Exhibit 99.1
The Lubrizol Corporation
29400 Lakeland Boulevard, Wickliffe, Ohio 44092-2298
News Release
FOR RELEASE: | Immediately | |||
FROM: | Financial/Investor Contact | Media Contact | ||
| Joanne Wanstreet | James S. Baldwin | |||
| 440/347-1252 | 440/347-1838 | |||
| Web Site: http://www.lubrizol.com | ||||
LUBRIZOL ANNOUNCES 2003 EARNINGS MEET GUIDANCE
Record revenues for the year of $2.05 billion
CLEVELAND, Ohio, February 6, 2004 – The Lubrizol Corporation (NYSE: LZ) announced that consolidated earnings for 2003 were $90.8 million, or $1.76 per share, after a restructuring charge of $.29 per share, which compares to November guidance in the range of $1.72 to $1.82 per share. Consolidated earnings for 2002 were $118.5 million, or $2.30 per share after a $.15 per share write-off of goodwill related to a required accounting change. Excluding the restructuring charge and the cumulative effect of the accounting change in 2003 and 2002 respectively, earnings were $2.05 in 2003 compared to $2.45 in 2002. For the full year 2003, consolidated revenues of $2.05 billion were 3 percent higher than $1.98 billion for 2002.
Fourth Quarter Results
Consolidated earnings for the fourth quarter ended December 31, 2003 were $11.1 million or $.21 per share, after a pre-tax restructuring charge of $15.1 million, or $.19 per share, related to workforce reductions announced in November. Consolidated earnings for the fourth quarter of 2002 were $25.5 million. Excluding the restructuring charge, earnings were $.40 per share for the fourth quarter of 2003, compared to $.49 per share in 2002. Compared to the prior year, earnings for the fourth quarter of 2003 were affected by lower shipment volume and higher raw material costs, which more than offset higher average selling price.
Consolidated revenues for the quarter increased 4 percent to $519.4 million compared to $497.7 million in the fourth quarter of 2002. Excluding acquisitions, revenues for the quarter were up 2 percent from the comparable period a year ago.
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The effective tax rate for the year was lowered to 29.7 percent from the 31 percent estimated annual tax rate of the third quarter. The rate reduction was based on higher than expected non-taxable currency translation gains.
Segment Results
In the fluid technologies for transportation (FTT) segment, revenues of $388.8 million for the fourth quarter were even with the fourth quarter of 2002. The effects of favorable currency and stronger price/mix on revenues offset an 8 percent volume decline. FTT shipment volume was down in all geographic regions (North America, Europe, Asia-Pacific/Middle East and Latin America) compared to the fourth quarter of 2002. Compared to the third quarter of 2003, however, FTT volume increased 1 percent. Average raw material cost for FTT increased 8 percent in the fourth quarter and STAR (selling, testing, administrative and research) expenses were down 7 percent from the comparable period a year earlier. Segment contribution income for FTT of $64.3 million declined 6 percent in the quarter compared to the fourth quarter, 2002. For the full year 2003, FTT revenues of $1.55 billion were down 1 percent from 2002 and FTT segment contribution declined 8 percent to $286.9 million.
Fluid technologies for industry (FTI) segment revenues of $122.1 million for the quarter increased 19 percent compared to the fourth quarter of 2002. Excluding acquisitions, FTI revenues grew 9 percent from organic growth, with the strongest gains in additives for coatings and inks, metalworking fluids and compressor lubricants, as well as ingredients for personal care products. Segment contribution income of $17.8 million was 6 percent higher than the fourth quarter last year. FTI revenues for the full year 2003 grew 21 percent to $464.1 million, with acquisitions and organic growth contributing about equally to the increase. Segment contribution for FTI for 2003 was $73.3 million, an increase of 4 percent over 2002. This amount was affected by plant start-up costs and a one-time event announced previously.
Revenues in the “all other” segment, which includes emissions control systems, fluid metering equipment and PuriNOx™ low-emissions diesel fuel technology were $8.5 million for the quarter and $33.3 million for the year, representing 31 percent increases from both comparable periods in 2002. Segment contribution losses were $2.5 million for the quarter compared to $2.8 million a year ago. For the full-year comparison, losses decreased 25 percent.
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Commenting on the results, W. G. Bares, Chairman and Chief Executive Officer, said, “Earnings met the guidance we issued in early November. As expected, fourth quarter FTT shipment volumes were lower than a year ago. The fourth quarter usually has the lowest volume of the year for FTT, but we are encouraged that shipment volume increased slightly from the soft third quarter of 2003. Currency was positive for the quarter, but raw material costs continued to pressure margins.
“By year-end we substantially completed the cost reduction programs initiated in 2003, and we expect annualized savings of approximately $20 million. We made progress on our growth agenda, as we integrated the third-quarter acquisitions into FTI’s business units for foam control additives and personal care ingredients. Both acquisitions were accretive in their first full quarter. In addition, we recently completed the acquisition of Avecia Additives coatings and inks business. Integration with our existing coatings and inks additives business is already under way. In FTT, we completed development of GF-4, the next standard change for North American passenger car lubricants. GF-4 meets challenging technical requirements for emissions reductions and fuel economy and we are prepared for the rollout to begin in 2004.
