Cytec Announces Second Quarter Results Full Year 2006 Outlook Updated

Cytec Industries Inc. (NYSE:CYT) announced today netearnings for the second quarter of 2006 of $48.4 million or $1.00 perdiluted share on net sales of $853 million. Included in the quarter isa pre-tax net restructuring charge of $21.9 million (after-tax $15.4million or $0.32 per diluted share), a pre-tax charge of $1.0 million(after-tax $0.8 million or $0.01 per diluted share) for integrationexpenses related to the Surface Specialties acquisition, a pre-taxgain relating to the receipt of $15.6 million (after-tax $12.4 millionor $0.26 per diluted share) in a legal dispute and an income taxbenefit of $3.5 million ($0.07 per diluted share) related to thecompletion of prior years tax audits. Excluding these items, netearnings were $48.7 million or $1.00 per diluted share.

Net earnings for the second quarter of 2005 was $11.9 million or$0.25 per diluted share on net sales of $813 million. Included in thequarter was a purchase accounting related charge of $10.3 millionpre-tax (after-tax $7.5 million, or $0.16 per diluted share) relatedto the 2005 acquisition of the Surface Specialties business, a pre-taxcharge of $28.0 million (after-tax $17.7 million or $0.37 per dilutedshare) for interest rate derivative transactions associated with theSurface Specialties acquisition, a pre-tax charge of $2.4 million(after-tax $1.8 million or $0.04 per diluted share) for an anticipatedsettlement of a certain litigation matter, a pre-tax charge of $22.0million (after-tax $14.0 million or $0.30 per diluted share)pertaining to the optional redemption of our Mandatory Par PutRemarketed Securities (MOPPRS) prior to their maturity and an incometax benefit of $9.6 million, or $0.20 per diluted share, reflectingthe partial resolution of a tax audit in Norway with respect to prioryear tax returns. Excluding these special items, net earnings were$43.3 million or $0.92 per diluted share.

David Lilley, Chairman, President and Chief Executive Officersaid, "Our second quarter results continued the positive momentum fromthe first quarter. The benefits of our previous initiatives are nowbeing realized in our financial results and in spite of the headwindsof higher raw material costs, primarily related to propylene and itsderivatives, our operating margin improved to almost 10%.

Cytec Performance Chemicals Sales increased 1% to $230 million;Operating Earnings increased to $18.3 million

Mr. Lilley continued, "In Cytec Performance Chemicals, sellingvolumes decreased 1%, selling prices increased 2% and exchange ratechanges were flat. Strong sales volume in mining chemicals andpressure sensitive adhesives were more than offset by lower volumes inspecialty additives and in water treatment chemicals, primarily intothe paper sector.

"Operating earnings increased to $18.3 million primarily due tothe benefits of restructuring and a better product mix partiallyoffset by higher raw material costs and expense of $0.9 million forstock options and stock appreciation rights settled in stock relatedto the application of "Financial Accounting Standard No. 123R, "ShareBased Payment" (SFAS 123R). Included in 2005, and related to theSurface Specialties acquisition, is a charge of $1.3 million for theexcess of the fair value of the finished goods inventory of theacquired business over normal manufacturing cost.

Cytec Surface Specialties Sales increased 5% to $391 million;Operating Earnings increased to $29.5 million

"In Cytec Surface Specialties, selling volumes increased 7%,selling prices decreased 2% and exchange rate changes were flat. Theincrease in selling volumes was strong in all regions except NorthAmerica. Selling prices were down in radcure and powder coatingresins.

"Operating earnings increased to $29.5 million primarily due toincreased selling volumes, improved product mix, favorable rawmaterial costs principally in the radcure product line and thebenefits of restructuring partially offset by lower selling prices andexpense of $0.8 million for stock options and stock appreciationrights settled in stock related to the application of SFAS 123R.Included in 2005 and related to the Surface Specialties acquisition,is a charge of $9.0 million for the excess of the fair value of thefinished goods inventory of the acquired business over normalmanufacturing cost.

Cytec Engineered Materials Sales increased 8% to $152 million;Operating Earnings increased to $28.3 million

"Cytec Engineered Materials selling volumes increased 5%, sellingprices increased 3% and exchange rate changes were essentially flat.The selling volume increase was primarily due to higher build ratesfor large commercial aircraft partially offset by the expected rampdown in volume to a European high-end automotive program.

