-----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, reyr652iryBDsVdUGS7gGt5PPfTjY0N+Do9H/1G6ieUJrQnRVXIe0HMyfWrRThRP euUzAP8xCEVHYozP1ZEdkw== 0000920049-94-000021.txt : 19940815 0000920049-94-000021.hdr.sgml : 19940815 ACCESSION NUMBER: 0000920049-94-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940812 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: 94543343 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 August 12, 1994 Securities and Exchange Commission Judiciary Plaza 450 Fifth Street, N.W. Washington, DC 20549-1004 Re: Commission File No.: 0-2085 --------------------------------- Dear Sirs: Betz Laboratories, Inc. ("Company") hereby submits for filing with the Commission its Form 10-Q for the quarter ended June 30, 1994. The Company also is submitting by first class mail conforming paper format documents pursuant to Section 901(d) of Regulation S-T. Very truly yours, BETZ LABORATORIES, INC. James H. Decker Assistant General Counsel 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 June 30, 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. 27,778,567 Common Shares outstanding as of August 8, 1994. ---------- --------------- BETZ LABORATORIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, 1994 1993 1994 1993 ---- ---- ---- ---- Net Sales $179,701 $171,472 $352,635 $339,967 Operating Costs and Expenses: Cost of products sold 63,211 58,760 124,425 117,677 Selling, research and administrative expenses 85,965 82,907 167,722 162,490 ------- ------- ------- -------- 149,176 141,667 292,147 280,167 OPERATING EARNINGS 30,525 29,805 60,488 59,800 Other Income (Expense): Investment and other income 1,011 780 1,970 2,026 Interest expense (40) (11) (102) (54) ------- ------- ------- ------- 971 769 1,868 1,972 ------- ------- ------- ------- EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 31,496 30,574 62,356 61,772 Income Taxes 12,598 11,771 24,942 23,782 ------- ------- ------- -------- EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 18,898 18,803 37,414 37,990 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 $18,898 $18,803 $37,414 $40,131 ======= ======= ======= ======= Primary earnings per Common Share: Before cumulative effect of accounting changes $ .64 $ .61 $ 1.25 $ 1.23 Accounting changes - - - .07 ------- ------- ------- ------- Primary earnings per Common Share $ .64 $ .61 $ 1.25 $ 1.30 ======= ======= ======= ======= Fully diluted earnings per Common Share: Before cumulative effect of accounting changes $ .60 $ .58 $ 1.18 $ 1.17 Accounting changes - - - .07 ------- ------- ------- ------- Fully diluted earnings per Common Share $ .60 $ .58 $ 1.18 $ 1.24 ======= ======= ======= ======= Cash dividends declared per Common Share $ .36 $ .35 $ .71 $ .69 ======= ======= ======= ======= Average number of Common Shares: Primary 28,009 28,673 28,205 28,783 ======= ======= ======= ======= Fully diluted 30,752 31,413 30,970 31,519 ======= ======= ======= ======= See notes to consolidated financial statements.
BETZ LABORATORIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands) ASSETS June 30, 1994 December 31, 1993 ------------- ----------------- CURRENT ASSETS Cash and cash equivalents $37,148 $43,921 Trade accounts receivable, less allowances: 1994--$3,216; 1993--$2,698 117,638 102,882 Inventories: Finished products and goods purchased for resale 16,891 17,155 Raw materials 22,048 20,191 -------- -------- 38,939 37,346 Prepaid expenses and other 24,376 24,486 -------- ------- TOTAL CURRENT ASSETS 218,101 208,635 PROPERTY, PLANT AND EQUIPMENT-- at cost Buildings 162,646 155,781 Machinery and equipment 362,324 360,426 Allowance for depreciation (deduction) (273,177) (253,881) --------- --------- 251,793 262,326 Land 21,336 21,146 Construction in progress 28,031 17,270 -------- -------- 301,160 300,742 OTHER ASSETS Investments and other 7,563 7,223 Intangibles -- at cost, less amortization: 1994 -- $2,662; 1993 -- $2,513 4,379 4,529 -------- -------- 11,942 11,752 -------- -------- $531,203 $521,129 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 1994 December 31, 1993 ------------- ----------------- CURRENT LIABILITIES Trade accounts payable $29,405 $32,554 Payroll and related taxes 22,986 17,727 Accrued expenses 26,752 24,577 Income taxes 14,300 6,838 Dividends payable 10,000 9,845 Current portion of ESOP debt 1,000 500 ------- -------- TOTAL CURRENT LIABILITIES 104,443 92,041 ESOP DEBT--less portion classified as