-----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, SVU1jPytwgmVxaRhWXKq7pfI168xOniZ8q6AZFPUFrinkmXccngAwxStmBBviUSo 5c+MHeXFEK1axzP4LsNcuw== 0000069598-94-000012.txt : 19940817 0000069598-94-000012.hdr.sgml : 19940817 ACCESSION NUMBER: 0000069598-94-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940812 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: 94543292 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 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1994 THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-4957 NALCO CHEMICAL COMPANY Incorporated in the State of Delaware Employer Identification No. 36-1520480 One Nalco Center, Naperville, Illinois 60563-1198 Telephone 708-305-1000 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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares outstanding of each of the issuer's classes of common stock, as of June 30, 1994 was 68,354,353 shares common stock - par value $.1875 a share. NALCO CHEMICAL COMPANY INDEX
Page No. Part I. Financial Information: Item 1. Financial Statements Condensed Consolidated Statements of Financial Condition - June 30, 1994 (Unaudited) and December 31, 1993 . . . . 2 Condensed Consolidated Statements of Earnings (Unaudited) - Three Months and Six Months Ended June 30, 1994 and 1993 . 3 Condensed Consolidated Statements of Cash Flows (Unaudited)- Three Months and Six Months Ended June 30, 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 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
June 30, December 31, 1994 1993 Dollars in millions (Unaudited) (Note) ASSETS Current assets Cash and cash equivalents $ 80.0 $ 78.1 Accounts receivable, less allowances of $5.2 and $4.3, respectively 224.1 215.2 Inventories Finished products 48.2 43.5 Materials and work in process 28.6 25.4 76.8 68.9 Prepaid expenses 16.1 12.8 Total current assets 397.0 375.0 Goodwill, less accumulated amortization of $13.7 and $10.1, respectively 116.0 112.9 Other assets 155.6 166.0 Property, plant and equipment 1,186.4 1,129.9 Less allowances for depreciation (601.8) (571.4) 584.6 558.5 $1,253.2 $1,212.4 LIABILITIES/SHAREHOLDERS' EQUITY Current liabilities Short-term debt $ 20.5 $ 15.2 Accounts payable 99.6 84.5 Other current liabilities 94.3 89.9 Total current liabilities 214.4 189.6 Long-term debt 249.3 252.1 Deferred income taxes 57.9 58.1 Accrued postretirement benefits 98.1 94.2 Other liabilities 67.2 67.8 Shareholders' equity 566.3 550.6 $1,253.2 $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 EARNINGS (UNAUDITED)
Three Months Ended Six Months Ended (Amounts in millions, June 30 June 30 except per share data) 1994 1993 1994 1993 Net sales $352.0 $347.5 $688.2 $686.5 Operating costs and expenses Cost of products sold 158.3 151.8 308.7 301.9 Operating expenses 135.3 129.9 262.0 255.7 293.6 281.7 570.7 557.6 Operating earnings 58.4 65.8 117.5 128.9 Other income (expense) Interest and other income 2.8 2.9 5.5 6.4 Interest expense (6.6) (6.4) (13.4) (14.8) Earnings before income taxes 54.6 62.3 109.6 120.5 Income taxes 21.5 24.2 42.7 47.3 Earnings before extraordinary loss and effect of accounting change 33.1 38.1 66.9 73.2 Extraordinary loss from retirement of debt, net of taxes - - - (10.6) Cumulative effect of change in accounting for postretirement benefits other than pensions, net of taxes - - - (56.5) Net earnings $ 33.1 $ 38.1 $ 66.9 $ 6.1 Per common share Earnings - Primary Before extraordinary loss and accounting change $ .44 $ .50 $ .89 $ .96 Extraordinary loss from retirement of debt - - - (.15) Cumulative effect of change in accounting for postretirement benefits other than pensions - - - (.80) Net earnings $ .44 $ .50 $ .89 $ .01 Earnings - Fully Diluted Before extraordinary loss and accounting change $ .41 $ .46 $ .83 $ .89 Extraordinary loss from retirement of debt - - - (.13) Cumulative effect of change in accounting for postretirement benefits other than pensions - - - (.72) Net earnings $ .41 $ .46 $ .83 $ .04 Cash dividends $ .24 $ .225 $ .465 $ .435 Average primary shares outstanding (in thousands) 69,127 69,830 69,325 70,129 Average fully diluted shares outstanding (in thousands) 77,263 78,036 77,469 78,335
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). NALCO CHEMICAL COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended Six Months Ended June 30 June 30 Dollars in millions 1994 1993 1994 1993 Cash provided by (used for) operating activities Net earnings $ 33.1 $ 38.1 $ 66.9 $ 6.1 Adjustments not affecting cash Extraordinary loss from retirement of debt - - - 10.6 Cumulative effect of change in accounting for postretirement benefits other than pensions - - - 56 Depreciation and amortization23.4 22.0 47.1 43.6 Other, net 7.9 5.4 4.8 3.2 Changes in current assets and liabilities (6.3) 1.8 5.6 3.7 Net cash provided by operations 58.1 67.3 124.4 123.7 Investing activities Additions to property, plant and equipment (33.8) (28.3) (68.5) (53.6) Changes in short-term marketable securities - - - 104.0 Other (3.9) 14.2 (0.7) 11.6 Net cash provided by (used for) investing activities (37.7) (14.1) (69.2) 62.0 Financing activities Cash dividends (119.2) (18.4) (37.5) (35.8) Changes in short-term debt 0.9 4.2 9.4 (16.7) Changes in long-term debt 0.3 (4.9) (1.2) (165.8) Common stock reacquired (21.5) (12.5) (32.4) (44.3) Other 1.8 1.5 5.4 9 Net cash (used for) financing activities (37.7) (30.1) (56.3) (253.0) Effects of foreign exchange rate changes 1.8 - 3.0 (0.2) Increase (decrease) in cash and cash equivalents $(15.5) $ 23.1 $ 1.9 $(67.5)
