Engelhard Reports First-Quarter Results

    Business Editors

    ISELIN, N.J.--(BUSINESS WIRE)--April 27, 2005--Engelhard Corporation (NYSE: EC) today reported net earnings for the first quarter ended March 31 of $58.0 million, or 47 cents per share, compared with $50.3 million, or 40 cents per share, for the same period in 2004.
    During the first quarter, Engelhard and the U.S. Internal Revenue Service reached agreement with respect to the company's tax return for the year 2001. The agreement resulted in reversal of previously accrued income taxes totaling $2.7 million, improving results by two cents per share.
    First-quarter revenues were $1.0 billion, approximately even with the prior-year period.
    "Improved pricing coupled with an intense focus on productivity delivered solid growth in operating earnings and margin expansion in our technology segments," said Barry W. Perry, chairman and chief executive officer. "A balanced approach of driving growth and managing the business mix across our enterprise enabled us to deliver ongoing earnings results slightly ahead of expectations."

    First-Quarter Operating Results

    Operating earnings from Environmental Technologies were $36 million, a decline of 1% following a 24% increase in the first quarter of last year. Revenues rose 1% to $241 million. Unfavorable volume and mix in light-duty vehicles was partially offset by performance in other served markets and improved productivity.
    Operating earnings from Process Technologies increased 17% to $19 million. Revenues rose 12% to $148 million. Improved performance from chemical-process markets combined with continued demand for new additives technology for petroleum refining to deliver improved margins and solid earnings growth.
    Operating earnings from Appearance and Performance Technologies increased 20% to $18 million. Revenues rose 5% to $174 million. Earnings growth and improved margins resulted from better performance in several specialty markets and the accretive impact of last year's acquisition in cosmetics and personal care.
    Operating earnings from Materials Services were $4 million, an increase of $1 million versus a year ago. Revenues were $450 million, compared with $491 million in last year's first quarter.
    Earnings from equity investments were $8 million in the first quarter compared with $5 million a year ago. The company's Asian joint ventures continued to deliver solid performance.
    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 30 of Engelhard's 2004 Form 10-K, dated March 11, 2005.

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

Three Months Ended March 31, ----------------------- 2005 2004 ----------- ----------- Net sales $1,026,670 $1,040,032 Cost of sales 858,176 880,676 ----------- ----------- Gross profit 168,494 159,356 Selling, administrative and other expenses 99,068 94,849 ----------- ----------- Operating earnings 69,426 64,507 Equity in earnings of affiliates 8,109 4,939 Gain on investment 119 - Interest expense, net (4,780) (4,906) ----------- ----------- Earnings before income taxes 72,874 64,540 Income tax expense 14,922 14,199 ----------- -----------

Net earnings $57,952 $50,341 =========== =========== ----------- ----------- Earnings per share - basic $0.48 $0.41 =========== =========== ----------- ----------- Earnings per share - diluted $0.47 $0.40 =========== =========== ----------- ----------- Cash dividends paid per share $0.12 $0.11 =========== ===========

Average number of shares outstanding - basic 121,702 124,157 =========== ===========

Average number of shares outstanding - diluted 123,905 126,468 =========== ===========

Actual number of shares outstanding at end of period 121,161 123,995 =========== ===========

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 March 31, ----------------- Pro forma information (in thousands, except per- share data) 2005 2004 ------------------------------------------------- -------- -------- Net earnings - as reported $57,952 $50,341 Net earnings - pro forma 55,674 47,521 Diluted earnings per share - as reported 0.47 0.40 Diluted earnings per share - pro forma 0.45 0.38

ENGELHARD CORPORATION BUSINESS SEGMENT INFORMATION (Thousands) (Unaudited)

Three Months Ended March 31, ----------------------- 2005 2004 Change ----------- ----------- ------ Net Sales Environmental Technologies $241,361 $238,437 1% Process Technologies 147,981 132,219 12% Appearance and Performance Technologies 173,875 166,293 5% ----------- ----------- Technology segments 563,217 536,949 5% Materials Services 450,481 491,099 -8% All Other 12,972 11,984 8% ----------- ----------- Total net sales $1,026,670 $1,040,032 -1% =========== =========== Operating Earnings Environmental Technologies $36,500 $36,989 -1% Process Technologies 19,057 16,296 17% Appearance and Performance Technologies 18,063 15,051 20% ----------- ----------- Technology segments 73,620 68,336 8% Materials Services 4,393 3,367 30% All Other (8,587) (7,196) 19% ----------- ----------- Total operating earnings 69,426 64,507 8% Equity in earnings of affiliates 8,109 4,939 64% Gain on investment 119 - Interest expense, net (4,780) (4,906) -3% ----------- ----------- Earnings before income taxes 72,874 64,540 13% Income tax expense 14,922 14,199 5% ----------- -----------

Net earnings $57,952 $50,341 15% =========== ===========

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

March December 31, 2005 31, 2004 ----------- ----------- Cash $52,662 $126,229 Receivables, net 456,472 410,382 Committed metal positions 390,657 457,570 Inventories 469,473 459,637 Other current assets 142,711 135,631 ----------- ----------- Total current assets 1,511,975 1,589,449 Investments 200,932 179,160 Property, plant and equipment, net 902,027 911,029 Goodwill 389,904 330,798 Other intangible and noncurrent assets 160,228 168,156 ----------- ----------- Total assets $3,165,066 $3,178,592 =========== ===========

Short-term borrowings $46,574 $12,025 Accounts payable 334,271 375,890 Hedged metal obligations 292,258 292,880 Other current liabilities 245,296 248,872 ----------- ----------- Total current liabilities 918,399 929,667 Long-term debt 490,186 513,680 Other noncurrent liabilities 328,660 320,933 Shareholders' equity 1,427,821 1,414,312 ----------- ----------- Total liabilities and shareholders' equity $3,165,066 $3,178,592 =========== ===========

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

Three Months Ended March 31, ----------------------- 2005 2004 ---------- ---------- Cash flows from operating activities Net earnings $57,952 $50,341 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and depletion 31,368 31,016 Amortization of intangible assets 1,117 933 Equity results, net of dividends (5,050) (3,418) Net change in assets and liabilities: Materials Services related (14,662) (11,700) All other (29,101) (23,173) ---------- ---------- Net cash provided by operating activities 41,624 43,999 ---------- ----------

Cash flows from investing activities Capital expenditures (24,967) (21,918) Proceeds from investments - 1,988 Acquisitions and other investments (55,084) - ---------- ---------- Net cash used in investing activities (80,051) (19,930) ---------- ----------

Cash flows from financing activities Increase (decrease) in short-term borrowings 20,532 (22,579) Proceeds from long-term debt 69 7,720 Purchase of treasury stock (46,016) (39,669) Cash from exercise of stock options 2,709 7,264 Dividends paid (14,636) (13,670) ---------- ---------- Net cash used in financing activities (37,342) (60,934) Effect of exchange rate changes on cash 2,202 (186) ---------- ---------- Net decrease in cash (73,567) (37,051) Cash at beginning of year 126,229 87,889 ---------- ---------- Cash at end of period $52,662 $50,838 ========== ==========

--30--KL/ny*

CONTACT: Engelhard Corporation Media: Ted Lowen, 732-205-6360 or Investor Relations: Gavin A. Bell, 732-205-6313

KEYWORD: NEW JERSEY INDUSTRY KEYWORD: CHEMICALS/PLASTICS ENVIRONMENT MANUFACTURING EARNINGS SOURCE: Engelhard Corporation

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