cyt_slidedeck_final

Cytec Industries“Delivering the Vision”

Michael Loffredo | Jed Sekaran | Tyler Smith | Alex Vielmetti

Cleveland Research Company Stock Pitch | 2015

Investment Thesis & Overview

Industry Dynamics

Growth Opportunities & Drivers

Valuation

Final Thoughts

3

6

11

16

20

Appendix 21

3AppendixValuation & Final

Thoughts

Growth Opportunities

& DriversIndustry Dynamics

Investment Thesis &

Overview

Cytec Industries is currently positioned to take advantage of legislative tailwinds and high growth segments of the market

Cytec has substantial contracts with aerospace giants Boeing and Airbus which are rapidly growing production to meet the demand of airlines overhauling their fleets

United States legislation mandates that automakers’ vehicles reach an average gas mileage of 54.5 mpg by the year 2025 increasing demand for lightweight composites

Increased mining production as a result of decreasing ore grades and emerging market demand drives production of In Process Separation chemicals

We recommend Cytec as a Buy with a 12 month price target of $70.50, which represents an upside of 30.51% from the current share price of $54.02

Investment Thesis


Thoughts



Investment Thesis &

Overview

Company Description

Cytec Industries, Inc. operates in the industrial materials and specialty chemicals industry

Operations on all continents

Headquartered in Woodland Park, NJ

NYSE: CYT

2014 Revenue Breakdown

Key Statistics Stock Performance

Company Overview

49.8%

20.4%

16.2%

13.5%

Aerospace Materials

In Process Separation

Industrial Materials

Additive Technologies

0

1

2

3

4

40

44

48

52

56

3/27/2014 7/27/2014 11/27/2014 3/27/2015

Mil

lion

s

Market Data Value

Current Price 54.02 EV/EBITDA 14.0x

Market Cap. 3,853 M EV/Sales 2.2x

Quarterly Dividend $0.125 Price/Book 3.1x

Dividend Yield 0.81% Price/Earnings 23.7x

2014 EPS $2.25 PEG 1.1x

Operations Capital Structure

2014 Revenue 2,008 M Debt 743 M

Gross Margin 29.36% Cash & Equivalents 134 M

EBIT Margin 11.64% Quick Ratio 1.1x

Profit Margin 7.66% Current Ratio 2.3x

Sources: Bloomberg, Company 10-k


Thoughts



Investment Thesis &

Overview

Aerospace Materials Industrial Materials

In Process Separation Additive Technologies

Further Operations

70%

30%

Civil Aircraft Military & Space

• Fighter Jets

• Transports

• Rotocrafts

• Unmanned vehicles

• Launch vehicles/missiles• Large commercial transport

• Business jets

• Regional jets

• Turboprops

25%

14%

11%7%7%

5%

5%

26%

Aerospace

Motorsports

High performance auto

Tooling

Wind energy

Defense

Recreation

Others

45%

25%

15%

15% Copper

Alumina

Other Phosphines(non-mining)

OtherMetals/Minerals

• Gold, molybdenum, nickel, cobalt

• Rare earths

• Industrial minerals

• Soil fumigation

• Electronics/LED

• Hydrofracking50%

42%

8%

Polymer Additives

Specialty Additives

Other

Sources: Company 10-k, Investor Presentation


Thoughts



Investment Thesis &

Overview

Production Strengths

Aerospace backlogs have been increasing steadily since 2009 and at an increasing rate in recent months

Growth in backlog orders fueled by favorable input cost reductions and aging fleets

Carriers are looking to expand capacity to meet rising demand of air travel

Strength in the aerospace segment is expected to continue with rising consumer confidence

Backlog Expansion

Composite Drivers

Carriers are looking to replace their aging fleets with more fuel efficient aircraft

The use of lightweight composite materials helps to increase fuel efficiency and further reduces costs for airlines

Economic viability will continue to increase as costs associated with production of lightweight composites declines

Fleet Turnover

Aerospace Materials

0

100

200

300

400

500

600

700

800

2000 2002 2004 2006 2008 2010 2012 2014

Bil

lion

s

Shipments Orders Backlog

0

9,000

18,000

27,000

36,000

45,000

2014 2019E 2024E 2029E 2034E

Growth Replacement Retained Fleet

14,350 Replacement, 41%

20,930 Growth, 59%

Sources: Company Presentation, Aia-Aerospace, Company 10-k


Thoughts



Investment Thesis &

Overview

Carbon Fiber Uses

Alternate Energy –Wind turbines, nat. gas storage

Efficient Automobiles – Currently in micro-production super-cars, but moving toward large production cars

Construction and Infrastructure – Lightweight pre-cast concrete, earth quake protection

Oil Exploration – Deep sea drilling, oil pipes

Carbon Fiber Market Share

Value of Carbon Fiber

Manufacturing costs can be cut by 80% with carbon fiber vs. steel due to greatly reduced tooling and simpler assembly and joining

Carbon fibers are 10x stronger than steel and 8x than aluminum, as well as much lighter than both materials

Fatigue properties are superior to all known metallic structures

Industry Revenue Outlook


26%

17%

14%

44%Hexcel Corporation

Cytec Industries

Toray Group

Other

(40.0%)

