-----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, GfrGh1rxwksTL3RiaYV11Q8nVsGDkFCRT9OTRfdGMVXqTD0RulQ0omm20kvyS8fM 6zlnhtJSitVtD4/aGz6StQ== 0000812708-96-000005.txt : 19960515 0000812708-96-000005.hdr.sgml : 19960515 ACCESSION NUMBER: 0000812708-96-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WELLMAN INC CENTRAL INDEX KEY: 0000812708 STANDARD INDUSTRIAL CLASSIFICATION: PLASTIC MAIL, SYNTH RESIN/RUBBER, CELLULOS (NO GLASS) [2820] IRS NUMBER: 041671740 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10033 FILM NUMBER: 96562897 BUSINESS ADDRESS: STREET 1: 1040 BROAD ST STE 302 CITY: SHREWSBURY STATE: NJ ZIP: 07702 BUSINESS PHONE: 9085427300 10-Q 1 FORM 10-Q FOR 1ST QUARTER 1996 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 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 0-15899 WELLMAN, INC. ------------- (Exact name of registrant as specified in its charter) Delaware 04-1671740 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1040 Broad Street, Shrewsbury, NJ 07702 --------------------------------------- (Address of principal executive offices) (908) 542-7300 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of May 2, 1996, there were 33,570,173 shares of the registrant's common stock, $.001 par value, issued and outstanding and no shares of Class B common stock outstanding. WELLMAN, INC. INDEX Page No. -------- PART I - FINANCIAL INFORMATION ITEM 1 - Financial Statements Condensed Consolidated Statements of Income - For the three months ended March 31, 1996 and 1995. . . . 3 Condensed Consolidated Balance Sheets - March 31, 1996 and December 31, 1995. . . . . . . . . . . 4 Condensed Consolidated Statements of Stockholders' Equity. . . 5 Condensed Consolidated Statements of Cash Flows - For the three months ended March 31, 1996 and 1995. . . . 6 Notes to Condensed Consolidated Financial Statements . . . . . 7 ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . 8 - 9 PART II - OTHER INFORMATION ITEM 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 10 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2
WELLMAN, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) THREE MONTHS ENDED MARCH 31, ---------------------- 1996 1995 -------- -------- Net sales $301,001 $276,066 Cost of sales 256,354 213,994 -------- -------- Gross profit 44,647 62,072 Selling, general and administrative expenses 21,953 22,501 -------- -------- Operating income 22,694 39,571 Interest expense, net 3,938 2,899 -------- -------- Earnings before income taxes 18,756 36,672 Income taxes 7,047 13,935 -------- -------- Net earnings $ 11,709 $ 22,737 ======== ======== Net earnings per common share $ 0.35 $ 0.67 ======== ======== Weighted average common shares 33,663 33,684 ======== ========
See notes to condensed consolidated financial statements. 3
WELLMAN, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) March 31, December 31, 1996 1995 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 15,755 $ 3,893 Accounts receivable, less allowance of $5,480 in 1996 and $5,335 in 1995 152,895 145,572 Inventories 204,920 200,224 Prepaid expenses and other current assets 3,768 14,614 ------------ ------------ Total current assets 377,338 364,303 Property, plant and equipment, at cost: Land, buildings and improvements 127,320 127,555 Machinery and equipment 668,437 648,639 ------------ ------------ 795,757 776,194 Less accumulated depreciation 256,151 248,638 ------------ ------------ Property, plant and equipment, net 539,606 527,556 Cost in excess of net assets acquired, net 292,893 295,062 Other assets, net 19,966 23,752 ------------ ------------ $ 1,229,803 $ 1,210,673 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 94,401 $ 89,104 Accrued liabilities 46,701 50,368 Line of credit with bank -- 6,216 Current portion of long-term debt 147 147 ------------ ------------ Total current liabilities 141,249 145,835 Long-term debt 282,306 272,867 Deferred income taxes and other liabilities 144,613 141,625 ------------ ------------ Total liabilities 568,168 560,327 Stockholders' equity: Common stock, $.001 par value; 55,000,000 shares authorized, 33,551,719 shares issued and outstanding in 1996, 33,441,391 in 1995 34 33 Class B common stock, $.001 par value; 5,500,000 shares authorized -- -- Paid-in capital 232,329 230,008 Foreign currency translation adjustments 6,453 6,849 Retained earnings 422,819 413,456 ------------ ------------ Total stockholders' equity 661,635 650,346 ------------ ------------ $ 1,229,803 $ 1,210,673 ============ ============
See notes to condensed consolidated financial statements. 4
WELLMAN, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except per share data) COMMON STOCK CURRENCY --------------- PAID-IN TRANSLATION RETAINED SHARES AMOUNT CAPITAL ADJUSTMENTS EARNINGS TOTAL -------- ------ --------- ----------- --------- --------- Balance at December 31, 1994 33,192 $ 33 $ 224,352 $ 4,783 $ 348,405 $ 577,573 Net earnings 74,054 74,054 Cash dividends ($0.27 per share) (9,003) (9,003) Exercise of stock options 90 846 846 Issuance of common stock to employee benefit plans 158 4,190 4,190 Issuance of restricted stock 1 34 34 Tax effect of exercise of stock options 586 586 Currency translation adjustments 2,066 2,066 ------- ----- -------- ------- ------- -------- Balance at December 31, 1995 33,441 33 230,008 6,849 413,456 650,346 ------- ----- -------- ------- ------- -------- Net earnings 11,709 11,709 Cash dividends ($0.07 per share) (2,346) (2,346) Exercise of stock options 28 530 530 Issuance of common stock to employee benefit plans 83 1 1,791 1,792 Currency translation adjustments (396) (396) ------- ----- -------- ------- ------- -------- Balance at March 31, 1996 33,552 $ 34 $232,329 $ 6,453 $ 422,819 $ 661,635 ======= ===== ======== ======= ======= ========
