<PAGE> 1
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 April 30, 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 May 1, 1995, there were 11,328,778 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)
April 30, 1995 Oct. 31, 1994
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ASSETS (Thousands of $)
- - ------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 18,924 $ 19,801
Stock investments 763 763
Accounts receivable, less estimated doubtful
accounts of $1,938,000 and $1,306,000, respectively 75,837 68,733
Inventories-
Raw materials, parts and supplies 27,145 28,174
Finished goods 39,895 33,051
Reserve for adjustment to LIFO (18,935) (17,427)
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48,105 43,798
Contracts in process 1,126 1,026
Less progress billings (216) (961)
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Net inventories 49,015 43,863
Other current assets 13,368 12,557
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Total Current Assets 157,907 145,717
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Investment in affiliated companies 11,569 9,223
Patents and other intangibles 12,725 17,767
Other assets 16,690 15,169
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40,984 42,159
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Properties
Buildings 65,831 68,027
Machinery and equipment 208,667 223,500
Construction in progress 8,625 6,489
Accumulated depreciation (170,986) (178,437)
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112,137 119,579
Land 6,014 7,484
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118,151 127,063
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Total Assets $ 317,042 $ 314,939
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Current Liabilities
Notes payable $ 11,132 $ 6,124
Accounts payable 35,703 42,114
Accrued vacation pay 3,910 3,910
Estimated income taxes 9,722 9,047
Accrued reorganization costs 4,550 8,667
Other current liabilities 10,294 9,586
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Total Current Liabilities 75,311 79,448
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Other Liabilities
Long term debt 40,000 40,000
Retiree medical benefits 13,139 12,513
Minority interest in consolidated subsidiaries 1,619 1,588
Other liabilities 2,473 2,707
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57,231 56,808
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Deferred Income Taxes, net 13,094 13,094
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Total Liabilities 145,636 149,350
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Stockholders' Equity
Capital stock, without par value-
Authorized - 35,000,000 shares
Issued - 12,216,697 and 12,201,597, respectively 9,271 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 10,518 9,044
Dividends (6,344) (12,741)
Cumulative translation adjustment (744) (2,319)
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Total Stockholders' Equity 171,406 165,589
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Total Liabilities and Stockholders' Equity $ 317,042 $ 314,939
========= =========
</TABLE>
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<TABLE>
PETROLITE CORPORATION
CONSOLIDATED STATEMENTS OF CURRENT AND ACCUMULATED EARNINGS
FOR SIX MONTHS ENDED APRIL 30
<CAPTION>
(Unaudited)
3 Months to April 30 6 Months to April 30
-------------------- --------------------
1995 1994 1995 1994
---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net revenues $ 94,010 $ 90,556 $ 186,333 $ 182,352
Cost of product sold and other direct costs 57,161 53,175 113,207 106,870
-------- -------- --------- ---------
Gross profit 36,849 37,381 73,126 75,482
-------- -------- --------- ---------
Expenses:
Selling 22,258 21,186 42,368 41,995
Research 3,632 3,269 6,443 6,363
General and administrative 4,458 5,674 9,294 11,457
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30,348 30,129 58,105 59,815
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Earnings from operations 6,501 7,252 15,021 15,667
Equity in earnings (loss) of affiliates 311 (83) 554 3
Other income (expense), net (505) (483) 242 (622)
-------- -------- --------- ---------
Earnings before income taxes and effect of
change in accounting principle 6,307 6,686 15,817 15,048
U.S. and foreign income taxes 2,018 2,356 5,299 5,304
-------- -------- --------- ---------
Net earnings before effect of change
in accounting principle 4,289 4,330 10,518 9,744
Effect of change in accounting for income taxes - - - 2,037
-------- -------- --------- ---------
Net earnings $ 4,289 $ 4,330 $ 10,518 $ 11,781
======== ======== ========= =========
Earnings per share before effect of change in
accounting principle $ 0.38 $ 0.38 $ 0.93 $ 0.86
Effect of change in accounting for income taxes - - - 0.18
-------- -------- --------- ---------
Earnings per share $ 0.38 $ 0.38 $ 0.93 $ 1.04
======== ======== ========= =========
Average shares outstanding 11,329 11,304 11,328 11,299
