-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Zu7MxbY9lmP6WnP3sJTN/T+ggZTyWLLM3mapejkARpISR7KPtrQPJDn1ADTNhnSZ FzGOJYNRuG57/Xk0nda0Kw== 0000045370-94-000012.txt : 19941117 0000045370-94-000012.hdr.sgml : 19941117 ACCESSION NUMBER: 0000045370-94-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941104 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANNA M A CO/DE CENTRAL INDEX KEY: 0000045370 STANDARD INDUSTRIAL CLASSIFICATION: 3060 IRS NUMBER: 340232435 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05222 FILM NUMBER: 94557625 BUSINESS ADDRESS: STREET 1: SUITE 36-5000 STREET 2: 200 PUBLIC SQUARE CITY: CLEVELAND STATE: OH ZIP: 44114-2304 BUSINESS PHONE: (216)589-4000 FORMER COMPANY: FORMER CONFORMED NAME: HANNA MINING CO DATE OF NAME CHANGE: 19850523 10-Q 1 3RD QUARTER FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED September 30, 1994 COMMISSION FILE NUMBER 1-5222 M. A. HANNA COMPANY (Exact name of registrant as specified in its charter) STATE OF DELAWARE 34-0232435 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) SUITE 36-5000, 200 PUBLIC SQUARE, CLEVELAND, OHIO 44114-2304 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 216-589-4000 1301 E. NINTH STREET, SUITE 3600, CLEVELAND, OHIO 44114 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 by filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No Common Shares Outstanding, as of the close of the period covered by this report 35,737,883. M. A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES INDEX PAGE PART I - FINANCIAL INFORMATION Item 1. Financial Statements. Consolidated Statements of Income - Three Months and Nine Months Ended September 30, 1994 and 1993 2 Consolidated Balance Sheets - September 30, 1994 and December 31, 1993 3 Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1994 and 1993 4 Notes to Consolidated Financial Statements 5-6 Item 2. Management's Discussion and Analysis of Interim Financial Condition and Results of Operations. 7-9 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10 -1- PART 1 M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30 September 30 1994 1993 1994 1993 (Dollars in thousands except per share data) Net Sales $479,114 $388,059 $1,347,629 $1,135,251 Costs and Expenses Cost of goods sold 382,826 310,695 1,076,479 908,087 Selling, general and administrative 57,659 48,115 168,839 144,773 Provision for doubtful accounts 756 808 2,167 2,974 Other income (707) (915) (1,934) (2,880) Other expense 2,002 2,255 6,478 6,711 Interest on debt 7,178 8,086 21,521 24,780 Amortization 4,709 4,440 12,992 12,928 454,423 373,484 1,286,542 1,097,373 Income from Continuing Operations Before Extraordinary Item and Income Taxes 24,691 14,575 61,087 37,878 Income taxes 10,682 5,997 26,878 16,680 Income from Continuing Operations Before Extraordinary Item 14,009 8,578 34,209 21,198 Income(loss) from Discontinued Operations (1,115) 286 (1,115) 1,850 Income Before Extraordinary Item 12,894 8,864 33,094 23,048 Extraordinary Item - - (3,680) - Net Income $ 12,894 $ 8,864 $ 29,414 $ 23,048 Net Income per Share of Common Stock Primary Continuing operations $ 0.45 $ 0.28 $ 1.11 $ 0.69 Discontinued operations (0.03) 0.01 (0.04) 0.06 Extraordinary item - - (0.12) - Net income $ 0.42 $ 0.29 $ $0.95 $ 0.75 Fully diluted Continuing operations $ 0.44 $ 0.28 $ 1.09 $ 0.69 Discontinued operations (0.03) 0.01 (0.04) 0.06 Extraordinary item - - (0.12) - Net income $ 0.41 $ 0.29 $ 0.93 $ 0.75 Dividends per common share $ 0.125 $ 0.117 $ 0.375 $ 0.350
-2- M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)
September December 30, 1994 31, 1993 (Dollars in thousands) (c> Assets Current Assets Cash and cash equivalents $ 21,577 $ 37,645 Short-term securities - 5,061 Receivables 259,966 211,242 Inventories: Finished products 113,258 104,399 Raw materials and supplies 48,105 34,123 161,363 138,522 Prepaid expenses 3,292 4,494 Deferred taxes 22,854 22,922 Total current assets 469,052 419,886 Property, Plant and Equipment 382,005 359,880 Less allowances for depreciation and depletion 161,152 147,318 220,853 212,562 Other Assets Goodwill and other intangibles 410,571 382,822 Investments and other assets 93,793 88,736 Deferred taxes 34,171 37,296 538,535 508,854 $1,228,440 $1,141,302 Liabilities and Stockholders' Equity Current Liabilities Notes payable to banks $ 303 $ 2,478 Trade payables and accrued expenses 318,725 270,566 Current portion of long-term debt 821 740 Total current liabilities 