-----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, E2a1RX+i3nnEriK9MucmtOb0EsoE2heZM2ewG70/LbOoA2zQkPO9npIgm19+Y8Dq mIqccmjj7W4GrJbU/ZEAlw== 0000058091-95-000005.txt : 19951119 0000058091-95-000005.hdr.sgml : 19951119 ACCESSION NUMBER: 0000058091-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAWTER INTERNATIONAL INC CENTRAL INDEX KEY: 0000058091 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS CHEMICAL PRODUCTS [2890] IRS NUMBER: 361370818 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07558 FILM NUMBER: 95589377 BUSINESS ADDRESS: STREET 1: 990 SKOKIE BLVD CITY: NORTHBROOK STATE: IL ZIP: 60062 BUSINESS PHONE: 7084984700 FORMER COMPANY: FORMER CONFORMED NAME: LAWTER CHEMICALS INC DATE OF NAME CHANGE: 19810602 FORMER COMPANY: FORMER CONFORMED NAME: KRUMBHAAR CHEMICALS INC DATE OF NAME CHANGE: 19701117 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to ________________ Commission File Number: 1-7558 LAWTER INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 36-1370818 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 990 Skokie Boulevard; Northbrook, Illinois 60062 (Address of principal executive offices) (708) 498-4700 (Registrant's telephone number, including area code) 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock $1.00 par value per share - 45,066,386 shares outstanding as of October 31, 1995. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. The condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. In the opinion of the Company, all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position of Lawter International, Inc. and Subsidiaries as of September 30, 1995 and December 31, 1994 and the results of their operations for the three months ended September 30, 1995 and 1994, and the nine months ended September 30, 1995 and 1994, and the statements of cash flows for the nine months ended September 30, 1995 and 1994, have been included. It should be noted that these interim statements are based on certain annual estimates such as the final level of LIFO inventories and the provision for income taxes. These and other similar items may be subject to year end adjustments. The results of operations for such interim periods are not necessarily indicative of the results for the full year. Lawter International, Inc. and Subsidiaries Condensed Statements of Earnings (Shown in thousands) Three Months Ended Nine Months Ended September 30 September 30 ------------------- ------------------- 1995 1994 1995 1994 -------- -------- -------- -------- Sales $ 50,971 $ 48,844 $153,469 $135,873 Cost of Products Sold 37,799 34,322 111,981 94,807 -------- -------- -------- -------- 13,172 14,522 41,488 41,066 Selling, General and Administrative Expenses 5,109 5,148 15,928 14,943 -------- -------- -------- -------- 8,063 9,374 25,560 26,123 Investment Income 1,607 991 4,565 2,826 -------- -------- -------- -------- Earnings before Income Taxes 9,670 10,365 30,125 28,949 Provision for Income Taxes 2,515 2,710 7,830 7,544 -------- -------- -------- -------- Net Earnings $ 7,155 $ 7,655 $ 22,295 $ 21,405 ======== ======== ======== ======== Earnings per Share of Common Stock (Note 2) $ .16 $ .17 $ .50 $ .48 Dividends per Share of Common Stock $ .10 $ .10 $ .30 $ .30 Weighted Average Shares Outstanding 45,051 44,902 45,003 44,860 The accompanying notes to the condensed financial statements are an integral part of these statements. -2- Lawter International, Inc. and Subsidiaries Condensed Balance Sheets (Shown in thousands) September 30 December 31 ------------ ----------- Assets 1995 1994 - -------- -------- -------- Current Assets Cash $ 8,307 $ 8,063 Time Deposits 55,857 58,724 Marketable Securities 8,192 4,473 Accounts Receivable (net) 47,399 43,327 Inventories (Note 1) Raw Materials 23,554 14,366 Finished Goods 25,850 18,437 Prepaid Expenses 2,463 2,739 -------- -------- Total Current Assets 171,622 150,129 -------- -------- Property, Plant and Equipment 118,599 102,788 Less Accumulated Depreciation (54,490) (50,323) -------- -------- Net Property 64,109 52,465 -------- -------- Investment in Affiliates 21,669 20,139 -------- -------- Intangibles and Other Assets 8,405 9,094 -------- -------- Total Assets $265,805 $231,827 ======== ======== Liabilities and Stockholders' Equity - ------------------------------------ Current Liabilities Accounts Payable and Accrued Expenses $ 31,110 $ 33,217 