Ethyl Corporation Reports First Quarter 2002 Results - Yes Ethyl IS Still Around Thank You
RICHMOND, Va.--May 2, 2002--Ethyl Corporation :| -- | Petroleum additives results improve over first quarter last year |
| -- | New credit agreement in place |
| -- | Board approves and recommends a one-for-five reverse stock split |
Ethyl Corporation President and Chief Executive Officer, Thomas E. (Teddy) Gottwald today released the following earnings report for the first quarter 2002 and update on the company's operations.
To Our Shareholders:
Earnings excluding nonrecurring items for first quarter 2002 were income of $1 million or 1 cent per share compared to earnings on the same basis for the first quarter of last year of $4 million income or 4 cents per share. Earnings for both first quarter this year and last year were affected by significant nonrecurring items including the write-off of goodwill this year. These nonrecurring items are included in the summary of earnings chart at the end of this earnings release.
These results included improved earnings in our petroleum additives segment as well as lower corporate and interest cost due to our cost reduction and debt reduction initiatives. These improvements to earnings were more than offset by lower TEL earnings as well as significantly lower non-cash pension income and a negative impact related to foreign currency, relative to the strong US dollar.
The petroleum additives segment posted an improved operating profit in the first quarter of 2002 as compared to the same period last year. While sales revenue and volume were lower than anticipated, we experienced favorable costs, which are the combined impact of lower manufacturing costs and lower raw materials. However, crude oil prices have risen substantially from the low levels of the first quarter, and we are beginning to experience the effect in the second quarter. It is difficult to anticipate at this time the full impact these increases will have on our raw material cost and on the world economy.
First quarter 2002 operating profit was lower in our TEL segment than the same period last year. This business is characterized by quarterly swings and we expect TEL to be on plan by year end. TEL marketing agreement shipments were somewhat higher in first quarter 2002 compared to first quarter 2001; however, TEL earnings in first quarter 2001 included the benefit of the sale of substantially all our remaining inventory to Octel that they were required to purchase under our TEL agreement with them. TEL earnings for the year are expected to be lower than last year as this product continues to be phased out around the world.
We recently reached agreement with our lenders to extend our loan facility to March 31, 2003. This facility can be further extended to March 31, 2004 provided certain conditions are met. Debt reduction continues to be a top priority. Debt was reduced $1 million in the first quarter of this year. This quarter included the costs associated with our loan extension and the beginning of the required funding associated with the amendment of our TEL marketing alliance. This funding requirement is expected to be substantially completed in the second quarter and will result in a net increase in debt during the first half of the year. We expect to be able to make significant debt reductions in the second half.
The Board of Directors has unanimously approved and recommended to shareholders a one-for-five reverse stock split of Ethyl's common stock. The proposed reverse stock split will be presented to shareholders for approval at Ethyl's annual meeting on June 4, 2002. The Board of Directors believes this action will serve to encourage greater interest in our stock by the investment community.
We continue to make progress on our goal of profitable growth in petroleum additives. Our improved first quarter petroleum additives profits include steady progress in specialty lubricant additives. Our cost structure in petroleum additives is now positioned to allow us to compete effectively for the long run, and we entered 2002 better positioned for profitable growth. Our actions and strategies position us well in this highly competitive business. Our TEL earnings are on target as our marketing agreements maximize earnings and cash flows.
Sincerely,
Teddy Gottwald
Earnings for both the first quarter this year and last year include significant nonrecurring items. A summary of earnings totaling net income under generally accepted accounting principles is included below as part of the earnings release.
Summary of earnings for the first quarter 2002 and 2001:
First Quarter
-------------
2002 2001
---- ----
Net (loss) income
Earnings excluding nonrecurring items $ 0.9 $ 3.5
Nonrecurring items (1) - (14.8)
Cumulative effect of accounting change
for goodwill write-off (2.5) -
--------- ---------
Net (loss) $ (1.6) $ (11.3)
========= =========
Basic and diluted (loss) earnings per
share:
Earnings excluding nonrecurring items $ 0.01 $ 0.04
Nonrecurring items (1) - (0.18)
Cumulative effect of accounting change
for goodwill write-off (0.03) -
--------- ---------
Net (loss) $ (0.02) $(0.14)
========= =========
(1) Details included in notes to accompanying financial
statements.
