Document MJjnZ8gX3kvqRvynjOXDVOLQz

C FA2VAJW I X> American Cyanamid Company Annual Report 1969 N9485 American Cyanamid Company Report of the Board of Directors for the Year Ended December 31,1369 TABLE OF CONTENTS Letter to the Shareholders --pages 2-3 Year In Review --pages 4-15 Financial Review, Accountants' Report --pages 16-21 Ten Year Comparative Summary--pages 22-23 Divisions and Principal Subsidiaries--page 24 Plants, Laboratories and Offices--page 25 4 j American Cyanamid Company and Subsidiaries Highlights , For the Years Ended December 31,1969 and 1968 S - * ;: ' Sales ........................................................................................................ . Earnings before income taxes........................... .......................... ..... . Income taxes ...................... ..... ..................................................... . Net earnings ... . . ................................................. ..... . . . Dividends on Common Stock paid in cash........................................... Earnings per share Common Stock (based on the average number of shares outstanding for each year)................................................ Dividends per share Common Stock . . . . . . . . . . . Depreciation, amortization and depletion . . . . . . . . . . Expenditures for capital additions........................................................... Funded debt.................................................................................................. Shareholders' equity.................................................................................. Shares outstanding at end of year: Common Stock (excluding treasury shares)...................................... Number of shareholders............................................................................ Number of employees.................................................................................. 1969 V 1968 . $1,087,097,977 $1,023,231,047 166,870,096 156,759,601 77,000,000 71,000,000 89,870,096 85,759,601 55,107,596 55,117i784 2.02 1.25 54,834,159 95,833,461 118,993,967 690,829,736 1.93 1.25 54,361,328 56,8104181 105,209,689 683,587,317 44,366,194 122,219 36,325 44,399,352 124,189 35,365 CY0005366 Clifford D. Siverd, center, President and Chief Executive Officer, Ian K. MacGregor, left (Chairman of American Metal Climax,Inc.), and L. Emery Katzenbach. right (General Partner in White, Weld & Co.). Thomas L. Perkins, center (Counsel, Perkins, Daniels & McCormack), James B. Fisk, right, (President, Bell Telephone Laboratories, Inc.). CY0005367 i o Our bharancu The year 1969 for Cyanamid was one of further progress. Worldwide sales reached a new all-time high of $1,087,098,000, up 6% from $1,023,231,000 in 1968. Earnings were $89,870,000 or $2.02 per share, 5% higher than $85,760,000 or $1.93 per share in 1968. The year-to-year earnings increase was due princi pally to the higher sales volume throughout the year, to larger dividends from associated companies and to the proceeds of the settlement of certain foreign patent litigation which were received in the fourth quarter. The improvement in earnings was achieved despite the pressure on profit margins, which has become more pronounced in recent months. Lower manufacturing productivity, higher salaries and wages, and lower selling prices, particularly for some agricultural products and for certain medical products overseas, all contributed to the pressure on profit margins. A strike at the Pearl River, New York, plant of the Lederle Laboratories Division during the latter part of the year also affected earnings adversely, al though deliveries were maintained from inventories and partial production. Worldwide sales increased in all four of the major segments of the company's business. Toward the end of the year, however, definite signs of a slowdown made their appearance in some product areas. The largest year-to-year percentage gains in both worldwide sales and earnings were registered by building and consumer products. The medical seg ment of the business also showed gains in sales and earnings despite the strike at Pearl River. For chemi cals, although sales increased in 1969, earnings were lower because of the decline in profit margins. In the agricultural part of the business, both sales and earn ings for the last half of 1969 were well above those for the comparable period of 1968. For the year 1969 as a whole worldwide sales of products for agriculture were somewhat higher than in 1968. However, earn ings were lower because of depressed conditions in the fertilizer industry and reduced sales of pesticides during the first half of the year. The table on the opposite page shows the approxi mate percentage contribution to 1969 and 1968 sales and earnings made by each of the four segments-- 2 and, in the case of earnings, by dividends from asso ciated companies also. Cyanamid made three acquisitions in 1969. The largest of the three was the IRC Fibers Division of Midland-Ross Corporation, purchased for a price some what in excess of $20 million. With this purchase, Cyanamid acquired technology and production facili ties for industrial polyester fibers and modified rayon, thereby expanding the position it has successfully established in man-made fibers with the broad fine of Cr e s l a n acrylic fibers. The other two of the year's acquisitions were Sargent Calcium Co. and Control Print Corporation. Sargent Calcium Co. is a producer of dicalcium phos phate and ground limestone sold to manufacturers of animal feeds. With the acquisition of Control Print Corporation, Cyanamid enhanced its capability to offer systems and hardware utilizing its new luminescers for control of automated industrial operations. As a result of the program for settling the anti trust litigation in which Cyanamid is involved, the company during 1969 accrued the amount of $54 million with respect to the settlement of certain of the damage suits filed against it, and this amount, less an estimated tax benefit of $29.4 million, has been charged against earnings of appropriate prior years. In October, the company deposited approximately $34.4 million in escrow under court supervision as its share of a total deposit of approximately $85.3 million made to implement a major portion of the settlement pro gram. A further discussion of recent developments in this litigation and the settlement program appears in the section of this report captioned Litigation on page 15. Capital expenditures in 1969, primarily for new and enlarged production facilities and for acquisi tions, were approximately $96 million, as compared with $57 million in 1968. This report on the year's activities would not be complete without mention of the company's response to its social obligations. The following pages include a description of some of the further steps taken by Cyanamid during 1969 in preservation of air and water quality and in hiring of the disadvantaged. In addition, in recognition of the impact of inflation on CY0005368 Chemical :^y jvj-^s '* '* '^-'y'r^~ - - 969 VCbenjlgal "Agricultural :**%?..Mi*?141 ptfeg^^V >-106%' 'ioo%'^^^U3ipo%^`' Spa of corporate Income pnji expenses were, made in eccorcM^h generally recognized eccounUnfl^ytlctlC^iKircenlagee above the cost of living, the company increased its pension payments to retired employees. During the year, in order to describe more clearly functional responsibilities, the committee previously designated as the Executive Committee was renamed the Finance Committee, and the committee previously called the Management and Finance Committee was then renamed the Executive Committee. The outlook for the general economy in 1970 is highly uncertain. The costs of doing business remain under strong upward pressure, and the company has redoubled its efforts directed at improving manufac turing productivity, at stringent control of costs, and at increasing profit margins by all other measures possible. As in past years, the competence and dedication of Cyanamid's employees, and the loyalty and support of our shareholders, customers, and suppliers, con tributed immeasurably to our performance in 1969. These are among the factors that give us confidence as we look ahead to the challenges of 1970 and the years beyond. For The Board of Directors PRESIDENT Wayne, New Jersey February 3,1970 3 CY0005369 Polyester tire yam production facilities were part of the acquisition by Cyanamid of the IRC Fibers Division of Midland-Ross Corporation late in 1969. The IRC plant is at Painesville, Ohio, and also produces modified rayon. Expansion is planned. Indoor-outdoor carpet of Cresian acrylic fiber withstands exposure to the elements. Cyanamid introduced a new system for achieving color-fastness which enables carpet designers to offer a wider selection of colors. Building and Consumer Worldwide sales ($ millions) % Total sales (approx.) % Total earnings (approx.) 1969 $278 26% 17% 1968 $247 24% 15% The building and consumer products segment, which includes Consumer Products, Fibers, and Formica Cor poration, has been the most rapidly growing segment of the company's business. In consumer products, world wide sales showed a substantial gain in 1969, aided by the success of recently introduced hair-care products. There was a considerable decline in domestic demand for fibers in the latter part of 1969, but fiber sales in overseas markets were good for the year, bringing worldwide fiber sales to about the same level as in 1968. Sales of Fo r mic a brand laminates increased both here and abroad despite continued weakness in home construc tion in the United States. Earnings for the year showed good improvement in the building and consumer products segment. The profit generated by the higher volume of consumer products and Formica sales more than offset the effect on earnings of lower fiber demand in the United States. Despite the overall higher volume of sales, however, earnings from building and consumer products were affected in recent months by lower manufacturing productivity and higher 4 manufacturing costs evident in other segments of the company's business. Activity during 1969 related to building and consumer products, as outlined below, was highlighted by an im portant acquisition and the planning and introduction of new products. Consumer Products: The strong surge in sales of consumer products in 1969 was evidence of a year of significant progress in this area of the company's business. In both hair-care and household products, an impressive record of accomplishments was achieved in the research, de velopment, market testing and national launch of new products as well as in improved formulating, packaging and marketing of existing products. The success of