-----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, MnJqlR0g2ExcM4pZNZTQnxl5neIyWerEODQJD8+OX/qJ/mcYcp6NpN5ReOiQ57d4 YJs+MdabYLxZyPMyz7GU+Q== 0000069598-95-000031.txt : 19951119 0000069598-95-000031.hdr.sgml : 19951119 ACCESSION NUMBER: 0000069598-95-000031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: CSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NALCO CHEMICAL CO CENTRAL INDEX KEY: 0000069598 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS CHEMICAL PRODUCTS [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: 95591353 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 NALCO CHEMICAL COMPANY INDEX Page No. Part I. Financial Information: Condensed Consolidated Statements of Financial Condition - September 30, 1995 (Unaudited) and December 31, 1994 2 Condensed Consolidated Statements of Earnings (Unaudited) - Three Months and Nine Months Ended September 30, 1995 and 1994 3 Condensed Consolidated Statements of Cash Flows (Unaudited) - Three Months and Nine Months Ended September 30, 1995 and 1994 4 Notes to Condensed Consolidated Financial Statements (Unaudited) 5 Report of Independent Accountants on Review of Interim Financial Information 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II. Other Information: Item 6. Exhibits and Reports on Form 8-K 14 Exhibit (11) - Statement Re: Computation of Earnings Per Share 15 Exhibit (15) - Awareness Letter of Independent Accountants 17 Exhibit (27) - Financial Data Schedule 18 Signatures 19 PART I. FINANCIAL INFORMATION NALCO CHEMICAL COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION September 30, December 31, 1995 1994 Dollars in millions (Unaudited) (Note) ASSETS Current assets Cash and cash equivalents $ 39.8 $ 45.1 Accounts receivable, less allowances of $6.4 and $5.6, respectively 230.3 205.9 Inventories Finished products 58.8 51.4 Materials and work in process 28.4 32.4 87.2 83.8 Prepaid expenses, taxes and other current assets 23.1 27.3 Total current assets 380.4 362.1 Investment in and advances to partnership 130.4 109.4 Goodwill, less accumulated amortization of $17.8 and $15.1, respectively 111.2 114.4 Other assets 155.8 172.4 Property, plant and equipment 1,141.2 1,067.1 Less allowances for depreciation (591.6) (543.2) 549.6 523.9 $1,327.4 $1,282.2 LIABILITIES/SHAREHOLDERS' EQUITY Current liabilities Short-term debt $ 52.1 $ 21.6 Accounts payable 103.5 109.1 Accrued formation and consolidation expenses 24.3 43.2 Other current liabilities 110.0 100.4 Total current liabilities 289.9 274.3 Long-term debt 248.8 245.3 Deferred income taxes 52.9 56.8 Accrued postretirement benefits 97.4 95.2 Other liabilities 67.6 66.4 Shareholders' equity 570.8 544.2 $1,327.4 $1,282.2 Note: The Statement of Financial Condition at December 31, 1994 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 Nine Months Ended (Amounts in millions, September 30 September 30 except per share data) 1995 1994 1995 1994 Net sales $335.5 $343.4 $977.7 $1,031.6 Operating costs and expenses Cost of products sold 151.9 152.5 441.8 461.2 Operating expenses 121.0 125.4 358.4 387.4 Formation and consolidation expenses - 51.1 - 51.1 272.9 329.0 800.2 899.7 Operating earnings 62.6 14.4 177.5 131.9 Other income (expense) Interest and other income 2.0 6.5 5.3 12.0 Interest expense (4.1) (4.3) (12.5) (17.7) Equity in earnings of partnership 3.7 2.6 11.9 2.6 Earnings before income taxes 64.2 19.2 182.2 128.8 Income taxes 23.7 11.7 66.8 54.4 Net earnings $ 40.5 $ 7.5 $115.4 $ 74.4 Per common share Net earnings - Primary $ 0.56 $ 0.07 $ 1.57 $ 0.96 Net earnings - Fully diluted $ 0.52 $ 0.08 $ 1.46 $ 0.91 Cash dividends $ 0.25 $ 0.24 $ 0.74 $ 0.705 Average primary shares outstanding (in thousands) 67,827 68,844 68,052 69,196 Average fully diluted shares outstanding (in thousands) 75,851 76,968 76,107 77,331 See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). NALCO CHEMICAL COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended Nine Months Ended September 30 September 30 Dollars in millions 1995 1994 1995 1994 Cash provided by (used for) operating activities Net earnings $ 40.5 $ 7.5 $115.4 $ 74.4 Adjustments not affecting cash Formation and consolidation expenses - 51.1 - 51.1 Depreciation and amortization 22.2 22.7 66.0 69.8 Other, net (2.5) (3.9) (15.7) 0.9 Changes in current assets and liabilities (8.9) (2.0) (24.9) 3.6 Net cash provided by operations 51.3 75.4 140.8 199.8 Investing activities Additions to property, plant and equipment (35.7) (29.6) (96.7) (98.1) Other 14.5 (24.3) 0.3 (25.0) Net cash used for investing activities (21.2) (53.9) (96.4) (123.1) Financing activities Cash dividends (19.7) (19.2) (58.5) (56.7) Changes in short-term debt (1.7) (4.1) 33.1 5.3 Changes in long-term debt 1.8 (1.8) 2.7 (3.0) Common stock reacquired (12.7) (6.3) (36.0) (38.7) Other 1.2 0.9 8.7 6.3 Net cash used for financing activities (31.1) (30.5) (50.0) (86.8) Effects of foreign exchange rate changes (0.7) 1.5 0.3 4.5 Increase (decrease) in cash and cash equivalents $ (1.7) $ (7.5) $ (5.3) $ (5.6) See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). NALCO CHEMICAL COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) September 30, 1995 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 nine month periods ended September 30, 1995 and 1994. 