Cytec Fourth Quarter EPS up 9%; Full Year EPS up 12%
25 January 1999
Cytec Fourth Quarter EPS up 9%; Full Year EPS up 12%
WEST PATERSON, N.J.--Jan. 25, 1999--Cytec Industries Inc. announced today that net earnings for the fourth quarter of 1998 were $32 million or $0.71 per diluted share on sales of $352 million. This compares to net earnings of $31 million, or $0.65 per diluted share on sales of $360 million for the comparable period of 1997.Net earnings for the full year ended December 31, 1998 were $125 million on net sales of $1,445 million. This compares to net earnings of $114 million on net sales of $1,291 million for the comparable period of 1997. Earnings per diluted share for the full year ended 1998 were $2.68; a 12% increase over the $2.39 per diluted share for the comparable period of 1997.
Included in 1998 results for the fourth quarter and full year is a gain of $4.4 million, ($2.8 million after tax or $0.06 per diluted share), relating to the sale of the Bulk Molding Compounds product line. Excluding this gain, earnings per diluted share were $0.65 and $2.62, respectively for the quarter and full year ended December 31, 1998.
Net earnings for the fourth quarter ended December 31, 1997 include the unfavorable effect of restructuring and other charges of $33.8 million, ($23 million after tax or $0.49 per diluted share). Also included is the favorable reversal of the tax valuation allowance of $24.4 million, ($0.52 per diluted share). Excluding the above, earnings per share for the fourth quarter ended December 31, 1997 were $0.62 per diluted share.
Net earnings for the full year ended December 31, 1997 include the unfavorable effects of restructuring and other charges of $52.4 million, ($34.3 million after tax or $0.72 per diluted share). Also included is the favorable reversal of the tax valuation allowance of $24.4 million, ($0.51 per diluted share). In addition, full year results include a gain of $22.3 million, ($13.6 million after tax or $0.29 per diluted share) primarily relating to the divestiture of the acrylic fibers product line. Excluding the above, diluted earnings per share for the full year ended December 31, 1997 were $2.31.
Fourth Quarter Discussion
In announcing these results, David Lilley, Chairman, President and Chief Executive Officer commented: "Sales for the quarter showed some encouraging signs. International sales have grown to 41% of total Cytec sales. This is a key area for growth in Cytec. Sales in the Asia Pacific region increased 14% overall led by Specialty Chemicals.
Specialty Chemicals sales increased 6% for the quarter. Prices were down 1% and volumes were up 8%. Excluding the effects of the acquisitions completed this year volumes were up 2% in the quarter. The Paper, Water, Mining product line increased due to stronger international sales. This was partly offset by lower U.S. sales where the markets we compete in remain weak. Additives sales volumes and prices were down for the quarter. Resins sales were up after excluding sales associated with the remaining 50% of our Dyno-Cytec joint venture acquired in the third quarter of this year.
Overall, Specialty Material sales were flat. During the quarter we completed the acquisition of The American Materials & Technologies Corporation, (AMT), and the divestiture of our Bulk Molding Compounds product line. Cytec Fiberite, our advanced composites and adhesives business, had a sales volumes increase of 5%. This was due to sales from the recent acquisition of AMT and increased European penetration, partially offset by lower sales due to the planned shutdown of our Newark, Delaware facility of which certain products were discontinued. The shutdown will be completed early in the second quarter. Our U.S. sales of products for aircraft interiors finished strongly although this was offset by lower U.S. sales of products for aircraft structures.
Building Block sales decreased 29%. Selling prices and volumes were down 16% and 14%, respectively. Selling prices for acrylonitrile and methanol continued downward and we expect these low levels to continue well into 1999. Acrylonitrile volumes remain depressed due to a combination of high supply and weak demand, primarily in Asia. We are running the acrylonitrile plant at a reduced rate and will continue production at the lower rate until market conditions improve. Costs for propylene, the key raw material for production of acrylonitrile, are down compared to the year ago period, substantially offsetting the impact of lower selling prices."
Mr. Lilley continued, "Our earnings were positively affected by the acquisitions and the related synergies, lower raw material costs, lower costs resulting from our restructuring programs, reduced costs relating to ongoing benefit plans and a lower effective tax rate. Poor market conditions for acrylonitrile and methanol, mentioned above, led to reduced earnings in the quarter for Building Blocks. Lower selling prices and volumes in the U.S. and Europe contributed to a down quarter for the Additives product line. Criterion Catalyst finished the fourth quarter with strong sales momentum. This was the main reason for the increase in equity in earnings of associated companies."
