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 June 30, 1995
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 July 31, 1995
$1 par value 144,131,357
<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 Six Months Ended
June 30, June 30,
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $721,144 $633,366 $1,415,599 $1,191,103
Cost of sales 595,309 528,989 1,177,814 996,884
--------- --------- --------- ---------
Gross profit 125,835 104,377 237,785 194,219
Selling, administrative and
other expenses 68,865 57,064 134,274 112,227
---------- --------- --------- ---------
Earnings from operations 56,970 47,313 103,511 81,992
Equity in earnings of
affiliates 979 510 340 363
Net interest expense 7,653 5,328 15,725 9,522
--------- --------- --------- ---------
Earnings before income taxes 50,296 42,495 88,126 72,833
Income tax expense 13,573 10,624 23,794 18,208
--------- --------- --------- ---------
Net earnings $36,723 $31,871 $64,332 $54,625
========= ========= ========= =========
Net earnings per share * $0.26 $0.22 $0.45 $0.38
========= ========= ========= =========
Cash dividends paid per share * $0.09 $0.07 $0.17 $0.14
========= ========= ========= =========
Average number of shares
outstanding * 143,539 144,931 143,227 144,705
========= ========= ========= =========
* Reflects 3-for-2 stock split as of June 30, 1995
See Note to Condensed Consolidated Financial Statements
</TABLE>
- 2 -
<TABLE>
ENGELHARD CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
(Unaudited)
June 30, December 31,
1995 1994
-------- ------------
<S> <C> <C>
Cash $48,207 $26,404
Receivables 229,954 265,639
Inventories 227,461 243,439
Other current assets 50,469 38,155
---------- ---------
Total current assets 556,091 573,637
Investments 230,168 112,855
Property, plant and equipment, net 532,796 540,361
Other noncurrent assets 206,230 213,906
--------- ---------
Total assets $1,525,285 $1,440,759
========= =========
Short-term borrowings $180,544 $179,667
Current maturities of long-term debt 345 489
Accounts payable 108,479 86,230
Other current liabilities 211,087 233,313
--------- ---------
Total current liabilities 500,455 499,699
Long-term debt 111,861 111,762
Other noncurrent liabilities 214,697 214,563
Shareholders' equity 698,272 614,735
--------- ---------
Total liabilities and
shareholders' equity $1,525,285 $1,440,759
========= =========
See Note to Condensed Consolidated Financial Statements
</TABLE>
- 3 -
<TABLE>
ENGELHARD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
(Unaudited)
Six Months Ended
June 30,
-------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities
Net earnings $64,332 $54,625
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation, depletion and amortization 33,322 34,659
Equity earnings, net of dividends 2,817 91
Change in assets and liabilities 3,436 (30,743)
--------- ---------
Net cash provided by operating
activities 103,907 58,632
Cash flows from investing activities
Capital expenditures, net (43,611) (42,456)
Investments and acquisitions (28,270) (19,250)
Other (8,876) 107
--------- ---------
Net cash used in investing activities (80,757) (61,599)
Cash flows from financing activities
Net change in short-term borrowings 1,074 8,808
Dividends paid (24,394) (21,863)
Other 19,592 7,479
--------- ---------
Net cash used in financing activities (3,728) (5,576)
Effect of exchange rate changes on cash 2,381 454
--------- ---------
Net change in cash 21,803 (8,089)
Cash at beginning of year 26,404 25,613
--------- ---------
Cash at end of period $48,207 $17,524
========= =========
See Note to Condensed Consolidated Financial Statements
</TABLE>
- 4 -
<TABLE>
ENGELHARD CORPORATION
INDUSTRY SEGMENT INFORMATION
(Thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales
Catalysts and Chemicals $183,749 $143,286 $359,273 $279,353
Pigments and Additives 104,903 95,014 206,363 183,336
Engineered Materials and
Precious Metals Management 432,492 395,066 849,963 728,414
--------- --------- --------- ---------
$721,144 $633,366 $1,415,599 $1,191,103
Operating Earnings
Catalysts and Chemicals $27,521 $23,788 $52,010 $44,203
Pigments and Additives 22,562 17,922 41,332 31,025
Engineered Materials and
Precious Metals Management 14,351 9,641 25,384 17,088
--------- --------- --------- ---------
64,434 51,351 118,726 92,316
Equity earnings 979 510 340 363
Interest and other expenses, net (15,117) (9,366) (30,940) (19,846)
--------- --------- --------- ---------
Earnings before income taxes $50,296 $42,495 $88,126 $72,833
========= ========= ========= =========
See Note to Condensed Consolidated Financial Statements
</TABLE>
- 5 -
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.
Certain prior period amounts have been reclassified to conform to the
current period presentation. The 1994 financial statements have been
restated to reflect the June 30, 1995 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 1994 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 1995
With the Second Quarter of 1994
- ----------------------------------------
Earnings before income taxes for the second quarter of 1995
increased 18 percent to $50.3 million compared with $42.5 million in the
second quarter of 1994 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 up slightly for the second quarter of 1995 compared with
the second quarter of last year.
