<PAGE>
UNITED STATES
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, 2000
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 number 1-8142
ENGELHARD CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 22-1586002
------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
101 WOOD AVENUE, ISELIN, NEW JERSEY 08830
---------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
(732) 205-5000
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed 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 (or for such shorter period that the
Registrant was required to file such reports), 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, 2000
- --------------------- -----------------------------
$1 par value 127,615,764
1
<PAGE>
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,
-------------------------
2000 1999
----------- -----------
Net sales ......................................... $1,165,125 $1,073,234
Cost of sales ..................................... 973,100 928,080
----------- -----------
Gross profit ................................. 192,025 145,154
Selling, administrative and other expenses ........ 94,413 77,595
----------- -----------
Operating earnings ........................... 97,612 67,559
Equity in earnings of affiliates .................. 10,000 3,675
Gain/(loss) on disposal of investments and land... (6,000) 1,020
Interest expense, net.............................. (16,880) (13,919)
----------- -----------
Earnings before income taxes ................. 84,732 58,335
Income tax expense ................................ 26,691 17,792
----------- -----------
Net earnings ................................. $ 58,041 $ 40,543
=========== ===========
Basic earnings per share .......................... $ 0.46 $ 0.28
=========== ===========
Diluted earnings per share ........................ $ 0.45 $ 0.28
=========== ===========
Cash dividends paid per share ..................... $ 0.10 $ 0.10
=========== ===========
Average number of shares outstanding - Basic ...... 126,100 143,481
=========== ===========
Average number of shares outstanding - Diluted .... 127,619 145,441
=========== ===========
See the Accompanying Notes to the Unaudited Condensed Consolidated
Financial Statements
2
<PAGE>
ENGELHARD CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
(Unaudited)
March 31, December 31,
2000 1999
------------ ------------
Cash ............................................. $ 61,671 $ 54,375
Receivables, net.................................. 397,011 394,338
Committed metal positions ........................ 915,648 467,768
Inventories ...................................... 378,017 359,153
Other current assets ............................. 127,008 121,672
---------- ----------
Total current assets ...................... 1,879,355 1,397,306
Investments ...................................... 189,788 182,184
Property, plant and equipment, net ............... 862,353 871,900
Intangible assets, net ........................... 313,083 325,544
Other noncurrent assets .......................... 128,786 143,590
---------- ----------
Total assets .............................. $3,373,365 $2,920,524
========== ==========
Short-term borrowings ............................ $ 431,774 $ 452,029
Accounts payable ................................. 521,637 246,016
Hedged metal obligations ......................... 643,324 497,800
Other current liabilities ........................ 292,145 268,978
---------- ----------
Total current liabilities ................. 1,888,880 1,464,823
Long-term debt ................................... 497,477 499,466
Other noncurrent liabilities ..................... 184,560 191,845
Shareholders' equity ............................. 802,448 764,390
---------- ----------
Total liabilities and
shareholders' equity .................... $3,373,365 $2,920,524
========== ==========
See the Accompanying Notes to the Unaudited Condensed Consolidated
Financial Statements
3
<PAGE>
ENGELHARD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
(Unaudited)
Three Months Ended
March 31,
--------------------
2000 1999
--------- --------
Cash flows from operating activities
Net earnings .........................................$ 58,041 $ 40,543
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities
Depreciation and depletion ...................... 25,885 23,933
Amortization of intangible assets ............... 3,321 3,239
(Gain)/loss on disposal of investments and land.. 6,000 (1,020)
Equity results, net of dividends ................ (10,000) (3,675)
Net change in assets and liabilities
Metal related .............................. (29,493) (88,168)
All other .................................. (16,851) (34,151)
--------- ---------
Net cash provided by (used in) operating
activities..................................... 36,903 (59,299)
--------- ---------
Cash flows from investing activities
Capital expenditures ................................. (21,607) (13,117)
Proceeds from disposal of investments and land........ 6,500 -
Acquisitions and other investments ................... - (578)
