November 10, 1994
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549-1004
Re: Commission File No.: 0-2085
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Dear Sirs:
Betz Laboratories, Inc. ("Company") hereby submits for filing with the
Commission its Form 10-Q for the quarter ended September 30, 1994.
Very truly yours,
BETZ LABORATORIES, INC.
James H. Decker
Assistant General Counsel
<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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QUARTERLY REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For Quarter Ended September 30, 1994
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Commission File Number: 0-2085
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BETZ LABORATORIES, INC.
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(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
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Indicate by check mark whether the registrant (1) has filed all re-
ports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such report(s), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
27,823,655 Common Shares outstanding as of November 4, 1994.
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<PAGE>
<TABLE>
BETZ LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $180,398 $176,543 $533,033 $516,510
Operating Costs and Expenses:
Cost of products sold 64,555 59,830 188,980 177,507
Selling, research and administrative
expenses 84,367 83,637 252,089 246,127
Provision for restructuring -- 4,084 -- 4,084
-------- -------- -------- -------
148,922 147,551 441,069 427,718
OPERATING EARNINGS 31,476 28,992 91,964 88,792
Other Income (Expense):
Investment and other income 354 581 2,324 2,607
Interest expense (80) (33) (182) (87)
-------- -------- -------- -------
274 548 2,142 2,520
-------- -------- -------- -------
EARNINGS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGES 31,750 29,540 94,106 91,312
Income Taxes 12,382 11,901 37,324 35,683
-------- -------- -------- -------
EARNINGS BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGES 19,368 17,639 56,782 55,629
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
-------- -------- -------- --------
NET EARNINGS $ 19,368 $ 17,639 $ 56,782 $ 57,770
======== ======== ======== ========
Primary earnings per Common Share:
Before cumulative effect of accounting changes $ .65 $ .58 $ 1.90 $ 1.81
Accounting changes -- -- -- .07
-------- -------- -------- --------
Primary earnings per Common Share $ .65 $ .58 $ 1.90 $ 1.88
======== ======== ======== ========
Fully diluted earnings per Common Share:
Before cumulative effect of accounting changes $ .61 $ .54 $ 1.79 $ 1.71
Accounting changes -- -- -- .07
-------- -------- -------- --------
Fully diluted earnings per Common Share $ .61 $ .54 $ 1.79 $ 1.78
======== ======== ======== ========
Cash dividends declared per Common Share $ .36 $ .35 $ 1.07 $ 1.04
======== ======== ======== ========
Average number of Common Shares:
Primary 27,995 28,583 28,135 28,716
======== ======== ======== =======
Fully diluted 30,808 31,354 30,916 31,463
======== ======== ======== =======
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
BETZ LABORATORIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (In thousands)
ASSETS September 30, 1994 December 31, 1993
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CURRENT ASSETS
Cash and cash equivalents $ 44,022 $ 43,921
Trade accounts receivable,
less allowances:
1994--$3,286; 1993--$2,698 120,308 102,882
Inventories:
Finished products and goods
purchased for resale 18,463 17,155
Raw materials 23,277 20,191
-------- --------
41,740 37,346
Prepaid expenses and other 26,630 24,486
-------- --------
TOTAL CURRENT ASSETS 232,700 208,635
PROPERTY, PLANT AND EQUIPMENT--
at cost
Buildings 167,130 155,781
Machinery and equipment 365,683 360,426
Allowance for depreciation
(deduction) (283,287) (253,881)
--------- ---------
249,526 262,326
Land 21,216 21,146
Construction in progress 31,640 17,270
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302,382 300,742
OTHER ASSETS
Investments and other 7,231 7,223
Intangibles -- at cost, less
amortization:
1994 -- $2,737; 1993 -- $2,513 4,305 4,529
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11,536 11,752
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$546,618 $521,129
========= =========
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY September 30, 1994 December 31, 1993
- ---------------------------------------------------------------------------
CURRENT LIABILITIES
Trade accounts payable $29,601 $32,554
Payroll and related taxes 22,120 17,727
Accrued expenses 29,963 24,577
Income taxes 16,054 6,838
Dividends payable 10,007 9,845
Current portion of ESOP debt 1,000 500
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TOTAL CURRENT LIABILITIES 108,745 92,041
