-----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, PmPKGtWjImYoXHnDOTfceOQtp2SbPamaDq+2tnb8zEEmzIakbA63XSVTdtbFjE70 K3TEtIWiG5xbpF9yeiiTnQ== 0000812708-97-000004.txt : 19970513 0000812708-97-000004.hdr.sgml : 19970513 ACCESSION NUMBER: 0000812708-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970512 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: 97600125 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 1997 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, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission file number 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 5, 1997, there were 31,113,143 shares of the registrant's common stock, $.001 par value, 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, 1997 and 1996. . . . 3 Condensed Consolidated Balance Sheets - March 31, 1997 and December 31, 1996. . . . . . . . . . . 4 Condensed Consolidated Statements of Stockholders' Equity - For the three months ended March 31, 1997 and the year ended December 31, 1996. . . . . . . . . . . . . . . 5 Condensed Consolidated Statements of Cash Flows - For the three months ended March 31, 1997 and 1996. . . . 6 Notes to Condensed Consolidated Financial Statements . . . . . 7 - 8 ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . 9 - 13 PART II - OTHER INFORMATION ITEM 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 14 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2 WELLMAN, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data)
THREE MONTHS ENDED MARCH 31, ---------------- 1997 1996 ---- ---- Net sales $255,148 $301,001 Cost of sales 215,209 256,354 -------- -------- Gross profit 39,939 44,647 Selling, general and administrative expenses 21,353 21,953 -------- -------- Operating income 18,586 22,694 Interest expense, net 3,275 3,938 -------- -------- Earnings before income taxes 15,311 18,756 Income taxes 6,584 7,047 -------- -------- Net earnings $ 8,727 $ 11,709 ======== ======== Net earnings per common share $ 0.28 $ 0.35 ======== ======== Weighted average common shares 31,146 33,663 ======== ========
See notes to condensed consolidated financial statements. 3 WELLMAN, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
March 31, December 31, 1997 1996 ---------- ------------ Assets Current assets: Cash and cash equivalents $ 1,034 $ 2,120 Accounts receivable, less allowance of $ 3,771 in 1997 and $ 2,661 in 1996 130,601 132,296 Inventories 150,135 158,685 Prepaid expenses and other current assets 2,811 3,947 ---------- ---------- Total current assets 284,581 297,048 Property, plant and equipment, at cost: Land, buildings and improvements 122,915 122,047 Machinery and equipment 800,986 771,624 ---------- ---------- 923,901 893,671 Less accumulated depreciation 307,271 296,043 ---------- ---------- Property, plant and equipment, net 616,630 597,628 Cost in excess of net assets acquired, net 286,802 290,450 Other assets, net 18,153 18,823 ---------- ---------- $1,206,166 $1,203,949 ========== ========== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 59,703 $ 64,019 Accrued liabilities 34,822 41,320 Current portion of long-term debt 159 159 ---------- ---------- Total current liabilities 94,684 105,498 Long-term debt 326,596 319,407 Deferred income taxes and other liabilities 158,149 155,116 ---------- ---------- Total liabilities 579,429 580,021 Stockholders' equity: Common stock, $0.001 par value; 55,000,000 shares authorized, 33,612,464 shares issued in 1997, 33,612,464 in 1996 34 34 Class B common stock, $0.001 par value; 5,500,000 shares authorized; no shares issued -- -- Paid-in capital 233,665 233,665 Foreign currency translation adjustments 6,422 9,853 Retained earnings 436,140 429,900 Less common stock in treasury at cost: 2,500,000 shares at March 31, 1997 (49,524) (49,524) ---------- ---------- Total stockholders' equity 626,737 623,928 ---------- ---------- $1,206,166 $1,203,949 ========== ==========
See notes to condensed consolidated financial statements. 4 WELLMAN, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except per share data)
COMMON STOCK ISSUED CURRENCY --------------- PAID-IN TRANSLATION RETAINED TREASURY SHARES AMOUNT CAPITAL ADJUSTMENTS EARNINGS STOCK TOTAL ------ ------ ------- ----------- -------- ------- -------- Balance at December 31, 1995 33,441 $33 $230,008 $6,849 $413,456 $ --- $650,346 Net earnings 26,529 26,529 Cash dividends ($0.31 per share) (10,085) (10,085) Exercise of stock options 49 861 861 Issuance of common stock to employee benefit plans 121 1 2,669 2,670 Issuance of restricted stock 1 26 26 Tax effect of exercise of stock options 101 101 Currency translation adjustments 3,004 3,004 Purchase of treasury stock (49,524) (49,524) ------ --- --------- ------ --------- ------- -------- Balance at December 31, 1996 33,612 34 233,665 9,853 429,900 (49,524) 623,928 Net earnings 8,727 8,727 Cash dividends ($0.08 per share) (2,487) (2,487) Currency translation adjustments (3,431) (3,431) ------ --- -------- ------ -------- -------- -------- Balance at March 31, 1997 33,612 $34 $233,665 $6,422 $436,140 $(49,524) $626,737 ====== === ======== ====== ======== ======== ========
