EXHIBIT 99.1
| | |
Contact: | | |
Octel Corp. Investor Relations | | Citigate Financial Intelligence |
Heather Ashworth | | Shoshana Dubey / Patrick Kilhaney |
+44-161-498-8889 | | +1-212-499-3500 |
| | |
Contact: | | |
| |
Heather Ashworth | | Kelly Tapkas/Victoria Hofstad |
Octel Corp. Investor Relations | | Citigate Financial Intelligence |
011-44-161-498-8889 | | 1-201-499-3500 |
Octel Corp. Reports 4th Quarter and Full Year 2003 Results
NEWARK, DELAWARE, February 9, 2004 -Octel Corp. (NYSE: OTL) today announced financial results for the fourth quarter and year ended December 31, 2003.
- Highlights for the fourth quarter and year ended December 31, 2003 -
| | • | Net income of $4.13 per diluted share for the full year. |
| | • | Full year Specialty Chemicals operating income 14.3% higher than 2002. |
| | • | Ongoing TEL operating income up 22.9% in the quarter and ahead of last year. |
| | • | Full year cash flow from operating activities of $85.2 million. |
| | • | 20% increase in semi-annual dividend to 6 cents per share. |
| | • | Refinancing completed with a new three and one half year syndicated facility. |
Net income for the fourth quarter of 2003 was $12.9 million or $1.02 per diluted share compared with a net loss of $2.3 million or $0.19 per diluted share in the comparable period last year.
For the full year, net income is $51.8 million or $4.13 per diluted share compared with a net income of $52.1 million or $4.15 per diluted share in 2002.
Fourth quarter sales inSpecialty Chemicals maintained the year over year improvement seen in earlier quarters with sales of $54.0 million, 9.1% higher than the corresponding period in 2002. Gross profit for the quarter of $17.1 million was 9.6% ahead of the same period last year. The benefits of the restructuring undertaken in 2002 and early 2003 were fully apparent in the quarter’s performance. For the full year, sales of $195.9 million are 10.8% up on 2002, with gross profits 7.8% higher at $63.9 million.
The excellent performance in TEL (tetraethyl lead) in 2003 continued into the fourth quarter, in which sales were $73.9 million, 8.8% above the same period last year. Continued cost control at our UK plant contributed to gross profit for the fourth quarter of $41.5 million or 56.2% of sales. Tight cost control coupled with effective selling price management has more than offset the impact of the global market volume decline during 2003. Full year sales of $266.3 million are 3.7% higher than last year on volumes 11.1% down.
Overall operating expenses, which exclude restructuring costs and the amortization of intangible assets, for the quarter of $24.1 million were broadly in line with last year, bringing the full year costs to 7.0% higher than 2002. This increase includes the negative translation impact of the weaker US dollar on our predominantly non-US dollar cost base, without which costs would have been below last year’s levels. The company has also incurred additional costs in order to ensure that it is in compliance with new governance and other regulatory requirements.
Operating income for the full year is 10.1% higher than last year at $98.3 million, reflecting the improved performance in both Specialty Chemicals and TEL.
As previously announced, further provisions for restructuring costs of $4.5 million were made in the fourth quarter of 2003 across all businesses. After tax, these amounted to $0.24 per diluted share. For the full year, restructuring costs amounted to $15.0 million or $0.82 per diluted share after tax. Aggregate further charges of around $6.0 million are likely to be incurred during 2004, primarily in TEL as the continuing decline in demand is proactively managed.
Cash flow from operating activities was $29.2 million for the fourth quarter of 2003, bringing the full year total to $85.2 million. The company has completed its planned senior debt refinancing transaction, having concluded negotiations with a small number of banks and entered into a three and one half-year facilities agreement consisting of a $100 million term loan and a $50 million revolving credit facility. The agreement is fully syndicated and will provide for the longer term capital needs of the company.
In accordance with the company’s dividend policy, the Board of Directors has undertaken its semi-annual consideration of a dividend and has declared a dividend of 6 cents per share, a 20% increase over the previous dividend. The dividend is payable on April 1, 2004, to the holders of record of the common stock of the corporation on February 20, 2004.
Dennis Kerrison, President and Chief Executive Officer, commented: “2003 has been an excellent year for Octel. I am particularly encouraged by the progress made in our Specialty Chemicals businesses, which are now starting to show real growth. The restructuring that was undertaken in 2002 and early 2003 is beginning to pay off and the future for these businesses looks bright.”
“Our performance in TEL was especially pleasing, given the adverse political situations in some of the countries to which we supply. Although we still see an average decline in overall market demand of between 15% and 25% per annum, none of our major customers exited the TEL market in 2003 and business performance reflects this. We have continued to take proactive steps to rationalize our capacity and support infrastructure, and are working hard to ensure that we optimise our returns.”
