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8-K - FORM 8-K - LUBRIZOL CORP | l42517e8vk.htm |
Exhibit 99.1
The Lubrizol Corporation
29400 Lakeland Boulevard, Wickliffe, Ohio 44092-2298
29400 Lakeland Boulevard, Wickliffe, Ohio 44092-2298
News Release
FOR RELEASE:
|
Immediately | |||
FROM:
|
Financial/Investor Contact | Media Contact | ||
Mark Sutherland | Julie Young | |||
440/347-1206 | 440/347-4432 | |||
Web Site: www.lubrizol.com |
Lubrizol Announces Earnings of $2.57 per Share
for the First Quarter of 2011
for the First Quarter of 2011
| First quarter revenues increased to $1.52 billion | ||
| Adjusted earnings increased to $2.71 per share, excluding merger-related and restructuring costs of $.14 per share | ||
| Dividends of $.36 per share to be paid to shareholders of record at the close of business on May 10 |
CLEVELAND, April 27, 2011 The Lubrizol Corporation (NYSE: LZ) announced that consolidated
earnings for the first quarter ended March 31, 2011, were $169.5 million, or $2.57 per diluted
share, including $9.1 million, or $.14 per diluted share, of after-tax special charges primarily
related to the pending Berkshire Hathaway acquisition of Lubrizol. Comparable earnings for the
first quarter of 2010 were $162.3 million, or $2.32 per diluted share, which included after-tax
restructuring charges of $.6 million, or $.01 per diluted share, primarily related to restructuring
initiatives in the Advanced Materials segment.
First Quarter Consolidated Results
Consolidated revenues for the first quarter increased to $1.52 billion compared with $1.32 billion
in the first quarter of 2010. This increase largely was due to an improvement in the combination
of price and product mix and higher volume. The impact of currency was negligible for the quarter.
Excluding the special charges in both periods, adjusted earnings were $178.6 million, or $2.71 per
diluted share, for the first quarter of 2011 compared with $162.9 million, or $2.33 per diluted
share, for the first quarter of 2010.
Compared with the prior-year first quarter, the increase in adjusted earnings per share largely was
attributable to improvement in the combination of price and product mix, higher volumes,
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the favorable impact of fewer shares outstanding and a lower effective tax rate. These favorable
factors to earnings more than offset the impact of higher raw material costs, higher manufacturing
costs associated with the increased volumes and higher selling, testing, administrative and
research (STAR) expenses.
Cash flow from operations was $82 million for the first three months of 2011 compared with $99
million in the year-earlier period. The year-over-year decrease in cash provided by operating
activities primarily was attributable to the funding of the companys U.S. pension plan in the
first quarter of 2011, slightly offset by increased earnings. Capital expenditures in the first
quarter of 2011 were approximately $59 million compared with $30 million in the first quarter of
2010. The companys cash balance at March 31, 2011, decreased to $755 million compared with $896
million at December 31, 2010, primarily due to the acquisition of the Nalco personal care and
household care business for $164 million. The company did not repurchase any shares during the
first quarter of 2011.
Lubrizol Additives Segment Results
Revenues for the Additives segment increased to $1.08 billion compared with $.95 billion in the
prior-year period. The increase in revenues was due to an improvement in the combination of price
and product mix and higher volume. Currency had a negligible impact on revenues.
Rising costs for crude, feedstocks and other commodities have continued to affect the chemical
industry. Average raw material cost for the segment increased 15 percent in the first quarter 2011
compared with the first quarter of 2010, marking the seventh consecutive quarter of sequential
increases. In response to escalating raw material costs, the segment announced its second price
increase of 2011 at the end of March with initial implementation on May 1. The segments first
price increase of 2011 was announced in February and largely implemented by the end of the quarter.
Additives segment operating income in the quarter was $260 million and segment operating margin was
24.0 percent, which is on track with the companys 2013 operating margin target range for Additives
of 24 to 26 percent.
Lubrizol Advanced Materials Segment Results
Revenues in the Advanced Materials segment for the quarter increased to $436 million compared with
$368 million in the first quarter of 2010 due to higher volume and improvement in the combination
of price and product mix. Currency had a negligible impact on revenues. Excluding the Nalco
personal care and household care acquisition, revenues increased 17 percent compared with the
year-earlier period.
