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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
4AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
5AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
6AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
7AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
Industrial Materials
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
8AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
9AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
In Process Separation
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
10AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
11AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
12AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
13AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
Sources: Company 10-k, Investor Presentation
14AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
15AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
Sources: Company 10-k, Investor Presentation
16AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
17AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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%
Sources: Team Projections
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%
18AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
Sources: Team Projections
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
19AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
20AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
21AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
Investment Thesis &
Overview
Appendix
22AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
23AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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
24AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
Investment Thesis &
Overview
Pro Forma Balance SheetBalance Sheet
(In millions, except per share amounts) Historical Projected
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
Deferred income taxes 24.1 26.6 8.9 25.2 41.2 42.6 45.5 49.2 53.1 57.4
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
Deferred income taxes 3.1 1.8 0.6 0.1 0.3 0.0 0.0 0.0 0.0 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
Deferred income taxes 71.3 77.1 70.9 31.6 31.4 26.7 22.9 18.7 13.6 0.0
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
Back
25AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
Investment Thesis &
Overview
Pro Forma Statement of Cash Flows
Back
Statement of Cash Flows
(In millions, except per share amounts) Historical Projected
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
26AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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%
Back
27AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
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%
1st Quartile 84.9% 5,931.9 6,505.5 372.4 3,835.5 23.9x 3.0x 11.5x 1.1x $1.69 $4.07 16.1x 3.8%
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
1st Quartile 85.6% 6,430.5 7,564.0 479.6 2,880.1 21.8x 3.3x 11.4x 1.9x $2.26 $3.77 15.3x 4.8%
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
28AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
Investment Thesis &
Overview
Mining Presence
Current Operations Recent Expansion New Market Adjacencies
Back
29AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
Investment Thesis &
Overview
North America Operations
Corporate Headquarters
Aerospace Materials
Industrial Materials
In Process Separation
Additive Technologies
Back
30AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
Investment Thesis &
Overview
Latin America Operations
Corporate Headquarters
Aerospace Materials
Industrial Materials
In Process Separation
Additive Technologies
Back
31AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
Investment Thesis &
Overview
Europe Operations
Corporate Headquarters
Aerospace Materials
Industrial Materials
In Process Separation
Additive Technologies
Back
32AppendixValuation & Final
Thoughts
Growth Opportunities
& DriversIndustry Dynamics
Investment Thesis &
Overview
Asia Pacific Operations
Corporate Headquarters
Aerospace Materials
Industrial Materials
In Process Separation
Additive Technologies
Back