-----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, GBGUND5+CKU8bZdF2wbxazq327uPH/2+LWWLs+M2TXyvwxq0lo+qs/jfUvQWCVFk MiYscA/FlxJlSkUkfWoB5g== 0000950109-96-005082.txt : 19960813 0000950109-96-005082.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950109-96-005082 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LYDALL INC /DE/ CENTRAL INDEX KEY: 0000060977 STANDARD INDUSTRIAL CLASSIFICATION: TEXTILE MILL PRODUCTS [2200] IRS NUMBER: 060865505 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07665 FILM NUMBER: 96608054 BUSINESS ADDRESS: STREET 1: ONE COLONIAL RD STREET 2: P O BOX 151 CITY: MANCHESTER STATE: CT ZIP: 06045-0151 BUSINESS PHONE: 2036461233 FORMER COMPANY: FORMER CONFORMED NAME: COLONIAL BOARD CO DATE OF NAME CHANGE: 19700115 10-Q 1 THIRD QUARTER 10Q - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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 JUNE 30, 1996 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 1-7665 ---------------- LYDALL, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 06-0865505 (I.R.S. EMPLOYER (STATE OR OTHER JURISDICTION OF IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) ONE COLONIAL ROAD, P.O. BOX 151, 06045-0151 MANCHESTER, CONNECTICUT, (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (860) 646-1233 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) NONE (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT.) ---------------- 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 XNo Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock $.10 par value per share. Total shares outstanding August 7, 1996 17,099,076
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PAGE NO. -------- Part I. Financial Information Item 1. Financial Statements Consolidated Condensed Balance Sheets............................. 2 Consolidated Condensed Statements of Income....................... 3-4 Consolidated Condensed Statements of Cash Flows................... 5 Notes to Consolidated Condensed Financial Statements.............. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 7-8 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders......... 8 Item 6. Exhibits and Reports on Form 8-K............................ 8 Signature............................................................. 9
1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS LYDALL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (IN THOUSANDS)
JUNE 30, DECEMBER 31, 1996 1995 -------- ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents.............................. $ 28,440 $ 27,820 Short-term investments................................. 2,273 913 Accounts receivable, net............................... 36,298 34,202 Inventories: Finished goods....................................... 7,261 6,033 Work in process...................................... 3,766 3,367 Raw materials and supplies........................... 6,424 7,217 LIFO reserve......................................... (2,518) (2,493) -------- -------- Total inventories...................................... 14,933 14,124 Prepaid expenses....................................... 1,210 820 Deferred tax assets.................................... 4,584 4,590 -------- -------- Total current assets................................. 87,738 82,469 -------- -------- Property, plant and equipment, at cost................... 108,077 105,467 Less accumulated depreciation............................ (48,561) (45,393) -------- -------- 59,516 60,074 Other assets, at cost, less amortization................. 14,832 15,529 -------- -------- $162,086 $158,072 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt...................... $ 3,533 $ 2,871 Accounts payable....................................... 16,419 14,770 Accrued taxes.......................................... 590 263 Accrued payroll and other compensation................. 4,609 5,426 Other accrued liabilities.............................. 6,913 6,409 -------- -------- Total current liabilities............................ 32,064 29,739 Long-term debt........................................... 4,300 7,750 Deferred tax liabilities................................. 13,869 14,207 Other long-term liabilities.............................. 3,950 4,565 Stockholders' equity: Preferred stock........................................ -- -- Common stock........................................... 2,102 2,089 Capital in excess of par value......................... 33,318 32,448 Foreign currency translation adjustment................ 1,540 2,091 Pension liability adjustment........................... (598) (459) Retained earnings...................................... 91,297 78,461 -------- -------- 127,659 114,630 Less: treasury stock, at cost.......................... (19,756) (12,819) -------- -------- Total stockholders' equity........................... 107,903 101,811 -------- -------- $162,086 $158,072 ======== ========
See accompanying Notes to Consolidated Condensed Financial Statements. 2 LYDALL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (IN THOUSANDS EXCEPT PER-SHARE DATA)
THREE MONTHS ENDED JUNE 30, -------------------- 1996 1995 --------- --------- (UNAUDITED) Net sales................................................ $ 67,669 $ 65,552 Cost of sales............................................ 46,147 45,528 --------- --------- Gross margin............................................. 21,522 20,024 Selling, product development and administrative expenses. 10,478 10,456 --------- --------- Operating income......................................... 11,044 9,568 Other (income) expense Investment income...................................... (275) (198) Interest expense....................................... 132 191 Other, net............................................. 96 (54) --------- --------- (47) (61) --------- --------- Income before income taxes............................... 11,091 9,629 Income tax expense....................................... 4,220 3,757 --------- --------- Net income............................................... $ 6,871 $ 5,872 ========= ========= Net income per share..................................... $ .38 $ .32 ========= ========= Weighted average common stock and equivalents outstanding............................................. 18,081 18,293 ========= =========
