-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F1DEbOAa44QintIDuTT//kcN71Pt2Z76aFE15+uctiU+8ymUVBMHnpRndkW40Ib8 LWV5zeObHBT1STbsNLmzmQ== 0000100790-97-000012.txt : 19970512 0000100790-97-000012.hdr.sgml : 19970512 ACCESSION NUMBER: 0000100790-97-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970509 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNION CARBIDE CORP /NEW/ CENTRAL INDEX KEY: 0000100790 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 131421730 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01463 FILM NUMBER: 97599089 BUSINESS ADDRESS: STREET 1: 39 OLD RIDGEBURY RD CITY: DANBURY STATE: CT ZIP: 06817-0001 BUSINESS PHONE: 2037942000 MAIL ADDRESS: STREET 1: 39 OLD RIDGEBURY RD CITY: DANBURY STATE: CT ZIP: 06817-0001 FORMER COMPANY: FORMER CONFORMED NAME: UNION CARBIDE CORP DATE OF NAME CHANGE: 19890806 FORMER COMPANY: FORMER CONFORMED NAME: UNION CARBIDE & CARBON CORP DATE OF NAME CHANGE: 19710317 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D C 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-1463 UNION CARBIDE CORPORATION (Exact name of registrant as specified in its charter) New York 13-1421730 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 39 Old Ridgebury Road, Danbury, CT 06817-0001 (Address of principal executive offices) (Zip Code) 203-794-2000 Registrant's telephone number, including area code (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _______ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at April 30, 1997 Common Stock, $1 par value 125,483,309 shares Total number of sequentially numbered pages in this filing, including exhibits thereto: 20 INDEX PART I. FINANCIAL INFORMATION PAGE Financial Statements Condensed Consolidated Statement of Income - Union Carbide Corporation and Subsidiaries - Quarter Ended March 31, 1997 and 1996........................ 3 Condensed Consolidated Balance Sheet - Union Carbide Corporation and Subsidiaries - March 31, 1997 and December 31, 1996............................................ 4 Condensed Consolidated Statement of Cash Flows - Union Carbide Corporation and Subsidiaries - Quarter Ended March 31, 1997 and 1996......................... 5 Notes to Condensed Consolidated Financial Statements - Union Carbide Corporation and Subsidiaries................... 6-9 Discussion and Analysis of Results of Operations and Financial Condition........................................ 10-13 PART II. OTHER INFORMATION Item 1. Legal Proceedings....................................... 14 Item 2. Sales of Unregistered Securities........................ 14 Item 4. Submission of Matters to a Vote of Security Holders..... 14-15 Item 6. Exhibits and Reports on Form 8-K........................ 16 Signature........................................................ 17 Exhibit Index.................................................... 18 PART I. FINANCIAL INFORMATION UNION CARBIDE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF INCOME Millions of dollars (Except per share figures) Quarter ended March 31, 1997 1996 NET SALES $ 1,638 $ 1,501 Cost of sales, exclusive of depreciation and amortization 1,231 1,099 Research and development 40 36 Selling, administration and other expenses(a) 80 81 Depreciation and amortization 82 75 Partnership income 35 26 Other income - net 7 23 INCOME BEFORE INTEREST EXPENSE AND PROVISION FOR INCOME TAXES 247 259 Interest expense 19 23 INCOME BEFORE PROVISION FOR INCOME TAXES 228 236 Provision for income taxes 66 66 INCOME OF CONSOLIDATED COMPANIES 162 170 Minority interest 3 (1) Loss from corporate investments carried at equity 2 14 NET INCOME 157 157 Preferred stock dividend, net of income taxes 2 2 NET INCOME - COMMON STOCKHOLDERS $ 155 $ 155 Earnings per common share Primary $ 1.14 $ 1.11 Fully diluted $ 1.03 $ 1.01 Cash dividends declared per common share $ 0.1875 $ 0.1875 (a) Selling, administration and other expenses include: Selling $ 31 $ 32 Administration 29 31 Other expenses 20 18 $ 80 $ 81 The Notes to Condensed Consolidated Financial Statements on Pages 6 through 9 should be read in conjunction with this statement. UNION CARBIDE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET Millions of dollars March 31, Dec. 31, 1997 1996 ASSETS Cash and cash equivalents $ 214 $ 94 Notes and accounts receivable 1,082 1,047 Inventories 553 541 Other current assets 179 191 Total current assets 2,028 1,873 Property, plant and equipment 7,274 7,159 Less: Accumulated depreciation 3,809 3,750 Net fixed assets 3,465 3,409 Companies carried at equity 706 695 Other investments and advances 71 77 Total investments and advances 777 772 Other assets 525 492 Total assets $6,795 $6,546 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 275 $ 268 Short-term debt and current portion of long-term debt 76 112 Accrued income and other taxes 113 133 Other accrued liabilities 757 765 Total current liabilities 1,221 1,278 