<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
--------------------------------------
For the Quarterly Period Ended April 30, 1997 Commission file number 0685
--------------- ----
PETROLITE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 43-0617572
- --------------------------------- ----------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
369 Marshall Avenue, St. Louis, Missouri 63119
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 961-3500
--------------------
- --------------------------------------------------------------------------------
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
----- -----
On May 1, 1997, there were 11,405,148 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, 1997 Oct. 31, 1996
------------- -------------
(Thousands of $)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 55,155 $ 44,669
Accounts receivable, less estimated doubtful
accounts of $1,210,000 and $1,191,000 respectively 71,649 68,324
Inventories-
Raw materials, parts and supplies 19,708 19,706
Finished goods 36,519 36,648
Reserve for adjustment to LIFO (19,087) (18,626)
--------- ---------
37,140 37,728
Contracts in process 793 (402)
Less progress billings (687) (209)
--------- ---------
Net inventories 37,246 37,117
Prepaid income tax 6,350 6,350
Other current assets 6,392 5,379
--------- ---------
Total Current Assets 176,792 161,839
--------- ---------
Investment in affiliated companies 13,644 14,417
Patents and other intangibles 5,843 7,068
Prepaid pension costs 11,577 9,484
Other assets 8,582 8,228
--------- ---------
39,646 39,197
--------- ---------
Properties
Buildings 63,344 66,063
Machinery and equipment 146,032 155,997
Other fixed assets 44,357 45,112
Construction in progress 5,881 3,681
Accumulated depreciation (170,143) (176,971)
--------- ---------
89,471 93,882
Land 6,921 6,869
--------- ---------
96,392 100,751
--------- ---------
Total Assets $ 312,830 $ 301,787
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 10,855 $ 5,493
Accounts payable 30,599 38,290
Accrued vacation pay 3,620 3,720
Estimated income taxes 9,887 2,113
Other current liabilities 17,229 19,535
--------- ---------
Total Current Liabilities 72,190 69,151
--------- ---------
Other Liabilities
Long term debt 31,714 38,000
Retiree medical benefits 14,817 14,165
Minority interest in consolidated subsidiaries 1,731 1,647
Other liabilities 3,198 2,951
--------- ---------
51,460 56,763
--------- ---------
Deferred Income Taxes, net 8,969 9,044
--------- ---------
Total Liabilities 132,619 134,958
--------- ---------
Stockholders' Equity
Capital stock, without par value-
Authorized - 35,000,000 shares
Issued - 12,292,897 and 12,230,197, respectively 11,596 9,620
Less treasury stock, at cost - 887,749 shares (18,694) (18,694)
Reinvested earnings, beginning of year 177,276 170,943
Earnings for the period 24,263 19,033
Dividends (6,372) (12,699)
Cumulative translation adjustment (7,858) (1,374)
--------- ---------
Total Stockholders' Equity 180,211 166,829
--------- ---------
Total Liabilities and Stockholders' Equity $ 312,830 $ 301,787
========= =========
</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
-------------------------- --------------------------
1997 1996 1997 1996
-------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net revenues $101,080 $ 88,497 $195,138 $177,194
Cost of product sold and other direct costs 60,775 57,164 117,453 113,856
-------- -------- -------- --------
Gross profit 40,305 31,333 77,685 63,338
-------- -------- -------- --------
Expenses:
Selling 17,858 17,277 34,379 33,683
Research 4,825 4,631 8,947 10,007
General and Administrative 5,049 5,254 9,826 11,964
Write-off of investment in subsidiary - 5,137 - 5,137
-------- -------- -------- --------
27,732 32,299 53,152 60,791
-------- -------- -------- --------
Earnings from operations 12,573 (966) 24,533 2,547
Equity in earnings of affiliates 1,473 1,457 2,888 2,549
Interest expense (645) (764) (1,324) (1,587)
Gain on sale of Singapore facility - - 8,606 -
Other income, net 1,087 428 1,767 1,546
-------- -------- -------- --------
Earnings before income taxes 14,488 155 36,470 5,055
U.S. and foreign income taxes 4,782 (4,504) 12,207 (2,887)
-------- -------- -------- --------
Net earnings $ 9,706 $ 4,659 $ 24,263 $ 7,942
======== ======== ======== ========
Earnings per share $ 0.85 $ 0.41 $ 2.13 $ 0.70
======== ======== ======== ========
Average shares outstanding 11,390 11,337 11,373 11,335
======== ======== ======== ========
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
<CAPTION>
(Unaudited)
1997 1996
-------- --------
(Thousands of $)
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 24,263 $ 7,942
Adjustments to reconcile net earnings to net cash
provided by operations -
Depreciation and amortization 8,590 9,096
Deferred income taxes (75) (2,627)
