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 JuneSeptember 30, 2000
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 JulyOctober 31, 2000
Common Stock, $1 par value 134,922,253135,196,104 shares
Total number of sequentially numbered pages in this filing,
including exhibits thereto: 24
INDEX
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PART I. FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements of Union Carbide Corporation and
Subsidiaries
Condensed Consolidated Statement of Income -
Quarter Ended JuneSeptember 30, 2000 and 1999 3
Condensed Consolidated Statement of Income -
SixNine Months Ended JuneSeptember 30, 2000 and 1999 4
Condensed Consolidated Balance Sheet -
JuneSeptember 30, 2000 and December 31, 1999 5
Condensed Consolidated Statement of Cash Flows -
SixNine Months Ended JuneSeptember 30, 2000 and 1999 6
Notes to Condensed Consolidated Financial Statements 7-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-20
Item 3. Quantitative and Qualitative Disclosure About Market Risk 15-1616
PART II. OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds 21
Item 6. Exhibits and Reports on Form 8-K 21
Signature 22
Exhibit Index 23
Cautionary statement: All statements in this Quarterly Report on
Form 10-Q that do not reflect historical information are forward-
looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995 (as amended). Forward-looking
statements include statements concerning the pending merger with
The Dow Chemical Company (and,("Dow" and, with regard to the merger,
the Dow
Merger)"Dow Merger"); plans; objectives; strategies; anticipated
future events or performance; sales; cost, expense and earnings
expectations; interest rate and currency risk management; the
chemical markets in 2000 and beyond; development, production and
acceptance of new products and process technologies; ongoing and
planned capacity additions and expansions; joint ventures;
Management's Discussion and Analysis; and any other statements
that do not reflect historical information. Such forward-looking
statements are subject to risks and uncertainties. Important
factors that could cause actual results to differ materially from
those discussed in such forward-looking statements include the
supply/demand balance for the corporation's products; customer
inventory levels; competitive pricing pressures; raw material
availability and costs; changes in industry production capacities
and operating rates; currency exchange rates; interest rates;
global economic conditions; competitive technology positions;
failure by the corporation to achieve technology objectives,
achieve cost reduction targets or complete projects on schedule
and on budget; inability to obtain new customers or retain
existing ones; and, with respect to the Dow Merger, failure to
obtain necessary regulatory and other governmental approvals and
failure to satisfy conditions of the merger agreement.
-2-
PART I. FINANCIAL INFORMATION
UNION CARBIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Millions of dollars
(Except per share figures)
Quarter ended JuneSeptember 30,
2000 1999
---- ---------- ------
NET SALES $1,674 $1,418$1,637 $1,498
------ ------
Cost of sales, exclusive of depreciation and
amortization 1,354 1,1051,421 1,232
Research and development 39 3937 38
Selling, administrative and other expenses(a) 61 5748 72
Depreciation and amortization 102 95100 103
Partnership income (loss) 9 (4)(6) 18
Other income - net 36 279 52
------ ------
INCOME BEFORE INTEREST EXPENSE AND PROVISION FOR
INCOME TAXES 163 14534 123
Interest expense 45 35 32
------ ------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 118 110(1) 91
Provision for income taxes 29 28- 24
------ ------
INCOME (LOSS) OF CONSOLIDATED COMPANIES
AND PARTNERSHIPS 89 82(1) 67
Minority interest 3 2
1
Income (loss) from corporate investments carried at equity 43 (18)33 12
------ ------
NET INCOME $ 13029 $ 6377
====== ======
Earnings per common share
Basic $ 0.960.22 $ 0.470.58
Diluted $ 0.940.22 $ 0.460.57
Cash dividends declared per common share $ 0.225 $ 0.225
(a) Selling, administrative and other expenses include:
Selling $ 2221 $ 2324
Administrative 22 1621 28
Other expenses 17 186 20
------ ------
$ 6148 $ 5772
====== ======
The Notes to Condensed Consolidated Financial Statements on Pages
7 through 13 should be read in conjunction with this statement.
-3-
UNION CARBIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Millions of dollars
(Except per share figures)
SixNine months ended JuneSeptember 30,
2000 1999
---- ---------- ------
NET SALES $3,291 $2,820$4,928 $4,318
------ ------
Cost of sales, exclusive of depreciation and
amortization 2,668 2,1374,089 3,369
Research and development 78 76115 114
Selling, administrative and other expenses(a) 134 127182 199
Depreciation and amortization 204 199304 302
Partnership income 12 26 20
Other income - net 60 4169 93
------ ------
INCOME BEFORE INTEREST EXPENSE AND PROVISION FOR
INCOME TAXES 279 324313 447
Interest expense 82 66117 98
------ ------
INCOME BEFORE PROVISION FOR INCOME TAXES 197 258196 349
Provision for income taxes 49 6690
------ ------
INCOME OF CONSOLIDATED COMPANIES AND PARTNERSHIPS 148 192147 259
Minority interest 3 26 4
Income (loss) from corporate investments carried
at equity 82 (50)115 (38)
------ ------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 227 140256 217
Cumulative effect of change in accounting principle - (20)
------ ------
NET INCOME $ 227256 $ 120197
====== ======
Earnings per common share
Basic -
Income before cumulative effect of change
in accounting principle $ 1.681.90 $ 1.051.63
Cumulative effect of change in accounting principle - $(0.15)(0.15)
------ ------
Net income $ 1.681.90 $ 0.901.48
====== ======
Diluted -
Income before cumulative effect of change
in accounting principle $ 1.651.86 $ 1.021.59
Cumulative effect of change in accounting principle - (0.14)
------ ------
Net income $ 1.651.86 $ 0.881.45
====== ======
Cash dividends declared per common share $ 0.450.675 $ 0.450.675
(a) Selling, administrative and other expenses include:
Selling $ 4566 $ 4670
Administrative 44 4165 69
Other expenses 45 4051 60
------ ------
$ 134182 $ 127199
====== ======
The Notes to Condensed Consolidated Financial Statements on Pages
7 through 13 should be read in conjunction with this statement.
