fill the bill. Photo is from an advertisement run by our Fibers Division in a leading sports magazine. 13 CY0005544 SERVING SOCIETY Pioneering program launched with National Education Association. $22 million devoted to pollution control facilities. Employee safety, benefits among best in industry. Continued gains in employment for women and minorities. Safety supervisor Michael Wolk of Brack's plant in West Springfield, Massachusetts, conducts a training program for fork lift operators. Cyanamid in 1975 had its best safety record ever. Meeting social and employee needs is vital to any company concerned with long-term profitability and growth. At Cyanamid, social responsibility is a key facet of our continuing business planning. A pioneering program was launched in education to dispel the distrust which exists between the educational and busi ness communities. The National Educa tion Association has a membership of 1,700,000 elementary and high school teachers in the United States, and early in the year we met with leaders of this When more than half of Wayne employees joined the U.S. Savings Bond payroll plan, U.S. Treasury Dept, awarded Cyanamid this Minuteman flag. Raising the flag are (left to right) Robert W. Kleinert, president of New Jersey Bell and 1975 New Jersey Industrial Chairman of the U.S. Savings Bond drive; retired board chairman C. D. Siverd; board chairman J. G. Affleck; and Wayne employees. organization to explore how Cyanamid and other concerned companies could systematically aid the classroom teacher in better educating our nation's children. One of our key goals is to acquaint chil dren with the challenge of the business world and the career opportunities that will be available to them. In July, at the NEA national convention in Los Angeles, Dr. Affleck announced agreement with this major educational association to work on a jointly devel oped "NEA-Industry Proposal." In No vember, a meeting was held with 100 businessmen and NEA leaders in Wash ington to chart specific plans of action. These will be submitted to the next NEA national convention in June, 1976. This program should provide dual ben efits. On the one hand, the business com munity has expertise in the practical applications of science, technology and economics which can be put to work to enrich school curricula. On the other, industry needs well-educated youth to carry on in the future --and the better their preparation, the better we can ex pect to do. Protecting the environment around our production plants is another important aspect of social responsibility. In 1975, $22 million was spent for facilities to con trol pollution. Our cumulative capital ex penditures for environmental protection through 1975 amount to $117 million, and we expect to commit about $50 mil lion in 1976. 14 CY0005545 LiTIGATlOK Antibiotics Litigation On January 12, 1976, the U.S. Court of Appeals for the Fourth Circuit affirmed the dismissal in 1974 by the U.S. District Court in North Carolina of the antitrust treble damage suit by the State of North Carolina and its consumers class against the company and four other drug com panies in connection with tetracycline and other broad spectrum antibiotics. The State has petitioned the District Court for a new trial and has indicated it will seek review by the U.S. Supreme Court. On August 14, 1975, a settlement was concluded in the suit by International Rectifier Corporation. Subsequently twelve other suits, including the class suit on behalf of union health and welfare funds, were also settled. The company's share of all these settlements was ap- Speaking at National Education Assn, con ; proximately $15 million before giving vention, board chairman Affleck announces : effect to related tax reductions. Cyanamid's industry-education program. These settlements, as with the earlier civil settlements during 1969-74, were concluded for amounts substantially less : than those claimed by plaintiffs' counsel. Major developments in 1975 were the ' There are 17 other suits remaining. completion of a $24 million effluent treat ; The company's share of the claims as- ment unit at the titanium dioxide pigment | j serted in them would be approximately $100 million, but the company believes plant at Savannah, Georgia, and the be | the claims are grossly exaggerated. ginning of construction of a $23 million I Three of the remaining suits, including treatment facility at the Bound Brook, I the suit for single damages by the Fed- New Jersey, organic chemicals complex. ; eral government, have been on trial in Employee safety is a prime business ; | the U.S. District Court in Minnesota since November, 1974. However, agreement goal, and we continued to improve our ; has been reached to settle the other two record in 1975. The frequency of dis I suits on trial. One settlement, the class abling accidents is now less than one ; suit on behalf of health insurance com- per million-man-hours -- or 12 times bet ' panies, is subject to court approval. The ter than the average for all U.S. industry. | company's share of the additional settle- | ments would be $5.3 million, Our employee benefits package is one j Provisions for the above-mentioned of the best in the industry and during the I settlements have been made in the 1975 year was improved to provide better I financial statements. maternity and surgical coverage. In spite | No trial date has yet been set for suits of the recession, we continued to make I brought by certain other claimants, in- gains in women and minority employ j eluding the governments of Iran, South ment, and today about 8% of our mana ; Vietnam, the Philippines, West Germany, gers and supervisors are minority group members. women or I | ; India, Colombia and South Korea. A suit by the government of Spain has been voluntarily dismissed. In August, 1975, the Contributions to charitable funds, hos j Court of Appeals forthe 8th Circuit denied pitals, educational and other institutions j the right of such governments to sue as totaled $732,000 in 1975, with emphasis on the communities in which we operate. ; | : "parens patriae" under the U.S. antitrust laws for damages to their citizens and now has