Long-term debt 1,494 1,487 Postretirement benefit obligation 471 473 Other long-term obligations 832 811 Deferred credits 316 301 Minority stockholders' equity in consolidated subsidiaries 278 29 Convertible preferred stock - ESOP 140 144 Unearned employee compensation - ESOP (84) (91) Stockholders' equity: Common stock - authorized - 500,000,000 shares - issued - 154,609,669 shares 155 155 Additional paid-in capital 329 370 Translation and other equity adjustments (51) (33) Retained earnings 2,760 2,629 Less: Treasury stock, at cost-29,155,611 shares (28,169,324 shares in 1996) 1,066 1,007 Total stockholders' equity 2,127 2,114 Total liabilities and stockholders' equity $6,795 $6,546 The Notes to Condensed Consolidated Financial Statements on Pages 6 through 9 should be read in conjunction with this statement. UNION CARBIDE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Millions of dollars Quarter ended March 31, 1997 1996 Increase (decrease) in cash and cash equivalents OPERATIONS Net income $ 157 $ 157 Noncash charges (credits) to net income Depreciation and amortization 82 75 Deferred income taxes 17 32 Other noncash charges (2) - Net gains on investing transactions - (2) Increase in working capital(a) (79) (79) Long-term assets and liabilities 3 30 Cash Flow From Operations 178 213 INVESTING Capital expenditures (138) (186) Investments, advances and acquisitions (excluding cash acquired) (45) (259) Sale of fixed and other assets - 6 Cash Flow Used for Investing (183) (439) FINANCING Change in short-term debt (3 months or less) (35) 9 Proceeds from short-term debt - 10 Repayment of short-term debt - (16) Proceeds from long-term debt 14 - Repayment of long-term debt (7) (2) Issuance of common stock 18 25 Purchase of common stock (73) (78) Proceeds from subsidiary preferred stock 246 - Payment of dividends (27) (28) Other (10) 1 Cash Flow From (Used for) Financing 126 (79) Effect of exchange rate changes on cash and cash equivalents (1) - Change in cash and cash equivalents 120 (305) Cash and cash equivalents beginning-of-period 94 449 Cash and cash equivalents end-of-period $ 214 $ 144 Cash paid for interest and income taxes Interest (net of amount capitalized) $ 10 $ 12 Income taxes $ 7 $ 2 _____________ (a) Net change in certain components of working capital (excluding non-cash expenditures): (Increase) decrease in current assets Notes and accounts receivable $ (35) $ (20) Inventories (12) 38 Other current assets 5 22 Decrease in payables and accruals (37) (119) Increase in working capital $ (79) $ (79) The Notes to Condensed Consolidated Financial Statements on Pages 6 through 9 should be read in conjunction with this statement. UNION CARBIDE CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Consolidated Financial Statements In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments necessary for a fair statement of the results for the interim periods. These adjustments consist of only normal recurring adjustments. The accompanying statements should be read in conjunction with the Notes to Financial Statements of Union Carbide Corporation and Subsidiaries ("the corporation" or "UCC") in the 1996 annual report to stockholders. 2. Common Stock Through March 31, 1997, since inception of its 50 million common share repurchase program, the corporation repurchased 44.2 million shares (1.9 million during the first quarter of 1997) at an average effective price of $33.11 per share. The corporation intends to acquire additional shares from time to time at prevailing market prices, at a rate consistent with the combination of corporate cash flow and market conditions. In conjunction with the corporation's common stock buyback program, put options were sold in a series of private placements entitling the holders to sell 11.0 million shares of common stock to UCC, at specified prices upon exercise of the options. Since inception of this program, through March 31, 1997, options representing 8.1 million common shares have expired unexercised, while options representing 2.1 million shares were exercised for $79 million, or an average price of $37.05 per share. Options representing 0.8 million shares remain outstanding at March 31, 1997. Premiums received since the inception of the program recorded as additional paid-in capital have reduced the average price of repurchased shares from $33.37 per share to $33.11 per share. 