SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] Annual Report pursuant to Section 15 (d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 2002
OR
[ ] Transition report pursuant to Section 15 (d) of the
Securities Exchange Act of 1934
For the transition period from ________ to _________
Commission file number 0-30270
A. Full title of the Plan and the address of the Plan, if
different from that of the issuer named below:
CROMPTON CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
B. Name of issuer of the securities held pursuant to the Plan
and the address of its principal executive office:
Crompton Corporation
Benson Road
Middlebury, Connecticut 06749
CROMPTON CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Index to Financial Statements
Independent Auditors' Report
Statements of Net Assets Available for Plan Benefits as of
December 31, 2002 and 2001
Statements of Changes in Net Assets Available for Plan Benefits
for the Years Ended December 31, 2002 and 2001
Notes to Financial Statements
Supplemental Schedule:
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
Signature
Exhibit 23 - Consent of KPMG LLP, Independent Auditors
Exhibit 99.1 - Certification of Vice President and Treasurer and
Senior Vice President, Organization & Administration Pursuant to
18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
CROMPTON CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Financial Statements and Supplemental Schedule
December 31, 2002 and 2001
(With Independent Auditors' Report Thereon)
CROMPTON CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
INDEX
Independent Auditors' Report
Statements of Net Assets Available for Plan Benefits as of
December 31, 2002 and 2001
Statements of Changes in Net Assets Available for Plan Benefits
for the Years Ended
December 31, 2002 and 2001
Notes to Financial Statements
Supplemental Schedule:
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
Independent Auditors' Report
The Board of Directors
Crompton Corporation:
We have audited the accompanying statements of net assets available
for plan benefits of the Crompton Corporation Employee Stock
Ownership Plan (the "Plan") as of December 31, 2002 and 2001, and the
related statements of changes in net assets available for plan
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 auditing standards
generally accepted in the United States of America. 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 plan
benefits as of December 31, 2002 and 2001, and the changes in net
assets available for plan 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
schedule of assets (held at end of year) is presented for the purpose
of additional analysis and is not a required part of the basic
financial statements but is 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.
This supplemental schedule is the responsibility of the Plan's
management. The supplemental schedule has been subjected to the
auditing procedures applied in the audits of the basic financial
statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a
whole.
/s/KPMG LLP
Stamford, Connecticut
June 20, 2003
CROMPTON CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 2002 and 2001
2002 2001
Investments, at fair value:
Common stock of Crompton $14,989,723 $24,362,058
Corporation
Fixed Income Fund 12,019,047 12,071,789
Mutual Funds 14,393,489 18,242,752
Contributions receivable from 332,966 333,454
participants
Contribution receivable from 214,614 231,246
Crompton Corporation
Net assets available for plan $41,949,839 $55,241,299
benefits
See accompanying notes to financial statements.
CROMPTON CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Statements of Changes In Net Assets Available for Plan Benefits
December 31, 2002 and 2001
2002 2001
Additions to net assets attributed to:
Interest and dividends $ 793,940 $ 1,426,720
Contributions:
Participant rollovers - 37,881
Participants 4,397,318 5,217,557
Employer 2,906,735 3,378,177
Total additions 8,097,993 10,060,335
Deductions from net assets attributed to:
Net depreciation in fair value of (10,920,025) (5,354,656)
investments
Withdrawals and distributions (10,410,114) (8,150,844)
Administrative expenses (59,314) (36,136)
Total deductions (21,389,453) (13,541,636)
Net decrease (13,291,460) (3,481,301)
Net assets available for plan benefits at
the beginning of the year 55,241,299 58,722,600
Net assets available for plan benefits
at the end of the year $41,949,839 $55,241,299
See accompanying notes to financial statements.
CROMPTON CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements
December 31, 2002 and 2001
1. Basis of Presentation
The accompanying financial statements have been prepared on
the accrual basis of accounting and present the net assets
available for plan benefits and changes in those net assets.
2. Plan Description
The Employee Stock Purchase and Savings Plan was adopted by
the Board of Directors of Crompton Corporation (the
"Company") on January 27, 1976. Effective July 1, 1989, the
Board of Directors amended the Plan to convert it into an
Employee Stock Ownership Plan (the "Plan"). The following
description of the Plan provides only general information.
