Cytec Announces Second Quarter 2011 Results
(Thomson Reuters ONE) -
Cytec Announces Second Quarter 2011 Results
Net Revenue of $798 million, Up 14% From Second Quarter 2010
As-Adjusted Continuing EPS of $0.92 per Diluted Share
Updates Full Year 2011 Guidance
WOODLAND PARK, N.J., July 21, 2011 -- Cytec Industries Inc. (NYSE: CYT)
announced today net earnings for the second quarter 2011 of $35.1 million or
$0.70 per diluted share on net sales of $798 million. Earnings from continuing
operations attributable to Cytec were $36.2 million or $0.72 per diluted share.
Loss from discontinued operations was $1.1 million or $0.02 per diluted share.
Included in the quarter are several special items from continuing operations
that total $9.7 million of net expense after-tax or $0.19 per diluted share and
are outlined further in this release. Excluding the special items and loss from
discontinued operations, earnings from continuing operations attributable to
Cytec were $45.9 million or $0.92 per diluted share.
Net earnings for the second quarter of 2010 were $61.8 million or $1.24 per
diluted share on net sales of $702 million. Earnings from continuing operations
attributable to Cytec were $50.5 million or $1.02 per diluted share. Earnings
from discontinued operations were $11.3 million or $0.22 per diluted share.
Included in the quarter were special items that totaled $3.1 million of net
expense after-tax or $0.06 per diluted share. Excluding the special items from
continuing operations and earnings from discontinued operations, net earnings
from continuing operations attributable to Cytec were $53.6 million or $1.08 per
diluted share.
Shane Fleming, Chairman, President and Chief Executive Officer commented, "We
overcame the challenge of continued raw material cost escalation and
macroeconomic uncertainty and delivered good sequential sales and earnings
growth across our portfolio. We remained disciplined in our pricing actions in
our Specialty Chemicals businesses and were able to more than offset the impact
of sharply increased raw material costs. In addition, we made good progress
implementing planned price increases in our Engineered Materials segment. Our
sales growth for the quarter included 10% from higher selling prices and 5% from
exchange rate changes versus the second quarter last year. This was partially
offset by slightly lower selling volumes of 1%. In the Coating Resins and
Additive Technologies segments, industrial markets softened in the latter part
of the quarter while we continue to see good volume growth in our Engineered
Materials and In Process Separation segments."
Cytec Coating Resins sales increased 14% to $421 million; operating profit flat
at $28.2 million.
In Coating Resins, overall selling volumes were down by 9% versus the second
quarter 2010, due to weak demand in many of our industrial markets across all
regions. Selling prices increased sales by 15% and the impact of changes in
exchange rates increased sales by 8%.
Operating earnings of $28.2 million were flat versus $28.0 million in the second
quarter of 2010. Higher selling prices of $54.1 million more than offset higher
raw material costs of $46.7 million. This net benefit was offset by the impact
of lower selling volumes.
Cytec Additive Technologies sales increased 10% to $73 million; operating
earnings decreased to $10.1 million.
In Additive Technologies, overall selling volumes were down by 3% versus the
second quarter 2010, attributed primarily to weaker demand in the North America
and Asia Pacific regions as well as limited product availability given our
short-term capacity constraints in this business as we operate at high
utilization levels and focus on asset reliability to meet our customer's needs.
This was offset by higher selling prices of 8% and the favorable impact of
changes in exchange rates of 5%.
Operating earnings of $10.1 million were down slightly compared to the $10.7
million in the second quarter of 2010 mainly as a result of lower selling
volumes and higher operating expenses. Increased selling prices essentially
offset increased raw material costs of $5.6 million.
Cytec In Process Separation sales increased
16% to $82 million; operating earnings increased to $15.6 million.
In Process Separation selling volumes were up 10% versus the second quarter
2010, resulting primarily from higher demand in our key alumina markets and
strong demand for phosphine chemicals. Selling prices increased sales by 4% and
the change in exchange rates increased sales by 2%.
Operating earnings of $15.6 million were higher compared to $14.3 million in the
prior year quarter, mainly as a result of higher selling volumes and prices.
These positive impacts were partially offset by higher raw material costs of
$3.2 million.
Cytec Engineered Materials sales increased by 13% to $222 million; operating
earnings decreased to $30.4 million.
In Engineered Materials, selling volumes increased by 9% compared to the prior
year period, primarily driven by higher build rates in both new and legacy large
commercial aircraft programs and civil rotorcraft. Selling prices increased
sales by 3% and the impact of exchange rates increased sales by 1%.
Operating earnings of $30.4 million were down versus $38.6 million in the second
quarter of 2010, mainly as a result of higher period and operating costs. These
costs were incurred to meet increasing demand and future growth opportunities as
well as to mitigate the impact of delays in moving production to two expanded
facilities as a result of qualification delays. Increased selling prices
covered increased raw material costs.
