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Contact:
Jodi Allen (Investor Relations)
(973) 357-3283
Cytec Announces First Quarter
2010 Results
As-Adjusted EPS of $0.66, Significantly Above Prior Year
As-Adjusted EPS of $0.06
WOODLAND PARK, N.J., April 22, 2010 -- Cytec Industries Inc.
(NYSE:CYT-News) announced today net earnings for the first
quarter 2010 of $24.8 million or $0.50 per diluted share on net
sales of $787 million. Included in the quarter are several
special items that total $7.9 million of net expense after-tax
or $0.16 per diluted share and are outlined further in this
release. Excluding these special items, net earnings were $32.7
million or $0.66 per diluted share.
Net loss for the first quarter of 2009 was $0.1 million or $0.00
per share on net sales of $612 million. Included in the quarter
were several special items that totaled $2.8 million of net
expense after-tax or $0.06 per diluted share and are outlined
further in this release. Excluding these special items, net
earnings were $2.7 million or $0.06 per diluted share.
Shane Fleming, Chairman, President and Chief Executive Officer
commented, “We are pleased with the results of our first quarter
which reflect improvement in the global economy and the leverage
from our cost reduction initiatives that were implemented in
2009. Selling volumes in our Specialty Chemical and Building
Block segments increased from improved demand across all regions
when compared with the high levels of de-stocking which took
place in the prior year quarter. While Engineered Materials
sales declined compared with the prior year quarter, mostly due
to significantly lower build rates in the business jet and
military markets, they were flat with the last quarter of 2009
and well above third quarter 2009 sales levels. In summary, we
had an excellent start to the year, our structural improvement
initiatives are in place, our balance sheet is strong, and we
continue to build momentum in 2010.”
Cytec Coating Resins sales increased 38% to $341
million; Operating Earnings increased to $16.8 million.
In Coating Resins, overall selling volumes were up by 42% versus
the first quarter 2009, due to improved demand versus the
destocking activities that occurred in 2009. Selling prices
decreased by 9% in response to competitive pressures while the
impact of changes in exchange rates increased sales by 5%.
Operating earnings were $16.8 million versus a loss of $20.3
million in the first quarter 2009. The much improved operating
earnings are principally due to the higher selling volumes
across all product lines and lower raw material costs. These
increases were partially offset by lower selling prices.
Cytec Additive Technologies sales increased 22% to $62
million; Operating Earnings increased to $8.4 million.
In Additive Technologies, overall selling volumes were up 18%
versus the first quarter 2009. Excluding the divested impact of
the polyurethane product line in mid-2009, overall sales were up
by 38%. Selling prices increased 1% and the impact of changes in
exchange rates increased sales by 3%.
Operating earnings were $8.4 million versus $0.6 million in the
first quarter of 2009 mainly as a result of the higher selling
volumes.
Cytec In Process Separation sales increased 16% to $65
million; Operating Earnings increased to $14.9 million.
In Process Separation selling volumes increased by 17% versus
the first quarter 2009, primarily as a result of higher demand
across all product lines. Selling prices decreased by 4% and the
impact of changes in exchange rates increased sales by 3%.
Operating earnings were $14.9 million versus $4.8 million in the
prior year quarter principally due to higher selling volumes and
lower raw material costs. These increases were partially offset
by lower selling prices.
Cytec Engineered Materials sales decreased by 7% to $178
million; Operating Earnings decreased to $21.0 million.
In Engineered Materials, selling volumes decreased by 9% versus
the first quarter 2009 driven primarily by build rate reductions
in the business jets and military sectors and offset somewhat by
stronger demand in the large commercial transport sector.
Selling prices increased by 1% and changes in exchange rates
increased sales by 1%.
Operating earnings of $21.0 million were down versus earnings of
$33.1 million in the prior year quarter, principally as a result
of the lower selling volumes.
Cytec Building Block Chemicals sales increased 110% to
$140 million; Operating Earnings increased to $4.1 million.
In Building Block Chemicals, selling volumes increased 35%
versus the first quarter 2009, which is primarily related to
improved demand levels in North America for both acrylonitrile
and melamine. Selling prices increased by 75% across all product
lines due to higher raw material costs, driven principally by
propylene.
