SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Fiscal year ended December 31, 1993 Commission file number 1-5222
M. A. HANNA COMPANY
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 34-0232435
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1301 E. NINTH STREET, SUITE 3600, CLEVELAND, OHIO 44114-1860
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 216-589-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $1 par value New York Stock Exchange
Chicago Stock Exchange
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, 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. [X]
Aggregate market value of the voting stock held by nonaffiliates of the
Registrant, computed by reference to the price at which the stock was sold as
of February 18, 1994: $855,231,228.00.
Common Shares outstanding as of February 18, 1994: 23,756,423.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by
reference into the designated parts of this Form 10-K: (1)
Registrant's definitive proxy statement distributed to stockholders
dated March 17, 1994, filed with the Commission pursuant to
Regulation 14A and incorporated by reference into Parts I and III
of this Form 10-K; and (2) Registrant's Annual Report distributed
to stockholders for the fiscal year ended December 31, 1993,
incorporated by reference into Parts I and II of this Form 10-K.
With the exception of the information specifically incorporated by
reference, neither the Registrant's proxy statement nor the 1993
Annual Report to stockholders is deemed to be filed as part of this
Form 10-K.
Except as otherwise stated, the information contained in this
report is given as of December 31, 1993, the end of the
Registrant's last fiscal year.
PART I
ITEM 1. BUSINESS
(a) Acquisitions and Dispositions
In May 1993, the Registrant completed its previously
announced acquisition of Global Processing Company, a
specialty rubber compounder located in Santa Fe Springs,
California. With annual sales of approximately $10
million and 50 associates, Global Processing is one of
the leading fluoroelastomer compounders in the United
States.
Also in May 1993, the Registrant announced an
agreement to acquire the thermoplastic resin distribution
business of Plasticos Polisol S.A. de C.V., based in
Mexico City, as part of Registrant's program to establish
a polymer processing and distribution capability in
Mexico. In furtherance of this program, Registrant
through its Hanna Polimeros, S.A. de C.V. subsidiary,
began construction of a processing plant near Mexico City
in January 1994, which is scheduled for start-up in June
1994. Also, another subsidiary, M. A. Hanna de Mexico,
S.A. de C.V., was formed to engage in the polymers
distribution business in Mexico.
In June 1993, the Registrant completed its
previously announced acquisition of the engineered
materials division of Cookson America Inc., comprised of
certain assets of Monmouth Plastics, a leading producer
of flame retardant polyolefins, located in Freehold, New
Jersey, and Texapol Corporation, a major producer of
engineering thermoplastic compounds, located in
Bethlehem, Pennsylvania. With combined annual sales of
approximately $32 million, the two units serve end
markets that include the electrical/electronics, consumer
durables, appliances and automotive industries.
In August 1993, Amoco Performance Products, Inc., a
subsidiary of Amoco Chemical Company and a leading
producer of engineering thermoplastics, named Registrant
a distributor of Amodel polyphthalamide (PPA) resins.
Also, in July 1993, Himont, Incorporated, entered into an
agreement naming the Registrant as a distributor of
Himont's resin products in the United States.
Also in August 1993, the Registrant completed an
agreement with Sumika Polymers America Corporation, a
Sumitomo Chemical subsidiary, for the construction and
operation of a manufacturing facility to produce a family
of value-added thermoplastic compounds in Dyersburg,
Tennessee. The facility will be designed jointly by
Sumika and the Registrant's Colonial Plastics unit, with
start-up scheduled for August 1994.
In November 1993, the Registrant announced that it
had reached a preliminary agreement to sell its
elastomeric membrane roofing material business based in
Kingstree, South Carolina, to Firestone Building Products
Company, a division of Bridgestone/Firestone, Inc. The
sale is expected to close in the first quarter of 1994.
In December 1993, the Registrant sold its BenePlan
Strategies unit, a third-party administrator of medical
benefits based in Dayton, Ohio, to Harrington Services
Corporation, based in Columbus, Ohio.
Also in December 1993, the Registrant purchased for
$27.5 million warrants for 2.75 million shares of its
common stock held by Brascan Limited of Toronto. The
warrants had been issued to Brascan in 1991 as part of
the purchase of 7.7 million shares of the Registrant that
Brascan had acquired in 1982.
Two of Registrant's plastics color and additive
concentrate units, Allied Color Industries, Inc., based
in Broadview Heights, Ohio, and Avecor, Inc., based in
Vonore, Tennessee were merged effective January 1, 1994.
The combined businesses, with annual sales of
approximately $70 million and seven manufacturing
facilities, will operate as Allied Color Industries, Inc.
On March 16, 1994, the Registrant acquired North
Coast Compounders, a producer of thermoplastic elastomers
("TPEs"). Based in North Ridgeville, Ohio, with
approximately 50 employees, North Coast Compounders
produces proprietary TPEs, alloys and blends, and also
engages in toll compounding.
(b) See the financial information regarding the
Registrant's business segments set forth at pages 30
through 31 of the Registrant's Annual Report distributed
to stockholders for the fiscal year ended December 31,
1993, which pages are incorporated herein by this
reference.
(c)
(1)(i)
Formulated Polymers
(a) Processing
The Registrant, through its Burton Rubber
Processing, Inc., Colonial Rubber Works, Inc., Global
Processing Company, MACH-I Compounding, Monmouth
Plastics, Plastic Distributing Corporation, Southwest
Chemical Services, Inc., and Texapol Corporation business
units, engages in the custom compounding of plastic and
rubber materials to the specifications of manufacturers
of plastic and rubber products for customers located
throughout the United States and Canada.
Through its Allied Color Industries, Inc., PMS
Consolidated, Inc., Synthecolor S.A. and Wilson Color
business units, the Registrant manufactures custom
formulated colorants in the form of color concentrates,
liquid dispersions, dry colorants, and additives for
customers in the plastics industry throughout the United
States, Canada and Europe. PMS Consolidated and Wilson
Color also produce specialty colorants and additives for
the automobile, vinyl siding and textile industries and
for the wire and cable industry, respectively. Through
its Hanna Polimeros unit, Registrant is scheduled to
begin manufacturing colorants in Mexico in 1994.
(b) Resin Distribution
Through its Bruck Plastics Company, Fiberchem, Inc.,
Plastic Distributing Corporation and M.A. Hanna de Mexico
business units, the Registrant distributes polymer resins
in North America.
(c) Polymer Products
Through its Cadillac Plastic Group business unit,
Registrant engages in the worldwide distribution of
plastic sheet, rod, tube, and film products to industrial
and retail customers as well as cutting and machining
plastic products to customers' specifications and
thermoforming plastic into products such as skylights and
signs.
Registrant, through its Day International Printing
and Textile Products business unit, engages in the
manufacture and worldwide sale of printing blankets and
print rollers for the printing industry and aprons, cots,
and other consumable supplies for the textile industry.
Through its Colonial Rubber Works, Inc. business
unit, Registrant manufactures molded sponge automotive
parts for customers located throughout the United States
and Canada.
Other Operations
Net sales and operating revenues from Registrant's
operations outside the formulated polymers industry do
not individually constitute 10 percent or more of
Registrant's consolidated revenues.
(1) (iii) In Registrant's formulated polymers processing
segment the primary raw materials required are natural
and synthetic rubbers, plastics, and chemicals, all of
which are available in adequate supply. The primary raw
materials required by Registrant's colorant subsidiaries
are plastics, chemicals, and organic and inorganic
pigments, all of which are available in adequate supply.
(1) (iv) Registrant's formulated polymers business units own
numerous patents and registered trademarks, which are
important in that they protect the Registrant's
corresponding inventions and trademarks against
infringement by others and thereby enhance Registrant's
position in the marketplace. The patents vary in
duration from 1 year to 17 years, and the trademarks have
an indefinite life which is based upon continued use.
(1) (x) The custom compounding of plastic and rubber
materials is highly competitive, with product quality and
service to customers being principal factors affecting
competition. Registrant is the largest independent
custom compounder of rubber and a leading compounder of
plastics in the United States in terms of pounds
produced.