-4-
UNION CARBIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
Millions of dollars
JuneSept. 30, Dec. 31,
2000 1999
---- ----------- -------
ASSETS
- ------
Cash and cash equivalents $ 5963 $ 41
Notes and accounts receivable 1,1661,104 1,132
Inventories 743701 680
Other current assets 301314 297
------------- -------
Total current assets 2,2692,182 2,150
Property, plant and equipment 9,3039,311 9,057
Less: Accumulated depreciation 4,6874,734 4,536
------------- -------
Net fixed assets 4,6164,577 4,521
Companies carried at equity 915994 756
Other investments and advances 9293 75
------------- -------
Total investments and advances 1,0071,087 831
Other assets 525526 455
------------- -------
Total assets $8,417$ 8,372 $ 7,957
============= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Accounts payable $ 298336 $ 329
Short-term debt and current portion of long-term debt 1,1091,111 782
Accrued income and other taxes 15 -
Other accrued liabilities 758749 678
------ -------
Total current liabilities 2,1802,196 1,789
Long-term debt 1,7581,755 1,869
Postretirement benefit obligation 431428 438
Other long-term obligations 567547 603
Deferred credits 652640 599
Minority stockholders' equity in consolidated
subsidiaries 4440 42
Stockholders' equity:
Common stock - authorized - 500,000,000 shares
- issued - 158,297,608158,495,782 shares
(157,571,933 shares in 1999) 158 158
Additional paid-in capital 193197 165
Other equity adjustments (2)(1) (1)
Accumulated other comprehensive loss (191)(217) (160)
Retained earnings 3,697 3,530
Unearned employee compensation - ESOP (51)(49) (56)
Treasury stock, at cost - 23,416,03423,413,994 shares
(23,428,229 shares in 1999) (1,019) (1,019)
------ ------------- -------
Total stockholders' equity 2,7852,766 2,617
------------- -------
Total liabilities and stockholders' equity $8,417$ 8,372 $ 7,957
============= =======
The Notes to Condensed Consolidated Financial Statements on Pages 7
through 13 should be read in conjunction with this statement.
-5-
UNION CARBIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Millions of dollars
SixNine Months Ended June 30,Sept.30,
2000 1999
- -----------------------------------------------------------------------------------
Increase (decrease) in
Cash and cash equivalents
- -----------------------------------------------------------------------------------
OPERATIONS
- -----------
Income before cumulative effect of change in
accounting principle $ 227256 $ 140217
Noncash charges (credits) to net income:
Depreciation and amortization 204 199304 302
Deferred income taxes 58 8141 99
Equity in (earnings) losses of joint ventures,
net of cash received (57) 68(84) 53
Other (45) 21
Decrease (increase)(80) 36
Increase in working capital(a) (101) (228)(13) (211)
Long-term assets and liabilities (27) (33)(44) (77)
----- -----
Cash Flow From Operations 259 248380 419
----- -----
INVESTING
---------
Capital expenditures (322) (381)(397) (559)
Investments, advances and acquisitions (135) (62)(184) (91)
Proceeds from the sale of
available-for-sale securities 65 18143 28
Purchase of available-for-sale securities (38) (28)(84) (35)
Sale of fixed and other assets 8 1926
----- -----
Cash Flow Used for Investing (422) (434)(514) (631)
----- -----
FINANCING
---------
Change in short-term debt (3 months or less) 340 20342 243
Proceeds from short-term debt 38 2
Repayments of short-term debt (13) (8)(19) (17)
Proceeds from long-term debt - 285
Repayments of long-term debt (114) (52)(227)
Issuance of common stock 20 3025 41
Purchase of common stock - (50)
Payment of dividends (61) (60)(91) (90)
Other 5 11
----- -----
Cash Flow From Financing 180 178156 198
----- -----
Effect of exchange rate changes on cash and
cash equivalents - 1 -
Change in cash and cash equivalents 18 (8)22 (13)
Cash and cash equivalents, beginning-of-period 41 49
----- -----
Cash and cash equivalents, end-of-period $ 5963 $ 4136
===== =====
Cash (received) paid for interest and income taxes
Interest (net of amount capitalized) $ 96124 $ 7293
Income taxes $ (33)(24) $ 1831
(a) Net change in certain components of working
capital (excluding noncash transactions):
(Increase) decrease in current assets
Notes and accounts receivable $ (24) $(146)24 $(176)
Inventories (63) 71(21) 62
Other current assets (4) (20)(19) (21)
(Decrease) increase in payables and accruals (10) (133)3 (76)
----- -----
(Increase) decrease in working capital $(101) $(228)$ (13) $(211)
===== =====
The Notes to Condensed Consolidated Financial Statements on Pages 7
through 13 should be read in conjunction with this statement.
-6-
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"(the corporation or "UCC")UCC) in the 1999 annual report to
stockholders.
Unrealized gains and losses resulting from translating
foreign subsidiaries' assets and liabilities into U.S.
dollars generally are recognized as part of "Comprehensive
income," and are included in "Accumulated other
comprehensive loss" on the Condensed Consolidated Balance
Sheet until such time as the subsidiary is sold or
substantially or completely liquidated. Translation gains
and losses relating to those operations located in Latin
American countries where hyperinflation exists and to
international operations using the U.S. dollar as their
functional currency are included in the Condensed
Consolidated Statement of Income.
2. Comprehensive Income
The following summary presents the components of comprehensive income:
Quarter Ended SixNine Months Ended
JuneSept. 30, JuneSept. 30,
Millions of dollars, 2000 1999 2000 1999
---- ---- ---- ----
Net income $130 $63 $227 $120$ 29 $77 $256 $197
Other comprehensive income:
Unrealized gains and losses on
available-for-sale securities,
net of reclassification adjustments
and net of tax - 2 4 2(3) (1) 1 1
Foreign currency translation
adjustments (25) (2) (35) (55)(23) 8 (58) (47)
---- --- -- ---- ----
Comprehensive income $105 $63 $196 $ 673 $84 $199 $151
==== === ==== ====
3. Inventories
June 30,Sept.30, Dec. 31,
Millions of dollars, 2000 1999
---- --------- -----
Raw materials and supplies $170 $152$ 169 $ 152
Work in process 5867 45
Finished goods 515465 483
---- ----
$743 $680$ 701 $ 680
==== ====
-7-
4. Business and Geographic Segment Information
The corporation has two operating segments, Specialties &
Intermediates ("S&I")(S&I) and Basic Chemicals & Polymers ("BC&P")(BC&P).
