<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 June 30, 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 July 31, 2000
--------------------- ----------------------------
$1 par value 127,698,861
1
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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,
------------------------ ----------------------
2000 1999 2000 1999
----------- ----------- ---------- ----------
Net sales .................... $1,397,850 $1,202,732 $2,562,975 $2,275,966
Cost of sales ................ 1,213,820 1,030,403 2,186,920 1,958,483
----------- ----------- ---------- ----------
Gross profit ............ 184,030 172,329 376,055 317,483
Selling, administrative and
other expenses ............. 85,086 85,335 179,499 162,930
----------- ----------- --------- ---------
Operating earnings ...... 98,944 86,994 196,556 154,553
Equity in earnings of
affiliates ................. 4,397 4,128 14,397 7,803
Gain/(loss) on disposal of
investments and land ....... - 4,660 (6,000) 5,680
Interest expense, net ........ (15,986) (14,946) (32,866) (28,865)
----------- ----------- --------- ---------
Earnings before income 87,355 80,836 172,087 139,171
taxes .................
27,516 24,655 54,207 42,447
Income tax expense ........... ----------- ----------- --------- ---------
Net earnings ............ $ 59,839 $ 56,181 $ 117,880 $ 96,724
=========== =========== ========= =========
Basic earnings per share ..... $ 0.47 $ 0.42 $ 0.93 $ 0.70
=========== =========== ========= =========
Diluted earnings per share ... $ 0.47 $ 0.41 $ 0.92 $ 0.69
=========== =========== ========= =========
Cash dividends paid per share $ 0.10 $ 0.10 $ 0.20 $ 0.20
=========== =========== ========= =========
Average number of shares
outstanding - Basic ........ 126,291 134,717 126,195 139,075
=========== =========== ========= =========
Average number of shares
outstanding - Diluted ...... 128,157 136,991 127,962 141,167
=========== =========== ========= =========
Actual number of shares
outstanding ................ 126,304 125,835 126,304 125,835
=========== =========== ========= =========
See the Accompanying Notes to the Unaudited Condensed Consolidated
Financial Statements
2
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ENGELHARD CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
(Unaudited)
June 30, December 31,
2000 1999
------------ ------------
Cash ............................................. $ 36,841 $ 54,375
Receivables, net.................................. 453,836 394,338
Committed metal positions ........................ 566,373 467,768
Inventories ...................................... 376,447 359,153
Other current assets ............................. 122,365 121,672
---------- ----------
Total current assets ...................... 1,555,862 1,397,306
Investments ...................................... 202,873 182,184
Property, plant and equipment, net ............... 855,577 871,900
Intangible assets, net ........................... 310,423 325,544
Other noncurrent assets .......................... 122,633 143,590
---------- ----------
Total assets .............................. $3,047,368 $2,920,524
========== ==========
Short-term borrowings ............................ $ 411,712 $ 452,029
Accounts payable ................................. 193,702 246,016
Hedged metal obligations ......................... 599,762 497,800
Other current liabilities ........................ 298,846 268,978
---------- ----------
Total current liabilities ................. 1,504,022 1,464,823
Long-term debt ................................... 496,937 499,466
Other noncurrent liabilities ..................... 185,189 191,845
Shareholders' equity ............................. 861,220 764,390
---------- ----------
Total liabilities and
shareholders' equity .................... $3,047,368 $2,920,524
========== ==========
See the Accompanying Notes to the Unaudited Condensed Consolidated
Financial Statements
3
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ENGELHARD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
(Unaudited)
Six Months Ended
June 30,
--------------------
2000 1999
--------- --------
Cash flows from operating activities
Net earnings ........................................ $117,880 $ 96,724
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and depletion ..................... 51,684 47,795
Amortization of intangible assets .............. 5,478 6,492
Loss/(gain) on disposal of investments and land. 6,000 (5,680)
