Exhibit 99.1
Cytec Announces Fourth Quarter and Full Year Results
Full Year 2007 Outlook Provided
WEST PATERSON, N.J.--(BUSINESS WIRE)--Feb. 1, 2007--Cytec
Industries Inc. (NYSE:CYT) announced today net earnings for the fourth
quarter of 2006 of $83.4 million or $1.70 per diluted share on net
sales of $794 million. Included in the quarter are several special
items as outlined further in this release. Excluding these special
items, net earnings were $37.4 million or $0.76 per diluted share.
Net earnings for the fourth quarter of 2005 were $18.4 million, or
$0.39 per diluted share, on net sales of $788 million. Included in the
quarter were several special items as outlined further in this
release. Excluding these special items, net earnings were $26.4
million or $0.56 per diluted share.
David Lilley, Chairman, President and Chief Executive Officer
said, "Overall, we had a solid quarter with our diluted earnings per
share up 36% after excluding the special items as discussed further
on. The Engineered Materials segment selling volumes were
significantly higher than the prior year particularly in the large
commercial aircraft sector. Similar to the prior quarters of 2006, our
specialty chemicals businesses experienced higher raw material costs
and we continue to raise prices to compensate. Overall for Specialty
Chemicals, taking into account the water treatment divestiture,
volumes were flat with increases in Europe and Asia offset by lower
volumes in North America. Building Block Chemicals selling volumes had
good growth and they benefited from lower raw material costs for
propylene."
Cytec Performance Chemicals Sales decreased 20% to $176 million;
Operating Earnings decreased to $11.6 million
Mr. Lilley continued, "In Cytec Performance Chemicals, the effect
of the divestiture of the water treatment chemicals product line
decreased sales by 20%, other selling volumes were flat, selling
prices decreased 2% and the impact of exchange rate changes increased
sales by 2%. Mining chemical sales were down due to order pattern and
polymer additives were impacted by lower sales of older product
technologies. These were offset by higher selling volumes in other
product lines principally due to new business.
"Operating earnings of $11.6 million were down compared to the
$17.0 million in the fourth quarter of 2005. The decrease is primarily
due to the impact of the divestiture of the water treatment chemicals
product line, lower selling prices, higher raw material costs, a
benefit plan curtailment charge of $0.3 million discussed under
special items and $0.8 million related to the application of Statement
of Financial Accounting Standards No. 123R, "Share-Based Payment"
(SFAS 123R)."
Cytec Surface Specialties Sales increased 7% to $375 million;
Operating Earnings increased to $17.6 million
"In Cytec Surface Specialties, overall selling volumes were flat,
selling prices increased by 2% and the impact of exchange rate changes
increased sales by 5%. We benefited from higher selling volumes in
Europe and Asia/Pacific but this was offset by lower selling volumes
in North America primarily reflecting weaker customer demand.
"Operating earnings of $17.6 million were up compared to the $13.9
million in the fourth quarter of 2005. The benefits of increased
selling prices, improved manufacturing performance plus the previous
restructuring activities were partially offset by higher raw material
costs. Also impacting the quarter was expense of $0.7 million related
to the application of SFAS 123R."
Cytec Engineered Materials Sales increased 17% to $160 million;
Operating Earnings increased to $27.2 million
"In Cytec Engineered Materials, selling volumes increased by 13%,
selling prices increased by 3% and the impact of exchange rate changes
on sales increased sales by 1%. The selling volume increase was
primarily in the large commercial aircraft and business jet sectors.
"Operating earnings of $27.2 million were up compared to the $26.7
million in the fourth quarter of 2005. The favorable impact of the
higher selling volumes and selling prices was mostly offset by
increased raw material costs, higher manufacturing period costs as a
result of the increased production volumes, planned increases in
selling and technical and research expenses and a benefit plan
curtailment charge of $2.3 million discussed further under special
items. Also included in operating earnings was expense of $0.6 million
related to the application of SFAS 123R."
Building Block Chemicals Sales increased 4% to $82 million;
Operating Earnings increased to $3.5 million
"In Building Block Chemicals, the effect of the divestiture of the
acrylamide product line decreased sales by 18% but this was more than
offset by an increase in sales of acrylonitrile to the purchaser of
the divested product line. Acrylonitrile is the key material used to
make acrylamide and in conjunction with the divestiture we signed a
long-term agreement to provide acrylonitrile to Kemira. Excluding
these two factors, selling volumes decreased by 7% principally due to
shipping delays as a result of poor weather in the Gulf Coast of the
U.S. Selling prices increased by 3% and the impact of exchange rate
changes was neutral.