319,849 273,784 Other Liabilities 182,190 179,959 Long-term Debt Senior notes 236,145 300,000 Other 84,653 22,103 320,798 322,103 Stockholders' Equity Preferred stock, without par value Authorized 5,000,000 shares Issued 132 shares - - Common stock, par value $1 Authorized 50,000,000 shares Issued 42,994,268 shares at September 30, 1994 and 28,605,722 shares at December 31, 1993 42,994 28,606 Capital surplus 308,272 299,389 Retained earnings 286,934 269,026 Associates ownership trust (121,858) (115,214) Cost of treasury stock (7,256,385 shares at September 30, 1994 and 4,864,707 shares at December 31, 1993) (102,221) (102,794) Minimum pension liability adjustment (8,577) (8,577) Accumulated translation adjustment 59 (4,980) 405,603 365,456 $1,228,440 $1,141,302
-3- M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 1994 1993 (Dollars in thousands) Cash Provided from (Used for) Operations Net income $29,414 $23,048 Discontinued operations 1,828 (379) Depreciation and amortization 38,283 36,450 Companies carried at equity: Income (4,383) (3,804) Dividends received 5,281 2,481 Changes in operating assets and liabilities: Receivables (41,955) (20,456) Inventories (16,981) (1,749) Prepaid expenses 382 2,556 Trade payables and other accruals 42,870 1,504 Restructuring obligations (8,618) (14,128) Extraordinary item 6,034 - Other 10,313 10,222 Net operating transactions 62,468 35,745 Cash Provided from (Used for) Investment Transactions Expenditures for property, plant and equipment (28,792) (12,897) Acquisition of companies, less cash acquired (53,371) (28,797) Acquisition obligations (3,302) (3,408) Sale of assets 13,874 3,390 Purchase of short-term securities - (5,077) Sale of short-term securities 5,061 25,702 Other 1,636 (1,055) Net investment transactions (64,894) (22,142) Cash Provided from (Used for) Financing Transactions Cash dividends paid (11,505) (10,260) Proceeds from the sale of common stock 13,856 2,398 Increase in debt 118,944 11,680 Reduction in debt (135,269) (26,756) Net financing transactions (13,974) (22,938) Effect of exchange rate changes on cash 332 (1,248) Cash and Cash Equivalents Decrease (16,068) (10,583) Beginning of period 37,645 54,277 End of period $21,577 $43,694 Cash paid during period Interest $28,423 $32,751 Income taxes 11,947 13,994
-4- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1994 Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and in the opinion of the Company include all adjustments necessary to present fairly the results of operations, financial position, and changes in cash flow. Reference should be made to the footnotes included in the 1993 Annual Report. The results of operations for the interim periods are not necessarily indicative of the results expected for the full year. Acquisitions On March 15, 1994, the Company acquired certain assets of North Coast Compounders, a producer of thermoplastic elastomers and other materials and on July 19, 1994, the Company acquired Th. Bergmann Kunststoffwerk GmbH, one of Germany's largest producers of specialty and reinforced thermoplastic compounds. The acquisitions have been accounted for using the purchase method of accounting. Had the acquisitions been made at the beginning of 1993, reported results of operations would not be materially different. Discontinued Operations Discontinued operations in 1993 include $1.5 million from the sale of a former natural resources affiliate and $.3 million in operating profits related to the Company's elastomeric membrane roofing business. During the fourth quarter of 1993, the Company announced it had reached a preliminary agreement to sell the roofing business. The sale closed on August 8,1994, resulting in an additional charge of $1.1 million in the third quarter of 1994 for additional costs incurred while obtaining government antitrust clearance for the sale. Net Income Per Share of Common Stock Primary net income per share of common stock is computed by dividing net income applicable to common stock by the average number of shares outstanding during the period (30,950,417 and 30,829,804 for the three month periods ended September 30, 1994 and 1993, respectively, and 30,816,863 and 30,708,787 for the nine month periods ended September 30, 1994 and 1993, respectively). -5- Shares of common stock held by the Associates Ownership Trust ("AOT") enter into the determination of the average number of shares outstanding as the shares are released from the AOT to fund a