(20.0%)

- -

20.0%

40.0%

60.0%

0

500

1,000

1,500

2,000

2,500

Mil

lion

s

YOY Growth Revenue

Sources: CarbonWorld, IBISWorld, Company 10-k


Thoughts



Investment Thesis &

Overview

“Perfect storm of growth in production [and] reduction in price”

Legal Tailwinds

Obama administration requires average fleet gas mileage to reach 54.5 mpg by 2025 (35.5 in 2016) compared to the current average of 24.2 mpg

Reducing weight by 10% leads to ≈ 7% increase in fuel efficiency

Carbon fiber is not only the lightest alternative, but also requires the least tooling which reduces manufacturing costs

Potential Weight Savings

Automotive Industry

0

500

1,000

1,500

2,000

2,500

0

20,000

40,000

60,000

2013 2014 2015 2016E 2017E 2018E 2019E

Glo

bal

Seri

al A

uto

Opp

ortu

nity

Car

bon

Fibe

r C

ompo

site

Sys

tem

Cos

ts

Carbon Fiber Structure Price Auto Market Opportunity

1,000 EAV

5,000 EAV

10,000 EAV

50,000 EAV25,000 EAV

Thousands Millions

Formula One

Super Car

High-end LuxuryLuxury Serial

Chassis50%

Functional Parts

10%

Semi-Structure

30%

Exterior Body

30%

Interior

50%

Average Car Weight Weight Using Composite Technologies

Sources: CarbonWorld, Wall Street Journal, Company 10-k, Investor Presentation


Thoughts



Investment Thesis &

Overview

Diverse Field

Wide variety of players in the mining chemical industry

Subsets of larger corporations

Oil & Gas: Chevron

Chemical Conglomerates: BASF

Very few suppliers offer the entire range of mining chemicals to maintain decent margins

Global Output

Increasing Importance

$20 billion market size

Depressed metal prices have caused extractors to depend on companies like Cytec for excellent products

Sales are dependent on annual production as opposed to price of commodities

Mining Chemical Functions


49%

18%

17%

11%

4%

1%

Grinding Aids

Sulfide Collectors

Flocculants

Frothers

Other Collectors

Solvent Extractants

- -

4.0%

8.0%

12.0%

16.0%

2011 2012 2013 2014 2015E 2016E 2017E

Copper Production Growth YOY Aluminum Production Growth YOY

Sources: CAS, Company 10-k, Investor Presentation, USGS


Thoughts



Investment Thesis &

Overview

Fragmented Industry

Many players in the additives industry

No one firm is a significant player in every segment of the additives industry

Firms choose to specialize in a few segments of the additives industry

Cytec operates in the polymer, specialty, and formulated resins businesses

Plastic Additives Consumption

Segment Focus

Polymer Additives

Plastics & coatings for: automotive parts, construction, packaging, outdoor furniture, sporting goods, and toys

Specialty Additives

Water-based paints, adhesives, and coatings for textiles and paper, super absorbent polymers, and pharmaceuticals

Formulated Resins

Formulated resins for bonding and/or sealing of electrical and electronic components, and filtration

Customer Industries

Additives Technology

23%

20%

20%

10%

7%

20% Western Europe

United States

China

Africa/Middle East

Japan

Other

Rotomolding

Emulsions

Autos

Pharma

Sources: CAS, Company 10-k, Investor Presentation


Thoughts



Investment Thesis &

Overview

Cutting Through Headwinds

Cytec’s contract structure positions them well in the current macroeconomic environment

Aerospace contracts are denominated in USD

Costs are accumulated in Euros

Diversified customer base hedges Cytec against adverse movements in particular industries

Q1 2015 Earnings Revision

Margin Expansion

Management targets the largest growth in margins in the industrial materials segments

Top line growth, adjacent market penetration, and further efficiencies will drive these expansions

Breakdown

Margins

(33.5%)

(20.7%)

(7.3%)

(20.7%)(18.0%)

(3.3%)

(40.0%)

(30.0%)

(20.0%)

(10.0%)

- -

Oil/Energy IdustrialProducts

Technology Autos BasicMaterial

Cytec

Since 12/18/14

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Aerospace IPS Industrial Materials Additives


Thoughts



Investment Thesis &

Overview

Industry Positioning

Large backlog growth of commercial and military aircraft will lead to steady growth in the coming years

Cytec is well positioned to take advantage of new developmental programs as manufacturers put greater emphasis on weight reduction and fuel efficiency

Diverse portfolio of product offerings allows for application throughout the manufacturing process

Revenue Growth Drivers

Aerospace Development

3.0%

9.0%

7.0%

(1.0%)

- -

3.0%

6.0%

9.0%

12.0%

Base Business/BuildRate

New Programs Sunsetting Programs 2018E

Program OEM Backlog

> $

1M F-35 88

787 864

$500

K-$

1m

A-380 157

747-8 53

C-Series 177

C 919 310

$200

k-$5

00k

A350 678

737 Max 1,431

A400 174

Hondajet 100

Learjet85 100

< $

200k 737 2,014

A320/A320Neo 4,014

SSj 100 232

Cytec Contracted Revenue

Rev

en

ue

pe

r u

nit

Sources: Company Presentation, Company 10-k


Thoughts



Investment Thesis &

Overview

Causes of Diminishing Carbon Fiber Costs

Carbon fiber is still a burgeoning industry with very little automation relative to metal counterparts