"Operating earnings improved 12% to $28.3 million, primarily dueto higher selling volumes and selling prices. Included in operatingearnings is expense of $0.6 million for stock options and stockappreciation rights settled in stock related to the application ofSFAS 123R.

Building Block Chemicals Sales increased 10% to $81 million;Operating Earnings decreased to $6.2 million

"Building Block Chemicals selling volumes increased 1%, sellingprices increased 9% and exchange rate changes were flat. Due totighter supply/demand conditions for acrylonitrile, selling pricesincreased.

"Operating earnings decreased to $6.2 million. Selling priceincreases almost offset the increase in raw material costs. Our plantoperations ran well, however, similar to last quarter, our melaminemanufacturing joint venture partner did not take any production duringthe quarter. The resulting operational inefficiencies associated withthe melamine plant being down for about half the quarter reducedearnings by slightly over $1 million. Also included is expense of $0.3million for stock options and stock appreciation rights settled instock related to the application of SFAS 123R."

Earnings in Associated Companies

Earnings in Associated Companies decreased from the prior yearperiod as a result of the May 2005 sale of our 50% interest in CYROIndustries to our former partner, Degussa.

Corporate and Unallocated

James P. Cronin, Executive Vice President and Chief FinancialOfficer commented, "During the quarter, we recorded a netrestructuring charge of $21.9 million, which was primarily recorded incost of sales. Of the net restructuring charge, $22.6 million relatesto permanently shutting down manufacturing operations for two oldertechnology polymer additive light stabilizer products produced at ourmanufacturing facility in Botlek, the Netherlands which included afull review of the support and commercial infrastructure at the site.Included in the $22.6 million charge is a non-cash $13.8 millionwrite-off of polymer additive assets at our Botlek site with themajority of the remaining amount being mostly severance related. Oneof the products, CYASORB(R) UV-5411 light stabilizer, will beconsolidated at our Willow Island, West Virginia facility. Productionof the other product, CYASORB(R) UV-1084 light stabilizer, is expectedto cease by the end of the third quarter and we will exit this productline. The remainder of the net restructuring charge is a reduction of$0.7 million of a previous restructuring accrual primarily as a resultof incurring less cost than originally estimated.

"Included in administrative expense are integration costs of $1.0million related to the Surface Specialties acquisition. Theseintegration costs which began in the second quarter, the majority ofwhich are duplicative in nature, are being incurred primarily as aresult of the elimination of transition service agreements that werein place with the former owner regarding the information technologyhardware infrastructure.

"In addition, we realized a gain of $15.6 million during thequarter which is included in other income (expense), net relating to alegal dispute with a European firm that was in arbitration proceedingssince 2000. After proceeding through a number of appeals the defendantwas ordered to pay us damages and we collected essentially all of thecash in the second quarter. Although a final appeal is pending, webelieve the appeal is without merit.

"Included in administrative expense in the second quarter of 2005was a pre-tax charge for $2.4 million ($1.8 million after-tax) relatedto an increase in accrual for a certain litigation matter.

"Included in other income (expense), net in the second quarter of2005 was a pre-tax loss of $28.0 million ($17.7 million after-tax or$0.38 per diluted share) pertaining to interest rate derivativetransactions related to the acquisition of the Surface Specialtiesbusiness."

Interest Expense

Mr. Cronin commented, "Interest expense was reduced from the prioryear quarter due to the overall lower debt level as we continue tomake good progress in reducing debt incurred for the SurfaceSpecialties acquisition in the first quarter of 2005.

"In the second quarter of 2005, we redeemed our $120 millionMOPPRS debt at the optional redemption price of approximately $141million which included $21 million for the value of redeeming thesecurities prior to their final maturity. In addition, we recognized acharge of $1 million from amounts related to the unamortized putpremium and rate lock agreements for these securities. Accordingly,2005 interest expense includes a total pre-tax charge of $22.0 millionrelated to this transaction."

Income Tax Expense

Mr. Cronin added, "Our tax provision for the second quarter of2006 was $10.9 million, or 18.4%, on the earnings before income taxes.Favorably impacting the rate for the quarter is a reduction in incometax expense of $3.5 million related to the completion of prior yearsU.S. tax audits. Also favorably impacting the tax rate was the taxbenefit from the restructuring charge which was recorded at 29.6% andthe gain on the favorable resolution of the previously mentioned legaldispute which was effectively recorded at a tax provision of 20%.Excluding these items, our underlying effective tax rate for thequarter was 27%.

