-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B0outfxXABEhfgR7MENWVycOCRecXFz2yV7hc/d2kgp6d2DepFHXhi7uKc4xqvPL hGBlKH63VEFtz2jMXAKPSA== 0000950115-96-000607.txt : 19960514 0000950115-96-000607.hdr.sgml : 19960514 ACCESSION NUMBER: 0000950115-96-000607 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BETZ LABORATORIES INC CENTRAL INDEX KEY: 0000011884 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS CHEMICAL PRODUCTS [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: 96561679 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 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, 1996 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 reports 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. 27,740,827 Common Shares outstanding as of May 6, 1996. BETZ LABORATORIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
Three Months Ended March 31, 1996 1995 ---- ---- Net Sales $199,472 $177,934 Operating Costs and Expenses: Cost of products sold 76,876 63,077 Selling, research and administrative expenses 90,878 84,605 ------------ ------------ 167,754 147,682 OPERATING EARNINGS 31,718 30,252 Other Income (Expense): Investment and other income 285 512 Interest expense (518) (39) ------------ ------------ (233) 473 ------------ ------------ EARNINGS BEFORE INCOME TAXES 31,485 30,725 Income Taxes 11,807 11,983 ------------ ------------ NET EARNINGS $19,678 $18,742 ============ ============ Net earnings per Common Share: Primary $.66 $.63 ============ ============ Fully diluted $.62 $.59 ============ ============ Cash dividends declared per Common Share $.37 $.36 ============ ============ Average number of Common Shares: Primary 27,826 28,025 ============ ============ Fully diluted 30,677 30,786 ============ ============
See notes to consolidated financial statements. 2 of 10 BETZ LABORATORIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands) ASSETS March 31, 1996 December 31, 1995 -------------- ----------------- CURRENT ASSETS Cash and cash equivalents $15,365 $13,919 Trade accounts receivable, less allowances: 1996--$2,969; 1995--$2,886 149,894 146,404 Inventories: Finished products and goods purchased for resale 25,132 25,675 Raw materials 26,988 25,608 ---------- ---------- 52,120 51,283 Prepaid expenses and other 41,071 40,535 ---------- ---------- TOTAL CURRENT ASSETS 258,450 252,141 PROPERTY, PLANT AND EQUIPMENT-- at cost Buildings 191,291 190,308 Machinery and equipment 440,832 439,764 Allowance for depreciation (deduction) (348,284) (336,578) ---------- ---------- 283,839 293,494 Land 27,770 27,792 Construction in progress 23,381 12,528 ---------- ---------- 334,990 333,814 OTHER ASSETS Investments and other 12,084 13,037 Intangibles -- at cost, less amortization: 1996 -- $3,829; 1995 -- $3,544 31,623 31,476 ---------- ---------- 43,707 44,513 ---------- ---------- $637,147 $630,468 ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY March 31, 1996 December 31, 1995 -------------- ----------------- CURRENT LIABILITIES Trade accounts payable $39,098 $39,220 Payroll and related taxes 19,657 26,681 Notes payable 22,329 18,488 Accrued expenses 28,170 35,971 Income taxes 20,864 13,244 Dividends payable 0 10,232 Current portion of ESOP debt 1,000 1,000 ---------- ---------- TOTAL CURRENT LIABILITIES 131,118 144,836 ESOP DEBT--less portion classified as 95,500 95,500 current LONG-TERM LIABILITIES Income taxes 21,183 20,475 Employee benefit plans 21,273 19,451 Other 7,036 7,207 ---------- ---------- 49,492 47,133 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: 1996 -- 486,105 shares; 1995 -- 487,903 shares 97,221 97,581 Guarantee of related ESOP debt (91,063) (91,406) ---------- ---------- 6,158 6,175 Common Shareholders' Equity Common Shares -- Authorized - 90,000,000 shares, $.10 par value; Issued (including treasury shares): 1996 -- 33,642,238 shares; 1995 -- 33,643,981 shares 3,364 3,364 Capital in excess of par value of 84,118 82,613 shares Retained earnings 463,843 446,111 Cost of Common Shares in treasury: 1996 -- 5,908,842 shares; 1995 -- 5,990,825 shares (196,377) (198,157) Unearned compensation (5,474) (3,327) Foreign currency translation 5,405 6,220 adjustments ---------- ---------- COMMON SHAREHOLDERS' EQUITY 354,879 336,824 ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 361,037 342,999 ---------- ---------- $637,147 $630,468 ========== ==========
See notes to consolidated financial statements. BETZ LABORATORIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Three Months Ended March 31, 1996 1995 ---- ---- OPERATING ACTIVITIES Net earnings $19,678 $18,742 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 14,023 11,974 Compensation and employee benefit plans 2,194 2,969 Other, net 128 263 Changes in operating assets and liabilities: Accounts receivable (3,490) 14 Inventories (1,132) (4,190) Prepaid expenses and other (535) (830) Accounts payable and accrued expenses (2,172) 1,656 ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 28,694 30,598 INVESTING ACTIVITIES Expenditures for property, plant and equipment (15,048) (9,362) Proceeds from sales of long-term assets 182 564 Purchases of businesses and long-term investments (4,622) (505) Other, net 1,018 (155) ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (18,470) (9,458) FINANCING ACTIVITIES Dividends paid (12,178) (11,997) Proceeds from issuance of common shares, including treasury shares 261 178 Purchase of treasury shares - (4,411) Net short-term borrowings 3,841 - ----------- ----------- NET CASH USED IN FINANCING ACTIVITIES (8,076) (16,230) Effect of exchange rate changes on cash (702) 705 ----------- ----------- INCREASE IN CASH AND CASH EQUIVALENTS 1,446 5,615 Cash and Cash Equivalents at Beginning of Year 13,919 43,926 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $15,365 $49,541 =========== ===========
