UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the fiscal year ended December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 1-12372
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
Cytec Employees' Savings and Profit Sharing Plan.
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Cytec Industries Inc.
Five Garret Mountain Plaza
West Paterson, New Jersey 07424
This Annual Report, including exhibits, contains 19 pages, numbered
sequentially, including this cover page. The exhibit index is on page 18.
Item 4. REQUIRED INFORMATION
Financial Statements
Page
Report of Independent Registered Public Accounting Firm 3
Financial Statements:
Statements of Net Assets Available for Benefits
as of December 31, 2003 and 2002 4
Statements of Changes in Net Assets Available for Benefits
for the years ended December 31, 2003 and 2002 5
Notes to Financial Statements 6
Supplemental Schedules:
Schedule H, Line 4 (i) -Schedule of Assets Held for Investment Purposes as of 15
December 31, 2003
Schedule H, Line 4 (j) -Schedule of 5% Reportable Transactions for the year ended 16
December 31, 2003
2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Plan Administrator
Cytec Employees' Savings and Profit Sharing Plan
We have audited the accompanying statements of net assets available for benefits
of the Cytec Employees' Savings and Profit Sharing Plan as of December 31, 2003
and 2002 and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Cytec
Employees' Savings and Profit Sharing Plan as of December 31, 2003 and 2002, and
the changes in net assets available for benefits for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes as of December 31, 2003 and 5% reportable transactions
for the year ended December 31, 2003 are presented for the purpose of additional
analysis and are not required parts of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of the
Plan's management. These supplemental schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
Grant Thornton LLP
Edison, New Jersey
June 15, 2004
3
CYTEC EMPLOYEES' SAVINGS AND PROFIT SHARING PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
As of
December 31,
------------
2003 2002
---- ----
Investments, at Fair Value $382,422,930 $293,011,555
Loans to Members 5,458,943 4,573,196
Receivables:
Members' Contributions 1,302,491 1,133,412
Company Contributions 5,597,120 5,413,998
---------- ---------
Total Receivables 6,899,611 6,547,410
Total Net Assets Available for Benefits $394,781,484 $304,132,161
============ ============
The accompanying Notes are an integral part of these statements.
4
CYTEC EMPLOYEES' SAVINGS AND PROFIT SHARING PLAN
STATEMENTS OF CHANGES IN NET ASSETS
AVAILABLE FOR BENEFITS
Years Ended December 31,
------------------------
2003 2002
Additions: ---- ----
Member Contributions $ 15,406,456 $ 14,712,598
Company Contributions 11,137,357 10,696,101
Rollover Contributions from Members 659,633 715,019
Asset Transfer in from members in the
Avecia Investments Ltd. Plan 15,573,080 -
Interest on Loans to Members 307,120 363,788
Interest and Dividends 7,613,342 7,844,722
Net appreciation in Fair Value of Investments 62,427,372 -
Miscellaneous 214 8,027
----------- ----------
Total additions 113,124,574 34,340,255
Deductions:
Net depreciation in Fair Value of Investments - 24,944,737
Benefit Payments to Members 22,475,251 24,139,349
----------- ----------
Total deductions 22,475,251 49,084,086
Net increase (decrease) 90,649,323 (14,743,831)
Net Assets Available for Benefits:
Beginning of Year 304,132,161 318,875,992
----------- ----------
End of Year $394,781,484 $ 304,132,161
============ ===========
The accompanying Notes are an integral part of these statements.
5
CYTEC EMPLOYEES' SAVINGS AND PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2003 and 2002
(1) Summary of Accounting Policies
------------------------------
(a) Basis of Presentation and Accounting Estimates
----------------------------------------------
The accompanying financial statements have been prepared on the accrual basis in
conformity with accounting principles generally accepted in the United States of
America ("GAAP") as applied to defined contribution plans and in accordance with
the terms of the trust agreement. GAAP requires management to make significant
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as of the date
of the financial statements and the reported amounts of additions and deductions
during the reporting periods. These significant estimates include the market
values of investments. Actual results could materially differ from those
estimates.
(b) Investment Valuation and Income Recognition
-------------------------------------------
The Plan's investments are stated at fair value. Shares of mutual funds are
valued at the quoted net asset value of shares held by the Plan at year-end. The
Cytec stock fund is valued at its year-end unit closing price (comprised of the
year-end market price of shares of Cytec stock owned by the Cytec Stock Fund
plus 0.71% of cash invested in money market fund assets). Participant loans are
valued at cost which approximates fair value.
