0000045370-95-000017.txt : 19950809
0000045370-95-000017.hdr.sgml : 19950809
ACCESSION NUMBER: 0000045370-95-000017
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 2
CONFORMED PERIOD OF REPORT: 19950630
FILED AS OF DATE: 19950808
SROS: CSX
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: 95559608
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
2ND 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 June 30, 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
NOT APPLICABLE
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (l) 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 forthe past 90 days. Yes X No
Common Shares Outstanding, as of the close of the period
covered by this report 35,495,642
M. A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Statements of Income -
Three Months and Six Months ended
June 30, 1995 and 1994 2
Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994 3
Condensed Consolidated Statements of
Cash Flows - Six Months Ended
June 30, 1995 and 1994 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 I
M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
(Dollars in thousands except per share data)
Net Sales $483,295 $422,516 $976,067 $811,036
Costs and Expenses
Cost of goods sold 393,218 341,941 795,486 658,247
Selling, general and administrative 55,265 52,243 111,946 101,124
Other income (10,864) (569) (10,910) (1,047)
Other expense 1,654 2,418 4,037 4,475
Interest on debt 7,216 6,777 14,153 14,343
Amortization 3,497 2,718 6,968 5,632
449,986 405,528 921,680 782,774
Income from Continuing Operations Before
Extraordinary Item and Income Taxes 33,309 16,988 54,387 28,262
Income taxes 13,949 7,618 23,013 12,682
Income from Continuing Operations Before
Extraordinary Item 19,360 9,370 31,374 15,580
Income from Discontinued Operations 42,406 2,573 45,337 4,620
Income Before Extraordinary Item 61,766 11,943 76,711 20,200
Extraordinary Item - (3,680) - (3,680)
Net Income $ 61,766 $ 8,263 $ 76,711 $ 16,520
Net Income per Share of Common Stock
Primary
Continuing operations $ 0.62 $ 0.30 $ 1.01 $ 0.51
Discontinued operations 1.36 0.08 1.46 0.15
Extraordinary item - (0.12) - (0.12)
Net income $ 1.98 $ 0.26 $ 2.47 $ 0.54
Fully diluted
Continuing operations $ 0.61 $ 0.30 $ 0.99 $ 0.50
Discontinued operations 1.33 0.08 1.43 0.15
Extraordinary item - (0.12) - (0.12)
Net income $ 1.94 $ 0.26 $ 2.42 $ 0.53
Dividends per common share $ 0.135 $ 0.125 $ 0.27 $ 0.25
-2-
M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June December
30, 1995 31, 1994
(Dollars in thousands)
Assets
Current Assets
Cash and cash equivalents $ 102,626 $ 23,105
Short-term securities 40,139 -
Receivables 276,246 247,116
Inventories:
Finished products 135,404 116,718
Raw materials and supplies 48,442 44,542
183,846 161,260
Prepaid expenses 3,336 3,981
Deferred taxes 24,717 26,938
Net assets of discontinued operations - 103,215
Total current assets 630,910 565,615
Property, Plant and Equipment 373,968 342,543
Less allowances for depreciation and depletion 155,145 138,408
218,823 204,135
Other Assets
Goodwill and other intangibles 330,641 330,757
Investments and other assets 65,505 79,803
Deferred taxes 30,729 34,850
426,875 445,410
$1,276,608 $1,215,160
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable to banks $ 2,098 $ 931
Trade payables and accrued expenses 383,154 335,877
Current portion of long-term debt 643 683
Total current liabilities 385,895 337,491
Other Liabilities 172,324 173,888
Long-term Debt
Senior notes 227,270 235,770
Other 5,192 53,099
232,462 288,869
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 43,086,360 shares at June 30, 1995 and
43,015,494 shares at December 31, 1994 43,086 43,015
Capital surplus 311,305 299,725
Retained earnings 364,997 296,632
Associates ownership trust (118,589) (111,471)
Cost of treasury stock (7,590,718 shares at June 30, 1995
and 7,321,400 shares at December 31, 1994) (110,743) (103,731)
Minimum pension liability adjustment (7,262) (7,262)
Accumulated translation adjustment 3,133 (1,996)
485,927 414,912
$1,276,608 $1,215,160
-3-
M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
JUNE 30
1995 1994
(Dollars in thousands)
Cash Provided from (Used for) Operations
Net income $ 76,711 $16,520
Discontinued operations 4,797 6,422
Depreciation and amortization 23,608 19,653
Companies carried at equity:
Income (2,789) (2,177)
Dividends received 3,952 1,250
Changes in operating assets and liabilities:
Receivables (26,101) (23,450)
Inventories (28,516) (11,974)
Prepaid expenses 324 (4,069)
Trade payables and other accruals 37,553 25,711
Gain from sales of assets (84,427) -
Restructuring obligations (5,835) (5,607)
Extraordinary item - 6,034
Other 9,173 5,358
Net operating transactions 8,450 33,671
Cash Provided from (Used for) Investment Transactions
Capital expenditures (29,000) (15,033)
Acquisition of companies, less cash acquired - (1,875)
Acquisition obligations (2,335) (3,176)
Sales of assets 223,500 -
Purchase of short-term securities (40,139) -
Sale of short-term securities - 5,061
Other (6,051) (472)
Net investment transactions 145,975 (15,495)
Cash Provided from (Used for) Financing Transactions
Cash dividends paid (8,346) (7,643)
Proceeds from the sale of common stock 1,126 10,741
Purchase of shares for treasury (7,877) -
Increase in debt 57,543 53,574
Reduction in debt (117,636) (85,822)
Net financing transactions (75,190) (29,150)
Effect of exchange rate changes on cash 286 (445)
Cash and Cash Equivalents
Increase (Decrease) 79,521 (11,419)
Beginning of period 23,105 37,645
End of period $102,626 $26,226
Cash paid during period
Interest $ 14,794 $16,253
Income taxes 22,065 8,843
-4-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 sale consummated on June 6, 1995 with the Company realizing a
gain from the sale of $40,254,000. Had the sale been consummated as of
January 1, 1994, fully diluted earnings per share from continuing
operations would have been $.64 and $.31 for the three months ended June
30, 1995 and 1994, respectively and $1.05 and $.52 for the six months
ended June 30, 1995 and 1994, respectively.