“The successful refinancing of the business will provide for the longer term capital requirements of the company. We believe that this, together with a progressive dividend policy and selective acquisitions, provides the base from which to build a significant presence in Specialty Chemicals.”
Octel Corp., a Delaware corporation, is a global chemical company specializing in high performance fuel additives and special and effect chemicals. The company’s strategy is to manage profitably and responsibly the decline in world demand for its major product – tetraethyl lead (TEL) in gasoline – through competitive differentiation and stringent product stewardship, to expand its Specialty Chemicals business organically through product innovation and focus on customer needs, and to seek synergistic growth opportunities through joint venture, alliances, collaborative arrangements and acquisitions.
Certain of the statements made herein constitute forward-looking statements. Generally, the words “believe,” “expect,” “intend,” “estimate,” “project,” “will” and similar expressions identify forward looking statements, which generally are not historical in nature. Forward looking statements are subject to certain risks and uncertainties, including the risks associated with business plans, the effects of changing economic and competitive conditions and government regulations, that could cause actual results to differ materially from the Company’s historical experience and our present expectations or projections. Other factors that could cause actual results to differ from expectations include, without limitation, the timing of orders received from customers, the gain or loss of significant customers, competition from other manufacturers and changes in the demand for our products, including the rate of decline in demand for TEL. In addition, increases in the cost of product, changes in the market in general and significant changes in new product introduction could cause actual results to vary from expectations. Additional information may be obtained by reviewing the Company’s reports filed from time to time with the SEC.
Schedule 1
OCTEL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| | | | | | | | | | | | | | | | |
| | | Three Months
Ended December 31
| | | Year Ended
December 31
| |
| | | 2003
| | | 2002
| | | 2003
| | | 2002
| |
| | | (millions of dollars except per share data) | |
Net sales | | $ | 127.9 | | | $ | 120.5 | | | $ | 462.2 | | | $ | 447.5 | |
Cost of goods sold | | | (69.3 | ) | | | (71.8 | ) | | | (257.7 | ) | | | (253.7 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Gross profit | | | 58.6 | | | | 48.7 | | | | 204.5 | | | | 193.8 | |
Operating expenses | | | | | | | | | | | | | | | | |
Selling, general and admin. | | | (22.8 | ) | | | (22.0 | ) | | | (75.7 | ) | | | (69.5 | ) |
Research and development | | | (1.3 | ) | | | (1.7 | ) | | | (5.1 | ) | | | (6.0 | ) |
Restructuring charge | | | (4.5 | ) | | | (16.4 | ) | | | (15.0 | ) | | | (19.5 | ) |
Amortization of intangible assets | | | (2.7 | ) | | | (2.8 | ) | | | (10.4 | ) | | | (9.5 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| | | | (31.3 | ) | | | (42.9 | ) | | | (106.2 | ) | | | (104.5 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Operating income | | | 27.3 | | | | 5.8 | | | | 98.3 | | | | 89.3 | |
| | | | |
Interest expense (net) | | | (4.1 | ) | | | (2.0 | ) | | | (12.5 | ) | | | (12.1 | ) |
Other net income / (expenses) | | | (2.8 | ) | | | 0.8 | | | | (4.4 | ) | | | — | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Income before income taxes and minority interest | | | 20.4 | | | | 4.6 | | | | 81.4 | | | | 77.2 | |
Minority interest | | | (1.7 | ) | | | (0.9 | ) | | | (4.3 | ) | | | (3.0 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Income before income taxes | | | 18.7 | | | | 3.7 | | | | 77.1 | | | | 74.2 | |
| | | | |
Income taxes | | | (5.8 | ) | | | (6.8 | ) | | | (23.3 | ) | | | (23.0 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Income from continuing operations | | | 12.9 | | | | (3.1 | ) | | | 53.8 | | | | 51.2 | |