The contracts underlying the Interest Income Fund are valued at fair value,
which approximates contract value. Contract value represents contributions made
plus interest accrued at the respective contract rate, less withdrawals. The
contracts are nontransferable, but provide for benefit responsive withdrawals by
Plan members in accordance with SOP No. 94-4, Reporting of Investment Contracts
Held by Health and Welfare Plans and Defined Contribution Pension Plans. In
determining fair value, the Board of Directors of Vanguard Fiduciary Trust
Company considers such factors as the benefit-responsiveness of the investment
contracts, the ability of the parties to perform in accordance with the terms of
the contracts, and the likelihood that plan directed withdrawals would cause
payment to plan members to be at amounts other than contract value. There are no
limitations to liquidity guarantees and no valuation reserves are being recorded
to adjust contract amounts.
Purchases and sales of investments are recorded on a trade-date basis. Interest
income is accrued when earned. Dividend income is recorded on the ex-dividend
date. Capital gain distributions are included in dividend income.
(c) Payment of Benefits
-------------------
Benefits are recorded when paid.
6
(2) Plan Description
----------------
(a) Organization
------------
The Plan is a defined contribution plan and was established effective January 1,
1994 for the benefit of employees of Cytec Industries Inc. ("Cytec" or "the
Company") and employees of its participating subsidiaries. The following is some
general information regarding the Plan:
The purpose of the Plan is to provide eligible employees with the opportunity to
accumulate personal savings and to share in the growth and ownership of Cytec
through receipt of profit sharing contributions and the allocations of Cytec
common stock. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974, (as amended).
For a more complete description of the Plan provisions, participants should
refer to the Summary Plan Description and Plan Document.
(b) Members' Contributions
----------------------
Participating members may contribute to the Plan after the first of the month
following their one month anniversary (as defined in the plan), through payroll
deductions, 1% to 25% (subject to IRS limitations) of such member's earnings (as
defined), on a before-tax basis, an after-tax basis or a combination thereof.
Member contributions may be invested in (i) the Interest Income Fund, (ii)
Vanguard International Growth Fund (of the Vanguard World Fund), (iii) Vanguard
LifeStrategy Growth Fund (of the Vanguard STAR Fund), (iv) Vanguard LifeStrategy
Conservative Growth Fund (of the Vanguard STAR Fund), (v) Vanguard Explorer
Fund, (vi) Vanguard Balanced Index Fund, (vii) the Vanguard 500 Index Fund,
(viii) the Cytec Stock Fund, (ix) the Vanguard Total Bond Market Index Fund, and
(x) the Vanguard PRIMECAP Fund. The VMMR Prime Portfolio Fund functions as a
holding mechanism for forfeitures or other items not yet offset by future
sponsor contributions.
Members may elect to make before-tax contributions which defers federal income
taxes (and, generally, similar local and/or state income taxes) on their
contributions (subject to IRS limitations) until the withdrawal or distribution
of those contributions from the Plan.
The Plan accepts eligible rollover contributions from eligible members. If a
member has been a participant in a plan which meets the requirements of Section
401 of the Internal Revenue Code, that member may, within sixty days of
receiving a distribution from that previous employer's plan, transfer his or her
eligible account balance into the Plan without tax implications.
7
(c) Company Contributions
---------------------
Prior to January 1, 2001, matching contributions were made by the Company in
amounts equal to 75% of most members' contributions of the first 4% of the
member's earnings, as defined, ("Matched Contributions"). Beginning January
2001, matching contributions made by the Company are equal to 100% of most
salaried members' contributions up to the first 3% of the member's earnings, and
50% of members' contributions up to the next 2% of the member's earnings. To be
eligible for a Company matching contribution, a Plan member must have completed
one year of service, as defined in the plan. Union members continue to receive
matching contribution under the pre-January 1, 2001 formula pursuant to the
collectively bargained agreements. For a member's contribution exceeding the
aforementioned limits ("Unmatched Contributions"), there are no employer
contributions. Plan eligible compensation for all employees, for the purposes of
employee contributions and matched contributions includes "all pay" as defined
by the IRS.
In addition to matching contributions, if the Company's fully diluted earnings
per share meets or exceeds a defined formula, the Company may make an additional
profit sharing contribution. To be eligible for a Company profit sharing
contribution, a Plan member must have been an active employee on December 31 of
the respective year and have completed at least one year of service. Profit
sharing contributions of $5,086,722 and $4,970,721 were made in 2003 and 2002,
respectively. Profit sharing contributions are recorded by the Plan in the year
such contributions are earned, and are credited to the accounts of eligible
members during the early part of the following year. Eligible pay for profit
sharing purposes is the annualized base pay on September 1st in the year for
which the contribution is being made.
