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Contact:
Jodi Allen (Investor Relations)
(973) 357-3283
Cytec Announces
First Quarter 2011 Results
As-Adjusted Continuing EPS of $0.78, Up 34% From First Quarter
2010
Full Year 2011 Continuing EPS Guidance Unchanged
WOODLAND PARK,
N.J., April 21, 2011 -- Cytec Industries Inc. (NYSE: CYT)
announced today net earnings for the first quarter 2011 of $83.2
million or $1.66 per diluted share on net sales of $766 million.
Earnings from continuing operations attributable to Cytec were
$39.6 million or $0.79 per diluted share. Earnings from
discontinued operations were $43.6 million or $0.87 per diluted
share including the gain on the sale of Building Block Chemicals
of $36.8 million after-tax or $0.73 per diluted share. Included
in the quarter are several special items from continuing
operations that total $0.5 million of net credit after-tax or
$0.01 per diluted share and are outlined further in this
release. Excluding the special items and earnings from
discontinued operations, earnings from continuing operations
attributable to Cytec were $39.1 million or $0.78 per diluted
share.
Net earnings for the first quarter of 2010 were $24.8 million or
$0.50 per diluted share on net sales of $647 million. Earnings
from continuing operations attributable to Cytec were $21.0
million or $0.42 per diluted share. Earnings from discontinued
operations were $3.8 million or $0.08 per diluted share.
Included in the quarter were several special items that totaled
$7.9 million of net expense after-tax or $0.16 per diluted
share. Excluding the special items and earnings from
discontinued operations, net earnings from continuing operations
attributable to Cytec were $28.9 million or $0.58 per diluted
share.
Shane Fleming, Chairman, President and Chief Executive Officer
commented, “We are encouraged by the continued improvement in
the global economy. Sales growth for the quarter of 18% included
9% from higher volumes and 8% from higher selling prices. In the
Specialty Chemicals businesses, sales increased 17% with 6% from
higher volumes and the remainder mostly due to our focused
efforts to raise prices in response to significantly higher raw
material costs. Engineered Materials sales increased 22%
compared with the prior year quarter, mostly due to higher build
rates in the large commercial aircraft programs, business jet
markets, and rotorcraft markets. Overall, we had a good start to
the year and with our strong cash position and robust strategy,
we expect to continue to deliver on our commitments for 2011 and
beyond.” Mr. Fleming continued, “We are also pleased to announce
the completion of our divestiture of the Building Block
Chemicals business. This divestiture is a major step in
reshaping Cytec’s portfolio, which will allow us to narrow our
focus on core growth platforms. The divestiture reduces our
exposure to more cyclical end markets and provides us with
additional capital to pursue bolt-on acquisitions, as well as
repurchase our shares via our stock buyback program.”
Cytec Coating Resins sales increased 18% to $404
million; Operating Earnings increased to $18.8 million.
In Coating Resins, overall selling volumes were up by 5% versus
the first quarter 2010, due to strong demand driven by powder
and waterborne resins. Selling prices increased by 12% in
response to higher raw material costs while the impact of
changes in exchange rates increased sales by 1%.
Operating earnings were $18.8 million versus $16.8 million in
the first quarter 2010. The improved operating earnings are
principally due to the higher selling prices which more than
offset increased raw material costs of approximately $36 million
as well as the favorable impact from the overall increase in
demand. Partially offsetting this was an unfavorable product mix
driven by higher powder resins selling volumes.
Cytec Additive Technologies sales increased 8% to $67
million; Operating Earnings decreased slightly to $8.0 million.
In Additive Technologies, overall selling volumes were up 3%
versus the first quarter 2010 driven by specialty additives.
Selling prices increased 4% and the impact of changes in
exchange rates increased sales by 1%.
Operating earnings of $8.0 million were slightly down versus
$8.4 million in the first quarter of 2010 mainly as a result of
higher manufacturing costs for maintenance work. Increased
selling prices essentially offset increased raw material costs
of approximately $3 million.
Cytec In Process Separation sales increased 20% to $78
million; Operating Earnings increased to $16.4 million.
In Process Separation selling volumes increased by 16% versus
the first quarter 2010, primarily as a result of higher demand
and new product commercializations in mining chemicals. Selling
prices increased by 3% and the impact of changes in exchange
rates increased sales by 1%.
Operating earnings were $16.4 million versus $14.9 million in
the prior year quarter principally due to higher selling volumes
offset by an increase in selling and research expenses to
support the growth initiatives in this segment. Higher raw
material costs of $2.5 million were mostly offset by higher
selling prices.
Cytec Engineered Materials sales increased by 22% to
$217 million; Operating Earnings increased to $26.7 million.
In Engineered Materials, selling volumes increased by 21% versus
the first quarter 2010 driven primarily by higher build rates in
the large commercial aircraft programs, business jet markets,
and rotorcraft markets. Selling prices increased by 1%.