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, 1994. The unaudited condensed consolidated financial statements and the related notes have been reviewed by Nalco's independent accountants, Price Waterhouse LLP. The Independent Accountants' Review Report is included on page 8. NOTE B -- SHAREHOLDERS' EQUITY Shareholders' equity may be further detailed as follows: September 30, December 31, Dollars in millions, 1995 1994 except per share figures Preferred stock - par value $1.00 per share; authorized 2,000,000 shares; Series B ESOP Convertible Preferred Stock - 400,426 shares at September 30, 1995 and 404,224 shares at December 31, 1994 $ 0.4 $ 0.4 Series A Junior Participating Preferred Stock - none issued - - Capital in excess of par value of shares 192.2 194.0 Unearned ESOP compensation (166.5) (168.7) 26.1 25.7 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 25.9 25.5 Retained earnings 897.5 840.6 Minimum pension liability adjustment (5.7) (5.7) Foreign currency translation adjustments (42.6) (39.3) Common stock reacquired - at cost 13,023,739 shares at September 30, 1995 and 12,387,441 shares at December 31, 1994 (345.5) (317.7) Total shareholders' equity $ 570.8 $ 544.2 NOTE C -- FORMATION AND CONSOLIDATION EXPENSES The Company adopted a worldwide consolidation plan for manufacturing and support operations during 1994, primarily as a result of the formation of the Nalco/Exxon Energy Chemicals, L.P. joint venture partnership. The production volume reduction caused by redundancies associated with the joint venture formation required the Company to downsize, close, and consolidate operations. The Company's South Chicago plant was closed, and several European and Latin American manufacturing and support operations have been or will be closed or downsized. In addition, certain support functions will be recognized on a pan-European basis in order to more efficiently serve customers. Certain redundant assets that were not contributed to the joint venture have been written down to net realizable value, and assets associated with other programs will be written off. All of these activities are in process, and should be largely completed by the end of 1995. As a result of these plans, the Company recorded a pretax provision of $68 million in 1994 ($54 million after tax, or 70 cents per share on a fully diluted basis). Included in this provision is the cost of termination benefits for the elimination of over 400 positions, primarily in the United States and Europe, including manufacturing and support personnel, which will require approximately $27 million in cash. Costs associated with facility closings and the disposition of assets that are no longer productive total approximately $24 million, including $21 million for non-cash asset write-offs and $3 million in cash payments associated with asset disposals. The remaining $17 million of the pretax costs represents anticipated cash payments for post- closure plant environmental remediation, legal and consulting fees, and other exit costs. The Company anticipates that cash expenditures will be funded through operating cash flows. A tax benefit of $14 million, net of tax costs associated with the contribution of assets to various joint venture entities, was included in the Company's 1994 income tax provision related to the formation and consolidation expenses. As of September 30, 1995, $44 million had been charged against the provision for formation and consolidation expenses and over 300 employees had been terminated. The following table sets forth the details of activity for 1994 and the first nine months of 1995: Nalco/ Environ- Termi- Asset Exxon Legal & mental nation Write- Forma- Consult- Remedi- (in millions) Benefits downs tion ing ation Total 1994 accrual $27.0 $ 23.7 $ 2.0 $ 6.3 $ 9.2 $ 68.2 Cash payments (9.4) - (2.0) (3.0) - (14.4) Noncash charges - (10.6) - - - (10.6) Balance at December 31, 1994 17.6 13.1 - 3.3 9.2 43.2 Cash payments (9.6) (1.9) - (3.3) (0.5) (15.3) Noncash charges - (3.6) - - - (3.6) Balance at September 30, 1995 $ 8.0 $ 7.6 $ - $ - $ 8.7 $ 24.3 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 September 30, 1995, and for the