Press Releases
Contact:
David M. Drillock
(973) 357-3249
Cytec
Announces Fourth Quarter 2009 Results
As-Adjusted EPS of $0.70, Significantly Above Prior Year
As-Adjusted EPS of $0.10
Excellent Cash Flow for Quarter and Full Year
2010 Outlook Provided
Woodland Park, New Jersey, January 28, 2010 – Cytec Industries
Inc. (NYSE:CYT) announced today net earnings for the fourth
quarter 2009 of $9.8 million or $0.20 per diluted share on net
sales of $752 million. Included in the quarter are several
special items that total $24.6 million of net expense after-tax
or $0.50 per diluted share and are outlined further in this
release. Excluding these special items, net earnings were $34.4
million or $0.70 per diluted share.
Net loss for the fourth quarter of 2008 was $350.7 million or
$7.39 per basic share on net sales of $698 million. Included in
the quarter results was a goodwill impairment charge of $358.3
million after-tax or $7.55 per basic share and several other
special items that totaled net $2.9 million after-tax income or
$0.06 per basic share. Excluding the goodwill impairment charge
and these special items, net earnings were $4.7 million or $0.10
per diluted share.
Shane Fleming, Chairman, President and Chief Executive Officer
commented, “We are pleased with the results of our fourth
quarter which reflect the significant impact of our cost
reduction and cash flow improvement efforts, particularly our
working capital initiative. Selling volumes in our Chemical
segments increased from improved demand and restocking
activities. In Engineered Materials, sales declined during the
quarter mostly due to significantly lower build rates in the
business and regional jet markets. In summary, we had an
excellent finish to a difficult year, our structural improvement
initiatives are in place, our balance sheet is strong and we
have built up good momentum going into 2010.”
Cytec Coating Resins sales increased 16% to $329
million; Operating Earnings increased to $17.6 million.
In Coating Resins, overall selling volumes were up by 21% versus
the fourth quarter 2008, due to improved demand and restocking
activities. Selling prices decreased by 12% in response to
competitive pressures and lower raw material costs while the
impact of changes in exchange rates increased sales by 7%.
Operating earnings of $17.6 million were up versus a loss of
$404.2 million in the fourth quarter 2008. Operating loss in
2008 includes a goodwill impairment charge of $385.0 million and
a charge of $1.4 million of accelerated depreciation related to
the exit of Radcure manufacturing at our Pampa, TX site.
Excluding these special items, 2008’s operating loss was $17.8
million. The increase in operating earnings in 2009 is
principally due to the higher selling volumes across each
product line. Net of selling price declines, raw material costs
were favorable versus the fourth quarter of 2008. In addition
operating earnings includes the benefits from the cost
improvement initiatives which were partially offset by higher
fixed costs per unit as the manufacturing plants ran at reduced
production rates to lower inventories further as part of the
working capital initiative.
Cytec Additive Technologies sales increased 3% to $61
million; Operating Earnings increased to $4.2 million.
In Additive Technologies, overall selling volumes were up 2%
versus the fourth quarter 2008, but after adjusting for the exit
of several commodity products and a product line divestiture
earlier in 2009, comparable volumes were up 18%. Selling prices
decreased by 3% and the impact of changes in exchange rates
increased sales by 4%.
Operating earnings of $4.2 million were up versus an operating
loss of $0.3 million in the fourth quarter of 2008 mainly as a
result of the higher selling volumes and reduced operating
costs. Net of selling price declines, raw material costs were
favorable versus the fourth quarter of 2008. This was only
partially offset by higher fixed costs per unit as the
manufacturing plants ran at reduced rates to reduce inventories
further as part of the working capital initiative.
Cytec In-Process Separation sales increased 10% to $81
million; Operating Earnings were flat with prior year at $15.2
million.
In Process Separation selling volumes increased by 13% versus
the fourth quarter 2008, primarily as a result of higher demand
principally from metal extractant customers. Selling prices
decreased by 6% and the impact of changes in exchange rates
increased sales by 3%.
Operating earnings of $15.2 million were essentially flat
compared to $15.3 million in the prior year quarter as higher
selling volumes were offset by lower selling prices, higher raw
material costs, and higher fixed costs per unit as the
manufacturing plants ran at reduced rates to reduce inventories
further as part of the working capital initiative.
Cytec Engineered Materials sales decreased by 5% to $178
million; Operating Earnings decreased to $22.8 million.
In Engineered Materials, selling volumes decreased by 6% versus
the fourth quarter 2008 driven primarily by build rate
reductions in the business and regional jets sector. Selling
prices were essentially flat and changes in exchange rates
increased sales by 1%.
Operating earnings of $22.8 million were down versus earnings of
$29.9 million in the prior year quarter, principally as a result
of lower selling volumes and higher fixed costs per unit as the
manufacturing plants ran at reduced production rates to reduce
inventories further as part of the working capital initiative.