3. Inventories Millions of dollars Mar. 31, Dec. 31, 1997 1996 Raw materials and supplies $ 124 $ 114 Work in process 47 54 Finished goods 382 373 $ 553 $ 541 4. Commitments and Contingencies The corporation has entered into 3 major agreements for the purchase of ethylene-related products and 2 other purchase agreements in the U.S. and Canada. The net present value of the fixed and determinable portion of these obligations at March 31, 1997 totaled $336 million. The corporation is subject to loss contingencies resulting from environmental laws and regulations, which include obligations to remove or remediate the effects on the environment of the disposal or release of certain wastes and substances at various sites. The corporation has established accruals in current dollars for those hazardous waste sites where it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The reliability and precision of the loss estimates are affected by numerous factors, such as different stages of site evaluation, the allocation of responsibility among potentially responsible parties and the assertion of additional claims. The corporation adjusts its accruals as new remediation requirements are defined, as information becomes available permitting reasonable estimates to be made, and to reflect new and changing facts. At March 31, 1997, the corporation had established environmental remediation accruals in the amount of $307 million. These accruals have two components, estimated future expenditures for site investigation and cleanup and estimated future expenditures for closure and postclosure activities. In addition, the corporation had environmental loss contingencies of $134 million. The corporation has sole responsibility for the remediation of approximately 40 percent of its environmental sites. These sites are well advanced in the investigation and cleanup stage. The corporation's environmental accruals at March 31, 1997 included $221 million for these sites, of which $90 million was for estimated future expenditures for site investigation and cleanup and $131 million was for estimated future expenditures for closure and postclosure activities. In addition, $68 million of the corporation's environmental loss contingencies related to these sites. The site with the largest total potential cost to the corporation is a nonoperating site. Of the above accruals, this site accounted for $31 million, of which $17 million was for estimated future expenditures for site investigation and cleanup and $14 million was for estimated future expenditures for closure and postclosure activities. In addition, $20 million of the above environmental loss contingencies related to this site. The corporation does not have sole responsibility at the remainder of its environmental sites. All of these sites are in the investigation and cleanup stage. The corporation's environmental accruals at March 31, 1997 included $86 million for estimated future expenditures for site investigation and cleanup at these sites. In addition, $66 million of the corporation's environmental loss contingencies related to these sites. The largest two of these sites are also nonoperating sites. Of the above accruals, these sites accounted for $36 million for estimated future expenditures for site investigation and cleanup. In addition, $13 million of the above environmental loss contingencies related to these sites. In 1996, worldwide expenses of continuing operations related to environmental protection for compliance with Federal, state and local laws regulating solid and hazardous wastes and discharge of materials to air and water, as well as for waste site remedial activities, totaled $110 million. Expenses in 1995 and 1994 were $138 million and $153 million, respectively. While estimates of the costs of environmental protection for 1997 are necessarily imprecise, the corporation estimates that the level of these expenses will be somewhat greater than that experienced in 1996. The corporation has severally guaranteed 45 percent (approximately $608 million at March 31, 1997) of EQUATE Petrochemical Company's debt and working capital financing needs until certain completion tests are achieved; thereafter, a $54 million several guarantee will provide ongoing support. The corporation also severally guaranteed certain sales volume targets until EQUATE's sales capabilities are proved. In addition, the corporation has pledged its shares in EQUATE as security for EQUATE's debt. The corporation has political risk insurance coverage for its equity investment and, until the completion tests are concluded, substantially all of its guarantee of EQUATE's debt. The corporation had additional contingent obligations at March 31, 1997 of $59 million, of which $33 million related to guarantees of debt. The corporation is one of a number of defendants named in approximately 4,500 lawsuits, some of which have more than one plaintiff, involving silicone breast implants. The corporation was not a manufacturer of breast implants but did supply generic bulk silicone materials to certain manufacturers. Also, the corporation in 1990 acquired and in 1992 divested the stock of a small specialty silicones company that, among other things, supplied silicone gel intermediates and silicone dispersions for breast implants. In 1993, most of the suits that were brought in Federal courts were consolidated for pre-trial