UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2002
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Commission File Number 000-32955
LSB CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-3557612
- -------------------------------------------------------------- ---------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
30 Massachusetts Avenue, North Andover, MA 01845
- -------------------------------------------------------------- ---------------------------------------
(Address of principal executive offices) (Zip Code)
(978) 725-7500
(Registrant's telephone number, including area code)
-------------------------
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.10 PER SHARE
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(Title of Class)
PREFERRED STOCK PURCHASED RIGHTS
--------------------------------
(Title of Class)
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 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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act) Yes No X
--- ----
State the aggregate market value of the voting stock held by non-affiliates*
of the registrant based on the closing sale price of $12.81 per share as
of March 21, 2003
Approximately $47,832,988
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AS OF MARCH 21, 2003
- ----- --------------------------------
Common Stock, par value $.10 per share 4,196,405 shares
DOCUMENTS INCORPORATED BY REFERENCE. Portions of the LSB Corporation (the
"Company") Annual Report to Stockholders for the fiscal year ended December 31,
2002 (the "Annual Report"), attached hereto as Exhibit (13) and the Company's
Proxy Statement for the 2003 Annual Meeting (the "Proxy Statement"), attached
hereto as Exhibit (20), are incorporated by reference into Parts I, II, and III
of this Form 10-K. An index to the exhibits attached to this Form 10-K can be
found on page 9 of this Form 10-K.
* For purposes of this calculation only, the common stock of LSB
Corporation held by directors and executive officers of LSB Corporation
has been treated as owned by affiliates.
PART I
ITEM 1. BUSINESS
The response is incorporated herein by reference from the discussion
respectively under the captions entitled "FINANCIAL HIGHLIGHTS" on page 4,
"BUSINESS" on pages 5 through 7, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" on pages 8 through 21 and
Consolidated Financial Statements and Notes to Consolidated Financial Statements
on pages 24 through 45 of the Annual Report.
ITEM 2. PROPERTIES
The Company conducts its business at its Corporate offices in North
Andover and multiple branch locations listed here. The Company believes that all
of its properties are well maintained and are suitable for banking needs and
operations. Rent expense for 2002 totaled $152,000. The following table sets
forth the locations of the offices of the Lawrence Savings Bank (the "Bank"),
the wholly owned bank subsidiary of the Company, as well as certain information
relating to these offices as of December 31, 2002:
Lease
--------------------
Year Current
Acquired Square Owned/ Term Renewal
Or Leased Feet Leased Expires Options
--------- ------ ------ ------- -------
CORPORATE OFFICES
North Andover 1992 45,315 Owned -- --
30 Massachusetts Ave.
No. Andover, MA 01845
BRANCH OFFICES
Essex Street 1998 3,432 Leased 2003 One (5) yr.
300 Essex Street Renewal Option
Lawrence, MA 01840
Jackson Street 1998 2,369 Leased 2003 One (5) yr.
20 Jackson Street Renewal Option
Methuen, MA 01844
West Methuen 1979 5,234 Owned -- --
148 Lowell Street
Methuen, MA 01844
Andover 1995 2,449 Leased 2010 Two (5) yr.
342 North Main Street Options
Andover, MA 01810
2
ITEM 3. LEGAL PROCEEDINGS
The Bank is involved in various legal proceedings incidental to its
business. After review with legal counsel, management does not believe
resolution of such litigation will have a material adverse effect on the
financial condition and operating results of the Bank.
In one litigation matter, the Bank was awarded a $4.2 million
judgment in 1997. The Bank prevailed on this appeal. The Bank expects to collect
this judgment, at least in substantial part, which would have a material
favorable impact on the Bank's financial statements. Post judgment interest
accrues from the date of this judgment and approximates $2.3 million at December
31, 2002. However, collectibility of post judgment interest in addition to the
$4.2 million award has not yet been determined.
In another litigation matter, the Bank was awarded $1.1 million by
a jury verdict, during the fourth quarter 1999, in a legal case where the Bank
sought to recover damages from loans previously charged off. In 2000, the court
entered final judgment for approximately $1.8 million, which includes post
judgment accrued interest. This award has been appealed by defendants and
collectibility of this award is subject to this appeal and other contingencies.
