RNS Number:0276H
Engelhard Corporation
4 February 2003
ENGELHARD REPORTS FOURTH-QUARTER RESULTS
ISELIN, N.J., February 4, 2003 - Engelhard Corporation (NYSE:EC) today reported
net earnings for the fourth quarter ended December 31 of $56.1 million, or 44
cents per share, compared with $60.5 million, or 46 cents, for the same period
in 2001. Fourth-quarter sales were $911 million compared with $871 million a
year ago.
Full-year net earnings totaled $171 million, or $1.31 per share, which includes
a non-cash charge in the third quarter for an equity investment impairment that
amounted to $57.7 million, or 44 cents per share. Year-ago net earnings were
$226 million, or $1.71 per share.
Sales for the year were $3.8 billion compared with $5.1 billion in 2001. The
lower sales level reflects reduced prices and volumes of precious metals.
"We are pleased that our strategy began to generate results in new applications
that expanded our served market base and delivered sustainable productivity
improvements across the enterprise," said Barry W. Perry, chairman and chief
executive officer. "We are disappointed that much of those advances were
neutralized by the prolonged economic weakness in most of our served markets
throughout 2002. In spite of that, we achieved results within the range of
estimates established by analysts at the beginning of the year, and we were able
to fund ongoing growth programs while strengthening our balance sheet."
Fourth-Quarter Operating Results
Operating earnings from Environmental Technologies declined 23% to $21 million.
Sales rose 23% to $187 million on increased revenue from automotive and both OEM
and retrofit diesel markets. One-third of the increase in sales resulted from
the higher pass-through cost of substrates. Strong results from solidly
increased sales and earnings from mobile environmental market applications were
more than offset by the costs associated with additional rework for power-
generation applications and weak demand in stationary and surface coating
markets.
Operating earnings from Process Technologies increased 3% to $32 million. Sales
rose 5% to $161 million. Increased demand for new technologies for the
polyolefin, gas-to-liquid and refining-additive markets was partly offset by
ongoing weakness in other core chemical-process markets.
Operating earnings from Appearance and Performance Technologies were up 54% to
$20 million. Sales rose 5% to $156 million. Moderately higher demand from most
served markets and the benefit of productivity improvements led to sharply
higher results for the fourth consecutive quarter.
Operating earnings from Materials Services declined 27% to $7 million. Sales
were off 2% to $398 million. Lower volumes plus decreased recycling and related
services led to the lower results.
Performance Outlook
"Our business plan calls for per-share earnings at the lower end of the current
range of analysts' estimates of $1.80 to $2.00," Mr. Perry said. "However,
current conditions might suggest that a range of $1.75 to $1.95 better reflects
ongoing uncertainties."
The company anticipates weak comparisons from Materials Services and a first
quarter negatively impacted by the absence of strong, year-ago results from the
gas turbine market.
In addition, charges related to productivity programs and selective resource
reductions will also impact the first quarter by about five cents per share,
bringing the outlook for the quarter to approximately 10 to 12 cents per share
below the same period last year.
Factors expected to favorably impact full-year results include new products from
several technology platforms and alliances related to energy, personal care and
diesel markets; price-mix enhancements; and the positive impact of productivity
actions taken in the first quarter of 2003.
"We are committed to improving results in 2003 by taking action on what we can
control," said Mr. Perry. "We expect to deliver favorable results in our
technology businesses even without recovery in our served markets and in spite
of headwinds from pensions and other service costs."
Engelhard Corporation is a surface and materials science company that develops
technologies to improve customers' products and processes. A Fortune 500
company, Engelhard is a world-leading provider of technologies for
environmental, process, appearance and performance applications. For more
information, visit Engelhard on the Internet at www.engelhard.com.
Forward-looking statements: This document contains forward-looking statements in
management's comments. There are a number of factors that could cause
Engelhard's actual results to vary materially from those projected in the
forward-looking statements. For a more thorough discussion of these factors,
please refer to page 27 of Engelhard's 2001 Form 10-K, dated March 21, 2002.
