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Contact:
Jodi Allen (Investor Relations)
(973) 357-3283
Cytec Announces Fourth Quarter and
Full Year 2012 Results
Fourth Quarter As-Adjusted Continuing EPS of $0.72;
Fourth Quarter As-Adjusted Total EPS of $1.10; Up 28%
Full Year As-Adjusted Continuing EPS of $3.02
Full Year As-Adjusted Total EPS of $5.45 up 20%
WOODLAND PARK, N.J., January 31, 2013 -- Cytec Industries
Inc. (NYSE: CYT) announced today net earnings attributable to
Cytec for the fourth quarter 2012 of $45.8 million or $0.99 per
diluted share. Net sales from continuing operations were
$470.7 million. Earnings from continuing operations were
$21.4 million or $0.46 per diluted share. Earnings from
discontinued operations were $25.1 million or $0.54 per diluted
share. Net earnings attributable to non-controlling
interests (which are associated with the discontinued
operations) were $0.7 million or $0.01 per diluted share.
Included in the quarter are several special items that total
$5.4 million of net charges after-tax, or $0.11 per diluted
share, and are outlined further in this release ($0.26 of net
expense attributable to continuing operations and $0.15 of net
benefit attributable to discontinued operations).
Excluding these special items, net earnings attributable to
Cytec were $51.2 million or $1.10 per diluted share, earnings
from continuing operations were $33.5 million or $0.72 per
diluted share, and earnings from discontinued operations were
$17.7 million or $0.38 per diluted share.
Net earnings attributable to Cytec for the fourth quarter of
2011 were $41.6 million or $0.88 per diluted share. Net sales
from continuing operations were $369.5 million. Earnings from
continuing operations were $30.0 million or $0.64 per diluted
share. Earnings from discontinued operations were $12.6
million or $0.26 per diluted share. Net earnings
attributable to non-controlling interests (which are associated
with the discontinued operations) were $1.0 million or $0.02 per
diluted share. Included in the quarter were several
special items that totaled $1.3 million of net benefit after-tax
or $0.02 per diluted share ($0.03 of net expense attributable to
continuing operations and $0.05 of net benefit attributable to
discontinued operations). Excluding the special items, earnings
attributable to Cytec were $40.3 million or $0.86 per diluted
share, earnings from continuing operations were $31.4 million or
$0.67 per diluted share, and earnings from discontinued
operations were $8.9 million or $0.19 per diluted share.
Shane Fleming, Chairman, President and Chief Executive Officer
commented, “Our fourth quarter results reflect the continued
solid performance of our Engineered Materials and In Process
Separation segments, delivering higher selling volumes and
prices versus the same period a year ago. In the
Additive Technologies segment, demand remained weak for certain
specialty additive products in North America and Europe yet we
were able to maintain good operating margins. Overall, our
sales in continuing operations were up 27% over the prior year,
mostly due to our Umeco acquisition.”
Mr. Fleming continued, “We remain on track for a first quarter
close of our Coating Resins business divestiture and are
awaiting final regulatory approvals.”
Cytec Engineered Materials sales increased 9% to $231.0
million; Operating Earnings decreased to $41.2 million.
In Engineered Materials, selling volumes increased by 5% versus
the fourth quarter 2011 mostly driven by higher build rates in
the large commercial transport and civil rotorcraft sectors.
Higher selling prices increased sales by 4%.
Operating earnings of $41.2 million were down versus earnings of
$41.6 million in the prior year quarter, primarily due to higher
spending in manufacturing to support the higher growth levels
and lower fixed costs absorption resulting from planned
inventory reductions. These unfavorable impacts were
partially offset by higher selling prices and volumes.
Prior year quarter results also included approximately $2.7
million of one-time retroactive price increase adjustments.
Cytec’s newly acquired business, Umeco, reported sales
of $83.3 million and as-adjusted operating earnings of $3.8
million.
On July 20, 2012, we completed the purchase of our previously
announced acquisition of Umeco Plc. Sales in the Process
Materials (vacuum bagging) product line were in-line with our
expectations and sales of Structural Materials fell short of our
expectations by approximately $4.5 million, mostly in Europe,
and primarily due to sales orders deferred into 2013 and softer
demand in high-end automotive programs.