current 96,500 97,500 DEFERRED CREDITS Income taxes 21,997 21,998 Other deferred credits 9,005 10,271 ------- -------- 31,002 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 -- 494,177 shares; 1993 -- 496,005 shares 98,835 99,201 Guarantee of related ESOP debt (93,466) (94,101) -------- -------- 5,369 5,100 Common Shareholders' Equity Common Shares -- Authorized - 90,000,000 shares, $.10 par value; Issued (including treasury shares): 1994 -- 33,652,995 shares; 1993 -- 33,654,715 shares 3,365 3,365 Capital in excess of par value of shares 79,132 78,667 Retained earnings 408,460 394,726 Cost of Common Shares in treasury: 1994 -- 5,875,012 shares; 1993 -- 5,527,310 shares (189,361) (170,442) Unearned compensation (6,727) (7,773) Foreign currency translation adjustments (980) (4,324) -------- -------- COMMON SHAREHOLDERS' EQUITY 293,889 294,219 -------- -------- TOTAL SHAREHOLDERS' EQUITY 299,258 299,319 -------- -------- $531,203 $521,129 ======== ======== See notes to consolidated financial statements. BETZ LABORATORIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Six Months Ended June 30, 1994 1993 ---- ----- OPERATING ACTIVITIES Net earnings $37,414 $40,131 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 22,686 21,696 Compensation and employee benefit plans 2,272 2,517 Cumulative effect of accounting changes - (2,141) Other, net (611) (636) Changes in operating assets and liabilities: Accounts receivable (14,756) 265 Inventories (1,900) (1,105) Prepaid expenses and other 126 (4,581) Accounts payable and accrued expenses 8,471 (3,115) ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 53,702 53,031 INVESTING ACTIVITIES Expenditures for property, plant and equipment, net (23,466) (31,738) Proceeds from sales of business and long-term investments 4,973 6,716 Other, net 539 (364) ------- ------- NET CASH USED IN INVESTING ACTIVITIES (17,954) (25,386) FINANCING ACTIVITIES Dividends paid (23,525) (23,395) Proceeds from issuance of common stock, including treasury shares 1,126 1,672 Purchase of treasury stock (19,995) - Principal payments on ESOP debt (500) (500) Retirement of ESOP preferred stock (514) (111) ------- ------- NET CASH USED IN FINANCING ACTIVITIES (43,408) (22,334) Effect of exchange rate changes on cash 887 495 ------- ------ (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (6,773) 5,806 Cash and Cash Equivalents at Beginning of Year 43,921 46,363 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $37,148 $52,169 ======= ======= 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 presentation 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 June 30, 1994, 2,543,921 and 645,442 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, 2,728,000 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 Second quarter 1994 net sales increased $8.2 million from $171.5 million to $179.7 million. This 5 percent increase was composed of a 6 percent increase in volume-mix, with no increase in selling prices, offset by a 1 percent decrease resulting from the changes in the value of foreign currencies relative to the U.S. dollar. Operating earnings were $30.5 million and were up 2 percent over the same year-ago period. Net earnings rose 1 percent from $18.8 million to $18.9 million. Primary earnings per Common Share increased 5 percent from $.61 to $.64, and fully diluted earnings per Common Share rose 3 percent from $.58 to $.60. Net sales for the six month period ending June 30, 1994 increased 4 percent from $340.0 million to $352.6 million. The percentage increase in sales was composed of a 5 percent increase in volume-mix, no increase in selling prices, and a 1 percent decrease resulting from changes in the value of foreign currencies relative to the U.S. dollar. Operating earnings rose 1 percent from $59.8 million to $60.5 million. Net earnings before the cumulative effect of accounting changes decreased 2 percent from $38.0 million to $37.4 million, while net earnings after accounting changes were down 7 percent. Primary earnings per Common Share before accounting changes were up 2 percent from $1.23 to $1.25 while primary earnings per Common Share after accounting changes were down 4 percent from $1.30 to $1.25. Fully diluted earnings per Common Share before accounting changes were up 1 percent from $1.17 to $1.18 and fully diluted earnings per Common Share after accounting changes were down 5 percent from $1.24 to $1.18. The Company's 1994 second