-----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, SErj8VTiRuz0MbQyUfbD5CwWXkPmw2+s7e9d7oBOmpIcQFH6josjfNGdMURV7jMc 8iYdwgxCHu+K2ydMLM9kJw== 0000950152-97-003745.txt : 19970513 0000950152-97-003745.hdr.sgml : 19970513 ACCESSION NUMBER: 0000950152-97-003745 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: GEON CO CENTRAL INDEX KEY: 0000897547 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, MATERIALS, SYNTH RESINS & NONVULCAN ELASTOMERS [2821] IRS NUMBER: 341730488 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11804 FILM NUMBER: 97600595 BUSINESS ADDRESS: STREET 1: ONE GEON CENTER CITY: AVON LAKE STATE: OH ZIP: 44012 BUSINESS PHONE: 2169301000 MAIL ADDRESS: STREET 1: ONE GEON CENTER CITY: AVON LAKE STATE: OH ZIP: 44012 10-Q 1 GEON COMPANY 10-Q 1 ================================================================================ - -------------------------------------------------------------------------------- FORM 10-Q ---------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED MARCH 31, 1997. COMMISSION FILE NUMBER 1-11804 THE GEON COMPANY (Exact name of Registrant as specified in its charter) DELAWARE 34-1730488 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) One Geon Center, Avon Lake, Ohio 44012 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (216) 930-1000 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 March 31, 1997 there were 23,384,568 shares of common stock outstanding. There is only one class of common stock. - -------------------------------------------------------------------------------- ================================================================================ 2 Part I. Financial Information Item 1. Financial Statements THE GEON COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended March 31, ------------------ 1997 1996 ------- ------- Sales $ 301.0 $ 245.7 Operating costs and expenses: Cost of sales 281.8 239.8 Selling and administrative expenses 11.4 12.4 ------- ------- Operating income (loss) 7.8 (6.5) Interest expense (3.2) (2.9) Interest income -- .7 Other expense, net (1.0) (.2) ------- ------- Income (loss) before income taxes 3.6 (8.9) Income tax (expense) benefit (1.3) 3.3 ------- ------- Net income (loss) $ 2.3 $ (5.6) ======= ======= Earnings per share of common stock: Net income (loss) $ .10 $ (.22) ======= ======= Number of shares used to compute earnings per share 23.6 25.2 Dividends paid per common share of common stock: $ .125 $ .125
3 THE GEON COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE DATA)
March 31, December 31, ASSETS 1997 1996 -------- -------- Current assets: Cash and cash equivalents $ 21.3 $ 17.9 Accounts receivable, less allowance for doubtful receivables ($2.7 in 1997 and in 1996) 90.7 72.7 Inventories: Finished products and in-process 108.5 102.2 Raw materials and supplies 39.6 36.3 -------- -------- 148.1 138.5 LIFO reserve (34.5) (33.4) -------- -------- 113.6 105.1 Deferred income taxes 18.1 18.1 Prepaid expenses 18.9 20.0 -------- -------- Total current assets 262.6 233.8 Property: Land, buildings, machinery and equipment 1,187.3 1,179.9 Allowances for depreciation and amortization (735.4) (722.7) -------- -------- Property, net 451.9 457.2 Deferred charges and other assets 57.5 45.9 -------- -------- Total assets $ 772.0 $ 736.9 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term bank debt $ 38.5 $ 18.9 Accounts payable 144.1 126.4 Accrued expenses 54.3 57.6 Current portion of long-term debt .7 .7 -------- -------- Total current liabilities 237.6 203.6 Long-term debt 136.9 137.2 Deferred income taxes 33.3 33.0 Postretirement benefits other than pensions 86.9 86.7 Other non-current liabilities 56.5 54.0 -------- -------- Total liabilities 551.2 514.5 Stockholders' equity: Preferred stock, 10.0 shares authorized, no shares issued -- -- Common stock, $.10 par, authorized 100.0 shares; issued 27.9 shares in 1997 and in 1996 2.8 2.8 Additional paid-in capital 294.1 296.1 Common stock held in treasury (4.5 shares in 1997 and 4.6 shares in 1996) (113.7) (115.7) Retained earnings 61.8 62.4 Cumulative translation adjustment (19.8) (18.6) Equity adjustment to recognize minimum pension liability (3.3) (3.3) Unearned portion of restricted stock awards (1.1) (1.3) -------- -------- Total stockholders' equity 220.8 222.4 -------- -------- Total liabilities and stockholders' equity $ 772.0 $ 736.9 ======== ========
4 THE GEON COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN MILLIONS)
