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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 January 31, 1997 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
incorporation or organization) Identification No.)
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 February 1, 1997, there were 11,377,448 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)
Jan. 31, 1997 Oct.31, 1996
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ASSETS (Thousands of $)
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 52,613 $ 44,669
Accounts receivable, less estimated doubtful
accounts of $1,244,000 and $1,191,000 respectively 66,491 68,324
Inventories-
Raw materials, parts and supplies 19,029 19,706
Finished goods 35,336 36,648
Reserve for adjustment to LIFO (18,662) (18,626)
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35,703 37,728
Contracts in process 696 (402)
Less progress billings (843) (209)
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Net inventories 35,556 37,117
Prepaid income tax 6,350 6,350
Other current assets 6,083 5,379
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Total Current Assets 167,093 161,839
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Investment in affiliated companies 13,363 14,417
Patents and other intangibles 6,457 7,068
Prepaid pension costs 10,186 9,484
Other assets 8,518 8,228
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38,524 39,197
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Properties
Buildings 62,917 66,063
Machinery and equipment 145,253 155,997
Other fixed assets 44,450 45,112
Construction in progress 5,220 3,681
Accumulated depreciation (167,187) (176,971)
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90,653 93,882
Land 6,843 6,869
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97,496 100,751
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Total Assets $ 303,113 $ 301,787
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 9,331 $ 5,493
Accounts payable 30,561 38,290
Accrued vacation pay 3,720 3,720
Estimated income taxes 11,934 2,113
Other current liabilities 13,984 19,535
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Total Current Liabilities 69,530 69,151
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Other Liabilities
Long term debt 31,714 38,000
Retiree medical benefits 14,491 14,165
Minority interest in consolidated subsidiaries 1,662 1,647
Other liabilities 3,012 2,951
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50,879 56,763
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Deferred Income Taxes, net 9,044 9,044
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Total Liabilities 129,453 134,958
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Stockholders' Equity
Capital stock, without par value-
Authorized - 35,000,000 shares
Issued - 12,265,197 and 12,230,197, respectively 10,763 9,620
Less treasury stock, at cost (887,749 and 887,749 shares, respectively) (18,694) (18,694)
Reinvested earnings, beginning of year 177,277 170,943
Earnings for the period 14,555 19,033
Dividends (3,176) (12,699)
Cumulative translation adjustment (7,065) (1,374)
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Total Stockholders' Equity 173,660 166,829
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Total Liabilities and Stockholders' Equity $ 303,113 $ 301,787
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</TABLE>
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<TABLE>
PETROLITE CORPORATION
CONSOLIDATED STATEMENTS OF CURRENT AND ACCUMULATED EARNINGS
FOR THREE MONTHS ENDED JANUARY 31
<CAPTION>
(Unaudited)
3 Months to January 31
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1997 1996
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(In thousands, except per share data)
<S> <C> <C>
Net revenues $ 94,058 $ 88,697
Cost of product sold and other direct costs 56,677 56,692
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Gross profit 37,381 32,005
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Expenses:
Selling 16,521 16,406
Research 4,122 5,376
General and Administrative 4,777 6,710
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25,420 28,492
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Earnings from operations 11,961 3,513
Equity in earnings of affiliates 1,415 1,092
Interest expense (679) (823)
Gain on sale of Singapore facility 8,606 0
Other income, net 680 1,118
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Earnings before income taxes 21,983 4,900
U.S. and foreign income taxes 7,425 1,617
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Net earnings $ 14,558 $ 3,283
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Earnings per share $ 1.28 $ 0.29
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Average shares outstanding 11,357 11,333
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Dividends per share $ 0.28 $ 0.28
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</TABLE>
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<TABLE>
PETROLITE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THREE MONTHS ENDED JANUARY 31
<CAPTION>
(Unaudited)
1997 1996
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(Thousands of $)
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 14,558 $ 3,283
Adjustments to reconcile net earnings to net cash
provided by operations -
Depreciation and amortization 4,297 4,529
Gain on sale of fixed assets (22) (507)
Gain on sale of Singapore facility (8,606) 0
Changes in assets and liabilities -
Accounts receivable 1,833 810
Inventories 1,562 (589)
Other current assets (706) 64
Accounts payable and accrued liabilities (2,508) 543
Other (1,983) (2,815)
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Net cash provided by operating activities 8,425 5,318
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Cash flow from Investing Activities:
Capital expenditures, net (2,483) (2,465)
Proceeds from sale of Singapore plant 6,807 0
Proceeds from sale of airplane 0 5,250
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Net cash provided by investing activities 4,324 2,785
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Cash Flows from Financing Activities:
Payment of debt, net (2,448) (899)
Dividends paid (3,176) (3,173)
Sales of Common Stock 1,143 46
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Net cash used in financing activities (4,481) (4,026)
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Effect of Exchange Rate Changes on Cash and Equivalents (324) (229)
Net increase in Cash and Equivalents 7,944 3,848
Cash and Equivalents at Beginning of Period 44,669 33,662
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Cash and Equivalents at End of Period $ 52,613 $ 37,510
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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
1996 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 January 31,
1997 and October 31, 1996 (audited), the Statements of Earnings for the three
months ended January 31, 1997 and 1996 and the Statements of Cash Flows for
the three months ended January 31, 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 &
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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 25, 1997.