======== ======== ========= =========
Dividends per share $ 0.28 $ 0.28 $ 0.56 $ 0.56
======== ======== ========= =========
</TABLE>
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<TABLE>
PETROLITE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED APRIL 30, 1995
<CAPTION>
(Unaudited)
1995 1994
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(Thousands of $)
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 10,518 $ 11,781
Adjustments to reconcile net earnings to net cash
provided by operations -
Depreciation and amortization 9,486 10,165
Change in accounting principle - (2,037)
Gain on sale of fixed assets (1,490) (672)
Changes in assets and liabilities -
Accounts receivable (7,104) (4,810)
Inventories (5,152) 2,307
Other current assets (811) 4,502
Accounts payable and accrued liabilities (5,317) (6,820)
Accrued reorganization costs (4,117) -
Other 888 (362)
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Net cash provided (used in) by operating activities (3,099) 14,054
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Cash flow from Investing Activities:
Capital expenditures, net (7,359) (7,296)
Net gain on sale of minor fixed assets 150 672
Proceeds from sale of plant 10,335 -
Investment in joint venture & business alliance (449) (1,125)
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Net cash provided by investing activities 2,677 (7,749)
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Cash Flows from Financing Activities:
Additional borrowing (repayment of), net 5,821 (3,291)
Dividends paid (6,344) (6,329)
Sales of Common Stock 68 643
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Net cash used in financing activities (455) (8,977)
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Net Decrease in Cash and Equivalents (877) (2,672)
Cash and Equivalents at Beginning of Period 19,801 8,036
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Cash and Equivalents at End of Period $ 18,924 $ 5,364
======== ========
</TABLE>
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<PAGE> 5
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 of only normal recurring
adjustments) necessary to present fairly the Balance Sheets as of April 30,
1995 and October 31, 1994, the Statements of Earnings for the six months ended
April 30, 1995 and 1994 and the Statements of Cash Flows for the six months
ended April 30, 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 registrant's
balance sheet. During the first quarter of fiscal 1995, $3,500,000 of
severance costs were charged against the reorganization accrual. During the
second quarter, $345,000 of severance costs and $288,000 of plant shutdown
costs were charged against the reorganization accrual leaving a remaining
balance of $2,939,000 of severance costs and $1,612,000 of plant shutdown
costs as a liability on the registrant's balance sheet at April 30, 1995.
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<PAGE> 6
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 April 30, 1995 reflected a
current ratio of 2.1:1, a low debt-to-equity ratio of .3:1, and cash and
securities of $19.7 million. The registrant expects its strong financial
position to continue.
Capital expenditures (net) during the second quarter and the six months
ended April 30, 1995 were $3.0 million and $7.4 million, respectively.
Capital expenditures in fiscal 1995 are now projected to be approximately $20
million as compared to fiscal 1994 capital expenditures 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 closing expenditures on the new
laboratory and manufacturing office facilities for Eurochem operations in
Kirkby, England.
QUARTER AND SIX MONTHS ENDED APRIL 30, 1995 COMPARED TO QUARTER AND SIX
MONTHS ENDED APRIL 30, 1994
Revenues for the second quarter amounted to $94.0 million versus $90.6
million a year ago. For the first half, revenues increased to $186.3 million
from $182.4 million. Net earnings for the second quarter totaled $4.3
million, or $0.38 per share, matching the performance for the period a year
ago. Earnings for the first six months, before an accounting change,
increased 7 percent to $10.5 million or $0.93 per share, from $9.8 million, or
$0.86 per share a year ago. As previously reported, earnings in the first
quarter last year benefited from a $2.0 million tax credit that inflated first
half net income to $11.8 million or $1.04 per share.
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BUSINESS DISCUSSION
The Polymers Division posted an increase in revenues and earnings for
the quarter and six months. Its key product lines, especially those used as
additives in mold release agents, graphic arts materials, adhesives, and
coatings, showed gains in both domestic and international markets. The
division's Commercial Development program continued to generate new specialty
business using core chemical technologies in novel applications, and its new
partnership company, Bareco Products, commenced operations.