Discontinued Operations
Net loss for the second quarter of 2011 includes an unfavorable pre-tax
adjustment of $3.5 million ($2.2 million after-tax) related to the gain on the
divestiture that we recorded in the first quarter of 2011, as we settled the
working capital adjustment provision of the transaction. This was partially
offset by a favorable adjustment to the tax provision for discontinued
operations of $1.1 million associated with the former Building Block Chemicals
Segment's allocable portion of our revised full year estimated U.S. domestic
manufacturing deduction.
Special Items
The second quarter of 2011 includes net pre-tax charges of $12.5 million ($9.0
million after-tax or $0.18 per diluted share) for restructuring activities
principally related to Coating Resins segment, and a pre-tax charge of $1.2
million ($0.7 million after-tax or $0.01 per diluted share) related to an
increase in the environmental liability at an inactive site for new remedial
design requirements.
Income Tax Expense
Income tax expense related to continuing operations for the second quarter of
2011 was $18.3 million, compared with a tax expense of $18.6 million in the
second quarter of 2010. Included in the provision for the second quarter of
2011 are discrete tax expenses of $0.7 million primarily attributable to the re-
measurement of our deferred tax position related to changes in U.S. state tax
rates. Excluding the impact from the aforementioned discrete tax expenses and
the special items previously noted, the underlying estimated annual tax rate for
the second quarter of 2011 was approximately 31.30% versus the underlying
estimated annual tax rate in the second quarter of 2010 of 31.75%.
Cash Flow
David Drillock, Vice President and Chief Financial Officer commented, "Operating
cash flows from continuing operations were $28.7 million for the second quarter
2011. During the quarter our average net working capital days were flat
compared to the first quarter of 2011. While trade accounts receivable
increased $14.2 million due to higher revenues, the average days sales
outstanding of approximately 48 days was slightly down compared to the first
quarter 2011 average of 49 days. Inventory increased by $51.0 million from the
first quarter 2011 due to weak demand and preparation for the seasonal
production shutdowns. Average inventory days on hand of approximately 74 days
was up from the average for the first quarter of 2011 of 69 days. Accounts
payable decreased by $3.1 million due to the lower demand levels while accounts
payable days were up 4 days to 62 days versus the average first quarter of 2011
level of 58 days."
"Capital spending for the quarter was $25 million with approximately 60% of the
spending attributable to Specialty Chemical segments and 40% to Engineered
Materials, versus $25 million spent in the second quarter of 2010. We are
revising our outlook for full year capital spending to a range of $120 to $130
million down from our previous guidance of $170 to $190 million. The decrease
is the result of several expansion projects moved into 2012."
"During the quarter we purchased 415,000 shares of our common stock for $23
million. The remaining amount on the current share repurchase authorization is
approximately $147 million."
2011 Outlook
Mr. Fleming commented, "Although the improved global demand across our Specialty
Chemicals businesses in the first quarter of 2011 was encouraging, we did
experience a slowdown in demand in our industrial markets in the latter part of
the second quarter, negatively impacting our Coating Resins and Additive
Technologies segments particularly. The exceptions were the European automotive
market mainly driven by German exports and the Japanese market which is showing
first signs of recovery from the earthquake. Regarding raw materials, propylene
prices appear to have peaked in May at an all-time high of $0.96. Although
propylene prices contracted in June and July, chemical grade propylene prices
are expected to stay relatively high throughout the remainder of the year
compared to prior year levels. We are now faced with the uncertain pace of
global economic recovery, persistent high unemployment and fiscal constraints in
the developed economies, and inflationary concerns in the emerging markets.
With our solid first half results and our cautious second half view for demand
for our Specialty Chemicals segments, our guidance for full year operating
earnings in Coating Resins, Additive Technologies, and In Process Separation
businesses is unchanged."
"In Coating Resins, given the significant increase in pricing that was necessary
to recover raw material costs, the revised full year sales projection is now
$1.55 to $1.65 billion, up from the prior projection of $1.50 to $1.52 billion.
The range for full year operating earnings of $70 to $80 million is unchanged.
In Additive Technologies, the full year guidance is unchanged with a sales range
of $260 to $280 million and operating earnings of $37 to $40 million. The full
year guidance for the In Process Separation segment also remains unchanged with
a sales range of $320 to $330 million and operating earnings in a range of $60
to $70 million."
Mr. Fleming continued, "In Engineered Materials, we expect continued strong
selling volume increases in the second half of 2011 in the large commercial
transport, business jet, and rotorcraft sectors. We are also making good
progress to more than offset the year-over-year increases in raw material costs
by year end. We have now obtained the majority of the qualifications at our new
facilities and are transferring production to these sites which should lead to
improved margins in the second half of 2011. The expected improvement in margins
may be partially offset by additional expense investments to meet increasing
demand for existing programs and qualification expenses for future generation
aircraft. For this segment, 2011 full year sales are now projected to be in a
range of $880 to $900 million, up versus the prior guidance of $825 to $845
million. Full year operating earnings are expected to be in a range of $125 to
$135 million for this segment, down versus the previous range of $130 to $140
million.
