SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 29, 2003
| ENGELHARD CORPORATION |
| (Exact name of registrant as specified in its charter) |
| Delaware | 1-8142 | 22-1586002 |
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
| 101 Wood Avenue, Iselin, New Jersey | 08830 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code (732) 205-5000
Item 12. Results of Operations and Financial Condition.
On July 29, 2003, Engelhard Corporation (the "Company") issued a press release announcing its earnings for its second quarter of fiscal year 2003. A copy of the release is furnished herewith as Exhibit 99.1.
The information furnished under this Item 12, including Exhibit 99.1, shall not be deemed to be filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ENGELHARD CORPORATION | |||
| (Registrant) | |||
| Date: | July 29, 2003 |
/s/ Michael A. Sperduto | |
| Michael A. Sperduto | |||
| Vice President and Chief Financial Officer |
EXHIBIT INDEX
| Exhibit No. | Description |
| 99.1 | Press Release, dated July 29, 2003, relating to Engelhard Corporation's earnings release for the second quarter of 2003. |
EXHIBIT (99.1)
| News | Contact Ted Lowen (Media) 732-205-6360 Peter Martin (Investor Relations) 732-205-6106 Ref. #C1367 Engelhard Corporation 101 Wood Avenue P.O. Box 770 Iselin, NJ 08830-0770 |
For immediate release
ENGELHARD SECOND-QUARTER RESULTS
IN LINE WITH EXPECTATIONS
ISELIN, NJ, July 29, 2003 - Engelhard Corporation (NYSE: EC) today reported net earnings for the second quarter ended June 30 of $54.0 million, or 43 cents per share on a diluted basis, compared with $60.1 million, or 46 cents per share, for the same period a year ago.
The current quarter included an after-tax charge of four cents per
share related to a previously projected provision for the remaining lease cost
of certain minerals-storage facilities no longer needed because of productivity
initiatives. The prior year's quarter included an after-tax benefit of five
cents per share stemming from insurance settlements and two charges amounting to
four cents per share related to costs associated with manufacturing
consolidations and the write down of an investment.
Second quarter sales were $929 million compared with $982 million a
year ago reflecting continued lower volumes and prices of platinum group metals,
which are passed through to customers.
"Market acceptance of new technology growth platforms coupled with our
company-wide focus on productivity enabled us to post another quarter of solid
operating results without the benefit of significant economic recovery," said
Barry W. Perry, chairman and chief executive officer.
Mr. Perry said he still expects the company to post modest earnings
growth this year supported by the growth platforms and productivity focus, plus
benefits from strong cash flow.
"We continue to be encouraged by the results our strategic focus has delivered in overcoming the harsh realities of today's
marketplace," Mr. Perry said.
Second-Quarter Operating Results
Operating earnings from Environmental Technologies increased 13% to
$31.5 million including the impact of a $3.1 million charge in the year-ago
quarter. Sales rose 23% to $209 million. Excluding the charge, earnings
increased 1% reflecting solid demand from mobile environmental markets. Higher
pass-through cost of substrates sold to those markets plus the favorable effects
of foreign exchange accounted for more than three-quarters of the sales
increase.
Operating earnings from Process Technologies rose 7% to $24.6 million,
while sales rose 3% to $140 million. Strong volumes of new petroleum refining
catalyst and performance-enhancing additive technologies, plus solid results
from polyolefin catalysts, more than offset the impact of higher energy costs.
Operating earnings from Appearance and Performance Technologies,
including the impact of the current-quarter charge of $7.8 million, decreased
25% to $18.6 million. Sales rose 3% to $175 million. Excluding the charge,
earnings increased 7% resulting from higher demand for colors and special
effects. The latter benefited from strong market acceptance of new effect
technologies. Combined with productivity efforts, these favorable results more
than offset higher energy costs and weakness in certain performance minerals
markets.
Operating earnings from Materials Services declined 89% to $3.0 million
compared with the year-ago quarter which included an $11.0 million gain from an
insurance settlement. Sales were off 20% to $394 million. Reduced industrial
demand for platinum group metals and lower results from recycling services
continue to impact the segment.