Full Year Discussion
Mr. Lilley added, "The increase in full year diluted earnings per share, our fifth consecutive increase, reflects many factors including the positive effects of our acquisitions, namely Fiberite, the remaining 50% interest in our Dyno-Cytec joint venture, AMT and Oreprep. All our synergy goals for 1998 were achieved and we are now working to build further improvements. We also made much progress throughout Cytec in enhancing productivity, improving customer service and reducing costs. We intend to maintain this momentum with many new initiatives in place for 1999.
Our share buyback program contributed to the increase in earnings per share by reducing the number of shares outstanding. During the fourth quarter, we completed the repurchase of the remaining shares authorized under our 4.5 million share buyback plan announced in February 1997. We anticipate starting on the recently announced share buyback program shortly.
All this was accomplished while managing through difficult macro economic events such as the Asian economic downturn, weak Latin American economies, declining selling prices for the chemical industry in general and some uncertainty in the aerospace market. We expect many of these events to continue through 1999. Cytec has provided consistent earnings growth since its inception, and in spite of the current difficult economic environment, our goal for 1999 and beyond is to continue to provide earnings growth for our shareholders."
Company Profile
Cytec Industries Inc. is a vertically integrated, specialty chemicals company that focuses on value-added specialty products. The Company develops, manufactures and markets specialty chemicals, specialty materials and building block chemicals serving a broad group of end users, including the aerospace, plastics, coatings, mining, paper, water treatment and automotive industries.
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.
Financial Tables to Follow
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Millions of dollars, except share and per share amounts)
Three Months Ended December 31,
1998 1997
Reported Adjusted Reported Adjusted
(A) (A)
Net sales $352.40 $352.40 $ 359.6 $ 359.6
Manufacturing cost of sales 244.4 244.4 265 249
Selling and technical
services 38.7 38.7 41.4 38.2
Research and process
development 11.2 11.2 13.2 11.2
Administrative and general 10.5 10.5 15.1 12.5
Amortization of acquisition
intangibles 2.8 2.8 2 2
Earnings from operations 44.8 44.8 22.9 46.7
Other income (expense), net 5.3 0.9 -6 3
Equity in earnings of
associated companies 6.9 6.9 2.5 2.5
Interest expense, net 6.2 6.2 5.6 4.6
Earnings before income taxes 50.8 46.4 13.8 47.6
Income tax provision
(benefit) 18.8 17.1 -16.9 18.3
Net earnings $32.00 $29.30 $ 30.7 $ 29.3
Earnings per common share
Basic $0.73 $0.67 $0.68 $0.65
Diluted $0.71 $0.65 $0.65 $0.62
Weighted average shares
outstanding
Basic 43,733,000 43,733,000 45,219,000 45,219,000
Diluted 45,176,000 45,176,000 47,328,000 47,328,000
(A) See Accompanying Notes to Consolidated Statements of Income
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Millions of dollars, except share and per share amounts)
Year Ended December 31,
1998 1997
Reported Adjusted Reported Adjusted
(A) (A)
Net sales $1,444.50 $1,444.50 $1,290.60 $1,290.60
Manufacturing cost of sales 1,006.60 1,006.60 930.9 896.3
Selling and technical
services 153.4 153.4 145.4 142.2
Research and process
development 42.9 42.9 44.7 42.7
Administrative and general 46.6 46.6 47.7 45.1
Amortization of acquisition
intangibles 9.5 9.5 2.7 2.7
Earnings from operations 185.5 185.5 119.2 161.6
Other income (expense), net 14.5 10 23.9 10.6
Equity in earnings of
associated companies 20.3 20.3 12.3 12.3
Interest expense, net 22.4 22.4 5.7 4.7
Earnings before income taxes 197.9 193.4 149.7 179.8
Income tax provision 73.2 71.5 36.1 69.9
Net earnings $124.70 $121.90 $113.60 $109.90
Earnings per common share
Basic $2.79 $2.73 $2.50 $2.42
Diluted $2.68 $2.62 $2.39 $2.31
Weighted average shares
outstanding
Basic 44,715,000 44,715,000 45,450,000 45,450,000
Diluted 46,480,000 46,480,000 47,554,000 47,554,000
(A) See Accompanying Notes to Consolidated Statements of Income
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Millions of dollars, except share and per share amounts)
December 31, December 31,
1998 1997
ASSETS
Current assets
Cash and cash equivalents $ 1.7 $ 6.4
Accounts receivable, less allowance
for doubtful accounts
of $9.2 and $10.0 in 1998 and 1997,
respectively 241.3 226.9
Inventories 140.5 131.9
Deferred income taxes 72.9 70.7
Other current assets 21.2 16.9
Total current assets 477.6 452.8
Equity in net assets of and
advances to associated companies 147.4 141.1
Plants, equipment and facilities,