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 (31,144,475 and 30,858,926 for the three
month periods ended June 30, 1995 and 1994, respectively, and 31,097,721
and 30,750,684 for the six month periods ended June 30, 1995 and 1994,
respectively). 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.
-5-
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 31,792,339 and 31,478,730 for the
three month periods ended June 30, 1995 and 1994, respectively, and
31,750,525 and 31,376,188 for the six month periods ended June 30, 1995 and
1994, respectively.
-6-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
INTERIM FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales increased $60.8 million in the second quarter of 1995 and
$165.0 million in the first six months of 1995 as compared with the 1994
periods. Sales from processing businesses increased $23.3 million in the
second quarter of 1995 and $78.4 million in the first six months of 1995
over comparable 1994 periods due to pricing, acquisitions made in 1994
and the impact of exchange, partially offset by lower volume. Sales from
distribution businesses increased from $187.3 million in the second
quarter of 1994 to $220.1 million in the comparable 1995 period and from
$358.2 million in the first six months of 1994 to $439.1 million in the
first six months of 1995 due to higher unit volumes and pricing. Sales
from other operations were comparable with prior year levels.
Gross margins were 18.6% in the second quarter of 1995 and 18.5% for the
first six months compared with 19.1% and 18.8%, respectively, for the
comparable 1994 periods. Absent the provision in 1995 for inventories
valued by the last-in first-out cost method, gross margins would have
been 19.1% and 19.0% in the second quarter and first six months of 1995,
respectively.
Selling, general and administrative costs increased $3.0 million in the
second quarter of 1995 and $10.8 million in the first six months of 1995
due to acquisitions made in 1994 and higher sales activities from
existing businesses. However, as a percentage of sales, selling, general
and administrative expenses decreased from 12.4% and 12.5% in the 1994
periods to 11.4% and 11.5% in the comparable 1995 periods, reflecting the
Company's ongoing efforts to manage these costs.
Other income in the second quarter and first six months of 1995 includes
a gain of $9.3 million from the sale of its 8% interest in Iron Ore
Company of Canada. The Company will continue to receive fees as managing
agent and from its interest in the sales agency through 1996.
In December 1994, the Company adopted a plan to sell its Day
International printing and textile business. Accordingly, the results
of that business were reclassified as discontinued operations. In June
1995, the previously announced sale of the business to American
Industrial Partners Capital Fund was consummated with the Company
recognizing a gain of $40.3 million.
The extraordinary item in 1994 of $3.7 million is the premium associated
with the repurchase of $64 million of the Company's Senior Notes.
-7-
Liquidity and Sources of Capital
Operating activities provided $8.5 million in the first half of 1995.
This amount includes the use of $55.2 million for working capital and
$5.8 million for the payment of obligations related to prior
restructurings. Investment activities provided $146.0 million which
includes $223.5 million from the sale of assets, partially offset by
$29.0 million for capital expenditures and $40.1 million invested in
short-term securities. Financing activities used $75.2 million and
include $60.1 million in net reductions of long-term debt, $8.3 million
for dividends and $7.9 million for 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 agreement provides
for interest rates to be determined at the time of borrowing based on a
choice of formulas specified in the agreement. At June 30, 1995, there
were no borrowings outstanding under this agreement.
The current ratio was 1.6:1 at June 30, 1995 compared with 1.7:1 at
December 31, 1994. Long-term debt to total capital was 32.4% at June 30,
1995 compared with 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.
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
-8-
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.
-9-
PART II
Item 6. Exhibits and Reports on Form 8-K
a) During the quarter ended June 30, 1995, the Registrant filed
Current Report on Form 8-K dated June 21, 1995 reporting that
the Registrant had completed the previously announced
disposition of its printing and textile businesses to Day
International Group, Inc., a company newly organized by
American Industrial Partners.
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: August 8, 1995
-10-
EX-27
2
5
1,000
6-MOS
DEC-31-1995
JUN-30-1995
102,626
40,139
288,219
11,973
183,846
630,910
373,968
155,145
1,276,608
385,895
232,462
43,086
0
0
442,841
1,276,608
976,067
976,067
795,486
795,486
0
1,805
14,153
54,387
23,013
31,374
45,337
0
0
76,711
2.47
2.42