The S&I segment includes the corporation's specialty
chemicals and polymers product lines, licensing, and solvents
and chemical intermediates. The BC&P 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. In addition to its operating
segments, the corporation's Other segment includes its non-
core operations and financial transactions other than
derivatives designated as hedges, which are included in the
same segment as the item being hedged.
Sales of the BC&P segment include intersegment sales,
principally ethylene oxide, which are made at the estimated
market value of the products transferred. The corporation
evaluates performance based on Income before interest expense
and provision for income taxes ("operating profit")(operating profit).
S&I BC&P Other Total
--- ---------- ------ ----- -----------
Millions of dollars,
for the three monthsquarter ended
JuneSeptember 30, 2000
-------------
Net sales $1,125$1,122 $ 549515 $ - $1,674$1,637
Intersegment revenues - 10699 - 10699
Segment revenues 1,125 6551,122 614 - 1,7801,736
Depreciation and
amortization 6765 35 - 102100
Partnership income (loss) 8 1(6) - 9- (6)
Operating profit (loss) 92 74 (3) 16345 (15) 4 34
Interest expense - - 45 4535 35
Income (loss) from corporate
investments carried
at equity (2) 451 32 - 4333
S&I BC&P Other Total
--- ---------- ----- ----- ------
Millions of dollars,
for the three monthsquarter ended
JuneSeptember 30, 1999
-------------
Net sales $1,036 $382$1,057 $441 $ - $1,418$1,498
Intersegment revenues - 5481 - 5481
Segment revenues 1,036 4361,057 522 - 1,4721,579
Depreciation and
amortization 62 3367 36 - 95103
Partnership income (loss) (2) (2)17 1 - (4)18
Operating profit (loss) 188 (42) (1) 145134 (7) (4) 123
Interest expense - - 35 3532 32
Income (loss) from corporate
investments carried
at equity - (18)12 - (18)12
-8-
S&I BC&P Other Total
--- ---------- ------ ----- -----------
Millions of dollars,
for the sixnine months ended
JuneSeptember 30, 2000
-------------
Net sales $2,233 $1,058$3,355 $1,573 $ - $3,291$4,928
Intersegment revenues - 205304 - 205304
Segment revenues 2,233 1,2633,355 1,877 - 3,4965,232
Depreciation and
amortization 134 70199 105 - 204304
Partnership income (loss) 104 2 - 126
Operating profit (loss) 174 104 1 279219 89 5 313
Interest expense - - 82 82117 117
Income (loss) from corporate
investments carried
at equity (1) 83 - 82115 - 115
S&I BC&P Other Total
--- ----------- ------ ----- -----------
Millions of dollars,
forFor the sixnine months ended
JuneSeptember 30, 1999
-------------
Net sales $2,070 $750$3,127 $1,191 $ - $2,820$4,318
Intersegment revenues - 107188 - 107188
Segment revenues 2,070 8573,127 1,379 - 2,9274,506
Depreciation and
amortization 125 74192 110 - 199302
Partnership income (loss) 219 1 - - 220
Operating profit (loss) 396 (75) 3 324530 (82) (1) 447
Interest expense - - 66 6698 98
Income (loss) from
corporate investments
carried at equity 4 (54)(42) - (50)(38)
Operating profit for the three and six month periodsnine months ended JuneSeptember 30, 2000
includes an $18 million gain on shares received and sold in
connection with the demutalizationdemutualization of Metropolitan Life
Insurance Company, a provider of certain employee benefit
programs for the corporation, of which $12 million and $6 million
waswere recognized by the S&I and BC&P segment, respectively.
The operating profit of the S&I segment includes $38 million and
$50 million of net gains from litigation settlements related to
licensing for the threequarter and six
month periodsnine months ended JuneSeptember 30,
1999, includes a $12 million net gain
from a litigation settlement.respectively.
-9-
5. Earnings Per Share
Millions of dollars, Quarter Ended JuneSept. 30, SixNine Months Ended JuneSept. 30,
except per share amounts 2000 1999 2000 1999
---- ---- ---- --------- ----- ----- ------
Income before cumulative effect of change
in accounting principle $ 13029 $ 6377 $ 227256 $ 140217
Cumulative effect of change in accounting
principle - - - (20)
----- ----- ----- ------
Net income $ 13029 $ 6377 $ 227256 $ 120197
===== ===== ===== ======
Basic -
Weighted average number of shares
outstanding for basic calculation 134,745,740 133,088,173 134,575,898 132,968,994134,960,774 133,464,524 134,705,126 133,135,986
=========== =========== =========== ===========
Earnings per share -
Income before cumulative effect of change
in accounting principle $0.96 $0.47 $1.68$0.22 $0.58 $1.90 $ 1.051.63
Cumulative effect of change in accounting
principle - - - (0.15)
----- ----- ----- ------
Net income $0.96 $0.47 $1.68$0.22 $0.58 $1.90 $ 0.901.48
===== ===== ===== ======
Diluted -
Weighted average number of shares
outstanding for basic calculation 134,745,740 133,088,173 134,575,898 132,968,994134,960,774 133,464,524 134,705,126 133,135,986
Add: Effect of stock options 3,173,330 3,365,490 3,165,604 3,113,5102,114,616 3,434,248 2,815,275 3,220,422
----------- ----------- ----------- -----------
Weighted average number of shares
outstanding for diluted calculation 137,919,070 136,453,663 137,741,502 136,082,504137,075,390 136,898,772 137,520,401 136,356,408
=========== =========== =========== ===========
Earnings per share -
Income before cumulative effect of change
in accounting principle $0.94 $0.46 $1.65$0.22 $0.57 $1.86 $ 1.021.59
Cumulative effect of change in accounting
principle - - - (0.14)
----- ----- ----- ------
Net income $0.94 $0.46 $1.65$0.22 $0.57 $1.86 $ 0.881.45
===== ===== ===== ======
6. Commitments and Contingencies
The corporation has three major agreements for the purchase
of ethylene-related products and two other purchase
agreements in the U.S. and Canada. The net present value of
the fixed and determinable portion of obligations under these
purchase commitments at JuneSeptember 30, 2000 totaled
$194$185 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.