This was only partially offset by lower raw material costs and
the benefits from the cost savings initiatives.
Cytec Building Block Chemicals sales increased by 10% to
$104 million; Operating Earnings increased to $0.3 million.
In Building Block Chemicals, selling volumes increased 38%
versus the fourth quarter 2008, which is primarily related to
improved demand levels. Selling prices decreased by 28% across
all product
lines due to lower raw material costs.
Operating earnings were $0.3 million compared to an operating
loss of $6.4 million in the fourth quarter 2008. This is
primarily due to the increased selling volumes and favorable raw
material costs which were partially offset by lower selling
prices and higher manufacturing costs mostly related to
scheduled maintenance and downtime in the acrylonitrile plant.
Special Items
In the fourth quarter of 2009 a number of special items were
recorded that resulted in a net pre-tax charge of $36.7 million
($24.6 million after-tax or $0.50 per diluted share) as follows:
-
Included in
Corporate and Unallocated, principally in manufacturing cost
of sales, is a pre-tax charge of $1.5 million ($0.8 million
after-tax or $0.02 per diluted share) associated with
various restructuring initiatives across Specialty
Chemicals, Engineered Materials, and Corporate operations.
-
Included in
Corporate and Unallocated in General and Administrative is a
net pre-tax charge of $5.2 million ($3.5 million after-tax
or $0.07 per diluted share) related to the aforementioned
restructuring initiatives.
-
Included in
Corporate and Unallocated, in manufacturing cost of sales is
a pre-tax non-cash charge of $19.7 million ($15.6 million
after-tax or $0.32 per diluted share) mainly due to
accelerated depreciation of plant assets at the recently
shutdown facility in Spain.
-
Included in
Corporate and Unallocated, a pre-tax asset impairment charge
of $4.3 million ($3.4 million after-tax or $0.07 per diluted
share) related to the write down of the land at our closed
facility in Spain to its estimated fair value.
-
Included in
other income/(expense) is a net pre-tax non-cash loss of
$12.2 million ($9.1 million after-tax or $0.18 per diluted
share) associated with a settlement of an existing pension
plan in an international jurisdiction. Also included in
other income/expense is a pre-tax gain of $6.2 million ($3.8
million after-tax or $0.08 per diluted share) related to a
legal settlement.
-
Included in
income tax expense is a benefit of $4.0 million or $0.08 per
diluted share related to a favorable tax adjustment for an
audit settlement in an international jurisdiction.
Income Tax
Expense
The tax benefit for the fourth quarter of 2009 was $0.1 million,
compared with a tax benefit of $23.7 million in the fourth
quarter of 2008. Included in the provision for the fourth
quarter of 2009 is the aforementioned special item net gain of
$4.0 million related to a favorable tax adjustment for an audit
settlement in an international jurisdiction. For the fourth
quarter of 2009 the overall underlying annual effective tax rate
was reduced to 30.8% from the previously recorded 34% during the
first nine months of 2009. The reduction in income tax expense
related to this cumulative adjustment included in fourth quarter
results was $1.5 million or $0.03 per diluted share. The
underlying annual effective tax rate for 2008 was 32%.
Cash Flow
David Drillock, Vice President and Chief Financial Officer
commented, “Cash flow from operations was $169 million for the
fourth quarter 2009 and our full year cash flow from operations
was $564 million. During the quarter excellent progress
continued related to our working capital initiative. Trade
accounts receivable decreased by $48 million and days
outstanding of approximately 45 days were down 5 days versus the
end of the third quarter of 2009. Inventory decreased by $34
million and days on hand of approximately 62 days was reduced by
6 days versus the third quarter of 2009. Accounts payable
decreased by $6 million in the quarter and our days payable
outstanding of approximately 45 days decreased by 1 day versus
the third quarter of 2009. We believe the gains made from the
working capital initiative are sustainable going forward. As a
result of this and many other efforts to improve cash flow
during 2009, our cash balance at year end was $262 million
versus $55 million at year end 2008.
“Capital spending for the quarter was $35 million with
approximately 39% of the spending attributable to Engineered
Materials, 10% to Building Block Chemicals and 43% to Specialty
Chemical segments. Capital spending for the full year 2009 was
$194 million and our expectation for capital spending for the
full year 2010 is to be in a range of $140 million to $160
million.
Mr. Drillock continued, “We further reduced our debt by $20
million in the quarter which brings our year to date debt
reduction to $173 million representing a significant improvement
from the beginning of the year. Including the actions we took in
the second and third quarter to improve our debt maturity
profile, this represents a significant strengthening of our
balance sheet.”
