Engelhard Corporation

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 23, 2003

ENGELHARD CORPORATION
(Exact name of registrant as specified in its charter)


Delaware 1-8142 22-1586002
(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer Identification No.)
         
101 Wood Avenue, Iselin, New Jersey 08830
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (732) 205-5000



Item 12. Results of Operations and Financial Condition.

On October 23, 2003, Engelhard Corporation (the “Company”) issued a press release announcing its earnings for its third quarter of fiscal year 2003. A copy of the release is furnished herewith as Exhibit 99.1.

The information furnished under this Item 12, including Exhibit 99.1, shall not be deemed to be filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.



SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date: October 23, 2003 ENGELHARD CORPORATION
                    (Registrant)


By:  /s/ Michael A. Sperduto
      ——————————————
      Michael A. Sperduto
      Vice President and
      Chief Financial Officer



EXHIBIT INDEX


Exhibit No.   Description
     
99.1    Press Release, dated October 23, 2003, relating to Engelhard Corporation's earnings release for the third quarter of 2003.


EXHIBIT (99.1)


Contact
News Ted Lowen
(Media)
732-205-6360
                 
Peter Martin
(Investor Relations)
732-205-6106
Ref. #C1379
                 
Engelhard Corporation
101 Wood Avenue
P.O. Box 770
Iselin, NJ 08830-0770

For immediate release

ENGELHARD THIRD-QUARTER RESULTS
IN LINE WITH EXPECTATIONS

ISELIN, NJ, October 23, 2003 – Engelhard Corporation (NYSE: EC) today reported net earnings for the third quarter ended September 30 of $59.8 million, or 47 cents per share on a diluted basis, compared with $2.9 million, or two cents per share for the same period a year ago. The year-ago quarter included a charge for an equity investment impairment amounting to $57.7 million, or 44 cents per share. The current quarter’s results were in line with the current range of estimates.

        Third quarter sales were $915 million compared with $859 million a year ago.

        “We’re pleased that the strength from new technology coupled with a passion for productivity once again enabled us to deliver results in line with estimates without the benefit of significant economic recovery,” said Barry W. Perry, chairman and chief executive officer. “In addition, we’re using our strong cash flow to further support return to shareholders through an increase in the dividend, additional share buyback and acceleration of payment to our pension fund.

        “Our core industrial end markets are not yet reflecting an economic recovery,” Mr. Perry said. “However, we expect to sustain modest earnings growth and strong cash flow through next year without relying on a significant rebound across these markets.”

Third-Quarter Operating Results

        Operating earnings from Environmental Technologies increased 54% to $31 million. Sales rose 28% to $202 million. The significant earnings increase resulted from a combination of solid results from mobile environmental markets plus the absence of costs in the year-ago quarter related to rework for power-generation applications. Higher pass-through cost of substrates to mobile markets plus the favorable effects of foreign exchange accounted for slightly less than half the sales increase.

        Operating earnings from Process Technologies rose 15% to $25 million while sales increased 14% to $144 million. Increased demand for certain petroleum refining, petrochemical and polyolefin catalysts contributed to the earnings increase, along with benefits from productivity programs and foreign exchange. Partly offsetting these results were higher energy costs.

        Operating earnings from Appearance and Performance Technologies declined 33% to $18 million, while sales were down 3% to $166 million. Lower volumes of minerals-based products sold to paper and certain other industrial end markets and higher energy costs accounted for the declines.

        Operating earnings from Materials Services declined to $1 million, as expected, compared with $8 million earned in the year-ago quarter. Sales increased 1% to $385 million. Weak industrial demand for certain platinum group metals and lower recycling service results continue to impact this segment.

        Engelhard Corporation is a surface and materials science company that develops technologies to improve customers’ products and processes. A Fortune 500 company, Engelhard is a world-leading provider of technologies for environmental, process, appearance and performance applications. For more information, visit Engelhard on the Internet at www.engelhard.com.

        Forward-looking statements: This document contains forward-looking statements in management’s comments. There are a number of factors that could cause Engelhard’s actual results to vary materially from those projected in the forward-looking statements. For a more thorough discussion of these factors, please refer to page 26 of Engelhard’s 2002 Form 10-K, dated March 25, 2003.



