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Jodi Allen
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Cytec Announces First Quarter 2008 Results
Reaffirms Full Year Earnings Guidance
West Paterson, New Jersey, April 17, 2008 – Cytec Industries
Inc. (NYSE:CYT) announced today net earnings for the first
quarter 2008 of $49.1 million or $1.01 per diluted share on net
sales of $973 million. Included in the quarter are several
special items that total $3.4 million expense after-tax or $0.07
per diluted share and are outlined further in this release.
Excluding these special items, net earnings were $52.5 million
or $1.08 per diluted share.
Net earnings for the first quarter of 2007 were $51.7 million,
or $1.05 per diluted share, on net sales of $864 million.
Included in that quarter were several special items that total
$14.4 million income after-tax or $0.29 per diluted share and
are outlined further in this release. Excluding these special
items, net earnings were $37.3 million or $0.76 per diluted
share.
David Lilley, Chairman, President and Chief Executive Officer
said, “Our earnings per share, excluding special items, showed
good improvement versus the same period in 2007, up 42%. The
Engineered Materials segment had a strong quarter as selling
volumes were significantly higher than the prior year,
particularly in the large commercial aircraft, and regional and
business jet sectors. In the Specialty Chemicals segment, demand
in North America was weak while demand in Europe softened in the
latter half of the quarter. Yet, compared to the same period
last year, our earnings did improve as a result of increased
selling prices and the benefits from our operational excellence
initiatives. In addition, Building Block Chemicals contributed
to the earnings growth primarily as a result of higher selling
prices which more than offset significantly higher raw material
costs.”
Cytec Performance Chemicals Sales increased 2% to $183
million; Operating Earnings increased to $14.2 million.
Mr. Lilley continued, “In Cytec Performance Chemicals, overall
selling volumes were down 4% primarily due to the final phase of
the divestiture of the water treatment product line. In
addition, sales were down in Polymer Additives which reflects
our decision to exit certain commodity product lines. Mining and
Phosphine Chemicals both increased their volumes. Selling prices
increased by 2% and the impact of exchange rates increased sales
by 4%.”
“Operating earnings of $14.2 million were up compared to the
$13.0 million in the first quarter of 2007. The increase is due
primarily to the improved earnings in the Polymer Additives
product line resulting from our focus on selling higher-value
products plus the benefits of our restructuring initiatives.”
Cytec Surface Specialties Sales increased 11% to $449
million; Operating Earnings increased to $20.1 million.
“In Cytec Surface Specialties, overall selling volumes were flat
with continued weak demand in North America and some softening
in Europe. However, we continue to achieve good volume growth in
Asia and Latin America. Selling prices increased by 1% and the
impact of exchange rate changes increased sales by 10%.”
“Operating earnings of $20.1 million were up compared to the
$15.7 million in the first quarter of 2007 and this is
principally due to the combined impact of higher selling prices
and lower raw materials partially offset by the accelerated
depreciation ($1.4M pre-tax) at the Pampa, TX manufacturing site
that we expect to exit later in the year, and other inflation
related cost increases.”
Cytec Engineered Materials Sales increased 23% to $200
million; Operating Earnings increased to $44.5 million.
“In Cytec Engineered Materials, selling volumes increased by 20%
and selling prices increased 3%. The selling volume increase was
primarily in the large commercial transport, regional and
business jet sectors.”
“Operating earnings of $44.5 million were up compared to the
$32.6 million in the first quarter of 2007. The favorable impact
of the higher selling volumes and selling prices was partially
offset by increased raw material costs and higher manufacturing
costs as a result of the increased production volumes. The
business also had planned increases in research and technical
service expenses related to technology investments.”
Building Block Chemicals Sales increased 21% to $141 million;
Operating Earnings increased to $5.9 million.
“In Building Block Chemicals, selling volumes decreased by 10%
and selling prices increased by 31%. The decrease in selling
volumes came primarily from acrylonitrile, as the 2007 period
included shipments delayed from 2006.”
“Operating earnings increased to $5.9 million compared to $2.6
million in the first quarter of 2007. The increase was mostly
due to the higher selling prices which more than offset higher
raw material costs.”
