Engelhard Corp. HTML 8K - 4th Quarter 2004

 
UNITED STATES
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): February 8, 2005
 
 
    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

 

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
[   ]    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
[   ]     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
[   ]      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
[   ]      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

 
 

  1  

 

Item 2.02    Results of Operations and Financial Condition.
 
On February 8, 2005, Engelhard Corporation (the “Company”) issued a press release announcing its earnings for its fourth quarter of fiscal year 2004. A copy of the release is furnished herewith as Exhibit 99.1.
 
The information furnished under this Item 2.02, 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.
 

 
 

  2  

 

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:
February 8, 2005
 
        /s/ Michael A. Sperduto
 
     
Michael A. Sperduto
 
     
Vice President and
 
     
        Chief Financial Officer
 

 
 

  3  

 

EXHIBIT INDEX
 
Exhibit No.
Description
99.1
Press Release, dated February 8, 2005 relating to Engelhard Corporation’s earnings release for the fourth quarter of 2004.

 
 

  4  

 

EXHIBIT (99.1)
 
 
News
Contact
Ted Lowen
(Media)
732-205-6360
 
Gavin Bell
(Investor Relations)
732-205-6313
Ref. #C1406
 
Engelhard Corporation
101 Wood Avenue
P.O. Box 770
Iselin, NJ 08830-0770

For immediate release

ENGELHARD REPORTS FOURTH-QUARTER RESULTS


ISELIN, NJ, February 8, 2005 - Engelhard Corporation (NYSE: EC) today reported net earnings for the fourth quarter ended December 31 of $58.1 million, or 47 cents per share, compared with $63.7 million, or 50 cents per share, for the same period in 2003.

Fourth-quarter results include a previously announced charge of $6.6 million, mostly non-cash, resulting from the decision to consolidate certain manufacturing operations to improve efficiency at the company’s Middle Georgia Operations, which manufacture kaolin-based products. These actions are consistent with the company’s ongoing efforts to simplify processing and manage product mix to maximize profitability and growth opportunities. The impact of all special items in the fourth quarter was a net pre-tax charge of $5.3 million, or three cents per share.

Fourth-quarter sales were $1.0 billion, about even with the prior year period.

Full-year net earnings were $235.5 million, or $1.88 per share, which included both the fourth-quarter net charge of three cents per share and an $8.0 million, or six cents per share, tax provision benefit resulting from an agreement reached with the Internal Revenue Service with respect to the company’s tax returns for 1998 through 2000. Earnings in 2003 were $234.2 million, or $1.84 per share, which included $4.9 million, or four cents per share, of net-positive special items. Sales for the year were $4.2 billion compared with $3.7 billion in 2003.

“A balanced approach of driving growth and managing the business mix across our enterprise, coupled with an intense focus on productivity, enabled us to deliver another year of solid financial results,” said Barry W. Perry, chairman and chief executive officer. “We grew earnings, generated strong cash flow and posted solid returns despite continued weakness in certain served markets.”

Fourth-Quarter Operating Results
 
Operating earnings from Environmental Technologies increased 5% to $34 million, while sales rose 6% to $219 million. Higher revenues resulted from favorable foreign exchange translation and higher pass-through costs of substrates. The earnings increase resulted from growth in emission-control technologies for certain mobile-source markets and improved productivity, offset by unfavorable volume and mix in light-duty vehicles.

Operating earnings from Process Technologies declined 18% to $27 million. Sales rose 5% to $176 million. Continued strong demand for technologies for petroleum refining was more than offset by lower results from chemical process markets.
 

 
  5  

 

Operating earnings from Appearance and Performance Technologies increased 19% from $14 million to $17 million, excluding the impact of the above-referenced charges of $6.6 million. Sales rose 9% to $166 million. Operating results primarily reflected stronger sales of kaolin-based technologies for non-paper applications and continued strength in cosmetics and personal care.