Other ................................................ - (1,540)
--------- ---------
Net cash used in investing activities ........... (15,107) (15,235)
--------- ---------
Cash flows from financing activities
(Decrease)/increase in short-term borrowings.......... (20,255) 13,460
Increase in hedged metal obligations................. 20,876 78,834
Proceeds from issuance of long-term debt ............. - 183
Repayment of long-term debt .......................... (1,988) (50)
Stock bonus and option plan transactions ............. 1,121 2,222
Dividends paid ....................................... (12,759) (14,495)
--------- ---------
Net cash (used in) provided by financing
activities .................................... (13,005) 80,154
Effect of exchange rate changes on cash ................... (1,495) 1,463
--------- ---------
Net increase in cash ............................ 7,296 7,083
Cash at beginning of year ....................... 54,375 22,339
--------- ---------
Cash at end of period............................$ 61,671 $ 29,422
========= =========
See the Accompanying Notes to the Unaudited Condensed Consolidated
Financial Statements
4
<PAGE>
ENGELHARD CORPORATION
BUSINESS SEGMENT INFORMATION
(Thousands)
(Unaudited)
Three Months Ended
March 31,
------------------------
2000 1999
----------- ---------
Net Sales
Environmental Technologies .................. $ 159,179 $ 148,203
Process Technologies ........................ 116,028 112,852
Specialty Pigments and Additives............. 94,777 88,032
Paper Pigments and Additives.... ............ 55,903 55,928
Industrial Commodities Management ........... 729,366 636,418
----------- -----------
Reportable segments .................... 1,155,253 1,041,433
All Other ................................... 9,872 31,801
----------- -----------
$1,165,125 $1,073,234
=========== ===========
Operating Earnings
Environmental Technologies .................. $ 32,850 $ 26,135
Process Technologies ........................ 15,451 14,425
Specialty Pigments and Additives............. 15,752 13,897
Paper Pigments and Additives................. 2,042 6,723
Industrial Commodities Management ........... 42,328 6,890
----------- ---------
Reportable segments .................... 108,423 68,070
All Other ................................... (10,811) (511)
----------- ---------
97,612 67,559
Equity in earnings of affiliates ................. 10,000 3,675
Gain/(loss) on disposal of investments and land... (6,000) 1,020
Interest expense, net ............................ (16,880) (13,919)
----------- ---------
Earnings before income taxes ........... $ 84,732 $ 58,335
Income tax expense ............................... 26,691 17,792
----------- ---------
Net earnings ........................... $ 58,041 $ 40,543
=========== =========
Note: Certain historical segment data have been reclassified to conform to a
realignment of responsibilities resulting from internal organization changes in
the second quarter of 1999.
See the Accompanying Notes to the Unaudited Condensed Consolidated
Financial Statements
5
<PAGE>
Notes to the Unaudited Condensed Consolidated Financial Statements
- ------------------------------------------------------------------
Note 1 - Basis of Presentation
- ------------------------------
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 financial statement results for interim
periods are not necessarily indicative of financial results for the full year.
These financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's 1999 Annual
Report to Shareholders. Certain prior-year amounts have been reclassified
to conform with the current-year presentation.
Note 2 - Inventories
- --------------------
Inventories consist of the following (in thousands):
March 31, 2000 December 31, 1999
-------------- -----------------
Raw materials ........................... $ 85,802 $ 84,165
Work in process ......................... 57,190 52,954
Finished goods .......................... 208,743 195,731
Precious metals ......................... 26,282 26,303
-------- --------
Total inventories ....................... $378,017 $359,153
======== ========
All precious metals included in inventories are stated at LIFO cost. The
market value of the precious metals inventories exceeded cost by $170.6 million
and $115.3 million at March 31, 2000 and December 31, 1999, respectively.
Note 3 - Comprehensive Income
- -----------------------------
Comprehensive income is summarized as follows (in thousands):
Three Months Ended
March 31,
---------------------
2000 1999
-------- --------
Net earnings ......................................... $58,041 $40,543
Other comprehensive loss:
Foreign currency translation adjustment ........... (13,298) (1,759)
-------- --------
Comprehensive income ................................. $44,743 $38,784
======== ========
No provision has been made for U.S. or additional foreign taxes on the
undistributed earnings of foreign subsidiaries because such earnings are
expected to be reinvested indefinitely in the subsidiaries' operations.