-10-
At JuneSeptember 30, 2000, the corporation had established
environmental remediation accruals in the amount of
$192$187 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 $96$78 million.
The corporation has sole responsibility for the remediation
of approximately 40 percent of its environmental sites for
which accruals have been established. These sites are well
advanced in the investigation and cleanup stage. The
corporation's environmental accruals at JuneSeptember 30, 2000
included $153 million for these sites, of which $40$43 million
was for estimated future expenditures for site investigation
and cleanup and $113$110 million was for estimated future
expenditures for closure and postclosure activities. In
addition, $61 million of the corporation's environmental loss
contingencies related to these sites. The three sites with
the largest total potential cost to the corporation are
nonoperating sites. Of the above accruals, these sites
accounted for $56$51 million, of which $16$12 million was for
estimated future expenditures for site investigation and
cleanup and $40$39 million was for estimated future expenditures
for closure and postclosure activities. In addition,
$41$40 million of the above environmental loss contingencies
related to these sites.
The corporation does not have sole responsibility at the
remainder of its environmental sites for which accruals have
been established. All of these sites are in the
investigation and cleanup stage. The corporation's
environmental accruals at JuneSeptember 30, 2000 included
$39$34 million for estimated future expenditures for site
investigation and cleanup at these sites. In addition,
$35$17 million of the corporation's environmental loss
contingencies related to these sites. The largest threetwo of
these sites are also nonoperating sites. Of the above
accruals, these sites accounted for $13$12 million for estimated
future expenditures for site investigation and cleanup. In
addition, $18$2 million of the above environmental loss
contingencies related to these sites.
In 1999, worldwide 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, totaled $118 million. Expenses in 1998
and 1997 were $91 million and $100 million, respectively.
While estimates of the costs of environmental protection for
2000 are necessarily imprecise, the corporation estimates
that these expenses will approximate the average of the last
three years.
The corporation severally guaranteed up to approximately
$167$122 million at JuneSeptember 30, 2000 of EQUATE Petrochemical
Company's ("EQUATE")(EQUATE) debt and working capital financing
needs. The corporation has 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 a majority of its guarantee of EQUATE's debt.
The corporation had additional contingent obligations at
JuneSeptember 30, 2000 totaling $107$85 million, of which $30$28 million
related to guarantees of debt.
The corporation and its consolidated subsidiaries are
involved in a number of legal proceedings and claims with
both private and governmental
-11-
parties. These cover a wide range of matters, including, but
not limited to: product liability; trade regulation;
governmental regulatory proceedings; health, safety and
environmental matters; employment; patents; contracts; taxes;
and commercial disputes. 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 $131$135 million and related insurance recovery
receivables of $117 million. At JuneSeptember 30, 2000, the
corporation had nonenvironmental litigation loss
contingencies of $70$71 million.
While it is impossible at this time to determine with
certainty the ultimate outcome of any of the 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 when determinable.
7. Accounting Changes
Effective January 1, 1999, the corporation adopted the
provisions of the American Institute of Certified Public
Accountants' Statement of Position ("SOP")(SOP) 98-5, "Reporting on the
Costs of Start-Up Activities." This SOP requires the expensing
of certain costs, such as preoperating expenses and
organizational costs associated with an entity's start-up
activities. In accordance with this SOP's provisions, on
January 1, 1999, the corporation recognized a charge of $27
million ($20 million after-tax) as a cumulative effect of change
in accounting principle, the majority of which represented
formation costs associated with the corporation's joint
ventures.
In 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("Statement")(Statement)
No. 133, "Accounting for Derivative Instruments and Hedging
Activities." It requires that an entity recognize all
derivative instruments as either assets or liabilities in the
statement of financial position and measure those instruments
at fair value. Changes in the fair value of those
derivatives will be reported in earnings or accumulated other
comprehensive loss, depending on the uses of the derivatives
and whether they qualify for hedge accounting. This
Statement, as amended by Statement No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133," and Statement
No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities - an amendment of FASB Statement
No. 133," is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. TheDue to the
corporation's limited use of financial instruments to manage
its exposure to market risks, primarily related only to
changes in foreign currency exchange rates, the corporation
is currently evaluatingdoes not expect the effectadoption of Statement No. 133 willon January
1, 2001 to have a material effect on itsthe corporation's
financial position andor results of operations in the period of adoption.operations.
-12-
In 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB")(SAB) 101, "Revenue Recognition in
Financial Statements," which summarizes the staff's views
regarding the application of generally accepted accounting
principles to selected revenue recognition issues. The
corporation is evaluating whetherhas determined that SAB 101 will cause any
change innot have a
significant effect on its revenue recognition policies and
procedures.
-12-
8. The Dow Merger
On August 3, 1999, the corporation and The Dow Chemical
Company ("Dow")(Dow) entered an Agreement and Plan of Merger
providing for the merger of a subsidiary of Dow with and into
the corporation. As a result of the merger, the corporation
will become a wholly-owned subsidiary of Dow and the
corporation's shareholders will receive 1.611 shares of Dow
common stock for each share of UCC common stock they own as of
the date of the merger. On December 1, 1999, the
corporation's shareholders approved the merger. On May 3,
2000, the European Commission approved the merger subject to
the divestiture of certain assets and the licensing of certain
technology. The merger is still subject to certain additional
conditions including review by antitrust regulatory
authorities in the United States.