before it the question of their The contributions to education amounted : standing to sue based on their own pur- to $335,000. These range from Faculty j chases. The plaintiffs have petitioned Support Grants to a tuition reimburse I the U.S. Supreme Court to review the ment program for employees and aid to a j decision. number of minority students at colleges. The Minnesota trial also does not in clude the civil suit brought by the Federal government in January, 1974, against the company alone which asks for cancella tion of four of the company's patents covering antibiotics on the basis of al leged fraud on the Patent Office and for damages based on prices for broadspectrum antibiotics purchased or paid for by the government over a period going back 25 years. Three of the patents have expired and the fourth has previously been made available for license. Due to the uncertainty necessarily in herent in litigated matters of this sort, the eventual cost of this litigation to the com pany, and its disposition, cannot be accu rately predicted, and therefore the com pany has not accrued any additional amounts with respect thereto despite the possibility that large amounts may even tually be paid. Any additional amounts which may become payable by the com pany with respect to these claims would be charged against earnings of appropri ate years prior to 1967, after giving effect to related tax reductions. However, the company believes, on the basis of infor mation and advice presently available, that any additional liability with respect to this litigation will be substantially less than the amounts claimed and will not have a material adverse effect upon the consolidated financial position of the company and its subsidiaries. The company emphatically denies that it has violated the antitrust laws or en gaged in any wrongdoing before the Patent Office. Dyes Litigation Several treble damage suits have been brought by purchasers of dyestuffs from the company and eight other manufac turers, based upon the matters referred to in a criminal proceeding charging con spiracy to fix dye prices in December 1970, in which the defendants pleaded nolo contendere. The company was fined $43,500. A companion government civil suit for an injunction is still pending in Federal Court in Newark, New Jersey. In December, 1975, the U.S. District Court for the Southern District of New York ap proved a settlement by the nine com panies for a total of $15 million of the damage claims of dyestuffs purchasers; almost all class members elected to par ticipate in the settlement. The company has provided for its share of the settle ment which is not material to its consoli dated financial position or results of 1975 operations. 15 CY0005546 American Cyanamid Company and Subsidiaries financial Review Sales Volume--Consolidated sales in 1975 were $1,928,444,000 compared with $1,779,872,000 in 1974. Comparative quarterly sales for the two years were: 1975 1974 Amounts % of Quarter in thousands total Amounts % of in thousands total First Second Third Fourth $ 462,104 496,580 473,534 496,226 24 26 24 26 $ 410,501 448,752 463,471 457,148 23 25 26 26 $1,928,444 100% $1,779,872 100% Capital Stock--As of December 31,1975 there were 47,747,212 shares of common stock outstanding compared to 47,742,546 shares outstanding at the end of 1974 after excluding treasury stock of 1,158,126 shares at December 31,1975 and 1,162,792 shares at December 31, 1974. During the year 1,358 such shares were issued pursuant to stock option plans and 3,308 shares were issued to retired participants under the incentive compensation plan. Earnings--Earnings of consolidated companies for 1975 were $143,026,000 compared with $129,218,000 in 1974. Net earn ings were $147,675,000 in 1975 compared with $154,724,000 in 1974, which (as more fully described in Note 9 to the consoli dated financial statements) includes earnings of discontinued Quarter First Second Third Fourth -1--9-7--5Net earnings Amounts in thousands Per share $ 38,583 39,589 30,998 38,505 $147,675 $ .81 .83 .65 .80 $3.09 The average number of shares (excluding treasury shares) out standing for 1975 was 47,744,681 compared to 47,740,004 for 1974. Common Stock Prices--Reported comparative high and low sales prices on the New York Stock Exchange and the dividends paid per share of the common stock by quarter for the two years were: Quarter First Second Third Fourth 1975 1974 Sales price Dividends Sales price Dividends High Low paid High Low paid $27'/s $20% 30% 24% 28'/a 22% 26% 22% $ .37% .37% .37% .37% $25 $18% 24% 19% 20% 17 Vs 23% 17% $ .35 .35 .37% .37% $1.50 $1.45 Cash dividends paid in 1975 and 1974 amounted to $71,234,000 and $68,815,000, respectively. operations of $8,256,000 (17 per share). Net earnings per share for 1975 was $3.09 compared to $3.24 in 1974 based on the average number of shares of common stock (excluding treasury shares) outstanding for each year. Comparative data by quarter for the two years were: 1974 Earni.ngs f,rom ------- continuing operations Net earnings Quarter First Second Third Fourth Amounts in thousands $ 34,880 38,124 39,124 34,340 $146,468 Per share $ .73 .80 .82 .72 $3.07 Amounts in thousands $ 34,885 41,956 42,229 35,654 $154,724 Per share $ .73 .88 .88 .75 $3.24 Business Segment Information -- Approximate consolidated earnings and earnings of associated companies by business segment were as follows: Medical ($ in millions) Consolidated earnings Earnings of assoc, co.'s % Assoc, co.'s to total earnings 1975 $ 23 2 8 1974 $ 19 3 14 1973 $ 34 2 6 1972 $ 33 2 6 1971 $ 33 2 6 Agriculture ($ in millions) Consolidated earnings Earnings of assoc, co.'s % Assoc, co.'s to total earnings $ 94 1 1 $ 72 1 1 $ 33 0 -- $ 23 0 -- $ 15 0 16 Specialty Chemicals ($ in millions) Consolidated earnings Earnings of assoc, co.'s % Assoc, co.'s to total earnings 1975 $ 19 3 14 1974 $ 27 10 27 1973 $ 22 2 8 1972 $ 19 0 -- 1971 $ 12 1 8 Consumer Products ($ in millions) Consolidated earnings Earnings of assoc, co.'s % Assoc, co.'s to total earnings $ 7 $ 10 (D 4 -- 29 $ 27 5 16 $ 23 2 8 $ 20 3 13 CY0005547 Years Ended December 31,1975 and 1974 NET SALES............................................................................................................................................................... Expenses: Manufacturing cost of sales less depreciation and depletion Selling and advertising expenses........................................... Administrative and general expenses................................... Depreciation and depletion...................................................... Research and process development expenses..................... Employees' benefits (Note 8).................................................... EARNINGS FROM OPERATIONS................................................ Interest, dividends, royalties and other income, net--less interest expense of $22,403 in 1975 ($17,894 in 1974)................................................................................ EARNINGS OF CONSOLIDATED COMPANIES BEFORE TAXES ON INCOME.......................................... 1975 1974 (Thousands of dollars except per share amounts) $1,928,444 $1,779,872 1,050,757 328,409 101,520 77,642 67,181 66,786 1,692,295 236,149 7,477 243,626 972,483 303,837 82,788 71,961 58,807 59,399 1,549,275 230,597 3,021 233,618 Provision for taxes on income (Note 10): Federal................................................ Foreign and other............................. EARNINGS OF CONSOLIDATED COMPANIES ............. Equity in net earnings of associated companies EARNINGS FROM CONTINUING OPERATIONS DISCONTINUED OPERATIONS (Note 9) NET EARNINGS (Note 3)................... PER SHARE OF COMMON STOCK (Note 3): Earnings from continuing operations.............................................................................. Net earnings....................................................................................................................... See accompanying Notes to Consolidated Financial Statements 45,700 54,900 100,600 143,026 4,649 147,675 $ 147,675 $3.09 $3.09 48,600 55,800 104,400 129,218 17,250 146,468 8,256 $ 154,724 $3.07 $3.24 THE BOARD OF DIRECTORS AND STOCKHOLDERS AMERICAN CYANAMID COMPANY: We have examined the consolidated balance sheets of American Cyanamid Company and subsidiaries as of December 31, 1975 and 1974 and the related consolidated statements of earnings, earnings employed in the business and changes in financial position for the years then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the aforementioned consolidated financial statements present fairly the financial position of American Cyanamid Com pany and subsidiaries at December 31, 1975 and 1974, and the results of their operations and the changes in their financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis. New York, N.Y. February 3, 1976 PEAT, MARWICK, MITCHELL & CO. 17 CY0005548 American Cyanamid Company and Subsidiaries . -:a-3d Baiaru December 31,1975 and 1974 it ASSETS CURRENT ASSETS Cash ........................................................................................................... Marketable securities and time deposits, at market and accrued interest (approximates cost)........................... Accounts receivable, less allowance for doubtful accounts of $10,287 ($7,172 in 1974).................................................................................... Inventories (Note 3).................................................................................. TOTAL CURRENT ASSETS................................................................................... INVESTMENTS AND ADVANCES Equity in net assets of and advances to associated companies Other investments and advances ............................................... TOTAL INVESTMENTS AND ADVANCES............................................. PLANTS, EQUIPMENT AND FACILITIES, at COSt (Note 4)........................................ Less accumulated depreciation and depletion........................... NET PLANT INVESTMENT...................................................................... INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS...................................... PREPAID EXPENSES AND DEFERRED CHARGES............................................................ 1975 1974 (Thousands of dollars) 63,087 $ 52,358 91,031 127,050 329,157 314,171 797,446 300,898 322,036 802,342 56,102 39,113 95,215 1,488,400 703,168 785,232 17,717 26,564 $1,722,174 53,544 43,021 96,565 1,311,145 652,110 659,035 17,709 27,228 $1,602,879 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses ... Short-term borrowings (Note 10)..................... Funded debt installments due within one year Income taxes ................................................... TOTAL CURRENT LIABILITIES FUNDED DEBT NOT DUE WITHIN ONE YEAR (Note 5)............................................................... DEFERRED INCOME TAXES......................................................................................................... OTHER NON-CURRENT LIABILITIES (Note 10)............................................................................ STOCKHOLDERS' EQUITY (Note 6) Common stock--par value $5 per share Authorized--60,000,000 shares Issued --48,905,338 shares ........................................................................ Additional paid-in capital ...................................................................................... Earnings employed in the business (Note 5)......................................................... Less cost of 1,158,126 shares of common stock held in treasury (1,162,792 shares in 1974)............................................................. TOTAL STOCKHOLDERS' EQUITY........................................................................ CONTINGENT LIABILITIES AND COMMITMENTS (Note 7) See accompanying Notes to Consolidated Financial Statements $ 267,074 31,596 3,699 32,973 335,342 282,176 40,000 20,380 244,527 38,942 792,803 1,076,272 31,996 1,044,276 $1,722,174 $ 273,869 40,979 2,877 17,020 334,745 243,615 39,600 17,208 244,527 38,940 716,362 999,829 32,118 967,711 $1,602,879 18 CY0005549 - uc s-stemenir cl Years Ended December 31,1975 and 1974 ; .