three month and nine 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, 1994, 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 February 1, 1995, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial condition as of December 31, 1994, 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 October 24, 1995 Chicago, Illinois Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Third Quarter 1995 Operations Compared to Third Quarter 1994 Effective September 1, 1994, Nalco and Exxon Chemical Company (Exxon), a division of Exxon Corporation, formed Nalco/Exxon Energy Chemicals, L.P. (Nalco/ Exxon), a joint venture partnership to provide specialty chemical products and services to the petroleum and chemicals industries worldwide. Nalco's investment in the joint venture is accounted for by the equity method. At the time of formation of Nalco/Exxon, Nalco transferred the business and sales volume of its U.S. Petroleum Chemicals Division and certain petroleum chemical product lines of its international operations to the joint venture. While this formation did not change Nalco's net assets or results of operations, several historical captions in the consolidated financial statements were affected. Because results for the third quarter 1994 have not been reclassified to exclude petroleum chemical operations, the following unaudited statement of consolidated earnings for the quarter ended September 30, 1994 is presented. d. It reflects results of operations on a comparable basis with 1995; that is, Nalco petroleum chemical operations are excluded and recognized as if they were accounted for by the equity method. Three Months Ended (Amounts in millions) September 30 1995 1994* Net sales $335.5 $307.5 Operating costs and expenses Cost of products sold 151.9 136.3 Selling, administrative, and research expenses 121.0 112.0 Formation and consolidation expenses - 51.1 272.9 299.4 Operating earnings 62.6 8.1 Other income (expense) Interest and other income 2.0 6.5 Interest expense (4.1) (4.0) Equity in earnings of partnership 3.7 6.5 Earnings before income taxes 64.2 17.1 Income taxes 23.7 9.6 Net earnings $ 40.5 $ 7.5 * Reclassified The following discussion of results of operations compares the third quarter 1995 to the reclassified third quarter 1994 results presented above. Sales for the quarter increased 9 percent over last year, with all five divisions reporting improved results. Sales by the Water and Waste Treatment Division rose 1 percent, with double-digit gains reported by the UNISOLV and WATERGY Groups. The Process Chemicals Division reported a 14 percent sales improvement, with double-digit growth posted by the General Industry, the Mining and Mineral Processing, and the Pulp and Paper Chemicals Groups. A more modest increase was reported by the Absorbent Chemicals Group. Sales by the European Division rose 10 percent, partially as a result of the weaker dollar compared to a year ago. However, double-digit gains in local currencies were turned in by subsidiaries in Italy and Spain. The Latin American Division posted a 19 percent sales improvement as a result of double-digit gains reported by subsidiary companies in Venezuela, Chile, and Argentina, and sales by Nalcomex (Mexico), a former affiliate, which became a wholly owned subsidiary in the fourth quarter 1994. Sales by the Pacific Division were up 11 percent, as double-digit gains were posted by subsidiary companies in Indonesia, Thailand, Korea, Hong Kong, and the Philippines. The gross margin was 54.7 percent, down 1.0 percentage point from last year's rate of 55.7 percent. Gross margins in the United States decreased from a year ago partially as a result of a lower gross margin for the Absorbent Chemicals Group. Gross margins of International Divisions were also slightly lower on a combined basis. Selling, administrative, and research expenses were up $9.0 million or 8 percent over the third quarter of last year, primarily to support growth overseas and in the paper market. Part of the increase was attributable to the weaker dollar used to translate expenses of most international subsidiaries, principally those in Europe. Results for the third quarter 1994 were significantly impacted by a $51.1 million charge, before tax, for formation and consolidation expenses. (See Note C). Interest and other income decreased $4.5 million from a year ago, primarily as a result of last year's gain on the sale of the Company's automotive paint spray booth business. Nalco's equity in earnings of Nalco/Exxon for the third quarter 1995 was $3.7 million, down $2.8 million from the $6.5 million for Nalco petroleum chemical operations for July and August 1994 and Nalco/Exxon's first month of operations in September 1994. The