Ethyl Corporation Reports First Quarter 2001 Results
RICHMOND, Va.--May 2, 2001---Implementing changes for improved profitability
-New credit agreement in place
-Debt repayment a top priority
Ethyl Corporation reported first quarter 2001 earnings of $4 million or 4 cents per share excluding nonrecurring items.
First quarter 2000 earnings on the same basis were $1 million or 1 cent per share. Including nonrecurring items, the first quarter of this year posted a net loss of $11 million or 14 cents per share compared with net income of $28 million or 33 cents per share for the same period last year.
The improvement in first quarter 2001 earnings excluding nonrecurring items when compared to first quarter last year reflects higher TEL profits partially offset by lower profits from the petroleum additives segment. The improved TEL profits reflect a benefit from higher selling prices and a benefit from the sale of most of our remaining TEL inventory to Octel. Lower petroleum additives profit reflects slightly lower shipments and higher raw material cost. Price increases in petroleum additives have only partially offset these negative factors.
After tax nonrecurring charges in the first quarter of this year amounted to $15 million or 18 cents per share and were related to charges for our crankcase product line.
This cost consisted of a noncash charge of $8 million or 10 cents per share for the partial writedown of indefinitely idled crankcase facilities and a charge of about $7 million or 8 cents per share for severance, early retirement and other expenses. The nonrecurring gain of $27 million or 32 cents per share in the first quarter of last year includes the settlement of certain pension contracts partially offset by a noncash charge for the write off of an idled facility.
Bruce C. Gottwald, Chairman and Chief Executive Officer, said, "We are well underway with our plans to improve profitability and strengthen the balance sheet. Our downsizing is nearly complete and in the coming months while we will incur certain one-time charges as well as experience the full impact of a reduced customer base in crankcase, our new, more efficient organization is coming firmly into position.
"I am pleased to report that we have a new credit agreement in place that will support our efforts over the next several years. We have begun generating momentum within our new business structure that will allow us to more aggressively pursue proven technology strengths with growth potential for Ethyl. We will continue offering chemical technology solutions and systems for fuels, refinery operations, driveline and industrial lubricants, engine oils and other formulations, applying our resources in a way that is consistent with our new strategy.
"We're doing what we need to be doing, focusing on profitability improvement, and as quickly as possible, paying down debt. Over the next 24 months, with about half from the sale of non-strategic assets and the excess monies in the former pension fund, and half from operations, we'll repay at least another $200 million of debt. Ethyl expects to see improved earnings by 2002 at which time we'll be in a good position to consider additional 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, which is available upon request.
SEGMENT RESULTS AND OTHER FINANCIAL INFORMATION
(In millions except per share amounts, unaudited)
ETHYL CORPORATION AND SUBSIDIARIES
Three Months Ended
March 31
----------------------------
2001 2000
---- ----
Net sales:
Petroleum additives $ 200.5 $ 194.8
Tetraethyl lead 10.8 3.7
---------- ----------
Total $ 211.3 $ 198.5
========== ==========
Segment operating (loss) profit:
Petroleum additives before
nonrecurring items $ 8.2 $ 12.3
Nonrecurring items (a) (23.2) (7.5)
---------- ----------
Total petroleum additives (15.0) 4.8
Tetraethyl lead 10.6 3.1
Segment operating (loss) profit (4.4) 7.9
---------- ----------
Corporate unallocated expense (5.9) (6.8)
Interest expense (8.2) (8.4)
Pension contract settlements (a) - 49.9
Other income, net 0.7 1.4
---------- ----------
(Loss) income before income taxes $ (17.8) $ 44.0
========== ==========
Net (loss) income:
Earnings excluding nonrecurring
items $ 3.5 $ 1.0
Nonrecurring items (a) (14.8) 26.8
---------- ----------
Net (loss) income $ (11.3) $ 27.8
========== ==========
Basic and diluted (loss) earnings
per share:
Earnings excluding nonrecurring
items $ 0.04 $ 0.01
Nonrecurring items (a) (0.18) 0.32
----------- ----------
Net (loss) income $ (0.14) $ 0.33
=========== ==========
(a) Nonrecurring items after income taxes are shown below. The
crankcase rationalization and write-off of plant assets are included
in segment operating profit.
Crankcase rationalization:
Write-off assets $ (8.0) $ -
Severance, early retirement, and
other costs (6.8) -
Pension contract settlements - 31.6
Write-off of plant assets - (4.8)
---------- ----------
$ (14.8) $ 26.8
========== ==========
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts, unaudited)
ETHYL CORPORATION AND SUBSIDIARIES
Three Months Ended
March 31
2001 2000
---------- -----------
Net sales $ 211,280 $ 198,512
Cost of goods sold (a, b) 181,105 156,248
---------- -----------
Gross profit 30,175 42,264
TEL marketing agreements services 8,082 5,148
Selling, general, and administrative expenses 18,470 18,980
Research, development, and testing expenses (b) 17,991 17,918
Special items (expense) income, net (b, c) (10,707) 42,369
---------- -----------
Operating (loss) profit (8,911) 52,883
Interest and financing expenses 8,194 8,368
Other expense, net (694) (550)
---------- ----------
(Loss) income before income taxes (17,799) 43,965
Income taxes (6,532) 16,141
---------- ----------
Net (loss) income $ (11,267) $ 27,824
========== ==========
Basic and diluted (loss) earnings per share $ (.14) $ .33
========== ==========
Shares used to compute basic and diluted
earnings per share 83,455 83,465
========== ==========
Cash dividends declared per share of
common stock $ - $ .0625
========== ==========
Notes to Consolidated Statements of Income
(a) In 2001, TEL inventories were permanently reduced resulting in
a liquidation of LIFO layers. This LIFO liquidation decreased cost of
goods sold by $1.5 million and increased net income by $1 million or
$.01 per share.
