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 September 30, 1997
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.
29,170,356 Common Shares outstanding as of November 7, 1997.
1 of 12
<PAGE>
BETZDEARBORN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $ 331.8 $ 304.2 $ 960.6 $ 713.8
Operating Costs and Expenses:
Cost of products sold 132.8 120.4 383.9 278.1
Selling, research and administrative 144.6 140.3 422.2 323.9
Integration/restructuring 0.4 14.2 15.7 14.5
-------- -------- -------- --------
277.8 274.9 821.8 616.5
OPERATING EARNINGS 54.0 29.3 138.8 97.3
Other Income (Expense):
Investment and other income (0.6) (0.4) (0.8) (0.9)
Interest (12.0) (12.6) (35.1) (13.7)
-------- -------- -------- --------
(12.6) (13.0) (35.9) (14.6)
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES 41.4 16.3 102.9 82.7
Income Taxes 14.7 5.4 36.5 29.8
-------- -------- -------- --------
NET EARNINGS $ 26.7 $ 10.9 $ 66.4 $ 52.9
======== ======== ======== ========
Net earnings per Common Share:
Primary $ .85 $ .34 $ 2.11 $ 1.75
======== ======== ======== ========
Fully diluted $ .80 $ .33 $ 2.00 $ 1.66
======== ======== ======== ========
Cash dividends declared per Common Share $ .38 $ .375 $ 1.13 $ 1.115
======== ======== ======== ========
Average number of Common Shares:
Primary 29.7 28.1 29.4 28.0
======== ======== ======== ========
Fully diluted 32.5 31.0 32.2 30.8
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
2 of 12
<PAGE>
BETZDEARBORN INC.
Consolidated Balance Sheets (In millions, except share amounts)
<TABLE>
<CAPTION>
ASSETS September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 45.8 $ 38.2
Trade accounts receivable,
less allowances:
1997--$7.2; 1996--$7.6 285.8 243.2
Inventories:
Finished products and goods
purchased for resale 51.5 54.5
Raw materials 47.9 42.2
-------- --------
99.4 96.7
Income taxes 21.1 31.1
Prepaid expenses and other 33.5 29.5
-------- --------
TOTAL CURRENT ASSETS 485.6 438.7
PROPERTY, PLANT AND EQUIPMENT--at cost
Land 35.6 38.9
Buildings 213.9 221.9
Machinery and equipment 532.3 531.0
Construction in progress 35.4 11.9
-------- --------
817.2 803.7
Allowance for depreciation (deduction) (411.7) (374.7)
-------- --------
405.5 429.0
OTHER ASSETS
Investments and other 17.6 16.6
Goodwill - net of accumulated amortization:
1997 -- $15.1; 1996 -- $7.1 441.3 449.9
Other Intangibles - net of accumulated amortization:
1997 -- $7.4; 1996 -- $4.3 81.3 84.1
-------- --------
540.2 550.6
-------- --------
$1,431.3 $1,418.3
======== ========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
CURRENT LIABILITIES
Trade accounts payable $ 72.6 $ 68.9
Payroll and related taxes 40.4 47.8
Notes payable 10.6 0.8
Accrued restructuring costs 20.1 30.9
Other accrued liabilities 45.3 67.5
Income taxes 5.5 0.0
Dividends payable 0.0 10.6
Current portion of long-term debt 1.2 1.0
-------- --------
TOTAL CURRENT LIABILITIES 195.7 227.5
LONG-TERM DEBT--less portion classified as current 728.4 744.5
LONG-TERM LIABILITIES
Income taxes 20.0 12.4
Employee benefit plans 48.6 44.3
Other 4.6 4.1
-------- --------
73.2 60.8
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:
1997 -- 477,327 shares;
1996 -- 481,780 shares 95.5 96.4
Guarantee of related ESOP debt (89.0) (90.0)
-------- --------
6.5 6.4
Common Shareholders' Equity
Common Shares -- Authorized - 90,000,000
shares, $.10 par value;
Issued (including treasury shares):
1997 -- 33,631,330 shares;
1996 -- 33,637,359 shares 3.4 3.4
Capital in excess of par value of shares 115.7 93.8
Retained earnings 509.0 463.9
Cost of Common Shares in treasury:
1997 -- 4,516,995 shares;
1996 -- 5,509,124 shares (164.5) (188.0)
Unearned compensation (3.7) (4.2)
Foreign currency translation adjustments (32.4) 10.2
-------- --------
COMMON SHAREHOLDERS' EQUITY 427.5 379.1
-------- --------
TOTAL SHAREHOLDERS' EQUITY 434.0 385.5
-------- --------
$1,431.3 $1,418.3
======== ========
</TABLE>
See notes to consolidated financial statements.
