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Contact:
Jodi Allen (Investor Relations)
(973) 357-3283
Cytec Announces First Quarter Results
First Quarter As-Adjusted Continuing EPS of $0.75, up 15% over
comparable 2012
Updates Full Year 2013 Guidance with New
Reporting Segments
WOODLAND PARK, N.J., April 18, 2013 -- Cytec Industries Inc.
(NYSE: CYT) announced today net earnings attributable to Cytec
for the first quarter 2013 of $33.5 million or $0.73 per diluted
share. Net sales from continuing operations were $477.4
million. Earnings from continuing operations were $8.0 million
or $0.17 per diluted share. Earnings from discontinued
operations were $25.9 million or $0.56 per diluted share.
Net earnings attributable to non-controlling interests (which
are associated with the discontinued operations) were $0.4
million or $0.01 per diluted share. Included in the
quarter for continuing operations are several special items that
total $26.2 million of net charges after-tax, or $0.57 per
diluted share, and are outlined further in this release. Excluding
these special items, earnings from continuing operations were
$34.2 million or $0.75 per diluted share.
Net earnings attributable to Cytec for the first quarter of 2012
were $53.1 million or $1.14 per diluted share. Net sales from
continuing operations were $378.1 million. Earnings from
continuing operations were $30.2 million or $0.65 per diluted
share. Earnings from discontinued operations were $23.4
million or $0.50 per diluted share. Net earnings
attributable to non-controlling interests (which are associated
with the discontinued operations) were $0.5 million or $0.01 per
diluted share. Included in the quarter for
continuing operations were several special items that totaled
$0.3 million of net expense after-tax or $0.01 per diluted share.
Excluding the special items, earnings from continuing
operations were $30.5 million or $0.65 per diluted share.
Shane Fleming, Chairman, President and Chief Executive Officer
commented, “With the Coating Resins divestiture now behind us, I
am extremely excited about the opportunities ahead of us as we
begin operating as a new Cytec. First quarter 2013 revenue
growth met our overall expectations as we anticipated a modest
start to the year with stronger growth in the remaining quarters
of 2013. We faced tough comparisons in Aerospace Materials
that we expect to see improve as the year progresses. In
addition, we experienced lower volumes combined with unfavorable
product mix in both our In Process Separation and Industrial
Materials segments which negatively impacted our earnings in the
quarter.”
Cytec Aerospace Materials sales increased 14% to $236
million; Operating Earnings decreased to $41.5 million.
In Aerospace Materials, selling volumes increased by 4% versus
the first quarter 2012 primarily driven by higher build rates in
large commercial transport and larger business jets as well as
new business jet programs. Higher selling prices and
acquisition related volumes increased sales by 3% and 7%,
respectively.
Operating earnings of $41.5 million were down versus earnings of
$43.3 million in the prior year quarter, primarily due to higher
period costs related to increased manufacturing headcount versus
the prior year quarter. In addition, we experienced an
atypical surge in orders in the first quarter 2012 as customers
were preparing to meet build rate increases in a longer lead
time environment and this resulted in higher production levels
and lower unit production costs versus the first quarter 2013.
Cytec Industrial Materials sales were $84 million;
Operating Earnings were $2.6 million.
Sales of the Structural Materials product line were $51 million
reflecting the challenging European demand environment which
impacted the high performance automotive and motorsports markets.
Included in Structural Materials is $12 million of sales related
to the distribution product line which is in the process of
being divested. Sales in the Process Materials (vacuum
bagging) product line were $33 million which reflected improving
sales into the wind energy market.
Operating earnings were $2.6 million for the quarter and fell
below our expectation primarily due to unfavorable product mix
within process materials and lower selling volumes in structural
composites. In addition, we incurred $0.8 million of
one-time costs associated with exiting a distributor agreement
and other head-count reductions.
Cytec In Process Separation sales decreased 3% to $89
million; Operating Earnings decreased to $16.7 million.
In Process Separation selling volumes decreased by 4% versus the
first quarter of 2012 mostly due to a weaker alumina market.
The business also experienced lower metal extractant sales
mostly due to order timing. Higher selling prices
increased sales by 1%.
