SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended June 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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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 July 29, 1994
$1 par value 95,842,160
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<TABLE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
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Engelhard Corporation
Condensed Consolidated Statements of Earnings
(Thousands except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ --------------------------
1994 1993 1994 1993
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $633,366 $563,229 $1,191,103 $1,053,412
Cost of sales 528,989 469,792 996,884 881,331
-------- -------- ---------- ----------
Gross profit 104,377 93,437 194,219 172,081
Selling, administrative and other expenses 57,064 52,472 112,227 108,615
-------- -------- ---------- ----------
Earnings from operations 47,313 40,965 81,992 63,466
Equity in earnings of affiliates 510 857 363 1,109
Gain on sale of investment - - - 10,145
Net interest expense 5,328 3,757 9,522 7,001
-------- -------- ---------- ----------
Earnings before income taxes and
cumulative effect of an accounting change 42,495 38,065 72,833 67,719
Income tax expense 10,624 9,592 18,208 17,065
-------- -------- ---------- ---------
Net earnings before cumulative effect
of an accounting change 31,871 28,473 54,625 50,654
Cumulative effect of an accounting change - - - (16,000)
-------- -------- ---------- ---------
Net earnings $31,871 $28,473 $54,625 $34,654
======== ======== ========== =========
Net earnings per share
Before cumulative effect of an accounting change $0.33 $0.29 $0.57 $0.51
Cumulative effect of an acccounting change - - - (0.16)
-------- -------- ---------- ---------
Net earnings $0.33 $0.29 $0.57 $0.35
======== ======== ========== =========
Cash dividends paid per share $0.11 $0.10 $0.22 $0.20
======== ======== ========== =========
Average number of shares outstanding 96,621 96,994 96,470 97,851
======== ======== ========== =========
See Note to Condensed Consolidated Financial Statements
</TABLE>
<TABLE>
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Engelhard Corporation
Condensed Consolidated Balance Sheets
(Thousands)
(unaudited)
June 30, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Cash $17,524 $25,613
Receivables 244,721 230,593
Inventories 231,046 216,279
Other current assets 55,263 44,095
------------ ------------
548,554 516,580
Investments 114,727 97,147
Property, plant and equipment, net 510,668 494,440
Other noncurrent assets 181,092 170,931
------------ ------------
Total assets $1,355,041 $1,279,098
============ ============
Short-term borrowings $108,795 $99,987
Current maturities of long-term debt 458 440
Accounts payable 79,023 56,342
Other current liabilities 294,343 305,968
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Total current liabilities 482,619 462,737
Long-term debt 112,091 112,240
Other noncurrent liabilities 170,105 170,256
Deferred income taxes 4,998 2,547
Shareholders' equity 585,228 531,318
------------ ------------
Total liabilities and
shareholders' equity $1,355,041 $1,279,098
============ ============
See Note to Condensed Consolidated Financial Statements
</TABLE>
<TABLE>
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Engelhard Corporation
Condensed Consolidated Statements of Cash Flows
(Thousands)
(unaudited)
Six Months Ended
June 30,
---------------------------
1993 1994
<S> ----------- -----------
Cash flows from operating activities <C> <C>
Net earnings $54,625 $34,654
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation, depletion and amortization 34,659 34,585
Cumulative effect of an accounting change - 16,000
Gain on sale of investment - (10,145)
Equity earnings, net of dividends 91 1,013
Change in assets and liabilities (30,743) (14,674)
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Net cash provided by operating activities 58,632 61,433
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Cash flows from investing activities
Capital expenditures, net (42,456) (44,603)
Acquisition of business and investment (19,250) -
Proceeds from sale of investment - 39,787
Other 107 461
---------- -----------
Net cash used in investing activities (61,599) (4,355)
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Cash flows from financing activities
Increase in short-term borrowings, net 8,808 35,649
Dividends paid (21,863) (19,498)
Other 7,479 (75,566)
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Net cash used in financing activities (5,576) (59,415)
Effect of exchange rate changes on cash 454 (996)
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Net change in cash (8,089) (3,333)
Cash at beginning of year 25,613 31,326
---------- -----------
Cash at end of period $17,524 $27,993
========== ===========
See Note to Condensed Consolidated Financial Statements
</TABLE>
<TABLE>
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Engelhard Corporation
Industry Segment Information
(Thousands)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------------------------------
1994 1993 1994 1993
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Net Sales
Catalysts and Chemicals $143,286 $142,161 $279,353 $277,603
Pigments and Additives 95,014 96,181 183,336 187,633
Engineered Materials and
Precious Metals Management 395,066 324,887 728,414 588,176
--------- -------- --------- ---------
$633,366 $563,229 $1,191,103 $1,053,412
========= ======== ========= =========
Operating Earnings
Catalysts and Chemicals $23,788 $21,863 $44,203 $36,521
Pigments and Additives 17,922 15,662 31,025 26,213
Engineered Materials and
Precious Metals Managememt 9,641 8,893 17,088 13,236
--------- -------- --------- ---------
51,351 46,418 92,316 75,970
Equity earnings 510 857 363 1,109
Gain on sale of investment - - - 10,145
Interest and other expenses, net (9,366) (9,210) (19,846) (19,505)
--------- -------- ---------- ---------
Earnings before income taxes and
cumulative effect of an accounting change $42,495 $38,065 $72,833 $67,719
========== ========= ========== =========
See Note to Condensed Consolidated Financial Statements
</TABLE>
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Note to Condensed Consolidated Financial Statements
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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. Certain prior period amounts have been reclassified to
conform to the current period presentation. 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 Second Quarter of 1994
With the Second Quarter of 1993
- ----------------------------------------
Earnings before income taxes for the second quarter of
1994 increased 12 percent to $42.5 million compared with $38.1
million in the second quarter of 1993 primarily due to higher
earnings from all business segments partially offset by increased
net interest expense as a result of higher average debt balances
and rates. Equity in earnings of affiliates was down for the
second quarter of 1994 compared with last year.