3 of 12
<PAGE>
BETZDEARBORN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 66.4 $ 52.9
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 48.9 44.1
Amortization 11.5 4.3
Compensation and employee benefit plans 7.6 8.0
Provision for restructuring -- 9.1
Other, net 0.6 0.2
Changes in operating assets and liabilities, net of business
acquisitions:
Accounts receivable (43.0) (21.2)
Inventories (7.2) (5.2)
Prepaid expenses and other (4.0) 1.0
Accounts payable and accrued expenses (18.6) 18.5
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 62.2 111.7
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (54.8) (41.4)
Proceeds from sales of long-term assets 8.0 1.7
Purchases of businesses and long-term investments -- (6.9)
Purchase of the Dearborn Business, net of cash
equivalents acquired -- (544.5)
Other, net (1.0) (0.3)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (47.8) (591.4)
FINANCING ACTIVITIES
Repayments of long-term debt (604.2) (1.0)
Borrowings classified as long-term debt 587.5 566.0
Net short-term borrowings 9.8 (17.2)
Dividends paid (38.0) (36.5)
Proceeds from issuance of common shares,
including treasury shares 39.8 3.4
------- -------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (5.1) 514.7
Effect of exchange rate changes on cash (1.6) 0.1
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS 7.7 35.1
Cash and Cash Equivalents at Beginning of Year 38.1 13.9
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 45.8 $ 49.0
======= =======
</TABLE>
See notes to consolidated financial statements.
4 of 12
<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, except for
Restructuring/Integration discussed in Note 4, which, in the opinion of
management, are necessary for a fair statement of the results of the interim
periods. Certain amounts in the financial statements for the year ended December
31, 1996 and for the quarter and nine months ended September 30, 1996 have been
reclassified to conform with 1997 classifications.
Note 2 - Common Shares Reserved for Stock Plans
At September 30, 1997, 5,130,590 and 498,170 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. An additional
400,000 shares of the Company's common stock is reserved to be purchased by U.S.
employees of the Company through payroll deductions under the terms of the
Employee Stock Purchase Plan. Further, 2,686,000 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, the Company acquired (the "Acquisition") the Dearborn
business unit ("Dearborn") of W.R. Grace & Co. - Conn. ("Grace"). The
Acquisition is accounted for using the purchase method of accounting. Had the
Acquisition occurred as of January 1, 1996, unaudited pro forma results would
have been (in millions, except per share amounts):
Nine Months Ended September 30
------------------------------
1997 1996
---- ----
Net Sales $960.6 $940.1
Net Earnings 66.4 37.7
Net Earnings per Common Share:
Primary 2.11 1.21
Fully Diluted 2.00 1.17
The pro forma results reflect adjustments for the nine months ended
September 30, 1996, primarily for the increased amortization and interest
expense attributable to the Acquisition and the related tax effects. Potential
cost savings, however, from combining Dearborn with the Company's operations are
not reflected. Therefore, the pro forma results are not indicative of the
results that would have occurred had the Acquisition actually been consummated
on January 1, 1996, and are not intended to be a projection of future results or
trends. The historical financial results of operations of Dearborn included in
the pro forma
5 of 12
<PAGE>
results reflect the "carve out" of Dearborn from Grace. Certain selling,
research and administrative expenses of Grace have been allocated to Dearborn on
various bases, which, in the opinion of Grace's management, are reasonable.
However, such expenses are not necessarily indicative of, and it is not
practicable for management to estimate, the nature and level of expenses which
might have been incurred if Dearborn had been operated as a separate independent
company.
Note 4 - Restructuring/Integration
To continue to achieve the planned reductions in operating costs and to
integrate the operations of the former Betz Laboratories, Inc. ("Betz") and the
former Dearborn business, the Company has incurred incremental and non-recurring
expenses that are reported as Integration operating expenses. Integration
expenses for the third quarter and nine months ending September 30, 1997 are
$0.4 million and $15.7 million, respectively. These costs are associated with
the activities of integration teams responsible for merging the two companies
for the benefit of future operations and include items such as consulting and
legal fees, transition administrative services fees, integration bonuses,
training, travel and Betz employee relocation expenses.