See notes to consolidated financial statements. 4 of 10 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. Note 2 - Common Shares Reserved for Stock Plans At March 31, 1996, 4,408,563 and 565,715 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, 2,772,000 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 1996 net sales increased 12% or $21.6 million from $177.9 million to $199.5 million. Net earnings increased $1.0 million, or 5%, from $18.7 million to $19.7 million. Primary earnings per Common Share increased 5% from $.63 to $.66, while fully diluted earnings per Common Share also increased 5% from $.59 to $.62. The 12% increase in net sales is approximately comprised of a 5% increase in volume-mix, a 5% increase due to sales recorded by subsidiaries acquired after the first quarter of 1995, a 1% combined increase in selling prices and changes in the value of foreign currencies relative to the U.S. dollar and a 1% increase due to the inclusion of certain freight revenues in 1996 first quarter net sales. Beginning in 1996, the Company revised its practice of accounting for freight to standardize this practice worldwide. The result increases both net sales and cost of products sold, with no impact on operating earnings. Despite very competitive market conditions in most regions of the world, all operating divisions turned in solid performances for the first quarter. The Company's PaperChem and Process Chemicals units both achieved double-digit sales growth on a global basis. The first quarter results reflect an increase in non-U.S. sales, as reported, of 30% over 1995. Excluding the increase in net sales attributable to acquisitions and to the aforementioned freight reclassification, non-U.S. sales increased 8% over 1995's first quarter. Net sales by the Company's European subsidiaries increased less than 8% on a comparable basis; however, strong performances reported by operations in Canada and the Asia-Pacific region offset the weakness in Europe. First quarter sales in the United States, as reported, rose 6% over the prior year first quarter, 5% on a comparable basis. The three largest operating units in the U.S. (the Betz Water Management Group, Betz PaperChem and Betz Process Chemicals) all posted improved sales growth in the quarter. The table below sets forth as a percentage of sales cost of products sold, selling, research and administrative expenses and operating earnings for the respective periods. Three Months Ended March 31, 1996 1995 ---- ---- Cost of products sold 38.5% 35.4% Selling, research and administrative expenses 45.6% 47.6% Operating earnings 15.9% 17.0% Cost of products sold, as a percentage of sales, increased when compared to the prior year first quarter primarily due to changes in product mix, including those related to the Company's 1995 acquisitions, the standardization of the method of accounting for freight and increases in raw material expense without comparable increases in selling prices. Selling, research and administrative expenses, as a percentage of sales, declined due to savings being realized from the Company's restructuring actions. The Company recorded a $15.6 million provision for restructuring in 1995 for a series of actions to reduce operating costs. These actions include personnel reductions, office consolidations and asset dispositions, including the shutdown of two blending plants in Compton, California, and Cheyenne, Wyoming. During the first quarter of 1996 the Company incurred approximately $730,000 in cash charges to the reserve, eliminated approximately 60 jobs and ceased production at both plants. The remaining restructuring reserve is expected to be sufficient to complete the restructuring actions and will continue to be financed with available operating cash flows and external financing resources. Statement of Financial Accounting Standard Number 121, "Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of," was adopted in the first quarter of 1996. This adoption had no material impact on the Company's results of operations or financial condition. During the quarter, expenditures for property, plant and equipment were $15.0 million, an increase of $5.6 million over the first quarter of 1995. The Company anticipates that capital expenditures will be approximately $60 - $65 million and will include improvements to the Company's production facilities in Italy and Beaumont, Texas to increase the manufacturing capacity for the Novus(R) polymer line, which is used in both process and water treatment applications. First quarter 1996 purchases of long-term investments and businesses include approximately $4.3 million for a payment of the purchase price accrued for the acquisition of the Misan Group in the fourth quarter of 1995. Net cash used in financing activities decreased $8.1 million from the prior year's first quarter primarily due to the purchase of treasury stock at a cost for $4.4 million in the first quarter of 1995 with no similar purchase in 1996, as well as a $3.8 million increase in