Cytec Meets Earnings Expectations
WEST PATERSON, N.J. - Cytec Industries Inc. (NYSE:CYT) announced today that net earnings for the first quarter of 2001 were $17.2 million or $0.41 per diluted share on sales of $376 million.
David Lilley, Chairman, President and Chief Executive Officer said, "The slowing U.S. and Asian economies, related inventory reductions, and raw material and energy cost increases, primarily impacted the results of our Performance Products and Building Block Chemicals segments. This is consistent with our statements in January, assessing the operating environment, and the resulting expectation that we would earn $0.40 to $0.45 per diluted share this quarter.
"Our Specialty Materials segment achieved double-digit growth in sales and earnings. This is the result of solid demand from our commercial, military, and regional aircraft customers, as well as our #1 position in aerospace structural film adhesives and advanced composites technologies."
Water and Industrial Process Chemicals Sales increased 8%; Operating Earnings decreased to $8 million
Mr. Lilley continued, "Sales improved in our Water, Mining and Phosphine Chemicals businesses. Selling volumes were up 11% excluding a 19% decline related to the divestiture of the Paper Chemicals business on November 1, 2000. Adverse exchange rate changes reduced sales by 3% while selling prices were flat.
"Higher selling volumes were more than offset by adverse exchange rates and higher raw material costs, primarily petroleum derivatives. In addition, our plant manufacturing operations did not meet our performance standards. This resulted in lower operating earnings for this segment."
Performance Products Sales decreased 7%; Operating Earnings declined to $4 million
"This segment serves a broad range of industrial markets that were impacted by the weak economy and the related customer inventory reductions during the quarter. As a result, selling volumes were down 8%. Exchange rate changes decreased sales 2%, while selling prices were up 3%.
"Operating earnings declined because of lower sales, higher raw material costs--primarily those derived from natural gas, and exchange rate changes. We also cut production to better align inventories with demand, which reduced earnings."
Specialty Materials Sales increased 16%; Operating Earnings grew to $28 million
"Specialty Materials sales were $116 million. Selling volumes were up 17%. Adverse exchange rate changes decreased sales by 1% while selling prices were flat. During the quarter, we continued to see growing demand from our large commercial, military, and regional aircraft customers.
"The sharp growth in earnings primarily reflects our operating leverage--the result of increasing sales without a commensurate increase in fixed costs."
"On March 30, 2001 we acquired the advanced composites business of 3M to strengthen our global position with complementary technologies and new aircraft qualifications. The acquired business had 2000 sales of $15 million."
Building Block Chemicals Sales increased 24% to $60 million; Operating Earnings declined to a loss of $8 million
Mr. Lilley continued, "Building Block Chemicals sales increased year-over-year due to higher acrylonitrile and melamine prices. Segment selling volumes increased 2% and exchange rate changes decreased sales 1%.
"Although selling prices increased 23%, the business was adversely impacted by the rapid escalation of natural gas and energy costs, and a slowing demand for acrylonitrile, which more than offset the higher selling prices. For these reasons, and due to the increased global supply of acrylonitrile, we have reduced the production rate of our acrylonitrile plant to 75% of capacity.
"Our ammonia manufacturing joint venture facility was idled during December; production was resumed in February when higher ammonia prices made it economically feasible. Ammonia prices and demand have now softened, so in early April we again idled the facility. During the quarter we purchased the other half of our ammonia manufacturing joint venture for $800 thousand from our partner LaRoche Industries Inc. which is in bankruptcy proceedings. This purchase favorably resolves the financial issues Cytec had with LaRoche. It also accelerates the pace of our evaluation and resolution of strategic options for the ammonia plant. Our economic discipline will continue to drive operational decision making and aggressive risk management for all of the Building Block Chemicals operations."
Earnings in Associated Companies
James P. Cronin, Executive Vice President and Chief Financial Officer commented, "Equity in earnings of associated companies decreased over the prior year primarily reflecting continuing weak demand at CYRO Industries. We see this extending into the second quarter with moderate improvement in the second half. First quarter results in 2000 also included $4 million of earnings from the Criterion Catalyst joint venture, which we divested in July, 2000.
"CYRO Industries has recently announced it will shut down a manufacturing facility located in Niagara Falls, Ontario, Canada and will move the production to its other manufacturing facilities in the United States. This quick payback project will result in a restructuring charge of about $4 to $5 million in the second quarter of this year, of which Cytec's share would be half."
