CYT-9.30.2013-10Q
Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 ____________________________________________
FORM 10-Q
 ____________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013
Commission file number 1-12372
 ____________________________________________
CYTEC INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
____________________________________________ 
Delaware
 
22-3268660
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No).
 
 
Five Garret Mountain Plaza
Woodland Park, New Jersey
 
07424
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code (973) 357-3100
____________________________________________ 
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  ý    No  ¨.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨.
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definition of “accelerated filer, large accelerated filer, and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
ý
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
¨
Small reporting company
¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
There were 35,462,141 shares of common stock outstanding at October 18, 2013.
 


Table of Contents

CYTEC INDUSTRIES INC. AND SUBSIDIARIES
10-Q Table of Contents
 
 
 
Page
 
Item 1.
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
 
 
Item 1.
 
 
 
Item 2.
 
 
 
Item 6.
 
 


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Table of Contents

PART I – FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in millions, except per share amounts)
 
Three Months Ended  
 September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Net sales
$
463.9

 
$
455.4

 
$
1,455.1

 
$
1,237.4

Manufacturing cost of sales
313.3

 
316.8

 
978.6

 
850.6

Selling and technical services
35.3

 
35.6

 
110.7

 
102.3

Research and process development
12.5

 
13.0

 
36.4

 
38.2

Administrative and general
32.3

 
37.2

 
93.4

 
98.6

Amortization of acquisition intangibles
3.6

 
3.4

 
11.1

 
5.1

Asset impairment charge
2.7

 

 
5.6

 

Earnings from operations
64.2

 
49.4

 
219.3

 
142.6

Other expense, net
0.3

 
0.3

 
8.5

 
1.3

Loss on early extinguishment of debt

 

 
39.4

 
0.2

Equity in losses of associated company

 
0.1

 
0.3

 
0.1

Interest expense, net
3.4

 
7.0

 
14.9

 
24.0

Earnings from continuing operations before income taxes
60.5

 
42.0

 
156.2

 
117.0

Income tax provision
16.1

 
7.3

 
40.4

 
45.3

Earnings from continuing operations
44.4

 
34.7

 
115.8

 
71.7

Earnings from operations of discontinued business, net of tax

 
39.7

 
31.6

 
93.4

Loss on sales of discontinued operations, net of tax
(0.6
)
 
(15.5
)
 
(32.9
)
 
(15.5
)
(Loss) earnings from discontinued operations, net of tax
(0.6
)
 
24.2

 
(1.3
)
 
77.9

Net earnings
43.8

 
58.9

 
114.5

 
149.6

Less: Net earnings attributable to noncontrolling interests

 
(0.5
)
 
(0.4
)
 
(1.5
)
Net earnings attributable to Cytec Industries Inc.
$
43.8

 
$
58.4

 
$
114.1

 
$
148.1

Comprehensive income
$
66.5

 
$
89.7

 
$
52.6

 
$
162.4

Less: Comprehensive income attributable to noncontrolling interest

 
(0.6
)
 
(0.2
)
 
(1.3
)
Comprehensive income attributable to Cytec Industries Inc.
$
66.5

 
$
89.1

 
$
52.4

 
$
161.1

Earnings (loss) per share attributable to Cytec Industries Inc.
 
 
 
 
 
 
 
Basic earnings (loss) per common share
 
 
 
 
 
 
 
Continuing operations
$
1.23

 
$
0.75

 
$
2.85

 
$
1.55

Discontinued operations (net of noncontrolling interests)
(0.02
)
 
0.51

 
(0.04
)
 
1.66

 
$
1.21

 
$
1.26

 
$
2.81

 
$
3.21

Diluted earnings (loss) per common share
 
 
 
 
 
 
 
Continuing operations
$
1.20

 
$
0.74

 
$
2.79

 
$
1.53

Discontinued operations (net of noncontrolling interests)
(0.01
)
 
0.50

 
(0.04
)
 
1.63

 
$
1.19

 
$
1.24

 
$
2.75

 
$
3.16

Dividends per common share
$
0.125

 
$
0.125

 
$
0.375

 
$
0.375

See accompanying Notes to Consolidated Financial Statements

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Table of Contents

CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in millions, except per share amounts)
 
September 30,
2013
 
December 31,
2012
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
176.6

 
$
179.3

Trade accounts receivable, less allowance for doubtful accounts of $5.1 and $4.7 in 2013 and 2012, respectively
258.6

 
263.6

Other accounts receivable
71.6

 
39.1

Inventories
281.3

 
269.8

Deferred income taxes
15.7

 
38.4

Other current assets
18.6

 
18.9

Current assets held for sale

 
409.7

Total current assets
822.4

 
1,218.8

Investment in associated companies
1.3

 
1.7

Plants, equipment and facilities, at cost
1,522.9

 
1,310.4

Less: accumulated depreciation
(509.2
)
 
(475.1
)
Net plant investment
1,013.7

 
835.3

Acquisition intangibles, net of accumulated amortization of $54.3 and $43.9 as of September 30, 2013 and December 31, 2012, respectively
162.8

 
183.7

Goodwill
519.0

 
525.3

Deferred income taxes
47.6

 
8.9

Other assets
77.5

 
88.7

Non-current assets held for sale

 
1,061.8

Total assets
$
2,644.3

 
$
3,924.2

Liabilities
 
 
 
Current liabilities
 
 
 
Accounts payable
$
205.8

 
$
176.4

Short-term borrowings

 
3.0

Current maturities of long-term debt
0.2

 
136.1

Accrued expenses
169.1

 
177.4

Income taxes payable
20.1

 
51.4

Deferred income taxes
0.6

 
0.6

Current liabilities held for sale

 
265.9

Total current liabilities
395.8

 
810.8

Long-term debt
716.3

 
567.4

Pension and other postretirement benefit liabilities
188.3

 
275.5

Other noncurrent liabilities
195.2

 
198.3

Deferred income taxes
28.3

 
70.9

Non-current liabilities held for sale

 
198.3

Stockholders’ equity
 
 
 
Preferred stock, 20,000,000 shares authorized; none issued and outstanding

 

Common stock, $.01 par value per share, 150,000,000 shares authorized; issued 49,711,909 in 2013 and 49,618,861 in 2012
0.5

 
0.5

Additional paid-in capital
466.9

 
465.6

Retained earnings
1,517.9

 
1,419.2

Accumulated other comprehensive income
94.0

 
155.7

Treasury stock, at cost, 14,278,697 shares in 2013 and 4,672,700 shares in 2012
(958.9
)
 
(243.3
)
Total Cytec Industries Inc. stockholders’ equity
1,120.4

 
1,797.7

Noncontrolling interests

 
5.3

Total equity
1,120.4

 
1,803.0

Total liabilities and stockholders’ equity
$
2,644.3

 
$
3,924.2

See accompanying Notes to Consolidated Financial Statements

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Table of Contents

CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in millions)
Nine months ended September 30,
2013
 
2012
Cash flows (used in) provided by operating activities
 
 
 
Net earnings
$
114.5

 
$
149.6

(Loss) earnings from discontinued operations, net of tax
(1.3
)
 
77.9

Net earnings from continuing operations
115.8

 
71.7

Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
 
 
 
Depreciation
42.9

 
43.4

Amortization
15.4

 
8.8

Share-based compensation
9.8

 
9.7

Deferred income taxes
(14.8
)
 
(7.3
)
Asset impairment charges
5.6

 

Loss on early extinguishment of debt
39.4

 
0.2

Unrealized loss on derivative instruments
1.6

 
2.9

Other
0.4

 

Changes in operating assets and liabilities (excluding effects of acquisitions and divestitures):
 
 
 
Trade accounts receivable
4.3

 
(18.1
)
Other receivables
7.0

 
7.3

Inventories
(17.0
)
 
(21.3
)
Other assets
9.3

 
(0.9
)
Accounts payable
18.4

 
(9.2
)
Accrued expenses
(3.7
)
 
16.2

Income taxes payable
(49.4
)
 
19.7

Other liabilities
(95.6
)
 
(19.2
)
Net cash provided by operating activities of continuing operations
89.4

 
103.9

Net cash (used in) provided by operating activities of discontinued operations
(107.4
)
 
82.1

Net cash (used in) provided by operating activities
(18.0
)
 
186.0

Cash flows (used in) provided by investing activities:
 
 
 
Additions to plants, equipment and facilities
(217.5
)
 
(84.3
)
Acquisitions of businesses, net of cash received

 
(445.4
)
Net cash used in investing activities of continuing operations
(217.5
)
 
(529.7
)
Net cash provided by investing activities of discontinued operations
1,002.0

 
97.4

Net cash provided by (used in) investing activities
784.5

 
(432.3
)
Cash flows (used in) provided by financing activities:
 
 
 
Proceeds from long-term debt
634.0

 
214.2

Payments on long-term debt
(658.2
)
 
(202.4
)
Change in short-term borrowings, net
2.2

 
2.9

Cash dividends
(17.1
)
 
(20.2
)
Proceeds from the exercise of stock options
21.3

 
19.7

Purchase of treasury stock
(750.1
)
 

Excess tax benefits from share-based payment arrangements
4.5

 
4.6

Other

 
(1.1
)
Net cash (used in) provided by financing activities
(763.4
)
 
