-----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, SYFMOBuYvchjxlIiRqZ+qNTELeGV+0IwH8FO/LMkT3ZRwS4LA1hdmoyC4Pz69cjN 95Z0D+SXlbRXK8+sk/Jyxw== 0000058091-97-000002.txt : 19970515 0000058091-97-000002.hdr.sgml : 19970515 ACCESSION NUMBER: 0000058091-97-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAWTER INTERNATIONAL INC CENTRAL INDEX KEY: 0000058091 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, MATERIALS, SYNTH RESINS & NONVULCAN ELASTOMERS [2821] 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: 97605099 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 March 31, 1997 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) (847) 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 - 45,359,035 shares outstanding as of April 30, 1997. 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 March 31, 1997 and December 31, 1996 and the results of their operations for the three months ended March 31, 1997 and 1996, and the statements of cash flows for the three months ended March 31, 1997 and 1996, 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 March 31 --------------------------- 1997 1996 -------- -------- Net Sales $ 50,140 $ 49,366 Cost of Products Sold 34,524 35,810 -------- -------- Gross Margin $ 15,616 $ 13,556 Selling, Admin. Research and Distribution Expenses 7,563 6,286 -------- -------- Income from Operations $ 8,053 $ 7,270 Investment Income 754 1,171 -------- -------- Earnings before Income Taxes $ 8,807 $ 8,441 Provision for Income Taxes 2,869 2,276 -------- -------- Net Earnings $ 5,938 $ 6,165 ======== ======== Earnings per Share of Common Stock (Note 2) $ .13 $ .14 Dividends per Share of Common Stock $ .10 $ .10 Weighted Average Shares Outstanding 45,355 45,071 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) March 31 December 31 -------- ----------- Assets 1997 1996 - -------- -------- -------- Current Assets Cash $ 7,227 $ 8,221 Time Deposits 45,414 46,710 Marketable Securities 1,680 2,400 Accounts Receivable (net) 48,555 47,671 Inventories (Note 1) Raw Materials 25,148 24,094 Finished Goods 24,248 25,517 Prepaid Expenses 2,000 1,974 -------- -------- Total Current Assets $154,272 $156,587 -------- -------- Property, Plant and Equipment $135,897 $141,346 Less Accumulated Depreciation (47,649) (49,229) -------- -------- Net Property $ 88,248 $ 92,117 -------- -------- Investment in Affiliates $ 25,548 $ 24,833 -------- -------- Intangibles and Other Assets $ 18,872 $ 19,586 -------- -------- Total Assets $286,940 $293,123 ======== ======== Liabilities and Stockholders' Equity - ------------------------------------ Current Liabilities Accounts Payable and Accrued Expenses $ 30,829 $ 41,844 Short-Term Borrowings 45,461 38,962 Income Taxes Payable 2,951 1,371 -------- -------- Total Current Liabilities $ 79,241 $ 82,177 -------- -------- Deferred Income Taxes $ 36,155 $ 36,281 -------- -------- Long-Term Obligations $ 29,050 $ 29,050 -------- -------- Total Liabilities $144,446 $147,508 -------- -------- Stockholders' Equity Preferred Stock (None Issued) $ --- $ --- Common Stock 45,359 45,349 Additional Paid-in Capital 14,822 14,711 Retained Earnings 91,319 89,917 Cumulative Translation Adjustments (8,524) (3,826) Other (482) (536) -------- -------- Net Stockholders' Equity $142,494 $145,615 -------- -------- Total Liabilities and Equity $286,940 $293,123 ======== ======== 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) Three Months Ended March 31 --------------------------- 1997 1996 -------- -------- Cash Flow from Operating Activities: Net Earnings $ 5,938 $ 6,165 Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities- Depreciation and Amortization 1,358 1,407 Deferred Income Taxes --- (152) Undistributed Equity Income (715) (614) Deferred Exchange Gain (Loss) (178) 271 Purchase of Marketable Securities --- (19,623) Proceeds from Sales of Marketable Securities 739 2,959 Net (Gain) Loss from Marketable Securities (1) (53) (Increase) Decrease in Current Assets- Accounts Receivable (2,837) 442 Inventories (1,660) 2,091 Prepaid Expenses (133) (276) Increase (Decrease) in Current Liabilities- Accounts Payable and Accrued Expenses (9,516) (1,620) Income Taxes Payable 1,598 (58) -------- -------- Net Cash Used for Operating Activities $ (5,407) $ (9,061) -------- -------- Cash Flow from Investing Activities: Expenditures for Property, Plant & Equipment - Net $ (1,682) $ (9,456) Loans to Officers (6) --- Repayment of Officers' Loans 43 --- -------- -------- Net Cash Used for Investing Activities $ (1,645) $ (9,456) -------- -------- Cash Flow from Financing Activities: Exercise of Stock Options $ 121 $ 98 Proceeds from Long-Term Borrowings --- 25,000 Payment of Short-Term Borrowings --- (6,000) Proceeds from Short-Term Borrowings 9,610 5,949 Cash Dividends Paid (4,535) (4,507) -------- -------- Net Cash Provided by Financing Activities $ 5,196 $ 20,540 -------- -------- Effect of Exchange Rate Changes on Cash $ (434) $ (112) -------- -------- Increase (Decrease) in Cash and Equivalents $ (2,290) $ 1,911 Cash and Equivalents, Beginning of Period 54,931 63,680 -------- -------- Cash and Equivalents, End of Period $ 52,641 $ 65,591 ======== ======== 