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, 2005 and 2004
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 18 pages, numbered
sequentially, including this cover page. The exhibit index is on page 17.
Item 4. REQUIRED INFORMATION
Page
----
Report of Independent Registered Public Accounting Firm 3
Financial Statements
Statements of Net Assets Available for Benefits
as of December 31, 2005 and 2004 4
Statements of Changes in Net Assets Available for Benefits
for the years ended December 31, 2005 and 2004 5
Notes to Financial Statements 6-13
Supplementary Information
Schedule H, Line 4i - Schedule of Assets Held for
Investment Purposes as of December 31, 2005 14
Schedule H, Line 4j - Schedule of 5% Reportable Transactions
for the year ended December 31, 2005 15
2
Report of Independent Registered Public Accounting Firm
To Members and Plan Administrator of
Cytec Employees' Savings and Profit Sharing Plan
We have audited the accompanying statements of net assets available for
benefits of Cytec Employees' Savings and Profit Sharing Plan (the "Plan") as of
December 31, 2005 and 2004, 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 audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to
perform an audit of the Plan's internal control over financial reporting. An
audit includes consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Plan's internal control over financial reporting. Accordingly, we express no
such opinion. 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 Cytec
Employees' Savings and Profit Sharing Plan as of December 31, 2005 and 2004, 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, 2005 and 5% reportable
transactions for the year then ended are presented for the purpose of additional
analysis and are not a required part 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. The supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in the audit 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.
AMPER, POLITZINER & MATTIA, P.C.
June 22, 2006
Bridgewater, New Jersey
3
CYTEC EMPLOYEES' SAVINGS AND PROFIT SHARING PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
As of
December 31,
-----------------------------
2005 2004
------------ ------------
Investments, at Fair Value $460,520,139 $442,759,566
Loans to Members 6,090,205 5,932,239
Receivables:
Members' Contributions 1,500,000 1,406,450
Company Contributions 4,557,136 9,428,886
------------ ------------
Total Receivables 6,057,136 10,835,336
------------ ------------
Total Net Assets Available for Benefits $472,667,480 $459,527,141
============ ============
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,
-----------------------------
2005 2004
------------ ------------
Additions:
Member Contributions $ 18,869,328 $ 16,663,777
Company Contributions 11,610,795 15,743,088
Rollover Contributions from Members 4,322,747 477,987
Interest on Loans to Members 307,843 298,880
Interest and Dividends 12,212,788 9,415,906
Net (Depreciation)/Appreciation
in Fair Value of Investments (4,417,187) 51,420,438
------------ ------------
Total additions 42,906,314 94,020,076
Deduction:
Benefit Payments to Members 29,765,975 29,274,419
------------ ------------
Net increase 13,140,339 64,745,657
Net Assets Available for Benefits:
Beginning of Year 459,527,141 394,781,484
------------ ------------
End of Year $472,667,480 $459,527,141
============ ============
The accompanying Notes are an integral part of these statements.
5
CYTEC EMPLOYEES' SAVINGS AND PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2005 and 2004
(1) Summary of Significant 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.
Actual results could materially differ from those estimates.
(b) Investment Valuation and Income Recognition
-------------------------------------------
Investments are stated at fair value. Shares of mutual funds are valued at
the quoted net asset value of shares held 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 common stock owned by the Cytec Stock Fund
plus 0.23% and 0.44% as of December 31, 2005 and 2004, respectively, of
cash invested in money market fund assets). 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 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 withdrawals would cause payment 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.
In December 2005, the Financial Accounting Standards Board ("FASB")
approved a FASB Staff Position ("FSP") that addresses the application of
contract value accounting for benefit-responsive investment contracts, such
as the ones underlying the Interest Income Fund. This FSP will require the
presentation of both the fair value and contract value of
benefit-responsive investment contracts in the Plan's financial statements,
and change the footnote disclosure of such investment contracts. The FSP
will be effective for years ending after December 15, 2006. The adoption of
the FSP is not expected to have a material impact on the Plan's financial
statements.