See accompanying Notes to Consolidated Condensed Financial Statements. 3 LYDALL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (IN THOUSANDS EXCEPT PER-SHARE DATA)
SIX MONTHS ENDED JUNE 30, ------------------ 1996 1995 -------- -------- (UNAUDITED) Net sales................................................... $133,463 $128,288 Cost of sales............................................... 91,150 89,038 -------- -------- Gross margin................................................ 42,313 39,250 Selling, product development and administrative expenses.... 21,694 20,719 -------- -------- Operating income............................................ 20,619 18,531 Other (income) expense Investment income......................................... (599) (430) Interest expense.......................................... 314 455 Other, net................................................ 221 170 -------- -------- (64) 195 -------- -------- Income before income taxes.................................. 20,683 18,336 Income tax expense.......................................... 7,847 7,158 -------- -------- Net income.................................................. $ 12,836 $ 11,178 -------- -------- Net income per share........................................ $ .71 $ .61 ======== ======== Weighted average common stock and equivalents outstanding... 18,195 18,218 ======== ========
See accompanying Notes to Consolidated Condensed Financial Statements. 4 LYDALL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, ------------------ 1996 1995 -------- -------- (UNAUDITED) Cash flows from operating activities: Net income................................................ $ 12,836 $ 11,178 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation............................................. 4,039 3,687 Amortization............................................. 713 763 Changes in operating assets and liabilities: Accounts receivable..................................... (2,307) (2,992) Inventories............................................. (912) (3,593) Other assets............................................ (424) 282 Accounts payable........................................ 1,770 43 Accrued taxes........................................... 355 (1,285) Accrued payroll and other compensation.................. (804) (232) Deferred income taxes................................... (183) 384 Other long-term liabilities............................. (537) 65 Other accrued liabilities............................... 523 2,614 -------- -------- Total adjustments......................................... 2,233 (264) -------- -------- Net cash provided by operating activities.................. 15,069 10,914 Cash flows from investing activities: Additions of property, plant & equipment.................. (4,708) (5,228) Purchase of investments, net.............................. (1,484) (208) Disposals of property, plant & equipment, net............. 597 380 -------- -------- Net cash used for investing activities..................... (5,595) (5,056) -------- -------- Cash flows from financing activities: Long-term debt payments................................... (2,780) (2,777) Issuance of common stock.................................. 883 1,721 Acquisition of common stock............................... (6,937) -- -------- -------- Net cash used for financing activities..................... (8,834) (1,056) -------- -------- Effect of exchange rate changes on cash.................... (20) 68 -------- -------- Increase in cash and cash equivalents...................... 620 4,870 Cash and cash equivalents at beginning of period........... 27,820 11,684 -------- -------- Cash and cash equivalents at end of period................. $ 28,440 $ 16,554 ======== ======== Supplemental schedule of cash flow information: Cash paid during the period for: Interest................................................. $ 658 $ 550 Income taxes............................................. 7,485 8,007 Non-cash transactions: Effect on Additional Paid in Capital and Common Stock for stock split effected in the form of a stock dividend..... -- 1,041
See accompanying Notes to Consolidated Condensed Financial Statements. 5 LYDALL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. The accompanying consolidated condensed financial statements include the accounts of Lydall, Inc. and its wholly owned subsidiaries. All financial information is unaudited for interim periods reported. All significant intercompany transactions have been eliminated in the consolidated condensed financial statements. Management believes that all adjustments, which include only normal recurring accruals, necessary to present a fair statement of the financial position and results of the periods have been included. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. 2. Earnings per common share are based on the weighted average number of common shares outstanding during the period, including the effect of stock options, stock awards and warrants where such effect would be dilutive. Fully diluted earnings per share are not presented since the dilution is not material. 