FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------------------
QUARTERLY REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
-------------------------------------
For Quarter Ended June 30, 1996
Commission File Number: 0-2085
BETZDEARBORN 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
------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 355-3300
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 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.
27,776,601 Common Shares outstanding as of August 8, 1996.
<PAGE>
BETZDEARBORN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 210,091 $ 188,896 $ 409,563 $ 366,830
Operating Costs and Expenses:
Cost of products sold 80,818 68,592 157,694 131,669
Selling, research and administrative
expenses 93,032 88,702 183,910 173,307
--------- --------- --------- ---------
173,850 157,294 341,604 304,976
OPERATING EARNINGS 36,241 31,602 67,959 61,854
Other Income (Expense):
Investment and other income (820) 1,196 (535) 1,708
Interest expense (522) (87) (1,040) (126)
--------- --------- --------- ---------
(1,342) 1,109 (1,575) 1,582
--------- --------- --------- ---------
EARNINGS BEFORE INCOME TAXES 34,899 32,711 66,384 63,436
Income Taxes 12,563 12,757 24,370 24,740
--------- --------- --------- ---------
NET EARNINGS $ 22,336 $ 19,954 $ 42,014 $ 38,696
========= ========= ========= =========
Net earnings per Common Share:
Primary $ .75 $ .67 $ 1.41 $ 1.30
========= ========= ========= =========
Fully diluted $ .71 $ .64 $ 1.33 $ 1.23
========= ========= ========= =========
Cash dividends declared per Common Share $ .37 $ .37 $ .74 $ .73
========= ========= ========= =========
Average number of Common Shares:
Primary 27,953 27,863 27,889 27,944
========= ========= ========= =========
Fully diluted 30,669 30,654 30,673 30,720
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
BETZDEARBORN INC.
Consolidated Balance Sheets (In thousands)
<TABLE>
<CAPTION>
ASSETS June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 31,785 $ 13,919
Trade accounts receivable,
less allowances:
1996--$7,201; 1995--$2,886 234,889 146,404
Inventories:
Finished products and goods
purchased for resale 50,031 25,675
Raw materials 48,877 25,608
----------- -----------
98,908 51,283
Prepaid expenses and other 38,904 40,535
----------- -----------
TOTAL CURRENT ASSETS 404,486 252,141
PROPERTY, PLANT AND EQUIPMENT--
at cost
Buildings 238,919 190,308
Machinery and equipment 556,113 439,764
Allowance for depreciation
(deduction) (426,101) (336,578)
----------- -----------
368,931 293,494
Land 31,066 27,792
Construction in progress 25,158 12,528
----------- -----------
425,155 333,814
OTHER ASSETS
Unallocated purchase price of
the Dearborn business 476,414 0
Investments and other 16,397 13,037
Intangibles -- at cost, less
amortization:
1996 -- $4,118; 1995 -- $3,544 31,688 31,476
----------- -----------
524,499 44,513
----------- -----------
$ 1,354,140 $ 630,468
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
CURRENT LIABILITIES
Trade accounts payable $ 56,533 $ 39,220
Payroll and related taxes 15,852 26,681
Notes payable 8,822 18,488
Accrued expenses 60,363 35,971
Income taxes 11,019 13,244
Dividends payable 10,271 10,232
Current portion of long-term debt 1,000 1,000
----------- -----------
TOTAL CURRENT LIABILITIES 163,860 144,836
LONG-TERM DEBT--less portion classified as current 768,932 95,500
LONG-TERM LIABILITIES
Income taxes 23,057 20,475
Employee benefit plans 29,887 19,451
Other 7,099 7,207
----------- -----------
60,043 47,133
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:
1996 -- 485,253 shares;
1995 -- 487,903 shares 96,922 97,581
Guarantee of related ESOP debt (90,698) (91,406)
----------- -----------
6,224 6,175
Common Shareholders' Equity
Common Shares -- Authorized - 90,000,000
shares, $.10 par value;
Issued (including treasury shares):
1996 -- 33,640,636 shares;
1995 -- 33,643,981 shares 3,364 3,364
Capital in excess of par value of shares 84,331 82,613
Retained earnings 463,697 446,111
Cost of Common Shares in treasury:
1996 -- 5,881,246 shares;
1995 -- 5,990,825 shares (195,777) (198,157)
Unearned compensation (4,873) (3,327)
Foreign currency translation adjustments 4,339 6,220
----------- -----------
COMMON SHAREHOLDERS' EQUITY 355,081 336,824
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 361,305 342,999
----------- -----------
$ 1,354,140 $ 630,468
=========== ===========
</TABLE>
<PAGE>