6
<PAGE>
Note 4 - Earnings Per Share
- ---------------------------
The following table represents the computation of basic and diluted earnings per
share:
Three Months Ended
March 31,
----------------------
(in thousands, except per share data) 2000 1999
- ------------------------------------- -------- --------
Basic EPS Computation
- ---------------------
Net earnings applicable to common shares $ 58,041 $ 40,543
-------- --------
Average number of shares outstanding-basic 126,100 143,481
-------- --------
Basic earnings per share $ 0.46 $ 0.28
======== ========
Diluted EPS Computation
- -----------------------
Net earnings applicable to common shares $ 58,041 $ 40,543
-------- --------
Average number of shares outstanding-basic 126,100 143,481
Effect of dilutive stock options 188 625
Effect of Rabbi Trust 1,331 1,335
-------- --------
Total number of shares outstanding-diluted 127,619 145,441
-------- --------
Diluted earnings per share $ 0.45 $ 0.28
======== ========
Note 5 - Disposal of Investments and Land
- -----------------------------------------
In the first quarter of 2000, the Company recorded an impairment charge of
$6.0 million associated with the divestiture of the International Dioxide, Inc.
("IDI") business unit. The $6.0 million charge ($3.7 million after-tax or $0.03
per share on a diluted basis) was recorded in "gain/(loss) on disposal of
investments and land" in the Company's "Condensed Consolidated Statements of
Earnings". This impairment charge was recorded as the contracted selling price
from the eventual buyer was less than the carrying value of IDI at March 31,
2000. The Company sold IDI in April 2000 and the net cash proceeds received of
$4.5 million approximated the adjusted carrying value. In 1999, IDI had annual
sales of approximately $10.4 million and was reported in the Company's "All
Other" segment.
7
<PAGE>
Note 6 - Other Matters
- ----------------------
In 1998, management learned that Engelhard and several other companies
operating in Japan had been victims of a fraudulent scheme involving base-metal
inventory held in third-party warehouses in Japan. The inventory loss was
approximately $40 million in 1997 and $20 million in 1998. The Company is
vigorously pursuing various recovery actions. These actions include
negotiations with the various third parties involved and, in several instances,
the commencement of litigation. In the first quarter of 1998, Engelhard
recorded a receivable from the insurance carriers and third parties involved
for approximately $20 million. This amount represents management's and
counsel's best estimate of the minimum probable recovery from the various
insurance policies and other parties involved in the fraudulent scheme.
The Company is involved in a value-added tax dispute in Peru, which
Management believes has a maximum financial exposure of approximately $30
million. On December 2, 1999, Engelhard Peru, S.A., a wholly owned subsidiary,
was denied refund claims of approximately $27 million. The Peruvian tax
authority also determined that Engelhard Peru, S.A. is liable for approximately
$69 million in refunds previously paid, fines and interest. Engelhard Peru, S.A.
is contesting these determinations vigorously, and Management believes, based on
consultation with counsel, that Engelhard Peru, S.A. is entitled to all refunds
claimed and is not liable for these additional taxes, fines or interest.
However, even if the matter is subsequently resolved against Engelhard Peru,
S.A., Management believes the maximum financial exposure is limited to the
aggregate value of all assets of Engelhard Peru, S.A., including unpaid refunds,
which is approximately $30 million.
8
<PAGE>
Management's Discussion and Analysis of
Item 2. Financial Condition and Results of Operations
- ------- ---------------------------------------------
Results of Operations
---------------------
Comparison of the First Quarter of 2000
with the First Quarter of 1999
- ---------------------------------------
Net earnings increased 43% to $58.0 million in the first quarter of 2000
from $40.5 million in the same period of 1999. Operating earnings for the first
quarter of 2000 increased 44% to $97.6 million from $67.6 million in the same
period of 1999. Four of the Company's five reportable segments reported
increased operating earnings, led by particularly strong results from the
Industrial Commodities Management and Environmental Technologies segments.
The effective tax rate was 31.5% in the first quarter of 2000 compared with
30.5% for the same period last year. The higher effective rate was primarily due
to a shift in the geographic mix of earnings and a changing product slate.
The Company's share of earnings from affiliates was $10.0 million for the
first quarter of 2000 compared with $3.7 million for the same period in 1999.
The increase was primarily due to higher equity earnings from Engelhard-CLAL, a
precious-metal-fabrication joint venture. Engelhard-CLAL's earnings included a
gain of $3.8 million related to the partial liquidation of precious metal
inventories. Higher equity earnings were also reported for Heesung Engelhard, an
environmental catalyst joint venture and N.E. Chemcat Corporation, a 38.8% owned
publicly traded Japanese Corporation that is a leading producer of automotive
and chemical catalysts.