-13-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
-----------------------------------------------------------
Union Carbide operates in two business segments. The
Specialties & Intermediates ("S&I")(S&I) segment converts basic and
intermediate chemicals into a diverse portfolio of chemicals and
polymers serving industrial customers in many markets. This
segment also provides technology services, including licensing,
to the oil and petrochemicals industries. The Basic Chemicals &
Polymers ("BC&P")(BC&P) segment converts hydrocarbon feedstocks,
principally liquefied petroleum gas and naphtha, into ethylene
or propylene used to manufacture polyethylene, polypropylene,
ethylene oxide and ethylene glycol for sale to third-party
customers, as well as ethylene, propylene, ethylene oxide and
ethylene glycol for consumption by the S&I segment. In
comparison with those of S&I, the revenues and operating profit
of BC&P tend to be more cyclical and very sensitive to a number
of external variables, including overall economic demand,
hydrocarbon feedstock costs, industry capacity increases and
plant operating rates.
In addition to its business segments, the corporation's Other
segment includes its noncore operations and financial
transactions other than derivatives designated as hedges, which
are included in the same segment as the item being hedged.
Summary
- -------
The corporation reported secondthird quarter net income of $130$29
million, or $0.94$0.22 per diluted share ($0.960.22 per basic share).
For the same quarter in 1999, the corporation reported net
income of $63$77 million, or $0.46$0.57 per diluted share ($0.470.58 per
basic share). Net income for the sixnine months ended JuneSeptember
30, 2000 was $227$256 million, or $1.65$1.86 per diluted share ($1.681.90 per
basic share), compared with net income of $140$217 million, or $1.02$1.59
per diluted share ($1.051.63 per basic share), before the charge for
a cumulative effect of a change in accounting principle of $20
million, or $0.14 per diluted share ($0.15 per basic share), for
the same sixnine months of 1999.
Consolidated net sales increased 18.1for the third quarter of 2000 were $1,637
million, an increase of 9.3 percent from $1,418over net sales of $1,498
million for the secondthird quarter of 1999 to $1,674 million for the
second quarter of 2000. This increase reflects a 20.1reflecting an 8.8 percent
increase in average customer selling prices slightly offset bycoupled with a 1.7 percent declineslight
increase in customer volume. Consolidated net sales for the first sixnine
months of 2000 compared withwere $4,928 million, an increase of 14.1 percent
over net sales of $4,318 million for the same sixnine months of
1999, increased 16.7 percent from $2,820 million to
$3,291 million, representing a 17.214.2 percent increase in average customer selling
prices andoffset by a slight decline in customer volume. Increases inAlthough average
customer selling pricesprice increases occurred in both segments, however, the majority
of the increasethree and nine month period increases came from products
in the BC&P segment.
The corporation's unit variable margin (revenues less variable
manufacturing and distribution costs divided by customer volume)
was 15.512.9 cents per pound in the secondthird quarter of 2000 compared
with 14.614.1 cents per pound for the same quarter in 1999.
Consolidated unit variable margin for the first half ofnine months ended
September 30, 2000 was 15.014.3 cents per pound compared with 15.415.0
cents per pound infor the first halfsame nine months of 1999. AlthoughDeclines for
both the three and nine month periods principally reflected
lower unit variable margins in the S&I segment, benefited fromcaused by rising average selling prices for the three and six month
periods ended June 30, 2000, this benefit did not fully
offset significant increases in
purchased material and energy costs, which have continued to rise over the past several
quarters. In contrast,were not fully offset
by increases in average selling prices. Lower S&I unit variable
marginmargins were partially offset by higher unit variable margins of
the BC&P segment, for the three and six
-14-
month periods reflected significant improvements asreflecting increases in average customer selling prices
that more than offset increases inhigher raw material and energy costs.
Increases in raw material costs
were partially offset by the corporation's increased production
of ethylene at a lower cost than if purchased.-14-
Fixed cost per pound of product sold (fixed manufacturing and
distribution costs, plus research and development and selling,
administrative and other expenses, divided by customer volume)
increased from 9.5was 9.8 cents per pound for the second quarter of
1999 to 10.1three months ended September 30,
2000 compared with 10.4 cents per pound for the same quarter of 2000.in
1999. For the first half ofnine months ended September 30, 2000 fixed cost
per pound of productsproduct sold was 10.110.0 cents compared with 9.79.9 cents
for the same periodnine months of 1999. Partnership income increased by $13 million and $10 million for
the quarter and six month period ended June 30, 2000,
respectively, as compared with the same periods in 1999. These
increases primarily reflect higher earnings for the
corporation's UOP and Petromont ventures. Additionally, for the
second quarter of 2000, compared with the same quarter in 1999,
the corporation's Aspell partnership showed some improvement
from a cost-savings program completed in the first quarter of
2000. Income from corporate investments carried at equity
increased substantially from a loss of $18 million in the second
quarter of 1999 to income of $43 million for the same quarter in
2000 and from a loss of $50 million in the first half of 1999 to
income of $82 million in the same half of 2000. The majority of
the increase during these periods related to better performance
of the corporation's EQUATE and Polimeri Europa joint ventures.
Other income for the three and six month periods ended June 30,
2000 included an $18 million ($11 million after-tax) gain on
shares received and sold in connection with the demutualization
of Metropolitan Life Insurance Company ("Met Life"), a provider
of certain employee benefit programs for the corporation. Other
income for the three and six month periods ended June 30, 1999
included a $12 million net gain ($9 million after-tax) from a
litigation settlement.
Operating profit was increasedFixed costs were reduced by a
reduction in pension expense of $22$23 million and $46$69 million for
the three and sixnine month periods ended JuneSeptember 30, 2000,
respectively, as compared with the same periods in 1999, the
result of amortization of investment gains and changes in
actuarial assumptions reflecting long-term investment returns on
pension plan assets. Additionally, fixed costs in the third
quarter of 2000 included a non-recurring decline in selling,
administrative and other expenses, as well as increased costs
associated with the start-up of the olefins and polyethylene
units in Canada.