purposes in the United States District Court, Northern District of Alabama. In 1995, after the District Court rejected an initial settlement proposal, certain defendants, including the corporation, proposed, and the court approved, a revised settlement program. While the corporation cannot predict the number of claimants who will participate in the settlement, based on sample data prepared under supervision of the court, the corporation estimates that its maximum expenditures under the revised agreement should not exceed $100 million prior to insurance recovery. Although insurance coverage is subject to issues as to scope and application of policies, retention limits, exclusions and policy limits, and the insurers have reserved their right to deny coverage, the corporation believes that after probable insurance recoveries neither the settlement nor litigation outside the settlement will have a material adverse effect on the consolidated financial position of the corporation. In addition to the above, the corporation and its consolidated subsidiaries are involved in a number of legal proceedings and claims with both private and governmental parties. These cover a wide range of matters including, but not limited to, product liability; governmental regulatory proceedings; health, safety and environmental matters; employment; patents; contracts and taxes. In some of these legal proceedings and claims, the cost of remedies that may be sought or damages claimed is substantial. The corporation has recorded nonenvironmental litigation accruals of $192 million, and related insurance recovery receivables of $135 million. At March 31, 1997, the corporation had nonenvironmental litigation loss contingencies of $45 million. While it is impossible at this time to determine with certainty the ultimate outcome of any legal proceedings and claims referred to in this note, management believes that adequate provisions have been made for probable losses with respect thereto and that such ultimate outcome, after provisions therefor, will not have a material adverse effect on the consolidated financial position of the corporation, but could have a material effect on consolidated results of operations in a given quarter or year. Should any losses be sustained in connection with any of such legal proceedings and claims, in excess of provisions therefor, they will be charged to income in the future. 5. Minority Interest On January 30, 1997, a newly formed real estate investment trust subsidiary issued $250 million of preferred stock bearing a current dividend yield of 14 percent for 10 years and 1 percent thereafter. Domestic real estate with a fair market value of approximately $500 million will be mortgaged in conjunction with this transaction. The preferred stock may be redeemed if, as a result of a change in tax laws, rules or regulations, dividends on the preferred stock or interest paid on the mortgage note is not fully deductible for Federal income tax purposes. DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Overview The corporation reported first quarter 1997 net income available to common stockholders of $155 million, or $1.03 per share, fully diluted ($1.14 per share, primary). For the corresponding quarter in 1996 the corporation reported earnings of $155 million, or $1.01 per share, fully diluted ($1.11 per share, primary). The corporation's first quarter earnings were the same as in the first quarter of 1996 and reflected the offsetting effects of increased sales volumes, decreasing average selling prices for most chemical products and increasing raw material and energy costs. Notwithstanding significantly increased sales volumes, the Specialties & Intermediates segment experienced a reduction in operating profit largely due to lower average selling prices attributable in part to the negative impact on international sales of an increased U.S. dollar currency exchange rate. Basic Chemicals & Polymers reported an improvement in operating profit over the first quarter of 1996 as a result of increased volumes and increased average selling prices for polyethylene and polypropylene resins. Ethylene oxide/glycol prices remained at levels well below the first quarter of 1996. In the second quarter of 1997, the company believes average selling prices for Specialties & Intermediates should increase while volumes are expected to remain at levels achieved in the first quarter of the year. Propylene costs are expected to increase moderately. In the Basic Chemicals & Polymers segment, the corporation's outlook includes volumes at levels achieved in the first quarter of this year, increased average selling prices and reduced raw material costs which, if realized, would result in improved margins. Results of Operations Sales increased 9.1 percent in the first quarter, compared to the same period of 1996, as the result of a 13.3 percent increase