Cytec Meets Lowered Earnings Expectations
WEST PATERSON, N.J., July 19, 2001 - Cytec Industries Inc. (NYSE:CYT) today announced net earnings for the second quarter of 2001 of $25.9 million or $0.62 per diluted share on sales of $354 million.
For the second quarter of 2000 net earnings were $34.8 million or $0.81 cents per diluted share on sales of $389 million. This comparison excludes the non-recurring items noted below.
The second quarter 2001 results indicated above exclude the previously announced Building Block Chemicals and CYRO Industries restructuring charges totaling $7.7 million ($5.0 million after tax), or $0.12 per diluted share, which reduced reported net earnings to $20.9 million or $0.50 per diluted share. The second quarter 2000 results indicated above exclude a one-time insurance benefit of $9.1 million ($5.9 million after tax), or $0.14 per diluted share, which increased reported net earnings to $40.7 million or $0.95 per diluted share.
David Lilley, Chairman, President and Chief Executive Officer said, "While we met earnings expectations this quarter, we did so in the context of weak U.S. and Asian economies, a worsening situation in Europe and a continuing strengthening of the U.S. dollar. This resulted in reduced earnings in our Specialty Chemicals businesses. Our Building Block Chemicals segment sequentially reduced its operating loss, but continued to be negatively impacted by weak demand. Energy costs were still well above the year ago period, although they have improved sequentially from the first quarter. Cytec Fiberite, our Specialty Materials business, continued to improve, and demonstrated double-digit growth in sales volumes and earnings."
Water and Industrial Process Chemicals Sales decreased 2%; Operating Earnings decreased to $7 Million
Mr. Lilley continued, "Segment sales of $85 million were impacted by a general slowing in mining, and in wastewater treatment for the paper industry. Overall, selling volumes were down 1%, excluding an 18% volume decline from the divestiture of the Paper Chemicals business on November 1, 2000. Adverse exchange rate changes reduced sales by 3% while selling prices were up 2%. Lower operating earnings reflect the impact of these factors, as well as a mix shift from mining to water treating chemicals.
Performance Products Sales decreased 8%, Operating Earnings decreased to $6 Million
"With sales of $115 million, Performance Products serves a broad base of industrial markets which continued to be impacted by weak global demand in the second quarter. For the segment overall, selling volumes were down 9%, selling prices were up 3%, with adverse exchange rates decreasing sales 2%. Reduced operating earnings reflected lower sales and production volumes, and higher raw material costs.
Specialty Materials Sales increased 9%; Operating Earnings increased to $30 Million
"Specialty Materials selling volumes grew 10% increasing sales to $117 million. Demand in our primary aerospace markets: large commercial aircraft, regional jets, and military aircraft remained strong. Adverse exchange rates decreased sales by 1% while selling prices were flat. Operating earnings and profitability grew, reflecting our increased volumes, operational excellence, and focused cost management."
Building Block Chemicals Sales decreased 27% to $37 Million; Operating Loss of $3 Million Reflects Improving Trends
Mr. Lilley continued, "During the quarter Building Block Chemicals (BBC) acrylonitrile plant had a three week maintenance shutdown which we extended an additional week due to poor demand and excess competitive supply. For the segment overall, selling volumes decreased 28% of which acrylonitrile and related co-products accounted for 21%. Exchange rate and selling price changes were not significant.
"This quarter BBC narrowed its operating loss significantly, compared to the first quarter of this year. Natural gas pricing, down sequentially from record high first quarter levels, was still well above the year ago period. Propylene prices declined, contributing to an increase in the acrylonitrile margin spread compared to the second quarter of last year as well as the first quarter of this year.
"On June 25, we announced a restructuring of BBC which included the indefinite mothballing of the ammonia plant together with significant reductions of infrastructure costs at our Fortier manufacturing complex. Total restructuring costs as a result of this action will be $6.9 million of which Cytec's share, recorded in second quarter results, is $5.4 million. The remaining balance will be absorbed by our joint ventures at Fortier," Mr. Lilley concluded.
Equity in Associated Companies
James P. Cronin, Executive Vice President and Chief Financial Officer commented, "Our equity in associated companies was a $0.5 million loss (before restructuring charges of $2.3 million) for the quarter. This primarily reflected continuing weak demand, as well as a reduction in production levels in the second quarter to better align inventories with demand at CYRO Industries. CYRO sells acrylic sheet and molding compounds across a broad range of industrial markets primarily in North America where demand has been weak as a result of the soft economy."
