Exhibit 99.1
ETHYL CORPORATION ANNOUNCES FIRST QUARTER 2003 RESULTS
| • | Petroleum additives profits improve significantly |
| • | Debt reduced $42 million |
| • | Refinancing completed in April |
| • | Phenolic Antioxidant business sale completed |
| • | TEL profits decline |
Richmond, VA, May 6, 2003 – Ethyl Corporation (NYSE:EY) – President and Chief Executive Officer, Thomas E. (Teddy) Gottwald today released the following earnings report for the first quarter 2003 and an update on the company’s operations.
Earnings from continuing operations excluding nonrecurring items for first quarter 2003 were slightly lower than first quarter last year on this same basis. Results on this basis for first quarter 2003 were a loss of $100 thousand or about $.01 per share while results for the first quarter last year were break even. Net income for this year and last year’s first quarter include significant nonrecurring items. Including these items, net income for the first quarter 2003 amounted to $16.3 million or $.98 per share while first quarter last year was a net loss of $1.6 million or $.10 per share. The nonrecurring items are included in the summary of earnings chart at the end of this press release.
Petroleum additives segment operating profit improved significantly. Results from continuing operations, excluding nonrecurring items grew 29 percent over first quarter last year. Net sales were up 19 percent, with each major region showing improvement. The continuing improvement in petroleum additive earnings and sales reflects the continued success of the close partnership of our customers and our technical, marketing, sales and product supply personnel. We continue to focus our efforts to help our customers grow their business and reduce their operating costs through solutions provided by our products and services.
As expected Tetraethyl lead (TEL) earnings were lower in first quarter 2003 reflecting the timing of shipments and the continuing decline of this market. The TEL segment has historically been characterized by large swings in quarterly profitability, as is the case this quarter. TEL continues to provide strong cash flows to our company.
Our earnings also benefited from lower interest expense as we made excellent progress on debt reduction. During the first quarter of this year we reduced debt $42 million. This significant reduction in debt included $27 million from the sale of our phenolic antioxidant business in January 2003.
On April 30th, 2003, we entered into a new long-term financing structure. The new structure includes $150 million in senior notes due 2010, $115 million in a bank term loan facility due 2009, and a $50 million revolving credit facility due 2008. The proceeds were used to repay previously existing loan agreements that were due in March 2004 as well as other company debt. This structure will provide us with the financial base and flexibility we need to grow our
business and increase shareholder value. A summary of the new financing structure is attached to this release.
We are extremely pleased with the continuing improvement in the profitability of our petroleum additives segment as well as our progress on debt reduction. Due primarily to fluctuations in the TEL business, we expect to continue to see significant quarterly variations in our company-wide 2003 results. We remain concerned about certain aspects of the global economy and expect to see the negative impact of raw material increases in the second and third quarter of this year. There will be several one-time expenses flowing through our second quarter income and cash flow statements that are associated with establishing the new loan and paying off the old loans. While we continue to expect that the increase in profits in our Petroleum Additives segment will offset the declines in TEL for the year 2003, we plan to discontinue comments on specific earnings projections after this earnings release.
Sincerely,
Teddy Gottwald
Earnings for the first quarter for both 2003 and 2002 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
First Quarter March 31 | ||||||||
2003 | 2002 | |||||||
Net income (loss): | ||||||||
Earnings excluding discontinued operations and nonrecurring items | $ | (0.1 | ) | $ | — |
| ||
Discontinued operations including 2003 gain on sale of phenolic antioxidant business (1) |
| 14.8 |
|
| .9 |
| ||
Nonrecurring items (1) |
| 1.6 |
|
| (2.5 | ) | ||
Net income (loss) | $ | 16.3 |
| $ | (1.6 | ) | ||
Basic and diluted earnings (loss) per share: | ||||||||
Earnings excluding discontinued operations and nonrecurring items | $ | (0.01 | ) | $ | — |
| ||
Discontinued operations including 2003 gain on sale of phenolic antioxidant business (1) |
| 0.89 |
|
| 0.05 |
| ||
Nonrecurring items (1) |
| 0.10 |
|
| (0.15 | ) | ||
Net income (loss) | $ | 0.98 |
| ($ | 0.10 | ) | ||
(1) Details included in notes to accompanying financial statements.
Summary of New Finance Structure
The senior notes for $150 million bear interest at a fixed rate of 8.875% and are due in 2010.
The bank term loan is for $115 million and has a variable interest rate of LIBOR plus 450 basis points. The term loan matures in April 2009 and has scheduled quarterly payments beginning in June 2003.
