FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 -----------------------------------------
For the fiscal year ended December 31, 1993
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[ ] 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 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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 355-3300
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock NEW YORK STOCK EXCHANGE
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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[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of Registrant's voting common stock (Par
value $.10) held by non-affiliates of Registrant as of February 11, 1994:
$1,386,178,748
--------------
The number of shares outstanding of each of the Registrant's classes
of common stock as of February 11, 1994:
28,138,835 Common Shares
------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive proxy statement for use in
conjunction with Registrant's 1994 Annual Meeting of Shareholders and
Registrant's 1993 Annual Report are incorporated into Parts II and III
hereof.
PART 1
ITEM 1 - BUSINESS
GENERAL
Betz Laboratories, Inc. and its subsidiaries ("Registrant"), is
engaged in the engineered chemical treatment of water, wastewater and
process systems operating in a wide variety of industrial and commercial
applications, with particular emphasis on the chemical, petroleum refining,
paper, automotive, electrical utility and steel industries. Registrant
produces and markets a wide range of specialty chemical products, including
the technical and laboratory services necessary to utilize these products
effectively. Chemical treatment programs are developed and marketed for
use in boilers, cooling systems, heat exchangers, paper and process streams
and both influent and effluent systems. Registrant monitors changing
water, process and plant operating conditions so as to prescribe the
appropriate treatment programs to solve problems such as corrosion, scale,
deposit formation and a variety of process problems.
Registrant has thirteen (13) production plants in the United
States and eight (8) in foreign countries. Operations are conducted
primarily in the United States and Canada, and also in Europe, Southeast
Asia and the Caribbean area. Registrant employs approximately 4,115 people
worldwide.
MARKETING
During 1993, the Registrant undertook a reorganization of its
marketing strategies on a global basis. Pursuant to this globalization
initiative, Registrant's foreign paper and refinery process sales and
marketing organizations will report to Registrant's domestic operations
along technology lines. This should result in faster overseas growth,
where Registrant presently has a very small market share.
Domestically, Registrant continued to organize into separate marketing
units along technology lines in order to be more responsive to customer
needs. As part of this strategy, Registrant has further decentralized into
nine autonomous domestic marketing units, four of which are wholly-owned
subsidiaries and five of which are groups or divisions of the Registrant.
Each unit operates as a separate profit center with its own sales staff and
specific programs for the market it serves.
Effective January 1, 1994, Betz Industrial was decentralized into
four separate operating units: the Refining and Chemical Division; the
Pulp and Paper Division; the Power Industry Division; and the Manufacturing
Industries Division. These four divisions along with Betz Entec, Inc.
became the Betz Water Management Group which markets all of Registrant's
water treatment programs to customers within the United States. Betz Water
Management Group, which accounted for approximately 50.1% of Registrant's
1993 sales, will continue to provide specialty chemicals and value added
treatment programs to basic domestic industries, such as petroleum,
refining, chemical, paper, electric utility and food processing industries.
Betz Entec, Inc., a subsidiary, specializes in the treatment of
boilers, cooling systems, air conditioning systems and wastewater for mid-
sized industrial plants, hospitals, government buildings, institutions and
commercial facilities. Its customized treatment programs are designed to
control scale, corrosion and microbiological growth. As an adjunct to the
sale of its specialty chemical products, Betz Entec, Inc. markets
laboratory reagents and chemical test kits for use in analyzing water.
Betz Process Chemicals, Inc., a subsidiary, develops specific
products used in process streams in the refining, petrochemical and steel
industries. These products are "process-side" treatments as compared to
"water-side" treatments and are formulated to reduce production
inefficiencies in large industrial plants. This technology is applied in
many ways including controlling corrosion with effective inhibitors and
controlling fouling in heat exchangers through trace metal deactivation,
polymer retardants and oxidation control.
A related market is served by Betz Energy Chemicals, Inc. This
subsidiary serves the oil production markets by providing products and
programs used in extracting crude oil from deposits in the earth.
The pulp and paper industry is served by another subsidiary, Betz
PaperChem, Inc. It formulates custom engineered programs for the process
related problems associated with paper production. As a consumer of large
amounts of water in the production process, the pulp and paper industry's
efforts to reuse water and conserve energy have increased the need for
water treatment chemicals. Recirculating water systems build up organic
and inorganic deposits which must be controlled. Deposition, corrosion,
pulp bleaching, foam control, de-inking and felt conditioning are other
problems associated with pulp and paper production that are treated by Betz
PaperChem, Inc.'s products and programs.
The Betz MetChem Division serves steel, aluminum and plastic
producers, and the related automotive, machinery, appliances, fabricated
parts and coil industries. Its products and treatment programs are
designed to increase productivity, improve quality and reduce overall
operating expenses through specific process chemicals aimed at the
respective markets.
Technical specialists working in each of the Registrant's nine
marketing units assist in the development of engineered programs to meet
a customer's needs. Such programs are custom designed to conserve
energy, minimize corrosion and deposits, control microbiological fouling,
reduce waste generation, improve process efficiency or any combination
of the above, depending on the customer's requirements. Technical
specialists also train customer operating personnel in the controlling,
testing and chemical feeding required in applying Registrant's treatment
programs. Since plant operating conditions and intake water characteristics
do not remain static, the technical specialists make regular, scheduled
plant follow-up visits to monitor the treatment program results and help
customer operating personnel.
To ensure treatment effectiveness, Registrant may also provide
additional technical services from its mobile water treatment TravelLabs
(registered trademark) which conduct tests on customer water systems.
In the United States and other countries, Registrant has approximately
1,495 Regional Managers, District Managers and technical specialists
selling and servicing its chemical products.
Registrant's worldwide sales of specialty chemicals and the above
related products during 1993 amounted to $684,872,000, as compared to
$706,972,000 in 1992 and $665,565,000 in 1991, and in each case constituted
100% of Registrant's consolidated net sales. Consolidated net earnings for
1993 were $65,520,000, as compared to $82,047,000 in 1992 and $75,524,000
in 1991.
INTERNATIONAL OPERATIONS
Registrant's international activities are conducted through
foreign subsidiaries operating in fourteen foreign locations. Betz
International, Inc., a wholly-owned domestic subsidiary of Registrant,
manages Registrant's U.S. based international sales effort and holds
substantially all of the stock in Registrant's Singapore, Australian,
Korean and Venezuelan subsidiaries. Betz International markets to
customers outside of the U.S., Canada, and Europe which are located
primarily in the Caribbean, Central America, South America, Saudi Arabia,
India, Korea, Singapore, Malaysia, Indonesia, Thailand, Australia and New
Zealand. Betz Europe, Inc., a wholly-owned domestic subsidiary of
Registrant, holds directly or indirectly all of the stock in Registrant's
Belgian, Austrian, German, Finnish, Swedish, French, Italian and United
Kingdom subsidiaries. Registrant's Canadian subsidiary, Betz Inc.,
operates independently of Betz International and Betz Europe.
Although Registrant does not believe that its foreign operations
are presently subject to a materially greater risk than its domestic
operations, Registrant's foreign operations may at any time be adversely
affected by conditions outside its control including economic and political
conditions. See Notes 1, 2 and 4 to Consolidated Financial Statements for
certain additional information pertaining to foreign operations.
The range of products sold by Registrant to customers located
outside of the United States is substantially similar to, although not as
broad in scope as, those sold in the United States. Products and services
sold to foreign markets during 1993 accounted for approximately
$153,592,000 or 22.4% of Registrant's consolidated net sales as compared to
$160,484,000 (22.7%) in 1992 and $142,042,000 (21.3%) in 1991. Of these
amounts, direct exports by Betz International from the United States to
foreign markets accounted for approximately $11,981,000 or 1.7% of
Registrant's consolidated net sales in 1993, as compared to $10,913,000
(1.5%) in 1992 and $9,989,000 (1.5%) in 1991.
Excluding products and services exported directly by Betz
International, sales for 1993 by foreign subsidiaries were approximately
$141,611,000 or 20.7% of the Registrant's consolidated net sales. Foreign
subsidiary sales in 1992 and 1991, and their percentage of Registrant's
consolidated net sales were $149,571,000 (21.2%) and $132,053,000 (19.8%)
respectively. Of these amounts, sales by Registrant's Canadian subsidiary
amounted to $36,171,000 (5.3%) in 1993; $34,361,000 (4.9%) in 1992; and,
$33,893,000 (5.1%) in 1991. The operating earnings of Registrant's foreign
subsidiaries in 1993 were $18,988,000 or 2.8% of Registrant's consolidated
net sales as compared to $27,069,000 (3.8%) in 1992, and $23,963,000 (3.6%)
in 1991.
Approximately $399,927,000 or 76.7% of Registrant's identifiable
assets are attributable to its domestic operations and $121,202,000 or
23.3% are attributable to its foreign operations.
PRODUCTION AND DISTRIBUTION
Many of Registrant's products are produced at more than one of
the twenty-one (21) production plants referred to under Item 2
("Properties"). The particular plant from which a customer's needs are
filled is generally determined on the basis of economy of freight. Most
shipments to customers are made by common carriers and Registrant-owned
vehicles. Under Registrant's own liquid distribution program, formulated
products are delivered directly by custom-built vehicles owned by
Registrant to tanks owned by Registrant or the customer at the customer's
site. This "Betz Point of Feed (registered trademark) Delivery (POF
(registered trademark)) Service" reduces the storage and handling costs of
the Registrant's customers.
The "Betz Semi-Bulk Control" (registered trademark) Program is a
distribution system to augment its "Point of Feed" and drum distribution
programs. It is used by all of Registrant's marketing units to serve
their respective markets and involves the delivery of a restricted line
of the Registrant's products to customer locations in stackable,
returnable, reusable 300 and 400 gallon containers. This "Betz Semi-Bulk
Control" Program offers greater convenience to those of the Registrant's
customers whose volume demand or other considerations make unavailable
"Betz Point of Feed Delivery Service", but who desire delivery in other
than 55 gallon drums.
In addition, Registrant operates a "Custom Distribution
Service" (CDS (registered trademark)) established by Betz Entec,
Inc. that offers the "Betz Point of Feed Delivery Service" to some of
the Registrant's customers with smaller quantity requirements. All
three of the above distribution systems eliminate the need for the
handling, storage and cleaning of chemical drums.
As most of Registrant's chemical products are shipped to
customers within one week of the receipt of specific purchase orders,
Registrant has no backlog of orders.
RAW MATERIALS
Most of the chemicals used by the Registrant as raw materials are
standard commercial products available from two or more sources. Some of
these chemicals are produced by Registrant. Registrant's inventories of
raw materials vary according to the availability of and need for such raw
materials. Management believes that the loss of any single source of
supply would not have a materially adverse effect on its business.
The Registrant cannot presently estimate the effect which energy
problems, inflation or recession and resulting economic uncertainties may
have upon its customers, upon such customers' possible future purchases of
Registrant's products, upon future prices of raw materials purchased by
Registrant or upon future selling prices of Registrant's products and
services.
RESEARCH AND DEVELOPMENT - PATENTS, TRADEMARKS AND LICENSES
For many years the Registrant has pursued a research and
development program which has resulted in the improvement of existing
products and the development of new products. Although Registrant does
not segregate such research and development expenditures from total
laboratory and engineering costs, it estimates that expenditures
for research and development during 1993 amounted to approximately
$28,732,000 as compared with approximately $28,343,000 during
1992 and $26,712,000 during 1991. All of these activities were
sponsored and paid for by the Registrant. Such activities were carried
out in 1993 by approximately 492 professional and technical
employees as compared with approximately 474 and 462 professional
and technical employees, respectively, in 1992 and 1991.
As a result of its research efforts, Registrant has produced
numerous chemicals, chemical formulations and equipment for which it has
secured letters patent and others for which Registrant is presently seeking
letters patent. Registrant also has registered various of its trademarks.