Higher net interest expense was primarily due to increased borrowings
related to a major share repurchase in May 1999 and an increase in interest
rates.
Net sales increased 9% to $1.17 billion in the first quarter of 2000 from
$1.07 billion for the same period in 1999. The Environmental Technologies,
Process Technologies, Specialty Pigments and Additives, and Industrial
Commodities Management segments reported higher sales, which more than offset
slightly lower sales from the Paper Pigments and Additives segment. Sales
reported in the "All Other" segment decreased primarily as the Company sold its
metal plating business in the second quarter of 1999.
9
<PAGE>
Environmental Technologies
- --------------------------
Operating earnings increased 26% to $32.9 million in the first quarter of
2000 from $26.1 million in the same period of 1999. Net sales for the first
quarter of 2000 increased 7% to $159.2 million from $148.2 million in the same
period of 1999.
The majority of this segment's sales and operating earnings are derived
from technologies to control pollution from mobile sources, including gasoline
and diesel-powered passenger cars, sport-utility vehicles, trucks, buses and
off-road vehicles. Earnings increased primarily in both North America and Europe
from auto-emission catalysts. Earnings in North America increased as a result of
increased sales volumes for auto catalysts.
Earnings also were favorably impacted by strength in the segment's
non-automotive markets, primarily from increased sales volumes of heavy-duty
diesel-engine retrofits and surface technologies.
The segment's earnings increases were partially offset by costs related to
the start-up of new manufacturing facilities in Brazil and China, plus the
expansion of a facility in India.
Process Technologies
- --------------------
Operating earnings increased 7% to $15.5 million in the first quarter of
2000 from $14.4 million in the same period of 1999. Net sales for the first
quarter of 2000 increased 3% to $116.0 million from $112.9 million in the same
period of 1999.
The segment had higher earnings primarily due to increased earnings from
petroleum catalysts and polypropylene catalysts.
Earnings from petroleum catalysts increased primarily due to increased
sales volumes and reduced costs from supply-chain management initiatives and
productivity improvements. Earnings from polypropylene catalysts increased
primarily as the business benefited from increased capacity versus the year-ago
quarter.
Earnings from chemical catalysts decreased due to a sales decline related
to continued weakness in the chemical industry and the timing of orders.
Specialty Pigments and Additives
- --------------------------------
Operating earnings increased 13% to $15.8 million in the first quarter of
2000 from $13.9 million in the same period of 1999. Net sales for the first
quarter of 2000 increased 8% to $94.8 million from $88.0 million in the same
period of 1999.
Earnings increased primarily due to record sales volumes of effect pigments
in the industrial and cosmetics segments. In addition, earnings of the color
pigments business increased as a result of lower costs due to productivity gains
and improved product quality.
10
<PAGE>
Paper Pigments and Additives
- ----------------------------
Operating earnings decreased 70% to $2.0 million in the first quarter of
2000 from $6.7 million in the same period of 1999. Net sales of $55.9 million
for the first quarter of 2000 were flat from the year-ago quarter.
Earnings decreased primarily as a result of increased manufacturing costs
resulting from a 21-day curtailment of natural gas due to cold weather which
required a switch to a more expensive fuel oil, resultant equipment outages, and
lower production volume.
Industrial Commodities Management
- ---------------------------------
Operating earnings increased 514% to $42.3 million in the first quarter of
2000 from $6.9 million in the same period of 1999. Net sales for the first
quarter of 2000 increased 15% to $729.4 million from $636.4 million in the same
period of 1999.
The sales and earnings increases are due to increased demand for platinum
group metals, as well as significant higher volatility in platinum group metals
in the current year first quarter as compared with lower volatility in the prior
year.
Financial Condition and Liquidity
---------------------------------
The Company's current ratio was 1.0 at March 31, 2000 and December 31,
1999. The Company's total-debt-to-total-capital ratio decreased to 54% at March
31, 2000 from 55% at December 31, 1999, due to decreased short-term and
long-term borrowings. In addition, the Company's cash balance increased $7.3
million to $61.7 million at March 31, 2000 from $54.4 million at December 31,
1999.
