Exhibit 99.1
Cytec Announces Second Quarter Results; Full Year Outlook Updated
WEST PATERSON, N.J.--(BUSINESS WIRE)--Aug. 5, 2005--Cytec
Industries Inc. (NYSE:CYT) announced today net earnings for the second
quarter of 2005 of $11.9 million or $0.25 per diluted share on net
sales of $813 million. Included in the quarter was a purchase
accounting related charge of $10.3 million pre-tax (after-tax $7.5
million, or $0.16 per diluted share) related to the February 28, 2005
acquisition of the Surface Specialties business, a pre-tax charge of
$28.0 million (after-tax $17.7 million or $0.37 per diluted share) for
interest rate derivative transactions associated with the Surface
Specialties acquisition, a pre-tax charge of $2.4 million (after-tax
$1.8 million or $0.04 per diluted share) for an anticipated settlement
of a certain litigation matter, a pre-tax charge of $22.0 million
(after-tax $14.0 million or $0.30 per diluted share) pertaining to the
optional redemption of our Mandatory Par Put Remarketed Securities
(MOPPRS) prior to their maturity and an income tax benefit of $9.6
million, or $0.20 per diluted share, reflecting the partial resolution
of a tax audit in Norway with respect to prior year tax returns.
Excluding these special items, net earnings were $43.3 million or
$0.92 on a diluted share basis.
Net earnings for the comparable period of 2004 were $31.2 million
or $0.77 per diluted share, on net sales of $422 million. Included in
the quarter was a pre-tax charge of $6.1 million (after-tax $4.8
million or $0.12 per diluted share) in connection with the settlement
of several environmental and toxic tort lawsuits and $2.4 million or
$0.06 per diluted share for a favorable outcome of a tax audit in
Korea. Excluding these special items, net earnings for the second
quarter of 2004 were $33.6 million or $0.83 per diluted share.
David Lilley, Chairman, President and Chief Executive Officer
said, "Overall, sales for the quarter were $813 million up 93%
compared to the same quarter in 2004, due primarily to the acquisition
of the Surface Specialties business. The integration of Surface
Specialties into Cytec continues and is on schedule with the
organizational part of the integration completed, and synergies on
track at an expected annualized rate of $35 million."
As a reminder, the segment results discussed below have been
restated to reflect Cytec's new organization following the Surface
Specialties acquisition. A recap of the reorganization is as follows:
-- Cytec Performance Specialties - Includes the Water Treatment
Chemicals, Mining Chemicals, Phosphine and Phosphorus
Specialties, Polymer Additives and Specialty Additives product
lines.
-- Cytec Surface Specialties - Includes the acquired Surface
Specialties product lines plus Cytec's previously existing
Coating Chemicals and Performance Chemicals product lines.
-- Cytec Specialty Materials is renamed Cytec Engineered
Materials.
-- Building Block Chemicals remains unchanged.
Cytec Performance Specialties Sales increase 13%; Operating
Earnings increase to $17 million
Mr. Lilley continued, "In Cytec Performance Specialties, selling
prices were up 6%, selling volumes increased 4% and exchange added 3%
to sales. The selling price increases were across all product lines
helping to compensate for much higher raw material and energy costs.
Volumes were much improved in water treatment chemicals, mining
chemicals and specialty additives where demand remained strong.
However, the slowdown in industrial demand, principally in Europe and
in Asia, experienced in the latter part of the first quarter
continued, and this impacted polymer additives which experienced lower
volumes.
The increase in operating earnings of $6.0 million was primarily
due to higher selling volumes and prices more than offsetting raw
material cost increases.
Cytec Surface Specialties Sales increase 430%; Operating Earnings
increase to $14 million
"The increase in Cytec Surface Specialties sales is principally
due to the acquisition of the Surface Specialties business which
accounts for almost all of the sales increase. Our Cytec heritage
coating chemicals and performance chemicals product lines had
increased selling prices of 2% and exchange rate changes added another
2%. Volumes were down 1% on the heritage business with the slowdown in
demand experienced in the latter part of the first quarter continuing
in both Europe and North America for most of the quarter. Asia demand
showed some improvement in the latter part of the quarter. Similar
trends were experienced in the acquired business.