Partnership income decreased from income of $18 million in the
third quarter of 1999 to a loss of $6 million in the same
quarter of 2000. For the first nine months of 2000, partnership
income was $6 million compared with $20 million for the same
nine months of 1999. Declines in partnership income primarily
reflect lower income associated with the corporation's UOP joint
venture, which resulted from a reduction, particularly in
international markets, of new projects undertaken by oil
companies.
Other income for the nine month period ended September 30, 2000
included an $18 million ($11 million after-tax) gain on shares
received and sold in connection with the demutualization of
Metropolitan Life Insurance Company (Met Life), a provider of
certain employee benefit programs for the corporation and $15
million of interest income related to a tax refund. Other
income for the three and nine month periods ended September 30,
1999 included $38 million ($29 million after-tax) and $50
million ($38 million after-tax), respectively, of net gains from
litigation settlements.
Interest expense increased $10$3 million and $16$19 million for the
three and sixnine month periods ended JuneSeptember 30, 2000,
respectively, as compared with the similarsame three and sixnine month
periods of 1999. These increases are primarily the result of higher interest rates
and additionala
greater amount of average short-term debt partlyoutstanding during
2000 compared with 1999. Additionally, increases for the nine
month period were partially offset by an increase in capitalized
interest related primarily to the corporation's current
capital projects.olefins and
polyethylene projects in Canada and the corporation's OPTIMAL
Group investment project in Malaysia.
Income from corporate investments carried at equity increased
$21 million and $153 million for the three and nine month
periods ended September 30, 2000 compared with the same periods
in the prior year. Increases were directly attributable to
better performance of the EQUATE and Polimeri Europa joint
ventures, partially offset by preoperating expenses of the
Malaysian joint ventures.
The corporation's effective tax rate for the three and sixnine
month periods ended JuneSeptember 30, 2000 was 25.0 percent. The
corporation's effective tax rate for the same three and nine
month periods in 1999 was approximately 25
percent.26.4 percent and 25.8 percent,
respectively.
-15-
Corporate Matters
- -----------------
Interest Rate and Currency Risk Management
The corporation selectively uses financial instruments to manage
its exposure to market risk related to changes in foreign
currency exchange rates and interest rates. The corporation
does not hold derivative financial instruments for trading
purposes.
-15-
At JuneSeptember 30, 2000, the corporation held open foreign
currency forward contracts and options with net notional amounts
of $97$225 million and an unrecognizedunrealized net lossgain of less than $1
million. At JuneSeptember 30, 2000, the corporation did not hold
any derivatives related to its interest rate exposure.
The corporation uses sensitivity analysis to evaluate the
potential effect of movements in foreign currency exchange rates
and interest rates on the condensed consolidated financial
statements. Based on this analysis, a hypothetical 10 percent
weakening in the U.S. dollar across all currencies would have
resulted in a $10.4$12.0 million net loss at JuneSeptember 30, 2000.
Alternatively, a hypothetical 10 percent strengthening in the
U.S. dollar across all currencies would have resulted in a $9.1$13.6
million net gain at JuneSeptember 30, 2000. These gains and losses
would generally be offset by fluctuations in the underlying
currency transactions.
At JuneSeptember 30, 2000, the corporation had long-term debt of
$1,759$1,755 million, of which $15 million was variable-rate debt. A
10 percent increase in market interest rates would have
decreased the net fair market value of fixed-rate debt
instruments by $102$104 million at JuneSeptember 30, 2000, and a 10
percent decrease in market interest rates would have increased
the net fair market value of fixed-rate debt instruments by
$115$118 million at JuneSeptember 30, 2000.
Outlook - Corporate
- ---------------------------------------
On August 3, 1999, the corporation and The Dow Chemical Company
("Dow")(Dow) entered an Agreement and Plan of Merger providing for the
merger of a subsidiary of Dow with and into the corporation. As
a result of the merger, the corporation will become a wholly-
owned subsidiary of Dow and the corporation's shareholders will
receive 1.611 shares of Dow common stock for each share of UCC
common stock they own as of the date of the merger. On December
1, 1999, the corporation's shareholders approved the merger. On
May 3, 2000, the European Commission approved the merger subject
to the divestiture of certain assets and the licensing of certain
technology. The merger is still subject to certain additional
conditions including review by antitrust regulatory authorities
in the United States. The transaction is intended to qualify as
a tax-free reorganization for United States Federal income tax
purposes and is expected to be accounted for under the pooling-of-
interests method of accounting.
-16-
Specialties and& Intermediates
- --------------------------------------------------------
Quarter Ended SixNine Months Ended
Millions of dollars, JuneSept. 30, JuneSept. 30, JuneSept. 30, JuneSept. 30,
except as indicated 2000 1999 2000 1999
-------- -------- -------- -------------- ------- ------ ------
Segment revenues $1,125 $1,036 $2,233 $2,070$1,122 $1,057 $3,355 $3,127
Depreciation and amortization 65 67 62 134 125199 192
Partnership income (loss) 8 (2) 10 2(6) 17 4 19
Operating profit 92 188 174 39645 134 219 530
Income (loss) from corporate investments
carried at equity (2)1 - (1)- 4
Unit variable margin (cents/pound) 18.6 22.7 18.8 24.317.6 20.1 18.4 22.9
Fixed cost per pound of products
sold (cents/pound) 13.3 13.0 13.1 13.514.1 13.1 13.7
Capital expenditures 47 93 116 16229 58 145 220
S&I segment revenues increased 8.66.1 percent for the quarter ended
JuneSeptember 30, 2000 compared with the same quarter in 1999, the
result of a 10.47.5 percent increase in average selling prices
partially offset by a 1.61.2 percent decline in volume. Revenues
of the S&I
segment for the first halfnine months of 2000 compared with the same halfnine
months of 1999, increased 7.97.3 percent, onthe result of a 6.16.7
percent increase in average selling prices and a 1.7 percentslight increase
in volume. Although average selling prices increased from the prior year's
second quarter and first half, the increases were insufficient to offset
the continuingThroughout 2000, steady increases in purchased raw
material and energy costs eroded any benefit this segment derived
from increases in average selling prices and the impact of the strong United States dollar on competitive
international pricing.
