EX-99.1 3 a4623008ex991.txt PRESS RELEASE Exhibit 99.1 Cytec Reports First Quarter EPS of $0.78; Quarter Sales a Record for Cytec WEST PATERSON, N.J.--(BUSINESS WIRE)--April 22, 2004--Cytec Industries Inc. (NYSE:CYT) announced today that net earnings for the first quarter of 2004 were $31.3 million or $0.78 per diluted share on sales of $415 million. Net earnings for the comparable period of 2003 were $28.9 million or $0.73 per diluted share, on sales of $367 million, before a cumulative effect of a change in accounting principle of $13.6 million after tax ($0.34 per diluted share) for the adoption of Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations." David Lilley, Chairman, President and Chief Executive Officer said, "Our two Specialty Chemical segments benefited from the acquisitions completed in 2003 and our Specialty Materials segment displayed strong volume growth. Our Building Block Chemicals sales increased in line with higher input costs. Exchange rate changes also favorably impacted sales for the quarter. "In the quarter we experienced shortages of propylene causing our Building Block Chemicals acrylonitrile plant to run at less than capacity. Natural gas prices remained high, and we were impacted by a rapid escalation in the price of propylene. Despite these significant issues, we delivered increased earnings and respectable margins to begin 2004." Water and Industrial Process Chemicals Sales increased 8%; Operating Earnings decrease to $4 million Mr. Lilley continued, "In Water and Industrial Process Chemicals, selling volumes decreased 6%, acquisitions added 10%, exchange rate changes increased sales by 6% and selling prices were down 2%. Mining Chemicals was impacted by reduced production at two major mines undergoing repairs and Water Treatment volumes were down primarily in North America as we continue our exit from certain low profit accounts. "The decrease in operating earnings was principally the result of the lower selling volumes, higher raw material costs, primarily propylene and ammonia, and energy costs which more than offset the favorable impact from acquisitions. Performance Products Sales increased 17%; Operating Earnings improve to $14 million "For Performance Products, selling volumes increased 2%, acquisitions added 11%, exchange rate changes increased sales by 4% and selling prices were flat. Demand was generally up in all regions except Asia Pacific. "Operating earnings increased principally due to the favorable impact from acquisitions and higher base sales volumes offset somewhat by increased raw material costs, primarily ammonia and methanol derivatives, and energy costs. Specialty Materials Sales increased 11%; Operating Earnings improve to $23 million "In Specialty Materials, selling volumes improved 11%, exchange rate changes increased sales by 1% and selling prices were down 1%. Demand increased for military applications, rotorcraft and high performance automotive applications. Sales in the large commercial aircraft sector were up due to increased sales to Airbus partially offset by reduced sales to the regional and business jet sectors. "The increase in operating earnings primarily reflects the higher sales volume and the resulting leverage impact on our production costs partially offset by increased selling and technical costs for our growth initiatives. Building Block Chemicals Sales increase 17%; Operating Earnings improve to $5 million "Building Block Chemicals selling volumes increased 3%, selling prices increased 12% and exchange rate changes increased sales by 2%. The acrylonitrile plant ran at reduced rates in the quarter due to short supply of propylene. This affected most acrylonitrile producers in the U.S., and as a result acrylonitrile selling prices have increased consistent with continued strong demand. "Raw material and energy costs, primarily propylene, ammonia and natural gas, were higher in the quarter but these costs were mostly recovered through higher selling prices. In addition, a favorable product mix and improved plant operations more than offset the impact of running our acrylonitrile plant at reduced rates. After taking into account all of the above, operating earnings improved over the