SEGMENT RESULTS AND OTHER FINANCIAL INFORMATION
(In millions except per share amounts, unaudited)
ETHYL CORPORATION AND SUBSIDIARIES
Three Months Ended
March 31
------------------
2002 2001
------- --------
Net sales: (a)
Petroleum additives $ 148.9 $ 205.9
Tetraethyl lead 1.7 11.4
-------- --------
Total $ 150.6 $ 217.3
======== ========
Segment operating profit (loss):
Petroleum additives before nonrecurring items $ 10.6 $ 8.2
Nonrecurring items (b) (1.5) (23.2)
-------- --------
Total petroleum additives 9.1 (15.0)
-------- --------
Tetraethyl lead 4.5 10.6
Nonrecurring items (b) (1.6) -
-------- --------
Total tetraethyl lead 2.9 10.6
-------- --------
Segment operating profit (loss) 12.0 (4.4)
Item to reconcile Segment Reporting to the
Consolidated Statements of Income (c) 3.1 -
Corporate unallocated expense (2.3) (5.9)
Interest expense (7.0) (8.2)
Other (expense) income, net (4.5) 0.7
-------- --------
Income (loss) before income taxes $ 1.3 $ (17.8)
======== ========
Net loss:
Earnings excluding nonrecurring items $ 0.9 $ 3.5
Nonrecurring items (b) (2.5) (14.8)
-------- --------
Net loss: $ (1.6) $ (11.3)
======== ========
Basic and diluted earnings (loss) per share:
Earnings excluding nonrecurring items $ 0.01 $ 0.04
Nonrecurring items (b) (0.03) (0.18)
-------- --------
Net loss $(0.02) $ (0.14)
======== ========
(a) Certain amounts have been reclassified to conform to the
current presentation.
(b) Nonrecurring items after income taxes are shown below. The
engine oil additives rationalization and write-off of goodwill are
included in segment operating profit.
Write-off of goodwill $ (2.5)
Engine oil additives rationalization:
Write-off assets $ (8.0)
Severance, early retirement, and other costs (6.8)
------- --------
$ (2.5) $ (14.8)
======= ========
(c) For segment reporting, the write-off of goodwill is shown in
operating profit as a nonrecurring item in 2002. In the Consolidated
Statements of Income, the write-off is shown as a cumulative effect of
an accounting change.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts, unaudited)
ETHYL CORPORATION AND SUBSIDIARIES
Three Months Ended
March 31
-------------------
2002 2001
---- ----
Net sales (a) $150,614 $217,260
Cost of goods sold (a, b, c) 118,606 187,085
--------- ---------
Gross profit 32,008 30,175
TEL marketing agreements services 5,716 8,082
Selling, general, and administrative expenses 16,469 18,470
Research, development, and testing expenses (c) 12,232 17,991
Special items expense (c) - (10,707)
--------- ---------
Operating profit (loss) 9,023 (8,911)
Interest and financing expenses 7,038 8,194
Other expense, net (d) (686) (694)
--------- ---------
Income (loss) before income taxes 1,299 (17,799)
Income tax expense (benefit) 416 (6,532)
--------- ---------
Income (loss) before cumulative effect of
accounting change 883 (11,267)
Cumulative effect of accounting change for
goodwill impairments (net of tax) (e) (2,505) -
--------- ---------
Net loss $ (1,622) $(11,267)
========= =========
Basic and diluted earnings (loss) per share:
Income (loss) before cumulative effect of
accounting change $ 0.01 $ (0.14)
Cumulative effect of accounting change for
goodwill impairments (net of tax) (e) (0.03) -
--------- ---------
$ (0.02) $ (0.14)
========= =========
Shares used to compute basic earnings
(loss) per share 83,455 83,455
========= =========
Shares used to compute diluted earnings
(loss) per share 84,449 83,455
========= =========
Notes to Consolidated Statements of Income
(a) Certain amounts have been reclassified to conform to the
current presentation.
(b) During first quarter 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.
