-----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, QQsmKl9kCj+LiRIMjIYUAPTFTrFlnOE/osjq2zBDgbhcZ9mmT7NSE4lTmlZfiFw2 Uayl2XfZJBEneu3GciVuYQ== 0000950109-96-007455.txt : 19961115 0000950109-96-007455.hdr.sgml : 19961115 ACCESSION NUMBER: 0000950109-96-007455 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 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: 96660479 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 QUARTERLY REPORT - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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, 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 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 X No --- --- 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 November 7, 1996 17,087,330
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- LYDALL, INC. INDEX
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 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)
SEPTEMBER 30, DECEMBER 31, 1996 1995 ------------- ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents.......................... $ 35,298 $ 27,820 Short-term investments............................. 2,518 913 Accounts receivable, net........................... 33,240 34,202 Inventories: Finished goods................................... 6,270 6,033 Work in process.................................. 3,750 3,367 Raw materials and supplies....................... 6,183 7,217 LIFO reserve..................................... (1,846) (2,493) -------- -------- Total inventories.................................. 14,357 14,124 Prepaid expenses................................... 965 820 Deferred tax assets................................ 4,583 4,590 -------- -------- Total current assets........................... 90,961 82,469 -------- -------- Property, plant and equipment, at cost............... 110,520 105,467 Less accumulated depreciation........................ (50,196) (45,393) -------- -------- 60,324 60,074 Other assets, at cost, less amortization............. 14,606 15,529 -------- -------- $165,891 $158,072 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt.................. $ 3,492 $ 2,871 Accounts payable................................... 15,580 14,770 Accrued taxes...................................... 866 263 Accrued payroll and other compensation............. 5,393 5,426 Other accrued liabilities.......................... 6,431 6,409 -------- -------- Total current liabilities...................... 31,762 29,739 Long-term debt....................................... 4,300 7,750 Deferred tax liabilities............................. 14,076 14,207 Other long-term liabilities.......................... 4,044 4,565 Stockholders' equity: Preferred stock.................................... -- -- Common stock....................................... 2,108 2,089 Capital in excess of par value..................... 33,596 32,448 Foreign currency translation adjustment............ 1,518 2,091 Pension liability adjustment....................... (506) (459) Retained earnings.................................. 97,077 78,461 -------- -------- 133,793 114,630 -------- -------- Less: treasury stock, at cost...................... (22,084) (12,819) -------- -------- Total stockholders' equity..................... 111,709 101,811 -------- -------- $165,891 $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 SEPTEMBER 30, -------------------- 1996 1995 --------- --------- (UNAUDITED) Net sales................................................ $ 59,707 $ 61,487 Cost of sales............................................ 40,308 42,572 --------- --------- Gross margin............................................. 19,399 18,915 Selling, product development and administrative expenses. 10,270 9,643 --------- --------- Operating income......................................... 9,129 9,272 Other (income) expense Investment income...................................... (380) (288) Interest expense....................................... 143 200 Other, net............................................. 62 123 --------- --------- (175) 35 --------- --------- Income before income taxes............................... 9,304 9,237 Income tax expense....................................... 3,524 3,790 --------- --------- Net income............................................... $ 5,780 $ 5,447 ========= ========= Net income per share..................................... $ .32 $ .30 ========= ========= Weighted average common stock and equivalents outstand- ing..................................................... 18,049 18,418 ========= =========
See accompanying Notes to Consolidated Condensed Financial Statements. 3 LYDALL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (IN THOUSANDS EXCEPT PER-SHARE DATA)
NINE MONTHS ENDED SEPTEMBER 30 ------------------ 1996 1995 -------- -------- (UNAUDITED) Net sales................................................... $193,170 $189,775 Cost of sales............................................... 131,458 131,610 -------- -------- Gross margin................................................ 61,712 58,165 Selling, product development and administrative expenses.... 31,964 30,362 -------- -------- Operating income............................................ 29,748 27,803 Other (income) expense Investment income......................................... (979) (718) Interest expense.......................................... 457 655 Other, net................................................ 283 293 -------- -------- (239) 230 -------- -------- Income before income taxes.................................. 29,987 27,573 Income tax expense.......................................... 11,371 10,948 -------- -------- Net income.................................................. $ 18,616 $ 16,625 ======== ======== Net income per share........................................ $ 1.03 $ .91 ======== ======== Weighted average common stock and equivalents outstanding... 18,147 18,285 ======== ========
