The Lubrizol Corp. (LZ, Financial) filed Quarterly Report for the period ended 2009-03-31.
Lubrizol Corp. is a global fluid technology company concentrating on high-performance chemicals systems and services for industry and transportation. The company develops produces and sells specialty additive packages and related equipment used in transportation and industrial finished lubricants. The company groups its product lines into two operating segments: chemicals for transportation and chemicals forindustry. The Lubrizol Corp. has a market cap of $2.98 billion; its shares were traded at around $44.23 with a P/E ratio of 10.9 and P/S ratio of 0.6. The dividend yield of The Lubrizol Corp. stocks is 2.8%. The Lubrizol Corp. had an annual average earning growth of 7.2% over the past 10 years. GuruFocus rated The Lubrizol Corp. the business predictability rank of 2-star.
Cost of Sales The decrease in cost of sales in the first quarter of 2009 compared with the same period in 2008 primarily was due to lower volume. Average raw material cost increased 1% in the first quarter of 2009 compared with the same period in 2008. Total manufacturing expenses decreased 2% in the first quarter of 2009 compared with the same quarter last year primarily due to a favorable currency impact, reductions in spending on supplies and services and lower utility costs, offset by $38.1 million of unabsorbed manufacturing costs due to abnormally low production. Cost of sales during the first quarter of 2009 also included incremental charges of $7.1 million associated with a liquidation of LIFO inventory quantities carried at higher costs.
Restructuring charges of $0.5 million related to the decision made in the third quarter of 2008 to close a Lubrizol Additives blending, packaging and warehouse facility in Ontario, Canada. We expect to record an additional $5.3 million of restructuring charges related to this facility closure, of which $0.8 million is expected to be recognized in 2009.
Interest Expense The increase in interest expense in the first quarter of 2009 compared with the same period in 2008 primarily was due to the incremental interest expense associated with the issuance of our 8.875% notes due 2019 and borrowings under our $150.0 million term loan in the first quarter of 2009. In addition, we repurchased $177.0 million of our 4.625% notes due 2009 at a purchase price of 100.5% per note, resulting in a loss on retirement of $1.3 million and accelerated amortization of $0.6 million in debt issuance costs, Treasury rate lock agreements and original issue discounts associated with the repurchased notes.
Net Income Attributable to The Lubrizol Corporation Primarily as a result of the above factors, net income per diluted share attributable to The Lubrizol Corporation decreased 10% to $0.95 during the first quarter of 2009 compared with $1.06 in the same period in 2008.
Read the The complete ReportLZ is in the portfolios of David Dreman of Dreman Value Management.
Lubrizol Corp. is a global fluid technology company concentrating on high-performance chemicals systems and services for industry and transportation. The company develops produces and sells specialty additive packages and related equipment used in transportation and industrial finished lubricants. The company groups its product lines into two operating segments: chemicals for transportation and chemicals forindustry. The Lubrizol Corp. has a market cap of $2.98 billion; its shares were traded at around $44.23 with a P/E ratio of 10.9 and P/S ratio of 0.6. The dividend yield of The Lubrizol Corp. stocks is 2.8%. The Lubrizol Corp. had an annual average earning growth of 7.2% over the past 10 years. GuruFocus rated The Lubrizol Corp. the business predictability rank of 2-star.
Highlight of Business Operations:
During the year ended December 31, 2008, we determined goodwill associated with our performance coatings, Estane and TempRite reporting units within our Lubrizol Advanced Materials segment was impaired as the carrying value of goodwill within these reporting units exceeded its fair value. No goodwill remained within our performance coatings reporting unit at March 31, 2009. The remaining value of goodwill associated with our Estane and TempRite reporting units totaled $61.8 million and $73.3 million at March 31, 2009, respectively. A 10% decrease in the fair value of our Estane reporting unit or any further decrease in the fair value of our TempRite reporting unit could indicate the potential for an additional impairment of goodwill. The products within our Estane reporting unit are used within film and sheet for various coating processes, wire and cable insulation, athletic equipment (such as footwear), medical applications, pneumatic tubing and automotive molded parts, and the demand for these products are affected by overall economic conditions. Our TempRite reporting unit serves customers who produce plastic piping for residential and commercial plumbing, fire sprinkler systems and industrial piping applications, and is thus subject to cyclical demand patterns within these markets. To the extent the weakness in the economy, including the residential and commercial construction markets, persists longer than expected or our cost of capital increases, our Estane or TempRite reporting units could experience a decline in fair value that may result in an additional impairment of goodwill.Cost of Sales The decrease in cost of sales in the first quarter of 2009 compared with the same period in 2008 primarily was due to lower volume. Average raw material cost increased 1% in the first quarter of 2009 compared with the same period in 2008. Total manufacturing expenses decreased 2% in the first quarter of 2009 compared with the same quarter last year primarily due to a favorable currency impact, reductions in spending on supplies and services and lower utility costs, offset by $38.1 million of unabsorbed manufacturing costs due to abnormally low production. Cost of sales during the first quarter of 2009 also included incremental charges of $7.1 million associated with a liquidation of LIFO inventory quantities carried at higher costs.
Restructuring charges of $0.5 million related to the decision made in the third quarter of 2008 to close a Lubrizol Additives blending, packaging and warehouse facility in Ontario, Canada. We expect to record an additional $5.3 million of restructuring charges related to this facility closure, of which $0.8 million is expected to be recognized in 2009.
Interest Expense The increase in interest expense in the first quarter of 2009 compared with the same period in 2008 primarily was due to the incremental interest expense associated with the issuance of our 8.875% notes due 2019 and borrowings under our $150.0 million term loan in the first quarter of 2009. In addition, we repurchased $177.0 million of our 4.625% notes due 2009 at a purchase price of 100.5% per note, resulting in a loss on retirement of $1.3 million and accelerated amortization of $0.6 million in debt issuance costs, Treasury rate lock agreements and original issue discounts associated with the repurchased notes.
Net Income Attributable to The Lubrizol Corporation Primarily as a result of the above factors, net income per diluted share attributable to The Lubrizol Corporation decreased 10% to $0.95 during the first quarter of 2009 compared with $1.06 in the same period in 2008.
Read the The complete ReportLZ is in the portfolios of David Dreman of Dreman Value Management.