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 26 of Engelhard's 2002 Form 10-K, dated March 25, 2003.
ENGELHARD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Thousands, except per share data)
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 |
2002 |
2003 |
2002 | ||||||||||
| Net sales | $ | 929,358 | $ | 982,314 | $ | 1,759,797 | $ | 1,984,135 | |||||
| Cost of sales | |
766,461 |
|
805,158 |
|
1,447,339 |
|
1,646,287 |
|||||
| Gross profit | 162,897 | 177,156 | 312,458 | 337,848 | |||||||||
| Selling, administrative and other expenses | 88,400 | 95,800 | 180,569 | 183,411 | |||||||||
| Special charge/(credit), net | |
7,802 |
|
(7,862) |
|
(11,978) |
|
(7,862) |
|||||
| Operating earnings | 66,695 | 89,218 | 143,867 | 162,299 | |||||||||
| Equity in earnings of affiliates | 7,539 | 4,408 | 13,177 | 8,070 | |||||||||
| Loss on investments | - | (6,659) | - | (6,659) | |||||||||
| Interest expense, net | |
(4,753) |
|
(6,868) |
|
(10,310) |
|
(13,788) |
|||||
| Earnings before income taxes | 69,481 | 80,099 | 146,734 | 149,922 | |||||||||
| Income tax expense | |
15,447 |
|
20,024 |
|
33,764 |
|
37,480 |
|||||
| Net earnings before cumulative effect of a change in accounting | |||||||||||||
| principle, net of tax | 54,034 | 60,075 | 112,970 | 112,442 | |||||||||
| Cumulative effect of a change in accounting principle, net of tax of $1,390 | |
- |
|
- |
|
(2,269) |
|
- |
|||||
| Net earnings | $ |
54,034 |
$ |
60,075 |
$ |
110,701 |
$ |
112,442 |
|||||
| Earnings per share - basic: Earnings before cumulative effect of a change in accounting principle |
$ | 0.43 | $ | 0.47 | $ | 0.90 | $ | 0.87 | |||||
| Cumulative effect of a change in accounting principle, net of tax | |
- |
|
- |
|
(0.02) |
|
- |
|||||
| Earnings per share - basic | $ |
0.43 |
$ |
0.47 |
$ |
0.88 |
$ |
0.87 |
|||||
| Earnings per share - diluted: Earnings before cumulative effect of a change in accounting principle |
$ | 0.43 | $ | 0.46 | $ | 0.89 | $ | 0.85 | |||||
| Cumulative effect of a change in accounting principle, net of tax | |
- |
|
- |
|
(0.02) |
|
- |
|||||
| Earnings per share - diluted | $ |
0.43 |
$ |
0.46 |
$ |
0.87 |
$ |
0.85 |
|||||
| Cash dividends paid per share | $ |
0.10 |
$ |
0.10 |
$ |
0.20 |
$ |
0.20 |
|||||
| Average number of shares outstanding - basic | |
125,261 |
|
128,707 |
|
126,067 |
|
128,750 |
|||||
| Average number of shares outstanding - diluted | |
127,078 |
|
131,673 |
|
127,566 |
|
131,544 |
|||||
| Actual number of shares outstanding at end of period | |
125,296 |
|
129,180 |
|
125,296 |
|
129,180 |
|||||
Had compensation cost for Engelhard's stock option plans been determined based on the fair value at grant date consistent with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," (assuming SFAS No. 123 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 June 30, |
Six Months Ended June 30, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Pro forma information (in millions, except per share data) |
2003 |
2002 |
2003 |
2002 | |||||||
| Net earnings - as reported | $ | 54.0 | $ | 60.1 | $ | 110.7 | $ | 112.4 | |||
| Net earnings - pro forma | 52.6 | 58.5 | 107.9 | 109.3 | |||||||
| Diluted earnings per share - as reported | 0.43 | 0.46 | 0.87 | 0.85 | |||||||
