UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to ________________
Commission File Number: 1-7558
LAWTER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-1370818
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
990 Skokie Boulevard; Northbrook, Illinois 60062
(Address of principal executive offices)
(708) 498-4700
(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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock $1.00 par value per share - 45,010,545 shares outstanding as
of April 30, 1995.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that disclosures are adequate to make
the information presented not misleading. It is suggested that these condensed
financial statements be read in conjunction with the financial statements and
the notes thereto included in the Company's latest annual report on Form 10-K.
In the opinion of the Company, all adjustments (consisting of normal recurring
accruals) necessary to present fairly the financial position of Lawter
International, Inc. and Subsidiaries as of March 31, 1995 and December 31, 1994
and the results of their operations for the three months ended March 31, 1995
and 1994, and the statements of cash flows for the three months ended March 31,
1995 and 1994, have been included. It should be noted that these interim
statements are based on certain annual estimates such as the final level of LIFO
inventories and the provision for income taxes. These and other similar items
may be subject to year end adjustments. The results of operations for such
interim periods are not necessarily indicative of the results for the full year.
Lawter International, Inc. and Subsidiaries
Condensed Statements of Earnings
(Shown in thousands)
Three Months Ended March 31
---------------------------
1995 1994
-------- --------
Net Sales $ 52,489 $ 42,614
Cost of Products Sold 37,492 29,741
-------- --------
$ 14,997 $ 12,873
Selling, General and Administrative Expenses 5,534 4,476
-------- --------
$ 9,463 $ 8,397
Investment Income 1,466 703
-------- --------
Earnings before Income Taxes $ 10,929 $ 9,100
Provision for Income Taxes 2,839 2,375
-------- --------
Net Earnings $ 8,090 $ 6,725
======== ========
Earnings per Share of Common Stock (Note 2) $ .18 $ .15
Dividends per Share of Common Stock $ .10 $ .10
Weighted Average Shares Outstanding 44,945 44,819
The accompanying notes to the condensed financial statements are an integral
part of these statements.
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Lawter International, Inc. and Subsidiaries
Condensed Balance Sheets
(Shown in thousands)
March 31 December 31
-------- -----------
Assets 1995 1994
- -------- -------- --------
Current Assets
Cash $ 10,171 $ 8,063
Time Deposits 51,453 58,724
Marketable Securities 3,890 4,473
Accounts Receivable (net) 45,189 43,327
Inventories (Note 1)
Raw Materials 23,801 14,366
Finished Goods 25,099 18,437
Prepaid Expenses 3,246 2,739
-------- --------
Total Current Assets $162,849 $150,129
-------- --------
Property, Plant and Equipment $106,950 $102,788
Less Accumulated Depreciation (52,717) (50,323)
-------- --------
Net Property $ 54,233 $ 52,465
-------- --------
Investment in Affiliates $ 20,650 $ 20,139
-------- --------
Intangibles and Other Assets $ 8,593 $ 9,094
-------- --------
Total Assets $246,325 $231,827
======== ========
Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities
Accounts Payable and Accrued Expenses $ 33,596 $ 33,217
Short-Term Borrowings 27,719 18,504
Income Taxes Payable 11,091 12,807
-------- --------
Total Current Liabilities $ 72,406 $ 64,528
-------- --------
Deferred Income Taxes $ 35,491 $ 35,354
-------- --------
Long-Term Obligations $ 4,152 $ 4,152
-------- --------
Total Liabilities $112,049 $104,034
-------- --------
Stockholders' Equity
Preferred Stock (None Issued) $ --- $ ---
Common Stock 44,969 44,924
Additional Paid-in Capital 7,236 6,955
Retained Earnings 84,524 80,929
Cumulative Translation Adjustments (2,410) (5,015)
Other (43) ---
-------- --------
Net Stockholders' Equity $134,276 $127,793
-------- --------
Total Liabilities and Equity $246,325 $231,827
======== ========
The accompanying notes to the condensed financial statements are an integral
part of these balance sheets.
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Lawter International, Inc. and Subsidiaries
Condensed Statements of Cash Flows
(Shown in thousands)
Three Months Ended March 31
---------------------------
1995 1994
-------- --------
Cash Flow from Operating Activities:
Net Earnings $ 8,090 $ 6,725
Adjustments to Reconcile Net Earnings to
Net Cash Provided by Operating Activities-
Depreciation and Amortization 1,193 963
Deferred Income Taxes 113 ---
Undistributed Equity Income (527) (419)
Deferred Exchange Gain (Loss) (51) (430)
Purchase of Marketable Securities --- (1,091)
Proceeds from Sales of Marketable Securities 1,000 ---
Net (Gain) Loss from Marketable Securities (418) 244
(Increase) Decrease in Current Assets-
Accounts Receivable (832) (1,453)
Inventories (14,624) (2,917)
Prepaid Expenses (380) 62
Increase (Decrease) in Current Liabilities-
Accounts Payable and Accrued Expenses (471) (4,532)
Income Taxes Payable (1,935) 1,858
-------- --------
Net Cash Used for Operating Activities $ (8,842) $ (990)
-------- --------
Cash Flow from Investing Activities:
Expenditures for Property, Plant
& Equipment - Net $ (1,704) $ (2,797)
Loans to Officers (43) (29)
-------- --------
Net Cash Used for Investing Activities $ (1,747) $ (2,826)
-------- --------
Cash Flow from Financing Activities:
Exercise of Stock Options $ 326 $ 149
Proceeds from Short-Term Borrowings 9,243 4,972
Cash Dividends Paid (4,494) (4,482)
-------- --------
Net Cash Provided by Financing Activities $ 5,075 $ 639
-------- --------
Effect of Exchange Rate Changes on Cash $ 351 $ 88
-------- --------
Increase (Decrease) in Cash and Equivalents $ (5,163) $ (3,089)
Cash and Equivalents, Beginning of Period 66,787 77,488
-------- --------
Cash and Equivalents, End of Period $ 61,624 $ 74,399
======== ========
The accompanying notes to the condensed financial statements are an integral
part of these statements.