"Operating earnings include a charge of $10.3 million ($7.5
million after-tax or $0.16 per diluted share) relating to purchase
accounting for finished goods inventory of the acquired business
recorded at their fair value which exceeded normal manufacturing
costs. We anticipate this to be the final charge related to the
write-up of acquired inventory. Excluding this amount, operating
earnings increased to $24.4 million reflecting the favorable impact of
the acquisition.
Cytec Engineered Materials Sales increase 10%; Operating Earnings
decline slightly to $25 million
"Cytec Engineered Materials sales volumes increased 8% and selling
prices were up 2%. The volume increases were primarily due to large
commercial aircraft and rotorcraft customers as the aircraft
manufacturers increase their build rates.
The favorable effect on operating earnings from the higher sales
was offset by higher costs in our two European manufacturing sites
plus higher selling and research costs as we increased our efforts to
meet the numerous opportunities for the future.
Building Block Chemicals Sales increase 44%; Operating Earnings
increase to $7 million
"In Building Block Chemicals, selling prices increased 19% which
was below the increase in raw material costs. Propylene, the key raw
material for acrylonitrile, started off in the quarter with very high
purchase prices but those costs decreased starting in May. On average
for the quarter, propylene costs were still up almost $0.06 per pound
when compared to the prior year quarter. Selling volumes were up 24%
primarily due to higher acrylonitrile volumes. In the second quarter
of last year the plant was shut down for about a month for scheduled
maintenance work resulting in reduced sales. Exchange rate changes
increased sales 1%.
"Operating earnings improved primarily due to the higher selling
volumes."
Earnings in Associated Companies
James P. Cronin, Executive Vice President and Chief Financial
Officer commented, "On May 31, 2005, we completed the sale of our 50%
interest in CYRO Industries (CYRO) to our partner, Degussa, for cash
consideration of $100 million subject to final working capital
adjustments. The proceeds essentially covered the book value of our
investment in CYRO. The net after tax proceeds were used to pay down
debt related to our acquisition of Surface Specialties. Through the
date of closing of the sale, CYRO's sales and earnings were up
compared to the full quarter year ago period primarily due to
increased volume and selling prices."
Corporate and Unallocated
Mr. Cronin added, "During the quarter, we recorded a pre-tax
charge in administrative expense for $2.4 million ($1.8 million
after-tax) related to an increase in our accrual for a certain
litigation matter. The total accrual is based on the now anticipated
probable settlement value of $2.7 million. Partially offsetting this
was a reduction in expenses relating to the mark to market accounting
for our stock based incentive compensation reflecting a decrease in
our stock price in the quarter."
Also, during the quarter the Company recorded a pre-tax loss in
other income (expense), net of $28.0 million ($17.7 million after-tax
or $0.38 per diluted share) pertaining to interest rate derivative
transactions related to the acquisition of the Surface Specialties
business. These derivatives were entered into to partially hedge the
impact of potential increases in interest rates related to the Surface
Specialties acquisition and require mark to market accounting. Hence,
any changes to the fair value are recorded as a gain or loss in the
period incurred. The interest rate derivatives are still outstanding
pending the anticipated refinancing of our 364 day credit facility
later this year.
Interest Expense
Mr. Cronin added, "Interest expense is significantly higher than
the prior year quarter primarily due to the higher levels of debt
outstanding associated with the Surface Specialties acquisition, as
well as the charge related to the MOPPRS redemption."
"In order to take advantage of current interest rates during the
quarter, we redeemed our $120 million MOPPRS at the optional
redemption price of approximately $141 million including $21 million
for the value of redeeming the securities prior to their final
maturity. In addition, we recognized a charge of $1 million from
amounts related to the unamortized put premium and rate lock
agreements for these securities. Accordingly, interest expense for the
quarter includes a total pre-tax charge of $22.0 million related to
this transaction."