Increased automation leads to more consistency among end-product as well as quicker production cycles to increase output

Launch of DForm, an innovative prepreg format that combines short fiber conformability with the handling and laminate characteristics of a conventional long fiber composite

DForm reduces lay-up time by approximately 75%, making the overall tool manufacturing much more cost efficient yet retaining the high-quality surface finish

Economies of scale from large investments to meet mass-commercial demand for carbon fiber components

Revenue Growth Drivers Management Relationships

Capitalizing on Auto Industry

3.0%

11.0%4.0%

4.0%

0.0%

4.0%

8.0%

12.0%

Base Business Growth(non-auto)

Structural Materials(auto)

Process Materials 2018E

Preexisting relationships from plastics additive business can be leveraged into lightweight composite contracts

Precedents from current deals with Lamborghini, Formula 1, and Jaguar/Land Rover



Thoughts



Investment Thesis &

Overview

New Markets

Cytec has recently begun operations in the major mining countries of Kazakhstan and Mongolia

Two of the few areas where new mines are being opened

Opportunities for future geographic expansion with a low cost base

Including Egypt, Turkey, & Indonesia

Ability to increase margins

Revenue Drivers

Catalysts for Increased Production

Diminishing mineral grades means a higher volume must be mined to attain the same output

Increased mining production leads to more demand for IPS chemicals from Cytec

Not dependent on commodity prices

Increase in global demand being driven by emerging markets

Mineral Grade Depreciation

IPS Penetration and Expansion

0.0

0.5

1.0

1.5

2.0

- -

0.4%

0.8%

1.2%

1.6%

Ave

rage

Gol

d G

rade

Ext

ract

ed (

g/t)

Ave

rage

Cop

per

Gra

de E

xtra

cted

(C

u%)

Copper Grade Gold Grade

2.0%

11.0%

3.0%

3.0%

3.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Base BusinessGrowth

Technology /Share Gain

GeographicExpansion /New Mines

New MarketAdjacencies

2018E

Sources: Company 10-k, Investor Presentation, USGS


Thoughts



Investment Thesis &

Overview

Plastics in the Automotive Industry

Increased use of low-density plastic for weight reduction drives growth

7%-8% growth in automotive plastic application

Smaller engines in fuel efficient vehicles produce more heat, further adding to the importance of thermoplastic composites

Growth Drivers

Operational Cash Flow

Cytec’s additives business provides stability to their core business

Strong cash flow generation and limited capital expenditures from this segment allows management to allocate capital in high-growth industries

Return on Invested Capital

Additives Market Opportunities

2.0%

6.0%3.0%

1.0%

- -

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Base BusinessGrowth

PolymerAdditives

SpecialtyAdditives

2018E

- -

4.0%

8.0%

12.0%

CYT ASH POL AKZA ALB



Thoughts



Investment Thesis &

Overview

Valuation Summary

$45.00 $50.00 $55.00 $60.00 $65.00 $70.00 $75.00 $80.00 $85.00 $90.00

Bear Case - Segmented DCF

Public Comparables - P/E

Public Comparables - EV/EBITDA

Base Case - Segmented DCF

Traditional DCF

Bull Case - Segmented DCF

2015E Earnings: $3.13 Forward P/E: 22.5x

2016E Earnings: $3.39 Forward P/E: 20.8x

Sources: Team Projections


Thoughts



Investment Thesis &

Overview

EPS Projections WACC Calculation

Comparables Comparables Analysis

Cytec Industries is undervalued based on the industries it operates in

A sum of parts analysis was used

Specialty chemical companies were given a higher valuation on a P/E basis

Valuation

$1.00

$3.00

$5.00

$7.00

2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

Historical Bear Base Bull

WACC Calculation

Total Debt 743 16.2%

Total Equity 3,855 83.8%

4,597 100.0%

Beta 1.0

Expected Market Return 9.4%

Risk Free Rate 1.8%

Cost of Equity 9.1%

Pre-Cost of Debt 2.0%

Tax Rate 27.0%

Cost of Debt 1.4%

WACC 7.8%


Implied Valuation

EV/EBITDA

1st Quartile Median Mean 3rd Quartile

Implied Share Price $42.96 $55.70 $56.21 $64.74

Upside (20.2%) 3.4% 4.4% 20.2%

P/E

1st Quartile Median Mean 3rd Quartile

Implied Share Price $47.75 $55.41 $67.69 $63.49

Upside (11.3%) 2.9% 25.7% 17.9%


Thoughts



Investment Thesis &

Overview

Segmented DCF Multiple Methodologies

Traditional DCF Sensitivity Analysis

Valuation

PPG Method at 2.75% Exit Mutiple of 10.0x

Terminal Value 6,390

Present Value

PV Sum of Free Cash Flows 995

PV of Terminal Value 4,728

Implied Enterprise Value 5,723

Net Debt 609

Equity Value 5,114

Shares Outstanding 72

Implied Price per Share $70.88

Implied Difference to Current Price 32.68%

PPG Method at 2.75% Exit Mutiple of 10.0x

Terminal Value 6,433

Present Value

PV Sum of Free Cash Flows 995

PV of Terminal Value 4,759

Implied Enterprise Value 5,754

Net Debt 609

Equity Value 5,145

Shares Outstanding 72

Implied Price per Share $71.31

Implied Difference to Current Price 33.49%

Traditional DCF projected revenue and costs using commonly accepted practices

Segmented DCF was calculated from Earnings Before Interest & Taxes margin from each of Cytec’s four segments


