-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, gvEcW2ejqcwz6fZPMpeeh6cdgCBxD629cIvRlmBjhZ7SlRyLvCzevPLF+ZmwDYAp acoTaPgh13WwDPm9jpmk7g== 0000920049-94-000010.txt : 19940601 0000920049-94-000010.hdr.sgml : 19940601 ACCESSION NUMBER: 0000920049-94-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BETZ LABORATORIES INC CENTRAL INDEX KEY: 0000011884 STANDARD INDUSTRIAL CLASSIFICATION: 2890 IRS NUMBER: 231503731 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11558 FILM NUMBER: 94528027 BUSINESS ADDRESS: STREET 1: 4636 SOMERTON RD CITY: TREVOSE STATE: PA ZIP: 19053 BUSINESS PHONE: 2153553300 MAIL ADDRESS: STREET 1: 4636 SOMERTON ROAD CITY: TREVOSE STATE: PA ZIP: 19053 10-Q 1 QUARTERLY REPORT FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 1994 ------------------------ Commission File Number: 0-2085 --------- BETZ LABORATORIES, INC. ------------------------ (Exact name of registrant as specified in its charter) Pennsylvania 23-1503731 - - ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4636 Somerton Road, Trevose, PA 19053 - - ----------------------------------------- ------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (215) 355-3300 -------------- Indicate by check mark whether the registrant (1) has filed all re- ports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ------ Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. 27,774,620 Common Shares outstanding as of May 9, 1994. ----------- ------------ BETZ LABORATORIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Three Months Ended March 31, 1994 1993 ---- ---- Net Sales $172,934 $168,495 Operating Costs and Expenses: Cost of products sold 61,214 58,917 Selling, research and administrative expenses 81,757 79,583 -------- ------- 142,971 138,500 OPERATING EARNINGS 29,963 29,995 Other Income (Expense): Investment and other income 959 1,246 Interest expense (62) (43) -------- ------- 897 1,203 -------- ------- EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 30,860 31,198 Income Taxes 12,344 12,011 -------- ------ EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 18,516 19,187 Cumulative effect of accounting changes: Income taxes - 3,600 Retiree health care, net of $1,700 income taxes - (2,700) Pension, net of $780 income taxes - 1,241 ------- ------- NET EARNINGS $18,516 $21,328 ======= ======= Primary earnings per Common Share: Before cumulative effect of accounting changes $ .61 $ .62 Accounting changes - .07 -------- ------- Primary earnings per Common Share $ .61 $ .69 ======== ======= Fully diluted earnings per Common Share: Before cumulative effect of accounting changes $ .58 $ .59 Accounting changes - .07 ------- ------- Fully diluted earnings per Common Share $ .58 $ .66 ======= ======= Cash dividends declared per Common Share $ .35 $ .34 ======= ======= Average number of Common Shares: Primary 28,401 28,893 ======= ======= Fully diluted 31,189 31,624 ======= ======= See notes to consolidated financial statements. BETZ LABORATORIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands) ASSETS March 31, 1994 December 31, 1993 -------------- ----------------- CURRENT ASSETS Cash and cash equivalents $ 51,137 $ 43,921 Trade accounts receivable, less allowances: 1994--$2,783; 1993--$2,698 112,205 102,882 Inventories: Finished products and goods purchased for resale 17,091 17,155 Raw materials 21,056 20,191 -------- -------- 38,147 37,346 Prepaid expenses and other 23,288 24,486 -------- -------- TOTAL CURRENT ASSETS 224,777 208,635 PROPERTY, PLANT AND EQUIPMENT-- at cost Buildings 160,234 155,781 Machinery and equipment 362,956 360,426 Allowance for depreciation (deduction) (264,836) (253,881) -------- -------- 258,354 262,326 Land 21,212 21,146 Construction in progress 21,990 17,270 -------- -------- 301,556 300,742 OTHER ASSETS Investments and other 7,536 7,223 Intangibles -- at cost, less amortization: 1994 -- $2,588; 1993 -- $2,513 4,454 4,529 -------- -------- 11,990 11,752 -------- -------- $538,323 $521,129 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY March 31, 1994 December 31, 1993 -------------- ----------------- CURRENT LIABILITIES Trade accounts payable $30,893 $32,554 Payroll and related taxes 16,434 17,727 Accrued expenses 29,338 24,577 Income taxes 17,317 6,838 Dividends payable 0 9,845 Current portion of ESOP debt 500 500 ------- ------- TOTAL CURRENT LIABILITIES 94,482 92,041 ESOP DEBT--less portion classified as current 97,500 97,500 DEFERRED CREDITS Income taxes 22,004 21,998 Other deferred credits 10,084 10,271 ------- ------- 32,088 32,269 