Cash payments of $20.4 million to meet restructuring obligations were made
during the first nine months of 1997. The remaining reserve at September 30,
1997 is expected to be sufficient to complete these actions. Cash flows from
operations and available financing sources will be sufficient to meet
restructuring liabilities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS
Results of Operations
The acquisition of the Dearborn Business ("Dearborn") from W.R. Grace & Co.
- - Conn. ("Grace") on June 28, 1996 significantly impacts the comparability of
results for the third quarter and first nine months of 1997 to 1996 since only
two months of Dearborn non-North America operations were included in the same
periods of 1996. The subsequent integration of this business makes it
impracticable to segregate the 1997 Dearborn results from the remainder of the
Company's operations. Consequently, only pro forma sales comparisons, adding the
first six months of 1996 Dearborn North America sales and the first seven months
of their non-North America sales (as provided by Grace) to the sales reported
for the first nine months of 1996 can be discussed. The remainder of the
discussion will primarily focus on results of operations as a percentage of
sales.
Third quarter net earnings, excluding integration expenses, increased to a
record $27.0 million from $20.3 million in 1996 and fully diluted earnings per
share, also excluding integration, increased 27% to $0.81 from $0.64. Net
earnings for the quarter, as reported, increased $15.8 million to $26.7 million
and fully diluted earnings per share rose 142% to $0.80. Net earnings for the
first nine months of 1997, excluding integration expenses, increased 22% to
$76.5 million from $62.7 million in 1996 and fully diluted earnings per share,
excluding integration, increased 18% to $2.32 from $1.97. Net earnings for the
first nine months of 1997, including integration/restructuring expenses,
increased $13.5 million to $66.4 million and fully diluted earnings per share
rose 20% to $2.00 from $1.66.
6 of 12
<PAGE>
Third quarter net sales, as reported, increased 9% from $304.2 million in
1996 to $331.8 million in 1997. On a pro forma basis, quarterly sales increased
approximately 2% in U.S. dollars and 5% in local currencies. Current quarter
U.S. sales increased 2% over the prior year's pro forma level, while sales
outside the U.S. increased 1% in U.S. dollars, but approximately 8% in local
currencies. Both the Europe and Asia Pacific regions reported local currency
percentage increases in the low double-digit range. The higher increases in
these regions are partially offset by a Latin American local currency pro forma
sales percentage increase in the mid single-digit range.
Net sales for the first nine months of 1997, as reported, increased 35%
from $713.8 million in 1996 to $960.6 million in 1997. On a pro forma basis,
consolidated nine month sales increased approximately 2% in U.S. dollars and 5%
in local currencies. U.S. sales for the first nine months increased 1% over the
prior year's pro forma level, while sales outside the U.S. increased
approximately 4% in U.S. dollars and 10% in local currencies.
Worldwide 1997 third quarter and nine month sales recorded by the Water
Management Group global business unit, on a pro forma basis, decreased in the
low single digits in U.S. dollars, but remained flat in local currencies. In the
U.S., third quarter pro forma sales are lower than last year, while local
currency percentage increases outside the U.S. are in the low single-digit
range. This business unit was impacted by lower than normal seasonal demands
brought on by the mild summer in the U.S.
The combined process chemical global business units increased pro forma
1997 third quarter net sales by approximately 10%, with the U.S. reporting a
percentage increase in the low double-digit range, while units outside the U.S.
reported local currency increases in the mid teen range. All global process
chemical units reported increased sales on a pro forma basis. For the third
consecutive quarter, the Paper Process Group, the largest of the three process
chemical groups, reported a solid double-digit pro forma sales growth in local
currencies over the comparable quarter of the prior year. The Hydrocarbon
Process Group reported a local currency quarterly sales percentage increase in
the low single-digit range, while the Metals Process Group reported a local
currency increase in the upper single-digit range for the third quarter.
The Company's quarterly gross profit margin decreased from 60.4% of net
sales in 1996 to 60.0% in 1997. This deterioration in the gross profit margin is
primarily due to an additional month of non-North American sales included in the
third quarter 1997 Statement of Operations that are attributable to the Dearborn
acquisition which historically generated gross profit margins at a rate lower
than the Company's pre-acquisition margins. The Company's post-acquisition gross
margin percentage has been stable. The 1997 third quarter is the fourth
consecutive quarter since the acquisition of Dearborn that the gross margin has
been in the 60% range (59.4% in the fourth quarter of 1996; 60.1% in the first
quarter of 1997; 60.0% in the second quarter of 1997).