Additionally, Registrant has entered into certain licensing agreements
with third parties whereby Registrant has authorized others to make use of
and/or sell Registrant's products or whereby Registrant has obtained such
authorization with respect to the products of others. Such licensing
agreements are not material. Under United States law each letter patent is
effective for 17 years from the date of grant. Generally, trademark
registrations are valid so long as the trademarks registered are used and
renewal of the registration is timely made. Registrant's rights under its
licensing agreements expire at various times in accordance with the
respective terms of such agreements. Because of the highly competitive
nature of the specialty chemical industry and the uniqueness of
Registrant's technology in the industry, Registrant considers its rights
under its patents, trademarks, and licensing agreements to be valuable
assets.
COMPETITION
Registrant's business is highly competitive. Competition is
furnished by many large and small companies which compete with Registrant
to varying degrees throughout the world. The large competitors are also
engaged in business areas which are not in competition with Registrant, and
they do not publish sales and earnings figures which would make direct
comparisons possible. However, on the basis of its experience in the
industry and its estimates of sales of comparable chemical products,
Management believes that Registrant is one of the largest suppliers of
such products in the United States and Canada. Registrant believes
that it competes effectively with its major competitors both as to
service and price. From time to time, Registrant has instituted price
increases on its products to cover increased costs; however, Registrant
does not believe that such increases have affected its ability to compete
effectively. Registrant believes that its 1993 experience with respect to
increased costs was similar to that of its competitors.
ENVIRONMENTAL LEGISLATION
Registrant believes that it is in compliance in all material
respects with all applicable Federal, state or local environmental
legislation and regulations. In those instances where the Registrant has
taken affirmative action to insure compliance with applicable legislation
or regulations, such actions have had no material effect on the earnings
or competitive position of Registrant.
Federal and state pollution and waste control legislation
governing the disposal of industrial and hazardous wastes confer broad
powers on the administrative personnel charged with their enforcement.
The interpretation and enforcement of such laws govern the amount and
manner of disposal of many of the chemicals used by industry, including
some chemical products presently sold by Registrant and its competitors.
It is possible that some of such products will no longer be able to be used
unless the industrial users install their own waste treatment plants or
otherwise provide for disposition of their wastes. These laws also impose
heavy fines against manufacturers of chemicals or carriers of chemicals, or
both, if as a result of an accident, even if beyond the control of the
manufacturer or carrier, those chemicals spill into a river, lake or other
navigable water. Such manufacturers may also be ultimately responsible for
the cost of cleaning up any such spill.
While Registrant does not anticipate that it will incur
substantial costs in complying with existing environmental legislation,
Registrant is unable to predict the effect of existing or future Federal,
state or local environmental legislation or regulation on the
Registrant's domestic or foreign business. (See "Pending Legal
Proceedings", page 11.)
ITEM 2 - PROPERTIES
The Registrant's principal facilities are at the following locations:
DOMESTIC FACILITIES
Square
Owned Footage
or of
Location Leased Facility General Character
-------- ------ -------- -----------------
Bakersfield, California Owned 55,000 Office, Plant and
Warehouse
Cerritos, California Leased 28,480 Office and Warehouse
Compton, California Owned 36,600 Plant and Warehouse
Ventura, California Leased 10,000 Office and Laboratory
Jacksonville, Florida Owned 117,000 Office and Laboratory
Macon, Georgia Owned 71,000 Plant and Warehouse
Addison, Illinois Owned 56,800 Plant and Warehouse
Leased 16,000 Warehouse
Reserve, Louisiana Owned 24,000 Plant and Warehouse
New Philadelphia, Ohio Owned 108,000 Plant and Warehouse
Cornwells Heights, Pennsylvania Owned 40,834 Office, Laboratory
Supply and Limited
Production
Trevose, Pennsylvania Owned 198,000 Headquarters
Owned 46,500 W. H. and L. D. Betz
Research Center
Owned 50,000 Training Center,
Warehouse and
Maintenance Bldg.
Owned 81,000 J. D. Betz Engineering
Laboratory and Betz
Industrial Laboratory
Langhorne, Pennsylvania Owned 134,000 Plant and Warehouse
Horsham, Pennsylvania Owned 32,500 Office and Laboratory
Horsham, Pennsylvania Owned 126,000 Office and Limited
Production
Horsham, Pennsylvania Owned 100,000 Office and Laboratory
Square
Owned Footage
or of
Location Leased Facility General Character
-------- ------ -------- -----------------
Puerto Rico Leased 12,000 Office and Warehouse
Beaumont, Texas Owned 82,000 Plant, Warehouse and
Office
The Woodlands, Texas Owned 120,000 Laboratory and Office
Garland, Texas Owned 45,000 Plant and Warehouse
Orange, Texas Owned 53,000 Plant and Warehouse
South Houston, Texas Owned 25,000 Plant and Warehouse
Washougal, Washington Owned 46,000 Plant and Warehouse
Cheyenne, Wyoming Owned 35,800 Plant and Warehouse
FOREIGN FACILITIES
Ingleburn, New South Wales,
Australia Owned 31,895 Office, Plant,
Warehouse and
Laboratory
Haasrode, Belgium Owned 38,500 Office and Laboratory
Herentals, Belgium Owned 43,800 Office, Plant and
Laboratory
Herentals, Belgium Owned 11,500 Office
Edmonton, Alberta, Canada Owned 59,800 Plant, Warehouse and
Laboratory
Pointe Claire, Quebec, Canada Owned 90,000 Office and Plant
Kanata, Ontario, Canada Owned 24,400 Office and Laboratory
Winsford, England Owned 49,000 Office, Plant and
Laboratory
Crissey, France Owned 48,000 Office and Plant
Marne la Vallee, France Owned 21,000 Office and Laboratory
Willich, Germany Owned 15,000 Office and Laboratory
Ferentino, Italy Owned 35,721 Office, Plant and
Laboratory
Square
Owned Footage
or of
Location Leased Facility General Character
-------- ------ -------- -----------------
Rome, Italy Owned 18,200 Office
Iri, Korea Owned 22,700 Office, Plant
(under construction)
and Laboratory
Singapore(1) Owned/ 26,320 Office, Plant,
Lease Warehouse and
Laboratory
The Registrant believes that the present production capacity of
its plants is adequate to meet its present and reasonably anticipated
domestic and foreign needs.
In addition to owned facilities, the Registrant leases numerous
office facilities throughout the world from which its local sales efforts
are conducted. See Note 7 to the Consolidated Financial Statements
comprising Item 8 hereof for information concerning lease obligations.
- - -------------------------
(1) In accordance with local law and custom, Registrant owns the
Singapore facility but presently holds the land upon which the
facility is situated under a 30 year lease, which expires in
August, 2009. At such time as the lease lapses without being
renewed, the office, plant and warehouse would become the
property of the Singapore government. Registrant would receive
no compensation therefor.
ITEM 3 - PENDING LEGAL PROCEEDINGS
There are no material pending legal proceedings other than
ordinary routine litigation incidental to the business of the Registrant to
which the Registrant or any of its subsidiaries is a party or of which any
of their property is the subject.
The Registrant is a "Potentially Responsible Party" ("PRP") under
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") as amended by the Superfund Amendments and Reauthorization Act
("SARA") with respect to thirteen (13) sites at which alleged releases or
threatened releases of hazardous substances into the environment may have
occurred. In response, the Registrant has been voluntarily participating
with other PRPs at each of these sites to familiarize itself with site
conditions, determine the nature and extent of contamination, analyze
alternatives for remediation and develop a plan for clean-up. In each
instance, the Registrant has participated in discussions with
representatives of the EPA and other PRPs to determine its potential
liability for financing necessary response actions. Although it is
impossible to determine the exact cost of response activities, present
information and the likelihood of contributions from other PRPs at each
site indicates that the Registrant's ultimate share of remediation costs at
eleven (11) of the thirteen (13) sites will be less than $100,000 of the
total anticipated response cost.
At the Operating Industries, Inc. site, Monterey Park, California
(the "Site"), the Registrant is a signatory to two Partial Consent Decrees
among the United States of America, the State of California, the California
Hazardous Substance Account and approximately three hundred (300) other
parties entered in the United States District Court for the Central
District of California in 1989 and 1992 respectively. Pursuant to such
Partial Consent Decrees, the parties are performing remedial activities at
the Site in response to alleged releases and threatened releases of
hazardous substances into the environment. The Registrant, without
admitting liability, agreed to an allocation of costs of approximately
$279,000 to be paid over a period of three (3) to five (5) years pursuant
to the 1989 Partial Consent Decree. Pursuant to the 1992 Partial Consent
Decree, the Registrant agreed to pay a portion of state and federal past
costs and perform necessary remedial work, and pay for oversight of such
work. Although Registrant's share of such costs has not been finally
determined among the parties, it is estimated that Registrant's future
allocation will be approximately $180,000 payable over the next eight to
ten years. Such amount, if ultimately assessed and paid, would not be
material to the business of the Registrant.
The Registrant is a third party defendant in two federal court
actions in the State of New Jersey involving the Helen Kramer Landfill site
in Mantua Township, New Jersey. It is alleged that the Registrant's wastes
were shipped to the site from 1968 to 1971 and that two loads of municipal
solid waste were sent to the site in 1981. In September, 1988 EPA
estimated the chosen remedy to have a present worth cost of approximately
$44 million. Actual costs have been higher; press releases issued in
January, 1993 indicated costs were in the range of $90-100 million.
However, in overall settlement discussions, EPA and New Jersey Department
of Environmental Protection have demanded over $200 million to end the
litigation. The defendants and third-party defendants await documentation
of this later sum. If remedial costs exceed $100 million, the
Registrant's allocation may exceed $100,000; however, such allocation is
speculative and would most likely not materially affect the Registrant's
financial condition or results of operations. Presently, no allocation of
costs has been determined among the PRPs, and the Registrant's ultimate
allocation is still speculative.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Registrant's security
holders through the solicitation of proxies or otherwise during the fourth
quarter of the fiscal year to which this report relates.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
Pursuant to General Instruction G(2) to Form 10-K, in response to
Item 5, Registrant hereby incorporates by reference the information
contained in Note 10 to the Consolidated Financial Statements, "Quarterly
Financial Information (Unaudited)", under the captions "Cash Dividends
Declared Per Common Share" and "Common Stock Market Prices" on page 26 of
Registrant's 1993 Annual Report to its Shareholders.
ITEM 6 - SELECTED FINANCIAL DATA
Pursuant to General Instruction G(2) to Form 10-K, in response to
Item 6, Registrant hereby incorporates by reference the following
information contained under the heading "Consolidated Summary of
Operations" on pages 30 and 31, of Registrant's 1993 Annual Report to its
Shareholders: For Fiscal Years 1989 through 1993, both inclusive, the
information under the headings "Net Sales", "Net Earnings", "Earnings
per Common Share", "Cash dividends declared per Common Share", "Total
assets", and "ESOP debt".
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Pursuant to General Instruction G(2) to Form 10-K, in response to
Item 7, Registrant hereby incorporates by reference the information
contained under the heading "Management's Discussion And Analysis Of
Financial Condition And Results Of Operations" on pages 27 through 29 of
Registrant's 1993 Annual Report to its Shareholders.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pursuant to General Instruction G(2) to Form 10-K, in response to
Item 8, Registrant hereby incorporates by reference the consolidated
financial statements included on pages 17 through 26, both inclusive, of
Registrant's 1993 Annual Report to its Shareholders.
ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Pursuant to General Instruction G(3) to Form 10-K, in response to
Item 10, Registrant hereby incorporates by reference the information
contained under the heading "Directors and Executive Officers" on pages 2
through 6, both inclusive, of Registrant's definitive proxy statement to be
used in connection with Registrant's 1994 Annual Meeting of Shareholders,
as filed with the Securities and Exchange Commission on or about March 11,
1994.