The manufacture of custom formulated colorants for
the plastics industry is highly competitive with product
quality and service to customers being principal factors
affecting competition. Registrant is one of the leading
producers of custom formulated colorants in the United
States and Europe.
The distribution of plastic sheet, rod, tube, film
products, and polymer resins is highly competitive with
product quality and service to customers being principal
factors affecting competition. Registrant is one of the
leading distributors of such products in the world.
The manufacture of molded sponge automotive parts is
highly competitive, with quality, price and service to
customers being principal factors affecting competition.
Information generally available indicates that Registrant
is the leading supplier of such parts in the United
States.
The manufacture of printing blankets and rollers is
highly competitive, with image quality and durability
being principal factors affecting competition.
Registrant ranks as one of the world's leading producers
of these products. The manufacture of aprons, cots, and
other consumable supplies for the textile industry is
highly competitive, with quality and price being the
principal factors affecting competition. Registrant
ranks among the larger producers of such products in the
United States.
(1) (xii) At each of its operations the Registrant, its
subsidiaries, and associated companies are governed by
laws and regulations designed to protect the environment
and in this connection Registrant has adopted a corporate
policy which directs compliance with the various
requirements of these laws and regulations. The
Registrant believes that it, its subsidiaries and
associated companies are in substantial compliance with
all such laws and regulations, although it recognizes
that these laws and regulations are constantly changing.
There are presently no material estimated capital
expenditures for further environmental control facilities
projected by the Registrant, its subsidiaries and
associated companies for any of its operations.
(1) (xiii) Registrant employs 6,334 persons at its consolidated
operations (6,333 in 1992) and manages operations for
others that employ 2,235 persons (2,351 in 1992).
(d) (1) See information regarding Registrant's international
operations at page 30 of Registrant's Annual Report
distributed to stockholders for the fiscal year ended
December 31, 1993, which page is incorporated herein by
this reference.
(2) The international operations in which the Registrant
and its subsidiaries have equity interests, and the
investments of the Registrant and its subsidiaries in
such companies, may be affected from time to time by
foreign political and economic developments, laws and
regulations, increases or decreases in costs in such
countries and changes in the relative values of the
various currencies involved.
ITEM 2. PROPERTIES
The table below sets forth the principal plants and properties
owned or leased by the Registrant's formulated polymers business
units. For properties which are leased, the date of expiration of
the current term of the lease is indicated followed by an "R" if
the lease is subject to renewal or a "P" if the property is subject
to an option to purchase. Properties which are shown as owned are
owned in fee simple, subject to any mortgages on the properties.
In addition to mortgages, some properties are subject to minor
encumbrances of a nature which do not materially affect the
Registrant's operations.
In addition, several business units of Registrant lease floor
space at various locations within the United States. They are used
by the regional branches for sales offices, for the distribution of
Registrant's products, for fabrication, and for warehousing. These
are short-term leases.
Registrant and certain of its business units lease or own
space in various locations outside the United States, including
Australia, Belgium, Canada, the United Kingdom, France, Germany,
Mexico and Sweden.
Approximate
Owned/ Size
Location Facility Leased (sq. ft.)
Burton, Burton rubber Owned 160,000
Ohio compounding
_________________________________________________________________
Macedonia, Burton plastic Owned 87,000
Ohio compounding
_________________________________________________________________
Tillsonburg, Burton rubber Owned 60,000
Ontario compounding
_________________________________________________________________
Jonesboro, Burton rubber Owned 69,000
Tennessee compounding
_________________________________________________________________
Santa Fe Springs, Global rubber Leased 13,231
California compounding 1996
_________________________________________________________________
Broadview Heights, Allied colorant Owned 61,000
Ohio manufacturing
_________________________________________________________________
Greenville, Allied colorant Owned 11,000
South Carolina manufacturing
_________________________________________________________________
Phoenix, Allied colorant Owned 20,500
Arizona manufacturing
_________________________________________________________________
Vonore, Allied colorant Owned 47,000
Tennessee manufacturing
_________________________________________________________________
North Kansas City, Allied colorant Leased 44,000
Missouri manufacturing 1998
_________________________________________________________________
San Fernando, Allied colorant Leased 50,000
California manufacturing 1998
_________________________________________________________________
Vancouver, Allied colorant Leased 35,000
Washington manufacturing 2002-R
_________________________________________________________________
Troy, Cadillac Plastic Leased 28,620
Michigan headquarters 1998-R
_________________________________________________________________
Romeoville, Bruck headquarters Leased 103,000
Illinois & distribution 2008-P
_________________________________________________________________
Seattle, Fiberchem Leased 79,000
Washington headquarters & 2005-R-P
distribution
_________________________________________________________________
Three Rivers, Day printing Owned 57,943
Michigan products manufacturing
_________________________________________________________________
Dundee, Day printing/ Owned 101,000
Scotland textile products
manufacturing
_________________________________________________________________
Lerma, Day printing Owned 45,000
Mexico products manufacturing
_________________________________________________________________
Arden, Day printing/ Owned 240,580
North Carolina textile products
manufacturing
_________________________________________________________________
Kingstree, Colonial polymer Owned 381,354
South Carolina compounding and
products manufacturing
_________________________________________________________________
Dyersburg, Colonial polymer Owned 862,399
Tennessee compounding and
products manufacturing
_________________________________________________________________
Bethlehem, Texapol engineered Leased 82,000
Pennsylvania thermoplastic 2004-P
compounding
_________________________________________________________________
Suwanee, PMS Consolidated, Owned 20,000
Georgia Inc., headquarters
_________________________________________________________________
Somerset, PMS colorant Owned 44,300
New Jersey manufacturing
_________________________________________________________________
Florence, PMS colorant Leased 30,000
Kentucky manufacturing 1994-R-P
_________________________________________________________________
Gastonia, PMS colorant Leased 32,150
North Carolina manufacturing 1997
_________________________________________________________________
Elk Grove Village, PMS colorant Owned 51,870
Illinois manufacturing
_________________________________________________________________
St. Peters, PMS colorant Owned 32,480
Missouri manufacturing
_________________________________________________________________
Fort Worth, PMS colorant Owned 75,080
Texas manufacturing
_________________________________________________________________
Norwalk, PMS colorant Owned 94,000
Ohio manufacturing
_________________________________________________________________
Gardena, PMS colorant Owned 46,652
California manufacturing
________________________________________________________________
Carolina, PMS colorant Leased 12,600
Puerto Rico manufacturing 1994
_________________________________________________________________
Buford, PMS colorant Leased 73,000
Georgia manufacturing 1997-R
_________________________________________________________________
Milford, PMS colorant Leased 20,600
New Hampshire manufacturing 1995-R
_________________________________________________________________
Coral Springs, PMS research & Leased 18,000
Florida development
_________________________________________________________________
Toluca, Hanna Polimeros Owned 22,000
Mexico colorant
manufacturing (6/94)
_________________________________________________________________
LaPorte, Southwest Chemical Owned 200,000
Texas polymer compounding
_________________________________________________________________
Ayer, PDC headquarters & Leased 82,000
Massachusetts distribution 2000\2-P
_________________________________________________________________
Houston, PDC compounding & Leased
Texas distribution 1997 88,000
1998 44,120
_________________________________________________________________
Statesville, PDC distribution Leased 48,240
North Carolina 1998
_________________________________________________________________
Neshanic Station, Wilson headquarters Leased 123,000
New Jersey & colorant 1997-R-P
manufacturing
_________________________________________________________________
Assesse, Wilson colorant Owned 120,976
Belgium manufacturing
_________________________________________________________________
Tossiat, Wilson colorant Owned 87,188
France manufacturing
_________________________________________________________________
Bendorf, Wilson colorant Owned 72,086
Germany manufacturing
_________________________________________________________________
Angered, Wilson colorant Owned 22,259
Sweden manufacturing
_________________________________________________________________
Paris, Synthecolor Owned 46,285
France colorant Leased 16,146
manufacturing
________________________________________________________________
Registrant's combined annual plastic and rubber compounding
capacity and colorant manufacturing capacity, based on the
estimated design capacities of Registrant's plants amounts to
approximately 770 million pounds of compounded rubber products, 795
million pounds of compounded plastic products and over 235 million
pounds of colorants. A variation in the mix of products produced
at a given plant results in a corresponding increase or decrease in
the quantity (in pounds) of products that can be produced at full
capacity. Beyond these estimated capacities for Registrant's
rubber and plastic compounding and colorant manufacturing
properties, there are no comparative measurement units of
production capacity that reasonably can be ascribed to Registrant's
other properties in the formulated polymer segment.