Three Months Ended March 31, ------------------- 1997 1996 -------- -------- OPERATING ACTIVITIES Net income (loss) $ 2.3 $ (5.6) Adjustments to reconcile net income to net cash (used) provided by operating activities: Depreciation and amortization 13.5 13.9 Provision (credit) for deferred income taxes 1.8 (1.5) Change in assets and liabilities: Accounts receivable (18.0) (12.7) Inventories (8.1) 1.6 Accounts payable 17.3 (2.6) Accrued expenses (0.4) 13.2 Income taxes payable (2.9) .9 Other 2.6 (1.1) ------- ------- Net cash provided by operating activities 8.1 6.1 INVESTING ACTIVITIES Purchases of property (9.6) (13.2) Investment in and advances to equity affiliates (11.3) (.6) ------- ------- NET CASH USED BY OPERATING AND INVESTING ACTIVITIES (12.8) (7.7) FINANCING ACTIVITIES Increase in short-term debt 19.4 3.6 Repayment of long-term debt (.3) (.3) Dividends (2.9) (3.1) Proceeds from issuance of common stock -- .2 ------- ------- Net cash provided by financing activities 16.2 .4 EFFECT OF EXCHANGE RATE CHANGES ON CASH -- .3 ------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3.4 (7.0) CASH AND CASH EQUIVALENTS AT JANUARY 1 17.9 61.1 ------- ------- CASH AND CASH EQUIVALENTS AT MARCH 31 $ 21.3 $ 54.1 ======= =======
During the first three months of 1997, the Company paid net income taxes of $3.3 million compared to the first three months of 1996 in which the Company received net income tax refunds of $2.2 million. Cash payments for interest, including amounts capitalized, were $0.7 million for the first three months of 1997 and $0.6 million for the same period of 1996. 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ Note A - ------ The accompanying unaudited consolidated financial statements of The Geon Company (Company or Geon) have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair financial presentation have been included. Operating results for the three month period ended March 31, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1996. Certain amounts 1996 have been reclassified to conform to the 1997 interim period presentation. Note B - ------ There are pending or threatened against the Company or its subsidiaries various claims, lawsuits and administrative proceedings, all arising from the ordinary course of business with respect to employment, commercial, product liability and environmental matters, which seek remedies or damages. The Company believes that any liability that may finally be determined should not have a material adverse effect on the Company's consolidated financial position. Note C - ------ On August 1, 1996, the Board of Directors authorized the Company to repurchase up to 2.5 million shares of Geon common stock. As of March 31, 1997, 600,000 shares have been repurchased. No shares were repurchased in the first quarter of 1997. Future purchases will be dependent on the price of Geon common stock and the Company's cash flow. Note D - ------ The Company has a 50% participation in a joint venture to construct and operate a chlor-alkali plant. In the initial phase, the plant will have an annual capacity of 250,000 tons of chlorine and 275,000 tons of caustic soda. Mechanical completion is expected in late 1997. The new unit will initially supply approximately 35% of Geon's captive chlorine needs. The plant's construction is being financed by the venture partners as the venture pursues its own financing. Note E - ------ On May 2, 1997, the Company announced that it would take a $15 million pre-tax charge in the second quarter of 1997 primarily for employee separation costs. Most position reductions will occur at the Company's Avon Lake, Ohio headquarters through 1998. Note F - ------ In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share (EPS)," which requires the disclosure of basic and diluted EPS, as defined therein. No material difference is expected between the reported EPS for the three months ended March 31, 1997 and the disclosures under the new pronouncement. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Industry Conditions: - -------------------- Based on The Society of Plastics Industry's March 1997 data, North American (U.S. and Canada) producer shipments of polyvinyl chloride (PVC), including exports, are estimated to have been 10% higher in the first quarter of 1997 over both the first quarter of 1996 and the fourth quarter of 1996. Capacity utilization (shipments/capacity) for North America was estimated at 97% of effective capacity (90% of nameplate) during the first quarter of 1997. In the first quarter and fourth quarter of 1996 shipments were 95% and 92% of effective capacity, respectively. North American capacity in the first quarter of 1997 is estimated to have increased 9% since last year's first quarter. Industry operating margins (price less raw materials) for the largest PVC resin market applications increased approximately 0.5 cents per pound in the first quarter compared to the previous quarter and decreased 0.5 cents per pound compared to the same period in 1996. This change in operating margins was the result of higher average selling prices being largely offset by both higher chlorine and ethylene costs. The selling price of general purpose resins averaged approximately 1.5 and 4.0 cents per pound higher than the fourth quarter and first quarter of 1996, respectively. No ethylene price changes have been announced to date for the second quarter of 1997. Chlorine demand remains strong and producers have announced increases of $30 per ton effective April 1997. PVC price increases of 4 to 6 cents per pound for the second quarter of 1997 have been announced by the Company and most producers for the domestic pipe and general purpose resin markets, following price increases of generally 5 cents per pound over the February and March period. Results of Operations: - ---------------------- The Company had sales of $301.0 million in the first quarter or 23% above the same quarter last year. Operating income was $7.8 million in the first quarter of 1997 compared to an operating loss of $6.5 million for the first quarter of 1996. For the first quarter of 1997, net income was $2.3 million verses a net loss of $5.6 million for the same period of 1996. During the fourth quarter of 1996, the Company had sales and net income of $279.1 million and $1.6 million, respectively. The Company's average spread between resin prices and raw material costs (ethylene and chlorine) was essentially flat as compared to the first quarter of 1996, which is slightly better than the pipe and general purpose market change. Compared to the fourth quarter of 1996 the change in the Company's average spread between resin prices and raw material costs was in line with the industry. The Company's first quarter 1997 resin shipments were 20% and 9% higher than the first quarter and fourth quarter of 1996, respectively. Compound shipments in the first quarter of 1997 increased 9% and 5% over the first and fourth quarters of 1996, respectively. The 1996 first quarter operating income was adversely impacted by certain manufacturing operating problems, which resulted in lost production, higher operating maintenance cost and the purchase of replacement materials at a higher cost. Interest & Other Expense: - ------------------------- Interest expense of $3.2 million during the first quarter of 1997 increased from $2.9 million during the same period of 1996. The increase primarily reflects interest expense on higher average short-term bank debt levels. Other expense, net increased in the first quarter 1997 as compared to the same period of 1996 primarily as a result of higher costs associated with the sale of accounts receivable. Taxes: - ------ The first quarter of 1997 included an income tax expense of $1.3 million on pre-tax income of $3.6 million as compared to an income tax benefit of $3.3 million in the first quarter of 1996 on a pre-tax loss of $8.9 million. Changes in effective tax rates between the periods noted above were primarily attributable to the benefit from a state income tax refund. 7 Capital Resources and Liquidity: - -------------------------------- During the three months ended March 31, 1997, the Company used $12.8 million of net cash from operating and investing activities compared to a use of $7.7 million during the same period of 1996. Operating activities reflect higher net income and a lower seasonal increase in operating working capital (accounts receivable plus inventory less accounts payable) offset by an increase in investing activities. Investing activities include the purchase of property of $9.6 million during the first three months of 1997 as compared to $13.2 during the same period in 1996. Capital expenditures for the full year of 1997 are estimated to approximate $60 million compared to $73 million in 1996. Investing activities for 1997 also include $11.3 of