> .nicy*c Balance at beginning of year as previously reported............................. Provision for settlement of litigation (Note 7)........................................... Balance at beginning of year as restated............................................... Add net earnings......................................................................................... Deduct dividends of $1.50 per share in 1975 ($1.45 per share in 1974) Balance at end of year (Note 5)............................................................... recede; C i stefTveniE or Changes in Financial Position Years Ended December 31,1975 and 1974 1975 1974 (Thousands of dollars) $729,862 13,500 $643,953 13,500 716,362 147,675 (71,234) 630,453 154,724 (68,815) $792,803 $716,362 SOURCES OF WORKING CAPITAL Earnings from continuing operations.................................................................................... Items not requiring the use of funds: Depreciation and depletion............................................................................................... Deferred income taxes....................................................................................................... Equity in undistributed earnings or loss for the year of associated companies.......... Funds derived from continuing operations.......................................................................... Net funds derived from discontinued operations.................................................................. Funds derived from operations............................................................................................ Disposal of associated company less net gain included in discontinued operations___ Increase in funded debt not due within one year................................................................ Increase in other non-current liabilities................................................................................ Reductions (additions) to investments and advances--net................................................. Decrease (increase) in prepaid expenses and deferred charges....................................... Equity arising from issuance of common stock.................................................................... USES OF WORKING CAPITAL Additions to plants, equipment and facilities--net Cash dividends on stock......................................... All others--net.......................................................... (DECREASE) INCREASE IN WORKING CAPITAL (DECREASES) INCREASES IN THE COMPONENTS OF WORKING CAPITAL Cash, marketable securities and time deposits*....................................................... Accounts receivable...................................................................................................... Inventories..................................................................................................................... Accounts payable and accrued expenses* ................................................................ Short-term borrowings.................................................................................................. Funded debt installments due in one year.................................................................... Income taxes payable..................................................................................................... (DECREASE) INCREASE IN WORKING CAPITAL ................................................................................... 'Includes effect of payments regarding treble damage litigation of $36,882 and $19,496 in 1974 and 197S respectively. See accompanying Notes to Consolidated Financial Statements 1975 1974 (Thousands of dollars) $147,675 $146,468 77,642 400 523 226,240 226,240 38,561 3,172 827 664 124 269,588 71,961 4,000 (6,594) 215,835 47,730 263,565 18,800 5,105 3,437 (7,465) (6,785) 123 276,780 203,839 71,234 _______ 8 275,081 $ (5,493) 138,346 68,815 (986) 206,175 $ 70,605 (25,290) 28,259 (7,865) 6,795 9,383 (822) (15,953) $ (5,493) 6,942 48,571 77,678 (32,209) (29,479) (2,262) 1,364 $ 70.605 19 CY0005550 American Cyanamid Company and Subsidiaries (Thousands of dollars) 1. Summary of Accounting Policies Consolidation--The consolidated financial statements include the accounts of American Cyanamid Company and all subsid iaries except real estate subsidiaries (see Note 9). All sig nificant intercompany transactions and balances have been eliminated upon consolidation. Subsidiaries operating outside the United States and Canada are included on a fiscal-year basis ending November 30. The equity method of accounting is used for investments in associated companies (20% to 50% owned). Aggregate cost of these investments was $30,225 at December 31,1975 ($26,796 at December 31, 1974). Dividends of $5,172 were received from these companies in 1975 ($10,657 in 1974). At December 31,1975, principal associated companies are comprised of the following (% owned): Arizona Chemical Company (50%) B. Braun-Dexon G.m.b.H. (50%) Cyanamid-Ketjen Kalalysator B.V. (50%) Cyanaquim, S.A. de C.V. (40%, Cyanenka S.A. (40%) Formica International Limited (40%) Lederle (Japan), Ltd. (50%) Sherkat Saharrji Cyanamid-KBC (50%) Societe des Sutures Chirurgicales Robert & Carriere--Lederle (50%) TDF Tiofine B.V. (50%) Currency translation--Assets, other than plants, equipment and facilities, and liabilities of foreign subsidiaries are included in the consolidated balance sheets at official or prevailing rates of exchange at year-end; foreign plants, equipment and facil ities are included at the exchange rates in effect at the time of acquisition. Statement of earnings accounts are translated at the average rates of exchange in effect during the year except for depreciation and amortization which are translated at his torical exchange rates. Gains on forward exchange contracts are recognized as contracts are settled. Anticipated losses are recognized currently. Exchange adjustments ($21,000 loss in 1975, $7,200 loss in 1974) are included in earnings of the respective years. Implementation of Statement of Financial Ac counting Standards No. 8 in 1976 does not have a material effect on the consolidated financial statements. Depreciation and amortization--Depreciation is provided on a straight-line composite method over the