decrease reflects a weak petroleum market in the United States and start-up and consolidation expenses for the joint venture. The effective tax rate was 36.9 percent for the third quarter 1995, compared to an effective tax rate of 56.4 percent for the same period last year, based on the reclassified results presented above. The unusually high rate for the third quarter 1994 was the result of the significantly lower earnings before tax amount due to the formation and consolidation charge, as well as the related net tax benefit which included tax expenses on assets transferred to the joint venture. Excluding the $51.1 million charge for formation and consolidation expenses and the related $15.6 million net tax benefit, the third quarter 1994 effective tax rate was 36.9 percent. Net earnings as a percent to sales was 12.1 percent for the third quarter 1995, compared to 14.0 percent for the third quarter 1994, based on the reclassified results presented above and excluding the after-tax charge of $35.5 million for formation and consolidation expenses. Fully diluted earnings per share were 52 cents for the quarter, compared to the 8 cents per share reported last year. Third quarter 1994 earnings per share would have been 50 cents, excluding the 46 cents per share after-tax charge for on the sale of Nalco's automotive paint spray booth business. First Nine Months 1995 Operations Compared to First Nine Months 1994 As previously discussed, the formation of the Nalco/Exxon joint venture in September 1994 did not change Nalco's net assets or results of operations, but several historical captions in the consolidated financial statements were affected. The following unaudited statement of consolidated earnings for the nine months ended September 30, 1994 is presented to reflect results of operations on a comparable basis with 1995; that is, Nalco petroleum chemical operations are excluded and recognized as if they were accounted for by the equity method. Nine Months Ended (Amounts in millions) September 30 1995 1994* Net sales $977.7 $894.8 Operating costs and expenses Cost of products sold 441.8 398.6 Selling, administrative, and research expenses 358.4 332.9 Formation and consolidation expenses - 51.1 800.2 782.6 Operating earnings 177.5 112.2 Other income (expense) Interest and other income 5.3 11.9 Interest expense (12.5) (16.7) Equity in earnings of partnership 11.9 15.6 Earnings before income taxes 182.2 123.0 Income taxes 66.8 48.6 Net earnings $115.4 $ 74.4 * Reclassified The following discussion of results of operations compares the first nine months of 1995 to the reclassified first nine months of 1994 results presented above. Sales for the first nine months increased 9 percent over last year, as all five divisions posted higher results. Sales by the Water and Waste Treatment Division were up 3 percent, with solid improvements reported by the UNISOLV and WATERGY Groups. More modest increases were reported by the Basic Industry and Waste Treatment Chemicals Groups. The Process Chemicals Division posted an 8 percent sales improvement. Double-digit gains were reported by the Pulp and Paper Chemicals Group, the Mining and Mineral Processing Group, and the General Industry Group. Sales by the European Division were up 13 percent. The weaker dollar compared to a year ago accounted for part of this increase, but double-digit gains in local currencies were reported by subsidiaries in Italy and Spain, as well as the Division's Pan European Paper business. The Latin American Division turned in a 20 percent sales improvement, as double-digit gains were reported by subsidiary companies in Brazil, Chile, and Venezuela. About three-fourths of the increase for the Division was attributable to Nalcomex (Mexico), a former affiliate, which became a wholly owned subsidiary in the fourth quarter 1994. Sales by the Pacific Division increased 16 percent, as double-digit gains were reported by all but two of the subsidiary companies in the Division. The gross margin was 54.8 percent, down 0.7 percentage point from last year's rate of 55.5 percent. Gross margins in the United States decreased from a year ago primarily as a result of a lower gross margin for the Absorbent Chemicals Group. Gross margins of the International Divisions were also down slightly from last year on a combined basis. Selling, administrative, and research expenses increased $25.5 million or 8 percent over the first nine months of last year, primarily to support growth in Latin America, the Pacific, and the paper market. The increase was also partly attributable to the weaker dollar used to translate expenses of most international subsidiaries, mainly those in Europe. In the third quarter 1994, the Company recorded a