Press Releases
Contact:
Jodi Allen (Investor Relations)
(973) 357-3283
Cytec Announces Third Quarter 2012
As-Adjusted EPS of $1.51;
As-Adjusted Continuing EPS of $0.91, Up 75%;
Updates Full Year As-Adjusted 2012 EPS Guidance
WOODLAND PARK, N.J.,
October 18, 2012 -- Cytec Industries Inc. (NYSE: CYT) announced
today net earnings attributable to Cytec for the third quarter
2012 of $53.3 million or $1.13 per diluted share on net sales
from continuing operations of $455.4 million. Earnings from
continuing operations were $31.0 million or $0.66 per diluted
share. Earnings from discontinued operations were $22.8 million
or $0.48 per diluted share. Net earnings attributable to
non-controlling interests (which are associated with the
discontinued operations) were $0.5 million or $0.01 per diluted
share. Included in the quarter are several special items that
total $17.8 million of net charges after-tax, or $0.38 per
diluted share, and are outlined further in this release ($0.25
attributable to continuing operations and $0.13 attributable to
discontinued operations). Excluding these special items, net
earnings attributable to Cytec were $71.1 million or $1.51 per
diluted share, earnings from continuing operations were $42.8
million or $0.91 per diluted share, and earnings from
discontinued operations were $28.3 million or $0.60 per diluted
share.
Net earnings attributable to Cytec for the third quarter of 2011
were $47.9 million or $0.98 per diluted share on net sales from
continuing operations of $363.4 million. Earnings from
continuing operations were $25.4 million or $0.52 per diluted
share. Earnings from discontinued operations were $23.1 million
or $0.47 per diluted share. Net earnings attributable to
non-controlling interests (which are associated with the
discontinued operations) were $0.6 million or $0.01 per diluted
share. Included in the quarter were several special items that
totaled $6.0 million of net expense after-tax or $0.12 per
diluted share (all attributable to discontinued operations).
Excluding the special items, earnings attributable to Cytec were
$53.9 million or $1.10 per diluted share, earnings from
continuing operations were $25.5 million or $0.52 per diluted
share, and earnings from discontinued operations were $28.4
million or $0.58 per diluted share.
Shane Fleming, Chairman, President and Chief Executive Officer
commented, “I am pleased to report another good quarter, with
sales in our continuing operations up 25%, primarily as a result
of our Umeco acquisition. Net of the acquisition, sales
increased 7% with volume growth of 5%. Engineered Materials
sales increased 12% with the majority of the increase due to
volume growth across most of our aerospace end markets. Our In
Process Separation business continues to generate strong sales
and earnings with higher volume and margins. Additive
Technologies experienced lower demand for certain specialty
additive products in North America and softness across the
entire Additives Technology product line in Europe due to the
weak economic environment.”
Mr. Fleming continued, “I am also very pleased with our recent
agreement to sell the Coating Resins business. We now have
greater capacity to focus on and invest in our leading positions
in our target high secular growth markets which should further
enhance our financial performance.”
Cytec Engineered Materials sales increased 12% to $224.1
million; Operating Earnings increased to $40.5 million.
In Engineered Materials, selling volumes increased by 9% versus
the third quarter 2011 mostly driven by higher build rates in
the commercial transport and rotorcraft sectors despite certain
inventory destocking in the supply chain. Higher selling prices
increased sales by 3%.
Operating earnings of $40.5 million were up versus earnings of
$30.0 million in the prior year quarter, principally as a result
of the higher selling volumes and selling prices, which were
partially offset by higher spending to meet the increased
production levels.
Cytec’s newly acquired business, Umeco, reported sales
of $66.8 million and as-adjusted operating earnings of $2.9
million.
On July 20, 2012, we completed the purchase of our previously
announced acquisition of Umeco Plc. Process Materials (vacuum
bagging) sales were strong, but the Structural Materials
products experienced soft demand across the industrial sectors
in Europe with a number of customers pushing orders into the
fourth quarter of 2012 or first quarter of 2013.
As-adjusted operating earnings were $2.9 million for the quarter
which were below our expectation primarily due to lower selling
volumes. Also included in the quarter is a corporate overhead
allocation of approximately $0.8 million.