(c) Asset writedowns, severance, early retirement, and other costs
related to the rationalization of our engine oil additives product
lines were $23.2 million ($14.8 million after tax or $.18 per share)
for first quarter 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 10.7
---------
$ 23.2
=========
(d) Other expense for the first quarter 2002 includes $1.3 million
of expenses related to debt refinancing activities.
(e) In conformity with Statement of Financial Accounting Standards
No. 142, during the first quarter 2002, we wrote-off goodwill of $3.1
million ($2.5 million after tax or $.03 per share).
CONSOLIDATED BALANCE SHEETS
(In thousands)
ETHYL CORPORATION AND SUBSIDIARIES
March 31 December 31
2002 2001
(unaudited)
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 11,707 $ 12,382
Restricted cash 866 996
Trade and other accounts receivable,
less allowance for doubtful accounts
($888 - 2002; $889 - 2001) 117,767 121,261
Receivable - TEL marketing agreements
services 18,164 16,935
Inventories 113,654 121,458
Deferred income taxes and prepaid
expenses 15,809 11,742
----------- ----------
Total current assets 277,967 284,774
----------- ----------
Property, plant and equipment, at cost 761,785 760,649
Less accumulated depreciation and
amortization 551,922 544,892
----------- ----------
Net property, plant and equipment 209,863 215,757
----------- ----------
Prepaid pension cost 25,921 25,731
Deferred income taxes 14,095 12,440
Other assets and deferred charges 93,540 102,007
Goodwill and other intangibles, net of
amortization 73,780 78,916
----------- ----------
Total assets $ 695,166 $ 719,625
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 44,859 $ 54,376
Accrued expenses 51,551 59,907
Long-term debt, current portion (a) 310,970 30,504
Income taxes payable 15,351 14,648
----------- ----------
Total current liabilities 422,731 159,435
----------- ----------
Long-term debt 24,064 305,453
Other noncurrent liabilities 105,453 109,444
Shareholders' equity
Common stock ($1 par value) Issued -
83,454,650 in 2002 and 2001 83,455 83,455
Accumulated other comprehensive loss (27,923) (27,170)
Retained earnings 87,386 89,008
----------- ----------
142,918 145,293
----------- ----------
Total liabilities and shareholders'
equity $ 695,166 $ 719,625
=========== ==========
(a) The current maturity date of our bank loans is March 31, 2003.
While it is our intent to extend these loans, the amounts outstanding
are classified as current in accordance with generally accepted
accounting principles.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
ETHYL CORPORATION AND SUBSIDIARIES
Three Months Ended
March 31
------------------
2002 2001
------ ------
Cash and cash equivalents at
beginning of year $ 12,382 $ 4,470
--------- ---------
Cash flows from operating
activities:
Net loss (1,622) (11,267)
Adjustments to reconcile net
loss to cash flows from
operating activities:
Depreciation and amortization (a) 14,188 26,427
Write-off of goodwill 3,120
Accrued severance, early
retirement, and other
engine oil additives
rationalization charges - 11,625
Deferred income tax benefit (2,241) (3,933)
Prepaid pension cost 1,477 (2,815)
TEL working capital advance (322) -
Working capital changes (7,276) (8,285)
Other, net 471 1,131
--------- ---------
Cash provided from operating
activities 7,795 12,883
--------- ---------
Cash flows from investing activities:
Capital expenditures (2,358) (2,287)
Prepayment for TEL marketing agreement
services (3,200) -
Equity investments - (1,250)
Other, net (6) (16)
--------- ---------
Cash used in investing activities (5,564) (3,553)
--------- ---------
Cash flows from financing activities:
Repayment on term loans (38,640) (40,000)
Net borrowings 37,840 40,000
Debt issuance costs (3,483) (2,446)
Other, net 1,377 (116)
--------- ---------
Cash used in financing activities (2,906) (2,562)
--------- ---------
(Decrease) increase in cash and cash
equivalents (675) 6,768
--------- ---------
Cash and cash equivalents at end
of period $ 11,707 $ 11,238
========= =========
Notes to the Condensed Consolidated Statements of Cash Flows
(a) First quarter 2001 includes $11.6 million of accelerated
depreciation of the engine oil additives facilities which were
indefinitely idled in the second quarter of 2001.