Share Repurchase
Mr. Cronin continued, "During the quarter we invested approximately $17 million to buy about 500,000 shares of Cytec stock. To date we have invested $22 million and purchased approximately 661,000 shares of our stock under the $100 million authorization announced in the fourth quarter of last year."
Cash Flow
Mr. Cronin added, "First quarter cash flow used by our operations was $4 million. Excluding the impact of taxes due in the first quarter of 2001 on the sale of paper chemicals, which closed in the fourth quarter of 2000, cash from operations would have been $23 million. Other items reducing cash flow in the quarter were typical payments for incentive compensation related to prior year results, and also for the restructuring announced in the fourth quarter of 2000. We have improved accounts receivable by bringing some of our product swaps into balance and by reducing our days-sales-in-trade-receivables, compared to year-end."
"Inventories increased during the quarter, primarily in our Building Block Chemicals segment as a result of the operating environment noted earlier. We have decreased Performance Products' inventories to align them with demand. Overall, we decreased our days of inventory on hand, compared to the year-end. We expect to continue improving our inventories during the second quarter particularly in Building Block Chemicals. Our inventory plan includes extending the second quarter planned three-week maintenance shutdown of the acrylonitrile plant by one week, and the ammonia plant has been idled.
"At Cytec, generating strong cash flow continues to be a top priority. While improvements have been made, we are not satisfied with our progress. Action plans are in place to drive further improvements each quarter."
Outlook
Mr. Lilley added, "In 2001 we will continue our highly disciplined focus on the operating factors that we control, building on our past history. Our first quarter earnings of $0.41 per share met our stated expectations that we would earn $0.40 to $0.45 per diluted share.
"Our second quarter 2001 expectation is to earn $0.60 to $0.65 per diluted share, excluding our share of the CYRO restructuring charge. The current softness in the global economy and high raw material costs indicates a bias to the low end of that EPS range.
"Our full year objective for earnings of between $2.60 and $2.70 per diluted share, excluding our share of the CYRO restructuring charge, remains unchanged. This performance expectation clearly depends upon both improved economic conditions and lower raw material and energy costs in the second half of 2001. We will continue to execute the growth strategies for our platform businesses, while aggressively focusing on operational excellence and cash flow."
Investor Conference Call to be Held on April 20, 2001, 11:00 A.M. EDT
Cytec will host their first quarter earnings release conference call on April 20, 2001 at 11:00 a.m. EDT, information to access the call has been faxed to institutional investors. 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.
A recording of the conference call may be accessed by telephone from 2:00 p.m. on April 20 until April 25, 2001 at 2:00 p.m. by calling 888-203-1112 (U.S.) or 719-457-0820 (International) and entering access code 761230. The conference call recording will also be accessible on Cytec's website for 3 weeks after the conference call.
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 is a specialty chemicals and materials technology company with sales in 2000 of $1.5 billion and diluted earnings per share of $2.85 (excluding special items). 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.
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Millions of dollars, except share and per share amounts)
Three Months Ended
March 31,
--------------------
--------------------
2001 2000
---- ----
---- ----
Net sales $ 376.1 $ 368.8
Manufacturing cost of
sales 294.2 264.9
Selling and technical
services 28.8 34.2
Research and process
development 8.6 9.5
Administrative and general 10.4 11.4
Amortization of acquisition
intangibles 3.1 3.1
----------- ----------
Earnings from operations 31.0 45.7
Other income (expense), net (0.4) 4.1
Equity in earnings of
associated companies 0.2 6.5
Interest expense, net 4.5 7.3
----------- ----------
Earnings before income taxes 26.3 49.0
Income tax provision 9.1 16.9
----------- ----------
Net earnings $ 17.2 $ 32.1
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Earnings per common share
Basic $0.43 $0.77
Diluted $0.41 $0.74
Weighted average shares
outstanding
Basic 40,416,000 41,652,000
