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Contact:
Jodi Allen (Investor Relations)
(973) 357-3283
Cytec Announces
Second Quarter 2011 Results
Net Revenue of $798 million, Up 14% From Second Quarter 2010
As-Adjusted Continuing EPS of $0.92 per Diluted Share
Updates Full Year 2011 Guidance
WOODLAND PARK,
N.J., July 21, 2011 -- Cytec Industries Inc. (NYSE: CYT)
announced today net earnings for the second quarter 2011 of
$35.1 million or $0.70 per diluted share on net sales of $798
million. Earnings from continuing operations attributable to
Cytec were $36.2 million or $0.72 per diluted share. Loss from
discontinued operations was $1.1 million or $0.02 per diluted
share. Included in the quarter are several special items from
continuing operations that total $9.7 million of net expense
after-tax or $0.19 per diluted share and are outlined further in
this release. Excluding the special items and loss from
discontinued operations, earnings from continuing operations
attributable to Cytec were $45.9 million or $0.92 per diluted
share.
Net earnings for the second quarter of 2010 were $61.8 million
or $1.24 per diluted share on net sales of $702 million.
Earnings from continuing operations attributable to Cytec were
$50.5 million or $1.02 per diluted share. Earnings from
discontinued operations were $11.3 million or $0.22 per diluted
share. Included in the quarter were special items that totaled
$3.1 million of net expense after-tax or $0.06 per diluted
share. Excluding the special items from continuing operations
and earnings from discontinued operations, net earnings from
continuing operations attributable to Cytec were $53.6 million
or $1.08 per diluted share.
Shane Fleming, Chairman, President and Chief Executive Officer
commented, “We overcame the challenge of continued raw material
cost escalation and macroeconomic uncertainty and delivered good
sequential sales and earnings growth across our portfolio. We
remained disciplined in our pricing actions in our Specialty
Chemicals businesses and were able to more than offset the
impact of sharply increased raw material costs. In addition, we
made good progress implementing planned price increases in our
Engineered Materials segment. Our sales growth for the quarter
included 10% from higher selling prices and 5% from exchange
rate changes versus the second quarter last year. This was
partially offset by slightly lower selling volumes of 1%. In the
Coating Resins and Additive Technologies segments, industrial
markets softened in the latter part of the quarter while we
continue to see good volume growth in our Engineered Materials
and In Process Separation segments.“
Cytec Coating Resins sales increased 14% to $421
million; operating profit flat at $28.2 million.
In Coating Resins, overall selling volumes were down by 9%
versus the second quarter 2010, due to weak demand in many of
our industrial markets across all regions. Selling prices
increased sales by 15% and the impact of changes in exchange
rates increased sales by 8%.
Operating earnings of $28.2 million were flat versus $28.0
million in the second quarter of 2010. Higher selling prices of
$54.1 million more than offset higher raw material costs of
$46.7 million. This net benefit was offset by the impact of
lower selling volumes.
Cytec Additive Technologies sales increased 10% to $73
million; operating earnings decreased to $10.1 million.
In Additive Technologies, overall selling volumes were down by
3% versus the second quarter 2010, attributed primarily to
weaker demand in the North America and Asia Pacific regions as
well as limited product availability given our short-term
capacity constraints in this business as we operate at high
utilization levels and focus on asset reliability to meet our
customer’s needs. This was offset by higher selling prices of 8%
and the favorable impact of changes in exchange rates of 5%.
Operating earnings of $10.1 million were down slightly compared
to the $10.7 million in the second quarter of 2010 mainly as a
result of lower selling volumes and higher operating expenses.
Increased selling prices essentially offset increased raw
material costs of $5.6 million.
Cytec In Process Separation sales increased 16% to $82
million; operating earnings increased to $15.6 million.
In Process Separation selling volumes were up 10% versus the
second quarter 2010, resulting primarily from higher demand in
our key alumina markets and strong demand for phosphine
chemicals. Selling prices increased sales by 4% and the change
in exchange rates increased sales by 2%.
Operating earnings of $15.6 million were higher compared to
$14.3 million in the prior year quarter, mainly as a result of
higher selling volumes and prices. These positive impacts were
partially offset by higher raw material costs of $3.2 million.
Cytec Engineered Materials sales increased by 13% to
$222 million; operating earnings decreased to $30.4 million.