ENGELHARD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------- -------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
Net sales $ 910,862 $ 870,981 $3,753,571 $5,096,926
Cost of sales 750,699 715,291 3,099,806 4,433,709
----------- ----------- ----------- -----------
Gross profit 160,163 155,690 653,765 663,217
Selling,
administrative and
other expenses 87,912 79,214 350,137 335,994
Special
(credit)/charge, net - - (7,862) 7,100
----------- ----------- ----------- -----------
Operating
earnings 72,251 76,476 311,490 320,123
Equity in earnings of
affiliates 4,267 5,167 16,207 29,095
Equity investment
impairment - - (57,704) -
Loss on investments - - (6,659) -
Interest expense, net (5,642) (7,254) (25,410) (43,994)
----------- ----------- ----------- -----------
Earnings before
income taxes 70,876 74,389 237,924 305,224
Income tax expense 14,823 13,875 66,516 79,663
----------- ----------- ----------- -----------
Net earnings $ 56,053 $ 60,514 $ 171,408(A) $ 225,561
=========== =========== =========== ===========
Basic earnings per
share $ 0.44 $ 0.47 $ 1.34 $ 1.73
=========== =========== =========== ===========
Diluted earnings per
share $ 0.44 $ 0.46 $ 1.31 $ 1.71
=========== =========== =========== ===========
Cash dividends paid
per share $ 0.10 $ 0.10 $ 0.40 $ 0.40
=========== =========== =========== ===========
Average number of
shares outstanding -
basic 127,146 129,704 128,089 130,018
=========== =========== =========== ===========
Average number of
shares outstanding -
diluted 128,772 132,081 130,450 132,155
=========== =========== =========== ===========
Actual number of
shares outstanding 127,757 129,460 127,757 129,460
=========== =========== =========== ===========
Had compensation cost for Engelhard's stock option plans been
determined based on the fair value at grant date for awards consistent
with the provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation," (assuming this
standard was adopted on its effective date of October 1995), Engelhard
would have reported net earnings and diluted earnings per share as
follows:
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
Pro forma information
(in thousands, except
per share data) 2002 2001 2002 2001
--------------------- ---------- ---------- ---------- ----------
Net earnings - as
reported $ 56,053 $ 60,514 $ 171,408 $ 225,561
Net earnings - pro
forma 54,485 59,058 165,137 219,739
Diluted earnings per
share - as reported 0.44 0.46 1.31 1.71
Diluted earnings per
share - pro forma 0.42 0.45 1.27 1.66
(A) Excluding certain items reported in 2002, Engelhard would have
reported net earnings of $228.3 million for the year ended
December 31, 2002. The following table reconciles Engelhard's net
earnings excluding certain items with reported net earnings (in
millions):
Net earnings -
excluding certain
items $228.3
Insurance settlement
gain 6.8
Manufacturing
consolidation charge (1.9)
Plug Power investment
impairment (4.1)
Equity investment
impairment (57.7)
----------
Net earnings - as
reported $171.4
==========
ENGELHARD CORPORATION
BUSINESS SEGMENT INFORMATION
(Thousands)
Three Months Ended
December 31,
--------------------------
2002 2001 Change
----------- ---------------------
Net Sales
Environmental Technologies $ 187,204 $ 152,182 23%
Process Technologies 161,291 154,268 5%
Appearance and Performance
Technologies 155,952 149,039 5%
----------- -----------
Technology segments 504,447 455,489 11%
Materials Services 397,660 405,419 -2%
All other 8,755 10,073 -13%
----------- -----------
Total net sales $ 910,862 $ 870,981 5%
=========== ===========
Operating Earnings
Environmental Technologies $ 21,416 $ 27,677 -23%
Process Technologies 31,576 30,786 3%
Appearance and Performance
Technologies 20,217 13,126 54%
----------- -----------
Technology segments 73,209 71,589 2%
Materials Services 6,973 9,569 -27%
All other (7,931) (4,682) 69%
----------- -----------
Total operating earnings 72,251 76,476 -6%
Equity in earnings of affiliates 4,267 5,167 -17%
Equity investment impairment - -
Loss on investments - -
Interest expense, net (5,642) (7,254) -22%
----------- -----------
Earnings before income taxes 70,876 74,389 -5%
Income tax expense 14,823 13,875 7%
----------- -----------
Net earnings $ 56,053 $ 60,514 -7%
=========== ===========
Twelve Months Ended
December 31,
--------------------------
2002 2001 Change
