Cytec Reports Mixed Third Quarter Earnings
WEST PATERSON, N.J. - Oct. 12, 2000 - Cytec Industries Inc. (NYSE:CYT) announced today that net earnings for the third quarter of 2000 were $28 million and that earnings per share were $0.65 per diluted share on sales of $368 million.
David Lilley, Chairman, President and Chief Executive Officer said, "The Specialty Chemicals segments continued their strong top-line performance. In the Specialty Materials' sales results, there was continued evidence of improving aerospace demand; productivity initiatives and a favorable product mix increased both the operating margin and income. Equity in associated companies also improved due to the absence of Criterion Catalyst, which we sold in July. This strong operating performance, coupled with our strategic actions, more than offset the effects of adverse exchange rate changes and higher raw material costs."
Water and Industrial Process Chemicals Sales Grew 8%; Operating Earnings Decrease 18% to $10 Million
Mr. Lilley continued, "Water and Industrial Process sales increased in all three of our major markets. Selling volumes were up a strong 12%, including 5% from the acquisition of Inspec Mining Chemicals in September of last year. Adverse exchange rate changes reduced sales by 4%.
"Higher selling volumes and lower operating costs continued to benefit operating earnings. However, the effect of a decline in exchange rates, principally in Europe; and, higher raw material costs of petroleum derivatives, such as propylene, more than offset those benefits. This resulted in lower operating earnings for this segment.
Performance Products Sales Grew 8%; Operating Earnings Increase 22% to $15 Million
"For the overall segment, selling volumes were up 11% with 4% of that due to the acquisition of the amino coating resins business of BIP in October of last year. Exchange rate changes decreased sales 3%. Polymer Additives continued its double-digit sales growth as a result of stronger sales in Europe, Asia and North America.
"The increase in operating earnings is the result of strong volume growth and continued manufacturing productivity which offset adverse exchange rate changes and higher raw material costs, primarily natural gas derivatives.
Specialty Materials Sales Decrease 1%; Operating Earnings Improve 6% to $21 Million
"Specialty Materials third quarter sales of $104 million were flat with the same quarter of 1999, except for exchange rate impact which decreased sales by 1%.
"During the quarter there were continuing signs of growth in demand from the commercial aircraft markets -- including large commercial airliners, regional and business jets. Our other aerospace markets, such as military aircraft, also continued growing.
"Operating earnings growth reflects the benefits of Specialty Materials' manufacturing rationalization programs, productivity initiatives and a favorable product mix."
Building Block Chemicals Sales Up 25% to $48 Million; Operating Earnings Decline to $1 Million
Mr. Lilley continued, "Building Block Chemicals sales continue to favorably reflect sharply higher acrylonitrile selling prices, primarily due to strong global demand. Overall, sales grew 25%. Selling prices were up 37%, exchange rate changes and the divestiture of our Methanol plant in December of last year each decreased sales 3% and selling volumes were down 6%.
"The cost of propylene, the key raw material for acrylonitrile, has started to decline thereby improving the acrylonitrile spread. Many of our acrylonitrile contracts provide for raw material cost changes with a one-quarter time lag. However, higher natural gas costs have adversely impacted this segment."
Earnings in Associated Companies Improve
James P. Cronin, Executive Vice President and Chief Financial Officer commented, "Third quarter 2000 equity in earnings of associated companies increased due to the absence of prior year losses from Criterion Catalyst which was sold in July of this year."
Share Repurchase Program Continues
Mr. Cronin continued, "During the quarter we invested $14 million to buy 425,000 shares of Cytec stock, favorably impacting earnings per share. Year to date we have invested $51 million and purchased 1,812,300 shares of our stock. The total cost of shares repurchased to date is $94 million under our current $100 million share buyback authorization."
Strategic Realignment to Generate Approximately $190 Million in Pre-tax Cash Flow; Large Gain and a Potentially Significant Charge is Expected in the Fourth Quarter
Mr. Cronin added, "During the quarter we completed the sale of our 50% interest in Criterion Catalyst for $60 million cash; we also reached definitive agreements to sell our Paper Chemicals business which will generate about $130 million cash. These transactions are consistent with our objective of realigning our portfolio and re-deploying the cash proceeds to increase the economic returns of Cytec.
"Proceeds from the Criterion divestiture equaled the carrying value of the Company's investment in and related loans to Criterion, so no gain or loss was recorded on the transaction. The closings on the sale of our Paper Chemicals business are anticipated to occur later this year and would result in a significant one-time gain.
"In conjunction with this strategic realignment and other initiatives being planned or underway, the Company expects to take a one-time charge against earnings in the fourth quarter of this year. While not yet quantifiable, such charge is expected to be significant."