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 1996 Form 10-K for the year ended October 31,
1996.
The Registrant's financial position at January 31, 1997, reflected a
current ratio of 2.4:1, a debt-to-equity ratio of .2:1, and cash and
securities of $52.6 million.
Capital expenditures in fiscal 1997 are projected to be $14.0 million,
as compared to fiscal 1996 capital expenditures of $11.2 million. Major
capital projects for 1997 include the continued expansion and upgrade of
manufacturing plants in Bayport, Texas, Liverpool, England, and Barnsdall,
Oklahoma; investment in three customer service facilities in Southeast
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Asia; and the upgrading of information systems at some division locations.
Capital expenditures (net) during the first quarter were $2.5 million. This
amount was reduced by cash received from the sale of certain machinery and
equipment at the Polymers Division manufacturing plants ($.4 million).
THREE MONTHS ENDED JANUARY 31, 1997, COMPARED TO THREE MONTHS ENDED JANUARY
31, 1996.
The Registrant reported that net earnings for the first quarter ended
January 31 totaled $14.6 million or $1.28 per share compared with $3.3
million or $0.29 per share a year ago. The increase in earnings included
after-tax gains of $5.6 million or $0.49 per share from the sale of the
company's Singapore facility and $0.7 million or $0.06 per share from extending
an option to amend its business alliance with Energy BioSystems Corp. of
Houston. Without these additional gains, earnings from operations were $8.3
million or $0.73 per share.
The strong earnings gain came on increased sales with existing
customers in the company's core energy chemicals and polymers businesses, in
both domestic and international markets. First quarter revenues of $94.1
million were up 6 percent or $5.4 million over a year ago.
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The Registrant's energy chemicals business in the United States and
Canada more than doubled earnings over the prior period on increased sales,
improved internal efficiencies and aggressive cost-control efforts. Earnings
from energy chemical operations overseas also improved as business,
particularly in the Middle East, strengthened.
The Registrant's Polymers business recorded an increase in earnings on
lower sales, reflecting the completed transfer of wax business to Bareco
Products, a marketing partnership with Pennzoil.
During the quarter, the Registrant entered into a 4th Amendment to its
Collaboration Agreement with Energy BioSystems Corporation (EBC), pursuant to
which EBC paid $1.0 million to the Registrant. Under the amendment the
Registrant: (i) will continue existing operational and technical support to
the biocatalytic desulfurization pilot plant through December 31, 1998, for
which the registrant will receive reimbursement from EBC, and (ii) granted
EBC an option for 24 months to further amend its Collaboration Agreement with
the Registrant, which option, if exercised, would include an additional
payment of $9 million and a warrant to purchase $1.0 million of EBC common
stock at a designated price, in exchange for a reduction in Petrolite's
interest in EBC's future earnings.
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Selected prior year information has been reclassified to conform with
1997 presentation. There is no impact on earnings resulting from this
change.
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) (i) The Registrant filed a current report on Form 8-K dated
November 27, 1996, reporting information under Item 5.
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(ii) The Registrant filed a current report on Form 8-K dated
February 25, 1997, 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
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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: March 14, 1997
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> OCT-31-1997 OCT-31-1996
<PERIOD-START> NOV-01-1996 NOV-01-1995
<PERIOD-END> JAN-31-1997 JAN-31-1996
<CASH> 52,613 37,510
<SECURITIES> 0 0
<RECEIVABLES> 66,491 62,542
<ALLOWANCES> 0 0
<INVENTORY> 35,556 37,298
<CURRENT-ASSETS> 167,093 149,398
<PP&E> 257,840 265,734
<DEPRECIATION> 167,187 167,214
<TOTAL-ASSETS> 303,113 290,256
<CURRENT-LIABILITIES> 69,530 66,513
<BONDS> 31,714 40,000
<COMMON> 10,763 9,435
0 0
0 0
<OTHER-SE> 181,597 166,563
<TOTAL-LIABILITY-AND-EQUITY> 303,113 290,256
<SALES> 94,058 88,697
<TOTAL-REVENUES> 94,093 88,899
<CGS> 56,677 56,692
<TOTAL-COSTS> 82,097 85,184
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> (14) 348
<INTEREST-EXPENSE> 679 823
<INCOME-PRETAX> 21,983 4,900
<INCOME-TAX> 7,425 1,617
<INCOME-CONTINUING> 14,558 3,283
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 14,558 3,283
<EPS-PRIMARY> 1.28 0.29
<EPS-DILUTED> 1.28 0.29
</TABLE>