Increasesvolume.
Declines in partnership income for the three and sixnine month
periods ended JuneSeptember 30, 2000 compared with the same periods
in 1999, primarily reflected better resultslower earnings from the
corporation's UOP joint venture. In the current environment of
high demand and Petromont
partnerships. The second quarter of 2000 reflected lower losses
from Aspell, resulting from a cost-savings program completedlimited supply, many oil companies, including
those serviced by UOP, have deferred catalyst replacement and
technology upgrade projects in the beginning of 2000.order to keep refinery capacity
running.
Operating profit for the quarter and six month periodsnine months ended JuneSeptember 30, 2000
includes a $12 million gain on shares received and sold in
connection with the demutalizationdemutualization of Met Life, a provider of
certain employee benefit programs. Operating profit for the
quarterthree and sixnine month periodperiods ended JuneSeptember 30, 1999 includes
a $12$38 million and $50 million, respectively, in net gaingains from
a litigation settlement.settlements.
Outlook - Specialties & Intermediates
- -------------------------------------
Looking ahead tointo the thirdfourth quarter, it is anticipatedthe corporation
anticipates that, the
S&I segment willalthough raw material costs may remain high,
operating profit should benefit from increasesmodest improvement in
average selling pricesvariable margins for a number of specialty and volumes, somewhat offset by continued high purchased material and
energy costs.intermediate
product lines. Partnership income is expected to remain low,
until UOP's customers are ready to begin work on delayed
projects.
-17-
Basic Chemicals & Polymers
- --------------------------
Quarter Ended SixNine Months Ended
Millions of dollars, JuneSept. 30, JuneSept. 30, JuneSept. 30, JuneSept. 30,
except as indicated 2000 1999 2000 1999
-------- -------- -------- ------------ ----- ------ ------
Segment revenues $ 655 $436 $1,263 $ 857$614 $522 $1,877 $1,379
Depreciation and amortization 35 33 70 7436 105 110
Partnership income (loss)- 1 (2) 2 -1
Operating profit (loss) 74 (42) 104 (75)(15) (7) 89 (82)
Income (loss) from corporate
investments carried at equity 45 (18) 83 (54)32 12 115 (42)
Unit variable margin (cents/pound) 11.6 4.7 10.5 5.27.5 7.1 9.5 5.8
Fixed cost per pound of products
sold (cents/pound) 6.4 5.9 6.3 5.2 6.2 5.25.4
Capital expenditures 80 115 206 21946 120 252 339
Revenues of the BC&P segment for the secondthird quarter of 2000
increased 17.6 percent over the same quarter of 1999 as thea result
of a 46.014.2 percent increase in average customer selling prices
slightly
offset bycoupled with a 1.72.3 percent declineincrease in customer volume. BC&P
segment revenues for the first halfnine months of 2000 increased 36.1
percent over the same period in the prior year as a result of a
33.2 percent increase in average customer selling prices, partly
offset by a 1.1 percent decline in customer volume. In 2000,
this segment's unit variable margin has benefited from average
customer selling price increases which, until the third quarter,
exceeded the impact of rising raw material and energy costs.
Income from corporate investments carried at equity during the
third quarter of 2000 increased over the same period in 1999 on a 45.1 percent increase in average customer selling prices
and a 2.8 percent decline in customer volume. Unit variable margin
was positively affected by the strong increase in average customer
selling prices, which more than offset the increasing cost of raw
materials and energy. Declines in customer volume for the quarter
and six month comparative periods reflected the reduction in ethylene
oxide/glycol volume, which is now being produced and sold by
EQUATE, the corporation's joint venture in Kuwait.
Income from corporate investments carried at equity
increased substantially from a loss induring the three and six month periods
ended June 30, 1999 to income forfirst nine months of 2000
compared with the same periodsnine months of 2000. This
increase represents better1999. These increases
represent improved performance at EQUATE and Polimeri Europa,
where demandwhich was strong and increasesonly slightly offset by preoperating expenses
associated with the OPTIMAL joint ventures. Although earnings in
average selling
prices were experienced. Additionally, the corporation'schemical industry are being negatively impacted by rising raw
material costs, EQUATE
joint venture benefits from having advantaged raw
material supply contracts. Polimeri Europa's performance in the
year 2000 reflects better industry margins and volumes in Europe,
than in 1999.
Operating profit for the quarter and six month periodnine months ended JuneSeptember 30, 2000
includes a $6 million gain on shares received and sold in
connection with the demutalizationdemutualization of Met Life, a provider of
certain employee benefit programs.
Outlook - Basic Chemicals & Polymers
- ------------------------------------
The corporation anticipates that results forcorporation's performance in the third quarter
will reflect a reduction in average customer selling prices
andnear term is highly
dependent on external variables, such as the continued high cost of raw
materials and energy, which may be partially offset by higheras well as industry operating rates. The
company is anticipating increases in average fourth quarter raw
material and energy costs compared with third quarter levels.
Overall, average BC&P customer volumes. Income
from corporate investments carried at equityselling prices in the fourth quarter
are expectedlikely to be lower than secondin the third quarter, 2000 levels.despite price
increases in selected products. Depreciation for the BC&P segment
will increase due to the start-up of the olefins and polyethylene
units in Canada. Equity company results will likely decline from
third quarter, primarily because of weakness at Polimeri Europa, as
well as increased preoperating expenses associated with the
Malaysian joint venture projects.
-18-
Environmental
-
-------------
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, 1999. 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 10 through 12 of this report on
Form 10-Q.
Accounting Changes
- ------------------
Effective January 1, 1999, the corporation adopted the provisions
of the American Institute of Certified Public Accountants'
Statement of Position ("SOP")(SOP) 98-5, "Reporting on the Costs of Start-UpStart-
Up Activities." This SOP requires the expensing of certain costs,
such as preoperating expenses and organizational costs associated
with an entity's start-up activities. In accordance with this
SOP's provisions, on January 1, 1999, the corporation recognized a
charge of $27 million ($20 million after-tax) as a cumulative
effect of change in accounting principle, the majority of which
represented formation costs associated with the corporation's joint
ventures.