in volume being partially offset by a 3.6 percent decline in average selling prices. The corporation's variable margin (revenues less variable manufacturing and distribution costs) for the first quarter of 1997 was 42.2 percent, down 3.2 percentage points compared to 45.4 percent in the first quarter of 1996, principally due to higher feedstock costs and lower prices for ethylene oxide/glycol and other products. The current quarter's gross margin (variable margin less fixed manufacturing and distribution costs) as a percentage of sales declined 2.0 percentage points, from 26.8 percent to 24.8 percent, in comparison to the first quarter of 1996, reflecting higher feedstock costs coupled with stable fixed manufacturing and distribution costs. Industry Segments The company's operations are classified into two main business segments, Specialties & Intermediates and Basic Chemicals & Polymers. The Specialties & Intermediates segment includes the corporation's specialty chemicals and polymers product lines, licensing and solvents and chemical intermediates. The Basic Chemicals & Polymers segment includes the corporation's ethylene and propylene manufacturing operations as well as the production of first level ethylene and propylene derivatives - polyethylene, polypropylene, ethylene oxide and ethylene glycol. The corporation's noncore operations and financial transactions are included in the Other segment. Information about the corporation's operations in its business segments for the first quarter of 1997 and 1996 follows. Sales of the Basic Chemicals & Polymers segment include intersegment sales, principally ethylene oxide, which are made at the estimated market value of the products transferred. Operating profit represents income before interest expense and provision for income taxes. Millions of dollars Quarter ended March 31, 1997 1996 Sales Specialties & Intermediates $1,122 $1,077 Basic Chemicals & Polymers 597 519 Intersegment Eliminations (81) (95) Total $1,638 $1,501 Operating Profit Specialties & Intermediates $ 184 $ 193 Basic Chemicals & Polymers 62 58 Other 1 8 Total $ 247 $ 259 Depreciation and Amortization Specialties & Intermediates $ 51 $ 46 Basic Chemicals & Polymers 31 29 Total $ 82 $ 75 Capital Expenditures Specialties & Intermediates $ 88 $ 134 Basic Chemicals & Polymers 50 52 Total $ 138 $ 186 Sales of the Specialties & Intermediates segment increased 4.2 percent to $1,122 million in the first quarter of 1997 over that of 1996. Operating profit for the first quarter of 1997 was $184 million, versus $193 million for the comparable quarter of 1996. Volume increased by 13.5 percent, while average selling prices declined by 8.2 percent due in part to the negative impact on international sales of a stronger U.S. dollar currency exchange rate. Operating profit declined versus the comparable quarter of 1996 due to lower selling prices and an increase in the cost of propylene, the segment's main raw material. Sales of the Basic Chemicals & Polymers segment increased 15.0 percent to $597 million in the first quarter of 1997 from $519 million in the comparable quarter of 1996. The sales increase was related to a 13.0 percent increase in customer volume coupled with a 7.8 percent increase in average selling prices. Average prices for polyethylene and polypropylene resins increased significantly versus the first quarter of 1996, more than offsetting a decline in ethylene oxide/glycol prices. Operating profit for the first quarter of 1997 improved to $62 million from $58 million. Selling, administration and other expenses were $80 million in the first quarter of 1997, versus $81 million in the first quarter of 1996. Partnership income increased $9 million, or 34.6 percent, in the first quarter of 1997 versus the comparable quarter in 1996 due to increased earnings of Petromont related to increases in polyethylene pricing and an increase of the earnings of UOP due to normal variations in quarterly sales activity. Other income - net declined by $16 million from the first quarter of 1996, largely due to decreased interest income. Interest expense decreased $4 million in the first quarter of 1997, reflecting lower interest rates due to first quarter 1997 refinancings and an increase in capitalized interest associated with the corporation's capital program. Loss from corporate investments carried at equity declined from $14 million in the first quarter of 1996 to $2 million in the current quarter. This improvement is the result of improved Polimeri Europa results partially offset by an increase in EQUATE's preliminary operating expenses. These expenses are expected to continue through start-up in the second half of 1997. Estimates of future expenses related to environmental protection for compliance with Federal, state and local laws regulating solid and hazardous wastes and discharge of materials to air and water, as well as