FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
(Mark One)
X
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-4957
NALCO CHEMICAL COMPANY
Incorporated in the State of Delaware
Employer Identification No. 36-1520480
One Nalco Center, Naperville, Illinois 60563-1198
Telephone 630-305-1000
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 reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The number of shares outstanding of each of the issuer's classes of common
stock, as of September 30, 1997 was 66,592,789 shares common stock - par value
$.1875 a share.
<PAGE>
NALCO CHEMICAL COMPANY
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
Page No.
Part I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Statements of
Financial Condition - September 30, 1997
(Unaudited) and December 31, 1996.........................................2
Condensed Consolidated Statements of
Earnings (Unaudited) - Three Months and
Nine Months Ended September 30, 1997 and 1996.............................3
Condensed Consolidated Statements of
Cash Flows (Unaudited) - Three Months and
Nine Months Ended September 30, 1997 and 1996.............................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...............................................12
Exhibit (11) - Statement Re: Computation
of Earnings Per Share................................................13
Exhibit (15) - Awareness Letter of Independent
Accountants..........................................................15
Exhibit (27) - Financial Data Schedule.......................................................16
Signatures 17
</TABLE>
<PAGE>
- 2 -
PART I. FINANCIAL INFORMATION
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
1997 1996
(Dollars in millions) (Unaudited) (Note)
ASSETS
Current assets
Cash and cash equivalents $ 63.9 $ 38.8
Accounts receivable, less allowances
of $4.7 and $4.9, respectively 243.1 233.4
Inventories
Finished products 63.8 61.4
Materials and work in process 24.9 29.4
-------- --------
88.7 90.8
Prepaid expenses, taxes and other
current assets 22.9 22.2
-------- --------
Total current assets 418.6 385.2
Investment in and advances
to partnership 134.7 126.0
Goodwill and other intangibles,
less accumulated amortization
of $28.4 and $24.7, respectively 223.9 202.5
Other assets 156.8 158.8
Property, plant and equipment 1,146.2 1,169.4
Less allowances for depreciation (653.6) (647.4)
-------- --------
492.6 522.0
-------- --------
$1,426.6 $1,394.5
======== ========
LIABILITIES/SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt $ 73.4 $ 31.3
Accounts payable 97.8 114.6
Other current liabilities 138.3 143.8
-------- --------
Total current liabilities 309.5 289.7
Long-term debt 245.7 252.6
Deferred income taxes 38.8 42.9
Accrued postretirement benefits 100.4 98.5
Other liabilities 59.1 56.3
Shareholders' equity 673.1 654.5
-------- --------
$1,426.6 $1,394.5
======== ========
</TABLE>
Note: The Statement of Financial Condition at December 31, 1996 has been derived
from the audited financial statements at that date.
See accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
<PAGE>
- 14 -
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
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<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
(Amounts in millions, September 30 September 30
except per share data) 1997 1996 1997 1996
------ ------ ------ -----
Net sales $371.0 $343.3 $1,060.0 $963.8
Operating costs and expenses
Cost of products sold 165.0 147.0 462.4 421.6
Operating expenses 139.7 132.6 418.5 383.5
------ ------ -------- ------
304.7 279.6 880.9 805.1
------ ------ -------- ------
Operating earnings 66.3 63.7 179.1 158.7
Other income (expense)
Interest and other income (0.4) - 0.8 0.2
Interest expense(3.7) (4.3) (11.1) (11.3)
Equity in earnings of partnership 6.6 5.0 19.8 18.0
------ ------ -------- ------
Earnings from continuing operations
before income taxes 68.8 64.4 188.6 165.6
Income taxes 24.6 23.4 68.5 60.1
------ ------ -------- ------
Earnings from continuing operations 44.2 41.0 120.1 105.5
Discontinued operations, net of income taxes - 1.5 - 5.8
------ ------ -------- ------
Net earnings $ 44.2 $ 42.5 $ 120.1 $111.3
====== ====== ======== ======
Per common share - Primary
Earnings from continuing operations $ 0.61 $ 0.56 $ 1.65 $ 1.43
Discontinued operations,
net of income taxes - 0.03 - 0.09
------ ------ ------ ------
Net earnings $ 0.61 $ 0.59 $ 1.65 $ 1.52
====== ====== ====== ======
Per common share - Fully diluted
Earnings from continuing operations $ 0.57 $ 0.52 $ 1.54 $ 1.34
Discontinued operations,
net of income taxes - 0.02 - 0.08
------ ------ ------ ------
Net earnings $ 0.57 $ 0.54 $ 1.54 $ 1.42