Operating earnings of $26.7 million were up versus earnings of
$21.0 million in the prior year quarter, principally as a result
of the higher selling volumes. Higher raw material costs of
approximately $6.0 million, mostly due to carbon fiber as a
result of a tight global carbon fiber market supply, were not
fully covered by increases in selling prices. In addition, there
was a production issue at one of our facilities which resulted
in an additional charge of approximately $2.0 million in the
quarter.
Discontinued Operations
In February 2011, we completed the previously announced sale of
the Building Block Chemicals business to an affiliate of H.I.G.
Capital, LLC for approximately $176 million (approximately $145
million after-tax) which includes a 6 year, $15 million note.
Earnings from discontinued operations net of tax was $43.6
million which includes a gain from the sale of business of $36.8
million, net of tax.
Special Items
In the first quarter of 2011 a number of special items
(all from continuing operations) were recorded that resulted in
net pre-tax credit of $0.8 million ($0.5 million net benefit on
an after-tax basis or $0.01 per diluted share) as follows:
-
Included in
Corporate and Unallocated, principally in operating
expenses, are favorable pre-tax net restructuring
adjustments of $0.7 million ($0.5 million after-tax or $0.01
per diluted share).
-
Included in
Gain on sale of assets is a pre-tax gain of $3.3 million
($2.0 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 in
Other Expense is a pre-tax charge of $3.2 million ($2.0
million after-tax or $0.04 per diluted share) related to an
increase in the environmental liability at an inactive site
for an updated estimate of future remedial costs to meet new
design requirements of the relevant state agency as well as
increased annual operating and maintenance costs.
Income Tax
Expense
Income tax expense related to continuing operations for the
first quarter of 2011 was $15.0 million, compared with a tax
expense of $22.6 million in the first quarter of 2010. Included
in the Income tax provision for the first quarter of 2011 are
discrete tax benefits of $2.3 million related to several
international tax matters. Excluding the impact from the
aforementioned discrete tax benefits and special items
previously noted, the overall underlying annual tax rate for the
first quarter of 2011 was 31.25% versus the underlying annual
tax rate in the first quarter of 2010 of 32.5%.
Cash Flow
David Drillock, Vice President and Chief Financial Officer
commented, “Operating cash flows from continuing operations were
$21.5 million for the first quarter 2011. During the quarter our
average net working capital days decreased compared to the
fourth quarter of 2010 due to our continued focus on our working
capital. While trade accounts receivable increased $59.6 million
due to higher revenues, the average days sales outstanding for
the first quarter of approximately 49 days was flat with the
fourth quarter 2010 average. Inventory increased by $49.4
million in the first quarter of 2011 due to higher demand and
production, while average days on hand of approximately 69 days
was slightly up from the average for the fourth quarter of 2010
of 67 days. Accounts payable increased by $114.6 million in the
quarter due to the higher demand levels and an increase of 7
days to 58 days versus the average fourth quarter of 2010 level
of 51 days. The decrease in accrued expenses reflects payments
against our prior year incentive compensation accruals.”
“Capital spending for the quarter was $26 million with
approximately 45% related to Specialty Chemical segments and 55%
of the spending attributable to Engineered Materials, versus $28
million spent in the first quarter of 2010.”
“During the quarter we purchased 440,000 shares of our common
stock for $24 million. The remaining amount on the current share
repurchase authorization is approximately $170 million.”
2011 Outlook
Mr. Fleming commented, “We expect to build on our solid first
quarter performance and we remain focused on addressing the
headwind of increasing raw material costs across our businesses
through higher selling prices. Assuming the current economic
recovery continues, we are maintaining our guidance for 2011
continuing full year adjusted diluted earnings per share
attributable to Cytec in the range of $3.15 to $3.50, consistent
with the detailed guidance we provided in January for each
segment”.
“While pleased with the year-on-year operating earnings
improvement in Coating Resins, we are not satisfied with the
current level of profitability in this segment. As a result of
the commoditization of a significant portion of the Coating
Resins portfolio and the slow recovery of several key markets
for these products, additional changes are required to meet our
earnings expectations. We will begin implementation of the
necessary changes in the second quarter.”
In closing, Mr. Fleming commented, “We remain confident in our
ability to execute and deliver our goals for this year. We will
continue to be vigilant in monitoring raw material escalations
and take the appropriate actions to optimize the performance of
each of the businesses in this highly volatile environment. We
remain steadfast in our commitment to enhance shareholder value
and we are confident in the long-term trends for our core growth
platforms.”
Investor Conference Call to be Held on Monday, April 25,
2011 at 11:00am ET
Cytec will host their first quarter earnings release conference
call on April 25, 2011 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 excluding special items and diluted
earnings per share (continuing operations attributable to Cytec)
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 chemicals and materials
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 composites, structural adhesives,
automotive and industrial coatings,electronics, inks, mining and
plastics.
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