ITEM 11 - EXECUTIVE COMPENSATION AND TRANSACTIONS
Pursuant to General Instruction G(3) to Form 10-K, in response to
Item 11, Registrant hereby incorporates by reference the information
contained under the headings "Executive Compensation" on pages 8 through
15, both inclusive, of Registrant's definitive proxy statement to be used
in connection with Registrant's 1994 Annual Meeting of Shareholders, as
filed with the Securities and Exchange Commission on or about March 11,
1994.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Pursuant to General Instruction G(3) to Form 10-K, in response to
Item 12, Registrant hereby incorporates by reference the information
contained under the heading "Ownership of Company Shares" on pages 7 and 8
of Registrant's definitive proxy statement to be used in connection with
Registrant's 1994 Annual Meeting of Shareholders, as filed with the
Securities and Exchange Commission on or about March 11, 1994.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
a. 1. and 2. The following consolidated financial statements of Betz
Laboratories, Inc. and subsidiaries, included in the Annual Report of
Registrant to its shareholders for the year ended December 31, 1993,
are incorporated by reference in Item 8:
Annual
Report
Page(s)
-------
Consolidated Statements of Operations--Years ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . 17
Consolidated Balance Sheets--December 31, 1993 and 1992 . 18-19
Consolidated Statements of Cash Flows--Years
ended December 31, 1993, 1992 and 1991 . . . . . . . . . 20
Consolidated Statements of Common Shareholders' Equity--
Years ended December 31, 1993, 1992 and 1991 . . . . . . 21
Notes to Consolidated Financial Statements . . . . . . . . 22-26
The following consolidated financial statement schedules of Betz
Laboratories, Inc. and subsidiaries are included in Item 14(d):
Form
10-K
Page(s)
--------
Schedule V -- Property, Plant and Equipment . . . . 16 (F-1)
Schedule VI -- Accumulated Depreciation, Depletion
and Amortization of Property, Plant
and Equipment . . . . . . . . . . . 17 (F-2)
Schedule VIII -- Valuation and Qualifying Accounts . . . 18 (F-3)
Schedule X -- Supplementary Income Statement
Information . . . . . . . . . . . . 19 (F-4)
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
3. LISTING OF EXHIBITS.
Form 10-K
Exhibit
Number Description Page
------- ----------- ----
3 Articles of Incorporation and Bylaws . . . . *
* The items designated Exhibit 3 to
Registrant's Annual Report on Form 10-K
for fiscal year 1988, (Restated Articles
of Incorporation and Bylaws of Betz
Laboratories, Inc.) as heretofore filed
with the Securities and Exchange Commis-
sion are hereby incorporated by reference
as Exhibit 3 hereto.
4 Instruments defining the rights of Security
Holders . . . . . . . . . . . . . . . . . . . *
See Exhibit 3 hereto.
Page
----
10 Material Contracts . . . . . . . . . . . . *
*The items designated Exhibit 10 to Registrant's
Annual Report on Form 10-K for fiscal year 1992,
("Guidelines For Betz Laboratories, Inc. Corporate
Discretionary Senior Executive Officer Bonus Plan;
Corporate Discretionary Executive Officer Bonus Plan;
Corporate Discretionary Officer Plan; and Corporate
Discretionary Key Employee Bonus Plan"; the item
designated as Exhibit A to Registrant's definitive
Proxy Statement dated March 7, 1991, ("Employee Stock
Incentive Plan"); the item designated Exhibit A to
Registrant's definitive Proxy Statement dated March 5,
1982, ("Stock Option Plan"); and the item designated
Exhibit A to Registrant's definitive Proxy Statement
dated March 7, 1991 ("Stock Option Plan of 1987"); all
as heretofore filed with the Securities and Exchange
Commission are hereby incorporated by reference as
Exhibit 10 hereto.
11 Statement Re: Computation of Per Share Earnings 20
13 Registrant's 1993 Annual Report to Shareholders 21
18 Letter Re: Change in Accounting Principles. . . . . . 57
21 Subsidiaries of Registrant . . . . . . . . . . . . 58
23 Consent of Independent Auditors . . . . . . . . . 59
b. REPORTS ON FORM 8K
None
<TABLE>
<CAPTION>
BETZ LABORATORIES, INC. AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In thousands)
COL. A COL. B COL. C COL. D. COL. E COL. F
-------------- -------------------- ----------------- ----------- --------------- --------------
OTHER CHANGES--
CLASSIFICATION BALANCE AT BEGINNING ADDITIONS AT COST RETIREMENTS ADD (DEDUCT)-- BALANCE AT END
OF PERIOD DESCRIBE OF PERIOD
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Land $ 21,018 $ 509 $ - $ (381) (A) $ 21,146
Buildings 139,203 18,551 41 (1,932) (A) 155,781
Machinery and equipment 328,466 44,224 9,437 (2,827) (A) 360,426
Construction in progress 21,089 (72) 3,220 (527) (A) 17,270
-------- ------- ------- ------- --------
$509,776 $63,212 $12,698 $(5,667) $554,623
======== ======= ======= ======= ========
Year ended December 31, 1992:
Land $ 17,815 $ 3,321 $ 8 $ (110) (A) $ 21,018
Buildings 122,985 18,495 1,015 (1,262) (A) 139,203
Machinery and equipment 295,885 47,825 12,463 (2,781) (A) 328,466
Construction in progress 15,009 6,612 404 (128) (A) 21,089
-------- ------- ------- ------- --------
$451,694 $76,253 $13,890 $(4,281) $509,776
======== ======= ======= ======= ========
Year ended December 31, 1991:
Land $ 14,889 $ 3,151 $ - $ (225) (A) $ 17,815
Buildings 104,857 19,333 143 (1,062) (A) 122,985
Machinery and equipment 261,914 43,037 7,958 (1,108) (A) 295,885
Construction in progress 21,700 (5,772) 549 (370) (A) 15,009
-------- ------- ------- ------- --------
$403,360 $59,749 $ 8,650 $(2,765) $451,694
======== ======= ======= ======= ========
(A) Principally foreign currency translation adjustments.
Note: Depreciation is computed principally by the straight-line method in accordance with the following
range of rates:
Buildings 2% to 5%
Machinery and equipment 9% to 33%
F-1
</TABLE>
<TABLE>
<CAPTION>
BETZ LABORATORIES, INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In thousands)
COL. A COL. B COL. C COL. D. COL. E COL. F
----------- ----------------- -------------------- ----------- ------------------ --------------
DESCRIPTION BALANCE AT BEGIN- ADDITIONS CHARGED TO RETIREMENTS OTHER CHANGES--ADD BALANCE AT
NING OF PERIOD COSTS AND EXPENSES (DEDUCT)--DESCRIBE END OF PERIOD
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Buildings $ 32,976 $ 5,490 $ 4 $ (456) (A) $ 38,006
Machinery and equipment 188,429 36,268 7,212 (1,610) (A) 215,875
-------- ------- ------- ------- --------
$221,405 $41,758 $ 7,216 $(2,066) $253,881
======== ======= ======= ======= ========
Year ended December 31, 1992:
Buildings $ 29,260 $ 4,803 $ 643 $ (444) (A) $ 32,976
Machinery and equipment 167,804 33,725 11,384 (1,716) (A) 188,429
-------- ------- ------- ------- --------
$197,064 $38,528 $12,027 $(2,160) $221,405
======== ======= ======= ======= ========
Year ended December 31, 1991:
Buildings $ 25,717 $ 3,875 $ 93 $ (239) (A) $ 29,260
Machinery and equipment 144,192 29,454 5,333 (509) (A) 167,804
-------- ------- ------- ------- --------
$169,909 $33,329 $ 5,426 $ (748) $197,064
======== ======= ======= ======= ========
<FN>
(A) Principally foreign currency translation adjustments.
F-2
</TABLE>
<TABLE>
<CAPTION>
BETZ LABORATORIES, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In thousands)
COL. A COL. B COL. C COL. D COL. E
------------ -------------------- ---------------------------------- ----------- --------------
ADDITIONS
----------------------------------
DESCRIPTION BALANCE AT BEGINNING (1) (2) DEDUCTIONS-- BALANCE AT END
OF PERIOD CHARGED TO COSTS CHARGED TO OTHER DESCRIBE OF PERIOD
AND EXPENSES ACCOUNTS--DESCRIBE
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful
Accounts Receivable
deducted from Trade
Accounts Receivable:
Year Ended
December 31, 1993 $2,880 $ 1,140 $ - $1,322 (A) $ 2,698
====== ======= ==== ====== =======
Year Ended
December 31, 1992 $2,428 $ 822 $ - $ 370 (A) $ 2,880
====== ======= ==== ====== =======
Year Ended
December 31, 1991 $1,773 $ 723 $ - $ 68 (A) $ 2,428
====== ======= ==== ====== =======
Accrued Restructuring Costs
Included in Long-Term and
Current Liabilities:
Year Ended
December 31, 1993 $ - $16,196 $ - $5,539 (B) $10,657
====== ======= ==== ====== =======
Year Ended
December 31, 1992 $ - $ - $ - $ - $ -
====== ======= ==== ====== =======
Year Ended
December 31, 1991 $ - $ - $ - $ - $ -
====== ======= ==== ====== =======
<FN>
(A) Principally accounts written off.
(B) Fixed assets written off and cash expenditures.
F-3
</TABLE>
<TABLE>
<CAPTION>
BETZ LABORATORIES, INC. AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In thousands)
COL. A COL. B
ITEM CHARGED TO COSTS AND EXPENSES
<S> <C>
Year Ended December 31, 1993:
Maintenance and repairs $10,655
Year Ended December 31, 1992:
Maintenance and repairs $10,007
Year Ended December 31, 1991:
Maintenance and repairs $ 9,193
<FN>
Amounts for depreciation and amortization of intangible assets, taxes, other than payroll and
income taxes, royalties and advertising costs are not presented as such amounts are less than
1% of total sales and revenues.
F-4
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BETZ LABORATORIES, INC.
By: s/ William R. Cook Date: March 11, 1994
--------------------------------- -----------------
William R. Cook,
President and
Chief Executive Officer
By: s/ R. Dale Voncannon Date:March 14, 1994
--------------------------------- -----------------
R. Dale Voncanon,
Vice President - Finance and
Treasurer (Principal Financial
and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
By: s/ John F. McCaughan Date: March 14, 1994
--------------------------------- -----------------
John F. McCaughan,
Director
By: s/ John W. Boyer, Jr. Date: March 15, 1994
--------------------------------- -----------------
John W. Boyer, Jr.,
Director
By: s/ Patrick F.Brennan Date: March 15, 1994
--------------------------------- -----------------
Patrick F. Brennan,
Director
By: s/ Carolyn S. Burger Date: March 18, 1994
--------------------------------- -----------------
Carolyn S. Burger
Director
By: s/ George R. Butler Date: March 14, 1994
--------------------------------- -----------------
George A. Butler,
Director
By: s/ William R. Cook Date: March 11, 1994
--------------------------------- -----------------
William R. Cook,
Director
By: s/ John A. Miller Date: March 14, 1994
--------------------------------- -----------------
John A. Miller,
Director
By: s/ Theodore B. Palmer, 3rd Date: March 14, 1994
--------------------------------- -----------------
Theodore B. Palmer, 3rd,
Director
By: s/ John R. Quarles Date: March 17, 1994
--------------------------------- -----------------
John R. Quarles,
Director
By: s/ John A. H. Shober Date: March 14, 1994
--------------------------------- -----------------
John A. H. Shober,
Director
By: s/ Geoffrey Stengel, Jr. Date: March 14, 1994
--------------------------------- -----------------
Geoffrey Stengel, Jr.,
Director
By: s/ Robert L. Yohe Date: March 18, 1994
--------------------------------- -----------------
Robert L. Yohe
Director
INDEX TO EXHIBITS
Exhibit Name Exhibit Number
- - ------------ --------------
Index to Exhibits (Electronic) 99.1
Statement Re: Computation of Per Share Earnings 11
1993 Annual Report to Shareholders 13
Letter Re: Change in Accounting Principles 18
Subsidiaries of Registrant 21
Consent of Independent Auditors 23
<TABLE>
<CAPTION>
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share amounts)
YEAR ENDED DECEMBER 31,
1993 1992 1991
--------- --------- --------
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Earnings before cumulative effect of accounting changes $63,379 $82,047 $75,524
Effect of preferred stock dividends (4,928) (5,017) (5,032)
--------- --------- --------
58,451 77,030 70,492
Cumulative effect of accounting changes 2,141 - -
--------- --------- --------
Net earnings available to common shareholders $60,592 $77,030 $70,492
========= ======= ========
Average Common Shares outstanding 28,470 28,474 28,547
Common stock equivalents 106 - -
--------- --------- --------
Average number of Common Shares - primary 28,576 28,474 28,547
========= ======= ========
Primary earnings per share:
Before cumulative effect of accounting changes $2.05 $2.71 $2.47
Cumulative effect of accounting changes 0.07 - -
--------- --------- --------
Primary Earnings per Common Share $2.12 $2.71 $2.47
========= ========= ========
FULLY DILUTED EARNINGS PER SHARE
Earnings before cumulative effect of accounting changes $63,379 $82,047 $75,524
Effect of ESOP charge to operations assuming
conversion of Series A ESOP Convertible
Preferred Shares (2,332) (1,366) (1,727)
--------- --------- --------
61,047 80,681 73,797
Cumulative effect of accounting changes 2,141 - -
--------- --------- --------
Net earnings available to common shareholders $63,188 $80,681 $73,797
========= ========= ========
Average Common Shares outstanding 28,470 28,474 28,547
Common stock equivalents 106 - -
Assumed conversion of Series A ESOP Convertible
Preferred Shares 2,755 2,747 2,759
--------- --------- --------
Average number of Common Shares - fully diluted 31,331 31,221 31,306
========= ========= ========
Fully diluted earnings per share:
Before cumulative effect of accounting changes $1.95 $2.58 $2.36
Cumulative effect of accounting changes 0.07 - -
--------- --------- --------
Fully Diluted Earnings per Common Share $2.02 $2.58 $2.36
========= ========= ========
<FN>
Common stock equivalents reflect the assumed exercise of dilutive employees' stock options
using the treasury stock method for 1993. These common stock equivalents were excluded from
the calculation in 1992 and 1991 as their dilutive effect was not material.