Fourth Quarter 2000 Outlook
Mr. Lilley said, "We expect our momentum to enable us to meet the EPS consensus estimate in the fourth quarter, excluding any gain or charge as discussed in the section above. However, industry conditions such as higher raw material costs and likely softening in some end markets together with the adverse Euro exchange impact, will make this challenging. By meeting the fourth quarter estimate, we will have achieved our targeted 10% EPS growth for this year, or $2.85 per diluted share on a "normalized" basis.
2001 EPS Outlook
"Next year, consistent with our strategic plan, our targeted EPS growth is 10 %. In 2001 we, like the rest of the industry, have to address the headwinds of raw material costs, the Euro and slowing in some end markets. By capitalizing on our strategic focus, by leveraging key opportunities -- including superior cash resources, and by focusing on operational excellence, we expect to meet those challenges. More specific guidance will be broadly communicated after we complete our business planning process," Mr. Lilley concluded.
Third Quarter 1999 "Special" Items
For the third quarter of 1999 "normalized" net earnings were $28 million, or $0.64 per diluted share, on sales of $344 million. Also recorded in the third quarter of 1999 were the following: a reduction of $8.0 million ($0.18 per diluted share) in income tax expense related to the utilization of additional prior years tax credits, a reduction of $0.4 million ($0.01 per diluted share) as a result of the company reducing its effective tax rate and a charge of $2.5 million ($1.6 million after tax or $0.04 pre diluted share) in administrative expense for external costs associated with such tax planning. The net of the above three transactions resulted in increased net earnings of $6.8 million ($0.15 per diluted share) bringing reported net earnings for the third quarter of 1999 to $35 million or $0.79 per diluted share.
Nine Month Results
Net earnings for the first nine months of 2000 were $101 million or $2.35 earnings per diluted share on sales of $1,109 million. Included in the first nine months of 2000 is an after tax gain of $8.7 million or $0.20 per diluted share relating to insurance settlements. Excluding this gain, "normalized" earnings were $2.14 per diluted share.
This compares to net earnings of $91 million or $2.05 per diluted share on sales of $1,058 million for the comparable period of 1999. Included in the nine months of 1999 were the following: A reduction of $8.0 million ($0.18 per diluted share) in income tax expense related to the utilization of additional prior years tax credits. A charge of $2.5 million ($1.6 million after tax or $0.04 per diluted share) in administrative expense for external costs associated with such tax planning. The net of the above two transactions resulted in increasing net earnings by $6.4 million ($0.14 per diluted share).
Cytec to Webcast Third Quarter Conference Call
Listen-in live to Cytec's Third Quarter Earnings discussion on Friday, October 13 at 11:00 a.m. EDT at www.cytec.com.
Corporate Profile
Cytec Industries is a specialty chemicals and materials technology company with 1999 sales of $1.4 billion and diluted earnings per share of $2.73. Its growth strategies are based on developing technologically advanced customer solutions for global markets, including: aerospace, plastics, industrial coatings, mining, and water treatment. Cytec is in the S & P Mid-cap 400 index.
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.
Financial Tables to Follow
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Millions of dollars, except share and per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Net sales $ 368.1 $ 344.1 $ 1,108.9 $ 1,058.4
Manufacturing cost
of sales 258.8 236.4 777.2 733.3
Selling and technical
services 38.1 35.7 116.8 110.1
Research and
process development 9.8 10.7 28.6 30.5
Administrative and
general 11.9 14.4 35.5 39.0
Amortization of
acquisition
intangibles 3.1 2.7 9.2 8.0
Earnings from
operations 46.4 44.2 141.6 137.5
Other income
(expense), net (0.1) 3.9 20.2 6.8
Equity in earnings
of associated
companies 2.3 (0.8) 12.2 3.2
Interest expense, net 6.2 6.5 20.4 20.1
Earnings before
income taxes 42.4 40.8 153.6 127.4
Income tax provision 14.6 5.6 53.0 36.0
Net earnings $ 27.8 $ 35.2 $ 100.6 $ 91.4
Earnings per
common share
Basic $0.68 $0.82 $2.45 $2.12
Diluted $0.65 $0.79 $2.35 $2.05
Weighted average
shares outstanding
Basic 40,596,000 42,904,000 41,126,000 43,042,000
Diluted 42,497,000 44,533,000 42,878,000 44,671,000