====== ====== ====== ======
Per common share - Cash dividends $ 0.25 $ 0.25 $ 0.75 $ 0.75
====== ====== ====== ======
Average primary shares outstanding
(in thousands) 67,650 67,664 67,492 67,601
Average fully diluted shares
outstanding (in thousands) 75,396 75,710 75,504 75,693
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
<PAGE>
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30 September 30
(Dollars in millions) 1997 1996 1997 1996
-------- ------- -------- ------
Cash provided by (used for)
operating activities
Net earnings $ 44.2 $ 42.5 $120.1 $111.3
Adjustments not affecting cash
Depreciation and amortization 27.7 26.5 77.2 74.3
Other, net (5.7) (4.4) (8.9) (7.4)
Changes in current assets and
liabilities 5.4 17.8 (18.8) (15.6)
------ ------ ------ ------
Net cash provided by operations 71.6 82.4 169.6 162.6
------ ------ ------ ------
Investing activities
Additions to property,
plant and equipment (20.4) (17.8) (59.0) (66.4)
Business purchases - - (39.8) (81.8)
Other 3.6 8.9 (1.6) 16.2
------ ------ ------ ------
Net cash (used for)
investing activities (16.8) (8.9) (100.4) (132.0)
------ ------ ------ -------
Financing activities
Cash dividends (19.6) (19.6) (58.8) (59.0)
Changes in short-term debt 0.9 10.4 42.8 (8.9)
Changes in long-term debt (1.4) (52.2) 4.9 44.3
Common stock reacquired (22.8) (6.4) (44.8) (6.4)
Other 8.1 2.7 16.0 6.4
------ ------ ------ ------
Net cash (used for)
financing activities (34.8) (65.1) (39.9) (23.6)
------ ------ ------ ------
Effects of foreign exchange
rate changes (3.2) (0.5) (4.2) 0.5
------ ------ ------ ------
Increase in cash
and cash equivalents $ 16.8 $ 7.9 $ 25.1 $ 7.5
====== ====== ====== ======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
<PAGE>
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1997
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, 1997 and 1996. 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, 1996.
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 -- EFFECT OF CHANGING ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share." SFAS
128 establishes standards for computing and presenting earnings per share (EPS)
and simplifies the standards for computing earnings per share previously found
in APB Opinion No. 15 (APB 15), "Earnings per Share." It replaces the
presentation of primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures.
Basic EPS excludes dilution and is computed by dividing income available to
common shareholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted EPS is computed similarly to fully
diluted EPS pursuant to APB 15.
SFAS 128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods; earlier application is not
permitted. SFAS 128 requires restatement of all prior-period EPS data presented.
Adoption of SFAS 128 is expected to have little or no impact on the Company's
future and previously reported EPS.
<PAGE>
NOTE C -- SHAREHOLDERS' EQUITY
Shareholders' equity may be further detailed as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
(Dollars in millions, 1997 1996
------------ --------
except per share figures)
Preferred stock par value $1.00 per share;
par value $1.0 per share;
authroized 2,000,000 shares;
Preferred Stock - 385,458 shares
at September 30, 1997 and 392,851
shares at December 31, 1996 $ 0.4 $ 0.4
Series C Junior Participating
Preferred Stock - none issued - -
Capital in excess of par value
of shares 185.0 188.6
Unearned ESOP compensation (151.1) (162.6)
-------- -------
34.3 26.4
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 35.9 31.2
Retained earnings 1,053.3 992.0
Minimum pension liability adjustment (6.1) (6.1)
Foreign currency translation
adjustments (65.3) (39.9)
Common stock reacquired - at cost
13,694,779 shares at
September 30, 1997 and 13,263,648
shares at December 31, 1996 (394.1) (364.2)
-------- -------
Total shareholders' equity $ 673.1 $ 654.5
======== =======
</TABLE>
NOTE D - ACQUISITIONS
In January 1997, the Company acquired the stock of International Water
Consultants Beheer B.V. (IWC) and the assets of Nutmeg Technologies, Inc.
(Nutmeg). IWC serves the water treatment needs of customers in the Netherlands,
Belgium, Germany and the Commonwealth of Independent States and Nutmeg is a
water treatment company which serves markets mainly in the Northeast United
States. They had 1996 sales of just under $30 million.
In May 1997, the Company acquired the pulp and paper enzyme business of Ciba
Specialty Chemicals, Inc. The enzyme technology which was acquired is used in
paper mills to enhance fiber quality and water drainage during the paper making
process. Also in May 1997, the Company increased its investment in Taiwan Nalco
Chemical Co. Ltd. from 55 percent to 79 percent.