before-tax charge of $51.1 million that resulted from the formation of the Nalco/Exxon joint venture and adoption of a worldwide consolidation plan. After tax, this charge reduced net earnings for the first nine months of 1994 by $35.5 million, or 46 cents per share on a fully diluted basis. An additional $18.5 million, after tax, was recorded in the fourth quarter 1994, bringing the total after-tax charge to $54.0 million, or 70 cents per share on a fully diluted basis (See Note C). Interest and other income was down $6.6 million from a year ago. This was mainly attributable to last year's gain on the sale of the Company's automotive paint spray booth business. Also contributing to the decrease was a drop in interest income as a result of lower invested cash balances, and lower realized exchange and unrealized translation gains reported by the Company's subsidiary in Brazil. Interest expense was $4.2 million lower than a year ago, which was also mainly attributable to the Company's Brazilian subsidiary. These changes were the result of a monetary control program instituted by the Brazilian government in mid-1994. Nalco's equity in earnings of Nalco/Exxon for the first nine months of 1995 was $11.9 million, a $3.7 million decline from the $15.6 million for Nalco petroleum chemical operations from January to August 1994 and the joint venture's first month of operations in September 1994. This decrease reflects the weak petroleum market in the United States, as well as start-up and consolidation expenses for the joint venture. The effective tax rate was 36.6 percent for the first nine months of 1995, compared to an effective tax rate of 39.5 percent for the same period last year. However, excluding the $51.1 million charge for formation and consolidation expenses and the related $15.6 million net tax benefit, the effective tax rate for the first nine months of 1994 was 36.9 percent. Net earnings as a percent to sales was 11.8 percent for the first nine months of 1995, compared to 12.3 percent for the first nine months of 1994, based on the reclassified results presented above and excluding the $35.5 million after-tax charge for formation and consolidation expenses. Fully diluted earnings per share for the first nine months of 1995 were $1.46, compared to the 91 cents per share reported a year earlier. Without the 46 cents per share net charge for formation and consolidation expenses and the 4 cents per share net gain on the sale of the Company's automotive paint spray booth business, earnings per share for the first nine months of 1994 would have been $1.33. Changes in Financial Condition Cash and cash equivalents decreased $5.3 million during the first nine months of 1995 as detailed in the Unaudited Condensed Consolidated Statement of Cash Flows. Days sales outstanding were 62 days at September 30, 1995, up slightly from the 60 days at December 31, 1994. Working capital at September 30, 1995 totaled $90.5 million, up $2.7 million over the $87.8 million at last year end. The ratio of current assets to current liabilities was 1.3 to 1 at September 30, 1995 and December 31, 1994. Domestic projects accounted for more than two-thirds of the $96.7 million in capital investments during the first nine months of 1995. Major expenditures were for additional PORTA-FEED( units, improvements to the Company's superabsorbent manufacturing process at its Garyville, Louisiana plant, and automobiles for the sales force. Primarily as a result of the formation of the Nalco/Exxon joint venture, the Company adopted a worldwide consolidation plan for manufacturing and support operations during 1994. The joint venture was formed to take advantage of synergy's in business management, technology, product offerings, and manufacturing operations. The production volume reduction caused by redundancies associated with the joint venture formation required the Company to downsize, close, and consolidate operations. The Company's South Chicago plant was closed and several European and Latin American manufacturing and support operations have been or will be closed or downsized. In addition, certain support functions will be regionalized on a pan-European basis in order to more efficiently serve customers. Certain redundant assets that were not contributed to the joint venture have been written down to net realizable value, and assets associated with other programs have been written off. All of these activities are in process and should be largely completed by the end of 1995. As a result of these plans, the Company recorded a pretax provision for formation and consolidation expenses of $68 million in 1994 ($54 million after tax, or 70 cents per share on a fully diluted basis). Charges against the provision totaled $18.9 million in the first nine months of 1995 and $25 million in the year ended December 31, 1994. (See Note C). The Nalco/Exxon joint venture and the Company's consolidation plan are expected to result in annualized pretax earnings improvements by 1996. This is expected to be realized through lower payroll expenses, depreciation, and other operating expenses resulting from the joint venture and the consolidation plan. 