ESOP DEBT--less portion classified
as current 96,500 97,500
DEFERRED CREDITS
Income taxes 22,145 21,998
Other deferred credits 8,659 10,271
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30,804 32,269
SHAREHOLDERS' EQUITY
Preferred Shares -- Authorized -
1,000,000 shares, $.10 par
value, voting Series A ESOP
Convertible, 8% Cumulative,
stated at aggregate liquidation
preference; Issued:
1994 -- 493,100 shares;
1993 -- 496,005 shares 98,620 99,201
Guarantee of related ESOP debt (93,149) (94,101)
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5,471 5,100
Common Shareholders' Equity
Common Shares -- Authorized -
90,000,000 shares, $.10 par
value; Issued (including
treasury shares):
1994 -- 33,650,717 shares;
1993 -- 33,654,715 shares 3,365 3,365
Capital in excess of par value
of shares 79,241 78,667
Retained earnings 415,846 394,726
Cost of Common Shares in treasury:
1994 -- 5,854,456 shares;
1993 -- 5,527,310 shares (188,941) (170,442)
Unearned compensation (6,039) (7,773)
Foreign currency translation
adjustments 1,626 (4,324)
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COMMON SHAREHOLDERS' EQUITY 305,098 294,219
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TOTAL SHAREHOLDERS' EQUITY 310,569 299,319
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$546,618 $521,129
========= =========
See notes to consolidated financial statements.
<PAGE>
BETZ LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended
September 30,
1994 1993
- -------------------------------------------------------------------------
OPERATING ACTIVITIES
Net earnings $56,782 $57,770
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 33,810 32,385
Compensation and employee benefit plans 3,356 3,755
Cumulative effect of accounting changes -- (2,141)
Provision for restructuring -- 4,084
Other, net (118) (781)
Changes in operating assets and
liabilities:
Accounts receivable (17,426) (2,908)
Inventories (4,557) (2,191)
Prepaid expenses and other (2,127) (3,843)
Accounts payable and accrued expenses 11,995 (1,478)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 81,715 84,652
INVESTING ACTIVITIES
Expenditures for property, plant and
equipment, net (35,641) (44,920)
Proceeds from sales of business and
long-term investments 5,075 11,493
Other, net 2,290 (349)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (28,276) (33,776)
FINANCING ACTIVITIES
Dividends paid (35,499) (35,385)
Proceeds from issuance of common stock,
including treasury shares 1,400 1,924
Purchase of treasury stock (19,995) (2,809)
Principal payments on ESOP debt (500) (500)
Retirement of ESOP preferred stock (515) (272)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (55,109) (37,042)
Effect of exchange rate changes on cash 1,771 (1,338)
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 101 12,496
Cash and Cash Equivalents at Beginning of Year 43,921 46,363
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $44,022 $58,859
======== ========
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore,
do not include all information and footnotes necessary for a fair pre-
sentation of consolidated financial position, consolidated results of
operations and consolidated cash flows in conformity with generally
accepted accounting principles. The foregoing consolidated financial
statements do include all adjustments, consisting only of normal recurring
accruals which, in the opinion of management, are necessary for a fair
statement of the results of the interim period.
The 1993 cumulative effect of accounting changes has been restated
from previously reported amounts due to a change in the method of
calculating the value of the assets of the Company's pension plan for
purposes of determining annual pension costs under Financial Accounting
Standard No. 87 adopted in the fourth quarter of 1993, effective January 1,
1993. The cumulative effect on years prior to December 31, 1992 is
$1,241,000, net of taxes of $780,000 ($.04 per Common Share on a primary
and fully diluted basis), which was a one-time, noncash increase in net
earnings for the first quarter of 1993.
Note 2 - Common Shares Reserved for Stock Plans
At September 30, 1994, 2,532,621 and 645,031 Common Shares were re-
served for possible issuance pursuant to the exercise of stock options and
grants under the Company's Stock Option and Incentive Plans, respectively.
Further, 2,765,000 Common Shares were reserved and kept available for
possible conversion of the Series A ESOP Convertible preferred stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS
Third quarter 1994 net sales increased $3.9 million from $176.5 mil-
lion to $180.4 million. This 2 percent increase was due to a 4 percent in-
crease in volume-mix, offset by a 2 percent decrease resulting from the
sale of the Company's oil field chemicals business on June 30, 1994.