In August 1997, the Company acquired a majority interest in Green Label Products
Inc. (Green Label). Green Label is located in Gainesville, Georgia and supplies
odor control products, technology and application systems for chemically
neutralizing objectionable odors of various processes.
The purchase price of these businesses was approximately $40 million. The
Company is in the process of evaluating the assets that were purchased and the
liabilities that were assumed in these acquisitions and accordingly will make
any necessary adjustments to the recorded value of the acquired assets and
liabilities.
During October 1997, the Company acquired the assets of Chemical Technologies,
Incorporated (CTI). CTI is located in Jackson, Michigan and is a manufacturer
and marketer of synthetic fluids and lubricants that are used in cooling and
lubricating tooling employed in the machining of metal products. CTI's estimated
annual sales for 1997 are $18 million. Also during October 1997, the Company
acquired Gamus Quimica, Ltda., a manufacturer of waste treatment chemical
products in Brazil. Annual sales for 1997 are estimated to be approximately $2
million.
<PAGE>
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, 1997, 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, 1996, 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 3, 1997, 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, 1996, 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 28, 1997
Chicago, Illinois
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Third Quarter 1997 Operations Compared to Third Quarter 1996
Sales increased by 8% over last year with all five divisions reporting improved
results. Effective with the beginning of the third quarter of 1997, the Company
adopted the policy of reporting freight revenues as a component of sales rather
than offsetting freight costs that are included as a component of cost of
products sold. This resulted in recognizing additional sales revenues of
approximately $14 million for the third quarter of 1997. Sales and costs of
products sold amounts for prior periods have not been reclassified to conform
with this change.
Third Quarter
(Dollars in millions) 1997 1996 Increase
------ -------- --------
Water and Waste Treatment $126.2 $115.0 10%
Process Chemicals 97.8 87.7 12%
Europe 79.2 75.0 6%
Latin America 27.7 27.2 2%
Pacific 40.1 38.4 4%
------- -------
Total $371.0 $343.3 8%
======= =======
About two-thirds of the improvement reported by the Water and Waste Treatment
Division was attributable to the change in reporting of freight revenues.
Excluding the impact of freight revenues, a near double-digit increase was
posted by WATERGY(R) and more modest gains were reported by UNISOLV(R) and Waste
Treatment Chemicals. Freight revenues represented slightly more than one-third
of the increase posted by the Process Chemicals Division. Excluding freight,
solid double-digit improvements were reported by the General Industry and Pulp
Technologies Groups, and the Paper Group posted a good increase. In Europe,
sales by IWC, which was acquired in January 1997, and the impact of freight
revenues were more than offset by the negative translation effect of the
stronger U.S. dollar compared to most European currencies. However, most
business units in the Division reported strong gains in local currencies.
Freight revenues had insignificant effects on sales reported by the Latin
America and Pacific Divisions. In Latin America, strong gains were posted by
operations in Brazil, Mexico, and Venezuela. Solid improvements in local
currencies reported by most operations in the Pacific Division more than offset
the effect of translation impacts of the stronger U.S. dollar compared to most
Pacific Rim currencies.
The gross margin of 55.5 percent for the third quarter of 1997 reflects the
effect of classifying $14 million of freight revenue as a component of sales
rather than as an offset to cost of products sold. Had this revenue been
classified in cost of products sold, the gross margin would have been 57.7
percent compared to last year's rate of 57.2 percent. Improved margins in North
America and the Pacific offset slight declines in Europe and Latin America
margins.
Operating expenses (selling, service, research, etc.) were up $7.1 million over
the third quarter of last year. Higher spending supported the growth in sales,
and was moderated by the effect of the stronger U.S. dollar compared to most
European and Pacific Rim currencies.
Interest and other income decreased by $0.4 million from a year ago. Interest
expense decreased by $0.6 million from the third quarter of last year,
reflecting lower average borrowings compared to a year ago.
Nalco's equity in Nalco/Exxon for the third quarter of 1997 was $6.6 million, an
increase of $1.6 million over the third quarter of 1996.
The effective income tax rate for the third quarter of 1997 was 35.8 percent
compared to the 36.3 percent that was reported for the third quarter of 1996.
Fully diluted earnings per share from continuing operations for the third
quarter 1997 was 57 cents compared to the 52 cents for the third quarter 1996.
Net earnings per share on a fully diluted basis for the third quarter 1997 was
57 cents compared to 54 cents for the third quarter 1996, which included the
results of the discontinued superabsorbent chemical business.