“Also in FTT, earlier this week we announced price increases for products sourced from North American and Latin American facilities. These actions are necessary to respond to recent increases in the prices of raw materials and energy.”
Outlook
Commenting on 2004 outlook, Mr. Bares said, “Looking ahead, we believe we will achieve 2004 earnings in the range of $2.25 to $2.40 per share for the year and $.53 to $.58 per share for the first quarter. Our guidance assumes ongoing challenges from persistently high raw material and natural gas utility costs, higher pension, health care and insurance expenses and a higher tax rate. We are also projecting business gains and stronger customer demand and pricing in FTT, continuing growth in FTI and savings from our 2003 cost reduction programs. As we enter 2004, we believe the challenges we addressed in 2003 have prepared us for earnings growth this year.”
An audio webcast of the fourth quarter earnings conference call with investors will be available today at 11:00 a.m. Eastern time onwww.lubrizol.com and will be archived for 30 days.
The Lubrizol Corporation (NYSE: LZ) is a global provider of specialty additives and fluid technologies. These high-performance technologies focus on chemicals, systems and services
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for transportation and industry. The company’s customers use its technology to enhance a wide variety of end-use products, including engine lubricants and fuel; gear oils and other vehicle-related fluids; hydraulic fluids and emission control systems; greases and industrial fluids; personal care products and industrial cleaners; paints, coatings and inks; and mining chemicals.
Lubrizol was founded in 1928 and owns and operates 37 manufacturing plants in 16 countries.
The Wickliffe, Ohio-based company has 53 sales and technical offices and more than 5,000 employees worldwide. Its three research centers are located in Wickliffe, Ohio; Hazelwood, England; and Kinuura, Japan. The company had revenues of $2 billion and earnings of $90.8 million in 2003. For more information, visitwww.lubrizol.com.
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This press release contains forward-looking statements within the meaning of the federal securities laws. As a general matter, forward-looking statements relate to anticipated trends and expectations rather than historical matters. Forward-looking statements are subject to uncertainties and factors relating to the company’s operations and business environment that are difficult to predict and may be beyond the control of the company. Such uncertainties and factors may cause actual results to differ materially from those expressed or implied by forward-looking statements. Uncertainties and factors that could affect the future performance of the company and cause results to differ from the forward-looking statements in this press release are contained in the company’s latest annual report to its shareholders, which is available upon request.
THE LUBRIZOL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Data)
| Fourth Quarter December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||
Net sales | $ | 518,718 | $ | 496,644 | $ | 2,049,101 | $ | 1,980,289 | ||||||||
Royalties and other revenues | 648 | 1,024 | 3,022 | 3,578 | ||||||||||||
Total revenues | 519,366 | 497,668 | 2,052,123 | 1,983,867 | ||||||||||||
Cost of sales | 389,432 | 364,425 | 1,507,792 | 1,416,255 | ||||||||||||
Selling and administrative expenses | 53,291 | 50,240 | 202,904 | 196,940 | ||||||||||||
Research, testing and development expenses | 43,677 | 43,629 | 166,942 | 168,303 | ||||||||||||
Restructuring charge | 15,087 | — | 22,534 | — | ||||||||||||
Total cost and expenses | 501,487 | 458,294 | 1,900,172 | 1,781,498 | ||||||||||||
Other income (expense) — net | 1,341 | 1,704 | (1,565 | ) | (5,380 | ) | ||||||||||
Interest (expense) — net | (5,661 | ) | (4,665 | ) | (21,315 | ) | (16,601 | ) | ||||||||
Income before income taxes and cumulative effect of change in accounting principle | 13,559 | 36,413 | 129,071 | 180,388 | ||||||||||||
Provision for income taxes | 2,489 | 10,923 | 38,297 | 54,116 | ||||||||||||
Income before cumulative effect of change in accounting principle | 11,070 | 25,490 | 90,774 | 126,272 | ||||||||||||
Cumulative effect of change in accounting principle | (7,785 | ) | ||||||||||||||
Net income | $ | 11,070 | $ | 25,490 | $ | 90,774 | $ | 118,487 | ||||||||
Net income per share: | ||||||||||||||||
Net income before cumulative effect of change in accounting principle | $ | 0.21 | $ | 0.49 | $ | 1.76 | $ | 2.45 | ||||||||