ENGELHARD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Thousands, except per share data)
(Unaudited)


Three Months Ended
September 30, 		Nine Months Ended
September 30,
     
 
 
       2003    2002    2003    2002  
Net sales     $ 915,373   $ 858,574   $ 2,675,170   $ 2,842,709  
Cost of sales       761,234     702,820     2,208,573     2,349,107  
      Gross profit       154,139     155,754     466,597     493,602  
Selling, administrative and other expenses       88,038     78,814     268,607     262,225  
Special credit, net       —     —     (11,978 )   (7,862 )
      Operating earnings       66,101     76,940     209,968     239,239  
Equity in earnings of affiliates       14,517     3,870     27,694     11,940  
Equity investment impairment       —     (57,704 )   —     (57,704 )
Loss on investments       —     —     —     (6,659 )
Interest expense, net       (5,510 )   (5,980 )   (15,820 )   (19,768 )
      Earnings before income taxes       75,108     17,126     221,842     167,048  
Income tax expense       15,275     14,213     49,039     51,693  
      Net earnings before cumulative effect of a change    
           in accounting principle, net of tax       59,833     2,913     172,803     115,355  
      Cumulative effect of a change in accounting    
           principle, net of tax of $1,390       —     —     (2,269 )   —  
           Net earnings     $ 59,833   $ 2,913   $ 170,534   $ 115,355  
Earnings per share – basic:    
      Earnings before cumulative effect of a change in    
           accounting principle     $ 0.48   $ 0.02   $ 1.38   $ 0.90  
      Cumulative effect of a change in accounting    
           principle, net of tax       —     —     (0.02 )   —  
Earnings per share – basic     $ 0.48   $ 0.02   $ 1.36   $ 0.90  
Earnings per share – diluted:    
      Earnings before cumulative effect of a change in    
           accounting principle     $ 0.47   $ 0.02   $ 1.36   $ 0.88  
      Cumulative effect of a change in accounting    
           principle, net of tax       —     —     (0.02 )   —  
Earnings per share – diluted     $ 0.47   $ 0.02   $ 1.34   $ 0.88  
Cash dividends paid per share     $ 0.10   $ 0.10   $ 0.30   $ 0.30  
Average number of shares outstanding – basic       124,683     127,732     125,601     128,407  
Average number of shares outstanding – diluted       126,877     129,839     127,320     130,966  
Actual number of shares outstanding at end of period       125,581     127,905     125,581     127,905  



Had compensation cost for Engelhard’s stock option plans been determined based on the fair value at grant date consistent with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure,” (assuming SFAS No. 123 was adopted on its effective date of October 1995), Engelhard would have reported net earnings and diluted earnings per share as follows:


Three Months Ended
September 30, 		Nine Months Ended
September 30,
Pro forma information (in millions, except per share data)      2003      2002      2003      2002
Net earnings – as reported     $ 59.8   $ 2.9   $ 170.5   $ 115.4
Net earnings – pro forma       58.4     1.4     166.3     110.8
Diluted earnings per share – as reported       0.47     0.02     1.34     0.88
Diluted earnings per share – pro forma       0.46     0.01     1.31     0.85


ENGELHARD CORPORATION
BUSINESS SEGMENT INFORMATION
(Thousands)
(Unaudited)


Three Months Ended
September 30, 		Nine Months Ended
September 30,
  
   2003    2002    Change  2003    2002     Change
 
Net Sales
   Environmental Technologies $ 202,225   $ 158,197     28 %    $ 624,918   $ 493,202     27 %
   Process Technologies   143,568       125,635       14 %     401,921     377,487     6 %
   Appearance and Performance Technologies   166,089     171,882     -3 %      500,475     494,884     1 %
   
 
      Technology segments   511,882     455,714     12 %     1,527,314     1,365,573     12 %
   Materials Services   385,308     382,080     1 %     1,108,750     1,438,373     -23 % 
   All other   18,183     20,780     -12 %      39,106     38,763     1 %
   
 
      Total net sales $ 915,373   $ 858,574     7 %   $ 2,675,170   $ 2,842,709     -6 % 
   
 
Operating Earnings
   Environmental Technologies $ 30,980   $ 20,103     54 %   $ 87,046 (A) $ 87,747 (E)   -1 % 
   Process Technologies   24,629     21,339     15 %     62,720 (B)   61,380     2 %
   Appearance and Performance Technologies   18,009     27,045     -33 %      55,205 (C)   66,896     -17 % 
   
 
      Technology segments   73,618     68,487     7 %     204,971     216,023     -5 % 
   Materials Services   1,295     8,288     -84 %      8,779     45,711 (F)   -81 % 
   All other   (8,812 )   165     -5441 %     (3,782 )(D)   (22,495 )   83 %
   