BETZDEARBORN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 42,014 $ 38,696
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 27,829 24,387
Compensation and employee benefit plans 4,774 5,805
Other, net 105 (232)
Changes in operating assets and liabilities,
net of Dearborn Business acquisition:
Accounts receivable (18,036) (9,894)
Inventories 197 (5,395)
Prepaid expenses and other 8,121 2,407
Accounts payable and accrued expenses (12,111) (8,035)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 52,893 47,739
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (28,166) (27,853)
Proceeds from sales of long-term assets 947 1,114
Purchases of businesses and long-term investments (7,022) (15,514)
Purchase of the Dearborn Business, net of cash
equivalents acquired (540,437) --
Other, net 177 (326)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (574,501) (42,579)
FINANCING ACTIVITIES
Net borrowings classified as long-term under
credit facilities 574,432 --
Dividends paid (24,369) (23,944)
Proceeds from issuance of common shares,
including treasury shares 883 242
Purchase of treasury shares -- (8,622)
Principal payments on ESOP debt (1,000) (1,000)
Net short-term borrowings (9,687) --
--------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 540,259 (33,324)
Effect of exchange rate changes on cash (785) 1,631
--------- ---------
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 17,866 (26,533)
Cash and Cash Equivalents at Beginning of Year 13,919 43,926
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 31,785 $ 17,393
========= =========
</TABLE>
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 presentation 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
periods.
Note 2 - Common Shares Reserved for Stock Plans
At June 30, 1996, 4,388,714 and 568,426 Common Shares were reserved for
possible issuance pursuant to the exercise of stock options and grants under the
Company's Stock Option and Incentive Plans, respectively. Further, 2,713,000
Common Shares were reserved and kept available for possible conversion of the
Series A ESOP Convertible preferred stock.
Note 3 - Dearborn Business Acquisition
On June 28, 1996, pursuant to the previously announced Grace Dearborn
Worldwide Purchase and Sale Agreement (the "Agreement"), the Company acquired
(the "Acquisition") the Dearborn business unit (the "Dearborn Business") of W.R.
Grace & Co.-Conn. ("Grace") for $630.0 million, subject to certain adjustments.
The Dearborn Business is a global supplier of industrial water and process
treatment chemicals with 1995 net revenues of $395.9 million. The Acquisition is
financed by a $750 million Credit Agreement (the "Credit Agreement") among the
Company and a syndicate of banks (See Note 4). Immediately following the
Acquisition, the Company changed its name from Betz Laboratories, Inc. to
BetzDearborn Inc.
The Acquisition is accounted for using the purchase method of
accounting and, accordingly, the purchase price will be allocated to the assets
acquired and liabilities assumed based on the estimated fair value of such
assets and liabilities at the date of acquisition. Due to the timing of the
closing date, the Company is unable to complete an initial allocation of
purchase price at this time. Accordingly, the Company's Consolidated Balance
Sheet at June 30, 1996 includes the unaudited historical accounts of the
Dearborn Business as of the acquisition date, adjusted only for certain known
elements of purchase accounting. The remaining excess purchase price at June 30,
1996 is classified as "Unallocated Purchase Price of the Dearborn Business" on
the Company's consolidated balance sheet and will be allocated to assets
acquired and liabilities assumed under the Agreement, based on the results of
appraisals, finalization of the purchase price as a result of a closing date
audit and other analyses, which the Company has arranged to obtain and generally
are in process. The other analyses include, but are not limited to, actuarial
studies of employee benefit plans, the income tax effects of the Acquisition,
analyses of operations to identify assets for disposition and the evaluation of
staffing requirements necessary to meet future business needs. The excess of the
purchase price over the fair value of the net tangible and identified intan-
<PAGE>
gible assets acquired will be recorded as goodwill, which will be amortized
on a straight-line basis over 40 years.
