13 May 2005
13 May 2005
Cytec Industries Inc. have incurred a net loss for the first quarter of 2005 of $6.5 million or $0.16 loss per basic share on net sales of $564 million.
Net earnings were $38.9 million or $0.89 on a diluted share basis compared with net earnings for the comparable period of 2004 which were $33.2 million or $0.83 per diluted share, on net sales of $415 million.
David Lilley, Chairman, President and Chief Executive Officer said, “We were pleased to close on our acquisition of Surface Specialties on February 28, 2005 and this obviously had a major impact on our first quarter results.” The acquisition was valued at $1.8 billion of which $1.5 billion was paid in cash and the remainder in 5,772,857 shares of Cytec stock valued at $0.3 billion. The cash portion was funded with the following: $725 million from a five year term loan, $600 million from a 364 day credit facility and $180 million of Cytec’s existing cash. Cytec expects to refinance the $600 million 364 day credit facility with long term debt later this year.
Mr. Lilley commented further, “Overall, sales for the quarter were up 36% compared to the same quarter in 2004, with 27% due to the acquisition of the Surface Specialties business which reflects one month of operations under Cytec. Selling prices increased 6% as our initiatives are catching up to the significant raw material cost increases we have encountered. Base selling volumes were up 2% and favourable exchange increased sales 1%. The integration of Surface Specialties into Cytec continues and we are excited about the possibilities this acquisition brings to us.”
The increase in operating earnings of $5 million was due to higher selling volumes and prices along with improved plant operations offsetting raw material cost increases.
James P. Cronin, Executive Vice President and Chief Financial Officer commented, “Earlier this month we announced that we reached a definitive agreement to sell our 50% interest in CYRO Industries (CYRO) to our partner, Degussa, for cash consideration of $95 million subject to customary closing conditions. We expect the closing to occur at the end of this month and that the proceeds will essentially cover the book value of our investment in CYRO. The net after tax proceeds will be used to pay down debt related to our acquisition of Surface Specialties. For the quarter, sales and earnings from CYRO increased from the year ago period primarily due to volume gains.
Mr. Lilley commented further, “…oil and gas prices have increased and remain stubbornly high which is keeping the upward pressure on raw material and energy costs. We continue to aggressively pursue selling price increases to compensate and we now believe we are beginning to catch up and improve margins. However, we are concerned with the slowdown in demand which we, and our customers, have seen in the latter part of the quarter, particularly in Europe and Asia in our Performance Specialties and Surface Specialties segments and, at present, do not foresee a significant decline in raw material and energy costs.
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