| Diluted earnings per share - pro forma | 0.41 | 0.44 | 0.85 | 0.83 | |||||||
ENGELHARD CORPORATION
BUSINESS SEGMENT INFORMATION
(Thousands)
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 |
2002 |
Change |
2003 |
2002 |
Change | ||||||||||||||||
| Net Sales Environmental Technologies |
$ | 209,153 | $ | 170,564 | 23 | % | $ | 422,693 | $ | 335,005 | 26 | % | |||||||||
| Process Technologies | 139,833 | 136,407 | 3 | % | 258,353 | 251,852 | 3 | % | |||||||||||||
| Appearance and Performance Technologies | |
175,190 |
|
170,632 |
3 | % | |
334,386 |
|
323,002 |
4 | % | |||||||||
| Technology segments | 524,176 | 477,603 | 10 | % | 1,015,432 | 909,859 | 12 | % | |||||||||||||
| Materials Services | 394,485 | 495,564 | -20 | % | 723,442 | 1,056,293 | -32 | % | |||||||||||||
| All other | |
10,697 |
|
9,147 |
17 | % | |
20,923 |
|
17,983 |
16 | % | |||||||||
| Total net sales | $ |
929,358 |
$ |
982,314 |
-5 | % | $ |
1,759,797 |
$ |
1,984,135 |
-11 | % | |||||||||
| Operating Earnings Environmental Technologies |
$ | 31,489 | $ | 27,983 | (B) | 13 | % | $ | 56,066 | (D) | $ | 67,644 | (B) | -17 | % | ||||||
| Process Technologies | 24,571 | 22,972 | 7 | % | 38,091 | (E) | 40,041 | -5 | % | ||||||||||||
| Appearance and Performance Technologies | |
18,613 |
(A) | |
24,720 |
-25 | % | |
37,196 |
(A) | |
39,851 |
-7 | % | |||||||
| Technology segments | 74,673 | 75,675 | -1 | % | 131,353 | 147,536 | -11 | % | |||||||||||||
| Materials Services | 3,031 | 27,245 | (C) | -89 | % | 7,484 | 37,423 | (C) | -80 | % | |||||||||||
| All other | |
(11,009) |
|
(13,702) |
20 | % | |
5,030 |
(F) | |
(22,660) |
122 | % | ||||||||
| Total operating earnings | 66,695 | 89,218 | -25 | % | 143,867 | 162,299 | -11 | % | |||||||||||||
| Equity in earnings of affiliates | 7,539 | 4,408 | 71 | % | 13,177 | 8,070 | 63 | % | |||||||||||||
| Loss on investments | - | (6,659) | - | - | (6,659) | - | |||||||||||||||
| Interest expense, net | |
(4,753) |
|
(6,868) |
-31 | % | |
(10,310) |
|
(13,788) |
-25 | % | |||||||||
| Earnings before income taxes | 69,481 | 80,099 | -13 | % | 146,734 | 149,922 | -2 | % | |||||||||||||
| Income tax expense | |
15,447 |
|
20,024 |
-23 | % | |
33,764 |
|
37,480 |
-10 | % | |||||||||
| Net earnings before cumulative effect of a change | |||||||||||||||||||||
| in accounting principle, net of tax | 54,034 | 60,075 | -10 | % | 112,970 | 112,442 | - | ||||||||||||||
| Cumulative effect of a change in accounting | |||||||||||||||||||||
| principle, net of tax of $1,390 | |
- |
|
- |
- | |
(2,269) |
|
- |
- | |||||||||||
| Net earnings | $ |
54,034 |
$ |
60,075 |
-10 | % | $ |
110,701 |
$ |
112,442 |
-2 | % | |||||||||
(A) - Includes a charge of $7.8 million
($4.8 million after tax or $0.04 per share) in 2003 related to lease commitments for
idle facilities.
(B) - Includes a restructuring charge of $3.1 million ($1.9 million after tax or $0.01 per share) in 2002.
(C) - Includes an insurance settlement gain of $11.0 million ($6.8 million after tax or $0.05 per share) in 2002.
(D) - Includes a restructuring charge of $5.3 million ($3.5 million after tax or $0.03 per share) in 2003.
(E) - Includes a restructuring charge of $2.6 million ($1.6 million after tax or $0.01 per share) in 2003.
