Engelhard Reports Third-Quarter Results

Third-quarter revenues were $1.2 billion versus $1.0 billion theprior-year period.

"The company's earnings results were in line with expectations inthe quarter," said Barry W. Perry, chairman and chief executiveofficer. "A balanced performance across our enterprise deliveredstrong revenue growth, enabling us to overcome weakness in certainserved markets and the overall impact of a severe hurricane season."

"For the full year, we expect to deliver solid top-line growth andhigher earnings per share versus the prior year," he said.

Third-Quarter Operating Results

Revenues from Environmental Technologies rose 19% to $255 million.Operating earnings of $33 million were down 2% versus the prior year.Third-quarter earnings performance resulted from growth inemission-control technologies for certain mobile-source markets andimproved productivity, offset by unfavorable volume and mix inlight-duty vehicles.

Revenues from Process Technologies increased 13% to $167 million.Operating earnings grew 12% to $23 million, driven primarily by strongdemand for technologies for petroleum refining and improved resultsfrom chemical-process markets.

Revenues from Appearance and Performance Technologies increased 9%to $188 million. Operating earnings of $17 million were down 12%versus the prior year as the positive impact of recent acquisitions incosmetics and personal care was offset by the continuing negativeimpact of higher natural gas prices.

Revenues from Materials Services were $578 million, compared with$447 million in last year's third quarter. Operating earnings of $6million were down $1 million versus a year ago.

Earnings from equity investments were $9 million in the thirdquarter as the company's Asian joint ventures continued to deliversolid performance.

Engelhard Corporation is a surface and materials science companythat develops technologies to improve customers' products andprocesses. A Fortune 500 company, Engelhard is a world-leadingprovider of technologies for environmental, process, appearance andperformance applications. For more information, visit Engelhard on theInternet at www.engelhard.com.

Forward-looking statements: This document contains forward-lookingstatements in management's comments. There are a number of factorsthat could cause Engelhard's actual results to vary materially fromthose projected in the forward-looking statements. For a more thoroughdiscussion of these factors, please refer to page 30 of Engelhard's2004 Form 10-K, dated March 11, 2005.

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


Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------------------
2005 2004 2005 2004
----------- --------- ----------- -----------
Net sales $1,208,258 $995,451 $3,325,181 $3,125,849
Cost of sales 1,033,676 825,800 2,796,445 2,627,067
----------- --------- ----------- -----------
Gross profit 174,582 169,651 528,736 498,782
Selling, administrative
and other expenses 103,865 94,846 307,737 285,204
----------- --------- ----------- -----------
Operating earnings 70,717 74,805 220,999 213,578
Equity in earnings of
affiliates 8,695 6,087 24,237 19,390
Gain/(loss) on
investments (12) - 168 -
Interest expense, net (7,419) (3,953) (18,746) (13,421)
----------- --------- ----------- -----------
Earnings before
income taxes 71,981 76,939 226,658 219,547
Income tax expense 13,430 17,123 45,394 40,700
----------- --------- ----------- -----------

Income from continuing
operations 58,551 59,816 181,264 178,847

Loss from discontinued
operations, net of
taxes (42) (761) (6,905) (1,455)

----------- --------- ----------- -----------
Net Income $ 58,509 $ 59,055 $ 174,359 $ 177,392
=========== ========= =========== ===========


Earnings per share from
continuing operations:
Basic $ 0.49 $ 0.49 $ 1.50 $ 1.45
Diluted $ 0.48 $ 0.48 $ 1.48 $ 1.42

Earnings per share from
discontinued operations:
Basic $ - $ (0.01) $ (0.06) $ (0.01)
Diluted $ - $ (0.01) $ (0.06) $ (0.01)

Earnings per share:
Basic $ 0.49 $ 0.48 $ 1.45 $ 1.44
Diluted $ 0.48 $ 0.47 $ 1.42 $ 1.41

Cash dividends
paid per share $ 0.12 $ 0.11 $ 0.36 $ 0.33
=========== ========= =========== ===========

Average number of shares
outstanding - basic 119,608 122,951 120,493 123,584
=========== ========= =========== ===========

Average number of shares
outstanding - diluted 121,554 125,150 122,547 125,829
=========== ========= =========== ===========

Actual number of shares
outstanding at end of
period 119,884 122,470 119,884 122,470
=========== ========= =========== ===========


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 Nine Months Ended
September 30, September 30,
------------------ ----------------------
Pro forma information (in
thousands, except per-
share data) 2005 2004 2005 2004
--------------------------- ------- -------- --------- ----------
Net earnings - as
reported $ 58,509 $ 59,055 $ 174,359 $ 177,392
Net earnings - pro forma 57,696 58,244 170,473 172,959
Diluted earnings per
share - as reported 0.48 0.47 1.42 1.41
Diluted earnings per
share - pro forma 0.47 0.47 1.39 1.37



ENGELHARD CORPORATION
BUSINESS SEGMENT INFORMATION
(Thousands)
(Unaudited)