Cytec In Process Separation sales increased 9% to $98.1
million; Operating Earnings increased to $24.4 million.
In Process Separation selling volumes increased by 4% versus the
third quarter 2011, primarily as a result of higher demand for
mining chemicals in the emerging markets, which included one new
mine fill in Africa. The growth was further supported by strong
demand for phosphine chemicals in North America. Higher selling
prices increased sales by 5%.
Operating earnings were $24.4 million versus $17.3 million in
the prior year quarter principally due to higher selling
volumes, improved margin coming from higher selling prices and
better product mix, partially offset by increased operating
expenses to support the growth initiatives in this segment.
Cytec Additive Technologies sales decreased 11% to $66.4
million; Operating Earnings decreased to $9.6 million.
In Additive Technologies, overall selling volumes were down 9%
versus the third quarter 2011 primarily due to lower demand for
specialty additive products which was partially offset by
increased selling prices of 1%. Impact of exchange rates
decreased sales by 3%.
Operating earnings of $9.6 million were down versus $12.8
million in the third quarter of 2011 mainly as a result of lower
selling volumes.
Corporate and Unallocated
For the three and nine months ended September 30, 2012
continuing costs previously allocated to Coating Resins but now
included as part of corporate and unallocated were $15.7 and
$50.5 million, respectively. For the three and nine months ended
September 30, 2011, these costs were $15.5 and $50.1 million,
respectively.
Discontinued Operations
The Coating Resins segment is classified as discontinued
operations. In July 2012, we completed the previously announced
sale of our Pressure Sensitive Adhesives (PSA) product line to
Henkel for approximately $105 million. In October 2012, we
announced an agreement for the sale of our remaining Coating
Resins business to Advent International for $1,032 million cash
plus the assumption of certain liabilities of $118 million. The
Closing is expected in the first quarter of 2013.
The following covers Coating Resins sales and earnings as they
would have been reported if they had not been required to be
classified as discontinued operations. Sales were $364.3 million
down 12% in the third quarter 2012 versus $415.0 million in the
same period 2011. Selling volumes were down 6% with a portion of
this reduction due to our decision to exit certain low margin
products. Selling prices were down 1% year over year and the
impact of changes in exchange rates decreased sales by 5%.
Operating earnings would have increased to $24.3 million versus
$19.7 million in the third quarter 2011 primarily due to lower
raw material costs and the benefit of decreased operating
expenses related to cost reduction initiatives taken in 2011.
Special Items
In the third quarter of 2012 a number of special items were
recorded that resulted in a net pre-tax charge of $5.2 million
($17.8 million expense after-tax) as follows:
Continuing Operations:
-
Included in Corporate
Unallocated as Research and Process Development expense is a
pre-tax charge of $0.7 million ($0.4 million after-tax or
$0.01 per diluted share) related to ongoing incremental
accelerated depreciation related to the sale-leaseback
transaction of our research and development facility in
Stamford, Connecticut in the third quarter of 2011.
-
Included in Corporate
Unallocated as Administrative and General expense is a
pre-tax charge of $4.3 million ($4.3 million after-tax or
$0.09 per diluted share) related to Umeco acquisition costs.
For tax purposes, these costs will be capitalized as part of
the transaction with no related tax benefit.
-
Included in Corporate
Unallocated principally in Administrative and General and
Manufacturing Cost of Sales is pre-tax net restructuring
charges of $4.5 million ($3.3 million after-tax or $0.07 per
diluted share) primarily related to initiatives to reduce
stranded costs resulting from the sale of Coating Resins and
personnel reductions in the acquired Umeco business.
-
Included in the Umeco
segment as Manufacturing Cost of Sales is a pre-tax charge
of $4.5 million ($3.1 million after-tax or $0.07 per diluted
share) related to purchase accounting for the difference
between assigning a fair value to the acquired Umeco
finished goods inventory at the date of acquisition and
normal manufacturing cost.
Included in Corporate Unallocated as Other Income/Expense,
net is a pre-tax charge of $1.1 million ($0.7 million
after-tax or $0.01 per diluted share) related to an exchange
loss recorded in connection with an acquired Umeco
intercompany loan which was settled prior to quarter end.
Discontinued
Operations:
-
A pre-tax non-cash
charge of $25.4 million ($23.8 million after-tax or $0.51
per diluted share) to record the estimated loss on the sale
of Coating Resins.