for waste site remedial activities have not changed materially since December 31, 1996. The reliability and precision of the loss estimates are affected by numerous factors, such as different stages of site evaluation, the allocation of responsibility among potentially responsible parties and the assertion of additional claims. The corporation's environmental exposures are discussed in more detail in the Commitments and Contingencies footnote to the financial statements on pages 6 through 9 of this report on Form 10-Q. The corporation continues to be named as one of a number of defendants in lawsuits involving silicone gel breast implants. The corporation supplied bulk silicone materials to certain companies that at various times were involved in the manufacture of breast implants. These cases are discussed in more detail in the "Commitments and Contingencies" footnote to the financial statements on pages 6 through 9 of this report on Form 10-Q. Accounting Changes Statement of Financial Accounting Standards No. 128 ("Statement 128"), "Earnings Per Share", will require presentation of "basic" and "diluted" earnings per share for periods ending after December 15, 1997. Had Statement 128 been in effect, "basic" and "diluted" earnings per common share would have been $1.17 and $1.03, respectively, in the first quarter of 1997 ($1.15 and $1.01 per common share, respectively, in the first quarter of 1996). Financial Condition - March 31, 1997 Cash flow from operations for the first quarter of 1997 was $178 million, down from $213 million in the first quarter of 1996, principally caused by a decline in deferred income taxes and an increase in undistributed earnings of companies carried at equity. Cash flow used for investing totaled $183 million, down from $439 million in the comparable period of 1996. The majority of this decline is due to decreases of $48 million in capital expenditures and $214 million in investments, advances and acquisitions. Major capital projects in progress in the first quarter of 1997 included a new CARBOWAX polyethylene glycol and TERGITOL surfactants facility, an ethanolamine unit and an olefins expansion, all at Taft, La., as well as an upgrade of information technology infrastructure. Capital expenditures are expected to approximate 1996 levels by the end of 1997. Major capital projects in 1996 included an ethylene propylene rubber facility at Seadrift, Tex., as well as new cogeneration facilities at Texas City, Tex. and Taft, La., and an upgrade of information technology infrastructure. During the first quarter of 1997 the corporation made an additional investment of $12 million in EQUATE Petrochemical Company. Significant investments and acquisitions in the first quarter of 1996 included the purchases of the polypropylene assets and business of Shell Oil Company and 95 percent of the outstanding shares of Companhia Alcoolquimica Nacional, a Brazilian producer of vinyl acetate monomer. Cash flow from financing was $126 million for the first quarter of 1997, as opposed to cash flow used by financing of $79 million for the quarter ended March 31, 1996. The 1997 quarter included common stock repurchases of 1.9 million shares for $73 million under the existing common stock repurchase program. Cash dividends totaled $27 million, while debt was reduced by $28 million. On January 30, 1997, a newly formed real estate investment trust subsidiary issued $250 million of preferred stock bearing a current dividend yield of 14 percent for 10 years and 1 percent thereafter, The corporation's ratio of debt to total capital decreased to 39.5 percent at March 31, 1997 from 42.7 percent at December 31,1996. At March 31, 1997 there were no outstanding borrowings under the existing major bank credit agreement aggregating $1 billion. PART II. OTHER INFORMATION Item 1. Legal Proceedings See Note 4 to the corporation's consolidated financial statements on pages 6 through 9 of this report on Form 10-Q. Item 2. Sales of Unregistered Securities During the first quarter of 1997, put options were sold to institutional investors in a series of private placements exempt from registration under Section 4(2) of the Securities Act of 1933, entitling the holders to sell 800,000 shares of Union Carbide Corporation common stock to the corporation, at $45.00 per share. Premiums received for the sales of the options totaled $898,500. Item 4. Submission of Matters to a Vote of Security Holders (a) Annual Meeting - April 23, 1997 (b) Election of Directors Proxies for the meeting were solicited pursuant to Regulation 14A. There was no solicitation in opposition to the management's nominees as listed in the proxy statement. All of the management's nominees as listed in the proxy statement were elected, the vote on said proposal being as follows: Shares Voted Directors Shares For Shares Withheld John J. Creedon 124,524,975 1,577,935 C. Fred