WACC WACC

$71.31 6.8% 7.3% 7.8% 8.3% 8.8%

2.3% $81.72 $72.76 $65.39 $59.23 $54.00

2.5% $86.12 $76.24 $68.21 $61.55 $55.94

2.8% $91.05 $80.10 $71.31 $64.08 $58.04

3.0% $96.63 $84.41 $74.73 $66.85 $60.32

3.3% $102.98 $89.26 $78.52 $69.89 $62.81Per

pet

uit

y G

row

th

WACC

$70.88 6.8% 7.3% 7.8% 8.3% 8.8%

2.3% $81.23 $72.32 $65.00 $58.88 $53.68

2.5% $85.59 $75.78 $67.80 $61.18 $55.61

2.8% $90.49 $79.62 $70.88 $63.70 $57.69

3.0% $96.03 $83.90 $74.27 $66.45 $59.96

3.3% $102.35 $88.71 $78.04 $69.47 $62.43

Per

pet

uit

y

Gro

wth


Thoughts



Investment Thesis &

Overview

Positioning Analysis

Loss of contracts with major customers like Boeing or Airbus

R&D could yield major advancement in lightweight technologies

M&A opportunities to expand distribution or augment current product offerings

Current lack of feasible recycling methods for carbon fiber

W

TO

Strong contracts with aerospace producers denominated in USD

Large backlog of revenue for customers allows for accurate projections

Strong cash flow generation

Experienced management across all segments S

High cost differential between carbon fiber and high strength aluminum

The emergence of a lightweight compound other than carbon fiber to steal market share

Political/economic unrest in regions served by IPS segment

Sources: Company 10-k, Bloomberg


Thoughts



Investment Thesis &

Overview

Final Thoughts

Cytec Industries is currently positioned to take advantage of legislative tailwinds and high growth segments of the market

Cytec has substantial contracts with aerospace giants Boeing and Airbus which are rapidly growing production to meet the demand of airlines overhauling their fleets

United States legislation mandates that automakers’ vehicles reach an average gas mileage of 54.5 mpg by the year 2025 increasing demand for lightweight composites

Increased mining production as a result of decreasing ore grades and emerging market demand drives production of In Process Separation chemicals

We recommend Cytec as a Buy with a 12 month price target of $70.50, which represents an upside of 30.51% from the current share price of $54.02


Thoughts



Investment Thesis &

Overview

Appendix


Thoughts



Investment Thesis &

Overview

Appendix Contents

Pro Forma Income Statement

Pro Forma Balance Sheet

Pro Forma Statement of Cash Flows

Segmented Base Case DCF

Comparables

Mining Presence

North America Operations

Latin America Operations

Europe Operations

Asia Pacific Operations


Thoughts



Investment Thesis &

Overview

Pro Forma Income StatementIncome Statement

(In millions, except per share amounts) Historical Projected

2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

Revenue

Additive Technologies 271.0 287.2 270.4 275.2 271.3 290.3 307.7 329.2 349.0 366.5

In Process Separation 292.2 339.5 384.2 382.7 410.5 433.1 463.4 514.4 570.9 633.8

Industrial Materials 0.0 0.0 176.4 316.3 325.8 335.6 362.4 398.7 442.5 495.6

Aerospace Materials 0.0 0.0 877.1 960.8 1,000.1 1,075.1 1,161.1 1,254.0 1,366.9 1,503.6

Engineered Materials 660.2 789.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total revenue 1,223.4 1,415.9 1,708.1 1,935.0 2,007.7 2,134.1 2,294.6 2,496.3 2,729.3 2,999.4

Operating income

Additive Technologies 40.3 39.4 40.8 39.6 33.9 37.7 43.1 47.7 52.4 55.0

In Process Separation 55.2 69.7 95.3 86.5 95.6 99.6 111.2 126.0 142.7 164.8

Industrial Materials 0.0 0.0 11.4 19.0 30.8 30.2 36.2 43.9 53.1 62.0

Aerospace Materials 0.0 0.0 168.5 177.6 178.2 204.3 223.5 244.5 273.4 308.2

Engineered Materials 107.1 124.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Operating income from business segements 202.6 234.0 316.0 322.7 338.5 371.8 414.1 462.1 521.6 589.9

Amortization of acquisition intangibles 15.6 13.9 12.3 11.0 9.8

Net (loss) gain on sale of assets 0.0 0.0 0.0 0.0 0.0

Asset impairment charge 0.0 0.0 0.0 0.0 0.0

EBIT 356.2 400.2 449.8 510.6 580.2

Other (expense)/income, net (8.5) (9.2) (10.0) (10.9) (12.0)

