Press Releases
Contact:
Jodi Allen
(973) 357-3283
Cytec Announces Second Quarter
2008 Results
Reaffirms Full Year EPS Outlook
West Paterson, New Jersey, July 17, 2008 – Cytec Industries Inc.
(NYSE:CYT) announced today net earnings for the second quarter
2008 of $56.5 million or $1.16 per diluted share on net sales of
$1,006 million. Included in the quarter are special items that
total $2.0 million of net after-tax expense or $0.04 per diluted
share and are outlined further in this release. Excluding these
special items, net earnings were $58.5 million or $1.20 per
diluted share.
Net earnings for the second quarter of 2007 were $54.8 million,
or $1.11 per diluted share, on net sales of $864 million.
Included in that quarter was an after-tax net restructuring
charge of $1.8 million or $0.04 per diluted share and is
described further in this release. Excluding this item, net
earnings were $56.6 million or $1.15 per diluted share.
David Lilley, Chairman and Chief Executive Officer said, “Our
second quarter results reflect the strong performance of our
Engineered Materials segment, with significantly higher selling
volumes versus the same period a year ago. In the Specialty
Chemicals segments, we continue to grow volumes, except in North
America where we are still experiencing lower demand. In
addition, we are incurring significantly higher raw material,
energy and freight costs which are impacting our earnings. We
remain committed to raising prices in a selective way to offset
the rising costs and allow a reasonable return on our
investment. The Building Block Chemicals segment was also a
strong contributor in the quarter, as they have successfully
passed along the higher selling prices, more than offsetting the
higher raw material costs.”
Cytec Performance Chemicals Sales increased 9% to $202
million; Operating Earnings decreased to $20.5 million.
Mr. Lilley continued, “In Cytec Performance Chemicals, overall
selling volumes were up by 2% primarily due to increases in
mining chemicals as our new technologies continue to gain
acceptance in the market. Selling prices in the segment
increased by 2% and the impact of exchange rate changes
increased sales by 5%.”
“Operating earnings of $20.5 million were down compared to the
$23.7 million in the second quarter of 2007. The decrease is
primarily attributable to the higher raw material and freight
costs resulting from the escalation of crude oil prices.”
Cytec Surface Specialties Sales increased 13% to $473
million; Operating Earnings decreased to $22.2 million.
“In Cytec Surface Specialties, overall selling volumes were up
by 1% due primarily to volume growth in the Asia Pacific region
as we continued to experience weaker demand in North America and
modest growth in Europe. Selling prices were flat and the impact
of exchange rate changes increased sales by 12%.”
“Operating earnings of $22.2 million include a charge of $1.4
million of accelerated depreciation related to the exit of our
Pampa, Texas site. This was lower than the $32.8 million in same
period last year and primarily attributable to higher raw
material and freight costs versus the second quarter 2007.”
Cytec Engineered Materials Sales increased 16% to $193
million; Operating Earnings increased to $41.8 million.
“In Cytec Engineered Materials, selling volumes increased by 13%
and selling prices increased by 3%. The volume increase was
across all product lines and customer sectors principally lead
by growth in rotorcraft and large commercial aircraft.”
“Operating earnings increased to $41.8 million versus $34.8
million in the second quarter 2007. Higher selling volumes and
selling prices were the principle contributors to the earnings
increase and more than offset higher raw material costs and our
increased investments in Research and Development.”
Building Block Chemicals Sales increased 48% to $138 million;
Operating Earnings increased to $6.5 million.
“In Building Block Chemicals, selling volumes were up by 2% and
selling prices increased by 46%. The increase in selling prices
was to recover the large cost increases of propylene, natural
gas, and ammonia.”
“Operating earnings increased to $6.5 million compared to $4.6
million in the second quarter of 2007 primarily due to the
higher selling prices.”
Special Items
David M. Drillock, Vice President and Chief Financial Officer
commented, “We recorded a number of special items in the second
quarter of 2008 that net to a pre-tax charge of $3.0 million
($2.0 million after-tax) as follows:
-
Included in
manufacturing cost of sales in Corporate and Unallocated is
a net pre-tax charge of $1.6 million ($1.1 million
after-tax) for additional restructuring costs primarily
associated with manufacturing operations in West Virginia,
Connecticut, and France. These expenses were anticipated but
not accruable when the plans were announced.