All Company matching contributions for plan participants are invested in the
Cytec Stock Fund, which invests in Cytec Industries Inc. common stock. Profit
sharing contributions are invested in the Interest Income Fund, unless specified
differently by the member (participant directed).
Members who are at least age 55, can reallocate Company matching contributions
invested in the Cytec Stock Fund at a cumulative rate of 20% per year to any
other investment option offered under the Plan. Additionally, members who are at
least age 62 and have five years of service, may reallocate up to 100% of
Company matching contributions invested in the Cytec Stock Fund.
8
(d) Vesting
-------
All units representing employee contributions, Company match and profit sharing
contributions, and earnings or losses thereon are fully vested at all times.
(e) Withdrawals
-----------
During employment, a member may make withdrawals in cash (or common stock of the
Company in the case of withdrawals from the Cytec Stock Fund) of amounts
applicable to employee and employer contributions and earnings or losses
thereon, subject to certain restrictions. Employer contributions made prior to
January 1, 2001 may not be withdrawn earlier than 24 months after being
contributed. Withdrawals of employee before-tax contributions preclude the
member from making contributions to the Plan or from receiving further normal
employer contributions under the Plan for various periods of time, as defined in
the Plan, unless the participant has attained age 59 1/1/2. Employer matching
contributions earned on or after January 1, 2001 are no longer eligible to be
withdrawn unless the member has attained age 59 1/2.
(f) Benefit Payments
-----------------
Upon termination of employment, a member's vested values under the Plan may be
distributed in any one of four ways: lump-sum distribution, single life annuity,
joint and survivor annuity, or monthly payments up to 360 months (subject to
limits imposed by the Internal Revenue Code). Upon the death of an active
member, such member's vested value under the Plan can be distributed in any one
of three ways: lump sum distribution, single life annuity, or monthly payments
up to 360 months. Annuity payments and monthly payments commence as soon as
practicable following a request from the participant.
Minimum distributions are required to begin by April 1 of the calendar year
following the later of:
o The calendar year in which the participant attains 70 1/2 years of age; or
o The calendar year in which the participant retires from service with the
Company.
(g) Loan Provisions
---------------
Eligible participants may borrow up to fifty percent of the value of employee
account balances, subject to a minimum of $1,000 and a maximum of $50,000
reduced by the highest loan balance outstanding during the prior twelve months.
Loans for the purchase of a "principal residence" must be repaid in one to
fifteen years, at the member's option. Loans for all other purposes must be
repaid in one to five years, at the member's option. These loans are made at the
prevailing market interest rates equal to prime rate plus one percent. In 2003,
the applicable loan rates ranged from 4.00% to 10.50% and in 2002, the
applicable loan rates ranged from 5.25% to 10.50%. No more than one loan from
the Plan to a participant shall be permitted at any time. All principal and
interest payments made by the employee are credited back to the employee's
account.
9
(3) Fund Management
---------------
Under the terms of a trust agreement dated January 1, 1994, the Plan assets are
held and managed by the Vanguard Fiduciary Trust Company (the "Trustee"), which
has full discretionary power over investments in the Funds subject to the
limitations thereon imposed by the investment objectives of the various funds
and the provisions of the Employee Retirement Income Security Act of 1974, (as
amended). All transactions qualify as party-in-interest transactions. Fees for
the administrative expenses are borne by the Company, and were not significant
for the years ended December 31, 2003 and 2002.
The Plan Administrator, who is an officer of the Company and the Named
Fiduciary, has full authority to control and manage the operation and
administration of the Plan.
(4) Non-Participant Directed Funds
------------------------------
All funds are participant directed with the exception of Cytec matching
contributions which are solely invested in, and remain in, the Cytec Stock Fund;
provided, however, those participants who are at least age 55 may elect an
investment change with regards to the matching contributions, subject to certain
restrictions (see Note 2c). Additionally, profit sharing contributions are also
directed by the participants. If no fund is specified, the profit sharing
contributions are invested in the Interest Income Fund and can be redirected to
another fund at the discretion of the participant.
Information about the net assets and the significant components of the changes
in net assets relating to the nonparticipant-directed investments is as follows:
December 31,
-----------
2003 2002
---- ----
Cytec Stock Fund $48,878,544 $ 32,855,154
Year Ended
December 31,
------------
2003 2002
---- ----
Balance at Beginning of Year $32,855,154 $ 29,896,210
Changes in Net Assets Available for Benefits:
Contributions 6,042,689 5,717,204
Net Appreciation 13,752,449 456,958
Benefits Paid to Participants (2,716,379) (2,370,728)
Transfer to Participant Directed Investments (1,062,067) (935,348)
Miscellaneous 6,698 90,858
Balance at End of Year $48,878,544 $ 32,855,154
=========== ==========
10
(5) Forfeitures
-----------
Forfeitures of employer contributions are used to reduce employer contributions.