</TABLE>
FINANCIAL REPORT
Betz Laboratories, Inc.
- - ----------------------------------------------------------------------------
REPORT OF ERNST & YOUNG,
INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Betz Laboratories, Inc.
We have audited the accompanying consolidated balance sheets of
Betz Laboratories, Inc. as of December 31, 1993 and 1992, and the related
consolidated statements of operations, common shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1993.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Betz Laboratories, Inc. at December 31, 1993 and 1992, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1993, in conformity with generally accepted
accounting principles.
As discussed in the Notes to Consolidated Financial Statements, in
1993 the Company changed its methods of accounting for income taxes
(Note 2) and postretirement benefits other than pensions (Note 9) and
changed its method of calculating asset values used in the determination
of pension expense (Note 3).
ERNST & YOUNG
Philadelphia, Pennsylvania
January 27, 1994
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
Betz Laboratories, Inc.
(In thousands, except per share amounts)
- - ------------------------------------------------------------------------
Year Ended December 31
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Net Sales $684,872 $706,972 $665,565
Operating Costs and Expenses:
Cost of products sold 237,530 241,396 233,238
Selling, research and
administrative expenses 329,860 334,312 313,290
Provision for restructuring 16,196 - -
-------- -------- --------
583,586 575,708 546,528
-------- -------- --------
OPERATING EARNINGS 101,286 131,264 119,037
Other Income (Expense):
Investment and other income 2,927 3,228 4,991
Interest expense (143) (321) (218)
-------- -------- --------
2,784 2,907 4,773
-------- -------- --------
EARNINGS BEFORE INCOME TAXES AND CUM-
ULATIVE EFFECT OF ACCOUNTING CHANGES 104,070 134,171 123,810
Income Taxes 40,691 52,124 48,286
-------- -------- --------
EARNINGS BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGES 63,379 82,047 75,524
Cumulative effect of accounting changes:
Income taxes 3,600 - -
Retiree health care, net of
$1,700 income taxes (2,700) - -
Pension, net of $780 income taxes 1,241 - -
-------- -------- --------
2,141 - -
-------- -------- --------
NET EARNINGS $ 65,520 $ 82,047 $ 75,524
======== ======== ========
Primary earnings per Common Share:
Before cumulative effect of
accounting changes $ 2.05 $ 2.71 $ 2.47
Accounting changes .07 - -
-------- -------- --------
PRIMARY EARNINGS PER COMMON SHARE $ 2.12 $ 2.71 $ 2.47
======== ======== ========
Fully diluted earnings per Common Share:
Before cumulative effect of
accounting changes $ 1.95 $ 2.58 $ 2.36
Accounting changes .07 - -
-------- -------- --------
FULLY DILUTED EARNINGS PER COMMON SHARE $ 2.02 $ 2.58 $ 2.36
======== ======== ========
Average number of Common Shares:
Primary 28,576 28,474 28,547
======== ======== ========
Fully diluted 31,331 31,221 31,306
======== ======== ========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
Betz Laboratories, Inc.
(Dollars in thousands)
- - ----------------------------------------------------------------------
December 31
1993 1992
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 43,921 $ 46,363
Trade accounts receivable, less allowances:
1993 -- $2,698; 1992 -- $2,880 102,882 106,073
Inventories:
Finished products and goods purchased
for resale 17,155 15,675
Raw materials 20,191 19,316
-------- --------
37,346 34,991
Prepaid expenses and other 24,486 15,065
-------- --------
TOTAL CURRENT ASSETS 208,635 202,492
PROPERTY, PLANT AND EQUIPMENT -- at cost
Buildings 155,781 139,203
Machinery and equipment 360,426 328,466
Allowance for depreciation (253,881) (221,405)
-------- --------
262,326 246,264
Land 21,146 21,018
Construction in progress
(estimated cost to complete -- $14,487) 17,270 21,089
-------- --------
300,742 288,371
OTHER ASSETS
Investments and other 7,223 15,022
Intangibles -- at cost, less amortization:
1993 -- $2,513; 1992 -- $2,187 4,529 4,732
-------- --------
11,752 19,754
-------- --------
$521,129 $510,617
======== ========
- - ------------------------------------------------------------------------
December 31
1993 1992
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 32,554 $ 27,565
Payroll and related taxes 17,727 25,686
Accrued expenses 24,577 14,042
Income taxes 6,838 6,646
Dividends payable 9,845 9,698
Current portion of ESOP debt 500 500
-------- --------
TOTAL CURRENT LIABILITIES 92,041 84,137
ESOP DEBT -- less portion classified as
current 97,500 98,000
DEFERRED CREDITS
Income taxes 21,998 27,201
Other deferred credits 10,271 3,590
-------- --------
32,269 30,791
SHAREHOLDERS' EQUITY
Preferred Shares -- Authorized - 1,000,000
shares, $.10 par value, voting
Series A ESOP Convertible, 8% Cumulative,
stated at aggregate liquidation prefer-
ence; Issued: 1993 -- 496,005 shares;
1992 -- 497,323 shares 99,201 99,465
Guarantee of related ESOP debt (94,101) (95,374)
-------- --------
5,100 4,091
Common Shareholders' Equity:
Common Shares -- Authorized - 90,000,000
shares, $.10 par value;
Issued (including treasury shares):
1993 -- 33,654,715 shares;
1992 -- 33,666,491 shares 3,365 3,367
Capital in excess of par value of shares 78,667 75,524
Retained earnings 394,726 373,005
Cost of Common Shares in treasury:
1993 -- 5,527,310 shares;
1992 -- 5,146,082 shares (170,442) (150,550)
Unearned compensation (7,773) (9,511)
Foreign currency translation adjustments (4,324) 1,763
-------- --------
COMMON SHAREHOLDERS' EQUITY 294,219 293,598
-------- --------
TOTAL SHAREHOLDERS' EQUITY 299,319 297,689
-------- --------
$521,129 $510,617
======== ========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Betz Laboratories, Inc.
(In thousands)
- - --------------------------------------------------------------------------------------------------
Year Ended December 31
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 65,520 $ 82,047 $ 75,524
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 42,083 38,883 33,827
Compensation and employee benefit plans 4,707 5,569 5,749
Income taxes 2,575 8,924 7,972
Provision for restructuring 16,196 - -
Cumulative effect of accounting changes (2,141) - -
Other, net (745) - 537
Changes in operating assets and
liabilities:
Accounts receivable 3,192 (12,909) (6,973)
Inventories (2,959) 12 1,521
Prepaid expenses and other (2,590) (2,253) (862)
Accounts payable and accrued expenses (5,665) (5,603) 9,123
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 120,173 114,670 126,418
INVESTING ACTIVITIES
Expenditures for property, plant and equipment,
net (63,212) (74,290) (58,408)
Proceeds from sales of investments 11,718 - 6,508
Purchase of investments - - (2,347)
Other, net (258) 129 (38)
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES (51,752) (74,161) (54,285)
FINANCING ACTIVITIES
Dividends paid (47,206) (44,970) (41,076)
Proceeds from issuance of common stock,
including treasury shares 1,955 5,665 5,819
Purchase of treasury stock (22,432) (10,696) (15,995)
Principal payments on ESOP debt (500) (500) (500)
Retirement of ESOP preferred stock (370) (489) (263)
-------- -------- --------
NET CASH USED IN FINANCING ACTIVITIES (68,553) (50,990) (52,015)
Effect of exchange rate changes on cash (2,310) (2,165) (890)
-------- -------- --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,442) (12,646) 19,228
Cash and Cash Equivalents at Beginning of Year 46,363 59,009 39,781
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 43,921 $ 46,363 $ 59,009
======== ======== ========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
Betz Laboratories, Inc.
(Dollars in thousands, except per share amounts)
- - -----------------------------------------------------------------------------------------------------------
Year Ended December 31
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
COMMON SHARES
Balance at beginning of year $ 3,367 $ 3,368 $ 3,371
Shares cancelled through stock plans
(1993 -- 11,776 shares; 1992 --
18,243 shares; 1991 -- 20,596 shares) (2) (1) (3)
-------- -------- --------
BALANCE AT END OF YEAR $ 3,365 $ 3,367 $ 3,368
======== ======== ========
CAPITAL IN EXCESS OF PAR VALUE OF SHARES
Balance at beginning of year $ 75,524 $ 68,531 $ 59,551
Tax benefits related to stock plans 2,130 4,701 5,248
Shares issued through stock plans 1,013 2,292 3,732
-------- -------- --------
BALANCE AT END OF YEAR $ 78,667 $ 75,524 $ 68,531
======== ======== ========
RETAINED EARNINGS
Balance at beginning of year $373,005 $333,841 $297,686
Net earnings for the year 65,520 82,047 75,524
Common dividends declared (per share:
1993 -- $1.39; 1992 -- $1.33;
1991 -- $1.20) (39,405) (37,865) (34,250)
Preferred dividends declared ($16.00 per share) (7,948) (7,964) (7,987)
Tax benefit related to ESOP preferred
dividends 3,554 2,946 2,868
-------- -------- --------
BALANCE AT END OF YEAR $394,726 $373,005 $333,841
======== ======== ========
TREASURY SHARES
Balance at beginning of year $150,550 $145,131 $134,730
Purchases: (1993 -- 505,200 shares; 1992 --
200,000 shares; 1991 -- 300,000 shares) 22,432 10,696 15,995
Reissue of shares to stock plans:
(1993 -- 123,972 shares; 1992 --
271,007 shares; 1991 -- 371,918 shares) (2,540) (5,277) (5,594)
-------- -------- --------
BALANCE AT END OF YEAR $170,442 $150,550 $145,131
======== ======== ========
UNEARNED COMPENSATION
Balance at beginning of year $ 9,511 $ 11,460 $ 12,028
New grants 2,231 2,668 3,591
Amounts expensed during the year (3,969) (4,617) (4,159)
-------- -------- --------
BALANCE AT END OF YEAR $ 7,773 $ 9,511 $ 11,460
======== ======== ========
UNREALIZED LOSS ON INVESTMENTS
Balance at beginning of year $ - $ - $ 5,050
Unrealized increase in value of investments - - (2,040)
Writedown of marketable securities - - (3,010)
-------- -------- --------
BALANCE AT END OF YEAR $ - $ - $ -
======== ======== ========
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
Balance at beginning of year $ 1,763 $ 6,659 $ 9,900
Current-year adjustments (6,087) (4,896) (3,241)
-------- -------- --------
BALANCE AT END OF YEAR $ (4,324) $ 1,763 $ 6,659
======== ======== ========
See notes to consolidated financial statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Betz Laboratories, Inc.