| | | | |
Share of affiliated company earnings | | | — | | | | 1.1 | | | | 0.9 | | | | 1.1 | |
Discontinued operations, net of tax | | | — | | | | (0.3 | ) | | | (3.4 | ) | | | (0.2 | ) |
Cumulative effect of change in accounting principle, net of tax | | | — | | | | — | | | | 0.5 | | | | — | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Net income | | $ | 12.9 | | | $ | (2.3 | ) | | $ | 51.8 | | | $ | 52.1 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Earnings per share Basic | | $ | 1.08 | | | $ | (0.19 | ) | | $ | 4.34 | | | $ | 4.41 | |
Diluted | | $ | 1.02 | | | $ | (0.19 | ) | | $ | 4.13 | | | $ | 4.15 | |
| | | | |
Weighted average shares outstanding in thousands Basic | | | 11,991 | | | | 11,843 | | | | 11,925 | | | | 11,817 | |
Diluted | | | 12,702 | | | | 11,843 | | | | 12,554 | | | | 12,557 | |
| | | | |
| ANALYSIS OF BUSINESS UNIT RESULTS | | | | | | | | | | | | | | | | |
| | | | |
| | | 2003
| | | 2002
| | | 2003
| | | 2002
| |
| | | (millions of dollars) | |
Net sales | | | | | | | | | | | | | | | | |
TEL - Ongoing | | $ | 73.9 | | | $ | 67.9 | | | $ | 266.3 | | | $ | 256.7 | |
TEL - Chlorine | | | — | | | | 3.1 | | | | — | | | | 14.0 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| | | | 73.9 | | | | 71.0 | | | | 266.3 | | | | 270.7 | |
Specialty Chemicals | | | 54.0 | | | | 49.5 | | | | 195.9 | | | | 176.8 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Total | | | 127.9 | | | | 120.5 | | | | 462.2 | | | | 447.5 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Gross Profit | | | | | | | | | | | | | | | | |
TEL - Ongoing | | | 41.5 | | | | 34.1 | | | | 140.6 | | | | 136.3 | |
TEL - Chlorine | | | — | | | | (1.0 | ) | | | — | | | | (1.8 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| | | | 41.5 | | | | 33.1 | | | | 140.6 | | | | 134.5 | |
Specialty Chemicals | | | 17.1 | | | | 15.6 | | | | 63.9 | | | | 59.3 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Total | | | 58.6 | | | | 48.7 | | | | 204.5 | | | | 193.8 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Operating income | | | | | | | | | | | | | | | | |
TEL - Ongoing | | | 34.9 | | | | 28.4 | | | | 118.4 | | | | 117.9 | |
TEL - Chlorine | | | — | | | | (1.0 | ) | | | — | | | | (1.8 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| | | | 34.9 | | | | 27.4 | | | | 118.4 | | | | 116.1 | |
Specialty Chemicals | | | 2.2 | | | | 1.5 | | | | 11.2 | | | | 9.8 | |
Corporate costs | | | (5.3 | ) | | | (6.7 | ) | | | (16.3 | ) | | | (17.1 | ) |
Restructuring | | | (4.5 | ) | | | (16.4 | ) | | | (15.0 | ) | | | (19.5 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Total | | $ | 27.3 | | | $ | 5.8 | | | $ | 98.3 | | | $ | 89.3 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Schedule 2
OCTEL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | | | | | | | |
| | | December 31
2003
| | | December 31
2002
| |
| | | (millions of dollars) | |
Assets | | | | | | | | |
Current assets | | | | | | | | |
Cash and cash equivalents | | $ | 46.1 | | | $ | 26.7 | |
Accounts receivable, less allowance of $4.8 (2002 - $3.1) | | | 71.7 | | | | 80.7 | |
Other receivable – Veritel | | | — | | | | 3.2 | |
Inventories | | | | | | | | |
Finished goods | | | 40.7 | | | | 25.3 | |
Raw materials and work-in-progress | | | 15.8 | | | | 30.4 | |
| | |
|
|
| |
|
|
|
Total inventories | | | 56.5 | | | | 55.7 | |
Prepaid expenses | | | 4.6 | | | | 5.5 | |
| | |
|
|
| |
|
|
|
Total current assets | | | 178.9 | | | | 171.8 | |
| | |
Property, plant and equipment | | | 98.4 | | | | 88.9 | |
Less accumulated depreciation | | | (49.7 | ) | | | (32.1 | ) |
| | |
|
|
| |
|
|
|
Net property, plant and equipment | | | 48.7 | | | | 56.8 | |
| | |
Goodwill | | | 348.9 | | | | 352.8 | |
Intangible assets | | | 40.8 | | | | 50.9 | |
Prepaid pension cost | | | 115.9 | | | | 105.2 | |
Deferred finance costs | | | 0.1 | | | | 4.4 | |
Other assets | | | 8.3 | | | | 5.9 | |
| | |
|
|
| |
|
|
|