17.7

Effect of currency rate changes on cash and cash equivalents
(5.8
)
 
2.3

Decrease in cash and cash equivalents
(2.7
)
 
(226.3
)
Cash and cash equivalents, beginning of period
179.3

 
415.8

Cash and cash equivalents, end of period
$
176.6

 
$
189.5

See accompanying Notes to Consolidated Financial Statements

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Table of Contents

CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Currencies in millions, except per share amounts, unless otherwise indicated)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q and accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim reporting. Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted pursuant to such rules and regulations. Financial statements prepared in accordance with U.S. GAAP require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and other disclosures. In the opinion of management, these condensed consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation of the financial position and the results of our operations and cash flows for the interim periods presented. The results of operations for any interim period are not necessarily indicative of the results of operations for the full year. These condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements contained in the Company’s 2012 Annual Report on Form 10-K, as updated by the Current Report on Form 8-K filed with the SEC on April 18, 2013, related to the Company’s changes in reportable segments. All amounts reported in these financial statements are presented according to the realigned reportable segments, as described in Note 15. Unless indicated otherwise, the terms “Company,” “Cytec,” “we,” “us” and “our” each refer collectively to Cytec Industries Inc. and its subsidiaries.
2. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02. This ASU requires us to present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income–but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. It also requires us to cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP to be reclassified directly to net income in their entirety in the same reporting period). On January 1, 2013, we adopted the provisions of ASU No. 2013-02, which are reflected in these financial statements.

3. CHANGE IN PENSION ACCOUNTING METHOD

We have elected to change our method of accounting for our continuing pension and other postemployment benefit (OPEB) plans to a more preferable method as permitted under U.S. GAAP. The new accounting method, referred to as mark-to-market (MTM), was adopted in the second quarter of 2013, and is retrospectively applied to our financial results for all periods. Our management believes that this change in accounting improves transparency of reporting of its operating results by recognizing the effects of economic and interest rate trends on pension and OPEB plan investments and assumptions in the year these actuarial gains and losses are incurred.
Historically, we have recognized pension and OPEB actuarial gains and losses annually in our Consolidated Balance Sheets as Accumulated Other Comprehensive Income (Loss) as a component of Stockholders' Equity, and then amortized these gains and losses each quarter in our Statements of Income. The expected return on assets component of pension expense has been calculated using a five-year smoothing of asset gains and losses. In addition, the gain or loss component of pension and OPEB expense has historically been based on amortization of actuarial gains and losses that exceed 10 percent of the greater of plan assets or projected benefit obligations over the average future service period of active employees.
Under the new method of accounting, our pension and OPEB costs consist of two elements: 1) ongoing costs recognized quarterly, which are comprised of service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits; and 2) MTM gains and losses recognized annually, in the fourth quarter of each year, resulting from changes in actuarial assumptions and the differences between actual and expected returns on plan assets and discount rates. Any interim remeasurements triggered by a curtailment, settlement, or significant plan changes will be recognized as an MTM adjustment in the quarter in which such remeasurement event occurs. This methodology is preferable under GAAP since it aligns more closely with fair value principles and does not delay the recognition of gains and losses into future periods. The new method has been retrospectively applied to the financial results of all periods presented.

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Table of Contents

Our operating segment results follow internal management reporting, which is used for making operating decisions and assessing performance. Historically, total pension and OPEB costs have been allocated to each segment. In conjunction with the change in accounting principle, the service cost, which represents the benefits earned by active employees during the period, and amortization of prior service costs/credits will continue to be allocated to each business segment. Interest costs, expected return on assets, and the MTM adjustment for actuarial gains and losses will be included in the Corporate and Unallocated segment and not allocated to the business segments. We believe this change in expense allocation will better reflect the underlying operating results of each business and is consistent with management's review of the operating results of our segments.
The cumulative effect of the change in accounting for pension and OPEB plans was a decrease in Retained Earnings as of December 31, 2012 (the most recent measurement date prior to the change) of $222.1, an increase in Accumulated Other Comprehensive Income of $220.8, for a net decrease of $1.3 to total stockholders' equity. Additionally, inventory increased by $2.6, accrued expenses increased by $3.4, current deferred tax assets increased by $0.6, and current assets held for sale decreased by $1.1. See Note 18 “Employee Benefit Plans”.
Unaudited Consolidated Statements of Income
 
Three Months Ended September 30, 2013
 
Previous
Effect of
As
 
Accounting Method
Accounting Change
Reported
Manufacturing cost of sales
$
319.6

$
(6.3
)
$
313.3

Selling and technical services
37.0

(1.7
)
35.3

Research and process development
13.4

(0.9
)
12.5

Administrative and general
33.6

(1.3
)
32.3

Earnings from operations
54.0

10.2

64.2

Earnings from continuing operations before income taxes
50.3

10.2

60.5

Income tax provision
12.6

3.5

16.1

Earnings from continuing operations
37.7

6.7

44.4

Loss from discontinued operations, net of tax
(0.7
)
0.1

(0.6
)
Net earnings
37.0

6.8

43.8

Net earnings attributable to Cytec Industries Inc.
37.0

6.8

43.8

 
 
 
 
Comprehensive income
$
65.8

$
0.7

$
66.5

Comprehensive income attributable to Cytec Industries Inc.
65.8

0.7

66.5

 
 
 
 
Basic earnings (loss) per common share
 
 
 
Continuing operations
$
1.04

$
0.19

$
1.23

Discontinued operations (net of noncontrolling interests)
(0.02
)

(0.02
)
 
$
1.02

$
0.19

$
1.21

 
 
 
 
Diluted earnings (loss) per common share
 
 
 
Continuing operations
$
1.02

$
0.18

$
1.20

Discontinued operations (net of noncontrolling interests)
(0.01
)

(0.01
)
 
$
1.01

$
0.18

$
1.19



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Table of Contents

Unaudited Consolidated Statements of Income
 
Three Months Ended September 30, 2012
 
As Previously
Effect of
 
 
Reported
Accounting Change
Revised
Manufacturing cost of sales
$
320.8

$
(4.0
)
$
316.8

Selling and technical services
36.5

(0.9
)
35.6

Research and process development
13.4

(0.4
)
13.0

Administrative and general
37.9

(0.7
)
37.2

Earnings from operations
43.4

6.0

49.4

Earnings from continuing operations before income taxes
36.0

6.0

42.0

Income tax provision
5.0

2.3

7.3

Earnings from continuing operations
31.0

3.7

34.7

Earnings from discontinued operations, net of tax
22.8

1.4

24.2

Net earnings
53.8

5.1

58.9

Net earnings attributable to Cytec Industries Inc.
53.3

5.1

58.4

 
 
 
 
Comprehensive income
$
89.8

$
(0.1
)
$
89.7

Comprehensive income attributable to Cytec Industries Inc.
89.2

(0.1
)
89.1

 
 
 
 
Basic earnings per common share
 
 
 
Continuing operations
$
0.67

0.08

0.75

Discontinued operations (net of noncontrolling interests)
0.48

0.03

0.51

 
$
1.15

$
0.11

$
1.26

 
 
 
 
Diluted earnings per common share
 
 
 
Continuing operations
$
0.66

0.08

0.74

Discontinued operations (net of noncontrolling interests)
0.47

0.03

0.50

 
$
1.13

$
0.11

$
1.24



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Table of Contents

Unaudited Consolidated Statements of Income
 
Nine Months Ended September 30, 2013
 
Previous
Effect of
As
 
Accounting Method
Accounting Change
Reported
Manufacturing cost of sales
$
996.9

$
(18.3
)
$
978.6

Selling and technical services
115.5

(4.8
)
110.7

Research and process development
38.8

(2.4
)
36.4

Administrative and general
97.0

(3.6
)
93.4

Earnings from operations
190.2

29.1

219.3

Earnings from continuing operations before income taxes
127.1

29.1

156.2

Income tax provision
29.9

10.5

40.4

Earnings from continuing operations
97.2

18.6

115.8

Earnings (loss) from discontinued operations, net of tax
(6.8
)
5.5

(1.3
)
Net earnings
90.4

24.1

114.5

Net earnings attributable to Cytec Industries Inc.
90.0

24.1

114.1

 
 
 
 
Comprehensive income
$
49.1

$
3.5

$
52.6

Comprehensive income attributable to Cytec Industries Inc.
48.9

3.5

52.4

 
 
 
 
Basic earnings (loss) per common share
 
 
 
Continuing operations
$
2.39

$
0.46

$
2.85

Discontinued operations (net of noncontrolling interests)
(0.18
)
0.14

(0.04
)
 
$
2.21

$
0.60

$
2.81

Diluted earnings (loss) per common share
 
 
 
Continuing operations
$
2.35

$
0.44

$
2.79

Discontinued operations (net of noncontrolling interests)
(0.18
)
0.14

(0.04
)
 
$
2.17

$
0.58

$
2.75


Earnings from operations for the nine months ended September 30, 2013, includes a net $1.9 benefit for pension MTM adjustments, consisting of the portion deferred from the fourth quarter 2012 MTM and the remeasurement of two of our U.S. plans triggered by the curtailment of the plans resulting from the Coatings business divestiture on April 3, 2013.