Income Tax Expense
Mr. Cronin continued, "The Company's effective tax rate for
continuing operations for the quarter was favorably impacted by a
reduction in income tax expense of $9.6 million ($0.20 per diluted
share) related to a partial resolution of a tax audit in Norway with
respect to prior year tax returns. The remaining liability pertaining
to the Norway tax audits is 84 million Norwegian krone or $12.8
million. In prior years, as this matter developed, the Company accrued
for the potential unfavorable outcome of this dispute and has retained
tax counsel to assist in the defense of the remaining Norwegian
assessment. We believe the remaining issues will likely be litigated
given Cytec's vigorous defense in protesting the additional assessment
of tax. Also favorably impacting the rate were the losses incurred in
the U.S. on the interest rate derivatives and the MOPPRS redemption.
The tax benefit on these losses is recorded at 36.5%. Excluding these
items, the Company's underlying effective tax rate for the quarter
would have been 27% which compares to 23% in the same period of last
year. As expected, this increase is primarily attributable to
relatively more earnings from acquired Surface Specialties entities in
countries with higher tax rates than in countries for heritage Cytec."
Earnings from Discontinued Operations
Discontinued operations represent the net after tax results of the
Surface Specialties' Amino Resins product line (SSAR). In June 2005 we
announced a definitive agreement to sell SSAR to affiliates of INEOS
Group Limited for net cash consideration of EUR 64 million ($78
million at 1.22$/EUR) subject to customary closing adjustments. The
pending sale was made pursuant to our commitments under orders by the
FTC and the EC to divest SSAR following our acquisition of the Surface
Specialties business earlier this year. We expect to complete this
transaction at the end of August, 2005.
Cash Flow
Mr. Cronin continued, "For the quarter, trade accounts receivable
increased due to the higher level of sales and an increase in days
outstanding of 3. This is to be expected as the acquired Surface
Specialties business has a higher mix of international business where
payment terms are typically longer. Inventory decreased as certain of
our plants were run at reduced rates part of the quarter. Capital
spending for the quarter was $30 million, which includes spending for
capacity expansions principally in our mining chemicals and carbon
fiber product lines."
2005 Outlook
Mr. Lilley commented further, "We move into the second half of
2005 with the organizational aspects of the integration of Surface
Specialties into Cytec essentially completed. We are now re-focusing
the efforts of Surface Specialties on delighting our customers through
technology and enhanced technical service, and initiating operational
excellence programs in manufacturing and supply chain operations where
we now believe there are clearly many opportunities for improvement.
The emphasis on selling price initiatives across Cytec is continuing
to show results but with oil and natural gas prices remaining high, we
expect little relief from high raw material and energy costs. The
slowdown in market demand in our Performance Specialties and Surface
Specialties segments experienced in the latter part of the first
quarter continued into the second quarter. We did see a slight pickup
in demand towards the end of the second quarter, particularly in Asia,
but Europe remains weak. Our aerospace markets continue to improve as
build rates for large commercial aircraft and rotorcraft increase.
The US dollar has strengthened versus the euro and the euro is now
a major currency for Cytec after the acquisition of Surface
Specialties. Assuming all other factors remain the same, overall a one
cent change in the dollar to euro exchange ratio impacts Cytec by
about $1 million with about half of that in Surface Specialties. A
strengthening dollar has a negative impact on our Surface Specialties,
Performance Specialties and Building Block Chemicals segments and a
positive impact on the Engineered Materials segment. Our previous full
year outlook assumed a dollar to euro ratio of $1.31 and we now
project that to be $1.25.
The following specific details for the full year excludes the
purchase accounting charges for in-process research and development in
the first quarter and inventory step-up in the first and second
quarters, the environmental dispute settlement in the first quarter,
the charge in the second quarter for the anticipated settlement of a
certain litigation matter, the acquisition related net hedge gains or
losses including unrealized gains and losses through the date the
hedges remain outstanding, the charges for the redemption of the
MOPPRS in the second quarter, the actual and forecasted integration
and severance costs, the tax benefits from the closure of prior year
audits in the US in the first quarter and the partial resolution of
the Norwegian prior year tax audits in the second quarter.
