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Cytec Industries Inc. (CYT)
Q4 2009 Earnings Call
January 29, 2010; 11:00 am ET
Shane Fleming - Chairman, President & Chief Executive Officer
Dave Drillock - Vice President & Chief Financial Officer
Jeffrey Fitzgerald - Director of Investor Relations
David Begleiter - Deutsche Bank
P.J. Juvekar - Citi
Laurence Alexander - Jefferies & Co.
Mike Sisson - KeyBanc
Amy Zhang - Goldman
John McNulty - Credit Suisse
Edward Marshall - Sidoti & Co.
Previous Statements by CYT
» Cytec Industries Inc. Q3 2009 Earnings Call Transcript
» Cytec Industries, Inc. Q2 2009 Earnings Call Transcript
» Cytec Industries Inc. Q1 2009 Earnings Call Transcript
Thank you, Ryan. Good morning, everyone. We appreciate your participation in our conference call. For our call today, Shane Fleming, Chairman and President and Chief Executive Officer will provide an overview of operations and Dave Drillock, Vice President and Chief Financial Officer, will review the financial results and special items noted in our press release.
Shane will then finish with commentary on our outlook for 2010. This call’s being webcast in a listen-only mode and it will be archived in auto format on our website for three weeks. Throughout the call, we will reference supporting materials, which can be downloaded from our Investor Relations website under calendar of events or you may follow the slides accompanying today’s webcast, which is also available through our website.
During the course of this presentation, and in response to your questions, you will hear certain forward-looking statements. Our actual results may differ materially. Please read our commentary on forward-looking statements on slide number two of our supporting materials, or at the end of our news release, or the statements in our quarterly or annual SEC filings.
Our reported results for the fourth quarter of 2008 and 12 months ended December 31, 2008 and 2009 are a net loss. Accordingly, we compute EPS per basic share in accordance with GAAP since utilizing diluted shares for these periods would result in a loss per share that is lower, or anti-dilutive.
In addition, our discussions include certain non-GAAP financial measurements as defined under SEC rules. We have provided a reconciliation of those non-GAAP financial measures to the most directly comparable GAAP measure, including basic to diluted earnings per share at the end of our press release. A copy of our press release is available on our website.
Now, let me turn the call over to Shane.
Thanks, Jeff, and good morning, everyone. I appreciate you taking the time to join our fourth quarter earnings conference call. I’m extremely pleased with the great work done by the company in 2009. First, in recognizing early on the need to take decisive action to reduce our cost base and improve liquidity and then to execute the plans that we develop to deliver these objectives.
These actions allowed us to translate the improved demand that we have seen over the last half of the year into much improved cash flow and operating earnings, as demonstrated in our fourth quarter results. Dave will provide details on our successful restructuring, working capital reduction liquidity improvement actions later in this presentation.
As you can see, in slide number three, sales in the quarter were up 8% versus the fourth quarter 2008 to $752 million. This was our strongest sales quarter for the year, despite the customary December holiday slowdown impacting the number of our industrial markets. The year-to-year sales increase was driven by stronger results in all segments with the exception of Engineered Materials.
We continued to see customer restocking and strong demand growth in Asia in our specialty chemical markets and while Engineering Materials sales for the quarter were down versus last year, sales were up versus the third quarter, signaling a slowing in the destocking activity that started in the second quarter of 2009, many of our manufacturing sites, the reduced rates in the quarter as we continued to make progress in the working capital initiative.
Cytec’s net earnings for the quarter were $34.4 million, or $0.70 per diluted share, excluding the special items that Dave will explain later. This compares with net earnings of $4.7 million, or $0.10 per diluted share in the fourth quarter 2008. Our much improved fourth quarter earnings results are due to improved margins across the company, as raw material costs were down significantly. Stronger demand in the chemicals business and the actions we have taken to lower our cost base.
I will now provide an overview of the business segment results, beginning with Coating Resins on slide four. This segment delivered sales for the quarter of $329 million, a 16% increase over the difficult fourth quarter of 2008. Versus the previous year 2009 selling volumes were up 21%, while lower selling prices reduced sales by 12% and exchange rates had a 7% favorable impact.
Raw material costs were down considerably year-on-year, leading to substantial margin improvement, despite the lower selling prices. Our structural cost reduction actions continued to positively impact segment earnings. However, our plans for reduced rates further reduced inventory levels. The net result of all of the above was operating earnings of $17.6 million in the quarter, up versus an operating loss of $17.8 million in the fourth quarter of 2008.
The chart on slide five displays the monthly sales trend in the segment, which shows strong sales in October and November relative to earlier in the year, and a fall off in December results due to the typical end of year holiday shutdown by many of our customers, particularly in Europe. We continue to see strengthening sales in Asia, led by recovery in the automotive, construction and electronic segments.