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). NALCO CHEMICAL COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) June 30, 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 and six month periods ended June 30, 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 LLP. The Report of Independent Accountants on Review of Interim Financial Information is included on page 6. NOTE B - SHAREHOLDERS' EQUITY Shareholders' equity may be further detailed as follows:
June 30, December 31, Dollars in millions, except per share figures 1994 1993 Preferred stock - par value $1.00 per share; authorized 2,000,000 shares; Series B ESOP Convertible Preferred Stock - 406,351 shares at June 30, 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 195.1 195.7 Unearned ESOP compensation (173.6) (174.4) 21.9 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 23.5 10.6 Retained earnings 848.6 819.2 Minimum pension liability adjustment (7.1) (7.1) Foreign currency translation adjustments (38.0) (49.3) Common stock reacquired - at cost 11,933,215 shares at June 30, 1994 and 11,383,105 shares at December 31, 1993 (297.7) (259.6) Total shareholders' equity $ 566.3 $ 550.6
REPORT OF INDEPENDENT ACCOUNTANTS 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 June 30, 1994, and for the three month and six month periods 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 LLP By: Robert R. Ross Engagement Partner July 29, 1994 Chicago, Illinois Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Second Quarter 1994 Operations Compared to Second Quarter 1993 Sales for the quarter rose 1 percent over last year, with two of the four operating units reporting improved results. Net earnings were $33.1 million, a decrease of 13 percent from second quarter 1993 earnings of $38.1 million. Sales by the three units comprising U.S. Operations increased 3 percent. Sales by the Water and Waste Treatment Division were up 1 percent over a year ago with the Polymer Group reporting a double-digit gain. UNISOLV , Utility Chemicals, and Watergy also posted gains. The Process Chemicals Division posted a 7 percent increase in sales, led by the General Industry and Absorbent Chemicals Groups, which reported double-digit gains. Pulp and Paper Chemicals also posted a strong improvement over last year. Sales by the Petroleum Division were 5 percent lower than a year ago. Sales by International Operations were down 1 percent. Latin American subsidiaries reported a 9 percent gain in sales with double-digit advances posted by companies in Venezuela and Argentina. Pacific Rim sales rose 6 percent with all but one subsidiary reporting advances from last year. Sales by European subsidiaries, however, were down 7 percent from a year ago, with over half of the decrease resulting from changes in exchange rates. European exports to the Middle East were also down significantly. The gross margin was 55.0 percent, down 1.3 percentage points from last year's rate of 56.3 percent. Gross margins of U.S. Operations decreased from a year ago as lower raw material costs were more than offset by the effects of sales mix changes. Operating expenses (selling, service, research, etc.) were up $5.4 million or 4 percent over the second quarter of last year. Spending for future international growth resulted in higher salaries, employee benefits, and depreciation. Interest and other income decreased $0.1 million from a year ago as improved foreign exchange results were offset by lower equity in earnings of affiliated companies. Interest expense was up $0.2 million over the second quarter 1993. The effective tax rate was 39.4 percent for the quarter, compared to 38.9 percent for the same period last year and for all of 1993. Operating earnings of $58.4 million were 11 percent lower than last year s $65.8 million. Net earnings as a percent to sales were 9.4 percent compared to 11.0 percent for a year ago. Fully diluted earnings per share were 41 cents for the quarter, a decrease of 11 percent from the 46 cents for the second quarter 1993. First Half 1994 Operations Compared To First Half 1993 Sales for the first six months were $688.2 million, up slightly over sales of $686.5 million for the same period last year. Sales by the three domestic divisions rose 3 percent. The Water and Waste Treatment Division reported a 3 percent increase with advances posted by four of the five marketing groups, most notably the Polymer Group which recorded a double-digit gain. Process Chemicals Division sales were up 6 percent, with the Absorbent Chemicals, General Industry, and Pulp and Paper Chemicals Groups reporting solid growth. Petroleum Chemicals Division sales were down 3 percent from a year ago. International Operations reported a 3 percent decrease in sales from a year ago. Sales by Latin American subsidiaries were up 6 percent, with solid increases posted by companies in Venezuela and Argentina. In the Pacific Rim, sales