The Advanced Materials segment experienced 16 percent higher raw material costs compared with the
first quarter of 2010. All product lines have implemented price increases to recapture escalating
raw material costs.
Segment operating income in the first quarter was $71 million. Advanced Materials operating
margin in the quarter was 16.3 percent, which is on track with the companys 2013 operating margin
target range for this segment of 15 to 17 percent.
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Updates to Guidance Assumptions
The company maintained its outlook for full-year net income that was issued on February 2,
excluding merger-related and restructuring costs.
Costs for petrochemical-derived raw materials are expected to continue to increase and both
segments will take appropriate action to recover these escalating costs.
The volume forecast for the Additives segment remains unchanged despite the announced
reductions in automotive vehicle assembly activity resulting from the impact of the Japanese
earthquake and tsunami on that countrys industrial infrastructure.
The Advanced Materials segment also is maintaining its full-year volume outlook.
Lubrizol will not conduct a conference call with analysts or investors to discuss these quarterly
results due to the pending acquisition by Berkshire Hathaway. The company expects to file its Form
10-Q with the SEC by Friday, May 6, 2011.
Dividend Announced
As announced on April 26, the board of directors declared a regular dividend of 36 cents per share
payable June 10, 2011, to shareholders of record at the close of business on May 10, 2011. The
company believes this will be the last regular dividend paid to shareholders given the pending
acquisition of Lubrizol by Berkshire Hathaway, which currently is projected to close in the third
quarter of 2011.
About The Lubrizol Corporation
The Lubrizol Corporation (NYSE: LZ) is an innovative specialty chemical company that produces and
supplies technologies to customers in the global transportation, industrial and consumer markets.
These technologies include lubricant additives for engine oils, other transportation-related fluids
and industrial lubricants, as well as fuel additives for gasoline and diesel fuel. In addition,
Lubrizol makes ingredients and additives for personal care products and pharmaceuticals; specialty
materials, including plastics technology and performance coatings in the form of specialty resins
and additives. Lubrizols industry-leading technologies in additives, ingredients and compounds
enhance the quality, performance and value of customers products, while reducing their
environmental impact.
With headquarters in Wickliffe, Ohio, The Lubrizol Corporation owns and operates manufacturing
facilities in 17 countries, as well as sales and technical offices around the world. Founded in
1928, Lubrizol has approximately 7,000 employees worldwide. Revenues for 2010 were $5.4 billion.
For more information, visit www.lubrizol.com.
Forward-Looking Statements
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This 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 Lubrizols operations and business environment that are difficult to predict and may be
beyond the control of Lubrizol. Such uncertainties and factors may cause actual results to differ
materially from those expressed or implied by forward-looking statements. Uncertainties and risk
factors that could affect the future performance of Lubrizol and cause results to differ from the
forward-looking statements in this release include, but are not limited to, Lubrizols ability to
manage margins in an environment of volatile raw material costs; conditions affecting Lubrizols
customers, suppliers and the industries that it serves; competitors responses to Lubrizols
products; changes in accounting, tax or regulatory practices or requirements; other factors that
are set forth in managements discussion and analysis of Lubrizols most recently filed reports
with the Securities and Exchange Commission; and uncertainties associated with the proposed
acquisition of Lubrizol by Berkshire Hathaway, including uncertainties relating to the anticipated
timing of filings and approvals relating to the transaction, the expected timing of completion of
the transaction and the ability to complete the transaction. The forward-looking statements
contained herein represent Lubrizols judgment as of the date of this release and Lubrizol cautions
readers not to place undue reliance on such statements. Lubrizol assumes no obligations to update
the forward-looking statements contained in this release.