Registrant's 50 percent-owned partnership, DH Compounding
Company, owns and operates an engineering plastics compounding
plant in Clinton, Tennessee. The 100,000 square foot plant has an
annual design capacity of 60 million pounds.
ITEM 3. LEGAL PROCEEDINGS
The State of Idaho filed suit in 1983 in the U.S. District
Court of the District of Idaho against the Registrant and certain
other named and unnamed defendants based on allegations of
violation of the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 and state environmental law
and upon allegations of strict liability and maintenance of public
nuisance. The state filed amended complaints in 1990 and 1993. In
1993 the U.S. Government also sued the Registrant and the other
defendants in the same court, advancing essentially the same
theories of liability. Plaintiffs are seeking reimbursement from
the defendants for damages to the environment and all costs for
clean-up of the area around the Blackbird Mine, now owned by a
limited partnership in which the Registrant is the limited partner.
The general partner in the limited partnership is a major North
American mining company which has been actively participating in
the defense of this action. The Registrant and the other
defendants filed answers asserting various defenses and served
third-party complaints against former owners and operators of the
Blackbird Mine and the U.S. Government and certain of its
departments and agencies, alleging that such third-party defendants
are legally responsible for the alleged natural resources damage.
The Registrant and the other defendants are conducting discovery.
An independent consulting firm undertook a study of the Blackbird
Mine and in 1985 presented several abatement alternatives with
estimated construction costs ranging from $3.4 to $8.2 million and
estimated operation and maintenance costs ranging from $200,000 to
$600,000 annually for an indeterminate period. However, to date no
definitive cost estimates or remediation plans have been prepared
and submitted to the regulatory authorities. Registrant's insurance
carrier has reserved its rights to deny coverage and has sued
Registrant for declaratory judgement on this coverage issue, but is
funding certain legal defense costs. If the Registrant is found
liable, it may seek to recover its costs from the general partner
pursuant to the limited partnership agreement. In view of the fact
that Registrant's liabilities have not been determined, the
remediation costs have not been definitively estimated and the
insurance coverage has not been accepted by the carrier, it is not
possible at this time to state the amount of Registrant's future
costs or liabilities or the probability of insurance recoveries;
however, Registrant believes that the matter will be resolved
without a material adverse effect on Registrant's business or
financial position.
Registrant, through its indirect wholly-owned subsidiary,
Cadillac Plastic Group, Inc. (formerly Day International
Corporation), is obligated for costs of environmental remediation
measures taken and to be taken in connection with certain of
Cadillac's businesses related to operations that have been sold or
discontinued. These include the clean-up of Superfund sites and
participation with other companies in the clean-up of hazardous
waste disposal sites, several of which have been designated as
Superfund sites. Registrant has established reserves for
Cadillac's liabilities for environmental remediation, which do not
reflect potential insurance recoveries and which management
believes is adequate to cover Cadillac's ultimate exposure.
Registrant believes that these liabilities will not have a material
adverse effect on the Registrant's business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
_______ EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists information as of March 18 1994, as
to each executive officer of the Registrant, including his position
with the Registrant as of that date and other positions held by him
during at least the past five years:
M. D. Walker Chairman and Chief Executive
Age - 61 Officer. Chairman and Chief
Executive Officer, September 1986 to
date; President, December 1988 -
May 1989.
D. J. McGregor President and Chief Operating
Age - 53 Officer. Senior Vice President-
Operations of the Registrant, March
1988 - September 1988; Executive
Vice President, September 1988 -
May 1989; President and Chief
Operating Officer, May 1989 to date.
S. P. Chong Vice President-Total Quality
Age - 51 Planning & Technical Services. Vice
President-Technical Services, 1986 -
May 1990; Vice President Total
Quality Planning & Technical
Services, May 1990 to date.
G. W. Henry Vice President - Operations.
Age - 48 Comptroller, 1985 - July 1990; Vice
President, 1987 - July 1990; Vice
President - Marine Services and
Special Projects, July 1990 -
February 1992; Vice President -
Operations, February 1992 to date.
J. S. Pyke, Jr. Vice President and Secretary.
Age - 55 Secretary, 1973 to date; Vice
President, 1979 to date.
D. R. Schrank Vice President and Chief Financial
Age - 45 Officer. Senior Vice President and
Chief Financial Officer, Sealy, Inc.
(bedding manufacturer) 1989 to
September 1993. Vice President and
Chief Financial Officer of the
Registrant, September 1993 to date.
W. J. Tremblay Vice President - Taxes,
Age - 62 1983 to date.
L. C. Van Hoeven, Jr. Vice President and Treasurer.
Age - 57 Treasurer, 1980 to date. Vice
President, November 1987 to date.
T. E. Lindsey Comptroller. Assistant Comptroller
Age - 43 of the Registrant 1987 to July 1990;
Comptroller, July 1990 to date.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
See the tables regarding Registrant's Stock Price Data at
page 35 and Stock Information at page 36 of Registrant's
Annual Report distributed to stockholders for the fiscal
year ended December 31, 1993, which tables are
incorporated herein by this reference.
ITEM 6. SELECTED FINANCIAL DATA
See Selected Financial Data at page 36 of Registrant's
Annual Report distributed to stockholders for the fiscal
year ended December 31, 1993, which Selected Financial
Data is incorporated herein by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
See pages 37 through 38 of Registrant's Annual Report
distributed to stockholders for the fiscal year ended
December 31, 1993, which pages are incorporated herein by
this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See pages 22 through 39 of Registrant's Annual Report
distributed to stockholders for the fiscal year ended
December 31, 1993, which pages and section are
incorporated herein by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
See the table listing nominees for directors on page 2 of
Registrant's definitive proxy statement distributed to
stockholders dated March 17, 1994, filed with the
Commission pursuant to Regulation 14A, which table is
incorporated herein by this reference.
Executive Officers
See the item captioned "Executive Officers of the
Registrant" in Part I of this Form 10-K, which item is
incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
See the section captioned "Executive Compensation"
through the section captioned "Directors' Compensation"
at pages 5 through 13 of Registrant's definitive proxy
statement distributed to stockholders dated March 17,
1994, filed with the Commission pursuant to Regulation
14A, which sections are incorporated herein by this
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners:
See the section captioned "Holdings of Shares of the
Company's Common Stock" at pages 4 through 5 of
Registrant's definitive proxy statement distributed to
stockholders dated March 17, 1994 filed with the
Commission pursuant to Regulation 14A, which section is
incorporated herein by this reference.
(b) Security Ownership by Management:
See the table, and footnotes thereto, regarding
beneficial ownership of the Registrant's Common Stock by
management, at page 3 of Registrant's definitive proxy
statement distributed to stockholders dated March 17,
1994 filed with the Commission pursuant to Regulation
14A, which table and footnotes are incorporated herein by
this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the section captioned "Transactions with Directors"
at page 4 of Registrant's definitive proxy statement
distributed to stockholders dated March 17, 1994 filed
with the Commission pursuant to Regulation 14A, which
section is incorporated herein by this reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. and 2. -- The response to this portion of Item 14 is
submitted as a separate section commencing on
page F-1 of this Form 10-K.
3. List of Exhibits. [Those documents listed below that are
incorporated herein by reference to Registrant's earlier
periodic reports were filed with the Commission under
Registrant's File No. 1-5222.]
(i) Exhibits filed pursuant to Regulation S-K (Item
601):
(3) Articles of Incorporation and By-laws.