quarter results reflect improving business conditions within the industrial sector of the U.S. economy. Within the U.S., the Betz Water Management Group recorded strong increases in sales of its water treatment programs to the primary metals and power industries during the second quarter; however, these sales gains were partially offset by modest sales increases to the hydrocarbon processing industry, the Company's largest customer base. Betz PaperChem, Inc., the second largest U.S. subsidiary, achieved record level sales in the second quarter. Betz PaperChem has been particularly successful in marketing treatment programs aimed at solving problems associated with changing from an acid to an alkaline method of making paper. Second quarter sales of the Company's foreign operations this year, compared to the second quarter of last year, posted double-digit local currency gains in Canada, the Caribbean, Australia, France, Germany and Austria. On a combined basis, gains in foreign sales were reduced to 7 percent, when translated to U.S. dollars. The table below sets forth, as a percent of sales, cost of products sold, selling, research and administrative expenses and operating earnings for the second quarter and six month periods: Three Months Ended Six Months Ended June 30, June 30, 1994 1993 1994 1993 ---- ---- ---- ---- Cost of products sold 35.2% 34.3% 35.3% 34.6% Selling, research and administrative expenses 47.8% 48.4% 47.5% 47.8% Operating earnings 17.0% 17.4% 17.2% 17.6% Cost of products sold, as a percentage of sales, increased when compared to prior year periods. This increase is primarily caused by modest increases in manufacturing costs, with no corresponding increase in selling prices. Selling, research and administrative expenses, as a percentage of sales, decreased slightly, mainly due to reductions in research expenses resulting from restructuring actions taken in the last half of 1993. The net effect of the above resulted in a 0.4 percent decrease in the Company's operating earnings, as a percentage of sales, for the periods shown above. Income tax expense for the second quarter and first half of 1994 is higher than the comparable 1993 period due to a 1.5 percent increase in the effective tax rate resulting from the Omnibus Budget Reconciliation Act of 1993. The financial condition of the Company remains strong. Cash provided by operations for the first six months of 1993 and 1994 remained constant and current assets were 2.1 times current liabilities. Operating cash needs for the increase in accounts receivable during the first half of 1994, resulting from the increase in sales, were financed by increases in accounts payable and other operating cash flows. During the first half of 1994, the Company continued to implement its previously announced restructuring program. Approximately $2 million of cash, provided by operating activities during the first six months of 1994, was used to meet restructuring obligations. The program is in its early stages, but the Company continued to reduce its administrative staffing during the second quarter of 1994. Restructuring activities are expected to continue throughout the last half of 1994 and the first half of 1995. The cash required to fund the restructuring program will continue to be provided by operating activities. Net cash used in investing activities decreased by approximately $8 million for the period ended June 30, 1994 compared to the same prior year period. The principal cause of this decline was a reduction in expenditures for property, plant and equipment to approximately $23 million from approximately $32 million for the same 1993 period. The Company anticipates that capital expenditures for the year 1994 will approximate $60 million and will include expansion and process improvements at the Company's manufacturing facilities in Washougal, Washington, Orange, Texas and Macon, Georgia. On June 30, 1994, the Company announced the sale of its oil field chemicals business to Western Company of North America. The proceeds from the sale are included in investing activities with proceeds from the sales of business and long-term investments. The oil field production chemicals business, served by Betz Energy Chemicals, Inc., represented less than 2 percent of the Company's consolidated sales. The sale will allow the Company to concentrate more of its efforts on developing its core technologies. It will also allow the Company