Participants in the Solicitation
The company, its directors and officers, and its proxy solicitor, Innisfree M&A Incorporated, may
be deemed to be participants in the solicitation of proxies from the companys shareholders with
respect to the special meeting of shareholders that will be held to consider the proposed
transaction. Information about the companys directors and executive officers and their ownership
of the companys common stock is set forth in its Form 10-K which was filed with the SEC on
February 25, 2011 and the proxy statement for the companys Annual Meeting of shareholders, which
was filed with the SEC on March 17, 2010. Shareholders may obtain additional information regarding
the interests of the company and its directors and executive officers in the proposed transaction,
which may be different than those of the companys shareholders generally, by reading the
preliminary proxy statement filed with the SEC on March 25, 2011, and amended on April 11, 2011,
the definitive proxy statement (when available) and other relevant documents regarding the proposed
transaction, when filed with the SEC.
Additional Information
In connection with the proposed transaction, the company filed a preliminary proxy statement
with the SEC. INVESTORS ARE URGED TO READ THE PRELIMINARY PROXY STATEMENT AND, WHEN AVAILABLE,
THE DEFINITIVE PROXY STATEMENT, BECAUSE THESE DOCUMENTS CONTAIN, IMPORTANT INFORMATION ABOUT
THE PROPOSED TRANSACTION AND THE COMPANY. You can obtain the preliminary proxy statement, the
definitive proxy statement (when available) as well as other filings containing information
about the company, free of charge, at the website maintained by the SEC at www.sec.gov. Copies
of the preliminary proxy statement, the definitive proxy statement (when available) and other
filings made by the company with the SEC can also be obtained, free of charge, by directing a
request to The Lubrizol Corporation, 29400 Lakeland Boulevard, Wickliffe, Ohio 44092-2298,
attention: Corporate Secretary.
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more
THE LUBRIZOL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In Millions Except Per Share Data)
(In Millions Except Per Share Data)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Revenues |
$ | 1,518.9 | $ | 1,315.5 | ||||
Cost of sales |
1,036.7 | 864.8 | ||||||
Gross profit |
482.2 | 450.7 | ||||||
Selling and administrative expenses |
132.7 | 122.9 | ||||||
Research, testing and development expenses |
53.8 | 52.8 | ||||||
Amortization of intangible assets |
6.8 | 6.3 | ||||||
Berkshire Hathaway merger-related costs |
9.9 | | ||||||
Restructuring (credits) charges |
(0.6 | ) | 0.9 | |||||
Other expense (income) net |
0.9 | (8.1 | ) | |||||
Interest expense net |
23.6 | 23.5 | ||||||
Income before income taxes |
255.1 | 252.4 | ||||||
Provision for income taxes |
81.2 | 85.4 | ||||||
Net income |
173.9 | 167.0 | ||||||
Net income attributable to noncontrolling interests |
4.4 | 4.7 | ||||||
Net income attributable to The Lubrizol Corporation |
$ | 169.5 | $ | 162.3 | ||||
Earnings per share attributable to
The Lubrizol Corporation: |
||||||||
Basic |
$ | 2.63 | $ | 2.37 | ||||
Diluted |
$ | 2.57 | $ | 2.32 | ||||
Weighted-average common shares outstanding: |
||||||||
Basic |
64.4 | 68.6 | ||||||
Diluted |
66.0 | 69.8 | ||||||
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THE LUBRIZOL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Millions of Dollars)
(In Millions of Dollars)
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Assets |
||||||||
Cash and cash equivalents |
$ | 755.2 | $ | 896.2 | ||||
Receivables |
873.8 | 723.5 | ||||||
Inventories |
835.5 | 821.8 | ||||||
Other current assets |
118.6 | 108.6 | ||||||
Total current assets |
2,583.1 | 2,550.1 | ||||||
Property arid equipment net |
1,222.3 | 1,183.5 | ||||||
Goodwill and intangible assets net |
1,245.3 | 1,065.0 | ||||||
Other assets |
166.7 | 168.4 | ||||||
Total |
$ | 5,217.4 | $ | 4,967.0 | ||||
Liabilities and Equity |
||||||||
Current portion of long-term debt |
$ | 0.4 | $ | 0.4 | ||||
Accounts payable |
434.5 | 369.2 | ||||||
Accrued expenses and other current liabilities |
291.0 | 351.3 | ||||||
Total current liabilities |
725.9 | 720.9 | ||||||