Net loss on earnly extinguishment of debt 0.0 0.0 0.0 0.0 0.0

Interest expense, net 27.8 24.8 16.3 15.1 20.5

EBT 319.9 366.2 423.5 484.6 547.7

Income tax provision 86.4 102.5 122.8 145.4 169.8

Net Income 233.6 263.6 300.7 339.2 377.9

Basic weighted shares outstanding 98.68 96.90 92.07 78.84 72.16 71.22 70.28 69.35 67.94 66.54

Diluted weighted shares outstanding 99.73 98.01 93.57 80.37 73.38 72.64 71.69 70.73 69.30 67.87

Basic earnings per common share

Continuing operations $3.28 $3.75 $4.34 $4.99 $5.68

Discontinued operations $0.00 $0.00 $0.00 $0.00 $0.00

$3.28 $3.75 $4.34 $4.99 $5.68

Diluted earnings per common share

Continuing operations $3.22 $3.68 $4.25 $4.89 $5.57

Discontinued operations $0.00 $0.00 $0.00 $0.00 $0.00

$3.22 $3.68 $4.25 $4.89 $5.57

Dividends per common share $0.025 $0.250 $0.250 $0.250 $0.375 $0.500 $0.625 $0.750 $0.863 $0.992

Back


Thoughts



Investment Thesis &

Overview

Pro Forma Balance SheetBalance Sheet


Assets 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

Current assets

Cash and cash equivalents $383.3 $415.8 $179.3 $151.8 $133.9 $265.7 $429.9 $832.9 $1,005.1 $1,494.9

Trade accounts receivable, less allowance 370.6 396.6 263.6 251.3 265.1 263.1 281.5 306.4 334.2 366.5

Other accounts receivable 51.4 42.5 39.1 74.4 74.6 95.8 95.6 103.3 111.6 120.5

Inventories 350.0 374.3 269.8 253.1 307.6 284.2 298.6 323.4 346.6 374.3

Deferred income taxes 40.6 39.4 38.4 32.1 27.4 26.7 28.7 31.2 34.1 37.5

Other current assets 22.4 19.2 18.9 25.1 26.2 27.7 29.8 32.5 35.5 39.0

Current assets held for sale 93.1 0.0 409.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total current assets 1,311.4 1,287.8 1,218.8 787.8 834.8 963.2 1,164.2 1,629.7 1,867.1 2,432.6

Investement in associated companies 19.7 19.2 1.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Plants, equipment, and facilities, net 1,126.2 1,114.5 835.3 1,047.0 1,121.4 1,246.7 1,345.0 1,439.1 1,556.7 1,679.9

Acquisition intangibles, net 347.0 303.4 183.7 161.1 141.6 126.0 112.2 99.8 88.8 79.1

Goodwill 685.7 675.7 525.3 521.3 508.8 498.6 488.7 478.9 469.3 459.9


Other assets 88.5 109.5 88.7 138.1 119.4 128.0 137.7 149.8 163.8 180.0

Non-current assets held for sale 71.3 0.0 1,061.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total Assets $3,673.9 $3,536.7 $3,924.2 $2,680.5 $2,767.2 $3,005.2 $3,293.2 $3,846.4 $4,198.8 $4,888.8

Liabilities

Current liabilities

Accounts payable $263.6 $281.6 $176.4 $175.7 $172.4 $189.5 $199.1 $215.6 $231.0 $249.5

Short-term borrowings 6.1 3.5 3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Current martiurites of long-term debt 0.0 0.0 136.1 0.1 1.2 0.0 82.3 0.0 0.0 0.0

Accrued expenses 223.2 214.2 177.4 178.4 184.6 193.8 206.9 223.8 242.9 265.0

Income taxes payable 19.7 20.8 51.4 14.2 8.4 10.4 6.2 3.7 2.2 0.0


Current liabilities held for sale 63.9 0.0 265.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total current liabilities 579.6 521.9 810.8 368.5 366.9 393.7 494.4 443.0 476.1 514.6

Long-term debt 641.5 635.9 567.4 716.2 741.7 742.2 661.9 961.9 961.9 1,261.9

Pension and other postretirement benefit liabilities 364.2 337.4 275.5 195.2 245.9 291.6 334.9 374.8 414.0 452.0

Other noncurrent liabilities 272.8 271.1 198.3 187.1 170.3 192.1 206.5 224.7 245.6 269.9


Non-current liabilities held for sale 7.6 0.0 198.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Stockholders' Equity

Preferred stock 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Common stock, $.01 par value per share 0.5 0.5 0.5 1.0 1.0 1.0 1.0 1.0 1.0 1.0

Additional paid-in capital 451.5 461.2 465.6 467.4 474.2 474.2 474.2 474.2 474.2 474.2

Retained earnings 1,293.0 1,476.4 1,419.2 1,572.8 1,699.6 1,897.6 2,161.2 2,461.9 2,801.1 3,179.0