net short-term borrowings in the first quarter of 1996, necessary to finance the payment for Misan. On March 11, 1996, the Company announced that it signed a definitive agreement to acquire the Dearborn business unit of W.R. Grace & Co. for $632 million, the closing of which is expected to take place in the second quarter of 1996, subject to customary regulatory approvals. Dearborn is a global supplier of industrial water and process treatment chemicals with 1995 sales of approximately $400 million. It has major operations and facilities in North America, Latin America and Europe. The Dearborn acquisition will be accounted for using the purchase method of accounting. The excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired will be amortized on a straight-line basis over 40 years. The acquisition is anticipated to be initially financed using a revolving credit agreement with various participating financial institutions. This agreement is expected to be executed prior to the closing date of the Dearborn acquisition and will bear interest at short-term variable rates. The Company anticipates that present cash and cash equivalents and net cash provided by 1996 operating activities combined with other available external financing resources will be sufficient to fund the Company's operating and capital expenditure requirements and to service the dividend and debt requirements associated with its Employee Stock Ownership Plan. PART II OTHER INFORMATION Item 1 - Legal Proceedings There have been no material developments in the cases of Katherine Adams, et al. v. Pacific Gas and Electric, et al. and Danny Aguayo, et al. v. Betz Laboratories, Inc., et al., nor in the pending proceedings to which the Company is a "Potentially Responsible Party" under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") during the quarter for which this report is filed. The Company is a "Potentially Responsible Party" under CERCLA at thirteen (13) 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, 1995. Item 4 - Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Shareholders was held on April 11, 1996. 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 1996. 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 W. Boyer, Jr. 25,415,982 376,677 -- 2,349,747 Patrick F. Brennan 25,423,980 368,679 -- 2,349,747 William R. Cook 25,401,409 391,250 -- 2,349,747 Alan R. Hirsig 25,423,353 369,306 -- 2,349,747 John A. H. Shober 25,425,040 367,619 -- 2,349,747 Election of Independent Auditors For Against Abstained Not Voted --- ------- --------- --------- Ernst & Young LLP 25,640,929 95,738 55,992 2,349,747 Item 6 - Exhibits and Reports on Form 8-K (a) Exhibit 11: Statement Re: Computation of Per Share Earnings. (b) The Company filed a Form 8-K on March 15, 1996, announcing that it had entered into a definitive agreement on March 11, 1996, with W. R. Grace & Co. - Conn. ("Grace") whereby the Company will purchase and Grace will sell the Dearborn business unit of Grace for $632 million, subject to customary regulatory approval. The Company filed a Form 8-K/A on March 29, 1996, describing the above purchase and sale and attached as an Exhibit the Worldwide Purchase and Sale Agreement dated March 11, 1996, by and between Grace and the Company. No financial statements were filed with either report. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BETZ LABORATORIES, INC. (Registrant) Date: May 13, 1996 By: /s/ George L. James ------------------------------------ George L. James Vice President - Finance and Treasurer Date: May 13, 1996 By: /s/ William C. Brafford --------------------------------------- William C. Brafford Vice President, Secretary and General Counsel EX-11 2 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 1996 1995 - ------------------------------------- ---- ---- Net earnings $19,678 $18,742 Effect of preferred stock dividends, net of taxes (1,328) (1,219) ------------- -------------- Net earnings available to common shareholders $18,350 $17,523 ============= ============== Average Common Shares outstanding 27,674 27,847 Common stock equivalents 152 178 ------------- -------------- Average number of Common Shares - primary 27,826 28,025 ============= ============== Primary earnings per Common Share $0.66 $0.63 ============= ============== Fully Diluted Earnings per Common Share Net earnings $19,678 $18,742 Effect of ESOP charge to operations assuming conversion of Series A ESOP Convertible Preferred Shares, net of taxes (648) (539) ------------- -------------- Net earnings available to common shareholders $19,030 $18,203 ============= ============== Average Common Shares outstanding 27,674 27,847 Common stock equivalents 240 178 Assumed conversion of Series A ESOP Convertible Preferred Shares 2,763 2,761 ------------- -------------- Average number of Common Shares - fully diluted 30,677 30,786 ============= ============== Fully diluted earnings per Common Share $0.62 $0.59 ============= ==============
Common stock equivalents reflect the assumed exercise of dilutive employees' stock options using the treasury stock method. EX-27 3 ARTICLE 5 FDS FOR 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1996 MAR-31-1996 15,365 0 152,863 2,969 52,120 258,450 683,274 348,284 637,147 131,118 95,500 3,364 6,158 0 351,515 637,147 199,472 199,472 76,876 76,876 0 0 518 31,485 11,807 19,678 0 0 0 19,678 0.66 0.62
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