Long-term debt |
1,350.1 | 1,351.6 | ||||||
Other noncurrent liabilities |
613.9 | 613.8 | ||||||
Total liabilities |
2,689.9 | 2,686.3 | ||||||
Redeemable stock-based awards |
9.4 | 9.6 | ||||||
Total equity |
2,518.1 | 2,271.1 | ||||||
Total |
$ | 5,217.4 | $ | 4,967.0 | ||||
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THE LUBRIZOL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions of Dollars)
(In Millions of Dollars)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Cash provided by (used for): |
||||||||
Operating activities: |
||||||||
Net income |
$ | 173.9 | $ | 167.0 | ||||
Adjustments to reconcile net income to cash
provided by operating activities: |
||||||||
Depreciation and amortization |
41.8 | 42.7 | ||||||
Deferred income taxes |
2.7 | 7.8 | ||||||
Stock-based compensation |
4.1 | 3.9 | ||||||
Net change in working capital |
(128.7 | ) | (130.5 | ) | ||||
Other items net |
(11.6 | ) | 8.1 | |||||
Total operating activities |
82.2 | 99.0 | ||||||
Investing activities: |
||||||||
Capital expenditures |
(59.0 | ) | (30.4 | ) | ||||
Acquisitions |
(164.2 | ) | (2.5 | ) | ||||
Other items net |
4.8 | 3.5 | ||||||
Total investing activities |
(218.4 | ) | (29.4 | ) | ||||
Financing activities: |
||||||||
Dividends paid |
(23.1 | ) | (21.2 | ) | ||||
Common shares purchased |
| (60.2 | ) | |||||
Repayments of long-term debt |
| (45.8 | ) | |||||
Other items net |
3.4 | 22.4 | ||||||
Total financing activities |
(19.7 | ) | (104.8 | ) | ||||
Effect of exchange rate changes on cash |
14.9 | (13.7 | ) | |||||
Net decrease in cash and cash equivalents |
(141.0 | ) | (48.9 | ) | ||||
Cash and cash equivalents at the beginning of period |
896.2 | 991.0 | ||||||
Cash and cash equivalents at the end of period |
$ | 755.2 | $ | 942.1 | ||||
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THE LUBRIZOL CORPORATION
SEGMENT INFORMATION
(In Millions of Dollars)
(In Millions of Dollars)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Revenues from external customers: |
||||||||
Lubrizol Additives |
$ | 1,083.4 | $ | 948.0 | ||||
Lubrizol Advanced Materials |
435.5 | 367.5 | ||||||
Total revenues |
$ | 1,518.9 | $ | 1,315.5 | ||||
Segment operating income: |
||||||||
Lubrizol Additives |
$ | 259.9 | $ | 246.4 | ||||
Lubrizol Advanced Materials |
71.1 | 60.6 | ||||||
Total segment operating income |
331.0 | 307.0 | ||||||
Corporate expenses |
(38.2 | ) | (35.5 | ) | ||||
Corporate other (expense) income net |
(4.8 | ) | 5.3 | |||||
Berkshire Hathaway merger-related costs |
(9.9 | ) | | |||||
Restructuring credits (charges) |
0.6 | (0.9 | ) | |||||
Interest expense net |
(23.6 | ) | (23.5 | ) | ||||
Income before income taxes |
$ | 255.1 | $ | 252.4 | ||||
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THE LUBRIZOL CORPORATION
Supplemental Financial Information
For the Three Months Ended March 31, 2011 and 2010
Reconciliation of Earnings to Earnings As Adjusted
(In Millions of Dollars, Except Per Share Data)
For the Three Months Ended March 31, 2011 and 2010
Reconciliation of Earnings to Earnings As Adjusted
(In Millions of Dollars, Except Per Share Data)
Earnings as adjusted (Non-GAAP) is a measure of income that differs from earnings measured in
accordance with generally accepted accounting principles (GAAP). Earnings as adjusted may not be
comparable with similarly titled measures used by other companies and should not be considered
in isolation or as a substitute for measures of income in accordance with GAAP, as non-GAAP
measures have limitations in that they do not reflect all of the amounts associated with our
results of operations. We believe that earnings as adjusted for the exclusion of Berkshire
Hathaway merger-related costs and restructuring (credits) charges assists the investor in
evaluating the results of our core operating activities and provides greater comparability with
historical results where such charges may be materially different. We use earnings as adjusted
to measure and evaluate performance and to determine, in part, incentive compensation. We
believe that the presentation of both GAAP and non-GAAP measures may assist investors in
comparing our performance with that of peer companies presenting a similar non-GAAP
measure.
