-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PVZW8unVOYYd/jl4B6v5dDR3Thh+AEQejB9WFQYbQc2CzJ+Fj6paiFuvTXkk5rXe 1smnkUxnMp0BE7yJ46Dq9g== 0000045370-96-000002.txt : 19960325 0000045370-96-000002.hdr.sgml : 19960325 ACCESSION NUMBER: 0000045370-96-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960322 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05222 FILM NUMBER: 96537266 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-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Fiscal year ended December 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 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock, $1 par value New York Stock Exchange Chicago Stock Exchange 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 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Aggregate market value of the voting stock held by nonaffiliates of the Registrant, computed by reference to the price at which the stock was sold as of February 16, 1996: $1,019,678,689.00. Common Shares outstanding as of February 16, 1996: 34,712,466. DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents are incorporated by reference into the designated parts of this Form 10-K: (1) Registrant's definitive proxy statement distributed to stockholders dated March 20, 1996, filed with the Commission pursuant to Regulation 14A and incorporated by reference into Parts I and III of this Form 10-K; and (2) Registrant's Annual Report distributed to stockholders for the fiscal year ended December 31, 1995, incorporated by reference into Parts I and II of this Form 10-K. With the exception of the information specifically incorporated by reference, neither the Registrant's proxy statement nor the 1995 Annual Report to stockholders is deemed to be filed as part of this Form 10-K. Except as otherwise stated, the information contained in this report is given as of December 31, 1995, the end of the Registrant's last fiscal year. PART I ITEM 1. BUSINESS (a) Acquisitions and Dispositions On May 25, 1995, the Registrant sold its remaining 8.14 percent equity interest in Iron Ore Company of Canada ("IOC") to IOC. With mining and processing operations in Newfoundland and ore loading facilities in Quebec, IOC sells iron ore concentrates and pellets to major steel plants in North America, Europe and Asia. The Registrant will continue to act as the managing agent of IOC through December 31, 1996. On June 6, 1995, the Registrant completed the previously announced sale of its Day International, Inc. subsidiary, based in Dayton, Ohio. Day International, Inc., with annual sales of $120 million, produced highly engineered printing blankets for offset printing presses, as well as aprons, cots and other consumable parts used in the textile industry. In January 1995 the Registrant merged its Bruck Plastics Company, Fiberchem, Inc. and Plastic Distributing Corporation business units, to form M. A. Hanna Resin Distribution, headquartered in Lemont, Illinois. In June 1995, the Registrant announced the merger of its Allied Color Industries, Inc., PMS Consolidated, Inc. and Wilson Color, Inc. business units into a single unit named M. A. Hanna Color, headquartered in Suwanee, Georgia. And in October 1995, the Registrant announced the merger of its Burton Rubber Processing, Inc. and Colonial Rubber Works, Inc. business units to form a single unit named M. A. Hanna Rubber Compounding, with headquarters in Chagrin Falls, Ohio. On January 4, 1996, the Registrant announced that it had entered into an agreement with Suzhou Plastic Factory #1 ("SPF1") to form a plastics compounding joint venture in Suzhou, Jiangsu Province, China, about 60 miles west of Shanghai. The joint venture, to be known as Hanna Su Xing Plastics Compounding (Suzhou) Company Limited, will be housed in a new facility with 13 million pounds of annual capacity, to be built in 1996 and to be operated by approximately 65 associates, including management transferred from SPF1's existing compounding operations. The joint venture's primary products will be polypropylene, nylon and ABS compounds for the automotive and appliance markets. On January 26, 1996, the Registrant completed its previously announced tender offer for the shares of CIMCO, Inc., a producer of thermoplastic compounds and plastic components based in Costa Mesa, California. A total of 2,896,412, or approximately 97.4 percent of all outstanding shares of CIMCO stock, were tendered in response to the $10.50 per share offer, and the balance of the shares were acquired by cash offer. The Registrant had previously announced its intention to sell CIMCO's plastic components business, and to retain its plastic compounding business, Compounding Technology, Inc. ("CTi"), with plants in Singapore, Corona, California, and Charlotte, North Carolina and a fourth plant under construction in France. On March 14, 1996, the Registrant announced that it had reached an agreement to acquire Victor International Plastics, Ltd., a leading producer of color masterbatch in the United Kingdom, from Rexam, Plc. Victor International Plastics has annual sales of more than $50 million, has 55 million pounds of capacity and serves the injection and blow molding end markets. It employs 180 associates at its three operations in London, Manchester and Coventry, England. (b) See the financial information regarding the Registrant's business segments set forth at page 29 of the Registrant's Annual Report distributed to stockholders for the fiscal year ended December 31, 1995, which page is incorporated herein by this reference. (c) (1)(i) Formulated Polymers (a) Processing The Registrant, through its Bergmann, CTi, DH Compounding, M.A. Hanna Engineered Materials, M. A. Hanna Rubber Compounding, MACH-I Compounding, M. A. Hanna Thermoplastic Elastomers, and Southwest Chemical Services business units, engages in the custom compounding of plastic and rubber materials to the specifications of manufacturers of plastic and rubber products for customers located throughout North America, Europe and Asia. Through its M. A. Hanna Color, Hanna Polimeros, Synthecolor and Wilson Color business units, the Registrant manufactures custom formulated colorants in the form of color concentrates, liquid dispersions, dry colorants, and additives for customers in the plastics industry throughout North America, Europe, South America and Asia. M. A. Hanna Color and Wilson Color also produce specialty colorants and additives for the automobile, vinyl siding and textile industries and for the wire and cable industry, respectively. (b) Distribution Through its M. A. Hanna Resin Distribution and M.A. Hanna de Mexico business units, the Registrant distributes thermoplastic and thermoset resins and fiberglass materials in North America. Through its Cadillac Plastic business unit, Registrant engages in the worldwide distribution of engineered plastic sheet, rod, tube, and film products to industrial and retail customers as well as cutting and machining plastic products to customers' specifications and thermoforming plastic into products such as skylights and signs. Other Operations Through its Colonial Diversified Polymer Products business unit, Registrant manufactures molded sponge automotive parts for customers located throughout the United States and Canada. Registrant also engages in the management of marine terminals, management of an iron ore mine in Quebec, Canada, and insurance services. Net sales and operating revenues from Registrant's operations outside the polymers industry do not individually constitute 10 percent or more of Registrant's consolidated revenues. (1)(iii) In Registrant's processing segment the primary raw materials required are natural and synthetic rubbers, plastics, and chemicals, all of which are available in adequate supply. The primary raw materials required by Registrant's color and additive concentrate units are plastics, chemicals, and organic and inorganic pigments, all of which are available in adequate supply. (1) (iv) Registrant's processing business units own numerous patents and trademarks, which are important in that they protect the Registrant's corresponding inventions and product names against infringement by others and thereby enhance Registrant's position in the marketplace. The patents vary in duration from 1 year to 20 years, and the trademarks have an indefinite life which is based upon continued use. (1)(x) The custom compounding of plastic and rubber materials is highly competitive, with product quality and service to customers being principal factors affecting competition. Registrant believes it is the largest independent custom compounder of rubber and a leading compounder of plastics in North America in terms of pounds produced. The manufacture of custom formulated color and additive concentrates for the plastics industry is highly competitive with product quality and service to customers being principal factors affecting competition. Registrant believes it is one of the leading producers of custom formulated color and additive concentrates in the United States and Europe. The distribution of engineered plastic sheet, rod, tube, film products, and polymer resins is highly competitive with product quality and service to customers being principal factors affecting competition. Registrant believes it is one of the leading distributors of such products in the world. The manufacture of molded sponge automotive parts is highly competitive, with quality, price and service to customers being principal factors affecting competition. Information generally available indicates that Registrant is among the leading suppliers of such parts in the United States. (1)(xii) At each of its operations the Registrant, its subsidiaries, and associated companies are governed by laws and regulations designed to protect the environment and in this connection Registrant has adopted a corporate policy which directs compliance with the various requirements of these laws and regulations. The Registrant believes that it, its subsidiaries and associated companies are in substantial compliance with all such laws and regulations, although it recognizes that these laws and regulations are constantly changing. There are presently no material estimated capital expenditures for further environmental control facilities projected by the Registrant, its subsidiaries and associated companies for any of its operations. (1)(xiii) Registrant employs 5,695 persons at its consolidated operations (6,799 in 1994) and manages operations for others that employ 2,302 persons (2,245 in 1994). (d)(1) See information regarding Registrant's international operations at page 29 of Registrant's Annual Report distributed to stockholders for the fiscal year ended December 31, 1995, which page is incorporated herein by this reference. (2) The international operations in which the Registrant and its subsidiaries have equity interests, and the investments of the Registrant and its subsidiaries in such companies, may be affected from time to time by foreign political and economic developments, laws and regulations, increases or decreases in costs in such countries and changes in the relative values of the various currencies involved. ITEM 2. PROPERTIES The table below sets forth the principal plants and properties owned or leased by the Registrant's formulated polymers business units. For properties which are leased, the date of expiration of the current term of the lease is indicated. Properties which are shown as owned are owned in fee simple. Some properties may be subject to minor encumbrances of a nature which do not materially affect the Registrant's operations. In addition, Registrant's Cadillac Plastic and M. A. Hanna Resin Distribution business units lease floor space at various locations within the United States. They are used by the regional branches for sales offices, for the distribution of Registrant's products, for fabrication, and for warehousing. These are short- term leases. Registrant's Cadillac Plastic business unit also leases space for regional branches in various locations outside the United States, including Australia, Belgium, Canada, France, Germany, Hong Kong, Korea, Malaysia, Mexico, Netherlands, New Zealand, Singapore, Spain, Sweden, Taiwan and Vietnam. Approximate Owned/ Size Location Facility Leased (sq. ft.) Burton, M. A. Hanna Rubber Owned 160,000 Ohio Compounding _________________________________________________________________ Macedonia, MACH-1 Owned 87,000 Ohio Compounding _________________________________________________________________ Tillsonburg, M. A. Hanna Rubber Owned 60,000 Ontario Compounding _________________________________________________________________ Jonesboro, M. A. Hanna Rubber Owned 69,000 Tennessee Compounding _________________________________________________________________ DeForest M. A. Hanna Rubber Owned 130,000 Wisconsin Compounding _________________________________________________________________ Santa Fe Springs, M. A. Hanna Rubber Leased 13,231 California Compounding 1996 _________________________________________________________________ Broadview Heights, M. A. Hanna Color Owned 61,000 Ohio _________________________________________________________________ Approximate Owned/ Size Location Facility Leased (sq. ft.) Greenville, M. A. Hanna Color Owned 65,000 South Carolina _________________________________________________________________ Phoenix, M. A. Hanna Color Owned 20,500 Arizona _________________________________________________________________ Vonore, M. A. Hanna Color Owned 47,000 Tennessee _________________________________________________________________ North Kansas City, M. A. Hanna Color Leased 44,000 Missouri 1998 _________________________________________________________________ San Fernando, M. A. Hanna Color Leased 50,000 California 1998 _________________________________________________________________ Vancouver, M. A. Hanna Color Leased 35,000 Washington 2002 _________________________________________________________________ Troy, Cadillac Plastic Leased 29,175 Michigan (headquarters) 1998 _________________________________________________________________ Lemont, M. A. Hanna Resin Leased 103,000 Illinois Distribution 2008 (headquarters) _________________________________________________________________ Seattle, M. A. Hanna Resin Leased 79,000 Washington Distribution 2005 _________________________________________________________________ Kingstree, M. A. Hanna Rubber Owned 156,174 South Carolina Compounding _________________________________________________________________ Dyersburg, M. A. Hanna Owned 862,399 Tennessee Engineered Materials, M. A. Hanna Rubber Compounding and Colonial Diversified Polymer Products _________________________________________________________________ Approximate Owned/ Size Location Facility Leased (sq. ft.) Bethlehem, M. A. Hanna Leased Pennsylvania Engineered 2004 82,000 Materials 1999 25,400 _________________________________________________________________ Suwanee, M. A. Hanna Color Owned 20,000 Georgia (headquarters) _________________________________________________________________ Suwanee, M. A. Hanna Color Owned 44,022 Georgia (technical center) _________________________________________________________________ Somerset, M. A. Hanna Color Owned 44,300 New Jersey _________________________________________________________________ Florence, M. A. Hanna Color Owned 30,000 Kentucky _________________________________________________________________ Gastonia, M. A. Hanna Color Owned 43,992 North Carolina _________________________________________________________________ Elk Grove Village, M. A. Hanna Color Owned 51,870 Illinois _________________________________________________________________ St. Peters, M. A. Hanna Color Owned 32,480 Missouri _________________________________________________________________ Fort Worth, M. A. Hanna Color Owned 75,080 Texas _________________________________________________________________ Norwalk, M. A. Hanna Color Owned 94,000 Ohio _________________________________________________________________ Gardena, M. A. Hanna Color Owned 46,652 California _________________________________________________________________ Carolina, M. A. Hanna Color Leased 12,600 Puerto Rico 1999 _________________________________________________________________ Approximate Owned/ Size Location Facility Leased (sq. ft.) Buford, M. A. Hanna Color Leased 73,300 Georgia 1997 _________________________________________________________________ Milford, M. A. Hanna Color Leased 20,600 New Hampshire 2000 _________________________________________________________________ Toluca, Hanna Polimeros Owned 22,000 Mexico _________________________________________________________________ LaPorte, Southwest Chemical Owned 200,000 Texas Services, Inc. _________________________________________________________________ Ayer, M. A. Hanna Resin Leased 82,000 Massachusetts Distribution 2000 _________________________________________________________________ Houston, M. A. Hanna Leased Texas Engineered 1997 88,000 Materials 1998 44,120 _________________________________________________________________ Statesville, M. A. Hanna Resin Leased 48,240 North Carolina Distribution 1998 _________________________________________________________________ Neshanic Station, M. A. Hanna Color Leased 123,000 New Jersey 1997 _________________________________________________________________ North Ridgeville M. A. Hanna Leased 40,750 Ohio Thermoplastic 1999 Elastomers _________________________________________________________________ Assesse, Wilson Color Owned 120,976 Belgium _________________________________________________________________ Tossiat, Wilson color Owned 87,188 France _________________________________________________________________ Approximate Owned/ Size Location Facility Leased (sq. ft.) Bendorf, Wilson Color Owned 72,086 Germany _________________________________________________________________ Angered, Wilson Color Owned 22,259 Sweden _________________________________________________________________ Paris, Synthecolor Owned 46,285 France Leased 16,146 _________________________________________________________________ Gaggenau, Bergmann Owned 241,114 Germany _________________________________________________________________ Barbastro, Polibasa (Bergmann) Owned 71,042 Spain _________________________________________________________________ Corona, Compounding Leased 32,000 California Technology, Inc. 2001 _________________________________________________________________ Charlotte, Compounding Leased 20,100 North Carolina Technology, Inc. 1997 _________________________________________________________________ Singapore Compounding Leased 43,000 Technology, Inc. 1996 _________________________________________________________________ Registrant's combined annual plastic and rubber compounding capacity and colorant manufacturing capacity, based on the estimated design capacities of Registrant's plants, amounts to approximately 700 million pounds of compounded rubber products, 825 million pounds of compounded plastic products and over 235 million pounds of colorants. A variation in the mix of products produced at a given plant results in a corresponding increase or decrease in the quantity (in pounds) of products that can be produced at full capacity. Beyond these estimated capacities for Registrant's rubber and plastic compounding and colorant manufacturing properties, there are no comparative measurement units of production capacity that reasonably can be ascribed to Registrant's other properties in the processing segment. Registrant's 50 percent-owned partnership, DH Compounding Company, owns and operates an engineering plastics compounding plant in Clinton, Tennessee. The 150,000 square foot plant has an annual design capacity of 90 million pounds. ITEM 3. LEGAL PROCEEDINGS Registrant, directly and indirectly through a wholly-owned subsidiary, is obligated for costs of environmental remediation measures taken and to be taken in connection with certain operations that have been sold or discontinued. These include the clean-up of a Superfund site and participation with other companies in the clean-up of hazardous waste disposal sites, several of which have been designated as Superfund sites. Registrant has established reserves for these anticipated liabilities for environmental remediation, which do not reflect potential insurance recoveries and which management believes are adequate to cover Registrant's ultimate exposure. Registrant believes that these liabilities will not have a material adverse effect on the Registrant's business or financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. _______ EXECUTIVE OFFICERS OF THE REGISTRANT The following table lists information as of March 1, 1996, as to each executive officer of the Registrant, including his position with the Registrant as of that date and other positions held by him during at least the past five years: M. D. Walker Chairman and Chief Executive Age - 63 Officer. Chairman and Chief Executive Officer, September 1986 to date; President, December 1988 - May 1989. D. J. McGregor President and Chief Operating Age - 55 Officer. Senior Vice President- Operations of the Registrant, March 1988 - September 1988; Executive Vice President, September 1988 - May 1989; President and Chief Operating Officer, May 1989 to date. L. L. Beach Vice President, Human Resources. Age - 51 Vice President, Human Resources of Kraft USA (1989-1991) and of Kraft Foods International (manufacturer and distributor of consumer products) 1991 to April 1995. Vice President, Human Resources of the Registrant, April 1995 to present. S. P. Chong Vice President-Total Quality Age - 53 Planning & Technical Services. Vice President-Technical Services, 1986 - May 1990; Vice President Total Quality Planning & Technical Services, May 1990 to date. M. S. Duffey Vice President, Chief Financial Age - 41 Officer and Treasurer. Vice President and Treasurer, Outboard Marine Corporation (manufacturer of recreational boats and marine engines), 1986-1992; Vice President and Treasurer, Foote, Cone & Belding Communications, Inc. (world-wide advertising agency) 1992 - July 1994. Treasurer of the Registrant, July 1994 - April 1995; Vice President, Chief Financial Officer and Treasurer of Registrant, April 1995 to date. G. W. Henry Vice President, International Age - 50 Operations. Comptroller, 1985 - July 1990; Vice President, 1987 - July 1990; Vice President - Marine Services and Special Projects, July 1990 - February 1992; Vice President - Operations, February 1992 - October 1994; Vice President, International Operations, October 1994 to date. J. S. Pyke, Jr. Vice President, General Counsel Age - 57 and Secretary. Secretary, 1973 to date; Vice President, 1979 to date. D. R. Schrank Vice President, North American Age - 47 Plastics Operations. Senior Vice President and Chief Financial Officer, Sealy, Inc. (bedding manufacturer) 1989 to September 1993. Vice President and Chief Financial Officer of the Registrant, September 1993 - April 1995; Vice President of the Registrant's North American Plastics Operations, April 1995 to date. T. E. Lindsey Controller. Assistant Controller Age - 45 of the Registrant 1987 to July 1990; Controller, July 1990 to date. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS See the tables regarding Registrant's Stock Price Data at page 34 and Stock Information at page 35 of Registrant's Annual Report distributed to stockholders for the fiscal year ended December 31, 1995, which tables and information are incorporated herein by this reference. ITEM 6. SELECTED FINANCIAL DATA See Selected Financial Data at page 35 of Registrant's Annual Report distributed to stockholders for the fiscal year ended December 31, 1995, which Selected Financial Data is incorporated herein by this reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS See pages 36 through 37 of Registrant's Annual Report distributed to stockholders for the fiscal year ended December 31, 1995, which pages are incorporated herein by this reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See pages 21 through 38 of Registrant's Annual Report distributed to stockholders for the fiscal year ended December 31, 1995, which pages and section are incorporated herein by this reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE See Registrant's current report on Form 8-K/A dated March 8, 1995, which report is incorporated herein by this reference. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Directors See the table listing nominees for directors on page 2 of Registrant's definitive proxy statement distributed to stockholders dated March 20, 1996, filed with the Commission pursuant to Regulation 14A, which table is incorporated herein by this reference. Executive Officers See the item captioned "Executive Officers of the Registrant" in Part I of this Form 10-K, which item is incorporated herein by this reference. ITEM 11. EXECUTIVE COMPENSATION See the section captioned "Executive Compensation" at pages 5 through 12 of Registrant's definitive proxy statement distributed to stockholders dated March 20, 1996, filed with the Commission pursuant to Regulation 14A, which section is incorporated herein by this reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) Security Ownership of Certain Beneficial Owners: See the section captioned "Holdings of Shares of the Company's Common Stock" at page 4 of Registrant's definitive proxy statement distributed to stockholders dated March 20, 1996 filed with the Commission pursuant to Regulation 14A, which section is incorporated herein by this reference. (b) Security Ownership by Management: See the table, and footnotes thereto, regarding beneficial ownership of the Registrant's Common Stock by management, at page 3 of Registrant's definitive proxy statement distributed to stockholders dated March 20, 1996 filed with the Commission pursuant to Regulation 14A, which table and footnotes are incorporated herein by this reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. and 2. -- The response to this portion of Item 14 is submitted as a separate section commencing on page F-1 of this Form 10-K. 3. List of Exhibits. [Those documents listed below that are incorporated herein by reference to Registrant's earlier periodic reports were filed with the Commission under Registrant's File No. 1-5222.] (i) Exhibits filed pursuant to Regulation S-K (Item 601): (2) Plan of Disposition. Stock Purchase Agreement , dated April 11, 1995, as amended, by and among Day International Group, Inc. (formerly known as Day International Holdings Inc.), Cadillac Plastic Group, Inc. and Registrant, filed as Exhibit 1 to Registrant's current report on Form 8-K dated June 21, 1995, and incorporated herein by this reference. (3) Articles of Incorporation and By-laws. (a) Registrant's Articles of Incorporation (as restated as of November 13, 1989, and currently in effect), filed as Exhibit 3(b) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated herein by this reference. (b) Registrant's By-laws (as amended and restated as of March 2, 1988, and currently in effect), filed as Exhibit 3(d) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987 and incorporated herein by this reference. (4) Instruments Defining the Rights of Security Holders: (a) Rights Agreement, dated December 4, 1991, between the Registrant and Ameritrust Company National Association, filed as Exhibit 4.1 to Registrant's Form 8-K dated December 4, 1991, and incorporated herein by this reference. (b) Credit Agreement, dated June 30, 1994 between the Registrant, Citibank, N.A. and the other banks signatory thereto, a copy of which will be provided to the Commission upon request. (c) Indenture