"In Cytec Performance Specialties, our guidance for sales and
operating earnings is unchanged. We expect sales to increase 5%-10%
with about two-thirds due to selling price increases and the remainder
split between volume and exchange. Most of the volume increase is in
the mining chemicals product line as demand for copper and alumina
remains strong. Operating earnings are forecast to increase to a range
of $56-$58 million due to the selling price increases as well as
reduced operating costs offsetting raw material cost increases.
"In Cytec Surface Specialties, we see some additional weakness in
Europe with Asia improving more slowly than anticipated but the
selling price increases are holding in most but not all areas. We see
demand in North America being flat overall with sales related to the
automotive sector down. As mentioned earlier, the US dollar has also
strengthened versus the euro and this has a negative impact on Surface
Specialties. So, as a result of our expectation for weak volumes for
the second half of 2005 and the impact of unfavorable exchange rate
changes, we are updating our forecast for full year sales to be in a
range of $1.35 billion to $1.45 billion, down from a range of $1.40
billion to $1.50 billion. The organizational part of the integration
is complete so our sales force can focus its energies on our customers
and markets and while difficult to quantify we do expect this to have
a favorable impact going forward. In addition, we have begun a major
effort to ensure that costs are in line with demand levels. The impact
on earnings of the stronger dollar is about $2 million unfavorable.
Our decision to reduce inventories in line with business requirements
also has a negative impact on earnings. In addition, we have
substantially completed the asset valuations associated with the
acquisition and this has increased depreciation expense by about $4
million on an annualized basis. So taking into account the above, we
are updating our operating earnings forecast for this segment to a
range of $85-$90 million, down from a range of $95-$100 million. We
now see clearly a number of opportunities to improve the operations of
the acquired business on top of the synergies we will realize but the
impact of these improvements will only occur in the latter part of the
year and in 2006.
"Cytec Engineered Materials sales are now forecast to increase in
a range of 10%-13% up from a range of 8%-12% due to build rate
increases in military and commercial aircraft, and the benefits of
higher selling prices plus new business. We do expect to see
additional leverage from the higher sales in the second half of 2005
and we are making progress in correcting our manufacturing issues in
Europe. As a result, we are improving our operating earnings forecast
to a range of $100-$105 million up from $95-$100 million.
"Building Block Chemical sales forecast for an increase of 12%-15%
is down from our previous forecast of 15%-20%, but operating earnings
are now expected to increase to about $25 million from our previous
forecast of about $22 million due to improved acrylonitrile margin
spreads. Propylene, the key raw material for acrylonitrile, trended
down in the middle of the quarter but is forecasted to increase again
as the year progresses.
"The Corporate and Unallocated forecast is now projected to be
about a loss of $7 million improved from our previous forecast of a
loss of $10 million primarily due to reduced expenses related to our
stock based incentive compensation. Equity earnings for the full year
will essentially remain at the six month amount of $6.6 million, due
to the sale of our share of CYRO in the quarter which is above our
previous forecast of $2.6 million. Our remaining joint venture is not
material in terms of earnings. Based on a reduced forecast of the euro
as well as euro interest rates together with a planned delay in our
refinancing of the 364 day credit facility, interest expense, net will
now be in a range of $58-$60 million, down from our previous estimate
of $63-$66 million. Our estimated annual underlying effective tax rate
for ongoing operations remains at 27%."
"In terms of cash flow, we are reinvigorating our efforts to
reduce working capital particularly in the area of inventory which we
believe will be a significant source of cash for us from June 30, 2005
through year end. Capital spending is now forecast to be about $100
million, down from our previous estimate of $120 million. The decrease
in anticipated capital spending is primarily in the Surface
Specialties segment and reflects our recent completion of a detailed
review of previously proposed spending."
