Press Releases
Contact:
Jodi Allen (Investor Relations)
(973) 357-3283
Cytec Announces Fourth Quarter
and Full Year 2008 Results
Woodland Park, New Jersey, January 29, 2009 – Cytec Industries
Inc. (NYSE:CYT) announced today a net loss for the fourth
quarter of 2008 of $350.7 million or $7.39 per basic share on
net sales of $698 million. Included in the quarter results is a
goodwill impairment charge of $358.3 million after-tax or $7.55
per basic share and several other special items that total net
$2.7 million after-tax income or $0.06 per basic share and are
outlined further in this release. Excluding the goodwill
impairment charge and these special items, net earnings were
$4.9 million or $0.10 per diluted share.
Net earnings for the fourth quarter of 2007 were $47.6 million
or $0.97 per diluted share on net sales of $901 million.
Included in the 2007 quarter were several special items that
totaled a net $0.5 million charge after-tax or $0.01 per diluted
share. Excluding these special items, net earnings were $47.1
million or $0.96 per diluted share.
Shane Fleming, Chairman, President and Chief Executive Officer
commented, “We experienced a significant decline in sales of our
chemical products caused by the unprecedented downturn in the
automotive, construction and general industrial markets made
worse by destocking actions taken by many of our customers at
year-end. Sales volumes declined in all regions and most of our
chemical plants ran at significantly lower operating rates than
the prior year period. Engineered Materials performed well in a
difficult quarter. Selling volumes were down principally due to
the strike at Boeing, although this was partially offset by
improved sales in other commercial transport sectors. As
previously announced, we have initiated actions to aggressively
reduce our costs including consolidation of manufacturing
facilities, reduction of excess manufacturing capacity, working
capital reduction and the migration to regional shared services
among others and will continue these efforts in light of our
outlook for a continuing decline in demand.”
Cytec Surface Specialties Sales decreased 30% to $281
million; Operating loss of $404.8 million.
In Cytec Surface Specialties, overall selling volumes were down
by 32%, with depressed demand in industrial coatings markets,
particularly automotive and construction, affecting all product
lines. Selling prices increased by 4% and the impact of exchange
rates decreased sales by 2%.
The operating loss includes a goodwill impairment charge of
$385.0 million and a charge of $1.4 million of accelerated
depreciation related to the planned exit of Radcure
manufacturing at our Pampa, TX site. Excluding these special
items Surface Specialties had an operating loss of $18.4 million
which is a significant decrease compared to the $20.0 million of
operating earnings in the fourth quarter of 2007. This is
principally due to the dramatic selling volume decline as well
as the impact from higher raw material costs in inventory at the
end of the third quarter flowing through cost of sales in the
fourth quarter which were not completely covered by the selling
price increases.
Cytec Performance Chemicals Sales decreased 17% to $159
million; Operating Earnings decreased to $15.0 million.
In Cytec Performance Chemicals, overall selling volumes
decreased by 23% related to global economic weakness across all
product lines. Selling prices increased by 9% and the impact of
exchange rates decreased sales by 3%.
Operating earnings of $15.0 million were down compared to the
$16.2 million in the fourth quarter of 2007 as a result of the
selling volume decline due to weak economic conditions. In spite
of the reduced selling volumes, the Mining Chemicals and
Phosphine product lines significantly improved earnings in the
fourth quarter 2008 versus the prior year quarter due to an
improved product mix driven by new product sales and favorable
pricing, which substantially offset earnings declines in the
Polymer Additives and Pressure Sensitive Adhesives product
lines.
Cytec Engineered Materials Sales decreased by 8% to $164
million; Operating Earnings of $30.5 million.
In Cytec Engineered Materials, selling volumes decreased by 9%,
driven mainly by the impact of the strike at Boeing which was
partially offset by increases in other commercial transport and
rotorcraft sectors. Selling prices increased by 3% and the
impact of exchange rates decreased sales by 2%.
Operating Earnings of $30.5 million were down versus $36.1
million in the fourth quarter of 2007, principally related to
lower selling volumes.
Cytec Building Block Chemical Sales decreased by 27% to
$94 million; Operating loss of $6.4 million.
In Building Block Chemicals, selling volumes decreased by 34%
due to weak demand within the end markets for acrylonitrile and
melamine products across all regions. Selling prices increased
by 7%.
Operating loss was $6.4 million compared to operating earnings
of $7.2 million in the fourth quarter of 2007. The reduced
earnings resulted primarily from the lower selling volumes and
the negative impact on earnings of the high raw materials in
inventory at the end of the third quarter flowing through cost
of sales in the fourth quarter not being completely recovered
with higher selling prices.
Special Items
David Drillock, Vice President and Chief Financial Officer
commented, “The adverse impact of the current macroeconomic
business environment on the long-term financial outlook for the
Surface Specialties segment has led us to conclude that an
impairment has occurred related to the carrying value of the
segment’s goodwill. As a result we recorded a pre-tax non-cash
special item charge of $385.0 million ($358.3 million after-tax
or $7.55 per basic share) in fourth quarter results to reduce
the carrying value of goodwill related to the Surface
Specialties segment.”
“We also recorded a number of other special items in the fourth
quarter of 2008 that result in a net pre-tax gain of $0.6
million ($0.3 million after tax or $0.01 per basic share) as
follows:
- Included in
Corporate and Unallocated is a pre-tax charge of $4.1 million
($2.8 million after-tax or $0.06 per basic share) principally
for a reduction of approximately 31 employees mostly in our
Specialty Chemical operations.