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Table of Contents

Unaudited Consolidated Statements of Income
 
Nine Months Ended September 30, 2012
 
As Previously
Effect of
 
 
Reported
Accounting Change
Revised
Manufacturing cost of sales
$
847.3

$
3.3

$
850.6

Selling and technical services
105.0

(2.7
)
102.3

Research and process development
39.5

(1.3
)
38.2

Administrative and general
100.8

(2.2
)
98.6

Earnings from operations
139.7

2.9

142.6

Earnings from continuing operations before income taxes
114.1

2.9

117.0

Income tax provision
44.2

1.1

45.3

Earnings from continuing operations
69.9

1.8

71.7

Earnings from discontinued operations, net of tax
73.7

4.2

77.9

Net earnings
143.6

6.0

149.6

Net earnings attributable to Cytec Industries Inc.
142.1

6.0

148.1

 
 
 
 
Comprehensive income
$
172.3

$
(9.9
)
$
162.4

Comprehensive income attributable to Cytec Industries Inc.
171.0

(9.9
)
161.1

 
 
 
 
Basic earnings per common share
 
 
 
Continuing operations
$
1.52

$
0.03

$
1.55

Discontinued operations (net of noncontrolling interests)
1.56

0.10

1.66

 
$
3.08

$
0.13

$
3.21

Diluted earnings per common share
 
 
 
Continuing operations
$
1.49

$
0.04

$
1.53

Discontinued operations (net of noncontrolling interests)
1.54

0.09

1.63

 
$
3.03

$
0.13

$
3.16


Earnings from operations for the nine months ended September 30, 2012, includes a $13.9 charge for a pension MTM adjustment, which consists of the portion of the fourth quarter 2011 MTM adjustment that was deferred in inventory at the end of 2011.
4. ACQUISITIONS
Acquisition of Umeco plc
On July 20, 2012, we completed the acquisition of all of the outstanding shares of Umeco plc (“Umeco”), an international provider of composite and process materials, in an all-cash transaction at a cost of approximately $423.8. To fund the transaction, we used approximately $170.0 from the draw-down of our existing $400.0 revolving credit facility (the “Revolving Credit Facility”) with the balance funded by cash on hand. The acquisition is intended to strengthen our position as a leading manufacturer of composite materials, while offering significant opportunities for growth and value creation, particularly in industrial composites and process materials. The acquired Umeco business is being reported partly in the Aerospace Materials segment, but mostly in the Industrial Materials segment.
The acquisition is accounted for under the acquisition method of accounting in accordance with the FASB’s Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. As such, the Umeco assets acquired and liabilities assumed are recorded at their acquisition-date fair values. Acquisition-related transaction costs are not included as a component of consideration transferred, but are accounted for as an expense in the period in which the costs are incurred. Any excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed is allocated to goodwill.

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The following table summarizes the final assigned fair values of the assets acquired and liabilities assumed at the acquisition date.
Cash
$
3.0

Trade receivables
65.2

Inventories
58.2

Other current assets
25.5

Plants, equipment and facilities
67.9

Amortizable intangible assets
175.2

Goodwill
186.7

Deferred tax assets
1.2

Other non-current assets
5.3

Deferred tax liabilities
(52.1
)
Other current and non-current liabilities
(112.3
)
Total acquisition consideration allocation
$
423.8

Goodwill recorded in connection with this acquisition was approximately $186.7, which represents the significant opportunities for growth and value creation by expanding our presence in the industrial composites sector, as well as the expected synergies from combining the acquired business with our existing business. Goodwill was assigned in part to the Aerospace Materials and Industrial Materials segments. The estimated amount of goodwill deductible for tax purposes over a 5 year period is $7.1. The estimated goodwill non-deductible for tax purposes is approximately $179.6.
The following information provides details about the estimated step-up in fair value and/or the estimated fair value at the acquisition date for some key balance sheet items.
Inventories
As of the effective date of the acquisition, inventory is required to be measured at fair value. Raw materials and work in process are valued at book value which is assumed to be a reasonable proxy for fair value. The fair values for finished goods inventory were determined based on estimated selling prices less the sum of (a) costs of selling and (b) a reasonable profit allowance for the selling effort. The net step-up in fair value for finished goods was $5.6.
Deferred taxes
In connection with the acquisition of Umeco, we acquired the stock of Umeco and therefore inherited the historical tax basis of its assets and liabilities, as well as its other tax attributes. As a result, we established deferred tax assets and liabilities with respect to the step-up to fair value of assets and liabilities for book purposes. We also inherited various tax uncertainties and valuation allowances, which were adjusted to reflect our judgments and estimates regarding the ultimate resolution of the items and consideration of the combined company activities.
Property and equipment
As of the effective date of the acquisition, property and equipment are required to be measured at fair value. It is assumed that all property and equipment will be used in a manner that represents the highest and best use of those assets. The fair value of land assets was primarily determined through use of the market approach, while the fair value of land improvements and personal property (machinery and equipment and fixed assets – other) was primarily determined through use of the cost approach and corroborated with an income approach when appropriate. Our fair value adjustment to property and equipment has been made by obtaining an understanding of the nature, amount and type of Umeco property and equipment as of July 20, 2012. The step-up in fair value for property and equipment was $4.9.
Intangible assets include the following:
 
Estimated Fair
Value
 
Remaining
Useful Lives
(Years)
Customer relationships
$
141.9

 
16
Technology - Structural Materials: Aerospace & Defense
$
14.3

 
21
Technology - Structural Materials: Other industries
$
9.2

 
6
Trademarks and trade names
$
9.8

 
8

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It is assumed that all intangible assets will be used in a manner that represents the highest and best use of those assets. The fair value of intangible assets was determined primarily using income approaches. This included the multi-period excess earnings valuation method for customer relationships and the relief-from-royalty valuation method for trademarks and trade names, and technology assets. Some of the more significant assumptions used in the development of intangible asset values, as applicable, include the amount and timing of projected future cash flows (including net sales, cost of sales, marketing, administrative and development expenses and working capital); the discount rate selected to measure the risks inherent in the future cash flows; the assessment of the asset’s life cycle and the competitive trends impacting the asset; and royalty rates.
The fair value of the assets acquired includes trade receivables of $65.2, substantially all of which has been collected.
The assets and liabilities arising from contingencies recognized as of the acquisition date are not significant to the consolidated financial statements.
Pro Forma Financial Information
The results of operations of Umeco have been included in the consolidated statements of operations since the acquisition date of July 20, 2012. The following table reflects the unaudited pro forma consolidated results of operations as if the acquisition had taken place on January 1, 2011: 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2012
Net revenue
$
473.8

 
$
1,425.5

Net income attributable to Cytec from continuing operations
$
46.4

 
$
90.8

Diluted earnings per share from continuing operations
$
0.98

 
$
1.94

These amounts have been calculated after applying Cytec’s accounting policies and adjusting the results of Umeco to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment, and intangible assets had been applied from January 1, 2011 with the consequential tax effects.
For the three and nine months ended September 30, 2012, material non-recurring pro forma adjustments include the removal of costs related to the acquisition of Umeco of $14.9 and $19.0, respectively (including $10.6 and $11.8 of acquisition costs included in legacy Umeco’s consolidated statement of operations for the three and nine months ended September 30, 2012, respectively).
The unaudited pro forma information does not include any adjustments for any restructuring activities, operating efficiencies or cost savings.
Acquisition of manufacturing assets of Star Orechem International Private Limited
On March 30, 2012, we acquired the manufacturing assets of Star Orechem International Private Limited (SOIL), in Nagpur, Central India, in a cash transaction. We are in the process of completing and upgrading the capabilities of the acquired plant to meet appropriate safety and operating standards. Our expectation is that this work will be completed and we will begin production of our mining chemical products in mid-2014. The results of operations of the acquired business have been included in our In Process Separation segment since April 1, 2012. The acquisition was funded from our cash on hand and has been accounted for as an acquisition of a business.

The following table summarizes the final assigned fair values of the assets acquired and liabilities assumed as of March 30, 2012.
Inventories
$
1.1

Other current assets
0.4

Plants, equipment and facility
6.5

Identifiable intangibles
1.2

Goodwill
20.8

Other, net
0.2

Total purchase price
$
30.2


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The goodwill recorded in connection with this acquisition is largely attributable to the capacity and potential for future strategic growth. None of the goodwill recognized is expected to be deductible for income tax purposes.
The amount allocated to intangibles represents the fair value of non-compete agreements, which were determined based on an independent appraisal. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 fair value measurement.
There were no material revenues or earnings related to SOIL included in our consolidated statements of income for the three and nine months ended September 30, 2012.