The variance in cash flows from operating activities and financing
activities primarily occurred in the Industrial Commodities Management segment
and reflects changes in metal positions used to facilitate requirements of the
Company, its customers and suppliers. The nature of the Industrial Commodities
Management business can result in significant fluctuations in cash flow.
In July 1998, the Company filed a shelf registration for $300 million. The
Company currently has no plans to issue debt under the shelf registration.
Management believes the Company will continue to have adequate access to
credit and other capital markets to meet its needs for the foreseeable future.
11
<PAGE>
Other Matters
-------------
Year 2000 Update
- ----------------
During the rollover period from December 31, 1999 to January 1, 2000, the
Company's worldwide operations continued to function as normal. There were no
business interruptions or problems with the Company's products, and no customer
or supplier issues were noted. As a result, the Company did not have to use
any of the contingency plans that were in place for any Y2K issues. The Company
does not anticipate any problems in the future relating to the Y2K issue.
Forward-looking Statements
--------------------------
This document contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements relate to
analyses and other information which are based on forecasts of future results
and estimates of amounts not yet determinable. These statements also relate to
the future prospects, developments and business strategies of Engelhard. These
forward-looking statements are identified by their use of terms and phrases such
as "anticipate," "believe," "could," "estimate," "expect," "intend," "may,"
"plan," "predict," "project," "will" and similar terms and phrases, including
references to assumptions. These forward-looking statements involve risks and
uncertainties that may cause Engelhard's actual future activities and results of
operations to be materially different from those suggested or described in this
document. These risks include: competitive pricing or product development
activities; Engelhard's ability to achieve and execute internal business plans;
global economic trends; worldwide political instability and economic growth;
markets, alliances and geographic expansions developing differently than
anticipated; fluctuations in the supply and prices of precious and base metals;
government legislation and/or regulation (particularly on environmental issues);
technology, manufacturing and legal issues; and the impact of any economic
downturns and inflation. Investors are cautioned not to place undue reliance
upon these forward-looking statements, which speak only as of their dates.
Engelhard disclaims any obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Part II - OTHER INFORMATION
---------------------------
Item 4. Results of Matters to a Vote of Security Holders
- ------- ------------------------------------------------
(a) The Company's Annual Meeting of the Shareholders was held on
Thursday, May 4, 2000.
(b) Results of votes of security holders.
1. Election of Directors For Withheld
--------------------- --- --------
Marion H. Antonini 124,692,781 1,432,664
Henry R. Slack 124,668,623 1,456,822
Douglas G. Watson 124,696,535 1,428,910
12
<PAGE>
2. Appointment of Arthur Andersen LLP as Independent Public
Accountants.
For Against Abstain
--- ------- -------
125,634,468 135,756 355,221
Item 6. Exhibits and Reports on Form 8-K Pages
- ------- -------------------------------- -----
(a)(10) Material Contracts. 15-16
(a) Severance Letter Compilation for Thomas P. Fitzpatrick.
(12) Computation of the Ratio of Earnings to Fixed Charges 17-18
(b) In a report on Form 8-K filed with the Securities and
Exchange Commission on February 22, 2000, the
Company reported that it changed it's certifying
Accountant. *
* Incorporated by reference as indicated.
13
<PAGE>
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 12, 2000 /s/ Orin R. Smith
--------------------- -----------------------------
Orin R. Smith
Chairman and Chief
Executive Officer
Date May 12, 2000 /s/ Michael A. Sperduto
---------------------- -----------------------------
Michael A. Sperduto
Chief Accounting
Officer
14
<PAGE>
EXHIBIT (10)(a)
SEVERANCE LETTER
COMPILATION FOR
THOMAS P. FITZPATRICK
15
<PAGE>
Severance Letter Compilation for
Thomas P. Fitzpatrick
Dear Tom:
It is with regret that Engelhard accepts your resignation as an employee
and officer of the Company effective as of the close of business February 18,
2000.
In recognition of your services to Engelhard and contingent on the proper
and timely execution and return by you of the attached General Release and
Waiver of Rights (the "Release") and you not revoking the Release Engelhard
will:
1. On or before May 15, 2000 pay you $438,000 less withholding for taxes
and other applicable deductions.
2. On or before May 15, 2000 transfer or cause to be transferred to you
title to the Company vehicle currently assigned to you. You will be
responsible for any income tax consequences to you of such transfer.