Operating earnings from Materials Services were $3 million, an increase of about $2 million versus a year ago. Sales were $444 million, compared with $500 million in last year’s fourth quarter.

Earnings from equity investments were $18 million in the fourth quarter, compared with $12 million a year ago, primarily reflecting benefits resulting from the liquidation of the former Engelhard-CLAL joint venture’s assets and solid performance by the company’s Asian joint ventures.

Performance Outlook
 
“Our business plan calls for modest growth in net earnings per share in 2005,” Mr. Perry said. “We expect balanced performance across our technology segments and ongoing productivity initiatives to provide a strong underlying financial base and more than offset expected increases in pension, medical, and costs associated with a new requirement for all companies to expense employee stock options. We expect net earnings per share in the range of $1.90 to $2.00 for the full year and believe Engelhard is well-positioned to achieve double-digit earnings growth beyond 2005.”

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 25 of Engelhard’s 2003 Form 10-K, dated March 11, 2004.
 

 
 

  6  


ENGELHARD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Thousands, except per-share data)

 
   
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
 
   
2004
 
2003
 
2004
 
2003
 
Net sales
 
$
1,016,640
 
$
1,039,323
 
$
4,166,420
 
$
3,714,493
 
Cost of sales
   
844,814
   
871,835
   
3,496,606
   
3,080,408
 
Gross profit
   
171,826
   
167,488
   
669,814
   
634,085
 
Selling, administrative and other expenses
   
104,275
   
95,883
   
391,031
   
364,490
 
Special charge (credit), net
   
5,304
   
   
5,304
   
(11,978
)
Operating earnings
   
62,247
   
71,605
   
273,479
   
281,573
 
Equity in earnings of affiliates
   
18,191
   
11,674
   
37,582
   
39,368
 
Loss on sale of investment
   
(663
)
 
   
(663
)
 
 
Interest expense, net
   
(5,077
)
 
(4,475
)
 
(18,499
)
 
(20,295
)
Earnings before income taxes
   
74,698
   
78,804
   
291,899
   
300,646
 
Income tax expense
   
16,561
   
15,115
   
56,371
   
64,154
 
Net earnings before cumulative effect of a change in accounting principle, net of tax
   
58,137
   
63,689
   
235,528
   
236,492
 
Cumulative effect of a change in accounting principle, net of tax of $1,390
   
   
   
   
(2,269
)
Net earnings
 
$
58,137
 
$
63,689
 
$
235,528
 
$
234,223
 
                           
Earnings per share - basic:
                         
Earnings before cumulative effect of a change in accounting principle    
 
$
0.48
 
$
0.51
 
$
1.91
 
$
1.89
 
Cumulative effect of a change in accounting principle, net of tax   
   
   
   
   
(0.02
)
Earnings per share - basic    
 
$
0.48
 
$
0.51
 
$
1.91
 
$
1.87
 
                           
Earnings per share - diluted:
                         
Earnings before cumulative effect of a change in accounting principle    
 
$
0.47
 
$
0.50
 
$
1.88
 
$
1.86
 
Cumulative effect of a change in accounting principle, net of tax   
   
   
   
   
(0.02
)
Earnings per share - diluted
 
$
0.47
 
$
0.50
 
$
1.88
 
$
1.84
 
Cash dividends paid per share
 
$
0.11
 
$
0.11
 
$
0.44
 
$
0.41
 
Average number of shares outstanding - basic
   
121,877
   
124,643
   
123,155
   
125,359
 
Average number of shares outstanding - diluted
   
124,059
   
127,177
   
125,350
   
127,267
 
Actual number of shares outstanding at end of period
   
122,413
   
124,866
   
122,413
   
124,866
 
 
 
  7  

 

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
December 31,
 
Twelve Months Ended
December 31,
 
Pro forma information (in thousands, except per-share data)
 
