Engelhard Reports Second-Quarter Results

Second-quarter revenues were $1.1 billion, approximately even withthe prior-year period.

"Improved pricing coupled with our hallmark focus on productivitydelivered growth in our technology segments," said Barry W. Perry,chairman and chief executive officer. "A balanced approach of drivinggrowth and managing the business mix across our enterprise enabled usto deliver ongoing earnings results in line with expectations."

Second-Quarter Operating Results

Operating earnings from Environmental Technologies were $28million including the $10.4 million special charge. Excluding thespecial charge, operating earnings increased 17% in the quarter to $38million. Revenues rose 12% to $251 million. The increase in earningsresulted from growth in emission-control technologies for certainmobile-source markets and improved productivity, offset by unfavorablevolume and mix in light-duty vehicles.

Revenues from Process Technologies increased 8% to $173 million.Operating earnings grew 1% to $23 million, driven primarily bycontinued demand for technologies for petroleum refining.

Revenues from Appearance and Performance Technologies increased 1%to $187 million. Operating earnings of $20 million were down 14%versus the prior year as the positive impact of recent acquisitions incosmetics and personal care was more than offset by the continuingnegative impact of higher natural gas prices and general labor strikesaffecting the paper industry in Finland and Canada.

Operating earnings from Materials Services were $6 million, anincrease of $3 million versus a year ago. Revenues were $480 million,compared with $525 million in last year's second quarter.

Earnings from equity investments were $7 million in the secondquarter 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 Six Months Ended
June 30, June 30,
----------------------- -----------------------
2005 2004 2005 2004
----------- ---------- ----------- ----------
Net sales $1,106,025 $1,107,775 $2,132,695 $2,147,807
Cost of sales 920,176 938,034 1,778,352 1,818,710
---------- ---------- ---------- ----------
Gross profit 185,849 169,741 354,343 329,097
Selling,
administrative and
other expenses 105,702 96,594 204,770 191,443
Special charge 10,362 - 10,362 -
---------- ---------- ---------- ----------
Operating
earnings 69,785 73,147 139,211 137,654
Equity in earnings of
affiliates 7,432 8,364 15,542 13,303
Gain on investment 61 - 180 -
Interest expense, net (6,546) (4,563) (11,326) (9,469)
---------- ---------- ---------- ----------
Earnings before
income taxes 70,732 76,948 143,607 141,488
Income tax expense 12,835 8,953 27,757 23,152
---------- ---------- ---------- ----------

Net earnings $ 57,897 $ 67,995 $ 115,850 $ 118,336
========== ========== ========== ==========

---------- ---------- ---------- ----------
Earnings per share -
basic $ 0.48 $ 0.55 $ 0.96 $ 0.96
========== ========== ========== ==========

---------- ---------- ---------- ----------
Earnings per share -
diluted $ 0.47 $ 0.54 $ 0.94 $ 0.94
========== ========== ========== ==========

Cash dividends paid
per share $ 0.12 $ 0.11 $ 0.24 $ 0.22
========== ========== ========== ==========

Average number of
shares outstanding -
basic 120,191 123,650 120,943 123,904
========== ========== ========== ==========

Average number of
shares outstanding -
diluted 122,276 126,040 123,064 126,202
========== ========== ========== ==========

Actual number of
shares outstanding at
end of period 120,112 124,289 120,112 124,289
========== ========== ========== ==========


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 Six Months Ended
Pro forma information June 30, June 30,
(in thousands, except ---------------------- ----------------------
per-share data) 2005 2004 2005 2004
---------------------- ---------- ---------- ---------- ----------
Net earnings - as
reported $ 57,897 $ 67,995 $ 115,850 $ 118,336
Net earnings - pro
forma 57,102 67,193 112,777 114,714
Diluted earnings per
share - as reported 0.47 0.54 0.94 0.94
Diluted earnings per
share - pro forma 0.47 0.53 0.92 0.91


ENGELHARD CORPORATION
BUSINESS SEGMENT INFORMATION
(Thousands)
(Unaudited)

