-----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, M/sMVaaUrU9p2GmjDHVE9lbOHJESy0VQ6592CU6uP8HCIdEcQ+6gHjHh1K+FAqak kjjzix4SJXt1tM1xZlhwCw== 0000045370-95-000005.txt : 19950511 0000045370-95-000005.hdr.sgml : 19950511 ACCESSION NUMBER: 0000045370-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950510 SROS: MSE SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANNA M A CO/DE CENTRAL INDEX KEY: 0000045370 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED RUBBER PRODUCTS, NEC [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: 95536270 BUSINESS ADDRESS: STREET 1: SUITE 36 5000 STREET 2: 200 PUBLIC SQUARE CITY: CLEVELAND STATE: OH ZIP: 44114-2304 BUSINESS PHONE: 2165894000 FORMER COMPANY: FORMER CONFORMED NAME: HANNA MINING CO DATE OF NAME CHANGE: 19850523 10-Q 1 1ST 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 March 31, 1995 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 East 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 be 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 35,504,053 M. A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES INDEX PAGE PART I - FINANCIAL INFORMATION Item 1. Financial Statements. Consolidated Statements of Income - Three Months ended March 31, 1995 and 1994 2 Consolidated Balance Sheets - March 31, 1995 and December 31, 1994 3 Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 1995 and 1994 4 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Interim Financial Condition and Results of Operations. 6-8 PART II - OTHER INFORMATION Item 3. Legal Proceedings 9 Item 4. Submission of Matters to a Vote of Security Holders 9 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) FIRST QUARTER 1995 1994 (Dollars in thousands except per share data) Net Sales $492,772 $388,520 Costs and Expenses Cost of goods sold 402,268 316,306 Selling, general and administrative 56,681 48,881 Other income (46) (478) Other expense 2,383 2,057 Interest on debt 6,937 7,566 Amortization 3,471 2,914 471,694 377,246 Income from Continuing Operations Before Income Taxes 21,078 11,274 Income taxes 9,064 5,064 Income from Continuing Operations 12,014 6,210 Income from Discontinued Operations 2,931 2,047 Net Income $ 14,945 $ 8,257 Net Income per Share of Common Stock Primary Continuing operations $ 0.39 $ 0.20 Discontinued operations 0.09 0.07 Net income $ 0.48 $ 0.27 Fully diluted Continuing operations $ 0.38 $ 0.19 Discontinued operations 0.09 0.07 Net income $ 0.47 $ 0.26 Dividends per common share $ 0.135 $ 0.125 -2- M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)
March December 31, 1995 31, 1994 (Dollars in thousands) Assets Current Assets Cash and cash equivalents $ 27,810 $ 23,105 Receivables 285,975 247,116 Inventories: Finished products 121,230 116,718 Raw materials and supplies 50,019 44,542 171,249 161,260 Prepaid expenses 3,502 3,981 Deferred taxes 23,480 26,938 Net assets of discontinued operations 104,518 103,215 Total current assets 616,534 565,615 Property, Plant and Equipment 357,691 342,543 Less allowances for depreciation and depletion 147,062 138,408 210,629 204,135 Other Assets Goodwill and other intangibles 334,712 330,757 Investments and other assets 80,587 79,803 Deferred taxes 34,103 34,850 449,402 445,410 $1,276,565 $1,215,160 Liabilities and Stockholders' Equity Current Liabilities Notes payable to banks $ 2,092 $ 931 Trade payables and accrued expenses 344,673 335,877 Current portion of long-term debt 724 683 Total current liabilities 347,489 337,491 Other Liabilities 169,650 173,888 Long-term Debt Senior notes 227,270 235,770 Other 108,461 53,099 335,731 288,869 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 43,037,609 shares at March 31, 1995 and 43,015,494 shares at December 31, 1994 43,037 43,015 Capital surplus 306,834 299,725 Retained earnings 307,397 296,632 Associates ownership trust (117,078) (111,471) Cost of treasury stock (7,533,556 shares at March 31, 1995 and 7,321,400 shares at December 31, 1994) (109,364) (103,731) Minimum pension liability adjustment (7,262) (7,262) Accumulated translation adjustment 131 (1,996) 423,695 414,912 $1,276,565 $1,215,160