"In order to improve efficiency and lower costs CYRO recently announced the shutdown of its manufacturing facility in Niagara Falls, Ontario, Canada and will move the production to its other manufacturing facilities in the United States. This resulted in a restructuring charge of $3.7 million in this quarter. In addition, CYRO recorded an additional $800 thousand charge for its share of the restructuring of the infrastructure at Cytec's Fortier facility mentioned earlier. Cytec's half of these restructuring costs as a 50% partner in CYRO is reflected in equity in earnings (loss) of associated companies."
Other Items
Mr. Cronin continued, "Included in other income for the quarter is $7 million related to the sale of reclaimed land in Florida and the favorable resolution of a royalty issue relating to mineral rights associated with a former phosphate mining joint venture. We continue to work on other opportunities to monetize these types of assets. At this time we do not expect to complete additional transactions in 2001."
Share Repurchase
Mr. Cronin continued, "During the quarter we invested approximately $12 million to buy 381,500 shares of Cytec stock. To date we have invested $34 million and purchased 1,043,000 shares of our stock under the $100 million buyback authorization announced in the fourth quarter of last year."
Cash Flow
Mr. Cronin added, "Cash flow generated by operations was $44 million. Our plan to improve asset management is continuing, particularly in inventory management where our supply chain management initiatives are beginning to yield good results."
Full Year Outlook
Mr. Lilley added, "For the balance of 2001, we now have to take into account the worsening economic situation. In the U.S. and Asia, there has been no solid evidence of any improvement in industrial demand, and we are now experiencing weaker economic conditions in Europe. These adverse conditions impact our Specialty Chemicals, Building Block Chemicals and, with respect to conditions in North America, the CYRO joint venture.
"In addition, the strengthening U.S. dollar continues to negatively impact Cytec as sales and earnings in other currencies are translated into fewer U.S. dollars.
"There is continuing strong demand from the overall aerospace segment, although the normal seasonal influence of customer plant closures for vacation and maintenance should reduce Cytec Fiberite's sales in the second half versus the first half of 2001.
"Energy and raw material costs have declined from the extremely high first quarter levels. We expect some additional, sequential, modest reductions for the remainder of 2001.
"As a result, our objective for full year 2001 EPS, excluding restructuring charges, has been reduced. We do not expect an economic recovery in 2001, as a result our full year normalized EPS objective is expected to be in a range of $2.05 to $2.15, with the third quarter expected to be in a range of $0.52 to $0.57.
"We have and will continue to take action to position Cytec for future growth, operational excellence and strong cash flow."
Six Month Results
Net earnings for the six months ended June 30, 2001 were $38 million or $0.91 per diluted share on sales of $730 million. Included in net earnings are restructuring charges of $7.7 million ($5.0 after tax) or $0.12 per diluted share. Net earnings for the six months ended June 30, 2000 were $73 million or $1.69 per diluted share on sales of $758 million. Included in net earnings is an after tax gain of $8.7 million or $0.20 per diluted share related to insurance settlements.
