-----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, OAjvzs+HdwicvsmNTkYtxr6VAVEROzbuQRoHj/hcoMPHfuYJPp3+E2cCMGjutDek G32gkPUgCg1TwscrrpwMMg== 0000950132-96-000201.txt : 19960401 0000950132-96-000201.hdr.sgml : 19960401 ACCESSION NUMBER: 0000950132-96-000201 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-07665 FILM NUMBER: 96541801 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-K405 1 FORM 10-K405 12-31-95 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) 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 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) ONE COLONIAL ROAD, MANCHESTER, 06045-0151 CONNECTICUT (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (860) 646-1233 ---------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- Common Stock, $.10 par value New York Stock Exchange ---------------- 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 BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [X] On March 18, 1996, the aggregate market value of the Registrant's voting stock held by nonaffiliates was $356,743,387. On March 18, 1996, there were 17,393,626 shares of Common Stock outstanding, exclusive of treasury shares. ---------------- DOCUMENTS INCORPORATED BY REFERENCE Parts I and II incorporate certain information by reference from the Annual Report to Stockholders for the year ended December 31, 1995. Part III incorporates information by reference from the definitive Proxy Statement to be distributed in connection with the Registrant's Annual Meeting of Stockholders to be held on May 15, 1996. =============================================================================== PART I ITEM 1. BUSINESS. Lydall, Inc. (hereafter referred to as "Lydall" or the "Company") is a manufacturer of technologically advanced engineered materials for demanding specialty applications. Lydall develops and manufactures engineered fiber materials and composites in both roll and sheet form; fiber-based as well as combination-metal-and- fiber heat shields; and fabricates certain medical filtration and automotive thermal barrier components. All of Lydall's products are supplied to customers who in turn incorporate them into finished products. Utilizing a broad spectrum of available fibers, materials, binders, resins, etc. combined with both dry-laid or wet-laid forming capabilities, the Company has been able to develop a broad range of high-performance materials. The Company serves a number of market niches. Lydall's products are primarily sold directly to the customer (or fabricator), through an internal sales force and are distributed through common carrier, ocean cargo, or the Company's trucking operation. Within each market niche there are typically several competitors. The Company primarily competes through high-quality products and customer service. Lydall has a number of domestic and foreign competitors for its products, most of whom are either privately owned or divisions of large companies, making it difficult to determine the Company's market share. Lydall's products fall into five basic categories: thermal barriers, air and liquid filtration media, materials handling systems, electrical insulation, and other products and services. MAJOR PRODUCTS Thermal Barriers Lydall manufactures a broad range of materials which serve as heat or thermal barriers. The Cryotherm(R) and Lytherm(R) product lines include an assortment of composites using distinctive materials, in both rigid and flexible forms, manufactured by a variety of processes. Lydall's thermal barrier products in differing forms are capable of withstanding temperatures ranging from -459 degrees F to +3,000 degrees F. At the highest temperature requirements, Lytherm thermal barrier products are used as linings for ovens, kilns, and furnaces and in glass and metal manufacturing. At mid-range temperatures Lytherm nonwovens are patented layered composites of either organic and inorganic fibers or fiber- and-metal-foil combinations which are used as thermal barriers in medium- and light-duty trucks, vans, sport utility vehicles, and cars. An acquisition made in early 1994 contributed to the growth of thermal barrier sales. This acquisition also expanded the Company's product offerings to include all-metal and metal-and- fiber-combination automotive heat shields. Also, in mid-range temperatures, Manninglas(R) nonwovens are employed in consumer appliances and heat ventilation and air conditioning ducting and insulation. At the very coldest temperatures (approaching absolute zero), Cryotherm(R) cryogenic insulation materials are used for super-insulating applications. These include tanker trucks which transport liquid gases; stationary and portable cryogenic storage vessels; gas tanks for vehicles fueled by liquid natural gas; and supercolliders. These nonwovens are composed of 100-percent inorganic fibers. Lydall also manufactures custom-designed media employed in automotive air- bag pyrotechnic inflators. Although these sales are classified as thermal barriers by the Company, this specialty product performs both a filtration and heat-reduction function. 2 Sales of thermal barriers approximated 36 percent of the Company's sales for 1995, 34 percent of sales for 1994, and 24 percent of sales for 1993. Thermal barrier sales increased 27 percent in 1995 over 1994 activity. Increases can be primarily attributable to new products including battery covers and all- metal shields, as well as a full year of activity at the Columbus Operation which was acquired during 1994. Filtration Media The Company manufactures high-efficiency air filtration media, marketed under the Lydair(R) name. Lydair filtration media are used for applications where clean air is vital, such as in semiconductor manufacturing clean rooms, industrial clean rooms, and biotechnology laboratories. Lydall manufactures Lydair media in six filtration classes in over 100 grades with filtering efficiencies from 10 percent at 0.3 micron particle size to 99.999999 percent at 0.1 micron particle size. Lydall filtration media are primarily used in air filters for capital goods rather than consumables and last approximately five years. A replacement market exists as facilities using these filters upgrade clean room technology. The Company's HEPA filtration media are also used in home air-purification units. Lydall's line of fabricated medical filter components are sold under the trademark Lypore(R) and are widely used in blood filtration devices, such as cardiotomy reservoirs which filter the blood supply of an open-heart surgery patient during the operation, and autotransfusion filters used to filter blood collected from a patient before surgery or from an injured patient. This product line also includes a leukocyte filtration media used in devices that separate blood components. In addition, Lydall produces liquid filtration media used primarily in high- efficiency hydraulic oil and lubrication oil elements for off-road vehicles, trucks, and heavy equipment. These products are also sold under the Lypore trademark. Sales of filtration media increased to 22 percent of sales for 1995 compared with 20 percent and 24 percent of sales for 1994 and 1993, respectively. The overall sales of filtration media increased 27 percent in 1995 from that of 1994. This increase was fueled by new construction of clean-room facilities for a growing number of applications and Lydall's capability to successfully transfer production of certain grades to the Axohm Division. Management expects sales of filtration media to continue to grow with additional production transfer to Axohm and strong market demand for the product. Materials Handling Lydall produces slipsheets, separator sheets, and protective sheets. The Ly- Pak(R) slipsheets are used to ship a growing number of products such as food, pharmaceuticals, and chemicals. Ly-Pak slipsheet systems are used to replace wooden pallets, providing significant cost and space reductions for a shipper. Ly-Pak separator sheets are supplied to the glass and polyethylene terephthalate (PET) bottle industry and are manufactured to meet industry specifications for bulk palletizing. Ly-Pak protective sheets are used as pallet pads, protective top caps, and stabilizing sheets. These products are custom-made from plies of virgin kraft linerboard and laminated with a special moisture-resistant adhesive. The Company also sells a complete line of dunnage products. Sales of these products approximated 15 percent of 1995 total sales as compared with 14 percent and 15 percent of 1994 and 1993 total sales, respectively. Total materials-handling sales continued to increase, growing by 29 percent in 1995. This exceptional growth is attributable to a full year's sales at the Jacksonville plant, which was acquired in 1994, as well as a torrid sales pace for the first half of the year. It is expected this business will continue to grow; however, it is not expected to represent an increasing percentage of Lydall's total sales, absent any acquisition activity. 