investments in and advances to equity affiliates, which includes a joint venture constructing a chlor-alkali plant. The chlor-alkali plant, when completed in late 1997, will provide Geon with approximately 35% of its chlorine requirements. Financing activities in the first three months of 1997 primarily reflect an increase in short-term bank debt and the payment of dividends. As of March 31, 1997, 1.9 million shares are authorized for repurchase under an August 1996 board of directors resolution. The timing of any stock repurchase depends on the Company's cash flow and market price of its common stock The Company believes it has sufficient funds to support dividends, debt service requirements and normal capital expenditures plus expenditures and advances associated with the previously announced chlor-alkali plant based on projected operations, existing working capital facilities and other available permitted borrowings. Environmental Matters: - ---------------------- The Company is subject to various federal, state and local environmental laws and regulations concerning emissions to the air, discharges to waterways, the release of materials into the environment, the generation, handling, storage, transportation, treatment and disposal of waste materials or otherwise relating to the protection of the environment. The Company maintains a disciplined environmental and industrial safety and health compliance program and conducts internal and external regulatory audits at its plants in order to identify and categorize potential environmental exposures and to ensure compliance with applicable environmental, health and safety laws and regulations. This is an effort which has required and may continue to require process or operational modifications, the installation of pollution control devices and cleanups. The Company estimates capital expenditures related to the limiting and monitoring of hazardous and non-hazardous wastes during 1997 to approximate $2 million to $4 million. The Company believes that compliance with current governmental regulations will not have a material adverse effect on its capital expenditures, earnings, cash flow or liquidity. At March 31, 1997, the Company had accruals totaling approximately $27 million to cover future environmental remediation expenditures. Environmental remediation expenditures in 1997 are estimated to approximate the level of 1996. Item 3. Quantitative and Qualitative Disclosures About Market Risk None. 8 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. May 7, 1997 THE GEON COMPANY \S\W. D. WILSON --------------------------------- W. D. Wilson Chief Financial Officer, (Principal Financial Officer) \S\G. P. SMITH --------------------------------- G. P. Smith Controller and Assistant Treasurer (Principal Accounting Officer) 9 Part II- Other Information Item 1. Legal Proceedings None. Item 2. Changes in Securities Not Applicable Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders: None. Item 5. Other Information: None. Item 6. Exhibits and Reports on Form 8-K: (a) Exhibit 11 - Statement re Computation of Per Share Earnings Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K None EX-11 2 EXHIBIT 11 1 EXHIBIT 11 (In millions, except per share data)
Three Months Ended March 31, ------------------ 1997 1996 ------- -------- PRIMARY EARNINGS PER COMMON SHARE: Number of Shares: ----------------- Average shares of common stock outstanding 23.4 24.7 Net effect of dilutive stock options - based on treasury stock method using average market price .2 .5 ----- ----- Total common and common equivalent shares outstanding 23.6 25.2 ----- ----- Net income (loss) per share of common stock $0.10 $(.22) ===== =====
The unaudited earnings per share for all periods presented were computed based on the weighted average number of shares of common stock outstanding and common stock equivalents. While the market price of common stock as of March 31, 1997 was above the average for the three months ended March 31, 1997, the dilutive impact was immaterial. EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS OF THE GEON COMPANY AND SUBSIDIARIES AS OF MARCH 31, 1997 AND DECEMBER 31, 1996 AND THE RELATED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1997 AND 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 16 5 91 3 114 263 1187 735 772 238 137 3 0 0 218 772 301 301 282 293 1 0 3 4 1 3 0 0 0 3 .10 .10
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