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Cytec Announces First Quarter 2011 Results

Stocks in this article: CYT

Cytec Engineered Materials sales increased by 22% to $217 million; Operating Earnings increased to $26.7 million.

In Engineered Materials, selling volumes increased by 21% versus the first quarter 2010 driven primarily by higher build rates in the large commercial aircraft programs, business jet markets, and rotorcraft markets. Selling prices increased by 1%.

Operating earnings of $26.7 million were up versus earnings of $21.0 million in the prior year quarter, principally as a result of the higher selling volumes. Higher raw material costs of approximately $6.0 million, mostly due to carbon fiber as a result of a tight global carbon fiber market supply, were not fully covered by increases in selling prices. In addition, there was a production issue at one of our facilities which resulted in an additional charge of approximately $2.0 million in the quarter.

Discontinued Operations

In February 2011, we completed the previously announced sale of the Building Block Chemicals business to an affiliate of H.I.G. Capital, LLC for approximately $176 million (approximately $145 million after-tax) which includes a 6 year, $15 million note. Earnings from discontinued operations net of tax was $43.6 million which includes a gain from the sale of business of $36.8 million, net of tax.

Special Items

In the first quarter of 2011 a number of special items (all from continuing operations) were recorded that resulted in net pre-tax credit of $0.8 million ($0.5 million net benefit on an after-tax basis or $0.01 per diluted share) as follows:

  • Included in Corporate and Unallocated, principally in operating expenses, are favorable pre-tax net restructuring adjustments of $0.7 million ($0.5 million after-tax or $0.01 per diluted share).
  • Included in Gain on sale of assets is a pre-tax gain of $3.3 million ($2.0 million after-tax or $0.04 per diluted share) related to a sale of land at our manufacturing site in Colombia which was shutdown in the second half of 2009.
  • Included in Other Expense is a pre-tax charge of $3.2 million ($2.0 million after-tax or $0.04 per diluted share) related to an increase in the environmental liability at an inactive site for an updated estimate of future remedial costs to meet new design requirements of the relevant state agency as well as increased annual operating and maintenance costs.

Income Tax Expense

Income tax expense related to continuing operations for the first quarter of 2011 was $15.0 million, compared with a tax expense of $22.6 million in the first quarter of 2010. Included in the Income tax provision for the first quarter of 2011 are discrete tax benefits of $2.3 million related to several international tax matters. Excluding the impact from the aforementioned discrete tax benefits and special items previously noted, the overall underlying annual tax rate for the first quarter of 2011 was 31.25% versus the underlying annual tax rate in the first quarter of 2010 of 32.5%.

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