Gain on sale of fixed assets (77) (545)
Gain on sale of Singapore facility (8,606) 0
Write-down of fixed assets 0 2,000
Changes in assets and liabilities -
Accounts receivable (3,325) (2,706)
Inventories (130) 936
Other current assets (1,014) (705)
Accounts payable and accrued liabilities (1,398) (2,229)
Other (1,625) (1,492)
-------- --------
Net cash provided by operating activities 16,603 9,670
-------- --------
Cash flow from Investing Activities:
Capital expenditures, net (4,998) (4,126)
Proceeds from sale of Singapore plant 6,807 0
Proceeds from sale of airplane 0 5,250
-------- --------
Net cash provided by investing activities 1,809 1,124
-------- --------
Cash Flows from Financing Activities:
(Payment of debt) Additional borrowing, net (924) 2,184
Dividends paid (6,372) (6,348)
Sales of Common Stock 1,976 151
-------- --------
Net cash used in financing activities (5,320) (4,013)
-------- --------
Effect of exchange rate on cash and equivalents (2,606) (1,019)
-------- --------
Net increase in Cash and Equivalents 10,486 5,762
Cash and Equivalents at Beginning of Period 44,669 33,662
-------- --------
Cash and Equivalents at End of Period $ 55,155 $ 39,424
======== ========
</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 Form
10-K for the year ended October 31, 1996, 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 April 30,
1997 and October 31, 1996, the Statements of Earnings for the three and six
months ended April 30, 1997 and 1996 and the Statements of Cash Flows for the
six months ended April 30, 1997 and 1996. Due to seasonal and other factors,
interim period results are not necessarily indicative of results to be
expected for the year.
During the first quarter, the Registrant completed the sale of its
Singapore facility, resulting in a pretax gain of $8.6 million. In its place,
the Registrant is establishing three customer service facilities which will
enable the Registrant to better serve its expanding revenue base in the
area by moving its expertise closer to its customers in each regional market.
The Registrant and Wm. S. Barnickel & Company, its largest shareholder,
entered into a definitive agreement, dated as of February 25, 1997, to be
acquired by Baker Hughes Incorporated. Terms of the agreement call for a
tax-free exchange of common stock in which Petrolite shares will be converted
into shares of Baker Hughes common stock having a value of $61 per Petrolite
share, based on the average market price of Baker Hughes common stock during a
10-day period shortly before the closing. The agreement is subject to approval
by a vote of shareholders of Petrolite, including the favorable vote of
shareholders other than Wm. S. Barnickel & Company, a vote of shareholders of
Wm. S. Barnickel & Company, and satisfaction of other customary conditions.
A copy of the agreement and the Registrant's press release announcing the
agreement were included in a current report on Form 8-K filed February 28, 1997.
On June 2, 1997, the Registrant announced that its shareholder meeting
will be held at 11:00 a.m. on Tuesday, July 1, 1997. See Exhibit 99 to this
report.
5
<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 Form 10-K for the year ended October 31, 1996.
The Registrant's financial position at April 30, 1997, reflected a
current ratio of 2.4:1, a debt-to-equity ratio of .2:1, and cash and
securities of $55.1 million.
Capital expenditures (net) during the second quarter and the six months
ended April 30, 1997 were $2.5 million and $5.0 million, respectively.
Capital expenditures in fiscal 1997 are projected to be approximately $12
million as compared to fiscal 1996 capital expenditures of $11.2 million.
Major capital projects for 1997 include the continued expansion and upgrade of
the Bayport, Texas manufacturing plant; investment in three customer service
facilities in Southeast Asia; additional investment in chemical product
containers that are more environmentally safe; additional investment in
distribution vehicles and delivery trucks; and an expansion to the Aberdeen,
Scotland facilities.
6
<PAGE> 7
QUARTER AND SIX MONTHS ENDED APRIL 30, 1997, COMPARED TO QUARTER AND SIX
MONTHS ENDED APRIL 30, 1996.
The Registrant's net earnings for the second quarter ended April 30
totaled $9.7 million or $0.85 per share. This compares with $4.7 million or
$0.41 per share earned a year ago, which included a one-time tax benefit of
$1.1 million or $0.10 per share. Second quarter revenues of $101.1 million
were up 14 percent, or $12.6 million over the same period a year ago.
The improved earnings came on increased sales in the Registrant's
core businesses as all of the Registrant's worldwide energy chemicals
businesses posted increased earnings and revenues for the second quarter and
six months. Its polymers and equipment businesses achieved solid earnings
gains for both periods.
