Octel Corp. Reports 3rd Quarter 2003 Results.Business Editors NEWARK Newark, cities, United States Newark. 1 City (1990 pop. 37,861), Alameda co., W Calif., on the east side of San Francisco Bay; inc. 1955. , Del.--(BUSINESS WIRE)--Oct. 27, 2003 Octel Corp. (NYSE NYSE See: New York Stock Exchange : OTL OTL Office of Technology Licensing OTL Out To Lunch OTL Overtime Loss (hockey) OTL Over The Line (tournament in San Diego, CA, USA) OTL Output Transformer-Less (audio systems) ) today announced financial results for the third quarter and nine months ended September September: see month. 30, 2003. - Highlights for the third quarter and nine months ended September 30, 2003 - -- Net income of $3.11 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share for the first nine months -- Year to date Specialty Chemicals A Specialty chemical is a chemical produced for a specialized use. They are produced in lower volume than bulk chemicals, of which petrochemicals, made from oil feedstocks, are the most common. However, both are produced in a chemical plant. operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. 8.4% higher than last year -- Ongoing TEL TEL Telephone TEL Telegram TEL Telugu (langauge) TEL Terrorist Exclusion List TEL Technology-Enhanced Learning TEL Transporter-Erector-Launcher TEL Tetra-Ethyl Lead TEL Team Deutsche Telekom operating income for the 3rd quarter up 17.4% over last year -- Year to date cash flow from operating activities of $56.0 million Net income for the third quarter of 2003 was $18.4 million or $1.47 per diluted share compared with a net income of $18.3 million or $1.44 per diluted share in the comparable period last year. For the nine months, net income is $38.9 million or $3.11 per diluted share compared with a net income of $54.4 million or $4.32 per diluted share in the same period last year. Sales in Specialty Chemicals were $46.9 million for the quarter, 3.1% higher than the same period last year. The benefit of the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). activities resulted in gross profit for the quarter of $15.9 million, 12.0% ahead of last year. Year to date sales of $141.9 million are 11.5% up on the same period last year, with gross profits 7.1% higher at $46.8 million. TEL (tetraethyl lead tetraethyl lead (tĕt'rəĕth`əl), (C2H5)4Pb, viscous, colorless, poisonous liquid. It is an organometallic compound prepared by reacting ethyl chloride with a sodium-lead alloy. ) sales were $76.4 million for the third quarter, 15.2% above the same period last year with all major markets now back on track. Both tight selling price management and continued cost control at our UK plant resulted in gross profit for the third quarter of $40.5 million or 53.0% of sales. These are two major factors that have offset the impact of the global market volume decline. Year to date sales of $192.4 million are 1.9% higher than last year on volumes 14.6% down, reflecting some acceleration acceleration, change in the velocity of a body with respect to time. Since velocity is a vector quantity, involving both magnitude and direction, acceleration is also a vector. In order to produce an acceleration, a force must be applied to the body. of deliveries into the third quarter at customer request. Overall operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for the quarter of $20.5 million before restructuring costs and the amortization of intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. were $3.3 million higher than last year and are cumulatively 9.5% higher than last year. This increase reflects our investment in support infrastructure to drive the growth in Specialty Chemicals, as well as planned expenditure to ensure the company is always in a position to comply fully with new and proposed governance Governance makes decisions that define expectations, grant power, or verify performance. It consists either of a separate process or of a specific part of management or leadership processes. Sometimes people set up a government to administer these processes and systems. and other regulatory requirements Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. . Operating income of $31.0 million was $5.7 million ahead of last year for the third quarter reflecting the improved performance in both Specialty Chemicals and TEL. For the nine months, operating income is 15% lower than last year at $71.0 million. Cash flow from operating activities was $38.8 million for the third quarter of 2003, bringing the year to date total to $56.0 million cash inflow in·flow n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. . The company continues to make good progress towards refinancing Refinancing An extension and/or increase in amount of existing debt. its existing debt and a payment of $20.0 million will be made in December December: see month. against the current facility. As previously announced, further provisions for restructuring costs of $2.3 million were made in the third quarter of 2003 across all businesses. After tax, these amounted to $0.13 