First Nine Months 1997 Operations Compared to First Nine Months 1996
Sales increased 10 percent with all five divisions reporting improvements. As
discussed above, effective with the beginning of the third quarter of 1997, the
Company adopted the policy of reporting freight revenues as a component of sales
rather than as an offset to cost of products sold. Had these freight revenues
been reported as a component of cost of products sold, the sales improvement for
the first nine months of 1997 over 1996 would have been 9 percent.
Nine Months
(Dollars in millions) 1997 1996 Increase
-------- -------- --------
Water and Waste Treatment $ 349.7 $ 302.9 15%
Process Chemicals 276.3 256.7 8%
Europe 237.4 216.9 9%
Latin America 83.3 79.3 5%
Pacific 113.3 108.0 5%
-------- -------
Total $1,060.0 $ 963.8 10%
======== =======
The Water and Waste Treatment Division sales gain of 15 percent for the first
nine months of 1997 included sales by Diversey Water Technologies (DWT), a
middle market water treatment business acquired in mid-1996. In addition,
excluding the impact of the freight revenue reclassification previously
described, a near double-digit increase was reported by WATERGY, while more
modest improvements were posted by the other groups in the Division. Slightly
less than 20 percent of the sales increase reported by the Process Chemicals
Division was attributable to the freight revenue reclassification. Excluding the
freight revenue reclassification, strong gains were posted by the General
Industry and Paper Groups, and a double-digit increase was reported by the Pulp
Technologies Group. Approximately three-fourths of the increase in Europe
Division sales that resulted from acquired businesses and the freight revenue
reclassification was offset by the translation impact of the stronger U.S.
dollar compared to most European currencies. Solid gains in local currencies
were reported by most operations in the Division. In Latin America, double-digit
or near double-digit improvements were posted by operations in Chile, Colombia,
Mexico, and Venezuela. Double-digit increases reported by China, Japan, Korea,
Singapore/Malaysia, and Thailand contributed to the improvement in Pacific
Division sales, which would have been over $5 million higher if translation
rates were unchanged from a year ago.
The gross margin for the first nine months of 1997 was 56.4 percent compared to
last year's rate of 56.3 percent, which reflects the classification of $14
million of freight revenue in the third quarter 1997 as sales rather than as an
offset to cost of products sold. Had this $14 million in freight revenue been
treated as a reduction of cost of products sold, the gross margin for the first
nine months of 1997 would have been 57.1 percent. Improved margins in North
America and higher margins of DWT, which was acquired in mid-1996, contributed
to the increase.
Operating expenses (selling, service, research, etc.) for the first nine months
of 1997 were up $35.0 million over last year, with DWT and IWC operations
accounting for over two-thirds of the increase. Higher spending by operations in
North America supported the increase in sales volumes, while increased spending
by the three international divisions was largely offset by the effect of the
stronger U.S. dollar compared to most European and Pacific Rim currencies.
Interest and other income for the first nine months of 1997 increased by $0.6
million compared to last year. Higher interest income and a gain on sale of
assets contributed to the improvement. Interest expense decreased by $0.2
million from last year.
Nalco's equity in Nalco/Exxon for the first nine months of 1997 rose 10 percent
to $19.8 million compared to last year's reported amount of $18.0 million.
The effective tax rate was 36.3 percent for the first nine months of 1997, which
was equivalent to last year's rate.
Fully diluted earnings per share from continuing operations was $1.54 per share
compared to $1.34 per share for the first nine months of 1996. Net earnings per
share on a fully diluted basis for the first nine months of 1997 was $1.54 per
share compared to $1.42 per share a year ago, which included the results of the
discontinued superabsorbent chemical business.
Changes in Financial Condition
Cash and cash equivalents increased by $25.1 million during the first nine
months as detailed in the Unaudited Condensed Consolidated Statement of Cash
Flows.
Days sales outstanding were 63 days at September 30, 1997, down slightly from
the 64 days outstanding at December 31, 1996. Working capital at September 30,
1997 totaled $109.1 million, a $13.6 million increase over the $95.5 million at
December 31, 1996. The ratio of current assets to current liabilities was 1.4 to
1 at September 30, 1997.
The $21.4 million increase in goodwill is mainly attributable to the
acquisitions of IWC and Nutmeg during the first quarter of 1997, the second
quarter 1997 purchase of the pulp and paper enzyme business of Ciba Specialty
Chemicals, Inc., and the additional investment in Taiwan Nalco Chemical Co. Ltd.
These acquisitions were financed primarily by the issuance of commercial paper,
which accounted for most of the increase in short-term debt.