See notes to condensed consolidated financial statements. 5 WELLMAN, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (In thousands)
1997 1996 --------- --------- Cash flows from operating activities: Net earnings $ 8,727 $ 11,709 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 13,767 14,088 Amortization 2,805 2,878 Deferred income taxes 2,868 2,482 Common stock issued for stock plans -- 1,792 Changes in assets and liabilities 139 2,693 ------- -------- Net cash provided by operating activities 28,306 35,642 ------- -------- Cash flows from investing activities: Additions to property, plant and equipment (35,575) (30,397) Decrease in restricted cash 132 311 Proceeds from divestitures -- 4,185 ------- -------- Net cash used in investing activities (35,443) (25,901) ------- -------- Cash flows from financing activities: Net borrowings of long-term debt 8,717 9,463 Decrease in line of credit with bank -- (6,216) Dividends paid on common stock (2,487) (2,346) Exercise of stock options -- 530 ------- -------- Net cash provided by financing activities 6,230 1,431 ------- -------- Effect of exchange rate changes on cash and cash equivalents (179) 690 ------- -------- Increase (decrease) in cash and cash equivalents (1,086) 11,862 Cash and cash equivalents at beginning of period 2,120 3,893 ------- -------- Cash and cash equivalents at end of period $ 1,034 $ 15,755 ======= ======== Supplemental cash flow data: Cash paid (received)during the period for: Interest (net of amounts capitalized) $ 2,381 $ 1,582 Income taxes $ 4,932 $(8,970)
See notes to condensed consolidated financial statements. 6 WELLMAN, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information for the three months ended March 31, 1997 and 1996 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 of common and common equivalent shares (i.e., stock options) outstanding during the period. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share," which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact is not expected to result in any change in primary earnings per share as reported herein for the quarters ended March 31, 1997 and 1996. 3. INVENTORIES Inventories consist of the following:
March 31, December 31, 1997 1996 --------- --------- Raw materials $ 54,279 $ 65,552 Finished and semi-finished goods 81,284 78,280 Supplies 14,572 14,853 -------- -------- $150,135 $158,685 ======== ========
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 $12,900 and $29,000. In connection with these expenditures, the Company has accrued an amount at March 31, 1997 representing management's best estimate of 7 probable non-capital environmental expenditures. In addition, future capital expenditures aggregating approximately $7,800 to $27,700 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. 5. CONTINGENCIES In connection with the Netherlands-based PET resins business, the Company entered into a contract to purchase PET resin under a take or pay arrangement. The contract requires that 134,000 pounds be purchased on a declining basis during the period from 1997 to 2000. The Company purchased 16,400 pounds in the first three months of 1997. The purchase price of these volumes is essentially the cost of the raw materials to produce the product plus a processing fee. During the first quarter of 1997, the Company incurred operating losses with respect to this contract and has accrued approximately $3,000 as its best estimate of probable future losses with respect to this contract in the six month period from April through September of 1997. The Company cannot reasonably estimate losses, if any, beyond that period. It is reasonably possible that the Company's estimate of future losses with respect to this contract will change in the near term. 8 WELLMAN, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The primary business of Wellman, Inc. is the manufacture and marketing of high- quality polyester products, including Fortrel brand polyester textile fibers, polyester fibers made from recycled raw materials and PermaClear brand PET (polyethylene terephthalate) packaging resin. In the first quarter, the Company had annual capacity to manufacture approximately 1.1 billion pounds of fiber and over 400 million pounds of resin worldwide at five major production facilities in the United States and Europe. The Company commenced operation of an additional 200 million pounds per year of solid-stated resins production capacity in April 1997. The Company is also the world's largest plastics recycler, utilizing a significant amount of recycled raw materials in its manufacturing operations. The Fibers Group produces Fortrel textile fibers, which represent approximately 60% of the Company's fiber production. These fibers are used in apparel and home furnishings and produced from two chemical raw materials, purified terephthalic