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 (27) Financial Data Schedule (b) The Registrant did not file any reports on Form 8-K during the three months ended September 30, 1995. 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: November 13, 1995 /s/ W. E. BUCHHOLZ W. E. Buchholz - Vice President, Chief Financial Officer Date: November 13, 1995 /s/ S. J. GIOIMO S. J. Gioimo - Secretary 19 EX-11 2 EXHIBIT (11) STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE NALCO CHEMICAL COMPANY AND SUBSIDIARIES Three Months Ended Nine Months Ended (Amounts in thousands, September 30 September 30 except per share data) 1995 1994 1995 1994 Primary Average shares outstanding 67,409 68,346 67,596 68,624 Net effect of dilutive stock options and shares contingently issuable - based on the treasury stock method using average market price 418 498 456 572 TOTALS 67,827 68,844 68,052 69,196 Net earnings $ 40,478 $ 7,427 $115,421 $ 74,360 Preferred stock dividends, net of taxes (2,797) (2,743) (8,417) (8,263) Net earnings to common shareholders $ 37,681 $ 4,684 $107,004 $66,097 Per share amounts $ 0.56 $ 0.07 $ 1.57 $ 0.96 EXHIBIT (11) STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE NALCO CHEMICAL COMPANY AND SUBSIDIARIES Three Months Ended Nine Months Ended (Amounts in thousands, September 30 September 30 except per share data) 1995 1994 1995 1994 Fully diluted Average shares outstanding 67,409 68,346 67,596 68,624 Average dilutive effect of assumed conversion of ESOP Convertible Preferred shares 8,024 8,118 8,049 8,135 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 418 504 462 572 TOTALS 75,851 76,968 76,107 77,331 Net earnings $40,478 $ 7,427 $115,421 $74,360 Additional ESOP contribution resulting from assumed conversion, net of taxes (1,144) (1,207) (3,502) (3,710) Tax adjustment on assumed common dividends (197) (166) (598) (514) Net earnings to common shareholder s $39,137 $ 6,054 $111,321 $70,136 Per share amounts $ 0.52 $ 0.08 $ 1.46 $ 0.91 EX-15 3 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 October 24, 1995 (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. 33-57363, 33-53111, 33-9934, and 2-97721) and Form S-8 (Nos. 33-54377, 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 November 13, 1995 Chicago, Illinois EX-27 4 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 FINANCIAL DATA SCHEDULE NALCO CHEMICAL COMPANY AND SUBSIDIARIES THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AT SEPTEMBER 30, 1995 AND THE CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 OF NALCO CHEMICAL COMPANY AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9 MOS DEC-31-1995 SEP-30-1995 Item Number Description Amount 5-02(1) Cash and cash items $ 39,800,000 5-02(2) Marketable securities - 5-02(3)(a)(1) Notes and accounts receivable-trade 230,300,000 5-02(4) Allowances for doubtful accounts (6,400,000) 5-02(6) Inventory 87,200,000 5-02(9) Total current assets 380,400,000 5-02(13) Property, plant and equipment 1,141,200,000 5-02(14) Accumulated depreciation (591,600,000) 5-02(18) Total assets 1,327,400,000 5-02(21) Total current liabilities 289,900,000 5-02(22) Bonds, mortgages and similar debt 248,800,000 5-02(28) Preferred stock - mandatory redemption - 5-02(29) Preferred stock - no mandatory redemption 400,000 5-02(30) Common stock 15,100,000 5-02(31) Other stockholders' equity 555,300,000 5-02(32) Total liabilities and stockholders' equity 1,327,400,000 5-03(b)1(a) Net sales of tangible products 977,700,000 5-03(b)1 Total revenues 977,700,000 5-03(b)2(a) Cost of tangible goods sold 441,800,000 5-03(b)2 Total costs and expenses applicable to sales and revenues 441,800,000 5-03(b)3 Other costs and expenses - 5-03(b)5 Provision for doubtful accounts and notes - 5-03(b)(8) Interest and amortization of debt discount 12,500,000 5-03(b)(10) Income before taxes and other items 182,200,000 5-03(b)(11) Income tax expense 66,800,000 5-03(b)(14) Income/loss continuing operations 115,400,000 5-03(b)(15) Discontinued operations - 5-03(b)(17) Extraordinary items - 5-03(b)(18) Cumulative effect - changes in accounting principles - 5-03(b)(19) Net income or loss 115,400,000 5-03(b)(20) Earnings per share - primary 1.57 5-03(b)(20) Earnings per share - fully diluted 1.46 -----END PRIVACY-ENHANCED MESSAGE-----