Accumulated other comprehensive (loss) income (14.4) (66.5) 155.7 95.7 13.1 13.1 13.1 13.1 13.1 13.1

Treasury stock 0.0 (185.0) (243.3) (955.0) (976.9) (1,026.9) (1,076.9) (1,126.9) (1,201.9) (1,276.9)

Total Cytec Industries Inc. stockholders' equity 1,730.6 1,686.6 1,797.7 1,181.9 1,211.0 1,359.0 1,572.6 1,823.3 2,087.5 2,390.4

Noncontrolling interests 6.3 6.7 5.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total equity 1,736.9 1,693.3 1,803.0 1,181.9 1,211.0 1,359.0 1,572.6 1,823.3 2,087.5 2,390.4

Total Liabilities and Stockholders' Equity $3,673.9 $3,536.7 $3,924.2 $2,680.5 $2,767.2 3,005.2 3,293.2 3,846.4 4,198.8 4,888.8

check 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net Working Capital 325.4 353.6 224.0 267.6 335.2 303.8 322.2 353.7 385.9 423.2

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Thoughts



Investment Thesis &

Overview

Pro Forma Statement of Cash Flows

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Statement of Cash Flows


2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

Cash Flows Provided by (Used in) Operating Activities

Net earnings $175.1 $189.0 $177.0 $173.9 $153.8 $232.6 $291.0 $317.3 $348.6 $367.6

Earnings from discontinued operations (108.1) (131.5) (101.3) (2.2) (9.7) 0.0 0.0 0.0 0.0 0.0

Earnings from continuing operations 67.0 57.5 75.7 171.7 144.1 232.6 291.0 317.3 348.6 367.6

Noncash items including in earnings from continuing operations:

Depreciation 37.4 45.0 58.6 56.0 63.7 56.1 62.3 80.6 100.4 116.0

Amortization 9.0 8.7 14.1 19.2 17.9 15.6 13.9 12.3 11.0 9.8

Share-based compensation 10.2 11.1 11.3 11.4 11.6 0.0 0.0 0.0 0.0 0.0

Pension and postretirement benefit (income) expense 0.0 66.0 43.1 (47.2) 100.8 60.8 61.9 63.2 64.6 65.9

Contributions to pension and post retirement plans 0.0 (66.7) (51.3) (79.8) (13.6) (15.1) (18.6) (23.3) (25.4) (27.9)

Deferred income taxes (8.7) (9.9) (39.6) 23.5 (8.7) (5.7) (8.7) (10.2) (11.6) (20.2)

Non-cash loss on on sale of assets (2.3) (3.3) 16.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Non-cash loss on disposal of assets and asset impairment charge 0.0 0.0 2.0 9.5 2.5 0.0 0.0 0.0 0.0 0.0

Loss on early extinguishment of debt 0.8 0.3 0.2 39.4 22.7 0.0 0.0 0.0 0.0 0.0

Unrealized loss (gain) on derivative instruments (0.8) 2.1 (4.5) 0.3 7.4 0.0 0.0 0.0 0.0 0.0

Other 0.3 0.0 0.1 0.4 0.0 1.9 1.0 (1.2) (2.2) (3.4)

Changes in operating assets and liabilities

Trade accounts receivable (26.0) (44.2) (9.0) 13.6 (37.6) 2.7 (17.0) (22.5) (23.4) (25.2)

Other receivables (4.9) 5.7 12.4 (0.3) 0.2 (5.2) 0.1 (6.4) (6.9) (7.4)

Inventories (17.0) (33.1) (8.4) 11.5 (66.9) 23.4 (14.4) (24.8) (23.1) (27.7)

Other assets (4.2) (3.4) 1.0 (9.2) (0.8) (1.5) (1.9) (2.4) (2.6) (2.8)

Accounts payable 29.1 26.9 (1.7) 4.2 29.2 17.1 9.6 16.5 15.4 18.5

Accrued expenses 25.6 (9.8) 24.4 9.2 (0.3) 8.5 7.3 16.0 15.9 18.6

Income taxes payable 4.0 (4.2) 27.5 (58.9) 1.3 1.9 (3.5) (2.9) (1.6) (2.2)

Other liabilities (58.7) 12.9 (4.9) (16.5) (10.4) 21.2 13.4 16.4 17.7 19.1

Net cash provided by operating activities of continuing operations 60.8 61.6 167.7 158.0 263.1 414.4 396.4 428.7 476.8 498.6

Net cash provided by operating activities of discontinued operations 218.0 150.2 146.0 (127.4) 0.3 0.0 0.0 0.0 0.0 0.0

Net cash provided by operating activities 278.8 211.8 313.7 30.6 263.4 414.4 396.4 428.7 476.8 498.6

Cash Flows Provided by (Used in) Investing Activities

Additions to plants, equipment, and facilities (81.5) (78.9) (145.3) (304.9) (220.8) (180.9) (159.4) (172.2) (212.5) (229.5)

Acquistiion of businesses, net of cash received 0.0 0.0 (449.3) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net proceeds received on sale of assets 0.3 3.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net cash used in investing activities of continuing operations (81.2) (75.5) (594.6) (304.9) (220.8) (180.9) (159.4) (172.2) (212.5) (229.5)