"Operating earnings increased to $3.5 million compared to a loss
of $3.9 million in the fourth quarter of 2005 when our manufacturing
operations were still adversely impacted by the hurricanes. The
increase was mostly due to higher selling prices, increased plant
production levels and the benefit of lower raw material costs, due
principally to lower costs for propylene, all of which more than
covered the loss of the earnings from the divested acrylamide product
line. Also included is expense of $0.3 million related to the
application of SFAS 123R."
Special Items
James P. Cronin, Executive Vice President and Chief Financial
Officer commented, "Included in Corporate and Unallocated in the
fourth quarter of 2006 are several items as follows.
We recorded a pre-tax restructuring charge of $9.7 million
(after-tax $9.4 million or $0.19 per diluted share). Most of the
charge relates to our Cytec Surface Specialties manufacturing site in
France which produces solvent-borne alkyds and solvent-borne acrylics
primarily for the European market. The products made in France are
mature products, in a declining market with supplier overcapacity and
severe price erosion, thus the operations are generating losses. After
the appropriate consultations with the Works Council concerning the
site, we have commenced shutdown activities and recorded a pre-tax
$8.4 million restructuring charge, primarily for severance. The
remaining pre-tax $1.3 million is primarily for net restructuring
charges related to employee severance for our Cytec Performance
Chemicals manufacturing site in New Castle, Delaware which makes a key
polymer for our Engineered Materials segment. We are exiting the site
and the products made in New Castle will be made in our recently
completed manufacturing plant at our Kalamazoo, Michigan location.
"We changed our pension plan in the U.K. from a defined benefit to
a defined contribution plan and as a result we incurred a pre-tax
curtailment charge of $2.6 million ($1.9 million after-tax or $0.04
per diluted share). Approximately $2.3 million of the pre-tax amount
is included in the Cytec Engineered Materials segment and the
remainder in the Cytec Performance Chemicals segment.
"We incurred integration costs of $0.5 million ($0.4 million
after-tax or $0.01 per diluted share) related to the Surface
Specialties acquisition. These costs are included in Corporate and
Unallocated and this will be the last quarter where we are separately
tracking and reporting integration costs.
"Finally, included in tax expense for the quarter is a charge of
$1.7 million or $0.04 per diluted share related to a taxable capital
reduction in one of our Southeast Asian subsidiaries as we reduced our
cash exposure there."
Included in Corporate and Unallocated in the fourth quarter of
2005 was a pre-tax charge of $14.1 million ($10.5 million after-tax or
$0.22 per diluted share) for employee related severance costs
principally related to the formation of Cytec Specialty Chemicals
which combined the specialty chemicals product lines into one
organization under one leadership team. Also included were integration
costs of $0.2 million related to the Surface Specialties acquisition.
In addition, included in 2005 income tax expense was a $2.6 million or
$0.05 per diluted share gain related to a favorable tax development in
an international jurisdiction.
Special Items Continued - Sale of Water Treatment and Acrylamide
Product Lines
Mr. Cronin continued, "In October 2006 we completed the first of
three phases of the sale of our water treatment and acrylamide product
lines to Kemira Group. This first phase included the entire product
lines, excluding specific assets covered in the other two phases as
discussed below. We received approximately $208 million in proceeds
for this phase and recorded in Corporate and Unallocated in the fourth
quarter of 2006 is a pre-tax gain of $75.5 million (after-tax $59.6
million or $1.22 per diluted share) related to the first phase
closing.
"In January 2007, we completed the second phase of the sale of our
water treatment chemicals and acrylamide product lines to Kemira
Group. This second phase completes the transfer of the Botlek site in
the Netherlands to Kemira and adds approximately $21 million of
proceeds to the $208 million received for the first phase closing. The
remaining phase includes certain assets at various subsidiaries in
Asia-Pacific and Latin America which are expected to close in the next
three months and we expect an estimated $10 million of additional
proceeds upon completion. The remaining closings are subject to
certain other conditions and the amounts could change due to final
working capital transferred."
Interest Expense
Mr. Cronin commented, "Interest expense decreased primarily due to
the overall lower debt level. In the quarter we used the net proceeds
from the aforementioned divestiture to pay down debt."