The following summarizes the impact of the Acquisition and the Credit
Agreement on the Company's financial statements at June 30, 1996:
(in millions)
-------------
Cash paid to Grace $536.4
Note payable to Grace 100.0
June 28, 1996 estimated working capital adjustment 9.7
Professional fees and other transaction costs paid or accrued 6.5
------
Total 652.6
Less Net Assets in Historical Dearborn at closing 176.2
------
Unallocated Purchase Price in Balance Sheet $476.4
======
The $536.4 million payment to Grace for the purchase of the Dearborn
Business represents the cash paid at closing. Grace also received a $100 million
promissory note from the Company (see Note 4). The total of the cash paid plus
the promissory note is $636.4 million, which represents the $630 million
purchase price plus a $6.4 million purchase price adjustment. The adjustment is
due to a December 31, 1995 working capital adjustment in accordance with the
terms of the Agreement. The cash paid to Grace will be further adjusted for
changes in working capital as set forth in the Dearborn Business June 28, 1996
Statement of Net Assets, which is estimated above to be $9.7 million, subject to
final audit.
The Acquisition had no material impact on the Consolidated Statement of
Operations for the six months ended June 30, 1996. The following unaudited pro
forma information is intended to show the results of operations as if the
Acquisition had occurred on January 1, 1995 after giving effect to certain
adjustments, including the increased amortization of goodwill and other
identified intangible assets, additional interest expense on incremental
Acquisition indebtedness and the related income tax effects of these
adjustments:
Six Months Ended June 30,
1996 1995
---- ----
Net Sales $ 609.7 $ 559.2
Net Earnings $ 25.7 $ 21.3
Net Earnings per Common Share:
Primary $ .83 $ .68
Fully Diluted $ .80 $ .66
The unaudited pro forma results of operations are based on preliminary
assumptions regarding the allocation of purchase price and Dearborn Business
operating results, which could change significantly for the reasons described in
paragraph two
<PAGE>
of this note. The unaudited pro forma results are not indicative of the
results that would have occurred had the Acquisition actually been consummated
on January 1, 1995, and are not intended to be a projection of future results or
trends.
Note 4 - Debt
Prior to the consummation of the Acquisition the Company entered into a
Revolving Credit Agreement with a syndicate of banks. The Credit Agreement
provides for a five-year unsecured revolving credit facility in an amount of
$750 million that reduces to $550 million after two years. The commitments made
under the Credit Agreement expire in July 2001 (except for the partial mandatory
reduction in the maximum amount of the banks' commitments on June 28, 1998 to
$550 million). The Agreement requires the Company, among other things, to
maintain certain financial ratios and meet certain net worth and indebtedness
tests.
To finance the Acquisition and for other purposes, the Company borrowed
approximately $574 million under the Credit Agreement, and used an additional
$100 million of the revolver to obtain a Letter of Credit securing a $100
million promissory note payable to Grace, with a variable interest rate equal to
the London Interbank Offered Rate plus 10 basis points. The unused credit
available under this facility at June 30, 1996 was approximately $76 million.
Borrowings under the Credit Agreement, at the Company's option, are at
a composite of three banks' base rates or the London Interbank Offered Rate,
plus a margin. Margin pricing is dependent on the Company's selected pricing
option of either a specific financial ratio test or the Company's public debt
rating. The weighted-average interest rate as of June 30, 1996 was 5.9%. The
Company pays a facility fee based on the total commitment of funds provided by
the banks.
The Company utilizes interest rate swaps to manage its interest rate
exposures and its mix of fixed and floating interest rates. Interest rate swap
agreements involve the exchange of fixed and floating rate interest payments
periodically over the life of the agreement without the exchange of underlying
principal amounts (the notional amount). The differential to be paid or
received, on a periodic basis, will be accrued as interest rates change and
recognized over the lives of the agreements as an adjustment to interest
expense.
During the 1996 second quarter, the Company executed a series of
interest rate swap agreements of variable for fixed rates, for varying amounts,
with maturities ranging from one to five years, for the maximum notional amount
of $400 million. The Company has designated the series of swaps as hedges of
future interest rate exposure on its variable rate debt outstanding. The series
of swaps will hedge no more than the aggregate amount of variable rate debt
outstanding. The Company may also designate individual swaps included in this
series as both a hedge against interest rate exposure and a hedge of the fair
value of future fixed rate term debt replacing outstanding variable rate debt.
In the event future fixed rate term debt is issued, the Company intends to
terminate the designated swaps and amortize the gain or loss on such termination
over the remainder of the hedged period. In the event fixed rate debt is not
issued for the entire remaining hedged period, a portion of the termination gain
or loss will be included in net earnings.
