-----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, KIL5ctuD0KH9EWrQrwyyOegfazKG2vdJutDedxPSN5B0WkykhC/y72CA5kJJgo5s wKx1Z9m7MSa+jea/+71uCQ== /in/edgar/work/20000726/0000950152-00-005480/0000950152-00-005480.txt : 20000921 0000950152-00-005480.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950152-00-005480 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000726 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000726 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANNA M A CO/DE CENTRAL INDEX KEY: 0000045370 STANDARD INDUSTRIAL CLASSIFICATION: [3080 ] IRS NUMBER: 340232435 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-05222 FILM NUMBER: 679461 BUSINESS ADDRESS: STREET 1: STE 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 8-K 1 e8-k.txt M.A. HANNA COMPANY FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------- Date of report (Date of earliest event reported): July 26, 2000 M.A. HANNA COMPANY ------------------ (Exact name of registrant as specified in charter) Delaware 1-5222 34-0232435 - ---------------------------- --------------------- ------------- (State or other jurisdiction (Commission File No.) (IRS Employer of incorporation) 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 -------------- N/A ------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) 2 ITEM 5. OTHER EVENTS On July 26, 2000, M.A. Hanna Company, a Delaware corporation ("M.A. Hanna"), issued a press release announcing its financial results for the quarter ended June 30, 2000. A copy of the press release is attached as Exhibit 99.1 and is incorporated herein by reference in its entirety. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits. 99.1 Press Release of M.A. Hanna Company, dated July 26, 2000, announcing its financial results for the quarter ended June 30, 2000. 3 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. M.A. HANNA COMPANY By: /s/ John S. Pyke, Jr. ------------------------------------------- Name: John S. Pyke, Jr. Title: Vice President, General Counsel and Secretary Dated: July 26, 2000 4 EXHIBIT INDEX Exhibit No. Description ----------- ----------- 99.1 Press Release of M.A. Hanna Company, dated July 26, 2000, announcing its financial results for the quarter ended June 30, 2000. EX-99.1 2 ex99-1.txt EXHIBIT 99.1 1 EXHIBIT 99.1 ------------ [M.A. HANNA COMPANY LOGO] NEWS RELEASE M.A. HANNA COMPANY 200 Public Square Suite 36-5000 Cleveland, Ohio 44114-2304 phone 216.589.4000 fax 216.589.4200 FOR IMMEDIATE RELEASE Investor and media contact: Christopher Farage (216) 589-4085 M.A. HANNA REPORTS SECOND-QUARTER SALES OF $606.8 MILLION, OPERATING EARNINGS OF 19 CENTS PER SHARE CLEVELAND, July 26, 2000 - M.A. Hanna Company (NYSE: MAH:CHICAGO) today reported second-quarter earnings, before one-time events, of 19 cents per share, a decrease of 17 percent from second-quarter 1999 earnings of 23 cents per share. The quarterly results are in line with estimates that M.A. Hanna made public on July 10, when it cautioned investors that operating earnings would be within a range of 18 to 20 cents per share. M.A. Hanna reported then that earnings were impacted by higher raw material costs, start-up expenses for a new plant in Mexico in excess of new business growth, a decline in tire tolling, and performance of the company's Cadillac Plastic business that was below expectations. The company today reported the following second-quarter results: 2 EXHIBIT 99.1 ------------ - Sales of $606.8 million increased 2.1 percent compared with $594.3 million in the second quarter of 1999. - Before one-time events, operating earnings were $22.6 million compared with $25.7 million in 1999. - The one-time events included an after-tax loss of $52.3 million related to the pending Cadillac Plastic divestiture, and a $10.5 million reduction in income tax reserves related to a settlement of examinations of previously filed tax returns. - After these one-time events, the net loss was $33.3 million compared with net income of $10.4 million in the 1999 quarter. "As we made clear earlier this month, M.A. Hanna's second-quarter performance fell short of our expectations," said Chairman and Chief Executive Officer Phillip D. Ashkettle. "We understand what the problems were in the second quarter, and have put into place actions and processes that will address these problems and show benefits beginning in the third quarter. We also feel very positive about the longer term as we work closely together with The Geon Company to combine and form PolyOne(TM) Corporation, the world's largest polymer services company." The increase in M.A. Hanna's second-quarter sales can be attributed to the following: - - Volume accounted for 3.8 percent of the year-over-year increase. - - Price/mix had a positive 2.6 percent impact. - - The combined impact from acquisitions and divestitures was a negative 1.9 percent. - - Currency exchange accounted for a negative 2.4 percent. Gross margins were 17 percent compared with 18.1 percent in the same 1999 quarter. SG&A expenses of $76.5 million were 12.6 percent of sales, compared with $76.1 million, or 12.8 percent of sales, in the 1999 quarter. 