 
      Total operating earnings   66,101     76,940     -14 %      209,968     239,239     -12 % 
Equity in earnings of affiliates   14,517     3,870     275 %     27,694     11,940     132 %
Equity investment impairment   —     (57,704 )   —       —     (57,704 )   —  
Loss on investments   —     —     —       —     (6,659 )   —  
Interest expense, net   (5,510 )   (5,980 )   -8 %      (15,820 )   (19,768 )   -20 % 
   
 
      Earnings before income taxes   75,108     17,126     339 %     221,842     167,048     33 %
Income tax expense   15,275     14,213     7 %     49,039     51,693     -5 % 
   
 
   Net earnings before cumulative effect
      of a change in accounting
      principle, net of tax   59,833     2,913     1954 %     172,803     115,355     50 %
   Cumulative effect of a change in
      accounting principle, net of tax of
      $1,390   —     —     —       (2,269 )   —     —  
   
 
      Net earnings $ 59,833   $ 2,913     1954 %   $ 170,534   $ 115,355     48 %
   
 

(A) – Includes a restructuring charge of $5.3 million ($3.5 million after tax or $0.03 per share) in 2003.

(B) – Includes a restructuring charge of $2.6 million ($1.6 million after tax or $0.01 per share) in 2003.

(C) – Includes a charge of $7.8 million ($4.8 million after tax or $0.04 per share) in 2003 related to lease
         commitments for idle facilities.

(D) – Includes a royalty settlement gain of $28.4 million ($17.6 million after tax or $0.14 per share)
          and a Corporate restructuring charge of $0.8 million ($0.5 million after tax or less than $0.01
          per share) in 2003.

(E) – Includes a restructuring charge of $3.1 million ($1.9 million after tax or $0.01 per share) in 2002.

(F) – Includes an insurance settlement gain of $11.0 million ($6.8 million after tax or $0.05 per share) in 2002.

Note: All of the above per-share amounts are presented as diluted earnings per share.



ENGELHARD CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
(Unaudited)


 September 30,
 2003 		   December 31,
 2002 		 
Cash $ 79,377   $ 48,246  
Receivables, net   345,758     380,270  
Committed metal positions   311,610     615,441  
Inventories   438,661     427,162  
Other current assets   102,537     94,922  
      Total current assets   1,277,943     1,566,041  
Investments   141,166     136,804  
Property, plant and equipment, net   855,414     860,475  
Goodwill   273,691     272,353  
Other intangible and noncurrent assets   195,192     185,041  
      Total assets $ 2,743,406   $ 3,020,714  
Short-term borrowings $ 86,469   $ 348,749  
Accounts payable   208,387     225,045  
Hedged metal obligations   274,658     537,243  
Other current liabilities   274,401     275,250  
      Total current liabilities   843,915     1,386,287  
Long-term debt   392,402     247,805  
Other noncurrent liabilities   310,787     309,455  
Shareholders’ equity   1,196,302     1,077,167  
      Total liabilities and shareholders’ equity $ 2,743,406   $ 3,020,714  


ENGELHARD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
(Unaudited)


Nine Months Ended
September 30,
       2003    2002  
Cash flows from operating activities    
      Net earnings     $ 170,534   $ 115,355  
      Adjustments to reconcile net earnings to net cash provided by operating activities:    
           Depreciation and depletion       93,261     79,303  
           Amortization of intangible assets       2,479     2,153  
           Loss on investments       —     6,659  
           Equity results, net of dividends       (8,347 )   (8,187 )
           Equity investment impairment       —     57,704  
           Net change in assets and liabilities:    
                Materials Services related       295,995     (20,952 )
                All other       (14,448 )   (18,639 )
                     Net cash provided by operating activities       539,474     213,396  
Cash flows from investing activities    
      Capital expenditures       (68,080 )   (68,777 )
      Proceeds from investments       7,531     —  
      Acquisitions and other investments       —     (2,800 )
                     Net cash used in investing activities       (60,549 )   (71,577 )
Cash flows from financing activities    
      (Decrease)/increase in short-term borrowings       (262,280 )   18,361  
      (Decrease)/increase in hedged metal obligations       (241,345 )   1,329  
      Repayment of long-term debt       (184 )   (148 )
      Proceeds from issuance of long-term debt       147,842     —  
      Purchase of treasury stock       (84,517 )   (125,788 )
      Cash from exercise of stock options       23,293     46,471  
      Dividends paid       (37,823 )   (38,716 )
                     Net cash used in financing activities       (455,014 )   (98,491 )
Effect of exchange rate changes on cash       7,220     5,498  
                     Net increase in cash       31,131     48,826  
Cash at beginning of year       48,246     33,034  
                     Cash at end of period     $ 79,377   $ 81,860