<PAGE>
The Company is exposed to credit loss in the event of nonperformance by
the counterparties to its interest rate swap agreements. The counterparties to
the interest rate swaps are substantial and creditworthy multinational
commercial banks or other financial institutions which are recognized by market
makers. Consequently, the Company does not anticipate nonperformance by the
counterparties.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS
Acquisition of the Dearborn Business
On June 28, 1996, pursuant to the previously announced Grace Dearborn
Worldwide Purchase and Sale Agreement, the Company acquired the Dearborn
business unit of W.R. Grace & Co.-Conn. for $630.0 million, subject to certain
adjustments (see Note 3). The Dearborn Business is a global supplier of
industrial water and process treatment chemicals with 1995 net revenues of
$395.9 million, approximately 75% of which were recorded by operations outside
the United States. The Acquisition is financed by a $750 million Credit
Agreement among the Company and a syndicate of banks dated as of June 20, 1996
(See Note 4). Immediately following the Acquisition, the Company changed its
name from Betz Laboratories, Inc. to BetzDearborn Inc.
The acquisition combines the second and third largest global suppliers
of engineered programs and advanced specialty chemical treatments for water,
wastewater and process systems operating in a wide variety of industrial,
commercial, and institutional applications. The Company consists of four global
business units:
o BetzDearborn Water Management Group, providing water treatment
programs to industrial, commercial and institutional establishments and
headquartered in Horsham, Pennsylvania;
o BetzDearborn Paper Process Group, providing process treatment programs
to the pulp and paper industry and headquartered in Jacksonville,
Florida;
o BetzDearborn Hydrocarbon Process Group, providing process treatment
programs to the refining, petrochemical and steel industries and
headquartered in The Woodlands, Texas; and
o BetzDearborn Metals Process Group, serving the metals and plastics
finishing industries and headquartered in Horsham, Pennsylvania.
These global business units will be responsible for technology, research and
development, sales and marketing, and they will be supported by regional centers
in Asia-Pacific, Europe, Latin America, Canada and the United States.
The Company anticipates that a significant portion of the Unallocated
Purchase Price of the Dearborn Business will be allocated to intangible assets
which will substantially increase amortization expense over a period not to
exceed 40 years. Portions of the purchase price will also be allocated to
property, plant and equipment which will increase the Company's depreciation
expense over the remaining useful lives of the acquired assets. Appraisals,
finalization of the purchase price and other analyses, which are currently in
process, are necessary to complete the purchase accounting for the Dearborn
Business (see Note 3). In addition, the Acquisition financing will result in a
large increase in interest expense. Consequently, the Company anticipates that
the impact of the Acquisition on the Consolidated Statements of Op-
<PAGE>
erations over the next twelve months will result in approximately a 50%
increase in net sales, but net earnings and primary and fully diluted earnings
per Common Share are anticipated to be lower than results reported for the last
twelve months.
As plans are determined and implemented throughout 1996, the Company
will incur additional costs to integrate the two businesses and dispose of
excess assets and operations. A portion of the anticipated integration and
restructuring costs will further reduce net earnings in 1996 and a portion will
increase goodwill from this acquisition.
Second Quarter Results of Operations
Second quarter 1996 net sales increased $21.2 million from $188.9
million to $210.1 million. This 11% increase was approximately composed of a 6%
increase in volume-mix, a 4% increase attributable to sales from subsidiaries
acquired after the first quarter of 1995, a 1% increase in selling prices which
was mostly offset by changes in the value of foreign currencies relative to the
U.S. dollar and a 1% increase due to the inclusion of certain freight revenues
in 1996 second quarter net sales. Net earnings increased $2.3 million, or 12%,
from $20.0 million to $22.3 million. Primary earnings per Common Share increased
12% from $.67 to $.75, while fully diluted earnings per Common Share increased
11% from $.64 to $.71.
Net sales for the six month period ending June 30, 1996 increased 12%
from $366.8 million to $409.6 million. The percentage increase in sales was
approximately comprised of a 6% increase in volume-mix, a 1% increase in selling
prices, a 4% increase resulting from acquisitions made in 1995 and a 1% increase
due to the inclusion of certain freight revenues in 1996. Operating earnings
rose 10% from $61.9 million to $68.0 million. Net earnings increased 9% from
$38.7 million to $42.0 million. Primary and fully diluted earnings per Common
Share both increased 8% from $1.30 to $1.41 and from $1.23 to $1.33,
respectively.
The Company's second quarter results reflect continued strong
year-to-year growth on a worldwide basis. All four Global Business Units
reported solid sales performances, led by the Metals Process Group and the
Hydrocarbon Process Group, both with strong double-digit growth.