On a consolidated level, the guidance for Corporate and Unallocated is unchanged
at $16 to $18 million for the year. Guidance for other expense and net interest
expense remains unchanged at $4 million and in the range of $37 to $39 million,
respectively. The forecast for the underlying annual tax rate for ongoing
operations continues to be in a range of 30.5% to 32.5%.
After taking into account all these above factors, the revised 2011 continuing
full year adjusted diluted earnings per share is now in the range of $3.25 to
$3.50 on sales of $3.0 billion to $3.2 billion versus the prior projection of
$3.15 to $3.50 on sales of $2.9 billion to $3.0 billion."
In closing, Mr. Fleming commented, "I am pleased and proud of the people of
Cytec for their ability to react quickly to the uncertainty and rapidly changing
global economy. For our Engineered Material business, increasing build rates
from both legacy and new aerospace programs will continue to provide strong
growth in the short, medium and long term and we are well positioned to
capitalize on the favorable secular trend towards increased composites content.
We remain focused on margin improvement to generate stronger earnings and cash
flow which will allow us to pursue additional investments and growth to create
value for our shareholders."
Six Month Results
Net earnings for the six months ended June 30, 2011 were $118.3 million or $2.36
per diluted share on sales of $1,564 million. Earnings from continuing
operations attributable to Cytec were $75.8 million or $1.51 per diluted share.
Earnings from discontinued operations were $42.5 million or $0.85 per diluted
share.
For the six months ended June 30, 2011, a number of special items (all from
continuing operations) were recorded that resulted in net pre-tax charges of
$12.9 million ($9.1 million net charges on an after-tax basis or $0.18 per
diluted share) as follows:
* Included in Corporate and Unallocated, principally in operating expenses,
are pre-tax net restructuring charges of $11.8 million ($8.5 million after-
tax or $0.17 per diluted share) primarily related to Coating Resins.
* Included in Gain on sale of assets is a pre-tax gain of $3.3 million ($2.1
million after-tax or $0.04 per diluted share) related to a sale of land at
our manufacturing site in Colombia which was shutdown in the second half of
2009.
* Included in Other Expense is a pre-tax charge of $4.4 million ($2.7 million
after-tax or $0.05 per diluted share) related to an increase in the
environmental liability at inactive sites for updated estimates of future
remedial costs.
Excluding these items and earnings from discontinued operations, net earnings
from continuing operations attributable to Cytec were $84.9 million or $1.69 per
diluted share.
Net earnings for the six months ended June 30, 2010 was $86.6 million or $1.75
per diluted share on sales of $1,349 million. Earnings from continuing
operations attributable to Cytec were $71.6 million or $1.45 per diluted share.
Earnings from discontinued operations were $15.0 million or $0.30 per diluted
share. Included in the results for the six months were (a) favorable net pre-
tax adjustments of $0.7 million ($0.5 million after-tax or $0.01 per diluted
share) associated with various restructuring initiatives across Specialty
Chemicals, Engineered Materials, and Corporate operations, (b) pre-tax charges
of $5.1 million ($3.2 million after-tax or $0.06 per diluted share) related to
the decision to exit certain phosphorus products manufactured at our Mount
Pleasant, Tennessee facility and (c) income tax expense of $8.3 million or $0.17
per diluted share due to the U.S. Health Care Reform legislation passed in the
first quarter of 2010. Excluding these items and earnings from discontinued
operations, net earnings from continuing operations attributable to Cytec were
$82.6 million or $1.67 per diluted share.
Investor Conference Call to be Held on Friday July 22, 2011 at 11:00am ET
Cytec will host their second quarter earnings release conference call on July
22, 2011 at 11:00am ET.
The conference call will be simultaneously webcast for all investors from
Cytec's website.
Select the Investor Relations page to access the live webcast.
Use of Non-GAAP Measures
Management believes that net earnings from continuing operations attributable to
Cytec excluding special items and diluted earnings per share (continuing
operations attributable to Cytec) excluding special items, which are non-GAAP
measurements, are meaningful to investors because they provide a view of the
Company with respect to ongoing operating results. Special items represent
significant charges or credits that are important to an understanding of the
Company's overall operating results in the period presented. Such non-GAAP
measurements are not recognized in accordance with generally accepted accounting
principles (GAAP) and should not be viewed as an alternative to GAAP measures of
performance. A reconciliation of GAAP to non-GAAP measurements can be found at
the end of this release.
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's vision is to deliver specialty chemicals and materials technologies
beyond our customers' imagination. Our focus on innovation, advanced technology
and application expertise enables us to develop, manufacture and sell products
that change the way our customers do business. Our pioneering products perform
specific and important functions for our customers, enabling them to offer
innovative solutions to the industries that they serve. Our products serve a
diverse range of end markets including aerospace composites, structural
adhesives, automotive and industrial coatings, electronics, inks, mining and
plastics.
Contact:
Jodi Allen (Investor Relations)
(973) 357-3283
Cytec Industries Q2 2011 Press Release Financial Tables:
http://hugin.info/146098/R/1532782/466821.pdf
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(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Cytec Industries Inc via Thomson Reuters ONE
[HUG#1532782]
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Datum: 21.07.2011 - 22:07 Uhr
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