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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarterly Period Ended July 31, 1994 Commission
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file number 0685
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PETROLITE CORPORATION
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(Exact name of Registrant as specified in its charter)
Delaware 43-0617572
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
369 Marshall Avenue, St. Louis, Missouri 63119
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 961-3500
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Former name, former address and former fiscal year, if changed since last report
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
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On August 1, 1994, there were 11,308,526 outstanding shares
of capital stock, without par value.
No. of Pages 8
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<TABLE>
PART 1 - FINANCIAL INFORMATION
PETROLITE CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(Unaudited)
July 31, 1994 Oct.31, 1993
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ASSETS (Thousands of $)
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<S> <C> <C>
Current Assets
Cash and cash equivalents $ 11,335 $ 8,036
Securities 763 763
Accounts receivable, less estimated doubtful
accounts of $1,420,000 and $1,285,000, respectively 78,241 71,978
Inventories-
Raw materials, parts and supplies 26,604 26,731
Finished goods 32,839 34,435
Reserve for revaluation of inventories to LIFO cost (17,738) (17,017)
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41,705 44,149
Contracts in process 1,673 575
Less progress billings (1,676) (578)
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Net inventories 41,702 44,146
Other current assets 1,478 6,492
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Total Current Assets 133,519 131,415
Patents and other intangibles 18,961 18,521
Investment in affiliated companies 9,025 9,309
Other assets 19,465 17,799
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47,451 45,629
Properties:
Buildings 67,129 66,754
Machinery and equipment 215,420 205,703
Construction in progress 5,514 8,498
Accumulated depreciation (173,685) (164,266)
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114,378 116,689
Land 7,417 7,412
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121,795 124,101
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Total Assets $ 302,765 $ 301,145
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities
Short-term borrowings $ 6,640 $ 9,920
Accounts payable 40,818 42,183
Income taxes payable 7,357 9,383
Accrued vacation pay 4,070 4,070
Other current liabilities 9,134 7,799
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Total Current Liabilities 68,019 73,355
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Other Liabilities
Long term debt 40,000 40,000
Retiree medical benefits 11,099 10,750
Other liabilities 2,447 2,341
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Total Other Liabilities 53,546 53,091
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Deferred Income Taxes, Net 9,525 11,562
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Total Liabilities 131,090 138,008
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Stockholders' Equity
Capital stock, without par value-
Authorized - 35,000,000 shares
Issued - 12,215,697 and 12,192,597, respectively 9,337 8,694
Accumulated earnings retained for use in the business 187,075 181,101
Cumulative translation adjustment (5,493) (7,409)
Less treasury stock, at cost (907,171 and 907,326, respectively) (19,244) (19,249)
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Total Stockholders' Equity 171,675 163,137
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Total Liabilities and Stockholders' Equity $ 302,765 $ 301,145
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</TABLE>
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<TABLE>
PETROLITE CORPORATION
CONSOLIDATED STATEMENTS OF CURRENT AND ACCUMULATED EARNINGS
FOR NINE MONTHS ENDED JULY 31
<CAPTION>
3 Months to July 31 9 Months to July 31
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1994 1993 1994 1993
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(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net revenues $90,223 $92,597 $272,575 $258,704
Cost of product sold and other direct costs 51,550 53,697 158,420 149,097
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Gross profit 38,673 38,900 114,155 109,607
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Expenses:
Selling 22,252 20,294 64,247 57,823
Research 3,266 3,936 9,629 10,185
General and administrative 6,057 6,505 17,514 18,366
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31,575 30,735 91,390 86,374
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Earnings from operations 7,098 8,165 22,765 23,233
Equity in earnings (loss) of affiliates (491) 7 (488) 198
Interest expense, net (630) (327) (1,985) (334)
Other income (expense), net (159) 69 574 3
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Earnings before income taxes and effect of
change in accounting principles 5,818 7,914 20,866 23,100
U.S. and foreign income taxes 2,051 2,691 7,355 7,854
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Net earnings before effect of change
in accounting principles 3,767 5,223 13,511 15,246
Effect of change in accounting for income taxes
(1994) and post-retirement medical benefits (1993) -- -- 2,037 (6,500)
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Net earnings $ 3,767 $ 5,223 $ 15,548 $ 8,746
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Earnings per share before effect of change in
accounting principles $ 0.34 $ 0.46 $ 1.20 $ 1.35
Effect of change in accounting for income taxes
(1994) and post-retirement medical benefits (1993) -- -- 0.18 (0.58)
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Earnings per share $ 0.34 $ 0.46 $ 1.38 $ 0.77
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Average shares outstanding 11,309 11,283 11,302 11,282
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Dividends per share $ 0.28 $ 0.28 $ 0.84 $ 0.84
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</TABLE>
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<TABLE>
PETROLITE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR NINE MONTHS ENDED JULY 31
<CAPTION>
(Unaudited)
1994 1993
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(Thousands of $)
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 15,548 $ 8,746
Adjustments to reconcile net earnings to net cash
provided by operations -
Depreciation 15,213 12,238
Deferred income taxes -- (324)
Changes in accounting principles (2,037) 6,500
Changes in assets and liabilities -
Accounts receivable (6,263) (10,215)
Inventories 2,444 (3,766)
Other current assets 5,014 76
Accounts payable and accrued liabilities (1,418) 8,083
Other 1,064 (1,968)
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Net cash provided by operating activities 29,565 19,370
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Cash flow from Investing Activities:
Capital expenditures, net (12,851) (17,600)
Acquisition of Welchem capital assets and intangibles -- (25,148)
Investment in Sulfa Scrub technology -- (6,500)
Participation in business alliance (1,125) (2,025)
Other, net -- 1,931
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Net cash used in investing activities (13,976) (49,342)
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Cash Flows from Financing Activities:
Additional debt (reduction of debt), net (3,364) 38,189
Dividends paid (9,574) (9,477)
Other 648 114
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Net cash used in financing activities (12,290) 28,826
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Increase (decrease) in Cash and Equivalents 3,299 (1,146)
Cash and Equivalents at Beginning of Period 8,036 8,812
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Cash and Equivalents at End of Period $ 11,335 $ 7,666
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</TABLE>
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PART 1. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
FINANCIAL CONDITION AND LIQUIDITY.
