Net earnings attributable to Cytec for the fourth quarter of 2011 were $41.6 million or $0.88 per diluted share. Net sales from continuing operations were $369.5 million. Earnings from continuing operations were $30.0 million or $0.64 per diluted share. Earnings from discontinued operations were $12.6 million or $0.26 per diluted share. Net earnings attributable to non-controlling interests (which are associated with the discontinued operations) were $1.0 million or $0.02 per diluted share. Included in the quarter were several special items that totaled $1.3 million of net benefit after-tax or $0.02 per diluted share ($0.03 of net expense attributable to continuing operations and $0.05 of net benefit attributable to discontinued operations). Excluding the special items, earnings attributable to Cytec were $40.3 million or $0.86 per diluted share, earnings from continuing operations were $31.4 million or $0.67 per diluted share, and earnings from discontinued operations were $8.9 million or $0.19 per diluted share. Shane Fleming, Chairman, President and Chief Executive Officer commented, "Our fourth quarter results reflect the continued solid performance of our Engineered Materials and In Process Separation segments, delivering higher selling volumes and prices versus the same period a year ago. In the Additive Technologies segment, demand remained weak for certain specialty additive products in North America and Europe yet we were able to maintain good operating margins. Overall, our sales in continuing operations were up 27% over the prior year, mostly due to our Umeco acquisition."Mr. Fleming continued, "We remain on track for a first quarter close of our Coating Resins business divestiture and are awaiting final regulatory approvals."Cytec Engineered Materials sales increased 9% to $231.0 million; Operating Earnings decreased to $41.2 million.In Engineered Materials, selling volumes increased by 5% versus the fourth quarter 2011 mostly driven by higher build rates in the large commercial transport and civil rotorcraft sectors. Higher selling prices increased sales by 4%. Operating earnings of $41.2 million were down versus earnings of $41.6 million in the prior year quarter, primarily due to higher spending in manufacturing to support the higher growth levels and lower fixed costs absorption resulting from planned inventory reductions. These unfavorable impacts were partially offset by higher selling prices and volumes. Prior year quarter results also included approximately $2.7 million of one-time retroactive price increase adjustments. Cytec's newly acquired business, Umeco, reported sales of $83.3 million and as-adjusted operating earnings of $3.8 million.On July 20, 2012, we completed the purchase of our previously announced acquisition of Umeco Plc. Sales in the Process Materials (vacuum bagging) product line were in-line with our expectations and sales of Structural Materials fell short of our expectations by approximately $4.5 million, mostly in Europe, and primarily due to sales orders deferred into 2013 and softer demand in high-end automotive programs. As-adjusted operating earnings were $3.8 million for the quarter (which excludes $1.1 million of amortization of inventory step-up) as the impact from lower selling volumes of structural materials products was partially offset by lower operating costs. Cytec In Process Separation sales increased 5% to $94.2 million; Operating Earnings decreased to $17.4 million.In Process Separation selling volumes increased by 1% versus the fourth quarter of 2011. Solid demand for mining products related to copper and other base metals were partially offset by soft demand in the alumina market as well as lower sales of phosphine chemicals due largely to a planned maintenance turnaround in our phosphine plant. Higher selling prices increased sales by 4%.Operating earnings were $17.4 million versus $20.4 million in the prior year quarter, with the shortfall principally due to higher manufacturing costs associated with the phosphine plant turnaround, targeted inventory control, increased operating expenses to support future growth in the segment, and a less favorable product mix. Cytec Additive Technologies sales decreased 7% to $62.2 million; Operating Earnings increased to $8.2 million.In Additive Technologies, overall selling volumes were down 6% versus the fourth quarter 2011 primarily due to lower demand for specialty additive products in North America and Europe. The impact of exchange rates decreased sales by 1%.Operating earnings of $8.2 million were up versus $7.5 million in the fourth quarter of 2011. The higher earnings mostly resulted from a favorable product mix and lower raw material costs. Corporate and UnallocatedFor the three months and full year ended December 31, 2012, continuing costs previously allocated to Coating Resins but now included as part of corporate and unallocated were $16.0 and $66.5 million, respectively. For the three months and full year ended December 31, 2011, these costs were $15.9 and $66.0 million, respectively.Discontinued OperationsThe Coating Resins segment is classified as discontinued operations. The following covers Coating Resins sales and earnings as they would have been reported if they had not been required to be classified as discontinued operations. Sales were $324.1 million, down 10% in the fourth quarter 2012 versus $361.3 million in the same period 2011. Selling volumes were down 2% excluding the impact of the divestiture of the pressure sensitive adhesives business of 5%. Selling prices were down 1% year over year and the impact of changes in exchange rates decreased sales by 2%. Operating earnings increased to $11.9 million versus operating loss of $0.4 million in the fourth quarter of 2011.Special ItemsIn the fourth quarter of 2012 a number of special items were recorded in continuing operations that resulted in a net pre-tax charge of $24.7 million ($12.1 million expense after-tax) as follows:
- Included in Corporate Unallocated as Research and process development expense is a pre-tax charge of $0.4 million ($0.2 million after-tax or $0.00 per diluted share) related to incremental accelerated depreciation related to the sale-leaseback transaction of our research and development facility in Stamford, Connecticut in the third quarter of 2011.
- Included in Corporate Unallocated as Administrative and general expense is a pre-tax charge of $1.2 million ($1.0 million after-tax or $0.02 per diluted share) related to Umeco acquisition costs. For tax purposes, these costs will be predominantly capitalized as part of the transaction.