Capital investments totaled $59.0 million for the first nine months of 1997.
Major expenditures were for additional PORTA-FEED(R) units and vehicles for the
sales force.
<PAGE>
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, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NALCO CHEMICAL COMPANY
(Registrant)
Date: November 13, 1997 W. E. BUCHHOLZ
---------------------------
W. E.Buchholz - Senior Vice President,
Chief Financial Officer
Date: November 13, 1997 S. J. GIOIMO
------------------------
S. J. Gioimo - Secretary
EXHIBIT (11)
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
(Amounts in thousands, September 30 September 30
except per share data) 1997 1996 1997 1996
------ ------ ------ -----
Primary
Average shares outstanding 66,792 67,393 66,811 67,318
Net effect of dilutive stock options and shares contingently issuable-based on
the treasury stock method using
average market price 858 271 681 283
------- ------- ------- -------
TOTALS 67,650 67,664 67,492 67,601
======= ======= ======= =======
Earnings from continuing operations $ 44,197 $ 40,990 $120,092 $105,468
Earnings from discontinued operations,
net of income taxes - 1,550 - 5,829
-------- -------- -------- --------
Net earnings 44,197 42,540 120,092 111,297
Preferred stock dividends,
net of income taxes (2,857) (2,840) (8,610) (8,537)
-------- -------- -------- --------
Net earnings to
common shareholders $ 41,340 $ 39,700 $111,482 $102,760
======== ======== ======== ========
Per share amounts:
Earnings from continuing operations $ 0.61 $ 0.56 $ 1.65 $ 1.43
Earnings from discontinued operations,
net of income taxes - 0.03 - 0.09
------- ------- ------- -------
Net earnings to common shareholders $ 0.61 $ 0.59 $ 1.65 $ 1.52
======= ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT (11)
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
(Amounts in thousands, September 30 September 30
except per share data) 1997 1996 1997 1996
------ ------ ------ -----
Fully Diluted
Average shares outstanding 66,792 67,393 66,811 67,318
Average dilutive effect of
assumed conversion of ESOP
convertible Preferred shares 7,734 7,913 7,783 7,948
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 870 404 910 427
-------- -------- -------- --------
TOTALS 75,396 75,710 75,504 75,693
======== ======== ======== ========
Earnings from continuing operations $ 44,197 $ 40,990 $120,092 $105,468
Earnings from discontinued operations,
net of income taxes - 1,550 - 5,829
-------- -------- -------- --------
Net earnings 44,197 42,540 120,092 111,297
Additional ESOP contribution
resulting from assumed
conversion, net of income taxes (1,109) (1,126) (3,354) (3,399)
Tax adjustment on assumed
common dividends (262) (227) (784) (688)
-------- -------- -------- --------
Net earnings to
common shareholders $ 42,826 $ 41,187 $115,954 $107,210
======== ======== ======== ========
Per share amounts:
Earnings from continuing operations $ 0.57 $ 0.52 $ 1.54 $ 1.34
Earnings from discontinued operations,
net of income taxes - 0.02 - 0.08
------- ------- ------- -------
Net earnings to common shareholders $ 0.57 $ 0.54 $ 1.54 $ 1.42
======= ======= ======= =======
</TABLE>
EXHIBIT (15)
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 28, 1997 (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. 333-06955, 333-06963, 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, 1997
Chicago, Illinois
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AT sEPTEMBER 30, 1997
AND THE CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 OF NALCO CHEMICAL COMPANY AND SUBSIDIARIES AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 63,900,000
<SECURITIES> 0
<RECEIVABLES> 247,800,000
<ALLOWANCES> (4,700,000)
<INVENTORY> 88,700,000
<CURRENT-ASSETS> 418,600,000
<PP&E> 1,146,200,000
<DEPRECIATION> (653,600,000)
<TOTAL-ASSETS> 1,426,600,000
<CURRENT-LIABILITIES> 309,500,000
<BONDS> 245,700,000
400,000
0
<COMMON> 15,100,000
<OTHER-SE> 657,600,000
<TOTAL-LIABILITY-AND-EQUITY> 1,426,600,000
<SALES> 1,060,000,000
<TOTAL-REVENUES> 1,060,000,000
<CGS> 462,400,000
<TOTAL-COSTS> 462,400,000
<OTHER-EXPENSES> 418,500,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,100,000
<INCOME-PRETAX> 188,600,000
<INCOME-TAX> 68,500,000
<INCOME-CONTINUING> 120,100,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120,100,000
<EPS-PRIMARY> 1.65
<EPS-DILUTED> 1.54
</TABLE>