3 Electrical Insulation Lydall's electrical insulation material, sold under the SE/duroid(R), Sep-R- Max(R), and Voltex(R) trademarks are found in a broad range of applications such as computers, consumer appliances, utility power transformers, electric motors and other wiring devices. These materials are manufactured to electrical resistance, flame retardancy, formability, thermal aging, and moisture resistance specifications. The Company's electrical insulation products also include battery separator materials primarily used in European automotive batteries. These products are manufactured at the Company's European location. Lydall also manufactures Actipore(R) separators used in sealed lead acid batteries which power emergency standby energy systems. A significiant portion of the 1995 electrical insulation sales were derived from foreign operations. There are no anticipated operating risks related to foreign investment law, expropriation, inflation effects or availability of material, labor and energy. The Company's foreign and domestic operations limit currency and foreign exchange transaction risks by completing transactions primarily in their functional currencies. Sales of electrical insulation products were approximately 7 percent of total sales in 1995, 8 percent in 1994, and 10 percent in 1993. Actual sales increased in 1995 by 4 percent over 1994 levels. The dynamic growth of the thermal barrier and filtration businesses in 1995 accounts for the decline of sales of electrical products as a percent of total sales. The gradual decline in this market results from lower demand for automotive battery separator materials and a shift in the battery separator technology, favoring different materials than those used by the Company. As Lydall has expected, these changes have had an impact on European separator sales. The Company has successfully been replacing electrical products with new products in air filtration at the foreign facility. Other Products and Services Lydall maintains a transportation operation which brokers and/or hauls freight for and between Lydall plants as well as for outside customers. In addition, the Company manufactures paperboard products used in games and packaging, specialty gasketing materials, and fiberboard shoe insole materials. Lydall also produces a wood replacement material made from recycled newsprint and cardboard which is currently being made into writing instruments. Sales of all other products and services approximated 20 percent of the Company's sales in 1995, and 24 percent in 1994, and 27 percent in 1993. GENERAL BUSINESS INFORMATION Lydall operates ten manufacturing facilities in the United States which are located in Rochester, New Hampshire; Green Island, New York; Hoosick Falls, New York; Manchester, Connecticut; Richmond, Virginia; Hamptonville, North Carolina; Rockwell, North Carolina; Columbus, Ohio; Jacksonville, Florida and Covington, Tennessee. Lydall has one manufacturing facility in Saint-Rivalain en Melrand, France. Lydall holds a number of patents, trademarks, and licenses. While no single patent, trademark or license by itself is critical to the success of Lydall, together these intangible assets are of considerable value to the Company's operations. The working capital requirements of the Company are financed primarily from operations. No significant portion of Lydall's business is seasonal. Lydall maintains levels of inventory and grants credit terms which are normal within the industries it serves. The Company uses a wide range of raw materials in the manufacturing of its products and was able to obtain all the raw materials needed during 1995. The majority of these materials are available from a variety of suppliers who can be substituted if necessary. Thirty-three percent of Lydall's total sales in 1995 were to the world-wide automotive market compared to thirty-one percent in 1994. Lydall's automotive sales are sold to various customers including parts suppliers, 4 thermal insulation fabricators, air-bag manufacturers and original equipment manufacturers for use in a variety of models and applications. Sales to Ford Motor Company represented 13.7 percent of Lydall's total sales in 1995, and no other single customer accounted for more than 10 percent of total sales. Lydall invested $6.2 million in 1995, $5.5 million in 1994, and $4.8 million in 1993, respectively, on activities to develop new products and special manufacturing processes or to improve existing products. Most of Lydall's investment in research and development is application specific; very little is pure research. There were no significant customer-sponsored research and development activities during the past three years. Lydall's backlog was $28.0 million at December 31, 1995, $24.5 million at December 31, 1994 and $13.7 million at December 31, 1993. Lydall expects to fill its backlog of 1995 orders during the first quarter of 1996. Backlog at February 29, 1996 was $29.7 million. The increased backlog over prior year levels is primarily due to increased demand for both filtration and thermal barrier products. There are no seasonal aspects to this backlog. No material portion of Lydall's business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the government. Lydall believes that its plants and equipment are in substantial compliance with applicable federal, state and local provisions that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment. Additional measures to maintain compliance with presently enacted laws and regulations are not expected to have a substantial adverse effect on the capital expenditures, earnings and competitive position of the Company and its subsidiaries. For information relating to certain environmental proceedings involving the Company, please refer to Item 3 below. As of March 1, 1996, Lydall and its subsidiaries had 1,233 employees, including foreign employees. Approximately 179 of the domestic employees are represented by eight unions under contracts expiring between November 1997 and November 1999. Lydall considers its employee relationships to be satisfactory, and there have not been any actual or threatened work stoppages due to union related activities. All employees at the Company's facility in France are covered under a National Collective Bargaining Agreement. Foreign and export sales were 22 percent of total sales in 1995 and 21 percent in 1994 and 1993. Export sales are concentrated primarily in Europe, the Far East, Mexico, and Canada and were $38.9 million, $30.7 million, and $21.7 million in 1995, 1994 and 1993, respectively. Foreign sales were $17.0 million, $14.4 million and $12.3 million for the years ended December 31, 1995, 1994, and 1993, respectively. For the year ended December 31, 1995, the foreign facility earned $127 thousand excluding the effect of a statutory tax rate increase on deferred tax balances which negatively impacted income by $292 thousand. For the years ended December 31, 1994 and 1993, net income was $192 thousand and $57 thousand, respectively. Total foreign assets were $20.4 million and $19.5 million at December 31, 1995 and 1994, respectively. 5 ITEM 2. PROPERTIES The principal properties of the Company and its subsidiaries are situated at the following locations and have the following characteristics:
APPROXIMATE AREA ------------------ GENERAL LAND BUILDINGS LOCATION DESCRIPTION (ACRES) (SQ. FEET) -------- ----------- ------- ---------- 1 Manchester, Warehouse Facilities...... 2.0 25,000 Connecticut 2 Manchester, Paperboard Manufacturing.. 11.6 70,500 Connecticut 3 Covington, Composite Materials Tennessee Manufacturing............. 26.0 155,000 4 Richmond, Laminated Kraft Virginia Manufacturing............. 5.0 104,000 5 Rochester, Specialty Paper New Hampshire Manufacturing............. 18.0 131,000 6 Hoosick Falls, Composite Materials New York Manufacturing............. 11.0 129,000 7 Hamptonville, Nonwoven Materials North Carolina Manufacturing............. 35.2 85,000 8 Green Island, Specialty Paper New York Manufacturing & Warehouse................. 6.3 270,000 9 Manchester, Corporate Office and Connecticut Computer Center........... 4.5 20,000 10 Rockwell, Fabricating Facility...... 11.5 51,000 North Carolina 11 Saint-Rivalain en Melrand, Specialty Paper France Manufacturing............. 14.3 156,000 12 Columbus, Fabricating Facility...... 9.0 80,000 Ohio 13 Jacksonville, Laminated Kraft Florida Manufacturing............. -- 52,000
Properties numbered 4, 10, 12, and 13, are being leased; all others are owned. For information with respect to obligations for lease rentals and owned property, see the Notes to the Consolidated Financial Statements of the Company included in the 1995 Annual Report to Stockholders, which are incorporated herein by reference. Lydall considers its properties to be suitable and adequate for its present needs. The properties are being fully utilized. In addition to the properties listed above, the Company has several additional leases for sales offices and warehouses in the United States and overseas. ITEM 3. LEGAL PROCEEDINGS 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. 6 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 the financial statements and Dun and 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 of 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. On March 19, 1996, patent litigation brought by ATD Corporation ("ATD") against Lydall in the United States District Court for the Eastern District of Michigan Southern Division was concluded with all of ATD's claims for damages being denied. An eight-member jury decided in favor of Lydall in the lawsuit filed by ATD alleging patent infringement of two ATD patents for all-metal insulators by Lydall's all-metal automotive heat shields. In June 1995, ATD filed an amended complaint against Lydall, Inc. alleging that the Company willfully infringed ATD's patents, both literally and under the Doctrine of Equivalents. ATD sought as relief for Lydall's alleged infringement both an injunction and damages. Lydall vigorously contested this action and filed a counterclaim to invalidate ATD's patents. On January 9, 1996, a decision on the parties' cross motions for summary judgment was entered. The Court ruled that Lydall's all-metal shield products did not literally infringe ATD's patents and gave the issue of equivalency, i.e., the degree to which Lydall's products are different from ATD's products, to a jury to decide. The Court also gave the issue of validity of ATD's patents to the jury. Shortly before trial began, the Court ruled that Lydall did not willfully infringe. The trial began on February 21, 1996 and concluded on March 19, 1996. The jury decided in favor of Lydall on the issue of infringement of the patents involved in the suit on all but one claim of one of the two patents. With respect to that claim, the jury had voted seven to one for noninfringement, but because a unanimous vote was required, the judge declared the jury deadlocked. The jury found that key claims which formed the basis of both of ATD's patents to be invalid. In view of the jury's decisions in Lydall's favor, ATD's claim for damages was denied. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of security holders during the fourth quarter of 1995. EXECUTIVE OFFICERS AND OTHER SIGNIFICANT EMPLOYEES OF THE REGISTRANT: The name, age, current position, and other business experience since January 1, 1991 of each executive officer of the Company are listed on the following page. Leonard R. Jaskol, John E. Hanley, Carole F. Butenas, Alan J. Gnann and Mary Adamowicz are elected annually at the organizational meeting of the Board of Directors. All others are appointed by the President and Chief Executive Officer for an indefinite period. There are no family relationships among executive officers or other significant employees. 7
OTHER BUSINESS EXPERIENCE SINCE NAME AGE TITLE 1991 ---- --- ----- ---------------- Leonard R. Jaskol 59 Chairman of the Board (since N/A 1991) President and Chief Executive Officer (since 1988) John E. Hanley 39 Vice President--Finance and Lydall, Inc. Treasurer and Treasurer (since 1992) Controller Carole F. Butenas 53 Vice-President--Investor N/A Relations (since 1991) Director (1995) Alan J. Gnann 46 Vice President--Corporate President--Manning Nonwovens Development (since 1993) Division Mary Adamowicz 35 General Counsel and Secretary N/A (since 1991) Raymond S. Lanzi 57 Division President (since 1979) N/A Elliott F. Whitely 52 Division President (since 1987) N/A James P. Carolan 53 Division President (since 1993) President--Lydall Director (1994) International William J. Rankin 42 Division President (since 1992) General Manager--Lydall Director (1995) Express Christopher R. 42 Division President (since 1990) N/A Skomorowski Director (1994) John J. Worthington 47 Division President (since 1996) General Manager, W. R. Grace and Specialty Paperboard, Inc.
PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Information regarding the common stock of the Company and recent market prices of such stock, the cash dividend policy, and the approximate number of holders of common stock, is incorporated herein by reference to pages 22, 31, 32 and 41 of the 1995 Annual Report to Stockholders. ITEM 6. SELECTED FINANCIAL DATA. Information regarding selected financial data of the Company is incorporated herein by reference to the inside front cover of the 1995 Annual Report to Stockholders. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Management's discussion and analysis of financial condition and results of operations is incorporated herein by reference to the President's Letter, the Analysis of Results and Key Financial Items on pages 3 through 7 and 14 through 22 of the 1995 Annual Report to Stockholders. 8 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements of Lydall, Inc. and its subsidiaries and the supplementary quarterly financial information are incorporated by reference to pages 23 through 27 and 34 of the 1995 Annual Report to Stockholders. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There have been no disagreements with the Company's independent public accountants on accounting and financial disclosure. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information regarding the directors of Lydall is incorporated by reference to the definitive Proxy Statement of Lydall to be filed with the Commission relating to its Annual Meeting of stockholders to be held on May 15, 1996. Information regarding the executive officers and other significant employees of the Company is contained on pages 7 and 8 of this report. ITEM 11. EXECUTIVE COMPENSATION. Information regarding the compensation of Lydall's directors and executive officers is incorporated by reference to the definitive Proxy Statement of Lydall to be filed with the Commission relating to its Annual Meeting of stockholders to be held on May 15, 1996, excluding the Compensation and Stock Option Committee Report to Stockholders found on pages 10 through 13, and the comparative performance graph located on page 14, therein. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information regarding beneficial ownership of the common stock by certain beneficial owners and by management of the Company is incorporated by reference to the definitive Proxy Statement of Lydall to be filed with the Commission relating to its Annual Meeting of stockholders to be held on May 15, 1996. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information regarding certain relationships and related transactions with management is incorporated by reference to the definitive Proxy Statement of Lydall to be filed with the Commission relating to its Annual Meeting of stockholders to be held on May 15, 1996. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. a) 1) The following consolidated financial statements of Lydall, Inc. and its subsidiaries are found in and are incorporated by reference to the Annual Report to Stockholders for the year ended December 31, 1995:
ANNUAL REPORT PAGES ------ Consolidated Income Statements--Years ended December 31, 1995, 1994, and 1993.............................................................. 23 Consolidated Balance Sheets--December 31, 1995 and 1994................ 24-25 Consolidated Statements of Cash Flows--Years ended December 31, 1995, 1994, and 1993........................................................ 26 Consolidated Statements of Changes in Stockholders' Equity--Years ended December 31, 1995, 1994, and 1993..................................... 27 Notes to Consolidated Financial Statements............................. 28-38 Report of Independent Accountants...................................... 39
9 a) 2) Financial Statement Schedule:
10-K PAGES ----- Report and Consent of Independent Accountants........................... 13-14 Schedule II--Valuation and Qualifying Accounts--Years ended December 31, 1995, 1994, and 1993................................................... 15
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions, are inapplicable, or are presented in the notes to financial statements, and therefore have been omitted. With the exception of the consolidated financial statements and the accountants' report thereon listed in the above index, the information referred to in Items 2, 5, 6 and 7 and the supplementary quarterly financial information referred to in Item 8, all of which is included in the 1995 Annual Report to Stockholders of the Company and incorporated by reference into this Form 10-K Annual Report, the 1995 Annual Report to Stockholders is not to be deemed "filed" as part of this report. a) 3) Exhibits included herein:
3.1 Amended and Restated Certificate of Incorporation of the registrant dated August 14, 1995, (filed as Exhibit 4.1 to the registrants Quarterly Report on Form 10-Q dated November 9, 1995 and incorporated herein by this reference). 3.2 Bylaws of the registrant (filed as Exhibit 3.2 to the registrant's Registration Statement on Form 8-B dated October 16, 1987, and incorporated herein by this reference). 4.1 Certain long-term debt instruments, each representing indebtedness in an amount equal to less than 10 percent of the registrant's total consolidated assets, have not been filed as exhibits to this Annual Report on Form 10-K. The registrant hereby undertakes to file these instruments with the Commission upon request. 10.1* Lydall, Inc. 1978 Long-Term Incentive Compensation Plan (filed as Exhibit 4.4 to the registrant's Registration Statement on Form S-8 dated March 18, 1988 (Reg. No. 33-20777), and incorporated herein by this reference). 10.2* Amended and restated, Lydall, Inc. 1982 Stock Incentive Compensation Plan, amended through May 14, 1991 (filed as Exhibit 10.6 to the registrant's Annual Report on Form 10-K dated March 26, 1992 and incorporated herein by this reference). 10.3* Amended and restated, 1992 Stock Incentive Compensation Plan, dated May 14, 1992, amended through May 11, 1994, (filed as Exhibit 10.3 to the registrant's Annual Report on Form 10-K dated March 27, 1995, and incorporated hereby by this reference). 10.4* Lydall, Inc. Senior Management Annual Incentive Compensation Plan (filed as Exhibit 3.5 to the registrant's Registration Statement on Form 8-B dated October 16, 1987, and incorporated herein by this reference). 10.5* Lydall, Inc. Management Annual Incentive Compensation Plan (filed as Exhibit 3.6 to the registrant's Registration Statement on Form 8-B dated October 16, 1987, and incorporated herein by this reference). 10.6* Employment Agreement with Leonard R. Jaskol dated March 1, 1995, (filed as Exhibit 10.6 to the registrant's Annual Report on Form 10-K dated March 20, 1995, and incorporated hereby by this reference). 10.7* Employment Agreement with John E. Hanley dated March 10, 1995, (filed as Exhibit 10.1 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference).
10 10.8* Employment Agreement with James P. Carolan dated March 10, 1995 (filed as Exhibit 10.2 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.9* Employment Agreement with Elliott F. Whitely dated March 10, 1995 (filed as Exhibit 10.3 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.10* Employment Agreement with Alan J. Gnann dated March 10, 1995 (filed as Exhibit 10.4 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.11* Employment Agreement with Raymond J. Lanzi dated March 10, 1995 (filed as Exhibit 10.5 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.12* Employment Agreement with Christopher R. Skomorowski dated March 10, 1995 (filed as Exhibit 10.6 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.13* Employment Agreement with William J. Rankin dated March 10, 1995 (filed as Exhibit 10.7 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.14* Employment Agreement with Carole F. Butenas dated March 10, 1995 (filed as Exhibit 10.8 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.15* Employment Agreement with Mona G. Estey dated March 10, 1995 (filed as Exhibit 10.9 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.16* Employment Agreement with Mary Adamowicz dated March 10, 1995 (filed as Exhibit 10.10 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.17* Lydall, Inc. Board of Directors Deferred Compensation Plan effective January 1, 1991, (filed as Exhibit 10.17 to the registrant's Annual Report on Form 10-K dated March 26, 1991 and incorporated herein by this reference). 10.18 Asset Purchase Agreement between Lydall Central, Inc. and Standard Packaging, Inc. (filed as Exhibit 2.1 to the registrant's Current Report on Form 8-K dated February 28, 1994 and incorporated herein by this reference). 10.19 Asset Purchase Agreement between Lydall Eastern, Inc. and Riverwood International Georgia, Inc. (filed as Exhibit 10.1 to the registrant's Quarterly Report on Form 10-Q dated August 10, 1994 and incorporated herein by this reference). 10.20* Lydall, Inc. Supplemental Executive Retirement Plan effective January 1, 1994, filed herewith. 11.1 Schedule of Computation of Weighted Average Common Shares and Equivalents Outstanding, filed herewith. 13.1 Annual Report to Stockholders for the year ended December 31, 1995, filed herewith. 21.1 List of subsidiaries of the registrant, filed herewith. 23.1 Consent of Independent Public Accountants, filed herewith. 24.1 Power of Attorney, dated March 13, 1996, authorizing Leonard R. Jaskol and/or John E. Hanley to sign this report on behalf of each member of the Board of Directors indicated therein, filed herewith. 27.1 Financial Data Schedule, filed herewith.
- -------- * Management contract or compensatory plan. b) Reports on Form 8-K: No reports on Form 8-K were filed during the fourth quarter, 1995. 11 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, LYDALL, INC. HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. LYDALL, INC. /s/ Leonard R. Jaskol Date: March 27, 1996 By __________________________________ LEONARD R. JASKOL CHAIRMAN AND CHIEF EXECUTIVE OFFICER PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF LYDALL, INC. IN THE CAPACITIES AND ON THE DATES INDICATED. SIGNATURE TITLE DATE --------- ----- ---- /s/ Leonard R. Jaskol Chairman, Chief March 27, 1996 - ------------------------------------- Executive Officer LEONARD R. JASKOL and Director /s/ John E. Hanley Vice President--Finance March 27, 1996 - ------------------------------------- and Treasurer JOHN E. HANLEY (Principal Financial and Accounting Officer) /s/ John E. Hanley March 27, 1996 - ------------------------------------- JOHN E. HANLEY ATTORNEY-IN-FACT FOR: /s/ Lee A. Asseo Director* March 27, 1996 - ------------------------------------- LEE A. ASSEO /s/ Paul S. Buddenhagen Director* March 27, 1996 - ------------------------------------- PAUL S. BUDDENHAGEN /s/ Carole F. Butenas Director* March 27, 1996 - ------------------------------------- CAROLE F. BUTENAS /s/ Samuel P. Cooley Director* March 27, 1996 - ------------------------------------- SAMUEL P. COOLEY /s/ W. Leslie Duffy Director* March 27, 1996 - ------------------------------------- W. LESLIE DUFFY /s/ William P. Lyons Director* March 27, 1996 - ------------------------------------- WILLIAM P. LYONS /s/ William J. Rankin Director* March 27, 1996 - ------------------------------------- WILLIAM J. RANKIN /s/ Joel Schiavone Director* March 27, 1996 - ------------------------------------- JOEL SCHIAVONE /s/ Roger M. Widmann Director* March 27, 1996 - ------------------------------------- ROGER M. WIDMANN /s/ Albert E. Wolf Director* March 27, 1996 - ------------------------------------- ALBERT E. WOLF *(constituting in excess of a majority of the full Board of Directors) 12 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Lydall, Inc.: Our report on the consolidated financial statements of Lydall, Inc. and Subsidiaries has been incorporated by reference in this Form 10-K from page 39 of the 1995 Annual Report to Stockholders of Lydall, Inc. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in the index on page 10 of this Form 10-K. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. Coopers & Lybrand L.L.P. Hartford, Connecticut February 9, 1996 except for the Subsequent Event footnote, for which the date is March 19, 1996 13 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statement of Lydall, Inc. on Form S-8 (File No. 33-93768) of our reports dated February 9, 1996, except as to the information presented in the Subsequent Event footnote, for which the date is March 19, 1996, on our audits of the consolidated financial statements and financial statement schedule of Lydall, Inc., and Subsidiaries as of December 31, 1995 and 1994, and for the years ended December 31, 1995, 1994 and 1993, which reports are incorporated by reference from the Annual Report to Stockholders, and included, respectively, in this Annual Report on Form 10-K. Coopers & Lybrand L.L.P. Hartford, Connecticut March 27, 1996 14 SCHEDULE II LYDALL, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
$ THOUSANDS ADDITIONS - ----------- --------------------- CHARGED TO CHARGED TO OTHER BALANCE AT COSTS AND ACCOUNTS-- DEDUCTIONS-- BALANCE AT DESCRIPTION JANUARY 1 EXPENSES DESCRIBE DESCRIBE DECEMBER 31 ----------- ---------- ---------- ---------- ------------ ----------- 1995 Allowance for doubtful receivables............ $1,724 $ 565 $-- $ (351)(1) $1,938 Accumulated amortization of intangible assets... 7,524 923 -- (1)(4) 8,446 Accrued reorganization.. 157 4 -- (24)(2) 137 Accrued environmental... 1,002 -- 83 (4) (13)(2) 1,072 Accumulated amortization of goodwill............ 516 587 -- -- 1,103 1994 Allowance for doubtful receivables............ $1,126 $1,345 $-- $ (747)(1) $1,724 Accumulated amortization of intangible assets... 6,733 921 -- (130)(3) 7,524 Accrued reorganization.. 95 72 -- (10)(2) 157 Accrued environmental... 954 -- 90 (4) (42)(2) 1,002 Accumulated amortization of goodwill............ 34 482 -- -- 516 1993 Allowance for doubtful receivables............ $ 808 $ 340 $-- $ (22)(1) $1,126 Accumulated amortization of intangible assets(5).............. 5,822 911 -- -- 6,733 Accrued reorganization.. 56 42 -- (3)(2) 95 Accrued environmental... 1,003 67 (59)(4) (57)(2) 954 Accumulated amortization of goodwill(5)......... 21 13 -- -- 34
Notes(1): Uncollected receivables written off. (2): Disbursements of amounts previously accrued. (3): Write off of fully amortized asset. (4): Record foreign currency translation adjustments. (5): Prior year amounts have been adjusted to separately identify goodwill amortization from other intangibles. 15 SCHEDULE X INDEX TO EXHIBITS ----------------- Page in Exhibit Sequentially Number Description of Document Numbered Copy - ------- ----------------------- ------------- 3.1 Amended and Restated Certificate of Incorporation of the registrant dated August 14, 1995, (filed as Exhibit 4.1 to the registrants Quarterly Report on Form 10-Q dated November 9, 1995 and incorporated herein by this reference). 3.2 Bylaws of the registrant (filed as Exhibit 3.2 to the registrant's Registration Statement on Form 8-B dated October 16, 1987, and incorporated herein by this reference). 4.1 Certain long-term debt instruments, each representing indebtedness in an amount equal to less than 10 percent of the registrant's total consolidated assets, have not been filed as exhibits to this Annual Report on Form 10-K. The registrant hereby undertakes to file these instruments with the Commission upon request. 10.1 Lydall, Inc. 1978 Long-Term Incentive Compensation Plan (filed as Exhibit 4.4 to the registrant's Registration Statement on Form S-8 dated March 18, 1988 (Reg. No. 33-20777), and incorporated herein by this reference). 10.2 Amended and restated, Lydall, Inc. 1982 Stock Incentive Compensation Plan, amended through May 14, 1991, (filed as Exhibit 10.6 to the registrant's Annual Report on Form 10-K dated March 26, 1992 amended through May 14, 1991, by this reference). 10.3 Amended and restated 1992 Stock Incentive Compensation Plan, dated May 14, 1992 amended through May 11, 1994, filed as exhibit 10.3 to the registrant's Annual Report on Form 10-K dated March 27, 1995, and incorporated herein by this reference). 10.4 Lydall, Inc. Senior Management Annual Incentive Compensation Plan (filed as Exhibit 3.5 to the registrant's Registration Statement on Form 8-B dated October 16, 1987, and incorporated herein by this reference). 10.5 Lydall, Inc. Management Annual Incentive Compensation Plan (filed as Exhibit 3.6 to the registrant's Registration Statement on Form 8-B dated October 16, 1987, and incorporated herein by this reference). INDEX TO EXHIBITS (continued) ----------------------------- Page in Exhibit Sequentially Number Description of Document Numbered Copy - ------- ----------------------- ------------- 10.6 Employment Agreement with Leonard R. Jaskol dated March 1, 1995, (filed as exhibit 10.6 to the registrant's Annual Report on Form 10-K dated March 20, 1995, and incorporated herein by this reference). 10.7 Employment Agreement with John E. Hanley dated March 10, 1995, (filed as Exhibit 10.1 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.8 Employment Agreement with James P. Carolan dated March 10, 1995 (filed as Exhibit 10.2 to the registrant's Quarterly report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.9 Employment Agreement with Elliott F. Whitely dated March 10, 1995 (filed as Exhibit 10.3 to the registrant's Quarterly report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.10 Employment Agreement with Alan J. Gnann dated March 10, 1995 (filed as Exhibit 10.4 to the registrant's Quarterly report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.11 Employment Agreement with Raymond J. Lanzi dated March 10, 1995 (filed as Exhibit 10.5 to the registrant's Quarterly report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.12 Employment Agreement with Christopher R. Skomorowski dated March 10, 1995 (filed as Exhibit 10.6 to the registrant's Quarterly report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.13 Employment Agreement with William J. Rankin dated March 10, 1995 (filed as Exhibit 10.7 to the registrant's Quarterly report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.14 Employment Agreement with Carole F. Butenas dated March 10, 1995 (filed as Exhibit 10.8 to the registrant's Quarterly report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). INDEX TO EXHIBITS (continued) ----------------------------- Page in Exhibit Sequentially Number Description of Document Numbered Copy - ------- ----------------------- ------------- 10.15 Employment Agreement with Mona G. Estey dated March 10, 1995 (filed as Exhibit 10.9 to the registrant's Quarterly report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.16 Employment Agreement with Mary Adamowicz dated March 10, 1995 (filed as Exhibit 10.10 to the registrant's Quarterly report on Form 10-Q dated May 9, 1995 and incorporated herein by this reference). 10.17 Lydall, Inc. Board of Directors Deferred Compensation Plan effective January 1, 1991, (filed as Exhibit 10.17 to the registrant's Annual Report on Form 10-K dated March 26, 1991 and incorporated herein by this reference). 