new and recently introduced consumer products was the result of consumer-oriented research complemented by the broad scientific technologies avail able in other areas of Cyanamid's business. This research teamwork was responsible for the national introduction in mid-1969 of Br ec k hair color, a shampoo-in product that achieved sizable early sales and good customer ac ceptance. The company is supporting this new product with the sizable expenditures needed for advertising and sales promotion because of the competitive nature of the hair color business. The product line of 12 current color shades will be extended in 1970. An earlier product from Cyanamid research, Br ec k Bas ic hair texturizer, introduced in 1968, sold extremely well in 1969. The benefits of company-wide research also extended to household products in 1969. At year-end, national introduction was underway for a major new product, CY0005370 National advertising campaign for new Formica Floor Shine finish is reviewed by Robert Hecklau, standing, product manager, and creative team of advertising agency. Product was successful in test markets conducted in three cities. Floral pattern ol Formica Panel System 202 shows its increasing use in high humidity areas such as bathrooms. The laminate is bonded on a semi-rigid core of polystyrene foam and can be installed over old surfaces. Fiat shower unit in background is another Formica product. Both are popular In home remodeling. Glory girls help advertise new Breck hair color, a shampooin product that gained substantial early sales following its national introduction in mid-1969. The line now includes 12 different shades and will be extended with new shades in 1970. Fo r mic a Fl o o r Sh in e finish. Fl o o r Sh in e imparts a hard polymer finish to tile, vinyl, linoleum and other types of floors that resists scuffs, stains and spills. The finish meets housewife preference for a product that does not yellow and is easily removed, as indicated in successful test marketing in three cities. Product innovation in important Br ec k hair-care fines also is aiding sales. At the end of 1969, a national shift was underway to introduce a new "gold formula" for Br ec k shampoo which conditions the hair while both wet and dry. The new shampoos are packaged in a new and safe plastic shatter-proof container. Another product innovation, the introduction of unscented formulations of Miss Br ec k hair sprays, helped increase sales sig nificantly. Improvements in capacity and productivity were achieved in 1969 for the production of Pin e-So l cleaner, New plant to produce Pine-Sol cleaner, disinfectant, deodorizer was completed near Jackson, Miss., in 1969. Pine-Sol is now leader in liquid cleaner field. disinfectant, deodorizer. A new plant was completed near Jackson, Mississippi, replacing smaller leased facilities. Sales of Pin e-So l increased significantly during the year as the product climbed to the No. 1 position in the liquid cleaner market in the United States. 5 CY0005371 Fibers: The level of activity in the floor covering and ap parel markets in the United States declined in the latter part of 1969. In the competition for the lower volume of business, Cyanamid's acrylic fibers were aided by product improvements and technological innovations. A new system was introduced in 1969 for achieving the color-fastness required in acrylic outdoor carpeting. With the new system, carpet manufacturers have vir tually unlimited color selection and greatly increased styling versatility to meet the more sophisticated tastes of the consumer. Colors available with the process have withstood the test of exposure to months of bright Florida sunshine. At the recent Home Furnishings Market show, seven carpet manufacturing mills introduced 13 new lines con taining Cr es l an acrylic fiber, ten of which were styled from the company's newly introduced piece-dyed and cross-piece-dyed fibers. To expand its service to the carpet industry, Cyanamid is installing a carpet fiber application facility at its plant near Pensacola, Florida. Scheduled for completion in 1970, the unit will enable the company to duplicate com mercial techniques from basic fiber to finished carpet. It will include modem equipment for yam spinning, dyeing, tufting, and finishing. The facility also will broaden assistance to customers in styling and developing new carpet lines. In apparel applications, the use of Cr es l an by the sport shirt industry broadened during the year, primarily because of the fiber's ability to provide color versatility and help resist stretching and shrinking. In its first major move towards multi-fiber producing and marketing, Cyanamid in late 1969 acquired the business and assets of the IRC Fibers Division of MidlandRoss Corporation. The purchase price was in excess of $20 million, of which 20% was paid at closing and the balance due is represented by promissory notes maturing annually over the next four years. The new business is being operated as IRC Fibers Co., a wholly owned sub sidiary of Cyanamid. The acquisition furnishes Cyanamid with technology and production for polyester yam for tires and other in dustrial applications as well as in the field of modified rayon. Demand is good for polyester yam used in today's bias-belted tires, and the IRC line of modified rayon prod ucts will broaden Cyanamid's position in apparel markets. Plans are being made for substantial investment in the IRC operation, primarily to expand from industrial yam into other types of polyester fibers with applications in apparel and floor coverings. Formica Corporation: Sales of Fo r mic a brand laminates increased in 1969 with demand in commercial building and home remodeling markets offsetting the effect of the continuing decline in home construction. Significant progress was made with Fo r mic a Panel System 202, introduced in 1968 for use in areas of high humidity. The product is finding increasing acceptance in hotel and motel bath and wash areas and in residential remodeling. Formica broadened its position as a marketer of a wide Products Introduced by Lederle Laboratories and Davis & Geek include a semi-synthetic penicillin and Aristospan triamcinolone hexacetonide for treating arthritis, as well as hospital specialties. 6 CYO0O5372 range of vertical and horizontal surfacing materials to building and construction outlets. In addition to the commercial development of several new products dur ing the year, Formica's integrated marketing capabilities were strengthened by the two new design centers opened in 1969, one in Los Angeles and the other at the plant site in Evendale, Ohio. Both are contributing to Formica's design leadership and serve as marketing display rooms for architects, specifiers and other customers. Formica also broadened its research efforts with the completion of a major addition to the research and development labora tory at Evendale, Ohio. Among new products from research, Formica is pre paring to market a new laminated vinyl for vertical appli cation on furniture. It offers greater strength and dura bility than the thin vinyl films commonly used. It also offers design and color fidelity matching the Fo r mic a laminates used on horizontal surfaces of the furniture. Plans were completed for the 1970 introduction of Formica's new three-dimensional textured laminates, de signed to offer more relief and character to horizontal surfaces. New vertical laminates for exterior commercial applications, such as store fronts, will be marketed re gionally on the West Coast during 1970. Further marketing progress in Formica's new field of vinyl-coated wall coverings was delayed by a 45-day strike at the plant in Buchanan, New York, in early 1969. How ever, new patterns for Sa n it a s wall coverings were intro duced late in the year and similar new patterns for Wa l l c l a d wall coverings will be marketed in 1970. Flu vaccine is produced under sterile conditions at Lederle Labora tories in Pearl River, N.Y. Lederle helped meet the urgent need in the U.S. for special Hong Kong flu vaccine during epidemic in 1968-69. Plans for expansion of production capacity are underway. Springfield Gravure Corporation, a wholly owned sub sidiary which engraves many of the cylinders used to print patterns for Fo r mic a laminates and Sa n it as and Wa l l c l ad wall coverings has broadened its capabilities as a commercial printer. A new 11-unit color gravure press was placed in operation in 1969 at the plant in Springfield, Ohio. Springfield Gravure specializes in the large volume printing of color ads for newspapers. Medical ., V . i Worldwide sales ($ millions) % Total sales (approx.) % Total earnings (approx.) 1969 $231 21% 37% 1968 $216 21% 35% Worldwide medical sales and earnings increased in 1969 despite lower selling prices for some products over seas and the effects of the strike at Pearl River, New York. Medical sales in the United States benefited from an increased demand for antibiotics in the first quarter of the year because of the influenza epidemic. The strike by hourly production and maintenance em ployees at Pearl River began on August 30, 1969, and was settled on January 23, 1970. Sufficient production was maintained by supervisory and other employees to provide adequate inventories, but the strike nevertheless was costly and had some effect on earnings. An important factor in the worldwide increase in sales and earnings of medical products was the continuing sales growth of products other than antibiotics. Sales of the antituberculosis drug My a mb u t o l ethambutol again showed a good increase. The largest growth was in over seas markets because of the far greater incidence of the disease outside of the United States. The use of My a mb u t o l is growing in first-line therapy as well as for cases resistant to other tuberculosis drugs. In new products, Lederle Laboratories introduced Ar is t o s p a n triamcinolone hexacetonide for the relief of symptoms associated with rheumatoid arthritis and osteo arthritis. Developed in research, this new form of triam cinolone is designed for injection into arthritic joints. The improved formulation of Ar is t o s p a n has resulted in excellent reception by physicians. Late in the year, Lederle also broadened its position in the antibiotic field with the introduction of Al p e n brand of ampicillin under an agreement with another company. Ampicillin accounts for the largest single segment of the penicillin market. As a further service to help meet expanding patient needs in hospitals and nursing homes, Lederle initiated a system of color-coded packaging for drug products to help minimize the possibility of medication error. The CY0005373 first group of products to be so coded