Net earnings for the second quarter of 1994 were $31.9
million or $.33 per share, a 12 percent increase from $28.5 million
or $.29 per share for the same quarter in 1993. The effective tax
rate in 1994 was 25 percent compared with 25.2 percent for the same
period last year. Average shares outstanding were substantially
the same for both periods.
Net sales for the second quarter of 1994 increased 12
percent to $633.4 million compared with $563.2 million for the same
quarter in 1993. The increase was primarily attributable to the
Engineered Materials and Precious Metals Management segment and
reflected higher precious metal volumes and prices of certain
precious metals.
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Catalysts and Chemicals
- -----------------------
Operating earnings increased 9 percent to $23.8 million
in the second quarter of 1994 compared with $21.9 million in the
same period of 1993. Net sales increased slightly to $143.3
million in 1994 from $142.2 million in 1993.
Significantly higher earnings from the Environmental and
Petroleum Catalysts Groups more than offset lower earnings from the
Chemical Catalysts Group. The increase in the Environmental
Catalysts Group is primarily due to sales of the new diesel
emissions control catalysts to the truck and bus markets, as well
as a continuing strong demand for autocatalysts in North America.
In the Petroleum Catalysts Group, the increase in earnings resulted
from higher shipments of its fluid catalytic cracking and moving
bed catalysts. The Chemical Catalysts Group had lower North
American volumes of base metal catalysts which were partially
offset by reductions in manufacturing costs as a result of its
reengineering programs.
Pigments and Additives
- ----------------------
Operating earnings increased 14 percent to $17.9 million
in the second quarter of 1994 compared with $15.7 million in the
same period of 1993. Net sales in 1994 were down slightly to $95.0
million from $96.2 million in the second quarter of 1993.
Earnings for the Paper Pigments and Chemicals Group were
down slightly while the Specialty Minerals and Colors Group showed
a significant improvement. The slight decline in the Paper
Pigments and Chemicals Group was primarily due to lower volume and
pricing for hydrous products which was offset by reductions in
manufacturing costs as a result of its reengineering programs. The
Specialty Minerals and Colors Group benefitted from higher volumes
and sales prices as well as favorable plant costs.
Engineered Materials and Precious Metals Management
- ---------------------------------------------------
Operating earnings increased 8 percent to $9.6 million
in the second quarter of 1994 compared with $8.9 million in the
same period of 1993. Net sales in 1994 increased significantly to
$395.1 million from $324.9 million in 1993.
Higher earnings from the Engineered Materials Group were
partially offset by lower earnings from the Precious Metals
Management Group. The Engineered Materials Group experienced
substantial cost savings across the Group and volume increases for
fabricated industrial products in the U.S. The decline in the
earnings of the Precious Metals Management Group was primarily due
to generally slower industrial demand for precious metals products,
especially in Europe.
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Comparison of the First Six Months of
1994 With the First Six Months of 1993
- --------------------------------------
Earnings before income taxes and cumulative effect of an
accounting change for the first six months of 1994 were $72.8
million compared with $67.7 million for the same period in 1993.
The first six months of 1993 included a pretax gain of $10.1
million ($6.3 million after tax or $.06 per share) from the sale of
the Company's interest in M&T Harshaw, a base-metal plating
business. Excluding this gain, earnings before income taxes and
cumulative effect of an accounting change were up 27 percent from
the prior year with higher earnings from all business segments.
Net interest expense was $9.5 million in the first six months of
1994 compared with $7.0 million in the same period in 1993
primarily due to higher average debt balances and rates. Equity in
earnings of affiliates was $.4 million for the first six months of
1994 compared with $1.1 million in 1993, largely due to the startup
losses of a new joint venture, Engelhard ICC.
Net earnings before the cumulative effect of an
accounting change for the first six months of 1994 were $54.6
million compared with $50.7 million for the same period of 1993.