As-adjusted operating earnings were $3.8 million for the quarter
(which excludes $1.1 million of amortization of inventory
step-up) as the impact from lower selling volumes of structural
materials products was partially offset by lower operating
costs.
Cytec In Process Separation sales increased 5% to $94.2
million; Operating Earnings decreased to $17.4 million.
In Process Separation selling volumes increased by 1% versus the
fourth quarter of 2011. Solid demand for mining products related
to copper and other base metals were partially offset by soft
demand in the alumina market as well as lower sales of phosphine
chemicals due largely to a planned maintenance turnaround in our
phosphine plant. Higher selling prices increased sales by
4%.
Operating earnings were $17.4 million versus $20.4 million in
the prior year quarter, with the shortfall principally due to
higher manufacturing costs associated with the phosphine plant
turnaround, targeted inventory control, increased operating
expenses to support future growth in the segment, and a less
favorable product mix.
Cytec Additive Technologies sales decreased 7% to $62.2
million; Operating Earnings increased to $8.2 million.
In Additive Technologies, overall selling volumes were down 6%
versus the fourth quarter 2011 primarily due to lower demand for
specialty additive products in North America and Europe.
The impact of exchange rates decreased sales by 1%.
Operating earnings of $8.2 million were up versus $7.5 million
in the fourth quarter of 2011. The higher earnings mostly
resulted from a favorable product mix and lower raw material
costs.
Corporate and Unallocated
For the three months and full year ended December 31, 2012,
continuing costs previously allocated to Coating Resins but now
included as part of corporate and unallocated were $16.0 and
$66.5 million, respectively. For the three months and full
year ended December 31, 2011, these costs were $15.9 and $66.0
million, respectively.
Discontinued Operations
The Coating Resins segment is classified as discontinued
operations. The following covers Coating Resins
sales and earnings as they would have been reported if they had
not been required to be classified as discontinued operations.
Sales were $324.1 million, down 10% in the fourth quarter 2012
versus $361.3 million in the same period 2011. Selling volumes
were down 2% excluding the impact of the divestiture of the
pressure sensitive adhesives business of 5%. Selling
prices were down 1% year over year and the impact of changes in
exchange rates decreased sales by 2%. Operating earnings
increased to $11.9 million versus operating loss of $0.4 million
in the fourth quarter of 2011.
Special Items
In the fourth quarter of 2012 a number of special items were
recorded in continuing operations that resulted in a net pre-tax
charge of $24.7 million ($12.1 million expense after-tax) as
follows:
- Included in Corporate Unallocated as Research and
process development expense is a pre-tax charge of $0.4
million ($0.2 million after-tax or $0.00 per diluted share)
related to incremental accelerated depreciation related to
the sale-leaseback transaction of our research and
development facility in Stamford, Connecticut in the third
quarter of 2011.
- Included in Corporate Unallocated as Administrative and
general expense is a pre-tax charge of $1.2 million ($1.0
million after-tax or $0.02 per diluted share) related to
Umeco acquisition costs. For tax purposes, these costs
will be predominantly capitalized as part of the
transaction.
- Included in Corporate Unallocated, principally in
Administrative and general and Selling and technical
services, is pre-tax net restructuring charges of $5.3
million ($3.6 million after-tax or $0.08 per diluted share)
primarily related to initiatives to reduce stranded costs
resulting from the sale of Coating Resins and personnel
reductions in the acquired Umeco business.
- Included in the Umeco segment as Manufacturing cost of
sales is a pre-tax charge of $1.1 million ($0.7 million
after-tax or $0.01 per diluted share) related to a purchase
accounting adjustment for the difference between assigning a
fair value to the acquired Umeco finished goods inventory at
the date of acquisition and normal manufacturing cost.
- Included in (Loss)/Gain on sale of assets is a pre-tax
loss of $16.7 million ($10.5 million after-tax or $0.23 per
diluted share) related to the aforementioned sale-lease back
transaction in Stamford. The recognition of the sale
was previously deferred due to an open environmental
obligation. The transaction was recognized as a sale
upon the satisfactory completion of our obligation in the
fourth quarter of 2012, and as a result, we recognized the
loss for the remaining excess carrying value.