Income Tax Expense
Mr. Cronin added, "Our tax provision for the fourth quarter of
2006 was $28.5 million, or 25.5%, on earnings before income taxes.
Impacting the rate for the quarter was: the fact that no tax benefit
was available on the French restructuring charge; the 21% tax rate
associated with the gain on the divestiture of the water treatment and
acrylamide product lines; the incremental tax on the capital reduction
at one of our Southeast Asian subsidiaries; and the adjustment for
lowering the full year underlying effective tax rate to 26.8%
primarily due to the renewal of the 2006 research and development tax
credit in the U.S. Our underlying effective tax rate for the fourth
quarter of 2005 was 26%."
Cash Flow
Mr. Cronin commented further, "We are again pleased with our cash
flow generation in the quarter. Cash flow provided by operations was
$39.8 million for the quarter which is net of additional pension
contributions of $26 million to our U.S. plans and $5 million to our
U.K. plan. Trade accounts receivable dollars decreased $25 million and
days outstanding are essentially flat with the days outstanding at the
end of the third quarter. Inventory dollars increased $6 million and
days on hand are 77, up from the 71 days on hand at the end of the
third quarter. The largest increase in inventory was in Building Block
Chemicals primarily due to weather delayed shipments. Capital spending
for the quarter was $40 million bringing our full year spending to
$103 million. We continue to pay down debt in advance of scheduled
payment dates, primarily from the net proceeds received from the
divestiture, and during the quarter we paid down $215 million of our
debt.
"Our cash flow from operations for the year ended December 31,
2006 is $201 million and year to date we have a net reduction in our
debt of $391 million."
2007 Outlook
Mr. Lilley commented, "As we begin 2007 we expect our aerospace
markets to continue to grow, particularly in the large commercial
aerospace, business jet and rotorcraft sectors. This is expected to
come from increasing build rates and the increasing share of
composites in newer aircraft programs. Military aircraft is expected
to have modest growth in 2007 as the F-35 Joint Strike Fighter program
production rate will slowly ramp up. For our Specialty Chemicals
segments we expect demand in North America to be flat to down and our
expectation for Europe and Asia-Pacific is to continue their 2006
growing demand pattern into 2007. This should lead to only modest
growth despite continuing benefits from new product introductions.
"On the input side, we expect a continuation of high raw material
costs. Through the past quarter, tightness in various raw material
areas has mostly offset the impact of the reduced costs of oil and
natural gas and we expect this situation to continue. We continue to
be concerned about the raw material price volatility and we are
raising selling prices where we can.
"We expect some change in currencies year on year but our overall
mix of business is such that changes in currencies have a relatively
small impact on our overall results."
The following comparisons to 2006 are exclusive of the special
items as noted in this press release.
Mr. Lilley continued with some additional comments on the
individual segments, "In Cytec Performance Chemicals, we forecast
continued good growth in mining chemicals with moderate to low growth
in the remainder of the product lines. Our full year guidance is for
sales to be in a range of $700 million to $720 million, down from the
prior years $865 million and for operating earnings to be in a range
of $67 million to $71 million, about flat with the prior year. This
reflects the divestiture of our water treatment chemicals product line
in October of last year, which reduced sales by approximately $185
million. After excluding the divested product line, sales are
increasing in a range of 2% to 5%, with about half of the forecasted
increase due to volume and the remainder due to selling price.
"In Cytec Surface Specialties, we forecast good growth in our
environmentally friendly, differentiated products although this is
somewhat muted by our expectation of weak North American demand. Raw
material costs continue to be a significant factor for this segment.
We expect no overall relief in 2007 and we are continuing to raise
prices where we can although in some of the mature product
technologies this has proven difficult. Overall, we are on track with
the initiatives we have identified to date in manufacturing, supply
chain and other operational areas but there is much more to do and our
people are diligently working towards our goal of a 10% operating
margin in the next two to three years. We have begun a number of other
improvement initiatives, including a review of product line
profitability, which led to our decision to shutdown our solvent-borne
alkyds manufacturing plant in France, but the full benefits from this
will not be realized until 2008. We expect to continue these product
line reviews as we seek to improve operating margins through product
line and asset rationalizations. As a result of all the above, our
full year guidance is for sales to be in a range of $1.58 billion to
$1.64 billion, up 4% to 8% from the prior years $1.52 billion, with
about a third of the forecasted increase due to volume and the
remainder due to selling price. Our forecast for operating earnings is
to be in a range of $97 million to $105 million, up from the prior
years $95.5 million.