estimated remaining useful lives of various classes of assets. In view of the variety of plants, equipment and facilities, it is not considered practicable to list the rates used in making the computations. However, the aggregate charge for depreciation was equivalent to 6.7% in 1975 and 6.6% in 1974, of the average amount of depreciable plants, equipment and facilities. When depreciable assets are sold or otherwise retired from service, their cost, less amounts realized on sale or salvage, is charged or credited to the accumulated depreciation account. Expenditures for mainte nance and repairs are charged to current operating expenses. Acquisitions, additions and betterments for increasing produc tive capacity or prolonging service lives of the plants, equip ment and facilities are capitalized. Intangibles resulting from business acquisitions are carried at cost and amortized over a period of forty years unless, in the opinion of management, their lives are limited, or they have sustained a permanent diminution in value in which case they are amortized over ap 20 propriate periods. Income Taxes--The company files a consolidated Federal in come tax return with its domestic subsidiaries. The provision for Federal taxes on income has been reduced by the invest ment tax credit using the flow-through method ($10,000 in 1975 and $4,000 in 1974). Deferred income taxes equal to $400 in 1975 ($4,000 in 1974) have been provided to recognize the effect of timing differences between financial statement and income tax accounting, principally differences in depreciation methods and rates. Other taxes on income represent various state and local income taxes aggregating $7,000 in 1975 ($5,200 in 1974). Earnings per share--Earnings per share of common stock is based on the average number of shares outstanding during the year; 47,744,681 in 1975 (47,740,004 in 1974). The stock op tions described in Note 6 do not result in dilution of earnings per share. 2. Foreign Operations included in the consolidated financial statements are as follows: 1975 1974 Net current assets ..................................................... $197,700 $160,600 Net other assets (principally plants, equipment and facilities) ..................................... 158,000 118,100 Net earnings of foreign subsidiaries ..................... 61,100 77,600 Equity in undistributed earnings of foreign subsidiaries .'.............................................. 238,600 202,800 The company provides for taxes on the undistributed earn ings of subsidiaries and associates where the remittance of such earnings is not considered to be indefinitely postponed. At December 31,1975, the company has no present intention of remitting undistributed earnings of subsidiaries and associated companies aggregating $273,900 ($212,700 in 1974). 3. Inventories--Inventories are carried at the lower of cost or market. Cost is determined on the last-in, first-out (LIFO) method for substantially all inventories in the United States with the remainder determined on the first-in, first-out or average method. The LIFO method was adopted in 1974 resulting in a reduc tion in inventories at December 31, 1974, by approximately $50,000 and net earnings by $26,000 ($.54 per share). At De cember 31, 1975 estimated current cost exceeded LIFO value of the inventories by approximately $65,000. It is not prac ticable to determine the major components under the dollar value LIFO inventory method. 4. Plants, Equipment and Facilities are comprised of the fol lowing: 1975 1974 Land, including mining land Buildings .............................. Machinery and equipment Construction in progress . $ 45,755 280,934 1,028,821 132,890 $ 45,176 253,540 922,114 90,315 $1,468,400 $1,311,145 CY0005551 {Thousands of dollars) -. (continued) 5. Funded Debt, excluding the current portion, is as follows: 1975 1974 3%% promissory notes due 1977 to 1987 ........... $ 75,000 5%% sinking fund debentures due 1980 ............ 10,000 5Vi% Swiss franc debentures due 1987 .............. 38,150 5'/2% to 6.8% pollution control revenue bonds due at various dates through 2000 ..................... 31,600 7%% sinking fund debentures due 2001 ............ 100,000 Sundry obligations ..................................................... 27,426 $ 75,000 11,050 39,000 10,600 100,000 7,965 $282,176 $243,615 Annual maturities of funded debt and sinking fund require ments for the four years subsequent to December 31,1976, are as follows: 1977-SI 6,371; 1978-S11,171; 1979-S11,186 and 1980-SI 2,390. The 33/.% promissory notes due 1977 to 1987 contain cer tain restrictions including limitations on the payment of divi dends. As a result, the amount of earnings employed in the business at December 31, 1975, which may be applied to the payment of cash dividends, is limited to S308.500. 6. Stockholders* Equity Authorized Capital includes 650,000 shares of preferred stock with a par value of $1 per share, none of which is outstanding. Stock Options--Under the company's stock option plan key employees may be granted five-year and ten-year qualified and non-qualified options to purchase common stock at not less than 100% of market value on the date of grant. 1,500,000 shares were originally reserved for stock options. All options are exercisable in cumulative installments of one-third of the number of shares commencing one year after date of grant and annually thereafter. Details of stock option activity for 1975 and 1974 follow: Number of shares Options granted: 1975 190,265 1974 186,365 Option Price Per share Total $27.50 24.00 $ 5,232 4.473 Options which became exercisable: 1975 166,455 $24.00-37.25 $ 4.896 1974 157.111 28.50-37.25 5,052 Options exercised: 1975 668 1974 None $24.00-28.50 $ 21 Options outstanding: Dec. 31,1975 998,963 Dec. 31.1974 828,418 $24.00-37.25 $29,649 24.00-37.25 25,011 Market Value Per share Total (at date of grant) $27.50 $ 5,232 24.00 4,473 (at dates exercisable) $25.88-28.69 $ 4,532 19.56-23.68 3,433 (at dates exercised) $26.75-30.44 $ 25 (at dates of grant) $24.00-37.25 $29,649 24.00-37.25 25,011 At December 31, 1975, options to purchase 635,840 shares (475,835 shares at December 31, 1974) were