In 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("Statement")(Statement) No. 133,
"Accounting for Derivative Instruments and Hedging Activities."
It requires that an entity recognize all derivative instruments
as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Changes
in the fair value of those derivatives will be reported in
earnings or accumulated other comprehensive loss, depending on
the uses of the derivatives and whether they qualify for hedge
accounting. This Statement, as amended by Statement No. 137,
"Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133," and
Statement No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities - an amendment of
FASB Statement No. 133," is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. TheDue to the
corporation's limited use of financial instruments to manage its
exposure to market risks, primarily related only to changes in
foreign currency exchange rates, the corporation is
currently evaluatingdoes not expect
the effectadoption of Statement No. 133 willon January 1, 2001 to have a
material effect on itsthe corporation's financial position andor
results of operations in the period
of adoption.operations.
In 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB")(SAB) 101, "Revenue Recognition in Financial
Statements," which summarizes the staff's views regarding the
application of generally accepted accounting principles to
selected revenue recognition issues. The corporation is evaluating whetherhas
determined that SAB 101 will cause any change
innot have a significant effect on its
revenue recognition policies and procedures.
Financial Condition - JuneSeptember 30, 2000
- ----------------------------------------------------------------------------
Cash flow from operations for the first sixnine months of 2000 was
$259$380 million, an increasea decrease of $11$39 million from the same period inof
1999. This increasedecline is principally the result of a decrease in
working capital requirements and an increase in income before the
cumulative effect of change in accounting principle, partly offset by a
decrease in net noncash charges to net income, principally resultingpartially offset by a
reduction in working capital requirements. Decreases in noncash
charges to net income primarily resulted from increasesan increase in
-19-
undistributed earnings of the corporation's joint ventures and thea
reduction in pension expense.
Cash flow used for investing for the nine months ended September
30, 2000 totaled $422$514 million, a decrease of $12$117 million from
$434$631 million in the comparable period of 1999. This decrease is
principally due to a decreasedecline in capital expenditures and an
increase in the proceeds received from the sale of available-for-saleavailable-for-
sale securities partially offset by an increase in -19-
investments,
advances and acquisitions.acquisitions and increased cash used for purchases
of available-for-sale-securities. Funding of major capital
projects in the first halfnine months of 2000 and 1999 included a
new olefins facility, being built jointly with NOVA Chemicals
Corporation, and a polyolefins project, both in Canada. The
increase in investments, advances and acquisitions relates
principally to the corporation's funding of its share of the
cost of the Malaysian joint ventures.venture projects.
At JuneSeptember 30, 2000, the corporation had approximately $217$123
million in commitments related to authorized construction
projects and investments. These commitments are anticipated to
be sourcedmet through operating cash flows.
Cash flow from financing was $180$156 million for the first halfnine
months of 2000, as compared with $178$198 million for the same halfnine
months of 1999. The first halfnine months of 2000 primarily
included cash received for issuances of common stock of $20$25
million and net borrowings of $216$217 million offset by cash paid
for dividends of $61$91 million. The first halfnine months of 1999
included net proceeds of $250 million from the April issuance of
6.70 percent Public Notes, common stock repurchases of
$50 million, cash dividends totaling $60$90 million and net
repayments ofincreases in debt, excluding the April 1999 issuance of 6.70
percent Public Notes, of $3$36 million.
The corporation's ratio of debt to total capital was
50.350.5 percent at JuneSeptember 30, 2000 as compared with 49.9 percent
at December 31, 1999. At JuneSeptember 30, 2000 there were no
borrowings outstanding under the existing major bank credit
agreement aggregating $1 billion.
-20-
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings
-----------------
See Note 6 to the corporation's consolidated financial statements
on pages 10 through 12 of this report on Form 10-Q.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
(c) On May 16,October 5, 2000, the corporation issued 662 shareswas served with an
administrative Complaint and Notice of Union Carbide Corporation common stock to a participantOpportunity for Hearing
(Complaint) by the United States Environmental Protection Agency,
Region 6, alleging violations of reporting requirements under
the Union Carbide Non-Employee Director's Compensation
Deferral Plan pursuant to the termsSection 112 of the planFederal Clean Air Act at the corporation's Taft
facility in reliance
on Section 4(2)Hahnville, Louisiana. The Complaint seeks civil
penalties of the Securities Act of 1933.$159,840.00.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits.
The following exhibit is filed as part of this report:
27 Financial Data Schedule
(b) The corporation filed the following current reports on Form
8-K for the threenine months ended JuneSeptember 30, 2000:
1. Form 8-K dated April 26,July 24, 2000, contained a Letter Agreement,
with reference to the Agreement and Plan of Merger, dated as
of August 3, 1999, among Union Carbide Corporation, a New
York corporation, The Dow Chemical Company, a Delaware
corporation, and Transition Sub, Inc., a Delaware
corporation.
2. Form 8-K dated July 31, 2000, contained the corporation's
press release dated April 26, 2000.
2. Form 8-K dated May 1, 2000, contained the corporation's
press release dated May 1,July 31, 2000.
3. Form 8-K dated June 14,September 27, 2000, contained a joint press
release issued byLetter
Agreement, dated September 27, 2000, with reference to the
corporationAgreement and Plan of Merger, dated as of August 3, 1999,
among Union Carbide Corporation, a New York Corporation,
The Dow Chemical Company, dated June 14, 2000.a Delaware Corporation, and
Transition Sub, Inc., a Delaware Corporation.
-21-
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: August 4,November 3, 2000 By: /s/John K. Wulff
--------------
JOHN K. WULFF
Vice-President, Chief
Financial Officer and
Controller
-22-
EXHIBIT INDEX
-------------
Exhibit Page
No. Exhibit No.
- ------- --------------------------------------------- -----
27 Financial Data Schedule 24
-23-
EXHIBIT 27