Strong equipment sales to the refining industry enabled the Petreco
Division to post its fourth-best quarterly profit in 10 years and its best
first half on record. Sales of new crude oil desalters and retrofitting
services for older units led the results. Though the market for fuel treating
systems and oil field dehydrators has softened in recent months, the
division's backlog of equipment orders remains solid.
Increased revenues from oil field operations in the Middle East and
North Sea helped the Eurochem Division turn in a solid second quarter
performance though not matching the record results of a year ago.
Profitability also declined as operating costs rose and margins tightened,
partially the result of a weak U.S. dollar. Sales to the former Soviet Union
regained some momentum, though a major oil field start-up program there is
winding down as expected.
The Chemical Group's performance in the quarter declined, in part the
result of a bad debt write-off of nearly $1.0 million in its International
Division's operations in Mexico brought about by the devaluation of the
Mexican peso. Operations in Venezuela and Canada continued to improve while
business in the Pacific Rim showed a gain in revenue.
Performance of the group's Tretolite Division reflected the continued
overall weakness of the oil industry in the United States. The new XTENDSM
service for oil well protection continued to find favor with customers and a
newly established Independent Producer Group, focused on the needs of smaller
customers, should help strengthen that business.
Low refinery margins and unseasonably warm weather combined to slow the
performance of the group's Industrial Chemicals Division, although new
refinery process and fuel additive business gained in the period should help
provide improved results later in the year.
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<PAGE> 8
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.
The registrant's annual meeting of stockholders was held March 6, 1995.
Pursuant to the notice, the only matter submitted to a vote of
security-holders was the election of directors. There was no solicitation in
opposition to management's nominees as listed in the proxy statement, and all
of such nominees were elected. The number of votes cast for, against or
withheld with respect to each nominee for office is as follows:
Nine million, eight hundred thirty one thousand, seven hundred ninety
nine (9,831,799) votes were cast in favor of the Directors, except for the
following votes, which were withheld, to wit:
<TABLE>
Directors Votes Withheld
--------- --------------
<S> <C>
Paul F. Cornelsen 25,528
Andrew B. Craig, III 66,075
Louis Fernandez 37,550
Wayne J. Grace 23,395
Paul H. Hatfield 23,685
William E. Maritz 25,104
James E. McCormick 23,031
William E. Nasser 26,832
Richard L. O'Shields 26,485
Fairfax F. Pollnow 38,095
Thomas P. Reidy 20,231
</TABLE>
At least ninety-nine .33 percent (99.33%) of eligible shares of stock
were voted in favor of each of the eleven nominees.
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<PAGE> 9
Part II, Item 5. Other information
None
Part II, Item 6. Exhibits and Reports on From 8-K
(a) Exhibit 27. Financial Data Schedule
(b) The registrant filed a current report on Form 8-K dated March 6,
1995, reporting information under Item 5.
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
---------------------
John M. Casper
Chief Financial Officer -
Authorized Officer and
Principal Financial Officer
DATE: June 13, 1995
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> APR-30-1995
<CASH> 18,924
<SECURITIES> 763
<RECEIVABLES> 77,775
<ALLOWANCES> 1,938
<INVENTORY> 49,015
<CURRENT-ASSETS> 157,907
<PP&E> 289,137
<DEPRECIATION> 170,986
<TOTAL-ASSETS> 317,042
<CURRENT-LIABILITIES> 75,311
<BONDS> 40,000
<COMMON> 9,271
0
0
<OTHER-SE> 180,834
<TOTAL-LIABILITY-AND-EQUITY> 317,042
<SALES> 186,333
<TOTAL-REVENUES> 192,420
<CGS> 113,207
<TOTAL-COSTS> 171,312
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 781
<INTEREST-EXPENSE> 1,906
<INCOME-PRETAX> 15,817
<INCOME-TAX> 5,299
<INCOME-CONTINUING> 10,518
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,518
<EPS-PRIMARY> .93
<EPS-DILUTED> .93
</TABLE>