Short-Term Borrowings 44,443 18,504 Income Taxes Payable 10,790 12,807 -------- -------- Total Current Liabilities 86,343 64,528 -------- -------- Deferred Income Taxes 35,410 35,354 -------- -------- Long-Term Obligations 4,102 4,152 -------- -------- Total Liabilities 125,855 104,034 -------- -------- Stockholders' Equity Preferred Stock (None Issued) --- --- Common Stock 45,066 44,924 Additional Paid-in Capital 8,036 6,955 Retained Earnings 89,743 80,929 Cumulative Translation Adjustments (2,698) (5,015) Other (197) --- -------- -------- Net Stockholders' Equity 139,950 127,793 -------- -------- Total Liabilities and Equity $265,805 $231,827 ======== ======== The accompanying notes to the condensed financial statements are an integral part of these balance sheets. -3- Lawter International, Inc. and Subsidiaries Condensed Statements of Cash Flows (Shown in thousands) Nine Months Ended September 30 ----------------------- 1995 1994 -------- -------- Cash Flow from Operating Activities: Net Earnings $ 22,295 $ 21,405 Adjustments to Reconcile Net Earnings to Net Cash Provided by (Used for) Operating Activities- Depreciation and Amortization 4,071 3,123 Deferred Income Taxes 35 --- Undistributed Equity Income (1,577) (1,579) Deferred Exchange Gain (Loss) (859) (353) Purchase of Marketable Securities (3,179) (2,299) Proceeds from Sales of Marketable Securities 1,000 --- Net (Gain) Loss from Marketable Securities (1,540) 363 (Increase) Decrease in Current Assets- Accounts Receivable (3,097) (3,222) Inventories (15,567) (4,877) Prepaid Expenses 349 131 Increase (Decrease) in Current Liabilities- Accounts Payable and Accrued Expenses (2,723) (4,276) Income Taxes Payable (2,067) 2,536 -------- -------- Net Cash Provided by (Used for) Operating Activities (2,859) 10,952 -------- -------- Cash Flow from Investing Activities: Expenditures for Property, Plant & Equipment - Net (13,764) (6,691) Loans to Officers (197) (73) Repayment of Officers' Loans --- 2,369 Purchase of Business-Net of Cash --- (6,369) -------- -------- Net Cash Provided by (Used for) Investing Activities (13,961) (10,764) -------- -------- Cash Flow from Financing Activities: Exercise of Stock Options 1,223 698 Principal Payments on Long-Term Obligations (50) (53) Payment of Short-Term Borrowings (1,063) --- Proceeds from Short-Term Borrowings 26,978 314 Cash Dividends Paid (13,481) (13,459) -------- -------- Net Cash Provided by (Used for) Financing Activities 13,607 (12,500) -------- -------- Effect of Exchange Rate Changes on Cash 590 1,001 -------- -------- Increase (Decrease) in Cash and Equivalents (2,623) (11,311) Cash and Equivalents, Beginning of Period 66,787 77,488 -------- -------- Cash and Equivalents, End of Period $ 64,164 $ 66,177 ======== ======== The accompanying notes to the condensed financial statements are an integral part of these statements. -4- Lawter International, Inc. and Subsidiaries Notes to the Condensed Financial Statements Note 1. Inventories At year end, the Company takes a complete physical inventory to determine inventory values. During interim periods, the Company uses a combination of perpetual inventory records, physical inventories and the gross profit method to determine inventory values. The Company values the majority of its domestic inventories at last-in, first- out (LIFO) cost which is not in excess of net realizable value. The Company's other inventories are valued at the lower of first-in, first-out (FIFO) cost or market. Because the inventory determination under the LIFO method can only be made at the end of each fiscal year based on the inventory levels and costs at that point, interim LIFO determinations, including that at September 30, 1995, must necessarily be based on management's estimates of expected year end inventory levels and costs. Such future estimates of inventory levels and prices are subject to many forces beyond the control of management. Note 2. Earnings per Share Earnings per share of common stock are computed on the weighted average shares outstanding during the respective periods. Net earnings per share would not be materially different from reported earnings per share if all outstanding stock options were exercised. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Liquidity and Capital Resources Lawter's cash and equivalents, net of short-term borrowings, decreased $28,600,000 from $48,300,000 at December 31, 1994 to $19,700,000 at September 30, 1995. The decrease in cash and equivalents was due primarily to an increase in inventory of some important raw materials due to a tightening of their supply, along with expenditures for the new synthetic resin and printing ink vehicle facility in Europe. Lawter anticipates maintaining a strong liquid position. The capital expenditures planned for the near future include construction of a new synthetic resin and printing ink vehicle facility in Europe, as well as additions to and modernization of existing facilities elsewhere. The Company currently anticipates using externally generated funds for the majority of these capital expenditures. Results of Operations SALES. The Company's consolidated net sales increased 4.4% in the third quarter of 1995 when compared to the third quarter of 1994. Domestic average selling prices increased 3%, while sales volume decreased 8%, resulting in a 5% decrease in domestic net sales. Reportable European net sales increased 23% as a result -5- of a 9% increase in sales volume, a 6% increase in average selling prices and a 7% increase caused by higher exchange rates. Consolidated net sales for the first nine months of 1995 increased 13.0% over consolidated net sales for the first nine months of 1994. Domestic average selling prices increased 6%, while sales volume decreased 5%, resulting in a 1% increase in domestic net sales. Reportable European net sales increased 36%, as the result of an 8% increase from the sales of Cremona Resine during the first six months of 1995 (the acquisition took place on June 30, 1994), a 10% increase in sales volume, an 11% increase caused by higher exchange rates and a 6% increase in average selling prices. GROSS MARGINS. Gross margins as a percent of net sales were 25.8% and 29.7% for the quarters ended September 30, 1995 and 1994, respectively, and 27.0% and 30.2% for the nine months ended September 30, 1995 and 1994, respectively. The lower percentages in both 1995 periods were principally due to higher raw material costs and startup costs associated with the new resin plant in Pleasant Prairie, Wisconsin. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses include net foreign transaction exchange gains (losses) of $(107,000) and $146,000 for the three months ended September 30, 1995 and 1994, respectively, and $(168,000) and $169,000 for the nine months ended September 30, 1995 and 1994, respectively. Transaction gains and losses result mainly from the effect of the exchange rate fluctuations on transactions of the foreign subsidiaries which are denominated in currencies other than the subsidiaries' functional currencies. Excluding these net transaction gains (losses), selling, general and administrative expenses as a percent of sales were 9.8% and 10.3% for the three months and nine months ended September 30, 1995, respectively, and 10.8% and 11.1% for the three months and nine months ended September 30, 1994, respectively. The lower percentage in both periods of 1995 resulted primarily from increased sales along with tight controls on selling, general and administrative expenses. INVESTMENT INCOME. Investment income in the quarter ended September 30, 1995 increased from the same period in 1994 due principally to a $678,000 write up of marketable securities to market in 1995 versus a $166,000 write down in 1994. For the first nine months of 1995, investment income increased from the same period of 1994 due primarily to a $1,521,000 write up of marketable securities to market in 1995 versus a $364,000 write down in 1994. INCOME TAXES. The effective tax rates were comparable at 26.0% and 26.1% for the three months ended September 30, 1995 and 1994, respectively and 26.0 and 26.1% for the nine months ended September 30, 1995 and 1994, respectively. PART II - OTHER INFORMATION Item 1. Legal Proceedings. On September 25, 1995, the U.S. EPA filed an administrative complaint alleging record keeping violations under the Toxic Substance Control Act (TSCA). Simultaneously, Lawter and the U.S. EPA entered into a consent order fully settling the complaint. Pursuant to the consent order, and without admitting any liability, the Company has paid $280,000 to the United States and will conduct a TSCA compliance audit. The Company decided to settle this matter in order to avoid protracted litigation and the related costs. -6- Item 5. Other Information On November 9, 1995, the Company issued a news release announcing top management changes effective January 1, 1996, attached hereto as Exhibit A. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit A - News release dated November 9, 1995 (b) On August 30, 1995, the Company filed a Form 8-K to report that it had delivered a letter to Kathryn Hach-Darrow, the Chairman of Hach Company ("Hach"), stating that Lawter was prepared to acquire the business of Hach through a cash merger in which each of the shares of Hach common stock not already owned by Lawter would be exchanged for $21.00 per share in cash. On September 15, 1995, the Company filed a Form 8-K to report that it received a letter from Kathryn Hach-Darrow, stating that Hach's Board had voted to decline Lawter's offer to purchase the balance of Hach stock that Lawter does not already own. In view of the response by Hach's Board, the acquisition of the business of Hach would not be possible and, therefore, Lawter has terminated its offer. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LAWTER INTERNATIONAL, INC. -------------------------- (Registrant) November 13, 1995 /s/ Richard D. Nordman - ----------------- -------------------------- Richard D. Nordman President November 13, 1995 /s/ William S. Russell - ----------------- -------------------------- William S. Russell Vice President, Finance and Secretary -7- EX-27 2
5 1,000 9-MOS DEC-31-1995 SEP-30-1995 64,164 8,192 47,399 0 49,404 171,622 118,599 54,490 265,805 86,343 4,102 45,066 0 0 94,884 265,805 153,469 153,469 111,981 111,981 0 0 0 30,125 7,830 22,295 0 0 0 22,295 .50 .50
EX-99 3 Exhibit A LAWTER INTERNATIONAL, INC. 990 Skokie Blvd. Northbrook, IL 60062 NEWS RELEASE For further information, please contact: Mr. Richard D. Nordman,President LAWTER INTERNATIONAL ANNOUNCES TOP MANAGEMENT CHANGES EFFECTIVE JANUARY 1, 1996 Northbrook, Illinois -- November 9, 1995 -- Lawter today announced that Daniel J. Terra, Founder of the Company and currently Chairman and Chief Executive Officer indicated that he was going to step down as Chief Executive Officer effective January 1, 1996, but will continue as Chairman of the Board. Mr. Terra and his family own approximately 33% of Lawter common stock. Also, Richard D. Nordman, currently President and Chief Operating Officer, has indicated his desire to step down effective January 1, 1996. He will remain as a Director and will become a Consultant to the Company effective January 1, 1996. Mr. Nordman stated that it has been a privilege to be part of the leadership of Lawter over the past 21 years. His reasons for stepping down are to fulfill personal and professional opportunities. He looks forward to continuing his affiliation with the Company. Daniel Terra stated "I am pleased that Mr. Nordman will continue his involvement with the Company's affairs." The Board has elected John P. O'Mahoney, 39, Vice-Chairman and new Chief Executive Officer, effective January 1, 1996. Mr. O'Mahoney has been with Lawter for 19 years, and is currently Vice President/European Operations. Also, John P. Jilek, 43, who has been with Lawter for 15 years and is currently Vice President/Sales, has been elected President and Chief Operating Officer effective January 1, 1996. At the same time, Peter Samuelson, who has been with the Company for ten years and currently manages the U.S. West Coast operations and Mexico, has been appointed to the position of General Manager/European Operations, effective January 1, 1996. The Chairman stated: "European operations have grown rapidly over the past ten years with Mr. O'Mahoney's involvement and management. Europe accounts for more than 40% of Lawter's consolidated business and this experience uniquely qualifies Mr. O'Mahoney for this new role with the Company. Mr. Jilek, with previous General Manager experience in Europe, has had a leadership role in worldwide management and expansion, other than Europe, for the past five years." Headquartered in Northbrook, Illinois, Lawter is a specialty chemical manufacturer with 24 facilities in 15 countries. Major products are printing ink vehicles, specialty additives, synthetic resins, fluorescent colors and thermographic products and equipment. Major markets served are the graphic arts, coatings, adhesives and rubber compounding industries. -----END PRIVACY-ENHANCED MESSAGE-----