dated September 15, 1991 between the Registrant and Ameritrust Company, National Association, Trustee relating to Registrant's $100,000,000 aggregate principal amount of 9% Senior Notes due 1998 and $150,000,000 aggregate principal amount of 9 3/8% Senior notes due 2003, filed as Exhibit 4 to the Registrant's Form S-3 filed on September 18, 1991, and incorporated herein by this reference. (d) Indenture dated September 26, 1991 between the Registrant and Ameritrust Texas, National Association, Trustee, relating to Registrant's $50,000,000 aggregate principal amount of 9% Notes due 1998, filed as Exhibit 4 to the Registrant's Form S- 3 filed on October 24, 1991, and incorporated herein by this reference. (e) Associates Ownership Trust Agreement dated September 12, 1991, between Registrant and Wachovia Bank of North Carolina, filed as Exhibit 28.3 to Registrant's Current Report on Form 8-K dated September 12, 1991, and incorporated herein by this reference. (10) Material Contracts: *(a) The Restated 1979 Executive Incentive Compensation Plan of the Registrant, filed as Exhibit 5 to the Form S-8 Registration Statement No. 2-70755 filed with the Commission on February 19, 1981 and incorporated herein by this reference, and amendment to the Plan, as ratified and approved by Registrant's stockholders on October 3, 1983, filed as Exhibit 10(c) to Registrant's Form 10-K for the fiscal year ended December 31, 1983 and incorporated herein by this reference. Also amendment to the Plan as approved by Registrant's stockholders on May 1, 1985, filed as Exhibit 10(c) to Registrant's Form 10-K for the fiscal year ended December 31, 1985 and incorporated herein by this reference. *(b) Forms of 1985 Stock Option Agreement, 1985 Grant of Appreciation Rights and 1985 Grant of Performance Rights under the 1979 Executive Incentive Compensation Plan, filed as Exhibit 10(g) to Registrant's Form 10-K for the fiscal year ended December 31, 1985 and incorporated herein by this reference. *(c) Forms of 1987 Stock Option Agreement, 1987 Grant of Appreciation Rights and 1987 Grant of Performance Rights under the 1979 Executive Incentive Compensation Plan, filed as Exhibit 10(e) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1986, and incorporated herein by this reference. *(d) 1988 Long-Term Incentive Plan, and forms of Grants of Stock Options, Grants of Appreciation Rights and Grants of Long-Term Incentive Units thereunder, filed as Exhibit 10(e) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, and incorporated herein by this reference. Also forms of 1989 Stock Option Agreement, 1989 Grant of Appreciation Rights and 1989 Grant of Long-Term Incentive Units, filed as Exhibit 10(e) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989 and incorporated herein by this reference. Also 1990 Amendment to the Plan, filed as Exhibit 10(e) to Registrant's Form 10-K for the fiscal year ended December 31, 1990 and incorporated herein by this reference and forms of 1990 Stock Option Agreement, 1990 Grant of Appreciation Rights and 1990 Grant of Long-Term Incentive Units, filed as Exhibit 10(e) to Registrant's Form 10-K for the fiscal year ended December 31, 1990 and incorporated herein by this reference. Also 1991 Amendment to the Plan, and forms of 1991 Stock Option Agreement, 1991 Grant of Appreciation Rights, 1991 Grant of Long Term Incentive Units, and 1991 Stock Option Agreement with non-employee directors of Registration, filed as Exhibit 10(f) to Registrant's Form 10-K for the fiscal year ended December 31, 1991, and incorporated herein by this reference. Also forms of 1992 Stock Option Agreement and 1992 Grant of Long Term Incentive Units, filed as Exhibit 10(e) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by this reference. Also 1994 Amendment to the Plan, filed as Exhibit A to Registrant's definitive proxy statement distributed to stockholders dated March 17, 1994 and incorporated herein by this reference. *(e) Form of Supplemental Deferred Compensation agreement in which any of the five most highly compensated executive officers of the Registrant participates, filed as Exhibit 10(e) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein by this reference. *(f) Form of Supplemental Death Benefits agreement in which any of the five most highly compensated executive officers of the Registrant participates, filed as Exhibit 10(f) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein by this reference. *(g) Form of Employment Agreement dated as of February 17, 1989 between Registrant and certain of Registrant's executive officers filed as Exhibit 10(h) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988 and incorporated herein by this reference. Also (i) Employment Agreement dated as of September 27, 1993, between D. R. Schrank and Registrant, filed as Exhibit (a) to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, and incorporated herein by this reference; and (ii) Employment Agreement dated March 1, 1993 between D. J. McGregor and Registrant, filed as Exhibit 10(g) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein by this reference. *(h) Description of Directors' compensation and retirement plan, set forth in the section captioned "Directors' Compensation" on pages 12 through 13 of Registrant's definitive proxy statement dated March 20, 1996, as distributed to stockholders and filed with the Commission pursuant to Regulation 14A, which section is incorporated herein by this reference. Also, 1995 Amendments to Directors' Deferred Fee Plan, filed as Exhibit B to Registrant's definitive proxy statement distributed to stockholders dated March 20, 1995 filed with the Commission pursuant to Regulation 14A, which Exhibit B is incorporated herein by this reference. *(i) Excess Benefit Plan in which any of the five most highly compensated executive officers of the Registrant participates, filed as Exhibit 10(j) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein by this reference. *(j) Supplemental Retirement Benefit Plan in which any of the five most highly compensated executive officers of the Registrant participates, filed as Exhibit 10 (k) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein by this reference. *(k) Voluntary Non-Qualified Deferred Compensation Plan in which any of the five most highly compensated executive officers of the Registrant participates, filed as Exhibit A to the Registrant's definitive proxy statement distributed to stockholders dated March 20, 1995 filed with the Commission pursuant to Regulation 14A, which Exhibit A is incorporated herein by this reference. [*- Identifies management contract or compensation plans or arrangements filed pursuant to Item 601(b)(10)(iii)(A)] (11) Computation of per share earnings, filed herewith. (13) Registrant's Annual Report as distributed to stockholders for the fiscal year ended December 31, 1995, filed herewith. (16) Letter regarding Change in Certifying Accountants, filed as Exhibit (16) to Registrant's current report on Form 8-K/A dated March 8, 1995 and incorporated herein by this reference. (21) Subsidiaries of the Registrant, filed herewith. (23) Consent of Independent Auditors, filed herewith. (24) Powers of Attorney of certain Directors of Registrant, filed herewith. (27) Financial Data Schedule, filed herewith. (ii) Other exhibits: Financial statements (and consent of independent auditors) pursuant to Form 11-K and Rule 15d-21 for the year ended December 31, 1995, for the Capital Accumulation Plan for Salaried Employees of M. A. Hanna Company and Associated Companies, and for stock purchase/savings plans of Registrant's subsidiaries and divisions will be filed as exhibits to the Form 10-K under a Form 10-K/A amendment not later than June 28, 1996. (b) Since September 30, 1995, Registrant has filed no reports on Form 8-K. (c) The response to this portion of Item 14 is submitted as a separate Section commencing on page X-1 of this Form 10-K. (d) The response to this portion of Item 14 is submitted as a separate section commencing on page F-1 of this Form 10-K. Pursuant to the requirements of Section 13 or 15(d) 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) Date: March 22, 1996 By /s/J. S. Pyke, Jr. J. S. Pyke, Jr. Vice President, General Counsel and Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Date: March 22, 1996 By /s/M. D. Walker M. D. Walker, Chairman and Chief Executive Officer (Principal Executive Officer) and Director Date: March 22, 1996 By /s/M. S. Duffey M. S. Duffey, Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) Date: March 22, 1996 By /s/T. E. Lindsey T. E. Lindsey, Controller (Principal Accounting Officer) B. C. Ames, Director C. A. Cartwright, Director W. R. Embry, Director J. T. Eyton, Director By /s/T. E. Lindsey G. D. Kirkham, Director T. E. Lindsey Attorney-in-Fact M. L. Mann, Director Date: March 22, 1996 D. J. McGregor, Director R. W. Pogue, Director FORM 10-K ITEM 14(a)(1) and (2) FINANCIAL STATEMENTS AND SCHEDULES M.A. HANNA COMPANY The following consolidated financial statements of the Registrant and its consolidated subsidiaries, included in the annual report of the Registrant to its stockholders for the year ended December 31, 1995, are incorporated herein by reference in Item 8: Summary of accounting policies Consolidated balance sheets - December 31, 1995 and 1994 Consolidated statements of income, stockholders' equity and cash flows - years ended December 31, 1995, 1994 and 1993 Notes to financial statements The following consolidated financial information, together with the report of the independent accounts, are included in Item 14(d): Schedule II - Valuation and qualifying accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. Financial statements of unconsolidated subsidiaries or 50% or less owned persons accounted for by the equity method have been omitted because they do not, considered individually or in the aggregate, constitute a significant subsidiary. F-1 Report of Independent Accountants on Financial Statement Schedule To the Board of Directors of M.A. Hanna Company Our audit of the consolidated financial statements referred to in our report dated January 29, 1996 appearing in the 1995 Annual Report to Shareholders of M.A. Hanna Company (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule as of December 31, 1995 and for the year then ended listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ Price Waterhouse LLP Cleveland, Ohio January 29, 1996 F-2 Report of Independent Auditors Board of Directors M.A. Hanna Company We have audited the consolidated balance sheet of M.A. Hanna Company and subsidiaries as of December 31, 1994, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the two years then ended listed in the Index at Item 14(a)(1) and (2). Our audits also included the financial statement schedule listed in the Index at Item 14(a)(1) and (2). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of M.A. Hanna Company and subsidiaries at December 31, 1994 and the consolidated results of its operations and its cash flows for each of the two years then ended, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ ERNST & YOUNG LLP Cleveland, Ohio January 31, 1995 F-3 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS M. A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
COL. A COL. B COL. C ADDITIONS Balance at Beginning (1) (2) DESCRIPTION of Period Charged to Cost Charged to Other and Expenses Accounts - Describe Year ended December 31, 1995: Deducted from asset accounts: Allowance for doubtful accounts $11,346,000 $2,480,000 Year ended December 31, 1994: Deducted from asset accounts: Allowance for doubtful accounts $9,993,000 $3,250,000 $531,000 Year ended December 31, 1993: Deducted from asset accounts: Allowance for doubtful accounts $7,233,000 $3,647,000 $188,000 $1,321,000 COL. A COL. D COL. E DESCRIPTION Balance at End Deductions - Describe of Period Year ended December 31, 1995: Deducted from asset accounts: Allowance for doubtful accounts $2,792,000 $11,034,000 Year ended December 31, 1994: Deducted from asset accounts: Allowance for doubtful accounts $2,428,000 $11,346,000 Year ended December 31, 1993: Deducted from asset accounts: Allowance for doubtful accounts $2,396,000 $9,993,000 Reserves of companies acquired. Charge included in income(loss) from discontinued operations. Uncollectible amounts written off. F-4
EXHIBIT 11 M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE
Year Ended December 31 1995 1994 1993 (Dollars in thousands except per share data) Primary Income from continuing operations before extraordinary charge $ 56,702 $ 37,004 $ 21,297 Income(loss) from discontinued operations 45,337 9,970 (19,279) Extraordinary charge - (3,680) - Net income $ 102,039 $ 43,294 $ 2,018 Average common shares outstanding 31,007,977 30,865,775 29,777,668 Net effect of dilutive stock options and stock warrants - based on treasury stock method using average market price - * - * 1,052,105 Total 31,007,977 30,865,775 30,829,773 Income(loss) per share Continuing operations $ 1.83 $ 1.20 $ .69 Discontinued operations 1.46 .32 (.62) Extraordinary charge - (.12) - Net income $ 3.29 $ 1.40 $ .07 Fully diluted Income from continuing operations before extraordinary charge $ 56,702 $ 37,004 $ 21,297 Income(loss) from discontinued operations 45,337 9,970 (19,279) Extraordinary charge - (3,680) - Net income $ 102,039 $ 43,294 $ 2,018 Average common shares outstanding 31,007,977 30,865,775 29,777,668 Net effect of dilutive stock options and stock warrants - based on treasury stock method using the year-end market price if higher than average market price 687,070 598,942 1,394,322 Total 31,695,047 31,464,717 31,171,990 Income(loss) per share Continuing operations $ 1.79 $ 1.18 $ .68 Discontinued operations 1.43 .32 (.62) Extraordinary charge - (.12) - $ 3.22 $ 1.38 $ .06 * Not significant in 1995 and 1994.