prior year period." Earnings in Associated Companies James P. Cronin, Executive Vice President and Chief Financial Officer added, "Equity in earnings of associated companies decreased from the prior year primarily reflecting higher raw material costs at CYRO Industries, our 50% owned acrylic plastics joint venture. In addition, the prior year included $0.5 million from the former Mitsui-Cytec joint venture." Effective Tax Rate Mr. Cronin continued, "Our effective tax rate was lowered to 24%, down from the 28% effective tax rate used for the full year of 2003. This reduction reflected our continued growth of earnings in lower tax jurisdictions and, to a lesser extent, a favorable international tax ruling." Cash Flow Mr. Cronin added, "First quarter cash flow generated by operations was $23 million. Accounts receivable are up in line with the increased sales and inventory levels reflecting the higher demand. Accounts payable are higher due to an increase in purchasing volumes towards the end of the quarter and timing of payments versus year end 2003. Capital expenditures of $17 million reflect the work being done on the renovation of our Specialty Chemical research facility and the expansion of our Specialty Materials' advanced composite manufacturing facility in Germany. During the first quarter we repurchased approximately 388 thousand shares of stock at a cost of $13.2 million which favorably impacted earnings per share. We issued our first quarterly dividend of $0.10 per share which aggregated $3.9 million." Update on 2004 Outlook Mr. Lilley commented, "We are pleased with our strong start for 2004 and we continue to execute on the factors we can control. However, our last forecast which was provided in January 2004 assumed a moderation of raw material and energy costs. We now expect the trend of higher raw material costs to continue and this will have an adverse effect on our two Specialty Chemical segments. Somewhat offsetting the higher than anticipated raw material and energy costs, we did see encouraging signs of a pickup in demand during the course of the first quarter. In addition, we have lowered our effective tax rate estimate for 2004 to 24%." Our revised full year expectation by segment follows: "In Water and Industrial Process, we now forecast sales growth of about 8% with about 5% of that coming from acquisitions. Due to high raw material and energy costs, operating earnings are now forecast to be flat with 2003. Our previous forecast was for sales to be up 10% and operating earnings up 30%. "In Performance Products, we now forecast sales growth of about 10% with about 5% of that coming from acquisitions. Raw material and energy costs are also impacting this segment and we now see operating earnings to be up 40% from 2003 which is a slight reduction from our previous forecast. "In Building Block Chemicals, we now forecast sales to be up 10-15% due to higher selling prices and operating earnings to be down 15-20%. This segment is also seeing significantly higher raw material and energy costs but higher selling prices are mostly compensating for this. Our previous forecast was for sales to be flat and operating earnings to be down 20%. During 2004, we have regular maintenance turnarounds scheduled for our acrylonitrile and melamine facilities which will reduce the amount of production available for sale. The melamine maintenance turnaround occurred late in the first quarter and the acrylonitrile turnaround is scheduled for the second quarter. The corresponding sales decrease during the year will primarily impact the second quarter. "In Specialty Materials, we now forecast sales to be up about 7% primarily due to continued growth in the military and high performance automotive markets and modest growth in the large commercial aircraft sector and operating earnings to be up 15%. Our previous forecast was for sales to be up 5% and operating earnings to be up 10%. "We had forecast our earnings from associated companies to be flat year on year. However, high raw material and energy costs are also impacting our Cyro joint venture. We now expect full year earnings from associated companies to be down approximately 30% from 2003. We forecast Corporate and