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 March 31, 1997, 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. Note 3. Restructuring Charges In the fourth quarter of 1995, a new management team was formed. The new management, taking into account a change in market conditions, developed a new corporate strategy. Part of the decision making process included an evaluation of the feasibility of continuing to utilize older manufacturing facilities. With the anticipated completion of construction of the new ink vehicle and resin facility in Europe combined with the new ink vehicle and resin facility in the U. S., the Company decided to implement a restructuring plan. This plan included the decommissioning of older ink vehicle and resin plants. This resulted in a 1995 fourth quarter pretax charge of $8,449,000, of which $2,791,000 was charged to Selling, Administrative, Research and Distribution expenses for personnel redundancy and $5,658,000 was charged to Cost of Products Sold for site decommissioning. These restructuring activities commenced in the fourth quarter of 1995 and will continue through the middle of 1997. The personnel redundancy costs relate to cash outlays for benefits to be paid to the manufacturing and office employees at older plants in Europe and North America. The labor force will be reduced by approximately 100 positions when the restructuring plan is completed, of which 84 positions have already been eliminated. As of March 31, 1997, employee head count was down to 509 from a high of 604 employees in 1995. Redundancy payments charged against the reserve through March 31, 1997 were $2,372,000 including $94,000 utilized in the first quarter of 1997. The site decommissioning costs represent demolition, cleanup and asset write down costs for older facilities in Europe and North America. Included in the $5,658,000, is $4,461,000 for non-cash items which relate to the write down of the net book value of the assets at these locations. As of March 31, 1997, -5- four manufacturing facilities in North America and one manufacturing facility in Europe were shut down and/or sold, and one manufacturing facility in Europe was in the final stages of being shut down. The costs charged against the reserve related to these facilities were $4,324,000 comprised of $3,738,000 for the write down of the net book value of the assets, $161,000 for cleanup costs, $650,000 for costs incurred during the wind down period of the two European facilities, $14,000 for equipment dismantling and $191,000 for relocation costs, partially offset by the proceeds of $430,000 from the sale of one of the North American facilities. 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 $8,800,000 from $16,000,000 at December 31, 1996 to $7,200,000 at March 31, 1997. The decrease in net cash and equivalents was due primarily to payments of liabilities related to the purchase of a division of Wolstenholme International Limited, the initial cash outflows to operate the businesses acquired from Wolstenholme International Limited and Hercules Inc. and the build up of certain raw materials due to favorable pricing. The Company generally relies on internally generated funds from operations to satisfy working capital requirements and to fund capital expenditures. However, in certain circumstances, the Company finds it is more advantageous to borrow funds to satisfy these requirements. The capital expenditures planned for the near future include construction of a new corporate headquarters in Pleasant Prairie, Wisconsin as well as additions to existing facilities elsewhere. The Company currently anticipates using internally generated funds for the majority of these capital expenditures. Results of Operations SALES. The Company's consolidated net sales increased 2% in the first quarter of 1997 when compared to the first quarter of 1996. Included in the first quarter of 1997 are $6,200,000 in sales of products, mostly in Europe, related to the Wolstenholme and Hercules acquisitions. Excluding the Wolstenholme and Hercules products, sales were down 11% due primarily to 1) lower volume both domestically and in Europe due to competitive factors and 2) the impact of a stronger U. S. dollar versus European currencies. GROSS MARGINS. Gross margins as a percent of net sales were 31.1% and 27.5% for the quarters ended March 31, 1997 and 1996, respectively. Included in the gross margin in 1997 was a $1,675,000 benefit for business interruption insurance accrued for losses resulting from a shutdown of the Irish facility in 1996. Excluding this benefit, the first quarter 1997 gross margin was 27.8%. The higher percentage in 1997 was due to lower raw material costs domestically and the lower costs as a result of the restructuring plan (See "Restructuring Plan" below), partially offset by higher costs relating to tolling agreements for producing Hercules and Wolstenholme products. In the second quarter of 1997, the effects of these costs will dissipate as the major portion of the tolling agreements ended at March 31,1997 and production was taken internal. SELLING, ADMINISTRATIVE, RESEARCH AND DISTRIBUTION EXPENSES. Selling, administrative, research