Diluted 42,154,000 43,233,000
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Millions of dollars, except share and per share amounts)
March 31, December 31,
2001 2000
---- ----
ASSETS
Current assets
Cash and cash equivalents $ 15.6 $ 56.8
Accounts receivable,
less allowance for
doubtful accounts
of $8.6 and $8.8 in
2001 and 2000, respectively 262.3 271.4
Inventories 165.3 162.7
Deferred income taxes 40.6 42.6
Other current assets 35.3 34.3
-------------- -----------
Total current assets 519.1 567.8
Investment in
associated companies 92.7 94.8
Plants, equipment and
facilities, at cost 1,332.4 1,326.3
Less: accumulated depreciation (718.8) (710.1)
-------------- -----------
Net plant investment 613.6 616.2
Acquisition intangibles,
net of accumulated amortization 385.8 384.4
Deferred income taxes 41.9 36.8
Other assets 21.5 19.4
-------------- -----------
Total assets $ 1,674.6 $ 1,719.4
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LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 97.5 $ 111.0
Accrued expenses 177.1 179.6
Income taxes payable 51.4 68.3
-------------- -----------
Total current liabilities 326.0 358.9
Long-term debt 311.5 311.2
Other noncurrent liabilities 419.4 433.1
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 144.0 154.7
Retained earnings 772.2 755.1
Unearned compensation (4.6) (3.9)
Additional minimum
pension liability (1.9) (1.9)
Accumulated translation
adjustments (43.7) (32.7)
Treasury stock, at cost,
7,733,429 shares in 2001, and
7,966,229 shares in 2000 (248.9) (255.7)
-------------- -----------
Total stockholders' equity 617.7 616.2
-------------- -----------
Total liabilities and
stockholders' equity $ 1,674.6 $ 1,719.4
============== ===========
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)
Three Months Ended
March 31,
----------------------
2001 2000
----- ----
Cash flows provided by
(used for) operating
activities
Net earnings $ 17.2 $ 32.1
Noncash items included
in earnings:
Dividends from
associated companies
greater (less) than
earnings 1.5 (5.9)
Depreciation 19.1 20.5
Amortization 2.8 3.8
Deferred income taxes (2.5) 5.9
Other 0.1 0.2
Changes in operating
assets and liabilities
Accounts receivable 2.7 (13.1)
Inventories (6.3) (15.3)
Accounts payable (12.0) (10.5)
Accrued expenses (6.2) (0.6)
Income taxes payable (9.6) 3.3
Other assets (1.1) (12.5)
Other liabilities (9.4) (4.0)
--------- ---------
Net cash flows provided
by (used for) operating
activities (3.7) 3.9
--------- ---------
Cash flows provided by
(used for) investing
activities
Additions to plants,
equipment and facilities (17.0) (15.7)
Proceeds received on
sale of assets 1.0 1.3
Acquisition of businesses,
net of cash received (9.0) -
Investment in
unconsolidated affiliates (0.5) -
--------- ---------
Net cash flows used for
investing activities (25.5) (14.4)
--------- ---------
Cash flows provided by
(used for) financing
activities
Proceeds from the
exercise of stock
options 5.2 2.5
Purchase of treasury
stock (16.6) (13.8)
Change in long term debt 0.3 13.3
Proceeds received on
sale of put options 0.5 0.2
--------- ---------
Net cash flows provided by
(used for) financing
activities (10.6) 2.2
--------- ---------
Effect of exchange rate
changes on cash and
cash equivalents (1.4) (0.2)
--------- ---------
Decrease in cash and
cash equivalents (41.2) (8.5)
Cash and cash equivalents,
beginning of period 56.8 12.0
--------- ---------
Cash and cash equivalents,
end of period $ 15.6 $ 3.5
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CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NET SALES AND EARNINGS FROM OPERATIONS BY BUSINESS SEGMENT
(Millions of dollars)
Three Months Ended
March 31,
----------------------
2001 2000
---- ----
Net sales
Water and Industrial
Process Chemicals $ 88.0 $ 99.4
Performance Products 112.4 121.3
Specialty Materials 116.0 99.8
Building Block Chemicals
Sales to external customers 59.7 48.3
Intersegment sales 13.8 13.4
----- -----
Net sales from segments 389.9 382.2
Other revenues - -
Elimination of intersegment
revenue (13.8) (13.4)
------ ------
Total consolidated net sales $ 376.1 $ 368.8
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% of % of
Earnings (loss) from operations Sales Sales
----- -----
Water and Industrial
Process Chemicals $ 8.2 9% 10.0 10%
Performance Products 3.9 3% 15.0 12%
Specialty Materials 28.2 24% 18.5 19%
Building Block Chemicals (8.3) -11% 4.0 6%
----- ----
Earnings from segments 32.0 8% 47.5 12%
Corporate and Unallocated (1.0) (1.8)
----- -----
Total consolidated earnings
from operations $ 31.0 8% 45.7 12%
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