"For the second quarter of 2005 our effective tax rate forcontinuing operations was favorably impacted by a reduction in incometax expense of $9.6 million related to a partial resolution of a taxaudit in Norway with respect to prior years tax returns. Alsofavorably impacting the rate were the losses incurred in the U.S. onthe interest rate derivatives and the MOPPRS redemption. The taxbenefit on these losses is recorded at 36.5%. Excluding these items,our underlying effective tax rate for the quarter was 27%."

Cash Flow

Mr. Cronin commented further, "Cash flow provided by operationswas $74 million for the quarter. Trade accounts receivable dollarswere up $37 million, in line with the increase in sales. Inventorydollars increased $18 million and days outstanding are 71, up about 3days from year end. Capital spending for the quarter was $25 millionand our full year estimate of $110 million is unchanged. We continueto pay down debt in advance of scheduled payment dates and during thequarter we paid down $59 million of our debt."

Sale of Water Treatment Chemicals and Acrylamide Product Lines

Mr. Lilley commented further, "On July 17, 2006 we announced thatwe had reached a definitive agreement to sell our water treatmentchemicals and acrylamide product lines with estimated 2006 sales ofapproximately $300 million, to Kemira Group, for approximately $240million cash. The closing of the sale is expected in two phases. Thefirst phase, which includes the entire product lines excluding Cytec'smanufacturing site in the Netherlands, is expected to close by the endof September, 2006. The second phase for the Netherlands site isexpected to close in early 2007. Between the closing of phase one andphase two, Cytec will contract manufacture and sell water treatmentchemicals and acrylamide at the Botlek site solely to Kemira. Thetiming of the flow of funds is $220 million upon the first closingwith the balance payable upon the second closing. Both closings aresubject to regulatory approval and certain other conditions.

"When completed, this transaction will streamline Cytec, furtherimprove our balance sheet and let us increase our focus on our growthbusinesses. The net effect of this transaction, excluding anyanticipated gains on the actual closings, and giving effect to the useof net after-tax proceeds to pay down debt is expected to be about$0.04 dilutive to earnings per diluted share in 2006 assuming thefirst closing occurs on September 30, 2006."

2006 Outlook

Mr. Lilley commented further, "Our second quarter results havecontinued our momentum from the first quarter. We expect our aerospacemarkets to continue to grow in the second half of 2006 as the buildrates for large commercial aircraft, business jets, military aircraftand commercial rotorcraft continue to increase and our customersutilize more advanced composites. For our Specialty Chemical segmentswe now expect a slight decline in demand in North America. For Europe,demand has improved but typically the second half is lower than thefirst half. We continue to expect Asia-Pacific and Latin America tohave good growth in 2006. Our expectation is for crude oil costs tostay high for the rest of 2006 which for us affects the cost ofpropylene and its derivatives which then impacts Cytec's SpecialtyChemicals and Building Block Chemicals businesses."

Mr. Lilley continued with some additional comments, "The followingdiscussion includes the impact of the proposed sale of the watertreatment chemicals and acrylamide product lines assuming a September30, 2006 phase one closing.

"In Cytec Performance Chemicals, our full year guidance for asales range of $900 to $925 million revises to a range of $840 to $865million and for an operating earnings range of $65 to $70 millionrevises to a range of $63 to $68 million after adjusting for the saleof the water treatment chemicals product line. We continue to expectstrong demand in our mining chemicals and more moderate demand in mostothers. The polymer additive product line continues to see severeprice competition in our mature products but our commercialorganization continues its focus of increasing sales of ourproprietary differentiated products. We announced a restructuring ofour polymer additives manufacturing at our site in the Netherlands andthe impact from these actions will have a positive impact in 2007.

"In Cytec Surface Specialties, our full year guidance for a salesrange of $1.48 to $1.52 billion is unchanged. Our operating earningsrange of $95 to $105 million improves to a range of $97 to $107million. The improvement in demand from Europe is mostly offset byweakness in North America. We expect to continue to see good progressin the Asia-Pacific and Latin American regions and also from newglobal product introductions. Our forecast is for raw material coststo increase in the second half of the year and we will attempt tocompensate with selling price increases. We continue to find manyopportunities to improve our operations both in the short and mediumterm.

"In Cytec Engineered Materials, we continue to respond to aircraftmanufacturers as they develop new platforms for the future plus newapplications for advanced composites and anticipate increased aircraftproduction. We have a strong order book for the second half of theyear although we now expect some delays into 2007. Taking into accountthe above, we are changing our full year guidance for sales to $590 to$610 million from our previous guidance of $600 to $620 million andfor operating earnings to $110 to $115 million from our previousguidance of $115 to $120 million.