In Engineered Materials, selling volumes increased by 9%
compared to the prior year period, primarily driven by higher
build rates in both new and legacy large commercial aircraft
programs and civil rotorcraft. Selling prices increased sales by
3% and the impact of exchange rates increased sales by 1%.
Operating earnings of $30.4 million were down versus $38.6
million in the second quarter of 2010, mainly as a result of
higher period and operating costs. These costs were incurred to
meet increasing demand and future growth opportunities as well
as to mitigate the impact of delays in moving production to two
expanded facilities as a result of qualification delays.
Increased selling prices covered increased raw material costs.
Discontinued Operations
Net loss for the second quarter of 2011 includes an unfavorable
pre-tax adjustment of $3.5 million ($2.2 million after-tax)
related to the gain on the divestiture that we recorded in the
first quarter of 2011, as we settled the working capital
adjustment provision of the transaction. This was partially
offset by a favorable adjustment to the tax provision for
discontinued operations of $1.1 million associated with the
former Building Block Chemicals Segment’s allocable portion of
our revised full year estimated U.S. domestic manufacturing
deduction.
Special Items
The second quarter of 2011 includes net pre-tax charges of $12.5
million ($9.0 million after-tax or $0.18 per diluted share) for
restructuring activities principally related to Coating Resins
segment, and a pre-tax charge of $1.2 million ($0.7 million
after-tax or $0.01 per diluted share) related to an increase in
the environmental liability at an inactive site for new remedial
design requirements.
Income Tax
Expense
Income tax expense related to continuing operations for the
second quarter of 2011 was $18.3 million, compared with a tax
expense of $18.6 million in the second quarter of 2010. Included
in the provision for the second quarter of 2011 are discrete tax
expenses of $0.7 million primarily attributable to the
re-measurement of our deferred tax position related to changes
in U.S. state tax rates. Excluding the impact from the
aforementioned discrete tax expenses and the special items
previously noted, the underlying estimated annual tax rate for
the second quarter of 2011 was approximately 31.30% versus the
underlying estimated annual tax rate in the second quarter of
2010 of 31.75%.
Cash Flow
David Drillock, Vice President and Chief Financial Officer
commented, “Operating cash flows from continuing operations were
$28.7 million for the second quarter 2011. During the quarter
our average net working capital days were flat compared to the
first quarter of 2011. While trade accounts receivable increased
$14.2 million due to higher revenues, the average days sales
outstanding of approximately 48 days was slightly down compared
to the first quarter 2011 average of 49 days. Inventory
increased by $51.0 million from the first quarter 2011 due to
weak demand and preparation for the seasonal production
shutdowns. Average inventory days on hand of approximately 74
days was up from the average for the first quarter of 2011 of 69
days. Accounts payable decreased by $3.1 million due to the
lower demand levels while accounts payable days were up 4 days
to 62 days versus the average first quarter of 2011 level of 58
days.”
“Capital spending for the quarter was $25 million with
approximately 60% of the spending attributable to Specialty
Chemical segments and 40% to Engineered Materials, versus $25
million spent in the second quarter of 2010. We are revising our
outlook for full year capital spending to a range of $120 to
$130 million down from our previous guidance of $170 to $190
million. The decrease is the result of several expansion
projects moved into 2012.”
“During the quarter we purchased 415,000 shares of our common
stock for $23 million. The remaining amount on the current share
repurchase authorization is approximately $147 million.”
2011 Outlook
Mr. Fleming commented, “Although the improved global demand
across our Specialty Chemicals businesses in the first quarter
of 2011 was encouraging, we did experience a slowdown in demand
in our industrial markets in the latter part of the second
quarter, negatively impacting our Coating Resins and Additive
Technologies segments particularly. The exceptions were the
European automotive market mainly driven by German exports and
the Japanese market which is showing first signs of recovery
from the earthquake. Regarding raw materials, propylene prices
appear to have peaked in May at an all-time high of $0.96.
Although propylene prices contracted in June and July, chemical
grade propylene prices are expected to stay relatively high
throughout the remainder of the year compared to prior year
levels. We are now faced with the uncertain pace of global
economic recovery, persistent high unemployment and fiscal
constraints in the developed economies, and inflationary
concerns in the emerging markets. With our solid first half
results and our cautious second half view for demand for our
Specialty Chemicals segments, our guidance for full year
operating earnings in Coating Resins, Additive Technologies, and
In Process Separation businesses is unchanged.”