"In Cytec Engineered Materials, demand continues to improve due to
increasing build rates for aircraft, particularly large commercial and
business jet aircraft, and higher use of composite materials in
emerging programs. Our investments in new products are important for
these emerging programs and we will continue to make investments in
product qualifications as the manufacturers develop these new aircraft
platforms for the future. Taking into account the above, our full year
guidance for sales is to be in a range of $650 million to $660
million, up 8% to 10% from the prior years $602 million, primarily due
to increases in forecasted selling volumes, and operating earnings to
be in a range of $125 million to $130 million, up from the prior years
$108.4 million.
"For Building Block Chemicals, two events in 2006 will impact our
results for 2007. We divested our acrylamide product line in October
of last year but under a long-term agreement we will provide
acrylonitrile to the purchaser of the acrylamide product line;
although the margins for acrylonitrile are lower than acrylamide. In
addition, we took full ownership of the melamine plant from our joint
venture partner in the third quarter of last year so we no longer have
the benefit of our partner paying for half of the fixed costs. Our
sales and marketing people are making good progress in marketing the
additional melamine capacity that we now own, although margins have
been poor. We are attempting to raise prices to improve the
profitability, but it will take time to see if we are successful.
Acrylonitrile export margins have improved and our expectation for the
cost of propylene is to be flat with the average for 2006 of about
$0.45 per pound. Taking into account the above, our full year guidance
for sales is to be about $390 million, up 15% from the prior years
$339 million, primarily due to increases in forecasted selling
volumes, and operating earnings to be about $12 million, down from the
prior years $19.3 million.
"Our guidance for Corporate and Unallocated is expense of $7
million which is flat with the prior year. Other income/(expense) is
forecast to be expense of $4 million and equity earnings is forecast
to be flat with the prior year at about $3 million. Our forecast for
interest expense, net, is to be in a range of $42 to $44 million down
from the prior year amount of $56 million and our forecast for our
underlying annual effective tax rate for ongoing operations is a range
of 29.5% to 30.5% up from 2006's underlying annual effective tax rate
of 26.8%. The increase in the 2007 tax rate is primarily due to the
effect of the divestiture of the water treatment chemicals and
acrylamide product lines and increased earnings in 2007 in higher tax
jurisdictions.
"Overall, our demand drivers and our improvement initiatives
remain mostly on track. We remain vigilant to take the appropriate
actions given the volatility in raw materials. Taking all the above
into account, our guidance for full year diluted earnings per share is
to be in a range of $3.60 to $3.80 per share up from the 2006 adjusted
diluted earnings per share of $3.45.
"We continue to see growth opportunities for our specialty units
and we expect to increase capital expenditures to a range of $130 to
$140 million in 2007 to support this growth as well as continue to
enhance our infrastructure."
In closing Mr. Lilley commented, "Looking back at 2006, we put in
place a number of improvement initiatives to benefit earnings,
including a renewed focus on new product introductions, and we expect
to continue this approach in 2007. As always, our goal is to build a
strong growing company and provide returns we can all be proud of."
Full Year Results
Net earnings for the full year ended December 31, 2006 were $194.9
million or $4.01 per diluted share on sales of $3,330 million.
Included in the results for the full year ended December 31, 2006 were
- - (a) asset impairment charges of pre-tax $29.3 million (after-tax
$24.6 million or $0.51 per diluted share), (b) net restructuring
charges of pre-tax $19.2 million (after-tax $16.1 million or $0.33 per
diluted share), (c) a pre-tax gain of $15.7 million (after-tax $12.4
million or $0.26 per diluted share) related to resolution of a legal
dispute, (d) a pre-tax charge of $1.7 million (after-tax $1.3 million
or $0.03 per diluted share) for integration expenses related to the
Surface Specialties acquisition, (e) a pre-tax charge of $2.2 million
(after-tax $1.6 million or $0.03 per diluted share) related to a
contingent liability study/update, (f) a pre-tax charge of $2.6
million (after-tax $1.9 million or $0.04 per diluted share) for a
benefit plan curtailment, (g) a pre-tax gain on divestiture of two
product lines of $75.5 million (after-tax $59.6 million or $1.23 per
diluted share) (h) a reduction in income tax expense of $3.5 million
or $0.07 per diluted share relating to the completion of prior years
tax audits, (i) a charge of $1.7 million or $0.04 per diluted share
related to a taxable capital reduction in one of our Southeast Asian
subsidiaries and (j) the cumulative effect of an accounting change
after-tax charge of $1.2 million or $0.02 per diluted share related to
the adoption of SFAS 123R. Excluding these special items, net earnings
were $167.8 million or $3.45 per diluted share.
