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, 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.
28,972,711 Common Shares outstanding as of August 8, 1997.
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<PAGE>
BETZDEARBORN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $322.4 $210.1 $628.8 $409.6
Operating Costs and Expenses:
Cost of products sold 128.9 80.8 251.1 157.7
Selling, research and administrative 140.7 92.7 277.7 183.5
Integration/restructuring 8.7 0.4 15.3 0.4
------ ------ ------ ------
278.3 173.9 544.1 341.6
OPERATING EARNINGS 44.1 36.2 84.7 68.0
Other Income (Expense):
Investment and other income 0.2 (0.8) (0.2) (0.5)
Interest (11.6) (0.5) (23.0) (1.1)
------ ------ ------ ------
(11.4) (1.3) (23.2) (1.6)
------ ------ ------ ------
EARNINGS BEFORE INCOME TAXES 32.7 34.9 61.5 66.4
Income Taxes 11.6 12.6 21.8 24.4
------ ------ ------ ------
NET EARNINGS $ 21.1 $ 22.3 $ 39.7 $ 42.0
====== ====== ====== ======
Net earnings per Common Share:
Primary $ .67 $ .75 $ 1.26 $ 1.41
====== ====== ====== ======
Fully diluted $ .64 $ .71 $ 1.20 $ 1.33
====== ====== ====== ======
Cash dividends declared per Common Share $ .375 $ .37 $ .75 $ .74
====== ====== ====== ======
Average number of Common Shares:
Primary 29.5 28.0 29.3 27.9
====== ====== ====== ======
Fully diluted 32.3 30.7 32.0 30.7
====== ====== ====== ======
</TABLE>
See notes to consolidated financial statements.
2 of 11
<PAGE>
BETZDEARBORN INC.
Consolidated Balance Sheets (In millions, except share amounts)
<TABLE>
<CAPTION>
ASSETS June 30, 1997 December 31, 1996
------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 37.2 $ 38.2
Trade accounts receivable, less allowances:
1997 -- $7.0; 1996 -- $7.6 284.7 243.2
Inventories:
Finished products and goods
purchased for resale 55.4 54.5
Raw materials 46.4 42.2
-------- --------
101.8 96.7
Income taxes 21.1 31.1
Prepaid expenses and other 35.7 29.5
-------- --------
TOTAL CURRENT ASSETS 480.5 438.7
PROPERTY, PLANT AND EQUIPMENT--at cost
Land 36.1 38.9
Buildings 215.4 221.9
Machinery and equipment 526.7 531.0
Construction in progress 23.8 11.9
-------- --------
802.0 803.7
Allowance for depreciation (deduction) (399.5) (374.7)
-------- --------
402.5 429.0
OTHER ASSETS
Investments and other 17.4 16.6
Goodwill - net of accumulated amortization:
1997 -- $10.5; 1996 -- $7.1 452.7 449.9
Other Intangibles - net of accumulated amortization:
1997 -- $8.1; 1996 -- $4.3 83.0 84.1
-------- --------
553.1 550.6
-------- --------
$1,436.1 $1,418.3
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 73.7 $ 68.9
Payroll and related taxes 31.5 47.8
Notes payable 0.8 0.8
Accrued restructuring costs 24.6 30.9
Other accrued liabilities 57.7 67.5
Income taxes 1.1 --
Dividends payable 10.8 10.6
Current portion of long-term debt 1.0 1.0
-------- --------
TOTAL CURRENT LIABILITIES 201.2 227.5
LONG-TERM DEBT--less portion classified as current 754.3 744.5
LONG-TERM LIABILITIES
Income taxes 19.6 12.4
Employee benefit plans 47.8 44.3
Other 4.6 4.1
-------- --------
72.0 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 -- 478,955 shares;
1996 -- 481,780 shares; 95.8 96.4
Guarantee of related ESOP debt (89.4) (90.0)
-------- --------
6.4 6.4
Common Shareholders' Equity
Common Shares -- Authorized - 90,000,000
shares, $.10 par value;
Issued (including treasury shares):
1997 -- 33,634,239 shares;
1996 -- 33,637,359 shares; 3.4 3.4
Capital in excess of par value of shares 111.4 93.8
Retained earnings 481.8 463.9
Cost of Common Shares in treasury:
1997 -- 4,747,476 shares;
1996 -- 5,509,124 shares (171.0) (188.0)
Unearned compensation (4.4) (4.2)
Foreign currency translation adjustments (19.0) 10.2
-------- --------
COMMON SHAREHOLDERS' EQUITY 402.2 379.1
-------- --------
TOTAL SHAREHOLDERS' EQUITY 408.6 385.5
-------- --------
$1,436.1 $1,418.3
======== ========
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
BETZDEARBORN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Six Months Ended
June 30,
1997 1996
---- ----
OPERATING ACTIVITIES
Net earnings $ 39.7 $ 42.0
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 32.8 27.3
Amortization 7.5 0.6
Compensation and employee benefit plans 5.4 4.8
Other, net 0.2 0.1
Changes in operating assets and liabilities,
net of business acquisitions:
Accounts receivable (41.9) (18.0)
Inventories (9.0) 0.2
Prepaid expenses and other (6.2) 8.1
Accounts payable and accrued expenses (16.4) (12.1)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 12.1 53.0
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (30.8) (28.2)
