Press Releases
Cytec Announces Second Quarter Results
Full Year 2007 Outlook Updated
West Paterson,
New Jersey, July 19, 2007 - Cytec Industries Inc. (NYSE:CYT)
announced today net earnings for the second quarter of 2007 of
$54.8 million or $1.11 per diluted share on net sales of $864
million. Included in the quarter is an after-tax net
restructuring charge of $1.8 million or $0.04 per diluted share
as outlined further in this release. Excluding this item, net
earnings were $56.6 million or $1.15 per diluted share.
Net earnings
for the second quarter of 2006 were $48.5 million or $1.00 per
diluted share on net sales of $853 million. Included in the
quarter were several special items as outlined further in this
release. Excluding these special items, net earnings were $48.8
million or $1.00 per diluted share.
David Lilley,
Chairman, President and Chief Executive Officer said, “Our
second quarter results reflect the continuing sales growth in
Engineered Materials, and our efforts in Specialty Chemicals to
increase selling prices to improve our recovery of higher raw
material costs. We also had an improved product mix and we are
seeing the benefits of our efficiency and improvement
initiatives, particularly in our specialty chemical segments.
Our overall operating margin improved to over 10%, reflecting a
strong performance by all our segments.
Cytec Performance Chemicals Sales decreased 20% to $185 million;
Operating Earnings increased to $23.7 million
Mr. Lilley
continued, “In Cytec Performance Chemicals, the divestiture of
the water treatment chemicals product line decreased sales by
22%, base selling volumes and selling prices were up slightly
and exchange rate changes increased sales 2%. Mining chemicals,
phosphine chemicals and urethanes specialties had higher selling
volumes, mostly offset by lower selling volumes in all other
product lines.
“Operating
earnings increased 30% to $23.7 million primarily due to the
benefits of our efficiency and improvement initiatives in both
manufacturing and operating expenses and an improved product
mix.
Cytec Surface Specialties Sales increased 7% to $420 million;
Operating Earnings increased to $32.8 million
“In Cytec
Surface Specialties, selling volumes decreased 3%, selling
prices increased 6% and exchange rate changes increased sales
4%. Higher volumes in water-borne resins were more than offset
by lower volumes primarily in solvent-borne and powder coating
resins. Solvent-borne sales were negatively impacted by the
shutdown of our unprofitable manufacturing facility in France
which led us to discontinue certain products. In addition, we
continue to experience weak demand in North America. The
increase in selling prices was across most product lines.
“Operating
earnings increased 11% to $32.8 million primarily due to the
higher selling prices more than offsetting the increase in raw
material costs plus the impact of our efficiency and improvement
initiatives begun in prior periods.
Cytec Engineered Materials Sales increased 10% to $167 million;
Operating Earnings increased to $34.8 million
“Cytec
Engineered Materials selling volumes increased 7%, selling
prices increased 2% and exchange rate changes increased sales
1%. The selling volume increase was primarily due to higher
build rates in the large commercial aircraft, business jet and
high performance automotive sectors.
“Operating
earnings improved 23% to $34.8 million, primarily due to
increased selling volumes and selling prices.
Building Block Chemicals Sales increased 15% to $93 million;
Operating earnings decrease to $4.6 million
“In Building Block Chemicals, the divestiture of the acrylamide
product line decreased sales by 19% which was more than offset
by a 29% increase due to sales of acrylonitrile, (the key
chemical used to make acrylamide), to the purchaser of the
divested product line. Excluding these two factors, selling
volumes decreased by 1% primarily due to lower selling volumes
of acrylonitrile partially offset by higher selling volumes of
melamine in North America and Europe. Selling prices increased
by 6% and the impact of exchange rate changes was neutral.
“Operating
earnings decreased to $4.6 million compared to $6.4 million in
the same period of 2006. Our plant ran well, however, in the
quarter our acrylonitrile plant was down for 16 days for its
planned maintenance turnaround. This, as well as the
divestiture of the acrylamide product line, adversely impacted
earnings. Our acrylonitrile plant started back up on schedule
and is now running at capacity. Our melamine plant ran at
capacity in the quarter as we continue to increase our market
presence in North America.
Corporate and Unallocated
David M. Drillock, Vice President and Chief Financial Officer
commented, “During the quarter, we recorded a pre-tax
restructuring charge of $1.8 million in Corporate and
Unallocated. The costs are principally related to the shutdown
of our manufacturing operations in France which were expected
but not accruable under accounting rules as part of the charge
taken in the fourth quarter of 2006.”
Included in Corporate and Unallocated in the second quarter of
2006 were the following:
- A net restructuring charge of $22.6 million principally
relating to permanently shutting down manufacturing operations
for two older technology polymer additive light stabilizer
products produced at our manufacturing facility in Botlek, the
Netherlands which included a full review of the support and
commercial infrastructure at the site.
- Integration costs of $1.0 million related to the Surface
Specialties acquisition which was recorded in administrative
expense. These integration costs were duplicative in nature, and
incurred primarily as a result of the elimination of transition
service agreements that were in place with the former owner
surface specialties business regarding the information
technology hardware infrastructure.
- A realized gain of $15.6 million which was included in other
income (expense), net relating to a legal dispute with a
European firm that was in arbitration proceedings since 2000.
Interest Expense
Mr. Drillock commented, “Interest expense, net was reduced 22%
from the prior year quarter reflecting the continued good
progress we have made in reducing our debt levels.”