acid (PTA) and monoethylene glycol (MEG). The other 40% of fiber production, primarily fiberfill and carpet fibers, is manufactured by the Recycled Products Group from recycled raw materials, including producer wastes and postconsumer PET soft drink bottles. The Company's PET resins, produced by the Packaging Products Group from PTA and MEG, are primarily used in the manufacture of clear plastic soft drink bottles and other food and beverage packaging. The Company's markets are highly competitive. It competes in these markets primarily on the basis of product quality, customer service, brand identity and price. It believes it is the second-largest polyester staple and third-largest POY producer in the United States and the fourth-largest PET resin producer in North America. Several of the Company's competitors are substantially larger than the Company and have substantially greater economic resources. Demand for polyester fiber historically has been cyclical, as it is subject to changes in consumer preferences and spending, retail sales patterns, and fiber or textile product imports, all of which are driven primarily by general economic conditions. Global PET resin demand continues to grow, driven by new product applications for PET and conversion from other packaging materials to PET. Several factors significantly affect the Company's profitability: raw material margins, or the difference (or spread) between product selling prices and raw material costs; supply and demand for its products; the prices of competing materials, such as cotton and aluminum, which can affect demand for its products; and economic and market conditions in the United States, Europe and other regions of the world. Prices of PTA and MEG, primary determinants of polyester fiber and PET resin selling prices, are cyclical. Changes in PTA and MEG prices are driven by worldwide supply and demand. Raw material margins for the chemical-based fiber and PET resin businesses have generally been influenced by supply and demand factors. Despite growing demand for PET resin, worldwide supply is currently undergoing significant expansion which has adversely affected profitability, and is expected to continue to do so. Both fiber and resin margins experience increases or decreases due to timing of price changes and market conditions. 9 Raw material margins for the recycled fiber operation tend to be more variable than those for the chemical-based businesses, primarily because recycled raw material costs do not cause changes in fiber prices. Recycled raw material costs are primarily dependent upon worldwide supply and demand for waste materials. The Company's sales are neither materially dependent upon a single customer nor seasonal in nature. Demand, prices and raw material costs for both fibers and PET resins may be affected by global economic conditions, supply and demand balances and export activity. By the year 2000, the Company plans to substantially increase its polyester fiber and PET resin production capacity through the expansion of existing facilities and construction of a new, state-of-the-art production facility in Mississippi. Most of the expansion will be in PET resin capacity. As a result, the Company's production mix is expected to be approximately 50% fibers and 50% PET resins. THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1996 Net sales for the three months ended March 31, 1997 decreased 15.2% to $255.1 million from $301.0 million for the three months ended March 31, 1996. This was primarily the result of significantly lower selling prices which more than offset higher sales volume. Sales for the Fibers Group decreased 7.2% to $105.4 million in the 1997 period from $113.6 million in the 1996 period due to lower polyester fiber selling prices more than offsetting slightly higher sales volume. Sales for the Recycled Products Group (RPG) decreased 11.8% to $94.7 million in the 1997 period from $107.4 million in the year-ago period as a result of continued worldwide declines in polyester fiber selling prices which outpaced modest improvement in sales volumes, and the disposition of certain businesses which had sales of $3.3 million in the first quarter of 1996. Sales for the Packaging Products Group (PPG) decreased 31.3% to $55.0 million in 1997 from $80.1 million in 1996 primarily as a result of significantly lower worldwide PET resin selling prices which were partially offset by substantially higher sales volumes at the Netherlands-based PET resins business. Gross profit for the three months ended March 31, 1997 decreased 10.5% to $39.9 million from $44.6 million for the comparable period in 1996. The gross profit margin was 15.7% for the 1997 period compared to 14.8% for the 1996 period. Gross profit for the Fibers Group increased primarily as a result of lower overall costs which more than offset lower polyester fiber selling prices. The first quarter of 1996 was negatively impacted by higher production costs associated with a curtailed production