Operating earnings were $31.5 million and were up 9 percent over the same
year-ago period. Net earnings rose 10 percent from $17.6 million to $19.4
million. Primary earnings per Common Share increased 12 percent from $.58
to $.65, and fully diluted earnings per Common Share rose 13 percent from
$.54 to $.61.
Net sales for the nine month period ending September 30, 1994 in-
creased 3 percent from $516.5 million to $533.0 million. The percentage
increase in sales was composed of a 5 percent increase in volume-mix, a 1
percent decrease from the sale of the oil field chemicals business, no
increase in selling prices, and a 1 percent decrease resulting from changes
in the value of foreign currencies relative to the U.S. dollar. Operating
earnings rose 4 percent from $88.8 million to $92.0 million. Net earnings
<PAGE>
before the cumulative effect of accounting changes rose 2 percent from
$55.6 million to $56.8 million, while net earnings after accounting changes
were down 2 percent. Primary earnings per Common Share before accounting
changes were up 5 percent from $1.81 to $1.90 while primary earnings per
Common Share after accounting changes were up 1 percent from $1.88 to
$1.90. Fully diluted earnings per Common Share before accounting changes
were up 5 percent from $1.71 to $1.79 and fully diluted earnings per Common
Share after accounting changes were up 1 percent from $1.78 to $1.79.
The results of operations reflect the early success of the Company's
globalization initiatives to capture a larger share of the foreign market.
On a combined basis, foreign sales for the third quarter and nine month
period ending September 30, 1994 increased by 17 percent and 9 percent, re-
spectively, when compared to the same 1993 periods. Foreign subsidiaries
in Australia, Korea, Singapore and the Caribbean recorded double-digit
sales gains in the quarter and through nine months compared to 1993.
Domestic sales, excluding the oil field chemicals business, for the
third quarter of 1994 were fractionally higher than 1993. Year-to-date
domestic sales for the period ending September 30, 1994, excluding the oil
field chemicals business, were up 4 percent over the comparable 1993
period. Within the U.S., the Betz Water Management Group reported positive
sales increases to the chemical, primary metals, independent power and food
industries. Betz Entec, Inc., which serves the commercial, institutional
and light industrial marketplace, also recorded sales increases in excess
of the corporate average. Offsetting these sales increases in the domestic
marketplace were weaker sales to the refining and paper industries, two key
customer industries served by the Company. Although operating rates have
improved within these industries, they appear to be focused on short-term
results and are still economizing on their chemical treatment costs
wherever possible.
The table below sets forth, as a percent of sales, cost of products
sold, selling, research and administrative expenses and operating earnings
before the provision for restructuring recorded in the third quarter of
1993 for the third quarter and nine month periods:
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
- --------------------------------------------------------------------------
Cost of products sold 35.8% 33.9% 35.5% 34.4%
Selling, research and
administrative expenses 46.8% 47.4% 47.2% 47.6%
Operating earnings - before 1993
provision for restructuring 17.4% 18.7% 17.3% 18.0%
Cost of products sold, as a percentage of sales, increased when compared to
prior year periods primarily due to a less favorable product mix. The
Company also experienced increases in production and distribution costs,
<PAGE>
with no corresponding increase in selling prices. Selling, research and
administrative expenses, as a percentage of sales, decreased slightly,
mainly due to reductions in research expenses resulting from restructuring
actions taken in the last half of 1993. The net effect of the above
resulted in decreases in the Company's operating earnings before the
provision for restructuring, as a percentage of sales, for the periods
shown above.
The financial condition of the Company remains strong. Cash provided
by operations for the first nine months of 1994 was adequate to fund
dividend requirements, capital expenditures and treasury stock repurchases.
Current assets were 2.1 times current liabilities. Operating cash needs
for the increase in accounts receivable from December 31, 1993, resulting
from the increase in sales, were principally financed by increases in
accounts payable and other operating cash flows.
During the nine months ended September 30, 1994, the Company continued
to implement its previously announced restructuring program. Approximately
$3.7 million of cash, provided by operating activities during the first
nine months of 1994, was used to meet restructuring obligations. Several
phases of the program were completed by September 30, 1994, but restruc-
turing activities are expected to continue throughout the remainder of 1994
and the first half of 1995. The cash required to fund the restructuring
program will continue to be provided by operating activities.