6
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.
(2) Plan Description
----------------
(a) Organization
------------
The Cytec Employees' Savings and Profit Sharing Plan (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, refer to the
Summary Plan Description and Plan Document.
(b) Members' Contributions
----------------------
Participating employees ("Members") may contribute to the Plan after the
first of the month following their one month anniversary (as defined in the
Plan). Contributions are made through payroll deductions (subject to IRS
limitations) which may range from 1% to 50% (1% to 25% for 2004) of such
Member's earnings (as defined), on a before-tax basis, an after-tax basis
or a combination thereof. Members who are at least age 50 or older during a
Plan year may make an additional "catch-up contribution" equal to a
specified dollar amount on a before tax basis. An employee, who is covered
by a collective bargaining agreement which allows for participation in the
Plan, may be eligible to become a Member.
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 Members. If a Member
has been a participant in a plan subject to the provisions of Section 403
(b), 457 or 401(a) of the Internal Revenue Code of 1986, as amended, such
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
---------------------
To be eligible for a Company matching contribution, a Member must have
completed one year of service, as defined in the Plan.
Matching contributions made by the Company are equal to 100% of such
Members' contributions up to the first 3% of the Members' earnings, and 50%
of Members' contributions up to the next 2% of the Members' earnings.
For purposes of employee contributions and matched contributions, member
earnings are defined by the Plan.
In addition to matching contributions, at the discretion of the Company,
the Company may make a profit sharing contribution equal to a percentage of
each Member's earnings and the percentage is determined by a defined
formula based on the percentage growth in the Company's earnings per share.
To be eligible for a profit sharing contribution, the Member must have been
an active employee on December 31 of the respective Plan year and completed
at least one year of service. Profit sharing contributions of $3,904,828
and $8,822,067 were made in 2005 and 2004, respectively. The Company can
also make an additional discretionary profit sharing contribution to
Members who are employed on December 31 of the respective Plan year and who
have completed at least one year of service, generally excluding those
Members who are corporate officers. The additional discretionary profit
sharing contribution is allocated based on each such Members' earnings to
the earnings of all such Members. No such additional discretionary profit
sharing contributions were made in 2005 or 2004. Profit sharing
contributions are recorded by the Plan in the year such contributions are
earned, and are credited to the accounts of Members in the early part of
the following year. For purposes of each profit sharing contribution,
member earnings are the annualized base pay on September 1 in the year for
which the contribution is being made.
All Company matching contributions for Members are invested in the Cytec
Stock Fund, which invests in the common stock of Cytec Industries Inc.
Profit sharing contributions are invested in the Interest Income Fund,
unless specified differently by the Member, (participant directed).
The Plan was amended effective May 4, 2004 to designate the portion of the
Plan invested in the Cytec Stock Fund as of May 3, 2004, and all subsequent
contributions made thereto, as an employee stock ownership plan ("ESOP").
The portion of the Members account invested in the Cytec Stock Fund plus
all contributions made thereafter are held in the ESOP Account ("ESOP
Account"). Prior to May 4, 2004, a Member who had attained age 55 could
only elect to transfer up to 20% of the number of shares of Company Stock
credited to his matching account to any other Funds offered under the Plan.
Effective May 4, 2004, a Member who has attained the age of 55 may elect to
transfer up to 25% of the number of shares of Company Stock credited to his
ESOP Account to any other fund offered by the Plan. Each year thereafter,
the Member may annually transfer an additional 25% of the number of shares
of Company Stock credited to his ESOP Account to any other Funds offered
under the Plan. If a Member who is eligible to make this diversification
election decides not to transfer, or to transfer less than the maximum
percentage available for transfer in any particular calendar year, the
amount which the Member can transfer in the following calendar year shall
be increased by the percentage of the transfer foregone in the previous
year. Notwithstanding the foregoing, a Member who attains age 60 may elect
to transfer 100% of the number of shares of Company Stock in his ESOP
8
Account to one or more other funds. Prior to May 4, 2004, a Member who had
attained age 62 could elect to transfer 100% of the value in his matching
account to one or more other funds. Members have the option to re-invest
cash dividends on ESOP assets or to have the cash dividends distributed. If
no election is made, cash dividends are re-invested.