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- The consolidated financial
statements include the accounts of the Company and all subsidiaries. All
significant intercompany items and transactions are eliminated from the
consolidated statements.
FOREIGN OPERATIONS -- The Company follows the practice of using a
November 30 fiscal year for all foreign subsidiaries in order to expedite
the year-end closing.
CASH EQUIVALENTS -- The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be
cash equivalents. The carrying value of these investments approximates
their fair value at December 31, 1993.
INVENTORIES -- Inventories are stated at the lower of cost or
market. Cost of approximately 70% of the inventory is determined by the
last-in, first-out (LIFO) method, the balance by the first-in, first-out
(FIFO) method. If the FIFO method of inventory accounting had been used
for all inventory, amounts would have been approximately $10,419,000 and
$10,510,000 higher than reported at December 31, 1993 and December 31,
1992, respectively.
DEPRECIATION -- Depreciation is computed principally by the
straight-line method over the estimated useful lives of the related
assets. Depreciation expense for the three years ended December 31, 1993,
1992 and 1991 is $41,758,000, $38,528,000 and $33,329,000, respectively.
INVESTMENTS -- Investments are generally carried at cost.
INTANGIBLE ASSETS -- Intangible assets consist primarily of cost
in excess of net assets of acquired businesses. Amortization is computed
by the straight-line method over 40 years.
RESEARCH AND DEVELOPMENT -- Research and development costs
($28,732,000 in 1993, $28,343,000 in 1992 and $26,712,000 in 1991) are
charged to expense as incurred.
PER SHARE AMOUNTS -- Primary earnings per Common Share is computed
by dividing net income available to common shareholders by the weighted
average number of shares outstanding during the periods presented. In
computing primary earnings per Common Share, preferred stock dividends, net
of related income tax benefit, reduce income available to common
shareholders. In computing fully diluted earnings per Common Share,
conversion of the Series A ESOP Convertible Preferred Shares is assumed.
RECLASSIFICATIONS -- Certain amounts in the financial statements
for the year ended December 31, 1992 have been reclassified to conform with
1993 classifications.
NOTE 2 -- INCOME TAXES
Effective January 1, 1993, the Company changed its method of
accounting for income taxes from the deferred method to the liability
method required by Financial Accounting Standard No. 109, "Accounting for
Income Taxes." As permitted under the new rules, prior years' financial
statements have not been restated.
The cumulative effect of adopting Statement 109 as of January 1,
1993, was to increase net income by $3,600,000. The effect on 1993
earnings before cumulative effect of accounting changes is not material.
Deferred income taxes reflect the estimated future tax effects of
temporary differences between the carrying amounts of the assets and
liabilities for financial reporting purposes and the amounts used for
income tax purposes. Significant components of the Company's deferred tax
assets and liabilities as of December 31, 1993 are as follows:
Deferred Tax Assets:
Stock and benefit plans $ 5,763
Nondeductible expenses 7,395
Tax carryforwards 2,788
Other 3,165
---------
Total Deferred Tax Assets 19,111
Valuation allowance for deferred tax assets (3,095)
---------
Net Deferred Tax Assets 16,016
Deferred Tax Liabilities:
Tax over book depreciation (29,913)
Other (290)
---------
Total Deferred Tax Liabilities (30,203)
---------
Net Deferred Tax Liabilities $(14,187)
=========
The Company included current net deferred tax assets of $4,696,000
for 1992 as a reduction of income taxes in the balance sheet. In 1993,
prepaid expenses and other includes $7,712,000 of deferred tax assets, and
investments and other includes $99,000 of deferred tax assets. The
balance of $21,998,000 is included in deferred credits--income taxes on
the balance sheet.
The Company has the following capital loss and foreign tax credit
carryforwards as of December 31, 1993 (in thousands):
Type Amount Expiration Date
---- ------ ---------------
Capital loss carryforwards $ 721 Beginning in 1999
Foreign tax credit carryforwards 2,536 Beginning in 1995
<TABLE>
<CAPTION>
The provision for income taxes consists of the following (in
thousands):
Currently
1993 - Liability Method Payable Deferred Total
- - ----------------------- --------- -------- -----
<S> <C> <C> <C>
Federal $28,879 $(2,507) $26,372
State 5,505 (532) 4,973
Foreign 9,894 (548) 9,346
-------- --------- --------
$44,278 $(3,587) $40,691
======== ======== ========
1992 - Deferred Method
- - ----------------------
Federal $32,985 $ 1,013 $33,998
State 5,360 75 5,435
Foreign 12,730 (39) 12,691
-------- --------- --------
$51,075 $ 1,049 $52,124
======== ======== ========
1991 - Deferred Method
- - ----------------------
Federal $34,054 $( 137) $33,917
State 5,423 (7) 5,416
Foreign 9,033 (80) 8,953
-------- --------- --------
$48,510 $( 224) $48,286
======== ======== ========
A reconciliation of the effective income tax rate with the
applicable statutory federal income tax rate is as follows:
1993 1992 1991
---- ---- ----
Federal tax rate 35.0% 34.0% 34.0%
State and local taxes, net
of federal income taxes 3.2 2.8 2.8
Other items 0.9 2.0 2.2
------ ------ ------
Effective income tax rate 39.1% 38.8% 39.0%
====== ====== ======
The components of earnings before income taxes and cumulative
effect of accounting changes consists of the following (in thousands):
1993 1992 1991
---- ---- ----
Domestic $ 75,232 $ 99,316 $ 93,082
Foreign 28,838 34,855 30,728
--------- --------- ---------
$104,070 $134,171 $123,810
========= ========= =========
The Company made income tax payments of $43,087,000, $42,122,000
and $38,146,000 for the years 1993, 1992 and 1991, respectively.
The Company has not provided United States income taxes on
$66,224,000 of unremitted earnings of foreign subsidiaries because
management views such earnings as being indefinitely invested.
</TABLE>
NOTE 3 -- EMPLOYEE RETIREMENT PLANS
The Company has defined benefit plans to provide pension benefits to
substantially all of its employees. The benefits are primarily based on
years of service and the employee's final average compensation. The
Company's funding policy is to contribute an amount annually based upon
actuarial and economic assumptions designed to achieve adequate funding of
projected benefit obligations. Plan assets are principally invested in
listed common stocks, bonds and common trust funds.
Effective January 1, 1993, the Company changed its method of
calculating the value of assets of its pension plan for purposes of
determining annual pension costs under Financial Accounting Standard No.
87. This calculated value is the basis for computing the annual expected
return on plan assets and the net amortization and deferral component of
pension costs. This calculated value recognizes changes in fair value of
assets over three years (previously five years). The new method, which
also changes the manner in which such changes in fair value are recognized
over the three-year period, is preferable because, in the Company's
situation, it produces a calculated value which more closely approximates
fair value, and is therefore more sensitive to the current economic
environment, while still mitigating the effect of extreme market value
fluctuations.
The cumulative effect on years prior to 1993 is $1,241,000 (net of
taxes of $780,000), or $.04 per share, which is a one-time, noncash
increase in net income for 1993. The effect of this change on 1993 results
of operations and the pro forma effects on results of operations for the
prior periods presented are not material.
Net periodic pension expense (excluding the cumulative effect of the
accounting change) for the Company's defined benefit plans consists of the
following (in thousands):
1993 1992 1991
---- ---- ----
Service cost $ 6,262 $ 5,707 $ 4,597
Interest cost 10,907 9,763 7,993
Return on plan assets (11,469) (11,055) (20,735)
Net amortization and deferral 1,477 3,457 14,044
-------- -------- --------
Net periodic pension expense $ 7,177 $ 7,872 $ 5,899
======== ======== ========
The following table sets forth the actuarial present value of
benefit obligations and funded status at December 31, 1993 and 1992 for the
Company's plans (in thousands):
December 31
1993 1992
---- ----
Actuarial present value of benefit
obligations:
Vested benefits $(113,256) $( 81,979)
Nonvested benefits ( 6,900) ( 4,919)
---------- ----------
Accumulated benefit obligation (120,156) ( 86,898)
Effect of projected future salary
increases ( 47,628) ( 31,535)
---------- ----------
Projected benefit obligation (167,784) (118,433)
Plan assets at fair value 142,069 116,242
---------- ----------
Projected benefit obligation in excess
of plan assets ( 25,715) ( 2,191)
Unrecognized net loss (gain) 18,953 ( 8,617)
Unrecognized prior service cost 6,970 7,262
Adjustment required to recognize
minimum liability ( 2,418) ( 1,315)
---------- ----------
Net pension liability included in
the balance sheet $( 2,210) $( 4,861)
========== ==========
Assumptions used to develop the Company's net periodic pension
expense and the actuarial present value of benefit obligations
were as follows:
December 31
1993 1992 1991
---- ---- ----
Discount rate 7.25% 8.75% 8.75%
Rate of increase in compensation levels 5.0% 5.0% 5.0%
Long-term rate of return on plan assets 9.5% 9.5% 9.5%
<TABLE>
<CAPTION>
NOTE 4 -- SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates principally in one industry segment which includes the
development, manufacture and sale of specialty chemical products used to treat
industrial water and industrial processes using water.
The Company's areas of operation outside of the United States and Europe
principally include Canada, the Caribbean and the Pacific. No one single foreign
country in which the Company produces or markets its products is significant to
consolidated operations. No single customer accounts for more than 10 percent of
the Company's revenues.
Information about the Company's operations in different geographic locations
is shown below.
United Other
1993 States Europe Foreign Consolidated
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $543,261 $84,613 $56,998 $684,872
Operating earnings 82,298 9,905 9,083 101,286
Identifiable assets 399,927 75,928 45,274 521,129
- - ------------------------------------------------------------------------------
1992
- - ------------------------------------------------------------------------------
Net sales $557,401 $96,168 $53,403 $706,972
Operating earnings 104,195 16,140 10,929 131,264
Identifiable assets 397,306 75,149 38,162 510,617
- - ------------------------------------------------------------------------------
1991
- - ------------------------------------------------------------------------------
Net sales $533,513 $80,094 $51,958 $665,565
Operating earnings 95,074 13,144 10,819 119,037
Identifiable assets 368,639 69,641 37,564 475,844
- - ------------------------------------------------------------------------------
United States identifiable assets include $32,100,000, $49,500,000 and
$51,000,000 of cash and cash equivalents, marketable securities and other investments
at December 31, 1993, 1992 and 1991, respectively. These assets are available for
general corporate purposes.
Direct export sales of $11,981,000, $10,913,000 and $9,989,000 for the
years 1993, 1992 and 1991, respectively, are included in United States net sales.
</TABLE>
NOTE 5 -- STOCK OPTION, STOCK INCENTIVE AND SHAREHOLDER
RIGHTS PLANS
OPTION PLANS -- Options granted under the Company's Stock Option
Plans are at the fair value at the date of grant. The period during which
these options become exercisable ranges from date of grant to two years
after date of grant. Unexercised options expire ten years after date of
grant. No individual may receive an option if that individual owns (or
would own if options were exercised) stock possessing 5 percent of the
voting power or value of all classes of stock of the Company.
Option activity is summarized as follows:
Number of Option Price
Shares per Share
---------- ------------
Outstanding at January 1, 1991 1,222,263 $15.125 - $40.50
Granted 426,817 50.25 - 58.50
Exercised (309,074) 15.125 - 50.25
----------
Outstanding at December 31, 1991 1,340,006 15.125 - 58.50
Granted 358,681 53.875 - 60.50
Exercised (240,972) 15.125 - 56.75
----------
Outstanding at December 31, 1992 1,457,715 15.50 - 60.50
Granted 612,641 43.625 - 59.00
Cancelled (20,619) 33.50 - 60.50
Exercised (76,797) 15.50 - 58.25
----------
Outstanding at December 31, 1993 1,972,940 $ 17.375 - $60.50
==========
Exercisable at December 31, 1993 1,605,145
==========
INCENTIVE PLAN -- The Employee Stock Incentive Plan provides that
up to 1,500,000 shares of common stock may be granted to April 11, 2001, at
the discretion of the Board, to key employees at no cost to the employees.
