-----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, E4Nx+ko/SDwJOLb0YwfzWiGMERZCy9d8noN6TSxXyhrb04C8NECImWVwrfPRgO/Y FPkAD0ECUVf5ApbPVCcuDw== 0000069598-94-000007.txt : 19940602 0000069598-94-000007.hdr.sgml : 19940602 ACCESSION NUMBER: 0000069598-94-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NALCO CHEMICAL CO CENTRAL INDEX KEY: 0000069598 STANDARD INDUSTRIAL CLASSIFICATION: 2890 IRS NUMBER: 361520480 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04957 FILM NUMBER: 94526920 BUSINESS ADDRESS: STREET 1: ONE NALCO CTR CITY: NAPERVILLE STATE: IL ZIP: 60563 BUSINESS PHONE: 7083051000 MAIL ADDRESS: STREET 1: ONE NALCO CENTER CITY: NAPERVILLE STATE: IL ZIP: 60563-1198 10-Q 1 DOCUMENT NALCO CHEMICAL COMPANY INDEX
Page No. Part I. Financial Information: Item 1. Financial Statements Condensed Consolidated Statements of Financial Condition March 31, 1994 (Unaudited) and December 31, 1993 . . . . 2 Condensed Consolidated Statements of Operatons (Unaudited) Three Months Ended March 31, 1994 and 1993 . . . . . . 3 Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 1994 and 1993 . . . . . . 4 Notes to Condensed Consolidated Financial Statements (Unaudited). . . . . . . . . . 5 Report of Independent Accountants' on Review of Interim Financial Information . 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . 7 Part II. Other Information: Item 4. Submission of Matters to a vote of Security Holders . . . . . . . . . . . . . 9 Item 6. Exhibits and Reports on Form 8-K . . . . . 9 Exhibit (11) Statement Re: Computation of Earnings Per Share . . . . . . . .10 Exhibit (15) Awareness Letter of Independent Accountants . . . . . . . . . . . . .12 Signatures . . . . . . . . . . . . . . . . . . . .13
PART I. FINANCIAL INFORMATION NALCO CHEMICAL COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, December 31, 1994 1993 Dollars in millions (Unaudited) (Note) ASSETS Current assets Cash and cash equivalents $ 95.5 $ 78.1 Accounts receivable, less allowances of $4.9 and $4.3, respectively 217.7 215.2 Inventories Finished products 46.8 43.5 Materials and work in process 27.5 25.4 74.3 68.9 Prepaid expenses 14.1 12.8 Total current assets 401.6 375.0 Goodwill, less accumulated amortization of $10.9 and $10.1, respectively 113.0 112.9 Other assets 160.7 166.0 Property, plant and equipment 1,160.9 1,129.9 Less allowances for depreciation (591.2) (571.4) 569.7 558.5 $1,245.0 $1,212.4 LIABILITIES/SHAREHOLDERS' EQUITY Current liabilities Short-term debt $ 19.7 $ 15.2 Accounts payable 96.3 84.5 Other current liabilities 96.4 89.9 Total current liabilities 212.4 189.6 Long-term debt 249.8252.1 Deferred income taxes 57.7 58.1 Accrued postretirement benefits 95.9 94.2 Other liabilities 65.0 67.8 Shareholders' equity 564.2 550.6 $1,245.0 $1,212.4
Note: The Statement of Financial Condition at December 31, 1993 has been derived from the audited financial statements at that date. See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). NALCO CHEMICAL COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended (Amounts in millions, March 31 except per share data) 1994 1993 Net sales $336.2 $339.0 Operating costs and expenses Cost of products sold 150.4 150.1 Operating expenses 126.7 125.8 277.1 275.9 Operating earnings 59.1 63.1 Other income (expense) Interest and other income 2.7 3.5 Interest expense (6.8) (8.4) Earnings before income taxes 55.0 58.2 Income taxes 21.2 23.1 Earnings before extraordinary loss and effect of accounting change 33.8 35.1 Extraordinary loss from retirement of debt, net of taxes - (10.6) Cumulative effect of change in accounting for postretire- ment benefits other than pensions, net of taxes - (56.5) Net earnings (loss) $ 33.8 $(32.0) Per common share Earnings - Primary Before extraordinary loss and accounting change $ .45 $ .46 Extraordinary loss from retirement of debt - (.15) Cumulative effect of change in accounting for postre- tirement benefits other than pensions - (.80) Net earnings (loss) $ .45 $ (.49) Earnings - Fully Diluted Before extraordinary loss and accounting change $ .42 $ .43 Extraordinary loss from retirement of debt - (.13) Cumulative effect of change in accounting for postre- tirement benefits other than pensions - (.72) Net earnings (loss) $ .42 $ (.42) Cash dividends $ .225 $ .21 Average primary shares outstanding (in thousands) 69,533 70,409 Average fully diluted shares outstanding (in thousands) 77,686 78,624