10.18 Asset Purchase Agreement between Lydall Central, Inc. and Standard Packaging, Inc. (filed as Exhibit 2.1 to the registrant's Current Report on Form 8-K dated February 28, 1994 and incorporated herein by this reference). 10.19 Asset Purchase Agreement between Lydall Eastern, Inc. and Riverwood International Georgia, Inc. filed as Exhibit 10.1 to the registrant's Quarterly Report on Form 10-Q dated August 10, 1994 and incorporated herein by this reference). 10.20 Lydall, Inc. Supplemental Executive Retirement Plan effective January 1, 1994, filed herewith. 19-34 11.1 Schedule of Computation of Weighted Average Common Shares and Equivalents Outstanding, filed herewith. 35 13.1 Annual Report to Stockholders for the year ended December 31, 1995, filed herewith. P 21.1 List of subsidiaries of the registrant, filed herewith. 36 23.1 Consent of Independent Public Accountants, filed herewith. 37 24.1 Power of Attorney, dated March 13, 1996, authorizing Leonard R. Jaskol and/or John E. Hanley to sign this report on behalf of each member of the Board of Directors indicated therein, filed herewith. 38-39 27.1 Financial Data Schedule, filed herewith. 40 EX-10.20 2 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AMENDMENT NO. 1 TO THE LYDALL, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN The Lydall, Inc. Supplemental Executive Retirement Plan ("SERP") is hereby amended effective March 1, 1995 pursuant to Section 5.05 thereof as follows: I. Section 1.04 of the SERP is deleted in its entirety and the following new Section 1.04 is substituted therefor: 1.04 "Cause" shall mean (i) conviction of a crime involving moral ----- turpitude, or (ii) material and unexcused breach by Executive of his obligations under this SERP or any employment contract between the Company and/or any of its subsidiaries and Executive, which results in material harm to the Company and which is not cured within the period set forth below; provided, however, that "Cause" shall not exist unless such conviction or breach is detailed in a written notice of intent to terminate by the Board providing for sixty (60) days from receipt by Executive to cure the breach prior to termination of Executive; except such notice shall not be required if, in the Board's discretion, it determines that the Company would be immediately harmed. II. Section 1.05 of the SERP is amended by adding the following at the end of paragraph (i) thereof "/or", by adding the following at the end of paragraph (ii) thereof "and/or" and by adding the following new paragraph (iii) after paragraph (ii) thereof: (iii) the election or appointment to the Board of any director or directors whose appointment or election or nomination for election was not approved by a vote of at least a majority of the directors then still in office who were either directors on the date hereof or whose election, appointment or nomination for election was previously so approved. -1- AMENDMENT No. 1 executed at Manchester, Connecticut this 8th day of ----- December, 1995. LYDALL, INC. By Leonard R. Jaskol ----------------- Its Chairman and Chief Executive Officer -2- LYDALL, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN January, 1994 LYDALL, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN A number of executives are employed by Lydall, Inc. (the "Company") and/or its subsidiaries and have performed their duties in a capable and efficient manner resulting in substantial benefit to the Company. These executives may not receive the full retirement benefits to which they would otherwise be entitled under the various qualified employee benefit plans maintained by the Company due to various limitations contained in the Internal Revenue Code of 1986, as amended. In recognition of their past service, and in consideration of their future service to the Company, the Company has created the Lydall, Inc. Supplemental Executive Retirement Plan ("SERP") effective January 1, 1994 for the benefit of those executives following their retirement from service with the Company, and to provide supplemental retirement income to their survivors. The SERP is intended to be an unfunded plan maintained solely for the purpose of providing benefits to a select group of management and highly compensated employees. SECTION 1 DEFINITIONS ----------- For purposes of this SERP: 1.01. "Actuarial Equivalent" shall mean, with respect to a benefit, the -------------------- equivalent in value of such benefit when computed on the table of mortality and at the rate of interest stated in the Pension Plan. 1.02. "Age" shall mean the Executive's actual age as of a specified date --- expressed in years, months and days. 1.03. "Board" shall mean the Board of Directors of Lydall, Inc. or an ----- appropriate committee of the Board of Directors appointed by the Board of Directors for purposes of administering this SERP. 1.04. "Cause" shall mean conviction of a felony or other crime involving ----- moral turpitude, material breach by Executive of his obligations under this SERP or any employment contract between the Company and/or any of its subsidiaries and Executive, the bankruptcy or insolvency of the Executive, his refusal to follow reasonable orders or directions of the President and Chief Executive Officer of the Company or any other act or action which constitutes a material violation by Executive of his fiduciary duty owed to the Company and/or whatever subsidiary thereof actually employs Executive. 1.05 "Change of Control" shall mean: ----------------- (i) an acquisition of the Company by means of a merger or consolidation or purchase of substantially all of its assets - 2 - if and when incident thereto (a) the composition of the Board or its successor changes so that a majority of the Board is not comprised of individuals who were members of the Board immediately prior to such merger, consolidation or purchase of assets or (b) the stockholders of the Company acquire a right to receive, in exchange for or upon surrender of their stock, cash or other securities or a combination of the two, and, (ii) the acquisition by a Person (as that term is hereafter defined) of the voting rights with respect to 25 percent or more of the outstanding common stock of the Company if such Person was not an officer or director of the Company on December 31, 1993. The word "Person", as used in the preceding sentence, shall mean an individual, corporation, trust, or other legal or commercial entity and include two or more persons acting as a partnership, limited partnership, syndicate or other group for the purpose of acquiring, holding or disposing of securities of the Company. 1.06. "Code" shall mean the Internal Revenue Code of 1986, as amended, and ---- any regulations promulgated thereunder and interpretations thereof as such may affect this SERP. 1.07. "Compensation" shall mean the Executive's base salary rate for a ------------ calendar year plus cash bonuses paid during such calendar year (without regard to the limitations imposed under Section 401(a)(17) of the Code). - 3 - 1.08. "Early Retirement Date" shall mean the first day of the month --------------------- coincident with or next following the Executive's retirement on or after age 55 but before age 65 after being vested pursuant to Section 3.02. 1.09. "Executive" shall mean all officers of Lydall, Inc., Presidents of --------- Divisions of Lydall, Inc. (whether or not operated as a subsidiary) and the Vice President of Sales of the Southern Products Division plus any other executive employee of the Company whom the Board determines shall be eligible to participate in this SERP. 1.10. "Final Average Compensation" shall mean the average of the -------------------------- Executive's annual Compensation over the last sixty calendar months immediately preceding or coinciding with Executive's last day of employment with the Company. 1.11. "Normal Retirement Date" shall mean the first day of the month ---------------------- coincident with or next following the date the Executive attains age 65. 