"As expected, Building Block Chemicals saw some improvement in thesecond quarter. We continue to watch the impact of oil pricevolatility on propylene costs and acrylonitrile margin spreads. Ouroperating team is focused on what they can control, particularlymanufacturing efficiency and costs. Taking into account the above andanticipating the sale of the acrylamide product line and the resultingsales from the acrylonitrile supply contract, our full year guidancefor sales is in a range of $310 to $330 million and operating earningsnow looks to be about $15 million versus a previous range of $12 to$15 million.

"We forecast no change in our guidance for Corporate andUnallocated and other income/(expense). Our forecast for interestexpense, net will be reduced to a range of $51 to $53 million from arange of $54 to $56 million as we pay down debt with proceeds from thedivestiture. We see some improvement in our forecast for equityearnings to about $3 million and our forecast for our underlyingannual effective tax rate for ongoing operations will change slightlyto 27.3% from 27% as some of the earnings of the divested productlines were recorded in a lower tax rate entity.

"Overall, we had a solid first half in 2006 but we remain cautiouson the demand side and are concerned about high oil costs and rawmaterial volatility. Taking this into account plus all the above,including the impact of the pending sale of the water treatmentchemicals and acrylamide product lines, our revised forecast for fullyear diluted earnings per share is a range of $3.41 to $3.66 versusour prior range of $3.45 to $3.70 per diluted share.

Excluded from the full year guidance are the following specialitems - (a) approximately $3 million pre-tax for integration expensesrelated to the Surface Specialties acquisition, (b) the $15.6 millionpre-tax gain related to a legal dispute, (c) net restructuring chargesof $22.3 million pre-tax recorded in the first and second quarters of2006, (d) the reduction in income tax expense of $3.5 million relatingto the completion of prior years tax audits and (e) the cumulativeeffect of accounting change after-tax charge of $1.2 million relatedto the adoption of SFAS 123R. Also excluded are any additionalrestructurings or divestiture gain as a result of the pending sale ofthe water treatment chemicals and acrylamide product lines."

In closing Mr. Lilley commented, "We have recently announced anumber of key strategic and operational initiatives to improve Cytec,and we continue to focus on all issues under our control. The Cytecteam is committed to delivering the highest performance for all ourstakeholders."

Six Month Results

Net earnings for the six months ended June 30, 2006 were $86.4million or $1.79 per diluted share on sales of $1,673 million.Included in the results for the six months ended June 30, 2006 were -(a) net restructuring charges of pre-tax $22.3 million (after-tax$15.7 million or $0.33 per diluted share) recorded in the first andsecond quarters of 2006, (b) a pre-tax $15.6 million (after-tax $12.4million or $0.26 per diluted share) gain related to resolution of alegal dispute, (c) a pre-tax charge of $1.0 million (after-tax $0.8million or $0.01 per diluted share) for integration expenses relatedto the Surface Specialties acquisition, (d) a reduction in income taxexpense of $3.5 million or $0.07 per diluted share relating to thecompletion of prior years tax audits, and (e) the cumulative effect ofan accounting change after-tax charge of $1.2 million or $0.02 perdiluted share related to the adoption of SFAS 123R. Excluding theseitems, net earnings were $88.2 million or $1.82 per diluted share.

Net earnings for the six months ended June 30, 2005 were $5.3million or $0.12 per diluted share on sales of $1,377 million.Included in the results for the six months ended June 30, 2005 werepurchase accounting related charges of $20.8 million pre-tax(after-tax $15.2 million, or $0.33 per diluted share), related toacquired inventories from Surface Specialties being recorded at fairvalue which exceeded normal manufacturing cost, a charge of $37.0million or $0.82 per diluted share related to the write-off ofin-process research and development costs of Surface Specialties, apre-tax charge of $47.9 million (after-tax $30.4 million or $0.67 perdiluted share) related to currency and interest rate derivativetransactions associated with the Surface Specialties acquisition, apre-tax charge of $2.4 million (after-tax $1.8 million or $0.04 perdiluted share) related to an anticipated settlement of a certainlitigation matter, a pre-tax charge of $22.0 million (after-tax $14.0million or $0.31 per diluted share) related to the optional redemptionof our MOPPRS prior to their maturity, an income tax benefit of $25.7million, or $0.57 per diluted share, reflecting favorable partialresolution of tax audits with respect to prior year tax returns,employee redundancy costs of $1.3 million (after-tax net $0.9 millionor $0.02 per diluted share), and a $4.4 million settlement to resolvea dispute over an environmental matter (after-tax net $3.2 million or$0.07 per diluted share). Excluding these special items, net earningswere $82.1 million or $1.81 on a diluted share basis.