at cost 1,363.0 1,278.0
Less: accumulated depreciation -695.5 -648.3
Net plant investment 667.5 629.7
Acquisition intangibles, net of
accumulated amortization 349.5 295.6
Deferred income taxes 62.6 82.2
Other assets 26 12.7
Total assets $1,730.6 $1,614.10
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ 10.3 $ -
Accounts payable 99.9 116.3
Accrued expenses 243.9 239
Income taxes payable 40.3 19.7
Total current liabilities 394.4 375
Long-term debt 419.5 324
Other noncurrent liabilities 485.7 527.7
Stockholders' equity
Preferred stock, 20,000,000 shares
authorized, issued and outstanding
4,000 shares, Series C,
$.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 48,142,961 in 1998
and 48,181,264 in 1997 0.5 0.5
Additional paid-in capital 162.4 203.9
Retained earnings 456.2 331.5
Unearned compensation -1.7 -3.5
Accumulated translation adjustments -5.1 -6.9
Treasury stock, at cost,
4,952,881 shares in 1998, and
3,044,589 shares in 1997 -181.4 -138.2
Total stockholders' equity 431 387.4
Total liabilities and
stockholders' equity $ 1,730.6 $1,614.10
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)
Years Ended
Dec 31,
1998 1997
Cash flows provided by (used for)
operating activities
Net earnings $ 124.7 $113.6
Noncash items included in earnings:
Equity in undistributed earnings of
associated companies (13.8) 0.1
Depreciation 78 73.1
Amortization 9 5.7
Deferred income taxes 19.2 3.2
Gain on sale of businesses -6.9 -22.3
Other - 6.7
Changes in operating assets and
liabilities, net of effects
from sale/acquisition of businesses
Accounts receivable 3.9 -16.7
Inventories 1.1 -9.5
Accounts payable -25.2 -9.9
Accrued expenses -19.5 13.8
Income taxes payable 26.1 18.5
Other assets -8.6 -2.2
Other liabilities -35.7 -42.4
Net cash flows provided by
operating activities 152.3 131.7
Cash flows provided by (used for)
investing activities
Additions to plants, equipment and
facilities -103.8 -91.4
Proceeds received on sale of assets 25.9 95.7
Acquisition of businesses -73.8 -344
Change in other assets 4.8 2.1
Net cash flows used for
investing activities -146.9 -337.6
Cash flows provided by (used for)
financing activities
Proceeds from the exercise of
stock options 3.3 6
Purchase of treasury stock -113.4 -47.8
Change in short term borrowings 10.3 -
Change in long term debt 95.2 235
Debt issuance costs -6.9 -
Proceeds received on sale of
put warrants 1 1
Net cash flows provided by (used
for) financing activities (10.5) 194.2
Effect of exchange rate changes on
cash and cash equivalent 0.4 -2.3
Decrease in cash and cash
equivalents -4.7 -14
Cash and cash equivalents,
beginning of period 6.4 20.4
Cash and cash equivalents,
end of period $ 1.7 $ 6.4
Notes to Consolidated Statements of Income:
(A) The adjusted Consolidated Statements of Income for the three
months and full year ended December 31, 1997 reflect the reported
results excluding the restructuring and other gains/charges plus
the related income tax impact recorded in 1997 as detailed below.
-- Included in Manufacturing Cost of Sales for the fourth quarter and
full year 1997 are restructuring and other charges of $16.0 and
$34.6 million.
-- Included in Selling and Technical Services for the fourth quarter
and full year 1997 are restructuring and other charges of $3.2
million.
-- Included in Research and Process Development for the fourth
quarter and full year 1997 are restructuring and other charges of
$2.0 million.
-- Included in Administrative and General for the fourth quarter and
full year 1997 are restructuring and other charges of $2.6
million.
-- Included in Other Income (Expense), Net for the fourth quarter and
full year 1997 are charges for reducing the carrying amount of
certain assets being held for sale of $9.0. Also included for the
full year is a gain of $22.3 million relating to the divestiture
of the acrylic fibers product line.
-- Included in Interest Expense, Net for the fourth quarter and full
year 1997 is a charge of $1.0 million for upfront financing costs
relating to the acquisition of Fiberite.
-- Included in Income Tax Provision (Benefit) for the fourth quarter
and full year 1997 is a favorable impact of $24.4 million for the
reversal of the tax valuation allowance against net domestic
deferred income tax assets.
(A) The adjusted Consolidated Statements of Income for the three
months and full year ended December 31, 1998 reflect the reported
results excluding the gain and related income tax impact for the
sale of a product line recorded in 1998 as detailed below.
-- Included in the Consolidated Statement of Income under Other
Income (Expense), Net for the fourth quarter and full year ended
December 31, 1998 is a gain of $4.4 million relating to the sale
of the bulk molding compounds product line.