SHAREHOLDERS' EQUITY Preferred Shares -- Authorized - 1,000,000 shares, $.10 par value, voting Series A ESOP Convertible, 8% Cumulative, stated at aggregate liquidation preference; Issued: 1994 -- 494,971 shares; 1993 -- 496,005 shares 98,994 99,201 Guarantee of related ESOP debt (93,783) (94,101) -------- ------- 5,211 5,100 Common Shareholders' Equity Common Shares -- Authorized - 90,000,000 shares, $.10 par value; Issued (including treasury shares): 1994 -- 33,654,715 shares; 1993 -- 33,654,715 shares 3,365 3,365 Capital in excess of par value of shares 78,882 78,667 Retained earnings 411,260 394,726 Cost of Common Shares in treasury: 1994 -- 5,578,849 shares; 1993 -- 5,527,310 shares (174,032) (170,442) Unearned compensation (7,393) (7,773) Foreign currency translation adjustments (3,040) (4,324) -------- -------- COMMON SHAREHOLDERS' EQUITY 309,042 294,219 -------- -------- TOTAL SHAREHOLDERS' EQUITY 314,253 299,319 -------- -------- $538,323 $521,129 ======== ======== See notes to consolidated financial statements. BETZ LABORATORIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Three Months Ended March 31, 1994 1993 ---- ---- OPERATING ACTIVITIES Net earnings $18,516 $21,328 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 11,241 10,833 Compensation and employee benefit plans 1,147 1,280 Cumulative effect of accounting changes - (2,141) Changes in operating assets and liabilities: Accounts receivable (9,323) 1,746 Inventories (633) (1,000) Prepaid expenses and other 1,199 (1,954) Accounts payable and accrued expenses 7,884 (5,694) ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 30,031 24,398 INVESTING ACTIVITIES Expenditures for property, plant and equipment, net (11,360) (15,489) Proceeds from sales of investments 98 1,602 Other, net (172) 67 ------- ------- NET CASH USED IN INVESTING ACTIVITIES (11,434) (13,820) FINANCING ACTIVITIES Dividends paid (11,828) (11,688) Proceeds from issuance of common stock, including treasury shares 491 1,477 Retirement of ESOP preferred stock (295) (57) ------- ------- NET CASH USED IN FINANCING ACTIVITIES (11,632) (10,268) Effect of exchange rate changes on cash 251 (286) ------- ------- INCREASE IN CASH AND CASH EQUIVALENTS 7,216 24 Cash and Cash Equivalents at Beginning of Year 43,921 46,363 ------- ------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $51,137 $46,387 ======= ======= See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair pre- sentation of consolidated financial position, consolidated results of operations and consolidated cash flows in conformity with generally accepted accounting principles. The foregoing consolidated financial statements do include all adjustments, consisting only of normal recurring accruals which, in the opinion of management, are necessary for a fair statement of the results of the interim period. The 1993 cumulative effect of accounting changes has been restated from previously reported amounts due to a change in the method of calculating the value of the assets of the Company's pension plan for purposes of determining annual pension costs under Financial Accounting Standard No. 87 adopted in the fourth quarter of 1993, effective January 1, 1993. The cumulative effect on years prior to December 31, 1992 is $1,241,000, net of taxes of $780,000 ($.04 per Common Share on a primary and fully diluted basis), which was a one-time, noncash increase in net earnings for the first quarter of 1993. Note 2 - Common Shares Reserved for Stock Plans At March 31, 1994, 2,558,403 and 647,255 Common Shares were reserved for possible issuance pursuant to the exercise of stock options and grants under the Company's Stock Option and Incentive Plans, respectively. Further, 2,758,000 Common Shares were reserved and kept available for possible conversion of the Series A ESOP Convertible preferred stock. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS First quarter 1994 net sales increased $4.4 million from $168.5 million to $172.9 million. This 3 percent increase was composed of a 4 per- cent increase in volume-mix and a 1 percent decline resulting from the changes in the value of foreign currencies relative to the U.S. dollar. Net earnings before cumulative effect of accounting changes declined $0.7 mil- lion, or 3 percent, from $19.2 million to $18.5 million. Primary and fully diluted earnings per Common Share before cumulative effect of accounting changes decreased 2 percent from $.62 to $.61 and from $.59 to $.58, respectively. Net earnings after cumulative effect of accounting changes were down 13 percent