(a) Registrant's Articles of Incorporation (as restated as of
November 13, 1989, and currently in effect), filed as Exhibit
3(b) to Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989, and incorporated herein by this
reference.
(b) Registrant's By-laws (as amended and restated as of
March 2, 1988, and currently in effect), filed as Exhibit 3(d)
to Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987 and incorporated herein by this
reference.
(4) Instruments Defining the Rights of Security Holders:
(a) Rights Agreement, dated December 4, 1991, between the
Registrant and Ameritrust Company National Association, filed
as Exhibit 4.1 to Registrant's Form 8-K dated December 4,
1991, and incorporated herein by this reference.
(b) Credit Agreement, dated September 15, 1989 between the
Registrant, Citibank, N.A. and the other banks signatory
thereto, a copy of which will be provided to the Commission
upon request.
(c) Indenture dated September 15, 1991 between the Registrant
and Ameritrust Company, National Association, Trustee relating
to Registrant's $100,000,000 aggregate principal amount of 9%
Senior Notes due 1998 and $150,000 aggregate principal amount
of 9 3/8% Senior notes due 2003, filed as Exhibit 4 to the
Registrant's Form S-3 filed on September 18, 1991, and
incorporated herein by this reference.
(d) Indenture dated September 26, 1991 between the Registrant
and Ameritrust Texas, National Association, Trustee, relating
to Registrant's $50,000,000 aggregate principal amount of 9%
Notes due 1998, filed as Exhibit 4 to the Registrant's Form S-
3 filed on October 24, 1991, and incorporated herein by this
reference.
(e) Associates Ownership Trust Agreement dated September 12,
1991, between Registrant and Wachovia Bank of North Carolina,
filed as Exhibit 28.3 to Registrant's Current Report on Form
8-K dated September 12, 1991, and incorporated herein by this
reference.
(10) Material Contracts:
*(a) The Restated 1979 Executive Incentive Compensation Plan
of the Registrant, filed as Exhibit 5 to the Form S-8
Registration Statement No. 2-70755 filed with the Commission
on February 19, 1981 and incorporated herein by this
reference, and amendment to the Plan, as ratified and approved
by Registrant's stockholders on October 3, 1983, filed as
Exhibit 10(c) to Registrant's Form 10-K for the fiscal year
ended December 31, 1983 and incorporated herein by this
reference. Also amendment to the Plan as approved by
Registrant's stockholders on May 1, 1985, filed as Exhibit
10(c) to Registrant's Form 10-K for the fiscal year ended
December 31, 1985 and incorporated herein by this reference.
*(b) Forms of 1985 Stock Option Agreement, 1985 Grant of
Appreciation Rights and 1985 Grant of Performance Rights under
the 1979 Executive Incentive Compensation Plan, filed as
Exhibit 10(g) to Registrant's Form 10-K for the fiscal year
ended December 31, 1985 and incorporated herein by this
reference.
*(c) Forms of 1987 Stock Option Agreement, 1987 Grant of
Appreciation Rights and 1987 Grant of Performance Rights under
the 1979 Executive Incentive Compensation Plan, filed as
Exhibit 10(e) to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1986, and incorporated
herein by this reference.
*(d) 1988 Long-Term Incentive Plan, and forms of Grants of
Stock Options, Grants of Appreciation Rights and Grants of
Long-Term Incentive Units thereunder, filed as Exhibit 10(e)
to Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1988, and incorporated herein by this
reference. Also forms of 1989 Stock Option Agreement, 1989
Grant of Appreciation Rights and 1989 Grant of Long-Term
Incentive Units, filed as Exhibit 10(e) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1989 and incorporated herein by this reference. Also 1990
Amendment to the Plan, filed as Exhibit 10(e) to Registrant's
Form 10-K for the fiscal year ended December 31, 1990 and
incorporated herein by this reference and forms of 1990 Stock
Option Agreement, 1990 Grant of Appreciation Rights and 1990
Grant of Long-Term Incentive Units, filed as Exhibit 10(e) to
Registrant's Form 10-K for the fiscal year ended December 31,
1990 and incorporated herein by this reference. Also 1991
Amendment to the Plan, and forms of 1991 Stock Option
Agreement, 1991 Grant of Appreciation Rights, 1991 Grant of
Long Term Incentive Units, and 1991 Stock Option Agreement
with non-employee directors of Registration, filed as Exhibit
10(f) to Registrant's Form 10-K for the fiscal year ended
December 31, 1991, and incorporated herein by this reference.
Also forms of 1992 Stock Option Agreement and 1992 Grant of
Long Term Incentive Units, filed as Exhibit 10(e) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, and incorporated herein by this
reference.
*(e) Form of Supplemental Deferred Compensation agreement in
which any of the five most highly compensated executive
officers of the Registrant participates, refiled herewith.
*(f) Form of Supplemental Death Benefits agreement in which
any of the five most highly compensated executive officers of
the Registrant participates, refiled herewith.
*(g) Form of Employment Agreement dated as of February 17,
1989 between Registrant and certain of Registrant's executive
officers filed as Exhibit 10(h) to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1988 and
incorporated herein by this reference. Also (i) Employment
Agreement dated August 6, 1986, as amended March 5, 1987 and
December 1, 1992 between M. D. Walker and the Registrant,
filed as Exhibit 10(h)(i) to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992, and
incorporated herein by this reference; (ii) Employment
Agreement dated as of September 27, 1993, between
D. R. Schrank and Registrant, filed as Exhibit (a) to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1993, and incorporated herein by this
reference; and (iii) Employment Agreement dated March 1, 1993
between D. J. McGregor and Registrant, filed herewith.
*(h) Description of Directors' compensation and retirement
plan, set forth in the section captioned "Directors'
Compensation" on pages 12 and 13 of Registrant's definitive
proxy statement dated March 17, 1994, as distributed to
stockholders and filed with the Commission pursuant to
Regulation 14A, which section is incorporated herein by this
reference.
*(i) Excess Benefit Plan in which any of the five most highly
compensated executive officers of the Registrant participates,
filed as Exhibit 10(j) to Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1992 and
incorporated herein by this reference.
*(j) Supplemental Retirement Benefit Plan in which any of the
five most highly compensated executive officers of the
Registrant participates, filed as Exhibit 10 (k) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992 and incorporated herein by this
reference.
[*- Identifies management contract or compensation plans or
arrangements filed pursuant to Item 601(b)(10)(iii)(A)]
(11) Computation of per share earnings, filed herewith.
(13) Registrant's Annual Report as distributed to stockholders for
the fiscal year ended December 31, 1993, filed herewith.
(21) Subsidiaries of the Registrant, filed herewith.
(23) Consent of Independent Auditors, filed herewith.
(24) Powers of Attorney of certain Directors of Registrant, filed
herewith.
(ii) Other exhibits:
Financial statements (and consent of independent
auditors) pursuant to Form 11-K and Rule 15d-21 for the year ended
December 31, 1993, for the Capital Accumulation Plan for Salaried
Employees of M. A. Hanna Company and Associated Companies, and for
stock purchase/savings plans of Registrant's subsidiaries and
divisions will be filed as exhibits to the Form 10-K under a Form
10-KA amendment not later than June 30, 1994.
(b) Since September 30, 1993, Registrant has filed no reports on
Form 8-K.
(c) The response to this portion of Item 14 is submitted as a
separate Section commencing on page X-1 of this Form 10-K.
(d) The response to this portion of Item 14 is submitted as a
separate section commencing on page F-1 of this Form 10-K.
Pursuant to the requirements of Section 13 or 15(d) 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.
M. A. HANNA COMPANY
(Registrant)
Date: March 18, 1994 By /s/J. S. Pyke, Jr.