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NET SALES AND EARNINGS FROM OPERATIONS BY BUSINESS SEGMENT
(Millions of dollars)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Net sales
Water and Industrial
Process Chemicals $ 100.0 $ 92.4 $ 297.9 $ 274.3
Performance Products 116.5 108.1 358.6 327.5
Specialty Materials 103.9 105.3 310.6 340.0
Building Block
Chemicals
Sales to
external customers 47.7 38.3 141.8 116.6
Intersegment sales 17.0 8.9 45.6 29.5
Net sales from segments 385.1 353.0 1,154.5 1,087.9
Elimination of
intersegment revenue (17.0) (8.9) (45.6) (29.5)
Total consolidated
net sales $ 368.1 $ 344.1 $ 1,108.9 $ 1,058.4
Earnings from operations % % % %
of of of of
Sales Sales Sales Sales
Water and Industrial
Process Chemicals $ 10.0 10% $ 12.2 13% $ 31.1 10% $ 34.0 12%
Performance Products 14.6 13% 12.0 11% 45.6 13% 38.0 12%
Specialty Materials 21.4 21% 20.2 19% 63.6 20% 64.5 19%
Building Block
Chemicals 0.8 1% 2.6 6% 4.7 3% 7.7 5%
Earnings from
segments 46.8 12% 47.0 13% 145.0 13% 144.2 13%
Corporate and
Unallocated (0.4) (2.8) (3.4) (6.7)
Total consolidated
earnings from
operations $ 46.4 13% $ 44.2 13% $ 141.6 13% $137.5 13%
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Millions of dollars, except share and per share amounts)
Sept. 30, Dec. 31,
2000 1999
ASSETS
Current assets
Cash and cash equivalents $ 10.5 $ 12.0
Accounts receivable, less
allowance for doubtful accounts
of $8.6 and $9.3 in 2000 and 1999,
respectively 285.1 248.5
Inventories 150.7 139.5
Deferred income taxes 43.3 61.7
Other current assets 30.9 29.4
Total current assets 520.5 491.1
Investment in associated companies 89.7 146.4
Plants, equipment and facilities, at cost 1,334.6 1,352.6
Less: accumulated depreciation (711.5) (696.9)
Net plant investment 623.1 655.7
Acquisition intangibles, net of
accumulated amortization 388.9 395.2
Deferred income taxes 43.2 48.8
Other assets 30.7 22.7
Total assets $ 1,696.1 $ 1,759.9
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 121.4 $ 118.5
Accrued expenses 193.5 198.4
Income taxes payable 43.9 49.2
Total current liabilities 358.8 366.1
Long-term debt 368.6 422.5
Other noncurrent liabilities 426.2 465.5
Stockholders' equity
Preferred stock, 20,000,000 shares
authorized, issued and
outstanding 4,000 shares,
Series C Cumulative, $.01 par value
at liquidation value of $25 per share 0.1 0.1
Common stock, $.01 par value per share,
150,000,000 shares authorized,
issued 48,132,640 shares 0.5 0.5
Additional paid-in capital 157.5 159.8
Retained earnings 678.0 577.5
Unearned compensation (4.0) (1.9)
Accumulated translation adjustments (35.5) (14.3)
Treasury stock, at cost,
7,937,099 shares in 2000, and
6,522,967 shares in 1999 (254.1) (215.9)
Total stockholders' equity 542.5 505.8
Total liabilities and stockholders' equity $ 1,696.1 $ 1,759.9
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)
Nine Months Ended
September 30,
2000 1999
Cash flows provided by
(used for) operating activities
Net earnings $ 100.6 $ 91.4
Noncash items included in earnings:
Dividends from associated
companies, greater (less) than earnings (8.1) 3.8
Depreciation 61.5 60.5
Amortization 11.7 9.5
Deferred income taxes 24.9 11.9
Gain on sale of assets (4.8) (4.1)
Other 0.8 0.3
Changes in operating assets and liabilities
Accounts receivable (51.7) (7.8)
Inventories (16.9) 10.2
Accounts payable 16.0 3.0
Accrued expenses (2.3) (23.0)
Income taxes payable (2.4) 2.2
Other assets (5.6) (5.2)
Other liabilities (41.0) (22.5)
Net cash flows provided by
operating activities 82.7 130.2
Cash flows provided by
(used for) investing activities
Additions to plants, equipment
and facilities (54.3) (54.4)
Proceeds received on sale of assets 73.0 9.4
Acquisition of business (0.1) (32.3)
Net cash flows provided by (used for)
investing activities 18.6 (77.3)
Cash flows provided by
(used for) financing activities
Proceeds from the exercise of stock
options and warrants 4.0 1.1
Purchase of treasury stock (51.3) (27.5)
Change in short term borrowings - (10.3)
Change in long term debt (53.9) (4.4)
Proceeds received on sale of put options 0.6 1.0
Net cash flows used for financing activities (100.6) (40.1)
Effect of exchange rate changes on cash
and cash equivalents (2.2) (0.4)
Increase (decrease) in cash and cash
equivalents (1.5) 12.4
Cash and cash equivalents, beginning
of period 12.0 1.7
Cash and cash equivalents, end of period $ 10.5 $ 14.1
CONTACT: Cytec Industries Inc., West Paterson
William (Bill) Cleary (Investment Community)
973/357-3298
George Yuro (Media)
973/357-3319
www.cytec.com