Proceeds from sales of long-term assets 6.0 0.9
Purchases of businesses and long-term investments 0.2 (7.0)
Purchase of the Dearborn Business, net of cash
equivalents acquired -- (540.4)
Other, net (1.0) 0.2
------- -------
NET CASH USED IN INVESTING ACTIVITIES (25.6) (574.5)
FINANCING ACTIVITIES
Repayments of long-term debt (414.6) (1.0)
Borrowings classified as long-term debt 424.4 574.4
Net short-term borrowings -- (9.7)
Dividends paid (25.2) (24.4)
Proceeds from issuance of common shares,
including treasury shares 29.5 0.9
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 14.1 540.2
Effect of exchange rate changes on cash (1.6) (0.8)
------- -------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1.0) 17.9
Cash and Cash Equivalents at Beginning of Year 38.2 13.9
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 37.2 $ 31.8
======= =======
See notes to consolidated financial statements.
4 of 11
<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 six months ended June 30, 1996 have been
reclassified to conform with 1997 classifications.
Note 2 - Common Shares Reserved for Stock Plans
At June 30, 1997, 5,355,789 and 495,386 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, 2,706,000 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):
Six Months Ended June 30
------------------------
1997 1996
---- ----
Net Sales $628.8 $611.0
Net Earnings 39.7 25.3
Net Earnings per Common Share:
Primary 1.26 .81
Fully Diluted 1.20 .78
The pro forma results reflect adjustments for the six months ended June
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
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<PAGE>
future results or trends. The historical financial results of operations of
Dearborn 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 operating 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 second quarter and six months ending June 30, 1997 are $8.7
million and $15.3 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.
In connection with the Acquisition and associated restructuring/
integration decisions, a $26.0 million provision for restructuring was accrued
in 1996 and included in Goodwill. These costs are accrued when such decisions
are announced and exit costs can be reasonably estimated. During the 1997 second
quarter, the Company announced the closure of the former Dearborn plant in Lake
Zurich, IL. The 1996 provision included the shutdown of administrative and
research facilities at this site and now the entire facility will be idled. As a
result of this announcement, the Company reduced the value of the assets at this
site to fair market value and increased its restructuring liabilities. Also, the
Company completed the Dearborn acquisition purchase accounting during the second
quarter and made final adjustments to all restructuring liabilities recorded as
a result of the Dearborn acquisition. An additional $12.2 million provision for
restructuring was recorded in the second quarter of 1997 for the closure of the
remainder of Lake Zurich and for final adjustments to Dearborn restructuring
liabilities.
Cash payments of $16.3 million to meet restructuring obligations were
made during the first half of 1997. The remaining reserve at June 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.
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<PAGE>
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 second quarter and first half of 1997 to 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 1996 first half and second quarter
Dearborn sales (as provided by Grace) to the sales reported in the second
quarter of 1996 can be discussed. The remainder of the discussion will
primarily focus on results of operations as a percentage of sales.
Second quarter net earnings, excluding integration expenses, increased
to a record $26.7 million from $22.7 million in 1996 and fully diluted earnings
per share, also excluding integration, increased 14% to $0.81 from $0.71. Net
earnings for the quarter, as reported, decreased $1.2 million to $21.1 million
and fully diluted earnings per share declined 10% to $0.64. First half net
earnings, excluding integration expenses, increased 17% to $49.6 million from
$42.4 million in 1996 and fully diluted earnings per share, excluding
integration, increased 14% to $1.51 from $1.33. Net earnings for the first six
months of 1997, including integration/restructuring expenses, decreased $2.3
million to $39.7 million and fully diluted earnings per share declined 10% to
$1.20.