3 EXHIBIT 99.1 ------------ One-time, non-recurring events in the second quarter included a loss on the pending sale of a portion of the Cadillac Plastic shapes distribution businesses. M.A. Hanna announced on May 11 that it had reached agreement to sell a substantial component of Cadillac Plastic to GE Plastics. An after-tax loss of $52.3 million, or $1.16 per share, is related to the write down of goodwill and closing costs associated with the expected sale. After the divestiture of Cadillac Plastic, M.A. Hanna expects to see a net improvement in operating income as a percent of sales, as well as a reduction in selling, general and administrative (SG&A) expenses and working capital. Also during the second quarter, M.A. Hanna recorded a one-time reduction in income tax reserves of $10.5 million related to the settlement of examinations of previously filed tax returns. Debt to capital was 47.1 percent at the end of the quarter compared with 43.5 percent at the end of the comparable 1999 quarter. The tax rate was 40.5 percent on an operating basis. SEGMENT ANALYSIS Plastic Processing This segment had second-quarter sales of $248 million, an increase of 6.4 percent over second-quarter 1999 sales of $233.2 million. Operating margin was 5.5 percent, compared with 6.9 percent in the second quarter of 1999. The increase in sales for the segment can be attributed to the following: - - Volume increases accounted for 3.0 percent of the improvement. - - Acquisitions accounted for a 3.2 percent increase. - - Price/mix added 4.2 percentage points. - - Currency exchange had a negative 4 percent impact. 4 EXHIBIT 99.1 ------------ The decrease in operating margin for the plastic processing businesses was the result of raw material cost increases that the company was unable to fully offset with price increases. International plastic compounding and color and additives operations, however, showed solid year-over-year sales growth and improved profitability. The company is also implementing customer equity analysis, which evaluates customers according to profitability and focuses on growing business with profitable customers, and is examining pricing stewardship procedures across all customers. To address issues in the plastic processing segment, especially in the domestic operations, M.A. Hanna has continued to target improvements in manufacturing efficiencies and reductions in SG&A expenses. In addition, the company is organizing a number of new, customer-focused business teams to drive performance improvement. Rubber Processing Sales in this segment were $130.7 million compared with $131.6 million in second quarter 1999, a decline of 0.7 percent. Operating margin decreased to 7.5 percent from 8.8 percent in the 1999 quarter. The decline in segment sales can be attributed to the following: - - Volume accounted for a 0.7 percent increase. - - Price/mix was a negative 0.6 percent. - - Currency exchange was a negative 0.8 percent. Overall, three factors were responsible for the disappointing performance in rubber processing. First was the start-up of a new rubber compounding plant in Mexico. The plant's revenue base has not yet matched operating expenses, but the company expects it to break even in the third quarter. 5 EXHIBIT 99.1 ------------ Second, M.A. Hanna's tire tolling business - in which customers provide the raw materials that are then processed for shipment back to customers - decreased in step with the weakening tire market. Finally, this segment also experienced margin pressure from raw material cost increases. On July 1, M.A. Hanna implemented price increases for its long-term automotive related customers. The company expects to see effects from this increase in the third quarter. Additional actions in the rubber compounding business include a focus on lean manufacturing, a successful initiative that it launched a year ago to streamline its manufacturing systems, improve customer service, and promote associate training, involvement and innovation. The encouraging results so far of lean manufacturing also include increased inventory turns. Distribution Sales in the distribution segment were $236.5 million, a 1.2 percent increase over second-quarter 1999 sales of $233.7 million. Operating margin was 1.7 percent compared with 1.5 percent in the 1999 quarter. The increase in sales for the segment can be attributed to the following: - - Volume accounted for 6.6 percent of increase. - - Price/mix contributed a 2.8 percent increase. - - Currency exchange was a negative 1.6 percent. - - A 1999 divestiture led to a negative 6.6 percent impact. The resin distribution business maintained solid and consistent revenue, volume and earnings growth. Excluding the July 1999 divestiture of a thermoset resin distribution business, sales showed a double-digit gain. The growth in business is attributable to 6 EXHIBIT 99.1 ------------ strong market demand for products, improved operational efficiencies and the addition of trained sales associates. Distribution of plastic shapes (sheet, rod, tube and film) is a non-core business for M.A. Hanna. The shapes businesses, Cadillac