(d) Rollover Contributions
----------------------
On February 28, 2005, the Company completed the acquisition of the Surface
Specialties business ("Surface Specialties") of UCB SA ("UCB"). Eligible
former Surface Specialties employees had the option to rollover their
account balances with UCB's retirement savings plan and participate in the
Company's Plan. In 2005, $4,322,747 rollover contributions were made,
$3,140,547 of which were attributable to the rollover contributions made by
former Surface Specialties employees. In 2004, total rollover contributions
were $477,987.
(e) Vesting
-------
All units representing employee contributions, Company match and profit
sharing contributions, and earnings or losses thereon are fully vested at
all times.
(f) 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. A Member can make hardship
withdrawals of employee before-tax contributions which will preclude the
Member from making additional employee before-tax contributions to the Plan
for a six-month period. Employee before-tax contributions and matching
contributions can be withdrawn after attainment of age 59 1/1/2. Company
matching contributions made before January 1, 2001 and employee after-tax
contributions can also be withdrawn.
(g) Benefit Payments
----------------
A Member's account balance under the Plan may be distributed in any one of
two ways: lump-sum distribution, or in monthly installments over a period
of 60, 120, 180, 240, 300, or 360 months, as elected (subject to limits
imposed by the Internal Revenue Code). Prior to September 1, 2004 a Member
could also elect to take a distribution as a single life annuity or 50%
joint and survivor annuity.
Minimum distributions are required to begin by April 1 of the calendar year
following the later of:
o The calendar year in which the Member attains 70 1/2 years of age; or
o The calendar year in which the Member terminates employment from the
Company.
9
(h) Loan Provisions
---------------
An eligible Member may borrow up to fifty percent of the value of his
before-tax and after-tax account balance, 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 2005, the applicable loan
rates ranged from 4.00% to 10.50% and in 2004, the applicable loan rates
ranged from 4.75% to 10.50%. No more than one loan from the Plan to a
Member shall be permitted at any time. All principal and interest payments
made by the Member are credited back to the Member's account.
(3) Fund Management
---------------
Under the terms of a trust agreement 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).
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) Party-in-Interest Transactions
------------------------------
The Plan invests in mutual funds managed by an affiliate of Vanguard
Fiduciary Trust Company. Vanguard Fiduciary Trust Company is a trustee and
thus transactions qualify as party-in-interest transactions.
(5) Non-Participant Directed Funds
------------------------------
All funds are Member directed with the exception of Cytec matching
contributions which are solely invested in, and remain in, the Cytec Stock
Fund; provided, however, those Members who are at least age 55 may elect an
investment change with regards to their ESOP account (which includes all
matching contributions), subject to certain restrictions (see Note 2c).
Additionally, profit sharing contributions are invested in a Member's
Interest Income Fund in the event that Member has not specified into which
fund the contribution should be directed.
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,
-----------------------------
2005 2004
------------ ------------
Cytec Stock Fund $67,090,611 $68,231,598
10
Years Ended December 31,
-----------------------------
2005 2004
------------ ------------
Balance at Beginning of Year $68,231,598 $48,878,544
Changes in Net Assets Available for Benefits:
Contributions 7,660,682 6,785,379
Net (Depreciation) Appreciation (4,904,467) 17,341,179
Benefits Paid to Participants (3,382,263) (3,178,656)
Transfer to Participant Directed Investments (514,939) (1,594,848)
------------ ------------
Balance at End of Year $67,090,611 $68,231,598
============ ============
(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.