Three Months Ended
June 30,
------------------------
2005 2004 Change
---------- ---------- ------
Net Sales
Environmental Technologies $ 250,534 $ 224,209 12%
Process Technologies 172,559 159,214 8%
Appearance and Performance
Technologies 186,594 185,238 1%
---------- ----------
Technology segments 609,687 568,661 7%
Materials Services 480,202 525,153 -9%
All Other 16,136 13,961 16%
---------- ----------
Total net sales $1,106,025 $1,107,775
========== ==========
Operating Earnings
Environmental Technologies $ 28,034 (a)$ 32,755 -14%
Process Technologies 23,306 23,066 1%
Appearance and Performance
Technologies 20,484 23,806 -14%
---------- ----------
Technology segments 71,824 79,627 -10%
Materials Services 5,891 2,754 114%
All Other (7,930) (9,234) -14%
---------- ----------
Total operating earnings 69,785 73,147 -5%
Equity in earnings of affiliates 7,432 8,364 -11%
Gain on investment 61 -
Interest expense, net (6,546) (4,563) 43%
---------- ----------
Earnings before income taxes 70,732 76,948 -8%
Income tax expense 12,835 8,953 43%
---------- ----------
Net earnings $ 57,897 $ 67,995 -15%
========== ==========

Six Months Ended
June 30,
------------------------
2005 2004 Change
---------- ---------- ------
Net Sales
Environmental Technologies $ 491,895 $ 462,646 6%
Process Technologies 320,540 291,434 10%
Appearance and Performance
Technologies 360,469 351,531 3%
---------- ----------
Technology segments 1,172,904 1,105,611 6%
Materials Services 930,683 1,016,252 -8%
All Other 29,108 25,944 12%
---------- ----------
Total net sales $2,132,695 $2,147,807 -1%
========== ==========

Operating Earnings
Environmental Technologies $ 64,534 (a)$ 69,744 -7%
Process Technologies 42,363 39,362 8%
Appearance and Performance
Technologies 38,548 38,857 -1%
---------- ----------
Technology segments 145,445 147,963 -2%
Materials Services 10,284 6,122 68%
All Other (16,518) (16,431) 1%
---------- ----------
Total operating earnings 139,211 137,654 1%
Equity in earnings of affiliates 15,542 13,303 17%
Gain on investment 180 -
Interest expense, net (11,326) (9,469) 20%
---------- ----------
Earnings before income taxes 143,607 141,488 1%
Income tax expense 27,757 23,152 20%
---------- ----------


Net earnings $ 115,850 $ 118,336 -2%
========== ==========

(a) Includes special charges of $10.4MM related to the Carteret
manufacturing facility closure.


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


June 30, December 31,
2005 2004
---------- ------------
Cash $ 28,261 $ 126,229
Receivables, net 480,549 410,382
Committed metal positions 488,496 457,570
Inventories 490,761 459,637
Other current assets 122,309 135,631
---------- ------------
Total current assets 1,610,376 1,589,449
Investments 197,346 179,160
Property, plant and equipment, net 896,760 911,029
Goodwill 384,506 330,798
Other intangible and noncurrent assets 154,987 168,156
---------- ------------
Total assets $3,243,975 $ 3,178,592
========== ============

Short-term borrowings $ 38,490 $ 12,025
Accounts payable 337,594 375,890
Hedged metal obligations 401,873 292,880
Other current liabilities 267,198 248,872
---------- ------------
Total current liabilities 1,045,155 929,667
Long-term debt 496,025 513,680
Other noncurrent liabilities 305,805 320,933
Shareholders' equity 1,396,990 1,414,312
---------- ------------
Total liabilities and shareholders' equity $3,243,975 $ 3,178,592
========== ============

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

Six Months Ended
June 30,
--------------------
2005 2004
--------- --------
Cash flows from operating activities
Net earnings $ 115,850 $118,336
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and depletion 62,914 62,113
Amortization of intangible assets 2,416 1,845
Equity results, net of dividends (6,659) (3,356)
Net change in assets and liabilities:
Materials Services related 3,815 21,173
All other (38,387) (30,502)
--------- --------
Net cash provided by operating activities 139,949 169,609
--------- --------

Cash flows from investing activities
Capital expenditures (53,599) (44,591)
Proceeds from investments - 1,988
Acquisitions and other investments (93,828) (6,240)
--------- --------
Net cash used in investing activities (147,427) (48,843)
--------- --------

Cash flows from financing activities
Increase (decrease) in short-term borrowings 5,948 (58,574)
Proceeds from long-term debt 66 51,136
Purchase of treasury stock (82,895) (51,123)
Cash from exercise of stock options 6,275 19,200
Dividends paid (29,056) (27,335)
--------- --------
Net cash used in financing activities (99,662) (66,696)
Effect of exchange rate changes on cash 9,172 (1,361)
--------- --------
Net (decrease) increase in cash (97,968) 52,709
Cash at beginning of year 126,229 87,889
--------- --------
Cash at end of period $ 28,261 $140,598
========= ========