This case was heard by the appellate court on December 11, 2002. A decision by
the court has not been rendered as of March 31, 2002.
It is management's opinion that the timing and final amounts to be
collected cannot be determined at this time. Accordingly, no recognition of
these judgments has been recorded in the Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK EQUITY AND RELATED
STOCKHOLDER MATTERS
The response is incorporated herein by reference from the
discussion under the caption "STOCKHOLDERS' INFORMATION" on page 46, the
discussion under the subcaption "Capital Adequacy" of the caption "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" on
page 18 of the Annual Report, and from the table titled "Financial Highlights"
on page 4 of the Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
The response is incorporated herein by reference from the table
titled "FINANCIAL HIGHLIGHTS" on page 4 of the Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The response is incorporated herein by reference from the
discussion under the caption "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" on pages 8 through 21 of the Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The response is incorporated herein by reference from the
discussion under the subcaption "Interest Rate Sensitivity" of the caption
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" on pages 18 through 20 of the Annual Report.
3
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response is incorporated herein by reference from the LSB
Corporation and Subsidiary Consolidated Financial Statements and Notes thereto
on pages 24 through 45 of the Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response is incorporated herein by reference from the
discussion under the caption "INFORMATION REGARDING DIRECTORS" on pages 5
through 6, the discussion under the caption "EXECUTIVE OFFICERS" on page 9 and
the discussion under the caption "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE" on page 18 of the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The response is incorporated herein by reference from the section
entitled "EXECUTIVE COMPENSATION" on pages 10 through 14 of the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The response is incorporated herein by reference from the
discussion under the caption entitled "EQUITY COMPENSATION PLAN INFORMATION" on
page 16 and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" on
pages 16 through 18 of the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response is incorporated herein by reference from the
discussion under the caption entitled "INDEBTEDNESS OF DIRECTORS AND MANAGEMENT
AND CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS" on page 15 and 16 of the
Proxy Statement.
4
PART IV
ITEM 14. CONTROLS AND PROCEDURES
The Company's chief executive officer and chief financial officer,
after evaluating the effectiveness of the company's "disclosure controls and
procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c)
and 15-d-14(c)) as of December 31, 2002 (the "Evaluation Date"), have concluded
that as of the Evaluation Date, the company's disclosure controls and procedures
were adequate and designed to ensure that material information relating to the
Company and its subsidiaries would be made known to them by others within those
entities.
There were no significant changes in the Company's internal controls
or, to the company's knowledge, in other factors that could significantly affect
the Company's disclosure controls and procedures subsequent to the Evaluation
Date.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements: The following LSB Corporation and
Subsidiary Consolidated Financial Statements are incorporated
herein by reference from the Annual Report, listed below and
attached as Exhibit (13).
PAGE NUMBER(S) IN ANNUAL
REPORT
------
Report of Management Responsibility 22
Independent Auditors' Report 23
Consolidated Balance Sheets as of 24
December 31, 2002 and 2001
Consolidated Statements of Operations 25
for the years ended December 31,
2002, 2001 and 2000
Consolidated Statements of Changes 26
in Stockholders' Equity for the
years ended December 31, 2002,
2001 and 2000
Consolidated Statements of Cash Flows 27
for the years ended December 31, 2002,
2001 and 2000
Notes to Consolidated Financial Statements 28-45
(a) (2) Financial Statement Schedules:
None.
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the last quarter of
the period covered by this Form 10-K.
5
(c) List of Exhibits:
Exhibits to the Form 10-K have been included (unless otherwise
noted) only with the copies of the Form 10-K filed with the SEC.
Upon request to Investors Relations, LSB Corporation, 30
Massachusetts Avenue, North Andover, MA 01845, copies of the
individual exhibits will be furnished upon payment of a reasonable
reproduction fee.