The second quarter results reflect an increase in non-U.S. sales of
26% (11% before acquisitions) from 1995 levels in U.S. dollars. The
strongest local currency growth in the quarter was achieved in our Asia-Pacific
and Central and South American operations. Non-U.S. sales for the first half of
1996 are 28% higher in U.S. dollars and local currencies than the comparable
1995 period. Non-U.S. sales comprise 30% of total sales after six months.
Second quarter and first half 1996 sales in the United States, as
reported, rose 6% over the prior year periods and 5% on a comparable basis.
The table below sets forth as a percentage of sales cost of products
sold, selling, research and administrative expenses and operating earnings for
the respective periods.
<PAGE>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
Cost of products sold 38.5% 36.3% 38.5% 35.9%
Selling, research and administrative
expenses 44.2% 47.0% 44.9% 47.2%
Operating earnings 17.3% 16.7% 16.6% 16.9%
Cost of products sold, as a percentage of sales, increased when
compared to prior year periods primarily due to changes in product mix,
including those related to the Company's 1995 acquisitions, standardization of
the method of accounting for freight revenue and increases in raw material costs
without comparable increases in selling prices. When compared to prior year
periods, selling, research and administrative expenses, as a percentage of
sales, declined primarily due to savings achieved from the Company's 1995
restructuring actions and continued operating cost controls. During the second
quarter, in preparation for the integration of the Dearborn business, the
Company revised the vesting policy for certain employee benefits to align Betz
and Dearborn policies, resulting in a reduction of second quarter operating
expenses. Without this, 1996 second quarter operating expenses would have been
approximately 45% of sales.
The Company recorded a $15.6 million provision for restructuring in
1995 for a series of actions to reduce operating costs. These actions include
personnel reductions, office consolidations and asset dispositions, including
the shutdown of two blending plants. During the first half of 1996, the Company
incurred approximately $1,290,000 in cash charges to the reserve. Additionally,
the Compton Plant was sold for approximately $980,000. Approximately 110 jobs
have been eliminated under this restructuring plan. The remaining restructuring
reserve is expected to be sufficient to complete the restructuring actions and
will continue to be financed with available operating cash flows and external
financing resources.
Capital Resources and Liquidity
During the first half of 1996, expenditures for property, plant and
equipment were $28.2 million, a $.3 million increase from 1995. Including
post-acquisition items related to the Dearborn Business, the Company
anticipates that capital expenditures for the year will be approximately $80 -
$85 million and will include improvements to the Company's production facility
in Beaumont, Texas to increase the manufacturing capacity for the Novus(R)
polymer line, which is used in both process and water treatment applications.
Purchases of long-term investments and businesses for the first six months of
1996, exclusive of the Dearborn acquisition, include approximately $6.8 million
for a payment of the purchase price accrued for the acquisition of the Misan
Group in the fourth quarter of 1995. Net cash used in financing activities for
the first half of 1996, exclusive of the Dearborn acquisition, decreased by
$21.1 million from the prior year primarily due to the purchase of treasury
stock at a cost of $8.6 million during the first six months of 1995 with no
similar purchase in 1996, as well as a $12.3 million increase in net short-term
borrowings in the first six months of 1996, primarily necessary to finance the
payment for Misan.
The Acquisition and the related financing has a significant impact on
the Company's liquidity and sources of capital. The Company has taken or plans
to take actions necessary to manage its liquidity and capital resources in order
to comply with the provisions of the Credit Agreement, to optimize its capital
<PAGE>
structure and to service the dividend and debt requirements associated with its
Employee Stock Ownership Plan, while meeting its operating cash requirements.
Such actions may include restrictions on the growth in capital expenditures and
the rate of increase in the quarterly common stock dividend and a refinancing of
the Credit Agreement.
The Acquisition and related financing will also increase the Company's
exposure to interest rate and foreign currency movements. The Credit Agreement
bears interest at short-term variable rates and the Dearborn Business conducts
the majority of its operations outside the U.S. The Company plans to execute or
has executed additional foreign exchange forward contracts and interest rate
swaps to manage its exposure to foreign exchange and interest rate risks. During
the second quarter of 1996, the Company executed a series of interest rate swaps
of variable for fixed rates, with staggered maturities, at a maximum notional
amount of $400 million for any future period (see Note 4). The Company also
plans to increase the amount of foreign exchange forward contracts outstanding
in the last half of 1996.