- Included in Income tax (benefit)/provision is $3.9
million of income tax benefit ($0.08 per diluted share)
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 intended
sale of our Coating Resins segment. Such revision is
primarily due to changes in the tax attributes of certain
foreign subsidiaries.
In addition, a number of special items were recorded to
discontinued operations that resulted in a net pre-tax benefit
of $11.1 million ($6.7 million benefit after-tax).
In the fourth quarter of 2011 a number of special items were
recorded in continuing operations that resulted in a net pre-tax
charge of $2.2 million ($1.4 million expense after-tax) as
follows:
- Included in Corporate and Unallocated principally in
Manufacturing cost of sales is a pre-tax restructuring
charge of $0.1 million ($0.1 million after-tax or $0.00 per
diluted share).
- Included in Corporate Unallocated as Research and
process development expense is a pre-tax charge of $0.7
million ($0.4 million after-tax or $0.01 per diluted share)
related to incremental accelerated depreciation related to
the sale-leaseback transaction of our research and
development facility in Stamford, Connecticut in the fourth
quarter of 2011.
- Included in Manufacturing cost of sales and Other
expense, net is a pre-tax charge of $1.4 million ($0.9
million after-tax or $0.02 per diluted share) related to
adjustments to environmental liabilities at our active and
inactive locations.
In addition, a number of special items were recorded to
discontinued operations that resulted in a net pre-tax benefit
of $3.9 million ($2.7 million benefit after-tax).
Income Tax (Benefit)/Expense
The income tax benefit related to continuing operations for the
fourth quarter of 2012 was $4.1 million, compared with a tax
expense of $7.7 million in the fourth quarter of 2011.
Included in the income tax benefit for the fourth quarter of
2012 is a tax benefit of $3.1 million or $0.07 per diluted share
related to the expiration of the statute of limitations in
certain international tax jurisdictions. Excluding this item and
the impact from the special items previously noted, the overall
underlying annual tax rate for the fourth quarter of 2012 was
30.6% versus the underlying annual tax rate in the fourth
quarter of 2011 of 28.6%. The overall underlying annual
tax rate for the quarter of 30.6% is lower than the 31.5%
estimated rate at the end of the third quarter of 2012.
The favorable impact of the lower rate related to the first nine
months of 2012 was about $1.3 million or $0.03 per diluted
share.
Cash Flow
David Drillock, Vice President and Chief Financial Officer
commented, “On a continuing basis, our average net working
capital days during the quarter were down 12 days at 83 days
compared to the third quarter of 2012. Average accounts
receivable and payable days were up 1 day and 2 days,
respectively, compared with the third quarter of 2012.
Average inventory days were down 10 days to 82 days compared
with the third quarter of 2012, mostly due to aforementioned
inventory reduction in Engineered Materials and also in In
Process Separation.
“Capital spending for continuing operations in the quarter was
$61million with majority of the spending attributable to our
growth platforms. Our expectation for capital spending for the
full year 2013 is approximately $300 million, mostly related to
previously announced manufacturing capacity expansions in the
Engineered Materials and In Process Separation segments.”
2013 Outlook
Mr. Fleming commented, “2012 was a transformational year for
Cytec and we continue to make excellent progress on the Umeco
integration and Coating Resins separation activities. As
we mentioned previously, we are planning for a change in our
business segment reporting structure to align our composite
material resources, assets and strategy with target end markets
(Aerospace and Industrial). Our guidance for 2013 full
year adjusted diluted earnings per share for continuing
operations is in a range of $4.70 to $4.95 on sales from
continuing operations of approximately $2.0 billion. This
guidance assumes a March 31st closing of the Coating Resins
sale. The timing of the closing will impact our share
repurchase plan, actions on stranded cost reductions, and
reallocation of remaining stranded costs back to the operating
segments. Given a first quarter close of the Coating
Resins transaction, we plan to provide detailed 2013 guidance
under the new business segments when we release our first
quarter results in April.”