Net cash provided (used) in investing activities of discontinued operations (44.3) 117.8 84.7 1,017.0 0.0 0.0 0.0 0.0 0.0 0.0

Net cash provided by (used in) investing activities ($125.5) $42.3 ($509.9) $712.1 ($220.8) (180.9) (159.4) (172.2) (212.5) (229.5)

Cash Flows Provided by (Used in) Financing Activities

Proceeds from long-term debt 0.0 0.0 318.1 634.1 251.4 0.5 2.0 300.0 0.0 300.0

Payments on long-term debt (34.3) (5.9) (268.4) (658.2) (246.4) (1.2) 0.0 (82.3) 0.0 0.0

Change in short-term borrowings (4.9) (2.8) (0.5) 2.2 0.0 0.0 0.0 0.0 0.0 0.0

Cash dividends (3.8) (27.1) (25.9) (21.5) (26.9) (35.6) (43.9) (52.0) (58.6) (66.0)

Proceeds from the exercise of stock options 20.5 8.1 28.0 23.5 15.4 0.0 0.0 0.0 0.0 0.0

Excess tax benefits from share-based payment arangements 0.0 1.5 5.9 5.5 7.9 0.0 0.0 0.0 0.0 0.0

Purchase of treasury stock 2.9 (196.1) (99.9) (750.1) (50.0) (50.0) (50.0) (50.0) (75.0) (75.0)

Net cash settlement of cross currency swaps (14.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other 0.0 10.8 (1.3) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net Cash Used in Financing Activities (33.6) (211.5) (44.0) (764.5) (48.6) (86.3) (91.9) 115.7 (133.6) 159.0

Effect of currency rate changes on cash and cash equivalents 1.9 (10.1) 3.7 (5.7) (11.9) 0.0 0.0 0.0 0.0 0.0

Increase (Decrease) in Cash and Cash Equivalents $121.6 $32.5 ($236.5) ($27.5) ($17.9) 147.2 145.0 372.3 130.7 428.2

Cash and cash equivalents, beginning of period 261.7 383.3 415.8 179.3 151.8 133.9 281.1 426.1 798.4 929.1

Cash and Cash Equivalents, End of Period $383.3 $415.8 $179.3 $151.8 $133.9 $281.1 $426.1 $798.4 $929.1 $1,357.3

DEBT/EBITDA 4.01 4.11 3.43 1.86 2.36 1.73 1.44 1.68 1.49 1.79

Plant, Property, & Equipment Schedule

Beginning Balance 1,121.4 1,246.2 1,343.3 1,434.9 1,546.9

Capital Expenditures 180.9 159.4 172.2 212.5 229.5

Depreciation (56.1) (62.3) (80.6) (100.4) (116.0)

Ending Balance $1,126.2 $1,114.5 $835.3 $1,047.0 $1,121.4 $1,246.2 $1,343.3 $1,434.9 $1,546.9 c


Thoughts



Investment Thesis &

Overview

Segmented Base Case DCF

SEGMENTED DISCOUNTED CASH FLOWS

In millions, expect per share data

Historical Projected

2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

EBITDA 159.9 154.9 204.9 384.6 315.3 427.9 476.4 542.8 622.3 706.7

Less D&A 46.4 53.7 72.7 75.2 81.6 71.6 76.2 93.0 111.7 126.5

EBIT 113.5 101.2 132.2 309.4 233.7 356.2 400.2 449.8 510.6 580.2

Tax Effect 10.2 15.4 35.2 91.7 56.6 96.2 112.1 130.4 153.2 179.8

NOPAT 103.3 85.8 97.0 217.7 177.1 260.1 288.1 319.4 357.4 400.3

Add: D&A 46.4 53.7 72.7 75.2 81.6 71.6 76.2 93.0 111.7 126.5

Less: CapEx 81.5 78.9 145.3 304.9 220.8 181.4 160.6 174.7 218.3 239.9

Less: Change in NWC (28.2) 129.6 (43.6) (67.6) 31.4 (18.4) (31.5) (32.2) (37.3)

Free Cash Flow $88.8 ($105.2) $31.6 $105.5 $118.9 $222.1 $269.2 $283.0 $324.2

PV of FCF 110.3 191.0 214.7 209.4 222.4

Assumptions

Shares Outstanding 72.16 Cost of Equity 9.1%

Current Share Price $53.42 Cost of Debt 2.0%

Beta 0.95 Tax Provision 24.0%

Risk-free Rate 1.8% Market Value of Equity 3,854.52

Expected Market Return 9.4% Market Value of Debt 742.90

EV/EBITDA 13.0x WACC 7.8%

Perpetuity Growth Rate 2.75%

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Thoughts



Investment Thesis &

Overview

Comparables

Aerospace & Industrial Comparables

LTM Price Enterprise Value

EBITDA Revenue Earnings Book EBITDA Revenue

B/E Aerospace Incorporated BEAV US $62.90 85.9% 6,665.1 8,561.7 757.3 3,840.9 23.0x -- 11.3x 2.2x $2.73 $3.62 19.5x 4.0%