Income Tax Expense
Mr. Drillock added, “Our tax provision for the second quarter of
2007 was $24.3 million, or 30.7%, on our earnings before income
taxes. Impacting the rate for the quarter was our inability to
recognize any tax benefit on the French restructuring charge due
to continuing losses at our French entity, similar to the French
restructuring charges recorded in prior periods. Excluding this
item, our underlying effective tax rate for the second quarter
of 2007 was 29.75% versus the underlying rate for the second
quarter of 2006 of 27%. The increase in the tax rate from 2006
is due to the effect of the divestiture of the water treatment
chemicals and acrylamide product lines and unfavorable changes
in U.S. tax laws regarding manufacturing export incentives.
“For the second
quarter of 2006 our effective tax rate of 18.5% was favorably
impacted by a reduction in income tax expense of $3.5 million
related to the completion of prior years’ U.S. tax audits. Also
favorably impacting the tax rate was the tax benefit from the
restructuring charge which was recorded at 29.6% and the gain on
the favorable resolution of the previously mentioned legal
dispute which was effectively recorded at a tax provision of
20%.”
Cash Flow
Mr. Drillock commented further, “Cash flow provided by
operations was $67 million for the quarter. Trade accounts
receivable dollars were in line with the increase in sales and
days outstanding were flat at approximately 58. Inventory
dollars increased $14 million and days in inventory are 73, up
about 6 days from the prior quarter end as we built up certain
inventories to meet expected higher demand. Capital spending
for the quarter was $25 million bringing our year to date total
to $39 million. Our full year estimate of $130-$140 million is
unchanged as we expect spending to increase in the second half
of the year for our growth expansion projects.
“During the
quarter we purchased 263 thousand shares of our common stock for
approximately $15 million. For the six months year to date we
have purchased 433 thousand shares of our common stock for
approximately $25 million leaving about $44 million remaining on
our current authorization. We expect to continue our stock
buyback program into the second half of 2007.”
2007 Outlook
Mr. Lilley commented, “Our expectations going forward are for
the Specialty Chemical segments to have good growth in all parts
of the world except North America where we are forecasting
demand to be weak. We expect to continue to have selling prices
cover higher raw material costs although we must remain vigilant
with oil costs increasing and natural gas costs still volatile.
Our efforts to improve the underlying profitability of the
Specialty Chemical segments are evident and we are on track to
complete the review of additional improvement options during the
third quarter. In Building Block Chemicals we expect the
markets for acrylonitrile and melamine to remain tight and thus
retain our ability to pass through higher raw material costs.
Finally, increasing build rates in the large commercial
aircraft, rotorcraft and business jet sectors plus new composite
applications on new aerospace platforms provide an excellent
growth platform for our Engineered Materials segment, both in
the near and long term.
“Taking into
account our strong second quarter results and our view for
increasing raw material costs our overall guidance is to remain
on track with our previous guidance for 2007 full year adjusted
diluted earnings per share of $3.60 to $3.80 which is up from
the 2006 adjusted diluted earnings per share of $3.45.”
In closing Mr.
Lilley commented, “While we remain cautious about near term
external economic factors, our efforts to improve our businesses
are gaining momentum, creating a strong base for future growth.
We are committed to delivering the highest performance for all
our stakeholders.”
Six Month Results
Net earnings for the six months ended June 30, 2007 were $106.5
million or $2.17 per diluted share on sales of $1,728 million.
Included in the results for the six months ended June 30, 2007
were – (a) net restructuring charges of pre-tax $2.6 million
(after-tax $2.6 million or $0.05 per diluted share), (b) a
pre-tax $15.7 million (after-tax $15.3 million or $0.31 per
diluted share) gain as a result of completing the second phase
of the sale of our water treatment chemicals and acrylamide
product lines to Kemira Group. Excluding these items, net
earnings were $93.8 million or $1.91 per diluted share.
Net earnings for
the six months ended June 30, 2006 were $86.6 million or $1.79
per diluted share on sales of $1,673 million. Included in the
results for the six months ended June 30, 2006 were – (a) net
restructuring charges of pre-tax $22.3 million (after-tax $15.7
million or $0.33 per diluted share), (b) a pre-tax $15.6 million
(after-tax $12.4 million or $0.26 per diluted share) gain
related to resolution of a legal dispute, (c) a pre-tax charge
of $1.0 million (after tax $0.8 million or $0.01 per diluted
share) for integration expenses related to the Surface
Specialties acquisition, (d) a reduction in income tax expense
of $3.5 million or $0.07 per diluted share relating to the
completion of prior years tax audits, and (e) the cumulative
effect of an accounting change after-tax charge of $1.2 million
or $0.02 per diluted share related to the adoption of SFAS
123R. Excluding these items, net earnings were $88.4 million
or $1.82 per diluted share.
Investor Conference Call to be Held on July 20, 2007 11:00 A.M.
ET
Cytec will host their second quarter earnings release conference
call on July 20, 2007 at 11:00 a.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.
A recording of
the conference call may be accessed by telephone from 2:00 p.m.
ET on July 20 2007 until August 10, 2007 at 11:00 p.m. ET by
calling 888-203-1112 (U.S.) or 719-457-0820 (International) and
entering access code 4815637. The conference call recording
will also be accessible on Cytec’s website for 3 weeks after the
conference call.
Use of Non-GAAP Measures
Management believes that net earnings, basic 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
measurements to non-GAAP 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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