were the tetanus biologicals. Plans are underway to expand the system to other product areas. Cyanamid medical research in the recent past has identified a number of new products with major market potentials which are now undergoing clinical trials. The products, which are still some years away from the mar ket, embrace eight different fields of use, most new to Lederle. Similar research efforts resulted in the develop ment of Min o c in minocycline, a new semi-synthetic tetracycline antibiotic which now is awaiting clearance by the Food and Drug Administration. Min o c in , in de velopment for eight years, possesses high potency and activity against certain resistant strains of bacteria. Its behavior has been observed in thousands of patients by independent medical investigators throughout the world. While the product must await FDA clearance for market ing in the U.S., a small plant to produce initial require ments for Min o c in is now being completed at Pearl River, New York. A larger plant at the same location is under construction and is scheduled for operation late in 1970. Another new product from medical research, De x o n * suture, is also awaiting clearance by the Food and Drug Administration. Dex o n is the first wholly synthetic suture completely absorbable by the body. It will be marketed under the Davis & Geek label, a respected name in surgi cal sutures and hospital specialties. Reports from numer ous clinical investigators both here and abroad indicate that Dex o n is superior to conventional gut sutures in ab sorbability and strength and greatly reduces tissue irri tation. Facilities for the commercial production of Dex o n sutures are under construction at the plant in Danbury, Connecticut, with completion expected in 1970. During 1969 the Food and Drug Administration took initial actions which could lead to decertification of a large number of combination drug products which have been on the market for many years. Of the several Lederle products involved, only 3 are of importance: Ac h r o c id in tetracycline-antihistamine-analgesic, De c l o s t a t j n demethylchlortetracycline and nystatin, and Ac h r o s t a t in tetracycline and nystatin. The company has filed re sponses with the FDA contending that the record of safe and efficacious use over many years of these drugs, which were developed by Lederle as a result of physician de mand, is strong testimony as to their proven value in the practice of medicine. The company believes that the decertification moves against the Lederle combination products are not justified and in fact run counter to the desires of the practicing physician and the best interest of the patient. In order to support the company's posi tion, additional clinical tests are being conducted and a strong record of doctor experience with these drugs is being compiled. A determination of the issues involved will be some time in coining to a conclusion since the new data may require review at a formal FDA hearing at some undetermined date in the future. It is difficult to assess the possible future financial impact of decertifica tion since increased prescription of the individual anti biotic ingredients of these combination products would to some extent cushion the effects of decertification. 8 Chemical Worldwide sales ($ millions) % Total sales (approx.) % Total earnings (approx.) 1969 $382 35% . 25% 1968 ; $369 36% 29% Sales of chemical products in 1969 continued to be the largest part of Cyanamid's worldwide business. Among the company's chemical divisions, Industrial Chemicals, Organic Chemicals, and Pigments each had higher sales than in 1968. Sales of the Plastics Division were about equal to the previous year. The overall improvement in sales was achieved despite the somewhat reduced de mand for chemicals in the latter part of the year as a re sult of the slowdown in the growth of the economy in the United States. Earnings in the chemical segment were down from the 1968 level. Average selling prices for chemicals were relatively stable during 1969. However, the gain in sales volume was insufficient to offset the effects of lower A new pilot plant is in operation at Bound Brook, New Jersey, to complete the development on a new process to make beta naphthol. an important Cyanamid chemical used in dyes, pigments and other organic chemical products. Traderaaik CY0005374 manufacturing productivity and higher manufacturing, selling and developmental costs. Considerable progress was made during the year in bringing several large, new and modem production facili ties nearer to completion. At the Warners plant in Linden, New Jersey, a new sulfuric acid unit is expected to be in operation in the first quarter of 1970. It will replace smaller and less efficient facilities at the same location. Capacity for ultraviolet light absorbers will be increased substantially with the completion of additional facilities at Willow Island, West Virginia, scheduled for start-up early in 1970. Several new specialty absorbers were suc cessfully produced in interim facilities to expand the company's product line. An important application for ultraviolet absorbers is in prolonging the life of many plastics by protecting them from the deteriorating effects of radiation from the sun and from indoor fluorescent lighting. Construction is proceeding on the large new chloride process titanium dioxide pigments facility at Savannah, Georgia. The new unit is expected to provide a significant increase in capacity in late 1970 and permit expansion of the company's growing line of Un it a n e * titanium dioxide pigments. Demand and potential are good for the product line, which has wide application in paint, paper, printing ink and plastics. A project was launched in 1969 to determine the availability of domestic titanium minerals for the manu- Talllight femes made of Aerylife acrylic molding compounds are examined by a Cyanamid salesman, center, and representatives of a major automobile producer. Acrylite is also used in horn buttons and other accessory parts. Other Cyanamid products for auto makers include paint pigments, coating resins, rubber chemicals and adhesives. Special research is conducted for the auto industry. New sulfuric acid plant, shown in model, is almost completed at the Warners plant in Linden, New Jersey. A sulfur recovery unit also is being built at Warners. Both will significantly improve air quality by substantially eliminating sulfur dioxide emission. Coding machines and other print ing devices for packaging are manufactured by Control Print Corporation, which was acquired in 1969. Control Print is expected to enhance Cyanamid's efforts in the development of systems to control automated industrial operations using luminescent chemicals and reading devices. CY0005375 9 facture of Un it a n e pigments. The study of a possible ven ture for mining titanium-bearing ore, being conducted jointly with Union Camp Corporation on their property in northern Florida, has progressed to the pilot plant stage. A source of domestic titanium minerals would greatly re duce Cyanamid's dependence on imported ores for the manufacture of Un it a n e . Significant steps were taken in 1969 toward enlarging Cyanamid's capacity for producing certain "building block" chemicals that the company draws upon heavily to upgrade into other finished products. As an example, at the Fortier complex near New Orleans, Louisiana, pro duction of the important chemical acrylonitrile was in creased substantially by modifying equipment and intro ducing an improved catalyst in the manufacturing pro cess. The demand for acrylonitrile is growing for use in a wide variety of upgraded chemical outlets such as man made fibers, resins for plastics, and synthetic rubber. Acrylonitrile also is the raw material for Cyanamid's production of acrylamide polymers, which have increas ing applications in the paper, mining and water treatment industries. To meet the growing demand for acrylamide polymers, a major new production facility was under construction late in 1969 at the Warners plant in Linden, New Jersey. Operation is expected in 1971. Another "building block" chemical of importance to Cyanamid is melamine. Melamine and its chemical deriva tives find wide usage in coating resins, adhesives, lami nating resins, molding compounds, textile finishes and paper resins. In early 1970 construction began at the Fortier plant near New Orleans on a new melamine facility with a rated capacity of 70 million pounds a year. It is due on stream in late 1971. The new unit, replacing smaller, less efficient facilities in Wallingford, Connecti cut, will produce melamine from urea, which is also manu factured at Fortier. Several smaller capital projects were undertaken in 1969 to meet growing demand in certain specialty chemi cal product areas. At Bound Brook, New Jersey, produc tion capacity is being expanded for the manufacture of rubber accelerators. New facilities for the production of Par ez 630 NC resin are being built at company plants in Mobile, Alabama; Longview, Washington; Linden, New Jersey; and at the Fortier plant in Louisiana. This new resin, that imparts both wet and dry strength to paper, has experienced a rapid growth in sales. Because the field of non-metallic honeycomb core material for the aircraft in dustry has promising potential, the company completed a large, modem plant at Azusa, California, in the key West Coast market area. Cyanamid's emphasis on the extension of its specialty chemical product lines continued during 1969. Two new Aer o c at fluid cracking catalysts were introduced to the petroleum industry for the production of gasoline and fuel oil. An improved version of XT polymer was placed on the market, developed specifically for use in plastic fabrication techniques used in products for boats, recrea tional vehicles and mobile homes. Sales of XT increased during the year with additional new applications in the packaging of food items. A related plastic product, Ac r y l it e acrylic sheet, was 10 Cyanamid insecticide was sprayed on 3 million acres in Ohio public health project to kill mosquitoes during threat of encephalitis. Low in toxicity and non-persistent, Cyanamid's insecticides are used in health programs around world. increasingly used in the fabrication of outdoor illuminated signs. Manufacturing capacity for the sheet was increased in 1969 at the Sanford, Maine, plant site. New specialty products were introduced in the field of industrial safety equipment by Glendale Optical Co., Inc., a business which was acquired by Cyanamid late in 1968. Making use of newly developed Cyanamid chemical ab sorbers, Glendale Optical is now marketing lenses and goggles to protect against infrared rays