“Overall, I expect 2013 to be a year of continued growth across
our portfolio of businesses. We expect Engineered
Materials growth of about 10% with estimated annual sales in a
range of $975 million to $1,005 million, driven by build rates
in the large commercial transport and business jet sectors.
Expected growth in the industrial composites markets will be
moderated by macroeconomic conditions, particularly in Europe.
Our estimated annual sales for the Umeco business are in the
range of $315 million to $335 million. We expect In Process
Separation growth of approximately 10% with estimated annual
sales in the range of $410 million to $430 million, supported by
increased base metal demand and the expanded use of our new
technologies as we continue to penetrate new markets and
geographies. We anticipate modest growth in Additive
Technologies of about 3-4% with an estimate sales range of $275
million to $285 million as the business still faces
macroeconomic headwinds in certain markets but has the ability
to grow in the differentiated product lines. Therefore,
despite the modest growth outlook for the global economy in
2013, I remain optimistic about Cytec’s growth potential given
our new company profile and the opportunities in our composites
and specialty chemicals businesses. We remain focused on
executing our strategic initiatives to deliver growth and create
value for our shareholders.”
Full Year Results
Net earnings attributable to Cytec for the full year ended
December 31, 2012 were $188.0 million or $4.02 per diluted share
on net sales from continuing operations of $1,708.1 million.
Earnings from continuing operations were $91.3 million or $1.95
per diluted share. Earnings from discontinued operations
were $98.8 million or $2.11 per diluted share. Net
earnings attributable to noncontrolling interests (which are
associated with the discontinued operations) were $2.1 million
or $0.04 per diluted share.
Special Items
During the full year ended December 31, 2012, a number of
special items were recorded in continuing operations that
resulted in net pre-tax charges of $55.4 million ($49.9 million
after-tax) as follows:
- Included in Corporate and Unallocated as Research and
process development is a pre-tax charge of $2.5 million
($1.5 million after-tax or $0.03 per diluted share) related
to incremental accelerated depreciation related to the
sale-leaseback transaction of our research and development
facility in Stamford, Connecticut in the third quarter of
2011.
- Included in Corporate and Unallocated as Administrative
and general expense is a pre-tax charge of $8.4 million
($8.2 million after-tax or $0.18 per diluted share) related
to Umeco acquisition costs. For tax purposes, these
costs will be predominantly capitalized as part of the
transaction.
- Included in Corporate and Unallocated principally in
Administrative and general and Manufacturing cost of sales
are pre-tax net restructuring charges of $21.2 million
($14.6 million after-tax or $0.31 per diluted share)
primarily related to initiatives to reduce stranded costs
resulting from the sale of Coating Resins and personnel
reductions in the acquired Umeco business.
- Included in the Umeco segment as Manufacturing cost of
sales is a pre-tax charge of $5.6 million ($3.8
million after-tax or $0.08 per diluted share) related to
purchase accounting for the difference between assigning a
fair value to the acquired Umeco finished goods inventory at
the date of acquisition and normal manufacturing cost.
- Included in Other expense, net is a pre-tax charge of
$1.1 million ($0.7 million after-tax or $0.01 per diluted
share) related to an exchange loss recorded in connection
with an acquired Umeco intercompany loan which was settled
after the acquisition.
- Included in the Income tax (benefit)/provision is $10.6
million of income tax expense ($0.23 per diluted share)
related to the sale process of our Coating Resins segment.
Accounting rules require establishing a tax liability on the
unrepatriated earnings of foreign subsidiaries if it is
management’s intention to no longer permanently reinvest
such earnings. As a result of the intended sale of
Coatings Resins, management’s intentions changed with regard
to a portion of the unrepatriated earnings of certain
foreign subsidiaries. Therefore, included in the $10.6
million is $3.1 million of tax expense incurred due to the
repatriation of certain earnings during 2012 and an
estimated $7.5 million to be incurred on the future
repatriation of other earnings, subsequent to the sale of
Coating Resins.