Selling, research and administrative expenses, as a percent of net sales,
decreased from 46.1% in 1996 to the current quarter's level of 43.6%. The 1997
expenses also include $4.0 million of intangible amortization, primarily
attributable to the Dearborn acquisition. Selling, research and administrative
expenses, as a percent of net sales, excluding intangible amortization, are
42.4% for the third quarter and 42.7% for the first nine months of 1997,
compared to 44.9% and 44.7% for the third quarter and first nine
7 of 12
<PAGE>
months of 1996, respectively. These declines are primarily due to savings
achieved from the Company's 1995 and 1996 restructuring and integration
activities targeted at reducing operating expenses as a percent of sales and
integrating the Dearborn operations.
Integration expenses for the quarter and nine months ending September 30,
1997 amounted to $0.4 million and $15.7 million, respectively, and are
associated with the activities of integration teams responsible for merging the
two companies for the benefit of future operations and include items such as
consulting and legal fees, transition administrative service fees, integration
bonuses, training, travel and Betz employee relocation expenses. Third quarter
integration expenses are considerably less than reported in the first half of
this year because a majority of the integration activities are complete. Fourth
quarter 1997 is expected to be the last quarter for integration expenses and
will primarily consist of the final portion of the integration bonus accrual.
Investment and other income decreased from 1996's third quarter principally
due to foreign exchange losses primarily from Asia Pacific, which more than
offset higher investment income.
The cost of financing the Dearborn acquisition causes the significant
increase in interest expense during the first nine months of 1997 over the
comparable 1996 period.
During November, 1997, the Company acquired all the outstanding common
stock of D.W. Walker & Associates, Inc., dba Argo Scientific, in exchange for
the Company's common shares. Argo Scientific, founded in 1982, is a leading
supplier of highly specialized chemical treatments, services and technology for
membrane separation systems, which are being used increasingly in the production
of "pure" water from fresh water and sea water. It has six locations in the
United States, a wholly owned limited company in the United Kingdom, sales
representatives throughout Europe and the Middle East, and two joint ventures in
South Korea and Saudi Arabia. Included in the stock transaction are exclusive
patents and other technology; sales, administrative, and laboratory facilities;
equipment; product inventory; and all management, technical sales, and
administrative support personnel.
The Argo Scientific acquisition will be accounted for using the purchase
method of accounting. Accordingly, the purchase price will be allocated to the
estimated fair value of the assets and liabilities acquired, with the excess
recorded as goodwill. This goodwill will be amortized on a straight-line basis
over 40 years. The Argo Scientific results of operations will be included with
the Company's beginning in November 1997. This acquisition is not expected to
have a material impact on the Company's 1997 results of operations nor its
capital resources and liquidity.
Capital Resources and Liquidity
The $78.7 million increase in working capital since 1996 year end is mainly
due to a $43.0 million increase in accounts receivable. The receivables are
higher principally due to increased sales in the 1997 third quarter and to
delays in customer invoicing caused by system integration difficulties earlier
this year. This increase in receivables and cash payments to meet restructuring
and payroll liabilities are the principal reasons for the $49.4 million decline
in cash provided from operations in the first nine months of 1997 compared to
the same period last year. Cash proceeds amounting to $39.8 million from the
issuance of
8 of 12
<PAGE>
common shares under the employee stock option plans and $8 million cash proceeds
from asset sales, principally under the Company's restructuring initiatives,
offset the reduction in funds from operations.
During the first nine months of 1997, expenditures for property, plant and
equipment were $54.8 million, a $13.4 million increase from 1996. The Company
anticipates that capital expenditures for 1997 will be approximately $90
million. Major projects include the installation of SAP financial systems and
capacity expansions at the Company's production facility in Beaumont, Texas and
at other plants outside the U.S.
Approximately one-half of the Company's assets are outside the U.S. The
stronger U.S. dollar relative to most currencies is the primary cause for
declines in non-U.S. assets such as property, plant and equipment and goodwill,
with the offsetting impact included in the foreign currency translation
adjustments section of shareholders' equity.
The company refinanced its Revolving Credit Agreement on October 20, 1997
by executing a new $750 million Credit Agreement with a syndicate of banks. The
October 20, 1997 Credit Agreement expires in 5 years and contains fewer
restrictive covenants than the previous agreement. The new agreement is also at
variable interest rates, but with a 25 basis points lower margin over LIBOR than
the old agreement. At October 31, 1997, borrowings available under the Credit
Agreement are $164 million. The Company expects that cash balances and cash
generated from operations plus available lines of credit will be sufficient to
fund operating, dividend and capital requirements.