2004
 
2003
 
2004
 
2003
 
Net earnings - as reported
 
$
58,137
 
$
63,689
 
$
235,528
 
$
234,223
 
Net earnings - pro forma
   
56,546
   
62,236
   
228,735
   
228,413
 
Diluted earnings per share - as reported
   
0.47
   
0.50
   
1.88
   
1.84
 
Diluted earnings per share - pro forma
   
0.46
   
0.49
   
1.82
   
1.79
 


 
 

  8  

 


ENGELHARD CORPORATION
BUSINESS SEGMENT INFORMATION
(Thousands)
 
 
   
Three Months Ended
December 31,
     
Twelve Months Ended
December 31,
         
   
2004
     
2003
 

Change

 
2004
     
2003
     
Change
 
Net Sales
                                                     
Environmental Technologies
 
$
219,252
       
$
206,485
 
6
%
       
$
899,219
       
$
831,403
       
8
%
 
Process Technologies
   
175,978
         
167,304
 
5
%
 
 
615,187
         
569,225
       
8
%
 
Appearance and Performance Technologies
   
166,482
         
153,355
 
9
%
 
 
690,201
         
653,830
       
6
%
 
Technology segments
   
561,712
         
527,144
 

7

%
 
 
2,204,607
         
2,054,458
       
7
%
 
Materials Services
   
443,950
         
499,552
 
-11
%
 
 
1,909,443
         
1,608,302
       
19
%
 
All Other
   
10,978
         
12,627
 
-13
%
 
 
52,370
         
51,733
       
1
%
 
Total net sales
 
$
1,016,640
       
$
1,039,323
 

 -2

%
 
$
4,166,420
       
$
3,714,493
       
12
%
 
                                                         
Operating Earnings
                                                       
Environmental Technologies
 
$
33,865
 
(A
)
 
$
32,285

5

%
 
$
136,571
 
(A

)

 
$
119,331
   (D
)
 

14

%
 
Process Technologies
   
27,232
         
33,154
 

 -18

%
 
 
87,318
         
95,874
 

(E

)
 
-9
%
 
Appearance and Performance Technologies
   
10,399
 
(B
)
 
 
14,339
 
-27
%
 
 
68,520
 
(B

)

 
 
69,544
 

(F

)
 
-1
%
 
Technology segments
   
71,496
         
79,778
 

 -10

%
 
 
292,409
         
284,749
       
3
%
 
Materials Services
   
3,193
         
1,329
 

 140

%
 
 
15,759
         
10,108
       
56
%
 
All Other
   
(12,442
)

(C

)
 
 
(9,502
)

31

%
 
(34,689
)
(C
)
 
 
(13,284
)

(G

)
 
161
%
 
Total operating earnings
   
62,247
         
71,605
 

 -13

%
 
 
273,479
         
281,573
       
-3
%
 
Equity in earnings of affiliates
   
18,191
         
11,674
 

 56

%
 
 
37,582
         
39,368
       
-5
%
 
Loss on sale of investment
   
(663
)
       
         
(663
)
       
         
Interest expense, net
   
(5,077
)
       
(4,475
)
13
%
 
 
(18,499
)
       
(20,295
)
     
-9
%
 
Earnings before income taxes
   
74,698
         
78,804
 
 -5
%
 
 
291,899
         
300,646
       
-3
%
 
Income tax expense
   
16,561
         
15,115
 
10
%
 
 
56,371
         
64,154
       
-12
%
 
Net earnings before cumulative effect of a change in accounting principle, net of tax
   
58,137
         
63,689
 

 -9

%
 
 
235,528
         
236,492
       
0
%
 
Cumulative effect of a change in accounting principle, net of tax of $1,390
   
         
         
         
(2,269
)
         
Net earnings
 
$
58,137
       
$
63,689
 
-9
%
 
$
235,528
       
$
234,223
       
1
%
 
 

 
(A) - Includes a credit of $0.2 million ($0.1 million after tax) in 2004 related to reversal of prior year special charge accrual.
 
(B) - Includes a charge of $6.6 million ($4.1 million after tax or $0.03 per share) in 2004.
 