EXHIBIT 13 CONSOLIDATED STATEMENTS OF INCOME M.A. Hanna Company and Consolidated Subsidiaries
Year Ended December 31 Dollars in thousands except per share data 1995 1994 1993 Net Sales $1,901,954 $1,719,356 $1,412,071 Costs and Expenses Cost of goods sold 1,552,643 1,393,036 1,146,191 Selling, general and administrative 218,823 213,318 179,228 Other income (15,979) (4,066) (5,016) Other expense 7,399 9,839 9,750 Interest on debt 26,278 28,549 32,258 Amortization of intangibles 13,969 12,458 12,006 1,803,133 1,653,134 1,374,417 Income from Continuing Operations Before Income Taxes and Extraordinary Charge 98,821 66,222 37,654 Income taxes 42,119 29,218 16,357 Income from Continuing Operations Before Extraordinary Charge 56,702 37,004 21,297 Income(loss) from discontinued operations 45,337 9,970 (19,279) Extraordinary charge - (3,680) - Net Income $ 102,039 $ 43,294 $ 2,018 Net Income Per Share Primary Continuing operations $ 1.83 $ 1.20 $ .69 Discontinued operations 1.46 .32 (.62) Extraordinary charge - (.12) - Net income $ 3.29 $ 1.40 $ .07 Fully diluted Continuing operations $ 1.79 $ 1.18 $ .68 Discontinued operations 1.43 .32 (.62) Extraordinary charge - (.12) - Net income $ 3.22 $ 1.38 $ .06 See summary of accounting policies and notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS M. A. Hanna Company and Consolidated Subsidiaries
Year Ended December 31 Dollars in thousands 1995 1994 1993 Cash Provided from (Used for) Operating Activities Net income $102,039 $ 43,294 $ 2,018 Discontinued operations 4,797 13,910 41,345 Depreciation and amortization 47,241 41,904 38,182 Companies carried at equity: Income (6,459) (6,112) (4,286) Dividends received 8,213 7,033 5,729 Changes in operating assets and liabilities: Receivables (23,212) (40,103) (10,531) Inventories (10,934) (31,145) (9,239) Prepaid expenses (2,031) 725 1,774 Trade payables and accrued expenses 4,066 74,895 10,452 Gain from sales of assets (84,427) - (1,730) Restructuring payments (17,289) (10,540) (16,594) Other 11,911 12,664 10,730 Extraordinary charge - 6,034 - Net operating activities 33,915 112,559 67,850 Cash Provided from (Used for) Investing Activities Capital expenditures (55,885) (46,982) (23,379) Acquisitions of businesses, less cash acquired - (53,331) (28,803) Acquisition payments (2,969) (4,106) (3,410) Sales of assets 223,500 13,874 7,127 Investments in associated and other companies (4,775) - - Return of cash from associated and other companies 1,367 8,805 - Purchase of short-term securities (69,703) - (5,061) Sale of short-term securities 69,703 5,061 25,702 Other (7,211) 445 (2,000) Net investment activities 154,027 (76,234) (29,824) Cash Provided from (Used for) Financing Activities Purchase of common stock warrants - - (27,500) Cash dividends paid (16,962) (15,688) (14,003) Proceeds from the sale of common stock 1,996 14,165 14,582 Purchase of shares for treasury (24,969) (1,472) - Increase in debt 57,458 131,649 12,228 Reduction in debt (118,622) (179,879) (39,144) Net financing activities (101,099) (51,225) (53,837) Effect of exchange rate changes on cash 1,287 360 (821) Cash and Cash Equivalents Increase(decrease) 88,130 (14,540) (16,632) Beginning of year 23,105 37,645 54,277 End of year $111,235 $ 23,105 $ 37,645 Cash Paid During Year Interest $ 26,724 $ 30,114 $ 33,001 Income taxes 85,830 19,927 19,165 See summary of accounting policies and notes to consolidated financial statements
CONSOLIDATED BALANCE SHEETS M. A. Hanna Company and Consolidated Subsidiaries
December 31 Dollars in thousands 1995 1994 Assets Current Assets Cash and cash equivalents $ 111,235 $ 23,105 Receivables Trade (less allowance of $11,034 in 1995 and $11,346 in 1994) 258,274 236,737 Other 9,742 10,379 268,016 247,116 Inventories Finished products 126,411 116,718 Raw materials and supplies 40,390 44,542 166,801 161,260 Prepaid expenses 5,693 3,981 Deferred income taxes 22,867 26,938 Net assets of discontinued operations - 103,215 Total current assets 574,612 565,615 Property, Plant and Equipment Land 14,655 13,288 Buildings 95,941 78,289 Machinery and equipment 282,718 250,966 393,314 342,543 Less allowances for depreciation 166,293 138,408 227,021 204,135 Other Assets Goodwill and other intangibles 321,778 330,757 Investments and other assets 73,067 79,803 Deferred income taxes 35,118 34,850 429,963 445,410 Total assets $1,231,596 $1,215,160 Liabilities and Stockholders' Equity Current Liabilities Notes payable to banks $ 1,328 $ 931 Trade payables and accrued expenses 333,176 335,877 Current portion of long-term debt 747 683 Total current liabilities 335,251 337,491 Other Liabilities 179,580 173,888 Long-term Debt Senior notes 227,270 235,770 Other 4,717 53,099 Stockholders' Equity Preferred stock, without par value: authorized 5,000,000 shares: issued 0 shares in 1995 and 132 shares in 1994 - - Common stock, par value $1.00 per share: authorized 50,000,000 shares; issued 43,274,273 shares in 1995 and 43,015,494 shares in 1994 43,274 43,015 Capital surplus 324,273 299,725 Retained earnings 381,709 296,632 Associates ownership trust (4,301,006 shares in 1995 and 4,693,518 shares in 1994) (121,363) (111,471) Cost of treasury stock (8,631,355 shares in 1995 and 7,321,400 shares in 1994) (137,181) (103,731) Minimum pension liability adjustment (7,522) (7,262) Accumulated translation adjustment 1,588 (1,996) Total stockholders' equity 484,778 414,912 Total liabilities and stockholders' equity $1,231,596 $1,215,160 See summary of accounting policies and notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY M. A. Hanna Company and Consolidated Subsidiaries Dollars in thousands except per share data
Common Associates Preferred Common Stock Capital Retained Ownership Treasury Stock Stock Warrants Surplus Earnings Trust Stock Balance January 1, 1993 $ - $28,274 $14,621 $288,708 $280,420 $(111,221) $(102,379) Net income 2,018 Cash dividends - $.475 per share (14,003) Exercise of stock options 311 8,813 (1,675) Sale of common stock (21,273 shares) 21 609 Purchase of common stock warrants (14,621) (12,879) Payment of incentive compensation awards and associate benefits 2,525 8,260 569 Acquisition of business (640) 591 691 Adjustment to market value 12,253 (12,253) Minimum pension adjustment Translation adjustment Balance December 31, 1993 - 28,606 - 299,389 269,026 (115,214) (102,794) Net income 43,294 Cash dividends - $.51 per share (15,688) Exercise of stock options 61 1,335 (38) Purchase of shares for treasury (1,472) Sale of common stock (25,383 shares) 25 706 Payment of incentive compensation awards and associate benefits 3,115 13,246 573 Three-for-two common stock split 14,323 (14,323) Adjustment to market value 9,503 (9,503) Minimum pension adjustment Translation adjustment Balance December 31, 1994 - 43,015 - 299,725 296,632 (111,471) (103,731) Net income 102,039 Cash dividends - $.55 per share (16,962) Exercise of stock options 228 4,678 (1,483) Purchase of shares for treasury (33,008) Sale of common stock (30,502 shares) 31 755 Payment of incentive compensation awards and associate benefits 595 8,628 1,041 Adjustment to market value 18,520 (18,520) Minimum pension adjustment Translation adjustment Balance December 31, 1995 $ - $43,274 $ - $324,273 $381,709 $(121,363) $(137,181) Minimum Pension Accumulated Total Liability Translation Stockholders' Adjustment Adjustment Equity Balance January 1, 1993 $ - $ (480) $397,943 Net income 2,018 Cash dividends - $.475 per share (14,003) Exercise of stock options 7,449 Sale of common stock (21,273 shares) 630 Purchase of common stock warrants (27,500) Payment of incentive compensation awards and associate benefits 11,354 Acquisition of business 642 Adjustment to market value - Minimum pension adjustment (8,577) (8,577) Translation adjustment (4,500) (4,500) Balance December 31, 1993 (8,577) (4,980) 365,456 Net income 43,294 Cash dividends - $.51 per share (15,688) Exercise of stock options 1,358 Purchase of shares for treasury (1,472) Sale of common stock (25,383 shares) 731 Payment of incentive compensation awards and associate benefits 16,934 Three-for-two common stock split - Adjustment to market value - Minimum pension adjustment 1,315 1,315 Translation adjustment 2,984 2,984 Balance December 31, 1994 (7,262) (1,996) 414,912 Net income 102,039 Cash dividends - $.55 per share (16,962) Exercise of stock options 3,423 Purchase of shares for treasury (33,008) Sale of common stock (30,502 shares) 786 Payment of incentive compensation awards and associate benefits 10,264 Adjustment to market value - Minimum pension adjustment (260) (260) Translation adjustment 3,584 3,584 Balance December 31, 1995 $(7,522) $1,588 $484,778 See summary of accounting policies and notes to consolidated financial statements
SUMMARY OF ACCOUNTING POLICIES Dollars in thousands except per share data PRINCIPLES OF CONSOLIDATION Majority-owned subsidiaries are consolidated in the financial statements and all significant intercompany accounts and transactions have been eliminated. Investments in less than majority-owned companies are carried at cost adjusted for undistributed earnings and losses since acquisition, or at cost. REVENUE RECOGNITION Revenues are recognized when a product is shipped or a service is performed. NET INCOME PER SHARE Primary net income per share is computed by dividing net income by the average number of shares of common stock outstanding during the year. Shares of common stock held by the Associates Ownership Trust (AOT) enter into the determination of the average number of shares outstanding when the shares are released from the AOT to fund obligations under certain associate compensation and benefit plans. The effect of assuming the exercise of stock options and stock warrants (common stock equivalents) was not significant in 1995 and 1994. For fully-diluted net income per share, the number of shares used for primary net income per share are increased by the common stock equivalents which would arise from the exercise of stock options and stock warrants. CASH EQUIVALENTS AND SHORT-TERM SECURITIES Cash equivalents are highly liquid investments with an original purchased maturity of three months or less. Both cash equivalents and short-term securities are stated at cost, which approximates fair value. CONCENTRATIONS OF CREDIT RISK Financial instruments which potentially subject the Company to credit risk are trade accounts receivable and foreign exchange contracts. Concentration of credit risk with respect to trade accounts receivable is limited due to the large number of customers comprising the Company's customer base and their break down among many different industries and geographical locations. The Company is exposed to credit risk with respect to foreign exchange contracts in the event of nonperformance by the counterparties to these financial instruments, which are major financial institutions. The risk of incurring losses related to this credit risk is remote. INVENTORIES Inventories are stated at the lower of cost or market. Domestic inventories ($121,060) are valued principally by the last-in, first-out (LIFO) cost method. Inventories of international subsidiaries are valued by the first-in, first- out (FIFO) method. The excess of current cost over LIFO cost was $12,769 at December 31, 1995 and $9,937 at December 31, 1994. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Depreciation is computed principally by the straight-line method. Estimated asset lives are: Building and improvements 20 - 40 years Machinery and equipment 5 - 10 years Property items retired or otherwise disposed of are removed from the property and related allowance for depreciation accounts, and any profit or loss is included in operations. GOODWILL AND INTANGIBLES Goodwill is being amortized over 40 years by the straight- line method. Other intangibles ($21,174 net at December 31, 1995) are being amortized on a straight-line basis over 4 to 40 years. Accumulated amortization at December 31, 1995 and 1994 was $85,845 and $71,398 respectively. In 1993, net goodwill of $26,482 was written off in connection with the discontinuance of the elastomeric membrane roofing business. The carrying value of goodwill and other intangibles is evaluated if circumstances indicate a possible impairment in value. If undiscounted cash flows over the remaining amortization period indicate that goodwill and other intangibles may not be recoverable, the carrying value of goodwill and other intangibles will be reduced by the estimated shortfall of cash flows on a discounted basis. INCOME TAXES Deferred tax liabilities and assets are determined based on the differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rate and laws that will be in effect when the differences are expected to reverse. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the reported financial statements and the reported amounts or revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS M. A. Hanna Company and Consolidated Subsidiaries ACQUISITIONS In December 1995, the Company announced it had entered into a definitive merger agreement to acquire for $10.50 per share in cash all of the outstanding stock of CIMCO, Inc., a producer of thermoplastic compounds and plastic components. Consistent with its strategy as an intermediary between the polymer producer and end product manufacturer, the Company intends to sell CIMCO's plastic components business. In January 1996, the Company announced the successful completion of its tender offer for the outstanding stock of CIMCO. In March 1994, the Company acquired certain assets of North Coast Compounders, a producer of thermoplastic elastomers and other materials and in July 1994, acquired Th. Bergmann Kunststoffwerk GmbH, one of Germany's largest producers of specialty and reinforced compounds. Both acquisitions were accounted for using the purchase method of accounting and operations from the respective dates of acquisition are included in the Consolidated Statements of Income. Had the acquisitions been made at the beginning of 1994, reported pro forma results of operations for 1994 would not be materially different. 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 consumable supplies 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 an after-tax gain of $40,254. Had the sale consummated on January 1, 1994, fully diluted earnings per share from continuing operations would have been $1.85 and $1.26 for the years ended December 31, 1995 and 1994, respectively. In November 1993, the Company reached an agreement to sell its elastomeric membrane roofing business to Firestone Building Products Company, a division of Bridgestone/Firestone, Inc. The sale was consummated in the third quarter of 1994, resulting in an additional charge to earnings of $1,828 ($1,115 after tax) for costs incurred while obtaining government antitrust clearance for the sale. The Company recognized an after-tax charge of $30,000 in 1993 for the writeoff of goodwill and restructuring charges associated with the sale. The Company received $2,320 during 1993 representing the recovery of a prepetition bankruptcy claim Colowyo Coal Company had against a customer. The Company sold its interest in Colowyo in 1991. Summary operating results of these discontinued businesses are as follows: 1995 1994 1993 Net sales $55,454 $120,083 $148,699 Income from operations before income taxes $ 9,075 $ 18,891 $ 17,051 Income taxes 3,992 7,806 7,812 5,083 11,085 9,239 Gain(loss) net of income taxes on disposal 40,254 (1,115) (28,518) $45,337 $ 9,970 $(19,279) At December 31, 1994, net assets of discontinued operations consisted of current assets of $31,724, current liabilities of $18,015, net fixed assets of $26,942, other noncurrent assets of $72,155 and other noncurrent liabilities of $9,591. INCOME TAXES Income taxes from continuing operations consist of the following: 1995 1994 1993 Current: Federal $26,311 $20,740 $ 9,205 State 4,541 4,664 2,660 Foreign 6,311 4,809 2,907 37,163 30,213 14,772 Deferred: Federal 3,704 110 2,730 State 497 (1,023) (319) Foreign 755 (82) (826) 4,956 (995) 1,585 $42,119 $29,218 $16,357 The provision for income taxes from continuing operations differs from the amount computed by applying the U.S. statutory federal income tax rate as follows:
1995 1994 1993 Amount Percent Amount Percent Amount Percent Provision at statutory tax rate $34,587 35.0% $23,178 35.0% $13,179 35.0% State income taxes 3,274 3.3 2,367 3.6 1,528 4.1 Goodwill amortization 2,613 2.6 2,784 4.2 3,169 8.4 Change in income tax rate - - - - (578) (1.5) Utilization of capital loss and tax credit carryforwards - - (1,820) (2.7) (1,062) (2.8) Other - net 1,645 1.7 2,709 4.0 121 .2 $42,119 42.6% $29,218 44.1% $16,357 43.4%
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company has not provided deferred taxes on undistributed earnings of international subsidiaries and joint ventures because it is not practical to estimate the amount of tax payable associated with the remittance of these earnings. Significant components of the Company's deferred tax assets (liabilities) are as follows: 1995 1994 Basis differences from purchase accounting $(9,359) $(13,705) Depreciation (14,186) (13,665) Other post-retirement benefits 30,681 32,467 Associate benefits 21,152 22,064 Restructuring and plant closedown costs 4,483 7,699 Environmental costs 6,816 7,353 Inventory and receivable reserves 6,256 6,734 Other 12,142 11,983 Tax credit carryforwards - 858 Capital loss carryforwards - 23,317 Valuation allowance - (23,317) $57,985 $ 61,788 During 1995, the valuation allowance was reduced by $23,317 due to the utilization of capital loss carryforwards in discontinued operations. The valuation allowance in 1994 was increased by $375 due to increases in capital loss carryforwards and reduced $1,820 due to the utilization of tax credit carryforwards. Income before income taxes includes $17,577, $12,624, and $3,799 in 1995, 1994, and 1993, respectively, from international operations. LONG-TERM DEBT Long-term debt at December 31 consists of the following: 1995 1994 9% Senior Notes due 1998 $109,245 $117,745 9.375% Senior Notes due 2003 118,025 118,025 Credit agreements - 12,650 Other 5,464 41,132 232,734 289,552 Less current portion 747 683 $231,987 $288,869 Annual maturities of long-term debt for the next five years are: 1996--$747; 1997--$680; 1998--$109,950; 1999--$663 and 2000--$673. On June 30, 1994, the Company entered into a new revolving credit agreement with a group of financial institutions. The agreement provides for borrowings up to $200 million through June 1998 with interest rates determined at the time of the borrowing based on a choice of formulas specified in the agreement. At December 31, 1994, borrowings supported by this agreement were $12,650 at a rate of 6.70%. There were no borrowings supported by this agreement at December 31, 1995. Other debt at December 31, 1995 and 1994 consists primarily of mortgages, industrial revenue bonds, and notes including $35.5 million of foreign borrowings related to an acquisition which were repaid in 1995. These obligations mature in various installments through September 2005 and are at interest rates ranging from 4.00% to 9.50%. The weighted average interest rate on short-term borrowings was 8.37% and 7.28% at December 31, 1995 and 1994, respectively. In 1994, the Company repurchased $64,230 principal amount of Senior Notes in the open market, resulting in an extraordinary charge of $6,034 ($3,680 after tax). The Company also repurchased $8,500 principal amount of Senior Notes in the open market in 1995. The Senior Note agreements contain certain restrictions and conditions among which are limitations on cash dividends and other payments. Under the most restrictive of these agreements, approximately $180,416 of retained earnings was free of such limitations at December 31, 1995. STOCKHOLDERS' EQUITY In May 1994, the Company issued 14,322,624 shares of common stock to effect a three-for-two stock split. The par value ($1 per share) of the additional shares issued was charged to capital surplus. The Associates Ownership Trust (AOT) acquired shares of common stock from the Company in 1991 for a promissory note in the amount of $100,049. The shares acquired are to fund a portion of the Company's obligations under certain of its associate compensation and associate benefit plans for the 15- year term of the AOT. Such shares are adjusted at each balance sheet date to their respective market value with an offsetting adjustment to capital surplus. Under the Company's Stock Purchase Rights Plan each Right entitles the holder of common stock to buy from the Company one one-hundredth of a share of Cumulative Series A Preferred Stock, without par value for $95, subject to adjustment. The Rights become exercisable if certain triggering events occur, including the acquisition of 15% or more of the Company's common stock. The Company is entitled to redeem the Rights at $.01 per Right at any time until ten days after any person or group has acquired 20% of the Company's common stock and in certain circumstances thereafter. If a party owning 20% or more of the Company's common stock merges with the Company or engages in certain other transactions with the Company, each Right, other than the Rights held by the acquiring party, entitles the holder to purchase that number of additional common shares having a market value of two times the exercise price of the Right. The Rights expire on December 16, 2001. The Company's stock option plans provide for granting options, including options to nonassociate directors, at the market value at date of grant. Options are exercisable for ten years from the date of grant. The following table summarizes the changes in the outstanding options for the three years ended December 31, 1995. Shares Price Range Outstanding January 1, 1993 1,694,251 $ 8.167 - $18.833 Granted 375,465 19.833 - 20.50 Exercised (464,794) 8.167 - 16.833 Canceled or expired (25,275) 11.167 - 18.833 Outstanding December 31, 1993 1,579,647 8.167 - 20.50 Granted 342,913 22.125 - 27.125 Exercised (77,320) 8.889 - 20.50 Canceled or expired (3,667) 14.833 - 20.50 Outstanding December 31, 1994 1,841,573 8.167 - 27.125 Granted 281,465 26.00 Exercised (228,277) 8.167 - 20.50 Canceled or expired (13,772) 14.833 - 22.125 Outstanding December 31, 1995 1,880,989 8.167 - 27.125 At December 31, 1995, options were exercisable for 1,142,125 shares (1,099,126 shares at December 31, 1994) at prices from $8.167 to $27.125 and 791,370 shares were reserved for future grants. In October 1995, the Financial Accounting Standards Board issued Statement No. 123 "Accounting for Stock-Based Compensation", which establishes financial accounting and reporting standards for stock-based compensation plans. The Company will adopt Statement No. 123 in 1996. Statement No. 123 defines a fair value based method of accounting for employee stock options which allows for an element of compensation cost to be charged to earnings on an annual basis. Statement No. 123 also permits entities to continue to measure compensation cost using the intrinsic value based method of accounting prescribed by APB Opinion No. 25, which may result in no compensation cost being recognized. The Company anticipates it will continue to follow the intrinsic value based method of accounting prescribed in APB Opinion No. 25 and will make pro forma disclosures of net income and earnings per share as if the fair value based method had been applied. BUSINESS SEGMENTS The Company operates principally in the formulated polymers industry which consists of two major segments - processing and distribution. Processing includes production of custom plastic and rubber compounds and custom formulated colorants for the plastics industry. Distribution includes distributors of thermoplastic and thermoset resins and fiberglass materials and distributors of engineered plastic shapes. Sales are made through the Company's organization, distributors and representatives. Other operations include the Company's diversified polymer products business, its marine and insurance operations and management fees. The Company is Managing Agent for Iron Ore Company of Canada (IOC) and through May 1995 owned approximately 8% of IOC's common stock. The sale of the Company's investment in IOC resulted in a pre-tax gain of $9,334. The Company will continue to serve as the Managing Agent for IOC until December 1996. IOC incurred management expense of $3,162 in 1995 ($3,064 in 1994 and $2,648 in 1993) payable to the Company and commission expense of $5,169 in 1995 ($4,302 in 1994 and $3,317 in 1993) payable to 50% owned companies carried at equity. Net sales, operating profit and identifiable assets by geographic area are as follows: 1995 1994 1993 Net sales Domestic $1,579,424 $1,475,277 $1,220,555 International Europe 187,790 130,461 93,595 Other 134,740 113,618 97,921 $1,901,954 $1,719,356 $1,412,071 Operating profit Domestic $ 112,919 $ 104,484 $ 83,104 International Europe 13,982 10,565 4,172 Other 10,274 6,764 5,070 $ 137,175 $ 121,813 $ 92,346 Identifiable assets Domestic $ 991,667 $ 868,201 $ 859,193 International Europe 175,767 180,842 89,556 Other 64,162 62,902 49,087 Discontinued operations - 103,215 125,774 $1,231,596 $1,215,160 $1,123,610
Depreciation Operating and Capital Identifiable Net Sales Profit Amortization Expenditures Assets 1995 Processing $1,023,672 $ 92,404 $39,745 $49,542 $ 656,655 Distribution 862,077 35,509 5,991 3,804 354,599 Other 33,421 9,262 890 250 16,323 Intersegment activity (17,216) - - - - Corporate - (12,076) 615 760 204,019 Discontinued operations - - - 1,529 - $1,901,954 $125,099 $47,241 $55,885 $1,231,596 1994 Processing $ 942,999 $ 88,175 $34,254 $36,193 $ 615,715 Distribution 766,711 24,086 6,368 3,363 345,929 Other 32,129 9,552 823 - 16,751 Intersegment activity (22,483) - - - - Corporate - (27,042) 459 3,862 133,550 Discontinued operations - - - 3,564 103,215 $1,719,356 $ 94,771 $41,904 $46,982 $1,215,160 1993 Processing $ 784,951 $ 65,427 $29,842 $15,494 $ 522,122 Distribution 628,887 19,409 6,930 3,185 296,449 Other 33,479 7,510 936 727 16,281 Intersegment activity (35,246) - - - - Corporate - (22,434) 474 38 162,984 Discontinued operations - - - 3,935 125,774 $1,412,071 $ 69,912 $38,182 $23,379 $1,123,610 Includes $9,334 gain from sale of assets. Includes $1,300 of restructuring costs. Includes $1,730 gain from sale of assets.