Net earnings for the second quarter of 1995 were $36.7 million
or $.26 per share, a 15 percent increase from $31.9 million or $.22 per
share for the same quarter in 1994. The effective tax rate in 1995 was
27 percent compared with 25 percent for the same period last year.
Average shares outstanding were slightly lower.
Net sales for the second quarter of 1995 increased 14 percent
to $721.1 million compared with $633.4 million for the same quarter in 1994.
The increase reflected higher sales in all three business segments.
Catalysts and Chemicals
- -----------------------
Operating earnings increased 16 percent to $27.5 million in
the second quarter of 1995 compared with $23.8 million in the same period
of 1994. Net sales increased 28 percent to $183.7 million in 1995 from
$143.3 million in 1994.
Significantly higher earnings from Automotive Emission Systems
and the Chemical Catalysts Group more than offset lower earnings from the
Petroleum Catalysts Group. The increase in Automotive Emission Systems is
primarily due to sales of auto emission control catalysts in Europe and in
the U.S. The Chemical Catalysts Group had higher volumes of almost all
products and continued to benefit from reductions in manufacturing costs as
a result of its reengineering programs.
- 6 -
In the Petroleum Catalysts Group, the decrease in earnings resulted from
lower shipments of fluid catalytic cracking catalysts, reflecting lower usage
of heavy oil feed by refineries.
Pigments and Additives
- ----------------------
Operating earnings increased 26 percent to $22.6 million in the
second quarter of 1995 compared with $17.9 million in the same period of
1994. Net sales in 1995 were up 10 percent to $104.9 million from $95.0
million in the second quarter of 1994.
Earnings for the Paper Pigments and Chemicals Group were up
significantly while the Specialty Minerals and Colors Group was down slightly.
The increase in the Paper Pigments and Chemicals Group was primarily due to
favorable volume for hydrous and calcined products, improved mix, sales
prices and manufacturing costs. These results reflected a stronger economic
environment for the paper industry. The Specialty Minerals and Colors Group
experienced lower volumes due to a sluggishness in the housing industry while
favorable sales prices provided some offset.
Engineered Materials and Precious Metals Management
- ---------------------------------------------------
Operating earnings increased 49 percent to $14.4 million in
the second quarter of 1995 compared with $9.6 million in the same period
of 1994. Net sales in 1995 increased 9 percent to $432.5 million from
$395.1 million in 1994.
Higher earnings were reported by both the Engineered Materials
Group and the Precious Metals Management Group. The Engineered Materials
Group experienced substantial cost savings across the Group and modest
volume increases. The Precious Metals Management Group benefitted from
generally favorable industrial and precious metals markets.
On June 21, 1995, certain assets and liabilities of the
Engineered Materials Group were contributed to Engelhard-CLAL, a new
joint venture of the Company. See "Financial Condition" for further
discussion.
Comparison of the First Six Months of
1995 With the First Six Months of 1994
- --------------------------------------
Earnings before income taxes for the first six months of
1995 were $88.1 million compared with $72.8 million for the same period
in 1994. Net interest expense was $15.7 million in the first six months
of 1995 compared with $9.5 million in the same period in 1994 primarily
due to higher average debt balances and rates. Equity in earnings of
affiliates was about even with last year.
Net earnings for the first six months of 1995 were $64.3
million compared with $54.6 million for the same period of 1994.
The effective tax rate in 1995 was 27 percent compared with 25 percent
for the same period last year. Net earnings for the first six months of
1995 were $.45 per share compared with $.38 per share in 1994.
- 7 -
Net sales for the first half of 1995 increased 19 percent to
$1.42 billion compared with $1.19 billion a year earlier. The increase
reflected higher sales in all three business segments.
Catalysts and Chemicals
- -----------------------
Operating earnings increased 18 percent to $52.0 million in the
first six months of 1995 compared with $44.2 million in 1994. Net sales
increased 29 percent to $359.3 million for the 1995 period compared with
$279.4 million for the same period in 1994.
Significantly higher earnings from Automotive Emission Systems
and the Chemical Catalysts Group more than offset lower earnings from the
Petroleum Catalysts Group. The increase in Automotive Emission Systems
earnings was attributable to significantly higher sales of auto emission
control catalysts in the U.S. and Europe. The Chemical Catalysts Group
had higher volumes in most product lines as well as benefits from
reductions in manufacturing costs as a result of reengineering programs.
In the Petroleum Catalysts Group, the decrease in earnings resulted from
lower shipments of fluid catalytic cracking catalysts, reflecting
lower usage of heavy oil feed by refineries.
Pigments and Additives
- ----------------------
Operating earnings increased 33 percent to $41.3 million in the
first six months of 1995 compared with $31.0 million in 1994. Net sales
increased 13 percent to $206.4 million for the 1995 period compared with
$183.3 million for the same period in 1994.
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 volumes,
mix and pricing as well as lower manufacturing costs. The Specialty
Minerals and Colors Group benefitted from favorable sales prices as well
as some volume increases in kaolin-based products.