Second quarter net sales, as reported, increased 53% from $210.1
million in 1996 to $322.4 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 2% in U.S. dollars, but approximately 8% in
local currencies. Both the Latin American 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 European local currency pro
forma sales percent increase in the mid single-digit range.
Net sales for the first six months of 1997, as reported, increased 54%
from $409.6 million in 1996 to $628.8 million in 1997. On a pro forma basis
consolidated first half sales increased approximately 2% in U.S. dollars and 5%
in local currencies. First half 1997 U.S. sales increased 2% over the prior
year's pro forma level, while sales outside the U.S. increased 5% in U.S.
dollars and approximately 10% in local currencies.
Worldwide 1997 second quarter and first half sales recorded by the
Water Management Group global business unit, on a pro forma basis, are
essentially flat in U.S. dollars and up approximately 2% in local currencies. In
the U.S., pro forma sales are lower than last year, while local currency
percentage increases outside the U.S. are in the mid single-digit range. This
business unit was particularly impacted by integration activities involving the
field sales force which impinged on sales time. These activities involved
training and cross-training the sales force on new technology. In addition
computer system integration problems adversely affected deliveries and
invoicing. Although integration continues to be a high priority, the involvement
of the field sales force has been significantly reduced.
7 of 11
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The combined process chemical global business units increased pro forma
1997 second quarter net sales by approximately 9%, with the U.S. reporting a
percentage increase in the upper mid single-digit range, while units outside the
U.S. reported local currency increases in the low double-digit range. All global
process chemical units reported increased sales on a pro forma basis. For the
second 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 mid single-digit range, which was slightly lower than the increases reported
by the other process chemical units.
The Company's quarterly gross profit margin decreased from 61.5% of net
sales in 1996 to 60.0% in 1997. This deterioration in the gross profit margin is
primarily due to sales included in the 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. It is
impractical to quantify this impact on the second quarter margins since Dearborn
customer accounts are integrated with the remainder of the Company's accounts
and "cross-selling" of product offerings has occurred. The 1997 second quarter
is the third 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 and
60.1% in the first quarter of 1997).
Selling, research and administrative expenses, as a percent of net
sales, decreased from 44.1% in 1996 to the current quarter's level of 43.6%. The
1997 expenses also include $3.7 million of intangible amortization, primarily
attributable to the Dearborn acquisition, which is a $3.2 million increase over
the 1996 level. Selling, research and administrative expenses, as a percent of
net sales, excluding intangible amortization, are 42.5%. First half 1997
selling, research and administrative expenses, as a percent of net sales,
excluding intangible amortization were 43.0% compared to 44.7% in 1996. 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 three and six months ending June 30, 1997
amounted to $8.7 million and $15.3 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. The Company
anticipates that integration/restructuring expenses for the remainder of 1997
will be dramatically less than the first half of the year since a majority of
the integration activities are complete.
During the second quarter, the Company announced the closure of the
former Dearborn plant in Lake Zurich, IL, the last major decision under the
Dearborn restructuring/integration process. In 1996, the Company announced the
shutdown of administrative and research facilities at this site and now the
entire facility will be idled. Also, the Company completed the Dearborn
acquisition purchase accounting during the second quarter and made final
adjustments to all assets acquired and restructuring liabilities recorded as a
result of the Dearborn acquisition. These adjustments increased the estimated
goodwill as of the acquisition date by $24.1 million to $444.5 million.
8 of 11
<PAGE>
Investment and other income increased from 1996's second quarter and
first half primarily due to interest income generated on higher average cash and
cash equivalent balances. In addition, the cost of financing the Dearborn
acquisition caused the significant increases in interest expense during the
second quarter and first six months of 1997 over the comparable 1996 periods.
The effective income tax rate decreased to 35.5% in 1997 from 36.7% in
1996, reflecting the benefits from tax planning initiatives.
Capital Resources and Liquidity
The $68.1 million increase in working capital since 1996 year end is
mainly due to a $41.5 million increase in accounts receivable. The receivables
are higher principally due to delays in customer invoicing from non-recurring
computer system processing delays as a result of the integration of systems.