5. DISCONTINUED OPERATIONS AND OTHER DIVESTITURES
Discontinued operations
Coating Resins
On April 3, 2013, we completed the divestiture of our remaining Coating Resins business to Advent International, a global private equity firm for $1,015.0 plus assumed liabilities of $118.0, bringing the total value to $1,133.0. As a result, in the second quarter of 2013, we recorded an after-tax loss on the sale of $15.5. In the first quarter of 2013, we recorded a preliminary charge of $4.3 to adjust our carrying value of the disposal group to its fair value less cost to sell, based on the terms of the agreement. For the three months ended September 30, 2013, we recorded after-tax losses of approximately $0.6, which primarily relate to certain tax liabilities related to taxable periods (or portions thereof) ending on or before April 3, 2013. The after-tax losses and the adjustment to carrying value are included in loss on sale of discontinued operations, net of tax in the consolidated statements of income. The final price paid and loss on sale is subject to final working capital and other customary adjustments.
Previously, on July 31, 2012, we completed the sale of the pressure sensitive adhesives (“PSA”) product line of the former Coating Resins segment to Henkel AG & Co. for approximately $105.0, including working capital of approximately $15.0. For both the three and nine months ended September 30, 2012, we recorded an after-tax gain on the sale of PSA of $8.3, which is included in Loss on sale of discontinued operations, net of tax in the consolidated statements of income. We also recorded an after-tax charge of $23.8 in the third quarter of 2012 to adjust our carrying value of the Coatings disposal group to its fair value less cost to sell, based on the terms of the definitive agreement with Advent at that time. The charge is included in Loss on sale of discontinued operations, net of tax in the consolidated statements of income for the three and nine months ended September 30, 2012.
The results of operations of the former Coating Resins segment have been reported as discontinued operations, and are therefore excluded from both continuing operations and segment results for all periods presented. All previously reported financial information has been revised to conform to the current presentation.
The following table displays summarized activity in our consolidated statements of income for discontinued operations during the three and nine months ended September 30, 2013 and 2012, related to our former Coatings Resins segment. 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Net sales (1)
$

 
$
364.3

 
$
368.0

 
$
1,163.3

Earnings from operations of discontinued businesses before income taxes
$

 
$
56.4

 
$
48.1

 
$
146.5

Income tax expense on operations

 
(16.7
)
 
(16.5
)
 
(53.1
)
Gain (loss) on sale of discontinued operations
(0.8
)
 
21.4

 
16.7

 
21.4

Income tax (expense) benefit on gain (loss) on sale
0.2

 
(13.1
)
 
(37.1
)
 
(13.1
)
Adjust to fair value, less cost to sell

 
(25.4
)
 

 
(25.4
)
Income tax benefit on adjustment

 
1.6

 

 
1.6

(Loss) earnings from discontinued operations, net of tax
$
(0.6
)
 
$
24.2

 
$
11.2

 
$
77.9

__________________ 
(1)
Net sales for the nine months ended September 30, 2013 include sales from January 1, 2013 through April 2, 2013.

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Assets and liabilities held for sale
The following table displays a summary of the assets and liabilities held for sale as of December 31, 2012. 
 
December 31, 2012
Assets
 
Trade accounts receivable, net
$
192.5

Inventories, net
195.0

Other current assets
22.2

Plants, equipment and facilities, net
432.7

Acquisition intangibles, net
252.9

Goodwill, net
323.1

Other assets
53.1

 
$
1,471.5

Liabilities

Accounts payable
$
164.5

Accrued liabilities
100.8

Pension and other postretirement benefits
88.0

Deferred income taxes
51.8

Other liabilities
59.1

 
$
464.2

Net assets held for sale
$
1,007.3

In connection with the sale of the business to Advent, we agreed to retain certain liabilities, including liabilities for U.S. pension and other postretirement benefits and certain tax liabilities related to taxable periods (or portions thereof) ending on or before April 3, 2013.
Sale of Distribution business

On July 12, 2013, we sold the Industrial Materials' distribution business, which we acquired from Umeco in July 2012, to Cathay Investments for $8.6, subject to final working capital and other customary adjustments. In the second quarter of 2013, we recorded an after-tax charge of $12.5 to adjust our carrying value of the disposal group to its fair value less cost to sell, based on the terms of the agreement. The charge is included in loss on sale of discontinued operations, net of tax in the consolidated statements of income.
The results of operations of the former distribution business prior to its divestiture remain in continuing operations for all periods presented, as the results of operations for the business and assets and liabilities sold were not material to disclose as discontinued operations or assets held for sale.
6. RESTRUCTURING OF OPERATIONS
In accordance with our accounting policy, restructuring costs are included in our corporate unallocated operating results for segment reporting purposes, which is consistent with management’s view of its businesses. Aggregate pre-tax restructuring charges (credits) included in the consolidated statements of income were recorded by line item as follows: 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Manufacturing cost of sales
$
0.2

 
$
0.8

 
$
(0.2
)
 
$
3.1

Selling and technical services

 
0.3

 
0.2

 
0.8

Research and process development

 

 

 
0.5

Administrative and general
1.7

 
3.5

 
2.6

 
11.6

Asset impairment charge
2.6

 

 
2.6

 

Total
$
4.5

 
$
4.6

 
$
5.2

 
$
16.0


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Details of our 2013 restructuring initiatives are as follows:
In the third quarter of 2013, we launched cost reduction initiatives in our Industrial Materials segment to address the current market conditions and better position ourselves for profitable growth. The plan includes headcount reductions of approximately 55 people, through modification of shift patterns within various operations, centralization of logistics and planning activities, and closure of a small site in Beelitz, Germany. The plan resulted in a pre-tax restructuring charge in the third quarter of 2013 of approximately $4.2 related mainly to severance costs and the closure of a manufacturing facility. The initiative is expected to be completed by 2015.
In the second quarter of 2013, we launched initiatives in our Aerospace Materials segment to move all production operations from the Costa Mesa, Adelanto, and Huntington Beach, California sites into the Winona, Minnesota, Tulsa, Oklahoma, and Anaheim, California locations. Approximately 120 employees will be impacted by this move. These plans resulted in a restructuring charge of $1.1 during the first nine months of 2013, primarily for severance, retention costs and accelerated depreciation. The initiatives are expected to be completed in waves by the first quarter of 2015 and paid for by mid-2015.
The remaining reserve relating to the 2013 restructuring initiatives at September 30, 2013 is $1.6.
Details of our 2012 restructuring initiatives are as follows:
In the third quarter of 2012, we approved plans to realign the supporting structure of our Aerospace Materials and Industrial Materials segments as we take advantage of synergies from the acquisition of Umeco. These plans resulted in a restructuring charge of $6.6 related to the severance of 31 positions. The initiatives are expected to be substantially completed in 2013 and paid for by the end of 2015.
In the second quarter of 2012, we launched initiatives in our corporate functions across sales, marketing, manufacturing, supply chain, research and development, and administrative functions to mitigate continuing costs following the anticipated sale of Coating Resins. These initiatives resulted in charges related to severance and employee benefits of $14.7 associated with the elimination of 176 positions. These initiatives are expected to be substantially completed and paid for by the end of 2014.
During the first nine months of 2013, we recorded a net credit adjustment of $0.1 to these initiatives.
The remaining reserve relating to the 2012 restructuring initiatives at September 30, 2013 is $4.5. 
Restructuring Initiatives:
 
2012
 
2013
 
Total
Balance December 31, 2011  
 
$

 
$

 
$

2012 charges
 
21.3

 

 
21.3

Non-cash items
 
(0.1
)
 

 
(0.1
)
Cash payments
 
(8.3
)
 

 
(8.3
)
Currency translation adjustments
 
0.3

 

 
0.3

Balance December 31, 2012
 
$
13.2

 
$

 
$
13.2

First quarter charges
 
0.3

 

 
0.3

Non-cash items
 

 

 

Cash payments
 
(3.1
)
 

 
(3.1
)
Currency translation adjustments
 
(0.1
)
 

 
(0.1
)
Balance March 31, 2013
 
$
10.3

 
$

 
$
10.3

Second quarter charges (credits)
 
(0.4
)
 
0.8

 
0.4

Non-cash items
 

 

 

Cash payments
 
(4.0
)
 

 
(4.0
)
Currency translation adjustments
 

 

 

Balance June 30, 2013
 
$
5.9

 
$
0.8

 
$
6.7

Third quarter charges
 

 
4.5

 
4.5

Non-cash items (1)
 

 
(2.8
)
 
(2.8
)
Cash payments
 
(1.4
)
 
(1.0
)
 
(2.4
)
Currency translation adjustments
 

 
0.1

 
0.1

Balance September 30, 2013
 
$
4.5

 
$
1.6

 
$
6.1

__________________

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(1)
Includes a $2.6 charge for the write-off of plant assets at our manufacturing facility in Beelitz, Germany, and accelerated depreciation of plant assets at our California sites.
7. SHARE-BASED COMPENSATION
The fair value of each option or stock-settled share appreciation right (“SARS”) award is estimated on the grant date using a binomial-lattice option valuation model. Stock-settled SARS are economically valued the same as stock options. The binomial-lattice model takes into account variables such as volatility, dividend yield, and risk-free interest rate. In addition, the binomial-lattice model considers the contractual term of the option, the probability that the option will be exercised prior to the end of its contractual life, and the probability of termination or retirement of the option holder in computing the value of the option. The weighted average assumptions for nine months ended September 30, 2013 and 2012 are noted in the following table: 
Nine Months Ended September 30,
2013
 
