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Contact:
Jodi Allen (Investor Relations)
(973) 357-3283
Cytec Announces Record
As-Adjusted EPS for the Quarter
Significantly Increases 2010 Full Year As-Adjusted EPS Outlook
WOODLAND PARK, N.J., July 20, 2010 -- Cytec Industries Inc.
(NYSE:CYT-News) announced today net earnings for the second
quarter 2010 of $61.8 million or $1.24 per diluted share on net
sales of $874 million. Included in the quarter is a special item
charge of $3.1 million of net expense after-tax or $0.06 per
diluted share and is outlined further in this release. Excluding
this special item, net earnings were $64.8 million or $1.31 per
diluted share.
Net loss for the second quarter of 2009 was $24.8 million or
$0.52 per diluted share on net sales of $685 million. Included
in the quarter were several special items that totaled $24.2
million of net expense after-tax or $0.51 per share and are
outlined further in this release. Excluding these special items,
net loss was $0.6 million or $0.01 per diluted share.
Shane Fleming, Chairman, President and Chief Executive Officer
commented, “I’m extremely pleased to announce that our results
for the second quarter mark a record earnings performance for
Cytec. This outstanding result was partially driven by
year-over-year sales growth across all of our business segments
due to a much improved economic environment. The Company’s best
prior performance was the second quarter 2008, and we have
exceeded that level with 13% lower sales. We were able to
deliver stronger earnings at lower sales levels due to the
benefits of our 2009 cost reduction actions, improved product
mix from the sales of new products and pruning of low margin
products as well as our ability to recover the raw material
escalations during the quarter. Engineered Materials sales were
up sharply versus the prior year quarter as program ramp-ups are
starting to occur in the large commercial transport sector
reinforcing our belief that we are moving past the trough of the
aerospace cycle. On a consolidated level, sales increased across
all regions versus the prior year period, especially in North
America where we experienced greater than a 40% increase in
sales. Finally, we continue to maintain and improve upon our
working capital gains from 2009 which is reflected in our strong
cash generation.”
Cytec Coating Resins sales increased 25% to $369
million; operating profit increased to $28.0 million.
In Coating Resins, overall selling volumes were up by 27% versus
the second quarter 2009, with continued strong demand in our
large industrial coatings markets across all regions. Selling
prices increased by 2% and the impact of exchange rates
decreased sales by 4%.
Operating earnings of $28.0 million was up significantly versus
an operating loss of $19.2 million in the second quarter of 2009
principally due to higher volumes across all product lines in
this segment assisted by a lower cost structure resulting from
our 2009 restructuring actions.
Cytec Additive Technologies sales increased 5% to $66
million; operating earnings increased to $10.7 million.
In Additive Technologies, overall selling volumes were up by 4%
versus the second quarter 2009, attributed to stronger demand
broadly across most industrial markets partially offset by
reduced sales due to the divestiture of certain low value
products. Excluding these divested sales, segment sales were up
20% from the prior period. Selling prices increased by 2% and
the impact of exchange rates decreased sales by 1%.
Operating earnings of $10.7 million were up compared to the $3.1
million in the second quarter of 2009 mainly as a result of
higher selling volumes and better product mix.
Cytec In Process Separation sales increased 22% to $71
million; operating earnings increased to $14.3 million.
In Process Separation selling volumes were up 22% versus the
second quarter 2009, resulting primarily from higher demand in
our key alumina and copper mining markets and strong demand for
phosphine gas for the electronic and fumigation markets. Selling
prices decreased by 1% and the impact of exchange rates
increased sales by 1%.
Operating earnings of $14.3 million were significantly improved
compared to $2.1 million in the prior year quarter, mainly as a
result of higher selling volume and favorable product mix.
Cytec Engineered Materials sales increased by 10% to
$196 million; operating earnings increased to $38.6 million.
In Cytec Engineered Materials, selling volumes increased by 11%
compared to the prior year period, primarily due to the negative
impact in the second quarter of 2009 from destocking by our
customers who supply the large commercial transport sector.
Selling prices were essentially flat and the impact of exchange
rates reduced sales by 1%.