Impact of Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods presented.
Under the new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded. The impact of Statement 128
on the calculation of earnings per share for these quarters is not expected to
be material.
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, Reporting Comprehensive Income, and Statement No. 131, Disclosures about
Segments of an Enterprise and Related Information, both of which are required to
be adopted for fiscal years beginning after December 15, 1997. Statement 130
will require the Company to report in its financial statements all non-owner
related changes in equity for the periods being reported. Statement 131 will
require the Company to disclose revenues, earnings, and other financial
information pertaining to the business segments by which the Company is managed,
as well as what factors management used to determine these segments. The Company
is currently evaluating the effects Statements 130 and 131 will have on its
financial statements and related disclosures.
Forward-Looking Information
Statements contained in this communication, including statements relating
to the Company's expectations for anticipated growth in the future, are
"forward-looking statements", as such term is defined
9 of 12
<PAGE>
in the Private Securities Litigation Act of 1995. Actual results could differ
materially from the Company's statements in this 10-Q regarding its anticipated
performance due to various factors such as foreign currency fluctuations,
seasonality as it impacts purchasing patterns, the impact of integration
efforts, and economic, market and competitive conditions. In addition to the
forward-looking statements, the reader is cautioned that pro forma sales
comparisons are based on the Company's best estimates of the comparable sales
base.
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 ten (10) 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, 1996.
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.
10 of 12
<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: November 12, 1997 By: s / George L. James
--------------------------
George L. James
Vice President - Finance
Date: November 12, 1997 By: s / Linda R. Hansen
--------------------------
Linda R. Hansen
Vice President,
Secretary and General Counsel
11 of 12
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
Primary Earnings per Common Share 1997 1996 1997 1996
- --------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net earnings $ 26.7 $ 10.9 $ 66.4 $ 52.9
Effect of preferred stock dividends (1.4) (1.3) (4.2) (4.0)
-------- -------- -------- --------
Net earnings available to common shareholders $ 25.3 $ 9.6 $ 62.2 $ 48.9
======== ======== ======== ========
Average Common Shares outstanding 29.0 27.8 28.7 27.7
Common stock equivalents 0.7 0.3 0.7 0.3
-------- -------- -------- --------
Average number of Common Shares - primary 29.7 28.1 29.4 28.0
======== ======== ======== ========
Primary earnings per Common Share $ 0.85 $ 0.34 $ 2.11 $ 1.75
======== ======== ======== ========
Fully Diluted Earnings per Common Share
- ---------------------------------------
Net earnings $ 26.7 $ 10.9 $ 66.4 $ 52.9
Effect of ESOP charge to operations assuming
conversion of Series A ESOP Convertible
Preferred Shares (0.7) (0.6) (2.0) (1.9)
-------- -------- -------- --------
Net earnings available to common shareholders $ 26.0 $ 10.3 $ 64.4 $ 51.0
======== ======== ======== ========
Average Common Shares outstanding 29.0 27.8 28.7 27.7
Common stock equivalents 0.8 0.5 0.8 0.4
Assumed conversion of Series A ESOP Convertible
Preferred Shares 2.7 2.7 2.7 2.7
-------- -------- -------- --------
Average number of Common Shares - fully diluted 32.5 31.0 32.2 30.8
======== ======== ======== ========
Fully diluted earnings per Common Share $ 0.80 $ 0.33 $ 2.00 $ 1.66
======== ======== ======== ========
</TABLE>
Common stock equivalents reflect the assumed exercise of dilutive employees'
stock options using the treasury stock method.
12 of 12
<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> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 46
<SECURITIES> 0
<RECEIVABLES> 293
<ALLOWANCES> 7
<INVENTORY> 99
<CURRENT-ASSETS> 486
<PP&E> 817
<DEPRECIATION> 412
<TOTAL-ASSETS> 1,431
<CURRENT-LIABILITIES> 196
<BONDS> 728
7
0
<COMMON> 3
<OTHER-SE> 424
<TOTAL-LIABILITY-AND-EQUITY> 1,431
<SALES> 961
<TOTAL-REVENUES> 961
<CGS> 384
<TOTAL-COSTS> 384
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> 103
<INCOME-TAX> 37
<INCOME-CONTINUING> 66
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66
<EPS-PRIMARY> 2.11
<EPS-DILUTED> 2.00
</TABLE>