Equity results, net of dividends ............... (11,430) (5,759)
Net change in assets and liabilities
Metal related ............................. (47,520) 14,998
All other ................................. (77,758) (54,500)
--------- ---------
Net cash provided by operating activities....... 44,334 100,070
--------- ---------
Cash flows from investing activities
Capital expenditures ................................ (44,278) (38,998)
Proceeds from disposal of investments and land....... 11,000 7,537
Acquisitions and other investments .................. (5,000) (548)
Other ............................................... 29 151
--------- ---------
Net cash used in investing activities .......... (38,249) (31,858)
--------- ---------
Cash flows from financing activities
(Decrease)/increase in short-term borrowings......... (40,317) 330,131
Increase/(decrease) in hedged metal obligations...... 44,042 (71,251)
Proceeds from issuance of long-term debt ............ - 314
Repayment of long-term debt ......................... (2,531) -
Purchase of treasury stock .......................... - (296,076)
Stock bonus and option plan transactions ............ 2,747 6,285
Dividends paid ...................................... (25,525) (27,206)
--------- ---------
Net cash used in financing activities........... (21,584) (57,803)
Effect of exchange rate changes on cash .................. (2,035) (145)
--------- ---------
Net (decrease)/increase in cash ................ (17,534) 10,264
Cash at beginning of year ...................... 54,375 22,339
--------- ---------
Cash at end of period........................... $ 36,841 $ 32,603
========= =========
See the Accompanying Notes to the Unaudited Condensed Consolidated
Financial Statements
4
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ENGELHARD CORPORATION
BUSINESS SEGMENT INFORMATION
(Thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2000 1999 2000 1999
Net Sales ------------ ---------- ----------- ----------
Environmental Technologies .. $ 169,390 $ 151,502 $ 328,569 $ 299,705
Process Technologies ........ 126,476 125,947 242,504 238,800
Specialty Pigments and
Additives ................. 96,690 94,951 191,467 182,983
Paper Pigments and Additives. 58,736 60,164 114,639 116,092
Industrial Commodities
Management ................ 939,138 745,549 1,668,504 1,381,967
----------- ----------- ----------- -----------
Reportable segments ... 1,390,430 1,178,113 2,545,683 2,219,547
All other ................... 7,420 24,619 17,292 56,419
----------- ----------- ----------- -----------
$1,397,850 $1,202,732 $2,562,975 $2,275,966
=========== =========== =========== ===========
Operating Earnings
Environmental Technologies ... $ 32,979 $ 29,852 $ 65,829 $ 55,985
Process Technologies ......... 19,487 19,528 34,938 33,953
Specialty Pigments and
Additives .................. 20,121 17,343 35,873 31,240
Paper Pigments and Additives.. 3,387 9,130 5,429 15,853
Industrial Commodities
Management ................. 21,005 13,306 63,333 20,197
----------- ----------- ----------- -----------
Reportable segments ... 96,979 89,159 205,402 157,228
All other ................... 1,965 (2,165) (8,846) (2,675)
----------- ----------- ----------- -----------
98,944 86,994 196,556 154,553
Equity in earnings of
affiliates ................. 4,397 4,128 14,397 7,803
Gain/(loss) on disposal of
investments and land ....... - 4,660 (6,000) 5,680
Interest expense, net ........ (15,986) (14,946) (32,866) (28,865)
----------- ----------- ----------- -----------
Earnings before income
taxes ............... $ 87,355 $ 80,836 $ 172,087 $ 139,171
Income tax expense ........... 27,516 24,655 54,207 42,447
----------- ----------- ----------- -----------
Net earnings .......... $ 59,839 $ 56,181 $ 117,880 $ 96,724
=========== =========== =========== ===========
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):
June 30, 2000 December 31, 1999
-------------- -----------------
Raw materials ........................... $ 86,379 $ 84,165
Work in process ......................... 63,812 52,954
Finished goods .......................... 199,944 195,731
Precious metals ......................... 26,312 26,303
-------- --------
Total inventories ....................... $376,447 $359,153
======== ========
All precious metals included in inventories are stated at LIFO cost. The
market value of the precious metals inventories exceeded cost by $205.3 million
and $115.3 million at June 30, 2000 and December 31, 1999, respectively.
