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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 April 30, 1996 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, 1996, there were 11,339,448 outstanding shares of capital
stock, without par value.
No. of Pages 9
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<TABLE>
PART 1. ITEM 1. FINANCIAL STATEMENTS
PETROLITE CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(Unaudited)
Apr. 30, 1996 Oct.31, 1995
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(Thousands of $)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 39,424 $ 33,662
Accounts receivable, less estimated doubtful
accounts of $1,395,000 and $1,121,000 respectively 66,058 63,352
Inventories-
Raw materials, parts and supplies 19,734 19,984
Finished goods 35,874 35,574
Reserve for adjustment to LIFO (17,965) (18,541)
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37,643 37,017
Contracts in process 654 13
Less progress billings (2,524) (321)
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Net inventories 35,773 36,709
Other current assets 12,818 12,115
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Total Current Assets 154,073 145,838
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Investment in affiliated companies 12,890 13,116
Patents and other intangibles 8,272 9,505
Other assets 16,909 12,752
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38,071 35,373
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Properties
Buildings 61,479 63,325
Machinery and equipment 149,822 152,346
Other fixed assets 45,240 51,180
Construction in progress 7,642 4,159
Accumulated depreciation (169,922) (166,369)
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94,261 104,641
Land 6,682 6,733
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100,943 111,374
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Total Assets $ 293,087 $ 292,585
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 8,779 $ 4,594
Accounts payable 34,740 33,880
Accrued vacation pay 4,000 4,000
Estimated income taxes 1,339 3,378
Accrued reorganization costs 2,734 2,734
Other current liabilities 17,197 18,248
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Total Current Liabilities 68,789 66,834
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Other Liabilities
Long term debt 38,000 40,000
Retiree medical benefits 13,434 13,192
Minority interest in consolidated subsidiaries 1,727 1,404
Other liabilities 2,797 913
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55,958 55,509
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Deferred Income Taxes, net 8,150 10,778
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Total Liabilities 132,897 133,121
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Stockholders' Equity
Capital stock, without par value-
Authorized - 35,000,000 shares
Issued - 12,227,197 and 12,216,697, respectively 9,540 9,389
Less treasury stock, at cost (887,749 and 887,919 shares, respectively) (18,694) (18,694)
Reinvested earnings, beginning of year 170,943 177,404
Earnings for the period 7,942 6,231
Dividends (6,348) (12,691)
Cumulative translation adjustment (3,193) (2,175)
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Total Stockholders' Equity 160,190 159,464
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Total Liabilities and Stockholders' Equity $ 293,087 $ 292,585
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</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
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1996 1995 1996 1995
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(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net revenues $85,999 $94,010 $172,841 $186,333
Cost of product sold and other direct costs 51,958 57,161 104,088 113,207
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Gross profit 34,041 36,849 68,753 73,126
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Expenses:
Selling 20,946 22,258 42,040 42,368
Research 3,575 3,632 7,756 6,443
General and administrative 5,393 4,458 11,295 9,294
Write-off of investment in subsidiary 5,137 - 5,137 -
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35,051 30,348 66,228 58,105
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Earnings from operations (1,010) 6,501 2,525 15,021
Equity in earnings of affiliates 1,457 311 2,549 554
Other income, net (292) (505) (19) 242
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Earnings before income taxes 155 6,307 5,055 15,817
U.S. and foreign income taxes (4,504) 2,018 (2,887) 5,299
--------- --------- ---------- ----------
Net earnings $ 4,659 $ 4,289 $ 7,942 $ 10,518
========= ========= ========== ==========
Earnings per share $ 0.41 $ 0.38 $ 0.70 $ 0.93
========= ========= ========== ==========
Average shares outstanding 11,337 11,329 11,335 11,328
========= ========= ========== ==========
Dividends per share $ 0.28 $ 0.28 $ 0.28 $ 0.28
========= ========= ========== ==========
</TABLE>
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<TABLE>
PETROLITE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED APRIL 30
<CAPTION>
(Unaudited)
1996 1995
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(Thousands of $)
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 7,942 $10,518
Adjustments to reconcile net earnings to net cash
provided by operations -
Depreciation and amortization 9,096 9,486
Deferred income taxes (2,627) -
Writedown of fixed assets 2,000 -
Gain on sale of fixed assets (545) (1,490)
Changes in assets and liabilities -
Accounts receivable (3,672) (7,104)
Inventories 355 (5,152)
Other current assets (801) (811)
Accounts payable and accrued liabilities (1,441) (5,317)
Accrued reorganization costs - (4,117)
Other (754) 888
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Net cash provided by (used in) operating activities 9,553 (3,099)
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Cash flow from Investing Activities:
Capital expenditures, net (5,563) (7,359)
Net gain on sale of fixed assets 208 150
Proceeds from sale of airplane 5,250 -
Proceeds from sale of plant - 10,335
Investment in joint venture & business alliance - (449)
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Net cash provided by investing activities (105) 2,677
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Cash Flows from Financing Activities:
Additional borrowing, net 2,511 5,821
Dividends paid (6,348) (6,344)
Sales of Common Stock 151 68
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Net cash used in financing activities (3,686) (455)
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Net increase (decrease) in Cash and Equivalents 5,762 (877)
Cash and Equivalents at Beginning of Period 33,662 19,801
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Cash and Equivalents at End of Period $39,424 $18,924
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</TABLE>
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PART I. 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
1995 Annual Report incorporated by reference in the registrant's Form 10-K
for the year ended October 31, 1995, 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,
1996 and October 31, 1995, the Statements of Earnings for the six months
ended April 30, 1996 and 1995 and the Statements of Cash Flows for the six
months ended April 30, 1996 and 1995. Due to seasonal and other factors,
interim period results are not necessarily indicative of results to be
expected for the year.