-
A pre-tax restructuring
charge of $0.6 million ($0.4 million after-tax or $0.01 per
diluted share).
-
A pre-tax charge of
$4.5 million ($3.0 million after-tax or $0.06 per diluted
share) related to costs associated with the sale process of
Coating Resins.
-
A pre-tax benefit of
$19.0 million ($12.9 million after-tax or $0.27 per diluted
share). Depreciation and amortization are no longer required
to be recorded once assets are reclassified as held for
sale.
-
A pre-tax gain of $21.4
million ($8.3 million after-tax or $0.18 per diluted share)
related to the sale of our PSA product line to Henkel.
In the third quarter of
2011 a number of special items were recorded that resulted in
net pre-tax charges of $9.0 million ($6.0 million net charges on
an after-tax basis or $0.12 per diluted share) as follows:
Continuing Operations:
Discontinued Operations:
Income Tax Expense
Income tax expense related to continuing operations for the
third quarter of 2012 was $5.0 million, compared with a tax
expense of $13.1 million in the third quarter of 2011. Included
in income tax expense for the third quarter of 2012 is a tax
benefit of $8.5 million or $0.18 per diluted share related to
the reversal of certain tax reserves due to the settlement of US
tax audits for the years ended 2004 through 2008. Excluding this
item and the impact from the special items previously noted, the
overall underlying annual tax rate for the third quarter of 2012
was 31.5% versus the underlying annual tax rate in the third
quarter of 2011 of 31.5%.
Cash Flow
David Drillock, Vice President and Chief Financial Officer
commented, “Similar to last quarter, additional time is required
to prepare the Statement of Cash Flows reflecting the Coating
Resins segment as discontinued operations and the Umeco
acquisition. The Statement of Cash Flows will be available in
our quarterly 10-Q filing which is expected to be filed on or
about November 7th, 2012. On a continuing basis, our average net
working capital days during the quarter were up 12 days at 96
days compared to the second quarter of 2012. Average accounts
receivable and inventory days were up 2 days and 6 days,
respectively, compared with the second quarter of 2012. Average
payables days were down 4 days to 45 days compared with the
second quarter of 2012. As a result of destocking by some of our
customers in Engineered Materials and the extension of certain
orders in In Process Separation, our inventory days are higher
than anticipated. We expect to reduce this over the next several
quarters.
“Capital spending for total Cytec in the quarter was $49 million
with majority of the spending attributable to our growth
platforms. Our expectation for capital spending for the full
year 2012 remains approximately $200 million for total Cytec
with all of the increase from prior year mostly related to
previously announced manufacturing capacity expansions in the
Engineered Materials and In Process Separation segments.”
Mr. Drillock added, “In anticipation of the closing of the Umeco
acquisition, we borrowed approximately $170 million, net on our
previously unused $400 million credit facility. Our balance at
the end of the third quarter was $25 million as we reduced this
borrowing from our internal cash generation and proceeds from
the sale of the pressure sensitive adhesives product line.”
2012 Outlook
Mr. Fleming continued, “Now that we have reached the fourth
quarter we have a better view of our full year performance and
have therefore revised our earnings estimate. Our overall
continuing operations estimate for 2012 adjusted diluted
earnings per share is in a range of $2.84 to $3.03. The guidance
includes the $0.18 per diluted share tax benefit related to the
aforementioned completed U.S. tax return audits for the years
2004 through 2008. Excluding this amount, the new guidance
represents a significant increase above last year’s results. Our
prior guidance was a range of $2.65 to $2.90.
“In Engineered Materials, we are experiencing lower sales to
certain customers who have been destocking as discussed on our
second quarter earnings call and we believe there will be some
additional carryover into the fourth quarter. We are also
adjusting our production schedules to reduce inventory levels
and as a result we now estimate annual sales to be in a range of
$895 to $905 million and operating earnings for full year 2012
to be in a range of $163 million to $168 million, up at least
30% versus full year 2011. Our prior guidance was for sales of
$880 to $920 million and operating earnings to be in a range of
$170 million to $180 million. I remain confident in both the
short and longer term demand profile for the entire commercial
aerospace sector and we anticipate solid growth in 2013 and
beyond in this business.
