NALCO CHEMICAL COMPANY
INDEX
Page No.
Part I. Financial Information:
Condensed Consolidated Statements of
Financial Condition - September 30, 1995
(Unaudited) and December 31, 1994 2
Condensed Consolidated Statements of
Earnings (Unaudited) -
Three Months and Nine Months
Ended September 30, 1995 and 1994 3
Condensed Consolidated Statements of
Cash Flows (Unaudited) -
Three Months and Nine Months
Ended September 30, 1995 and 1994 4
Notes to Condensed Consolidated Financial
Statements (Unaudited) 5
Report of Independent Accountants on
Review of Interim Financial Information 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 14
Exhibit (11) - Statement Re: Computation
of Earnings Per Share 15
Exhibit (15) - Awareness Letter of Independent
Accountants 17
Exhibit (27) - Financial Data Schedule 18
Signatures 19
PART I. FINANCIAL INFORMATION
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, December 31,
1995 1994
Dollars in millions (Unaudited) (Note)
ASSETS
Current assets
Cash and cash equivalents $ 39.8 $ 45.1
Accounts receivable, less allowances
of $6.4 and $5.6, respectively 230.3 205.9
Inventories
Finished products 58.8 51.4
Materials and work in process 28.4 32.4
87.2 83.8
Prepaid expenses, taxes and other
current assets 23.1 27.3
Total current assets 380.4 362.1
Investment in and advances
to partnership 130.4 109.4
Goodwill, less accumulated
amortization of $17.8 and
$15.1, respectively 111.2 114.4
Other assets 155.8 172.4
Property, plant and equipment 1,141.2 1,067.1
Less allowances for depreciation (591.6) (543.2)
549.6 523.9
$1,327.4 $1,282.2
LIABILITIES/SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt $ 52.1 $ 21.6
Accounts payable 103.5 109.1
Accrued formation and
consolidation expenses 24.3 43.2
Other current liabilities 110.0 100.4
Total current liabilities 289.9 274.3
Long-term debt 248.8 245.3
Deferred income taxes 52.9 56.8
Accrued postretirement benefits 97.4 95.2
Other liabilities 67.6 66.4
Shareholders' equity 570.8 544.2
$1,327.4 $1,282.2
Note: The Statement of Financial Condition at December 31, 1994 has been derived
from the audited financial statements at that date.
See accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Ended Nine Months Ended
(Amounts in millions, September 30 September 30
except per share data) 1995 1994 1995 1994
Net sales $335.5 $343.4 $977.7 $1,031.6
Operating costs and expenses
Cost of products sold 151.9 152.5 441.8 461.2
Operating expenses 121.0 125.4 358.4 387.4
Formation and consolidation
expenses - 51.1 - 51.1
272.9 329.0 800.2 899.7
Operating earnings 62.6 14.4 177.5 131.9
Other income (expense)
Interest and other income 2.0 6.5 5.3 12.0
Interest expense (4.1) (4.3) (12.5) (17.7)
Equity in earnings of partnership 3.7 2.6 11.9 2.6
Earnings before income taxes 64.2 19.2 182.2 128.8
Income taxes 23.7 11.7 66.8 54.4
Net earnings $ 40.5 $ 7.5 $115.4 $ 74.4
Per common share
Net earnings - Primary $ 0.56 $ 0.07 $ 1.57 $ 0.96
Net earnings - Fully diluted $ 0.52 $ 0.08 $ 1.46 $ 0.91
Cash dividends $ 0.25 $ 0.24 $ 0.74 $ 0.705
Average primary shares outstanding
(in thousands) 67,827 68,844 68,052 69,196
Average fully diluted shares
outstanding (in thousands) 75,851 76,968 76,107 77,331
See accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30 September 30
Dollars in millions 1995 1994 1995 1994
Cash provided by (used for)
operating activities
Net earnings $ 40.5 $ 7.5 $115.4 $ 74.4
Adjustments not affecting cash
Formation and consolidation
expenses - 51.1 - 51.1
Depreciation and amortization 22.2 22.7 66.0 69.8
Other, net (2.5) (3.9) (15.7) 0.9
Changes in current assets and
liabilities (8.9) (2.0) (24.9) 3.6
Net cash provided by operations 51.3 75.4 140.8 199.8
Investing activities
Additions to property,
plant and equipment (35.7) (29.6) (96.7) (98.1)
Other 14.5 (24.3) 0.3 (25.0)
Net cash used for