The revolver is a $50 million facility for working capital and letter of credit issuance purposes. It bears interest at LIBOR plus 400 basis points.
The credit facilities contain covenants, representations, and events of default typical of a credit agreement of this nature. The financial covenants include:
| • | A minimum net worth; |
| • | A maximum debt to earnings before interest, taxes, depreciation and amortization (EBITDA); |
| • | A maximum senior debt to EBITDA; |
| • | Limitations on capital expenditures; |
| • | An interest coverage ratio; and |
| • | Restrictions on payments of dividends and stock repurchases. |
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.
To the extent that this press release contains non-GAAP financial measures, it also presents both the most directly comparable financial measures calculated and presented in accordance with GAAP and a quantitative reconciliation of the difference between any such non-GAAP measures and such comparable GAAP financial measures. For management’s statement concerning the reasons why management believes that presentation of non-GAAP measures provides useful information to investors concerning Ethyl’s financial condition and results of operations, see the Form 8-K furnished to the Securities and Exchange Commission on May 6, 2003.
CONTACT: Ethyl Corporation, Richmond
Investor Relations
David A. Fiorenza, 804-788-5555
Fax: 804-788-5688
Email:investorrelations@ethyl.com
SEGMENT RESULTS AND OTHER FINANCIAL INFORMATION
(In millions except per share amounts, unaudited)
ETHYL CORPORATION AND SUBSIDIARIES
Three Months Ended March 31 | ||||||||
2003 | 2002 | |||||||
Net sales: | ||||||||
Petroleum additives | $ | 171.8 |
| $ | 144.5 |
| ||
Tetraethyl lead |
| 1.7 |
|
| 1.7 |
| ||
Total | $ | 173.5 |
| $ | 146.2 |
| ||
Segment operating profit: | ||||||||
Petroleum additives before nonrecurring items | $ | 11.9 |
| $ | 9.2 |
| ||
Nonrecurring items (a) |
| 0.1 |
|
| (1.5 | ) | ||
Total petroleum additives |
| 12.0 |
|
| 7.7 |
| ||
Tetraethyl lead before nonrecurring items |
| 1.5 |
|
| 4.5 |
| ||
Nonrecurring items (a) |
| 2.4 |
|
| (1.6 | ) | ||
Total tetraethyl lead |
| 3.9 |
|
| 2.9 |
| ||
Segment operating profit |
| 15.9 |
|
| 10.6 |
| ||
Add back current year nonrecurring item to reconcile Segment Reporting to Consolidated Statements of Income (b) |
| (2.5 | ) |
| 3.1 |
| ||
Corporate unallocated expense |
| (4.6 | ) |
| (2.3 | ) | ||
Interest expense |
| (4.8 | ) |
| (7.0 | ) | ||
Pension expense |
| (1.4 | ) |
| (1.4 | ) | ||
Other (expense), net |
| (2.8 | ) |
| (3.1 | ) | ||
Loss from continuing operations before income taxes | $ | (0.2 | ) | $ | (0.1 | ) | ||
Net income (loss): | ||||||||
Earnings excluding nonrecurring items and discontinued operations | $ | (0.1 | ) | $ | — |
| ||
Nonrecurring items (a) |
| 1.6 |
|
| (2.5 | ) | ||
Discontinued operations (c) |
| 14.8 |
|
| 0.9 |
| ||
Net income (loss): | $ | 16.3 |
| $ | (1.6 | ) | ||
Basic and diluted earnings (loss) per share: (d) | ||||||||
Earnings excluding nonrecurring items and discontinued operations | $ | (0.01 | ) | $ | — |
| ||
Nonrecurring items (a) |
| 0.10 |
|
| (0.15 | ) | ||
Discontinued operations (c) |
| 0.89 |
|
| 0.05 |
| ||
Net income (loss) | $ | 0.98 |
| $ | (0.10 | ) | ||
Notes to Segment Results and Other Financial Information
Prior periods have been reclassified to conform to the current presentation.