See notes to condensed consolidated financial statements. 5
WELLMAN, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (In thousands) 1996 1995 --------- --------- Cash flows from operating activities: Net earnings $11,709 $22,737 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 14,088 12,525 Amortization 2,878 3,057 Deferred income taxes 2,482 2,644 Common stock issued for stock plans 1,792 1,851 Changes in assets and liabilities 2,693 10,531 ------- ------- Net cash provided by operating activities 35,642 53,345 ------- ------- Cash flows from investing activities: Additions to property, plant and equipment (30,397) (25,267) Decrease in restricted cash 311 989 Proceeds from divestitures 4,185 - ------- ------- Net cash used in investing activities (25,901) (24,278) ------- ------- Cash flows from financing activities: Net borrowings (repayments) of long-term debt 9,463 (11,425) Decrease in line of credit with bank (6,216) - Dividends paid on common stock (2,346) (1,994) Exercise of stock options 530 111 ------- ------- Net cash provided by (used in) financing activities 1,431 (13,308) ------- ------- Effect of exchange rate changes on cash and cash equivalents 690 482 ------- ------- Increase in cash and cash equivalents 11,862 16,241 Cash and cash equivalents at beginning of period 3,893 21,556 ------- ------- Cash and cash equivalents at end of period $15,755 $37,797 ======= ======= Supplemental cash flow data: Cash paid (received)during the period for: Interest (net of amounts capitalized) $ 1,582 $ 2,316 Income taxes $(8,970) $ 144
See notes to condensed consolidated financial statements. 6 WELLMAN, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information for the three months ended March 31, 1996 and 1995 is unaudited) (In thousands) 1. BASIS OF PRESENTATION The results of operations for the three month periods are not necessarily indicative of those for the full year. In the opinion of management, the accompanying unaudited condensed consolidated financial statements are presented on a basis consistent with the audited statements, and all adjustments, which consist only of normal recurring adjustments necessary to present fairly the financial position and the results of operations for the periods indicated, have been reflected. 2. NET EARNINGS PER COMMON SHARE Net earnings per common share is based on the weighted average number of common and common equivalent shares outstanding. 3. INVENTORIES
Inventories consist of the following: March 31, December 31, 1996 1995 --------- --------- Raw materials $ 82,975 $ 97,043 Finished and semi-finished goods 125,027 113,778 Supplies 15,233 14,281 --------- --------- 223,235 225,102 Less adjustments of certain inventories to a LIFO basis (18,315) (24,878) --------- --------- $ 204,920 $ 200,224 ========= =========
4. ENVIRONMENTAL MATTERS The Company's operations are subject to extensive laws and regulations governing air emissions, wastewater discharges and solid and hazardous waste management activities. The Company's policy is to accrue environmental remediation costs when it is both probable that a liability has been incurred and the amount can be reasonably estimated. While it is often difficult to reasonably quantify future environmental-related expenditures, the Company currently estimates its future non-capital expenditures related to environmental matters to range between $12,000 and $29,000. In connection with these expenditures, the Company has accrued approximately $23,700 at March 31, 1996 representing management's best estimate of probable non-capital environmental expenditures. In addition, future capital expenditures aggregating approximately $12,000 to $35,000 may be required related to environmental matters. These non-capital and capital expenditures are estimated to be incurred over the next 10 to 20 years. The Company believes that it is entitled to recover a portion of these expenditures under indemnification and escrow agreements. 7 WELLMAN, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1995 Net sales for the three months ended March 31, 1996 increased 9% to $301.0 million from $276.1 million for the three months ended March 31, 1995. Sales increased in the 1996 period for the Packaging Products Group (PPG) due to the 1995 second quarter expansion of PET (polyethylene terephthalate) resins production capacity and the December 31, 1995 acquisition of a Netherlands-based PET resins operation. Sales decreased in the 1996 period for the Fibers Group due to lower sales volumes. Sales decreased in 1996 for the Recycled Products Group (RPG) due to lower sales volumes for the domestic recycled fibers business and the impact of divested businesses. Gross profit for the three months ended March 31, 1996 amounted to $44.6 million versus $62.1 million for the 1995 period. The gross profit margin for 1996 was 14.8% compared to 22.5% in 1995. Gross profit for the Fibers Group decreased primarily due to lower sales volumes and increased raw material and production costs. RPG gross profit was lower primarily due to the aforementioned decrease in sales volumes and the pass-through of only a portion of increased raw material costs. PPG gross profit was higher due to increased sales volumes. Selling, general and administrative expenses amounted to $21.9 million, or 7.3% of sales, for 1996 