Cytec Fourth Quarter Earnings Increase 9%
WEST PATERSON, N.J. -- Cytec Industries Inc. announced today that net earnings for the fourth quarter of 1998 were $32 million or $0.71 per diluted share on sales of $352 million. This compares to net earnings of $31 million, or $0.65 per diluted share on sales of $360 million for the comparable period of 1997.
Net earnings for the full year ended December 31, 1998 were $125 million on net sales of $1,445 million. This compares to net earnings of $114 million on net sales of $1,291 million for the comparable period of 1997. Earnings per diluted share for the full year ended 1998 were $2.68; a 12% increase over the $2.39 per diluted share for the comparable period of 1997.
Included in 1998 results for the fourth quarter and full year is a gain of $4.4 million, ($2.8 million after tax or $0.06 per diluted share), relating to the sale of the Bulk Molding Compounds product line. Excluding this gain, earnings per diluted share were $0.65 and $2.62, respectively for the quarter and full year ended December 31, 1998.
Net earnings for the fourth quarter ended December 31, 1997 include the unfavorable effect of restructuring and other charges of $33.8 million, ($23 million after tax or $0.49 per diluted share). Also included is the favorable reversal of the tax valuation allowance of $24.4 million, ($0.52 per diluted share). Excluding the above, earnings per share for the fourth quarter ended December 31, 1997 were $0.62 per diluted share.
Net earnings for the full year ended December 31, 1997 include the unfavorable effects of restructuring and other charges of $52.4 million, ($34.3 million after tax or $0.72 per diluted share). Also included is the favorable reversal of the tax valuation allowance of $24.4 million, ($0.51 per diluted share). In addition, full year results include a gain of $22.3 million, ($13.6 million after tax or $0.29 per diluted share) primarily relating to the divestiture of the acrylic fibers product line. Excluding the above, diluted earnings per share for the full year ended December 31, 1997 were $2.31.
Fourth Quarter Discussion
In announcing these results, David Lilley, Chairman, President and Chief Executive Officer commented: "Sales for the quarter showed some encouraging signs. International sales have grown to 41% of total Cytec sales. This is a key area for growth in Cytec. Sales in the Asia Pacific region increased 14% overall led by Specialty Chemicals.
Specialty Chemicals sales increased 6% for the quarter. Prices were down 1% and volumes were up 8%. Excluding the effects of the acquisitions completed this year volumes were up 2% in the quarter. The Paper, Water, Mining product line increased due to stronger international sales. This was partly offset by lower U.S. sales where the markets we compete in remain weak. Additives sales volumes and prices were down for the quarter. Resins sales were up after excluding sales associated with the remaining 50% of our Dyno-Cytec joint venture acquired in the third quarter of this year.
Overall, Specialty Material sales were flat. During the quarter we completed the acquisition of The American Materials & Technologies Corporation, (AMT), and the divestiture of our Bulk Molding Compounds product line. Cytec Fiberite, our advanced composites and adhesives business, had a sales volumes increase of 5%. This was due to sales from the recent acquisition of AMT and increased European penetration, partially offset by lower sales due to the planned shutdown of our Newark, Delaware facility of which certain products were discontinued. The shutdown will be completed early in the second quarter. Our U.S. sales of products for aircraft interiors finished strongly although this was offset by lower U.S. sales of products for aircraft structures.
Building Block sales decreased 29%. Selling prices and volumes were down 16% and 14%, respectively. Selling prices for acrylonitrile and methanol continued downward and we expect these low levels to continue well into 1999. Acrylonitrile volumes remain depressed due to a combination of high supply and weak demand, primarily in Asia. We are running the acrylonitrile plant at a reduced rate and will continue production at the lower rate until market conditions improve. Costs for propylene, the key raw material for production of acrylonitrile, are down compared to the year ago period, substantially offsetting the impact of lower selling prices."
Mr. Lilley continued, "Our earnings were positively affected by the acquisitions and the related synergies, lower raw material costs, lower costs resulting from our restructuring programs, reduced costs relating to ongoing benefit plans and a lower effective tax rate. Poor market conditions for acrylonitrile and methanol, mentioned above, led to reduced earnings in the quarter for Building Blocks. Lower selling prices and volumes in the U.S. and Europe contributed to a down quarter for the Additives product line. Criterion Catalyst finished the fourth quarter with strong sales momentum. This was the main reason for the increase in equity in earnings of associated companies."
Full Year Discussion
Mr. Lilley added, "The increase in full year diluted earnings per share, our fifth consecutive increase, reflects many factors including the positive effects of our acquisitions, namely Fiberite, the remaining 50% interest in our Dyno-Cytec joint venture, AMT and Oreprep. All our synergy goals for 1998 were achieved and we are now working to build further improvements. We also made much progress throughout Cytec in enhancing productivity, improving customer service and reducing costs. We intend to maintain this momentum with many new initiatives in place for 1999.
Our share buyback program contributed to the increase in earnings per share by reducing the number of shares outstanding. During the fourth quarter, we completed the repurchase of the remaining shares authorized under our 4.5 million share buyback plan announced in February 1997. We anticipate starting on the recently announced share buyback program shortly.
All this was accomplished while managing through difficult macro economic events such as the Asian economic downturn, weak Latin American economies, declining selling prices for the chemical industry in general and some uncertainty in the aerospace market. We expect many of these events to continue through 1999. Cytec has provided consistent earnings growth since its inception, and in spite of the current difficult economic environment, our goal for 1999 and beyond is to continue to provide earnings growth for our shareholders."
Company Profile
Cytec Industries Inc. is a vertically integrated, specialty chemicals company that focuses on value-added specialty products. The Company develops, manufactures and markets specialty chemicals, specialty materials and building block chemicals serving a broad group of end users, including the aerospace, plastics, coatings, mining, paper, water treatment and automotive industries.
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.