Net earnings for the full year ended December 31, 2005 were $59.1
million or $1.27 per diluted share on sales of $2,926 million.
Included in the results for the full year ended December 31, 2005 were
- - (a) 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, (b) a charge of $37.0
million or $0.80 per diluted share related to the write-off of
in-process research and development costs of Surface Specialties, (c)
a pre-tax charge of $44.2 million (after-tax $28.1 million or $0.60
per diluted share) related to currency and interest rate derivative
transactions associated with the Surface Specialties acquisition, (d)
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, (e) a pre-tax charge of $22.0 million (after-tax
$14.0 million or $0.30 per diluted share) related to the optional
redemption of our MOPPRS prior to their maturity, (f) an income tax
benefit of $28.3 million, or $0.61 per diluted share, reflecting
favorable resolution of tax audits with respect to prior year tax
returns, (g) employee restructuring costs of $16.8 million (after-tax
net $12.4 million or $0.27 per diluted share), (h) a $4.4 million
(after-tax net $3.2 million or $0.07 per diluted share) settlement to
resolve a dispute over an environmental matter and (i) a pre-tax
charge of $0.2 million ($0.1 after-tax) for integration costs related
to the acquired surface specialties business. Excluding these special
items, net earnings were $142.6 million or $3.07 on a diluted share
basis.
Investor Conference Call to be Held on February 2, 2007 11:00 A.M.
ET
Cytec will host their fourth quarter earnings release conference
call on February 2, 2007 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 February 2, 2007 until February 23, 2007 at 11:00
p.m. ET by calling 888-203-1112 (U.S.) or 719-457-0820 (International)
and entering access code 2658400. 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, 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 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 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.
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
Three Months
Ended Years Ended
December 31, December 31,
- ----------------------------------------------------------------------
2006 2005 2006 2005
- ----------------------------------------------------------------------
Net sales $ 793.6 $ 787.5 $3,329.5 $2,925.7
Manufacturing cost of sales 637.6 634.7 2,670.1 2,313.7
Selling and technical services 53.6 57.7 215.4 213.6
Research and process development 19.4 18.1 73.9 68.5
Administrative and general 26.1 31.5 102.9 102.1
Amortization of acquisition
intangibles 9.1 8.7 37.8 30.3
Write-off of acquired in-process
research and development - - - 37.0
Gain on sale of assets 75.5 - 75.5 -
- ----------------------------------------------------------------------
Earnings from operations 123.3 36.8 304.9 160.5
Other income (expense), net (0.2) - 12.7 (44.9)
Equity in earnings of associated
companies 0.7 0.6 3.2 7.9
Interest expense, net 11.9 16.1 55.5 80.0
- ----------------------------------------------------------------------
Earnings from continuing operations
before income taxes and cumulative
effect of accounting change 111.9 21.3 265.3 43.5
Income tax provision (benefit) 28.5 2.9 69.2 (14.4)
- ----------------------------------------------------------------------
Earnings from continuing operations
before cumulative effect of
accounting change 83.4 18.4 196.1 57.9
Cumulative effect of accounting
change (net of income tax benefit
of $0.7) - - (1.2) -
- ----------------------------------------------------------------------
Earnings from continuing operations 83.4 18.4 194.9 57.9
Earnings from discontinued
operations (net of income tax
provision of $0.8) - - - 1.2
- ----------------------------------------------------------------------
Net earnings $ 83.4 $ 18.4 $ 194.9 $ 59.1
Basic net earnings per common share:
Earnings from continuing operations
before cumulative effect of
accounting change $ 1.74 $ 0.40 $ 4.13 $ 1.28
Cumulative effect of accounting
change, net of taxes - - (0.02) -
Earnings from discontinued
operations, net of taxes - - - 0.03
- ----------------------------------------------------------------------
Net earnings $ 1.74 $ 0.40 $ 4.11 $ 1.31
Diluted net earnings per common
share:
Earnings from continuing operations
before cumulative effect of
accounting change $ 1.70 $ 0.39 $ 4.03 $ 1.25
Cumulative effect of accounting