investing activities (21.2) (53.9) (96.4) (123.1)
Financing activities
Cash dividends (19.7) (19.2) (58.5) (56.7)
Changes in short-term debt (1.7) (4.1) 33.1 5.3
Changes in long-term debt 1.8 (1.8) 2.7 (3.0)
Common stock reacquired (12.7) (6.3) (36.0) (38.7)
Other 1.2 0.9 8.7 6.3
Net cash used for
financing activities (31.1) (30.5) (50.0) (86.8)
Effects of foreign exchange
rate changes (0.7) 1.5 0.3 4.5
Increase (decrease) in cash and
cash equivalents $ (1.7) $ (7.5) $ (5.3) $ (5.6)
See accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1995
NOTE A -- BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared,
without audit, in accordance with the instructions to Form 10-Q and therefore do
not include all information and footnotes necessary for a fair presentation of
financial position, results of operations, and cash flows in conformity with
generally accepted accounting principles. Financial information as of
December 31 has been derived from the audited financial statements of the
Company, but does not include all disclosures required by generally accepted
accounting principles.
It is the opinion of management that the unaudited condensed consolidated
financial statements include all adjustments necessary to fairly state the
results of operations for the three month and nine month periods ended September
30, 1995 and 1994. The results of interim periods are not necessarily
indicative of results to be expected for the year. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Company's annual report on Form 10-K for the year ended December
31, 1994.
The unaudited condensed consolidated financial statements and the related notes
have been reviewed by Nalco's independent accountants, Price Waterhouse LLP.
The Independent Accountants' Review Report is included on page 8.
NOTE B -- SHAREHOLDERS' EQUITY
Shareholders' equity may be further detailed as follows:
September 30, December 31,
Dollars in millions, 1995 1994
except per share figures
Preferred stock -
par value $1.00 per share;
authorized 2,000,000 shares;
Series B ESOP Convertible
Preferred Stock - 400,426 shares
at September 30, 1995 and 404,224
shares at December 31, 1994 $ 0.4 $ 0.4
Series A Junior Participating
Preferred Stock - none issued - -
Capital in excess of par value
of shares 192.2 194.0
Unearned ESOP compensation (166.5) (168.7)
26.1 25.7
Common stock -
par value $.1875 per share;
authorized 200,000,000 shares;
issued 80,287,568 shares 15.1 15.1
Capital in excess of par value
of shares 25.9 25.5
Retained earnings 897.5 840.6
Minimum pension liability adjustment (5.7) (5.7)
Foreign currency translation
adjustments (42.6) (39.3)
Common stock reacquired - at cost
13,023,739 shares at
September 30, 1995 and 12,387,441
shares at December 31, 1994 (345.5) (317.7)
Total shareholders' equity $ 570.8 $ 544.2
NOTE C -- FORMATION AND CONSOLIDATION EXPENSES
The Company adopted a worldwide consolidation plan for manufacturing and
support operations during 1994, primarily as a result of the formation of the
Nalco/Exxon Energy Chemicals, L.P. joint venture partnership. The production
volume reduction caused by redundancies associated with the joint venture
formation required the Company to downsize, close, and consolidate operations.
The Company's South Chicago plant was closed, and several European and Latin
American manufacturing and support operations have been or will be closed
or downsized. In addition, certain support functions will be recognized on
a pan-European basis in order to more efficiently serve customers. Certain
redundant assets that were not contributed to the joint venture have been
written down to net realizable value, and assets associated with other
programs will be written off. All of these activities are in process, and
should be largely completed by the end of 1995.