- Included in manufacturing cost of sales in the Surface
Specialties segment is a pre-tax charge of $1.4 million ($0.9
million after-tax or $0.02 per basic share) for accelerated
depreciation in relation to the planned exit of Radcure
manufacturing at our leased facility in Pampa, TX.
- Included in other income/expense in Corporate and Unallocated
is a pre-tax gain of $6.1 million ($4.0 million after-tax or
$0.09 per basic share) related to a legal settlement.
Finally, we
recorded an income tax benefit of $2.4 million or $0.05 per
basic share related to a favorable tax development from the sale
of the water treatment business in 2007.”
Interest Expense
Interest expense, net was reduced 28% from the prior year fourth
quarter reflecting the lower cost of debt versus the prior year
quarter.
Income Tax Expense
The tax benefit for the fourth quarter of 2008 was $23.7
million, or 6.3%, on the loss before income taxes compared with
a provision of $17.6 million, or 27%, on earnings before income
taxes in the fourth quarter of 2007. Included in income tax
benefit for the quarter is $26.7 million related to the goodwill
impairment charge and a benefit of $2.4 million related to the
aforementioned favorable tax development related to the sale of
the water treatment business in 2007. Excluding all special
items the overall underlying tax rate for 2008 was 32%. The
increase over the prior year’s 30.3% is primarily due to a
greater percent of earnings in higher tax jurisdictions.
Cash Flow
Cash flows from operations were $58 million for the fourth
quarter and $229 million year to date. For the quarter, trade
accounts receivable decreased by $153 million due to the lower
sales, partially offset by days outstanding being up by 5 days
versus the end of the third quarter. Inventory decreased by $27
million while days on hand are 96 at the end of the quarter, up
from 80 at the end of third quarter primarily reflecting the
significantly reduced demand in the fourth quarter. Accounts
payable decreased $115 million due to reduced spending as a
result of lower production levels and cost controls leading to a
reduction of costs from the third quarter. Capital spending for
the quarter was $80 million, with about half of this spending
being related to our carbon fiber plant in Greenville, SC and
prepreg plant in China, bringing our year to date total to $196
million.
2009 Outlook
In closing Mr. Fleming commented, “At this time, we do not
foresee any improvement in the global economy through 2009. This
will largely impact our Specialty Chemicals segments where we
expect lower sales volumes in 2009 versus 2008. Despite some
expected softening in demand in the Large Commercial Transport
and the Business and Regional Jet sectors in 2009, the shift to
larger and higher composite content aircraft and continued but
more modest growth in the military sector should lead to modest
increases in selling volumes for Engineered Materials.
“Given the high degree of uncertainty in the demand outlook in
many of our markets, we will not be providing 2009 earnings
guidance at this time. We expect to have better visibility as
the year progresses and anticipate providing more insight if
conditions allow.
“These are challenging times for everyone. We are confident that
our ongoing restructuring and working capital initiatives will
enable Cytec to navigate through this uncertain economic
environment and position us well for enhanced profitability when
demand growth returns.”
Full Year Results
Net loss for the full year ended December 31, 2008 was $198.8
million or $4.16 per basic share on sales of $3,640 million.
Included in the results for the full year ended December 31,
2008 were special items that total a net pre-tax charge of
$399.4 million ($365.9 million after-tax or $7.66 per basic
share) as follows:
- A pre-tax
goodwill impairment charge of $385.0 million ($358.3 million
after-tax or $7.50 per basic share related to the Surface
Specialties segment.
- Net pre-tax restructuring charges of $14.9 million ($10.4
million after-tax or $0.22 per basic share) primarily related to
restructuring initiatives mostly within Specialty Chemicals.
- A pre-tax charge of $5.6 million ($3.6 million after-tax or
$0.08 per basic share) recorded in the Surface Specialties
segment for accelerated depreciation of our Pampa, TX site.
- A pre-tax gain of $6.1 million ($4.0 million after-tax or
$0.08 per basic share) for to a legal settlement recorded in
Corporate and Unallocated.
- Included in the income tax benefit is a $2.4 million gain or
$0.05 per basic share related to a favorable tax development
related to the sale of the water treatment business in 2007.
Excluding these
special items, net earnings for the full year 2008 were $167.2
million or $3.46 per diluted share.
Net earnings for the full year ended December 31, 2007 were
$206.5 million or $4.20 per diluted share on sales of $3,504
million. Included in the results for the full year ended
December 31, 2007 were special items that total pre-tax income
of $7.4 million ($14.5 million income after-tax or $0.29
increase per diluted share) as follows:
- A $13.6 million
pre-tax gain for the sale of the water treatment product line to
Kemira (after-tax $13.3 million or $0.27 per diluted share).
- A $6.3 million benefit for tax adjustments primarily related
to tax rate changes in various jurisdictions ($0.13 per diluted
share)
- A $6.2 million net pre-tax charge primarily for the
restructure of manufacturing sites in France, West Virginia, and
Connecticut (after-tax $5.0 million of $0.10 per diluted share)
Excluding these
special items, net earnings were $191.9 million or $3.90 per
diluted share.
Investor Conference Call to be Held on January 30, 2009 at
11:00am ET
Cytec will host their fourth quarter earnings release conference
call on January 30, 2009 at 11:00am ET. 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.
Use of Non-GAAP Measures
Management believes that net earnings, basic and diluted
earnings per share before 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 Industries Inc. is a global specialty chemicals and
materials company focused on developing, manufacturing and
selling value-added products. Our products serve a diverse range
of end markets including aerospace, adhesives, automotive and
industrial coatings, chemical intermediates, inks, mining and
plastics. We use our technology and application development
expertise to create chemical and material solutions that are
formulated to perform specific and important functions in the
finished products of our customers.
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