-3- M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) THREE MONTHS ENDED MARCH 31 1995 1994 (Dollars in thousands) Cash Provided from (Used for) Operations Net income $14,945 $ 8,257 Discontinued operations 2,794 3,035 Depreciation and amortization 11,609 9,932 Companies carried at equity: Income (281) (730) Dividends received 850 750 Changes in operating assets and liabilities: Receivables (36,943) (9,997) Inventories (10,826) (3,496) Prepaid expenses 629 (1,602) Trade payables and other accruals 4,077 4,081 Restructuring obligations (3,344) (2,018) Other 2,636 2,518 Net operating transactions (13,854) 10,730 Cash Provided from (Used for) Investment Transactions Capital expenditures (12,021) (4,657) Acquisition of companies, less cash acquired - (1,861) Acquisition obligations (638) (682) Sale of short-term securities - 5,061 Other (1,766) 127 Net investment transactions (14,425) (2,012) Cash Provided from (Used for) Financing Transactions Cash dividends paid (4,178) (3,791) Proceeds from the sale of common stock 381 9,347 Purchase of shares for treasury (6,500) - Increase in debt 51,600 919 Reduction in debt (8,575) (14,249) Net financing transactions 32,728 (7,774) Effect of exchange rate changes on cash 256 (313) Cash and Cash Equivalents Increase 4,705 631 Beginning of period 23,105 37,645 End of period $27,810 $38,276 Cash paid during period Interest $12,387 $14,903 Income taxes 9,940 1,968 -4- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1995 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 1994 Annual Report. The results of operations for the interim periods are not necessarily indicative of the results expected for the full year. Discontinued Operations In December 1994, the Company adopted a plan to sell its Day International printing and textile business. The business consists of the manufacturing of printing blankets and other consumables for the printing industry and the manufacturing of engineered consumable supplies for the textile industry. In April 1995, the Company announced it had entered into an agreement to sell the business to American Industrial Partners Capital Fund. The agreement is contingent on American Industrial Partners securing financing and regulatory and other approvals. The Company believes the transaction will close late in the second quarter. 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 (31,053,936 in 1995 and 30,641,178 in 1994). 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 1995 and 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 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 31,678,640 in 1995 and 31,223,007 in 1994. -5- MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net sales increased from $388.5 million in 1994 to $492.8 million in 1995, an increase of 26.8%. Sales from processing businesses increased 25.3% over 1994 levels to $272.4 million. The increase is due to acquisitions made in 1994, higher unit volumes and pricing. Distribution sales increased $48.1 million to $219.0 million due to higher unit volumes and pricing. Sales from other operations were comparable with prior year levels. Cost of goods sold increased $86.0 million to $402.3 million in 1995 and corresponds with the increase in net sales. Gross margins were 18.4% in 1995 compared with 18.6% in 1994. Impacting gross margins in 1995 was a $2.4 million provision for inventories valued by the last-in first-out cost method. Absent this provision, gross margins would have been 18.9% in 1995. Selling, general and administrative expenses increased $7.8 million over 1994 levels due to the higher level of sales and acquisitions made in 1994. As a percentage of sales, selling, general and administrative costs were 11.5% in 1995 compared with 12.6% in 1994. Interest on debt decreased from $7.6 million in 1994 to $6.9 million in 1995. During the second quarter of 1994, the Company repurchased $64.2 million of its Senior Notes in the open market resulting in an after- tax extraordinary 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 revolving credit facility, which carry a lower rate of interest. In December 1994, the Company adopted a plan to sell its Day International printing and textile business. Accordingly, the operating results of that business have been reclassified as discontinued operations. In April 1995, the Company announced it had entered into an agreement to sell the business to American Industrial Partners Capital Fund. The Company believes the transaction will close late in the second quarter. Liquidity and Sources of Capital Operating activities used $13.9 million in the first quarter of 1995. This amount includes the use of $43.1 million for working capital and $3.3 million for the payment of obligations related to prior restructurings. -6- Investment activities used $14.4 million, which includes $12.0 million for capital expenditures. Financing activities provided $32.7 million and include $43.0 million from increases in outstanding debt, partially offset by $4.2 million for dividends and $6.5 million used in the purchase