As a result of these plans, the Company recorded a pretax provision of $68
million in 1994 ($54 million after tax, or 70 cents per share on a fully
diluted basis). Included in this provision is the cost of termination benefits
for the elimination of over 400 positions, primarily in the United States and
Europe, including manufacturing and support personnel, which will require
approximately $27 million in cash. Costs associated with facility closings and
the disposition of assets that are no longer productive total approximately
$24 million, including $21 million for non-cash asset write-offs and $3
million in cash payments associated with asset disposals. The remaining $17
million of the pretax costs represents anticipated cash payments for post-
closure plant environmental remediation, legal and consulting fees, and other
exit costs. The Company anticipates that cash expenditures will be funded
through operating cash flows. A tax benefit of $14 million, net of tax costs
associated with the contribution of assets to various joint venture entities,
was included in the Company's 1994 income tax provision related to the
formation and consolidation expenses.
As of September 30, 1995, $44 million had been charged against the provision
for formation and consolidation expenses and over 300 employees had been
terminated. The following table sets forth the details of activity for 1994
and the first nine months of 1995:
Nalco/ Environ-
Termi- Asset Exxon Legal & mental
nation Write- Forma- Consult- Remedi-
(in millions) Benefits downs tion ing ation Total
1994 accrual $27.0 $ 23.7 $ 2.0 $ 6.3 $ 9.2 $ 68.2
Cash payments (9.4) - (2.0) (3.0) - (14.4)
Noncash charges - (10.6) - - - (10.6)
Balance at
December 31, 1994 17.6 13.1 - 3.3 9.2 43.2
Cash payments (9.6) (1.9) - (3.3) (0.5) (15.3)
Noncash charges - (3.6) - - - (3.6)
Balance at
September 30, 1995 $ 8.0 $ 7.6 $ - $ - $ 8.7 $ 24.3
REPORT OF INDEPENDENT ACCOUNTANTS ON REVIEW
OF INTERIM FINANCIAL INFORMATION
To the Board of Directors and
Shareholders of Nalco Chemical Company
We have reviewed the accompanying interim financial information of Nalco
Chemical Company and consolidated subsidiaries as of September 30, 1995, and
for the three month and nine month periods then ended. This interim financial
information is the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial information for it to be in
conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing standards,
the statement of consolidated financial condition as of December 31, 1994,
and the related statements of consolidated earnings, of cash flows and of
common shareholders' equity for the year then ended (not presented herein),
and in our report dated February 1, 1995, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated statement of
financial condition as of December 31, 1994, is fairly stated in all material
respects in relation to the statement
of consolidated financial condition from which it has been derived.
Price Waterhouse LLP
By: Robert R. Ross
Engagement Partner
October 24, 1995
Chicago, Illinois
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Third Quarter 1995 Operations Compared to Third Quarter 1994
Effective September 1, 1994, Nalco and Exxon Chemical Company (Exxon), a
division of Exxon Corporation, formed Nalco/Exxon Energy Chemicals, L.P. (Nalco/
Exxon), a joint venture partnership to provide specialty chemical products and
services to the petroleum and chemicals industries worldwide. Nalco's investment
in the joint venture is accounted for by the equity method.
At the time of formation of Nalco/Exxon, Nalco transferred the business and
sales volume of its U.S. Petroleum Chemicals Division and certain petroleum
chemical product lines of its international operations to the joint venture.
While this formation did not change Nalco's net assets or results of operations,
several historical captions in the consolidated financial statements were
affected. Because results for the third quarter 1994 have not been reclassified
to exclude petroleum chemical operations, the following unaudited statement
of consolidated earnings for the quarter ended September 30, 1994 is presented.
d. It reflects results of operations on a comparable basis with 1995; that is,
Nalco petroleum chemical operations are excluded and recognized as if they
were accounted for by the equity method.
Three Months Ended
(Amounts in millions) September 30
1995 1994*
Net sales $335.5 $307.5
Operating costs and expenses
Cost of products sold 151.9 136.3
Selling, administrative, and
research expenses 121.0 112.0
Formation and consolidation expenses - 51.1
272.9 299.4
Operating earnings 62.6 8.1
Other income (expense)
Interest and other income 2.0 6.5
Interest expense (4.1) (4.0)
Equity in earnings of partnership 3.7 6.5
Earnings before income taxes 64.2 17.1
Income taxes 23.7 9.6
Net earnings $ 40.5 $ 7.5
* Reclassified
The following discussion of results of operations compares the third quarter
1995 to the reclassified third quarter 1994 results presented above.