and lasers. In mid-1969 Cyanamid entered a new field with the acquisition of the assets of Control Print Corporation of Fairfield, New Jersey. Control Print produces a line of printers, coders and carton presses widely used in the packaging of cosmetics, pharmaceuticals and beverages. The acquisition is expected to enhance the company's development of materials-handling systems based on lumi nescent chemicals. In another developing area of business, progress was made in establishing Cyanamid product identity in the treatment of process waters and effluent in manufactur ing operations and municipal waste systems. One particu lar water treating chemical, Ma g n if l o c flocculant, achieved considerable success in the treatment of intake water at large industrial plants along the Mississippi River. Significant market growth is anticipated in water and waste treatment chemicals in response to more stringent regulations dealing with water quality. In its own efforts to further improve water and air quality in company plant environments, Cyanamid made considerable progress in 1969. Eight additional aerators were installed at the large Bound Brook, New Jersey, biological waste treatment plant to provide more efficient oxygen transfer. Ten such aerators were installed in 1968. The facility treats approximately 20 million gal lons a day of liquid effluent from the plant. It also pro- CY0005376 New feed additive for cattle, Aureo S 700 premix. gained nationwide acceptance in 1969. The product is added to cattle rations to combat shipping fever, a respiratory infection which commonly occurs in feediots. Tests conducted by specialists showed cattle gained an average of 12 extra pounds in 28 days. New animal health product effec tive against cattle stomach, intestinal and lung worms. Tramisol levamisole hydro chloride was introduced in the U.S. in 1969. It is also sold overseas. Second large dragline has been purchased for use in expansion of phosphate rock mine in Florida for fertilizer production. It weighs 1800 tons and can scoop 70 tons of rock. Land is restored after mining and 1160 acres recently were given to community for recreation and conservation. the company's Marietta, Ohio, plant. An equally significant stride in abatement of air pollu tion was engineered into the design of the large new sul furic acid facility being completed at the Warners plant in Linden, New Jersey, mentioned earlier in this report. The unit will utilize a new processing step which incor porates advanced technology for the control of air quality. Sulfur dioxide emission will be maintained at levels lower than any other sulfuric acid plant in the United States. As part of the sulfuric acid project, a large Claus sul fur recovery unit also is under construction at the War ners plant and will be put into operation at the same time as the new acid plant. It will convert sulfur-containing by-product gases from various operations in the plant to molten sulfur and will substantially eliminate the plant's sulfur dioxide emissions to the atmosphere. vides secondary treatment for almost 5 million gallons a day of domestic and industrial sewage from three neigh boring communities. The surface aeration principle, which now has been successfully demonstrated at Bound Brook, has been extended to the treatment of plant waste at Charlotte, North Carolina. Air quality improvement in the vicinity of the Bound Brook plant was aided considerably during the year with the completion of the first phase of a project to convert the plant's fuel supply from coal to gas, with oil as a standby. The full conversion, due to be completed by the end of 1970, will completely eliminate emissions into the air caused by the burning of solid fuel. A similar con version from coal to gas was accomplished in 1969 at Agricultural Worldwide sales ($ millions) % Total sales (approx.) % Total earnings (approx.) 1969 $196 18% 11% 1968 $189 19% 14% Worldwide sales of products for agriculture were higher in 1969 than 1968. Earnings for the year were lower, primarily because of lower selling prices, depressed condi tions in the fertilizer industry and reduced sales of pesti- 11 CY0005377 cides during the first half of the year. Both sales and earnings for the last half of 1969,however, were well ahead of the same period in 1968 despite lower selling prices. The most important part- of Cyanamid's agricultural business is its specialty product lines--animal feed sup plements, pesticides and animal health products. In 1969, the major strength in both sales and earnings came from the feed supplements. Substantial sales gains were achieved for Au r eo S-P 250 feed premix for swine, which has developed into the largest selling medicated additive in the history of the feed business. Similar high customer approval was evi dent in the latter part of 1969 for Au r eo S 700 feed premix for cattle. Sales rose sharply as major customer accounts were cleared by the Food and Drug Administra tion to produce feeds containing the new product. Au r eo S 700 is added to cattle rations, mainly in feedlots, to aid in the maintenance of weight gains in the presence of respiratory diseases. Because of the increasing demand for Au r e o my c in chlortetracycline in animal feeds, four new fermenters were placed in operation at Pearl River, New York, in early 1969. Three additional fermenters are expected to be operational in late 1970. Cyanamid's position as a supplier to the animal feed industry was further improved with the introduction of a new patented coating for Cy r ea feed grade urea, which offers feed manufacturers an outstanding freeflowing non-caking product. Acceptance was excellent in 1969 and sales increased significantly. During 1969 Cyanamid acquired the assets and busi ness of Sargent Calcium Co. for approximately $7 million. Sargent Calcium mines limestone and produces dical cium phosphate for animal feeds. The acquisition pro vides Cyanamid with an immediate market position in the most concentrated use area in the United States through plants in Alden, Iowa and Weeping Water, Nebraska. In the important area of pesticide products, business was good in 1969 but total sales were affected by price reductions and sizable cutbacks in military requirements for Ma l a t h io n ULV* insecticide. Overseas, sales of Cy o l a n e* systemic insecticides in the Middle East were substantially lower than in 1968 but, on the other hand, sales of Cy c o c el plant growth regulant increased sig nificantly in Europe. Sales of Th ime t soil and systemic insecticide in creased sharply in 1969, mainly because of its effective ness in the control of com rootworm. Extremely wet weather in the apple and cherry producing areas of the Midwest and Northeast resulted in high usage of Cy pr ex fruit fungicide to control fungus infections including scab. Market position was further established with higher sales of Cy t h io n insecticide "The Premium Grade Mal athion". Both Cy t h io n and Ma l a t h io n ULV are highly effective and non-persistent insecticides with exceptionally low hazard to humans and wildlife. To meet growing demand, new facilities were com pleted late in 1969 at the Warners plant in Linden, New Jersey, for the production of Cy g o n * systemic insecticide and Ab a t e mosquito larvicide. Ab a t e has shown the 12 ability to kill mosquito larvae without injuring fish or wildlife or affecting water potability. Start-up problems were encountered in the first part of the year with the new facility at Willow Island, West Virginia, for para-nitrophenol, used in the manufacture of parathion insecticides. In October, an explosion at the new plant caused serious damage, which has suspended production. The scope of Cyanamid's animal health operations in creased significantly with the introduction of several major new products from research and development efforts. Tr a mis o l levamisole hydrochloride, a new broadspectrum anthelmintic to control internal parasites of farm animals, was well received both here and abroad, where it is sold under the name Rif e r c o l tetramisole. Presently cleared for use in beef cattle in the United Refrigerator front* of Formica brand laminate were introduced in Argentina. Suede-finished and textured laminates also became available in 1969. Plant capacity for the production of laminates was doubled in Brazil. Trademark CY0005378 States, it is highly effective in the control of lungworm and other stomach and internal parasites, which cause losses to cattlemen estimated at more than $250 million per year. Claims extending usage to swine, sheep and poultry are in preparation. Another new animal health product introduced for cattle is Au r eo my c in Su l me t Crumbles, a combina tion of two of the most effective antibacterials on the market. The product helps maintain weight gains of cat tle in the presence of respiratory infections commonly known as shipping fever. Cyanamid's worldwide fertilizer sales were down in 1969 because of further price declines, highly unfavorable weather conditions in the United States and Canada early in the year, and lower shipments abroad because of the dock strike in the United States in the first quarter. Dol lar sales of fertilizers in the United States in 1969 were about the same as in 1968 and physical volume was higher, aided strongly by improved demand in the latter half of the year. Anticipating the mine-out in 1970 of the 20-year old Sydney phosphate rock mine in Brewster, Florida, work was started to expand the nearby Chicora mine to meet requirements for fertilizers. The expansion will bring Cyanamid's total capacity to three million tons of phos phate rock per year. International: Sales outside the United States and Canada, exclusive of sales by associated companies, again reached record levels in 1969. Sales of $205,600,000 were 4 per cent higher than the $198,260,000 of 1968, contributing approximately 19% Reporters toured the new specialty chemical plant completed at Botlek, The Netherlands, by Cyanamid, N. V. The plant Is supply ing the European market with ultraviolet light absorbers, optical brighteners, antioxidants, surface-active agents and other products. Cyanamid non-persistent Insecticides are used by the Ministry of Agriculture in Iran to control the Senn pest in wheat fields. Company's new concentrated product formulations have expanded use of aerial application of insecticides overseas. Clifford D. Slverd, center, President and Chief Executive Officer, on Far East tour, saw production of vitamins and other phar maceutical products in Taiwan by Cyanamid Taiwan Corporation. At right is Harry F. Bliss. Jr., Managing Director, Cyanamid International. CY0005379 13 Management training seminar* in decision