“We are making good progress with the integration of Umeco;
reviewing the technologies, operations, and markets served by
our newest segment and delivering our initial synergy targets.
We are pleased with the strong performance of the Process
Materials product line, which is primarily specialty vacuum
bagging, and we are optimistic about trials underway to secure
new business. We remain cautious about demand for these products
in the wind energy sector, particularly in the U.S. as growth in
this market has slowed in recent months. The Structural
Materials product line is experiencing softer sales in certain
industrial markets in Europe and to a lesser extent, in the US
as some customers have begun pushing orders into the fourth
quarter and the first quarter of 2013. Taking into account all
the above, we estimate sales from late July through year end
2012 to be $155 to $160 million and operating earnings to be in
a range of $7 to $9 million. This range excludes the purchase
accounting inventory step up charge of $4.5 million.
“The In Process Separation segment has had a record year
performance, and demand for our mining and phosphine
technologies remains strong. This strength combined with our
success in winning new copper operation startups has offset some
temporary weakness in alumina. The outstanding performance this
year will result in higher sales and earnings for the segment.
We now estimate full year 2012 sales to be in a range of $385 to
$395 million and operating earnings are projected to be in a
range of $92 to $96 million, up from our previous guidance of a
sales range of $380 to $390 million and operating earnings of
$85 to $90 million.
“Additive Technologies continues to be impacted by the macro
environment, with the major impact coming in the European
markets where we have seen soft demand across most product
lines. The business has remained focused on maintaining strong
margins during this lower volume period and we have been pleased
with the overall performance in light of these circumstances.
Full year 2012 sales are now forecasted in a range of $270 to
$280 million and operating earnings are projected to be in a
range of $37 to $39 million, down from our previous guidance for
a sales range of $290 to $300 million and operating earnings of
$40 to $45 million. “
The guidance for corporate and unallocated expenses is slightly
lower at approximately $85 million for the year, which includes
continuing costs previously allocated to Coating Resins. Other
Expense is forecasted to be approximately $2 million, and
Interest Expense, net is now expected to be approximately $30
million. The forecast for the underlying annual tax rate is now
expected to be in a range of 30.5% to 32.5% excluding the $8.5
million ($0.18 per diluted share) tax benefit related to the
completed tax return audits for the years 2004 through 2008.
Guidance for as adjusted earnings per diluted share for
Discontinued Operations remains in a range of $2.15 to $2.20.
Mr. Fleming continued, “I am very pleased with the progress we
have made this year to transform our portfolio to a
higher-growth and higher-margin company. Our early success is
evident in the margin improvement we have delivered this year
across our businesses in the face of a challenging macro
environment. I remain extremely excited about our future and our
ability to deliver greater value for our shareholders.”
Nine Month Results
Net earnings attributable to Cytec for the nine months ended
September 30, 2012 were $142.1 million or $3.03 per diluted
share on net sales of $1,237.4 million. Earnings from continuing
operations were $69.9 million or $1.49 per diluted share.
Earnings from discontinued operations were $73.7 million or
$1.57 per diluted share. Net earnings attributable to
noncontrolling interests (which are associated with the
discontinued operations) were $1.5 million or $0.03 per diluted
share.
Special Items
During the nine months ended September 30, 2012, a number of
special items were recorded that resulted in net pre-tax charges
of $37.4 million ($61.8 million after-tax which includes $21.5
million of income tax expense related to the sale process of our
Coating Resins segment).
Continuing
Operations:
-
Included in Corporate
and Unallocated as Research and Process Development is a
pre-tax charge of $2.0 million ($1.3 million after-tax or
$0.03 per diluted share) related to ongoing incremental
accelerated depreciation related to the sale-leaseback
transaction of our research and development facility in
Stamford, Connecticut in the third quarter of 2011.
-
Included in Corporate
and Unallocated as Administrative and General Expense is a
pre-tax charge of $7.2 million ($7.2 million after-tax or
$0.15 per diluted share) related to Umeco acquisition costs.
For tax purposes, these costs will be capitalized as part of
the transaction with no related tax benefit.