Sales for the quarter increased 9 percent over last year, with all five
divisions reporting improved results. Sales by the Water and Waste Treatment
Division rose 1 percent, with double-digit gains reported by the UNISOLV and
WATERGY Groups. The Process Chemicals Division reported a 14 percent sales
improvement, with double-digit growth posted by the General Industry, the
Mining and Mineral Processing, and the Pulp and Paper Chemicals Groups. A more
modest increase was reported by the Absorbent Chemicals Group. Sales by the
European Division rose 10 percent, partially as a result of the weaker dollar
compared
to a year ago. However, double-digit gains in local currencies were turned in by
subsidiaries in Italy and Spain. The Latin American Division posted a 19
percent sales improvement as a result of double-digit gains reported by
subsidiary companies in Venezuela, Chile, and Argentina, and sales by Nalcomex
(Mexico), a former affiliate, which became a wholly owned subsidiary in the
fourth quarter 1994. Sales by the Pacific Division were up 11 percent, as
double-digit gains were posted by subsidiary companies in Indonesia, Thailand,
Korea, Hong Kong, and the Philippines.
The gross margin was 54.7 percent, down 1.0 percentage point from last year's
rate of 55.7 percent. Gross margins in the United States decreased from a
year ago partially as a result of a lower gross margin for the Absorbent
Chemicals Group. Gross margins of International Divisions were also slightly
lower on a combined basis.
Selling, administrative, and research expenses were up $9.0 million or 8
percent over the third quarter of last year, primarily to support growth
overseas and in the paper market. Part of the increase was attributable to the
weaker dollar used to translate expenses of most international subsidiaries,
principally those in Europe.
Results for the third quarter 1994 were significantly impacted by a $51.1
million charge, before tax, for formation and consolidation expenses. (See
Note C).
Interest and other income decreased $4.5 million from a year ago, primarily
as a result of last year's gain on the sale of the Company's automotive paint
spray booth business.
Nalco's equity in earnings of Nalco/Exxon for the third quarter 1995 was $3.7
million, down $2.8 million from the $6.5 million for Nalco petroleum chemical
operations for July and August 1994 and Nalco/Exxon's first month of operations
in September 1994. The decrease reflects a weak petroleum market in the United
States and start-up and consolidation expenses for the joint venture.
The effective tax rate was 36.9 percent for the third quarter 1995, compared
to an effective tax rate of 56.4 percent for the same period last year, based
on the reclassified results presented above. The unusually high rate for the
third quarter 1994 was the result of the significantly lower earnings before
tax amount due to the formation and consolidation charge, as well as the
related net tax benefit which included tax expenses on assets transferred to
the joint venture. Excluding the $51.1 million charge for formation and
consolidation expenses and the related $15.6 million net tax benefit, the
third quarter 1994 effective tax rate was 36.9 percent.
Net earnings as a percent to sales was 12.1 percent for the third quarter 1995,
compared to 14.0 percent for the third quarter 1994, based on the reclassified
results presented above and excluding the after-tax charge of $35.5 million for
formation and consolidation expenses. Fully diluted earnings per share were 52
cents for the quarter, compared to the 8 cents per share reported last year.
Third quarter 1994 earnings per share would have been 50 cents, excluding the
46 cents per share after-tax charge for on the sale of Nalco's
automotive paint spray booth business.
First Nine Months 1995 Operations Compared to First Nine Months 1994
As previously discussed, the formation of the Nalco/Exxon joint venture in
September 1994 did not change Nalco's net assets or results of operations,
but several historical captions in the consolidated financial statements were
affected. The following unaudited statement of consolidated earnings for the
nine months ended September 30, 1994 is presented to reflect results of
operations on a comparable basis with 1995; that is, Nalco petroleum chemical
operations are excluded and recognized as if they were accounted for by the
equity method.