Investor Conference Call to be Held on July 21, 2006 11:00 A.M. ET

Cytec will host their second quarter earnings release conferencecall on July 21, 2006 at 11:00 a.m. ET. The conference call will alsobe simultaneously webcast for all investors from Cytec's websitewww.cytec.com. Select the Investor Relations page to access the liveconference call.

A recording of the conference call may be accessed by telephonefrom 2:00 p.m. ET on July 21, 2006 until August 11, 2006 at 11:00 p.m.ET by calling 888-203-1112 (U.S.) or 719-457-0820 (International) andentering access code 5345506. The conference call recording will alsobe accessible on Cytec's website for 3 weeks after the conferencecall.

Use of Non-GAAP Measures

Management believes that net earnings, basic and diluted earningsper share before special items, which are non-GAAP measurements, aremeaningful to investors because they provide a view of the Companywith respect to ongoing operating results. Special items representsignificant charges or credits that are important to an understandingof the Company's overall operating results in the period presented.Such non-GAAP measurements are not recognized in accordance withgenerally accepted accounting principles (GAAP) and should not beviewed as an alternative to GAAP measures of performance. Areconciliation of GAAP measurements to non-GAAP can be found at theend of this release.

Forward-Looking and Cautionary Statements

Except for the historical information and discussions containedherein, statements contained in this release may constitute"forward-looking statements" within the meaning of the PrivateSecurities Litigation Reform Act of 1995. Achieving the resultsdescribed in these statements involves a number of risks,uncertainties and other factors that could cause actual results todiffer materially, as discussed in Cytec's filings with the Securitiesand Exchange Commission.

Corporate Profile

Cytec Industries Inc. is a global specialty chemicals andmaterials company focused on developing, manufacturing and sellingvalue-added products with pro forma sales in 2005 of approximately$3.2 billion. Our products serve a diverse range of end marketsincluding aerospace, adhesives, automotive and industrial coatings,chemical intermediates, inks, mining, plastics and water treatment. Weuse our technology and application development expertise to createchemical and material solutions that are formulated to performspecific and important functions in the finished products of ourcustomers.
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in millions, except per share amounts)

-------------------------------------
Three Months Six Months
Ended Ended
June 30, June 30,
2006 2005 2006 2005
----------------------------------------------------------------------

Net sales $853.1 $813.4 $1,672.5 $1,377.3
Manufacturing cost of sales 688.2 639.1 1,334.1 1,079.4
Selling and technical services 54.2 58.1 106.9 102.8
Research and process development 17.2 19.9 36.1 32.8
Administrative and general 26.1 26.6 51.0 44.5
Amortization of acquisition
intangibles 9.3 8.8 18.0 12.8
Write-off of acquired in-process
research and development - - - 37.0
----------------------------------------------------------------------
Earnings from operations 58.1 60.9 126.4 68.0
Other income (expense), net 14.9 (30.5) 14.0 (50.8)
Equity in earnings of associated
companies 0.9 4.5 1.7 6.6
Interest expense, net 14.6 38.5 29.1 48.1
----------------------------------------------------------------------
Earnings (loss) from continuing
operations before income taxes
and cumulative effect of
accounting change 59.3 (3.6) 113.0 (24.3)
Income tax provision (benefit) 10.9 (15.3) 25.4 (29.0)
----------------------------------------------------------------------
Earnings from continuing
operations before cumulative
effect of accounting change 48.4 11.7 87.6 4.7
Cumulative effect of accounting
change (net of income tax benefit
of $0.7) - - (1.2) -
----------------------------------------------------------------------
Earnings from continuing
operations 48.4 11.7 86.4 4.7
Earnings from discontinued
operations (net of income tax
provision of $0.7) - 0.2 - 0.6
----------------------------------------------------------------------
Net earnings 48.4 $11.9 86.4 $5.3

Basic net earnings per common
share:
Earnings from continuing
operations before cumulative
effect of accounting change $1.02 $0.26 $1.86 $0.11
Cumulative effect of accounting
change, net of taxes - - (0.03) -
Earnings from discontinued
operations, net of taxes - - - 0.01
----------------------------------------------------------------------
Net earnings $1.02 $0.26 $1.83 $0.12