Three Months Ended
September 30, Change
----------------------- ------
2005 2004
----------- -----------
Net Sales
Environmental Technologies $ 254,701 $ 213,432 19%
Process Technologies 167,012 147,776 13%
Appearance and Performance
Technologies 188,223 172,187 9%
----------- -----------
Technology segments 609,936 533,395 14%
Materials Services 578,436 446,606 30%
All Other 19,886 15,450 29%
----------- -----------
Total net sales $1,208,258 $ 995,451 21%
=========== ===========
Operating Earnings
Environmental Technologies $ 33,345 $ 33,976 -2%
Process Technologies 23,270 20,723 12%
Appearance and Performance
Technologies 16,952 19,264 -12%
----------- -----------
Technology segments 73,567 73,963 -1%
Materials Services 5,800 6,657 -13%
All Other (8,650) (5,815) 49%
----------- -----------
Total operating earnings 70,717 74,805 -5%
Equity in earnings of affiliates 8,695 6,087 43%
Gain/(loss) on investment (12) - 0%
Interest expense, net (7,419) (3,953) 88%
----------- -----------
Earnings before income taxes 71,981 76,939 -6%
Income tax expense 13,430 17,123 -22%
---------- ----------
Income from continuing
operations 58,551 59,816 -2%
Loss from discontinued operations, net
of taxes (42) (761) -94%

----------- -----------
Net Income $ 58,509 $ 59,055 -1%
=========== ===========


Nine Months Ended
September 30, Change
----------------------- ------
2005 2004
----------- -----------
Net Sales
Environmental Technologies $ 738,416 $ 667,901 11%
Process Technologies 487,554 439,209 11%
Appearance and Performance
Technologies 548,692 523,719 5%
----------- -----------
Technology segments 1,774,662 1,630,829 9%
Materials Services 1,501,528 1,453,627 3%
All Other 48,991 41,393 18%
----------- -----------
Total net sales $3,325,181 $3,125,849 6%
=========== ===========

Operating Earnings
Environmental Technologies $ 108,327 $ 104,256 4%
Process Technologies 65,633 60,085 9%
Appearance and Performance
Technologies 55,499 58,121 -5%
----------- -----------
Technology segments 229,459 222,462 3%
Materials Services 16,706 13,361 25%
All Other (25,166) (22,245) 13%
----------- -----------
Total operating earnings 220,999 213,578 3%
Equity in earnings of affiliates 24,237 19,390 25%
Gain/(loss) on investment 168 - 0%
Interest expense, net (18,746) (13,421) 40%
----------- -----------
Earnings before income taxes 226,658 219,547 3%
Income tax expense 45,394 40,700 12%
----------- -----------
Income from continuing
operations 181,264 178,847 1%
Loss from discontinued operations, net
of taxes (6,905) (1,455) 375%

----------- -----------
Net Income $ 174,359 $ 177,392 -2%
=========== ===========


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

September 30, December 31,
2005 2004
------------- ------------
Cash $ 29,538 $ 126,229
Receivables, net 500,218 406,962
Committed metal positions 687,037 457,498
Inventories 530,437 458,020
Other current assets 134,342 135,468
------------- ------------
Total current assets 1,881,572 1,584,177
Investments 197,862 179,160
Property, plant and equipment, net 913,018 902,751
Goodwill 418,596 330,798
Other intangible and noncurrent assets 212,845 181,706
------------- ------------
Total assets $ 3,623,893 $ 3,178,592
============= ============

Short-term borrowings $ 207,588 $ 12,025
Accounts payable 398,156 375,343
Hedged metal obligations 543,101 292,880
Other current liabilities 285,010 248,411
------------- ------------
Total current liabilities 1,433,855 928,659
Long-term debt 437,596 513,680
Other noncurrent liabilities 306,503 321,940
Shareholders' equity 1,445,939 1,414,313
------------- ------------
Total liabilities and shareholders'
equity $ 3,623,893 $ 3,178,592
============= ============


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

Nine Months Ended
September 30,
--------------------
2005 2004
---------- ----------
Cash flows from operating activities
Net earnings from continuing operations $ 181,264 $ 178,847
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and depletion 93,538 92,785
Amortization of intangible assets 3,440 2,767
Equity results, net of dividends (13,369) (4,608)
Net change in assets and liabilities:
Materials Services related (29,938) (47,961)
All other (98,058) (51,948)
---------- ----------
Net cash provided by operating activities 136,877 169,882
---------- ----------

Cash flows from investing activities
Capital expenditures (85,334) (76,335)
Proceeds from investments - 1,988
Acquisitions and other investments (159,303) (66,240)
---------- ----------
Net cash used in investing activities (244,637) (140,587)
---------- ----------

Cash flows from financing activities
Increase (decrease) in short-term borrowings 74,732 (54,326)
Proceeds from long-term debt 49,469 108,972
Purchase of treasury stock (91,366) (107,586)
Cash from exercise of stock options 7,009 22,433
Dividends paid (43,444) (40,819)
---------- ----------
Net cash used in financing activities (3,600) (71,326)

Effect of exchange rate changes on cash 14,669 (2,498)
---------- ----------
Net decrease in cash (96,691) (44,529)
Cash at beginning of year 126,229 87,889
---------- ----------
Cash at end of period $ 29,538 $ 43,360
========== ==========