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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, 1995 Commission 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, 1995, there were 11,332,778 outstanding shares of
capital stock, without par value.
No. of Pages 10
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<TABLE>
PART 1. ITEM 1. FINANCIAL STATEMENTS
PETROLITE CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(Unaudited)
July 31, 1995 Oct.31, 1994
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ASSETS (Thousands of $)
------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 30,050 $ 19,801
Stock investments - 763
Accounts receivable, less estimated doubtful
accounts of $1,187 and $1,306 respectively 64,488 68,733
Inventories-
Raw materials, parts and supplies 22,904 28,174
Finished goods 40,103 33,051
Reserve for adjustment to LIFO (18,914) (17,427)
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44,093 43,798
Contracts in process 595 1,026
Less progress billings (335) (961)
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Net inventories 44,353 43,863
Other current assets 12,146 12,557
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Total Current Assets 151,037 145,717
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Investment in affiliated companies 13,354 9,223
Patents and other intangibles 12,514 17,767
Other assets 17,645 15,169
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43,513 42,159
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Properties
Buildings 60,906 68,027
Machinery and equipment 197,190 220,179
Construction in progress 12,235 9,810
Accumulated depreciation (161,378) (178,437)
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108,953 119,579
Land 6,676 7,484
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115,629 127,063
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Total Assets $ 310,179 $ 314,939
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities
Notes payable $ 8,411 $ 6,124
Accounts payable 29,143 37,471
Accrued vacation pay 3,910 3,910
Estimated income taxes 8,492 9,047
Accrued reorganization costs 3,752 8,667
Other current liabilities 15,655 14,229
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Total Current Liabilities 69,363 79,448
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Other Liabilities
Long term debt 40,000 40,000
Retiree medical benefits 13,454 12,513
Minority interest in consolidated subsidiaries 1,477 1,588
Other liabilities 2,579 2,707
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57,510 56,808
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Deferred Income Taxes, net 13,094 13,094
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Total Liabilities 139,967 149,350
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Stockholders' Equity
Capital stock, without par value-
Authorized - 35,000,000 shares
Issued - 12,220,697 and 12,215,697, respectively 9,389 9,248
Less treasury stock, at cost (887,919 and 890,518
shares, respectively) (18,699) (18,744)
Surplus, beginning of year 177,404 181,101
Earnings for the period 13,065 9,044
Dividends (9,517) (12,741)
Cumulative translation adjustment (1,430) (2,319)
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Total Stockholders' Equity 170,212 165,589
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Total Liabilities and Stockholders' Equity $ 310,179 $ 314,939
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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>
(Unaudited)
3 Months to July 31 9 Months to July 31
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1995 1994 1995 1994
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(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net revenues $ 87,212 $ 90,223 $ 273,545 $ 272,575
Cost of product sold and other direct costs 54,462 51,550 167,669 158,420
--------- --------- ----------- ----------
Gross profit 32,750 38,673 105,876 114,155
--------- --------- ----------- ----------
Expenses:
Selling 21,262 22,252 63,630 64,247
Research 3,091 3,266 9,534 9,629
General and administrative 5,666 6,057 14,960 17,514
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30,019 31,575 88,124 91,390
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Earnings from operations 2,731 7,098 17,752 22,765
Equity in earnings (loss) of affiliates 1,372 (491) 1,926 (488)
Other expense, net (276) (789) (34) (1,411)
--------- --------- ----------- ----------
Earnings before income taxes and effect of
change in accounting principle 3,827 5,818 19,644 20,866
U.S. and foreign income taxes 1,280 2,051 6,579 7,355
--------- --------- ----------- ----------
Net earnings before effect of change
in accounting principle 2,547 3,767 13,065 13,511
Effect of change in accounting for income
taxes - - - 2,037
--------- --------- ----------- ----------
Net earnings $ 2,547 $ 3,767 $ 13,065 $ 15,548
========= ========= =========== ==========
Earnings per share before effect of change
in accounting principle $ 0.22 $ 0.34 $ 1.15 $ 1.20
Effect of change in accounting for income
taxes - - - 0.18
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Earnings per share $ 0.22 $ 0.34 $ 1.15 $ 1.38
========= ========= =========== ==========
Average shares outstanding 11,331 11,309 11,329 11,302
========= ========= =========== ==========
Dividends per share $ 0.28 $ 0.28 $ 0.84 $ 0.84
========= ========= =========== ==========
</TABLE>
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<TABLE>