PART I. 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 1995 Annual Report incorporated by reference in
the registrant's Form 10-K for the year ended October 31, 1995.
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The registrant's financial position at April 30, 1996 reflected a
current ratio of 2.2:1, a low debt-to-equity ratio of .3:1, and cash and
securities of $39.4 million. The registrant expects these favorable ratios
to continue.
Capital expenditures (net) during the second quarter and the six months
ended April 30, 1996 were $1.8 million and $5.6 million, respectively.
Capital expenditures in fiscal 1996 are projected to be approximately $14
million as compared to fiscal 1995 capital expenditures of $12.6 million.
Major capital projects for 1996 include the continued expansion and upgrade
of the Bayport and Kirkby manufacturing plants; additional investment in
containers that are more environmentally safe, and additional investment in
distribution vehicles, including both contract treating and delivery trucks.
QUARTER AND SIX MONTHS ENDED APRIL 30, 1996 COMPARED TO QUARTER
AND SIX MONTHS ENDED APRIL 30, 1995.
Petrolite's net earnings for the second quarter totaled $4.7 million or
$0.41 per share on revenues of $86 million. This compares with $4.3 million
or $0.38 per share earned a year ago and $3.3 million or $0.29 per share last
quarter.
This quarter's earnings reflected improved gross margins and a one-time
benefit of $1.1 million or $0.10 per share from ceasing business operations
through the company's Venezuelan subsidiary. Without this benefit, second
quarter earnings were $0.31 per share.
Operating expenses in last year's second quarter included a bad debt
write-off of nearly $1.0 million from registrant's operations in Mexico.
This was offset by a similar decrease in general and administrative expenses
that resulted from the reversal of certain accruals based on the projected
performance of the business for that fiscal year. No similar accrual
reversals occurred in the current quarter.
The energy chemicals business in the United States and Canada posted a
slight earnings
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improvement on increased sales to refineries. In overseas markets, earnings
from energy chemical operations were off year to year, due to lower sales in
the Middle East. Registrant's polymers business recorded a modest earnings
improvement on lower sales, reflecting continued softness in some domestic
markets and the continuing transfer of wax business to Bareco Products, the
marketing partnership started in April of last year with Pennzoil. The
registrant's equipment business posted lower earnings on its sales of refinery
and oil field process systems.
Earnings for the six months totaled $7.9 million or $0.70 per share
compared with $10.5 million or $0.93 per share a year ago. Revenues amounted
to $172.8 million as compared to $186.3 million the prior year. The decline
in revenues reflects the closure of the Venezuelan subsidiary, reduced Middle
Eastern and equipment business, and the continuing transfer of wax business
to Bareco Products. The gross profit margin improved slightly as a result of
more favorable product mix and selective product price increases.
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 4, 1996.
Pursuant to the notice, the only matter submitted to a vote of
security-holders was the election of directors.
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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, nine hundred twenty five thousand, seven hundred sixty
one (9,925,761) votes were cast in favor of each director, except for the
following votes, which were withheld, to wit:
<TABLE>
<CAPTION>
Directors Votes Withheld
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<S> <C>
Andrew B. Craig, III 22,538
Jerry B. Davis 25,792
Louis Fernandez 32,534
Wayne J. Grace 36,096
Paul H. Hatfield 30,217
William E. Maritz 75,278
Richard L. O'Shields 25,008
Fairfax F. Pollnow 39,671
Thomas P. Reidy <F*> 22,489
Brian M. Rushton 32,338
Joseph T. Williams 20,899
At least 99.96% of eligible shares of stock were voted in favor of each
of the eleven nominees.
<FN>
<F*> Mr. Reidy died on April 18, 1996.
</TABLE>
Part II. Item 5. Other information
None
Part II. Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10. Supplemental Retirement Plan
Exhibit 27. Financial Data Schedule
(b) There were no reports on Form 8-K filed during the quarter ended
April 30, 1996.
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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
-----------------
John M. Casper
Chief Financial Officer -
Authorized Officer and
Principal Financial Officer
DATE: May 31, 1996
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> FEB-01-1996
<PERIOD-END> APR-30-1996
<CASH> 39,424
<SECURITIES> 0
<RECEIVABLES> 67,453
<ALLOWANCES> (1,395)
<INVENTORY> 35,773
<CURRENT-ASSETS> 154,073
<PP&E> 264,183
<DEPRECIATION> 169,922
<TOTAL-ASSETS> 293,087
<CURRENT-LIABILITIES> 68,790
<BONDS> 38,000
<COMMON> 9,540
0
0
<OTHER-SE> 169,343
<TOTAL-LIABILITY-AND-EQUITY> 293,088
<SALES> 85,999
<TOTAL-REVENUES> 88,290
<CGS> 51,958
<TOTAL-COSTS> 87,009
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 60
<INTEREST-EXPENSE> 715
<INCOME-PRETAX> 155
<INCOME-TAX> (4,504)
<INCOME-CONTINUING> 4,659
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,659
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
</TABLE>