Operating earnings were $4.1 million compared to $3.2 million in
the first quarter 2009. This is primarily due to the increased
selling volumes and higher selling prices. These increases were
partially offset by higher raw material costs.
Special Items
In the first quarter of 2010 a number of special items were
recorded that resulted in a net pre-tax benefit of $0.4 million
($7.9 million after-tax charge or $0.16 per diluted share) as
follows:
-
Included in
Corporate and Unallocated, is a favorable net adjustment of
$0.4 million benefit ($0.4 million after-tax or $0.01 per
diluted share) associated with various restructuring
initiatives across Specialty Chemicals, Engineered
Materials, and Corporate operations. The net benefit of $0.4
million is comprised of $1.0 million benefit related to the
sale of our facility in La Llagosta, Spain, which was
completed in March 2010 at more favorable terms than
previously assumed, offset by $0.6 million charges for
additional costs incurred during the first quarter of 2010
related to other 2009 initiatives.
-
Included in
income tax expense is a charge of $8.3 million or $0.17 per
diluted share due to the recent U.S. Health Care Reform
legislation that eliminated a tax benefit on a subsidy given
to employers with respect to certain prescription drug
benefits to retirees equivalent to those provided under U.S.
Medicare Part D.
Income Tax
Expense
The tax expense for the first quarter of 2010 was $24.4 million,
compared with a tax expense of $1.0 million in the first quarter
of 2009. Included in the provision for the first quarter of 2010
is the aforementioned charge of $8.3 million related to the
elimination of a tax benefit due to recently enacted Health Care
Reform legislation. Excluding the impact from the special items
previously noted, the overall underlying annual effective tax
rate for the first quarter of 2010 was 32.5% versus the
underlying annual effective tax rate in the first quarter of
2009 of 34%.
Cash Flow
David Drillock, Vice President and Chief Financial Officer
commented, “Cash flow from operations was $38 million for the
first quarter 2010. During the quarter we continued to maintain
the excellent progress achieved by our 2009 working capital
initiative. While trade accounts receivable increased $58
million due to higher revenues, the average days sales
outstanding for the first quarter of approximately 47 days was
flat with the fourth quarter 2009 average. Inventory increased
by $35 million in the first quarter of 2010 due to higher demand
and production, while average days on hand of approximately 61
days was flat with the average for the fourth quarter of 2009.
Accounts payable increased by $84 million in the quarter due to
the higher demand levels and an increase of 3 days to 49 days
versus the average fourth quarter of 2009 level of 46 days. We
believe the gains made from our working capital initiative are
sustainable going forward. The decrease in accrued expenses
reflects payments against our prior year restructuring
initiatives and incentive compensation payments while other
liabilities reflects increased contributions to our pension
plans versus the prior year period.”
“Capital spending for the quarter was $29 million with
approximately 64% of the spending attributable to Engineered
Materials, 27% to Specialty Chemical segments, and 5% to
Building Block Chemicals versus $64 million spent in the first
quarter of 2009. First quarter 2009 capital spending included
$24 million for our carbon fiber expansion project which is now
on hold and $6 million related to scheduled maintenance
turnarounds in Building Block Chemicals. Mr. Drillock continued,
“We further reduced our debt by $14 million in the quarter
bringing our total gross debt to $672 million while our cash
remained at $262 million.”
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 most
importantly staying close to our customers. These efforts
coupled with the global demand improvement we have seen across
our chemical businesses beginning in the second half of 2009
give us good momentum for the remainder of 2010, subject to the
sustained global economic recovery. Taking all this into account
and assuming current economic conditions continue, our
expectations would be to achieve the upper end of our 2010 full
year adjusted diluted earnings per share guidance of $1.90 to
$2.40 with a possibility of modestly exceeding the high end of
our guidance. We will further update the earnings guidance when
we release our second quarter results.”
In closing, Mr. Fleming commented, “I am extremely pleased and
proud of the people of Cytec for the successful execution of our
restructuring initiatives, sustaining our working capital
improvements, and continuing to delight our customers through
our service and technical innovation. 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.”
Investor Conference Call to be Held on April 23, 2010 at
11:00am ET
Cytec will host their first quarter earnings release conference
call on April 23, 2010 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 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. delivers 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. These 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, chemical intermediates,
electronics, inks, mining and plastics.
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