(C) - Includes a credit of $1.1 million ($0.7 million after tax or $0.01 per share) in 2004 related to reversal of prior year special charge accrual.
 
(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 charge of $7.8 million ($4.8 million after tax or $0.04 per share) in 2003 related to lease commitments for idle facilities.
 
(G) - 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.
 

 
  9  

 

ENGELHARD CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
 
 
   
December 31,
2004
 
December 31,
2003
 
Cash
 
$
126,229
 
$
87,889
 
Receivables, net
   
410,382
   
400,043
 
Committed metal positions
   
457,570
   
350,163
 
Inventories
   
459,637
   
442,787
 
Other current assets
   
135,631
   
112,678
 
Total current assets
   
1,589,449
   
1,393,560
 
Investments
   
179,160
   
158,664
 
Property, plant and equipment, net
   
911,029
   
880,822
 
Goodwill
   
330,798
   
275,121
 
Other intangible and noncurrent assets
   
168,156
   
224,836
 
Total assets
 
$
3,178,592
 
$
2,933,003
 
Short-term borrowings
 
$
12,025
 
$
68,275
 
Accounts payable
   
375,890
   
296,979
 
Hedged metal obligations
   
292,880
   
295,821
 
Other current liabilities
   
248,872
   
286,940
 
Total current liabilities
   
929,667
   
948,015
 
Long-term debt
   
513,680
   
390,565
 
Other noncurrent liabilities
   
320,933
   
309,024
 
Shareholders’ equity
   
1,414,312
   
1,285,399
 
Total liabilities and shareholders’ equity
 
$
3,178,592
 
$
2,933,003
 


 
 

  10  

 

ENGELHARD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
 
 
   
Twelve Months Ended
December 31,
 
   
2004
 
2003
 
Cash flows from operating activities
             
Net earnings
 
$
235,528
 
$
234,223
 
Adjustments to reconcile net earnings to net cash provided by operating activities:
             
Depreciation and depletion
   
124,951
   
124,315
 
Amortization of intangible assets
   
3,736
   
3,357
 
Equity results, net of dividends
   
(16,038
)
 
(14,805
)
Net change in assets and liabilities:
             
Materials Services related
   
(31,566
)
 
107,590
 
All other
   
6,770
 
 
(48,696
)
Net cash provided by operating activities
   
323,381
   
405,984
 
               
Cash flows from investing activities
             
Capital expenditures
   
(123,168
)
 
(113,557
)
Proceeds from investments
   
1,988
   
6,651
 
Acquisitions and other investments
   
(68,640
)
 
(1,000
)
Net cash used in investing activities
   
(189,820
)
 
(107,906
)
               
Cash flows from financing activities
             
Repayment of short-term borrowings
   
(56,250
)
 
(284,283
)
Proceeds from issuance of long-term debt
   
108,669
   
150,224
 
Repayment of long-term debt
   
(73
)
 
(184
)
Purchase of treasury stock
   
(113,027
)
 
(119,568
)
Cash from exercise of stock options
   
24,420
   
32,880
 
Dividends paid
   
(54,281
)
 
(51,576
)
Net cash used in financing activities
   
(90,542
)
 
(272,507
)
               
Effect of exchange rate changes on cash
   
(4,679
)
 
14,072
 
Net increase in cash
   
38,340
   
39,643
 
Cash at beginning of year
   
87,889
   
48,246
 
Cash at end of period
 
$
126,229
 
$
87,889
 


The prior year presentation of the “Condensed Consolidated Statements of Cash Flows” has been changed to conform to the current year presentation. Specifically, ‘Decrease in hedged metal obligation’ has been reclassified from ‘Net cash used in financing activities’ to ‘Net cash provided by operating activities,’ and is included in the ‘Materials Services related’ line. The net effect of this reclassification is to decrease ‘Net cash provided by operating activities’ by $225 million and decrease ‘Net cash used in financing activities’ by an equivalent amount.
 
 
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