Net cash used in investing activities decreased by approximately $6
million for the period ended September 30, 1994 compared to the same prior
year period. The principal cause of this decline was a reduction in
expenditures for property, plant and equipment to approximately $36 million
from approximately $45 million for the same 1993 period. The Company
anticipates that capital expenditures for the year 1994 will approximate
$58 million and will include expansion and process improvements at the
Company's manufacturing facilities in Washougal, Washington, Orange, Texas
and Macon, Georgia.
Net cash used in financing activities during the first nine months of
1994 increased by approximately $18 million over the same prior year per-
iod. During the first half of 1994, the Company used $20 million to
purchase 400,000 shares of treasury stock.
The Company expects that cash flows and existing financial resources
will be adequate to fund its future operating, capital expenditure and
common dividend requirements and to service the dividend and debt require-
ments associated with the ESOP.
PART II OTHER INFORMATION
Item 1 - Legal Proceedings
There are no material pending legal proceedings other than ordinary
routine litigation incidental to the business of the Company and its
subsidiaries to which the Company or any of its subsidiaries is a party or
of which any of their property is the subject.
<PAGE>
The Company is a "Potentially Responsible Party" under the Compre-
hensive Environmental Response, Compensation and Liability Act to thirteen
(13) waste disposal sites. See the discussion under Item 3, "Pending Legal
Proceedings," of the Company's Annual Report on Form 10-K for fiscal year
ended December 31, 1993. There have been no material developments during
the quarter for which this report is filed in any of the pending
proceedings previously reported.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit 11: Statement Re: Computation of Per Share Earnings.
(b) No reports on Form 8-K have been filed during the quarter for
which this Form 10-Q is filed.
<PAGE>
<TABLE>
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
Primary Earnings per Common Share 1994 1993 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings before cumulative effect of
accounting changes $19,368 $17,639 $56,782 $55,629
Effect of preferred stock dividends (1,135) (1,191) (3,413) (3,697)
------- ------- ------- -------
18,233 16,448 53,369 51,932
Cumulative effect of accounting changes -- -- -- 2,141
------- ------- ------- -------
Net earnings available to common shareholders $18,233 $16,448 $53,369 $54,073
======= ======= ======= =======
Average Common Shares outstanding 27,783 28,583 27,903 28,575
Common stock equivalents 212 -- 232 141
------- ------- ------- -------
Average number of Common Shares - primary 27,995 28,583 28,135 28,716
======= ======= ======= =======
Primary earnings per Common Share:
Before cumulative effect of accounting changes $0.65 $0.58 $1.90 $1.81
Cumulative effect of accounting changes -- -- -- 0.07
------- ------- ------- -------
Primary earnings per Common Share $0.65 $0.58 $1.90 $1.88
======= ======= ======= =======
Fully Diluted Earnings per Common Share
Earnings before cumulative effect of
accounting changes $19,368 $17,639 $56,782 $55,629
Effect of ESOP charge to operations assuming
conversion of Series A ESOP Convertible
Preferred Shares (516) (552) (1,533) (1,762)
------- ------- ------- -------
18,852 17,087 55,249 53,867
Cumulative effect of accounting changes -- -- -- 2,141
------- ------- ------- -------
Net earnings available to common shareholders $18,852 $17,087 $55,249 $56,008
======= ======= ======= =======
Average Common Shares outstanding 27,783 28,583 27,903 28,575
Common stock equivalents 234 - 242 141
Assumed conversion of Series A ESOP Convertible
Preferred Shares 2,791 2,771 2,771 2,747
------- ------- ------- -------
Average number of Common Shares - fully diluted 30,808 31,354 30,916 31,463
======= ======= ======= =======
Fully diluted earnings per Common Share:
Before cumulative effect of accounting changes $0.61 $0.54 $1.79 $1.71
Cumulative effect of accounting changes - - - 0.07
------- ------- ------- -------
Fully diluted earnings per Common Share $0.61 $0.54 $1.79 $1.78
======= ======= ======= =======
<FN>
Common stock equivalents reflect the assumed exercise of dilutive employees'
stock options using the treasury stock method.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BETZ LABORATORIES, INC.
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(Registrant)
Date: November 10, 1994 By: s/R. Dale Voncanon
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R. Dale Voncanon
Vice President - Finance
Date: November 10, 1994 By: s/William C. Brafford
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William C. Brafford
Vice President,
Secretary and General Counsel