3. In the mid-1980's, the United States Environmental Protection Agency ("EPA") notified a former subsidiary of the Company that it and other entities may be potentially responsible in connection with the release of hazardous substances at a landfill and property located adjacent to a landfill located in Michigan City, Indiana. The two sites have been combined and are viewed by the EPA as one site. The preliminary indication, based on the Site Steering Committee's volumetric analysis, is that the alleged contribution to the waste volume at the site of the plant once owned by a former subsidiary is approximately 0.434 percent of the total volume. The portion of the 0.434 percent specifically attributable to the former subsidiary by the current operator of the plant is approximately 0.286 percent. There are over 800 potentially responsible parties ("prp") which have been identified by the Site Steering Committee. Of these, 38, not including the Company's former subsidiary, are estimated to have contributed over 80 percent of the total waste volume at the site. These prp's include Fortune 500 companies, public utilities, and the State of Indiana. The Company believes that, in general, these parties are financially solvent and should be able to meet their obligations at the site. The Company has reviewed Dun & Bradstreet reports on several of these prp's, and based on these financial reports, does not believe Lydall will have any material additional volume attributed to it for reparation of this site due to insolvency of other prp's. During the quarter ended September 30, 1994, the Company learned that the EPA had completed its Record of Decision ("ROD") for the Michigan site and has estimated the total cost of remediation to be between $17 million and $22 million. Based on the alleged volumetric contribution of its former subsidiary to the site, and on the EPA's estimated remediation costs, Lydall's alleged total exposure would be less than $100 thousand, which has been accrued. In June 1995, the Company and its former subsidiary were sued in the Northern District of Indiana by the insurer of the current operator of the former subsidiary's plant seeking contribution. No demand has been formally made in this matter, however, the Company believes it has several defenses to the action. Management believes the ultimate disposition of the claim will not have a material adverse effect upon the Company's consolidated financial position or results of operations. 4. The Company will adopt the disclosure requirements of SFAS 123, "Accounting for Stock-Based Compensation," for the year ending December 31, 1996. As permitted under SFAS 123, the Company has elected not to adopt the fair- value-based method of accounting for its stock-based compensation plans, but will continue to account for such compensation under the provisions of APB Opinion No. 25. The adoption will have no effect on the Company's consolidated financial position or results of operations. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS: For the second quarter ended June 30, 1996, sales were $67.7 million compared with $65.6 million for the same quarter last year, a 3 percent increase. Net income was $6.9 million compared with $5.9 million--up 17 percent. On a per-share basis, the Company earned $.38 in the second quarter of 1996 compared with $.32 in the same period last year--a 19 percent increase. Gross margin in the quarter was $21.5 million, or 31.8 percent of sales, compared with $20.0 million, or 30.5 percent, in the second quarter 1995. After-tax return on sales reached a record 10.2 percent compared with 9.0 percent for the same period last year. Sales for the six months ended June 30, 1996 were $133.5 million compared with $128.3 million for the same period in 1995--up 4 percent. Net income was $12.8 million, or $.71 per share, compared with $11.2 million, or $.61 per share--a 16 percent increase in earnings per share. Gross margin was $42.3 million, or 31.7 percent of sales, for the six months ended June 30, 1996, and the after-tax return on sales was 9.6 percent. For the 1995 six-month period, gross margin was $39.3 million, or 30.6 percent of sales, and the after-tax return on sales was 8.7 percent. With sales growth of 3 percent during the second quarter of 1996, Lydall recorded earnings gains of 17 percent over the second quarter of 1995. The quality of these gains is reflected by gross margin improvements and a record after-tax return on sales. The Company benefited from a good product mix in our thermal and filtration segments, favorable price/cost ratios, and continued progress with our quality program throughout the organization. International sales, including sales of our French operation and exports, were up by 8 percent from the second quarter of 1995 and accounted for 23 percent of total sales compared with 21 percent of total sales for the same period last year. Increased sales of non-automotive products as well as new-product introductions of automotive heat shields were the main drivers of a 19 percent growth in our thermal barrier businesses. Sales of Lydall's battery insulating products and all-metal heat shields were particularly strong. Filtration sales also grew significantly, up 27 percent from the second quarter of 1995. Demand for our Lydair(R) high-efficiency air filtration media employed in the air purification systems of clean rooms around the world continued to be strong. Sales of medical filtration products were also up during the quarter bolstered by new products such as Leukocyte depletion media. Lower sales of materials handling products, the anticipated continuation of the shift in technology away from Lydall's cellulose battery separators supplied to the European automotive aftermarket, and a decline in some of Lydall's more mature businesses offset the strength of the Company's thermal and filtration businesses. Selling, product development and administrative expenses remained relatively constant at approximately 16% of sales for the three and six month periods ended June 30, 1996 and 1995, respectively. The 1995 figures had slightly larger incentive compensation expenses due to