SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
___ OF THE SECURITIES EXCHANGE ACT OF 1934
--------------------------------------------------
For the quarterly period ended March 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
--------------------------------------------------
For the transition period from _______ to _______
Commission file name 1-8142
ENGELHARD CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 22-1586002
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization Number)
101 WOOD AVENUE, ISELIN, NEW JERSEY 08830
(Address of principal executive offices) (Zip Code)
(908) 205-5000
(Registrant's telephone number including area code)
Not Applicable
(Former name, former address and former fiscal year,
if change since last report)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90
days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class of Common Stock Outstanding at April 30, 1994
$1 par value 96,607,903
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<TABLE> PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
ENGELHARD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(thousands except per share data)
(Unaudited)
Three Months Ended
March 31,
1994 1993
---------- ----------
<S> <C> <C>
Net sales $ 557,737 $ 490,183
Cost of sales 467,895 411,539
---------- ----------
Gross profit 89,842 78,644
Selling, administrative and other expenses 55,163 56,143
---------- ----------
Earnings from operations 34,679 22,501
Equity in (loss) earnings of affiliates (147) 252
Gain on sale of investment - 10,145
Net interest expense 4,194 3,244
---------- ----------
Earnings before income taxes and cumulative
effect of an accounting change 30,338 29,654
Income tax expense 7,584 7,473
---------- ----------
Net earnings before cumulative
effect of an accounting change 22,754 22,181
Cumulative effect of an accounting change - (16,000)
---------- ----------
Net earnings $ 22,754 $ 6,181
========== ==========
Net earnings per share
Before cumulative effect of an accounting change $.24 $ .22
Cumulative effect of an accounting change - (.16)
---------- ----------
Net earnings $.24 $ .06
========== ==========
Cash dividends paid per share $.11 $.10
========== ==========
Average number of shares outstanding 96,318 98,714
========== ==========
See Note to Condensed Consolidated Financial Statements
</TABLE>
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<TABLE>
ENGELHARD CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(thousands)
(Unaudited)
March 31, December 31,
1994 1993
---------- -----------
<S> <C> <C>
Cash $ 24,876 $ 25,613
Receivables 240,559 230,593
Inventories 217,925 216,279
Other current assets 49,908 44,095
---------- ----------
Total current assets 533,268 516,580
Investments 117,321 97,147
Property, plant and equipment, net 500,248 494,440
Other noncurrent assets 174,879 170,931
---------- ----------
Total assets $1,325,716 $1,279,098
========== ==========
Short-term borrowings $ 114,149 $ 99,987
Current maturities of long-term debt 452 440
Accounts payable 79,262 56,342
Other current liabilities 287,011 305,968
---------- ----------
Total current liabilities 480,874 462,737
Long-term debt 112,071 112,240
Other noncurrent liabilities 171,373 170,256
Deferred income taxes 3,627 2,547
Shareholders' equity 557,771 531,318
---------- ----------
Total liabilities and shareholders' equity $1,325,716 $1,279,098
========== ==========
See Note to Condensed Consolidated Financial Statements
</TABLE>
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<TABLE>
ENGELHARD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands)
(Unaudited)
Three Months Ended
March 31,
1994 1993
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 22,754 $ 6,181
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation, depletion and amortization 17,224 17,291
Cumulative effect of an accounting change - 16,000
Gain on sale of investment - (10,145)
Equity loss (earnings), net of dividends 147 (252)
Change in assets and liabilities (8,895) (24,601)
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Net cash provided by operating activities 31,230 4,474
---------- ----------
Cash flows from investing activities
Capital expenditures, net (18,344) (18,555)
Proceeds from sale of investment - 39,787
Acquisition of business and investment, net (19,250) -
Other (3,114) (3,500)
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Net cash (used in) provided by investing activities (40,708) 17,732
---------- ----------
Cash flows from financing activities
Net change in debt 13,950 (6,460)
Dividends paid (10,626) (9,898)
Other 4,861 (11,241)
---------- ----------
Net cash provided by (used in) financing activities 8,185 (27,599)
---------- ----------
Effect of exchange rate changes on cash 556 (453)
---------- ----------
Net change in cash (737) (5,846)
Cash at beginning of year 25,613 31,326
---------- ----------
Cash at end of period $ 24,876 $ 25,480
========== ==========
See Note to Condensed Consolidated Financial Statements
</TABLE>
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<TABLE>
ENGELHARD CORPORATION
INDUSTRY SEGMENT INFORMATION
(thousands)
(Unaudited)
Three Months Ended
March 31,
1994 1993
---------- -----------
<S> <C> <C>
Net sales
Catalysts and Chemicals $ 136,067 $ 135,442
Pigments and Additives 88,322 91,452
Engineered Materials and
Precious Metals Management 333,348 263,289
---------- ----------
$ 557,737 $ 490,183
========== ==========
Operating earnings
Catalysts and Chemicals $ 20,415 $ 14,658
Pigments and Additives 13,103 10,551
Engineered Materials and
Precious Metals Management 7,447 4,343
---------- ----------
40,965 29,552
Equity (loss) earnings (147) 252
Gain on sale of investment - 10,145
Interest and other expenses, net (10,480) (10,295)
---------- ----------
Earnings before income taxes and
cumulative effect of an accounting change $ 30,338 $ 29,654
========== ==========
See Note to Condensed Consolidated Financial Statements
</TABLE>
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Note to Condensed Consolidated Financial Statements
- - ---------------------------------------------------
The unaudited condensed consolidated financial statements
of Engelhard Corporation and subsidiaries (the Company) contain all
adjustments which, in the opinion of management, are necessary for
a fair statement of the results for the interim periods presented.