2010 Outlook
Mr. Fleming commented, “Our results this past quarter continue
to demonstrate the excellent progress we have made with our
restructuring efforts, our working capital initiative and
importantly staying close to our customers. These efforts plus
the demand improvement and restocking in the fourth quarter
gives us good momentum coming into 2010. However, we remain
cautious about the fragility of the economic recovery in 2010.
There are a number of risks in the global economy that we
believe will make any further improvement in underlying demand
uncertain and uneven. Our view is that oil prices will average
approximately $80 per barrel in 2010 but the cost of oil will be
volatile throughout 2010 which will impact many of our raw
materials. We must remain vigilant to recover any spikes in raw
material costs. Our structural cost savings initiatives are in
place replacing the temporary cost measures we took during 2009.
We are forecasting 2010 demand levels in our Specialty Chemical
segments to be relatively flat with the second half of 2009
levels and Engineered Materials 2010 demand is expected to be
down slightly from full year 2009 levels. Taking all this into
account and the additional details as provided below, our
guidance for 2010 full year adjusted diluted earnings per share
is a range of $1.90 to $2.40. This wide range reflects the
uncertainty in the global economy but is a significant
improvement over 2009 results. Our guidance by segment follows.”
The trend of converting to environmentally friendly coating
resins continues and there are a number of opportunities for
eco-friendly technologies. Overall, Coating Resins selling
volumes in 2010 are projected to improve approximately 7% over
2009. In 2009 Coating Resins saw sequential improvement from the
February low point partially due to the benefit from restocking
activities through 2009. It is still too early to project
steadily improving demand and the Coating Resins sales forecast
approximates the second half of 2009’s run rate. The forecast
assumes higher raw material costs in 2010. Taking all the above
into account, sales are projected to be in a range of $1.25 to
$1.40 billion and expectations for operating earnings is to be
in a range of $45 to $60 million for this segment, up
significantly from the 2009 operating loss of $3 million.
Expectations for Additives Technologies are similar to Coating
Resins. The expansion of the technologically differentiated
products continues to increase, particularly in Asia. Overall,
Additive Technologies expectations are for selling volumes to
improve approximately 3% over 2009 excluding the impact of the
product line divestitures in 2009. Taking this into account,
sales are projected to be in a range of $200 million to $230
million and operating earnings are projected to be in a range of
$15 to $20 million for this segment, up from the 2009 operating
earnings of $11 million.
The long term trend of increasing infrastructure building in
emerging markets continues to favor the In-Process Separation
segment as it relates to both the mining and phosphine chemicals
product lines. There continues to be excellent acceptance of
Cytec’s new product introductions, particularly in the copper,
alumina and other base and precious metals markets. However,
there is some uncertainty about the sustainability of global
metals demand in 2010. Factoring in all the above, expectations
are for full year sales to be in a range of $280 million to $310
million and for full year operating earnings to be in a range of
$40 to $50 million, up from the 2009 operating earnings of $35
million.
In Engineered Materials, the trend of higher levels of
composites in aircraft remains intact and there continue to be a
large number of growth opportunities not only in the U.S., but
internationally as well. For 2010 though, the expectation is for
modest declines in selling volumes in the business and regional
jet and the large commercial aircraft sectors due to relatively
high sales in the first part of 2009. Build rates in these
sectors are expected to be essentially flat to slightly down.
Sales volumes in the military sector are expected to be down
from 2009 as production on the F-22 program winds down and the
Joint Strike fighter is in the early stages of ramp up. Taking
this into account, full year sales for 2010 are projected to be
in a range of $650 million to $680 million and operating
earnings are expected to be in a range of $80 to $90 million for
this segment, down from 2009 operating earnings of $96 million.
In Building Block Chemicals, we are expecting modest improvement
in demand for acrylonitrile, but melamine remains challenged by
weak demand in the building and construction market. Selling
prices are expected to be higher in this segment due to
increasing raw material costs but selling volumes are expected
to be essentially flat. Taking this into account, full year
sales are projected to be approximately $400 million and full
year operating earnings to be in a range of $7 to $10 million,
compared to 2009 operating earnings of $10 million.
The guidance for Corporate and Unallocated is an operating
expense of approximately $18 million for the year, Other Expense
is forecasted to be approximately $1 million, and interest
expense, net, is expected to be between $32 and $34 million. The
forecast for the underlying annual tax rate for ongoing
operations is expected to be in a range of 31% to 34%. This
range reflects the uncertainty of whether certain U.S. favorable
tax provisions that expired in 2009 will be reinstated.
In closing, Mr. Fleming commented, “I am extremely pleased and
proud of the people of Cytec for the successful execution of our
restructuring, working capital and other important improvement
initiatives in 2009. While there are still many risks and
uncertainties ahead in 2010, these efforts will enable us to
better leverage future sales growth into stronger earnings and
cash flow, real evidence of which was demonstrated in the second
half of 2009. We are in a great position to deliver our growth
strategy of bringing high-performance product and application
technologies to market that create value for our customers, a
strategy that will deliver increasing value and returns for our
shareholders.”