As of December 31, forfeiture account balance amounted to $18,619 and $40,631 in
2003 and 2002, respectively. Forfeitures amounted to $31,982 and $33,227 in 2003
and 2002, respectively.
(6) Plan Expenses
-------------
Administrative expenses of the Plan are currently paid by the Company. However,
the Company has the right to charge future expenses to the Trust. Investment
advisory fees for portfolio management of Vanguard funds are paid directly from
fund earnings. Investment expenses related to the investment contracts in the
Interest Income Fund are deducted from the assets in the fund.
(7) Plan Termination
----------------
The Plan has no termination date and it is the Company's current intention to
continue the Plan indefinitely. However, the Company may terminate, amend,
modify or suspend the Plan at any time. In the event of Plan termination, all
participants will be 100% vested in their accounts, including Company matching
and Profit Sharing contributions and will receive the fair value of their
accounts.
(8) Tax Status of the Plan
----------------------
The Internal Revenue Service issued a determination letter on May 20, 2004 which
stated that the Plan and its underlying Trust qualify under the provisions of
Section 401(a) of the Internal Revenue Code and therefore, are exempt from
federal income taxes under provisions of Section 501(a) of the Internal Revenue
Code. The Company believes that the Plan is designed and is currently being
operated in compliance with applicable requirements of the Internal Revenue
Code.
(9) Risks and Uncertainties
-----------------------
The Plan provides for investments in various investment securities, which in
general, investment securities are exposed to various risks, such as interest
rate, credit, and overall market volatility risks. Due to the level of risk
associated with certain investment securities, it is reasonably possible that
changes in the value of investment securities will occur in the near term and
that such changes could materially affect the amounts reported in the statements
of net assets available for benefits and participant account balances.
11
(10) Investments
-----------
(a) Investment Holdings
-------------------
The Plan's investments, at fair value, consisted of the following at
December 31, 2003 and 2002:
2003 2002
---- ----
Cytec Stock Fund ** $107,305,651* $81,950,844*
Interest Income Fund 116,857,971* 102,658,843*
Vanguard Balanced Index Fund 28,435,974* 23,032,013*
VMMR Prime Portfolio Fund 14,759 12,773
Vanguard 500 Index Fund 72,779,667* 49,705,716*
Vanguard International Growth Fund 7,238,353 4,484,305
Vanguard LifeStrategy Growth Fund 11,980,041 8,793,130
Vanguard LifeStrategy Conservative Growth Fund 6,288,821 4,406,327
Vanguard Explorer Fund 19,013,571 10,567,610
Vanguard PRIMECAP Fund 8,463,271 2,781,455
Vanguard Total Bond Market Index Fund 4,044,851 4,618,539
--------- ---------
$382,422,930 $293,011,555
============ ============
* Denotes investment which exceeds 5% of net assets available for Plan
benefits at the end of the year.
** Includes participant and non-participant directed funds.
(b) Interest Income Fund
--------------------
The Interest Income Fund is intended to provide fixed income with minimal risk.
Contributions to the Interest Income Fund are invested primarily in contracts
with insurance companies and other financial institutions. The Interest Income
Fund's average yield was 4.89% and 5.82% for 2003 and 2002, respectively. The
range of crediting interest rate was 0.76% to 7.57% and 1.22% to 7.57% for 2003
and 2002, respectively. The interest rate paid by the issuer or contract may be
fixed over the life of the contract or adjusted periodically. Contract rates
should not fall below -0-%.