In closing Mr. Lilley commented, "Based on all of the above, our
forecast of overall annual sales is now in a range of $2.9 to $3.0
billion, down from our previous forecast of $3.0 to $3.1 billion. Our
forecast for full year diluted earnings per share is unchanged at
$3.30 to $3.45.
"The people at Cytec have been through uncertain times before and
our track record is solid. With our new colleagues in Surface
Specialties, we will stick with our winning formula for increasing
shareholder value by focusing on what we can control."
Six Month Results
Net earnings for the six months ended June 30, 2005 were $5.3
million or $0.12 per diluted share on sales of $1,377 million.
Included in the six months ended June 30, 2005 were purchase
accounting related charges of $20.8 million pre-tax (after-tax $15.2
million, or $0.33 per diluted share), related to acquired inventories
from Surface Specialties being recorded at fair value which exceeded
normal manufacturing cost, a charge of $37.0 million or $0.82 per
diluted share related to the write-off of in-process research and
development costs of Surface Specialties, a pre-tax charge of $47.9
million (after tax $30.4 million or $0.67 per diluted share) related
to currency and interest rate derivative transactions associated with
the Surface Specialties acquisition, a pre-tax charge of $2.4 million
(after-tax $1.8 million or $0.04 per diluted share) related to an
anticipated settlement of a certain litigation matter, a pre-tax
charge of $22.0 million (after-tax $14.0 million or $0.31 per diluted
share) related to the optional redemption of our Mandatory Par Put
Remarketed Securities (MOPPRS) prior to their maturity, an income tax
benefit of $25.7, or $0.57 per diluted share, reflecting favorable
partial resolution of tax audits with respect to prior year tax
returns, employee redundancy costs of $1.3 million (after tax net $0.9
million or $0.02 per diluted share), and a $4.4 million settlement to
resolve a dispute over an environmental matter (after tax net $3.2
million or $0.07 per diluted share). Excluding these special items,
net earnings were $82.1 million or $1.81 on a diluted share basis.
Net earnings for the six months ended June 30, 2004 were $64.4
million or $1.60 per diluted share on sales of $837 million. This
includes a net charge of $0.06 per diluted share representing an
after-tax charge of $4.8 million or $0.12 per diluted share in
connection with the settlement of several environmental and toxic tort
lawsuits partially offset by a $2.4 million credit or $0.06 per
diluted share from a favorable outcome of an international tax audit.
Excluding these special items net earnings were $66.8 million or $1.66
per diluted share.
Investor Conference Call to be Held on August 8, 2005, 11:00 A.M.
ET
Cytec will host their second quarter earnings release conference
call on August 8, 2005 at 11:00 a.m. 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.
A recording of the conference call may be accessed by telephone
from 2:00 p.m. ET on August 8, 2005 until August 29, 2005 at 11:00
p.m. ET by calling 888-203-1112 (U.S.) or 719-457-0820 (International)
and entering access code 5747034. The conference call recording will
also be accessible on Cytec's website for 3 weeks after the conference
call.
Use of Non-GAAP Measures
Management believes that net earnings 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 measurements to non-GAAP 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 is a specialty chemicals and materials technology
company with pro forma sales in 2004, including the Surface
Specialties acquisition, of approximately $3.0 billion. Its growth
strategies are based on developing technologically advanced customer
solutions for global markets including: aerospace, coatings, mining,
plastics and water treatment.