Operating earnings of $38.6 million were up versus $22.1 million
in the second quarter of 2009, mainly as a result of higher
selling volumes.
Cytec Building Block Chemicals sales increased by 89% to
$172 million; operating earnings increased to $15.0 million.
In Building Block Chemicals, selling prices increased by 75%
versus the second quarter 2009 as a result of significantly
higher propylene costs driving up pricing for acrylonitrile.
Volumes were up 14% primarily due to higher melamine demand.
Operating earnings of $15.0 million were up significantly
compared to $1.9 million in the prior year second quarter. The
increased earnings resulted primarily from higher selling
volumes and higher margins on acrylonitrile due to tight supply
conditions in the export market.
Special Items
In the second quarter of 2010 is a pre-tax net charge of $4.8
million ($3.1 million after-tax charge or $0.06 per diluted
share) for restructuring activities principally related to the
decision to exit certain phosphorus products manufactured at our
Mount Pleasant, Tennessee facility.
Income Tax Expense
Income tax expense for the second quarter of 2010 was
$24.0 million, compared with a tax benefit of $11.4 million in
the second quarter of 2009. Included in the provision for the
second quarter of 2010 are discrete tax benefits of $2.9 million
primarily related to the reversal of a valuation allowance for a
European entity. Excluding the tax related impact from the
special items previously noted and the above mentioned tax
benefit, the overall underlying estimated annual tax rate for
the second quarter of 2010 was approximately 31.75% versus the
underlying estimated annual tax rate in the second quarter of
2009 of 35%. The decrease over the prior year period’s
underlying rate is primarily due to a favorable earnings mix and
greater U.S. manufacturing benefits.
Cash Flow
David Drillock, Vice President and Chief Financial
Officer commented, “Cash flow from operations was $86 million
for the second quarter 2010. During the quarter we continued to
maintain and build on the excellent progress achieved by our
2009 working capital initiative. While trade accounts receivable
increased $52 million due to higher revenues, the average days
sales outstanding for the second quarter of approximately 45
days was slightly lower than the first quarter 2010 average of
47 days. Inventory increased by $21 million in the second
quarter of 2010 due to higher demand and production, while
average days on hand of approximately 59 days was slightly lower
than the average for the first quarter of 2010 of 61 days.
Accounts payable increased by $26 million in the quarter due to
the higher demand levels and an additional increase of 2 days in
days payable outstanding in the quarter to 51 days versus the
average first quarter of 2010 level of 49 days. We continue to
believe the gains made from our working capital initiative are
sustainable going forward. The increase in accrued expenses
reflects anticipated costs to exit a certain phosphorus product
line and increased incentive compensation while the decrease in
other liabilities reflects increased contributions to our
pension plans.”
Capital spending for the quarter was $27 million (versus $53
million spent in the second quarter of 2009) with approximately
55% of the spending attributable to Engineered Materials, 40% to
Specialty Chemical segments, and 5% to Building Block Chemicals.
2010 Outlook
Mr. Fleming commented, “Although we are still operating in a
dynamic economic environment, the improved global demand we have
experienced across our chemical businesses in the first half of
2010 leads us to a positive outlook for the remainder of 2010.
This outlook assumes that the economic recovery continues and
that we see our normal seasonal downturn in the second half of
2010. We now expect to achieve 2010 revenues of $3.2 to $3.4
billion versus our prior projection of $2.7 to $3.0 billion, and
as adjusted 2010 diluted earnings per share in a range between
$3.20 to $3.50, up from our prior as adjusted forecast of $1.90
to $2.40 per diluted share.” Our updated segment guidance by
segment follows:
Overall, Coating Resins continues to show steady demand
improvement with stronger volumes in all regions. Pricing
continues to be competitive, but the effort to offset higher raw
material costs continues. Sales are estimated to be in a range
of $1.35 to $1.45 billion, up from our previous range of $1.25
to $1.40 billion. Operating earnings are now expected to be in a
range of $70 to $80 million, up from our previous range of $45
to $60 million for this segment and up significantly from the
2009 operating loss of $3 million.