J. S. Pyke, Jr.
Vice President and Secretary
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Date: March 18, 1994 By /s/M. D. Walker
M. D. Walker, Chairman and Chief
Executive Officer (Principal
Executive Officer) and Director
Date: March 18, 1994 By /s/D. R. Schrank
D. R. Schrank, Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date: March 18, 1994 By /s/T. E. Lindsey
T. E. Lindsey, Comptroller
(Principal Accounting Officer)
B. C. Ames, Director
W. R. Embry, Director
J. T. Eyton, Director
By /s/T. E. Lindsey G. D. Kirkham, Director
T. E. Lindsey
Attorney-in-Fact
M. L. Mann, Director
Date: March 18, 1994
P. M. Marshall, Director
D. J. McGregor, Director
R. W. Pogue, Director
FORM 10-K
ITEM 14(a) (1) and (2)
FINANCIAL STATEMENTS AND SCHEDULES
M. A. HANNA COMPANY
The following consolidated financial statements of the Registrant and its
consolidated subsidiaries, included in the annual report of the Registrant
to its stockholders for the year ended December 31, 1993, are incorporated
herein by reference in Item 8:
Summary of accounting policies
Consolidated balance sheets - December 31, 1993 and 1992
Consolidated statements of income, stockholders' equity and cash
flows - years ended December 31, 1993, 1992 and 1991
Notes to financial statements
The following consolidated financial information, together with the
report of the independent accountants, are included in Item 14 (d):
Schedule VIII - Valuation and qualifying accounts
Schedule IX - Short-term borrowings
Schedule X - Supplementary income statement information
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been
omitted.
Financial statements of unconsolidated subsidiaries or 50% or less owned
persons accounted for by the equity method have been omitted because they
do not, considered individually or in the aggregate, constitute a
significant subsidiary.
F-1
Report Of Independent Auditors
Board of Directors
M.A. Hanna Company
We have audited the accompanying consolidated balance sheets of
M.A. Hanna Company and subsidiaries as of December 31, 1993 and
1992, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1993. Our audits also included the
financial statement schedules listed in the Index at Item 14(a)(1)
and (2). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedules
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of M.A. Hanna and subsidiaries at December 31,
1993 and 1992, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement
schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material
respects the information set forth therein.
As discussed in notes to the financial statements, in 1992 the Company
changed its method of accounting for post-retirement benefits other than
pensions and income taxes.
/s/ Ernst & Young
January 31, 1994
F-2
<TABLE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
M. A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
Balance at Beginning (1) (2) Balance at End
DESCRIPTION of Period Charged to Costs Charged to Other Deductions - Describe of Period
and Expenses Accounts - Describe
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Deducted from asset accounts:
Allowance for doubtful accounts $8,003,000 $3,939,000 $188,000 (a) $2,539,000 (c) $10,912,000
1,321,000 (b)
Year ended December 31, 1992:
Deducted from asset accounts:
Allowance for doubtful accounts $6,329,000 $2,373,000 $1,067,000 (a) $2,657,000 (c) $8,003,000
891,000 (b)
Year ended December 31, 1991:
Deducted from asset accounts:
Allowance for doubtful accounts $7,473,000 $2,790,000 $793,000 (a) $4,954,000 (c) $6,329,000
227,000 (b)
(a) Reserves of companies acquired.
(b) Charge included in income(loss) from discontinued operations.
(c) Uncollectible amounts written off.
F-3
</TABLE>
SCHEDULE IX - SHORT-TERM BORROWINGS
M. A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
Balance Weighted Maximum Average Weighted
CATEGORY OF AGGREGATE at End of Average Amount Amount Average
SHORT-TERM BORROWINGS of Period Interest Outstanding Outstanding Interest Rate
Rate During the Period During the Period During the Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Notes payable to banks
by foreign subsidiaries $2,478,108 7.08% $3,960,008 $2,012,417 (1) 8.03% (2)
Year ended December 31, 1992
Notes payable to banks
by foreign subsidiaries $2,311,958 6.45% $2,826,279 $1,828,051 (1) 7.22% (2)
Year ended December 31, 1991
Notes payable to banks
by foreign subsidiaries $2,145,434 9.19% $7,178,279 $4,197,706 (1) 10.82% (2)
(1) The average amount outstanding during the period was computed by dividing the total of
month-end outstanding principal balance by 12.
(2) The weighted average interest rate during the period was computed by dividing the actual
interest expense by average short-term debt outstanding.
F-4
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
M. A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
COL. A COL. B
ITEM Charged to Costs and Expenses
Year ended December 31
1993 1992 1991
<S> <C> <C> <C>
Maintenance and repairs $21,177,000 $19,051,755 $17,291,633
Amortization of intangibles:
Goodwill 9,794,000 9,394,000 9,203,000
Other intangibles 7,518,000 7,014,734 6,283,038
Taxes, other than payroll and income taxes:
Real estate and personal property (A) (A) (A)
Other (A) (A) (A)
Royalties (A) (A) (A)
Advertising (A) (A) (A)
Note A - Not presented as such amount is less
than 1% of total sales and revenues.
F-5
</TABLE>
Item 14 - Exhibit 10(e)
DEFERRED COMPENSATION AGREEMENT
Dated as of
M. A. HANNA COMPANY, a Delaware corporation ("Hanna"), and
_________________________ ("Executive") hereby agree as follows:
1. Upon the retirement of the Executive from the employ of
Hanna on or after his having reached sixty (60) years of age, Hanna
shall, subject to the terms and conditions of this Agreement and
commencing with the later of (a) the Executive's retirement or (b)
five (5) years from the date of this Agreement, pay to him each
month the sum set forth in Appendix I opposite his age at his
retirement. Payments shall be made for the period shown in
Appendix I.
2. If the Executive leaves the employ of Hanna before he
reaches the later of (a) sixty (60) years of age or (b) five (5)
years from the date of this Agreement for any reason other than his
death or his permissible early retirement under one of Hanna's
early retirement plans, Hanna shall have no obligation under this
Agreement except to allow the Executive to purchase the Policy as
specified in paragraph 6 hereof.
If the Executive dies before he reaches the later of (a)
or (b) in this paragraph 2, the proceeds specified in the Policy
(as defined in paragraph 6 hereof) shall be paid to the beneficiary
designated as described in paragraph 5 hereof (or, if no
beneficiary is designated, pursuant to the provisions of paragraph
5), and Hanna shall have no obligation under this Agreement.
If the Executive takes permissible early retirement under
one of Hanna's early retirement plans before he reaches sixty (60)
years of age and provided that he makes the premium payments
specified in paragraph 7 hereof, then for purposes of this
Agreement he shall be deemed to have retired at sixty (60) years of
age and Hanna shall make payments to him as specified in paragraph
1 hereof commencing on the later of (a) or (b) in this paragraph 2.
3. If the Executive shall die prior to his retirement but on
or after the later of (a) his having reached sixty (60) years of
age or (b) five years from the date of this Agreement, Hanna shall
pay each month to the Executive's designated beneficiary, the sum
set forth in Appendix I that would have been paid if the Executive
had retired at age 65. Payments shall begin as soon as practicable
after the Executive's death and shall continue for a period of
fifteen (15) years.
If the Executive shall die prior to his retirement, but
before the later of (a) or (b) in this paragraph 3, the proceeds
specified in the Policy (as defined in paragraph 6 hereof) shall be
paid to the beneficiary designated as described in paragraph 5
hereof (or, if no beneficiary is designated, pursuant to the
provisions of paragraph 5), and Hanna shall have no obligation
under this Agreement.
4. If the Executive shall die after becoming eligible for
payments as specified in paragraph 1 above, but prior to receiving
the last monthly installment, the remaining installments shall be
paid as they become due to the Executive's designated beneficiary.
5. The Executive shall designate his beneficiary in a writing
filed with and acceptable to Hanna which may be modified by the
Executive at any time. If the Executive fails to designate a
beneficiary, installments otherwise payable to the designated
beneficiary shall be paid as they become due to the duly appointed
executor, administrator or other personal representative of the
Executive's estate.
6. Hanna will purchase an insurance policy (the "Policy") on
the life of the Executive and will be the sole owner of the Policy.
If the Executive leaves Hanna for any reason other than death or
retirement or if the Company wishes to terminate the Policy, the
Executive may purchase the Policy from Hanna for its cash surrender
value at that time, provided that the employee has worked for Hanna
for at least five (5) years from the Policy issuance date.