Operating earnings were $16.7 million versus $22.9 million in
the prior year quarter, partly due to lower selling volumes and
less favorable product mix. In addition, manufacturing and
commercial costs are higher in anticipation of increased revenue
growth as the year progresses. These unfavorable impacts
were partially offset by higher selling prices.
Cytec Additive Technologies sales increased 1% to $69
million; Operating Earnings increased to $8.0 million.
In Additive Technologies, overall selling volumes were up 2%
versus the first quarter 2012 primarily due to higher demand for
polymer additive products in Europe related to demand
improvement in the agricultural film market and general demand
improvement for differentiated technologies in North American
markets. This was partially offset by lower selling volumes for
specialty additive products in Europe and North America.
Changes in the selling prices and the overall impact of exchange
rates on sales were essentially flat versus the prior year
quarter.
Operating earnings of $8.0 million were up versus $6.4 million
in the first quarter of 2012, mostly due to higher selling
volumes in the polymer additive product line, favorable product
mix, and lower raw material costs.
Corporate and Unallocated
For the three months ended March 31, 2013, continuing costs
previously allocated to Coating Resins but now included as part
of corporate and unallocated were $12.2 million. For the
three months ended March 31, 2012, these costs were $17.2
million.
Sale of Coating Resins
On April 3, 2013, we completed the previously announced
sale of the Coating Resins business to Advent International for
a total value of $1,133 million, including assumed liabilities
subject to final working capital and other customary adjustments.
Special Items
In the first quarter of 2013 a number of special items were
recorded in continuing operations that resulted in a net pre-tax
charge of $40.0 million ($26.2 million expense after-tax) as
follows:
- Included in Corporate and Unallocated, principally in
Administrative and general, are pre-tax net charges of $0.6
million ($0.5 million after-tax or $0.01 per diluted share)
primarily related to initiatives to reduce stranded costs
resulting from the sale of Coating Resins, personnel
reductions in the acquired Umeco business, and costs
associated with the intended divestiture of the Industrial
Materials Distribution product line.
- Included in Corporate and Unallocated, in Loss on early
extinguishment of debt, is a pre-tax charge of $39.4 million
($24.7 million after-tax or $0.54 per diluted share) related
to premiums associated with the repurchase of $328 million
of our outstanding public debt.
- Included in Income tax (benefit)/provision is $1.0
million of income tax expense ($0.02 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 sale of our
Coating Resins business. The 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 in the first quarter of 2013 that
resulted in a net pre-tax benefit of $8.7 million ($6.6 million
benefit after-tax or $0.14 per diluted share).
In the first quarter of 2012 a number of special items were
recorded in continuing operations that resulted in a net pre-tax
charge of $0.5 million ($0.3 million expense after-tax or $0.01
per diluted share). In addition, a number of special items
were recorded to discontinued operations that resulted in a net
pre-tax expense of $9.7 ($6.4 million expense after-tax or $0.14
per diluted share).
Income Tax (Benefit)/Expense
The income tax benefit related to continuing operations for the
first quarter of 2013 was $2.4 million, compared with $13.8
million of expense in the first quarter of 2012. Included
in the income tax benefit for the first quarter of 2013 is a tax
benefit of $2.7 million or $0.06 per diluted share related to
the U.S. reinstatement of 2012 business tax incentives during
the first quarter of 2013. Excluding this item and the impact
from the special items previously noted, the overall underlying
annual tax rate for the first quarter of 2013 was 30.8% versus
the underlying annual tax rate in the first quarter of 2012 of
31.3%.
Cash Flow
David Drillock, Vice President and Chief Financial Officer
commented, “Additional time is required to prepare the Statement
of Cash Flows reflecting the Coating Resins segment as
discontinued operations. The Statement of Cash Flows will
be available in our quarterly 10-Q filing which is expected to
be filed on or about May 6, 2013. On a continuing basis,
our net working capital days at the end of the first quarter
were 4 days lower at 80 days compared to the end of the fourth
quarter of 2012. Accounts receivable days were slightly up
at 51 days compared with 49 days at the end of fourth quarter of
2012. Accounts payable were up 7 days at 53 days
versus the end of fourth quarter of 2012 at 46 days.
Inventory days were up 1 day at 82 days compared with the end of
fourth quarter of 2012 of 81 days, mostly due to timing of
certain mining chemicals orders in the In Process Separation
segment.”