exercisable, and 314,851 shares (486,264 shares at December 31, 1974) were available for option. In connection with the Shulton, Inc., merger in 1971, the company assumed obligations under various stock option and purchase plans of Shulton. At December 31, 1975, all such options to purchase shares of Cyanamid stock had expired. During 1975 options for 490 shares were exercised (none in 1974). Upon exercise of options, the excess of proceeds over the par value of shares issued or cost of treasury stock (S2 in 1975 and none in 1974) is credited to additional paid-in capital. Additional Paid-in Capital increases during 1975 were attrib utable solely to the issuance of shares under stock options (see above). Treasury Stock is acquired from time to time and used to fulfill obligations under the company's incentive compensation and stock option plans. During 1975, no such shares were ac quired (417 in 1974). In 1975, 1,358 shares were issued pur suant to the above stock options (none in 1974) and 3,308 shares were issued to retired participants under the incentive compensation plan (4,546 shares in 1974). 7. Contingent Liabilities and Commitments--Rental expense under property and equipment leases in 1975 was $25,427 ($22,734 in 1974). Estimated future rental expense under prop erty and equipment leases expiring between 1976 and 2059 are: 1976--S11,870; 1977-$6,816; 1978-$3,220; 1979-$2,453; 1980-SI ,465; 1981-1985-S3.638; 1986-1990-S555; 19911995--$10; and for 1996-2059--$154, all in the aggregate. The present status of significant litigation is disclosed in the section entitled "Litigation". As more fully'explained therein, certain settlement agreements regarding treble-damage litiga tion were made during 1975. In connection therewith a provi sion in the amount of $13,500 (after taxes of $13,500) was made against earnings employed in the business, as such amounts relate to years prior to 1967. Included in the above provision are related legal fees and settlements in excess of amounts previously provided. 8. Employees' Benefits include the cost of pension, group in surance and social security programs. The company and its consolidated subsidiaries have various pension plans covering substantially all their employees including certain employees in foreign countries. The company's policy generally is to accrue and fund pension costs over the service lives of the covered employees. The total pension expense was $19,423 for 1975 and $14,403 for 1974. The Employee Retirement Income Se curity Act of 1974 is not expected to have any material effect on the company's funding and pension expense. 9. Discontinued Operations--As of December 2, 1974, Cyanamid sold its 50% equity interests in the Jefferson Chemi cal Group realizing a profit of $39,676 (after applicable taxes of $21,600). The equity in net earnings of these companies until their sale ($19,025) is included in the results from discontinued operations in 1974. in December, 1974, the unconsolidated real estate subsidi aries (Ervin Industries, Inc. and its subsidiaries) commenced a program of orderly disposition of both their assets and related debt. Accordingly, Cyanamid management considered it appro priate to account for Ervin as a discontinued operation neces sitating a provision for the loss of its investment in and ad vances to these wholly-owned subsidiaries ($39,100, after ap plicable taxes of $36,200) including a provision of $28,000 less applicable income taxes of $13,400 for additional funds re quired by Ervin in connection with the disposition. These funds CY0005552 21 American Cyanamid Company and Subsidiaries Notes So Consoiidaiad nancial Statements of 1975 and 19 (continued) [Thousands ol dollars) were disbursed to Ervin in 1975 and the disposition has been substantially completed. Ervin's operating results through De cember 31, 1974 ($11,345 loss for 1974), are included in the results from discontinued operations. 10. Other financial statement information is as follows: The weighted average interest rate of short-term (principally for eign) borrowings was 12% at both December 31, 1975 and 1974 and the approximate weighted average interest rate was 13% for both 1975 and 1974. The maximum amount of aggre gate short-term borrowing outstanding at any month end during 1975 was $31,600 ($42,000 in 1974) and the approxi mate average aggregate short-term borrowing outstanding during 1975 was $27,000 ($22,000 in 1974). Other non-current liabilities at December 31, 1975, include incentive compensation to officers and other employees of $10,272 ($8,228 at December 31, 1974). A portion of such amount is not payable currently in cash but is contingently payable in common stock of the company after employment terminates; pending allotment of the amount available for 1975, the portion so contingently payable in common stock is not determinable. Another portion of such amount is similarly con tingently payable based on the performance of the company over a four-year period. Maintenance and repairs for 1975 were $70,499 ($67,112 in 1974). Social security taxes for 1975 were $29,571 ($27,765 in 1974). Taxes other than income taxes for 1975 were $21,428 ($22,184 in 1974). Advertising in 1975 was $105,687 ($104 341 in 1974). Total income tax expense of consolidated companies was $100,600 in 1975 and $104,400 in 1974 (effective rates of 41.3% and 44.7%, respectively). Explanation of the difference be tween these rates and the U.S. Federal income tax rate of 48% is as follows: 1975 1974 % of pretax Amount income % of pretax Amount income Computed expected tax expense Foreign income subject to foreign income tax, at less than 46%, but not expected to be subject to U.S. tax in the foreseeable future Investment tax credit on assets purchased during the year State income taxes included in other income taxes (net of Federal taxes) Other miscellaneous items $116,900 48.0% $112,100 46.0% (5,000) (2.1) (10,000) (4.1) 3,600 1.5 (4.900) (2.0) (4,900) (2.1) (4,000) (1.7) 2,700 1.1 (1,500) (.6) $100,600 41.3% $104,400 44.7% Discussion and Analysis of the Summary of Earnings (See opposite page) Net Sales of $1.93 billion for 1975 were 8% higher than $1.78 billion in 1974. The latter