7. The Executive will contribute to the cost of the benefits
under this Agreement and the Policy by making premium payments as
notified by Hanna but in no case greater than the amount shown in
Appendix II. During the Executive's employment with Hanna, premium
payments will be deducted by Hanna twice each month from the
Executive's compensation. When the Executive is no longer employed
by Hanna, he will make payments once per year in the amount shown.
If for any reason the Executive fails to make a premium
payment when it is due, Hanna shall notify him of that fact. If
Hanna has sent him a second notice, by registered mail, and the
Executive still fails to make such premium payment, Hanna shall be
entitled to terminate this Agreement and the Policy, and be
relieved of all further obligations under this Agreement, sixty
(60) days after sending the second notice.
8. This Agreement may not be terminated by Hanna after the
Executive's death. It may be terminated by Hanna prior to the
later of (a) the Executive's reaching sixty (60) years of age or
(b) five (5) years from the date of this Agreement, by written
notice sent to the Executive, as of a date not less than thirty
(30) days after the date of sending that notice, but only on the
following terms and conditions:
(i) Hanna terminates identical or similar deferred
compensation agreements with respect to all other
living employees who have not yet attained the
later of (a) or (b) in this paragraph 8; and
(ii) If such termination occurs at any time after three
(3) full years following the date of this
Agreement, the Executive shall be eligible for, and
entitled to, irrevocably vested deferred
compensation, commencing on or after the
Executive's retirement as stipulated in this
Agreement, in an amount as set forth in paragraph 1
above, and any amendments thereto, multiplied by a
fraction of which the numerator is the number of
full years from the date of this Agreement to the
date of such termination and the denominator is the
number of full years from the date of this
Agreement to the date when the Executive has
fulfilled his obligation to make premium payments
required under this Agreement.
Notwithstanding any provision to the contrary herein, Hanna
shall not have the right to amend or terminate this Agreement or
the Policy after a change in control of Hanna, as hereinafter
defined, occurs except for nonpayment of premiums by the Executive
as specified in paragraph 7 above.
For purposes of this Agreement, the term "change in control"
of Hanna shall have occurred if and when any of the following
events shall have occurred:
(a) Hanna enters into an agreement to merge,
consolidate or reorganize into or with another
corporation or other legal person, and as a result
of such merger, consolidation or reorganization
less than 75% of the combined voting power of the
then-outstanding securities of such corporation or
person immediately after such transaction are held
in the aggregate by the holders of Voting Stock (as
that term is defined in subparagraph (c) below) of
Hanna immediately prior to such transaction;
(b) Hanna enters into an agreement to sell or otherwise
transfer all or substantially all of its assets to
any other corporation or other legal person, and as
a result of such sale or transfer less than 75% of
the combined voting power of the then-outstanding
securities of such corporation or person
immediately after such sale or transfer is held in
the aggregate by the holders of Voting stock of
Hanna immediately prior to such sale or transfer;
(c) The filing on Schedule 13D or schedule 14D-1 (or
any successor schedule, form or report), each as
promulgated pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"),
disclosing that any person (as the term "person" is
used in Section 13 (d) (3) or Section 14 (d) (2) of
the Exchange Act) has become, the beneficial owner
(as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities
representing 30% or more of the combined voting
power of the then-outstanding securities entitled
to vote generally in the election of directors of
Hanna ("Voting Stock");
(d) Hanna files a report or proxy statement with the
Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to Form 8-K or
Schedule 14A (or any successor schedule, form or
report or item therein) that a change in control of
Hanna has or may have occurred or will or may occur
in the future pursuant to any then-existing
contract or transaction; or
(e) During any period of two consecutive years,
individuals who constitute the Directors of Hanna
at the beginning of any such period cease for any
reason to constitute at least a majority thereof,
unless the election, or the nomination for election
by Hanna's stockholders, of each new Director was
approved by a vote of at least two-thirds of the
Directors of Hanna then still in office who were
Directors of the Company at the beginning of such
period.
Notwithstanding the foregoing provisions of subparagraphs (c)
or (d) above hereof a "Change in Control" shall not be deemed to
have occurred for purposes of this Agreement solely because (i)
Hanna, (ii) an entity in which Hanna directly or indirectly
beneficially owns 50% or more of the voting securities, or (iii)
any Hanna-sponsored employee stock ownership plan or other employee
benefit plan of Hanna, either files or becomes obligated to file a
report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) under the Exchange Act,
disclosing beneficial ownership by it of shares of Voting Stock,
whether in excess of 30% or otherwise, or because Hanna reports
that a change in control of Hanna has or may have occurred or will
or may occur in the future by reason of such beneficial ownership.
In the event that any such agreement to merge, consolidate,
reorganize or sell or otherwise transfer assets referred to in
subparagraphs (a) or (b) above is terminated without such merger,
consolidation, reorganization or sale or transfer having been
consummated, or the person filing such Schedule 13D or Schedule
14D-1 referred to in subparagraph (c) above files an amendment to
such Schedules disclosing that it no longer is the beneficial owner
of securities representing 30% or more of the Voting Stock of
Hanna, or Hanna reports that the change of control which it
reported in the filing referred to in subparagraph (d) above will
not in fact occur, any executive officer of Hanna may be notice to
the Executive nullify the operation of this Agreement by reason of
such Change in Control, without prejudice to any exercise by the
Executive of his rights under this Agreement that may have occurred
prior to such nullification.
In the event a change in control of Hanna occurs, the rights
and benefits of the Executive hereunder will continue in full force
and effect, subject only to payment by the Executive on a timely
basis of his share of the premiums stipulated in this Agreement.
The Executive shall receive timely notice of all premium payments
due after a change in control of Hanna.
9. Except as permitted by this Agreement or in accordance
with a qualified domestic relations order as defined in Section
414(p) of the Internal Revenue Code, no rights of any kind under
this Agreement shall, without the written consent of Hanna, be
transferable or assignable by the Executive, any designated
beneficiary or any other person, or be subject to alienation,
encumbrance, garnishment, attachment, execution or levy of any
kind, voluntary or involuntary.
If the Executive or any other person attempts to assign,
transfer, alienate or encumber his rights to receive payments
hereunder (except as permitted by this Agreement) or permits the
same to be subject to alienation, garnishment, attachment,
execution or levy of any kind, Hanna shall have no further
obligation under this Agreement.
10. If the Executive shall, at any time while he is receiving
payments pursuant to the Agreement, acquire five percent (5%) or
more of the voting stock of a competing business or be employed by
a competing business, or shall take any action inimical to the
interest of Hanna, Hanna shall be relieved of all further
obligations hereunder. A competing business shall be any business
which is (i) substantially similar to the whole or any significant
part of the business then being conducted by Hanna and its
subsidiaries and (ii) conducted within twenty-five (25) miles of
any place of business maintained by Hanna and its subsidiaries.
11. This Agreement is not nor does it contain an offer or
commitment by Hanna to continue the Executive's employment with
Hanna for any period of time.
12. All questions of interpretation, construction or
application arising under this Agreement shall be decided by the
Board of Directors or a Committee of the Board of Directors of
Hanna, whose decision shall be final and conclusive upon all
persons.
13. The undertakings of Hanna herein constitute merely the
unsecured promise of Hanna to make the payments as provided for
herein. No property of Hanna is or shall be, by reason of this
Agreement, held in trust for the Executive, any designated
beneficiary or other person, and neither the Executive nor any
designated beneficiary or any other person shall have by reason of
this Agreement, any right, title or interest of any kind in or to
any property of Hanna.
14. Hanna will not consolidate or merge into or with another
corporation, or transfer all or substantially all of its assets to
another corporation or entity, unless such other corporation or
entity shall assume this Agreement and upon such assumption the
Executive and the successor corporation or entity shall become
obligated to perform the terms and conditions hereunder. This
provision shall continue to apply in the event of any subsequent
merger, consolidated or transfer of assets.