Nine Months Ended
(Amounts in millions) September 30
1995 1994*
Net sales $977.7 $894.8
Operating costs and expenses
Cost of products sold 441.8 398.6
Selling, administrative,
and research expenses 358.4 332.9
Formation and consolidation expenses - 51.1
800.2 782.6
Operating earnings 177.5 112.2
Other income (expense)
Interest and other income 5.3 11.9
Interest expense (12.5) (16.7)
Equity in earnings of partnership 11.9 15.6
Earnings before income taxes 182.2 123.0
Income taxes 66.8 48.6
Net earnings $115.4 $ 74.4
* Reclassified
The following discussion of results of operations compares the first nine months
of 1995 to the reclassified first nine months of 1994 results presented above.
Sales for the first nine months increased 9 percent over last year, as all five
divisions posted higher results. Sales by the Water and Waste Treatment
Division
were up 3 percent, with solid improvements reported by the UNISOLV and WATERGY
Groups. More modest increases were reported by the Basic Industry and Waste
Treatment Chemicals Groups. The Process Chemicals Division posted an 8 percent
sales improvement. Double-digit gains were reported by the Pulp and Paper
Chemicals Group, the Mining and Mineral Processing Group, and the
General Industry Group. Sales by the European Division were up 13 percent. The
weaker dollar compared to a year ago accounted for part of this increase, but
double-digit gains in local currencies were reported by subsidiaries in Italy
and Spain, as well as the Division's Pan European Paper business. The Latin
American Division turned in a 20 percent sales improvement, as double-digit
gains were reported by subsidiary companies in Brazil, Chile, and Venezuela.
About three-fourths of the increase for the Division was attributable to
Nalcomex (Mexico), a former affiliate, which became a wholly owned subsidiary
in the fourth quarter 1994. Sales by the Pacific Division increased 16 percent,
as double-digit gains were reported by all but two of the subsidiary companies
in the Division.
The gross margin was 54.8 percent, down 0.7 percentage point from last year's
rate of 55.5 percent. Gross margins in the United States decreased from a year
ago primarily as a result of a lower gross margin for the Absorbent Chemicals
Group. Gross margins of the International Divisions were also down slightly
from last year on a combined basis.
Selling, administrative, and research expenses increased $25.5 million or 8
percent over the first nine months of last year, primarily to support growth
in Latin America, the Pacific, and the paper market. The increase was also
partly attributable to the weaker dollar used to translate expenses of most
international subsidiaries, mainly those in Europe.
In the third quarter 1994, the Company recorded a before-tax charge of $51.1
million that resulted from the formation of the Nalco/Exxon joint venture and
adoption of a worldwide consolidation plan. After tax, this charge reduced net
earnings for the first nine months of 1994 by $35.5 million, or 46 cents per
share on a fully diluted basis. An additional $18.5 million, after tax, was
recorded in the fourth quarter 1994, bringing the total after-tax charge to
$54.0 million, or 70 cents per share on a fully diluted basis (See Note C).
Interest and other income was down $6.6 million from a year ago. This was
mainly attributable to last year's gain on the sale of the Company's automotive
paint spray booth business. Also contributing to the decrease was a drop in
interest income as a result of lower invested cash balances, and lower realized
exchange and unrealized translation gains reported by the Company's subsidiary
in Brazil. Interest expense was $4.2 million lower than a year ago, which was
also mainly attributable to the Company's Brazilian subsidiary. These
changes were the result of a monetary control program instituted by the
Brazilian government in mid-1994.
Nalco's equity in earnings of Nalco/Exxon for the first nine months of 1995
was $11.9 million, a $3.7 million decline from the $15.6 million for Nalco
petroleum chemical operations from January to August 1994 and the joint
venture's first month of operations in September 1994. This decrease reflects
the weak petroleum market in the United States, as well as start-up and
consolidation expenses for the joint venture.