The registrant's financial position at July 31, 1994
reflected a strong current ratio of 2.0:1, a low debt to equity
ratio of .3:1, and cash and securities of $12.1 million. Capital
expenditures (net) during the third quarter and the nine months
ended July 31, 1994 were $5.6 million and $12.9 million,
respectively. Capital expenditures in fiscal 1994 are projected
to be slightly greater than fiscal 1993 expenditures of almost $20
million. Major expenditures for fiscal 1994 include a new
semi-bulk distribution facility at the Bayport chemical
manufacturing plant, replacement of the Company airplane, and new
laboratory and manufacturing office facilities for EuroChem
operations in Kirkby, England.
QUARTER AND NINE MONTHS ENDED JULY 31, 1994 COMPARED TO QUARTER
AND NINE MONTHS ENDED JULY 31, 1993
Revenues for the third quarter were off year-to-year,
totalling $90.2 million versus $92.6 million last year. Nine
month revenues amounted to $272.6 million, compared with $258.7
million a year ago. Net earnings for the third quarter totalled
$3.8 million compared with $5.2 million a year ago. Net earnings
for the nine months before adoption of accounting changes declined
to $13.5 million from $15.2 million the year before.
As previously reported, the registrant adopted FAS 109
(income taxes) during the first quarter of 1994 and FAS 106
(post-retirement medical benefits) during the first quarter of
1993. These accounting changes consisted of a non-cash
tax credit of $2.0 million applicable to the adoption of FAS 109
in 1994 and a non-cash, after-tax charge of $6.5 million
applicable to the adoption of FAS 106 in 1993. Net earnings
inclusive of the above accounting changes for the nine month
period were $15.5 million this year as compared to $8.7 million
last year.
BUSINESS DISCUSSION
The results reflect primarily the reduced revenues from the
registrant's U.S. and Canadian oil field chemical operations as
major and independent oil producers accelerated their efforts to
downsize operations and lower costs in response to the tough
economics of oil production in
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these regions. In response to these deteriorating market conditions, the
registrant announced on August 19, 1994 that it intends to reduce by 200
the number of employees working in its U. S. and Canadian oil field
chemicals businesses. In addition, the registrant intends to close certain
facilities and sell certain under-utilized assets. To cover the
costs of these actions, the registrant intends to take a $12.0
million after-tax charge against earnings during the fourth
quarter.
The remainder of registrant's businesses worldwide showed
gains in revenues for both the third quarter and nine months,
except for the Polymers Division which had decreased revenues for
the nine months due to an expected loss of commodity wax sales.
Customer demand, especially in Europe, the Middle East and former
Soviet Union, and the Far East again lifted the performance of the
registrant's international chemical operations to near-record
levels for the quarter.
The registrant's refinery chemicals process business
overseas strengthened as a result of improved market penetration
in the United Kingdom, Italy and Scandinavia, while revenues from
the registrant's fuel performance and refinery fuel additives
business showed a double-digit increase for the quarter. Programs
to mitigate hydrogen sulfide problems also showed strength.
The earnings of the equipment design business were boosted
by overseas sales of turbine fuel treatment systems and oil field
dehydrators and additional orders from U.S. refiners seeking
system upgrades. Bookings of new projects remained strong.
Key accounts in the Far East and Europe helped the
registrant's polymers businesses post good earnings gains, while
demand for performance additives used in plastics processing and
personal care products were strong.
In addition to the previously mentioned weakness in the U.S.
and Canadian oil field markets, which added to already heavy
pressure on margins, certain areas of registrant's international
chemical business declined in the third quarter due to a number of
factors including continued political unrest in certain areas, and
currency devaluations.
OUTLOOK
The registrant's efforts to re-engineer its U.S. and
Canadian oil field chemicals businesses, now in the final stages
of implementation, position the registrant to realize a steady
improvement in the financial performance of these businesses.
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PART II - OTHER INFORMATION
Part II. Item 1. Legal Proceedings
None
Part II. Item 2. Changes in Securities
None
Part II. Item 3. Defaults upon senior securities
None
Part II, Item 4. Submission of Matters to a Vote of Security-Holders.
There were no matters submitted to a vote of
security-holders during the period covered by this report.
Part II, Item 5. Other information
None
Part II, Item 6. Exhibits and Reports on Form 8-K
a) Exhibits filed with this Report: None
b) There were no Reports on Form 8-K filed during the
quarter ended July 31, 1994.
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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.
PETROLITE CORPORATION
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(Registrant)
s/John M. Casper
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John M. Casper
Chief Financial Officer -
Authorized Officer and
Principal Financial Officer
DATE: September 13, 1994
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