15. This Agreement shall be effective as of ________________.
IN WITNESS WHEREOF, M. A. Hanna Company has caused this
Agreement to be duly executed and the Executive has executed this
Agreement, in triplicate, on this _______ day of _______________,
______.
M. A. HANNA COMPANY
By
________________________
Executive
Item 14 - Exhibit 10(f)
SUPPLEMENTAL DEATH BENEFIT AGREEMENT
THIS AGREEMENT, dated as of the _____ day of ______________,
_______, by M. A. HANNA COMPANY, a corporation with offices at 1301
East 9th Street, Suite 3600, Cleveland, Ohio 44114-1860
(hereinafter referred to as "Hanna") with and for the benefit of
_________________ (hereinafter referred to as the "Associate").
WITNESSETH:
WHEREAS, the Associate has been associated with Hanna in its
business during which time Hanna has had the benefit of the talent,
ability and unique and extensive business experience of the
Associate;
WHEREAS, Hanna wishes to secure for itself the benefits of a
continuing association with the Associate;
WHEREAS, Hanna has offered certain supplemental life insurance
and death benefits to certain of its employees under a program
(hereinafter referred to as the "Program") set forth in a letter of
the Chairman of the Board of Hanna to such employees, including the
Associate; and
WHEREAS, this Agreement is made by Hanna pursuant to the
Program;
NOW, THEREFORE, in consideration of the premises and of the
services rendered and to be rendered by the Associate to Hanna,
Hanna agrees to make payments of supplemental death benefits to the
designated beneficiary of the Associate according and subject to
the following terms and conditions:
1.(a) Supplemental Death Benefit
Provided that the employee is in the employ of
Hanna, or has retired from the employ of Hanna
on or after having attained sixty-five (65)
years of age or has ceased to be in the employ
of Hanna for any reason other than his death
or such retirement and Hanna shall have agreed
in writing that such cessation of employment
shall not be deemed to terminate the rights of
the Associate hereunder, then, upon the death
of the Associate on or after attaining sixty-
five (65) years of age, Hanna shall pay in
equal monthly installments for a period of
fifteen (15) years and until one hundred
eighty (180) equal monthly installments have
been paid, the aggregate sum of $___________
to the beneficiary whom the Associate shall
designate in a writing filed with the Employee
Benefits Department of Hanna and in form
accepted by the Employee Benefits Department.
The Associate shall have the right to change
or amend such designation from time to time by
a writing similarly filed and in form accepted
by the Employee Benefits Department. If the
Associate shall fail to make such designation
prior to the time an equal monthly installment
and all remaining monthly installments shall
be paid, as they become due, to the duly
appointed executor, administrator or other
personal representative of the estate of the
Associate.
If the Associate takes permissible early
retirement under one of Hanna's early
retirement plans, the Associate will be
instructed in writing as to the premium
payments necessary to keep this benefit in
force. Failure to pay stated premiums
relieves Hanna of all obligations under this
Agreement.
(b) Optional Payment Election
The Associate may elect to have Hanna pay to
the Associate on or after the date the
Associate attains seventy (70) years of age
the aggregate sum of $__________in equal
monthly installments for a period of fifteen
(15) years and until one hundred eighty (180)
equal monthly installments have been paid;
provided that
(i) the Associate shall give prior
written notice to the Employee
Benefits Department of Hanna of such
election with such notice specifying
the date on which the Associate
wishes to begin receiving the equal
monthly installments; and
(ii) such notice shall not be effective
if given prior to six (6) months
before the Associate attains seventy
(70) years of age.
Should the Associate die (i) after giving such
notice and before receiving the first such
monthly installment or (ii) within said
fifteen (15) year period, then all remaining
monthly installments shall be paid to the
beneficiaries or persons whom the Associate
shall designate in a writing filed with the
Employee Benefits Department of Hanna and in a
form accepted by said Employee Benefits
Department. The Associate shall have the
right to change or amend such designation from
time to time by a writing similarly filed and
in form accepted by the Employee Benefits
Department. If the Associate shall fail to
make such designation prior to the time an
equal monthly installment shall become
payable, such installment and all remaining
monthly installments shall be paid, as they
become due, to the duly appointed executor,
administrator or other personal representative
of the estate of the Associate.
2. Except as permitted this Agreement or in accordance with
a qualified domestic relations order as defined in Section 414(p)
of the Internal Revenue Code, no rights of any kind under this
Agreement shall, without the written consent of Hanna, be
transferable or assignable by the Associate, any designated
beneficiary, or any other person, or be subject to alienation,
encumbrance, garnishment, attachment, execution or levy of any
kind, voluntary or involuntary.
3. All questions of interpretation, construction or
application arising under this Agreement shall be decided by the
Board of Directors or a Committee of the Board of Directors of
Hanna, whose decision shall be final and conclusive upon all
persons.
4. The undertakings of Hanna herein constitute merely the
unsecured promise of the Company to make payments as provided for
herein. No property of Hanna is or shall, by reason of this
Agreement, be held in trust for the Associate, any designated
beneficiary or any other person, and neither the Associate nor any
designated beneficiary or any other person shall have, by reason of
this Agreement, any rights, title or interest of any kind in or to
any property of Hanna.
5. This Agreement may be terminated by Hanna prior to the
Associate attaining sixty-five (65) years of age provided that
(i) Hanna terminates the Program and
similar supplemental death benefit
agreements with respect to all other
living employees participating in
the Program who have not yet
attained sixty-five (65) years of
age; and
(ii) if such termination occurs at any
time after three (3) full years
following the date of this
Agreement, the Associate shall be
eligible for, and entitled to, an
irrevocably vested supplemental
benefit, commencing with the
Associate's retirement, in an amount
determined in the same manner as the
benefit provided under paragraph 1
above, multiplied by a fraction of
which the numerator is the number of
full years from the date of such
termination and the denominator is
the number of full years from the
date of this Agreement to the date
the Associate attains sixty-five
(65) years of age.
6. Notwithstanding any provisions to the contrary herein,
Hanna shall not have the right to amend or terminate this Agreement
after a change in control of Hanna, as hereinafter defined, occurs
except for nonpayment of premiums by the Executive as specified in
paragraph 1(a) hereof. For purposes of this Agreement, a "Change
in Control" of Hanna shall have occurred if and when any of the
following events shall have occurred:
(a) Hanna enters into an agreement to
merge, consolidate or reorganize
into or with another corporation or
other legal person, and as a result
of such merger, consolidation or
reorganization less than 75% of the
combined voting power of the then-
outstanding securities of such
corporation or person immediately
after such transaction are held in
the aggregate by the holders of
Voting Stock (as that term is
defined in subparagraph (c) below)
of Hanna immediately prior to such
transaction;
(b) Hanna enters into an agreement to
sell or otherwise transfer all or
substantially all of its assets to
any other corporation or other legal
person, and as a result of such sale
or transfer less than 75% of the
combined voting power of the then-
outstanding securities of such
corporation or person immediately
after such sale or transfer is held
in the aggregate by the holders of
Voting Stock of Hanna immediately
prior to such sale or transfer;
(c) The filing on Schedule 13D or
Schedule 14D-1 (or any successor
schedule, form or report), such as
promulgated pursuant to the
Securities Exchange Act of 1934, as
amended (the "Exchange Act"),
disclosing that any person (as the
term "person" is used in Section
13(d)(3) or Section 14 (d)(2) of the
Exchange Act) has become the
beneficial owner (as the term
"beneficial owner" is defined under
Rule 13d-3 or any successor rule or
regulation promulgated under the
Exchange Act) of securities
representing 30% or more of the
combined voting power of the then-
outstanding securities entitled to
vote generally in the election of
directors of Hanna ("Voting Stock");
(d) Hanna files a report or proxy
statement with the Securities and
Exchange Commission pursuant to the
Exchange Act disclosing in response
to Form 8-K or Schedule 14A (or any
successor schedule, form or report
or item therein) that a change in
control of Hanna has or may have
occurred or will or may occur in the
future pursuant to any then-existing
contract or transaction; or
(e) During any period of two consecutive
years, individuals who constitute
the Directors of Hanna at the
beginning of any such period cease
for any reason to constitute at
least a majority thereof, unless the
election, or the nomination for
election by Hanna's stockholders, of
each new Director was approved by a
vote of at least two-thirds of the
Directors of Hanna then still in
office who were Directors of the
Company at the beginning of such
period.