PENSION AND OTHER POST-RETIREMENT BENEFITS The Company has noncontributory defined benefit plans covering certain of its associates which comply with federal funding requirements. Benefits for these plans are based primarily on years of service and qualifying compensation during the final years of employment. Plan assets include marketable equity securities, money market funds and fixed income securities. The Company also sponsors defined contribution plans for certain of its associates, which provide for Company contributions of a specified percentage of each associate's total compensation. A summary of the components of net pension cost for the defined benefit plans and the total contributions charged to expense for the defined contribution plans follows: 1995 1994 1993 Defined benefit plans Service cost $ 306 $ 743 $ 617 Interest cost on projected benefit obligation 6,161 5,838 6,300 Return on plan assets (6,215) (5,073) (6,258) Net amortization and deferral 1,869 930 815 Net pension cost 2,121 2,438 1,474 Defined contribution plans 5,006 3,785 3,236 $7,127 $6,223 $4,710 The Company has recorded a minimum pension liability representing the excess of the accumulated benefit obligation over the fair value of plan assets and accrued pension liabilities. The liability has been offset by intangible assets to the extent possible. Because the intangible assets recognized may not exceed the amount of unrecognized prior service cost plus unrecognized obligations at transition that remain at December 31 each year, the balance of the liability at the end of 1995 and 1994 is reported as a separate reduction of stockholders' equity, net of applicable deferred income taxes. The following table sets forth the funded status of the Company's defined benefit plans:
Accumulated Benefits Assets Exceed Exceed Assets Accumulated Benefits 1995 1994 1995 1994 Actuarial present value of benefit obligations: Accumulated benefit obligations including vested benefits of $80,996 in 1995 and $73,428 in 1994 $48,369 $43,467 $34,442 $31,521 Projected benefit obligation $49,617 $44,414 $34,966 $31,981 Plan assets at fair value 37,804 30,182 41,198 36,909 Projected benefits in excess of (less than) plan assets 11,813 14,232 (6,232) (4,928) Consisting of: Unrecognized net transition obligation 994 1,190 143 135 Unrecognized net actuarial (gains) or losses 14,507 14,022 (3,411) (1,389) Adjustment to recognize minimum liability 14,334 14,265 - - Accrued(prepaid) pension cost recognized in balance sheet $10,646 $13,285 $(2,964) $(3,674)
The projected benefit obligation was determined using an assumed discount rate of 7.25% (8.25% in 1994) and an assumed long-term rate of increase in compensation of 5%. The assumed long-term rate of return on plan assets is 8.5%. The 1995 change in the discount rate caused the accumulated benefit obligation to increase approximately $6,996. In addition to providing pension benefits, the Company provides certain contributory and noncontributory health care and life insurance benefits for certain retired associates. Certain associates of the Company may become eligible for these post-retirement benefits if they reach retirement age while working for the Company. The status of the Company's plans, which are unfunded, at December 31, 1995 and 1994 is as follows: 1995 1994 Accumulated post-retirement benefit obligation Retirees $53,924 $57,134 Fully eligible active plan participants 4,421 3,747 Other active plan participants 10,528 9,732 68,873 70,613 Unrecognized actuarial gain 14,819 12,634 Accrued post-retirement benefit obligation $83,692 $83,247 Net periodic post-retirement benefit cost includes the following components: 1995 1994 1993 Service cost $ 915 $1,069 $1,201 Interest cost 5,196 5,605 6,512 Amortization of unrecognized actuarial gain (799) - - Net periodic post-retirement benefit cost $5,312 $6,674 $7,713 The weighted-average assumed rate of increase in the per capita cost of covered benefits (i.e., health care cost trend rate) is assumed to be 11.5% (12.0% in 1994) and decreasing gradually to 5.25% in 2009 (6.25% in 2007 in 1994) and remaining at that level thereafter. A one percentage point increase in the assumed health care cost trend rate would have increased the accumulated benefit obligation by $10,185 at December 31, 1995 and the aggregate service and interest costs components of net periodic post- retirement benefit costs for 1995 by $1,084. A discount rate of 7.25% (8.25% in 1994) was used in determining the accumulated benefit obligation. The change in the discount rate caused the accumulated benefit obligation to increase approximately $7,879. FINANCIAL INSTRUMENTS The Company conducts business in various foreign currencies. As a result, it is subject to transaction exposures that arise from foreign exchange movements between the date that the foreign currency transaction is recorded and the date it is consummated. The Company has a policy of entering into firm intercompany lending transactions and hedging the foreign exchange through foreign exchange forward contracts. The Company has entered into such cross-currency foreign exchange contracts with maturities of up to five years to protect the Company from the risk that the future intercompany cash flows will be adversely affected by changes in exchange rates. The Company does not hold or issue financial instruments for trading purposes. The table below summarizes by currency the contractual amounts of the Company's foreign exchange contracts at December 31, 1995. Foreign currency amounts are translated at exchange rates as of December 31, 1995. The "Buy" amounts represent the U.S. dollar equivalent of commitments to purchase foreign currencies, and the "Sell" amounts represent the U.S. dollar equivalent of commitments to sell foreign currencies. Buy Sell Currency: British pound sterling $21,797 $ - French franc - 19,742 German deutschmark - 52,692 Other 2,243 - $24,040 $72,434 The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments: Cash, Cash Equivalents and Short-Term Securities: The carrying amounts reported in the balance sheet approximate fair value. Long and Short-Term Debt: The carrying amount of the Company's short-term borrowings approximates fair value. The fair value of the Company's Senior Notes is based on quoted market prices. The carrying amount of the Company's borrowings under its long-term revolving credit agreements and other long-term borrowings approximates fair value. Foreign Exchange Contracts: The fair value of short-term foreign exchange contracts is based on exchange rates at December 31, 1995. The fair value of long-term foreign exchange contracts is based on quoted market prices. The carrying amounts and fair values of the Company's financial instruments at December 31, 1995 and 1994 are as follows: 1995 1994 Carrying Fair Carrying Fair Amount Value Amount Value Cash and cash equivalents $111,235 $111,235 $ 23,105 $ 23,105 Notes payable to banks 1,328 1,328 931 931 Long-term debt 9% Senior Notes 109,245 117,471 117,745 119,252 9.375% Senior Notes 118,025 138,951 118,025 122,002 Credit agreements - - 12,650 12,650 Other 5,464 5,464 41,132 41,132 Foreign exchange contracts - (2,372) - (1,681) LEASE COMMITMENTS Rental expense under operating leases for certain manufacturing facilities, warehouses, transportation equipment and data processing and office equipment was $17,843 in 1995, $16,890 in 1994 and $15,859 in 1993. Certain of the Company's leases have options to renew, and there are no significant contingent rentals. At December 31, 1995, future minimum lease commitments for noncancelable operating leases are $10,655 in 1996, $9,502 in 1997, $7,192 in 1998, $5,166 in 1999, $2,996 in 2000 and $14,202 thereafter. CONTINGENCIES The Company has been 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 entered into a settlement agreement among themselves which allocated a minor share of responsibility to the Company. In turn, a Consent Decree among the principal defendants and the State of Idaho and the United States government was entered by the Court in September 1995 settling all liability issues affecting the Company in those legal proceedings without a material adverse effect on the results of operations of the Company. Claims have also been made against a subsidiary of the Company for the 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. Reserves for such liabilities have been established and no insurance recoveries have been anticipated in the determination of the reserves. In management's opinion, the aforementioned claims will be resolved without material adverse effect on the financial position of the Company. OTHER INCOME Other income includes the following: 1995 1994 1993 Interest and dividends $ 4,809 $3,025 $1,680 Gain on sale of assets 9,334 - 1,730 Other 1,836 1,041 1,606 $15,979 $4,066 $5,016 OTHER EXPENSE Other expense includes the following: 1995 1994 1993 Expenses of closed facilities $4,854 $5,930 $7,031 Restructuring costs - 865 1,300 Other 2,545 3,044 1,419 $7,399 $9,839 $9,750 DETAIL OF CURRENT AND OTHER LIABILITIES Included in trade payables and accrued expenses and other liabilities at December 31 are: 1995 1994 Trade payables and accrued expenses: Trade payables $188,265 $178,166 Salaries and wages 16,288 14,744 Associate benefits 38,882 37,933 Restructuring and acquisition costs 13,540 19,808 Other liabilities: Plant closedown costs 11,864 13,460 Environmental costs 14,217 12,808 Associate benefits 18,557 17,605 Other post-retirement benefits 79,160 77,898 SUPPLEMENTAL CASH FLOW DATA The following is a summary of noncash investing and financing activities. 1995 1994 1993 Acquisition of businesses Assets acquired $70,456 $33,130 Liabilities assumed 13,752 4,327 Cash paid 56,704 28,803 Less cash acquired 3,373 - $53,331 $28,803 Debt of companies acquired $ 4,692 Payment of incentive compensation awards with treasury stock $ 1,636 $ 990 $ 780 Release of common stock held by Associates Ownership Trust $ 8,628 $13,246 $ 8,260 Payment of stock option exercised with shares of common stock $ 1,483 $ 38 $ 1,675 Transfer of common stock released from Associates Ownership Trust to treasury stock $(8,039) Quarterly Financial and Stock Price Data M.A. Hanna Company and Consolidated Subsidiaries Summarized unaudited quarterly financial and stock price data for 1995 and 1994 are as follows:
First Second Third Fourth Quarter Quarter Quarter Quarter 1995 Net sales $492,772 $483,295 $464,078 $461,809 Gross margin 90,504 90,077 85,032 83,698 Income Continuing operations 12,014 19,360 13,311 12,017 Discontinued operations 2,931 42,406 - - Net income 14,945 61,766 13,311 12,017 Income per common share (fully diluted) Continuing operations .38 .61 .42 .39 Discontinued operations .09 1.33 - - Net income .47 1.94 .42 .39 Price range High 25.88 27.50 30.00 28.00 Low 23.00 24.00 25.75 23.50 Cash dividends paid .135 .135 .135 .145 1994 Net sales $388,520 $422,516 $448,650 $459,670 Gross margin 72,214 80,575 84,130 89,401 Income(loss) Continuing operations 6,210 9,370 11,269 10,155 Discontinued operations 2,047 2,573 1,625 3,725 Extraordinary charge - (3,680) - - Net income 8,257 8,263 12,894 13,880 Income(loss) per common share (fully diluted) Continuing operations .19 .30 .36 .32 Discontinued operations .07 .08 .05 .12 Extraordinary charge - (.12) - - Net income .26 .26 .41 .44 Price range High 25.58 26.50 28.88 26.00 Low 21.42 23.17 23.50 21.62 Cash dividends paid .125 .125 .125 .135 Income per share calculations for each of the quarters are based on the weighted average number of shares outstanding for each period, and the sum of the quarters may not necessarily be equal to the full year income per share amount.