per share. It is still expected that aggregate further charges will total around $10.0 million during the remainder of 2003 and 2004, primarily in TEL. The combined charges will reflect our previously stated objectives of rationalizing sites and assets to capture synergies in Specialty Chemicals and being proactive in managing the continuing decline in demand for TEL. Dennis Dennis is a male first name derived from the Greco-Roman name Dionysius meaning "servant of Dionysus", the Thracian god of wine, which is ultimately derived from the Greek Dios (Διος, "of Zeus") combined with Nysos or Nysa (Νυσα), where the Kerrison, President and Chief Executive Officer, commented: "I am pleased with the continued improvement in Specialty Chemicals results. Management action and restructuring are now starting to provide real benefits. Operating income is clearly ahead of last year. The previously announced restructuring program in this business is now essentially complete." "TEL continues to generate strong cash flow with improved results. Quarter 3 benefited from normal supply to all major markets and overall market conditions remain good. The program to further reduce capacity and infrastructure in Ellesmere Port Ellesmere Port, town and district (1991 pop. 78,800), Cheshire, W central England. Ellesmere Port, located on the Manchester Ship Canal near its junction with the Shropshire Union Canal and the entrance into the Mersey estuary, is the principal town of the district. is well underway but the TEL downsizing (1) Converting mainframe and mini-based systems to client/server LANs. (2) To reduce equipment and associated costs by switching to a less-expensive system. (jargon) downsizing has been postponed until later in 2004 in order to meet current demand." "Overall, the third quarter net income was marginally mar·gin·al adj. 1. Of, relating to, located at, or constituting a margin, a border, or an edge: the marginal strip of beach; a marginal issue that had no bearing on the election results. 2. ahead of last year. With our major TEL customers now back on stream and Specialty Chemicals continuing to perform well, we are looking forward to further progress in the remainder of this year and 2004." Octel Corp., a Delaware corporation A Delaware corporation is a corporation chartered in the U.S. state of Delaware. Delaware is well known as a corporate haven, and thus, over 50% of US publicly-traded corporations and 58% of the Fortune 500 companies are incorporated in the state. , 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 gasoline or petrol, light, volatile mixture of hydrocarbons for use in the internal-combustion engine and as an organic solvent, obtained primarily by fractional distillation and "cracking" of petroleum, but also obtained from natural gas, by - through competitive differentiation differentiation, in biology, series of changes that occur in cells and tissues during development, resulting in their specialization. This, in turn, permits a greater variety of organisms. and stringent product stewardship Product stewardship is a concept whereby environmental protection centers around the product itself, and everyone involved in the lifespan of the product is called upon to take up responsibility to reduce its environmental impact. , to expand its Specialty Chemicals business organically through product innovation and focus on customer needs, and to seek synergistic synergistic /syn·er·gis·tic/ (sin?er-jis´tik) 1. acting together. 2. enhancing the effect of another force or agent. syn·er·gis·tic adj. 1. growth opportunities through joint venture, alliances, collaborative col·lab·o·rate intr.v. col·lab·o·rat·ed, col·lab·o·rat·ing, col·lab·o·rates 1. To work together, especially in a joint intellectual effort. 2. 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. Factors which 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 result in actual results varying 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
(Unaudited)
Three Months Nine Months
Ended Ended
September 30 September 30
--------------- ---------------
2003 2002 2003 2002
------- ------- ------- -------
(millions of dollars except per
share data)
--------------------------------
Net sales $ 123.3 $ 115.2 $ 334.3 $ 327.0
Cost of goods sold (66.9) (67.2) (188.4) (181.9)
------- ------- ------- -------
Gross profit 56.4 48.0 145.9 145.1
Operating expenses
Selling, general and admin. (19.3) (15.8) (52.9) (47.5)
Research and development (1.2) (1.4) (3.8) (4.3)
Restructuring charge (2.3) (3.1) (10.5) (3.1)
Amortization of intangible assets (2.6) (2.4) (7.7) (6.7)
------- ------- ------- -------
(25.4) (22.7) (74.9) (61.6)
------- ------- ------- -------
Operating income 31.0 25.3 71.0 83.5
Interest expense (net) (3.9) (1.9) (8.4) (10.2)
Other net income / (expenses) 0.6 0.8 (1.6) (0.7)
------- ------- ------- -------
Income before income taxes and
minority interest 27.7 24.2 61.0 72.6
Minority interest (0.9) (0.5) (2.6) (2.1)
--------------------------------
Income before income taxes 26.8 23.7 58.4 70.5