Engineered Materials and Precious Metals Management
- ---------------------------------------------------
Operating earnings for the first six months of 1995 increased
49 percent to $25.4 million from $17.1 million a year earlier on a 17
percent increase in net sales, which rose to $850.0 million in 1995 from
$728.4 million in the 1994 period.
Higher earnings were reported by both the Engineered Materials
Group and the Precious Metals Management Group. The Engineered Materials
Group experienced cost savings and modest volume increases. The Precious
Metals Management Group benefitted from generally favorable precious
metals markets.
On June 21, 1995, certain assets and liabilities of the
Engineered Materials Group were contributed to Engelhard-CLAL, a new
joint venture of the Company. See "Financial Condition" for further
discussion.
- 8 -
Financial Condition
-------------------
On June 21, 1995, as previously disclosed in its Form 8-K,
the Company announced the formation of a 50/50 joint venture with Paris-
based CLAL (Groupe FIMALAC) for manufacturing, marketing and refining
precious metal containing products. The new venture, Engelhard-CLAL,
combines most of the assets of CLAL and certain assets and liabilities
of the Company's Engineered Materials Group in Europe and Asia Pacific
and the engineered materials business currently conducted in Carteret, NJ
and Fremont, CA. Engelhard-CLAL is headquartered in Paris and has annual
revenues of more than $1 billion.
The changes in receivables, inventories, fixed assets and
accrued liabilities on the condensed consolidated balance sheets primarily
relate to the net asset contribution made by the Company in exchange for
its 50 percent investment in the joint venture. Approximately $25 million
of cash was contributed. This initial contribution of approximately
$100 million is subject to adjustment based upon the terms of the agreement.
These adjustments, if any, are expected to be finalized by yearend. The
establishment of the Engelhard-CLAL joint venture resulted in a reduction
of the Company's precious metals inventories with no impact to the results
of operations. Inventories consist of the following:
June 30, 1995 Dec 31, 1994
------------- ------------
Raw Material 68.5 62.9
Work in Process 20.8 24.1
Finished Goods 112.9 103.0
Precious Metals 25.3 53.4
------- -------
227.5 243.4
After the Engelhard-CLAL transaction, the combined market value of precious
metals in inventories and the investment in precious metals exceeded cost by
$60 million at June 30, 1995.
In the ordinary course of business, the Company engages in
transactions with Engelhard-CLAL, a related party. These transactions
range from precious metal sourcing arrangements to service agreements.
Capital Resources and Liquidity
-------------------------------
At June 30, 1995 the Company's current ratio was 1.1, about the
same as at December 31, 1994. The total debt to total capital ratio was
30 percent at June 30, 1995 compared with 32 percent at December 31, 1994.
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.
- 9 -
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Part I Exhibit:
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges.
(b) In a report filed on Form 8-K dated June 21, 1995, the Company
reported the formation of Engelhard-CLAL, a new joint venture.
- 10 -
<TABLE>
ENGELHARD CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
(Unaudited)
Six Months Ended
June 30 Year Ended December 31
---------------- -----------------------------------------------------
<C> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991 1990
<S> ---- ---- ---- ---- ---- ----
Income from continuing operations
before provision for income taxes 88,126 157,306 (4,709) 133,858 117,569 93,720
Add /(deduct)
Portion of rents representative
of the interest factor 2,400 4,800 4,500 4,000 4,200 5,000
Interest on indebtedness 15,725 21,954 13,696 16,231 21,658 25,804
Equity dividends 3,157 3,800 2,600 3,100 3,200 900
Equity earnings (340) (632) (3,443) (7,445) (5,024) (1,698)
--------- --------- --------- --------- --------- ---------
Earnings as adjusted 109,068 187,228 12,644 149,744 141,603 123,726
Fixed Charges
Portion of rents representative
of interest factor 2,400 4,800 4,500 4,000 4,200 5,000
Interest on indebtedness 15,725 21,954 13,696 16,231 21,658 25,804
Capitalized Interest 200 800 2,700 400 110 445
--------- --------- --------- --------- --------- ---------
18,325 27,554 20,896 20,631 25,968 31,249
Ratio of Earnings to Fixed Charges 5.95 6.79 - (A) 7.26 5.45 3.96
(A) For fiscal 1993, earnings were insufficient to cover fixed charges by approximately
$8.3 million. Earnings in 1993 were negatively impacted by a charge of approximately
$148 million for the realignment and consolidation of businesses and environmental
matters. Without such charge, the ratio of earnings to fixed charges for fiscal 1993
would have been 7.14.
</TABLE>
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 11, 1995 /s/ Orin R. Smith
--------------------- -----------------------------
Orin R. Smith
Chairman and Chief
Executive Officer
Date August 11, 1995 /s/ William E. Nettles
--------------------- -----------------------------
William E. Nettles
Vice President and
Chief Financial Officer
Date August 11, 1995 /s/ Martin J. Connor, Jr.
---------------------- -----------------------------
Martin J. Connor, Jr.
Controller
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