1.12. "Participant" shall mean an Executive who is participating in this ----------- SERP. 1.13. "Pension Plan" shall mean the Lydall, Inc. Pension Plan No. 1A as ------------ amended from time to time. 1.14. "Profit Sharing Plan" shall mean the Lydall, Inc. Profit Sharing Plan ------------------- No. 1 as amended from time to time. 1.15. "401(k) Plan" shall mean the Lydall, Inc. 401(k) Plan as amended from ----------- time to time. - 4 - 1.16. "Plans" shall mean collectively the Pension Plan, Profit Sharing Plan ----- and 401(k) Plan. 1.17. "Service" shall mean the Executive's full or partial years of service ------- with the Company as recognized under the Pension Plan. 1.18. The terms used in this SERP shall have the same meaning as those used in the Pension Plan unless such terms are defined in the SERP or unless otherwise provided in this SERP. SECTION 2 PARTICIPATION ------------- 2.01. Participation. All Executives shall be eligible to participate in ------------- this SERP, provided, however, that an Executive shall not be deemed a Participant in this SERP unless his benefits under the Plans are otherwise restricted due to the imposition of some or all of the limitations imposed under the Code. SECTION 3 RETIREMENT BENEFITS ------------------- 3.01. Normal Retirement Benefit. Upon the Executive's retirement on or ------------------------- after his Normal Retirement Date the Company shall pay to Executive an annual supplemental retirement benefit equal to the lesser benefit of (a) or (b) below; provided, however, that no benefits shall be payable hereunder if (c) exceeds the lesser of (A)(a)(i) or (B) the sum of (b)(1)(i), - 5 - (b)(2)(i), (b)(3)(i) and (b)(4)(i) for each calendar year of the Executive's Service until the Executive's retirement: (a)(i) 60% of the Executive's Final Average Compensation less (ii) the benefit determined und er (c) below; (b) The Actuarial Equivalent of the sum for each calendar year of the Executive's Service until the Executive's retirement of: (1)(i) the Actuarial Equivalent of the Accrued Benefit that the Executive would have earned under the Pension Plan for such calendar year based on his Compensation assuming the limitations imposed under Sections 401(a)(17) and 415 of the Code did not exist, less (ii) such Executive's Accrued Benefit for such calendar year under the Pension Plan. (2)(i) The contribution which would be made to the Executive's account in the Profit Sharing Plan based on his Compensation assuming the limitations imposed under Sections 401(a)(17) and 415 of the Code did not exist, less (ii) the actual contributions made to the Executive's account in the Profit Sharing for such calendar year. (3)(i) If the Executive made the maximum permissible contributions to the 401(k) Plan for a calendar year, the employer matching contribution which would be made to the Executive's account in the 401(k) Plan based on his Compensation assuming the limitations imposed under Sections 401(a)(17) and 415 of the Code did not exist, less (ii) the actual contribution - 6 - made to the Executive's account in the 401(k) Plan for such calendar year. (4)(i) Earnings attributable to accumulated amounts under (b)(2)(i) and (b)(3)(i) above as of the last day of each calendar year based on the actual rate of earnings earned by such Executive in the Profit Sharing Plan or 401(k) Plan, whichever is applicable, for such Plan Year less (ii) the actual rate of earnings attributable to accumulated amounts under (b)(2)(ii) and (b)(3)(ii) above as of the last day of each calendar year earned by such Executive in the Profit Sharing Plan or 401(k) Plan, whichever is applicable, for such Plan Year. (c) The sum of: (1) The Executive's annual normal retirement benefit payable to him under the Pension Plan (determined without regard to any optional method of benefit payment selected). (2) The annual benefit Actuarial Equivalent of the Executive's account balance in the Profit Sharing Plan. (3) The annual benefit Actuarial Equivalent of the Executive's account balance under the 401(k) Plan but only based on the portion of such account balance attributable to the matching contributions made by the Company to the Plan plus the actual earnings attributable to the Company's matching contributions. 3.02. Vesting. ------- (a) An Executive shall be 100% vested in his benefits under this SERP if the Executive has attained age 55 and the sum of his - 7 - Age and Service equal or exceed 70. In addition, an Executive shall be 100% vested in his benefits under this SERP determined as of the date of a Change in Control in the event of a Change of Control. No benefits will be payable to or on behalf of an Executive unless he is vested pursuant to this Section 3.02. (b) Notwithstanding anything contained in this SERP to the contrary, an Executive shall forfeit all benefits not yet paid to the Executive from this SERP in the event of his termination by the Company for Cause or his breach of the non-competition provisions specified in Section 3.02(c) during his Service or while receiving benefits under this SERP. (c) Executive will not compete directly or indirectly with the Company or be directly or indirectly interested in any business competing with the business being conducted by the Company. Ownership of less than one (1%) percent of the issued and outstanding capital stock of any corporation the stock of which is listed upon a national securities exchange or regularly quoted by the National Association of Security Dealers Automated Quotation (NASDAQ) shall not be deemed to create a material conflict of interest as contemplated hereunder. Executive shall regard and preserve as confidential and not use, communicate or disclose to any person, orally, in writing or by a publication, any secret or confidential information of the Company, regardless of where or when or how acquired by the Company, which the Company is obligated to maintain in confidence until such - 8 - information becomes a matter of public knowledge through no act of Executive. 3.03. Early Retirement Benefit. Upon the Executive's retirement on his ------------------------ Early Retirement Date the Company shall pay to Executive an annual supplemental retirement benefit equal to the retirement benefit as calculated in Section 3.01 but reduced in the same manner as under the Pension Plan. 3.04. Survivor Benefits. In the event of the Executive's death while ----------------- employed by the Company on or after becoming vested pursuant to Section 3.02, the Company shall pay an annual supplemental retirement benefit to his surviving spouse equal to the supplemental retirement benefit to which the Executive would have been entitled had he retired on the date of his death and received benefits in the form of a 100% joint and survivor annuity; provided, however, that if such death benefit commences prior to the date the Participant would have attained age 65, the benefit shall be reduced in the same manner as provided under the Pension Plan. In the event of the Executive's death after benefit payments have commenced, the Company shall continue such payments to the Executive's surviving spouse. 3.05. Benefit Payments. All benefits due under this Section 3 shall be paid ---------------- in equal monthly payments commencing as of the first day of the month coincident with or next following the Executive's retirement or death, whichever is applicable, and shall be made as of the first day of each calendar month by the Company thereafter. Benefits pursuant to Section 3.01 or 3.03 - 9 - shall continue for 15 years. Payments pursuant to Section 3.04 shall continue for the lesser of the spouse's life or 15 years or, if payments have already commenced pursuant to Sections 3.01 or 3.03, until the earlier of the spouse's life or 15 years after payments commenced under Section 3.01 or 3.03, whichever is applicable. - 10 - SECTION 4 PLAN ADMINISTRATION ------------------- 4.01. Named Fiduciary. The Company shall be the named fiduciary under the --------------- SERP. 4.02. Plan Administrator. The Company shall be the plan administrator of ------------------ the SERP. The Company, as plan administrator, shall have powers which include, but are not limited to, the following: (a) To make and enforce such rules and regulations as it deems necessary or proper for the administration of the SERP, including the establishment of any claims procedures that may be necessary; (b) To interpret and construe all provisions of the SERP, which interpretation shall be