Press Releases
Contact:
Jodi Allen (Investor Relations)
(973) 357-3283
Cytec Announces
Third Quarter 2010 Results
Adjusted EPS 40% increase over prior year
Reaffirms 2010 Full Year Outlook
WOODLAND PARK,
N.J., October 21, 2010 -- Cytec Industries Inc. (NYSE:CYT-News)
announced today net earnings for the third quarter 2010 of $37.7
million or $0.75 per diluted share on net sales of $837 million.
Included in the quarter is a special item of $2.2 million of net
expense after-tax or $0.04 per diluted share and is outlined
further in this release. Excluding the special item, net
earnings were $39.9 million or $0.80 per diluted share.
Net earnings for the third quarter of 2009 were $12.5 million or
$0.26 per diluted share on net sales of $740 million. Included
in the quarter were several special items that totaled $15.1
million of net expense after-tax or $0.31 per diluted share.
Excluding these special items, net earnings were $27.6 million
or $0.57 per diluted share.
Shane Fleming, Chairman, President and Chief Executive Officer
commented, “I’m very pleased with our results for the third
quarter and we remain on track to deliver the full year outlook
we communicated with our second quarter results. Sales increased
across all business segments and regions versus the prior year
period primarily due to higher volumes and selling prices,
especially in North America where we experienced greater than a
20% increase in sales. We continue to leverage the higher
volumes into higher operating earnings. On a business segment
basis we saw our strongest volume growth in the third quarter in
Engineered Materials as our aerospace markets continue to
recover. Finally, we continue to maintain our working capital
gains from 2009 which is reflected in our strong cash
generation.”
Cytec Coating Resins sales increased 8% to $364 million;
operating earnings increased to $19.5 million.
In Coating Resins, overall sales were up 8% with
selling volumes up 4% versus the third quarter 2009. Selling
volumes were higher in all regions except Asia Pacific which saw
a modest 2% decline, the largest growth was in Europe at 7%.
Selling prices increased 9% with increases across all product
lines reflecting higher raw material costs. Unfavorable changes
in exchange rates decreased sales by 5%.
Operating earnings of $19.5 million or 5% of sales were up
versus operating profit of $18.5 million in the third quarter of
2009 principally due to increased selling volumes across all
product lines. Higher raw material costs in the segment were
largely offset by increased selling prices.
Cytec Additive Technologies sales increased 2% to $66
million; operating earnings increased to $9.1 million.
In Additive Technologies, excluding the impact of low
value products divested in 2009, segment sales were up by 11%
versus the third quarter 2009, attributed to stronger demand
across most industrial markets. Including these divested sales,
segment sales were up 2% from the prior period. Selling prices
increased by 2% and the impact of exchange rates decreased sales
by 2%.
Operating earnings of $9.1 million or 14% of sales were up
compared to $3.1 million in the third quarter of 2009, with the
improvement coming mainly as a result of higher selling volumes
and increased pricing.
Cytec In Process Separation sales increased 6% to $75
million; operating earnings increased to $12.8 million.
In Process Separation sales were up 6% due to higher
selling volumes versus the third quarter 2009, resulting
primarily from stronger demand in our key alumina and copper
mining markets.
Operating earnings of $12.8 million or 17% of sales were higher
compared to $12.5 million in the prior year quarter, mainly as a
result of higher selling volumes. This was partially offset by
higher operating costs as we increased our investment in our
research and commercial activities to support the growing
opportunities in this segment.
Cytec Engineered Materials sales increased by 15% to
$195 million; operating earnings increased to $27.9 million.
In Cytec Engineered Materials, sales increased 15% with
selling volumes up 14% compared to the prior year period. The
volume increase was primarily due to higher sales associated
with new large commercial aircraft programs and also higher
sales in the high performance industrial sectors. Selling prices
increased 2% while the impact of exchange rates reduced sales by
1%.
Operating earnings of $27.9 million, or 14% of sales, were up
versus $18.3 million in the third quarter of 2009. The higher
earnings were mainly a result of higher selling volumes and were
partially offset by increased operating costs that were added to
meet the increasing demand and future growth opportunities.
Cytec Building Block Chemicals sales increased by 39% to
$137 million; operating earnings increased to $9.7 million.
Overall sales increased 39% from the third quarter of
2009 of which 34% was from higher selling prices primarily due
to higher raw material costs used in the manufacturing of
acrylonitrile where pricing closely follows raw material cost
movements. Overall selling volumes were up 5% from higher
acrylonitrile sales in North America, partially offset by lower
export volumes.
Earnings from operations were $9.7 million or 7% of sales in
2010, compared with $4.8 million in 2009. The $4.9 million
increase in earnings is primarily from increased selling prices
only partially offset by higher raw material costs.
Special Items
In the third quarter of 2010 is a net pre-tax charge of $3.2
million ($2.2 million after-tax charge or $0.04 per diluted
share) for restructuring costs primarily associated with
consolidating manufacturing operations in Europe.