PETROLITE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR NINE MONTHS ENDED JULY 31, 1995
<CAPTION>
(Unaudited)
1995 1994
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(Thousands of $)
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 13,065 $ 15,548
Adjustments to reconcile net earnings to net cash
provided by operations -
Depreciation and amortization 13,919 15,213
Change in accounting principle - (2,037)
Gain on sale of fixed assets (1,567) (708)
Changes in assets and liabilities -
Accounts receivable 4,245 (6,263)
Inventories (491) 2,444
Other current assets 412 5,014
Accounts payable and accrued liabilities (7,397) (1,418)
Accrued reorganization costs (4,342) -
Other (1,170) 1,064
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Net cash provided by operating activities 16,674 28,857
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Cash flow from Investing Activities:
Capital expenditures, net (9,751) (12,851)
Net gain on sale of minor fixed assets 163 708
Proceeds from sale of plant 10,335 -
Proceeds from sale of equity securities 827 -
Investment in joint venture & business
alliance (1,855) (1,125)
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Net cash provided by investing activities (281) (13,268)
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Cash Flows from Financing Activities:
Additional borrowing (repayment) of debt, net 3,187 (3,364)
Dividends paid (9,517) (9,574)
Sales of Common Stock 186 648
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Net cash used in financing activities (6,144) (12,290)
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Net Increase in Cash and Equivalents 10,249 3,299
Cash and Equivalents at Beginning of Period 19,801 8,036
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Cash and Equivalents at End of Period $ 30,050 $ 11,335
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</TABLE>
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PART 1. ITEM 1. (CONT.) NOTES TO FINANCIAL STATEMENTS
Financial Statement note disclosures normally included in
financial statements prepared in conformity with generally accepted
accounting principles have been omitted in this Form 10-Q pursuant
to the rules and regulations of the Securities and Exchange
Commission. However, in the opinion of Petrolite Corporation (the
"registrant"), the disclosures contained in this Form 10-Q are
adequate to make the information presented not misleading. See
"Notes to the Financial Statements" in the registrant's 1994 Annual
Report incorporated by reference in the registrant's Form 10-K for
the year ended October 31, 1994, for information relevant to the
financial statements contained herein, including information as to
significant accounting policies followed by the registrant.
In the opinion of the registrant, the accompanying unaudited
financial statements reflect all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the
Balance Sheets as of July 31, 1995 and October 31, 1994, the
Statements of Earnings for the nine months ended July 31, 1995 and
1994, and the Statements of Cash Flows for the nine months ended
July 31, 1995 and 1994. Due to seasonal and other factors, interim
period results are not necessarily indicative of results to be
expected for the year.
In the fourth quarter of fiscal 1994, the registrant recorded
a $20 million pretax charge for reorganization of its Specialty
Chemicals segment operations. Reorganization actions through
October 31, 1994 included the early retirement or voluntary
severance of employees, the decision to discontinue all chemical
manufacturing at Webster Groves, Missouri, and Clear Lake, Texas,
the decision to discontinue ethoxylation activities at Barcelona,
Venezuela, and the decision to discontinue production of
microcrystalline waxes at the registrant's Barnsdall, Oklahoma, and
Kilgore, Texas, facilities. At October 31, 1994, $6.8 million of
the severance accrual and $1.9 million of plant shutdown costs
were recognized as a liability on the
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registrant's balance sheet. During the first nine months of fiscal 1995,
$4,177,000 of severance costs and $737,000 of plant shutdown costs were
charged against the reorganization accrual, leaving a remaining balance of
$2,590,000 of severance costs and $1,163,000 of plant shutdown
costs as a liability on the registrant's balance sheet at July 31,
1995. Of this remaining balance ($3,753,000), approximately
$2,734,000 relates to severance and plant shutdown costs for the
discontinuance of production of microcrystalline waxes at the
registrant's Barnsdall, Oklahoma, and Kilgore, Texas, facilities.
Due to delays experienced by a joint venture partner in replacing
this microcrystalline production capacity, the registrant expects
this portion of the reserve ($2,734,000) to be carried forward
until the second quarter of fiscal 1996 when it is anticipated that
severance and plant shut down costs will be incurred.
PART 1. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
FINANCIAL CONDITION AND LIQUIDITY.
Reference is made to Notes to Financial Statements and
Management's Discussion and Analysis of Financial Condition and
Results of Operations presented in the registrant's 1994 Annual
Report incorporated by reference in the registrant's Form 10-K for
the year ended October 31, 1994.
The registrant's financial position at July 31, 1995 reflected
a current ratio of 2.2:1, a low debt-to-equity ratio of .3:1, and
cash and securities of $30.1 million. The registrant expects its
strong financial position to continue.