compared to $22.5 million, or 8.2% of sales, for 1995. As a result of the foregoing, operating income was $22.7 million for the first three months of 1996 versus $39.6 million for the first three months of 1995. Net interest expense, which was $3.9 million in 1996 compared to $2.9 million in 1995, was unfavorably impacted in 1996 by lower interest income. The effective income tax rate was 37.5% in the first quarter of 1996 versus 38% in the comparable 1995 period. As a result of the foregoing, net earnings in the first three months of 1996 were $11.7 million, or $0.35 per share, compared to $22.7 million, or $0.67 per share, for the first three months of 1995. OUTLOOK The Company is experiencing difficult worldwide market conditions in its polyester fiber and PET resins businesses. Fiber profit margins are expected to be under pressure in 1996 due to lower sales and production volumes and resultant higher unit costs. PET resins profit margins are also expected to be under pressure due to increased competition and weakening European demand. The aforementioned PET resins expansion and acquisition of a PET resins operation in Europe are expected to benefit the Company strategically and financially in 1996 and beyond. LIQUIDITY AND CAPITAL RESOURCES The Company generated cash from operations of $35.6 million for the three months ended March 31, 1996 compared to $53.3 million for the three months ended March 31, 1995. The decrease in cash from operations was primarily the result of significantly lower net earnings and changes in working capital items. 8 Net cash used in investing activities amounted to $25.9 million in 1996 compared to $24.3 million in 1995. Capital spending amounted to $30.4 million in 1996 compared to $25.3 million in 1995. Net cash provided by financing activities amounted to $1.4 million for 1996 and net cash used in financing activities amounted to $13.3 million for 1995. In 1996, there were net borrowings of long-term debt of $9.5 million compared to net repayments of $11.4 million in 1995. The bank line of credit, which is related to the aforementioned European PET resins acquisition, was repaid in full during the first quarter of 1996. The Company is currently engaged in a long-term capital investment program and estimates that capital expenditures could aggregate approximately $700 million over the next five years. The capital program includes construction of a new domestic production facility estimated to cost approximately $400 million and expected to be operational in phases beginning in late 1998. Internally generated funds, the current bank facility and other credit arrangements are expected to fund the construction. The Company's long-term capital investment program includes approximately $170 million in planned expenditures in 1996. The exact amount and timing of the capital spending is difficult to predict since certain projects may extend into 1997 or beyond depending upon equipment delivery and construction schedules. Significant 1996 capital expenditures include expansion of domestic PET resins production capacity and design and construction of the new production facility discussed in the preceding paragraph. The Company's financing agreements contain normal financial and restrictive covenants. The most restrictive indebtedness covenant related to those agreements permits a maximum leverage ratio of 55%, which would allow the Company to incur additional debt approximating $525 million at March 31, 1996. The Company's leverage ratio at March 31, 1996 was 29.9%. Under the most restrictive covenant, approximately $235 million of retained earnings at March 31, 1996 was not restricted as to the payment of dividends. The Company believes that the financial resources available to it, including $250 million available at March 31, 1996 under its $330 million revolving credit facility (the Facility), unused short-term uncommitted lines of credit aggregating $167.5 million and internally generated funds will be sufficient to meet its foreseeable working capital, capital expenditure and dividend payment requirements. 9 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the registrant has not filed herewith any instrument with respect to long-term debt which does not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. The registrant hereby agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request. (b) Reports on Form 8-K. The Company filed a Form 8-K dated February 28, 1996 for the purpose of filing an amendment to its Rights Agreement dated August 6, 1991. The amendment provides for modifications of the definitions of Acquiring Person and Distribution Date to raise from 15% to 20% the percentage of stock ownership needed to cause a Distribution Date to occur (as such capitalized terms are defined in the Rights Agreement). 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WELLMAN, INC. Dated May 14, 1996 By /s/ Keith R. Phillips ------------- ------------------------ Keith R. Phillips Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) Dated May 14, 1996 By /s/ Mark J. Rosenblum ------------- ------------------------ Mark J. Rosenblum Vice President, Controller (Principal Accounting Officer) 11 EX-27 2 ART. 5 FDS FOR 1ST QUARTER 10-Q
5 ART. 5 FDS for first quarter 1996 10-q 1,000 3-MOS DEC-31-1996 MAR-31-1996 15,755 0 158,375 5,480 204,920 377,338 795,757 256,151 1,229,803 141,249 282,306 34 0 0 661,601 1,229,803 301,001 301,001 256,354 256,354 0 0 3,938 18,756 7,047 11,709 0 0 0 11,709 0.35 0.35
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