line. Gross profit for the RPG also increased in the first quarter of 1997 versus the same period in 1996 as a direct result of significantly lower raw material costs and slightly higher sales volume. Gross profit for PPG decreased significantly in the first three months of 1997 versus the same period in 1996 as continued weak global market conditions caused lower worldwide PET resin selling prices which outpaced lower raw material costs. Selling, general and administrative expenses amounted to $21.4 million, or 8.4% of sales, for 1997 compared to $21.9 million, or 7.3% of sales, for 1996. As a result of the foregoing, operating income was $18.6 million for the first three months of 1997 compared to $22.7 million for the first three months of 1996. 10 Net interest expense was $3.3 million in 1997 compared to $3.9 million in 1996. Interest expense decreased due to higher interest capitalization resulting from the Company's ongoing capacity expansions. The effective tax rate was 43.0% in the first quarter of 1997 compared to 37.5% in the comparable 1996 period. The increase resulted from lower total projected earnings in 1997. The businesses where the decrease in projected earnings had the greatest impact were the Irish manufacturing operation and the European PET resin business. As a result of the foregoing, net earnings in the first three months of 1997 were $8.7 million, or $0.28 per share, compared to $11.7 million, or $0.35 per share, for the first three months of 1996. During the second half of 1996, the Company repurchased 2.5 million shares of its common stock in the open market. This repurchase had no material impact on earnings per share as reported for the 1997 period. OUTLOOK Demand for polyester fibers and PET resins is currently strong and expected to improve overall in 1997 compared to 1996. However, previously announced industry capacity expansions, including the Company's, are expected to exceed the higher demand. In April 1997, the Company started-up an additional 200 million pounds per year PET resin production line at the Darlington, S.C. plant. The higher sales volumes anticipated in 1997 are not expected to contribute materially to the Company's net earnings. Current global capacity oversupply and expected industry capacity expansions continue to exert downward pressure on polyester fiber selling prices. Worldwide PET resins selling prices are expected to improve in the near term; however, continued operating losses are expected in the Netherlands-based PET resins business in 1997. The higher sales volumes and selling price changes are not expected to materially affect the Company's profit margins. The statements above are forward looking statements subject to the qualifications set forth below in "Forward Looking Statements." LIQUIDITY AND CAPITAL RESOURCES The Company generated cash from operations of $28.3 million for the three months ended March 31, 1997 compared to $35.6 million for the three months ended March 31, 1996. The decrease in cash from operations was primarily the result of lower net earnings and changes in working capital items. Net cash used in investing activities amounted to $35.4 million in 1997 compared to $25.9 million in 1996. Capital spending amounted to $35.6 million in 1997 compared to $30.4 million in 1996 reflecting the Company's ongoing capacity expansions. Net cash provided by financing activities amounted to $6.2 million in 1997 compared to $1.4 million in 1996. In 1997, there were net borrowings (line of credit with bank and long-term debt) totaling $8.7 million compared to $3.2 million in 1996. With the completion of a domestic PET resins capacity expansion in April 1997, the remainder of the Company's ongoing capital investment program primarily includes the construction of a new domestic polyester production facility in Mississippi expected to be operational in phases beginning in late 1998. The Company estimates that its capital expenditures over the next three years could aggregate approximately $350 million. To receive certain incentives provided by 11 the state of Mississippi, the Company expects to issue Rural Economic Development Bonds. The Company believes these bonds, coupled with internally generated funds, its bank facility and other long-term financing are expected to provide adequate liquidity in the future. The Company's planned capital expenditures in 1997 are approximately $200 to $220 million. The exact amount and timing of the capital spending is difficult to predict since certain projects may extend into 1998 or beyond depending upon equipment delivery and construction schedules. The Company's financing agreements contain normal financial and restrictive covenants. The Company believes that the financial resources available to it, including $225.0 million available at March 31, 1997 under its $330 million revolving credit facility, unused short-term uncommitted lines of credit aggregating $110.0 million, internally generated funds, and other credit