“In Coating Resins, given the significant increase in pricing
that was necessary to recover raw material costs, the revised
full year sales projection is now $1.55 to $1.65 billion, up
from the prior projection of $1.50 to $1.52 billion. The range
for full year operating earnings of $70 to $80 million is
unchanged. In Additive Technologies, the full year guidance is
unchanged with a sales range of $260 to $280 million and
operating earnings of $37 to $40 million. The full year guidance
for the In Process Separation segment also remains unchanged
with a sales range of $320 to $330 million and operating
earnings in a range of $60 to $70 million.”
Mr. Fleming continued, “In Engineered Materials, we expect
continued strong selling volume increases in the second half of
2011 in the large commercial transport, business jet, and
rotorcraft sectors. We are also making good progress to more
than offset the year-over-year increases in raw material costs
by year end. We have now obtained the majority of the
qualifications at our new facilities and are transferring
production to these sites which should lead to improved margins
in the second half of 2011. The expected improvement in margins
may be partially offset by additional expense investments to
meet increasing demand for existing programs and qualification
expenses for future generation aircraft. For this segment, 2011
full year sales are now projected to be in a range of $880 to
$900 million, up versus the prior guidance of $825 to $845
million. Full year operating earnings are expected to be in a
range of $125 to $135 million for this segment, down versus the
previous range of $130 to $140 million.
On a consolidated level, the guidance for Corporate and
Unallocated is unchanged at $16 to $18 million for the year.
Guidance for other expense and net interest expense remains
unchanged at $4 million and in the range of $37 to $39 million,
respectively. The forecast for the underlying annual tax rate
for ongoing operations continues to be in a range of 30.5% to
32.5%.
After taking into account all these above factors, the revised
2011 continuing full year adjusted diluted earnings per share is
now in the range of $3.25 to $3.50 on sales of $3.0 billion to
$3.2 billion versus the prior projection of $3.15 to $3.50 on
sales of $2.9 billion to $3.0 billion.”
In closing, Mr. Fleming commented, “I am pleased and proud of
the people of Cytec for their ability to react quickly to the
uncertainty and rapidly changing global economy. For our
Engineered Material business, increasing build rates from both
legacy and new aerospace programs will continue to provide
strong growth in the short, medium and long term and we are well
positioned to capitalize on the favorable secular trend towards
increased composites content. We remain focused on margin
improvement to generate stronger earnings and cash flow which
will allow us to pursue additional investments and growth to
create value for our shareholders.”
Six Month Results
Net earnings for the six months ended June 30, 2011 were $118.3
million or $2.36 per diluted share on sales of $1,564 million.
Earnings from continuing operations attributable to Cytec were
$75.8 million or $1.51 per diluted share. Earnings from
discontinued operations were $42.5 million or $0.85 per diluted
share.
For the six months ended June 30, 2011, a number of special
items (all from continuing operations) were recorded that
resulted in net pre-tax charges of $12.9 million ($9.1 million
net charges on an after-tax basis or $0.18 per diluted share) as
follows:
-
Included in
Corporate and Unallocated, principally in operating
expenses, are pre-tax net restructuring charges of $11.8
million ($8.5 million after-tax or $0.17 per diluted share)
primarily related to Coating Resins.
-
Included in
Gain on sale of assets is a pre-tax gain of $3.3 million
($2.1 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 $4.4 million ($2.7
million after-tax or $0.05 per diluted share) related to an
increase in the environmental liability at inactive sites
for updated estimates of future remedial costs.
Excluding these
items and earnings from discontinued operations, net earnings
from continuing operations attributable to Cytec were $84.9
million or $1.69 per diluted share.
Net earnings for
the six months ended June 30, 2010 was $86.6 million or $1.75
per diluted share on sales of $1,349 million. Earnings from
continuing operations attributable to Cytec were $71.6 million
or $1.45 per diluted share. Earnings from discontinued
operations were $15.0 million or $0.30 per diluted share.
Included in the results for the six months were (a) favorable
net pre-tax adjustments 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, (b) pre-tax charges of $5.1
million ($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 and (c)
income tax expense of $8.3 million or $0.17 per diluted share
due to the U.S. Health Care Reform legislation passed in the
first quarter of 2010. Excluding these items and earnings from
discontinued operations, net earnings from continuing operations
attributable to Cytec were $82.6 million or $1.67 per diluted
share.
Investor Conference Call to be Held on Friday July 22,
2011 at 11:00am ET
Cytec will host their second quarter earnings release conference
call on July 22, 2011 at 11:00am ET.
The conference call will 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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