making and problem solving were accelerated during 1969 with 16 weekly sessions held, involving more than 250 representatives of middle and top management. To date, more than 500 employees have participated and are using techniques learned. of total company sales. Earnings on the international business also were higher in 1969. The overall improvement, particularly in medical prod ucts, more than offset the effects of the shipping strike at United States ports early in the year. Sales of chemicals increased considerably in Latin America and the Far East, and the demand for acrylic fibers overseas was good. An important additional part of Cyanamid's activities overseas is conducted through several associated com panies in which Cyanamid has a 40 to 50 per cent interest. Total sales by these companies in 1969, not reflected in consolidated sales, were approximately $121 million com pared to $97 million in 1968. Sales of medical products in international markets showed a good increase in 1969. As previously men tioned, the improvement was greatly helped by the con tinued growth of My a mb u t o l ethambutol, the com pany's antituberculosis drug. As a result of the expansion of the company's medical operations in France, production facilities near Lyons are being expanded to accommodate the formulation and packaging of a wide range of Lederle products, including My a mb u t o l . Because of the favorable results in clinical trials around the world, Dex o n * suture, previously described in the medical section, will be launched in Great Britain during the second quarter of 1970. Marketing plans for other countries are being prepared. In agricultural markets, international sales were lower than in 1968, principally fertilizer sales. Sales of Cy o l an e systemic insecticides were considerably lower than in 1968 because of lower levels of insect infestation during the year. Conversely, sales of Cy c o c el plant growth regulant increased sharply in Europe. Cy c o c el helps to prevent destructive lodging or toppling in strong winds and rain through the growth of shorter, sturdier plant stalks. In addition to its application on wheat crops, the use of Cy c o c el was extended in Sweden for the pro- 14 tection of rye. The company's Ab a t e mosquito larvicide was intro duced for public health projects in The Philippines, Aus tralia, France, Jordan, and Israel. Ma l at h io n insecticide and Abat e are receiving a great deal of attention from the World Health Organization for the control of mos quitoes. In Latin America, acceptance by the livestock industry was high for Riper c o l tetramisole, injectable for catde, a broad spectrum anti-parasitic veterinary drug. A similar product, Tr amis o l levamisole hydrochloride, was cleared by the Food and Drug Administration for sale in the United States during 1969 and gained immediate cus tomer endorsement. Pay zo n e nitrovin, a new non-antibiotic growth pro moter for broiler chickens, first marketed in Great Britain, was introduced into eleven countries in Europe, the Middle East and Africa in 1969. Reception has been good. As a result of the demand for specialty chemicals in European markets, a major expansion was completed at the chemical plant of Cyanamid N.V., formerly Nederlandse Cyanamid Maatschappij, at Botlek, The Nether lands. Production of the new product lines began at the close of 1969. As a part of the expansion and to give better technical service to customers in Europe and Africa, a technical service laboratory was established at Botlek. In Latin America, sales of Fo r mic a brand laminates increased in 1969. Because of sales growth, plant capacity for the production of Fo r mic a laminates was doubled at the plant in $ao Paulo, Brazil. Following a change in strategy, the marketing of Br ec k hair-care products overseas was further improved in 1969 by continued concentration on fewer products in fewer countries with improved potential for return on investment. The new marketing plan is proving success ful, particularly in Great Britain where sales were higher. Canada: Sales in Canada in 1969 were about equal to those of 1968 despite the adverse effects of strikes at com- Trademark CY0005380 pany plants as well as prolonged strikes in the building trades and at important customer plants in the mining industries. Fertilizer sales in Canada for the year were higher than in 1968 with improved volume in the second half overcoming the effects of wet weather and the strikes at the company's Welland and Beachville plants earlier in the year. Several products recently introduced in the United States also were marketed in Canada in 1969. My a mb u t o l ethambutol was approved by the Canadian Food and Drug Directorate for the treatment of tuberculosis and gained rapid acceptance in Canada. Cyanamid's new feed additive for beef cattle, Au r eo S 700 feed premix, was introduced in Canada in September and was received enthusiastically by the feed industry. As in the United States, Au r eo S 700 is a companion animal feed supplement product to the successful Au r eo S*P 250 feed premix for swine. A pilot plant was completed late in 1969 at the Wel land plant site in Canada to produce phosphine and several of its derivatives of interest primarily as inter mediates for flame retardants for plastics and textiles. Phosphine has not been available as a commercial prod uct and this will be the first installation designed to pro duce substantial quantities. The phosphine will be used captively and will permit Cyanamid to capitalize on many years of research on phosphorous compounds. Domestic Associated Companies (50% owned): Jefferson Chemical Company, Inc., a producer of petrochemicals jointly owned with Texaco Inc., had higher sales and a significant improvement in earnings compared to 1968. The first full year of operation of the large new ethylene oxide unit aided sales. In March, a new glycol ether unit was put in operation and in April a large new urethane polyol facility came on stream with production exceeding design capacity. Process improvements were made in ethylene and ethylene amines production at Jefferson's plant at Port Neches, Texas. Arizona Chemical Company, jointly owned with Inter national Paper Company, had higher sales in 1969, but earnings were slightly lower than in 1968 largely because of higher raw material costs. A new tall oil plant was placed in operation early in the year at Springhill, La., and a major expansion of facilities for the production of terpenes is underway in Panama City, Florida. Demand for rosins continued to grow. Arizona Chemical's products have wide usage in the paint, paper, and rubber indus tries, the manufacture of soaps and detergents and other applications. Employee Relations: As a participating member of the National Alliance of Businessmen, the company estab lished a goal in June, 1968, to employ 500 "hard core" men and women by June, 1971, with the first 100 to be employed by June, 1969. At mid-year, there were 281 employees on the job who were employed through the program. The overall retention rate during the first year of the program, however, was not as high as originally hoped. As a result, personal counseling for those hired through the program is being expanded, and supervisory training programs have been developed for those dealing with "hard core" employees. The company is participating in JOBS (Job Opportunities in the Business Sector), a program sponsored jointly by the National Alliance of Businessmen and the United States Department of Labor. JOBS includes a training program which helps qualify "hard core" employees for better initial jobs and subse quently for higher skill level jobs. The company is deeply distressed that despite increas ing attention to safety education and all possible efforts to maintain superior plant safety conditions, there were six employee fatalities from major accidents at three loca tions during 1969. The company has always recognized that the development of safety practices and safety edu cation programs is a never-ending task. Some encourage ment can be taken in the statistics for disabling injuries per million man hours worked, a national safety yard stick. Cyanamid showed a rate of 1.49 in 1969 compared to 1.81 in 1968. The comparable figure for all companies belonging to the Manufacturing Chemists Association was 3.27 in 1968, and for all U.S. manufacturing companies it was 7.35. In the company's labor relations, negotiations were completed in 1969 with 18 U.S. local unions with no interruptions of operations. Negotiations were settled fol lowing strikes at Buchanan, New York (six weeks), and at the Canadian plants at Beachville (15 weeks) and Wel land (11 weeks). The strike which began at Pearl River, New York, on August 30, 1969, was settled on January 23,1970. In the field of employee benefits, the company recog nized the effects of inflation on the fixed income of its retired employees. Accordingly, effective January 1, 1970, pension payments were adjusted upward for all U.S. em ployees--or their beneficiaries--who terminated prior to May 31, 1967, when the Employees Retirement Plan was improved for all active employees. Increases in the monthly pension payments for those affected range from 5 % to 15 % , depending on the former employee's date of retirement. Litigation: The United States Court of Appeals for the Second Circuit has not yet ruled on the defendants' ap peals from the December 1967 conviction of the Com pany and two other drug companies in the criminal anti trust suit involving broad spectrum antibiotics. With respect to the related treble damage suits and other civil litigation, the principal developments not previously re ported to the shareholders have been the filing of some additional treble damage suits and the tentative agree ment reached in January 1970 on a revised plan for set tlement of claims by private hospitals and certain insur ance plans. This revised plan, which has not yet been approved by the court nor submitted to all the members of the classes, would contemplate the present payment by Cyanamid of approximately $11,600,000, of which the major portion has been provided for in the accrual of $54,000,000 mentioned in the President's letter. The stock holder's derivative action brought on behalf of the Com pany against certain directors of the Company, involving the alleged antitrust violations referred to above, is still pending. 