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Millions of dollars, except share and per share amounts)
Three Months Six Months
Ended Ended
June 30, June 30,
2005 2004(1) 2005 2004(1)
---------------------------------
Net sales $813.4 $422.0 $1,377.3 $837.2
Manufacturing cost of sales 639.1 311.6 1,079.4 621.8
Selling and technical services 58.1 35.1 102.8 69.9
Research and process development 19.9 10.4 32.8 19.4
Administrative and general 26.6 14.7 44.5 27.9
Amortization of acquisition
intangibles 8.8 1.4 12.8 2.8
Write-off of acquired in-process
research and development - - 37.0 -
---------------------------------
Earnings from operations 60.9 48.9 68.0 95.5
Other income (expense), net (30.5) (8.7) (50.8) (7.7)
Equity in earnings of associated
companies 4.5 0.5 6.6 0.8
Interest expense, net 38.5 4.5 48.1 8.3
---------------------------------
Earnings (loss) from continuing
operations before income taxes (3.6) 36.3 (24.3) 80.3
Income tax provision (benefit) (15.3) 5.1 (29.0) 15.9
---------------------------------
Earnings from continuing operations 11.7 31.2 4.7 64.4
Earnings from discontinued operations
held for sale (net of income tax
provision of $0.0 and $0.7) 0.2 - 0.6 -
---------------------------------
Net earnings $ 11.9 $ 31.2 $ 5.3 $ 64.4
=================================
Basic net earnings per common share:
Earnings from continuing operations $ 0.26 $ 0.80 $ 0.11 $ 1.65
Earnings from discontinued operations
held for sale - - 0.01 -
---------------------------------
Net earnings $ 0.26 $ 0.80 $ 0.12 $ 1.65
Diluted net earnings per common
share:
Earnings from continuing operations $ 0.25 $ 0.77 $ 0.11 $ 1.60
Earnings from discontinued operations
held for sale - - 0.01 -
---------------------------------
Net earnings $ 0.25 $ 0.77 $ 0.12 $ 1.60
Dividends per common share $ 0.10 $ 0.10 $ 0.20 $ 0.20
Weighted average shares outstanding
(000 omitted)
Basic 46,162 39,221 44,141 39,160
Diluted 47,242 40,321 45,371 40,211
(1) 2004 results were restated to show the effect of FSP 106-2, which
was adopted retroactively during the third quarter of 2004, and
the retroactive application of the change from the last-in,
first-out ("LIFO") to the first-in, first-out ("FIFO") inventory
method which was adopted on January 1, 2005.
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED NET SALES AND EARNINGS FROM OPERATIONS BY BUSINESS
SEGMENT
(Millions of dollars)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
2005 2004 2005 2004
------- ------- ------- -------
Net sales
- ---------
Cytec Performance
Specialities
Sales to external
customers $185.8 $164.7 $359.2 $321.3
Intersegment
sales 1.7 0.8 2.8 2.1
Cytec Surface
Specialities 412.7 77.8 603.5 153.5
Cytec Engineered
Materials 141.0 128.1 268.8 248.4
Building Block
Chemicals
Sales to external
customers 73.9 51.4 145.8 114.0
Intersegment
sales 21.6 20.8 44.8 40.1
------ ------ ------ ------
Net sales from
segments 836.7 443.6 1,424.9 879.4
Elimination of
intersegment
revenue (23.3) (21.6) (47.6) (42.2)
------ ------ ------ ------
Total $813.4 $422.0 $1,377.3 $837.2
- ----------------------------------------------------------------------
% of % of % of % of
sales sales sales sales
----- ----- ----- -----
Earnings (loss)
from operations
- ---------------
Cytec Performance
Specialities $16.9 9% $10.9 7% $31.2 9% $20.3 6%
Cytec Surface
Specialities 14.1 3% 11.9 15% (20.4) -3% 20.5 13%
Cytec Engineered
Materials 25.3 18% 26.6 21% 48.7 18% 50.1 20%
Building Block
Chemicals 6.7 7% 2.0 3% 14.0 7% 8.9 6%
------ ------ ------ ------
Earnings from
segments 63.0 8% 51.4 12% 73.5 5% 99.8 11%
Corporate and
Unallocated (2.1) (2.5) (5.5) (4.3)
------ ------ ------ ------
Total $60.9 7% $48.9 12% $68.0 5% $95.5 11%
- ----------------------------------------------------------------------