Investor Conference Call to be Held on July 20, 2001, 11:00 A.M. Eastern Time
Cytec will host their second quarter earnings release conference call on July 20, 2001 at 11:00 a.m. Eastern time. 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. Eastern time on July 20 until July 24, 2001 at midnight Eastern time by calling 888-203-1112 (U.S.) or 719-457-0820 (International) and entering access code 486488. 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 June 30,
2001 2000
Reported Adjusted(A) Reported Adjusted(A)
Net sales $ 354.1 $ 354.1 $ 389.0 $ 389.0
Manufacturing
cost of sales 269.2 264.6 280.6 280.6
Selling and
technical services 29.0 28.2 34.3 34.3
Research and
process development 8.5 8.5 9.3 9.3
Administrative
and general 11.0 11.0 12.2 12.2
Amortization of
acquisition
intangibles 3.2 3.2 3.1 3.1
Earnings from
operations 33.2 38.6 49.5 49.5
Other income
(expense), net 6.7 6.7 16.2 7.1
Equity in earnings
(loss) of associated
companies (2.8) (0.5) 3.5 3.5
Interest expense, net 5.2 5.2 7.1 7.1
Earnings before
income taxes 31.9 39.6 62.1 53.0
Income tax provision 11.0 13.7 21.4 18.2
Net earnings $ 20.9 $ 25.9 $ 40.7 $ 34.8
Earnings per
common share
Basic $0.52 $0.64 $0.99 $0.85
Diluted $0.50 $0.62 $0.95 $0.81
Weighted average
shares outstanding
Basic 40,414,000 40,414,000 41,135,000 41,135,000
Diluted 41,903,000 41,903,000 42,911,000 42,911,000
(A) Excludes special items as described in the accompanying "Notes to
Consolidated Financial Statements"
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Millions of dollars, except share and per share amounts)
Six Months Ended June 30,
2001 2000
Reported Adjusted (A) Reported Adjusted (A)
Net sales $ 730.2 $ 730.2 $ 757.9 $ 757.9
Manufacturing
cost of sales 563.4 558.8 545.7 545.7
Selling and
technical
services 57.8 57.0 68.5 68.5
Research and
process development 17.1 17.1 18.8 18.8
Administrative and
general 21.4 21.4 23.6 23.6
Amortization of
acquisition
intangibles 6.3 6.3 6.1 6.1
Earnings from
operations 64.2 69.6 95.2 95.2
Other income
(expense), net 6.4 6.4 20.3 7.0
Equity in earnings
(loss) of associated
companies (2.6) (0.3) 10.0 10.0
Interest expense, net 9.8 9.8 14.4 14.4
Earnings before income
taxes 58.2 65.9 111.1 97.8
Income tax provision 20.1 22.8 38.3 33.7
Net earnings $ 38.1 $ 43.1 $ 72.8 $ 64.1
Earnings per common
share
Basic $0.94 $1.07 $1.76 $1.55
Diluted $0.91 $1.03 $1.69 $1.49
Weighted average
shares outstanding
Basic 40,415,000 40,415,000 41,393,000 41,393,000
Diluted 42,028,000 42,028,000 43,072,000 43,072,000
(A) Excludes special items as described in the accompanying "Notes to
Consolidated Financial Statements"
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NET SALES AND EARNINGS FROM OPERATIONS BY BUSINESS SEGMENT
(Millions of dollars)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
Net sales
Water and Industrial
Process Chemicals $ 85.1 $ 106.3 $ 173.2 $ 205.7
Performance Products 115.3 125.2 227.7 246.6
Specialty Materials 117.2 107.5 233.2 207.3
Building Block
Chemicals
Sales to external
customers 36.5 50.0 96.1 98.3
Intersegment sales 13.0 15.2 26.8 28.6
Net sales from
segments 367.1 404.2 757.0 786.5
Elimination of
intersegment revenue (13.0) (15.2) (26.8) (28.6)
Total consolidated
net sales $ 354.1 $ 389.0 $ 730.2 $ 757.9
Earnings (loss) 2001 2000
from operations 3 Months % of % of
Sales Sales
Water and
Industrial Process
Chemicals $ 6.7 8% $ 11.2 11%
Performance Products 6.3 5% 16.0 13%
Specialty Materials 30.2 26% 23.6 22%
Building Block Chemicals (2.9) -6% (0.1) 0%
Earnings from segments 40.3 11% 50.7 13%
Corporate and
Unallocated (7.1) (1.2)
Total consolidated
earnings from
operations $ 33.2 9% $ 49.5 13%
Earnings (loss) 2001 2000
from operations 6 Months % of % of
Sales Sales
Water and
Industrial Process
Chemicals $ 14.9 9% $ 21.1 10%
Performance Products 10.2 4% 31.0 13%
Specialty Materials 58.3 25% 42.2 20%
Building Block
Chemicals (11.2) -9% 3.9 3%
Earnings from
segments 72.2 10% 98.2 12%
Corporate and
Unallocated (8.0) (3.0)
Total consolidated
earnings from
operations $ 64.2 9% $ 95.2 13%
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Millions of dollars, except share and per share amounts)
June 30, December 31,
2001 2000
ASSETS
Current assets
Cash and cash equivalents $ 37.6 $ 56.8
Accounts receivable, less
allowance for doubtful accounts