was up 21 % from 1973. In both years medical sales increased by 14%, with significant increases in such important products as Minocin minocycline and Dexon sutures. Agricultural sales increased 23% in 1975 and 47% in 1974, with fertilizers leading the way because of strong world wide demand and higher selling prices. Specialty chemicals were strong in 1974 with sales up 27%, but declined 3% in 1975 due largely to depressed business conditions. Sales of consumer products, which include Formica decorative lami nates, wall coverings, synthetic fibers, household products, toiletries, fragrances and hair-care products, increased 4% in 1975 and 1974. Manufacturing Cost of Sates--Added volume and higher raw material and labor costs were the primary reasons for the 8% increase over 1974 and 25% increase over 1973. Also see the last paragraph of this section regarding the change in 1974 in the method of valuing inventories in the United States. Selling, Administrative, Research and Employees' Benefit Expenses increased by 12% in 1975 as compared with an 18% increase in 1974. Much of these increases resulted from higher payroll costs. Advertising and sales promotion expenses continued at increased levels in the consumer businesses in our determined effort to strengthen market position for key products. Exchange losses constituted a substantial portion of the increase in administrative expenses, increasing to $21.0 million in 1975 from $7.2 million in 1974. To insure the con tinuing flow of new products, research expenditures rose 14% to $67 million in 1975 following a 23% gain the preceding year, with major increases in the medical and agricultural segments. The increases in employee benefits were due to higher costs of pension, group insurance and social security programs. Interest Expense increased in 1975 due to increased indebt edness and rates which in some cases are based on current borrowing rates. Taxes on Income for 1975 declined from the preceding year, principally because of increased investment tax credits, in 1974, taxes were 12% higher than in 1973 due to higher earn ings before taxes. Earnings of Consolidated Companies increased 11 % in 1975 and 12% in 1974. This reflected very strong performances in both years by the agricultural business, and in 1974 by the chemical business as well. The medical business had in creased earnings in 1975 while the consumer business had lower earnings that year. As a result, the approximate percent age contribution to total earnings on a worldwide basis of the major business segments showed a significant change during the past few years. For example, agricultural earnings have continued to rise as a percentage of earnings of consolidated companies, while consumer earnings have declined. Equity in Net Earnings of Associated Companies declined 73% in 1975 as compared to a 99% increase in 1974. The decrease in 1975 was due principally to depressed conditions in the specialty chemicals and certain consumer businesses. The increase in 1974 was due to an overall higher level of earnings from most associated companies, particularly those in the specialty chemicals segment. Adoption of Last-in, First-out (LIFO) Method of Valuing In ventories--In 1974 the company adopted the LIFO method of valuing substantially all the inventories in the United States. This change in accounting reduced net earnings in 1974 by ap proximately $26 million (544 per share). 22 CY0005553 (Amounts in millions except earnings and dividends per share) 1975 1974 1973 1972 1971 Earnings Net sales........................................ Manufacturing cost of sales less depreciation and depletion ... Depreciation and depletion........ Selling, administrative, research and employees' benefit expenses .................................. Interest expense......................... Taxes on income......................... Earnings of consolidated companies............................... Equity in net earnings of associated companies............. Earnings from continuing operations ............................... Discontinued operations, less applicable income taxes......... Net earnings................................. Per share of common stock Earnings from continuing operations ........................... Net earnings........................... Dividends.................................. Average number of shares of common stock outstanding (used in calculating earnings per share) ............................... $1,928 1,051 78 564 22 101 143 5 148 148 3.09 3.09 1.50 47.7 $1,780 972 72 505 18 104 129 17 146 9 155 3.07 3.24 1.45 47.7 $1,472 $1,359 776 726 69 68 428 16 93 116 9 125 (11) 114 395 16 81 97 6 103 4 107 2.59 2.37 1.32'/2 2.12 2.19 1.25 48.1 48.6 $1,283 697 64 380 14 66 78 8 86 6 92 1.77 1.90 1.25 48.3 Other Statistics Gross additions to plants, equipment and facilities (includes acquisitions)........... Current assets............................. Current liabilities......................... Working capital........................... Plants, equipment and facilities-- at cost........................................ Net depreciated cost................... Funded debt not due within one year................................... Stockholders' equity: Common stock....................... Additional paid-in capital___ Earnings employed in the business............................... Deduct treasury stock ............. Total equity..................... 204 797 335 462 1,488 785 282 244 39 793 (32) 1,044 139 802 335 467 1,311 659 244 244 39 716 (32) 967 83 72 669 623 272 245 397 378 1,199 593 1,176 598 238 237 244 244 39 39 630 (32) 881 580 (5) 858 111 546 217 329 1,157 596 213 243 35 534 (6) 806 Note--The above data has been adjusted to reflect the settlements of litigation as described In the Notes to Consolidated Financial Statements. ---------- Consolidated Salus (in rmiii* m-. ,.< "l971 1972 1973 1974 TT77T .'OOO ''"H< mf)0 i :oo * <.(o 1 `.0(1 .sou ! tor. ' .