The Company granted 48,504, 47,573 and 76,431 shares during 1993, 1992 and
1991, respectively. Key employees receiving grants are entitled to receive
dividends, but assumption of full beneficial ownership is contingent at the
time of grant. In the event the employee does not remain in continuous
employment for the periods stipulated, the shares are cancelled and revert
to the Company for reissuance under the Plan.
The aggregate fair market value of the shares granted under this
Plan is considered unearned compensation at the time of grant and
compensation is earned ratably over the stipulated period.
At December 31, 1993, the Company had remaining an aggregate of
2,588,578 Common Shares reserved for issuance under its Stock Option Plans
and 657,107 Common Shares available for issuance under its Employee Stock
Incentive Plan.
COMMON STOCK SHAREHOLDER RIGHTS PLAN -- On September 8,
1988, the Board of Directors declared a distribution of one Stock Purchase
Right for each Common Share outstanding. Each right will entitle the
holder to buy from the Company a unit consisting of one Common Share at an
exercise price of $75 per unit. The rights become exercisable ten days
after a public announcement that a person or group has acquired 20 percent
or more of the Company's Common Shares or has commenced a tender offer for
20 percent or more of the Common Shares. The rights may be redeemed prior
to becoming exercisable by action of the Board of Directors at a redemption
price of $.01 per right. If more than 20 percent of the Company's Common
Shares become held by a beneficial owner, other than pursuant to an offer
deemed in the best interests of the shareholders by the Company's
independent directors, each right may be exercised for Common Shares, or
other property, of the Company having a value of twice the exercise price
of each right. If the Company is acquired by any person after the rights
become exercisable, each right will entitle its holder to receive common
shares of the acquiring company having a market value of twice the exercise
price of each right. The rights expire on September 19, 1998.
NOTE 6 -- EMPLOYEE STOCK OWNERSHIP (ESOP) AND 401(K) PLAN
In 1989, the Company established an ESOP and a related trust as a
long-term benefit for substantially all of its domestic employees. This
plan supplements the Company's employee retirement plan. Under this plan,
the Company sold 500,000 shares of a new Series A ESOP Convertible
Preferred Stock to the trust for $100,000,000. The Company arranged for
and guaranteed a loan of $100,000,000 to the trust for the purchase of the
preferred stock. Proceeds of the loan were primarily used for the purchase
of common treasury stock to be used for future conversion and redemption of
the preferred stock, which is presently convertible into 2,776,000 shares
of common stock. The loan and guarantee are recorded in the Company's
consolidated balance sheets as long-term debt and a reduction in
shareholders' equity.
Effective January 1, 1990, the Company's 401(k) program was
integrated into the Employee Stock Ownership Plan. Employees may invest 2-
15 percent of eligible compensation. Company matches, equal to 25 percent
of the first 4 percent of employees' investments, fully vest to employees
upon the completion of 5 years of service. The Company's matching
contributions, which are included in ESOP expense, are made in the form of
the ESOP Convertible Preferred Stock. The fair value of such matching
contributions amounted to $1,411,000 in 1993, $1,224,000 in 1992 and
$1,019,000 in 1991.
After satisfying the 401(k) matching contributions, the remaining
shares of ESOP stock are allocated to each participant based on the ratio
of the participant's compensation to total compensation of all
participants. During 1993, 1,318 shares of the Preferred Stock were
redeemed by plan participants and permanently retired.
The Company is required to make quarterly contributions to the Plan
which enable the Trust to service its indebtedness. Net ESOP cost for the
Company is comprised of the following elements (in thousands):
1993 1992 1991
---- ---- ----
ESOP expense $ 9,210 $ 9,321 $ 9,383
Preferred dividends (charged to
retained earnings) (7,947) (7,964) (7,987)
-------- -------- --------
ESOP expense charged to earnings $ 1,263 $ 1,357 $ 1,396
======== ======== ========
ESOP debt interest expense at 8.08%
for 1993; 8.15% for 1991 and 1992 $ 7,937 $ 8,047 $ 8,088
======== ======== ========
ESOP contributions $ 8,441 $ 8,548 $ 8,633
======== ======== ========
The ESOP expense is calculated using the 80-percent-of-shares-
allocated method. To the extent that this expense exceeds the ESOP's
annual debt service requirements, an adjustment is made to the
shareholders' equity reduction to reflect the cumulative effect of the
excess charges ($5,899,000, $4,626,000 and $3,351,000 in 1993, 1992 and
1991, respectively).
The ESOP debt matures on June 19, 2009 and requires principal
payments as follows: 1994 -- $500,000; in each of the years 1995-1998 --
$1,000,000. The Company is obligated to maintain, among other things,
certain levels of tangible net worth and interest coverage, and not to
exceed a maximum funded debt level. The fair value of the ESOP debt
approximates $106,000,000, which was estimated using discounted cash flow
analyses, based on quoted market rates for similar obligations.
Amounts paid by the Company to the ESOP which are characterized as
interest expense in the accompanying financial statements and interest on
other indebtedness amounted to $1,331,000, $1,375,000 and $1,527,000 for
the years 1993, 1992 and 1991, respectively. Capitalized interest amounted
to $1,188,000, $1,055,000 and $1,309,000 in 1993, 1992 and 1991,
respectively.
NOTE 7 -- LONG-TERM LEASES
Total rental expense for all leases amounted to $13,270,000 in
1993, $12,064,000 in 1992 and $9,798,000 in 1991. The future rental
commitments, primarily for automobiles, as of December 31, 1993 for all
noncancelable leases are: 1994 -- $8,176,000, 1995 -- $3,696,000, 1996 --
$915,000, 1997 -- $254,000, 1998 -- $166,000 and $1,068,000 thereafter.
NOTE 8 -- PROVISION FOR RESTRUCTURING
The $16,196,000 provision for restructuring recorded in 1993 is
for the estimated costs associated with the Company's decision to lower
operating costs on a prospective basis and reorganize the Company's
marketing efforts on a global basis. The provision includes $5,171,000 for
asset writedowns and $11,025,000 for personnel reductions, globalization of
marketing efforts and other anticipated restructuring costs. At December
31, 1993, $6,312,000 and $4,345,000 of accrued restructuring costs are
included in accrued expenses and other deferred credits, respectively.
NOTE 9 -- POSTRETIREMENT BENEFITS
The Company pays limited medical insurance premiums on behalf of
certain early retirees as well as providing a small life insurance benefit
for certain retirees. Prior to 1993, the cost of these benefits, which was
not significant, was charged to expense when incurred.
Effective January 1, 1993, the Company adopted Financial
Accounting Standard No. 106. Under this standard, the Company recognizes
the cost of postretirement benefits over the active service period of its
employees. The Company elected to recognize the transition obligation,
which represents the previously unrecognized prior service cost, as a one-
time noncash charge of $2,700,000 to net earnings in the first quarter of
1993. This charge is net of a $1,700,000 deferred tax benefit.
The following table sets forth the plans' status at December 31,
1993:
Accumulated postretirement benefit obligation (in thousands):
Retirees $(1,000)
Active plan participants (5,000)
--------
Accumulated postretirement benefit obligation (6,000)
Unrecognized net loss 1,100
--------
Postretirement benefit liability included
in balance sheet $(4,900)
========
Such benefit obligation is unfunded.
The components of net periodic postretirement benefit cost for
the year ended December 31, 1993 follow (in thousands):
Service cost $ 180
Interest cost on accumulated benefit
obligation 320
--------
Net periodic postretirement benefit costs $ 500
========
The estimated cash expenses for these benefits is approximately $120,000
per year.
The accumulated postretirement benefit obligation, service cost
and interest components were determined using a discount rate of 8.75% in
1993 (7.25% effective December 31, 1993). 1993 health care and Medicare
cost trend assumptions were 13% and 14%, grading down to an ultimate rate
of 6%, at the rate of 1% and 0.5% per year, respectively. An increase of
1% each year in the health care and Medicare cost trends assumption would
increase the accumulated benefit obligation by approximately $535,000.
NOTE 10 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
The following is a summary of quarterly financial information for the years ended December 31, 1993 and 1992 (in
thousands, except for per share data).
1993 Quarter Ended 1992 Quarter Ended
---------------------------------------- -----------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $168,495 $171,472 $176,543 $168,362 $175,673 $175,850 $182,860 $172,589
Gross Profit 109,578 112,712 116,713 108,339 114,854 115,146 120,536 115,040
Earnings Before Income Taxes
and Cumulative Effect of
Accounting Changes 31,198 30,574 29,540 12,758 32,960 33,211 35,068 32,932
Earnings Before Cumulative
Effect of Accounting
Changes 19,187 18,803 17,639 7,750 20,106 20,391 21,461 20,089
Net Earnings 21,328 18,803 17,639 7,750 20,106 20,391 21,461 20,089
Net Earnings Per Common Share:
Primary
Before Cumulative Effect
of Accounting Changes .62 .61 .58 .24 .66 .67 .71 .67
Net Earnings .69 .61 .58 .24 .66 .67 .71 .67
Fully Diluted
Before Cumulative Effect
of Accounting Changes .59 .58 .54 .24 .63 .64 .68 .63
Net Earnings .66 .58 .54 .24 .63 .64 .68 .63
Cash Dividends Declared Per
Common Share .34 .35 .35 .35 .31 .34 .34 .34
Common Stock Market Prices:
High Price 62-7/8 53 49-7/8 45-1/2 66-1/4 59-1/2 56-3/4 62-5/8
Low Price 51-1/4 44 44-1/8 40 54-3/4 48-1/4 50-3/4 51-1/2
Certain 1993 quarterly amounts have been restated or reclassified from previously reported amounts due to the
provision for restructuring (Note 8) and the change in the method of determining pension expense (Note 3).
Through December 14, 1992, the common stock of the Company was traded on the over-the-counter market and was listed
under the symbol BETZ. Effective December 15, 1992, the common stock of the Company is traded on the New York Stock
Exchange under the symbol BTL. The high/low price represents the high and low sales prices for the Company's stock.
The approximate number of record holders of Common Shares as of February 14, 1994, was 3,973.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Betz Laboratories, Inc.
- - ---------------------------------------------------------------------------
OVERVIEW
Nineteen ninety-three was a difficult year for Betz and marks the
first time since going public in 1965 that the Company has not experienced
an increase in sales and pretax earnings.
For the year 1993, net sales decreased $22.1 million from $707.0
million in 1992 to the current-year level of $684.9 million. The 3 percent
sales decrease was comprised of a decrease of approximately 2 percent
resulting from the effects of foreign currency fluctuations and a 2 percent
volume-mix loss, partially offset by selling price increases of
approximately 1 percent.
Operating earnings decreased 23 percent from 1992's amount of
$131.3 million to the current year's $101.3 million. Current-year earnings
before income taxes and the cumulative effect of changes in the method of
accounting for income taxes, retiree health benefits and employee
retirement plans decreased 22 percent compared to 1992 totals from $134.2
million to $104.1 million. Net earnings decreased 20 percent from $82.0
million to $65.5 million. Primary earnings per Common Share decreased 22
percent from $2.71 to $2.12 while fully diluted earnings per Common Share
also declined 22 percent from $2.58 to $2.02.
During 1993, the Company recorded a pretax restructuring charge
in the amount of $16.2 million, equivalent to $.31 per Common Share on a
fully diluted, after-tax basis. This charge reflects a series of actions
designed to lower operating costs on a prospective basis and includes
personnel reductions, facilities consolidation, the disposition of
unproductive assets and the cost of reorganizing the Company's marketing
efforts on a global basis.
In 1992, net sales increased 6 percent over 1991 (primarily
comprised of volume-mix gains of approximately 4.5 percent and selling
price increases of 2.5 percent, with virtually no effect resulting from
changes in the value of foreign currencies relative to the U.S. dollar).
Net earnings increased 9 percent for the same time period.