to focus on expanding its leadership position in the U.S. and its globalization initiative to address the significant opportunities for growth in Europe, Latin America and the Pacific. Net cash used in financing activities during the first six months of 1994 increased by approximately $21 million over the same prior year period. During the period March 28, 1994, through April 7, 1994, the Company used $20 million to purchase 400,000 shares of treasury stock. The Company expects that cash flows and existing financial resources will be adequate to fund its operating and capital expenditure requirements and to service the dividend and debt requirements associated with the ESOP. During the second quarter, the Company began hedging its exposure to foreign currency fluctuations through the use of foreign currency forward contracts. The Company executed a series of forward contracts during the quarter that were primarily accounted for on a mark to market basis. Unrealized gains or losses are included with investment and other income on the Consolidated Statement of Operations. There are no deferred gains or losses on these forward contracts included in the June 30, 1994 Consolidated Balance Sheet. The globalization of the Company's operations has increased the need to hedge its exposure to foreign currency fluctuations. The Company expects to continue hedging in the future, to the extent necessary to manage its foreign exchange risks, through the use of forward contracts and other foreign exchange derivatives, as well as foreign cash management techniques designed to hedge exchange risks. 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 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. EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (In thousands, except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, Primary Earnings per Common Share 1994 1993 1994 1993 ---- ---- ---- ---- Earnings before cumulative effect of accounting changes $18,898 $18,803 $37,414 $37,990 Effect of preferred stock dividends (1,138) (1,253) (2,278) (2,506) ------- ------- ------- ------- 17,760 17,550 35,136 35,484 Cumulative effect of accounting changes - - - 2,141 ------- ------- ------- ------- Net earnings available to common shareholders $17,760 $17,550 $35,136 $37,625 ======= ======= ======= ======= Average Common Shares outstanding 27,785 28,588 27,963 28,570 Common stock equivalents 224 85 242 213 ------- ------- ------- ------- Average number of Common Shares - primary 28,009 28,673 28,205 28,783 ======= ======= ======= ======= Primary earnings per Common Share: Before cumulative effect of accounting changes $0.64 $0.61 $1.25 $1.23 Cumulative effect of accounting changes - - - 0.07 ------- ------- ------- ------- Primary earnings per Common Share $0.64 $0.61 $1.25 $1.30 ======= ======= ======= ======= Fully Diluted Earnings per Common Share Earnings before cumulative effect of accounting changes $18,898 $18,803 $37,414 $37,990 Effect of ESOP charge to operations assuming conversion of Series A ESOP Convertible Preferred Shares (490) (593) (1,018) (1,211) ------- ------ ------- ------- $18,408 18,210 36,396 36,779 Cumulative effect of accounting changes - - - 2,141 ------- ------- ------- ------- Net earnings available to common shareholders $18,408 $18,210 $36,396 $38,920 ======= ======= ======= ======= Average Common Shares outstanding 27,785 28,588 27,963 28,570 Common stock equivalents 224 85 247 213 Assumed conversion of Series A ESOP Convertible Preferred Shares 2,743 2,740 2,760 2,736 ------- ------- ------- ------- Average number of Common Shares - fully diluted 30,752 31,413 30,970 31,519 ======= ======= ======= ======= Fully diluted earnings per Common Share: Before cumulative effect of accounting changes $0.60 $0.58 $1.18 $1.17 Cumulative effect of accounting changes - - - 0.07 ------- ------- ------- ------- Fully diluted earnings per Common Share $0.60 $0.58 $1.18 $1.24 ======= ======= ======= ======= Common stock equivalents reflect the assumed exercise of dilutive employees' stock options using the treasury stock method.
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: August 12, 1994 By: s/R. Dale Voncanon ------------------------------- R. Dale Voncanon Vice President - Finance Date: August 12, 1994 By: s/William C. Brafford -------------------------------- William C. Brafford Vice President, Secretary and General Counsel -----END PRIVACY-ENHANCED MESSAGE-----