“Capital spending for continuing operations in the quarter was
$54 million with a 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
Aerospace Materials and In Process Separation segments.”
2013 Outlook
Mr. Fleming commented, “We are in a great position to deliver
our growth strategy by building on our leadership positions in
our portfolio of growth platforms through the introduction of
high-performance product and application technologies that
create real value for our customers. We continue to
be optimistic about both our short and long term growth
opportunities yet there remain a number of risks in the global
economy mostly impacting our Industrial Materials segment.
We have revised our earnings per share forecast for the
remainder of 2013 taking into account the current demand
environment. Our new estimate for 2013 adjusted diluted
earnings per share is in a range of $4.50 to $4.75, down from
our prior guidance of $4.70 to $4.95. This forecast represents a
substantial increase over 2012 results of $3.02 adjusted diluted
earnings per share.”
Cytec’s sales and operating earnings guidance by segment follows
and as a reminder, the Company implemented a new segment
reporting structure effective for the first quarter (announced
in a separate release dated today, April 18, 2013) and the
guidance is reflective of the new segment reporting structure.
Mr. Fleming continued, “The Aerospace Materials segment is
estimated to grow at a low double-digit rate with estimated
annual sales in a range of $980 million to $990 million, driven
by increasing program build rates in large commercial transport
and as Boeing ramps up to their expected 787 year-end rate.
Sales will be further supported by growth in the business jet
programs. We are also making great progress
integrating the aerospace portion of our Umeco acquisition into
our existing aerospace business. Full year operating
earnings are projected to be in a range of $170 million to $175
million, up significantly over 2012 operating earnings of $156
million.
“The Industrial Materials segment continues to face a
challenging European market environment, which will impact
short-term growth in key structural composite sectors including
high-performance automotive and motorsports. We do expect
some recovery in these markets later this year and continue to
be excited about the longer-term composite opportunities.
We project steady demand for the process materials products
driven by the wind energy and aerospace markets. The
estimate for annual sales for the newly segmented Industrial
Materials business is in a range of $300 million to $315 million
and full year operating earnings are estimated to be between $18
million and $22 million. Not included in the Industrial
guidance is the distribution product line which we are in the
process of divesting.
“On the previously reported Umeco segment basis, we remain on
track to deliver the $0.50 per diluted share accretion target
for 2013 that we communicated back in January.
“For the In Process Separation segment, we expect solid sales
growth through the remainder of the year driven by geographic
expansion and sales to new mine start-ups in emerging countries.
We also estimate a more balanced aluminum market in the second
half of the year which will contribute to the sales growth.
Our estimated annual sales remains in a range of $410 million to
$430 million versus $384 million in 2012, and operating earnings
are estimated to be in a range of $96 million to $100 million.
“Additive Technologies is estimated to show modest growth,
driven by the Polymer Additives product lines where sales of
differentiated technologies are providing value in the market.
We expect continued headwinds in the Specialty Additives product
line related to the weak demand in construction and housing
related markets. Overall, we continue to estimate sales in
a range of $275 million to $285 million for the full year and
operating earnings in a range of $38 million to $40 million.”
Mr. Drillock added, “The guidance for Corporate and Unallocated
expenses is approximately $40 million to $42 million for the
year, taking into account the previous guidelines we have
provided on our stranded cost reductions following the sale of
Coating Resins. Interest Expense, net is expected to be
about $15 million, well below the prior year expense but above
the prior expectation. We took advantage of a favorable
debt market and increased the size of our offering by $100
million and repurchased more of our existing Notes than
originally anticipated. As a result we achieved a lower
overall effective interest rate which results in lower interest
expense capitalized during 2013 on our major capital projects.
The forecast for the underlying annual tax rate is expected to
be in a range of 30.5% to 32.5%.”
Mr. Fleming concluded, “We have made great progress with the
transformation of our portfolio of businesses over the past two
years. I am very excited about the number of growth
opportunities we are working on across our entire portfolio and
I remain extremely confident about our future and our ability to
deliver greater value for our shareholders.”
Investor Conference Call to be Held on Friday, April 19,
2013 at 11:00am ET
Cytec will host their first quarter earnings release conference
call on April 19, 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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