Income Tax Expense
Income tax expense for the third quarter of 2010 was $19.8
million, compared with a tax expense of $7.6 million in the
third quarter of 2009. Excluding the tax related impact from the
special item previously noted the overall underlying estimated
annual tax rate for the third quarter of 2010 was approximately
32.6%, an increase of almost 1% versus the previous estimated
annual rate of 2010 due to a shift in earnings to higher tax
jurisdictions. The impact on third quarter results related to
the cumulative tax catch-up on the first six months of 2010
reduced earnings approximately $1.2 million or $0.02 per diluted
share. The decrease from the prior year period’s underlying
estimated annual tax rate of 34% is primarily due to a favorable
earnings mix and the utilization of U.S. manufacturing tax
benefits.
Cash Flow
David Drillock, Vice President and Chief Financial Officer
commented, “Cash flow from operations was $58 million for the
third quarter 2010. During the quarter we continued to maintain
the excellent progress achieved by our 2009 working capital
initiative. Trade accounts receivable decreased $31 million due
to lower revenues versus the second quarter 2010, and the
average days sales outstanding for the third quarter of
approximately 47 days was slightly higher than the second
quarter 2010 average of 45 days. Inventory increased by $12
million in the third quarter of 2010 and average days on hand of
approximately 61 days was slightly higher than the average for
the second quarter of 2010 of 58 days. Accounts payable
decreased by $26 million although average days payable
outstanding increased 2 days in the quarter to 53 days versus
the average second quarter of 2010 level of 51 days. We are
pleased with our working capital performance in 2010 as it
reinforces our belief that the gains made from our working
capital initiative in the prior year are sustainable. The
increase in accrued expenses reflects increased incentive
compensation accruals and the aforementioned restructuring
charge.”
Capital spending for the quarter was $30 million (versus $43
million spent in the third quarter of 2009) with approximately
40% of the spending attributable to Engineered Materials, 40% to
Specialty Chemical segments, 18% to Building Block Chemicals,
with the remaining 2% for Corporate projects. The full year
estimate for capital expenditures is now in a range of $120 to
$130 million, down from the previous forecast of $140 to $160
million.
2010 Outlook
Mr. Fleming commented, “Although we continue to operate in a
highly dynamic global economic environment, we expect to achieve
2010 revenues of $3.2 to $3.4 billion with diluted earnings per
share adjusted to exclude special items in a range between $3.20
to $3.50, in line with the enhanced outlook we communicated with
our second quarter results.”
2010 full year sales and operating earnings projections for the
Specialty Chemicals business segments could be at the lower end
of the guidance ranges we provided in the second quarter.
However, we now expect Engineered Materials to be at the higher
end of our full year range of $730 to $760 million for revenues
and $105 to $115 million for operating earnings. Therefore, the
consolidated outlook for the company remains unchanged. The
guidance for Corporate and Unallocated is now forecasted to be
an operating expense of approximately $25 million for the year,
up from the previous 2010 estimate of $23 million. Our forecast
for Other Expense, net and Interest expense, net are unchanged
at approximately $6 million and $34 million, respectively. The
forecast for the underlying annual tax rate for ongoing
operations remains in a range of 31% to 33%.
In closing, Mr. Fleming commented, “As anticipated, our
performance in the third quarter has us well-positioned to
deliver our earnings guidance for the full year. As we execute
on our growth strategy including our progress on new product
introductions plus the benefits of our lower cost structure and
strong cash flow, we remain excited about our ability to
increase value to our shareholders.”
Nine Month Results
Net earnings for the nine months ended September 30, 2010 were
$124.3 million or $2.50 per diluted share on sales of $2,498
million. Included in the results for the nine months were:
• Included in Corporate and Unallocated, is a net pre-tax charge
of $7.7 million ($4.9 million after-tax or $0.10 per diluted
share) associated with various restructuring initiatives across
Specialty Chemicals.
• 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 $13.2 million after-tax
expense or $0.27 per diluted share, net earnings were $137.5
million or $2.76 per diluted share.
Net loss for nine months ended September 30, 2009 was $12.4
million or $0.26 per diluted share on sales of $2,038 million.
Included in the results for the nine months were (a) pre-tax net
restructuring charges of $59.5 million ($40.4 million after-tax
or $0.85 per diluted share), (b) net pre-tax charges of $1.4
million for the exit of the polyurethanes product line ($1.9
million after-tax or $0.04 per diluted share), (c) a net pre-tax
loss of $8.6 million ($5.5 million after-tax or $0.11 per
diluted share) associated with the premium for the debt tender,
and (d) a pre-tax non-cash gain of $8.9 million ($5.7 million
after-tax or $0.12 per diluted share) as a result of a land
sale. Excluding these items, net earnings were $29.7 million or
$0.62 per diluted share.
Investor Conference Call to be Held on October 22, 2010
at 11:00am ET
Cytec will host their third quarter earnings release
conference call on October 22, 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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