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Lubrizol Announces Fourth Quarter and Full Year 2008 Results

Published on 2009-02-06. Author : SpecialChem

The Lubrizol Corporation announced a consolidated loss for the fourth quarter ended December 31, 2008 of $243 million, or $3.59 per diluted share, including pre-tax restructuring and estimated impairment charges of $331 million, or $4.30 per diluted share, and a write-off of acquired in- process research and development for $1.6 million, or $.01 per diluted share. The restructuring and impairment charges consisted primarily of a $325 million preliminary non-cash goodwill impairment charge related to the company's Performance Coatings and Engineered Polymers product lines as announced on January 16, 2009. Comparable earnings for the fourth quarter of 2007 were $59.7 million, or $.86 per diluted share, which included pre-tax restructuring and impairment charges of $0.9 million, or $.01 per diluted share.

Fourth Quarter Consolidated Results

Consolidated revenues for the fourth quarter decreased 5 percent to $1.09 billion compared with $1.15 billion in the fourth quarter of 2007. The year- over-year decrease in revenues was attributable to lower volume and unfavorable currency that more than offset improvement in the combination of price and product mix. Included in these factors was the incremental impact from the refrigeration lubricants acquisition completed in November 2007, which had a small contribution to consolidated revenues in the fourth quarter of 2008.

Excluding the special charges in both periods, adjusted earnings were $50.0 million, or $.74 per diluted share, for the fourth quarter of 2008 compared with $60.3 million, or $.87 per diluted share, for the fourth quarter of 2007.

Commenting on the results, CEO James Hambrick stated, "As we advised in our earnings guidance issued last month, both of Lubrizol's operating segments experienced significant and sudden declines in volume at year end due to the weak global economy and inventory reductions by some of our customers. Nevertheless, I am pleased with our accomplishments in 2008, particularly our ability to successfully manage through a period of unprecedented material cost volatility."

Lower volume was the most significant factor in the 15 percent decrease in adjusted earnings per share for the fourth quarter of 2008 compared with the prior-year quarter. Other negative factors were higher raw material costs and unfavorable currency impact. The unfavorable factors to earnings offset improvement in the combination of price and product mix, reduced selling, technical, administrative and research (STAR) expenses and lower manufacturing costs.

Fourth Quarter Segment Results

In the fourth quarter of 2008, Lubrizol Additives segment revenues of $789 million were 1 percent higher than the fourth quarter of 2007. Compared with the year-earlier quarter, the increase in revenues was attributable to improvement in the combination of price and product mix, which offset a volume decrease and an unfavorable currency impact. The incremental impact from the 2007 refrigeration lubricants acquisition had a small contribution to segment revenues in the fourth quarter of 2008. The decrease in volume largely was equivalent across all geographic regions and was attributable to economic weakness as well as inventory destocking. Compared with the prior-year quarter, Lubrizol Additives segment operating income increased to $93 million in the fourth quarter of 2008 reflecting positive contributions from the improvement in the combination of price and product mix and lower STAR expenses. These positive factors partially were offset by lower volume and higher unit raw material and operating costs.

The Lubrizol Advanced Materials segment reported revenues of $298 million in the fourth quarter of 2008, a decrease of 18 percent compared with the prior-year results, as lower volumes and unfavorable currency more than offset the improvement in the combination of price and product mix. All product lines in the segment experienced double-digit volume declines, particularly in North America, as this segment also was impacted significantly by weak product demand and some inventory destocking. The Lubrizol Advanced Materials segment recorded an operating loss of $1.5 million in the fourth quarter of 2008 compared with operating income of $21 million in the fourth quarter of 2007. This year-over-year decrease in operating income primarily was due to the lower volume and higher raw material costs. These factors offset improvement in the combination of price and product mix and lower STAR expenses.

Consolidated 2008 Results

For the full year of 2008, consolidated revenues increased 12 percent to a record $5.03 billion compared with $4.50 billion for the full year of 2007. Consolidated loss for the full year of 2008 was $28 million, or $.41 per diluted share, including preliminary pre-tax restructuring and impairment charges of $356 million, or $4.48 per diluted share, and a $1.6 million, or $.01 per diluted share, write-off for in-process research and development (IPR&D) that accompanied the thermoplastic polyurethane business acquisition that closed on December 31, 2008. Earnings for the full year of 2007 were $283 million, or $4.05 per diluted share, including pre-tax restructuring and impairment charges of $1.5 million, or $.01 per diluted share. Excluding the restructuring and impairment charges from the respective periods and the IPR&D write-off, earnings of $4.09 per diluted share increased 1 percent in 2008 compared with $4.06 per diluted share for the full year of 2007.

Included in the full-year restructuring and impairment charges for 2008 is a preliminary estimate of goodwill impairment. As the company indicated in the January 16, 2009 earnings guidance announcement, this estimate of $325 million in goodwill impairment will be refined prior to the filing of the company's 2008 Form 10-K after valuation procedures have been completed.

Financing Activities

On January 27, 2009, the company completed the issuance of $500 million of 8.875% senior notes due February 1, 2019. Proceeds from the offering will be used to retire at maturity $382 million of notes due October 1, 2009 and for general corporate purposes. On February 2, 2009, the company closed a $150 million three-year bank term loan. Proceeds from the bank term loan will be used for general corporate purposes and to finance the acquisition of The Dow Chemical Company's thermoplastic polyurethane business, which closed on December 31, 2008.

About The Lubrizol Corporation:

The Lubrizol Corporation is an innovative specialty chemical company that produces and supplies technologies that improve the quality and performance of our customers' products 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. Lubrizol's 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 19 countries, as well as sales and technical offices around the world. Founded in 1928, Lubrizol has approximately 6,970 employees worldwide. Revenues for 2008 were $5.0 billion.

Forward-looking statements

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 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 risk factors that could affect the future performance of the company and cause results to differ from the forward-looking statements in this release include, but are not limited to, the company's ability to raise prices in an environment of increasing raw material costs; conditions affecting the company's customers, suppliers and the industries that it serves; competitors' responses to the company's products; the impact of our current capital structure on our ability to access the capital markets in the future; changes in accounting, tax or regulatory practices or requirements; and other factors that are set forth in the company's most recently filed reports with the Securities and Exchange Commission. The forward-looking statements contained herein represent the company's judgment as of the date of this release and it cautions readers not to place undue reliance on such statements. The company assumes no obligations to update the statements contained in this release.

Source: Lubrizol Corporation


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