-
Included in Corporate
and Unallocated principally in Administrative and General
and Manufacturing Cost of Sales are pre-tax net
restructuring charges of $15.9 million ($11.0 million
after-tax or $0.24 per diluted share) primarily related to
initiatives to reduce stranded costs resulting from the sale
of Coating Resins and personnel reductions in the acquired
Umeco business.
-
Included in the Umeco
segment as Manufacturing Cost of Sales is a pre-tax charge
of $4.5 million ($3.1 million after-tax or $0.07 per diluted
share) related to purchase accounting for the difference
between assigning a fair value to the acquired Umeco
finished goods inventory at the date of acquisition and
normal manufacturing cost.
-
Included in Other
Income/Expense, net is a pre-tax charge of $1.1 million
($0.7 million after-tax or $0.01 per diluted share) related
to an exchange loss recorded in connection with an acquired
Umeco intercompany loan which was settled prior to quarter
end.
-
Included in the Income
Tax provision is $14.5 million of income tax expense ($0.31
per diluted share) related to the sale process of our
Coating Resins segment. Accounting rules require
establishing a tax liability on the unrepatriated earnings
of foreign subsidiaries if it is management’s intention to
no longer permanently reinvest such earnings. As a result of
the intended sale of Coatings Resins, management’s
intentions changed with regard to a portion of the
unrepatriated earnings of certain foreign subsidiaries.
Discontinued Operations:
-
A net pre-tax charge of
$25.4 million ($23.8 million after-tax or $0.51 per diluted
share) to record the estimated loss on the sale of Coating
Resins.
-
A net pre-tax
restructuring charge of $0.3 million ($0.4 million after-tax
or $0.01 per diluted share).
-
A pre-tax gain of $21.4
million ($8.3 million after-tax or $0.18 per diluted share)
related to the sale of our PSA product line to Henkel.
-
A pre-tax charge of
$1.7 million ($1.2 million after-tax or $0.02 per diluted
share) related to an increase in the environmental liability
at a certain site for new remedial design requirements.
-
A pre-tax charge of
$19.7 million ($12.8 million after-tax or $0.27 per diluted
share) related to costs associated with the sale process of
Coating Resins.
-
A pre-tax benefit of
$19.0 million ($12.9 million after-tax or $0.27 per diluted
share). Depreciation and amortization are no longer required
to be recorded once assets are reclassified as held for
sale.
-
A $7.0 million of
income tax expense ($0.15 per diluted share) related to the
requirement of establishing a tax liability on a portion of
the un-repatriated earnings of certain foreign subsidiaries
to be sold as part of the sale of coating resins.
Excluding these special
items, net earnings attributable to Cytec were $203.9 million or
$4.35 per diluted share, earnings from continuing operations
were $107.7 million or $2.30 per diluted share, and earnings
from discontinued operations were $96.2 million or $2.05 per
diluted share.
Net earnings for the nine months ended September 30, 2011 were
$166.2 million or $3.35 per diluted share on net sales of
$1,046.4 million. Earnings from continuing operations were $54.0
million or $1.09 per diluted share. Earnings from discontinued
operations were $114.4 million or $2.30 per diluted share. Net
earnings attributable to non-controlling interests (which are
associated with the discontinued operations) were $2.2 million
or $0.04 per diluted share.
For the nine months ended September 30, 2011, a number of
special items were recorded that resulted in net pre-tax charges
of $21.9 million ($15.1 million net charges on an after-tax
basis or $0.30 per diluted share) as follows:
Continuing Operations:
-
Included in Other
expense, net 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.
-
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 Corporate and
Unallocated principally in Manufacturing cost of sales is a
pre-tax net restructuring charge of $0.6 million ($0.4
million after-tax or $0.01 per diluted share).
Discontinued Operations:
Excluding these special
items, net earnings attributable to Cytec were $181.3 million or
$3.65 per diluted share, earnings from continuing operations
were $55.0 million or $1.11 per diluted share, and earnings from
discontinued operations were $126.3 million or $2.54 per diluted
share.
Investor Conference Call to be Held on Friday, October
19, 2012 at 11:00am ET
Cytec will host their third quarter earnings release conference
call on October 19, 2012 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 and earnings from discontinued operations,
excluding special items and diluted earnings per share
(continuing operations attributable to Cytec and earnings from
discontinued operations) 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 material and chemical
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 and industrial materials, mining and
plastics.
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