12
Investments in the Interest Income Fund at December 31, 2003 and 2002 were:
2003 2002
---- ----
AIG Financial $10,742,577 $10,146,917
American International Life Assurance 1,824,524 3,649,048
CDC Capital 2,500,758 2,500,703
John Hancock Mutual -- 2,680,499
Life of Virginia -- 2,923,015
Massachusetts Mutual Life Insurance 2,569,499 6,310,495
NatWest Markets 1,320,164 3,718,960
New York Life Insurance 6,453,607 6,000,045
Rabobank 4,109,532 5,560,134
State Street Bank 4,551,070 8,698,279
UBS Warburg 18,824,217 17,825,870
Vanguard Federal Money Market 3,997,635 3,161,901
Vanguard Retirement Savings Trust 59,964,388 29,482,977
------------ ------------
$116,857,971 $102,658,843
============ ============
(c) Net appreciation (depreciation) in Fair Value of Investments
------------------------------------------------------------
During 2003 and 2002, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year), appreciated
(depreciated) in value by $62,427,372 and ($24,944,737) respectively, as
follows:
2003 2002
---- ----
Cytec Stock Fund $32,323,834 $1,720,598
Interest Income Fund (11) (8)
Vanguard Balanced Index Fund 3,997,083 (3,397,815)
Vanguard 500 Index Fund 14,665,360 (15,528,159)
Vanguard International Growth Fund 1,644,217 (1,076,040)
Vanguard LifeStrategy Growth Fund 2,491,009 (1,832,198)
Vanguard LifeStrategy Conservative Growth Fund 618,336 (427,177)
Vanguard Explorer Fund 5,197,673 (3,661,804)
Vanguard PRIMECAP Fund 1,544,139 (830,294)
Vanguard Total Bond Market Index Fund (54,268) 88,160
--------- ------
$62,427,372 ($24,944,737)
=========== ============
(11) Plan Merger
-----------
On September 30, 2003, the Avecia Deferred Compensation Plan transferred
$15,573,080 of participant accounts to the Plan. Certain business units of
Avecia Investments Limited ("Avecia"), the plan sponsor of the Avecia Deferred
Compensation Plan were acquired by the Company in July of 2003. The former
employees of Avecia became eligible to participate in the plan on August 1,
2003.
13
(12) Commitments and Contingencies
-----------------------------
The Plan is subject to claims and suits in the ordinary course of business. As
of December 31, 2003, there are no claims or suits pending.
(13) Subsequent Event
----------------
On May 3, 2004, the management of the Company approved the designation
of a portion of the plan assets as an Employee Stock Ownership Plan (ESOP).
Effective May 4, 2004, all future Savings Plan contributions and all existing
money in the Cytec Stock Fund as of May 3, 2004 will be considered ESOP assets
and employees will have the option to receive future dividends on ESOP assets in
the Cytec Stock Fund in cash.
14
CYTEC EMPLOYEES' SAVINGS AND PROFIT SHARING PLAN
Schedule H, Line 4 (i)
Schedule of Assets Held for Investment Purposes
As of December 31, 2003
Description of
--------------
Identity of issuer, borrower, lessor, or similar party investment Cost Fair Value
------------------------------------------------------ ----------- ---- ----------
Vanguard 500 Index Fund* Mutual fund *** $72,779,667
Vanguard Balanced Index Fund* Mutual fund *** 28,435,974
Vanguard Explorer Fund* Mutual fund *** 19,013,571
Vanguard International Growth Fund* Mutual fund *** 7,238,353
Vanguard LifeStrategy Conservative Growth Fund* Mutual fund *** 6,288,821
Vanguard LifeStrategy Growth Fund* Mutual fund *** 11,980,041
Vanguard Prime Money Market* Money market fund *** 14,759
Vanguard PRIMECAP Fund* Mutual fund *** 8,463,271
Vanguard Total Bond Market Index Fund* Mutual fund *** 4,044,851
Cytec Stock Fund**** $66,608,364 107,305,651
Loan Fund** Participant loans *** 5,458,943
Interest Income Fund* Common collective ***
trust 116,857,971
-----------
$387,881,873
===========
* Party-in-interest
** Rates ranged from 4.00% to 10.50% for loans outstanding during 2003.
*** Cost of participant-directed investments is not required.
**** Party-in-interest and includes both participant and non-participant
directed funds.
15
CYTEC EMPLOYEES' SAVINGS AND PROFIT SHARING PLAN
Schedule H, Line 4 (j) Schedule of 5% Reportable Transactions
For the Year Ended December 31, 2003
Identity of Description Purchase Selling Cost of Net Gain
Party Involved of Assets Price Price Assets or (Loss)
------------------------------ ----------------------- -------------------- ------------------- -------------------- ---------------
The Vanguard Group Cytec Stock Fund 20,411,089 N/A N/A N/A
The Vanguard Group Cytec Stock Fund N/A 27,380,043 22,815,885 4,564,158
16
Signature
---------
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the trustees (or other persons who administer the employee benefit plan)
have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
Cytec Employees' Savings and Profit Sharing Plan
By: /s/ Joseph E. Marosits
---------------------------------------
Joseph E. Marosits
Plan Administrator
June 23, 2004
17
EXHIBIT INDEX
-------------
23.1 Consent of Grant Thornton LLP
18