-
Also included
in manufacturing cost of sales in the Cytec Surface
Specialties segment is a pre-tax charge of $1.4 million
($0.9 million after-tax) for accelerated depreciation in
relation to Radcure manufacturing at our leased facility in
Pampa, TX.”
“In the second
quarter of 2007 we recorded an after-tax restructuring charge of
$1.8 million in Corporate and Unallocated. The costs were
principally related to the shutdown of the manufacturing
operations in France.”
Interest Expense
Mr. Drillock continued, “Interest expense was reduced 18% from
the prior year quarter reflecting the lower debt levels versus
the prior year quarter.”
Income Tax Expense
Mr. Drillock added, “Our tax provision for the second quarter of
2008 was $25.8 million, or 31.4%, on earnings before income
taxes compared with $24.3 million, or 30.7%, on earnings before
income taxes in the second quarter of 2007. Our underlying tax
rate for the second quarter of 2008 was 31.5% versus 29.75% for
the second quarter of 2007. The change in the 2008 underlying
tax rate is primarily due to increased earnings in 2008 in
higher tax jurisdictions and also that the U.S. research and
development tax credit has not been renewed.”
Cash Flow
Mr. Drillock further commented, “Cash flows from operations were
$44 million for the quarter and $82 million year to date. For
the quarter, trade accounts receivable increased by $30 million
principally reflecting higher selling prices and volumes as days
outstanding are flat versus the end of the first quarter.
Inventory increased approximately $24 million primarily
reflecting higher raw material and energy costs. Days on hand
are 73, up from 72 days at the end of last quarter. Capital
spending for the quarter was $43 million, bringing our year to
date spending to $70 million.”
“During the quarter we purchased 232 thousand shares of our
common stock for $14.1 million. The remaining amount available
under the current share repurchase authorization is
approximately $72 million.”
2008 Outlook
Mr. Lilley commented, “Taking into account our solid performance
in the first half of 2008, together with the challenges ahead of
us, we affirm our prior guidance for full year adjusted diluted
earnings per share is expected to be in a range of $4.15 to
$4.35 per share, up from the 2007 adjusted diluted earnings per
share of $3.90.”
“On the input side, we continue to operate in a very challenging
environment. We expect crude oil, natural gas, and propylene
costs to remain at today’s high levels for the remainder of
2008. We remain committed to passing along price increases
wherever necessary to offset the impact of these higher costs.”
Mr. Lilley continued with some additional comments on the
individual segments, “In Cytec Performance Chemicals, we are
forecasting modest growth across the segment, and we are
experiencing higher raw material costs versus our original
forecast. We plan to offset the raw material costs impact with
price increases. Our full year guidance remains essentially
unchanged with operating earnings growing by just under 10%.”
“In Cytec Surface Specialties, raw material costs continue as a
significant headwind, with crude oil and propylene reaching
all-time highs during the quarter. We are raising prices to
attempt to cover these higher raw material costs, but it will
not be easy. We are persisting with our operational excellence
initiatives to focus on cost reduction which should enhance
earnings. On the demand side, we expect continuing weakness in
North America for the remainder of the year. We expect Europe to
show only flat to modest growth, and we expect Asia and Latin
America to continue at similar rates as the first half of 2008.
Overall, we would expect sales volumes to be equal to 2007
levels. Given this difficult environment, we are now estimating
for Surface Specialties full year operating earnings in a range
of $90 million to $95 million, a 5% to 10% decline compared to
2007, versus our prior expectation of a 10% to 15% increase in
operating earnings.”
“In Engineered Materials, the full year demand is expected to be
strong as build rates continue to increase year over year across
the large commercial transport, business/regional jets, and
military sectors. However, we expect some customer inventory
reductions in the second half of 2008 but our outlook remains
positive for continued strong annual growth in this segment and
we are making important investments in 2008 to meet these
growing industry demands. Based on the first half performance,
we are raising our prior guidance and we now expect full year
sales growth of about 15% compared to our prior estimate of 10%.