arrangements will be sufficient to meet its foreseeable working capital, capital expenditure and dividend payment requirements. The Company has entered into forward interest rate swaps to reduce (hedge) the impact of interest rate changes for variable rate borrowings associated with planned capital expenditures over the next four years. The agreements include an aggregate notional amount of $200 million at March 31, 1997, forward starting dates ranging from June 1997 to May 1998 and maturity dates of at least 5 years thereafter. The Company will pay fixed rates of interest ranging from 6.10% to 6.20%. The Company estimates it would have received approximately $4.8 million if it had to terminate these agreements at March 31, 1997. The Company has entered into forward foreign currency contracts to exchange Dutch guilders for U.S. dollars with an aggregate notional amount of $45.8 million at March 31, 1997 in order to reduce the related impact of foreign currency translation adjustments. This has the effect of converting a portion of U.S. debt to local currency (guilder) debt. The Company has designated these contracts as a hedge of a net investment in a foreign entity. At March 31, 1997, the Company estimates it would receive approximately $2.6 million if these contracts were terminated. The Company has also entered into forward foreign currency contracts to exchange U.S. dollars for German marks with an aggregate notional amount of $23.7 million at March 31, 1997. These contracts are designed to reduce (hedge) the impact of foreign currency fluctuations relative to fixed asset purchase commitments and have maturity dates ranging from April 1997 through November 1998. At March 31, 1997, the Company would have had to pay approximately $.8 million to terminate these contracts. The Company's European businesses utilize foreign currency debt and forward currency contracts to hedge certain of their accounts receivable and accounts payable denominated in other foreign currencies. At March 31, 1997, the notional amount of such contracts was $16.1 million and the cost to terminate these contracts was immaterial. The Company's estimates with respect to the values of its derivative instruments are based on readily available dealer quotes. 12 NEW ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share," which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact is not expected to result in any change in primary earnings per share as reported herein for the quarters ended March 31, 1997 and 1996. FORWARD LOOKING STATEMENTS Statements contained in this Form 10-Q that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company cautions that a number of important factors could cause actual results for 1997 and beyond to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company. Such statements contain a number of risks and uncertainties, including, but not limited to, demand and competition for polyester fiber and PET resins, availability and cost of raw materials, levels of production capacity and announced changes thereto, changes in interest rates and foreign currency exchange rates, work stoppages, natural disasters, U.S., European and global economic conditions and changes in laws and regulations, prices of competing products, such as cotton and aluminum, and the Company's ability to complete expansions and other capital projects on time and budget and to maintain the operations of its existing production facilities. The Company cannot assure that it will be able to anticipate or respond timely to changes which could adversely affect its operating results in one or more fiscal quarters. Results of operations in any past period should not be considered indicative of results to be expected in future periods. Fluctuations in operating results may result in fluctuations in the price of the Company's common stock. 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. 4(a) 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. 10(a) Third Amendment to Employment Agreement dated as of January 1, 1997 between the Company and Thomas M. Duff. 27 Financial Data Schedule. (b) Reports on Form 8-K. None. 14 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 12, 1997 By /s/ Keith R. Phillips -------------- ------------------------ Keith R. Phillips Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) Dated May 12, 1997 By /s/ Mark J. Rosenblum ------------- ------------------------ Mark J. Rosenblum Vice President, Chief Accounting Officer and Controller (Principal Accounting Officer) 15 EX-27 2 EX-27 FOR 10Q 1ST QUARTER 1997
5 ART. 5 FDS for first quarter 1997 10-q 1,000 3-MOS DEC-31-1997 MAR-31-1997 1,034 0 134,372 3,771 150,135 284,581 923,901 307,271 1,206,166 94,684 326,596 34 0 0 626,703 1,206,166 255,148 255,148 215,209 215,209 21,353 0 3,275 15,311 6,584 8,727 0 0 0 8,727 0.28 0.28