15 CY0005381 Sales Volume--Consolidated sales in 1969 were $1,087,097,977 compared with $1,023,231,047 in 1968. Com parative quarterly sales for the two years were: Quarter 1969 Amount % of ' Total 1968 Amount % of Total First $ 270,554,000 Second 286,795,000 Third 264,951,000 Fourth 264,798,000 25 27 24 24 $ 241,868,000 276,134,000 246,615,000 258,614,000 24 27 24 25 $1,087,098,000 100% $1,023,231,000 100% Earnings -- Pre-tax earnings for 1969 were $166,870,096 compared with $156,759,601 in the previous year. After provision for Federal and foreign income taxes of $77,000,000 consolidated net earnings for 1969 were $89,870,096 compared with $85,759,601 in 1968. Per-share earnings amounted to $2.02 in 1969 and $1.93 in 1968 based on the average number of common shares (exclud ing treasury shares) outstanding for each year. Comparative earnings with earnings per share by quar ters for the two years were: Quarter 1969 Per Amount Share First Second Third Fourth $25,049,000 $ .56 23,523,000 .53 21,263,000 .48 20,035,000 .45 $89,870,000 $2.02 1968 Per Amount Share $20,691,000 $ .47 24,395,000 .55 19,404,000 .43 21,270,000 .48 $85,760,000 $1.93 The average number of shares (excluding treasury shares) outstanding for 1969 was 44,465,703 compared with 44,517,549 for 1968. Provision for Federal and foreign taxes has been re 16 duced by the amount of the current investment tax credit which has benefited 1969 earnings by 4 cents a share com pared to 5 cents a share in 1968. Capital Stock -- As of December 31, 1969 there were 44, 693,628 shares of common stock outstanding, compared to 44,690,608 shares outstanding at the end of 1968. This includes treasury stock of 327,434 shares at December 31, 1969 and 291,256 shares at December 31, 1968. In May 3,000 shares of common stock, previously re served, were issued relating to the net assets acquired in 1963 from John H. Breck, Inc. In December, 20 shares of common stock were issued upon the exercise of an option under the employees stock option plan. During the year the company purchased 154,700 shares of its common stock to be used for acquisitions or other appropriate corporate purposes. A total of 30,150 shares of common stock held in its treasury was transferred on a retricted basis to employee participants in the company's Incentive Compensation Plan in the form of contingent allotments for 1968. Another 15,372 shares of common stock were delivered in 1969 to retired participants in said plan. In June 73,000 shares of common stock were used to acquire the net assets of Control Print Corporation. The acquisition of the net assets of this company was treated as a pooling of interest; however, prior years' results of Cyanamid have not been restated to include the opera tions of this acquired company. Dividends paid by Cyanamid in 1969 and 1968 were $1.25 per share, amounting to $55,108,000 and $55,118,000 respectively. Associated Companies -- Cyanamid's investment in and advances to companies jointly owned (40% to 50% ) are carried at cost. Total 1969 earnings of the jointly owned companies were higher than in 1968. Cyanamid's equity in their 1969 earnings amounted to $9,887,000 and divi dends received were $10,351,000. This compares with its equity in 1968 earnings of $9,395,000 and dividends received of $7,026,000. CY0005382 C YA ATA iyi X r American Cyanamid Company and Subsidiaries Amines Year Ended December 31,1969 in Comparison with the Year Ended December 31,1968 NET SALES .................................................................................................................. Dividends from associated companies, 40% to 50% owned . Interest .................................................................................... Royalties and licenses......................................................... Other income--net............................................................... 1969 $1,087,097,977 10,350,836 3,482,967 6,877,286 4,614,458 1968 $1,023,231,047 7,026,325 3,375,613 5,092,646 1,343,181 1,112,423,524 1,040,068,812 Deduct: Manufacturing cost of sales--less depreciation and depletion Selling and advertising expenses.......................................... Administrative and general expenses............................... Depreciation, amortization and depletion (Note 2). Research and process development expenses..................... Interest charges on funded and other debt . . . Employees' benefits (Note 8)............................................... EARNINGS BEFORE TAXES ON INCOME...................................... Provision for Federal and foreign taxes on income NET EARNINGS........................................................................................... Net Earnings per share of Common Stock .... 577,768,604 175,776,831 57,628,983 54,834,159 44,932,682 6,137,914 28,474,255 945,553,428 166,870,096 77,000,000 $89,870,096 $2.02 532,414,705 167,494,233 52,491,339 54,361,328 42,926,535 6,181,388 27,439,683 883,309,211 156,759,601 71,000,000 $85,759,601 $1.93 Kccouniants' Report THE BOARD OF DIRECTORS AMERICAN CYANAMID COMPANY: We have examined the consolidated balance sheet of American Cyanamid Company and subsidiaries as of December 31, 1969 and the related statements of earnings and earnings employed in the business for the year 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 accompanying consolidated financial statements present fairly the financial position of American Cyanamid Company and subsidiaries at December 31, 1969 and the results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis con sistent with that of the preceding year. Also, in our opinion, the accompanying consolidated statement of source and application of funds presents fairly the information shown therein. New York, N.Y. February 3, 1970 PEAT, MARWICK, MITCHELL & CO. 17 CYOOOS3S3 C FAiVA JVC X X> American Cyanamid Company and Subsidiaries Consolidated Balance -Sheet December 31,1969 in Comparison with December 31,1968 ASSETS 1969 CURRENT ASSETS : Cash in banks and on hand......................................................................... $ 43,065,515 Marketable securities and time deposits, at cost and accrued interest. . 12,489,575 Accounts receivable, less provision for doubtful accounts.......................... 183,752,002 Inventories, at lower of cost or market.................................................... 190,378,133 TOTAL CURRENT ASSETS.............................................................. 429,685,225 1966 $ 39,987,707 57,581,065 165,988,136 180,740,553 444,297,461 INVESTMENTS AND ADVANCES : Associated companies, 40% to 50% owned--at cost (equity in net assets $58,200,000; 1968, $56,400,000)......................................................... Other investments and advances.............................................................. TOTAL INVESTMENTS AND ADVANCES.......................................... 40,781,287 5,379,815 46,161,102 38,600,920 5,040,086 43,641,006 PLANTS, EQUIPMENT AND FACILITIES, at COSt: Land, including mining land.................................................................... Buildings ................................................................................................... Machinery and equipment......................................................................... Uncompleted construction and installations............................................... 42,170,117 209,112,440 719,304,314 53,858,574 1,024,445,445 Less accumulated depreciation, amortization and depletion..................... 523,808,687 NET PLANT INVESTMENT.............................................................. 500,636,758 43,655,407 201,492,234 695,876,680 19,901,615 960,925,936 497,537,308 463,388,628 INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS................................. 15,150,889 13,908,203 PREPAID EXPENSES AND DEFERRED CHARGES ....................................................... 9,238,119 10,072,908 $1,000,872,093 $975,308,206 18 CY00053S4 LIABILITIES AND SHAREHOLDERS' EQUITY 1969 CURRENT LIABILITIES : Accounts payable and accrued expenses.........................................................$112,189,526 Short term borrowings.............................................................................. 15,421,247 Funded debt installments due within one year.......................................... 5,871,803 Accrual for settlement of litigation (Note 11)......................................... 17,983,559 Provision for Federal and foreign taxes on income............................... 8,058,573 TOTAL CURRENT LIABILITIES......................................... 159,524,708 FUNDED DEBT NOT DUE WITHIN ONE YEAR (Note 3).................................... INCENTIVE COMPENSATION CONTINGENTLY PAYABLE (Note 4)..................... INCOME TAXES PAYABLE IN THE FUTURE......................................... ..... MINORITY SHAREHOLDERS' EQUITY IN FOREIGN SUBSIDIARIES..................... 118,993,967 4,290,194 22,000,000 5,233,488 1968 $105,990,675 7,415,319 1,377,045 42,886,616 157,669,655 105,209,689 4,470,564 19,300,000 5,070,981 SHAREHOLDERS' EQUITY: Common Stock--par value $5 per share (Notes 5 and 9) Authorized--60,000,000 shares Outstanding--44,693,628 shares (1968--44,690,608 shares) . . . Capital surplus (Note 9).............................................................................. Earnings employed in the business (Notes 1, 6 and 11).......................... 223,468,140 20,563,114 456,915,061 Less cost of 327,434 shares of Common Stock held in treasury (1968--291,256 shares) (Note 7).................................... 700,946,315 10,116,579 TOTAL SHAREHOLDERS' EQUITY.................................................... 690,829,736 $1,000,872,093 223,453,040 20,562,544 448,752,106 692,767,690 9,180,373 683,587,317 $975,308,206 19 CY00053S5 C rAWAM X D American Cyanamid Company and Subsidiaries Year Ended December 31,1969 in Comparison with the Year Ended December 31,1968 1969 Balance at beginning of year as previously reported...................................... $448,752,106 Accrual in 1969 for settlement of litigation, less related tax benefits of $29,400,000 (Note 11)...................................... 24,600,000 Balance at beginning of year as restated............................................................ Net Earnings for the year................................................................................. 424,152,106 89,870,096 514,022,202 1968 $421,130,600 24,600,000 396,530,600 85,759,601 482,290,201 Deduct: Dividends on Common Stock--$1.25 per share........................................... Adjustments arising from the issuance of treasury stock upon poolings of interest................................................................. Par Value of Common Stock, previously reserved, relating to the net assets acquired in 1963 from John H. Breck, Inc..................................... 55,107,596 1,984,545 15,000 57,107,141 Balance at end of year (Notes 1 and 6)............................................................