Full Year Results
Net loss for full year ended December 31, 2009 was $2.5 million
or $0.05 per basic share on sales of $2,790 million. Included in
the results for the full year ended December 31, 2009 were
special items that total a net pre-tax charge of $97.2 million
($66.6 million after-tax or $1.37 per basic share) as follows:
-
Pre-tax net
restructuring charges of $60.2 million ($40.5 million
after-tax or $0.84 per basic share).
-
A pre-tax
non-cash charge of $25.7 million ($19.8 million after-tax or
$0.41 per basic share) mainly due to accelerated
depreciation of plant assets at our recently shutdown
facility in Spain.
-
A pre-tax asset
impairment charge of $4.3 million ($3.4 million after-tax or
$0.07 per basic share) related to the write down of the land
at our closed facility in Spain to its estimated fair value.
-
A net pre-tax
charge of $1.4 million ($1.9 million after-tax or $0.04 per
basic share) for the exit of the polyurethanes product line.
-
A net pre-tax
loss of $8.6 million ($5.2 million after-tax or $0.11 per
basic share) associated with the premium for the debt
tender.
-
A pre-tax,
non-cash gain of $8.9 million ($5.5 million after-tax or
$0.12 per basic share) as a result of a land sale for which
the proceeds were received in 2004.
-
A pre-tax gain
of $6.2 million ($3.8 million after-tax or $0.08 per basic
share) related to a legal settlement.
-
A pre-tax,
non-cash charge of $12.2 million ($9.1 million after-tax or
$0.18 per basic share) relating to a pension settlement in
an international jurisdiction.
-
A benefit of
$4.0 million or $0.08 per basic share related to a favorable
tax adjustment for an audit settlement regarding non-US tax
amortizable goodwill.
Excluding the above special items, net earnings for the full
year 2009 were $64.1 million or $1.32 per diluted share.
Net loss for the
full year ended December 31, 2008 was $198.8 million or $4.16
per basic share on sales of $3,640 million. Included in the
results for the full year ended December 31, 2008 were special
items that total a net pre-tax charge of $399.4 million ($365.8
million after-tax or $7.67 per basic share) as follows:
-
A pre-tax
goodwill impairment charge of $385.0 million ($358.3 million
after-tax or $7.50 per basic share) related to the Coating
Resins segment.
-
Net pre-tax
restructuring charges of $14.9 million ($10.4 million
after-tax or $0.22 per basic share) primarily related to
restructuring initiatives mostly within Specialty Chemicals.
-
A pre-tax
charge of $5.6 million ($3.6 million after-tax or $0.08 per
basic share) recorded in the Coating Resins segment for
accelerated depreciation of our Pampa, TX site.
-
A pre-tax gain
of $6.1 million ($4.0 million after-tax or $0.08 per basic
share) for a legal settlement recorded in Corporate and
Unallocated.
-
Included in the
income tax benefit is a $2.6 million gain or $0.05 per basic
share related to a favorable tax development related to the
sale of the water treatment business in 2007.
Excluding the above special items, net earnings for the full
year 2008 were $167.0 million or $3.46 per diluted share.
Investor
Conference Call to be Held on January 29, 2010 at 11:00am ET
Cytec will host their fourth quarter earnings release conference
call on January 29, 2010 at 11:00am ET. The conference call will
also be simultaneously webcast for all investors from Cytec’s
website www.cytec.com. Select the Investor Relations page to
access the live webcast.
Use of Non-GAAP Measures
Management believes that net earnings excluding special items
and diluted earnings per share excluding special items, which
are non-GAAP measurements, are meaningful to investors because
they provide a view of the Company with respect to ongoing
operating results. Special items represent significant charges
or credits that are important to an understanding of the
Company’s overall operating results in the period presented.
Such non-GAAP measurements are not recognized in accordance with
generally accepted accounting principles (GAAP) and should not
be viewed as an alternative to GAAP measures of performance. A
reconciliation of GAAP to non-GAAP measurements can be found at
the end of this release.
Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained
herein, statements contained in this release may constitute
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. Achieving the results
described in these statements involves a number of risks,
uncertainties and other factors that could cause actual results
to differ materially, as discussed in Cytec’s filings with the
Securities and Exchange Commission.
Corporate Profile
Cytec Industries Inc. is a global specialty chemicals and
materials company focused on developing, manufacturing and
selling value-added products. Our products serve a diverse range
of end markets including aerospace, adhesives, automotive and
industrial coatings, chemical intermediates, inks, mining and
plastics. We use our technology and application development
expertise to create chemical and material solutions that are
formulated to perform specific and important functions in the
finished products of our customers.
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