(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 Plan has been amended since receiving the
determination letter, however 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, which exceed 5% of net assets available for Plan
benefits, consisted of the following at December 31:
2005 2004
------------ ------------
Cytec Stock Fund* $136,132,263 $138,626,178
Interest Income Fund 128,160,230 122,456,493
Vanguard Balanced Index Fund 31,995,288 30,920,927
Vanguard 500 Index Fund 79,001,375 77,901,918
Vanguard Explorer Fund 24,692,561 22,606,224
* 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 at the
discretion of Vanguard. The Interest Income Fund's average yield was 4.15%
and 4.09% for 2005 and 2004, respectively. The range of crediting interest
rates was 3.42% to 7.13% and 1.93% to 5.41% for 2005 and 2004,
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-%.
Investments in the Interest Income Fund at December 31, 2005 and 2004 were:
2005 2004
------------ ------------
AIG Financial -- $10,615,522
IXIS (formerly CDC Capital) -- 2,500,855
Rabobank -- 4,336,234
UBS AG -- 19,699,330
Vanguard Federal Money Market 144,165 2,829,829
Vanguard Retirement Savings Trust 128,016,065 82,474,723
------------ ------------
$128,160,230 $122,456,493
============ ============
(c) Net (Depreciation) Appreciation in Fair Value of Investments
------------------------------------------------------------
During 2005 and 2004, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year),
(depreciated) appreciated in value as follows:
2005 2004
------------ ------------
Cytec Stock Fund $(10,069,717) $35,739,123
Mutual Funds 5,652,530 15,681,315
------------ ------------
$ (4,417,187) $51,420,438
============ ============
12
(11) Mutual Fund Fees
----------------
Underlying investments in mutual funds are subject to sales charges in the
form of front-end loads, back-end loads or 12b-1 fees, which are allowable
under Section 12b-1 of the Investment Company Act of 1940 and which may be
deducted annually to pay marketing and distribution costs of mutual funds.
These fees are deducted prior to the allocation of the Plan's investment
earnings activity and thus not separately identifiable as an expense.
13
CYTEC EMPLOYEES' SAVINGS AND PROFIT SHARING PLAN
Schedule H, Line 4 (i)
Schedule of Assets Held for Investment Purposes
As of December 31, 2005
Description of
--------------
Identity of issuer, borrower, lessor, or similar party investment Cost Fair Value
------------------------------------------------------ ---------- ---- ----------
Vanguard 500 Index Fund* Mutual fund *** $79,001,375
Vanguard Balanced Index Fund* Mutual fund *** 31,995,288
Vanguard Explorer Fund* Mutual fund *** 24,692,561
Vanguard International Growth Fund* Mutual fund *** 14,093,029
Vanguard LifeStrategy Conservative Growth Fund* Mutual fund *** 7,473,676
Vanguard LifeStrategy Growth Fund* Mutual fund *** 17,302,552
Vanguard Prime Money Market* Money market fund *** 35,959
Vanguard PRIMECAP Fund* Mutual fund *** 14,904,322
Vanguard Total Bond Market Index Fund* Mutual fund *** 6,728,884
Cytec Stock Fund**** $82,490,659 136,132,263
Loan Fund** Participant loans *** 6,090,205
Interest Income Fund* Unallocated insurance ***
contract 128,160,230
------------
$466,610,344
============
* Party-in-interest
** Rates ranged from 4.00% to 10.50% for loans outstanding during 2005.
*** Cost of participant-directed investments is not required.
**** Party-in-interest and includes both participant and non-participant
directed funds.
See Accompanying Report of Independent Registered Public Accounting Firm
14
CYTEC EMPLOYEES' SAVINGS AND PROFIT SHARING PLAN
Schedule H, Line 4 (j) Schedule of 5% Reportable Transactions
For the Year Ended December 31, 2005
Identity of Description Purchase Selling Cost of Net Gain
Party Involved of Assets Price Price Assets or (Loss)
-------------- --------- ----- ----- ------ ---------
The Vanguard Group Cytec Stock Fund $33,349,191 N/A N/A N/A
The Vanguard Group Cytec Stock Fund N/A $25,773,388 $21,457,833 $4,315,555
See Accompanying Report of Independent Registered Public Accounting Firm
15
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 26, 2006
16
EXHIBIT INDEX
-------------
23.1 Consent of Amper, Politziner & Mattia, P.C.
17