change, net of taxes - - (0.02) -
Earnings from discontinued
operations, net of taxes - - - 0.02
- ----------------------------------------------------------------------
Net earnings 1.70 0.39 $ 4.01 $ 1.27
- ----------------------------------------------------------------------
Dividends per common share $ 0.10 $ 0.10 $ 0.40 $ 0.40
Weighted Average Shares Outstanding
(000 Omitted)
Basic 47,845 46,371 47,453 45,242
Diluted 48,950 47,390 48,630 46,382
CYTEC INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED NET SALES AND
EARNINGS FROM OPERATIONS BY BUSINESS SEGMENT (Millions of dollars)
Three Months Ended Year Ended
December 31, December 31,
------------------------- --------------------------
2006 2005 2006 2005
----------- ----------- -------------- -----------
Net sales
- -----------------
Cytec Performance
Chemicals
Sales to
external
customers $ 176.4 $ 220.9 $ 865.0 $ 855.8
Intersegment
sales 1.8 1.7 7.0 5.6
Cytec Surface
Specialties 375.2 351.0 1,523.5 1,244.1
Cytec Engineered
Materials 160.3 137.1 601.9 541.6
Building Block
Chemicals
Sales to
external
customers 81.7 78.5 339.1 284.2
Intersegment
sales 10.0 25.1 77.1 85.3
--------- ---------- ----------- ----------
Net sales from
segments 805.4 814.3 3,413.6 3,016.6
Elimination of
intersegment
revenue (11.8) (26.8) (84.1) (90.9)
--------- ---------- ----------- ----------
Net sales $ 793.6 $ 787.5 $ 3,329.5 $ 2,925.7
- ----------------------------------------------------------------------
% of % of % of % of
sales sales sales sales
----- ----- ----- -----
Earnings
(loss) from
operations
- --------------
Cytec
Performance
Chemicals $11.6(1) 7% $ 17.0 8% $68.4(1) 8% $56.6(2) 7%
Cytec Surface
Specialties 17.6 5% 13.9 4% 95.5 6% 22.0(3) 2%
Cytec
Engineered
Materials 27.2(4) 17% 26.7 19% 106.0(4) 18% 103.0 19%
Building Block
Chemicals 3.5 4% (3.9) -4% 19.3 5% 5.7 2%
-------- --------- -------- ---------
Earnings from
segments 59.9 7% 53.7 7% 289.2 8% 187.3 6%
Corporate and
Unallocated 63.4(5) (16.9)(6) 15.7(7) (26.8)(8)
-------- --------- -------- ---------
Earnings from
operations $ 123.3 16% $ 36.8 5% $ 304.9 9% $ 160.5 5%
- ----------------------------------------------------------------------
(1) Includes $0.3 charge for U.K. defined benefit pension
curtailment.
(2) Includes $2.6 for amortization of inventory step-up of
finished goods acquired as part of the 2005 Surface Specialties
acquisition and $7.0 write-off of in-process research and development
expense acquired as part of the Surface Specialties acquisition.
(3) Includes $18.2 for amortization of inventory step-up of
finished goods acquired as part of the 2005 Surface Specialties
acquisition and $30.0 write-off of in-process research and development
expense acquired as part of the Surface Specialties acquisition.
(4) Includes $2.3 charge for U.K. defined benefit pension
curtailment.
(5) Includes $8.4 restructuring charges for our manufacturing
facility in Dijon, France related to our Liquid Coating Resins product
line in our Cytec Surface Specialties segment, $1.3 other
restructuring charges, a charge of $0.5 for integration expenses
related to the 2005 Surface Specialties acquisition and a gain of
$75.5 related to the divestiture of water treatment chemicals and
acrylamide product lines.
(6) Includes a restructuring charge of $14.1 for employee-related
severance costs principally related to the formation of Cytec
Specialty Chemicals whereby we combined our specialty chemicals
product lines into one organization, and integrations costs of $0.2
related to the 2005 Surface Specialties acquisition primarily for the
elimination of the transition service agreement with the former owner
of information technology hardware infrastructure.
(7) Includes $15.5 for an asset impairment charge for our
manufacturing facility in Dijon, France related to our Liquid Coating
Resins product line in our Cytec Surface Specialties segment, $8.4
charge for restructuring in Dijon, France, $22.5 of restructuring and
asset impairment charges related to our Polymer Additives product line
which is part of our Cytec Performance Chemicals segment, $2.1 other
restructuring charges, $1.7 for integration expenses related to the
2005 Surface Specialties acquisition, a net charge of $2.2 related to
an update of the asbestos contingent liability and a net gain of $75.5
related to the divestiture of water treatment chemicals and acrylamide
product lines.