Special Items
David M. Drillock, Vice President and Chief Financial Officer
commented, “We recorded a number of special items in the first
quarter of 2008 that total to a pre-tax charge of $4.8 million
($3.4 million expense after-tax or $0.07 per diluted share) as
follows:
- Included in manufacturing cost of sales in Corporate and
Unallocated is a pre-tax charge of $1.9 million ($1.4 million
after-tax or $0.03 per diluted share) for additional
restructuring costs associated with Specialty Chemicals
manufacturing operations in West Virginia, Connecticut, and
Dijon, France. These expenses were anticipated but not accruable
when the plans were announced.
- Included in Corporate and Unallocated is a pre-tax charge of
$1.5 million ($1.1 million after-tax or $0.02 per diluted share)
associated with various organizational restructuring initiatives
across Specialty Chemicals.
- Also included in manufacturing cost of sales of the Cytec
Surface Specialties segment is a pre-tax charge of $1.4 million
($0.9 million after-tax or $0.02 per diluted share) for
accelerated depreciation in relation to our Radcure
manufacturing at our leased Pampa, Texas facility. The previous
owners have sold the site and we have decided in conjunction
with the new owners to leave the site and are working on a
complete review of our alternatives. Economically it does not
make sense to relocate most of the assets and as a result, we
have accelerated depreciation to bring those assets to zero by
the end of this year. The total additional accelerated
depreciation expense expected for the full year is $5.6 million
which will be spread evenly throughout 2008.”
"We recorded special items in the first quarter of 2007 that
total pre-tax income of $14.9 million ($14.4 million of income
after-tax or a $0.29 increase per diluted share) as follows:
- We recorded a pre-tax gain of $15.7 million (after-tax $15.2
million or $0.31 per diluted share) as a result of completing
the second phase of the sales of our water treatment chemicals
and acrylamide product lines to Kemira Group. We also received
$6 million for the final working capital settlement from the
first phase closing.
- We recorded pre-tax net restructuring charges of $0.8 million
(after-tax $0.8 million or $0.02 per diluted share). The costs
were principally related to the shutdown of our manufacturing
operations in France, which were expected but not accruable as
part of the charge taken in the fourth quarter of 2006.”
Interest Expense
Mr. Drillock continued, “Interest expense decreased slightly in
the first quarter. Late in the quarter, we retired all $100
million of our 6.75% notes at their scheduled maturity date
using a combination of our existing cash and drawdowns under our
revolver.”
Income Tax Expense
Mr. Drillock added, "Our tax provision for the first quarter of
2008 was $22.2 million, or 31.1%, on earnings before income
taxes compared with $16.3 million, or 24.0%, on earnings before
income taxes in the first quarter of 2007. The rate in the 2007
quarter was significantly affected by the limited tax expense on
the gain recorded on phase two of the divestiture of the water
treatment chemicals and acrylamide product lines.”
Cash Flow
Mr. Drillock further commented, “We are pleased with our cash
flow generation in the quarter. Cash flow provided by operations
was approximately $38 million for the quarter. Trade accounts
receivable increased by $41 million and days outstanding are
down one day versus the end of the previous quarter. Inventory
increased $25 million and days on hand are 72, down from 73 days
at the end of last quarter. The change in accrued expenses is
related principally to our normal incentive compensation
payments for the prior year performance. Capital spending for
the quarter was $27 million.”
“During the quarter we purchased 101 thousand shares of our
common stock for $5.4 million. The remaining amount on the
current share repurchase authorization is approximately $86
million.”
2008 Outlook
Mr. Lilley commented, “We remain optimistic on our improvement
opportunities, and together with continued strong performance of
the Engineered Materials business, we affirm our overall
guidance for full year adjusted diluted earnings per share is to
be in a range of $4.15 to $4.35 per share, up from the 2007
adjusted diluted earnings per share of $3.90. The first quarter
is however indicative of the challenges we face in weakening
demand in North America and Europe affecting our Specialty
Chemicals business. Oil and natural gas have increased
significantly in the quarter and we are closely watching this
impact on our raw materials.”
In closing, Mr. Lilley commented, “Overall, our improvement
initiatives remain on track and we are confident in the
long-term trends for our businesses. We will continue to be
vigilant in monitoring economic conditions and raw material
volatility, and will take appropriate actions to minimize their
impact. We are also making progress in promoting our value-added
technologies to improve earnings in order to enhance shareholder
value.”
Investor Conference Call to be Held on April 18, 2008 at
11:00A.M. ET
Cytec will host their first quarter earnings release conference
call on April 18, 2008 at 11:00a.m. 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 conference call.
Use of Non-GAAP Measures
Management believes that net earnings and diluted earnings per
share before 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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