the outstanding results obtained in 1995 in comparison to 1994. Year to date 1996 figures include higher legal fees due to the successful defense of a lawsuit alleging patent infringement which was concluded in March of this year. The effective tax rate for the Company's domestic operations was 38.1% for the second quarter of 1996 and 38.0% on a year to date basis. This compares to 39.1% for the second quarter and 39.2% year to date in 1995. These rates would have been 38.8% in 1996 and 39.8% in 1995 both quarter and year to date had the Company not invested cash balances in tax advantaged investments. The tax rate at our Axohm Division in France is 36.6 percent in 1996 and 33.3 percent in 1995 both quarter and year to date but the effect on Lydall's consolidated results was minimal. LIQUIDITY AND CAPITAL RESOURCES: Lydall generated operating cash flow (EBITDA) of $13.3 million in the second quarter of 1996 bringing operating cash flow year-to-date to $25.2 million. The Company had cash, cash equivalents and short-term 7 investments of $30.7 million and working capital of $55.7 million at June 30, 1996. The current ratio was 2.74 at the end of the second quarter compared with 2.77 at the end of 1995, and total debt to total capitalization decreased to 7 percent from 9 percent at the end of 1995. The Company expects to continue to finance its day to day operating needs from accumulated cash plus cash from operations. During the month of April 1996, the Company repaid $2.2 million in long-term debt, made the semi-annual interest payment, paid quarterly federal and state income taxes and funded pension obligations. These payments were made from accumulated cash and cash from operations. The Company expects to continue to finance its day-to-day operating needs from these same sources. Lydall continues to actively seek strategic acquisitions and has the financial wherewithal to acquire company's that fit Lydall's defined technology and product profiles and offer attractive growth opportunities. ACCOUNTING STANDARDS: The Company will adopt the disclosure requirements of SFAS 123, "Accounting for Stock-Based Compensation," for the year ending December 31, 1996. As permitted under SFAS 123, the Company has elected not to adopt the fair-value- based method of accounting for its stock-based compensation plans, but will continue to account for such compensation under the provisions of APB Opinion No. 25. The adoption will have no effect on the Company's consolidated financial position or results of operations. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's Annual Meeting of Stockholders was held on May 15, 1996. Stockholders elected 11 Directors to serve for one-year terms, until the next Annual Meeting to be held in 1997.
WITHHOLD BROKER FOR AGAINST ABSTAIN AUTHORITY NONVOTES ---------- ------- ------- --------- -------- Election of Nominees to the Board of Directors Lee A. Asseo.................... 15,729,733 -- -- 89,351 -- Paul S. Buddenhagen............. 15,640,025 -- -- 179,059 -- James P. Carolan................ 15,640,533 -- -- 178,551 -- Samuel P. Cooley................ 15,730,859 -- -- 88,225 -- W. Leslie Duffey................ 15,631,117 -- -- 187,967 -- Leonard R. Jaskol............... 15,638,449 -- -- 180,635 -- William P. Lyons................ 15,726,917 -- -- 92,167 -- Joel Schiavone.................. 15,722,592 -- -- 96,492 -- Elliott F. Whitely.............. 15,637,400 -- -- 181,684 -- Roger M. Widmann................ 15,640,359 -- -- 178,725 -- Albert E. Wolf.................. 15,726,738 -- -- 92,346 --
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 11.1 --Schedule of Computation of Weighted Average Shares Outstanding 27.1 --Financial Data Schedule
(b) Reports on Form 8-K On June 4, 1996, in connection with the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company filed on Form 8- K Cautionary Statements identifying important factors that could cause the Company's actual results to differ materially from those projected in forward- looking statements of the Company made by or on behalf of the Company. 8 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 THEREUNTO DULY AUTHORIZED. Lydall Inc. (Registrant) /s/ John E. Hanley By___________________________________ JOHN E. HANLEY Vice President--Finance and Treasurer (Principal Financial and Accounting Officer) August 8, 1996 9 LYDALL, INC. INDEX TO EXHIBITS
EXHIBIT NO. PAGE ------- ---- 11.1 Schedule of Computation of Weighted Average Shares Outstanding... 11
10 EX-11 2 SCHEDULE OF COMPUTATION LYDALL, INC. EXHIBIT 11.1 SCHEDULE OF COMPUTATION OF WEIGHTED AVERAGE SHARES OUTSTANDING
THREE MONTHS SIX MONTHS ENDED ENDED JUNE 30, JUNE 30, ------------- ------------- 1996 1995 1996 1995 ------ ------ ------ ------ (UNAUDITED) (UNAUDITED) PRIMARY Weighted average number of common shares........... 17,098 17,253 17,184 17,246 Additional shares assuming conversion of stock options and warrants.............................. 983 1,040 1,011 972 ------ ------ ------ ------ Weighted average common shares and equivalents out- standing.......................................... 18,081 18,293 18,195 18,218 ====== ====== ====== ====== FULLY DILUTED Weighted average number of common shares........... 17,098 17,253 17,184 17,246 Additional shares assuming conversion of stock options and warrants.............................. 983 1,104 1,030 1,007 ------ ------ ------ ------ Weighted average common shares and equivalents out- standing.......................................... 18,081 18,357 18,214 18,253 ====== ====== ====== ======
11 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1996 APR-01-1996 JUN-30-1996 28,440 2,273 37,539 2,004 14,933 87,738 108,077 48,561 162,086 32,064 7,833 0 0 2,102 105,801 162,086 133,463 133,463 91,150 91,150 (64) 165 314 20,683 7,847 12,836 0 0 0 12,836 .71 .71
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