The effective tax rate in 1994 was 25 percent compared with 25.2
percent for the same period last year. Net earnings before the
cumulative effect of an accounting change for the first six months
of 1994 were $.57 per share compared with $.51 per share in 1993.
In 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 112 "Employers' Accounting
for Postemployment Benefits". The cumulative effect of this change
was a one-time, non-cash charge of $16.0 million ($.16 per share)
resulting in net earnings for the first six months of 1993 of $34.7
million ($.35 per share) compared with net earnings of $54.6
million in 1994 ($.57 per share).
Net sales for the first half of 1994 increased 13 percent
to $1.19 billion compared with $1.05 billion a year earlier. The
increase was attributable to the Engineered Materials and Precious
Metals Management segment and reflected higher precious metal
volumes and prices for certain precious metals.
Catalysts and Chemicals
- -----------------------
Operating earnings increased 21 percent to $44.2 million
in the first six months of 1994 compared with $36.5 million in
1993. Net sales increased slightly to $279.4 million for the 1994
period compared with $277.6 million for the same period in 1993.
Significantly higher earnings from the Environmental and
Petroleum Catalysts Groups more than offset lower earnings from the
Chemical Catalysts Group. The increase in the Environmental
Catalysts Group earnings was attributable to sales of the new
diesel emission control catalysts to the truck and bus market, as
well as continuing strong demand for autocatalysts in North
America. In the Petroleum Catalysts Group, the increase in
earnings resulted from significantly higher shipments of its fluid
- 9 -
catalytic cracking and moving bed catalysts. The Chemical
Catalysts Group had lower volumes of North American base metal
catalysts which more than offset the benefit from reductions in
manufacturing costs as a result of reengineering programs.
Pigments and Additives
- ----------------------
Operating earnings increased 18 percent to $31.0 million
in the first six months of 1994 compared with $26.2 million in
1993. Net sales declined slightly to $183.3 million for the 1994
period compared with $187.6 million for the same period in 1993.
Earnings increased for both the Paper Pigments and
Chemicals Group and the Specialty Minerals and Colors Group. The
increase in the Paper Pigments and Chemicals Group was primarily
due to favorable manufacturing costs which more than offset lower
volumes and pricing for hydrous products. The Specialty Minerals
and Colors Group had higher volumes and sales prices as well as
favorable manufacturing costs.
Engineered Materials and Precious Metals Management
- ---------------------------------------------------
Operating earnings for the first six months of 1994
increased 29 percent to $17.1 million from $13.2 million a year
earlier on a 24 percent increase in net sales for the first half of
1994 to $728.4 million from $588.2 million in the 1993 period.
Higher earnings from the Engineered Materials Group more
than offset lower earnings from the Precious Metals Management
Group. The Engineered Materials Group experienced cost savings and
some volume increases. Current market conditions with reduced
customer requirements caused the decline in the earnings of the
Precious Metals Management Group.
Capital Resources and Liquidity
-------------------------------
At June 30, 1994 the Company's current ratio was 1.1 to
1.0 about the same as at December 31, 1993. The total debt to
total capital ratio was 27 percent at June 30, 1994 compared with
29 percent 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
and capital markets will be adequate to finance its working capital
requirements and capital expenditure programs.
Other Matters
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On June 7, 1994, the Company announced that it intends to
acquire certain assets of the Floridin Company's specialty minerals
operations in Quincy, Florida from U.S. Silica. The assets include
a manufacturing facility and minerals rights. The Quincy
operations are engaged in the mining and processing of attapulgite
minerals into a variety of products used primarily in the
- 10 -
manufacture of paints, coatings, caulks, sealants, pet litter,
liquid fertilizers and agricultural products. Engelhard already
operates a similar business and has a manufacturing facility in
Attapulgus, Georgia, which it may cease operating. Engelhard noted
that its proposal to purchase the Floridin plant and certain
related assets is contingent on several actions, including the
appropriate approvals and definitive agreement.
On July 15, 1994, the Company announced that it purchased
the assets and business of General Plasma, Inc. from Derlan
Industries Limited for approximately $25 million in cash. General
Plasma is a North American supplier of thermal spray coating
technology and services. The Company applies metallic, ceramic and
plastic coatings through a variety of thermal spray processes for
the aircraft, land-based turbine, medical implant, diesel engine,
automotive and other industries. The acquisitions completed to date in
1994 are not expected to have a material impact on the operations or
cash flows of the Company in the near term.
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
Report on form 8-K
There were no reports on Form 8-K during the quarter
ended June 30, 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 August 12, 1994 /s/ Orin R. Smith
------------------------ -------------------------------------
Orin R. Smith
President and Chief Executive Officer
Date August 12, 1994 /s/ Robert L. Guyett
------------------------ -------------------------------------
Robert L. Guyett
Senior Vice President and
Chief Financial Officer
Date August 12, 1994 /s/ Martin J. Connor, Jr.
------------------------ -------------------------------------
Martin J. Connor, Jr.
Controller