EX-10 3 EX-10(A) EXHIBIT 10(a) THIRD AMENDMENT TO EMPLOYMENT AGREEMENT This Third Amendment to Employment Agreement (the "Agreement") made as of the 1st day of January, 1997 by and between WELLMAN, INC., a Delaware corporation (the "Company"), and THOMAS M. DUFF (the "Executive"). W I T N E S S E T H: WHEREAS, the parties hereto entered into an Employment Agreement dated as of January 1, 1990, as amended by a First Amendment thereto dated as of January 1, 1993 and further amended by a Second Amendment thereto dated as of January 1, 1995 (collectively, the "Original Employment Agreement"), pursuant to which the Company agreed to continue to employ the Executive, and the Executive agreed to remain in the employ of the Company; and WHEREAS, the parties have agreed to certain modifications to the Original Employment Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants set forth herein, and for good and valuable other consideration, receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Defined Terms. All capitalized terms not defined herein shall have the same meaning ascribed to such terms in the Original Employment Agreement. Section 2. Amendments to Original Employment Agreement. (a) Effective as of the date hereof, Section 1(b) of the Original Employment Agreement is amended in its entirety to read as follows: "(b) Subject to earlier termination as provided in Section 4 herein, the "Employment Period" shall be the period commencing on January 1, 1997 and continuing until the date either the Company or the Executive shall notify the other, in writing, that such party desires to terminate the Executive's employment under this Agreement. Notwithstanding the foregoing, unless the Employment Period has already terminated, the Employment Period shall be automatically extended upon a Change in Control so as to terminate three years from the Effective Date (such three year period of the Employment Period being hereinafter referred to as the "Change in Control Employment Period")." (b) Effective as of the date hereof, clause (i) of Section 4(e) of the Original Employment Agreement is amended in its entirety to read as follows: "(i) if the Executive's employment is terminated by the Company (other than for Cause or Disability) or by the Executive, the Date of Termination shall be the date on which the Company or the Executive, as the case may be, notifies the other of such termination and" (c) Effective as of the date hereof, Section 5(d) of the Original Employment Agreement is amended in its entirety to read as follows: "(d) Termination Other than for Cause or Disability Prior to the Effective Date. If, during the Employment Period but prior to the Effective Date, the Company shall terminate the Executive's employment other than for Cause or Disability. (i) the Company shall pay to the Executive: (A) an amount equal to the Annual Base Salary, such amount to be paid in twelve substantially equal monthly installments; and (B) an amount equal to the Highest Annual Bonus, such amount to be paid in twelve substantially equal monthly installments; and (C) any compensation previously deferred by the Executive (together with any accrued interest therein) and not yet paid by the Company, such amount to be paid in a lump sum within 30 days following the Date of Termination. (ii) for a period of twelve (12) months following the Date of Termination, the Company shall continue benefits to the Executive and/or the Executive's family equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3(b)(v) of this Agreement in effect as of the Date of Termination if the Executive's employment had not been terminated. For purposes of determining eligibility of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until the end of such twelve (12) month period and to have retired on the last day of such period." (d) Effective as of the date hereof, the address for the Executive and the Company set forth in Section 11(b) of the Original Employment Agreement are amended to read as follows: "If to the Executive: Thomas M. Duff 105 Rumson Road Rumson, NJ 07760 2 If to the Company: James E. Rogers, Chairman Compensation Committee of the Board of Directors of Wellman, Inc. SCI Investors, Inc. 101 Shockoe Slip, Suite 0 Richmond, VA 23219-4144 with a copy to: David K. Duffell, Esquire Edwards & Angell 2700 Hospital Trust Tower Providence, RI 02903" Section 3. Ratification. Each party hereto hereby ratifies and confirms all of its obligations, covenants, duties and agreements set forth in the Original Employment Agreement, as amended by the terms hereof. All references to the "Employment Agreement" or the "Agreement" or any other defined term amended hereby contained in the Original Employment Agreement, shall be deemed to be amended to refer to the Original Employment Agreement, as amended by the terms hereof or to such amended defined term, as the case may be. IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. /s/ Thomas M. Duff --------------------------------- Thomas M. Duff WELLMAN, INC. By: /s/ Clifford J. Christenson ------------------------------ Title: Executive Vice President 3 -----END PRIVACY-ENHANCED MESSAGE-----