Cytec Announces Third Quarter 2010 Results Adjusted EPS 40% Increase over Prior Year Reaffirms 2010 Full Year Outlook
Share:
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 wellpositioned
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:
o 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.
o 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.
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.
Cytec Industries Inc.
Five Garret Mountain Plaza
Woodland Park, New Jersey 07424
www.cytec.com
Contact:
Jodi A. Allen
(973) 357-3283