from $21.3 million to $18.5 million. Primary and fully diluted earnings per Common Share after cumulative effect of accounting changes declined 12 percent from the first quarter 1993 from $.69 to $.61 and from $.66 to $.58, respectively. The results of operations for the quarter ended March 31, 1993 have been restated due to a change in the method of determining annual pension expense adopted in the fourth quarter of 1993, effective January 1, 1993. The cumulative effect of this change is $1.2 million ($.04 per Common Share on a primary and fully diluted basis), which is a one-time, noncash increase in net earnings for the first quarter of 1993. The prior year's cumulative effect of accounting changes also includes a one-time, noncash increase in net earnings of $0.9 million ($.03 per Common Share on a primary and fully diluted basis) for the adoption of Financial Accounting Standards Nos. 106 (retiree health care) and 109 (accounting for income taxes). First quarter 1994 domestic sales were 3 percent higher than the first three months of 1993 with all major operating units posting sales gains. Within the Betz Water Management Group, the Pulp and Paper Division and Betz Entec, Inc. reported the strongest sales gains. On the process side, Betz MetChem, which offers a complete line of process chemicals for the metals and plastic industries, also reported a strong sales gain in the first quarter. Sales of NORINSE II (registered trademark) technology to the coil industry and ADHERE (registered trademark) programs to the plastic industries are meeting with considerable success. Betz Process Chemicals, Inc. experienced higher sales gains of its ALKAT-XL (registered trademark) treatment programs, which increase the efficiency of alkylation units in refineries, and its SPEC-AID (registered trademark) line of finished product additives, which help customers improve operations and bottom line profitability by controlling product instability. On a combined basis, 1994 first quarter foreign sales were also up 3 percent in U.S. dollars and 8 percent in local currencies compared to the same quarter last year. Betz Inc., the Company's Canadian subsidiary, continued its sales growth with double-digit sales increases, in local currencies, of its industrial water treatment and paper process treatment programs. Despite the lingering recession in Europe, the Company's European subsidiaries in England, France, Germany and Scandinavia reported solid sales gains. Foreign operations in Australia and Korea also reported sales gains above the Company's consolidated average. The table below sets forth as a percent of sales cost of products sold, selling, research and administrative expenses and operating earnings for the respective periods. Three Months Ended March 31, 1994 1993 ---- ---- Cost of products sold 35.4% 35.0% Selling, research and administrative expenses 47.3% 47.2% Operating earnings 17.3% 17.8% Cost of products sold as a percentage of sales increased slightly due to modest manufacturing cost increases with no corresponding increase in selling prices. Selling, research and administrative expenses remained essentially flat as a percentage of sales due to continuing cost controls. The net effect of the above resulted in a 0.5% decrease in the Company's operating profit margin. During the first quarter of 1994, the Company continued to implement its previously announced restructuring program. This program, designed to lower operating costs on a prospective basis and reorganize the Company's marketing efforts on a global basis, is in the early stages and there have been no significant changes in the estimated costs or cash flows necessary to complete it. The financial condition of the Company remains strong. Cash and cash equivalents were $51.1 million at March 31, 1994 and current assets were 2.4 times current liabilities. During the first quarter of 1994, expendi- tures for property, plant and equipment were $11.4 million. The Company anticipates that capital expenditures for the year 1994 will be approximately $63 million and will include an expansion of the Company's manufacturing facilities in Washougal, Washington and Orange, Texas. During the quarter, the Company completed construction of a new production plant in Korea. This new facility, for the first time, will provide Betz Korea, Ltd. with the capability of supplying customers with products manufactured by Betz in Korea. During the period March 28, 1994, through April 7, 1994, the Company continued its program of treasury stock purchases by