(F) - Includes a royalty settlement gain of $28.4 million ($17.6 million after tax or $0.14 per share) and a
Corporate
restructuring charge of $0.8 million ($0.5 million after tax or less than $0.01 per share) in 2003.
Note: All of the above per-share amounts are presented as diluted earnings per share.
ENGELHARD CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
(Unaudited)
| June 30, 2003 |
December 31, 2002 | |||||
|---|---|---|---|---|---|---|
| Cash | $ | 95,979 | $ | 48,246 | ||
| Receivables, net | 346,687 | 380,270 | ||||
| Committed metal positions | 328,565 | 615,441 | ||||
| Inventories | 439,407 | 427,162 | ||||
| Other current assets | |
88,927 |
|
94,922 |
||
| Total current assets | 1,299,565 | 1,566,041 | ||||
| Investments | 137,413 | 136,804 | ||||
| Property, plant and equipment, net | 855,347 | 860,475 | ||||
| Goodwill | 272,685 | 272,353 | ||||
| Other intangible and noncurrent assets | |
191,426 |
|
185,041 |
||
| Total assets | $ |
2,756,436 |
$ |
3,020,714 |
||
| Short-term borrowings | $ | 130,114 | $ | 348,749 | ||
| Accounts payable | 210,257 | 225,045 | ||||
| Hedged metal obligations | 304,064 | 537,243 | ||||
| Other current liabilities | |
268,548 |
|
275,250 |
||
| Total current liabilities | 912,983 | 1,386,287 | ||||
| Long-term debt | 398,969 | 247,805 | ||||
| Other noncurrent liabilities | 309,637 | 309,455 | ||||
| Shareholders' equity | |
1,134,847 |
|
1,077,167 |
||
| Total liabilities and shareholders' equity | $ |
2,756,436 |
$ |
3,020,714 |
||
ENGELHARD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
(Unaudited)
| Six Months Ended June 30, | ||||||
|---|---|---|---|---|---|---|
| 2003 |
2002 | |||||
| Cash flows from operating activities | ||||||
| Net earnings | $ | 110,701 | $ | 112,442 | ||
| Adjustments to reconcile net earnings to net cash provided by operating activities: |
||||||
| Depreciation and depletion | 61,775 | 52,632 | ||||
| Amortization of intangible assets | 1,649 | 1,515 | ||||
| Loss on investments | - | 6,659 | ||||
| Equity results, net of dividends | (4,200 | ) | (4,317 | ) | ||
| Net change in assets and liabilities: | ||||||
| Materials Services related | 267,789 | 7,706 | ||||
| All other | |
880 |
|
(6,449 |
) | |
| Net cash provided by operating activities | |
438,594 |
|
170,188 |
||
| Cash flows from investing activities | ||||||
| Capital expenditures | (39,934 | ) | (46,196 | ) | ||
| Proceeds from investments | 7,063 | - | ||||
| Acquisitions and other investments | |
- |
|
(2,400 |
) | |
| Net cash used in investing activities | |
(32,871 |
) | |
(48,596 |
) |
| Cash flows from financing activities | ||||||
| Decrease in short-term borrowings | (218,563 | ) | (20,008 | ) | ||
| Decrease in hedged metal obligations | (209,601 | ) | (11,708 | ) | ||
| Repayment of long-term debt | (184 | ) | (153 | ) | ||
| Proceeds from issuance of long-term debt | 147,842 | - | ||||
| Purchase of treasury stock | (74,714 | ) | (90,545 | ) | ||
| Cash from exercise of stock options | 11,011 | 45,335 | ||||
| Dividends paid | |
(25,280 |
) | |
(25,914 |
) |
| Net cash used in financing activities | (369,489 | ) | (102,993 | ) | ||
| Effect of exchange rate changes on cash | |
11,499 |
|
5,382 |
||
| Net increase in cash | 47,733 | 23,981 | ||||
| Cash at beginning of year | |
48,246 |
|
33,034 |
||
| Cash at end of period | $ |
95,979 |
$ |
57,015 |
||