Hexcel Corporation HXL US $51.28 97.8% 4,940.4 5,285.8 377.0 1,855.5 23.8x 4.3x 14.0x 2.8x $2.16 $2.70 20.9x 11.3%

Precision Casparts Corporation PCP US $210.80 76.6% 29,884.6 33,626.6 3,147.0 10,039.0 16.2x 2.5x 10.7x 3.3x $13.05 $14.06 15.0x 18.5%

Spirit Aerosystems Holdings Incorporated SPR US $52.46 99.3% 7,286.0 8,062.1 530.0 6,799.2 20.7x 4.4x 15.2x 1.2x $2.53 $4.03 13.8x 5.3%

Transdigm Group Incorporated TDG US $220.25 97.4% 11,609.2 18,070.7 1,052.2 2,430.5 65.4x -- 17.2x 7.4x $3.37 $9.67 24.4x 12.9%

1st Quartile 85.9% 6,665.1 8,062.1 530.0 2,430.5 20.7x 3.4x 11.3x 2.2x $2.53 $3.62 15.0x 5.3%

Median 97.4% 7,286.0 8,561.7 757.3 3,840.9 23.0x 4.3x 14.0x 2.8x $2.73 $4.03 19.5x 11.3%

Mean 91.4% 12,077.1 14,721.4 1,172.7 4,993.0 29.8x 3.7x 13.7x 3.4x $4.77 $6.81 18.7x 10.4%

3rd Quartile 97.8% 11,609.2 18,070.7 1,052.2 6,799.2 23.8x 4.3x 15.2x 3.3x $3.37 $9.67 20.9x 12.9%

Specialty Chemical Comparables

LTM Price Enterprise Value

EBITDA Revenue Earnings Book EBITDA Revenue

Ashland Incorporated ASH US $127.25 97.4% 8,813.9 10,832.9 463.0 6,079.0 60.6x 2.7x 23.4x 1.8x $2.10 $8.43 16.3x 3.8%

PolyOne Corporation POL US $36.78 84.9% 3,280.0 4,066.1 279.0 3,835.5 43.3x 4.2x 14.6x 1.1x $0.85 $2.59 16.1x 2.1%

Valspar Corporation/The VAL US $82.86 91.1% 6,732.2 8,246.7 718.4 4,581.0 17.3x 7.0x 11.5x 1.8x $4.78 $5.23 17.0x 7.6%

Akzo Nobel AKZA NA $71.20 99.1% 19,219.3 21,739.7 2,132.2 18,992.1 23.9x 3.0x 10.2x 1.1x $2.98 $4.22 18.4x 3.8%

Albemarle Corporation ALB US $52.89 69.3% 5,931.9 6,505.5 372.4 2,502.4 31.3x 3.0x 17.5x 2.6x $1.69 $4.07 14.6x 5.5%


Median 91.1% 6,732.2 8,246.7 463.0 4,581.0 31.3x 3.0x 14.6x 1.8x $2.10 $4.22 16.3x 3.8%

Mean 88.4% 8,795.5 10,278.2 793.0 7,198.0 35.3x 4.0x 15.4x 1.7x $2.48 $4.91 16.5x 4.6%

3rd Quartile 97.4% 8,813.9 10,832.9 718.4 6,079.0 43.3x 4.2x 17.5x 1.8x $2.98 $5.23 17.0x 5.5%

Cytec Industries Incorporated CYT US $54.02 98.9% 3,852.9 4,419.1 324.8 2,007.7 24.1x 3.1x 13.6x 2.2x $2.13 $3.72 16.0x 7.7%

Sum of Parts Applied


Median 95.4% 7,108.8 8,460.9 663.1 4,077.7 25.7x 3.9x 14.2x 2.5x $2.53 $4.09 18.5x 8.9%

Mean 90.4% 11,027.0 13,299.6 1,051.2 5,698.6 31.6x 3.8x 14.2x 2.9x $4.04 $6.20 18.0x 8.5%

3rd Quartile 97.7% 10,714.7 15,754.6 945.4 6,568.7 30.0x 4.3x 15.9x 2.9x $3.24 $8.25 19.7x 10.5%

EPS (TTM)Estimated

EPSForward PE

Profit

MarginCompany Name

Ticker &

ExchangeShare Price

% of 52-

Week HighMarket Cap.

Enerprise

Value

EPS (TTM)Estimated

EPSForward PE

Profit

MarginCompany Name

Ticker &

ExchangeShare Price

% of 52-

Week HighMarket Cap.

Enerprise

Value

Back


Thoughts



Investment Thesis &

Overview

Mining Presence

Current Operations Recent Expansion New Market Adjacencies

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Thoughts



Investment Thesis &

Overview

North America Operations

Corporate Headquarters

Aerospace Materials




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Thoughts



Investment Thesis &

Overview

Latin America Operations


Aerospace Materials




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Thoughts



Investment Thesis &

Overview

Europe Operations


Aerospace Materials




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Thoughts



Investment Thesis &

Overview

Asia Pacific Operations


Aerospace Materials




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Documents

market cytec

high growth segments

recent months growth

increasing demand

process separation chemicals

growing production

current ratio

current share price