- Included in Corporate Unallocated, principally in Administrative and general and Selling and technical services, is pre-tax net restructuring charges of $5.3 million ($3.6 million after-tax or $0.08 per diluted share) primarily related to initiatives to reduce stranded costs resulting from the sale of Coating Resins and personnel reductions in the acquired Umeco business.
- Included in the Umeco segment as Manufacturing cost of sales is a pre-tax charge of $1.1 million ($0.7 million after-tax or $0.01 per diluted share) related to a purchase accounting adjustment for the difference between assigning a fair value to the acquired Umeco finished goods inventory at the date of acquisition and normal manufacturing cost.
- Included in (Loss)/Gain on sale of assets is a pre-tax loss of $16.7 million ($10.5 million after-tax or $0.23 per diluted share) related to the aforementioned sale-lease back transaction in Stamford. The recognition of the sale was previously deferred due to an open environmental obligation. The transaction was recognized as a sale upon the satisfactory completion of our obligation in the fourth quarter of 2012, and as a result, we recognized the loss for the remaining excess carrying value.
- Included in Income tax (benefit)/provision is $3.9 million of income tax benefit ($0.08 per diluted share) related to a revision of our previously accrued estimated income tax liability on the unrepatriated earnings of certain foreign subsidiaries as a result of the intended sale of our Coating Resins segment. Such revision is primarily due to changes in the tax attributes of certain foreign subsidiaries.
- Included in Corporate and Unallocated principally in Manufacturing cost of sales is a pre-tax restructuring charge of $0.1 million ($0.1 million after-tax or $0.00 per diluted share).
- Included in Corporate Unallocated as Research and process development expense is a pre-tax charge of $0.7 million ($0.4 million after-tax or $0.01 per diluted share) related to incremental accelerated depreciation related to the sale-leaseback transaction of our research and development facility in Stamford, Connecticut in the fourth quarter of 2011.
- Included in Manufacturing cost of sales and Other expense, net is a pre-tax charge of $1.4 million ($0.9 million after-tax or $0.02 per diluted share) related to adjustments to environmental liabilities at our active and inactive locations.
- Included in Corporate and Unallocated as Research and process development is a pre-tax charge of $2.5 million ($1.5 million after-tax or $0.03 per diluted share) related to incremental accelerated depreciation related to the sale-leaseback transaction of our research and development facility in Stamford, Connecticut in the third quarter of 2011.
- Included in Corporate and Unallocated as Administrative and general expense is a pre-tax charge of $8.4 million ($8.2 million after-tax or $0.18 per diluted share) related to Umeco acquisition costs. For tax purposes, these costs will be predominantly capitalized as part of the transaction.
- Included in Corporate and Unallocated principally in Administrative and general and Manufacturing cost of sales are pre-tax net restructuring charges of $21.2 million ($14.6 million after-tax or $0.31 per diluted share) primarily related to initiatives to reduce stranded costs resulting from the sale of Coating Resins and personnel reductions in the acquired Umeco business.
- Included in the Umeco segment as Manufacturing cost of sales is a pre-tax charge of $5.6 million ($3.8 million after-tax or $0.08 per diluted share) related to purchase accounting for the difference between assigning a fair value to the acquired Umeco finished goods inventory at the date of acquisition and normal manufacturing cost.
- Included in Other expense, net is a pre-tax charge of $1.1 million ($0.7 million after-tax or $0.01 per diluted share) related to an exchange loss recorded in connection with an acquired Umeco intercompany loan which was settled after the acquisition.
- Included in the Income tax (benefit)/provision is $10.6 million of income tax expense ($0.23 per diluted share) related to the sale process of our Coating Resins segment. Accounting rules require establishing a tax liability on the unrepatriated earnings of foreign subsidiaries if it is management's intention to no longer permanently reinvest such earnings. As a result of the intended sale of Coatings Resins, management's intentions changed with regard to a portion of the unrepatriated earnings of certain foreign subsidiaries. Therefore, included in the $10.6 million is $3.1 million of tax expense incurred due to the repatriation of certain earnings during 2012 and an estimated $7.5 million to be incurred on the future repatriation of other earnings, subsequent to the sale of Coating Resins.
- Included in (Loss)/Gain on sale of assets is a pre-tax loss of $16.7 million ($10.5 million after-tax or $0.23 per diluted share) related to the aforementioned sale-lease back transaction in Stamford. The recognition of the sale was previously deferred due to an open environmental obligation. The transaction was recognized as a sale upon the satisfactory completion of our obligation in the fourth quarter of 2012, and as a result, we recognized the loss for the remaining excess carrying value.
- Included in Corporate and Unallocated principally in Manufacturing cost of sales is a pre-tax net restructuring charge of $0.8 million ($0.5 million after-tax or $0.01 per diluted share).
- Included in Corporate and Unallocated as Research and process development is a pre-tax charge of $0.7 million ($0.4 million after-tax or $0.01 per diluted share) related to incremental accelerated depreciation related to the sale-leaseback transaction of our research and development facility in Stamford, Connecticut in the third quarter of 2011.
- Included in (Loss)/Gain on sale of assets is a pre-tax gain of $3.3 million ($2.1 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 primarily in Other expense, net is a pre-tax charge of $5.8 million ($3.6 million after-tax or $0.07 per diluted share) related to an increase in the environmental liability at inactive sites for updated estimates of future remedial costs.
Jodi Allen
Investor Relations
Tel: 1.973.357.3283
jodi.allen@cytec.com
Tara Tepp
In Process Separation Marketing Communications
Tel: 1.973.357.3347
tara.tepp@cytec.com