$456,915,061 55,117,784 3,020,311 58,138,095 $424,152,106 Year Ended December 31,1969 in Comparison with the Year Ended December 31,1968 1969 1968 Net earnings............................................................................................................$ 89,870,096 $ 85,759,601 Charges to earnings not requiring current cash outlays: Depreciation, amortization and depletion................................................ 54,834,159 54,361,328 Income taxes payable in the future........................................................... 2,700,000 4,700,000 Decrease (increase) in cash and marketable securities................................ 42,013,682 (23,608,495) Decrease (increase) in prepaid expenses and deferred charges . . . . . 834,789 (2,792,695) Increase in current liabilities........................................................................... 1,855,053 37,232,237 Increase (decrease) in funded debt not due within one year........................... 13,784,278 (5,805,096) $205,892,057 $149,846,880 Dividends on Common Stock paid in cash......................................................$ 55,107,596 $ 55,117,784 Additions to plants, equipment and facilities--net........................................... 92,082,289 50,009,132 Increase in accounts receivable and inventories........................................... 27,401,446 30,756,423 Additions to investments and advances--net................................................ 2,520,096 2,064,059 Increase in intangibles resulting from business acquisitions..................... 1,242,686 9,998,760 Accrual for settlement of litigation, less related tax benefits........................... 24,600,000 Cost of treasury stock acquired, less cost of stock issued in connection with acquisitions and under incentive compensation plan...................... 936,206 (1,222,231) All other--net....................................................................................................... 2,001,738 3,122,953 $205,892,057 $149,846,880 20 CY00053&6 1. Assets, other than plants and facilities, and liabilities of the foreign subsidiaries are included in the consolidated balance sheet on the basis of official or other appropriate exchange rates at December 31, 1969; foreign plants and facilities are included on the basis of exchange rates pre vailing at time of acquisition. The amounts so included comprise net current assets of $71,000,000 and net other assets, principally plants and facilities, less depreciation, of $59,800,000. Net earnings for foreign subsidiaries in cluded in consolidated earnings amount to $19,900,000. The consolidated earnings employed in the business in clude the company's equity in the net undistributed earn ings of foreign subsidiaries amounting to $71,000,000. 2. Depreciation is provided on a straight-line composite basis over the estimated remaining useful lives of the assets. 3. Funded debt not due within one year is comprised of 3%% promissory notes due 1977 to 1987 ($75,000,000), 5%% guaranteed sinking fund debentures due 1980 of a subsidiary ($18,000,000), 6% guaranteed notes due 1971 to 1973 of a subsidiary ($13,704,426) and sundry obliga tions ($12,289,541). 4. The accounts for 1969 include provision for incentive compensation to officers and other employees. A portion of such amount is not payable currently in cash but is contingendy payable in Common Stock of the company after employment terminates; pending allotment of the amount available for 1969, the portion so contingendy payable in Common Stock is not determinable. The gross amount con tingendy payable in respect of allotments for prior years is $4,290,194. 5. The authorized capital of the company includes 650,000 shares of Preferred Stock with a par value of $1 per share, none of which is outstanding. 6. The promissory notes contain certain restrictions in cluding restrictions on the payment of dividends. As a result of such restrictions, the amount of earnings em ployed in the business at December 31, 1969 which may be applied to the payment of cash dividends is limited to $178,000,000. 7. At December 31, 1969 the company owned and held in its treasury 327,434 shares of Common Stock, which are available at the election of the company to fulfill contin gent obligations under the company's Incentive Compen sation Plan and for other corporate purposes. 8. Employees' benefits include the cost of pension, group insurance and social security programs. The company and its consolidated subsidiaries have various pension plans covering substantially all their em ployees, including certain employees in foreign countries. The company's policy is to accrue and fund pension costs over the service lives of the covered employees. The total pension expense for the year was $5,000,000. 9. In 1968, the company adopted a stock option plan under which key employees may be granted qualified stock op tions to purchase, at not less than 100% of market value on the date of grant, a maximum of 1,500,000 shares of Common Stock. The options are exercisable over a period of not more than five years from date of grant in cumula tive installments of one-third of the number of shares commencing one year after date of grant and annually thereafter. At December 31, 1969, options to purchase 395,550 shares at $33.50 and 9,950 shares at $25.75 were outstanding. An option for 20 shares at S33.50 per share was exercised in December 1969. The excess ($570) of the option price over the par value of the shares issued has been credited to capital surplus. 10. The company is contingently liable as guarantor on loans outstanding of an associated company in the amount to $26,500,000. 11. Reference is made to the remarks under "Litigation" in the foregoing report of the Board of Directors, and to the comments in the President's letter to shareholders with re spect to the antibiotics litigation in which the company is involved. The accrual of $54,000,000 was established on the basis of the original settlement offers made in February 1969 (plus an amount for legal expenses) and does not include any amount in respect of litigation to which such original settlement offers do not extend, such as the pend ing suits (some of which allege substantial amounts of damages) involving claims on behalf of competitors, pur chasers of animal feed and veterinary products, one foreign government, certain benefit and insurance plans which reimbursed individuals and the United States Government. Due to the uncertainty necessarily inherent in litigated matters of this sort, the eventual cost to the company of disposing of this litigation by way of settlement or other wise cannot be accurately predicted. However, the com pany believes, on the basis of information and advice presently available, that any additional liability with re spect to this antitrust litigation will not have a material adverse effect upon the consolidated financial position of the company and its subsidiaries. The amount included in the balance sheet reflects a reduction for the October deposit in escrow of $34,392,510 and certain litigation costs. 21 CYO0O53S7 C KAATA JVT I T> American Cyanamid Company and Subsidiaries $1100 -1000 -900 -800 -700 -600 -500 -400 -300 -200 -100 Ten Year Comparative Summary of Financial Statistics Net Sales.............................................................................................................. Earnings before Taxes on Income.................................................................... Provision for Taxes on Income......................................................................... Net Earnings................................................................................................... Dividends on Common Stock.............................................................................. Number of Common Shares at Dec. 31 (excl. treasury shares)** . . . . Earnings per share of Common Stock**......................................................... Dividends per share of Common Stock**......................................................... Provision for depreciation, amortization and depletion..................................... Gross additions to plant facilities (incl. acquisitions)..................................... Current Assets................................................................................................... Current Liabilities.............................................................................................. Working Capital.................................................... ......................................... Investment in Associated Companies............................................................... Plants, Equipment and Facilities.................................................................... Less accumulated depreciation, amortization and depletion..................... Net Amount......................................................................................... Funded Debt not due within one year.............................................................. Shareholders' Equity: Preferred Stock.............................................................................................. Common Stock.............................................................................................. Capital Surplus.............................................................................................. Earnings employed in the business............................... ............................... Less cost of Common Stock held in treasury . Total Shareholders' Equity..................... 