Three Months Ended | Three Months Ended | |||||||||||||||||||||||
March 31, 2011 | March 31, 2010 | |||||||||||||||||||||||
Income | Net Income | Income | Net Income | |||||||||||||||||||||
Before | Attributable | Diluted | Before | Attributable | Diluted | |||||||||||||||||||
Tax | to Lubrizol | EPS | Tax | to Lubrizol | EPS | |||||||||||||||||||
Earnings |
$ | 255.1 | $ | 169.5 | $ | 2.57 | $ | 252.4 | $ | 162.3 | $ | 2.32 | ||||||||||||
Adjustments: |
||||||||||||||||||||||||
Berkshire Hathaway merger-related costs |
9.9 | 9.5 | 0.15 | | | | ||||||||||||||||||
Restructuring (credits) charges |
(0.6 | ) | (0.4 | ) | (0.01 | ) | 0.9 | 0.6 | 0.01 | |||||||||||||||
Earnings as adjusted (Non-GAAP) |
$ | 264.4 | $ | 178.6 | $ | 2.71 | $ | 253.3 | $ | 162.9 | $ | 2.33 | ||||||||||||
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THE LUBRIZOL CORPORATION
Supplemental Financial Information
For the Three Months Ended March 31, 2011 and 2010
For the Three Months Ended March 31, 2011 and 2010
Reconciliation of Net Income Attributable to The Lubrizol Corporation to
Earnings Before Interest and Taxes (EBIT), and Before Berkshire Hathaway
Merger-Related Costs and Restructuring (Credits) Charges (Adjusted EBIT)
(In Millions of Dollars)
Earnings Before Interest and Taxes (EBIT), and Before Berkshire Hathaway
Merger-Related Costs and Restructuring (Credits) Charges (Adjusted EBIT)
(In Millions of Dollars)
Earnings before interest and taxes (EBIT) (Non-GAAP) and earnings before interest, taxes,
Berkshire Hathaway merger-related costs and restructuring (credits) charges (Adjusted EBIT)
(Non-GAAP) are measures of income that differ from net income attributable to The Lubrizol
Corporation measured in accordance with generally accepted accounting principles (GAAP). EBIT
and Adjusted EBIT may not be comparable with similarly titled measures used by other companies
and should not be considered in isolation or as a substitute for measures of income in
accordance with GAAP. EBIT is defined as net income attributable to The Lubrizol Corporation
per our consolidated results, adjusted for interest expense net and the provision for income
taxes. EBIT is further adjusted for Berkshire Hathaway merger-related costs and restructuring
(credits) charges to derive Adjusted EBIT. We believe that net income attributable to The
Lubrizol Corporation, EBIT and Adjusted EBIT assist the investor in understanding the results
of operations of The Lubrizol Corporation and may assist investors in comparing our performance
with that of peer companies presenting similar non-GAAP measures. In addition, we evaluate
results using net income attributable to The Lubrizol Corporation, EBIT and Adjusted EBIT.
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Net income attributable to The Lubrizol Corporation |
$ | 169.5 | $ | 162.3 | ||||
Add back: |
||||||||
Interest expense net |
23.6 | 23.5 | ||||||
Provision for income taxes |
81.2 | 85.4 | ||||||
Earnings before interest and taxes (EBIT) |
274.3 | 271.2 | ||||||
Berkshire Hathaway merger-related costs |
9.9 | | ||||||
Restructuring (credits) charges |
(0.6 | ) | 0.9 | |||||
Earnings before interest, taxes, Berkshire Hathaway merger-related
costs and restructuring (credits) charges (Adjusted EBIT) |
$ | 283.6 | $ | 272.1 | ||||
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