Cumulative effect of change in accounting principle | (0.15 | ) | ||||||||||||||
Net income per share | $ | 0.21 | $ | 0.49 | $ | 1.76 | $ | 2.30 | ||||||||
Diluted net income per share: | ||||||||||||||||
Income before cumulative effect of change in accounting principle | $ | 0.21 | $ | 0.49 | $ | 1.75 | $ | 2.44 | ||||||||
Cumulative effect of change in accounting principle | (0.15 | ) | ||||||||||||||
Net income per share, diluted | $ | 0.21 | $ | 0.49 | $ | 1.75 | $ | 2.29 | ||||||||
Weighted average common shares outstanding | $ | 51,769 | $ | 51,630 | $ | 51,702 | $ | 51,514 | ||||||||
THE LUBRIZOL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
| December 31, 2003 | December 31, 2002 | ||||||
| Assets | |||||||
Cash and short-term investments | $ | 258,699 | $ | 266,428 | |||
Receivables | 324,567 | 295,508 | |||||
Inventories | 311,919 | 302,968 | |||||
Other current assets | 42,663 | 44,875 | |||||
Total current assets | 937,848 | 909,779 | |||||
Property and equipment — net | 689,994 | 679,155 | |||||
Goodwill and intangible assets — net | 271,128 | 211,514 | |||||
Investment and other assets | 43,346 | 59,689 | |||||
Total | $ | 1,942,316 | 1,860,137 | ||||
| Liabilities and Shareholders’ Equity | |||||||
Short-term debt and current portion of long-term debt | $ | 2,899 | $ | 17,046 | |||
Other current liabilities | 296,578 | 290,695 | |||||
Total current liabilities | 299,477 | 307,741 | |||||
Long-term debt | 386,726 | 384,845 | |||||
Other noncurrent liabilities | 251,527 | 244,911 | |||||
Total liabilities | 937,730 | 937,497 | |||||
Minority interest in consolidated companies | 51,281 | 53,388 | |||||
Shareholders’ equity | 953,305 | 869,252 | |||||
Total | $ | 1,942,316 | $ | 1,860,137 | |||
THE LUBRIZOL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
| Twelve Months Ended December 31, | ||||||||
| 2003 | 2002 | |||||||
Cash provided from (used for): | ||||||||
| Operating activities: | ||||||||
Net income | $ | 90,774 | $ | 118,487 | ||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation and amortization | 100,423 | 95,831 | ||||||
Cumulative effect of change in accounting principle | 7,785 | |||||||
Restructuring charge | 3,327 | |||||||
Net change in working capital | (9,045 | ) | 13,923 | |||||
Other items — net | 9,275 | 8,842 | ||||||
Total operating activities | 194,754 | 244,868 | ||||||
| Investing activities: | ||||||||
Capital expenditures | (88,453 | ) | (65,285 | ) | ||||
Acquisitions and equity investments | (68,597 | ) | (86,671 | ) | ||||
Other — net | 1,146 | 3,420 | ||||||
Total investing activities | (155,904 | ) | (148,536 | ) | ||||
| Financing activities: | ||||||||
Net short and long-term borrowings (repayments) | (10,469 | ) | (3,707 | ) | ||||
Dividends paid | (53,571 | ) | (53,430 | ) | ||||
Proceeds from termination of interest rate swaps | 18,134 | |||||||
Stock options exercised | 4,569 | 8,569 | ||||||
Total financing activities | (59,471 | ) | (30,434 | ) | ||||
Effect of exchange rate changes on cash | 12,892 | 11,435 | ||||||
Net increase (decrease) in cash and short-term. investments | (7,729 | ) | 77,333 | |||||
Cash and short-term investments at the beginning of period | 266,428 | 189,095 | ||||||
Cash and short-term investments at the end of period | $ | 258,699 | $ | 266,428 | ||||
THE LUBRIZOL CORPORATION
SEGMENT INFORMATION
(In Thousands of Dollars)
Fourth Quarter Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||
| Revenues: | ||||||||||||||||
Fluid technologies for transportation | $ | 388,842 | $ | 388,676 | $ | 1,554,733 | $ | 1,575,998 | ||||||||
Fluid technologies for industry | 122,077 | 102,538 | 464,085 | 382,427 | ||||||||||||
All other | 8,447 | 6,454 | 33,305 | 25,442 | ||||||||||||
Total revenues | $ | 519,366 | $ | 497,668 | $ | 2,052,123 | $ | 1,983,867 | ||||||||
| Segment contribution income (loss): | ||||||||||||||||
Fluid technologies for transportation | $ | 64,324 | $ | 68,673 | $ | 286,880 | $ | 312,033 | ||||||||
Fluid technologies for industry | 17,785 | 16,770 | 73,276 | 70,335 | ||||||||||||
All other | (2,466 | ) | (2,792 | ) | (7,658 | ) | (10,247 | ) | ||||||||
Total segment contribution income | $ | 79,643 | $ | 82,651 | $ | 352,498 | $ | 372,121 | ||||||||
| Segment operating profit (loss): | ||||||||||||||||
Fluid technologies for transportation | $ | 28,664 | $ | 34,269 | $ | 147,215 | $ | 163,324 | ||||||||
Fluid technologies for industry | 9,987 | 11,594 | 39,778 | 49,350 | ||||||||||||
All other | (4,344 | ) | (4,785 | ) | (14,073 | ) | (15,685 | ) | ||||||||
Total segment operating profit | $ | 34,307 | $ | 41,078 | $ | 172,920 | $ | 196,989 | ||||||||