- Included in (Loss)/Gain on sale of assets is a pre-tax
loss of $16.7 million ($10.5 million after-tax or $0.23 per
diluted share) related to the aforementioned sale-lease back
transaction in Stamford. The recognition of the sale
was previously deferred due to an open environmental
obligation. The transaction was recognized as a sale
upon the satisfactory completion of our obligation in the
fourth quarter of 2012, and as a result, we recognized the
loss for the remaining excess carrying value.
In addition, a number of special items were recorded in
discontinued operations that resulted in a net pre-tax benefit
of $4.4 million ($17.3 million expense after-tax).
Excluding these special items, net earnings attributable to
Cytec were $255.2 million or $5.45 per diluted share, earnings
from continuing operations were $141.2 million or $3.02 per
diluted share, and earnings from discontinued operations were
$114.0 million or $2.43 per diluted share.
Net earnings for the full year ended December 31, 2011 were
$207.8 million or $4.24 per diluted share on net sales from
continuing operations of $1,415.9 million. Earnings from
continuing operations were $84.0 million or $1.71 per diluted
share. Earnings from discontinued operations were $126.9
million or $2.59 per diluted share. Net earnings
attributable to non-controlling interests (which are associated
with the discontinued operations) were $3.1 million or $0.06 per
diluted share.
For the full year ended December 31, 2011, a number of special
items were recorded in continuing operations that resulted in
net pre-tax charges of $4.0 million ($2.4 million expense
after-tax) as follows:
- Included in Corporate and Unallocated principally in
Manufacturing cost of sales is a pre-tax net restructuring
charge of $0.8 million ($0.5 million after-tax or $0.01 per
diluted share).
- Included in Corporate and Unallocated as Research and
process development is a pre-tax charge of $0.7 million
($0.4 million after-tax or $0.01 per diluted share) related
to incremental accelerated depreciation related to the
sale-leaseback transaction of our research and development
facility in Stamford, Connecticut in the third quarter of
2011.
- Included in (Loss)/Gain on sale of assets is a pre-tax
gain of $3.3 million ($2.1 million after-tax or $0.04 per
diluted share) related to a sale of land at our
manufacturing site in Colombia which was shutdown in the
second half of 2009.
- Included primarily in Other expense, net is a pre-tax
charge of $5.8 million ($3.6 million after-tax or $0.07 per
diluted share) related to an increase in the environmental
liability at inactive sites for updated estimates of future
remedial costs.
In addition, a number of special items were recorded to
discontinued operations that resulted in a net pre-tax charge of
$16.3 million ($11.4 million expense after-tax).
Excluding these special items, net earnings attributable to
Cytec were $221.6 million or $4.52 per diluted share, earnings
from continuing operations were $86.4 million or $1.76 per
diluted share, and earnings from discontinued operations were
$135.2 million or $2.76 per diluted share.
Income Tax Expense
Income tax expense related to continuing operations for the full
year 2012 was $40.1 million, compared with a tax expense of
$30.3 million in the full year 2011. Included in income
tax expense for 2012 is a tax benefit of $11.6 million or $0.25
per diluted share related to the reversal of tax reserves
primarily due to the settlement of U.S. tax audits and the
expiration of the statute of limitations in certain
international tax jurisdictions.
Investor Conference Call to be Held on Friday, February
1, 2013 at 11:00am ET
Cytec will host their fourth quarter earnings release conference
call on February 1, 2013 at 11:00am ET.
The conference call will also be simultaneously webcast for all
investors from Cytec’s website.
Select the Investor Relations page to access the live webcast.
Use of Non-GAAP Measures
Management believes that net earnings from continuing operations
attributable to Cytec and earnings from discontinued operations,
excluding special items and diluted earnings per share
(continuing operations attributable to Cytec and earnings from
discontinued operations) 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’s vision is to deliver specialty material and
chemical technologies beyond our customers’ imagination. Our
focus on innovation, advanced technology and application
expertise enables us to develop, manufacture and sell products
that change the way our customers do business. Our pioneering
products perform specific and important functions for our
customers, enabling them to offer innovative solutions to the
industries that they serve. Our products serve a diverse range
of end markets including aerospace and industrial materials,
mining and plastics.
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