final and conclusive; (c) To decide all questions concerning the SERP and the eligibility of any person to participate in the SERP; (d) To appoint such agents, counsel, accountants, consultants and other persons as may be necessary to carry out its duties hereunder; and (e) To allocate and delegate its responsibilities under the SERP and to designate other persons to carry out any of its responsibilities under the SERP, any such allocation, delegation or designation to be in writing. - 11 - SECTION 5 MISCELLANEOUS ------------- 5.01. The Company's Liability. The benefits payable hereunder shall ----------------------- constitute an unsecured liability of the Company to Executive and his Beneficiary, any such payment shall be made from the general funds of the Company, the Company shall be under no obligation to segregate any of its assets for this purpose, and neither the Executive nor his Beneficiary shall have an interest in any particular asset of the Company by virtue of this SERP. 5.02. Leave of Absence. The Company may grant the Executive one or more ---------------- leaves of absence during which time the Executive shall be considered to be in the employ of the Company for purposes of this SERP. 5.03. Nonassignability. No Participant or Beneficiary shall have power to ---------------- subject any right to receive payments under this SERP to assignment, pledge, sale, attachment, garnishment or any other transfer, alienation or encumbrance, nor shall such rights be subject to the Participant's or Beneficiary's debts or to seizure for satisfaction of judgments, alimony or separate maintenance obligations. 5.04. Continuation as Employee. Neither this SERP nor the payment of any ------------------------ benefits hereunder shall be construed as giving the Executive any right to be retained as an employee of the Company. - 12 - 5.05. Amendment and Termination. The Board may from time to time amend, ------------------------- suspend or terminate the SERP in whole or in part; provided, however, that any such amendment, suspension or termination cannot reduce any Participant's benefits accrued under the SERP up to the date of such amendment, suspension or termination except to the extent such benefits are reduced due to the increase of the Participant's benefits under the Pension Plan. Such amendment, suspension or termination shall not be effective until made in writing and shall be communicated in writing to all Participants. 5.06. Governing Law. The law of the State of Connecticut shall govern the ------------- interpretation, application and operation of this SERP. 5.07. Successors and Assigns. The rights and obligations of the Company ---------------------- under this SERP shall inure to the benefit of and shall be binding upon the successors and assigns of the Company, including, without limitation, any corporation, individual or other person or entity which may acquire all or substantially all of the assets and business of the Company. - 13 - EX-11.1 3 SCHEDULE OF COMPUTATION LYDALL, INC. Exhibit 11.1 Schedule of Computation of Weighted Average Shares Outstanding
December 31, ---------------------------- In thousands 1995 1994 1993 ---- ---- ---- Primary - ------- Weighted average number of common shares 17,263 16,637 16,439 Additional shares assuming conversion of stock options and warrants 1,050 1,315 1,143 ------ ------ ------ Weighted average common shares and equivalents outstanding 18,313 17,952 17,582 ------ ------ ------ Fully Diluted - ------------- Weighted average number of common shares 17,263 16,637 16,439 Additional shares assuming conversion of stock options and warrants 1,071 1,335 1,146 ------ ------ ------ Weighted average common shares and eqivalents outstanding 18,334 17,972 17,585 ------ ------ ------
1994 and 1993 have been restated to reflect a two-for-one stock split distributed in 1995. EX-21.1 4 LIST OF SUBSIDIARIES LYDALL, INC. Exhibit 21.1 List of Subsidiaries Lydall, Inc. - Incorporated in the State of Delaware Logistics Management, Inc. - Incorporated in the State of Connecticut Lydall Distribution Services, Inc. - Incorporated in the State of Connecticut Lydall Express, Inc. - Incorporated in the State of Connecticut Lydall Transport, Ltd. - Incorporated in the State of Virginia Lydall Eastern, Inc. - Incorporated in State of Connecticut DBA: Lydall Composite Materials, Covington Operation Lydall Southern Products, Richmond Operation Lydall Southern Products, Jacksonville Operation Lydall Technical Papers Lydall & Foulds Lydall New York, Inc. - Incorporated in State of New York DBA: Lydall Composite Materials, Hoosick Falls Operation Lydall Manning Nonwovens Division Lydall Central, Inc. - Incorporated in State of Indiana DBA: Lydall Westex, Hamptonville Operation Lydall Westex, Rockwell Operation Lydall Westex, Columbus Operation Lydall International, Inc. - Incorporated in State of Delaware Lydall FSC, Limited - Incorporated in Jamaica Trident II, Inc. - Incorporated in State of Connecticut Sopatex, S.A. - Organized under the laws of France Axohm Industries, S.A. - Organized under the laws of France DBA: Lydall Axohm Axohm S.A. Operations Axohm U.K. - Organized under the laws of Great Britain 28 EX-23.1 5 CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We consent to the incorporation by reference in the registration statement of Lydall, Inc. on Form S-8 (File No. 33-03768) on our reports dated February 9, 1996, except as to the information presented in the Subsequent Event footnote, for which the date is March 19, 1996, on our audits of the consolidated financial statements and financial statements schedule of Lydall, Inc., and Subsidiaries as of December 31, 1995 and 1994, and for the years ended December 31, 1995, 1994 and 1993, which reports are incorporated by reference from the Annual Report to Stockholders, and included, respectively, in this Annual Report on Form 10-K COOPER & LYBRAND L.L.P. Hartford, Connecticut March 27, 1996 22 EX-24.1 6 POWER OF ATTORNEY EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and officers of Lydall, Inc. (the "Corporation"), does hereby constitute and appoint Leonard R. Jaskol and John E. Hanley, and each of them singly, as his agent and attorney-in-fact to do any and all things and acts in his name and in the capacities indicated below and to execute any and all instruments for him and in his name in the capacities indicated below which said Leonard R. Jaskol and John E. Hanley, or either of them, may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with the preparation and filing of the Corporation's Annual Report on Form 10-K (the "Annual Report") respecting the fiscal year ended December 31, 1995, including specifically, but not limited to, power and authority to sign for him in his name in the capacities indicated below the Annual Report and any and all amendments thereto, and each of the undersigned does hereby ratify and confirm all that said Leonard R. Jaskol and John E. Hanley, or either of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney as of the date indicated opposite his or her name. Leonard R. Jaskol Chairman of the March 13, 1996 - ----------------- Board and Chief Leonard R. Jaskol Executive Officer Lee A. Asseo Director March 13, 1996 - ------------ Lee A. Asseo Paul S. Buddenhagen Director March 13, 1996 - ------------------- Paul S. Buddenhagen Carole F. Butenas Director March 13, 1996 - ----------------- Carole F. Butenas Samuel P. Cooley Director March 13, 1996 - ---------------- Samuel P. Cooley W. Leslie Duffy Director March 13, 1996 - --------------- W. Leslie Duffy William P. Lyons Director March 13, 1996 - ---------------- William P. Lyons William J. Rankin Director March 13, 1996 - ----------------- William J. Rankin Joel Schiavone Director March 13, 1996 - -------------- Joel Schiavone Roger M. Widmann Director March 13, 1996 - ---------------- Roger M. Widmann A. E. Wolf Director March 13, 1996 - ---------- A. E. Wolf EX-27 7 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 27,820 913 34,849 1,938 14,124 82,469 105,467 45,393 158,072 29,739 10,621 0 0 2,089 99,722 158,072 252,128 252,128 174,430 174,430 155 503 778 36,875 14,437 22,438 0 0 0 22,438 1.23 1.23
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