2012
Expected life (years)
6.2
 
6.2
Expected volatility
36.2%
 
41.9%
Expected dividend yield
0.78%
 
1.01%
Risk-free interest rate
1.86%
 
2.11%
Weighted-average fair value per option
$26.56
 
$19.91
The expected life of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. Expected volatilities are based on the combination of implied market volatility and our historical volatility. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. As share-based compensation recognized in the consolidated statement of income is based on awards ultimately expected to vest, we incorporate the probability of pre-vesting forfeiture in determining the number of expected vested options. The forfeiture rate is based on the historical forfeiture experience and prospective actuarial analysis.
Stock Award and Incentive Plan
The 1993 Stock Award and Incentive Plan (the “1993 Plan”) provides for grants of a variety of awards, such as stock options (including incentive stock options and nonqualified stock options), non-vested stock (including performance stock), SARS (including those settled with common shares) and deferred stock awards and dividend equivalents. At September 30, 2013 there were approximately 5,000,000 shares reserved for issuance under the 1993 Plan, inclusive of 2,300,000 shares reserved for issuance for all outstanding share-based compensation grants.
Stock options and stock-settled SARS
We have utilized the stock option component of the 1993 Plan to provide for the granting of nonqualified stock options and stock-settled SARS with an exercise price at 100% of the market price on the date of the grant. Options and stock-settled SARS are generally exercisable in installments of one-third per year commencing one year after the grant date and annually thereafter, with contract lives of generally 10 years from the grant date.
A summary of stock options and stock-settled SARS activity for the nine months ended September 30, 2013 is presented below: 
Options and Stock-Settled SARS Activity:
Number of
Units
 
Weighted
Average
Exercise
Price Per
Unit
 
Weighted
Average
Remaining
Contractual
Life (Years)
 
Aggregate
Intrinsic
Value
Outstanding at January 1, 2013
2,672,730

 
$
46.22

 
 
 
 
Granted
287,845

 
73.07

 
 
 
 
Exercised
(818,281
)
 
46.22

 
 
 
 
Forfeited
(113,354
)
 
51.28

 
 
 
 
Outstanding at September 30, 2013
2,028,940

 
$
49.75

 
6.0
 
$
64.3

Exercisable at September 30, 2013
1,428,106

 
$
44.98

 
4.9
 
$
52.0

During the nine months ended September 30, 2013, we granted 287,845 stock options. The weighted-average grant-date fair value of the stock options granted during the nine months ended September 30, 2013 and 2012 was $26.56 and $19.91 per share, respectively. Total pre-tax compensation cost related to stock option and stock-settled SARS was $2.4 and $1.7 for the

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three months ended September 30, 2013 and 2012, respectively, and $6.9 and $6.3 during the nine months ended September 30, 2013 and 2012, respectively. The total intrinsic value of stock options and stock-settled SARS exercised during the nine months ended September 30, 2013 and 2012 was $24.2 and $17.6, respectively. Treasury shares and newly issued shares have been utilized for stock option and stock-settled SARS exercises. The total fair value of stock options and stock-settled SARS vested during the nine months ended September 30, 2013 and 2012 was $7.7 and $6.5, respectively.
As of September 30, 2013, there was $5.9 of total unrecognized compensation cost related to stock options and stock-settled SARS. That cost is expected to be recognized over a weighted-average period of 1.3 years as the majority of our awards vest over 3 years.
Total tax benefits realized from share-based awards was $8.5 and $5.6 for the nine months ended September 30, 2013 and 2012, respectively. Cash received from stock options exercised was $21.3 and $19.7 for the nine months ended September 30, 2013 and 2012, respectively.
Cash-settled SARS
Our 1993 Plan also provides for the granting of cash-settled SARS, which were granted during 2004 and 2005. Cash-settled SARS are liability-classified awards. Cash used to settle cash-settled SARS exercised during the three months ended September 30, 2013 and 2012 was $0.4 for both periods. The total amount of pre-tax expense recognized for cash-settled SARS was $0.5 and $1.0 for the nine months ended September 30, 2013 and 2012, respectively. The liability related to our cash-settled SARS was $1.1 at September 30, 2013 and $1.7 at December 31, 2012.
Non-vested stock, non-vested stock units and performance stock
The 1993 Plan provides for the issuance of non-vested stock, non-vested stock units and performance stock. Non-vested stock and stock units are subject to certain restrictions on ownership and transferability that lapse upon vesting. Performance stock payouts are based on the attainment of certain financial performance objectives and may vary depending on the degree to which the performance objectives are met. We did not grant any performance stock in 2013 and 2012, and there were no outstanding performance stock awards as of September 30, 2013.
A summary of non-vested stock and non-vested stock units for the nine months ended September 30, 2013 is presented below: 
Non-vested Stock and Stock Units:
Number of
Units
 
Weighted Average
Grant Date
Fair Value
Per Unit
Nonvested at January 1, 2013
203,857

 
$
47.75

Granted
47,894

 
71.48

Vested
(51,201
)
 
37.61

Forfeited
(28,124
)
 
50.44

Nonvested at September 30, 2013
172,426

 
$
56.86

During the nine months ended September 30, 2013, we granted 37,499 non-vested stock units to employees and 10,395 shares of non-vested stock to nine directors, which generally vest on the third anniversary of the grant date. The weighted average fair value of the non-vested stock and non-vested stock units on the grant date was $71.48 per share. The total amount of share-based compensation expense recognized for non-vested stock and non-vested stock units was $1.0 and $1.1 for the three months ended September 30, 2013 and 2012, respectively, and $2.7 and $3.2 for the nine months ended September 30, 2013 and 2012, respectively. As of September 30, 2013, there was $3.1 of total unrecognized compensation cost related to non-vested stock and stock units. That cost is expected to be recognized over a weighted-average period of 1.9 years.
Compensation cost related to all share-based compensation arrangements capitalized in inventory as of September 30, 2013 and December 31, 2012 was approximately $0.6 and $0.4, respectively.
As of September 30, 2013 and December 31, 2012, our additional paid-in capital pool (“APIC Pool”), which represents excess tax benefits available to absorb potential future tax deficiencies, was $81.1 and $77.2, respectively.
In the second quarter of 2012, in an effort to retain key employees of the Coatings Resins business who could be impacted by the potential sale of Coating Resins, we agreed that if any such individual’s employment with Cytec were terminated as a result of a sale of Coating Resins, we would pay such employee an amount equal to the intrinsic value of any unvested options and restricted stock units based on the closing price of Cytec stock on the date of the sale. As of June 30, 2012, when we concluded that we had met all the criteria for discontinued operations, we determined that these certain unvested stock options and restricted stock units that had been accounted for as equity awards should be reclassified to be accounted for as liability awards.

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Accordingly, we recorded a liability of $2.9 for these awards at June 30, 2012 by reclassifying $1.7 of previously recognized expense out of Additional paid-in capital and recognized $1.2 of additional expense. In the second half of 2012, an additional $3.7 of expense was recognized related to these awards of which $1.7 was recognized in the three months ended September 30, 2012. During the fourth quarter new facts and circumstances regarding the timing of the close of the Coating Resins sale indicated that a portion of the awards previously reclassified to liability awards would vest prior to closing and were reclassified back to equity awards. Accordingly, we reclassified $2.3 from the liability to additional paid-in capital. During the first nine months of 2013, due to the change in the fair market value of Cytec's stock, we recognized an additional expense of $0.9 related to these awards. The expense recorded for these liability awards was recognized in Earnings from operations of discontinued business, net of tax on the Consolidated Statement of Income.
The divestiture of Coating Resins was completed on April 3, 2013, and the liability for all unvested options and restricted stock units held by former Coatings employees was settled for cash in the second quarter. There were restricted stock units settled as liability awards which are reflected as forfeitures in the tables above. At September 30, 2013, there is no remaining liability related to these awards.
8. EARNINGS PER SHARE (EPS)
Basic earnings per common share excludes dilution and is computed by dividing net earnings available to common stockholders by the weighted-average number of common shares outstanding (which includes shares outstanding, less performance and non-vested shares for which vesting criteria have not been met) plus deferred stock awards, weighted for the period outstanding. Diluted earnings per common share is computed by dividing net earnings available to common stockholders by the sum of the weighted-average number of common shares outstanding for the period adjusted (i.e., increased) for all additional common shares that would have been outstanding if potentially dilutive common shares had been issued and any proceeds of the issuance had been used to repurchase common stock at the average market price during the period. Under this method, an increase in the fair market value of the Company’s stock can result in a greater dilutive effect from potentially dilutive common shares. The proceeds are assumed to be the sum of the amount to be paid to the Company upon exercise of options, the amount of compensation cost attributed to future services and not yet recognized, and the amount of income taxes that would be credited to or deducted from capital upon exercise.
The following table sets forth the computation of basic and diluted earnings per common share for the three and nine months ended September 30, 2013 and 2012 (in thousands, except net earnings in millions and per share amounts): 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Numerator:
 
 
 
 
 
 
 
Earnings from continuing operations
$
44.4

 
$
34.7

 
$
115.8

 
$
71.7

Earnings (loss) from discontinued operations, net of tax
(0.6
)
 
23.7

 
(1.7
)
 
76.4

Net earnings attributable to Cytec Industries Inc.
$
43.8

 
$
58.4

 
$
114.1

 
$
148.1

Denominator:
 
 
 
 

 
 
Weighted average shares outstanding
36,232

 
46,359

 
40,660

 
46,190

Effect of dilutive shares:
 
 
 
 

 
 
Options and stock-settled SARS
605

 
669

 
659

 
599

Non-vested shares and units
111

 
125

 
108

 
127

Diluted average shares outstanding
36,948

 
47,153

 
41,427

 
46,916

Basic earnings (loss) per common share:
 
 
 
 

 
 