See accompanying Notes to Consolidated Condensed Financial Statements. 4 LYDALL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, ------------------- 1996 1995 --------- -------- (UNAUDITED) Cash flows from operating activities: Net income............................................... $ 18,616 $ 16,625 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation............................................ 6,088 5,602 Amortization............................................ 1,050 1,134 Changes in operating assets and liabilities: Accounts receivable.................................... 750 (3,585) Inventories............................................ (337) (1,922) Other assets........................................... (280) 378 Accounts payable....................................... 930 191 Accrued taxes.......................................... 632 (715) Accrued payroll and other compensation................. (21) (102) Deferred income taxes.................................. 30 906 Other long-term liabilities............................ (440) 9 Other accrued liabilities.............................. 40 1,136 --------- -------- Total adjustments........................................ 8,442 3,032 --------- -------- Net cash provided by operating activities................. 27,058 19,657 Cash flows from investing activities: Additions of property, plant & equipment................. (7,684) (8,726) Disposals of property, plant & equipment, net............ 693 406 Sale (Purchase) of investments, net...................... (1,647) 382 --------- -------- Net cash used for investing activities.................... (8,638) (7,938) --------- -------- Cash flows from financing activities: Long-term debt payments.................................. (2,821) (2,816) Issuance of common stock................................. 1,167 1,808 Acquisition of common stock.............................. (9,265) -- --------- -------- Net cash used for financing activities.................... (10,919) (1,008) --------- -------- Effect of exchange rate changes on cash................... (23) 22 --------- -------- Increase in cash and cash equivalents..................... 7,478 10,733 Cash and cash equivalents at beginning of period.......... 27,820 11,684 --------- -------- Cash and cash equivalents at end of period................ $ 35,298 $ 22,417 ========= ======== Supplemental schedule of cash flow information: Cash paid during the period for: Interest................................................ $ 661 $ 556 Income taxes............................................ 10,627 10,977 Non-cash transactions: Reclassification between short-term and long-term in- vestments, net......................................... -- 447 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 this matter 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 third quarter ended September 30, 1996, net income was $5.8 million compared with $5.4 million for the comparable prior-year quarter--up 6 percent. On an earnings per-share basis, the Company posted a third-quarter record of $.32 compared with $.30 for the same period last year--a 7 percent increase. Sales declined slightly in the quarter--$59.7 million compared with $61.5 million for the 1995 third quarter. Gross margin for the quarter was $19.4 million, 32.5 percent of sales, compared with $18.9 million, or 30.8 percent of sales, in the third quarter 1995. After-tax return on sales was 9.7 percent compared with 8.9 percent for the same period last year. Net income for the nine months ended September 30, 1996 was $18.6 million, or $1.03 per share, compared with $16.6 million, or $.91 per share--a 13 percent increase in earnings per share. Sales for the nine months ended September 30, 1996 were $193.2 million compared with $189.8 million for the first three quarters of 1995--up 2 percent. Gross margin was $61.7 million, or 31.9 percent of sales, for the nine months ended September 30, 1996, and the after-tax return on sales was 9.6 percent. For the same nine-month period in 1995, gross margin was $58.2 million, or 30.6 percent of sales, and the after- tax return on sales was 8.8 percent. The increase in the Company's gross margin percentage is largely attributable to the continuing emphasis placed on cost of quality. Substantial progress was made at acquisitions with gross margin for the quarter increasing to 21.1% from 12.2% for the same period in 1995. Selling, new product development and administrative expenses increased 5.3 percent in the first nine months of the year versus the same period in 1995. As a percentage of sales, these expenses amounted to 16.5 percent in 1996 in comparison to 16.0 percent in 1995. 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 Company anticipates that these expenses will approximate 17.0 percent through the end of the year. A factor in this increased level of expenditures is the Company's plan to implement a new information technology system throughout the entire organization. The Company anticipates achieving its twelfth year of growth in 1996. However, the second half of 1996 is proving to be less robust than earlier anticipated. Results are tracking somewhat below previously announced projections for 1996 of earnings per share of about $1.41 and sales in the range of $265 million. Earnings are now projected to be more in the range of $1.35 to $1.36 per share with sales slightly ahead of last year's sales of $252 million. Domestic sales are up slightly from 1995. International sales, including sales attributable to the Company's French operation and exports, have fallen 15.8 percent for the third quarter 1996 in comparison to the same period for 1995 and are relatively flat on a year-to-date comparison. International sales account for 19.6 percent and 21.1 percent of total sales on a quarterly and year to date basis, respectively, for 1996. Lydall has many