The effective tax rate was 36.6 percent for the first nine months of 1995,
compared to an effective tax rate of 39.5 percent for the same period last
year. However, excluding the $51.1 million charge for formation and
consolidation expenses and the related $15.6 million net tax benefit, the
effective tax rate for the first nine months of 1994 was 36.9 percent.
Net earnings as a percent to sales was 11.8 percent for the first nine months
of 1995, compared to 12.3 percent for the first nine months of 1994, based on
the reclassified results presented above and excluding the $35.5 million
after-tax charge for formation and consolidation expenses. Fully diluted
earnings per share for the first nine months of 1995 were $1.46, compared to
the 91 cents per share reported a year earlier. Without the 46 cents per share
net charge for formation and consolidation expenses and the 4 cents per share
net gain on the sale of the Company's automotive paint spray booth business,
earnings per share for the first nine months of 1994 would have been $1.33.
Changes in Financial Condition
Cash and cash equivalents decreased $5.3 million during the first nine months
of 1995 as detailed in the Unaudited Condensed Consolidated Statement of Cash
Flows.
Days sales outstanding were 62 days at September 30, 1995, up slightly from
the 60 days at December 31, 1994. Working capital at September 30, 1995 totaled
$90.5 million, up $2.7 million over the $87.8 million at last year end. The
ratio of current assets to current liabilities was 1.3 to 1 at September 30,
1995 and December 31, 1994.
Domestic projects accounted for more than two-thirds of the $96.7 million in
capital investments during the first nine months of 1995. Major expenditures
were for additional PORTA-FEED( units, improvements to the Company's
superabsorbent manufacturing process at its Garyville, Louisiana plant, and
automobiles for the sales force.
Primarily as a result of the formation of the Nalco/Exxon joint venture, the
Company adopted a worldwide consolidation plan for manufacturing and support
operations during 1994. The joint venture was formed to take advantage of
synergy's in business management, technology, product offerings, and
manufacturing operations. The production volume reduction caused by
redundancies associated with the joint venture formation required the Company
to downsize, close, and consolidate operations. The Company's South Chicago
plant was closed
and several European and Latin American manufacturing and support operations
have been or will be closed or downsized. In addition, certain support
functions will be regionalized on a pan-European basis in order to more
efficiently serve customers. Certain redundant assets that were not contributed
to the joint venture have been written down to net realizable value, and assets
associated with other programs have been written off. All of these activities
are in process and should be largely completed by the end of 1995.
As a result of these plans, the Company recorded a pretax provision for
formation and
consolidation expenses of $68 million in 1994 ($54 million after tax, or 70
cents per share on a fully diluted basis). Charges against the provision totaled
$18.9 million in the first nine months of 1995 and $25 million in the year ended
December 31, 1994. (See Note C).
The Nalco/Exxon joint venture and the Company's consolidation plan are expected
to result in annualized pretax earnings improvements by 1996. This is expected
to be realized through lower payroll expenses, depreciation, and other operating
expenses resulting from the joint venture and the consolidation plan.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
(11) Statement Re: Computation of Earnings Per Share
(15) Awareness Letter of Independent Accountants
(27) Financial Data Schedule
(b) The Registrant did not file any reports on Form 8-K
during the three months ended September 30, 1995.
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.