For complete information see the Plan document. The Plan is
a defined contribution plan and is subject to the provisions
of the Employee Retirement Income Security Act of 1974, as
amended (ERISA).
The Plan is administered by the Employee Benefits Committee
consisting of persons appointed by the Board of Directors of
the Company.
Beginning in 2001, Fidelity Investments(R) (the "Trustee") was
selected by the Company as custodial trustee for a majority
of the Plan assets. Prior to 2001, Fleet Bank was the
custodial trustee of the Plan. The Trustee has custodial
responsibility for a trust fund on behalf of the Plan and
maintains accounting records for all Plan assets.
Eligibility
Employees of participating affiliates of the Company are
eligible to participate upon having worked for at least a
thirty (30) consecutive day period of employment.
Contributions and Vesting
The Plan permits an eligible employee to elect to participate
by authorizing a withholding of an amount equal to 1%, 2%,
3%, 4%, 5% or 6% of compensation as the basic contribution to
the Plan. Contributions by the Company to the Plan are made
at an amount equal to 66 2/3% of each participating
employee's basic employee contribution to the Plan. If
participants are not eligible for any other defined
contribution plan, additional employee contributions in 1%
increments up to 10% of compensation can be made as
supplemental employee contributions. Supplemental employee
contributions are not eligible for matching Company
contributions.
A participant in the Plan is fully vested in his basic,
supplemental and rollover contributions. Employer
contributions vest 100% over a four-year period at a rate of
25% per year of service. Any amounts forfeited under the Plan
are accumulated and used to reduce Company contributions. At
December 31, 2002, forfeited non-vested amounts totaled
$75,740, and at December 2001 forfeited non-vested
accounts totaled $71,433.
Withdrawals/Benefit Payments
Upon termination, death, or retiring, a participant's account
shall be distributed. However, funds can remain in the Plan
after retirement indefinitely with quarterly withdrawals
permitted and as long as funds begin to be distributed after
the participant reaches the age of 70 1/2.
A participant may elect to make one withdrawal of his basic
or supplemental contributions in a 12-month period.
Withdrawal of basic contributions will cause a suspension of
contributions for a three-month period. A participant who is
fully vested and has withdrawn all of his basic and
supplemental contributions may also elect to withdraw all or
part of his employer contributions. Withdrawal of employer
contributions will result in a suspension of contributions
for a six-month period.
The Plan does not allow for participant loans.
Investments Options
The Company's contribution to the Plan is invested in the
Crompton Corporation Common Stock Fund. The Plan provides
for investment of employee contributions in the Crompton
Corporation Stock Fund and among various investment funds
maintained by Fidelity Investments and Fleet Investment
Management.
Each participant is permitted to elect to have his basic
contribution invested in any of the funds in 1% increments.
Fund transfers can be made on a daily basis in a minimum of
1% increments.
3. Summary of Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
of America requires the Plan to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported changes in net assets available for plan benefits
during the reporting period. Actual results could differ
from those estimates.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value except for
the benefit-responsive investment contract, which is valued
at contract-value (Note 5). Quoted market prices are used to
value investments. Shares of mutual funds are valued at the
net asset value of shares held by the Plan at year-end. The
Crompton Corporation Common Stock Fund is valued at its year-
end closing price.
Net appreciation (depreciation) in fair value of investments
includes investments bought and sold and held during the
year. Purchases and sales of securities are recorded on a
trade-date basis. Interest income is recorded on an accrual
basis and dividends are recorded on the ex-dividend date.
Payment of Benefits
Benefits are recorded when paid.
Plan Expenses
Plan expenses may be paid by the Company, however if not paid
by the Company, may be charged to the Plan. The Company
provides administrative and accounting services for the Plan
at no charge.
4. Investments
The Plan's investments that exceeded 5% of net assets
available for plan benefits as of December 31, 2002 and 2001
are as follows:
2002 2001
Crompton Corporation Common $14,989,723 $24,362,058
Stock
Fidelity Blended Income Fund 12,019,047 12,071,789
Fidelity Magellan Fund 3,239,041 4,965,324
Fidelity U.S. Equity Index 2,299,620 2,886,325
Commingled Fund
Fidelity Freedom 2010 2,253,476 2,662,243
During 2002 and 2001, the Plan's investments (including
gains and losses on investments bought and sold, as well as
held during the year) depreciated in value as follows:
2002 2001
Mutual Funds ($4,238,475) ($2,241,222)
Common Stock of Crompton (6,681,550) (3,113,434)
Corporation
($10,920,025) ($5,354,656)
5. Investment Contracts with Insurance Company
The Fidelity Blended Income Fund invests in benefit-
responsive guaranteed investment contracts ("GICs") offered
by major insurance companies and other approved financial
institutions and in certain types of fixed income securities.