Diluted net earnings per common
share:
Earnings from continuing
operations before cumulative
effect of accounting change $1.00 $0.25 $1.81 $0.10
Cumulative effect of accounting
change, net of taxes - - (0.02) -
Earnings from discontinued
operations, net of taxes - - - 0.01
----------------------------------------------------------------------
Net earnings $1.00 $0.25 $1.79 $0.12

----------------------------------------------------------------------
Dividends per common share $0.10 $0.10 $0.20 $0.20
----------------------------------------------------------------------

----------------------------------------------------------------------
Weighted average shares
outstanding (000 omitted)
----------------------------------------------------------------------
Basic 47,419 46,162 47,168 44,141
----------------------------------------------------------------------
Diluted 48,632 47,242 48,379 45,371
----------------------------------------------------------------------



CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED NET SALES AND EARNINGS FROM OPERATIONS BY
BUSINESS SEGMENT
(Millions of dollars)

Three Months Six Months
Ended Ended
June 30, June 30,
--------------- -------------------
2006 2005 2006 2005
------- ------- --------- ---------

Net sales
---------

Cytec Performance Chemicals
Sales to external customers $229.6 $227.3 $ 455.6 $ 423.2
Intersegment sales 2.1 1.7 3.9 2.8

Cytec Surface Specialities 390.8 371.2 764.7 539.5

Cytec Engineered Materials 151.6 141.0 290.7 268.8

Building Block Chemicals
Sales to external customers 81.1 73.9 161.5 145.8
Intersegment sales 23.2 21.6 46.3 44.8
------ ------ -------- --------
Net sales from segments 878.4 836.7 1,722.7 1,424.9
Elimination of intersegment revenue (25.3) (23.3) (50.2) (47.6)
------ ------ -------- --------

Total $853.1 $813.4 $1,672.5 $1,377.3
----------------------------------------------------------------------



% of % of % of % of
sales sales sales sales
----- ----- ----- -----
Earnings (loss) from
operations
----------------------

Cytec Performance
Chemicals (1) $ 18.3 8% $15.4 7% $ 36.2 8% $ 23.1 5%
Cytec Surface
Specialities (2) 29.5 8% 15.6 4% 58.9 8% (12.3) (2)%
Cytec Engineered
Materials 28.3 19% 25.3 18% 52.2 18% 48.7 18%
Building Block
Chemicals 6.2 6% 6.7 7% 5.9 3% 14.0 7%
------ ----- ------ ------

Earnings from segments 82.3 9% 63.0 8% 153.2 9% 73.5 5%

Corporate and
Unallocated (3) (24.2) (2.1) (26.8) (5.5)
------ ----- ------ ------

Total $ 58.1 7% $60.9 7% $126.4 8% $ 68.0 5%
----------------------------------------------------------------------

Notes:

1. Earnings from operations in the second quarter of 2005 and in the
first six months of 2005 for Cytec Performance Chemicals includes
a charge of $1.3 and $2.6 million, respectively, for amortization
of inventory step up of finished goods acquired related to the
Surface Specialties acquisition. Also included in earnings from
operations in the first six months of 2005 for Cytec Performance
Chemicals is a $7.0 million write-off of in-process research and
development expense related to the Surface Specialties
acquisition.

2. Earnings from operations in the second quarter of 2005 and in the
first six months of 2005 for Cytec Surface Specialties includes a
charge of $9.0 and $18.2 million, respectively for amortization of
inventory step up of finished goods acquired related to the
Surface Specialties acquisition. Also included in earnings from
operations in the first six months of 2005 for Cytec Surface
Specialties is a $30.0 million write-off of in-process research
and development expense related to the Surface Specialties
acquisition.

3. In the second quarter of 2006 Corporate and Unallocated includes a
net restructuring charge of $21.9 million and $1.0 for integration
costs related to the Surface Specialties acquisition. In the first
six months of 2006 Corporate and Unallocated includes a net
restructuring charge of $22.3 million and $1.0 for integration
costs related to the Surface Specialties acquisition. In the
second quarter of 2005 Corporate and Unallocated includes a $2.4
million additional accrual for a certain legal matter. In the
first six months of 2005 Corporate and Unallocated includes a
restructuring accrual of $1.3 million and a $2.4 million
additional accrual for a certain legal matter.



CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in millions, except per share amounts)

----------------------
June 30, December 31,
2006 2005
----------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $41.4 $68.6
Trade accounts receivable, less allowance for
doubtful accounts of 6.9 and $7.8 at June 30,
2006 and December 31, 2005, respectively 568.5 493.8
Due from related party 3.1 8.0
Other accounts receivable 68.1 65.9
Inventories 468.2 424.7
Deferred income taxes 13.9 12.2
Other current assets 22.7 31.4
----------------------------------------------------------------------
Total current assets 1,185.9 1,104.6
----------------------------------------------------------------------
Investment in associated companies 20.4 20.3
Plants, equipment and facilities, at cost 2,084.4 2,064.3
Less: accumulated depreciation (1,012.2) (988.8)
----------------------------------------------------------------------
Net plant investment 1,072.2 1,075.5
----------------------------------------------------------------------
Acquisition intangibles, net of accumulated
amortization of $71.3 and $51.0 at June 30,
2006 and December 31, 2005, respectively 494.6 491.5
Goodwill 1,040.0 1,012.2
Other assets 103.1 106.4
----------------------------------------------------------------------
Total assets $3,916.2 $3,810.5
----------------------------------------------------------------------
Liabilities
Current liabilities
Accounts payable $304.4 $278.6
Short-term borrowings 34.1 34.3
Current maturities of long-term debt 6.7 51.2
Accrued expenses 207.9 218.3
Income taxes payable 32.3 43.5
----------------------------------------------------------------------
Total current liabilities 585.4 625.9
----------------------------------------------------------------------
Long-term debt 1,178.8 1,225.5
Pension and other postretirement benefit
liabilities 436.2 432.5
Other noncurrent liabilities 264.7 224.4
Deferred income taxes 62.4 64.1

Stockholders' equity
Common stock, $.01 par value per share,
150,000,000 shares authorized; issued
48,132,640 shares 0.5 0.5
Additional paid-in capital 248.6 235.6
Retained earnings 1,226.7 1,149.7
Unearned compensation - (2.5)
Accumulated other comprehensive income (loss):
Minimum pension liability (115.0) (115.0)
Unrealized net gains (losses) on cash flow
hedges (8.2) 0.4
Accumulated translation adjustments 66.2 27.6
----------------------------------------------------------------------
(57.0) (87.0)
Treasury stock, at cost, 952,400 shares in 2006
and 1,833,812 shares in 2005 (30.1) (58.2)
----------------------------------------------------------------------
Total stockholders' equity 1,388.7 1,238.1
----------------------------------------------------------------------
Total liabilities and stockholders' equity $3,916.2 $3,810.5
----------------------------------------------------------------------



CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in millions)
-------------------
Six Months Ended
June 30,
----------------------------------------------------------------------
2006 2005
----------------------------------------------------------------------

Cash flows provided by (used in) operating activities
Net earnings $86.4 $5.3
Earnings from discontinued operations, net of taxes - 0.6
----------------------------------------------------------------------
Earnings from continuing operations 86.4 4.7
Noncash items included in earnings from continuing
operations:
Depreciation 55.0 56.8
Amortization 21.1 13.6
Share-based compensation 5.7 0.8
Deferred income taxes 6.1 (39.8)
Write-off of acquired in-process research and
development - 37.0
Amortization of write-up to fair value of finished
goods purchased in acquisition - 20.8
Gain on sale of assets - (1.2)
Loss on asset writeoff 13.8 -
Unrealized losses on derivative instruments - 23.4
Cumulative effect of accounting change, net of
taxes 1.2 -
Other 3.3 (5.5)
Changes in operating assets and liabilities
(excluding effects of 2005 acquisition):
Trade accounts receivable (56.2) (20.1)
Other receivables 2.7 14.0
Inventories (31.2) (28.7)
Other assets 1.6 5.7
Accounts payable 16.4 1.9
Accrued expenses (17.5) (7.5)
Income taxes payable (14.1) (19.5)
Other liabilities 0.6 1.3
----------------------------------------------------------------------
Net cash provided by operating activities of
continuing operations 94.9 57.7
Net cash provided by operating activities of
discontinued operations - 0.8
----------------------------------------------------------------------
Net cash provided by operating activities 94.9 58.5
----------------------------------------------------------------------
Cash flows (used in) investing activities
Acquisition of business, net of cash received - (1,509.0)
Additions to plants, equipment and facilities (40.9) (47.5)
Proceeds received on sale of assets - 101.4
----------------------------------------------------------------------
Net cash used in investing activities (40.9) (1,455.1)
----------------------------------------------------------------------
Cash flows provided by (used in) financing activities
Proceeds from long-term debt 65.9 864.2
Payments on long-term debt (177.3) (186.2)
Change in short-term borrowings (0.5) 521.6
Cash dividends (9.4) (8.6)
Proceeds from the exercise of stock options 30.5 10.5
Deferred financing costs - (4.4)
Excess tax benefits from share-based payment
arrangements 7.7 -
Other (0.4) (0.9)
----------------------------------------------------------------------
Net cash provided by (used in) financing activities (83.5) 1,196.2
----------------------------------------------------------------------
Effect of currency rate changes on cash and cash
equivalents $2.3 (9.0)
----------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (27.2) (209.4)
Cash and cash equivalents, beginning of period 68.6 323.8
----------------------------------------------------------------------
Cash and cash equivalents, end of period $41.4 $114.4
----------------------------------------------------------------------