Income taxes (8.7) (5.4) (17.5) (16.2)
------- ------- ------- -------
Income from continuing operations 18.1 18.3 40.9 54.3
Share of affiliated company earnings 0.3 - 0.9 -
Discontinued operations - - (3.4) 0.1
Cumulative effect of change in
accounting principle - - 0.5 -
---------------- ---------------
--------------------------------
Net income $ 18.4 $ 18.3 $ 38.9 $ 54.4
======= ======= ======= =======
Earnings per share
Basic $ 1.54 $ 1.54 $ 3.27 $ 4.60
Diluted $ 1.47 $ 1.44 $ 3.11 $ 4.32
Weighted average shares
Basic 11,942 11,851 11,903 11,809
outstanding (in thousands)
Diluted 12,559 12,651 12,505 12,587
ANALYSIS OF BUSINESS UNIT RESULTS
2003 2002 2003 2002
------ ------ ------ ------
(millions of dollars)
----------------------------
Net sales
TEL - Ongoing $ 76.4 $ 66.3 $192.4 $188.8
TEL - Chlorine - 3.4 - 10.9
------ ------ ------ ------
76.4 69.7 192.4 199.7
Specialty Chemicals 46.9 45.5 141.9 127.3
------ ------ ------ ------
Total 123.3 115.2 334.3 327.0
------ ------ ------ ------
Gross Profit
TEL - Ongoing 40.5 34.3 99.1 102.2
TEL - Chlorine - (0.5) - (0.8)
------ ------ ------ ------
40.5 33.8 99.1 101.4
Specialty Chemicals 15.9 14.2 46.8 43.7
------ ------ ------ ------
Total 56.4 48.0 145.9 145.1
------ ------ ------ ------
Operating income
TEL - Ongoing 35.0 29.8 83.5 89.5
TEL - Chlorine - (0.5) - (0.8)
------ ------ ------ ------
35.0 29.3 83.5 88.7
Specialty Chemicals 3.7 2.9 9.0 8.3
Corporate (5.4) (3.8) (11.0) (10.4)
Restructuring (2.3) (3.1) (10.5) (3.1)
------ ------ ------ ------
Total $ 31.0 $ 25.3 $ 71.0 $ 83.5
------ ------ ------ ------
Schedule 2
OCTEL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30 December 31
2003 2002
(Unaudited)
-------------- ------------
Assets (millions of dollars)
Current assets
Cash and cash equivalents $ 44.1 $ 26.7
Accounts receivable, less allowance 67.9 80.7
of $2.3 (2002 - $3.1)
Other receivable - Veritel - 3.2
Inventories
Finished goods 35.7 25.3
Raw materials and work-in-progress 18.8 30.4
------------- -----------
Total inventories 54.5 55.7
Prepaid expenses 6.3 5.5
------------- -----------
Total current assets 172.8 171.8
Property, plant and equipment 94.2 88.9
Less accumulated depreciation (45.2) (32.1)
------------- -----------
Net property, plant and equipment 49.0 56.8
Goodwill 351.5 352.8
Intangible assets 45.3 50.9
Prepaid pension cost 115.6 105.2
Deferred finance costs 2.2 4.4
Other assets 7.8 5.9
------------- -----------
$ 744.2 $ 747.8
============= ===========
Liabilities and Stockholders' Equity
Current liabilities
Bank overdraft $ 0.5 $ 4.0
Accounts payable 45.8 55.2
Other payable - Veritel - 10.0
Accrued liabilities 43.0 45.9
Accrued income taxes 12.4 13.7
Current portion of plant closure
provisions 10.4 -
Current portion of deferred income 2.0 2.0
Current portion of long-term debt 56.8 56.8
------------- -----------
Total current liabilities 170.9 187.6
Plant closure provisions 26.5 36.4
Deferred income taxes 41.2 41.7
Deferred income 6.9 8.4
Long-term debt 75.2 102.4
Other liabilities 2.1 4.2
Minority interest 5.7 4.6
Stockholders' Equity
Common stock, $0.01 par value 0.1 0.1
Additional paid-in capital 276.8 276.7
Treasury stock (33.6) (34.5)
Retained earnings 196.2 157.9
Accumulated other comprehensive income (23.8) (37.7)
------------- -----------
Total stockholders' equity 415.7 362.5
------------- -----------
$ 744.2 $ 747.8
============= ===========
Schedule 3
OCTEL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30
--------------------
2003 2002
--------- --------
(millions of dollars)
Cash Flows from Operating Activities
Net income $ 38.9 $ 54.4
Adjustments to reconcile net income to cash
provided by
operating activities:
Depreciation and amortization 17.5 19.8
Deferred income taxes 0.3 2.6
Other 2.7 1.6
Unremitted earnings of affiliated companies (0.9)
Changes in operating assets and liabilities:
Accounts receivable and prepaid
expenses 16.8 41.0
Inventories 2.9 (0.8)
Accounts payable and accrued
liabilities (11.5) (16.0)
Income taxes and other current
liabilities (1.5) 0.7
Other non-current assets and liabilities (9.2) (19.0)
--------- --------
Net cash provided by operating activities 56.0 84.3
Cash Flows from Investing Activities
Capital expenditures (3.3) (8.2)
Business combinations, net of cash acquired (5.8) (5.0)
Veritel (6.8) (17.2)
Other 1.8 (0.7)
--------- --------
Net cash used in investing activities (14.1) (31.1)
Cash Flows from Financing Activities
Repayment of long-term borrowings (24.4) (63.2)
Net Decrease in short-term borrowings (3.4) 1.4
Dividends paid (0.6) (0.6)
Issue of treasury stock 1.4
Repurchase of common stock (1.0) 0.2
Minority interest 0.9 (0.7)
Other (0.2)
--------- --------
Net cash used in financing activities (27.3) (62.9)
Effect of exchange rate changes on cash 2.8 (2.3)
--------- --------
Net change in cash and cash equivalents 17.4 (12.0)
Cash and cash equivalents at beginning of period 26.7 43.0
--------- --------
Cash and cash equivalents at end of period $ 44.1 $ 31.0
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