Capital expenditures (net) during the third quarter and the
nine months ended July 31, 1995 were $2.4 million and $9.8 million,
respectively. Capital expenditures in fiscal 1995 are now
projected to be approximately $15 million as compared to fiscal
1994 capital expenditures
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of almost $22 million. Major projects for 1995 include the continued
expansion and upgrade of the Bayport and Kirkby chemical manufacturing plants,
additional investment in containers that are more environmentally safe,
upgrading the Nisku, Canada, blending and distribution facilities, and final
costs on the new laboratory and manufacturing office facilities for Eurochem
operations in Kirkby, England.
QUARTER AND NINE MONTHS ENDED JULY 31, 1995 COMPARED TO QUARTER
AND NINE MONTHS ENDED JULY 31, 1994
Net earnings for the period totaled $2.5 million, or $0.22 per
share, compared with $3.8 million, or $0.34 per share, a year ago.
Revenues for the quarter amounted to $87.2 million versus $90.2
million last year.
Net income for the nine months totaled $13.1 million, or $1.15
per share, compared with $13.5 million, or $1.20 per share, the
year before. The comparison excludes a one-time, non-cash tax
credit of $2.0 million, or $0.18 per share, adopted in the first
quarter last year under Financial Accounting Standard No. 109. The
comparison also includes pension income amounting to $2.2 million
for the nine months ended July 31, 1995 as compared to .5 million
for the prior year period based on the most recent actuarial
valuation. Revenues amounted to $273.5 million, versus $272.6
million last year.
BUSINESS DISCUSSION AND OUTLOOK
The Polymers Division increased its earnings on lower
revenues, reflecting the transfer of wax product business at the
end of last quarter to its new wax marketing partnership. The
division's results also benefited from continued strong customer
response to its commercial development program and improved
performance by its overseas affiliate Toyo-Petrolite.
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While the Petreco Division did not match its quarterly gains
of the first half, its performance for the nine months was still
its best in more than a decade. Contracts for a turbine fuel
treatment system and other equipment were added recently to the
division's backlog.
Despite year-to-year overall revenue gains, the EuroChem
Division recorded lower results for the quarter. Oil field sales
in North Africa were depressed as finished fuel additive and
process chemical sales in much of Europe declined and raw material
costs increased.
Costlier raw materials further squeezed the margins of the
Chemicals Group. Its Industrial Chemicals Division saw its
performance decline as many U.S. refiners cut their use of process
chemicals and fuel performance additives in the wake of
unseasonably hot weather and lower gasoline margins.
The oil field business in Venezuela and Mexico continued to
improve for the group's International Division. Its Far East
operations also increased revenues but its profitability declined,
again reflecting thin margins as well as start-up costs for
expanded representation in China and Vietnam.
The group's Tretolite division made progress in its marketing
and organizational initiatives to improve operating efficiencies;
however, its financial performance was improved only slightly due
to the significant raw material price increases absorbed and lower
business volumes.
The improvement in equity in earnings (loss) of affiliates is
due to the recognition of earnings from the Bareco joint venture
which began operations in April, 1995 as opposed to the prior year
period which included a year to date loss from the Venezuelan joint
venture. The significant reduction in other expense, net is due to
the pretax gain of $1.1 million from the sale of the Clear Lake
manufacturing plant in Texas as disclosed in the first quarter plus
additional interest income due to the improvement in the cash
position during this fiscal year.
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On August 11, 1995, Paul H. Hatfield was appointed to serve in
the newly created position of vice chairman, responsible for
Chemicals Group operations. A Petrolite director since March 1994,
he formerly was president and chief executive officer of Protein
Technologies International, a free-standing subsidiary of Ralston
Purina.
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) Exhibit 27. Financial Data Schedule
(b) There were no reports on Form 8-K filed during the
quarter ended July 31, 1995.
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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
---------------------
(Registrant)
s/John M. Casper
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John M. Casper
Chief Financial Officer -
Authorized Officer and
Principal Financial Officer
DATE: September 12, 1995
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> JUL-31-1995
<CASH> 30,050
<SECURITIES> 0
<RECEIVABLES> 65,675
<ALLOWANCES> 1,187
<INVENTORY> 44,354
<CURRENT-ASSETS> 151,037
<PP&E> 277,007
<DEPRECIATION> 161,378
<TOTAL-ASSETS> 310,179
<CURRENT-LIABILITIES> 69,363
<BONDS> 40,000
<COMMON> 9,389
0
0
<OTHER-SE> 179,522
<TOTAL-LIABILITY-AND-EQUITY> 310,179
<SALES> 273,545
<TOTAL-REVENUES> 281,561
<CGS> 167,669
<TOTAL-COSTS> 255,793
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 883
<INTEREST-EXPENSE> 2,867
<INCOME-PRETAX> 19,644
<INCOME-TAX> 6,579
<INCOME-CONTINUING> 13,065
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,065
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.15
</TABLE>