| | | $ | 741.6 | | | $ | 747.8 | |
| | |
|
|
| |
|
|
|
Liabilities and Stockholders’ Equity | | | | | | | | |
Current liabilities | | | | | | | | |
Bank overdraft | | $ | — | | | $ | 4.0 | |
Accounts payable | | | 53.0 | | | | 55.2 | |
Other payable – Veritel | | | — | | | | 10.0 | |
Accrued liabilities | | | 43.7 | | | | 45.9 | |
Accrued income taxes | | | 2.8 | | | | 13.7 | |
Current portion of plant closure provisions | | | 9.2 | | | | — | |
Current portion of deferred income | | | 2.4 | | | | 2.0 | |
Current portion of long-term debt* | | | 1.7 | | | | 56.8 | |
| | |
|
|
| |
|
|
|
Total current liabilities | | | 112.8 | | | | 187.6 | |
| | |
Plant closure provisions | | | 27.0 | | | | 36.4 | |
Deferred income taxes | | | 38.6 | | | | 34.0 | |
Deferred income | | | 7.7 | | | | 8.4 | |
Long-term debt* | | | 102.9 | | | | 102.4 | |
Other liabilities | | | 15.8 | | | | 11.9 | |
Minority interest | | | 6.6 | | | | 4.6 | |
| | |
Stockholders’ Equity | | | | | | | | |
Common stock, $0.01 par value | | | 0.1 | | | | 0.1 | |
Additional paid-in capital | | | 276.8 | | | | 276.7 | |
Treasury stock | | | (32.4 | ) | | | (34.5 | ) |
Retained earnings | | | 209.1 | | | | 157.9 | |
Accumulated other comprehensive income | | | (23.4 | ) | | | (37.7 | ) |
| | |
|
|
| |
|
|
|
Total Stockholders’ Equity | | | 430.2 | | | | 362.5 | |
| | |
|
|
| |
|
|
|
| | | $ | 741.6 | | | $ | 747.8 | |
| | |
|
|
| |
|
|
|
| * | Following our refinancing the balance sheet classification of debt reflects payments due under the new facility. |
Schedule 3
OCTEL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | |
| | | Year Ended
December 31
| |
| | | 2003
| | | 2002
| |
| | | (millions of dollars) | |
Cash Flows from Operating Activities | | | | | | | | |
| | |
Net income | | $ | 51.8 | | | $ | 52.1 | |
Adjustments to reconcile net income to cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 25.8 | | | | 32.4 | |
Deferred income taxes | | | 5.0 | | | | 1.6 | |
Loss on disposal of equipment | | | 0.2 | | | | 5.7 | |
Loss on disposal of business | | | 2.7 | | | | — | |
Unremitted earnings of affiliated companies | | | (0.9 | ) | | | (1.1 | ) |
Changes in operating assets and liabilities: | | | | | | | | |
Accounts receivable and prepaid expenses | | | 19.7 | | | | 39.7 | |
Inventories | | | 2.2 | | | | 3.5 | |
Accounts payable and accrued liabilities | | | (2.7 | ) | | | (13.0 | ) |
Plant closure provisions | | | (1.2 | ) | | | (7.8 | ) |
Income taxes and other current liabilities | | | (11.4 | ) | | | 0.6 | |
Other non-current assets and liabilities | | | (6.0 | ) | | | (13.7 | ) |
| | |
|
|
| |
|
|
|
Net cash provided by operating activities | | | 85.2 | | | | 100.0 | |
| | |
Cash Flows from Investing Activities | | | | | | | | |
| | |
Capital expenditures | | | (7.8 | ) | | | (11.4 | ) |
Business combinations, net of cash acquired | | | (6.0 | ) | | | (5.8 | ) |
Veritel | | | (6.8 | ) | | | (30.8 | ) |
Other | | | 1.2 | | | | (3.8 | ) |
| | |
|
|
| |
|
|
|
Net cash used in investing activities | | | (19.4 | ) | | | (51.8 | ) |
| | |
Cash Flows from Financing Activities | | | | | | | | |
| | |
Receipt of long-term borrowings | | | — | | | | 16.6 | |
Repayment of long-term borrowings | | | (51.9 | ) | | | (88.6 | ) |
Net (decrease)/increase in short-term borrowings | | | (4.0 | ) | | | 4.0 | |
Dividends paid | | | (0.6 | ) | | | (0.6 | ) |
Issue of treasury stock | | | 2.9 | | | | 0.2 | |
Repurchase of common stock | | | (1.2 | ) | | | (0.2 | ) |
Minority interest | | | 1.8 | | | | (1.4 | ) |
Other refinancing costs | | | (0.2 | ) | | | — | |
| | |
|
|
| |
|
|
|
Net cash used in financing activities | | | (53.2 | ) | | | (70.0 | ) |
| | |
Effect of exchange rate changes on cash | | | 6.8 | | | | 5.5 | |
| | |
|
|
| |
|
|
|
Net change in cash and cash equivalents | | | 19.4 | | | | (16.3 | ) |
| | |
Cash and cash equivalents at beginning of year | | | 26.7 | | | | 43.0 | |
| | |
|
|
| |
|
|
|
Cash and cash equivalents at end of year | | $ | 46.1 | | | $ | 26.7 | |
| | |
|
|
| |
|
|
|