SELECTED FINANCIAL DATA M. A. Hanna Company and Consolidated Subsidiaries
1995 1994 1993 1992 1991 Summary of Operations Net sales $ 1,901,954 $ 1,719,356 $ 1,412,071 $ 1,188,541 $ 1,006,638 Cost of goods sold 1,552,643 1,393,036 1,146,191 961,925 797,892 Selling, general and administrative 218,823 213,318 179,228 152,366 147,998 Amortization of intangibles 13,969 12,458 12,006 11,069 10,146 Interest on debt 26,278 28,549 32,258 32,509 23,221 Income(loss) from continuing operations before income taxes, extraordinary charge and cumulative effect of changes in accounting principles 98,821 66,222 37,654 27,005 (16,195) Income taxes 42,119 29,218 16,357 8,819 8,225 Income(loss) from continuing operations before extraordinary charge and cumulative effect of changes in accounting principles 56,702 37,004 21,297 18,186 (24,420) Net income 102,039 43,294 2,018 19,025 1,875 Per share of common stock Income(loss) from continuing operations 1.83 1.20 .69 .63 (.72) Net income 3.29 1.40 .07 .66 .02 Dividends paid .55 .51 .48 .44 .42 Cash dividends paid on Common stock 16,962 15,688 14,003 12,630 15,267 Preferred stock - - - - 1,031 Balance Sheet Current assets $ 574,612 $ 565,615 $ 405,782 $ 416,739 $ 275,060 Current liabilities 335,251 337,491 259,680 229,327 195,610 Working capital 239,361 228,124 146,102 187,412 79,450 Property, plant and equipment - net 227,021 204,135 184,296 195,117 184,877 Other assets 429,963 445,410 438,628 440,873 443,702 Net long-term assets of discontinued operations - - 94,904 99,836 121,374 Other liabilities (179,580) (173,888) (176,422) (174,558) (118,082) Long-term debt (231,987) (288,869) (322,052) (350,737) (330,863) Total stockholders' equity $ 484,778 $ 414,912 $ 365,456 $ 397,943 $ 380,458 Shares of common stock outstanding 34,642,918 35,694,094 35,611,522 35,100,108 34,245,075 Average fully diluted shares outstanding 31,695,047 31,464,717 31,171,990 29,662,698 36,319,580 Book value per share of common stock $ 13.99 $ 11.62 $ 10.26 $ 11.34 $ 11.11 1990 1989 1988 (1) Summary of Operations Net sales $ 960,228 $ 918,276 $ 797,563 Cost of goods sold 749,071 718,636 614,465 Selling, general and administrative 137,674 135,741 128,573 Amortization of intangibles 9,704 8,886 6,456 Interest on debt 18,301 21,128 23,622 Income(loss) from continuing operations before income taxes, extraordinary charge and cumulative effect of changes in accounting principles 44,023 44,797 28,554 Income taxes 12,830 7,608 4,107 Income(loss) from continuing operations before extraordinary charge and cumulative effect of changes in accounting principles 31,193 37,189 24,447 Net income 55,871 86,920 83,223 Per share of common stock Income(loss) from continuing operations .75 .92 .49 Net income 1.35 2.23 2.32 Dividends paid .37 .30 .22 Cash dividends paid on Common stock 15,175 11,812 7,169 Preferred stock - 2,125 8,501 Balance Sheet Current assets $ 276,711 $ 264,772 $ 240,029 Current liabilities 181,471 167,272 166,185 Working capital 95,240 97,500 73,844 Property, plant and equipment - net 183,536 173,477 154,477 Other assets 458,394 444,479 406,426 Net long-term assets of discontinued operations 129,869 137,304 141,552 Other liabilities (161,674) (175,310) (169,470) Long-term debt (137,691) (134,834) (137,725) Total stockholders' equity $ 567,674 $ 542,616 $ 469,104 Shares of common stock outstanding 39,937,572 41,682,807 32,331,271 Average fully diluted shares outstanding 42,081,134 42,332,346 41,848,449 Book value per share of common stock $ 14.21 $ 13.02 $ 11.41 (1) Prior to 1988, the Company was a natural resources company and not in the specialty chemicals business. Results for 1985-1987 are excluded because they are not comparable to results for 1988-1995. Shareowner Information M.A. Hanna Company common stock is listed on the New York and Chicago stock exchanges under the symbol MAH. At December 31, 1995, the number of shareowners of record of the Company's common stock was 4,173.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Your company reached significant strategic and financial milestones in 1995 including signing a definitive agreement to acquire CIMCO, Inc., a producer of thermoplastic compounds and plastic components, a joint venture agreement with Suzhou Plastics Factory #1 to form a venture to serve the high growth plastics processing markets in China, the divestiture of Day International, Inc., and the sale of our final interest in the Iron Ore Company of Canada (IOC). Net sales were a record $1,902.0 million in 1995, an increase of 10.6% over 1994 levels. Income from continuing operations, excluding the nonrecurring gain from the IOC sale, was $51.0 million, a 37.8% increase over 1994 levels. 1995 Compared with 1994 Sales from processing businesses increased $80.7 million from 1994 levels due to acquisitions consummated in 1994 and higher pricing partially offset by lower unit volumes. Distribution sales increased $95.4 million to $862.1 million in 1995 due to higher pricing and higher unit volumes. Sales from other operations were comparable with 1994 levels. Cost of goods sold increased from $1,393.0 million in 1994 to $1,552.6 million in 1995 due to higher raw material costs, partially offset by lower unit volumes. Gross margins were 18.4% in 1995 and 19.0% in 1994. The deterioration in gross margin is due in part to the mix of sales between processing and distribution businesses. Distribution businesses, which carry a lower gross margin, had a higher overall growth rate in sales than the processing businesses. In addition, although the Company was able to pass through most raw material price increases, it was not able to maintain the comparable historical gross margin relationship. Selling, general and administrative expenses, as a percentage of sales, were 11.5% in 1995 compared with 12.4% in 1994. Selling, general and administrative costs increased 2.6% or $5.5 million from 1994 levels due to a higher level of sales and acquisitions consummated in 1994, partially offset by lower costs associated with the Company's incentive compensation programs. Other income in 1995 includes a gain of $9.3 million from the sale of the Company's remaining interest in IOC and higher levels of interest income due to the funds invested from the sale of IOC and Day International. Other expense in 1994 includes $2.6 million related to the relocation of the Company's technical center and costs associated with the combination of the Company's resin distribution businesses. Interest on debt decreased $2.3 million to $26.3 million in 1995. During 1994, the Company repurchased $64.2 million of its Senior Notes in the open market. An additional $8.5 million of its Senior Notes were repurchased in 1995. In addition, the financing for the acquisition of Th. Bergmann in 1994 was repaid in 1995. The Company's effective tax rate was 42.6% in 1995 and 44.1% in 1994. The tax rate in 1995 was favorably impacted by 1.6 percentage points due to the relationship of the level of nondeductible goodwill to pre-tax income. In December 1994, the Company adopted a plan to sell its Day International printing and textile business and accordingly the operating results of that business were reclassified as discontinued operations. The sale of the Day business was consummated in June 1995 with the Company recognizing a gain of $40.3 million. 1994 Compared with 1993 Net sales were $1,719.4 million, an increase of 21.8% over net sales in 1993 of $1,412.1 million. Sales from processing businesses increased from $784.9 million in 1993 to $943.0 million in 1994 due to acquisitions in 1994 and 1993, higher unit volumes and pricing. Distribution sales increased $137.8 million to $766.7 million in 1994 due to higher unit volumes and pricing. Sales from other operations were comparable with 1993 levels. Cost of goods sold increased from $1,146.2 million in 1993 to $1,393.0 million in 1994 due to higher unit volumes and raw material costs. Gross margins were 19.0% in 1994 and 18.8% in 1993. Gross margin dollars in 1994 were $326.3 million compared with $265.9 million in 1993 or an increase of 22.7%, which exceeds the growth in sales of 21.8%. Gross margins were favorably impacted by higher volumes and productivity improvements, partially offset by the mix of sales between processing and distribution businesses. Distribution businesses, which had a higher growth rate in net sales than processing businesses, carry a lower gross margin. Also impacting gross margins in 1994 was a $3.3 million provision for inventories valued by the last-in first-out cost method. Selling, general and administrative expenses increased $34.1 million in 1994 to $213.3 million and were attributable to the higher level of sales, acquisitions made in 1994 and increased costs associated with the Company's incentive compensation programs due to the higher level of earnings. Selling, general and administrative expenses, as a percentage of sales were 12.4% in 1994 compared with 12.7% in 1993. Interest on debt decreased from $32.3 million in 1993 to $28.5 million in 1994 due to lower average borrowings outstanding and lower effective interest rates. During 1994, the Company repurchased $64.2 million of its Senior Notes in the open market, resulting in an extraordinary charge of $6.0 million ($3.7 million after-tax). Funds to repurchase the Senior Notes were obtained from existing cash flows as well as borrowings under the Company's credit agreement, which carry a lower rate of interest. The Company's effective tax rate in 1994 was 44.1% compared with 43.4% in 1993. The tax rate in 1993 was favorably impacted by 1.6 percentage points from the enactment of a change in tax laws. Included in income from discontinued operations in 1994 was a charge of $1.1 million related to the Company's elastomeric membrane roofing business for additional costs incurred while obtaining government antitrust clearance for the sale, which closed in the third quarter of 1994. The Company recognized an after-tax charge of $30.0 million in 1993 for the writeoff of goodwill and restructuring charges associated with the sale. Also included in discontinued operations in 1993 was $1.5 million from the sale of a former natural resources affiliate. LIQUIDITY AND SOURCES OF CAPITAL Cash flows from operating activities provided $33.9 million in 1995. Included in this amount was a use of cash of $32.1 million for working capital reflecting an increase in days sales outstanding, higher levels of inventory due to increase in raw material costs and higher payments pertaining to taxes on income, due in part to the taxes associated on the gain recognized from the sale of Day International. Payments of obligations from prior restructurings used $17.3 million. Ignoring the tax payments related to the Day sale and the payments on the restructuring obligations, operating activities provided $90.2 million, or $2.85 per share. Investing activities provided $154.0 million and included $223.5 million in proceeds from the sale of Day International and the Company's interest in IOC. Capital expenditures utilized $55.9 million. Financing activities used $101.1 million in cash and include $17.0 million for the payment of dividends, $25.0 million for the repurchase of 1.0 million shares for treasury and $61.2 million in net reductions of outstanding debt. During 1995, the Company repaid the financing related to the 1994 acquisition of Th. Bergmann and also repurchased $8.5 million of its Senior Notes in the open market. The Company has a credit facility 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 December 31, 1995, there were no outstanding borrowings under this agreement. The current ratio was 1.7:1 at December 31, 1995. Excluding the net assets of discontinued operations reported as a current asset in 1994, the current ratio at December 31, 1994 was 1.4:1. Long-term debt to total capital was 32.4% at December 31, 1995 and 41.0% at December 31, 1994. The Company believes that its existing cash balances, its ability to generate cash flows from operations and the availability of funds under existing credit facilities will be sufficient to fund the cost of the CIMCO acquisition and its obligations under the joint venture agreement with Suzhou Plastics Factory #1, to meet anticipated capital expenditure programs, payment of obligations from prior restructurings, dividends and other planned financial commitments in 1996 and throughout the terms 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. 