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Millions of dollars, except share and per share amounts)
June 30, December 31,
2005 2004(1)
------------------------
Assets
Current assets
Cash and cash equivalents $ 114.4 $ 323.8
Trade accounts receivable, less allowance
for doubtful accounts of $14.2 and $6.7
in 2005 and 2004, respectively 503.4 248.2
Due from related party 19.0 -
Other accounts receivable 75.5 54.1
Inventories 487.6 263.8
Deferred income taxes 27.9 23.3
Other current assets 23.4 29.3
Assets of discontinued operations held for
sale 96.7 -
------------------------
Total current assets 1,347.9 942.5
Investment in associated companies 10.7 85.5
Plants, equipment and facilities, at cost 2,052.8 1,627.2
Less: accumulated depreciation (957.3) (948.6)
------------------------
Net plant investment 1,095.5 678.6
Acquisition intangibles, net of accumulated
amortization of $36.3 and $23.1 in 2005 and
2004, respectively 515.8 66.8
Goodwill 1,010.3 342.4
Deferred income taxes - 54.6
Other assets 119.0 81.2
------------------------
Total assets $4,099.2 $2,251.6
========================
Liabilities
Current liabilities
Accounts payable $ 268.7 $ 138.1
Short-term borrowings 503.6 -
Current maturities of long-term debt 87.5 119.0
Accrued expenses 236.9 178.1
Income taxes payable 65.6 61.5
Liabilities of discontinued operations held
for sale 32.2 -
------------------------
Total current liabilities 1,194.5 496.7
Long-term debt 1,017.4 300.1
Pension and other postretirement benefit
liabilities 397.8 348.3
Deferred income taxes 73.7 -
Other noncurrent liabilities 237.8 174.5
Stockholders' equity
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 234.1 122.8
Retained earnings 1,105.2 1,108.5
Accumulated other comprehensive income (loss):
Unearned compensation (3.0) (3.1)
Minimum pension liability (103.5) (108.5)
Unrealized net gains (losses) on cash flow
hedges 0.3 (0.5)
Accumulated translation adjustments 11.2 73.3
(95.0) (38.8)
Treasury stock, at cost, 2,121,674 shares in
2005 and 8,297,863 shares in 2004 (66.8) (261.0)
------------------------
Total stockholders' equity 1,178.0 932.0
------------------------
Total liabilities and stockholders' equity $4,099.2 $2,251.6
========================
(1) Balances at December 31, 2004 have been restated to show the
retroactive application of the change from the LIFO to the FIFO
inventory method which was adopted on January 1, 2005.
CYTEC INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)
Six Months
Ended June 30,
2005 2004(1)
-----------------
Cash flows provided by (used in) operating activities
Net earnings from continuing operations $ 4.7 $ 64.4
Non cash items included in net earnings from
continuing operations:
Dividends from associated companies greater than
(less than) earnings (4.3) 0.3
Depreciation 56.8 42.9
Amortization 14.4 5.6
Deferred income taxes (39.8) 15.5
Write-off of acquired in-process research and
development 37.0 -
Amortization of write-up to fair market value of
finished goods purchased in acquisition 20.8 -
Gains on sale of assets (1.2) (0.6)
Unrealized losses on derivative instruments 23.4 -
Other (1.2) (0.1)
Changes in operating assets and liabilities
(excluding effect of acquisitions):
Trade accounts receivable (20.1) (31.2)
Other receivables 14.0 (1.5)
Inventories (28.7) (21.5)
Other assets 5.7 (7.7)
Accounts payable 1.9 35.3
Accrued expenses (7.5) (11.7)
Income taxes payable (19.5) (8.1)
Other liabilities 1.3 (22.9)
-----------------
Net cash provided by (used in) operating activities
of continuing operations 57.7 58.7
Net cash provided by operating activities of
discontinued operations 0.8 -
-----------------
Net cash provided by (used in) operating activities 58.5 58.7
Cash flows (used in) investing activities
Additions to plants, equipment and facilities (47.5) (35.7)