advanced 3 percent as double- digit gains were recorded by subsidiaries in Hong Kong, Japan, Philippines, and Thailand. Unfavorable translation rates compared to last year and lower exports to the Middle East contributed to an 8 percent decrease in sales by European subsidiaries from a year ago. The gross margin was 55.1 percent, down 0.9 percentage points from last year's rate of 56.0 percent. Gross margins of U.S. Operations decreased from a year ago primarily as a result of sales mix changes. Gross margins of our International Operations were unchanged from last year. Operating expenses were up $6.3 million or 2 percent from a year ago as a result of higher salaries, benefits and depreciation. Interest and other income decreased $0.9 million from a year ago as a result of lower interest income, which reflected reduced levels of invested cash balances. In addition, lower equity in earnings of affiliated companies and net other miscellaneous income were partly offset by improved foreign exchange results compared to last year. Interest expense was down $1.4 million from last year as a result of lower borrowing levels. The effective tax rate was 38.9 percent, slightly lower than the 39.3 percent for the first half of 1993. Operating earnings were $117.5 million, a decrease of 9 percent from a year ago. Earnings before extraordinary loss and effect of accounting change as a percent to sales were 9.7 percent compared to 10.7 percent for a year ago. Fully diluted earnings per share before extraordinary loss and effect of accounting change were 83 cents, a decrease of 7 percent from the 89 cents for the first half 1993. Fully diluted net earnings per share were 83 cents for the first half of 1994, compared to 4 cents for a year ago. Changes in Financial Condition Cash and cash equivalents increased $1.9 million during the first half of 1994 as detailed in the Unaudited Condensed Consolidated Statements of Cash Flows. Days sales outstanding were 56 days at June 30, 1994, unchanged from December 31, 1993. Working capital at June 30, 1994 totaled $182.6 million, down slightly from the $185.4 million at last year end. The ratio of current assets to current liabilities was 1.9 to 1 at June 30, 1994, which was slightly lower than the December 31, 1993 ratio of 2.0 to 1. Domestic projects accounted for about two-thirds of the $68.5 million in capital investments during the first half. 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 was dedicated in June 1994. PART II. OTHER INFORMATION 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 did not file any reports on Form 8-K during the three months ended June 30, 1994. 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: August 10, 1994 W. E. BUCHHOLZ W. E. Buchholz - Vice President, Chief Financial Officer Date: August 10, 1994 S. J. GIOIMO S. J. Gioimo - Secretary EX-11 2 EXHIBIT (11) STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE NALCO CHEMICAL COMPANY AND SUBSIDIARIES
Three Months Ended Six Months Ended (Amounts in thousands, June 30 June 30 except per share data) 1994 1993 1994 1993 Primary Average shares outstanding 68,595 69,066 68,744 69,333 Net effect of dilutive stock options and shares contingently issuable - based on the treasury stock method using average market price 532 764 581 796 TOTALS 69,127 69,830 69,325 70,129 Earnings before extraordinary loss and effect of accounting change $33,128 $38,052 $66,933 $73,141 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 33,128 38,052 66,933 6,079 Preferred stock dividends - net of taxes (2,756) (2,823) (5,520) (5,652) Net earnings to common shareholders $30,372 $35,229 $61,413 $ 427 Per share amounts Earnings before extraordinary loss and effect of accounting change $ .44 $ .50 $ .89 $ .96 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 to common shareholders $ .44 $ .50 $ .89 $ .01
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE NALCO CHEMICAL COMPANY AND SUBSIDIARIES
Three Months Ended Six Months Ended (Amounts in thousands, June 30 June 30 except per share data) 1994 1993 1994 1993 Fully diluted Average shares outstanding 68,595 69,066 68,744 69,333 Average dilutive effect of assumed conversion of ESOP Convertible Preferred shares 8,136 8,197 8,144 8,206 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 532 773 581 796 TOTALS 77,263 78,036 77,469 78,335 Earnings before extraordinary loss and effect of accounting change $33,128 $38,052 $66,933 $73,141 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 33,128 38,052 66,933 6,079 Additional ESOP contribution resulting from assumed conversion, net of taxes (1,212) (1,316) (2,503) (2,714) Tax adjustment on assumed common dividends (169) (535) (348) (408) Net earnings applicable to common shareholders $31,747 $36,201 $64,082 $ 2,957 Per share amounts Earnings before extraordinary loss and effect of accounting change $ .41 $ .46 $ .83 $ .89 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 to common shareholders $ .41 $ .46 $ .83 $ .01
EX-15 3 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 July 29, 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 LLP By: Robert R. Ross Engagement Partner August 10, 1994 Chicago, Illinois -----END PRIVACY-ENHANCED MESSAGE-----