Income for the six months ended April 30 totaled $24.3 million or $2.13
per share, which included after-tax gains of $5.6 million or $0.49 per share
resulting from the sale of the Registrant's Singapore plant and $0.7 million
or $0.06 per share from extending an option to amend its business alliance
with Energy BioSystems Corp. This compares with year-ago earnings of $7.9
million or $0.70 per share, which included a one-time tax benefit of $1.1
million or $0.10 per share from ceasing business operations through the
Registrant's Venezuelan subsidiary. Revenues for the six months totaled
$195.1 million versus $177.2 million in 1996.
Selected prior year information has been reclassified to conform with
1997 presentation. There is no impact on earnings resulting from this change.
7
<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.
There were no matters submitted to a vote of security-holders during
the period covered by this report.
Part II, Item 5. Other information
(a) The Registrant has adopted Amendment No. 4 to its Rights Agreement
with Society National Bank dated March 28, 1994, a copy of which is attached
hereto as Exhibit 4, and incorporated by reference herein. The amendment
relates to an Agreement and Plan of Merger, dated as of February 25, 1997 (the
"Merger Agreement") by and among Baker Hughes Incorporated, a Delaware
corporation ("Baker Hughes"), the Registrant, and others, pursuant to which
Baker Hughes will acquire, directly or indirectly, all of the outstanding shares
of capital stock of the Registrant. In summary, the amendment provides, among
other things, that none of the execution and delivery of the Merger
Agreement, the conversion of shares of the Registrant's Capital Stock into the
right to receive shares of common stock of Baker Hughes, and the consummation
of the transactions contemplated by the Merger Agreement, shall be deemed to
be, among other things, a triggering event for purposes of the Rights
Agreement, or to cause any of the parties to the Merger Agreement to be
"Acquiring Persons" as that term is defined in the Rights Agreement. The
amendment further provides that all rights under the Rights Agreement shall
expire, and shall have no further force or effect, immediately prior to
consummation of the transactions contemplated by the Merger Agreement, as
further provided in the Merger Agreement.
8
<PAGE> 9
(b) On June 2, 1997, the Registrant announced that its annual meeting
of stockholders and a vote on the Registrant's pending acquisition by Baker
Hughes Incorporated, a Delaware corporation ("Baker Hughes") would be held on
Tuesday, July 1, 1997. The Registrant noted that, pending favorable votes by
Petrolite shareholders at the annual meeting, the proposed acquisition by
Baker Hughes is expected to close on Wednesday, July 2, 1997.
Part II, Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 4. Form of Amendment No. 4 to Rights Agreement dated as
of March 28, 1994 between the Registrant and Society National Bank
as Rights Agent.
Exhibit 27. Financial Data Schedule.
Exhibit 99. Press Release dated June 2, 1997
(b) The Registrant filed a current report on Form 8-K dated February 28,
1997, reporting information under item 5.
9
<PAGE> 10
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
---------------------
s/John M. Casper
---------------------------------
John M. Casper
Chief Financial Officer -
Authorized Officer and
Principal Financial Officer
DATE: June 13, 1997
---------------------------------
10
<PAGE> 1
Exhibit 4
AMENDMENT NO. 4 TO
RIGHTS AGREEMENT
----------------
Amendment No. 4 (this "Amendment"), dated as of February 25, 1997, to
the Rights Agreement, dated as of March 28, 1994, between Petrolite
Corporation, a Delaware corporation (the "Company"), and Society National Bank
(the "Rights Agent"), as amended by Amendment No. 1, dated as of December 1,
1994, Amendment No. 2, dated as of February 7, 1995, and Amendment No. 3,
dated as of November 27, 1996 (as amended, the "Rights Agreement").
WHEREAS, pursuant to Section 27 of the Rights Agreement, the Company and
the Rights Agent may from time to time supplement or amend the Rights
Agreement in accordance with Section 27 thereof;
WHEREAS, an Agreement and Plan of Merger, dated as of February 25, 1997
(the "Merger Agreement"), has been entered into among Baker Hughes
Incorporated ("BHI"), Baker Hughes Missouri, Inc., Baker Hughes Delaware,
Inc., the Company and Wm. S. Barnickel & Company ("Barnickel"), which Merger
Agreement provides for, among other things, the acquisition by BHI, directly
or indirectly, of all of the outstanding capital stock of each of Barnickel
and the Company;
WHEREAS, the Company has agreed to amend certain provisions of the
Rights Agreement in connection with the execution and delivery of the Merger
Agreement;
WHEREAS, all acts and things necessary to make this Amendment valid and
enforceable have been performed and done; and
WHEREAS, Society National Bank has been merged into Key Corp.