| (a) | Nonrecurring items after income taxes are shown below. The gain on the implementation of Statement of Financial Accounting Standards (SFAS) No. 143, as well as the impairment of goodwill are included in segment operating profit. |
Gain on implementation of SFAS No. 143 | $ | 1.6 | $ | — |
| ||
Impairment of goodwill |
| — |
| (2.5 | ) | ||
$ | 1.6 | $ | (2.5 | ) | |||
| (b) | For segment reporting, the 2003 gain on the implementation of SFAS No. 143, as well as the 2002 impairment of goodwill, is shown in operating profit as nonrecurring items. In the Consolidated Statement of Income, these items are shown as cumulative effect of accounting changes in both years. |
| (c) | Discontinued operations reflect the phenolic antioxidant business, which was sold in January 2003. The first quarter 2003 amount is the gain on the disposal of the business ($23.2 million before tax). The first quarter 2002 amount represents the earnings of the business. |
| (d) | Basic and diluted earnings (loss) per share have been adjusted for all periods presented to reflect the 1-for-5 reverse stock split. |
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts, unaudited)
ETHYL CORPORATION AND SUBSIDIARIES
Three Months Ended | ||||||||
March 31 | ||||||||
2003 | 2002 | |||||||
Net sales | $ | 173,466 |
| $ | 146,176 |
| ||
Cost of goods sold |
| 137,406 |
|
| 116,118 |
| ||
Gross profit |
| 36,060 |
|
| 30,058 |
| ||
TEL marketing agreements services |
| 3,001 |
|
| 5,716 |
| ||
Selling, general, and administrative expenses |
| 20,588 |
|
| 16,130 |
| ||
Research, development, and testing expenses |
| 13,682 |
|
| 12,006 |
| ||
Operating profit |
| 4,791 |
|
| 7,638 |
| ||
Interest and financing expenses |
| 4,802 |
|
| 7,038 |
| ||
Other expense, net (a) |
| (198 | ) |
| (686 | ) | ||
Loss from continuing operations before income taxes |
| (209 | ) |
| (86 | ) | ||
Income tax benefit |
| (72 | ) |
| (96 | ) | ||
(Loss) income from continuing operations |
| (137 | ) |
| 10 |
| ||
Discontinued operations (b) | ||||||||
Gain on disposal of business (net of tax) |
| 14,805 |
|
| — |
| ||
Income from operations of discontinued business (net of tax) |
| — |
|
| 873 |
| ||
Income before cumulative effect of accounting changes |
| 14,668 |
|
| 883 |
| ||
Cumulative effect of accounting changes (net of tax) (c) |
| 1,624 |
|
| (2,505 | ) | ||
Net income (loss) | $ | 16,292 |
| $ | (1,622 | ) | ||
Basic and diluted earnings (loss) per share (d): | ||||||||
(Loss) earnings from continuing operations | $ | (0.01 | ) | $ | — |
| ||
Discontinued operations (net of tax) (b) |
| 0.89 |
|
| 0.05 |
| ||
Cumulative effect of accounting changes (net of tax) (c) |
| 0.10 |
|
| (0.15 | ) | ||
$ | 0.98 |
| $ | (0.10 | ) | |||
Shares used to compute basic earnings (loss) per share (d) |
| 16,689 |
|
| 16,689 |
| ||
Shares used to compute diluted earnings (loss) per share (d) |
| 16,689 |
|
| 16,814 |
| ||
Notes to Consolidated Statements of Income
Prior periods have been reclassified to conform to the current presentation.
| (a) | Other expense for the first quarter 2002 includes $1.3 million of expenses related to debt refinancing activities. |
| (b) | Discontinued operations reflect the phenolic antioxidant business, which was sold in January 2003. The gain on the disposal of this business was $23.2 million ($14.8 million after tax or $.89 per share.) |
| (c) | The cumulative effect of accounting change in the first quarter 2003 reflects the gain of $2.5 million ($1.6 million after tax or $.10 per share) recognized upon the adoption of Statement of Financial Accounting Standard (SFAS) No. 143 on January 1, 2003. The first quarter 2002 amount reflects the impairment of goodwill of $3.1 million ($2.5 million after tax or $.15 per share) resulting from the January 1, 2002 adoption of SFAS No. 142. |
| (d) | The number of shares, as well as basic and diluted earnings (loss) per share, have been adjusted to reflect the 1-for-5 reverse stock split. |
CONSOLIDATED BALANCE SHEETS
(In thousands)