This increase in receivables and cash payments to meet restructuring and payroll
liabilities are the principal reasons for the $40.9 million decline in cash
provided from operations in the first half of 1997 compared to the same period
last year. Cash proceeds from a $9.8 million net increase in long-term debt plus
$29.5 million net proceeds from the issuance of common shares under the employee
stock option plans primarily funded the increase in working capital.
During the first six months of 1997, expenditures for property, plant
and equipment were $30.8 million, a $2.6 million increase from 1996. The Company
anticipates that capital expenditures for 1997 will be approximately $100
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. Proceeds from sales of long-term assets are
$5.0 million higher than the first six months of 1996 mainly due to proceeds
from the sale of the Company's former Canadian headquarters.
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.
At June 30, 1997, borrowings available under the Revolving Credit
Agreement are $164 million. The Company expects that available lines of credit
plus cash balances and cash generated from operations 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. 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.
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Forward-Looking Information
Pursuant to the "Safe Harbor" provisions under the Private Securities
Litigation Act of 1995, certain forward-looking statements made in this
communication concerning such issues as sales, income, profitability, foreign
currency fluctuations, cost savings and restructuring and integration progress
are subject to a number of risks that could cause actual results to differ
materially from those anticipated. For example, timeliness could be longer than
expected, there may be unforeseen execution difficulties, or market, economic,
or competitive conditions could alter expected results. In addition to the
forward-looking statements, the reader is cautioned that pro forma sales
comparisons are the Company's best estimates based on 1996 pre-acquisition
Dearborn sales.
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.
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<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, 1997 By: /s/ George L. James
-----------------------------------
George L. James
Vice President - Finance
Date: August 14, 1997 By: /s/ William C. Brafford
-----------------------------------
William C. Brafford
Vice President,
Secretary and General Counsel
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<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 1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings $21.1 $22.3 $39.7 $42.0
Effect of preferred stock dividends, net of taxes (1.4) (1.3) (2.8) (2.6)
----- ----- ----- -----
Net earnings available to common shareholders $19.7 $21.0 $36.9 $39.4
===== ===== ===== =====
Average Common Shares outstanding 28.8 27.8 28.6 27.7
Common stock equivalents 0.7 0.2 0.7 0.2
----- ----- ----- -----
Average number of Common Shares - primary 29.5 28.0 29.3 27.9
===== ===== ===== =====
Primary earnings per Common Share $0.67 $0.75 $1.26 $1.41
===== ===== ===== =====
Fully Diluted Earnings per Common Share
Net earnings $21.1 $22.3 $39.7 $42.0
Effect of ESOP charge to operations assuming
conversion of Series A ESOP Convertible
Preferred Shares, net of taxes (0.6) (0.6) (1.3) (1.3)
----- ----- ----- -----
Net earnings available to common shareholders $20.5 $21.7 $38.4 $40.7
===== ===== ===== =====
Average Common Shares outstanding 28.8 27.8 28.6 27.7
Common stock equivalents 0.8 0.2 0.7 0.2
Assumed conversion of Series A ESOP Convertible
Preferred Shares 2.7 2.7 2.7 2.8
----- ----- ----- -----
Average number of Common Shares - fully diluted 32.3 30.7 32.0 30.7
===== ===== ===== =====
Fully diluted earnings per Common Share $0.64 $0.71 $1.20 $1.33
===== ===== ===== =====
</TABLE>
Common stock equivalents reflect the assumed exercise of dilutive employees'
stock options using the treasury stock method.
<PAGE>
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 37
<SECURITIES> 0
<RECEIVABLES> 282
<ALLOWANCES> 7
<INVENTORY> 102
<CURRENT-ASSETS> 480
<PP&E> 802
<DEPRECIATION> 399
<TOTAL-ASSETS> 1,436
<CURRENT-LIABILITIES> 201
<BONDS> 754
6
0
<COMMON> 3
<OTHER-SE> 399
<TOTAL-LIABILITY-AND-EQUITY> 1,436
<SALES> 629
<TOTAL-REVENUES> 629
<CGS> 251
<TOTAL-COSTS> 251
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23
<INCOME-PRETAX> 62
<INCOME-TAX> 22
<INCOME-CONTINUING> 40
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.20
</TABLE>