RESULTS OF OPERATIONS - 1993 VS. 1992
The Company's results of operations for 1993 were negatively
impacted by sluggish growth in the industrial sector of the economy,
particularly the chemical, refining and paper industries, the Company's
major customers. Some customers in these industries reduced consumption of
existing treatment programs to meet short-term cost control objectives.
The Company's domestic/foreign sales relationship was 79
percent/21 percent, respectively. Domestic sales decreased 3 percent from
$557.4 million in 1992 to $543.3 million in 1993. Foreign sales decreased
5 percent from $149.6 million to $141.6 million for the same time period,
but were up approximately 5 percent when translated at 1992 foreign
currency exchange rates.
On a combined basis, sales of the Betz Industrial Division, the
Company's largest operating unit, and the Betz MetChem Division were down 5
percent from the prior year. Although Betz Industrial added new business
at a record pace in 1993, the shrinkage in business at existing accounts
more than offset new business gains.
Sales at Betz PaperChem, Inc., our second largest domestic
operating unit which markets the Company's line of specialty process
chemicals to the pulp and paper industry, declined 4 percent from the 1992
level, primarily as a result of customer shutdowns and reduced treatment
levels at existing accounts.
Betz Process Chemicals, Inc. posted modest sales gains for 1993.
The marketing of unique technology, such as SPEC-AID (registered trademark)
Finished Product Additives and ALKAT-XL (registered trademark) treatment
programs which increase the efficiency of alkylation units in refineries,
contributed to the sales increase at this subsidiary.
Betz Energy Chemicals, Inc. reported strong increases in sales of
its oil field chemical treatment programs despite the fact that crude oil
production within the U.S. fell to a 35-year low during 1993.
Betz Entec, Inc. experienced a 6 percent sales increase over the
prior year to the commercial, institutional and light industrial
marketplace. New business generated by Betz Entec was a strong contributing
factor to this unit's growth.
Regarding our foreign operations, Betz Inc., the Company's
Canadian subsidiary, recorded a 13 percent sales gain in Canadian dollars
over the prior period. This operating unit experienced strong increases in
sales of its process treatment programs to the pulp and paper industry.
Betz International, Inc. reported a 10 percent increase in sales over 1992
and experienced strong gains in Southeast Asia, Korea and the Caribbean.
Betz Europe, Inc. sales were up fractionally in local currencies,
but were down 12 percent when translated to U.S. dollars. Sales increases
in France, Italy and Scandinavia were offset by slightly lower sales in the
rest of the Company's European operations.
The Company's gross profit margin decreased slightly from 65.9
percent of net sales in the prior year to 65.3 percent of 1993's net sales.
Selling, research and administrative expenses decreased from $334.3 million
in 1992 to $329.9 million in 1993, but increased as a percent of net sales
with 1993's level at 48.2 percent compared to 1992's 47.3 percent. The
increase in selling, research and administrative expenses, as a percentage
of net sales, is primarily related to higher levels of research and selling
expenses due to continued emphasis on the development of new products and
expansion of the Company's sales force. This increase is partially offset
by declines in administrative expenses resulting from the implementation of
cost controls during the first half of 1993.
The $16.2 million provision for restructuring recorded in 1993 is
for the estimated costs associated with the Company's decision to lower
operating costs on a prospective basis and reorganize the Company's
marketing efforts on a global basis. The provision includes a non-cash
charge of $5.2 million for asset writedowns and $11.0 million for personnel
reductions, globalization of marketing efforts and other anticipated
restructuring costs. No significant components of this charge would have
been recognized at this time in the absence of these efforts. Net
reductions in expenses anticipated from the restructuring plan are
estimated to be $6 million in 1994 and $10 million in 1995 and future
years. The Company expects to fund the future cash expenditures for this
program with cash provided by operations.
Investment and other income decreased slightly as a result of
lower investment yields on the Company's cash, partially offset by gains on
the sales of long-term investments.
The effective income tax rate increased from 38.8 percent in 1992
to 39.1 percent in 1993 and is estimated to increase to 40.0 percent in
1994, reflecting the provisions of the Omnibus Budget Reconciliation Act of
1993.
In the first quarter of 1993, the Company adopted two new
accounting standards issued by the Financial Accounting Standards Board.
Financial Accounting Standard No. 106 requires companies to recognize
expense relating to postretirement benefits as employees render services
instead of when the benefits are actually paid. The cumulative effect of
this change in accounting method was a one-time, noncash charge to the
Company's 1993 net earnings of $2.7 million (net of a $1.7 million deferred
tax benefit). Financial Accounting Standard No. 109 requires companies to
adopt the liability method of accounting for income taxes. Deferred income
taxes were reduced by $3.6 million resulting in a one-time, noncash credit
to the Company's net earnings in 1993.
In the fourth quarter of 1993, effective January 1, 1993, the
Company changed its method of calculating the value of assets of its pension
plan for purposes of determining annual pension costs under Financial
Accounting Standard No. 87. The cumulative effect on years prior to
December 31, 1992 is $1.2 million (net of taxes of $0.8 million), which is
a one-time, noncash increase in net income for the year 1993. The effect
of this change on 1993 results of operations and the pro forma effects on
results of operations for 1992 and 1991 are not material. The projected
effect of this change on the 1994 results of operations is a reduction in
net periodic pension expense of approximately $3 million.
In response to the reduction in long-term interest rates,
effective December 31, 1993, the Company reduced from 8.75 percent to 7.25
percent the discount rate assumption used to develop net periodic pension
expense and the actuarial present value of projected benefit obligations of
the domestic employee retirement plan. The Company also reduced the
discount rate assumption used to determine the accumulated postretirement
benefit obligation and interest cost to 7.25 percent effective December 31,
1993. The projected impact of the reduction in the discount rate on the
1994 results of operations is an increase in net periodic pension expense
and postretirement medical benefit expense of approximately $5 million.
RESULTS OF OPERATIONS - 1992 VS. 1991
Nineteen ninety-two results were recorded during a period of slow
growth in the industrial sector of the economy, particularly the
hydrocarbon, paper and steel industries, the Company's major customers.
Despite these conditions, all of the major operating units, both domestic
and foreign, contributed to the Company's growth during 1992. For the year
ended December 31, 1992, the Company's domestic/foreign sales relationship
was 77 percent/23 percent, respectively. Domestic sales increased 4
percent from $533.5 million in 1991 to $557.4 million in 1992 while foreign
sales increased 13 percent from $132.1 million to $149.6 million for the
same time period.
Betz PaperChem, Inc. and Betz Process Chemicals, Inc. (ProChem)
reported strong years in 1992. In PaperChem's case, sales of treatment
programs aimed at solving problems associated with the use of recycled
fiber in the papermaking process were particularly strong, while sales of
virtually all other major product lines were also healthy. Problems
associated with the reformulation of gasoline in order to meet U.S. Clean
Air Act and state regulations provided ProChem with new markets and
opportunities to expand their existing business.
The Company's operations which support heavy industry had more
modest sales growth in 1992. The combined sales of the Betz Industrial and
Betz MetChem Divisions rose approximately 4 percent over the same period in
1991. Betz MetChem provides treatment programs used in metal finishing
while Industrial markets our traditional boiler water, cooling water and
wastewater treatment programs. Betz MetChem's detackification and NORINSE
II (trademark) sales were up to the automotive and coil industries,
respectively, while Industrial experienced slower sales gains to the
hydrocarbon processing and paper industries. Betz Entec, Inc. reported
sales gains in line with 1992 consolidated results.
The Company's foreign operations performed well during 1992.
Operations in Europe posted sales gains in U.S. dollars that were 20
percent higher than 1991's level. Increases in local currencies were 16
percent. Operating subsidiaries in Belgium, Italy, France and Germany all
reported strong increases in 1992. The Company's Canadian subsidiary, Betz
Inc., reported local currency sales increases of approximately 6 percent,
or 1 percent when translated into U.S. dollars.
Generally weak economic conditions in Canada offset relatively
strong sales increases to the paper industry in that country. The
remainder of our foreign business, which is served by our International
operating group, posted sales increases of 7 percent in both U.S. dollars
and local currencies. This operation primarily services the Company's
markets in the Pacific and Caribbean.
In an effort to continue to expand the Company's operations
abroad, late in 1992 new operations were established in Venezuela, where
there is a substantial market in the hydrocarbon processing and paper
industries.
The Company's gross profit margin increased from 65.0 percent of
net sales in 1991 to 65.9 percent of 1992's net sales. The major
contributing factors to this increase were increased selling prices, raw
material cost decreases and an improved product mix. Selling, research and
administrative expenses remained relatively constant as a percent of net
sales with 1992's level at 47.3 percent compared to 1991's 47.1 percent.
Investment and other income decreased $1.8 million as a result of
much lower investment yields on the Company's cash. Interest expense
remained constant in 1992 as compared to 1991.
LIQUIDITY AND SOURCES OF CAPITAL
The Company's ratio of current assets to current liabilities was
2.3 at the end of 1993 and 1991 and 2.4 at the end of 1992.
Net cash provided from operating activities amounted to $120.2
million, $114.7 million and $126.4 million for the years 1993, 1992 and
1991, respectively. The current-year increase in cash provided from
operations is mainly the result of decreases in the Company's accounts
receivable balances from 1992 to 1993.
Net cash used in investing activities decreased by $22.4 million
in 1993 as compared to 1992. Capital expenditures for the year 1993 were
$63.2 million, a $13.0 million decline from the 1992 expenditures. Major
projects in 1993 included the completion of a major expansion of the
Company's production plant in Beaumont, Texas, the completion of a
production plant in France and the start of construction of a production
plant in Korea, which is scheduled for completion in 1995. The Company
anticipates that capital expenditures for 1994 will be approximately equal
to the 1993 level. Investing activities also included $11.7 million of
cash proceeds from the sale of long- term investments, primarily preferred
stock.
During 1993, the Company continued its program of treasury stock
purchases by acquiring 505,200 shares at an approximate cost of $22.4
million. The purchases are pursuant to an authorization by the Board of
Directors in November 1990. Shares repurchased will be used in connection
with stock plans and for other corporate purposes. Future purchases will
be made through brokers or directly from shareholders at such times as
deemed appropriate by the Company's management.
The Company is a "Potentially Responsible Party" to thirteen
waste disposal sites under the Comprehensive Environmental Response,
Compensation and Liability Act as amended by the Superfund Amendments and
Reauthorization Act of 1986. Adequate provision has been made in the
financial statements for the Company's portion of the anticipated
remediation costs of these sites. While it is not possible to precisely
predict future costs in these matters, the Company does not believe that
any such assessments would have a materially adverse impact upon its
financial position.
The Company anticipates that present cash and cash equivalents
and net cash provided from 1994 operating activities combined with other
available financial resources will be sufficient to fund the Company's
operating and capital expenditure requirements and to service the dividend
and debt requirements of approximately $8.5 million associated with its
Employee Stock Ownership Plan.
IMPACT OF INFLATION AND CHANGING PRICES
The Company attempts to counter the impact of rising costs
through timely adjustments of product pricing whenever possible. The
Company believes that its substantial use of the LIFO cost method and
higher depreciation charges associated with its newer, more costly and
improved facilities mitigates the impact of inflation on its reported
earnings.
<TABLE>
<CAPTION>
CONSOLIDATED SUMMARY OF OPERATIONS
Betz Laboratories, Inc.