In Additives Technologies, sales growth remains strong as a
result of improved demand for our industrial surfactants as well
as our UV stabilizers, with especially strong demand in North
America and Asia. Sales are now projected to be in a range of
$240 to $250 million, up from our previous range of $200 to $230
million. Operating earnings are now projected to be in a range
of $35 to $40 million, up from our previous range of $15 to $20
million for this segment and up from the 2009 operating earnings
of $11 million.
In Process Separation continues to see strong demand and
excellent acceptance of Cytec’s new product introductions, with
the strongest growth of new products in Europe and Latin
America. Expectations are for full year sales to be in a range
of $290 to $310 million versus our prior guidance of $280 to
$310 million, and for full year operating earnings to be in a
range of $55 to $60 million versus our previous operating
earnings range of $40 to $50 million due to increased sales and
improved product mix.
In Engineered Materials, we saw strong increases in the second
quarter as some of our key commercial aerospace customers have
announced build-rate increases and have continued buying for new
programs. Taking this into account, full year sales for 2010 are
now projected to be in a range of $730 to $760 million versus
our prior guidance of $650 to $680 million, and full year
operating earnings are expected to be in a range of $105 to $115
million for this segment, up substantially from our previous
range of $80 to $90 million and up from 2009 operating earnings
of $96 million.
In Building Block Chemicals, we have seen modest improvement in
the building and construction markets during the first half of
the year and are expecting similar demand for acrylonitrile and
melamine in the second half. Although the supply situation for
acrylonitrile and melamine is currently tight, we expect the
market to normalize in the second half of this year.
Additionally, selling prices are expected to be lower in this
segment in the second half due to decreasing raw material costs.
Taking this into account, full year sales are projected to be
approximately $550 to $600 million versus our prior estimate of
$400 million and full year operating earnings to be in a range
of $25 to $30 million, up from our previous 2010 range of $7 to
$10 million and 2009 operating earnings of $10 million.
The guidance for Corporate and Unallocated is now forecast to be
an operating expense of approximately $23 million for the year
up from the previous 2010 estimate of $18 million as we have
increased spending on certain other improvement initiatives and
increased the accrual for incentive compensation. Our forecast
for Other expense, net is now $6 million and Interest expense,
net is essentially unchanged at approximately $34 million. The
forecast for the underlying annual tax rate for ongoing
operations is expected to be in a range of 31% to 33%.
In closing, Mr. Fleming commented, “I am extremely pleased with
our performance in the second quarter. The demand improvement
combined with the sustained success of the working capital
program, our new product introductions and the cost reductions
efforts from last year are demonstrated in our results to date.
As we execute on our growth strategy in a recovering economy,
the benefits of our new lower cost structure and the progress we
have made with new product introductions should continue to
leverage our earnings.”
Six Month Results
Net earnings for the six months ended June 30, 2010 were $86.6
million or $1.75 per diluted share on sales of $1,661 million.
Included in the results for the six months were:
-
Included in
Corporate and Unallocated, is a favorable net adjustment of
$0.7 million ($0.5 million after-tax or $0.01 per diluted
share) associated with various restructuring initiatives
across Specialty Chemicals, Engineered Materials, and
Corporate operations.
-
Included in
Corporate and Unallocated, is a charge of $5.1million ($3.2
million after-tax or $0.06 per diluted share) related to the
decision to exit certain phosphorus products manufactured at
our Mount Pleasant, Tennessee facility.
-
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.
Excluding these
items which total $11.0 million after-tax expense or $0.22 per
diluted share, net earnings were $97.6 million or $1.97 per
diluted share.
Net loss for the six months ended June 30, 2009 was $24.9
million or $0.52 per diluted share on sales of $1,297 million.
Included in the results for the six months were (a) pre-tax net
restructuring charges of $37.4 million ($25.0 million after-tax
or $0.52 per diluted share), and (b) pre-tax charges of $1.4
million ($1.9 million after-tax or $0.04 per diluted share) for
the exit of the polyurethanes product line. Excluding these
items, net earnings were $2.0 million or $0.04 per diluted
share.
Investor Conference Call to be Held on July 21, 2010 at
11:00am ET
Cytec will host their second quarter earnings release conference
call on July 21, 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’s vision is to deliver specialty chemical and material
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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