3. Reasonably promptly, but in no event later than the first meeting of
the Board of Directors of the Company following Engelhard's receipt
of the Release properly and timely executed by you, Engelhard will
request the Board of Directors of the Company to deem you to have
terminated employment by reason of retirement under the Key Employees
Stock Bonus Plan of Engelhard Corporation and the Engelhard
Corporation Stock Option Plan of 1991. Under the current terms of
the Key Employees Stock Bonus Plan of Engelhard Corporation, Common
Stock granted to the retiree shall become vested in full upon such
retirement; under the current terms of the Engelhard Corporation
Stock Option Plan of 1991, stock options granted under the plan to
the retiree shall become exercisable in full upon such retirement
and may be exercised by the retiree during the period ending on the
tenth anniversary of the date of the grant. You will be responsible
for any income tax consequences to you if the Board of Directors of
the Company approves Engelhard's request.
The above actions by Engelhard are contingent on you returning to me by
May 1, 2000 the Release, properly signed and notarized, and not revoking the
Release. By returning the signed and notarized Release you acknowledge that
you had at least twenty-one (21) days in which to consider and sign the Release.
You also have seven (7) days from the date that you sign the Release in which
to revoke your decision. You are advised to consult with an attorney before
making your decision, and review with the attorney the Release and this letter.
If you have any questions regarding the Release or this letter, please
feel free to contact me. We regret your decision to leave Engelhard and wish
you well.
Yours sincerely,
Engelhard Corporation
16
<PAGE>
EXHIBIT 12
COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
-----------------------------------------------------
17
<PAGE>
<TABLE>
<CAPTION>
ENGELHARD CORPORATION
COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
(Unaudited)
Three Months Ended
March 31, Years Ended December 31,
------------------ -----------------------------------------------------------------
2000 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings from continuing operations
before provision for income taxes $84,732 $284,118 $260,563 $ 85,812 $209,955 $185,312
Add/(deduct)
Portion of rents representative
of the interest factor 1,750 7,000 3,500 3,000 3,900 4,700
Interest on indebtedness 16,880 56,555 58,887 52,776 45,009 31,326
Equity dividends - 2,431 2,022 3,803 2,515 3,411
Equity in (earnings) losses
of affiliates (10,000) (16,266) (10,077) 47,833 5,008 (695)
-------- --------- --------- -------- -------- ---------
Earnings, as adjusted $93,362 $333,838 $314,895 $193,224 $266,387 $224,054
======== ========= ========= ======== ======== =========
Fixed Charges
Portion of rents representative
of the interest factor $ 1,750 $ 7,000 $ 3,500 $ 3,000 $ 3,900 $ 4,700
Interest on indebtedness 16,880 56,555 58,887 52,776 45,009 31,326
Capitalized interest 971 2,580 1,897 651 875 784
-------- --------- --------- -------- -------- --------
Fixed charges $19,601 $ 66,135 $ 64,284 $ 56,427 $ 49,784 $ 36,810
======== ========= ========= ======== ======== ========
Ratio of Earnings to Fixed Charges 4.76 5.05 4.90 3.42 (a) 5.35 6.09
======== ========= ========= ======== ======== ========
(a) Earnings in 1997 were negatively impacted by special and other charges of $149.6 million for a variety of events.
Without such charges the ratio of earnings to fixed charges would have been 5.28.
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 61,671
<SECURITIES> 0
<RECEIVABLES> 397,011
<ALLOWANCES> 0
<INVENTORY> 378,017
<CURRENT-ASSETS> 1,879,355
<PP&E> 1,728,352
<DEPRECIATION> 865,999
<TOTAL-ASSETS> 3,373,365
<CURRENT-LIABILITIES> 1,888,880
<BONDS> 497,477
0
0
<COMMON> 147,295
<OTHER-SE> 655,153
<TOTAL-LIABILITY-AND-EQUITY> 3,373,365
<SALES> 1,165,125
<TOTAL-REVENUES> 1,165,125
<CGS> 973,100
<TOTAL-COSTS> 973,100
<OTHER-EXPENSES> 94,413
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,880
<INCOME-PRETAX> 84,732
<INCOME-TAX> 26,691
<INCOME-CONTINUING> 58,041
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,041
<EPS-BASIC> 0.46
<EPS-DILUTED> 0.45
</TABLE>