and distribution expenses increased from $6,286,000 in the quarter ended March 31, 1996 to $7,563,000 in the quarter ended March 31, -6- 1997 due to costs associated with the Wolstenholme acquisition, foreign exchange transaction losses, and higher research, administrative and distribution costs in the U. S. NET INVESTMENT INCOME. Net investment income in the quarter ended March 31, 1997 decreased from the quarter ended March 31, 1996 due primarily to decreased funds available for investments as funds were used to finance acquisitions and capital expenditures. INCOME TAXES. The effective tax rates were 32.6% and 27.0% for the three months ended March 31, 1997 and 1996, respectively. The higher rate in 1997 was the result of increased earnings at higher taxed locations in Europe. In subsequent periods the effective tax rate is expected to be lower than the first quarter. Other Matters RESTRUCTURING CHARGES. In the fourth quarter of 1995, a new management team was formed. The new management, taking into account a change in market conditions, developed a new corporate strategy. Part of the decision making process included an evaluation of the feasibility of continuing to utilize older manufacturing facilities. With the anticipated completion of construction of the new ink vehicle and resin facility in Europe combined with the new ink vehicle and resin facility in the U. S., the Company decided to implement a restructuring plan. This plan included the decommissioning of older ink vehicle and resin plants. This resulted in a 1995 fourth quarter pretax charge of $8,449,000, of which $2,791,000 was charged to Selling, Administrative, Research and Distribution expenses for personnel redundancy and $5,658,000 was charged to Cost of Products Sold for site decommissioning. These restructuring activities commenced in the fourth quarter of 1995 and will continue through the middle of 1997. The personnel redundancy costs relate to cash outlays for benefits to be paid to the manufacturing and office employees at older plants in Europe and North America. The labor force will be reduced by approximately 100 positions when the restructuring plan is completed, of which 84 positions have already been eliminated. As of March 31, 1997, employee head count was down to 509 from a high of 604 employees in 1995. Redundancy payments charged against the reserve through March 31, 1997 were $2,372,000 including $94,000 utilized in the first quarter of 1997. The site decommissioning costs represent demolition, cleanup and asset write down costs for older facilities in Europe and North America. Included in the $5,658,000, is $4,461,000 for non-cash items which relate to the write down of the net book value of the assets at these locations. As of March 31, 1997, four manufacturing facilities in North America and one manufacturing facility in Europe were shut down and/or sold, and one manufacturing facility in Europe was in the final stages of being shut down. The costs charged against the reserve related to these facilities were $4,324,000 comprised of $3,738,000 for the write down of the net book value of the assets, $161,000 for cleanup costs, $650,000 for costs incurred during the wind down period of the two European facilities, $14,000 for equipment dismantling and $191,000 for relocation costs, partially offset by the proceeds of $430,000 from the sale of one of the North American facilities. LOOKING FORWARD. This Form 10-Q contains forward-looking statements which are not historical facts. These statements involve risks and uncertainties that could cause actual results to differ materially, including, but not limited to, foreign currency rate fluctuations, competitive factors, raw material costs and certain global and regional economic conditions and factors which are beyond the Company's control. -7- PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the annual meeting of stockholders held on April 24, 1997, shareholders voted to approve an amendment to the 1992 Non-Qualified Stock Option Plan and to approve an amendment to the 1995 Non-Qualified Stock Option Plan for Non- Employee Directors as proposed in the Company's 1997 Proxy Statement to Stockholders. The results of the vote on the proposal to approve the amendment to the 1992 Non-Qualified Stock Option Plan were 37,467,755 affirmative votes; 913,894 negative votes; and 1,395,826 abstentions. The results of the vote on the proposal to approve the amendment to the 1995 Non-Qualified Stock Option Plan for Non-Employee Directors were 37,194,101 affirmative votes; 1,184,621 negative votes; and 1,398,753 abstentions. 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) May 14, 1997 /s/ John P. O'Mahoney - ------------ -------------------------- John P. O'Mahoney Vice Chairman and Chief Executive Officer May 14, 1997 /s/ Mark W. Joslin - ------------ -------------------------- Mark W. Joslin Chief Financial Officer and Treasurer -8- EX-27 2
5 1,000 3-MOS DEC-31-1997 MAR-31-1997 52641 1680 48555 0 49396 154272 135897 47649 286940 79241 29050 0 0 45359 97135 286940 50140 50140 15616 15616 0 0 0 8807 2869 5938 0 0 0 5938 .13 .13
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