Earnings from continuing operations
$
1.23

 
$
0.75

 
$
2.85

 
$
1.55

Earnings (loss) from discontinued operations
(0.02
)
 
0.51

 
(0.04
)
 
1.66

Net earnings per common share attributable to Cytec Industries Inc.
$
1.21

 
$
1.26

 
$
2.81

 
$
3.21

Diluted earnings (loss) per common share:
 
 
 
 

 
 
Earnings from continuing operations
$
1.20

 
$
0.74

 
$
2.79

 
$
1.53

Earnings (loss) from discontinued operations
(0.01
)
 
0.50

 
(0.04
)
 
1.63

Net earnings per common share attributable to Cytec Industries Inc.
$
1.19

 
$
1.24

 
$
2.75

 
$
3.16


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The following table sets forth the anti-dilutive shares/units excluded from the above calculation because their inclusion would have had an anti-dilutive effect on earnings per share (in thousands): 
Nine months ended September 30,
2013
 
2012
Options
120

 
295

Stock-settled SARS

 

Non-vested shares/units

 

Total
120

 
295

9. INVENTORIES
Inventories consisted of the following: 
 
September 30, 2013
 
December 31, 2012
Finished goods
$
183.1

 
$
178.0

Work in progress
11.2

 
12.0

Raw materials and supplies
87.0

 
79.8

Total inventories
$
281.3

 
$
269.8

10. DEBT
Long-term debt, including the current portion, consisted of the following: 
 
September 30, 2013
 
December 31, 2012
 
Face
 
Carrying
Value
 
Face
 
Carrying
Value
Five-Year Revolving Credit Line Due June 2018
$
0.0

 
$
0.0

 
$
62.0

 
$
62.0

4.6% Notes Due July 1, 2013
0.0

 
0.0

 
135.2

 
135.3

6.0% Notes Due October 1, 2015
141.8

 
141.7

 
249.6

 
249.4

8.95% Notes Due July 1, 2017
164.3

 
164.1

 
249.4

 
249.0

3.5% Notes Due April 1, 2023
400.0

 
397.3

 

 

Other
19.0

 
13.4

 
8.9

 
7.8

Total debt
$
725.1

 
$
716.5

 
$
705.1

 
$
703.5

Less: current maturities
(0.2
)
 
(0.2
)
 
(136.0
)
 
(136.1
)
Long-term debt
$
724.9

 
$
716.3

 
$
569.1

 
$
567.4

On March 12, 2013, we issued $400.0 aggregate principal amount of 3.5% senior unsecured notes due April 1, 2023 ("3.5% notes"), which resulted in $394.6 in net proceeds after original issue discount and underwriting fees. In addition, on February 26, 2013, we called for the redemption of our 4.6% notes due July 1, 2013 ("4.6% notes"), and commenced offers to purchase our 6.0% notes due October 1, 2015 ("6.0% notes") and our 8.95% notes due July 1, 2017 ("8.95% notes"). In March 2013, we applied the net proceeds from the issuance of the 3.5% notes as follows: (1) to redeem all $135.2 principal amount of our 4.6% notes for a purchase price of $136.8 plus accrued interest of $1.5, (2) to repurchase $107.8 principal amount of our 6.0% notes for a purchase price of $121.1 plus accrued interest of $3.1 and (3) to repurchase $85.1 principal amount of our 8.95% notes for a purchase price of $108.3 plus accrued interest of $1.8. The redemption of the 4.6% notes and repurchase of the 6.0% and 8.95% notes resulted in a loss of $39.4 including transaction costs, which is included in loss on early extinguishment of debt in the accompanying statement of income.
All of the outstanding notes are unsecured and may be repaid in whole or in part, at our option at any time subject to a prepayment adjustment.
On June 28, 2013, we amended and restated our existing Five Year Credit Agreement (the “Agreement”). The material terms and conditions of the Agreement remain substantially similar to the prior agreement except as set forth below. As the result of the amendment and restatement, the maximum amount we may borrow under the Agreement continues to be $400.0, with a $25.0 swingline, and the term of the Agreement was extended to June 28, 2018. Subject to the consent of the lenders, we have the ability under certain circumstances to extend the term of the Agreement through June 28, 2021, and to increase the maximum amount we may borrow under the Agreement up to $500.0.

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In the second quarter of 2012, we had a net draw down of $170.0 from our Revolving Credit Facility for the purposes of funding the Umeco transaction. In April 2013, upon receiving proceeds from the close of the sale of Coating Resins, we repaid the outstanding portion of the Revolving Credit Facility. There was no outstanding balance on the facility as of September 30, 2013. At September 30, 2013, $400.0 was available for borrowing under the Revolving Credit Facility. We are required to comply with certain customary financial covenants under the facility: (i) the ratio of consolidated total debt to consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”), and (ii) the ratio of consolidated EBITDA to consolidated interest expense. We are in compliance with these covenants and expect to be in compliance for the foreseeable future.
At September 30, 2013 and December 31, 2012, the fair value of our debt was $731.9 and $787.9, respectively. The fair value of our debt is based on Level 2 inputs, as defined in Note 17. These inputs include a discounted cash flow analysis which incorporates the contractual terms of the notes and observable market-based inputs that include time value, interest rate curves, and credit spreads.
The weighted-average interest rate on all of our debt was 5.33% and 6.19%, as of September 30, 2013 and 2012, respectively. The weighted-average interest rate on short-term borrowings outstanding as of September 30, 2013 and 2012 was nil and 0.78%, respectively.
11. ENVIRONMENTAL, CONTINGENCIES AND COMMITMENTS
Environmental Matters
We are subject to substantial costs arising out of environmental laws and regulations, which include obligations to remove or limit the effects on the environment of the disposal or release of certain wastes or substances at various sites or to pay compensation to others for doing so.
As of September 30, 2013 and December 31, 2012, the aggregate environmental related accruals were $66.6 and $68.1, respectively, of which $9.7 was included in accrued expenses for both periods, with the remainder of $56.9 and $58.4 included in other noncurrent liabilities as of September 30, 2013, and December 31, 2012, respectively. Environmental remediation spending for the three months ended September 30, 2013 and 2012 was $1.2 and $0.9, respectively, and for the nine months ended September 30, 2013 and 2012 was $4.9 and $2.5, respectively.
Our process is to review our environmental remediation accruals quarterly and based on new information, we may from time to time adjust our environmental related accruals. During the nine months ended September 30, 2013, our adjustments resulted in a net increase of $3.9 in our environmental related accruals, of which $2.2 related primarily to an inactive Canadian site to revise its projected remediation costs based on a change in policy by that country's Ministry of the Environment, and the remaining $1.7 related to several other sites.
Our environmental related accruals can change substantially due to such factors as additional information on the nature or extent of contamination, methods of remediation required, changes in the apportionment of costs among responsible parties, and other actions by governmental agencies or private parties, or if we are named in a new matter and determine that an accrual needs to be provided, or if we determine that we are not liable and no longer require an accrual.
A further discussion of environmental matters can be found in Note 12 of the Notes to the Consolidated Financial Statements contained in our 2012 Annual Report on Form 10-K.
Other Contingencies
We are the subject of numerous lawsuits and claims incidental to the conduct of our or certain of our predecessors’ businesses, including lawsuits and claims relating to product liability and personal injury, including asbestos, environmental, contractual, employment and intellectual property matters.
As of September 30, 2013 and December 31, 2012, the aggregate self-insured and insured contingent liability was $46.2 and $49.8, respectively, and the related insurance recovery receivable for the liability as well as claims for past payments was $20.3 at September 30, 2013 and $20.7 at December 31, 2012. The asbestos liability included in the above amounts at September 30, 2013 and December 31, 2012 was $38.0 and $39.3, respectively, and the insurance receivable related to the liability as well as claims for past payments was $20.0 and $20.4, respectively. We anticipate receiving a net tax benefit for payment of those claims for which full insurance recovery is not realized.

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Asbestos
We, like many other industrial companies, have been named as one of hundreds of defendants in a number of lawsuits filed in the U.S. by persons alleging bodily injury from asbestos. The claimants allege exposure to asbestos at facilities that we own or formerly owned, or from products that we formerly manufactured for specialized applications. Most of these cases involve numerous defendants, sometimes as many as several hundred. Historically, most of the closed asbestos claims against us have been dismissed without any indemnity payment by us; however, we can make no assurances that this pattern will continue.
The following table presents information about the number of claimants involved in asbestos claims with us: 
 
Nine months ended September 30, 2013
 
Year ended December 31, 2012
Number of claimants at beginning of period
8,000

 
8,000

Number of claimants associated with claims closed during period
(100
)
 