Plastic, performed below expectations, in part because an action plan intended to modify the overall operating structure was put on hold as M.A. Hanna sought to divest this business. The pending sale of the largest portion of Cadillac Plastic to GE Plastics, which was announced on May 11, 2000, is expected to close in the third quarter. On July 19, M.A. Hanna announced that it had reached agreement to sell Richmond Aircraft, another unit of Cadillac Plastic, to UMECO plc, Europe's leading provider of value-added distribution services to the aerospace and defense industries. M.A. Hanna expects a third-quarter gain on the sale of Richmond Aircraft, which had revenues of $27 million in 1999. M.A. Hanna is exploring strategic alternatives for the remaining Cadillac Plastic interest, represented by a fifty-percent ownership in three European joint ventures. "The Cadillac Plastic and Richmond Aircraft divestitures are part of an effort to focus our resources on our core businesses and on what we do best," said Ashkettle. "Looking toward the future as PolyOne(TM) Corporation, we're committed to excel as a polymer services provider, clearly focused on working with our customers to find superior solutions to their polymer needs. Using the collective ideas from the combined talent of both companies, we're acting on very specific plans to improve all aspects of our business. We're very excited at the ability we will have to enhance our top line and to carry through many improvements that will contribute to substantial bottom-line growth. Our full expectation is that we will outperform our peers and grow aggressively, both organically and through targeted acquisitions." The combination with Geon is expected to close in the third quarter. 7 EXHIBIT 99.1 ------------ M.A. Hanna Company, headquartered in Cleveland, is a $2.3 billion international specialty polymers company focused on the plastics and rubber industries through its operations in North America, Europe and Asia. Its primary businesses are plastic compounding and color and additive systems, rubber compounding and additives, and distribution of plastic resins and engineered plastic shapes. On May 8, 2000, M.A. Hanna and The Geon Company (NYSE:GON) announced an agreement to consolidate, forming PolyOne(TM) Corporation, the world's largest polymer services company. Additional information about M.A. Hanna can be found at www.mahanna.com. Any forward-looking statements in this announcement are based on current expectations, and actual results may differ materially depending on business conditions and growth in the plastics and rubber industries, the general economy, foreign political and economic developments, availability and pricing of supplies and raw materials, changes in product mix, shifts in market demand, the success of the company's lean manufacturing and supply chain management initiatives, the continuing improvement in the domestic plastic processing businesses, changes in prevailing interest rates, inability to pass raw material cost increases through to customers, and unanticipated delays in effecting divestitures. -0- 8 M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES ------------------------------------------------ CONSOLIDATED STATEMENTS OF INCOME --------------------------------- (Unaudited)
Three Months Ended Six Months Ended June 30 June 30 ----------------------------- ----------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ (Dollars in thousands except per share data) Net Sales $ 606,788 $ 594,263 $ 1,219,470 $ 1,174,822 Costs and Expenses Cost of goods sold 503,764 486,987 1,008,029 962,465 Selling, general and administrative 76,527 76,079 155,592 154,796 Interest on debt 8,278 8,251 16,331 16,533 Amortization of intangibles 3,669 3,973 7,489 7,970 Other - net 45,571 1,518 45,895 2,593 ------------ ------------ ------------ ------------ 637,809 576,808 1,233,336 1,144,357 ------------ ------------ ------------ ------------ Income(Loss) Before Income Taxes (31,021) 17,455 (13,866) 30,465 Income taxes 2,302 7,069 9,250 12,338 ------------ ------------ ------------ ------------ Net Income(Loss) $ (33,323) $ 10,386 $ (23,116) $ 18,127 ============ ============ ============ ============ Net Income(Loss) per Share Basic $ (.74) $ .23 $ (.51) $ .41 ============ ============ ============ ============ Diluted $ (.74) $ .23 $ (.51) $ .41 ============ ============ ============ ============ Dividends per common share $ .125 $ .12 $ .25 $ .24 ============ ============ ============ ============ Average number of common shares Basic 44,943,169 44,577,005 44,946,516 44,530,611 Diluted 45,033,946 44,886,750 45,013,024 44,680,533
9 M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES ------------------------------------------------ CONSOLIDATED BALANCE SHEETS --------------------------- (Unaudited)
