Cytec To Apply New Accounting Rules
WEST PATERSON, N.J. - Cytec Industries Inc. (NYSE:CYT) CYT announced today that it will apply Emerging Issues Task Force (EITF) Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs", (EITF 00-10).
EITF 00-10 becomes effective in the fourth quarter of 2000. Among other things, EITF 00-10 prohibits the netting of shipping and handling costs against shipping and handling revenues. EITF 00-10 permits companies to adopt a policy of including shipping and handling costs in cost of sales or other income statement line items.
Cytec has followed the common practice of netting shipping costs against shipping revenues as a component of net sales, while handling costs such as warehousing expenses were included as a component of selling and technical services expense.
Application of the consensus will require certain reclassifications to the Consolidated Statement of Income. Reported sales will increase as a result of reclassifying shipping costs to cost of sales. Selling and technical service expenses will be lower due to reclassification of handling and warehousing expenses to cost of sales. Costs of Sales will be commensurately higher. These reclassifications will have no effect on Cytec's previously reported operating profit or net income.
The attached historical financial information has been provided in order to facilitate understanding of the implementation of EITF 00-10 on Cytec's past performance and for analytical and comparative purposes.
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.
Financial Tables to Follow
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NET SALES AND EARNINGS FROM OPERATIONS BY BUSINESS SEGMENT
RECLASSIFIED TO INCLUDE SHIPPING AND HANDLING COSTS IN COST OF SALES
(Millions of dollars)
Three Months Ended Three Months Ended
March 31, June 30,
2000 1999 2000 1999
Net sales
Water and Industrial
Process Chemicals $ 99.4 $ 90.9 $106.3 $ 98.2
Performance Products 121.3 108.7 125.2 114.1
Specialty Materials 99.8 120.4 107.5 115.0
Building Block Chemicals
Sales to external
customers 48.3 42.8 50.0 39.7
Intersegment sales 17.0 8.9 45.6 29.5
Net sales from
segments 385.8 371.7 434.6 396.5
Elimination of
intersegment
revenue (17.0) (8.9) (45.6) (29.5)
Total consolidated
net sales $368.8 $362.8 $389.0 $367.0
Earnings from operations % of % of % of % of
Sales Sales Sales Sales
Water and Industrial
Process Chemicals $ 10.0 10% $ 9.5 10% $ 11.2 11% $ 12.3 13%
Performance Products 15.0 12% 12.0 11% 16.0 13% 14.1 12%
Specialty Materials 18.5 19% 21.5 18% 23.6 22% 22.8 20%
Building Block
Chemicals 4.0 6% 2.6 5% (0.1) 0% 2.5 4%
Earnings from
segments 47.5 12% 45.6 12% 50.7 12% 51.7 13%
Corporate and
Unallocated (1.8) (1.8) (1.2) (2.2)
Total consolidated
earnings from
operations $ 45.7 12% 43.8 12% 49.5 13% $ 49.5 13%
Three Months Ended Three Months Ended
September 30, December 31,
2000 1999 2000 1999
Net sales
Water and Industrial
Process Chemicals $104.0 $ 96.0 N/A $ 102.4
Performance Products 118.6 109.9 N/A 117.1
Specialty Materials 104.1 105.6 N/A 94.8
Building Block
Chemicals N/A
Sales to external
customers 49.5 40.4 N/A 48.6
Intersegment sales 17.0 8.9 N/A 0.0
Net sales from
segments 393.2 360.8 N/A 362.9
Elimination of
intersegment
revenue (17.0) (8.9) N/A 0.0
Total consolidated
net sales $376.2 $351.9 N/A $ 362.9
Earnings from operations % of % of % of
Sales Sales Sales
Water and Industrial
Process Chemicals $ 10.0 10% $ 12.2 13% N/A $ 10.0 10%
Performance Products 14.6 12% 12.0 11% N/A 15.0 13%
Specialty Materials 21.4 21% 20.2 19% N/A 20.8 22%
Building Block
Chemicals 0.8 1% 2.6 5% N/A (0.9) -2%
Earnings from
segments 46.8 12% 47.0 13% N/A 44.9 12%
Corporate and
Unallocated (0.4) (2.8) N/A 2.6
Total consolidated
earnings from
operations $ 46.4 12% $ 44.2 13% N/A $ 47.5 13%
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
RECLASSIFIED WITH SHIPPING AND HANDLING COSTS IN COST OF SALES
(Millions of dollars)
Three Months Ended Three Months Ended
March 31, June 30,
2000 1999 2000 1999
Net sales $ 368.8 $ 362.8 $ 389.0 $ 367.0
Manufacturing cost of
sales 264.9 262.8 280.6 259.8
Selling and technical
services 34.2 31.6 34.3 32.3
Research and process
development 9.5 10.3 9.3 9.6
Administrative and general 11.4 11.4 12.2 13.2
Amortization of acquisition
intangibles 3.1 2.8 3.1 2.6
Earnings from operations 45.7 43.8 49.5 49.5
Other income (expense), net 4.1 2.3 16.2 0.6
Equity in earnings (losses)
of associated companies 6.5 4.2 3.5 (0.2)
Interest expense, net 7.3 6.9 7.1 6.8
Earnings before income
taxes 49.0 43.4 62.1 43.1
Income tax provision 16.9 15.2 21.4 15.1
Net earnings $ 32.1 $ 28.2 $ 40.7 $ 28.0
Three Months Ended Three Months Ended
September 30, December 31,
2000 1999 2000 1999
Net sales $ 376.2 $ 351.9 $ N/A $ 362.8
Manufacturing cost of
sales 272.1 249.1 N/A 251.6
Selling and technical
services 32.9 30.8 N/A 34.5
Research and process
development 9.8 10.7 N/A 13.3
Administrative and general 11.9 14.4 N/A 12.7
Amortization of acquisition
intangibles 3.1 2.7 N/A 3.2
Earnings from operations 46.4 44.2 N/A 47.5
Other income (expense), net (0.1) 3.9 N/A 2.5
Equity in earnings (losses)
of associated companies 2.3 (0.8) N/A 2.3
Interest expense, net 6.2 6.5 N/A 6.7
Earnings before income
taxes 42.4 40.8 N/A 45.6
Income tax provision 14.6 5.6 N/A 15.7
Net earnings $ 27.8 $ 35.2 $ N/A $ 29.9