Note 3 - Comprehensive Income
-----------------------------
Comprehensive income is summarized as follows (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------------
2000 1999 2000 1999
-------- ------- --------- --------
Net earnings ................. $59,839 $56,181 $117,880 $96,724
Other comprehensive income/(loss):
Foreign currency
translation adjustment 12,380 (12,871) (918) (14,630)
------- ------- --------- --------
Comprehensive income ......... $72,219 $43,310 $116,962 $82,094
======= ======= ========= ========
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
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Note 4 - Earnings Per Share
---------------------------
The following table represents the computation of basic and diluted earnings per
share:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
(in thousands, except per share data) 2000 1999 2000 1999
------------------------------------- -------- -------- -------- --------
Basic EPS Computation
---------------------
Net earnings applicable to common
shares $ 59,839 $ 56,181 $117,880 $ 96,724
-------- -------- -------- --------
Average number of shares
outstanding - basic 126,291 134,717 126,195 139,075
-------- -------- -------- --------
Basic earnings per share $ 0.47 $ 0.42 $ 0.93 $ 0.70
======== ======== ======== ========
Diluted EPS Computation
-----------------------
Net earnings applicable to common
shares $ 59,839 $ 56,181 $117,880 $ 96,724
-------- -------- -------- --------
Average number of shares
outstanding - basic 126,291 134,717 126,195 139,075
Effect of dilutive stock options
and other incentives 511 939 412 757
Effect of Rabbi Trust 1,355 1,335 1,355 1,335
-------- -------- -------- --------
Average number of shares
outstanding-diluted 128,157 136,991 127,962 141,167
-------- -------- -------- --------
Diluted earnings per share $ 0.47 $ 0.41 $ 0.92 $ 0.69
======== ======== ======== ========
7
<PAGE>
Note 5 - 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.
The Company and certain of its present and former officers have agreed to a
Stipulation of Settlement ("Stipulation") of a class action filed in November
1995 that alleged misstatements and omissions in connection with press releases
issued in 1995 concerning the Company's PremAir catalyst systems. In the
settlement, which was approved by the Court on December 8, 1998 and finalized in
May 2000, in exchange for the dismissal of the complaint against all
defendants, the Company paid $5.5 million of a total settlement amount of
$16.6 million. The balance of the settlement amount was paid by insurance
carried by the Company for such purposes. This matter did not have a material
adverse effect on the operating results of the Company.
8
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Management's Discussion and Analysis of
Item 2. Financial Condition and Results of Operations
------- ---------------------------------------------
Results of Operations
---------------------
Comparison of the Second Quarter of 2000
with the Second Quarter of 1999
----------------------------------------
Net earnings increased 7% to $59.8 million in the second quarter of 2000
from $56.2 million in the same period of 1999. Operating earnings for the second
quarter of 2000 increased 14% to $98.9 million from $87.0 million in the same
period of 1999. Higher operating earnings from three reportable segments --
Environmental Technologies, Specialty Pigments and Additives and Industrial
Commodities Management -- were partially offset by significantly lower operating
earnings from the Paper Pigments and Additives segment. Operating earnings from
the Process Technologies segment were essentially flat from the year-ago
quarter.
The effective tax rate was 31.5% in the second 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 $4.4 million for the
second quarter of 2000 compared with $4.1 million for the same period in 1999.
Higher equity earnings were primarily from Engelhard-CLAL, a
precious-metal-fabrication joint venture.
Net interest expense increased 7% to $16.0 million in the second quarter of
2000 from $14.9 million in the same period of 1999. Higher net interest expense
was primarily due to an increase in interest rates.
Net sales increased 16% to $1.4 billion in the second quarter of 2000 from
$1.2 billion for the same period in 1999. The Environmental Technologies,
Specialty Pigments and Additives, and Industrial Commodities Management segments
reported higher sales, which more than offset lower sales from the Paper
Pigments and Additives segment. Sales from the Process Technologies segment were
essentially flat from the year-ago quarter. Sales reported in the "All Other"
segment decreased primarily as the Company sold its metal plating business in
the second quarter of 1999.
9
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Environmental Technologies
--------------------------
Operating earnings increased 10% to $33.0 million in the second quarter of
2000 from $29.9 million in the same period of 1999. Net sales for the second
quarter of 2000 increased 12% to $169.4 million from $151.5 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 in North America, primarily as a result of
increased volumes for auto-emission catalysts.
Sales in the segment's non-automotive markets increased due to higher
volumes of heavy-duty diesel-engine retrofits and surface technologies. Earnings
in the non-automotive markets declined slightly as the effect of higher volumes
was offset by higher research and administrative costs.
Process Technologies
--------------------
Operating earnings of $19.5 million and net sales of $126.5 million for the
second quarter of 2000 were essentially flat compared with the year-ago quarter.
Earnings growth from petroleum catalysts and polypropylene catalysts was
offset by a decline in earnings from chemical catalysts.
Earnings from petroleum catalysts and polypropylene catalysts increased
primarily due to a favorable product mix and reduced operating costs. Earnings
from polypropylene catalysts were also favorably impacted as the business
benefited from increased capacity versus the year-ago quarter.
Earnings from chemical catalysts decreased primarily due to an unfavorable
product mix. Sales of chemical catalysts were flat compared with the year-ago
quarter, as some orders were delayed into the second half of the year.
Specialty Pigments and Additives
--------------------------------
Operating earnings increased 16% to $20.1 million in the second quarter of
2000 from $17.3 million in the same period of 1999. Net sales for the second
quarter of 2000 increased 2% to $96.7 million from $95.0 million in the same
period of 1999.
Earnings increased primarily due to increased volumes of effect pigments to
industrial and cosmetics markets. In addition, earnings of specialty
kaolin-based products increased as a result of increased volumes and decreased
manufacturing costs. Lower production costs of color pigments also had a
favorable impact on earnings.
10
<PAGE>
Paper Pigments and Additives
----------------------------
Operating earnings decreased 63% to $3.4 million in the second quarter of
2000 from $9.1 million in the same period of 1999. Net sales for the second
quarter of 2000 decreased 2% to $58.7 million from $60.2 million in the same
period of 1999.
Earnings decreased in spite of increased volumes as a result of
significantly higher natural gas costs, an unfavorable price mix and reduced
inventories.
Industrial Commodities Management
---------------------------------
Operating earnings increased 58% to $21.0 million in the second quarter of
2000 from $13.3 million in the same period of 1999. Net sales for the second
quarter of 2000 increased 26% to $939.1 million from $745.5 million in the same
period of 1999.
The sales increase resulted from higher prices and the continued strong
demand for platinum group metals. The operating earnings increase resulted from
significantly higher volatility in platinum group metals.
Comparison of the First Six Months of 2000
with the First Six Months of 1999
------------------------------------------
Net earnings increased 22% to $117.9 million in the first six months of
2000 from $96.7 million in the same period of 1999. Operating earnings for the
first six months of 2000 increased 27% to $196.6 million from $154.6 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
Environmental Technologies, Specialty Pigments and Additives, and Industrial
Commodities Management segments.
The effective tax rate was 31.5% in the first six months 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 $14.4 million for the
first six months of 2000 compared with $7.8 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. The Company's share of earnings from
Engelhard-CLAL included a gain of $6.7 million related to the partial
liquidation of precious metal inventories. Higher equity earnings were also
reported for Heesung Engelhard, an environmental catalyst joint venture.
Net interest expense increased 14% to $32.9 million for the first six
months of 2000 from $28.9 million for the same period in 1999. 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.
11
<PAGE>
Net sales increased 13% to $2.6 billion in the first six months of 2000
from $2.3 billion in the same period in 1999. Four of the Company's five
reportable segments reported increased sales, led by particularly strong results
from the Environmental Technologies and Industrial Commodities Management
segments. Sales reported in the "All Other" segment decreased primarily as the
Company sold its metal plating business in the second quarter of 1999.
Environmental Technologies
--------------------------
Operating earnings increased 18% to $65.8 million in the first six months
of 2000 from $56.0 million in the same period of 1999. Net sales for the first
six months of 2000 increased 10% to $328.6 million from $299.7 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 from strength in auto-emission
catalysts in both North America and Europe.
Earnings also were favorably impacted by strength in the segment's
non-automotive markets, primarily from increased 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 3% to $34.9 million in the first six months of
2000 from $34.0 million in the same period of 1999. Net sales for the first six
months of 2000 increased 2% to $242.5 million from $238.8 million in the same
period of 1999.
Earnings growth from petroleum catalysts and polypropylene catalysts was
offset by a decline in earnings from chemical catalysts.
Earnings from petroleum catalysts increased primarily due to increased
volumes and reduced costs from supply-chain-management initiatives and
productivity improvements. Earnings from polypropylene catalysts increased
primarily from a favorable product mix, reduced operating costs and increased
capacity versus the year-ago period.
Earnings from chemical catalysts decreased due to a sales decline related
to continued weakness in the chemical industry and the timing of orders. In
addition, earnings were negatively impacted by an unfavorable product mix and
an unfavorable foreign currency translation.
12
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Specialty Pigments and Additives
--------------------------------
Operating earnings increased 15% to $35.9 million in the first six months
of 2000 from $31.2 million in the same period of 1999. Net sales for the first
six months of 2000 increased 5% to $191.5 million from $183.0 million in the
same period of 1999.
Earnings increased primarily due to increased volumes of effect pigments to
industrial and cosmetics markets. In addition, earnings of specialty
kaolin-based products and specialty film products increased as a result of
increased volumes. Lower production costs of color pigments also had a favorable
impact on earnings.
Paper Pigments and Additives
----------------------------
Operating earnings decreased 66% to $5.4 million in the first six months of
2000 from $15.9 million in the same period of 1999. Net sales for the first six
months of 2000 decreased slightly to $114.6 million from $116.1 million in the
same period of 1999.
Earnings decreased primarily as a result of significantly higher natural
gas costs, an unfavorable price mix, reduced inventories and increased
manufacturing costs resulting from a 21-day curtailment of natural gas due to
cold weather that required a switch to a more expensive fuel oil.
Industrial Commodities Management
---------------------------------
Operating earnings increased 214% to $63.3 million in the first six months
of 2000 from $20.2 million in the same period of 1999. Net sales for the first
six months of 2000 increased 21% to $1.7 billion from $1.4 billion in the
same period of 1999.
The sales increase resulted from higher prices and the continued strong
demand for platinum group metals. The operating earnings increase resulted from
significantly higher volatility in platinum group metals.
Financial Condition and Liquidity
---------------------------------
The Company's current ratio was 1.0 at June 30, 2000 and December 31, 1999.
The Company's total-debt-to-total-capital ratio decreased to 51% at June 30,
2000 from 55% at December 31, 1999, due to decreased short-term and long-term
borrowings and increased retained earnings.
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. Cash flows from operating activities were
negatively impacted by higher receivables related to increased prices of
platinum group metals. In addition, the variance in cash flows from financing
activities was impacted by increased short-term borrowings to fund a major share
repurchase in May 1999. The nature of the Industrial Commodities Management
business can result in significant fluctuations in cash flow.
13
<PAGE>
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.
Other Matters
-------------
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.
14
<PAGE>
Part II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K Pages
------- -------------------------------- -----
(a)(12) Computation of the Ratio of Earnings to Fixed Charges 17-18
(b) There were no reports on Form 8-K filed during the
quarter ended June 30, 2000.
15
<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 August 11, 2000 /s/ Orin R. Smith
--------------------- -----------------------------
Orin R. Smith
Chairman and Chief
Executive Officer
Date August 11, 2000 /s/ Michael A. Sperduto
---------------------- -----------------------------
Michael A. Sperduto
Chief Accounting
Officer
16
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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)
Six Months Ended
June 30, 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 $172,087 $284,118 $260,563 $ 85,812 $209,955 $185,312
Add/(deduct)
Portion of rents representative
of the interest factor 3,500 7,000 3,500 3,000 3,900 4,700
Interest on indebtedness 32,866 56,555 58,887 52,776 45,009 31,326
Equity dividends 2,966 2,431 2,022 3,803 2,515 3,411
Equity in (earnings) losses
of affiliates (14,397) (16,266) (10,077) 47,833 5,008 (695)
--------- --------- --------- -------- -------- ---------
Earnings, as adjusted $197,022 $333,838 $314,895 $193,224 $266,387 $224,054
========= ========= ========= ======== ======== =========
Fixed Charges
Portion of rents representative
of the interest factor $ 3,500 $ 7,000 $ 3,500 $ 3,000 $ 3,900 $ 4,700
Interest on indebtedness 32,866 56,555 58,887 52,776 45,009 31,326
Capitalized interest 1,942 2,580 1,897 651 875 784
-------- --------- --------- -------- -------- --------
Fixed charges $38,308 $ 66,135 $ 64,284 $ 56,427 $ 49,784 $ 36,810
======== ========= ========= ======== ======== ========
Ratio of Earnings to Fixed Charges 5.14 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>
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