The 1993 financial statements have been restated to reflect the
adoption of Statement of Financial Accounting Standards No. 112
"Employers' Accounting for Postemployment Benefits" and the
September 30, 1993 three-for-two stock split. These financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's
1993 Annual Report to Shareholders.
Management's Discussion and Analysis of
Item 2. Financial Condition and Results of Operations
- - ------- ---------------------------------------------
Results of Operations
---------------------
Comparison of the First Quarter of 1994
With the First Quarter of 1993
- - ---------------------------------------
Earnings before income taxes and cumulative effect of
accounting changes for the first quarter of 1994 were $30.3 million
compared with $29.7 million in 1993. The 1993 quarter included a
pretax gain of $10.1 million from the sale of the Company's share
of M&T Harshaw, a base-metal plating business. Excluding this
gain, earnings before income taxes and cumulative effect of
accounting changes were up 56 percent from the prior year. The
increase was primarily due to a 39 percent increase in operating
earnings as all three business segments reported higher results.
Higher net interest expense reflects higher average debt balances
during the period.
Net earnings before the cumulative effect of an accounting
change for the first quarter of 1994 were $22.8 million compared
with $22.2 million in 1993. The effective tax rate in 1994 was
25.0 percent compared with 25.2 percent for the same period last
year.
In 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 112 "Employers' Accounting
for Postemployment Benefits". The impact of the change on 1993
results was a one-time, noncash charge of $16.0 million ($.16 per
share). After reflecting the cumulative effect in the first
quarter of 1993, the restated results were $6.2 million ($.06 per
share) compared with net earnings of $22.8 million in 1994 ($.24
per share).
Net sales for the first quarter of 1994 increased 14
percent to $557.7 million from $490.2 million for the same quarter
in 1993. The increase was primarily attributable to the Engineered
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Materials and Precious Metals Management segment reflecting higher
volumes.
Catalysts and Chemicals
- - -----------------------
Operating earnings increased 39 percent to $20.4 million
in the first quarter of 1994 from $14.7 million in the same period
of 1993 while net sales increased slightly to $136.1 million in
1994 from $135.4 in 1993.
Higher earnings were contributed by all groups. The
Environmental Catalysts Group had increased earnings largely due to
sales of new diesel emission control catalysts for trucks and buses
in the U.S. In the Petroleum Catalysts Group strong demand
resulted in higher shipments of its Fluid Catalytic Cracking
Catalysts while Moving Bed volumes declined. The Chemical
Catalysts Group continues to benefit from lower costs which helped
to offset lower Base Metal volumes.
Pigments and Additives
- - ----------------------
Operating earnings increased 24 percent to $13.1 million
in the first quarter of 1994 from $10.6 million in the same period
of 1993 while net sales decreased three percent to $88.3 million in
1994 from $91.5 million in 1993.
Earnings increased for both business groups. The
increase in the Paper Pigments and Chemicals Group was due to
lower operating costs which offset lower pricing, unfavorable
volumes, and the impact of severe winter conditions. The increase in the
Specialty Minerals and Colors Group was due to higher volumes,
lower manufacturing costs and some higher pricing.
Engineered Materials and Precious Metals Management
- - ---------------------------------------------------
Operating earnings increased 71 percent to $7.4 million
in the first quarter of 1994 from $4.3 million in the same period
of 1993 and net sales increased 27 percent to $333.3 million in
1994 from $263.3 million in 1993.
Earnings increased for both business groups. The
Engineered Materials Group benefitted significantly from cost
savings and strong domestic volumes. Current market conditions
helped to increase the earnings of the Precious Metals Management
Group.
Capital Resources and Liquidity
-------------------------------
At March 31, 1994 the Company's current ratio was 1.1
and the total debt to total capital ratio was 29 percent, both the
same as at December 31, 1993.
Management believes that the combination of the Company's
cash on hand, ongoing cash flow and the ability to access credit
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and capital markets will be adequate to finance its working capital
requirements and capital expenditure programs.
Other Matters
-------------
In early 1994, the Company and ICC Technologies, Inc.
formed Engelhard/ICC, a jointly owned partnership, to develop and
commercialize air conditioning and air treatment systems.
In March 1994, the Company completed its purchase of the
assets of the sorbents and moving bed catalysts business of Solvay
Catalysts, GmbH, in Nienburg, Germany.
Part II - Other Information
---------------------------
Item 4. Results of Votes of Security Holders
(a) The Company's Annual Meeting of the Shareholders
was held May 5, 1994.
(b) Results of votes.
The following members were elected to the Company's Board of
Directors to serve three-year terms expiring in 1997:
Nominee In Favor Withheld
------- -------- --------
Marion H. Antonini 90,749,549 61,049
Anthony W. Lea 90,787,338 23,260
Douglas G. Watson 90,808,341 2,257
Coopers & Lybrand was reappointed as Independent Public
Accountants - For - 91,434,944, Against - 182,242, Abstain - 140,192.
Item 6. Exhibits and Reports on Form 8-K
- - ------- --------------------------------
There were no reports on Form 8-K during the quarter ended
March 31, 1994.
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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 May 13 , 1994 /s/ Orin R. Smith
------------------- ------------------------------
Orin R. Smith
President and
Chief Executive Officer
Date May 13, 1994 /s/ Robert L. Guyett
------------------- ------------------------------
Robert L. Guyett
Senior Vice President and
Chief Financial Officer
Date May 13, 1994 /s/ Martin J. Connor, Jr.
------------------- --------------------------------
Martin J. Connor, Jr.
Controller