----------- ---------------------
Net Sales
Environmental Technologies $ 680,406 $ 646,666 5%
Process Technologies 538,778 568,186 -5%
Appearance and Performance
Technologies 650,836 634,403 3%
----------- -----------
Technology segments 1,870,020 1,849,255 1%
Materials Services 1,836,033 3,207,858 -43%
All other 47,518 39,813 19%
----------- -----------
Total net sales $3,753,571 $5,096,926 -26%
=========== ===========
Operating Earnings
Environmental Technologies $ 109,163 (A) $ 142,387 -23%
Process Technologies 92,956 94,295 -1%
Appearance and Performance
Technologies 87,113 46,502 (C) 87%
----------- -----------
Technology segments 289,232 283,184 2%
Materials Services 52,684 (B) 56,052 -6%
All other (30,426) (19,113) 59%
----------- -----------
Total operating earnings 311,490 320,123 -3%
Equity in earnings of affiliates 16,207 29,095 -44%
Equity investment impairment (57,704) -
Loss on investments (6,659) -
Interest expense, net (25,410) (43,994) -42%
----------- -----------
Earnings before income taxes 237,924 305,224 -22%
Income tax expense 66,516 79,663 -17%
----------- -----------
Net earnings $ 171,408 $ 225,561 -24%
=========== ===========
(A) - Includes a $3.1 million manufacturing consolidation charge
reported in the second quarter of 2002.
(B) - Includes an $11.0 million insurance settlement gain reported in
the second quarter of 2002.
(C) - Includes a $7.1 million special charge to reflect asset
redeployment actions and productivity improvements reported in the
second quarter of 2001.
ENGELHARD CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
December 31, December 31,
2002 2001
-------------- --------------
Cash $ 48,246 $ 33,034
Receivables, net 380,270 347,656
Committed metal positions 615,441 569,109
Inventories 427,162 401,647
Other current assets 94,922 142,301
-------------- --------------
Total current assets 1,566,041 1,493,747
Investments 136,804 213,467
Property, plant and equipment, net 860,475 822,520
Goodwill 272,353 253,603
Other intangible and noncurrent assets 185,041 212,212
-------------- --------------
Total assets $ 3,020,714 $ 2,995,549
============== ==============
Short-term borrowings $ 348,749 $ 389,051
Accounts payable 225,045 252,319
Hedged metal obligations 537,243 517,681
Other current liabilities 275,250 341,749
-------------- --------------
Total current liabilities 1,386,287 1,500,800
Long-term debt 247,805 237,853
Other noncurrent liabilities 309,455 253,390
Shareholders' equity 1,077,167 1,003,506
-------------- --------------
Total liabilities and shareholders'
equity $ 3,020,714 $ 2,995,549
============== ==============
ENGELHARD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
Twelve Months Ended
December 31,
---------------------
2002 2001
---------- ----------
Cash flows from operating activities
Net earnings $ 171,408 $ 225,561
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation and depletion 110,676 94,996
Amortization of intangible assets 2,886 13,521
Loss on investments 6,659 -
Equity results, net of dividends (12,279) (24,937)
Equity investment impairment 57,704 -
Net change in assets and liabilities
Materials Services related (30,053) 59,734
All other (4,732) (23,082)
---------- ----------
Net cash provided by operating
activities 302,269 345,793
---------- ----------
Cash flows from investing activities
Capital expenditures (113,309) (168,882)
Proceeds from sale of investments - 3,400
Acquisitions and other investments (7,606) (16,559)
---------- ----------
Net cash used in investing
activities (120,915) (182,041)
---------- ----------
Cash flows from financing activities
(Decrease)/increase in short-term borrowings (40,302) 36,936
Increase in hedged metal obligations 3,784 11,333
Repayment of long-term debt (148) (159,308)
Purchase of treasury stock (133,543) (101,154)
Cash from exercise of stock options 48,781 101,175
Dividends paid (51,492) (52,267)
---------- ----------
Net cash used in financing
activities (172,920) (163,285)
Effect of exchange rate changes on cash 6,778 (967)
---------- ----------
Net increase/(decrease) in cash 15,212 (500)
Cash at beginning of year 33,034 33,534
---------- ----------
Cash at end of year $ 48,246 $ 33,034
========== ==========
This information is provided by RNS
The company news service from the London Stock Exchange
END
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