(100
)
Number of claimants associated with claims opened during period
100

 
100

Number of claimants at end of period
8,000

 
8,000

Numbers in the foregoing table are rounded to the nearest hundred and are based on information as received by us which may lag actual court filing dates by several months or more. Claims are recorded as closed when a claimant is dismissed or severed from a case. Claims are opened whenever a new claim is brought, including from a claimant previously dismissed or severed from another case.
Our asbestos related contingent liabilities and related insurance receivables are based on an actuarial study performed by a third party, which is updated every three years. During the third quarter of 2012, we completed an actuarial study of our asbestos related contingent liabilities and related insurance receivables, which updated our last study prepared in the third quarter of 2009. The study is based on, among other things, the incidence and nature of historical claims data through June 30, 2012, the incidence of malignancy claims, the severity of indemnity payments for malignancy and non-malignancy claims, dismissal rates by claim type, estimated future claim frequency, settlement values and reserves, and expected average insurance recovery rates by claim type. The study assumes liabilities through 2049.
In 2012, as a result of our findings, we recorded a decrease of $2.1 to our self-insured and insured contingent liabilities for indemnity costs for pending and anticipated probable future claims and recorded a decrease of $1.0 related to receivables for probable insurance recoveries for these pending and future claims. The reserve decrease was attributable to lower projected claim filings offset by more severe malignancy rates and settlement value projections. The decrease in the receivable was a result of the lower gross liability and a shift in the types of future claims expected. Overall, we expect to recover approximately 48.0% of our future indemnity costs. We have completed coverage in place agreements with most of our larger insurance carriers.
The ultimate liability and related insurance recovery for all pending and anticipated future claims cannot be determined with certainty due to the difficulty of forecasting the numerous variables that can affect the amount of the liability and insurance recovery. These variables include but are not limited to: (i) significant changes in the number of future claims; (ii) significant changes in the average cost of resolving claims; (iii) changes in the nature of claims received; (iv) changes in the laws applicable to these claims; and (v) financial viability of co-defendants and insurers.
Lead Pigment
Over the past 20 years we have been named as defendants in more than fifty cases in the U.S. in which plaintiffs assert claims for personal injury, property damage, and other claims for relief relating to one or more kinds of lead pigment that were used as an ingredient decades ago in architectural paint. Eight lead ingestion personal injury cases remain outstanding. The different suits were brought by government entities and/or individual plaintiffs, on behalf of themselves and others. The suits variously sought compensatory and punitive damages and/or injunctive relief, including funds for the cost of monitoring, detecting and removing lead based paint from buildings and for medical monitoring; for personal injuries allegedly caused by ingestion of lead based paint; and plaintiffs’ attorneys’ fees. We settled one of these cases in 2005 for an immaterial amount in order to avoid litigation costs. In all of the others, we prevailed in court or were dismissed as a defendant.
We currently are one of several defendants in eight personal injury lead ingestion cases, consisting of 172 plaintiffs venued in federal and state courts in Milwaukee, Wisconsin. One of the eight cases consists of 164 claimants, each alleging personal injury as a result of the ingestion of white lead carbonate in paint. The remaining seven cases consist of less than 10 total plaintiffs. We believe that the eight personal injury cases against us are without merit. In July 2005, in a case in which we were one of several defendants, the Supreme Court of Wisconsin held that Wisconsin’s risk contribution doctrine applies to bodily

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injury cases against manufacturers of white lead pigment. Under this doctrine, manufacturers of white lead pigment may be liable for injuries caused by white lead pigment based on their past market shares, unless they can prove they are not responsible for the white lead pigment which caused the injury in question. Seven of the eight personal injury cases, including the personal injury case consisting of 164 plaintiffs, were filed before January 2011, when the Wisconsin legislature passed legislation that will make it substantially more difficult to bring lead suits in the future, including a 25 year statute of repose. In June 2013, the Governor of Wisconsin signed into law the biennial budget which contained within it a provision that retroactively applies the 2011 law to all call claims of lead poisoning whether filed or accrued. Also, in July 2009, the Wisconsin Supreme Court, in the case styled Ruben Godoy et al v. E.I. DuPont de Nemours et al., upheld a lower court’s decision dismissing the plaintiff’s strict liability and negligent defect causes of action for white lead carbonate. The decision in this case, the new statutory law in Wisconsin, and our non-existent or diminutive market share, reinforces our belief that we have no liability in any of the eight Wisconsin cases, and accordingly, we have not recorded a loss contingency. The majority of the eight personal injury cases currently are fully or partially stayed pending a decision by the United States Court of Appeals for the Seventh Circuit regarding whether the application of the risk contribution doctrine for lead ingestion cases in Wisconsin violates the defendants’, including the Company’s, constitutional rights and, if addressed by the court, whether the new Wisconsin law may be applied retroactively.
Other
Periodically, we enter into settlement discussions for lawsuits or claims for which we have meritorious defenses and for which an unfavorable outcome against us is not probable. In such instances, no loss contingency is recorded since a loss is not probable and it is our policy to expense defense costs as incurred. Typically, we consider these types of settlements in fairly limited circumstances usually related to the avoidance of future defense costs and/or the elimination of any risk of an unfavorable outcome. Such settlements, if any, are recorded when it is probable a liability has been incurred, typically upon entering into a settlement agreement.
While it is not feasible to predict the outcome of all pending environmental matters, lawsuits and claims, it is reasonably possible that there will be a necessity for future provisions for costs for environmental matters and for other contingent liabilities that we believe, will not have a material adverse effect on our consolidated financial position, but could be material to our consolidated results of operations or cash flows in any one accounting period. We cannot estimate any additional amount of loss or range of loss in excess of the recorded amounts. Moreover, many of these liabilities are paid over an extended period, and the timing of such payments cannot be predicted with any certainty.
From time to time, we are also included in legal proceedings as a plaintiff involving tax, contract, patent protection, environmental and other legal matters. Gain contingencies related to these matters, if any, are recorded when they are realized.
A further discussion of other contingencies can be found in Note 12 of Notes to Consolidated Financial Statements contained in our 2012 Annual Report on Form 10-K.
Commitments
We frequently enter into long-term contracts with customers with terms that vary depending on specific industry practices. Our business is not substantially dependent on any single contract or any series of related contracts. Descriptions of our significant sales contracts at December 31, 2012 are set forth in Note 12 of Notes to Consolidated Financial Statements contained in our 2012 Annual Report on Form 10-K.
12. COMPREHENSIVE INCOME
As discussed in Note 3, in the second quarter of 2013, we elected to change our method of accounting for actuarial gains and losses for our continuing pension and OPEB plans. This accounting change has been applied retrospectively to all periods presented.

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The components of comprehensive income, which represents the change in equity from non-owner sources, for the three and nine months ended September 30, 2013 and 2012 are as follows: 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Net earnings
$
43.8

 
$
58.9

 
$
114.5

 
$
149.6

Other comprehensive income:
 
 
 
 
 
 
 
Accumulated pension liability, net of tax
(0.5
)
 
2.1

 
16.8

 
0.4

Foreign currency translation adjustments
23.2

 
28.7

 
(78.7
)
 
12.4

Comprehensive income
$
66.5

 
$
89.7

 
$
52.6

 
$
162.4

Less: Comprehensive income attributable to noncontrolling interest

 
(0.6
)
 
(0.2
)
 
(1.3
)
Comprehensive income attributable to Cytec Industries Inc.
$
66.5

 
$
89.1

 
$
52.4

 
$
161.1


The following table presents changes in accumulated other comprehensive income (AOCI) by component for the three and nine months ended September 30, 2013:
 
Three Months Ended September 30, 2013
 
Nine Months Ended September 30, 2013
 
Accumulated Pension Liabilities
 
Cumulative Translation Adjustments
 
Total
 
Accumulated Pension Liabilities
 
Cumulative Translation Adjustments
 
Total
Balance, beginning of period
$
9.5

 
$
61.7

 
$
71.2

 
$
(7.8
)
 
$
163.5

 
$
155.7

Other comprehensive income before reclassifications

 
22.1

 
22.1

 

 
(21.8
)
 
(21.8
)
Amounts reclassified from AOCI
(0.5
)
 
1.2

 
0.7

 
16.8

 
(56.7
)
 
(39.9
)
Net current period OCI
(0.5
)
 
23.3

 
22.8

 
16.8

 
(78.5
)
 
(61.7
)
Balance, end of period
$
9.0

 
$
85.0

 
$
94.0

 
$
9.0

 
$
85.0

 
$
94.0


The following table presents a summary of reclassification adjustments out of AOCI for the three and nine months ended September 30, 2013:
Details of AOCI components
 
Amount Reclassified from AOCI
 
Affected line item in the statement where net income is presented
 
 
Three Months Ended September 30, 2013
 
Nine Months Ended September 30, 2013
 
 
Amortization of defined benefit pension items
 
 
 
 
 
 
  Prior service costs
 
$
(0.8
)
 
$
(2.4
)
 
(1) 
 
 
(0.8
)
 
(2.4
)
 
Total before tax
 
 
0.3

 
1.0

 
Tax expense
 
 
$
(0.5
)
 
$
(1.4
)
 
Net of tax
Impact from sale of Coating Resins
 

 
18.2

 
Loss on sales of discontinued operations, net of tax
Total pension related
 
$
(0.5
)
 
$
16.8

 
 
 
 
 
 
 
 
 
Cumulative translation adjustments
 
 
 
 
 
 
Impact from sale of Coating Resins and distribution business
 
$
1.2

 
$
(56.7
)
 