Proceeds received on sale of assets 101.4 0.7
Acquisition of business, net of cash received (1,482.5) -
Advanced payment of acquisition-related contingent
consideration (26.5) -
Minority interest (0.9)
Advance payment received on land lease - 9.1
-----------------
Net cash used in investing activities (1,456.0) (25.9)
Cash flows provided by (used in) financing activities
Proceeds from the exercise of stock options and
warrants 10.5 11.5
Cash dividends (8.6) (7.8)
Proceeds from long-term debt 864.2 -
Payments on long-term debt (186.2) -
Change in short-term borrowings 521.6 (0.2)
Deferred financing costs (4.4) -
Purchase of treasury stock - (13.2)
Proceeds from termination of interest rate swap - 2.7
-----------------
Net cash provided by (used in) financing activities 1,197.1 (7.0)
Effect of currency rate changes on cash and cash
equivalents (9.0) (6.9)
-----------------
Increase (decrease) in cash and cash equivalents (209.4) 18.9
Cash and cash equivalents, beginning of period 323.8 251.1
-----------------
Cash and cash equivalents, end of period $114.4 $270.0
=================
(1) 2004 results were restated to show the effect of FSP 106-2, which
was adopted retroactively during the third quarter of 2004, and
the retroactive application of the change from the LIFO to the
FIFO inventory method which was adopted on January 1, 2005.
Cytec Industries Inc.
Reconciliation of GAAP and Non-GAAP Measures
Management believes that net earnings 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 periods 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.
Three Months Ended June 30, 2005
Net Diluted
Earnings EPS
-------- -------
GAAP Net Earnings $11.9 $0.25
- Purchase accounting fair value inventory over
manufacturing cost (after tax) 7.5 0.16
- Loss on interest rate derivative transactions
(after tax) 17.7 0.37
- Anticipated settlement of a certain litigation
matter (after tax) 1.8 0.04
- Optional redemption of Mandatory Par Put
Remarketed Securities (MOPPRS) prior to their
maturity (after tax) 14.0 0.30
- Income tax benefit reflecting the partial
resolution of a tax audit in Norway with respect
to prior years returns (9.6) (0.20)
-----------------
Non-GAAP Net Earnings $43.3 $0.92
=================
Six Months Ended June 30, 2005
Net Diluted
Earnings EPS
-------- -------
GAAP Net Earnings $5.3 $0.12
- Purchase accounting fair value inventory over
manufacturing cost (after tax) 15.2 0.33
- Loss on currency and interest rate derivative
transactions (after tax) 30.4 0.67
- Anticipated settlement of a certain litigation
matter (after tax) 1.8 0.04
- Optional redemption of Mandatory Par Put
Remarketed Securities (MOPPRS) prior to their
maturity (after tax) 14.0 0.31
- Income tax benefit reflecting favorable
developments on of tax audits with respect to
prior years returns (25.7) (0.57)
- Write off of in-process research and development
costs of Surface Specialties 37.0 0.82
- Employee redundancy costs (after tax) 0.9 0.02
- Settlement to resolve a dispute over an
environmental matter (after tax) 3.2 0.07
-----------------
Non-GAAP Net Earnings $82.1 $1.81
=================
Three Months Ended June 30, 2004
Net Diluted
Earnings EPS
-------- -------
GAAP Net Earnings $31.2 $0.77
- After tax litigation settlement charge 4.8 0.12
- Tax benefit related to tax audit in Korea (2.4) (0.06)
-----------------
Non GAAP Net Earnings $33.6 $0.83
=================
Six Months Ended June 30, 2004
Net Diluted
Earnings EPS
-------- -------
GAAP Net Earnings $64.4 $1.60
- After tax litigation settlement charge 4.8 0.12
- Tax benefit related to tax audit in Korea (2.4) (0.06)
-----------------
Non GAAP Net Earnings $66.8 $1.66
=================
CONTACT: Cytec Industries Inc.
Investment Community:
David M. Drillock, 973-357-3249
or
Media:
Gail Petersen, 973-357-3319
www.cytec.com