PART II OTHER INFORMATION
Item 1 - Legal Proceedings
There have been no material developments in the cases of Katherine
Adams, et al. v. Pacific Gas and Electric, et al. and Danny Aguayo, et al. v.
Betz Laboratories, Inc., et al., nor in the pending proceedings to which the
Company is a "Potentially Responsible Party" under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") during the
quarter for which this report is filed. The Company is a "Potentially
Responsible Party" under CERCLA at thirteen (13) 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, 1995.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit 11: Statement Re: Computation of Per Share Earnings.
(b) The Company filed a Form 8-K on July 12, 1996 announcing that,
pursuant to the Grace Dearborn Worldwide Purchase and Sale Agreement, dated as
of March 11, 1996, by and between W. R. Grace & Co.-Conn. ("Grace") and the
Company, the Company and certain of its subsidiaries acquired on June 28, 1996
certain assets and liabilities comprising the Dearborn water treatment business
from Grace and certain of Grace's subsidiaries. Immediately following the
acquisition, the Company changed its name from Betz Laboratories, Inc. to
BetzDearborn Inc.
Prior to the consummation of the acquisition, the Company and
Betz Canada Inc., a wholly owned subsidiary of the Company, entered into a
Credit Agreement, dated June 20, 1996, with a syndicate of banks to finance the
acquisition. Such Credit Agreement was filed as an exhibit to the Form 8-K.
<PAGE>
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
Primary Earnings per Common Share 1996 1995 1996 1995
- ------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings $ 22,336 $ 19,954 $ 42,014 $ 38,696
Effect of preferred stock dividends, net of taxes (1,335) (1,214) (2,663) (2,433)
-------- -------- -------- --------
Net earnings available to common shareholders $ 21,001 $ 18,740 $ 39,351 $ 36,263
======== ======== ======== ========
Average Common Shares outstanding 27,748 27,703 27,710 27,775
Common stock equivalents 205 160 179 169
-------- -------- -------- --------
Average number of Common Shares - primary 27,953 27,863 27,889 27,944
======== ======== ======== ========
Primary earnings per Common Share $ 0.75 $ 0.67 $ 1.41 $ 1.30
======== ======== ======== ========
Fully Diluted Earnings per Common Share
Net earnings $ 22,336 $ 19,954 $ 42,014 $ 38,696
Effect of ESOP charge to operations assuming
conversion of Series A ESOP Convertible
Preferred Shares, net of taxes (658) (515) (1,306) (1,054)
-------- -------- -------- --------
Net earnings available to common shareholders $ 21,678 $ 19,439 $ 40,708 $ 37,642
======== ======== ======== ========
Average Common Shares outstanding 27,748 27,703 27,710 27,775
Common stock equivalents 205 188 223 183
Assumed conversion of Series A ESOP Convertible
Preferred Shares 2,716 2,763 2,740 2,762
-------- -------- -------- --------
Average number of Common Shares - fully diluted 30,669 30,654 30,673 30,720
======== ======== ======== ========
Fully diluted earnings per Common Share $ 0.71 $ 0.64 $ 1.33 $ 1.23
======== ======== ======== ========
</TABLE>
Common stock equivalents reflect the assumed exercise of dilutive employees'
stock options using the treasury stock method.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BETZDEARBORN INC.
(Registrant)
Date: August 14, 1996 By: s/George L. James
-------------------------------
George L. James
Vice President - Finance
and Treasurer
Date: August 14, 1996 By: s/William C. Brafford
------------------------------
William C. Brafford
Vice President,
Secretary and General Counsel
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF
OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 31,785
<SECURITIES> 0
<RECEIVABLES> 242,090
<ALLOWANCES> 7,201
<INVENTORY> 98,908
<CURRENT-ASSETS> 404,486
<PP&E> 851,256
<DEPRECIATION> 426,101
<TOTAL-ASSETS> 1,354,140
<CURRENT-LIABILITIES> 163,860
<BONDS> 768,932
6,224
0
<COMMON> 3,364
<OTHER-SE> 351,717
<TOTAL-LIABILITY-AND-EQUITY> 1,354,140
<SALES> 409,563
<TOTAL-REVENUES> 409,563
<CGS> 157,694
<TOTAL-COSTS> 157,694
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,040
<INCOME-PRETAX> 66,384
<INCOME-TAX> 24,370
<INCOME-CONTINUING> 42,014
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,014
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.33
</TABLE>