Shareholder Services, Inc. and, pursuant to Section 20 of the Rights
Agreement, is the successor to the Rights Agent.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties agree that the Rights Agreement is
hereby amended as follows:
1
<PAGE> 2
Exhibit 4
1. Section 1 of the Rights Agreement is amended by adding the
following new paragraph at the end of Section 1 immediately following the new
paragraph added by Amendment No. 3 to the Rights Agreement, dated as of
November 27, 1996:
Notwithstanding anything in this Amendment
that might otherwise be deemed to the
contrary, none of the execution and delivery
of the Agreement and Plan of Merger, dated as
of February 25, 1997, among Baker Hughes
Incorporated, Baker Hughes Missouri, Inc.,
Baker Hughes Delaware, Inc., the Company and
Wm. S. Barnickel & Co. (the "Merger
Agreement"), the conversion of shares of
Capital Stock and Barnickel Common Stock (as
defined in the Merger Agreement) into the
right to receive Parent Common Stock (as
defined in the Merger Agreement) in
accordance with Article 4 of the Merger
Agreement, and the consummation of the
Company Merger (as defined in the Merger
Agreement) and the Barnickel Merger (as
defined in the Merger Agreement) or any other
transaction contemplated by the Merger
Agreement will cause (i) the Rights to become
exercisable under this Amendment, (ii) Wm. S.
Barnickel & Co., Baker Hughes Incorporated or
any of its Subsidiaries (as defined in the
Merger Agreement) or Affiliates to be deemed
an Acquiring Person, (iii) any such event to
be deemed a "flip-over transaction or event"
or (iv) a Stock Acquisition Date, the
Distribution Date, a Section 11(a)(ii) Event,
a Section 13 Event or a Triggering Event to
occur. If all the conditions to the
Barnickel Merger and the Company Merger set
forth in the Merger Agreement, other than the
condition set forth in Section 9.2(d) of the
Merger Agreement, shall have been fulfilled
or waived in accordance with the Merger
Agreement, and at such time the Merger
Agreement shall not have been terminated in
accordance with the terms thereof, all Rights
shall expire
2
<PAGE> 3
Exhibit 4
immediately prior to the Barnickel Effective
Time (as defined in the Merger Agreement), and
shall have no further force or effect after
such expiration.
2. Section 7(a) of the Rights Agreement is amended by replacing
"Section 13(d)" in clause (iv) thereof with "Section 13(d) or Section 1".
3. The Rights Agreement shall not otherwise be supplemented or
amended by virtue of this Amendment, but shall remain in full force and
effect. This Amendment may be executed in one or more counterparts, all of
which shall be considered one and the same amendment and each of which shall
be deemed an original.
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
duly executed, all on the day and year first above written.
Attest: PETROLITE CORPORATION
By: s\Charles R. Miller By: s\John M. Casper
-------------------- -----------------
Charles R. Miller John M. Casper
Secretary Vice President and
Chief Financial Officer
Attest: KEY CORP. SHAREHOLDER
SERVICES, INC.
By: s\Caroline Lukez By: s\William Bedy
-------------------- -----------------
William Bedy
Vice President
3
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> OCT-31-1997 OCT-31-1996
<PERIOD-START> FEB-01-1997 FEB-01-1996
<PERIOD-END> APR-30-1997 APR-30-1996
<CASH> 55,155 39,424
<SECURITIES> 0 0
<RECEIVABLES> 71,649 66,068
<ALLOWANCES> 0 0
<INVENTORY> 37,246 38,565
<CURRENT-ASSETS> 176,792 156,875
<PP&E> 259,614 264,183
<DEPRECIATION> 170,143 169,922
<TOTAL-ASSETS> 312,825 295,889
<CURRENT-LIABILITIES> 72,194 71,580
<BONDS> 31,714 38,000
<COMMON> 11,596 9,540
0 0
0 0
<OTHER-SE> 187,315 169,352
<TOTAL-LIABILITY-AND-EQUITY> 312,834 295,886
<SALES> 101,080 88,497
<TOTAL-REVENUES> 101,125 88,668
<CGS> 60,775 57,164
<TOTAL-COSTS> 88,507 89,463
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> (3) 60
<INTEREST-EXPENSE> 645 764
<INCOME-PRETAX> 14,488 156
<INCOME-TAX> 4,782 (4,504)
<INCOME-CONTINUING> 9,706 4,660
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 9,706 4,660
<EPS-PRIMARY> 0.85 0.41
<EPS-DILUTED> 0.85 0.41
</TABLE>
<PAGE> 1
Exhibit 99
ST. LOUIS, June 2, 1997 -- Petrolite Corporation (NASDAQ:PLIT) has
announced that its annual meeting of stockholders and a vote on the company's
pending acquisition by Baker Hughes Incorporated (BHI - NYSE, PSE and EBS)
will be held on Tuesday, July 1, 1997, at 11:00 a.m. at the Doubletree Hotel
& Conference Center, located at 16625 Swingley Ridge Road in Chesterfield,
Mo.
Pending favorable votes by Petrolite shareholders at the annual
meeting, the proposed acquisition by Baker Hughes is expected to close on
Wednesday, July 2, 1997.