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). NALCO CHEMICAL COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31 Dollars in millions 1994 1993 Cash provided by (used for) operating activities Net earnings (loss) $ 33.8 $(32.0) Adjustments not affecting cash Extraordinary loss from retirement of debt - 10.6 Cumulative effect of change in accounting for postre- tirement benefits other than pensions - 56.5 Depreciation and amortization 23.7 21.6 Other, net (3.1) (2.2) Changes in current assets and liabilities 11.9 1.9 Net cash provided by operations 66.3 56.4 Investing activities Additions to property, plant and equipment (34.7 (25.3) Changes in short-term market- able securities - 104.0 Other 3.2 (2.6) Net cash provided by (used for) investing activities (31.5) 76.1 Financing activities Cash dividends (18.3 (17.4) Changes in short-term debt 8.5 (20.9) Changes in long-term debt (1.5) (160.9) Common stock reacquired (10.9) (31.8) Other 3.6 8.1 Net cash (used for) financing activities (18.6) (222.9) Effects of foreign exchange rate changes 1.2 (0.2) Increase (decrease) in cash and cash equivalents $ 17.4 $(90.6)
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). NALCO CHEMICAL COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 1994 NOTE A BASIS OF PRESENTATION The accompanying condensed consolidated financial statements have been prepared, without audit, in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. Financial information as of December 31 has been derived from the audited financial statements of the Company, but does not include all disclosures required by generally accepted accounting principles. It is the opinion of management that the unaudited condensed consolidated financial statements include all adjustments necessary to fairly state the results of operations for the three month periods ended March 31, 1994 and 1993. The results of interim periods are not necessarily indicative of results to be expected for the year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1993. The unaudited condensed consolidated financial statements and the related notes have been reviewed by Nalco's independent accountants, Price Waterhouse. The Independent Accountants' Review Report is included on page 6. NOTE B SHAREHOLDERS' EQUITY Shareholders' equity may be further detailed as follows:
Dollars in millions, except per March 31, December 31, share figures 1994 1993 Preferred stock - par value $1.00 per share; authorized 2,000,000 shares; Series B ESOP Convertible Preferred Stock - 407,283 shares at March 31, 1994 and 407,806 shares at December 31, 1993 $ 0.4 $ 0.4 Series A Junior Participating Preferred Stock - none issued - - Capital in excess of par value of shares 195.5 195.7 Unearned ESOP compensation (173.6) (174.4) 22.3 21.7 Common stock - par value $.1875 per share; authorized 200,000,000 shares; issued 80,287,568 shares 15.1 15.1 Capital in excess of par value of shares 23.1 10.6 Retained earnings 834.7 819.2 Minimum pension liability adjustment (7.1) (7.1) Foreign currency translation adjustments (44.2) (49.3) Common stock reacquired - at cost 11,497,275 shares at March 31, 1994 and 11,383,105 shares at December 31, 1993 (279.7) (259.6) Total shareholders' equity $ 564.2 $ 550.6
INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION To the Board of Directors and Shareholders of Nalco Chemical Company We have reviewed the accompanying interim financial information of Nalco Chemical Company and consolidated subsidiaries as of March 31, 1994, and for the three month period then ended. This interim financial information is the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial information for it to be in conformity with generally accepted accounting principles. We previously audited in accordance with generally accepted auditing standards, the statement of consolidated financial condition as of December 31, 1993, and the related statements of consolidated earnings, of cash flows and of common shareholders equity for the year then ended (not presented herein), and in our report dated January 25, 1994 (except as to Note 17, which is as of February 3, 1994) we expressed an unqualified opinion on those consolidated financial statements. Our opinion included an explanatory paragraph which discussed the Company s change in its method of accounting for postretirement benefits other than pensions in 1993. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial condition as of December 31, 1993, is fairly stated in all material respects in relation to the statement of consolidated financial condition from which it has been derived. Price Waterhouse By: Robert R. Ross Engagement Partner April 20, 1994 Chicago, Illinois Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations First Quarter 1994 Operations Compared to First Quarter 1993 Sales for the quarter decreased 1 percent from last year, with two of the four operating units reporting improved results. Earnings were $33.8 million, a decrease of 4 percent from first quarter 1993 earnings of $35.1 million before an extraordinary loss and the cumulative effect of a change in accounting principle. Sales by the three units comprising U.S. Operations were up 3 percent. Sales by the Water and Waste Treatment Division increased 4 percent from a year ago, as all five groups reported improvements. A double-digit gain was posted by the Polymer Group, and strong increases were also reported by the UNISOLV and Utility Chemicals Groups. The Process Chemicals Division also posted a 4 percent gain in sales, led by a strong improvement by the Pulp and Paper Chemicals Group. Sales by the Petroleum Chemicals Division were 1 percent lower than a year ago, as a solid gain by the Additives Group was offset by lower sales to refineries. Sales by International Operations decreased 6 percent. This was attributable to the weak economies in Europe and the stronger dollar compared to a year ago. Sales by European subsidiaries were down 9 percent from last year with about half the decline due to changes in translation rates. Latin American subsidiaries reported a 2 percent increase in sales with solid gains posted by companies in Argentina and Colombia. Pacific Rim sales rose 1 percent from a year ago. Most subsidiaries in the region posted strong improvements, but these gains were offset by lower results reported by companies in Australia and Indonesia. The gross margin was 55.3 percent, down 0.4 percentage points from last year s rate of 55.7 percent. Gross margins of U.S. Operations decreased from a year ago as stable selling prices and lower raw material costs were more than offset by higher costs for field equipment, lower production volumes and sales mix changes. Slightly higher gross margins were reported by International Operations, however. Operating expenses (selling, service research, etc.) were up $0.9 million or 1 percent over the first quarter of last year. Higher salaries and employee benefits were partially offset by decreased costs of incentive plans related to the lower sales and earnings for the quarter. Operating earnings were down 6 percent to $59.1 million. Interest and other income decreased $0.8 million from a year ago primarily as a result of lower interest income which reflected reduced levels of invested cash balances. Interest expense was $1.6 million lower than a year ago as a result of lower borrowing levels. The effective tax rate was 38.5 percent for the quarter, compared to 39.7 percent for the same period last year and 38.9 percent for all of 1993. Earnings before extraordinary loss and effect of accounting change as a percent to sales were 10.1 percent compared to 10.4 percent for a year ago. Fully diluted earnings per share before extraordinary loss and effect of accounting change were 42 cents for the quarter, a decrease of 2 percent from the 43 cents for the first quarter 1993. Fully diluted net earnings per share were 42 cents for the quarter, compared to a net loss per share of 42 cents a year ago. Changes in Financial Condition Cash and cash equivalents increased $17.4 million during the quarter as detailed in the Unaudited Condensed Consolidated Statement of Cash Flows. Days sales outstanding were 55 days at March 31, 1994, down slightly from the 56 days at the end of 1993. Working capital at March 31, 1994 totaled $189.2 million, up slightly from the $185.4 million at last year end. The ratio of current assets to current liabilities was 1.9 to 1 at March 31, 1994, which was slightly lower than the December 31, 1993 ratio of 2.0 to 1. Domestic projects accounted for more than two-thirds of the $34.7 million in capital investments during the first quarter. Major expenditures were for additional PORTA-FEED units, automobiles for the sales force, and construction of the new European business and technical center near Leiden, The Netherlands which is scheduled for completion mid-year. PART II. OTHER INFORMATION Item 4.Submission of Matters to a Vote of Security Holders The Annual Meeting of Stockholders of Nalco Chemical Company was held on April 20, 1994, for the purpose of electing three Class I directors for three-year terms and approving the appointment of independent accountants. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and there was no solicitation in opposition to management's solicitation. All of management s nominees for directors as listed in the proxy statement were elected. There were no broker non-votes. The vote electing the individual directors was as follows:
Shares Shares Director Voted For Withheld J. P. Frazee, Jr. 67,358,893 616,086 A. L. Kelly 66,565,335 1,409,644 F. A. Krehbiel 61,679,571 6,295,408
The appointment of Price Waterhouse as independent accountants for the Company was approved by the following vote:
Shares Shares Shares Voted Voted Voted For Against Abstaining 67,527,296 247,344 200,339
Item 6. Exhibits and Reports on Form 8-K (a) The following exhibits are included herein: (11) Statement Re: Computation of Earnings Per Share (15) Awareness Letter of Independent Accountants (b) The Registrant has filed a report on Form 8-K dated February 3, 1994 relating to a proposed joint venture with Exxon Chemical Company and letter of intent to sell its Freeport, Texas plant and worldwide automotive paint spray booth business to PPG Industries, Inc. No financial statements were filed as a part of this report. 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. NALCO CHEMICAL COMPANY (Registrant) Date: May 10, 1994 W. E. BUCHHOLZ W. E. Buchholz - Vice President, Chief Financial Officer Date: May 10, 1994 S. J. GIOIMO S. J. Gioimo - Secretary 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. NALCO CHEMICAL COMPANY (Registrant) Date: May 10, 1994 W. E. Buchholz - Vice President, Chief Financial Officer Date: May 10, 1994 S. J. Gioimo - Secretary EX-11 2 EXHIBIT 11 EXHIBIT (11) STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE NALCO CHEMICAL COMPANY AND SUBSIDIARIES
Three Months Ended (Amounts in thousands, March 31 except per share data) 1994 1993 Primary Average shares outstanding 68,904 69,586 Net effect of dilutive stock options and shares contingently issuable - based on the treasury stock method using average market price 629 823 TOTALS 69,533 70,409 Earnings before extraordinary loss and effect of accounting change $ 33,805 $ 35,089 Extraordinary loss from retirement of debt, net of taxes - (10,600) Cumulative effect of change in accounting for postretirement benefits other than pensions, net of taxes - (56,462) Net earnings (loss) 33,805 (31,973) Preferred stock dividends, net of taxes (2,764) (2,829) Net earnings (loss) to common shareholders $ 31,041$(34,802) Per share amounts Earnings before extraordinary loss and effect of accounting change $ .45 $ .46 Extraordinary loss from retirement of debt, net of taxes - (.15) Cumulative effect of change in accounting for postretirement benefits other than pensions, net of taxes - (.80) Net earnings (loss) to common shareholders $ .45 $ (.49)
EXHIBIT (11) STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE NALCO CHEMICAL COMPANY AND SUBSIDIARIES
Three Months Ended (Amounts in thousands, March 31 except per share data) 1994 1993 Fully diluted Average shares outstanding 68,904 69,586 Average dilutive effect of assumed conversion of ESOP Convertible Preferred shares 8,153 8,215 Additional shares assuming exercise of dilutive stock options and shares contingently issuable based on the treasury stock method using the quarter-end market price, if higher than average market price 629 823 TOTALS 77,686 78,624 Earnings before extraordinary loss and effect of accounting change $ 33,805 $35,089 Extraordinary loss from retirement of debt, net of taxes - (10,600) Cumulative effect of change in accounting for postretirement benefits other than pensions, net of taxes - (56,462) Net earnings (loss) 33,805 (31,973) Additional ESOP contribution resulting from assumed conversion, net of taxes (1,291) (1,398) Tax adjustment on assumed common dividends (179) 128 Net earnings (loss) applicable to common shareholders $ 32,335 $(33,243) Per share amounts Earnings before extraordinary loss and effect of accounting change $ .42 $ .43 Extraordinary loss from retirement of debt, net of taxes - (.13) Cumulative effect of change in accounting for postretirement benefits other than pensions, net of taxes - (.72) Net earnings (loss) to common shareholders $ .42 $ (.42)
EX-15 3 EXHIBIT 15 EXHIBIT (15) AWARENESS LETTER OF INDEPENDENT ACCOUNTANTS Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Dear Sirs: We are aware that Nalco Chemical Company has included our report dated April 20, 1994 (issued pursuant to the provisions of Statement on Auditing Standards No. 71) in the Prospectuses constituting part of its Registration Statements on Form S-3 (Nos. 33-53111, 33-9934, and 2-97721) and Form S-8 (Nos. 33-38033, 33-38032, 33-29149, 2-97721, 2-97131 and 2-82642). We are also aware of our responsibilities under the Securities Act of 1933. Yours very truly, Price Waterhouse By: Robert R. Ross Engagement Partner May 10, 1994 Chicago, Illinois -----END PRIVACY-ENHANCED MESSAGE-----