`I H: i mn moo 000 MOO' *0;: (.MO .SOM MX 1 01) Earnings and Dividends per Share SSfcv EafTMn9S H Dividends a so n ;*, 3 IV) : /s in 1971 1972 1973 1974 1975 - 1 00 - 0 75 -0 50 - 0.25 Stockholders' Equity (in millions of dollars) - 1200 - 1100 - 1000 - 900 - aoo - 700 - 600 - 600 - 400 300 .on i no 1971 1972 1973 1974 lOT' CY0005554 23 Organizational Units Operations AGRICULTURAL DIVISION Philip G. Connell, Jr., President Animal feed, health and veterinary products, insecticides, fun gicides, herbicides, nitrogen and phosphate fertilizer products. CONSUMER PRODUCTS DIVISION John H. Dietze, President Breck preparations for care of the hair; Pine-Sol* cleanerdisinfectant-deodorizer; and other household maintenance and cleaning aids. Markets these and Shulton products in Canada. CYANAMID EUROPE-MIDEAST-AFRICA George J. Sella, Jr., President Manufactures, imports and markets Cyanamid's products, ex cept for Consumer and Shulton products and fertilizers, through subsidiaries and distributors in Europe, Africa and the Middle East. CYANAMID LATIN AMERICA-ASIA William A. Liffers, President Manufactures, imports and markets Cyanamid's products, ex cept for Consumer and Shulton products and fertilizers, through subsidiaries and distributors in Latin America, Asia and the Pacific. CYANAMID OF CANADA LIMITED T. Dean Smith, President Produces for sale in Canada and for export and also imports and markets in Canada the products of Cyanamid and its subsidiaries. FIBERS DIVISION Howard E. Nehms, President Creslan* aciylic fibers for apparel, home furnishings and in dustrial applications; filament polyester for tire cord. FORMICA CORPORATION Martin B. Friedman, President Formica* brand decorative laminates; melamine component panels for architectural and residential applications; ad hesives; Formica* coated wall fabric; Sanitas* and Wallclad coated wall fabrics from Standard Coated Products. INDUSTRIAL CHEMICALS AND PLASTICS DIVISION Gerard A. Forlenza, President Industrial products for paper-making and mining; ftocculants and related chemical agents for industrial and municipal water and waste treatment. Chemical products for the chemical process industry; heavy chemicals, surfactants, acrylamide, acrylonitrile, melamine and specialty monomers. Plastics and resins for coatings; thermosetting and acrylic molding com pounds; high performance bonding agents and adhesives; and Acrylite acrylic sheet. LEDERLE LABORATORIES DIVISION Jan Dlouhy, President Antibiotics, steroids, pharmaceuticals, vitamins and hernatinics, vaccines; Davis & Geek surgical sutures and hospital products, clinical laboratory diagnostic aids; fine chemicals and bulk pharmaceuticals. ORGANIC CHEMICALS DIVISION Ben H. Loper, President Catalysts, dyes, elastomers, intermediates, plastic additives, refinery chemicals, rubber chemicals, textile chemicals, tex tile resins, chemical light, inorganic and organic chemical colors, Unitane titanium dioxide; and industrial safety equip ment from Glendale Optical Co., Inc. SHULTON, INC. Albert L. Munsell, President Old Spice men's toiletries; Desert Flower fragrances and toiletry products; Corn Silk cosmetics; imported Nina Ricci, Carven perfumes for women and Pierre Cardin' toiletries for men. Produces and markets Consumer and Shulton products outside the U.S. and Canada . Trademark Services Chemical Research Division Jason M. Salsbury, Director Commercial Development Division Kent L. Aldershot, Director Controller's Division Cameron H. Calder, Controller Engineering and Construction Division George P. Ferrigni, Director Investor Relations Wallace G. Taylor, Director Law Division James I. Wyer, Director 24 Personnel Division Clair L. Brandrup, Director Public Affairs Division Joseph C. Calitri, Director Materials Planning and Procurement Division Theodore E. Hazell, Director Transportation and Distribution Division Arthur C. Fennimore, Director Treasury Division Leonard T. Murphy, Treasurer Washington Office Don A. Goodall, Corporate Representative CY0005555 James G. Affleck James F. Bourland James B. Fisk Thomas P. Forbath L. Emery Katzenbach Ian K. MacGregor Borden R. Putnam George W. Russell George L. Schultz Clifford D. Siverd Nolan B. Sommer William L. Wearly Chairman of the Board, President and Chief Executive Otticer American Cyanamid Company Senior Vice President American Cyanamid Company Retired Chairman of the Board Bell Telephone Laboratories, Incorporated Senior Vice President American Cyanamid Company Chairman of White Weld Holdings, Inc. International investment bankers Chairman of the Board and Chiet Executive Otticer AMAX Inc. Mining, processing and labricating ot metals and minerals Senior Vice President American Cyanamid Company Senior Vice President American Cyanamid Company Chairman of the Board Shulton, Inc. Retired Chairman of the Board and Chief Executive Officer American Cyanamid Company Senior Vice President American Cyanamid Company Chairman ol the Board and Chief Executive Otticer Ingersoll-Rand Company Diversified manufacturer of machinery and equipment James G. Affleck J. Clifford Blauvelt James F. Bourland Thomas P. Forbath Morgan V. Hunter Borden R. Putnam George W. Russell Nolan B. Sommer James 1. Wyer Cameron H. Calder Leonard T. Murphy Chairman of the Board, President and Chiet Executive Officer Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Vice President, Secretary and General Counsel Controller Treasurer Clifford D. Siverd Chairman James G. Affleck James B. Fisk Thomas P. Forbath L. Emery Katzenbach Ian K. MacGregor George L. Schultz William L. Wearly Executive Commitiee James G. Affleck J. Clifford Blauvelt James F. Bourland Thomas P. Forbath Morgan V. Hunter Borden R. Putnam George W. Russell Nolan B. Sommer Chairman Audit Committee Ian K. MacGregor Chairman James B. Fisk L. Emery Katzenbach William L. Wearly Transfer Agent = r>d Registrar The Chase Manhattan Bank, N.A. New York, N.Y. 10015 Form 10-K available to stockholders A copy of the company's 1975 annua! report on Form 10-K, including finan cial statements and schedules, as filed with the Securities and Exchange Com mission, will be made available free of charge to Cyanamid stockholders. Copies of exhibits attached to the Form 10-K will also be made available at a charge. Requests should be addressed to the Secretary of the company. Printed in U.S.A. CY0005556 ANNUAL REPORT 1975 CYANAMID American Cyanamld Company Wayne, New Jersey 07470 CY0005557