These GICs are stated at contract value, as determined by
Fidelity, which approximates fair value. The average yield on
the Company's GICs was 5.18% and 5.93%, respectively, for
2002 and 2001. The crediting interest rate on these GICs was
4.69% and 2.43%, respectively, at December 31, 2002 and 2001.
6. Income Taxes
The Internal Revenue Service ("IRS") has determined and has
informed the Company by a letter dated November 16, 1994,
that the Plan and related trust are designed in accordance
with applicable sections of the Internal Revenue Code
("IRC"). The Plan has been amended since receiving the
determination letter. However, the Plan administrator and
the Plan's tax counsel believe that the Plan is designed and
is currently being operated in compliance with the applicable
requirements of the IRC. The Company received a favorable
tax determination letter effective October 30, 2002, which
stated that the Plan and related trust are designed in
accordance with the applicable sections of the IRC.
7. Party-in-Interest Transactions
In 2002, Fidelity Investments and the Company are parties-in-
interest as defined in Section 3 (14) of ERISA. In 2001,
Fidelity Investments(R), Fleet Bank and the Company are
parties-in-interest as defined in Section 3 (14) of ERISA.
During the years 2002 and 2001, there were no prohibited
party-in-interest transactions.
8. Priorities Upon Termination of the Plan
The Board of Directors of the Company shall have the right
from time to time to add to, modify or amend the Plan, and
the Board of Directors shall have the right to terminate the
Plan. The Board of Directors may also authorize the
inclusion in any contract entered into by the Company with
the union or unions representing employees, or with any group
or groups of employees, of a provision or provisions having
the effect of limiting or foregoing any such rights.
Further, no addition to, modification, amendment or
termination of the Plan shall have the effect of reducing the
entitlement of any participant benefit accrued under the Plan
or of diverting any part of the assets of the Trust Fund for
purposes other than provided in the Plan.
Upon termination of the Plan, or a complete and permanent
discontinuance of contributions of all participants, the
value of each participant account, if not already vested,
shall vest fully and all amounts remaining in all participant
accounts shall be delivered and paid as soon as practicable
in accordance with the Plan Document.
Schedule H, Line 4i
CROMPTON CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Schedule of Assets (Held at End-of-Year)
December 31, 2002
Description of Investment
Identity of Including Maturity Date,
Issue, Rate of Interest, Current
Borrower, Collateral, Par or Maturity Value
Lessor or Value
Similar
Party
* Crompton Common Stock $14,989,723
Corporation
* Fidelity Blended Income Fund 12,019,047
* Fidelity Fidelity Magellan Fund 3,239,041
* Fidelity U.S. Equity Index Commingled 2,299,620
Fund
* Fidelity Fidelity Freedom 2010 2,253,476
* Fidelity Fidelity Growth Company Fund 1,822,733
Dreyfus Dreyfus Small Company Fund 1,188,887
Dreyfus Dreyfus Premium Core Bond 1,119,197
Putnam Putnam Int'l Growth Fund A 1,002,943
Investments
* Fidelity MSIFT Equity Fund 467,983
* Fidelity Fidelity Freedom 2020 226,318
* Fidelity Dodge & Cox Stock 524,500
* Fidelity Fidelity Freedom 2030 69,531
* Fidelity Fidelity Freedom Income 52,034
Dreyfus Dreyfus Founders Discovery A 86,934
* Fidelity Fidelity Freedom 2040 11,182
* Fidelity Fidelity Freedom 2000 29,110
TOTAL INVESTMENTS $41,402,259
* Denotes a party-in-interest to the Plan
See accompanying independent auditors' report
SIGNATURE
The Plan. Pursuant to the requirements of the Securities
and 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.
CROMPTON CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Date: June 20, 2003 By:/s/Peter Barna
Peter Barna
Senior Vice President &
Chief Financial Officer