portion of the Company's obligations under certain of its employee compensation and benefit plans. The effect of assuming the exercise of stock options was not significant in 1994. The number of shares used to compute fully dilutive net income per share is based on the number of shares used for primary net income per share increased by the number of shares reserved under earnout provisions of purchase agreements and the common stock equivalents which would arise from the exercise of stock options and stock warrants. The average number of shares used in the computation were 31,596,388 and 30,863,259 for the three month periods ended September 30, 1994 and 1993, respectively, and 31,471,482 and 30,882,042 for the nine month periods ended September 30, 1994 and 1993, respectively. All per share amounts have been adjusted for a three-for-two stock split for shareholders of record on May 23, 1994 that was effected in the form of a stock dividend. -6- MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net sales increased $91.0 million in the third quarter of 1994 and $212.3 million in the first nine months of 1994 compared with the 1993 periods. Sales from polymer processing businesses increased $41.2 million and $106.7 million, respectively, due to higher unit volumes and acquisitions made in both 1993 and 1994. Resin distribution sales increased $29.8 million in the third quarter and $66.0 million in the first nine months over the comparable 1993 periods due to higher unit volumes and pricing. Polymer product sales increased from $113.5 million in third quarter of 1993 to $128.9 million in the comparable 1994 period and from $333.3 million for the first nine months of 1993 to $368.9 million in the first nine months of 1994 due to higher unit volumes. Sales from other operations decreased $1.0 million in the third quarter and $4.3 million in the first nine months compared with 1993 periods due to the sale of a business in the fourth quarter of 1993. Cost of goods sold increased $72.1 million in the third quarter of 1994 and $168.4 million for the first nine months of 1994 compared with 1993 periods and corresponds with the level of sales. Selling, general and administrative expenses increased $9.5 million in the third quarter of 1994 and $23.3 million in the first nine months of 1994 compared with 1993 periods due to acquisitions of polymer processing businesses in 1993 and 1994 and higher sales activities from existing businesses. However, as a percentage of sales, selling, general and administrative costs decreased from 12.6% and 13.0% in the 1993 periods to 12.2% and 12.7% in the comparable 1994 periods, reflecting the Company's ongoing efforts to manage these costs. Interest on debt decreased $.9 million in the third quarter of 1994 and $3.3 million in the first nine months of 1994 compared with 1993 levels due to lower average borrowings, lower interest rates and the repurchase of $63.9 million principal amount of the Company's Senior Notes in the second quarter of 1994. The repurchase of the Senior Notes resulted in an extraordinary after- tax charge to earnings of $3.7 million in the second quarter of 1994. Income from discontinued operations in 1993 consists of $1.5 million from the sale of a former natural resources affiliate and $.3 million in operating earnings from the Company's elastomeric membrane roofing business. During the fourth quarter of 1993, the Company announced it had reached a preliminary agreement to sell the roofing business. The sale closed on August 8, 1994, resulting in an additional charge of $1.1 million in the third -7- quarter of 1994 for additional costs incurred while obtaining government antitrust clearance for the sale. Liquidity and Sources of Capital The Company's ability to generate significant cash flows continued in the first nine months of 1994 with $62.5 million provided from operating activities. This amount includes the use of $15.7 million for working capital and $8.6 million for the payment of obligations related to prior restructurings. Investment transactions used $64.9 million and include $28.8 million for capital expenditures, $53.4 million related to acquisitions of businesses, partially offset by $5.1 million from the sale of short-term securities and $13.9 million from the sale of assets. Financing activities used $14.0 million and include $11.5 million for dividends, $16.4 million in net reductions of outstanding debt, partially offset by $13.9 