1969 $1,087,098 166,870 77,000 89,870 55,108 44,366 2.02 1.25 54,834 95,833 429,685 159,525 270,160 40,781 1,024,445 523,808 500,637 118,994 1968 $1,023,231 156,760 71,000 85,760 55,118 44,399 1.93 1.25 54,361 56,810 444,297 182,269* 262,028* 38,601 960,926 497,537 463,389 105,210 223,468 20,563 456,915 700,946 10,116 $690,830 223,453 20,563 424,152* 668,168* 9,180 $658,988* "Restated--The statistics (or the years 1960 through 1968 have been revised to reflect the accrual for settlement of litigation in the amount of $54,000,000, less related tax benefits of $29,400,000, which has been applied to years 1954 through 1966. **After giving effect to the issuance on April 18, 1966 of one additional share for each share outstanding 22 CY00053S3 1960 '61 '62 '63 '64 '65 '66 '67 '66 '69 1960 61 '62 '63 '64 '65 '66 '67 '68 '69 Shareholders' Equity (in millions of dollars) 5700 -600 -500 -400 -300 -200 V. b ^ >' ? ki l b -100 1960 '61 '62 '63 '64 '65 '66 '67 '68 '69 1967 $937,070 117,808 47,500 70,308 55,004 44,331 1.59 1.25 50,626 56,065 389,933 145,037* 244,896* 34,867 940,837 473,096 467,741 111,015 1966 $949,775* 157,111* 64,000* 93,111* 54,956 44,274 2.10* 1.25 45,479 108,430 397,345 167,346* 229,999* 30,761 926,100 459,550 466,550 110,573 1965 $859,965* 159,554* 67,800* 91,754* 47,165 44,161 2.08* 1.07V2 42,628 129,530 415,906 175,375* 240,531* 28,371 861,460 457,335 404,125 102,450 1964 $776,103* 140,745* 60,400* 80,345* 43,798 43,902 1.83* 1.00 39,040 49,106 421,534 162,231* 259,303* 25,455 760,701 438,428 322,273 80,832 1963 $706,928* 125,239* 60,600* 64,639* 39,391 43,868 1.47* .90 37,785 48,988 379,747 142,610* 237,137* 23,876 728,636 413,251 315,385 88,065 (Amounts are expressed in thousands) 1962 $645,711* 111,821* 54,100* 57,721* 36,365 42,758 1.35* .85 44,811 36,235 337,852 128,240* 209,612* 19,621 716,530 403,662 312,868 89,649 1961 $600,459* 92,353* 44,600* 47,753* 34,156 42,764 1.12* .80 43,825 49,464 302,508 129,158* 173,350* 20,251 689,589 367,204 322,385 88,503 I960 $574,690* 88,621* 43,500* 45,121* 34,028 42,595 1.06* .80 42,296 48,288 269,617 114,318* 155,299* 21,819 651,908 330,151 321,757 89,966 223,453 20,563 396,531* 640,547* 10,403 $630,144* 223,453 20,563 381,226* 625,242* 11,634 $613,608* 223,143 20,563 342,317* 586,023* 12,695 $573,328* 223,143 20,070 298,161* 541,374* 19,467 $521,907* 222,769 18,598 261,613* 502,980* 16,765 $486,215* 3 215,868 14,814 233,072* 463,757* 8,879 $454,878* 6 215,253 12,407 211,716* 439,382* 5,979 $433,403* 14 214,275 8,778 198,119* 421,186* 5,356 $415,830* CY0005389 23 S 0 ASO OF DIREC x : 3 S JAMES B. FISK THOMAS P. FORBATH ERNEST G. HESSE L. EMERY KATZENBACH IAN K. MAC GREGOR THOMAS L. PERKINS GEORGE W. RUSSELL CLIFFORD D. SIVERD NOLAN B. SOMMER ROBERT C. SWAIN GORDON C. WALKER CLIFFORD D. SIVERD, President and Chief Executive Officer GEORGE W. RUSSELL, Executive Vice President NOLAN B. SOMMER, Executive Vice President ROBERT C. SWAIN, Executing Vice President GORDON C. WALKER, Executive Vice President JAMES F. BOURLAND, Vice President BURTON F. BOWMAN, Vice President THOMAS P. FORBATH, Vice President ERNEST G. HESSE, Vice President THOMAS P. TURCHAN, Vice President J. CLIFFORD BLAUVELT, Controller HAROLD B. GROSS, Secretary and General Counsel LEONARD T. MURPHY, Treasurer FINANCE COMMITTEE (Formerly Executive Committee) JAMES B. FISK, Chairman L. EMERY KATZENBACH IAN K. MAC GREGOR THOMAS L. PERKINS CLIFFORD D. SIVERD (ex-officio) GORDON C. WALKER EXECUTIVE COMMITTEE (Formerly Management and Finance Committee) CLIFFORD D. SIVERD, Chairman GEORGE W. RUSSELL NOLAN B. SOMMER ROBERT C. SWAIN GORDON C. WALKER 24 Operating Divisions and Principal Subsidiaries JAMES F. BOURLAND, Vice President AGRICULTURAL, James G. Affleck, General Manager--animal feed sup plements and veterinary products, insecticides, fungicides, herbicides, nitrogen and phosphate fertilizer products, blended fertilizers. LEDERLE LABORATORIES, Borden R. Putnam, General Manager-- antibiotics, steroids, biologicals, pharmaceuticals, vitamins and hematinics, vaccines; clinical laboratory diagnostic aids; fine chemicals and bulk pharmaceuticals; Davis & Geek surgical sutures and hospital spe cialties, including dressings, germicides and scrub sponges. BURTON F. BOWMAN, Vice President CONSUMER PRODUCTS, Albert L. Munsell, General Manager--Br e c k preparations for care of the hair, Pin e -So l cleaner, disinfectant, deodor izer, Fo r mic a Fl o o r Sh in e finish, and other household maintenance, cleaning and laundering aids. FIBERS, Philip G. Connell, Jr., General Manager--Cr e s l an acrylic fiber for apparel, home furnishings and industrial applications; filament rayon, filament polyester for tire cord and industrial applications; Dy -l o k filament rayon for upholstery and drapery fabrics; Nu p r o n high-performance rayon staple for apparel fabrics. FORMICA CORPORATION, Wallace G. Taylor, President and General Manager--molded plastics, adhesives, Fo r mic a brand decorative, indus trial and laminated cabinet surfacing, laminate-clad doors, toilet com partments and panel systems. Fia t showers, shower floors, laundry tubs and toilet compartments-SANiTAS and Wa l l c l a d vinyl coated wall coverings from Standard Coated Products. ERNEST G. HESSE, Vice President CYANAMID INTERNATIONAL, Harry F. Bliss, Jr., Managing Director-- produces or imports and markets the Company's products through sub sidiaries and distributors in countries and territories outside the United States and Canada. CYANAMID OF CANADA LIMITED, Ben H. Loper, President--produces or imports and markets in Canada the products of Cyanamid and its subsidiaries. THOMAS P. TURCHAN, Vice President INDUSTRIAL CHEMICALS, Howard E. Nehms, General Manager-- chemicals for the paper industry, industrial process chemicals, water and waste treatment chemicals, heavy chemicals, explosives, surfactants, specialty monomers, mining and ore processing chemicals. ORGANIC CHEMICALS, Joseph A. Schmidlein, General Manager--cata lysts, dyes, elastomers, intermediates, plastic additives, refinery chemi cals, rubber chemicals, textile chemicals, textile resins, Nu ma spandex fiber, industrial safety equipment from Glendale Optical Co., Inc. PIGMENTS, John Ludden, Jr., General Manager--inorganic and organic chemical colors, Un it a n e titanium dioxide. PLASTICS, Gerard A. Forlenza, General Manager--adhesives, coating resins, laminating resins, melamine, resins for reinforced plastics, ther mosetting molding compounds, acrylic and modified acrylic molding compounds, honeycomb core material for aircraft and aerospace indus tries, Ac r y l it e cast acrylic sheet. Service Divisions CLIFFORD D. SIVERD, President and Chief Executive Officer PERSONNEL, Clair L. Brandrup, Director PUBLIC RELATIONS, John M. Fasoli, Director THOMAS P. FORBATH, Vice President COMMERCIAL DEVELOPMENT, William D. Holland, Director ENGINEERING & CONSTRUCTION, George P. Ferrigni, Director HAROLD B. GROSS, Secretary and General Counsel LAW, James I. Wyer, Director ROBERT C. SWAIN, Executive Vice President CENTRAL RESEARCH, John F. Flagg, Director GORDON C. WALKER, Executive Vice President CONTROLLER'S, J. Clifford Blauvelt, Controller PURCHASING, Richard E. Noble, Director TRANSPORTATION & DISTRIBUTION, Gerdt W. Van Schaick, Director TREASURY, Leonard T. Murphy, Treasurer CY0005390 CYOOOS391 American Cyanamid Company and Subsidiaries PRINCIPAL SALES OFFICES IN THE U.S. Akron, Ohio Atlanta, Ga. Bluefield, W.Va. Boston, Mass. Bound Brook, N.J. Buffalo, N.Y. Charlotte, N.C. Chicago, 111. Cincinnati, Ohio Cleveland, Ohio Dallas, Tex. Danbury, Conn. Davenport, Iowa Denver, Colo. Des Moines, Iowa Detroit, Mich. Falls Church, Va. Finderne, N.J. Grand Rapids, Mich. Greensboro, N.C. Havre de Grace, Md. Honolulu, Hawaii Houston, Tex. Indianapolis, Ind. Jacksonville, Fla. Kalamazoo, Mich. Kansas City, Mo. La Puente, Calif. Latrobe, Pa. Linden, N.J. Los Angeles, Calif. Louisville, Ky. Memphis, Tenn. Miami, Fla. Milwaukee, Wis. Minneapolis, Minn. Mobile, Ala. Montgomery, Ala. New York, N.Y. Oakland, Calif. Oklahoma City, Okla. Omaha, Neb. PeaTl River, N.Y. Philadelphia, Pa. Phoenix, Ariz. Pittsburgh, Pa. Plainview, N.Y. Portland, Ore. Princeton, N.J. Richmond, Va. Rochester, N.Y. St. Louis, Mo. San Antonio, Tex. San Diego, Calif. San Francisco, Calif. Seattle, Wash. South Bend, Ind. Springfield, Ohio Tampa, Fla. Torrance, Calif. Tukwila, Wash. Tulsa, Okla. Washington, D.C. Wayne, N.J. West Hartford, Conn. West Springfield, Mass. Woodbridge, Conn. Woodbury, L.I., N.Y. PRINCIPAL SALES OFFICES OUTSIDE THE U.S. Bangkok, Thailand Bogota, Colombia Bombay, India Brussels, Belgium Buenos Aires, Argentina Caracas, Venezuela Catania, Italy Copenhagen, Denmark Guatemala City, Guatemala Hong Kong Johannesburg, S. Africa Karachi, Pakistan Kinshasa, Congo Lima, Peru London* England Madrid, Spain Managua, Nicaragua Manila, Philippines Melbourne, Australia Mexico D.F., Mexico Milan, Italy Montreal, Canada Munich, Germany Oullins, France Rio de Janeiro, Brazil Rome, Italy Rotterdam, The Netherlands San Juan, Puerto Rico Sao Paulo, Brazil Seoul, Korea Stockholm, Sweden Sydney, Australia Taipei, Taiwan Tilbury, Canada Tokyo, Japan Toronto, Canada Vancouver, Canada Zurich, Switzerland PLANTS IN THE U.S. Aberdeen, Md. Albany, Ga. Alden, Iowa Andersonville, Ga. Azusa, Calif. Benton, Ark. Bound Brook, N.J. Brewster, Fla. Buchanan, N.Y. Charlotte, N.C. Chattanooga, Tenn. Cincinnati, Ohio Cloquet, Minn. Coosa Pines, Ala. Damascus, Va. Havre de Grace, Md. Danbury, Conn. Jackson, Miss. Demopolis, Ala. Joliet, 111. DeRidder, La. Kalamazoo, Mich. Escanaba, Mich. La Puente, Calif. Evendale, Ohio Longview, Wash. Fairfield, N.J. Madisonville, Ky. Finderne, N.J. Marietta, Ohio Fort Worth, Tex. Michigan City, Ind. Fortier (New Orleans), La. Mobile, Ala. Franklin Park, 111. Monticello, Miss. Georgetown, S.C. New Castle, Pa. Hamilton, Ohio Painesville, Ohio Hannibal, Mo. Pearl River, N.Y. Pensacola, Fla. Perrysburg, Ohio Philadelphia, Pa. Piney River, Va. Plainview, N.Y. Plymouth, N.C. Pottsville, Pa. Princeton, N.J. Sanford, Me. Savannah, Ga. Seattle, Wash. South Norwalk, Conn. Springfield, Ohio Springhill, La. Stamford, Conn. Sunset/Whitney Ranch, Calif. (Sierra) Tarboro, N.C. Wallingford, Conn. Warners, N.J. Weeping Water, Neb. West Springfield, Mass. Willow Island, W. Va. Woodbridge, N.J. Woodbury, L.I., N.Y. PLANTS OUTSIDE THE U.S. Beachville, Canada Bogota, Colombia Brussels, Belgium Buckingham, Canada Buenos Aires, Argentina (2) Bulsar, India Caracas, Venezuela (2) Cartagena, Colombia Catania, Italy (2) Gosport, England Guadalajara, Mexico Hsinchu, Taiwan Johannesburg, S. Africa Karachi, Pakistan Kirkland Lake, Canada Madrid, Spain (2) Managua, Nicaragua Melbourne, Australia Mexico D.F., Mexico Milan, Italy Montreal, Canada Munich, Germany Niagara Falls, Canada (2) Orillia, Canada Oullins, France Rezende, Brazil Rio de Janeiro, Brazil Rotterdam, The Netherlands St. Jean, Canada St. Joseph du Lac, Canada Sao Paulo, Brazil Sydney, Australia Tilbury, Canada Witbank, S. Africa RESEARCH AND DEVELOPMENT LABORATORIES Bound Brook, N.J. Danbury, Conn. East Paterson, N.J. Evendale, Ohio Niagara Falls, Canada Painesville, Ohio Pearl River, N.Y. Pensacola, Fla. Piney River, Va. Princeton, N.J. Sanford, Me. Stamford, Conn. Wallingford, Conn. PRINCIPAL ASSOCIATED COMPANIES (40% to 50% owned) Arizona Chemical Company Cyanamid-Ketjen Katalysator N.V. Cyanaquim, S.A. de C.V. Cyanenka S.A. Formica International Limited Jefferson Chemical Company, Inc. Lederle (Japan), Ltd. Sherkat Sahami Cyanamid-KBC Southern Minerals Corporation Southern Petroleum Corporation Southern Pipe Line Corporation N. V, Titaandioxydefabriek Tiofine C FAiVA M I X> t r a n s f e r a g e n t . The Chase Manhattan Bank, N.A. American Cyanamid Company WAYNE, NEW JERSEY r e g is t r a r , Morgan Guaranty Trust Company of New York Printed in U.S.A. CYOOQ5392