June December 30, 2000 31, 1999 ---------- ---------- (Dollars in thousands) Assets ------ Current Assets Cash and cash equivalents $ 39,659 $ 40,937 Receivables 326,340 356,029 Inventories 205,849 252,051 Other 147,953 48,501 ---------- ---------- Total current assets 719,801 697,518 Net Property, Plant and Equipment 316,446 333,908 Other Assets Goodwill and other intangibles 377,974 432,576 Investments and other 128,779 126,556 ---------- ---------- Total other assets 506,753 559,132 ---------- ---------- $1,543,000 $1,590,558 ========== ========== Liabilities and Stockholders' Equity ------------------------------------ Current Liabilities Notes payable $ 6,146 $ 4,011 Trade payables and accrued expenses 349,684 404,293 Current portion of long-term debt 2,361 4,020 ---------- ---------- Total current liabilities 358,191 412,324 Other Liabilities 206,087 205,031 Long-term Debt 460,789 423,689 Stockholders' Equity 517,933 549,514 ---------- ---------- $1,543,000 $1,590,558 ========== ========== Long-term Debt/Total Capital 47.1% 43.5%
10 M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES ------------------------------------------------ CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (Unaudited)
Six Months Ended June 30 --------------------- 2000 1999 -------- -------- (Dollars in thousands) Cash Provided from (Used for) Operating Activities Net income(loss) $(23,116) $ 18,127 Depreciation and amortization 33,377 32,594 Companies carried at equity Income (2,134) (2,385) Dividends received 728 1,400 Changes in operating assets and liabilities Receivables (42,199) (35,291) Inventories (16,215) 2,751 Prepaid expenses (703) (889) Trade payables and accrued expenses (9,565) 18,357 Restructuring payments (3,225) (4,643) Provisional loss from pending sale of assets 45,350 -- Other 12,531 13,553 -------- -------- Net operating activities (5,171) 43,574 Cash Provided from (Used for) Investing Activities Capital expenditures (24,261) (23,440) Acquisitions of businesses, less cash acquired (10,743) (9,423) Acquisition payments (185) (233) Sales of assets 6,985 2,197 Investments in associated and other companies -- (391) Return of cash from associated and other companies 1,008 512 Other (120) 6,303 -------- -------- Net investing activities (27,316) (24,475) Cash Provided from (Used for) Financing Activities Cash dividends paid (11,210) (10,657) Proceeds from the sale of common stock 340 674 Increase in debt 91,031 54,699 Reduction in debt (47,937) (56,798) -------- -------- Net financing activities 32,224 (12,082) Effect of exchange rate changes on cash (1,015) 284 -------- -------- Cash and Cash Equivalents Increase (decrease) (1,278) 7,301 Beginning of period 40,937 32,322 -------- -------- End of period $ 39,659 $ 39,623 ======== ======== Cash paid during period Interest $ 16,471 $ 15,691 Income taxes 8,681 302
11 M.A. HANNA COMPANY ------------------ SALES AND OPERATING PROFITS BY BUSINESS AREA -------------------------------------------- (Unaudited)
First Quarter ---------------------------------------------------------------------------------------- 2000 1999 -------------------------------------------- ------------------------------------------ Operating % Operating % Sales Profits Of Sales Sales Profits Of Sales ------------- ------------ ------------- ------------- ------------ ------------- Rubber Processing $139.1 $12.6 9.1% $130.9 $11.4 8.7% Plastic Processing 247.4 14.5 5.8% 230.8 13.9 6.0% Distribution 230.9 3.8 1.7% 223.0 2.5 1.1% Other 4.4 (0.1) -2.7% 3.6 .2 6.5% Sales Eliminations (9.1) - (7.7) - Corporate and Other - (5.6) - (6.7) ------------- ------------ ------------- ------------ $612.7 $25.2 4.1% $580.6 $21.3 3.7% ============= ============ ============= ============= ============ =============
Second Quarter ---------------------------------------------------------------------------------------- 2000 1999 -------------------------------------------- ------------------------------------------ Operating % Operating % Sales Profits Of Sales Sales Profits Of Sales ------------- ------------ ------------- ------------- ------------ ------------- Rubber Processing $ 130.7 $ 9.8 7.5% $131.6 $11.5 8.8% Plastic Processing 248.0 13.6 5.5% 233.2 16.0 6.9% Distribution 236.5 4.0 (a) 1.7% 233.7 3.6 1.5% Other 0.2 - 0.0% 3.7 .4 9.3% Sales Eliminations (8.6) (7.9) - Corporate and Other (4.8) - (5.8) ------------- ------------ ------------- ------------ $ 606.8 $ 22.6 3.7% $594.3 $25.7 4.3% ============= ============ ============= ============= ============ =============
First Six Months ---------------------------------------------------------------------------------------- 2000 1999 -------------------------------------------- ------------------------------------------ Operating % Operating % Sales Profits Of Sales Sales Profits Of Sales ------------- ------------ ------------- ------------- ------------ ------------- Rubber processing $269.8 $22.4 8.3% $262.5 $22.9 8.7% Plastic processing 495.4 28.1 5.7% 464.0 29.9 6.5% Distribution 467.4 7.8 (a) 1.7% 456.6 6.1 1.3% Other 4.6 (0.1) -4.0% 7.3 .6 7.9% Sales eliminations (17.7) (15.6) - Corporate and other (10.4) - (12.5) ------------- ------------ ------------- ------------ $ 1,219.5 $ 47.8 3.9% $1,174.8 $47.0 4.0% ============= ============ ============= ============= ============ =============
(a) Does not include $45.4 charge for pending sale of assets -----END PRIVACY-ENHANCED MESSAGE-----