(b) Asset writedowns, severance, early retirement, and other costs
related to the rationalization of our crankcase product lines were
$23.2 million ($14.8 million or $.18 per share) in 2001. These costs
are included in the Consolidated Statements of Income as follows:
Cost of goods sold $ 10.7
Research, development, and testing expenses 1.8
Special items (expense) income, net 10.7
------------
$ 23.2
============
(c) The special items (expense) income, net in 2000 consisted of
the recognition of $50 million noncash income ($32 million after tax
or $.38 per share) related to settlement of certain pension contracts
partly offset by an $8 million charge ($5 million after tax or $.06
per share) related to the write-off of plant assets.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ETHYL CORPORATION AND SUBSIDIARIES
March 31
2001 December 31
(unaudited) 2000
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 11,238 $ 4,470
Restricted cash 1,284 1,262
Accounts receivable, less allowance
for doubtful accounts ($902 - 2001;
$908 - 2000) 145,929 137,501
Receivable - TEL marketing agreements
services 12,517 12,555
Inventories 113,955 129,686
Deferred income taxes and prepaid
expenses 12,650 12,767
---------- ----------
Total current assets 297,573 298,241
---------- ----------
Property, plant and equipment,
at cost 763,896 767,675
Less accumulated depreciation and
amortization 494,186 476,573
---------- ----------
Net property, plant and equipment 269,710 291,102
---------- ----------
Prepaid pension cost 226,185 224,892
Other assets and deferred charges 91,848 100,166
Goodwill and other intangibles,
net of amortization 83,891 87,238
---------- ----------
Total assets $ 969,207 $1,001,639
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 55,716 $ 56,521
Accrued expenses 51,248 49,140
Long-term debt, current portion 97,207 87,191
Income taxes payable 8,221 11,480
---------- ----------
Total current liabilities 212,392 204,332
---------- ----------
Long-term debt 345,929 356,053
Other noncurrent liabilities 97,519 99,297
Deferred income taxes 73,148 82,544
Shareholders' equity
Common stock ($1 par value)
Issued - 83,454,650 in 2001 and 2000 83,455 83,455
Accumulated other comprehensive loss (26,017) (18,090)
Retained earnings 182,781 194,048
---------- ----------
240,219 259,413
---------- ----------
Total liabilities and shareholders'
equity $ 969,207 $1,001,639
========== ==========
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
ETHYL CORPORATION AND SUBSIDIARIES
Three Months Ended
March 31
-------------------------
2001 2000
--------- ---------
Cash and cash equivalents at beginning of
year $ 4,470 $15,846
--------- ---------
Cash flows from operating activities:
Net (loss) income (11,267) 27,824
Adjustments to reconcile net income to
cash flows from operating activities:
Depreciation and amortization (a) 26,427 16,669
Accrued severance, early retirement,
and other crankcase rationalization
charges 11,625 -
Deferred income taxes (3,933) 15,068
Prepaid pension cost (2,815) (3,713)
Asset writeoff - 7,524
Gain on pension contract settlements - (49,893)
Working capital changes (8,285) (10,124)
Other, net 1,131 2,025
--------- ---------
Cash provided from operating
activities 12,883 5,380
--------- ---------
Cash flows from investing activities:
Capital expenditures (2,287) (3,383)
Investment in Envera (1,250) -
Other, net (16) 434
--------- ---------
Cash used in investing activities (3,553) (2,949)
--------- ---------
Cash flows from financing activities:
Repayment of long-term debt (40,000) (30,000)
Net borrowings on revolving credit
agreement 40,000 25,000
Debt issuance costs (2,446) -
Cash dividends paid - (5,217)
Other, net (116) (92)
--------- ---------
Cash used in financing activities (2,562) (10,309)
--------- ---------
Increase (decrease) in cash and cash
equivalents 6,768 (7,878)
--------- ---------
Cash and cash equivalents at end of period $11,238 $ 7,968
========== =========
Notes to the Condensed Consolidated Statements of Cash Flows
(a) Includes $11.6 million of accelerated depreciation of the
crankcase facilities to be indefinitely idled in the second quarter of
2001.
ETHYL CORPORATION
QUARTERLY EARNINGS PER SHARE(a)
2000 2001
---------------------------- ------------
Second Third Fourth First
Quarter Quarter Quarter Quarter
------- ------- --------- ---------
Income (loss) before
special items 0.06 0.05 (0.02) 0.04
Nonrecurring items 0.05 0.21 0.05 (0.18)
------- ------- --------- ---------
Net income (loss) 0.11 0.26 0.03 (0.14)
======= ======= ========= =========
Shares used to compute
basic earnings per
share (a) 83,465 83,463 83,455 83,455
======== ======= ======== =========
1999 2000
------------------------------ ------------
Second Third Fourth First
Quarter Quarter Quarter Quarter
------- -------- --------- -----------
Income before special
items 0.16 0.20 0.12 0.01
Nonrecurring items - - - 0.32
-------- -------- --------- -----------
Net income 0.16 0.20 0.12 0.33
======== ======== ========= ===========
Shares used to compute
basic earnings per
share (a) 83,465 83,465 83,465 83,465
======== ========= ======== ========
(a) Basic and diluted earnings per share are the same for all periods presented.