of $8.5 and $8.8 in 2001 and 2000,
respectively 244.8 271.4
Inventories 152.3 162.7
Deferred income taxes 32.6 42.6
Other current assets 35.8 34.3
Total current assets 503.1 567.8
Investment in associated companies 88.6 94.8
Plants, equipment and facilities, at cost 1,337.7 1,326.3
Less: accumulated depreciation (729.0) (710.1)
Net plant investment 608.7 616.2
Acquisition intangibles, net of
accumulated amortization 384.0 384.4
Deferred income taxes 46.4 36.8
Other assets 25.1 19.4
Total assets $ 1,655.9 $ 1,719.4
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 83.2 $ 111.0
Accrued expenses 161.0 179.6
Income taxes payable 49.6 68.3
Total current liabilities 293.8 358.9
Long-term debt 311.8 311.2
Other noncurrent liabilities 422.5 433.1
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 142.4 154.7
Retained earnings 793.1 755.1
Unearned compensation (6.7) (3.9)
Additional minimum pension liability (1.9) (1.9)
Accumulated translation adjustments (45.5) (32.7)
Treasury stock, at cost, 7,892,928
shares in 2001, and 7,966,229
shares in 2000 (254.2) (255.7)
Total stockholders' equity 627.8 616.2
Total liabilities and
stockholders' equity $ 1,655.9 $ 1,719.4
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)
Six Months Ended
June 30,
2001 2000
Cash flows provided by (used for)
operating activities
Net earnings $ 38.1 $ 72.8
Noncash items included in earnings:
Dividends from associated companies,
greater (less) than earnings 5.0 (5.9)
Depreciation 38.7 40.9
Amortization 5.4 7.4
Deferred income taxes 0.5 20.9
Gain on sale of assets (1.9) (7.1)
Other (4.9) 0.6
Changes in operating assets
and liabilities
Accounts receivable 20.1 (39.1)
Inventories 10.6 (7.1)
Accounts payable (20.7) (2.7)
Accrued expenses (14.9) 1.9
Income taxes payable (9.5) -
Other assets (8.5) (14.4)
Other liabilities (14.5) (18.5)
Net cash flows provided by
operating activities 43.5 49.7
Cash flows provided by (used for)
investing activities
Additions to plants, equipment
and facilities (32.7) (32.6)
Proceeds received on sale of assets 2.8 9.9
Acquisition of businesses (9.8) -
Investment in unconsolidated affiliates (0.5) -
Net cash flows used for investing
activities (40.2) (22.7)
Cash flows provided by (used for)
financing activities
Proceeds from the exercise of stock
options and warrants 7.5 3.0
Purchase of treasury stock (29.0) (37.5)
Change in short term borrowings - 0.1
Change in long term debt 0.5 3.0
Proceeds received on sale of
put options 0.5 0.6
Net cash flows used for financing
activities (20.5) (30.8)
Effect of exchange rate changes on
cash and cash equivalents (2.0) (0.8)
Decrease in cash and
cash equivalents (19.2) (4.6)
Cash and cash equivalents,
beginning of period 56.8 12.0
Cash and cash equivalents,
end of period $ 37.6 $ 7.4
Notes to Consolidated Statements of Income:
The adjusted Consolidated Statements of Income for the three and six months ended June 30, 2001 reflect the reported results excluding the items detailed below.
- Included in Manufacturing Cost of Sales for the second quarter and six months 2001 is a restructuring charge of $4.6 million.
- Included in Selling and Technical Services for the second quarter and six months 2001 is a restructuring charge of $0.8 million.
- Included in Equity in Earnings (Loss) of Associated Companies for the second quarter and six months 2001 is a restructuring charge of $2.3 million representing the Company's 50% share of restructuring charges recorded by CYRO Industries Inc.
- Included in Income Tax Expense for the second quarter and six months 2001 is a reduction of $2.7 million reflecting the tax effect of the restructuring charges noted above.
The adjusted Consolidated Statements of Income for the three and six months ended June 30, 2000 reflect the reported results excluding the items detailed below.
- Included in Other Income (Expense), net for the second quarter and six months 2000 are gains of $9.1 million and $13.3 million, respectively, relating to an insurance recovery of environmental expenses.
- Included in Income Tax Expense for the second quarter and six months 2000 are increased expenses of $3.2 million and $4.6 million, respectively, reflecting the tax effect of the environmental insurance recovery noted above.
CONTACT: Cytec Industries Inc.
William (Bill) Cleary
Investment Community
973/357-3298
or
George Yuro
Media
973/357-3319