Loss on sales of discontinued operations, net of tax
__________________

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(1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost, and allocated to various line items on the consolidated statements of income, primarily manufacturing cost of sales. See Note 18 - Employee Benefit Plans for additional information on net periodic pension cost.
13. INCOME TAXES
The effective tax rate for continuing operations for the three and nine months ended September 30, 2013 was a tax provision of 26.6%, or $16.1, and 25.9%, or $40.4, respectively, compared to a tax provision of 17.4%, or $7.3, and 38.7%, or $45.3, respectively, for the three and nine months ended September 30, 2012. The effective tax rate for the three months ended September 30, 2013 was favorably impacted by a tax benefit of $3.7 primarily related to a change in tax rate with respect to the deferred tax assets and liabilities associated with an international jurisdiction and a net benefit related to the resolution of an international tax audit. In addition to the $3.7 benefit noted, the effective tax rate for the year to date period was primarily impacted by a tax benefit of $2.7 attributable to the U.S. reinstatement of 2012 business tax incentives during the first quarter of 2013, a $14.7 benefit related to the loss on early extinguishment of debt, and a net tax benefit of $0.7 related to a revision of our previously accrued estimated income tax liability on the unrepatriated earnings of certain foreign subsidiaries as a result of the sale of our Coating Resins business.
As of September 30, 2013, the amount of gross unrecognized tax benefits for continuing operations is $16.9 (excluding interest) of which $13.6 would impact our effective tax rate, if recognized. The amount of gross unrecognized tax benefits at December 31, 2012 for continuing operations was $19.7 (excluding interest) of which $16.5 would impact our effective tax rate, if recognized.
We recognize interest and penalties related to unrecognized tax benefits in income tax expense in the consolidated statements of income. We had recorded a liability for the payment of interest and penalties (gross) for continuing operations, of approximately $2.0 as of December 31, 2012. Activity for the nine months ended September 30, 2013 included a $0.2 increase for additional accruals which was offset by $0.2 due to settlements and foreign exchange, thus resulting in a liability for the payment of interest of $2.0 as of September 30, 2013.
14. OTHER FINANCIAL INFORMATION
Dividends
On July 18, 2013, the Board of Directors declared a $0.125 per common share cash dividend, payable on August 26, 2013 to shareholders of record as of August 9, 2013. Cash dividends paid in the third quarter of 2013 and 2012 were $4.5 and $5.7, respectively, and for the nine months ended September 30, 2013 and 2012 were $17.1 and $20.2, respectively. Dividends paid in the first nine months of 2013 and 2012 include $1.8 and $3.0, respectively, paid by a majority owned subsidiary to its minority shareholder. On October 17, 2013, the Board of Directors declared a $0.125 per common share cash dividend, payable on November 25, 2013 to shareholders of record as of November 11, 2013.
Income taxes paid
Income taxes paid for the nine months ended September 30, 2013 and 2012 were $151.6 and $70.8, respectively. Included in 2013 is approximately $44.0 paid in the third quarter related to the tax gain in the disposal of the Coating Resins business. It also includes a $21.0 corporate income tax payment primarily related to the divestiture of the PSA product line, which was statutorily due on December 17, 2012, but was deferred to February 1, 2013 as the Internal Revenue Service provided special tax relief for taxpayers in the federally-declared disaster areas struck by Hurricane Sandy.
Interest
Interest paid for the nine months ended September 30, 2013 and 2012 was $32.6 and $35.8, respectively. Interest income for the nine months ended September 30, 2013 and 2012 was $1.3 and $3.0, respectively.
Stock repurchases
During the three and nine months ended September 30, 2013, we repurchased 1,397,579 and 10,174,755 shares of our common stock at a total cost of $108.1 and $750.1, respectively. There are no amounts remaining under the buyback program as of September 30, 2013. There were no repurchases in the first nine months of 2012.
15. SEGMENT INFORMATION
Segment changes
In the first quarter of 2013, we reorganized our former Engineered Materials and Umeco segments into two new segments, Aerospace Materials and Industrial Materials. These new segments are managed and reported separately as the markets and distribution channels are distinct. While their manufacturing assets and processes are similar, their supply chains are dissimilar.

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This follows our strategy of focusing on the aerospace and industrial markets separately and reflects how we operate the businesses. We also believe this is more clear and understandable to investors. The segment information presented herein reflects this change in our business segments. For more information on our segment reorganization, see our 2012 Annual Report on Form 10-K, as updated by the Current Report on Form 8-K filed with the SEC on April 18, 2013, related to the Company's changes in reportable segments.
As discussed in Note 3, we have elected to change our method of accounting for actuarial gains and losses for our continuing pension and OPEB plans. The new method recognizes actuarial gains and losses in our operating results in the year in which the gains and losses occur rather than amortizing them over future periods. Historically, total pension and OPEB costs have been allocated to each segment. In conjunction with the change in accounting principle, the service cost, which represents the benefits earned by active employees during the period, and amortization of prior service costs/credits will continue to be allocated to each segment. Interest costs, expected return on assets, and the MTM adjustment for pension and OPEB plans actuarial gains and losses will be included in corporate expense and not allocated to segments. Management believes this change in expense allocation will better reflect the operating results of each business and is consistent with management's review of the operating results of the segments. The following tables reflect for each business segment the retrospective application of this expense allocation change for each period presented.
As discussed in Note 5, the former Coating Resins segment is reported as discontinued operations for all periods presented.
Summarized segment information for our four continuing segments for the three and nine months ended September 30 is as follows: 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Net Sales:
 
 
 
 
 
 
 
Aerospace Materials (1)
 
 
 
 
 
 
 
Sales to external customers
$
235.9

 
$
220.8

 
$
721.7

 
$
645.1

Intersegment sales
0.1

 

 
0.4

 

Industrial Materials (1)
70.9

 
70.1

 
239.9

 
94.2

In Process Separation
91.2

 
98.1

 
286.4

 
289.9

Additive Technologies
 
 
 
 
 
 
 
Sales to external customers
65.9

 
66.4

 
207.1

 
208.2

Intersegment sales

 
0.2

 
0.3

 
0.6

Net sales from segments
464.0

 
455.6

 
1,455.8

 
1,238.0

Elimination of intersegment revenue
(0.1
)
 
(0.2
)
 
(0.7
)
 
(0.6
)
Total consolidated net sales
$
463.9

 
$
455.4

 
$
1,455.1

 
$
1,237.4

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
% of
Sales
 
2012
 
% of
Sales
 
2013
 
% of
Sales
 
2012
 
% of
Sales
Earnings from operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aerospace Materials (1)
$
40.7

 
17
%
 
$
40.4

 
18
%
 
$
140.4

 
19
%
 
$
126.7

 
20
%
Industrial Materials (1)
5.1

 
7
%
 
1.6

 
2
%
 
13.0

 
5
%
 
5.5

 
6
%
In Process Separation
20.4

 
22
%
 
25.4

 
26
%
 
66.6

 
23
%
 
77.0

 
27
%
Additive Technologies
9.0

 
14
%
 
10.3

 
16
%
 
30.1

 
15
%
 
31.9

 
15
%
Earnings from segments
75.2

 
16
%
 
77.7

 
17
%
 
250.1

 
17
%
 
241.1

 
19
%
Corporate and Unallocated, net (2) (3)
(11.0
)
 

 
(28.3
)
 
 
 
(30.8
)
 

 
(98.5
)
 

Total earnings from operations
$
64.2

 
14
%
 
$
49.4

 
11
%
 
$
219.3

 
15
%
 
$
142.6

 
12
%
 ______________________
(1)
For 2012, net sales and operating earnings for Aerospace Materials and Industrial Materials include amounts from the Umeco businesses from its acquisition on July 20, 2012.

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(2)
For the three and nine months ended September 30, 2013, corporate and unallocated includes restructuring charges of $4.5 and $5.1, respectively, for 2013 initiatives within Industrial Materials and Aerospace Materials to reduce costs associated with the acquired Umeco business, charges of $0.1 and $3.0, respectively, for the write down of certain manufacturing assets in our Nagpur, India facility, and charges of $0.7 and $1.2, respectively, for costs to divest the Umeco distribution business. For the nine months ended September 30, 2013, it also includes benefits of $1.9 for net MTM adjustments of our pension and postretirement benefit plans (including the impact of inventory capitalization). For the three and nine months ended September 30, 2012, corporate and unallocated includes net pre-tax charges of $4.6 and $16.0, respectively, for personnel reductions in the Umeco business and across corporate functions to mitigate continuing costs following the anticipated sale of Coating Resins, charges of $4.3 and $7.2, respectively, related to costs incurred for the acquisition of Umeco, and accelerated depreciation of $0.7 and $2.0, respectively, for the sale-leaseback of our Stamford facility treated as a financing transaction. For the nine months ended September 30, 2012, Corporate and unallocated also included $13.9 charge for net MTM adjustments of our pension and retirement plans.
(3)
Corporate and unallocated also included costs previously allocated to the operations of our discontinued Coating Resins segment of $12.2 for the nine months ended September 30, 2013, and $15.7 and $50.5, respectively, for the three and nine months ended September 30, 2012. Steps have been taken to eliminate or reduce some of these operating costs following the sale of the coatings business.  The 2013 amount included in Corporate and unallocated relates to the period prior to the divestiture and, as required, these costs are allocated to the remaining operating segments beginning in the second quarter of 2013, following the sale.
16. GOODWILL AND OTHER ACQUISITION INTANGIBLES
The following is the activity in the goodwill balances for each segment. 
 
Aerospace
Materials
 
Industrial Materials
 
In Process Separation
 
Additive
Technologies
 
Total
Balance, December 31, 2012: