Ethyl Corporation Announces 2000 Results and Plan to Improve Profitability
RICHMOND, Va.--Feb. 8, 2001--Ethyl Corporation reported fourth quarter 2000 results of $2 million in net income or 3 cents per share, which included nonrecurring benefits of $4 million or 5 cents per share.Results for the fourth quarter 1999 were net income of $10 million or 12 cents per share.
Excluding nonrecurring items, earnings for the year 2000 were $9 million or 10 cents per share compared to 1999 earnings on the same basis of $51 million or 61 cents per share. Net income for the year 2000 of $61 million or 73 cents per share included several nonrecurring items that total $52 million or 63 cents per share. Net income for 1999 was $55 million or 66 cents per share and included a nonrecurring benefit of $4 million or 5 cents per share.
Cash flow from operations remained strong, enabling Ethyl to reduce debt about $52 million during the last six months of the year, for a total of $240 million of debt repayment in the last three years.
Lower earnings in both petroleum additives and tetraethyl lead (TEL) contributed to the decline in the year's results. The decline in petroleum additives profit for the quarter and year reflects the combination of higher raw material cost, higher research and development (R&D) spending, adverse effects from foreign exchange, and slightly lower shipments. The higher R&D spending reflects the impact of changing product specifications and Ethyl's commitment to provide customers with the technology to meet these specifications.
Petroleum additive price increases that became effective during the course of the year only partially offset these negative factors. TEL profits for the fourth quarter 2000 increased over the same 1999 period. Lower TEL profits for the year reflect the expected, continued decrease in worldwide TEL demand.
Nonrecurring items in 2000 primarily reflect settlements of certain pension contracts resulting in noncash gains of $51 million or 62 cents per share, of which $2 million or 2 cents per share occurred in the fourth quarter. The nonrecurring item from a supply contract amendment in 1999 was first quarter income of $4 million or 5 cents per share.
Bruce C. Gottwald, Chairman and Chief Executive Officer, said: "Over the past several years, a key factor in our overall earnings decline has been the market deterioration in one of our key business areas, crankcase additives - the high volume motor oil portion of the petroleum additives segment. The crankcase industry has suffered from overcapacity, low to no growth, and severe price erosion. Even as the supply of some crankcase components has tightened, the market has been weakened further in the face of substantial raw material cost increases, weak currency conditions, and the pricing leverage of the consolidating oil industry.
"Ethyl's strategy for the crankcase product line has been to pursue selected growth opportunities while defending our market position. At the same time, we have invested in acquisitions and research to support our customers with cost effective, leading-edge technology and service. We relied on this strategy anticipating an eventual turnaround in the margins of crankcase additives, however, crankcase industry conditions have continued to erode. The return on investment in our crankcase business is no longer satisfactory and has been a primary contributor to the loss of our crankcase positions at Pennzoil and Equilon."
Ethyl is committed to returning profitability to the crankcase product line while providing its customers the technology and services they need. Ethyl will implement a new business model for petroleum additives that includes a workforce and operations reduction. Earnings for 2001 will depend upon the timing and completion of the cost and workforce reduction and will likely include a number of one-time charges.
Over the next 24 months, the company intends to repay $200 million of debt. Ethyl is working with its lending institutions to structure its debt consistent with this business plan.
Thomas E. Gottwald, President and Chief Operating Officer, stated: "The outlook for the crankcase market has caused us to reach the difficult decision to reposition our crankcase additives business. The decision to reduce our workforce and capacity is a painful but necessary step in order to adapt our cost structure to the realities of the marketplace.
"We are committed to meeting the needs of our crankcase customers and will do so where it is profitable. By repositioning ourselves in the crankcase market, we can improve profitability and long term viability. Our specialty lubricant additives business as well as our fuel additives business, including MMT, provide us with solid platforms for growth, and together with our TEL business, strong cash generation. We anticipate that as a result of these actions we will see significantly improved earnings in 2002, and by the end of that year, we will start building cash to invest in new growth opportunities."
Some of the information contained in this press release constitutes forward-looking comments within the meaning of the Private Securities Litigation Reform Act of 1995. Although Ethyl's management believes its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results will not differ materially from expectations. Factors that could cause actual results to differ from expectations are included in Ethyl's latest annual report to shareholders and 10Q, which are available upon request.
Segment Results and Other Financial Information
Ethyl Corporation and Subsidiaries
(In millions except per share amounts, unaudited)
Fourth Quarter Twelve Months
----------------- ------------------
2000 1999 2000 1999
------ ------ ------ ------
Net sales:
Petroleum additives $ 197.9 $ 210.6 $ 795.8 $ 819.6
Tetraethyl lead 5.5 4.9 25.1 24.1
------- ------- ------- -------
Total $ 203.4 $ 215.5 $ 820.9 $ 843.7
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Segment operating (loss)
profit:
Petroleum additives
before nonrecurring
items $ (0.6) $ 17.3 $ 32.1 $ 77.9
Nonrecurring items (a) - - (7.5) 7.2
------- ------- ------- -------
Total petroleum
additives (0.6) 17.3 24.6 85.1
Tetraethyl lead 12.0 9.0 39.3 48.3
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Segment operating profit 11.4 26.3 63.9 133.4
Corporate unallocated
expense (6.9) (6.8) (26.1) (24.1)
Interest expense (9.1) (8.9) (36.1) (35.5)
Other income, net (a) 3.7 2.2 88.4 7.3
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(Loss) income before income
taxes $ (0.9) $ 12.8 $ 90.1 $ 81.1
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Net income:
(Loss) Earnings excluding
nonrecurring items $ (2.0) $ 10.1 $ 8.6 $ 50.9
Nonrecurring items (a) 4.3 - 52.4 4.4
------- ------- ------- -------
Net income: $ 2.3 $ 10.1 $ 61.0 $ 55.3
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Basic and diluted earnings
per share:
(Loss) Earnings excluding
nonrecurring items $ ( .02) $ .12 $ .10 $ .61
Nonrecurring items (a) .05 - .63 .05
-------- -------- -------- --------
Net income $ .03 $ .12 $ .73 $ .66
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(a) Nonrecurring items after income taxes are shown below. The
write-off of plant assets and supply contract amendment income are
included in segment operating profit. The pension plan gains,
demutualization income, gain on sale of nonoperating assets, and
special retirement charge are reported in other income, net. The tax
benefit is a part of income taxes.
Pension plan gains $ 1.5 $ - $ 51.3 $ -
Income tax election credit 2.8 - 2.8 -
Income from demutualization
of MetLife, Inc. - - 2.6 -
Gain on sale of nonoperating
assets - - 1.4 -
Write-off of plant assets - - (4.8) -
Special retirement charge - - (0.9) -
Supply contract amendment - - - 4.4
------- ------- ------- -------
$ 4.3 $ - $ 52.4 $ 4.4
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CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts, unaudited)
ETHYL CORPORATION AND SUBSIDIARIES
Three Months Ended Twelve Months Ended
December 31 December 31
2000 1999 2000 1999
---- ---- ---- ----
Net sales $203,404 $215,530 $820,870 $843,723
Cost of goods sold (a) 172,140 165,944 655,718 649,306
-------- -------- -------- --------
Gross profit 31,264 49,586 165,152 194,417
TEL marketing agreements
services 12,036 10,707 36,619 53,993
Selling, general and
administrative expenses 17,944 19,869 75,876 72,626
Research, development and
testing expenses 17,442 19,159 72,941 66,957
Special items income,
net(b) 2,405 - 76,009 7,200
-------- -------- -------- --------
Operating profit 10,319 21,265 128,963 116,027
Interest and financing
expenses 9,140 8,869 36,075 35,506
Other (expense) income,
net(c) (2,125) 448 (2,793) 601
-------- -------- -------- --------
(Loss) income before
income taxes (946) 12,844 90,095 81,122
Income taxes(d) (3,294) 2,791 29,098 25,825
Net income $ 2,348 $ 10,053 $ 60,997 $ 55,297
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Basic and diluted
earnings per share $ .03 $ .12 $ .73 $ .66
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Shares used to compute
basic and diluted
earnings per share 83,455 83,465 83,462 83,465
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Cash dividends declared
per share of common
stock $ - $ .0625 $ .1250 $ .25
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Notes to Consolidated Statements of Income
(a) In 2000, TEL inventories were permanently reduced resulting in
a liquidation of LIFO layers. This LIFO liquidation decreased fourth
quarter cost of goods sold by $.8 million and increased net income by
$.5 million or $.01 per share. For the year, cost of goods sold was
reduced by $1.8 million and net income was increased by $1.2 million
or $.01 per share.
(b) The fourth quarter special items income, net included a
benefit of $2.4 million ($1.5 million after tax or $.02 per share)
from the settlement of certain pension contracts resulting in the
recognition of a noncash gain.
The special items income, net for the year 2000 consisted of $80.9
million income ($51.3 million after tax or $.62 per share) related to
settlements of certain pension contracts resulting in the recognition
of noncash gains as well as $4 million income ($2.6 million after tax
or $.03 per share) related to the demutualization of MetLife, Inc. in
the second quarter. These items were partly offset by a $7.5 million
first quarter charge ($4.8 million after tax or $.06 per share)
related to the write-off of plant assets and the third quarter special
retirement charge of $1.4 million ($.9 million after tax or $.01 per
share).
The special income item in 1999 consisted of $7.2 million income
($4.4 million after tax or $.05 per share) from a supply contract
amendment.
(c) The fourth quarter and year 2000 net expense primarily
represents our portion of equity losses partially offset by a benefit
of $2.3 million ($1.4 million after tax or $.02 per share) related to
the gain on the sale of a nonoperating asset.
(d) The fourth quarter included a tax benefit of $2.8 million or
$.03 per share related to an income tax election credit.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ETHYL CORPORATION AND SUBSIDIARIES
December 31
2000 December 31
(unaudited) 1999
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 5,732 $ 15,846
Accounts receivable, less allowance
for doubtful accounts ($908 - 2000;
$975 - 1999) 142,501 133,291
Receivable - TEL marketing agreements
services 12,555 22,655
Inventories 138,186 174,792
Deferred income taxes and prepaid
expenses 12,767 18,274
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Total current assets 311,741 364,858
---------- ----------
Property, plant and equipment, at cost 767,675 769,307
Less accumulated depreciation and
amortization 476,573 436,331
---------- ----------
Net property, plant and equipment 291,102 332,976
---------- ----------
Prepaid pension cost 224,892 127,213
Other assets and deferred charges 86,666 67,170
Goodwill and other intangibles, net of
amortization 87,238 99,163
---------- ----------
Total assets $1,001,639 $ 991,380
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 56,521 $ 64,945
Accrued expenses 49,140 53,304
Dividends payable - 5,217
Long-term debt, current portion 87,191 67,088
Income taxes payable 11,480 12,538
---------- ----------
Total current liabilities 204,332 203,092
---------- ----------
Long-term debt 356,053 407,134
Other noncurrent liabilities 99,297 102,707
Deferred income taxes 82,544 63,238
Shareholders' equity
Common stock ($1 par value)
Issued - 83,454,650 in 2000 and 83,455 83,465
83,465,460 in 1999
Accumulated other comprehensive loss (18,090) (11,828)
Retained earnings 194,048 143,572
---------- ----------
259,413 215,209
Total liabilities and shareholders'
equity $1,001,639 $ 991,380
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
ETHYL CORPORATION AND SUBSIDIARIES
Twelve Months Ended
December 31
-----------------------
2000 1999
---- ----
Cash and cash equivalents at beginning
of year $ 15,846 $ 8,403
-------- --------
Cash flows from operating activities:
Net income 60,997 55,297
Adjustments to reconcile net income to
cash flows from operating activities:
Depreciation and amortization 66,256 65,125
Deferred income taxes 26,951 2,084
Prepaid pension cost (9,989) (12,186)
Net loss (gain) on sales and
impairments of assets 5,234 (125)
Special items income, net (79,483) -
Working capital 21,686 14,441
Other, net (910) 3,164
-------- --------
Cash provided from operating
activities 90,742 127,800
-------- --------
Cash flows from investing activities:
Capital expenditures (13,828) (13,793)
Prepayment for TEL marketing
agreement services (39,448) -
Proceeds from sale of certain assets 2,635 2,650
Investment in Envera (3,682) -
Other, net 262 (770)
-------- --------
Cash used in investing activities (54,061) (11,913)
-------- --------
Cash flows from financing activities:
Repayment of long-term debt (66,750) (86,311)
Net borrowings on revolving credit
agreement 35,000 -
Cash dividends paid (15,650) (20,866)
Other, net 605 (1,267)
-------- --------
Cash used in financing activities (46,795) (108,444)
-------- --------
(Decrease) increase in cash and
-------- --------
cash equivalents (10,114) 7,443
-------- --------
Cash and cash equivalents at end
of period $ 5,732 $ 15,846
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