We now expect operating earnings to be in a range of $153
million to $158 million for full year 2008 versus our prior
expectations for operating earnings growth of about 10%, which
equated to about $146 million.”
“In Building Block Chemicals, we expect the markets to remain
balanced, although the high price for acrylonitrile is creating
some demand destruction, but we will continue to pass along
higher raw material costs as necessary. In the second quarter,
we completed our four week maintenance shutdown of the
acrylonitrile unit and all production units are now up and
running. The estimate for operating earnings in the segment has
been increased to a range of approximately $20 million to $22
million for the full year 2008 versus our prior guidance of $18
million to $20 million.”
“Our guidance for Corporate and Unallocated is a net expense of
$9 million, improved from our prior forecast of $12 million,
other income/(expense) is forecasted to be income of $2 million
versus $2 million of expense and equity earnings are expected to
be about $2 million, down from $4 million. Our forecast for
interest expense remains at about $37 million, and our
underlying annual tax rate for ongoing operations is now in the
range of 31.25% to 31.75%, up from our prior range of 30.25% to
31%. The change in the 2008 underlying tax rate is primarily due
to higher earnings in 2008 in higher tax jurisdictions and that
the U.S. R&D tax credit has not been renewed.”
“We continue to focus on cash flow and will maintain similar
priorities for our use of cash. Our capital investments for this
year are on track. In the second quarter, we successfully
started up production of our waterborne resin unit in
Connecticut and also successfully started up our Radcure resin
line in China. In Engineered Materials, we began our capacity
expansion of the carbon fiber facility in South Carolina, which
is a three year investment. We expect a ramp-up of capital
spending in the second half of the year and our forecast full
year 2008 capital spending remains in a range of $180 million to
$200 million.”
In closing, Mr. Lilley commented, “We have a number of
challenges in front of us, but we also have a considerable
number of opportunities to increase sales and enhance
productivity across Cytec, and with the continued efforts of all
the people at Cytec, we look forward to the sustainable growth
of our businesses.”
Six Month Results
Net earnings for the six months ended June 30, 2008 were $105.7
million or $2.17 per diluted share on sales of $1,979 million.
Included in the results for the six months were – (a) pre-tax
net restructuring charges of $5.0 million ($3.6 million
after-tax or $0.07 per diluted share), (b) a pre-tax charge of
$2.8 million ($1.8 million after-tax or $0.04 per diluted share)
for accelerated depreciation of our Pampa site. Excluding these
items, net earnings were $111.1 million or $2.28 per diluted
share.
Net earnings for the six months ended June 30, 2007 were $106.5
million or $2.17 per diluted share on sales of $1,728 million.
Included in the results for the six months ended June 30, 2007
were – (a) pre-tax net restructuring charges of $2.6 million
($2.6 million after-tax or $0.05 per diluted share), (b) a
pre-tax gain of $15.7 million ($15.3 million after-tax or $0.31
per diluted share) as a result of completing the second phase of
the sale of our water treatment chemicals and acrylamide product
lines to Kemira Group. Excluding these items, net earnings were
$93.8 million or $1.91 per diluted share.
Investor Conference Call to be Held on July 18, 2008 at
11:00AM ET
Cytec will host their second quarter earnings release conference
call on July 18, 2008 at 11:00am ET. The conference call will
also be simultaneously webcast for all investors from Cytec’s
website www.cytec.com. Select the Investor Relations page to
access the live conference call.
Use of Non-GAAP Measures
Management believes that net earnings and diluted earnings per
share before 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 Industries Inc. is a global specialty chemicals and
materials company focused on developing, manufacturing and
selling value-added products. Our products serve a diverse range
of end markets including aerospace, adhesives, automotive and
industrial coatings, chemical intermediates, inks, mining and
plastics. We use our technology and application development
expertise to create chemical and material solutions that are
formulated to perform specific and important functions in the
finished products of our customers.
(Click
Here For Financial Tables)
Back to All Press Releases
|