NALCO CHEMICAL COMPANY
(Registrant)
Date: November 13, 1995 /s/ W. E. BUCHHOLZ
W. E. Buchholz - Vice President,
Chief Financial Officer
Date: November 13, 1995 /s/ S. J. GIOIMO
S. J. Gioimo - Secretary
19
EXHIBIT (11)
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
Three Months Ended Nine Months Ended
(Amounts in thousands, September 30 September 30
except per share data) 1995 1994 1995 1994
Primary
Average shares outstanding 67,409 68,346 67,596 68,624
Net effect of dilutive
stock options and shares
contingently issuable - based
on the treasury stock method
using average market price 418 498 456 572
TOTALS 67,827 68,844 68,052 69,196
Net earnings $ 40,478 $ 7,427 $115,421 $ 74,360
Preferred stock dividends,
net of taxes (2,797) (2,743) (8,417) (8,263)
Net earnings to
common shareholders $ 37,681 $ 4,684 $107,004 $66,097
Per share amounts $ 0.56 $ 0.07 $ 1.57 $ 0.96
EXHIBIT (11)
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
Three Months Ended Nine Months Ended
(Amounts in thousands, September 30 September 30
except per share data) 1995 1994 1995 1994
Fully diluted
Average shares outstanding 67,409 68,346 67,596 68,624
Average dilutive effect of
assumed conversion of ESOP
Convertible Preferred shares 8,024 8,118 8,049 8,135
Additional shares assuming
exercise of dilutive stock
options and shares contingently
issuable-based on the treasury
stock method using the
quarter-end market price,
if higher than average
market price 418 504 462 572
TOTALS 75,851 76,968 76,107 77,331
Net earnings $40,478 $ 7,427 $115,421 $74,360
Additional ESOP contribution
resulting from assumed
conversion, net of taxes (1,144) (1,207) (3,502) (3,710)
Tax adjustment on assumed
common dividends (197) (166) (598) (514)
Net earnings to
common shareholder s $39,137 $ 6,054 $111,321 $70,136
Per share amounts $ 0.52 $ 0.08 $ 1.46 $ 0.91
AWARENESS LETTER OF INDEPENDENT ACCOUNTANTS
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that Nalco Chemical Company has included our report dated
October 24, 1995 (issued pursuant to the provisions of Statement on Auditing
Standards No. 71) in the Prospectuses constituting part of its Registration
Statements on Form S-3 (Nos. 33-57363, 33-53111, 33-9934, and 2-97721) and
Form S-8 (Nos. 33-54377, 33-38033, 33-38032, 33-29149, 2-97721, 2-97131 and
2-82642). We are also aware of our responsibilities under the Securities Act
of 1933.
Yours very truly,
Price Waterhouse LLP
By: Robert R. Ross
Engagement Partner
November 13, 1995
Chicago, Illinois
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
FINANCIAL DATA SCHEDULE
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AT SEPTEMBER 30, 1995
AND THE CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 OF NALCO CHEMICAL COMPANY AND SUBSIDIARIES AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<S> <C>
<PERIOD-TYPE> 9 MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
Item
Number Description Amount
5-02(1) Cash and cash items $ 39,800,000
5-02(2) Marketable securities -
5-02(3)(a)(1) Notes and accounts receivable-trade 230,300,000
5-02(4) Allowances for doubtful accounts (6,400,000)
5-02(6) Inventory 87,200,000
5-02(9) Total current assets 380,400,000
5-02(13) Property, plant and equipment 1,141,200,000
5-02(14) Accumulated depreciation (591,600,000)
5-02(18) Total assets 1,327,400,000
5-02(21) Total current liabilities 289,900,000
5-02(22) Bonds, mortgages and similar debt 248,800,000
5-02(28) Preferred stock - mandatory redemption -
5-02(29) Preferred stock - no mandatory redemption 400,000
5-02(30) Common stock 15,100,000
5-02(31) Other stockholders' equity 555,300,000
5-02(32) Total liabilities and
stockholders' equity 1,327,400,000
5-03(b)1(a) Net sales of tangible products 977,700,000
5-03(b)1 Total revenues 977,700,000
5-03(b)2(a) Cost of tangible goods sold 441,800,000
5-03(b)2 Total costs and expenses applicable to
sales and revenues 441,800,000
5-03(b)3 Other costs and expenses -
5-03(b)5 Provision for doubtful accounts and notes -
5-03(b)(8) Interest and amortization of debt discount 12,500,000
5-03(b)(10) Income before taxes and other items 182,200,000
5-03(b)(11) Income tax expense 66,800,000
5-03(b)(14) Income/loss continuing operations 115,400,000
5-03(b)(15) Discontinued operations -
5-03(b)(17) Extraordinary items -
5-03(b)(18) Cumulative effect - changes in accounting
principles -
5-03(b)(19) Net income or loss 115,400,000
5-03(b)(20) Earnings per share - primary 1.57
5-03(b)(20) Earnings per share - fully diluted 1.46