repurchasing 400,000 shares of common stock, increasing the cost of Common Shares in treasury by approximately $20 million. As of March 31, 1994, $4.3 million of treasury stock repurchases had been accrued and are included in Cost of Common Shares in treasury and Accrued expenses. PART II OTHER INFORMATION Item 1 - Legal Proceedings There are no material pending legal proceedings other than ordinary routine litigation incidental to the business of the Company and its subsidiaries to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. The Company is a "Potentially Responsible Party" under the Compre- hensive Environmental Response, Compensation and Liability Act to thirteen (13) waste disposal sites. See the discussion under Item 3, "Pending Legal Proceedings," of the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1993. There have been no material developments during the quarter for which this report is filed in any of the pending proceedings previously reported. Item 4 - Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Shareholders was held on April 14, 1994. Proxies were solicited by the Board of Directors of the Company ("Board") pursuant to Regulation 14 of the Securities Exchange Act of 1934. There was no solicitation of proxies in opposition to the Board's nominees for Director. All such nominees were elected. The firm of Ernst & Young was elected as the Company's independent auditors for the year 1994. The number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes, were as follows: Election of Directors Nominee For Against Abstained Not Voted - - ------------------------------------------------------------------------ John F. McCaughan 22,355,621 779,171 - 5,731,521 Theodore B. Palmer, 3rd 22,328,839 805,953 - 5,731,521 John R. Quarles 22,337,680 797,112 - 5,731,521 Robert L. Yohe 22,354,652 780,140 - 5,731,521 Election of Independent Auditors For Against Abstained Not Voted - - ------------------------------------------------------------------------ Ernst & Young 22,933,863 127,260 73,669 5,731,521 Item 6 - Exhibits and Reports on Form 8-K (a) Exhibit 11: Statement Re: Computation of Per Share Earnings. (b) No reports on Form 8-K have been filed during the quarter for which this Form 10-Q is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BETZ LABORATORIES, INC. ----------------------- (Registrant) Date: May 13, 1994 By: s/R. Dale Voncanon ------------------------ R. Dale Voncanon Vice President - Finance Date: May 13, 1994 By: s/William C. Brafford ------------------------- William C. Brafford Vice President, Secretary and General Counsel EX-11 2 EXHIBIT 11 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (In thousands, except per share amounts) Three Months Ended March 31, Primary Earnings per Common Share 1994 1993 ---- ---- Earnings before cumulative effect of accounting changes $18,516 $19,187 Effect of preferred stock dividends (1,140) (1,253) ------- ------- 17,376 17,934 Cumulative effect of accounting changes - 2,141 ------- ------- Net earnings available to common shareholders $17,376 $20,075 ======= ======= Average Common Shares outstanding 28,142 28,553 Common stock equivalents 259 340 ------- ------ Average number of Common Shares-primary 28,401 28,893 ======= ====== Primary earnings per Common Share: Before cumulative effect of accounting changes $0.61 $0.62 Cumulative effect of accounting changes - 0.07 ------ ------ Primary earnings per Common Share $0.61 $0.69 ====== ====== Fully Diluted Earnings per Common Share Earnings before cumulative effect of accounting changes $18,516 $19,187 Effect of ESOP charge to operations assuming conversion of Series A ESOP Convertible Preferred Shares (528) (618) ------- ------- 17,988 18,569 Cumulative effect of accounting changes - 2,141 ------- ------- Net earnings available to common shareholders $17,988 $20,710 ======= ======= Average Common Shares outstanding 28,142 28,553 Common stock equivalents 269 340 Assumed conversion of Series A ESOP Convertible Preferred Shares 2,778 2,731 ------- ------- Average number of Common Shares-fully diluted 31,189 31,624 ======= ======= Fully diluted earnings per Common Share: Before cumulative effect of accounting changes $0.58 $0.59 Cumulative effect of accounting changes - 0.07 ------- ------- Fully diluted earnings per Common Share $0.58 $0.66 ======= ======= Common stock equivalents reflect the assumed exercise of dilutive employees' stock options using the treasury stock method. See notes to consolidated financial statements. -----END PRIVACY-ENHANCED MESSAGE-----