ETHYL CORPORATION AND SUBSIDIARIES
March 31 2003 (unaudited) | December 31 2002 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 15,603 |
| $ | 15,478 |
| ||
Restricted cash |
| 500 |
|
| 683 |
| ||
Trade and other accounts receivable, less | ||||||||
allowance for doubtful accounts ($1,109—2003; | ||||||||
$911—2002) |
| 130,856 |
|
| 124,430 |
| ||
Receivable—TEL marketing agreements services |
| 4,486 |
|
| 7,418 |
| ||
Inventories |
| 103,675 |
|
| 104,046 |
| ||
Deferred income taxes and prepaid expenses |
| 20,573 |
|
| 16,571 |
| ||
Assets of discontinued operations (a) |
| — |
|
| 4,323 |
| ||
Total current assets |
| 275,693 |
|
| 272,949 |
| ||
Property, plant and equipment, at cost |
| 751,209 |
|
| 746,237 |
| ||
Less accumulated depreciation and amortization |
| 557,773 |
|
| 547,518 |
| ||
Net property, plant and equipment |
| 193,436 |
|
| 198,719 |
| ||
Prepaid pension cost |
| 23,844 |
|
| 24,995 |
| ||
Deferred income taxes |
| 9,735 |
|
| 9,494 |
| ||
Other assets and deferred charges |
| 77,615 |
|
| 80,756 |
| ||
Intangibles, net of amortization |
| 68,039 |
|
| 69,338 |
| ||
Total assets | $ | 648,362 |
| $ | 656,251 |
| ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 49,609 |
| $ | 44,130 |
| ||
Accrued expenses |
| 42,601 |
|
| 38,778 |
| ||
Long-term debt, current portion |
| 9,163 |
|
| 40,537 |
| ||
Income taxes payable |
| 15,008 |
|
| 6,288 |
| ||
Total current liabilities |
| 116,381 |
|
| 129,733 |
| ||
Long-term debt |
| 238,883 |
|
| 249,530 |
| ||
Other noncurrent liabilities |
| 122,984 |
|
| 123,910 |
| ||
Shareholders' equity | ||||||||
Common stock ($1 par value) Issued—16,689,009 in 2003 and 2002 |
| 16,689 |
|
| 16,689 |
| ||
Additional paid in capital |
| 66,766 |
|
| 66,766 |
| ||
Accumulated other comprehensive loss |
| (28,550 | ) |
| (29,294 | ) | ||
Retained earnings |
| 115,209 |
|
| 98,917 |
| ||
| 170,114 |
|
| 153,078 |
| |||
Total liabilities and shareholders' equity | $ | 648,362 |
| $ | 656,251 |
| ||
Notes to the Consolidated Balance Sheets
| (a) | Assets of discontinued operations reflect the accounts of the phenolic antioxidant business sold in January 2003. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
ETHYL CORPORATION AND SUBSIDIARIES
Three Months Ended March 31 | ||||||||
2003 | 2002 | |||||||
Cash and cash equivalents at beginning of year | $ | 15,478 |
| $ | 12,382 |
| ||
Cash flows from operating activities: | ||||||||
Net income (loss) |
| 16,292 |
|
| (1,622 | ) | ||
Adjustments to reconcile net income (loss) to cash flows from operating activities: | ||||||||
Depreciation and amortization |
| 12,589 |
|
| 14,188 |
| ||
Prepaid pension cost |
| 1,389 |
|
| 1,477 |
| ||
Cumulative effect of accounting changes |
| (2,549 | ) |
| 3,120 |
| ||
Gain on sale of phenolic antioxidant business |
| (23,196 | ) |
| — |
| ||
TEL working capital advance |
| 779 |
|
| (322 | ) | ||
Deferred income tax expense (benefit) |
| 2,029 |
|
| (2,241 | ) | ||
Working capital changes |
| 3,366 |
|
| (7,276 | ) | ||
Legal settlement |
| 4,825 |
|
| — |
| ||
Other, net |
| 3,173 |
|
| 471 |
| ||
Cash provided from operating activities |
| 18,697 |
|
| 7,795 |
| ||
Cash flows from investing activities: | ||||||||
Capital expenditures |
| (1,818 | ) |
| (2,358 | ) | ||
Proceeds from sale of phenolic antioxidant business |
| 27,020 |
|
| — |
| ||
Prepayment for TEL marketing agreements services |
| — |
|
| (3,200 | ) | ||
Other, net |
| 3 |
|
| (6 | ) | ||
| �� | ||||||||
Cash provided from (used in) investing activities |
| 25,205 |
|
| (5,564 | ) | ||
Cash flows from financing activities: | ||||||||
Repayment of debt |
| (41,890 | ) |
| (38,640 | ) | ||
Net borrowings |
| — |
|
| 37,840 |
| ||
Debt issuance costs |
| (1,756 | ) |
| (1,982 | ) | ||
Other, net |
| (131 | ) |
| (124 | ) | ||
Cash used in financing activities |
| (43,777 | ) |
| (2,906 | ) | ||
Increase (decrease) in cash and cash equivalents |
| 125 |
|
| (675 | ) | ||
Cash and cash equivalents at end of period | $ | 15,603 |
| $ | 11,707 |
| ||