Exhibits:
(2) Plan of Reorganization*
(3)(i) Articles of incorporation*
(3)(ii) Corporate By-Laws, as amended*
(3)(iii) Certificate of vote of directors establishing a
series of a class of stock*
(4.1) Specimen certificate of shares of common stock of
the Company*
(4.2) Rights Agreement dated as of December 12, 1996*
(10.1) Employment Agreement by and between the Bank and
Paul A. Miller dated April 21, 1989*
(10.2) Amendment dated December 23, 1992 to Employment
Agreement dated April 21, 1989*
(10.3) Amendment dated May 25, 2000 to Employment Agreement
dated April 21, 1989*
(10.4) Employment Agreement by and between the Bank and
Robert P. Perreault dated May 9, 1986*
(10.5) Amendment dated December 23, 1992 to Employment
Agreement dated May 9, 1986*
(10.6) Special Termination Agreement by and between the
Bank and Robert P. Perreault dated May 9, 1986*
(10.7) Amendment dated May 25, 2000 to Special Termination
Agreement dated May 9, 1986*
(10.8) Supplemental Retirement Agreement by and between the
Bank and Paul A. Miller dated April 21, 1989*
(10.9) Supplemental Retirement Agreement by and between the
Bank and Paul A. Miller dated April 21, 1996*
(10.10) Employment Agreement by and between the Bank and
Jeffrey W. Leeds dated February 24, 2000*
(10.11) Employment Agreement by and between the Bank and
Timothy L. Felter dated February 24, 2000*
(10.12) Employment Agreement by and between the Bank and
John E. Sharland dated February 24, 2000*
(10.13) Employment Agreement by and between the Bank and
Richard J. D'Ambrosio dated February 24, 2000*
(10.14) Lawrence Savings Bank 1986 Stock Option Plan*
(10.15) Lawrence Savings Bank 1997 Stock Option Plan*
(13) 2002 Annual Report to Shareholders of LSB Corporation
6
(20) 2003 Proxy Statement
(21) Subsidiary of LSB Corporation and subsidiaries of
Lawrence Savings Bank
(23.1) Consent of KPMG LLP
* Incorporated herein by reference from LSB Corporation Form 8-K
filed July 2, 2001.
(d) Financial Statement Schedules:
None.
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the LSB Corporation has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
LSB Corporation
By: /s/ Paul A. Miller
---------------------------------
Paul A. Miller, President
and Chief Executive Officer
DATE: March 27, 2003
7
Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the LSB Corporation
and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Paul A. Miller President, Chief Executive Officer and March 27, 2003
- -------------------------------- Director
Paul A. Miller (Principal Executive Officer)
/s/ John E. Sharland Senior Vice President, Chief Financial March 27, 2003
- -------------------------------- Officer (Principal Financial and Principal
John E. Sharland Accounting Officer)
/s Thomas J. Burke Chairman of the Board March 27, 2003
- --------------------------------
Thomas J. Burke Director
/s/ Eugene A. Beliveau Director March 27, 2003
- --------------------------------
Eugene A. Beliveau
/s/ Malcolm W. Brawn Director March 27, 2003
- --------------------------------
Malcolm W. Brawn
Director March 27, 2003
- --------------------------------
Byron R. Cleveland, Jr.
/s/ Neil H. Cullen Director March 27, 2003
- --------------------------------
Neil H. Cullen
/s/ Robert F. Hatem Director March 27, 2003
- --------------------------------
Robert F. Hatem
/s/ Richard Hart Harrington Director March 27, 2003
- --------------------------------
Richard Hart Harrington
/s/ Marsha A. McDonough Director March 27, 2003
- --------------------------------
Marsha A. McDonough
/s / Kathleen Boshar Reynolds Director March 27, 2003
- --------------------------------
Kathleen Boshar Reynolds
8
CERTIFICATIONS
I, Paul A. Miller, certify that:
1. I have reviewed this annual report on Form 10-K of LSB Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the Consolidated Financial Statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 27, 2003
/s/ Paul A. Miller
-------------------------
Paul A. Miller
President and
Chief Executive Officer
9
I, John E. Sharland, certify that:
1. I have reviewed this annual report on Form 10-K of LSB Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the Consolidated Financial Statements, and
other financial information included in this annual report, fairly present in
all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this annual
report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 27, 2003
/s/ John E. Sharland
------------------------
John E. Sharland
Senior Vice President
Chief Financial Officer
10
INDEX TO EXHIBITS ATTACHED TO FORM 10-K
ITEM DESCRIPTION
- ----------------
(13) 2002 Annual Report to Shareholders of LSB Corporation
(20) 2003 Proxy Statement
(21) Subsidiary of the LSB Corporation and Lawrence Savings Bank
(23.1) Consent of KPMG LLP