(8) Includes a charge of $16.8 for restructuring provisions, $2.4
for settlement of a certain litigation matter and $0.2 for integration
costs.
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share amounts)
December 31,
2006 2005
------------------
Assets
Current assets
Cash and cash equivalents $ 23.6 $ 68.6
Trade accounts receivable, less allowance
for doubtful accounts of $5.1 and $7.8 in
2006 and 2005, respectively 510.3 493.8
Due from related party 2.4 8.0
Other accounts receivable 79.1 65.9
Inventories 474.6 424.7
Deferred income taxes 15.0 12.2
Other current assets 15.4 31.4
Assets held for sale 38.8 -
------------------
Total current assets 1,159.2 1,104.6
------------------
Investment in associated companies 23.3 20.3
Plants, equipment and facilities, at cost 1,895.5 2,064.3
Less: accumulated depreciation (897.0) (988.8)
------------------
Net plant investment 998.5 1,075.5
Acquisition intangibles, net of accumulated
amortization of $92.1 and $51.0 in 2006 and
2005, respectively 486.1 491.5
Goodwill 1,042.5 1,012.2
Other assets 91.2 106.4
------------------
Total assets $3,800.8 $3,810.5
------------------
Liabilities
Current liabilities
Accounts payable $ 298.8 $ 278.6
Short-term borrowings 41.8 34.3
Current maturities of long-term debt 1.4 51.2
Accrued expenses 212.3 218.3
Income taxes payable 44.4 43.5
Liabilities held for sale 16.3 -
------------------
Total current liabilities 615.0 625.9
Long-term debt 900.4 1,225.5
Pension and other postretirement benefit
liabilities 371.1 432.5
Other noncurrent liabilities 273.6 224.4
Deferred income taxes 70.6 64.1
Stockholders' equity
Preferred stock, 20,000,000 shares authorized;
none issued and outstanding
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 258.5 235.6
Retained earnings 1,333.0 1,149.7
Unearned compensation - (2.5)
Accumulated other comprehensive income (loss):
Accumulated pension liabilities (102.4) (115.0)
Unrealized net gains (losses) on cash flow
hedges 7.9 0.4
Accumulated translation adjustments 88.8 27.6
------------------
(5.7) (87.0)
Treasury stock, at cost, 510,006 shares in
2006 and 1,833,812 shares in 2005 (16.2) (58.2)
------------------
Total stockholders' equity 1,570.1 1,238.1
------------------
Total liabilities and stockholders' equity $3,800.8 $3,810.5
------------------
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
Years ended December 31, 2006 2005
--------------------
Cash flows provided by (used in) operating
activities
Net earnings $ 194.9 $ 59.1
Earnings from discontinued operations, net of
taxes - 1.2
-------------------
Earnings from continuing operations 194.9 57.9
Noncash items included in earnings from
continuing operations:
Depreciation 111.2 110.8
Amortization 41.6 36.5
Share-based compensation 13.4 2.5
Deferred income taxes 14.5 (25.0)
Write-off of acquired in-process research and
development - 37.0
Amortization of write-up to fair value of
finished goods purchased in acquisition - 20.8
Gain on sales of assets (75.5) (1.3)
Asset impairment charges 25.0 -
Unrealized net gains on derivative
instruments - -
Cumulative effect of accounting change 1.9 -
Other (0.4) (2.4)
Changes in operating assets and liabilities
(excluding effect of acquisitions and
divestitures):
Trade accounts receivable (33.6) (12.9)
Other receivables (7.9) 31.7
Inventories (54.3) 9.5
Other assets 16.3 21.5
Accounts payable 15.0 2.8
Accrued expenses (7.0) (19.3)
Income taxes payable (1.3) (42.6)
Other liabilities (52.8) -
-------------------
Net cash provided by operating activities of
continuing operations 201.0 227.5
Net cash provided by operating activities of
discontinued operations - 4.9
-------------------
Net cash provided by operating activities 201.0 232.4
-------------------
Cash flows provided by (used in) investing
activities
Acquisition of businesses, net of cash
received - (1,459.1)
Additions to plants, equipment and
facilities (102.5) (105.3)
Net Proceeds received on sale of assets 206.6 105.5
Proceeds received on sale of discontinued
business - 74.3