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. Reserves for such liabilities have been established and no insurance recoveries have been anticipated in the determination of reserves. While it is not possible to predict with certainty, management believes that the aforementioned claims will be resolved without material adverse effect on the financial position, liquidity or results of operations of the Company. On behalf of M.A. Hanna Management, /s/ Michael S. Duffey Michael S. Duffey Vice President, Chief Financial Officer and Treasurer Report of Independent Accountants To the Board of Directors and Stockholders of M.A. Hanna Company In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of stockholders' equity and of cash flows present fairly, in all material respects, the financial position of M.A. Hanna Company and its subsidiaries at December 31, 1995, and the results of their operations and their cash flows for the year in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. The consolidated financial statements of M.A. Hanna Company for the years ended December 31, 1994 and 1993 were audited by other independent auditors whose report dated January 31, 1995 expressed an unqualified opinion on those statements. /s/ Price Waterhouse LLP Cleveland, Ohio January 29, 1996 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT: Where Incorporated Name (or formed) Burton Rubber Compounding , L.P. Delaware (a limited partnership) Burton Rubber Processing, Ltd. Ontario Cadillac Plastic Group, Inc. Michigan CIMCO, Inc., Delaware DH Compounding Company Delaware (a general partnership) Erieview Insurance Company Limited Bermuda Global Processing Company California Hanna France SARL France Hanna Hamilton Holdings Company Delaware Hanna International Corporation Delaware Hanna Polimeros, S.A. de C.V. Mexico Hanna Su Xing Plastics Compounding (Suzhou) Company Limited China M. A. Hanna Export Services Company Barbados M. A. Hanna International Financial Services Company Ireland M. A. Hanna de Mexico, S.A. de C.V. Mexico M. A. Hanna Resin Distribution Company Delaware M. A. Hanna Company Thermoplastic Elastomers Delaware MAH Plastics Company Delaware Monmouth Plastics Company Delaware Poliamidas Barbastro, S.A. Spain Synthecolor, S.A. France Texapol Corporation Pennsylvania The Lower Lake Dock Company Ohio The Ohio & Western Pennsylvania Dock Company Ohio The Pennsylvania Tidewater Dock Company Delaware Theodor Bergmann GmbH & Co. Kunststoffwerk KG Germany Wilson Color S.A. Belgium Wilson Color GmbH Germany Wilson Color S.A. France Wilson Color AB Sweden The Registrant has other unconsolidated subsidiaries and 50 percent or less owned persons accounted for by the equity method, which in the aggregate do not constitute a significant subsidiary. EXHIBIT 23 Consent of Independent Accountants We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 and the Registration Statements on Form S-8 (appearing on Exhibit 1) of M.A. Hanna Company of our report dated January 29, 1996 appearing on page 38 of the Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page F-2 of this Form 10-K. /s/ Price Waterhouse LLP Cleveland, Ohio March 22, 1996 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statements (Exhibit 1) of M.A. Hanna Company of our report dated January 31, 1995, with respect to the consolidated financial statements and schedule of M.A. Hanna Company as of December 31, 1994 and for each of the two years then ended included in the Annual Report (Form 10-K) of M.A. Hanna Company for the year ended December 31, 1995. /s/ Ernst & Young LLP Cleveland, Ohio March 22, 1996 Consent of Independent Auditors Exhibit 1 Form S-8 No. 2-70755 pertaining to the M.A. Hanna Company 1979 Executive Incentive Compensation Plan. Form S-8 No. 33-29622 pertaining to the M.A. Hanna Company 1988 Long-Term Incentive Plan. Form S-8 No. 33-35654 pertaining to the M.A. Hanna Company Restated 1979 Executive Compensation Plan and 1988 Long-Term Incentive Plan. Form S-8 No. 33-38938 pertaining to the M.A. Hanna Company Capital Accumulation Plan. Form S-8 No. 33-41461 pertaining to the M.A. Hanna Company Capital Accumulation and Savings Plan for Salaried Employees of Day International Corporation. Form S-8 No. 33-45420 pertaining to the M.A. Hanna Company Pay for Performance Plans. Form S-3 No. 33-29624 pertaining to the M.A. Hanna Company Dividend Reinvestment and Stock Purchase Plan. Form S-3 No. 33-66128 pertaining to various employee compensation and benefit plans of M.A. Hanna Company. Form S-8 No. 33-51517 pertaining to Wilson Color Profit Sharing Plan. Form S-8 No. 33-51519 pertaining to Texapol Corporation Employees' 401(k) Savings Plan. Form S-8 No. 33-51555 pertaining to PMS Profit Sharing and Retirement Savings Plan. Form S-8 No. 33-51513 pertaining to Fiberchem, Inc. 401(k) Plan. Form S-8 No. 33-51497 pertaining to DH Compounding Company Savings and Retirement Plan. Form S-8 No. 33-51499 pertaining to Dayton Plastics Profit Sharing Plan. Form S-8 No. 33-51491 pertaining to Burton Rubber Processing, Inc. Savings and Retirement Plan. Form S-8 No. 33-51507 pertaining to Bruck Plastics Company Profit Sharing Plan. Form S-8 No. 33-51503 pertaining to Allied Color Industries, Inc. Savings and Retirement Plan for Associates of the Vonore, TN, Kansas City, MO, San Francisco, CA and Vancouver, WA Operations, formerly the Avecor, Inc. Savings and Retirement Plan. Form S-8 No. 51501 pertaining to Allied Color Industries, Inc. Profit Sharing Plan for Associates of the Broadview Heights, OH, Greenville, SC, and Phoenix, AZ Operations, formerly the Allied Color Industries, Inc. Profit Sharing Plan. Form S-8 No. 33-53093 pertaining the M.A. Hanna Company Directors' Deferred Fee Plan. Form S-8 No. 33-57021 pertaining to 401(k) Savings and Retirement Plan for Polymer Associates. EXHIBIT 24 POWER OF ATTORNEY The undersigned, Director of the corporation named herein opposite his signature, hereby appoints T. E. Lindsey, J. S. Pyke, Jr., and M. S. Duffey, or any of them, his attorney or attorneys in fact, with full power of substitution, to sign the Annual Report on Form 10-K for the fiscal year ended December 31, 1995, being filed with the Securities and Exchange Commission by M. A. Hanna Company, and any and all amendments to such Annual Report, with full power and authority to take any and all such action as may be necessary or advisable in the premises. Capacity in which Annual Report on Form 10-K is to be signed Signature Date /s/ B. C. Ames Director of M. A. Hanna March 6, 1996 B. C. Ames Company POWER OF ATTORNEY The undersigned, Director of the corporation named herein opposite her signature, hereby appoints T. E. Lindsey, J. S. Pyke, Jr., and M. S. Duffey, or any of them, her attorney or attorneys in fact, with full power of substitution, to sign the Annual Report on Form 10-K for the fiscal year ended December 31, 1995, being filed with the Securities and Exchange Commission by M. A. Hanna Company, and any and all amendments to such Annual Report, with full power and authority to take any and all such action as may be necessary or advisable in the premises. Capacity in which Annual Report on Form 10-K is to be signed Signature Date /s/ C. A. Cartwright Director of M. A. Hanna March 6, 1996 C. A. Cartwright Company POWER OF ATTORNEY The undersigned, Director of the corporation named herein opposite his signature, hereby appoints T. E. Lindsey, J. S. Pyke, Jr., and M. S. Duffey, or any of them, his attorney or attorneys in fact, with full power of substitution, to sign the Annual Report on Form 10-K for the fiscal year ended December 31, 1995, being filed with the Securities and Exchange Commission by M. A. Hanna Company, and any and all amendments to such Annual Report, with full power and authority to take any and all such action as may be necessary or advisable in the premises. Capacity in which Annual Report on Form 10-K is to be signed Signature Date /s/ W. R. Embry Director of M. A. Hanna March 6, 1996 W. R. Embry Company POWER OF ATTORNEY The undersigned, Director of the corporation named herein opposite his signature, hereby appoints T. E. Lindsey, J. S. Pyke, Jr., and M. S. Duffey, or any of them, his attorney or attorneys in fact, with full power of substitution, to sign the Annual Report on Form 10-K for the fiscal year ended December 31, 1995, being filed with the Securities and Exchange Commission by M. A. Hanna Company, and any and all amendments to such Annual Report, with full power and authority to take any and all such action as may be necessary or advisable in the premises. Capacity in which Annual Report on Form 10-K is to be signed Signature Date /s/ J. T. Eyton Director of M. A. Hanna March 6, 1996 J. T. Eyton Company POWER OF ATTORNEY The undersigned, Director of the corporation named herein opposite his signature, hereby appoints T. E. Lindsey, J. S. Pyke, Jr., and M. S. Duffey, or any of them, his attorney or attorneys in fact, with full power of substitution, to sign the Annual Report on Form 10-K for the fiscal year ended December 31, 1995, being filed with the Securities and Exchange Commission by M. A. Hanna Company, and any and all amendments to such Annual Report, with full power and authority to take any and all such action as may be necessary or advisable in the premises. Capacity in which Annual Report on Form 10-K is to be signed Signature Date /s/ G. D. Kirkham Director of M. A. Hanna March 6, 1996 G. D. Kirkham Company POWER OF ATTORNEY The undersigned, Director of the corporation named herein opposite his signature, hereby appoints T. E. Lindsey, J. S. Pyke, Jr., and M. S. Duffey, or any of them, his attorney or attorneys in fact, with full power of substitution, to sign the Annual Report on Form 10-K for the fiscal year ended December 31, 1995, being filed with the Securities and Exchange Commission by M. A. Hanna Company, and any and all amendments to such Annual Report, with full power and authority to take any and all such action as may be necessary or advisable in the premises. Capacity in which Annual Report on Form 10-K is to be signed Signature Date /s/ M. L. Mann Director of M. A. Hanna March 6, 1996 M. L. Mann Company POWER OF ATTORNEY The undersigned, Director of the corporation named herein opposite his signature, hereby appoints T. E. Lindsey, J. S. Pyke, Jr., and M. S. Duffey, or any of them, his attorney or attorneys in fact, with full power of substitution, to sign the Annual Report on Form 10-K for the fiscal year ended December 31, 1995, being filed with the Securities and Exchange Commission by M. A. Hanna Company, and any and all amendments to such Annual Report, with full power and authority to take any and all such action as may be necessary or advisable in the premises. Capacity in which Annual Report on Form 10-K is to be signed Signature Date /s/ R. W. Pogue Director of M. A. Hanna March 6, 1996 R. W. Pogue Company POWER OF ATTORNEY The undersigned, Director of the corporation named herein opposite his signature, hereby appoints T. E. Lindsey, J. S. Pyke, Jr., and M. S. Duffey, or any of them, his attorney or attorneys in fact, with full power of substitution, to sign the Annual Report on Form 10-K for the fiscal year ended December 31, 1995, being filed with the Securities and Exchange Commission by M. A. Hanna Company, and any and all amendments to such Annual Report, with full power and authority to take any and all such action as may be necessary or advisable in the premises. Capacity in which Annual Report on Form 10-K is to be signed Signature Date /s/ D. J. McGregor Director of M. A. Hanna March 6, 1996 D. J. McGregor Company EXHIBIT 27 [ARTICLE] 5 [MULTIPLIER] 1,000 [PERIOD-TYPE] 12-MOS [FISCAL-YEAR-END] DEC-31-1995 [PERIOD-END] DEC-31-1995 [CASH] 111,235 [SECURITIES] 0 [RECEIVABLES] 279,050 [ALLOWANCES] 11,034 [INVENTORY] 166,801 [CURRENT-ASSETS] 574,612 [PP&E] 393,314 [DEPRECIATION] 166,293 [TOTAL-ASSETS] 1,231,596 [CURRENT-LIABILITIES] 335,251 [BONDS] 231,987 [PREFERRED-MANDATORY] 0 [PREFERRED] 0 [COMMON] 43,274 [OTHER-SE] 441,504 [TOTAL-LIABILITY-AND-EQUITY] 1,231,596 [SALES] 1,901,954 [TOTAL-REVENUES] 1,901,954 [CGS] 1,552,643 [TOTAL-COSTS] 1,552,643 [OTHER-EXPENSES] 0 [LOSS-PROVISION] 2,480 [INTEREST-EXPENSE] 26,278 [INCOME-PRETAX] 98,821 [INCOME-TAX] 42,119 [INCOME-CONTINUING] 56,702 [DISCONTINUED] 45,337 [EXTRAORDINARY] 0 [CHANGES] 0 [NET-INCOME] 102,039 [EPS-PRIMARY] 3.29 [EPS-DILUTED] 3.22
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