Unallocated to be slightly more unfavorable than last year. Our interest costs will be up approximately 15% due to higher levels of debt outstanding compared to 2003. "The net of the above is a revised diluted EPS range of $2.65-$2.75 up from $2.55-$2.65. While we are cautiously optimistic that the demand situation is improving, we believe raw materials and energy costs will not decline as we had previously anticipated. Our diluted EPS estimate for the second quarter is a range of $0.60-$0.65 with a major factor in the quarter being the scheduled Building Block Chemicals' maintenance work. We will next update the 2004 outlook when we report our second quarter 2004 operating results. "We have a strong start and good momentum as we move further into 2004. We will remain focused on new product development, execution of our operational excellence initiatives and staying flexible enough to react to the challenges and changes of the global economy." Investor Conference Call to be Held on April 23, 2004, 11:00 a.m. EDT Cytec will host their first quarter earnings release conference call on April 23, 2004 at 11:00 a.m. EDT. The conference call will also be simultaneously webcast for all investors from Cytec's Web site 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. EDT on April 23, 2004 until April 29, 2004 at 11:00 p.m. EDT by calling 888-203-1112 (U.S.) or 719-457-0820 (International) and entering access code 701445. The conference call recording will also be accessible on Cytec's Web site for 3 weeks after the conference call. 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 sales in 2003 of $1.5 billion. Its growth strategies are based on developing technologically advanced customer solutions for global markets including: aerospace, plastics, industrial coatings, mining, and water treatment. CYTEC INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Millions of dollars, except share and per share amounts) Quarter Ended March 31, ------------------------ 2004 2003 ---------- ---------- Net sales $ 415.2 $ 367.4 Manufacturing cost of sales 312.7 272.4 Selling and technical services 34.9 30.1 Research and process development 9.1 8.2 Administrative and general 13.3 11.8 Amortization of acquisition intangibles 1.4 0.8 ---------- ---------- Earnings from operations 43.8 44.1 Other income (expense), net 0.9 (1.2) Equity in earnings of associated companies 0.3 2.5 Interest expense, net 3.8 4.1 ---------- ---------- Earnings before income taxes and cumulative effect of accounting change 41.2 41.3 Income tax provision 9.9 12.4 ---------- ---------- Earnings before cumulative effect of accounting change 31.3 28.9 ---------- ---------- Cumulative effect of accounting change, net of tax - (13.6) Net earnings $ 31.3 $ 15.3 ========== ========== Earnings before cumulative effect of accounting change per common share Basic $0.80 $0.75 Diluted $0.78 $0.73 Cumulative effect of accounting change, net of tax, per common share Basic - $(0.35) Diluted - $(0.34) Earnings per common share Basic $0.80 $0.39 Diluted $0.78 $0.38 Weighted average shares outstanding (000 omitted) Basic 39,099 38,735 Diluted 40,100 39,764 CYTEC INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED NET SALES AND EARNINGS FROM OPERATIONS BY BUSINESS SEGMENT (Millions of dollars) Quarter Ended March 31, ---------------------------- 2004 2003 ---- ---- Net sales --------- Water and Industrial Process Chemicals $ 92.4 $ 85.8 Performance Products Sales to external customers 139.9 119.8 Intersegment sales 1.3 - Specialty Materials 120.3 108.1 Building Block Chemicals Sales to external customers 62.6 53.7 Intersegment sales 19.3 16.4 -------- -------- Net sales from segments 435.8 383.8 Elimination of intersegment revenue (20.6) (16.4) -------- -------- Total consolidated net sales $ 415.2 $ 367.4 ======== ======== % of % of Earnings (loss) from operations sales sales ----- ----- Water and Industrial Process Chemicals $ 3.6 4% $ 6.9 8% Performance Products 13.5 10% 11.8 10% Specialty Materials 23.2 19% 22.3 21% Building Block Chemicals 5.3 6% 4.3 6% -------- -------- Earnings from segments 45.6 10% 45.3 12% Corporate and Unallocated (1.8) (1.2) -------- -------- Total consolidated earnings from operations $ 43.8 11% $ 44.1 12% ======== ======== CYTEC INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Millions of dollars, except share and per share amounts) March 31, Dec. 31, 2004 2003 ---------- ---------- ASSETS Current assets Cash and cash equivalents $ 251.6 $ 251.1 Accounts receivable, less allowance for doubtful accounts of $7.2 and $7.6 in 2004 and 2003, respectively 242.1 217.1 Other accounts receivable 52.9 50.2 Inventories 183.6 176.0 Deferred income taxes 0.1 8.2 Other current assets 17.7 8.8 ---------- ---------- Total current assets 748.0 711.4 Investment in associated companies 81.5 82.1 Plants, equipment and facilities, at cost 1,542.5 1,538.3 Less: accumulated depreciation (886.3) (875.4) ---------- ---------- Net plant investment 656.2 662.9 Acquisition intangibles, net of accumulated amortization 67.9 69.9 Goodwill 339.1 339.7 Deferred income taxes 86.5 85.7 Other assets 73.6 74.2 ---------- ---------- Total assets $ 2,052.8 $ 2,025.9 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term borrowings $ 9.2 $ 9.3 Accounts payable 140.7 93.5 Accrued expense 137.4 170.5 Income taxes payable 60.4 63.2 ---------- ---------- Total current liabilities 347.7 336.5 Long-term debt 418.6 416.2 Pension and other postretirement benefit liabilities 334.6 346.0 Other noncurrent liabilities 183.6 171.8 Stockholders' equity Preferred stock, 20,000,000 shares authorized, issued and outstanding 4,000 shares, Series C Cumulative $0.1 par value at liquidation value of $25 per share 0.1 0.1 Common stock, $0.1 par value per share, 150,000,000 shares authorized, issued 48,132,640 shares 0.5 0.5 Additional paid-in capital 118.1 122.2 Retained earnings 1,010.1 982.9 Unearned compensation (3.0) (5.3) Minimum pension liability adjustment (96.8) (96.8) Unrealized gain on derivative instruments 0.5 0.3 Accumulated translation adjustments 29.8 38.0 Treasury stock, at cost, 9,251,492 shares in 2004 and 9,139,897 shares in 2003 (291.0) (286.5) ---------- ---------- Total stockholders' equity 768.3 755.4 ---------- ---------- Total liabilities and stockholders' equity $ 2,052.8 $ 2,025.9 ========== ========== CYTEC INDUSTRIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Millions of dollars) Quarter Ended March 31, ------------------------ 2004 2003 ---------- ---------- Cash flows provided by (used for) operating activities Net earnings $ 31.3 $ 15.3 Noncash items included in earnings: Dividends from associated companies greater than earnings 0.8 0.6 Depreciation 21.6 21.6 Amortization 2.7 1.2 Deferred income taxes 7.3 (10.3) Gain on sale of assets (0.6) - Cumulative effect of change in accounting principle, net of tax - 13.6 Other (0.3) - Changes in operating assets and liabilities Trade accounts receivable (28.9) (16.6) Other receivables (3.8) (2.4) Inventories (9.0) (19.5) Accounts payable 44.0 12.3 Accrued expenses (24.6) (9.2) Income taxes payable - 17.7 Other assets (8.0) (2.7) Other liabilities (9.8) (11.5) ---------- ---------- Net cash flows provided by operating activities 22.7 10.1 ---------- ---------- Cash flows provided by (used for) investing activities Additions to plants, equipment and facilities (16.9) (18.9) Proceeds received on sale of assets 0.7 0.1 Advance payment received on land lease 9.1 - ---------- ---------- Net cash flows used for investing activities (7.1) (18.8) ---------- ---------- Cash flows provided by (used for) financing activities Proceeds from the exercise of stock options 2.9 1.7 Purchase of treasury stock (13.2) (11.3) Change in short-term borrowings (0.1) - Payments of long term debt - (100.0) Proceeds from termination of interest rate swap 2.7 - Cash dividends (3.9) - ---------- ---------- Net cash flows used for financing activities (11.6) (109.6) ---------- ---------- Effect of exchange rate changes on cash and cash equivalents (3.5) 1.1 ---------- ---------- Increase (decrease) in cash and cash equivalents 0.5 (117.2) Cash and cash equivalents, beginning of period 251.1 210.0 ---------- ---------- Cash and cash equivalents, end of period $ 251.6 $ 92.8 ========== ========== CONTACT: Cytec Industries Inc., West Paterson Dave Drillock (Investment Community), 973-357-3249 or George Yuro (Media), 973-357-3319 www.cytec.com