(In thousands, except per share amounts)
1993 1992 1991 1990 1989 1988
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $684,872 $706,972 $665,565 $596,805 $516,669 $447,580
Operating Costs and Expenses:
Cost of products sold 237,530 241,396 233,238 214,385 191,782 166,867
Selling, research and administrative expenses 329,860 334,312 313,290 278,304 237,426 204,738
Provision for restructuring 16,196 - - - - -
------------------------------------------------------------
583,586 575,708 546,528 492,689 429,208 371,605
------------------------------------------------------------
Operating Earnings 101,286 131,264 119,037 104,116 87,461 75,975
Other Income (Expense):
Investment and other income 2,927 3,228 4,991 4,863 5,007 2,917
Interest expense (143) (321) (218) (1,580) (1,548) (89)
------------------------------------------------------------
2,784 2,907 4,773 3,283 3,459 2,828
------------------------------------------------------------
Earnings Before Income Taxes and
Cumulative Effect of Accounting Changes 104,070 134,171 123,810 107,399 90,920 78,803
Income Taxes 40,691 52,124 48,286 41,925 35,060 30,418
------------------------------------------------------------
Earnings Before Cumulative Effect
of Accounting Changes 63,379 82,047 75,524 65,474 55,860 48,385
Cumulative Effect of Accounting Changes 2,141 - - - - -
------------------------------------------------------------
Net Earnings $65,520 $82,047 $75,524 $65,474 $55,860 $48,385
============================================================
Earnings per Common Share:
Primary - before cumulative effect
of accounting changes $ 2.05 - - - - -
Primary-net earnings per Common Share $ 2.12 $ 2.71 $ 2.47 $ 2.12 $ 1.76 $ 1.57
Fully Diluted - before cumulative effect
of accounting changes $ 1.95 - - - - -
Fully Diluted-net earnings per Common Share $ 2.02 $ 2.58 $ 2.36 $ 2.02 $ 1.72 -
Cash dividends declared per Common Share $ 1.39 $ 1.33 $ 1.20 $ 1.045 $ .915 $ .82
Average number of Common Shares:
Primary 28,576 28,474 28,547 28,512 30,224 30,747
Fully Diluted 31,331 31,221 31,306 31,287 31,696 -
Key Statistics
As Reported in the Company's Annual Reports
Total assets $521,129 $510,617 $475,844 $427,356 $369,226 $318,535
Foreign sales $141,611 $149,571 $132,052 $113,562 $92,051 $80,357
ESOP debt $98,000 $98,500 $99,000 $99,500 $100,000 -
Sales per employee $166 $170 $167 $162 $151 $142
Receivables turnover 56 days 52 days 49 days 50 days 51 days 51 days
Ratio of net sales to inventory 18.3 20.2 18.6 15.5 16.4 12.9
Ratio of net sales to total assets 1.3 1.4 1.4 1.4 1.4 1.4
Return on average common equity 20.6% 28.0% 29.7% 30.1% 25.8% 22.2%
Return on sales 9.6% 11.6% 11.3% 11.0% 10.8% 10.8%
Sales growth (3.1%) 6.2% 11.5% 15.5% 15.4% 16.0%
Primary earnings per Common Share growth (21.8%) 9.7% 16.5% 20.5% 12.1% 21.7%
Common dividends paid per share growth 6.2% 12.1% 14.9% 13.5% 11.3% 9.6%
<CAPTION>
CONSOLIDATED SUMMARY OF OPERATIONS (Continued)
Betz Laboratories, Inc.
(In thousands, except per share amounts)
1987 1986 1985 1984 1983
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $385,868 $344,377 $319,381 $303,888 $266,983
Operating Costs and Expenses:
Cost of products sold 140,807 126,728 117,867 113,683 103,616
Selling, research and administrative expenses 177,447 154,307 140,992 129,837 112,389
Provision for restructuring - - - - -
--------------------------------------------------
318,254 281,035 258,859 243,520 216,005
--------------------------------------------------
Operating Earnings 67,614 63,342 60,522 60,368 50,978
Other Income (Expense):
Investment and other income 3,049 3,506 4,446 4,391 7,694
Interest expense (124) (60) (104) (172) (297)
--------------------------------------------------
2,925 3,446 4,342 4,219 7,397
--------------------------------------------------
Earnings Before Income Taxes and
Cumulative Effect of Accounting Changes 70,539 66,788 64,864 64,587 58,375
Income Taxes 29,905 31,244 28,072 27,850 25,275
--------------------------------------------------
Earnings Before Cumulative Effect
of Accounting Changes 40,634 35,544 36,792 36,737 33,100
Cumulative Effect of Accounting Changes - - - - -
--------------------------------------------------
Net Earnings $40,634 $35,544 $36,792 $36,737 $33,100
==================================================
Earnings per Common Share:
Primary - before cumulative effect
of accounting changes - - - - -
Primary-net earnings per Common Share $ 1.29 $ 1.12 $ 1.17 $ 1.16 $ 1.04
Fully Diluted - before cumulative effect
of accounting changes - - - - -
Fully Diluted-net earnings per Common Share - - - - -
Cash dividends declared per Common Share $ .745 $ .69 $ .645 $ .575 $ .485
Average number of Common Shares:
Primary 31,403 31,814 31,516 31,586 31,857
Fully Diluted - - - - -
Key Statistics
As Reported in the Company's Annual Reports
Total assets $286,901 $269,617 $253,704 $220,662 $204,174
Foreign sales $64,829 $53,228 $44,453 $41,517 $38,286
ESOP debt - - - - -
Sales per employee $136 $130 $126 $124 $118
Receivables turnover 49 days 49 days 49 days 45 days 44 days
Ratio of net sales to inventory 15.3 19.3 20.7 21.3 16.5
Ratio of net sales to total assets 1.3 1.3 1.3 1.4 1.3
Return on average common equity 19.9% 17.8% 20.1% 22.1% 21.7%
Return on sales 10.5% 10.3% 11.5% 12.1% 12.4%
Sales growth 12.0% 7.8% 5.1% 13.8% 4.8%
Primary earnings per Common Share growth 15.2% (4.3%) 0.9% 11.5% 7.2%
Common dividends paid per share growth 7.4% 7.9% 14.5% 17.0% 14.6%
</TABLE>
OFFICERS AND DIRECTORS
Betz Laboratories, Inc.
- - -----------------------------
DIRECTORS
John F. McCaughan
CHAIRMAN OF THE BOARD,
BETZ LABORATORIES, INC.
William R. Cook
PRESIDENT AND CHIEF
EXECUTIVE OFFICER,
BETZ LABORATORIES, INC.
John W. Boyer, Jr.
VICE CHAIRMAN, PHILADEL-
PHIA SUBURBAN CORPORATION
Patrick F. Brennan
PRESIDENT, CHIEF EXECU-
TIVE OFFICER AND CHIEF
OPERATING OFFICER,
CONSOLIDATED PAPERS, INC.
Carolyn S. Burger
PRESIDENT AND CHIEF
EXECUTIVE OFFICER,
BELL ATLANTIC-DELAWARE, INC.
George A. Butler
RETIRED PRESIDENT,
CORESTATES FINANCIAL CORP
John A. Miller
CHAIRMAN, EXECUTIVE
COMMITTEE, PROVIDENT MUTUAL
LIFE INSURANCE COMPANY
Theodore B. Palmer, 3rd
RETIRED PRESIDENT AND
CHIEF EXECUTIVE OFFICER,
YARWAY CORPORATION
John R. Quarles, Jr., Esq.
PARTNER, MORGAN, LEWIS &
BOCKIUS
John A. H. Shober
VICE CHAIRMAN, PENN
VIRGINIA CORPORATION
Geoffrey Stengel, Jr.
PRESIDENT,
ENVIRITE CORPORATION
Robert L. Yohe
VICE CHAIRMAN, OLIN
CORPORATION
ADMINISTRATIVE COMMITTEE
John F. McCaughan, Chairman
William R. Cook
AUDIT COMMITTEE
George A. Butler, Chairman
John W. Boyer, Jr.
John A. Miller
John R. Quarles, Jr.
John A. H. Shober
OFFICERS
John F. McCaughan
William R. Cook
Robert B. Allahand
June B. Barry
William C. Brafford
Dwight P. Davis
Richard A. Heal
Dennis L. Holland
Frederick C. Klaessig
Dr. Hillel Lieberman
William F. Maguire
Richard W. Manna
James R. Marquiss
M. Raymond Matuza
Andrew J. Miciotto
B. C. Moore
Jack A. O'Brien
J. Patrick Prader
Larry V. Rankin
Thomas J. Smith
F. Steven Spoerle
R. Dale Voncanon
PRESIDENTS OF PRINCIPAL
SUBSIDIARIES AND DIVISIONS
Richard A. Heberle
BETZ INTERNATIONAL, INC.
Dennis L. Holland
BETZ WATER MANAGEMENT GROUP
Ronald A. Kutsche
BETZ PROCESS CHEMICALS, INC.
AND BETZ ENERGY CHEMICALS,
INC.
Donald M. Loop
BETZ PAPERCHEM, INC.
J. Donald McWilliam,
Executive Vice President
BETZ INC.
William A. Micsky
BETZ METCHEM DIVISION
Joseph J. Perugini
BETZ ENTEC, INC.
Jan R. Willemse
BETZ EUROPE, INC.
EXHIBIT 18 -- LETTER RE: CHANGE IN ACCOUNTING PRINCIPLES
January 27, 1994
The Board of Directors of
Betz Laboratories, Inc.
4636 Somerton Road
Trevose, Pennsyvania 19053
Dear Directors:
Note 3 of Notes to the Consolidated Financial Statements of Betz
Laboratories, Inc. included in its Form 10-K for the year ended December
31, 1993 describes a change in the method of calculating the value of
assets of its pension plan for purposes of determining annual pension
costs under Financial Accounting Standard No. 87 by recognizing changes
in the fair value of assets over three years (previously five years)
and a change in the manner in which such changes are recognized over the
three-year period. You have advised us that you believe that the change
is to a preferable method in your circumstances because it produces a
calculated value which more closely approximates fair value, and is
therefore more sensitive to the current economic environment while still
mitigating the effect of extreme market fluctuations.
There are no authoritative criteria for determining a OpreferableO method
for calculating the value of pension plan assets in BetzO particular
circumstances; however, we conclude that the change in the method of
calculating the value of pension plan assets for purposes of determining
annual pension costs under Financial Accounting Standard No. 87 is to an
acceptable alternative method which, based on your business judgment to
make this change for the reason cited above, is preferable in your
circumstances.
Very truly yours,
ERNST & YOUNG
EXHIBIT 21 - SUBSIDIARIES OF REGISTRANT
Betz Energy Chemicals, Inc., a California corporation
Betz Entec, Inc., a Pennsylvania corporation.
Betz PaperChem, Inc., a Florida corporation.
Betz Process Chemicals, Inc., a Texas corporation.
Betz Inc., a Canadian corporation.
* Betz International, Inc., a Pennsylvania corporation, holds
substantially all of the stock of:
Betz Pte., Ltd., a Singapore subsidiary;
Betz Pty, Ltd., an Australian subsidiary;
Betz Korea, Ltd., a Korean subsidiary; and
Betz de Venezuela,C.A., a Venezuelan subsidiary.
* Betz Europe, Inc., a Delaware corporation,
holds directly or indirectly all of the stock of:
Betz Limited, a United Kingdom subsidiary;
Betz G.m.b.H., a German subsidiary;
Betz N.V., a Belgium subsidiary;
Betz Sud S.p.A., an Italian subsidiary;
Betz Ges.m.b.h., an Austrian subsidiary;
Betz Industries s.a., a French subsidiary;
Finn Betz Oy, a Finnish subsidiary; and
Betz Kemi AB, a Swedish subsidiary.
* None of the foreign subsidiaries listed above constitutes a
"significant subsidiary" as defined in Rule 1-02(v) (17 CFR 210.1-02(v) of
Regulation S-X; however, Betz International, Inc. and Betz Europe, Inc.,
the holders of nearly all of the stock of such foreign subsidiaries, do
constitute "significant subsidiaries" of the Registrant.
EXHIBIT 23
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of Betz Laboratories, Inc. of our report dated January 27, 1994,
included in the 1993 Annual Report to Shareholders of Betz Laboratories, Inc.
Our audits also included the financial statement schedules of Betz
Laboratories, Inc. listed in Item 14(a). These schedules are the responsibility
of the CompanyOs management. Our responsibility is to express an opinion
on these schedules based on our audits. In our opinion, the financial
statement schedules referred to above, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No.33-40175) of Betz Laboratories, Inc. of our report dated
January 27, 1994, with respect to the financial statements incorporated
herein by reference and our report included in the preceding paragraph with
respect to the financial statement schedules included in the 1993 Annual
Report (Form 10-K) of Betz Laboratories, Inc.
ERNST & YOUNG
Philadelphia, Pennsylvania
March 21, 1994