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Lawter International, Inc. and Subsidiaries
Notes to the Condensed Financial Statements
Note 1. Inventories
At year end, the Company takes a complete physical inventory to determine
inventory values. During interim periods, the Company uses a combination of
perpetual inventory records, physical inventories and the gross profit method to
determine inventory values.
The Company values the majority of its domestic inventories at last-in, first-
out (LIFO) cost which is not in excess of net realizable value. The Company's
other inventories are valued at the lower of first-in, first-out (FIFO) cost or
market.
Because the inventory determination under the LIFO method can only be made at
the end of each fiscal year based on the inventory levels and costs at that
point, interim LIFO determinations, including that at March 31, 1995, must
necessarily be based on management's estimates of expected year end inventory
levels and costs. Such future estimates of inventory levels and prices are
subject to many forces beyond the control of management.
Note 2. Earnings per Share
Earnings per share of common stock are computed on the weighted average shares
outstanding during the respective periods. Net earnings per share would not be
materially different from reported earnings per share if all outstanding stock
options were exercised.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Liquidity and Capital Resources
Lawter's cash and equivalents, net of short-term borrowings, decreased
$14,400,000 from $48,300,000 at December 31, 1994 to $33,900,000 at March 31,
1995. The decrease in cash and equivalents was due primarily to an increase in
inventory of some important raw materials due to a tightening of their supply.
Lawter anticipates maintaining a strong liquid position.
The capital expenditures planned for the near future include construction of a
new synthetic resin and printing ink vehicle facility in Europe, as well as
additions to and modernization of existing facilities elsewhere. The Company
currently anticipates using externally generated funds for the majority of these
capital expenditures.
Results of Operations
SALES. The Company's consolidated net sales increased 23% in the first quarter
of 1995 when compared to the first quarter of 1994. Domestic net sales
increased 8% as a result of average selling prices increasing 6% with the rest
of the increase due to higher sales volume. Reportable European net sales,
which included the sales of Cremona Resine as of June 30, 1994, increased 48%.
Excluding the sales of Cremona Resine, European sales increased 38% as a result
of a 19% increase in sales volume, a 14% increase caused by higher exchange
rates and a 5% increase due to higher average selling prices.
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GROSS MARGINS. Gross margins as a percent of net sales were 28.6% and 30.2% for
the quarters ended March 31, 1995 and 1994, respectively. The lower gross
margin percentage in 1995 was principally due to higher raw material costs and
startup costs associated with the new resin plant in Wisconsin.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses include net foreign transaction exchange gains of
$64,000 and $327,000 for the three months ended March 31, 1995 and 1994,
respectively. Transaction gains and losses result mainly from the effect of the
exchange rate fluctuations on transactions of the foreign subsidiaries which are
denominated in currencies other than the subsidiaries' functional currencies.
Excluding these net transaction gains, selling, general and administrative
expenses as a percent of sales were 10.7% and 11.3% for the three months ended
March 31, 1995 and 1994, respectively. The lower percentage in 1995 resulted
primarily from sales increasing at a higher rate than selling, general and
administrative expenses.
INVESTMENT INCOME. Investment income in the quarter ended March 31, 1995
increased from the quarter ended March 31, 1994 due primarily to a $398,000
write up of marketable securities to market value in the first quarter of 1995
versus a $244,000 write down in the first quarter of 1994.
INCOME TAXES. The effective tax rates were comparable at 26.0% and 26.1% for
the three months ended March 31, 1995 and 1994, respectively.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders held on April 24, 1995, shareholders voted
to approve an amendment to the 1992 Non-Qualified Stock Option Plan and to
approve the 1995 Non-Qualified Stock Option Plan for Non-Employee Directors as
proposed in the Company's 1995 Proxy Statement to Stockholders.
The results of the vote on the proposal to approve the amendment to the 1992
Non-Qualified Stock Option Plan were 36,934,195 affirmative votes; 2,943,305
negative votes; and 389,647 abstentions.
The results of the vote on the proposal to approve the 1995 Non-Qualified Stock
Option Plan for Non-Employee Directors were 37,348,004 affirmative votes;
2,566,102 negative votes; and 353,041 abstentions.
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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.
LAWTER INTERNATIONAL, INC.
--------------------------
(Registrant)
May 10, 1995 /s/ Richard D. Nordman
- ------------ --------------------------
Richard D. Nordman
President
May 10, 1995 /s/ William S. Russell
- ------------ --------------------------
William S. Russell
Vice President, Finance
and Secretary
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