million from proceeds from the sale of stock. The current ratio was 1.5:1 at September 30, 1994 and December 31, 1993. Long-term debt to total capital was 44.2% at September 30, 1994 compared with 46.8% at December 31, 1993. During the second quarter of 1994, the Company repurchased $63.9 million principal amount of its Senior Notes in the open market, resulting in an extraordinary after-tax charge of $3.7 million. Funds to repurchase the Senior Notes were obtained from existing cash flows as well as borrowings under the Company's credit agreements, which carry a lower rate of interest than the Senior Notes. On June 30, 1994, the Company entered into a new revolving credit agreement, replacing an existing credit agreement which provided for a reducing amount of credit availability. The new agreement provides commitments for borrowings up to $200 million through June 1998. The arrangement provides for interest rates to be determined at the time of borrowing based on a choice of formulas specified in the agreement. At September 30, 1994 , there were $28.9 million of outstanding borrowings supported by this agreement. The Company also had a credit agreement which provided commitments for borrowings of up to 150 million French francs through November 1996. The agreement provided for interest rates to be determined at the time of borrowing. During the third quarter of 1994, borrowings under this agreement were repaid and the credit agreement was terminated. On July 19, 1994, the Company acquired Th. Bergmann Kunststoffwerk GmBH. The Company entered into an acquisition financing agreement which provided for borrowings in German marks. It is the intent of the Company to refinance the acquisition financing in the fourth quarter of 1994 and the first quarter of 1995. The Company believes that its ability to generate cash flows from operations and the availability of funds under existing credit facilities will be sufficient to meet anticipated capital expenditure programs, existing obligations arising from prior -8- restructurings and acquisitions, dividend requirements and other planned financial commitments in 1994 and throughout the term of the existing credit facilities. Environmental Matters The Company is subject to various laws and regulations concerning environmental matters. The Company is committed to a long-term environmental protection program that reduces releases of hazardous materials into the environment as well as to the remediation of identified existing environmental concerns. The Company is involved in certain legal actions and claims arising in the ordinary course of business including lawsuits brought by the State of Idaho in 1983 and the United States government in 1993 seeking reimbursement from the Company and other defendants for alleged damages to the environment and clean- up costs for the area around the Blackbird Mine in Idaho. Claims have been made against a subsidiary of the Company for costs of environmental remediation measures taken or to be taken in connection with operations that have been sold or closed. These include the clean-up of Superfund sites and participation with other companies in the clean-up of hazardous waste disposal sites, several of which have been designated as Superfund sites. In April 1994, the New Jersey Department of Environmental Protection and Energy finalized a Record of Decision, which incorporates the agreed upon remediation to be performed by the Company's subsidiary at its Wharton, New Jersey site. Reserves for such liabilities have been established and no insurance recoveries have been reflected in the determination of reserves. In management's opinion, such litigation and claims will be resolved without material adverse effect of the financial position of the Company. -9- PART II Item 6. Exhibits and Reports on Form 8-K a) No reports on Form 8-K were filed during the quarter for which this report is filed. 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. M. A. HANNA COMPANY (Registrant) /s/ Thomas E. Lindsey Thomas E. Lindsey Controller (Principal Accounting Officer) Date: November 4, 1994 -10- EX-27 2 ART. 5 FOR THIRD QUARTER 10-Q
5 1,000 9-MOS DEC-31-1994 SEP-30-1994 21,577 0 264,686 12,771 161,363 469,052 382,005 161,152 1,228,440 319,849 320,798 0 0 42,994 362,609 1,228,440 1,347,629 1,347,629 1,076,479 1,076,479 0 2,167 21,521 61,087 26,878 34,209 (1,115) (3,680) 0 29,414 .95 .93
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