Advance payment received on land lease - -
-------------------
Net cash provided by (used in) investing
activities 104.1 (1,384.6)
-------------------
Cash flows provided by (used in) financing
activities
Proceeds from long-term debt 241.2 1,438.4
Payments on long-term debt (669.5) (571.9)
Change in short-term borrowings 36.9 45.9
Cash dividends (18.8) (17.8)
Proceeds from the exercise of stock options
and warrants 45.0 17.7
Deferred financing cost - (5.9)
Excess tax benefits from share-based
payments arrangements 10.7 -
Purchase of treasury stock - -
Redemption of Series C preferred stock - -
Proceeds from termination of interest rate
swap - -
Other 0.1 (0.6)
-------------------
Net cash provided by (used in) financing
activities (354.4) 905.8
-------------------
Effect of currency rate changes on cash and cash
equivalents 4.3 (8.8)
Increase (decrease) in cash and cash equivalents (45.0) (255.2)
Cash and cash equivalents, beginning of year 68.6 323.8
-------------------
Cash and cash equivalents, end of year $ 23.6 $ 68.6
-------------------
Cytec Industries Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Measures
Amounts in millions except per share amounts
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 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 December 31, 2006
Net Diluted
Earnings EPS
-------- -------
GAAP Net Earnings $ 83.4 $ 1.70
- Gain on divestiture (59.6) (1.22)
- Net restructuring charge 9.4 0.19
- Integration costs related to acquired businesses 0.4 0.01
- Charge related to U.K. benefit plan change 1.9 0.04
- Tax on capital reduction at an international
subsidiary 1.7 0.04
- Other 0.2 0.0
-------- -------
Non-GAAP Net Earnings $ 37.4 $ 0.76
======== =======
Three Months Ended December 31, 2005
Net Diluted
Earnings EPS
-------- -------
GAAP Net Earnings $ 18.4 $ 0.39
- Income tax benefit for partial resolution of a tax (2.6) (0.05)
audit of prior years tax returns in international
jurisdiction
- Restructuring charge 10.5 0.22
- Integration costs related to acquired businesses 0.1 0.0
-------- -------
Non-GAAP Net Earnings $ 26.4 $ 0.56
======== =======
Numbers may not add due to rounding
Cytec Industries Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Measures (Cont'd)
Amounts in millions except per share amounts
Full year Ended December 31, 2006
Net Diluted
Earnings EPS
-------- -------
GAAP Net Earnings $ 194.9 $ 4.01
- Asset Impairment charge 24.6 0.51
- Net restructuring charge 16.1 0.33
- Integration costs related to acquired business 1.3 0.03
- Charge related to UK benefit plan change 1.9 0.04
- Net charge related to contingent liability
study/update 1.6 0.03
- Gain relating to a certain legal dispute (12.4) (0.26)
- Gain on divestiture (59.6) (1.23)
- Income tax benefit related to completion of prior
years audits (3.5) (0.07)
- Tax on capital reduction at an international
subsidiary 1.7 0.04
- Cumulative effect of accounting change 1.2 0.02
-------- -------
Non GAAP Net Earnings $ 167.8 $ 3.45
======== =======
Full year Ended December 31, 2005
Net Diluted
Earnings EPS
-------- -------
GAAP Net Earnings $ 59.1 $ 1.27
- - Purchase accounting fair value inventory over
manufacturing cost 15.2 0.33
- - Write off of in-process research and development
costs of Surface Specialties 37.0 0.80
- - Restructuring charge 12.4 0.27
- - Settlement to resolve a dispute over an
environmental matter 3.2 0.07
- - Anticipated settlement of a certain litigation
matter 1.8 0.04
- - Loss on currency and interest rate derivative
transactions 28.1 0.60
- - Optional redemption of Mandatory Par Put Remarketed 14.0 0.30
Securities (MOPPRS) prior to their maturity
- - Income tax benefit reflecting favorable (28.3) (0.61)
developments on tax audits with respect to prior
years returns
- - Integration expenses related to acquired business 0.1 0.0
-------- -------
Non-GAAP Net Earnings $ 142.6 $ 3.07
======== =======
Numbers may not add due to rounding
CONTACT: Cytec Industries Inc.
Investment Community:
David M. Drillock, 973-357-3249
or
Media:
Gail Petersen, 973-357-3319