Fetterolf 124,834,150 1,268,760 Joseph E. Geoghan 124,937,651 1,165,259 Thomas P. Gerrity 124,919,086 1,183,824 Rainer E. Gut 123,445,515 2,657,395 Vernon E. Jordan, Jr. 124,191,371 1,911,539 William H. Joyce 124,664,664 1,438,246 Robert D. Kennedy 124,743,052 1,359,858 Ronald L. Kuehn, Jr. 124,890,526 1,212,384 Rozanne L. Ridgway 124,807,819 1,295,091 James M. Ringler 124,891,613 1,211,297 William S. Sneath 122,358,810 3,744,100 Election required a plurality of the common and ESOP shares voted. (c) Other matters voted upon. Proposal to Ratify the Appointment of Auditors Shareholders ratified the appointment of KPMG Peat Marwick LLP to conduct the annual audit of the financial statements of the corporation and its consolidated subsidiary companies for the year ending December 31, 1997. The vote was: FOR - 124,739,670 shares or 99.46 percent of the shares voted. AGAINST - 674,785 shares or 0.54 percent of the shares voted. ABSTAIN - 688,455 shares. Ratification required an affirmative vote of a majority of the common and ESOP shares voted. Proposal to Adopt the 1997 Union Carbide Long-Term Incentive Plan Shareholders approved and authorized the 1997 Union Carbide Long-Term Incentive Plan. The vote was: FOR - 104,646,685 shares or 73.41 percent of the shares outstanding (83.78 percent of the shares voted). AGAINST - 20,257,820 shares or 14.21 percent of the shares outstanding (16.22 percent of the shares voted). ABSTAIN - 1,198,405 shares. Approval required an affirmative vote of a majority of the common and ESOP shares outstanding. Proposal to Adopt the 1997 Stock Option Plan for Non-Employee Directors of Union Carbide Corporation Shareholders approved and authorized the 1997 Stock Option Plan for Non-Employee Directors of Union Carbide Corporation. The vote was: FOR - 115,337,118 shares or 80.91 percent of the shares outstanding (92.60 percent of the shares voted). AGAINST - 9,222,735 shares or 6.47 percent of the shares outstanding (7.40 percent of the shares voted). ABSTAIN - 1,543,057 shares. Approval required an affirmative vote of a majority of the common and ESOP shares outstanding. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. The following exhibits are filed as part of this report: 11 - Computation of Earnings Per Share 27 - Financial Data Schedule. (b) The corporation filed the following reports on Form 8-K for the three months ended March 31, 1997. (1) Form 8-K dated January 20, 1997, contained the corporation's press release dated January 20, 1997. (2) Form 8-K dated January 22, 1997, contained the Distribution Agreement dated January 22, 1997 among Registrant, Credit Suisse First Boston Corporation, Morgan Stanley & Co. Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation, the Bond Resolution and the Forms of the Fixed and Floating Rate Notes related to the corporation's Medium Term Notes program. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNION CARBIDE CORPORATION (Registrant) Date: May 9, 1997 By: /s/John K. Wulff JOHN K. WULFF Vice-President, Chief Financial Officer and Controller EXHIBIT INDEX Exhibit Page No. Exhibit No. 11 Computation of Earnings Per Share 19 27 Financial Data Schedule 20 EX-11 2 Exhibit 11 UNION CARBIDE CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (In millions of dollars, except per share amounts) Quarter Ended March 31, 1997 1996 Earnings Per Share - Primary Net income $ 157 $ 157 Less: Preferred stock dividend 2 3 Appreciation on redeemed preferred stock 6 - Net income for primary income calculation $ 149 $ 154 Weighted average number of common and common equivalent shares applicable to primary earnings per share calculation Weighted average number of shares outstanding 126,406,832 134,502,414 Dilutive effect of stock options 4,227,498 4,739,654 130,634,330 139,242,068 Earnings per share - primary $ 1.14 $ 1.11 Earnings Per Share - Fully Diluted Net income for primary income calculation $ 149 $ 154 Add back: Preferred stock dividend 2 3 Net income for fully diluted income calculation $ 151 $ 157 Weighted average number of common and common equivalent shares applicable to fully diluted earnings per share calculation Weighted average number of shares outstanding 126,406,832 134,502,414 Dilutive effect of stock options 4,227,498 5,158,254 Shares issuable upon conversion of UCC convertible preferred stock 15,853,095 16,200,160 146,487,425 155,860,828 Earnings per share - fully diluted $ 1.03 $ 1.01 EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNION CARBIDE CORPORATION'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000100790 UNION CARBIDE CORPORATION 1,000,000 3-MOS DEC-31-1997 MAR-31-1997 214 0 1082 0 553 2028 7274 3809 6795 1221 1494 140 0 155 1972 6795 1638 1638 1231 1231 122 0 19 228 66 157 0 0 0 157 1.14 1.03 OTHER EXPENSES ARE EQUAL TO RESEARCH AND DEVELOPMENT OF 40 AND DEPRECIATION AND AMORTIZATION OF 82.
-----END PRIVACY-ENHANCED MESSAGE-----