Cytec Industries Inc.
Reconciliation of GAAP and Non-GAAP Measures
Amounts in millions except per share amounts

Management believes that net earnings, basic and diluted earningsper share before special items, which are non-GAAP measurements, aremeaningful to investors because they provide a view of the Companywith respect to ongoing operating results. Special items representsignificant charges or credits that are important to an understandingof the Company's overall operating results in the periods presented.Such non-GAAP measurements are not recognized in accordance withgenerally accepted accounting principles (GAAP) and should not beviewed as an alternative to GAAP measures of performance.
Three Months Ended June 30, 2006
Net Diluted
Earnings EPS
---------------
GAAP Net Earnings $48.4 $1.00
- Net restructuring charge (after-tax) 15.4 0.32
- Integration costs related to Surface Specialties 0.8 0.01
- Gain relating to a certain legal dispute (12.4) (0.26)
- Income tax benefit related to completion of prior
years audits (3.5) (0.07)
---------------
Non-GAAP Net Earnings $48.7 $1.00
===============


Three Months Ended June 30, 2005
Net Diluted
Earnings EPS
---------------
GAAP Net Earnings $11.9 $0.25
- Purchase accounting fair value inventory over
manufacturing cost (after tax) 7.5 0.16
- Loss on interest rate derivative transactions
(after tax) 17.7 0.37
- Anticipated settlement of a certain litigation
matter (after tax) 1.8 0.04
- Optional redemption of Mandatory Par Put Remarketed
Securities (MOPPRS) prior to their maturity (after
tax) 14.0 0.30
- Income tax benefit reflecting the partial resolution
of a tax audit in Norway with respect to prior years
returns (9.6) (0.20)
---------------
Non-GAAP Net Earnings $43.3 $0.92
===============



Cytec Industries Inc.
Reconciliation of GAAP and Non-GAAP Measures (Cont'd)
Amounts in millions except per share amounts


Six Months Ended June 30, 2006
Net Diluted
Earnings EPS
----------------
GAAP Net Earnings $86.4 $1.79
- Net restructuring charge (after-tax) 15.7 0.33
- Integration costs related to Surface Specialties 0.8 0.01
- Gain relating to a certain legal dispute (12.4) (0.26)
- Income tax benefit related to completion of prior
years audits (3.5) (0.07)
- Cumulative effect of accounting change (after-tax) 1.2 0.02
----------------
Non GAAP Net Earnings $88.2 $1.82
================


Six Months Ended June 30, 2005
Net Diluted
Earnings EPS
----------------
GAAP Net Earnings $5.3 $0.12
- Purchase accounting fair value inventory over
manufacturing cost (after tax) 15.2 0.33
- Loss on currency and interest rate derivative
transactions (after tax) 30.4 0.67
- Anticipated settlement of a certain litigation
matter (after tax) 1.8 0.04
- Optional redemption of Mandatory Par Put Remarketed
Securities (MOPPRS) prior to their maturity (after
tax) 14.0 0.31
- Income tax benefit reflecting favorable
developments on tax audits with respect to prior
years returns (25.7) (0.57)
- Write off of in-process research and development
costs of Surface Specialties 37.0 0.82
- Employee redundancy costs (after tax) 0.9 0.02
- Settlement to resolve a dispute over an
environmental matter (after tax) 3.2 0.07
----------------
Non-GAAP Net Earnings $82.1 $1.81
================