of stock for treasury. The Company has a credit agreement which 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 March 31, 1995, there were $63.3 million of outstanding borrowings supported by this agreement. In April 1995 the Company announced it had entered into an agreement to sell its Day International printing and textile business. The sale, which is subject to the buyer securing financing and obtaining regulatory approval, is expected to close late in the second quarter. Proceeds from the sale will be used to pay down outstanding borrowings and make further investment in the Company's processing and distribution businesses. The current ratio was 1.8:1 at March 31, 1995 compared with 1.7:1 at December 31, 1994. Excluding the net assets of discontinued operations, the current ratio was 1.5:1 at March 31, 1995 compared with 1.4:1 at December 31, 1994. Long-term debt to total capital was 44.2% at March 31, 1995 and 41.0% at December 31, 1994. 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. The Company and other principal defendants have entered into a settlement agreement among themselves allocating a minor share of responsibility to the Company. In turn, a Consent Decree was executed among the principal defendants and the State of Idaho and the United States government and was lodged with the Court on April 28, 1995. Assuming the Consent Decree is entered by the Court in its present form, all liability issues affecting the Company in these legal proceedings will have been settled without a material adverse effect on the results of operations or the financial position of the Company. -7- Claims have also 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 anticipated in the determination of reserves. In management's opinion, the aforementioned litigation and claims will be resolved without material adverse effect on the financial position of the Company. -8- PART II Item 3. Legal Proceedings With respect to the legal proceedings by the State of Idaho and the United States against the Registrant and other defendants involving alleged damages to the environment at the Blackbird Mine in Idaho, the Registrant and the other principal defendants have entered into a settlement agreement among themselves allocating a minor share of responsibility to the Registrant. In turn, a Consent Decree was executed among the principal defendants and the state and federal plaintiffs, and was lodged with the Court on April 28, 1995. It is expected that after a public comment period, the Consent Decree will be entered by the Court. Assuming that the Consent Decree is entered in its present form, all of the liability issues affecting Registrant in these legal proceedings will have been settled without a material adverse effect on Registrant's business or financial position. Item 4. Submission of Matters to a Vote of Security Holders a.) Annual meeting of stockholders held May 3, 1995. b.) Proxies for the meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934; there was no solicitation in opposition to management nominees as listed in the Proxy Statement; and nine directors were elected. c.) The appointment of Price Waterhouse LLP as the Company's independent public accountants for the year 1995 was ratified and approved. There were 31,197,340 shares voted in the affirmative, 117,842 shares voted in the negative and 240,493 shares abstained. d.) The adoption of the M.A. Hanna Company Voluntary Non- Qualified Deferred Compensation Plan was ratified and approved. There were 29,115,106 shares voted in the affirmative, 1,785,891 shares voted in the negative and 654,678 shares abstained. e.) The 1995 amendments to the M.A. Hanna Company Directors' Deferred Fee Plan was ratified and approved. There were 28,850,925 shares voted in the affirmative, 2,072,152 shares voted in the negative and 632,599 shares abstained. -9- Item 6. Exhibits and Reports on Form 8-K a) During the quarter ended March 31, 1995, the Registrant filed Current Report on From 8-K/A dated March 8, 1995 reporting that the Registrant had appointed Price Waterhouse LLP, replacing Ernst & Young LLP, who was dismissed, as its independent public accounting firm. 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 Controller (Principal Accounting Officer) Date: May 10, 1995 -10- EX-27 2
5 1,000 3-MOS DEC-31-1995 MAR-31-1995 27,810 0 298,235 12,260 171,249 616,534 357,691 147,062 1,276,565 347,489 335,731 43,037 0 0 380,658 1,276,565 492,772 492,772 402,268 402,268 0 908 6,937 21,078 9,064 12,014 2,931 0 0 14,945 .48 .47
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