growth opportunities on the horizon and this period of slower growth is viewed as a temporary plateau. In the thermal area, sales of automotive heat shields continue to be healthy. Compared with the same quarter last year, sales of these products for the third quarter of 1996 exhibited low double-digit growth, while automotive builds were reported to be up only around 4 percent. Growth of the battery insulator product line also continues to be good. Although high-efficiency air filtration products continue to present opportunities for growth through new product introduction, market penetration, and geographic expansion, sales of these products in the quarter were about equal to the record levels achieved last year. Air filtration sales have grown at a phenomenal rate over the past two years; however, they slowed modestly in the third quarter. In general, the long-term trend for this business is very positive with demand for clean rooms expanding across a wide variety of industries. In addition, there are opportunities for increasing demand in developing countries. The home air filtration market also has growth potential, domestically and overseas. 7 One of Lydall's more mature businesses, electrical materials sold to the European battery aftermarket, declined by approximately $1.1 million in the third quarter 1996 compared with the same quarter last year. In addition, sales of material handling products continued to be off from record highs last year. This has always been a good growth business for Lydall, and it continues to be solid. This year's lower sales resulted primarily in a deflationary issue. In contrast, raw material prices increased dramatically last year, and the Company passed through corresponding price increases. This is one area of business where the market pushes for price reductions that directly track decreases in raw material costs. The effective tax rate for the Company's domestic operations was 37.8 percent for the third quarter of 1996 and 37.9 percent on a year to date basis. This compares to 37.7 percent for the third quarter and 38.7 percent year to date in 1995. Had the Company not invested cash balances in a variety of tax exempt or tax advantaged investments, the year to date rates would have been 38.8 percent in 1996 and 39.2 percent in 1995. The tax rate at our Axohm Division in France remained unchanged at 36.6 percent in 1996 and 1995 on a year to date basis but the effect on Lydall's consolidated results was minimal. Stockholders are referred to Lydall's Form 8-K, filed on June 4, 1996, which outlines certain risks regarding the Company's forward-looking statements. Such risks include: a major downturn of the U.S. automotive market which accounts for about 30 percent of Lydall's total sales; a meaningful decrease in the number of clean rooms being built worldwide; and significant, unforeseen changes in raw material pricing, specifically, virgin fiber used in producing the Company's materials handling slipsheets. LIQUIDITY AND CAPITAL RESOURCES: Lydall generated operating cash flow (earnings before taxes, interest expense and investment income or expense plus depreciation and amortization) of $11.4 million in the third quarter of 1996, bringing operating cash flow year-to-date to a record $36.6 million. At September 30, 1996, cash, cash equivalents and short-term investments were $37.8 million compared with $28.7 million at the end of 1995. Working capital was $59.2 million compared with $52.7 million at the end of last year. The current ratio improved to 2.86 at the end of the third quarter from 2.77 at the end of 1995, and total debt to total capitalization was 7 percent reduced from 9 percent at December 31, 1995. The Company expects to continue to finance its day-to-day operating needs from accumulated cash plus cash generated from operations. Lydall continues to actively seek strategic acquisitions and to reinvest in the Company with the primary focus on the ongoing comprehensive quality program. 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 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 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 The Company did not file any reports on Form 8-K during the three months ended September 30, 1996. 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) By /s/ John E. Hanley ------------------------------------------ JOHN E. HANLEY Vice President--Finance and Treasurer (Principal Accounting and Financial Officer) November 7, 1996 9 LYDALL, INC. Index to Exhibits Exhibit No. Page No. - ----------- -------- 11.1 Schedule of Computation of Weighted Average 15 Shares Outstanding 27.1 Financial Data Schedule 14 EX-11.1 2 SCHEDULE OF COMP OF WEIGHTED AVE. SHARES OUTSTANDI LYDALL, INC. Exhibit 11.1 Schedule of Computation of Weighted Average Shares Outstanding
Three Months Nine Months Ended Ended September 30, September 30, ------------- ------------- 1996 1995 1996 1995 ---- ---- ---- ---- (Unaudited) (Unaudited) Primary - ------- Weighted average number of common shares 17,097 17,259 17,155 17,251 Additional shares assuming conversion of stock options and warrants 952 1,159 992 1,034 ------ ------ ------ ------ Weighted average common shares and equivalents outstanding 18,049 18,418 18,147 18,285 ====== ====== ====== ====== Fully Diluted - ------------- Weighted average number of common shares 17,097 17,259 17,155 17,251 Additional shares assuming conversion of stock options and warrants 973 1,170 1,011 1,061 ------ ------ ------ ------ Weighted average common shares and equivalents outstanding 18,070 18,429 18,166 18,312 ====== ====== ====== ======
15 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1996 JUL-01-1996 SEP-30-1996 35,298 2,518 34,533 2,009 14,357 90,961 110,520 50,196 165,891 31,762 7,792 0 0 2,108 109,601 165,891 193,170 193,170 131,458 131,458 (239) 159 457 29,987 11,371 18,616 0 0 0 18,616 1.03 1.03
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