Notwithstanding the foregoing provisions of subparagraphs (c)
or (d) hereof, a "Change in Control" shall not be deemed to have
occurred for purposes of this Agreement solely because (i) Hanna,
(ii) an entity in which Hanna directly or indirectly beneficially
owns 50% or more of the voting securities, or (iii) any Hanna-
sponsored employee stock ownership plan or other employee benefit
plan of Hanna, either files or becomes obligated to file a report
or proxy statement under or in response to Schedule 13D, Schedule
14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or
report or item therein) under the Exchange Act, disclosing
beneficial ownership by it of shares of Voting Stock, whether in
excess of 30% or otherwise, or because Hanna reports that a change
in control of Hanna has or may have occurred or will or may occur
in the future by reason of such beneficial ownership.
In the event that any such agreement to merge, consolidate,
reorganize or sell or otherwise transfer assets referred to in
subparagraphs (a) or (b) is terminated without such merger,
consolidation, reorganization or sale or transfer having been
consummated, or the person filing such Schedule 13D or Schedule
14D-1 referred to in subparagraph (c) files an amendment to such
Schedules disclosing that it no longer is the beneficial owner of
securities representing 30% or more of the Voting Stock of Hanna,
or Hanna reports that the change of control which it reported in
the filing referred to in subparagraph (d) will not in fact occur,
any executive officer of Hanna may by notice to the Executive
nullify the operation of this Agreement by reason of such Change in
Control, without prejudice to any exercise by the Associate of his
rights under this Agreement that may have occurred prior to such
nullification.
In the event a change in control of Hanna occurs, the rights
and benefits of the Executive hereunder will continue in full force
and effect, subject only to payment by the Executive on a timely
basis of his share of the premiums stipulated in this Agreement.
The Executive shall receive timely notice of all premium payments
due after a change in control of Hanna.
7. Nothing herein shall be construed as an offer or
commitment by Hanna to continue the Associate's employment with
Hanna for any period of time.
8. This Agreement shall be effective as of _________ __,
_____.
IN WITNESS WHEREOF, Hanna has caused this Agreement to be duly
executed and the Associate has executed this Agreement, in
triplicate, on this _____ day of ___________.
M. A. HANNA COMPANY
By: ____________________________
Vice President and Secretary
________________________________
Associate
Item 14 - Exhibit 10(g)(iii)
EMPLOYMENT AGREEMENT
AGREEMENT dated as of March 1, 1993, between M. A. HANNA
COMPANY, a Delaware corporation (the "Corporation"), and
DOUGLAS J. McGREGOR ("Mr. McGregor").
WITNESSETH:
WHEREAS, Mr. McGregor has been employed by the Corporation
since March 1, 1988 under an Employment Agreement dated as of March 1,
1988; and
WHEREAS, the parties wish to continue Mr. McGregor's employment
on the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, the parties
hereto have agreed, and do agree, as follows:
1. The Corporation agrees to employ Mr. McGregor and he
agrees to serve it, on the terms and subject to the conditions herein set
forth, for a period (the "Employment Period") commencing on March 1,
1993 and continuing through March 1, 1996, or on any earlier date this
Agreement is terminated by Mr. McGregor's death or as otherwise provided
herein.
2. Mr. McGregor has been elected President and Chief Operating
Officer. It is the intention of the Corporation that Mr. McGregor shall be
continued as President and Chief Operating Officer of the Corporation
during the Employment Period; provided, however, that the sole remedy of
Mr. McGregor for any failure to be so included or continued shall be as
provided for by Paragraph 6 hereof.
3. During the Employment Period, Mr. McGregor shall devote his
best efforts and all of his normal business time (reasonable vacations,
periods of temporary leave, sick leave, and time devoted to civic and
charitable activities excepted) to the business of the Corporation and its
subsidiaries and affiliated companies. Mr. McGregor may hereafter accept
service as a director of any other corporation approved by the Chief
Executive Officer of the Corporation and receive compensation therefor;
provided, however, that in the case of any other corporation Mr. McGregor
shall be required to provide the Corporation with such evidence of directors
and officers liability insurance and/or rights of indemnification as shall be
acceptable to the Corporation.
4. As President and Chief Operating Officer, Mr. McGregor shall
be responsible to the Chief Executive Officer of the Corporation. He shall
have all the responsibility and authority assigned to a President and Chief
Operating Officer of a large multi-division corporation, subject always to
responsibilities and delegated authority of the Chief Executive Officer and
the Board of Directors of the Corporation.
5. The Corporation agrees to compensate Mr. McGregor for the
services rendered by him during the Employment Period as follows:
(a) By paying him a base salary ("Base Compensation") at
the rate of $370,000 per annum (or at a higher rate if and as the Chief
Executive Officer may from time to time recommend to the Board of
Directors for their approval and determination), payable in installments in
accordance with the practice followed by the Corporation for its senior
officers.
(b) By paying him an incentive compensation bonus
("Incentive Compensation Bonus") as may be recommended by the Chief
Executive Officer and approved by the Board of Directors in conformity with
established Corporation executive incentive guidelines.
(c) By awarding him, pursuant to the present or any future
Long Term Incentive Plan or other benefit plans of the Corporation, in
respect to each year (or portion thereof) of his employment, an amount of
Long Term Incentive Plan Awards ("LTIP Awards") and stock options as, in
the judgment of the Board of Directors of the Corporation, are appropriate
for the office at the time occupied by him in relation to the amounts of LTIP
Awards and stock options awarded by the Corporation to other senior
officers, which awards shall be payable or exercisable in accordance with
the provisions of the Corporation's benefit plans and the terms established
by the Board of Directors.
(d) By granting to him, except as otherwise expressly
provided in this Agreement, participation in all benefit plans and personal
benefit programs applicable to senior officers of the Corporation, at such
times as Mr. McGregor otherwise qualifies for participation pursuant to the
terms of such plans or programs, including, but not limited to, the
Corporation's split-dollar insurance program, health and life insurance
programs, Capital Accumulation Plan, Salaried Employees Retirement
Income Plan, Supplemental Retirement Benefits Plan, and a Club
membership in a Country Club and Business Luncheon Club membership
approved by the Chief Executive Officer.
6. Except as otherwise provided herein, in the event that
Mr. McGregor is not retained in the employment of the Corporation in at
least the President and Chief Operating Officer capacity during the term of
this Agreement, or if, during the term of this Agreement, Mr. McGregor shall
suffer a total and permanent disability, as determined by a licensed
physician selected by the Chief Executive Officer and approved by a
majority of the Board of Directors, he may in either case, upon written
notice to the Corporation, elect to terminate his employment under this
Agreement, and the termination of this employment shall become effective
on the date specified in the notice which shall not be later than the last day
of the month in which the notice is given. The Corporation may also elect
to terminate Mr. McGregor's employment for reasons other than "gross
misconduct of duty" as defined in Paragraph 9 below. In the event of any
such termination, Mr. McGregor shall be entitled to receive, subject to
reduction as provided in the next following paragraph of this Paragraph 6,
for the unexpired term of this Agreement, the Base Compensation paid
semi-monthly, his Incentive Compensation Bonus for the year in which the
termination occurs paid at target and any other benefits referred to in
Paragraph 5 hereof the rights to which have vested, all of which shall
constitute Mr. McGregor's sole remedy for such termination.
The parties agree that notwithstanding any provisions to the contrary
in this Agreement, the terms of the Stock Option and Long-Term Incentive
Plan Agreements entered into between the Corporation and Mr. McGregor
pursuant to the Corporation's Long-Term Incentive Plans shall remain in full
force and effect and shall operate independently of this Agreement except
that if Mr. McGregor's employment is terminated pursuant to the provisions
of this Paragraph 6, either because Mr. McGregor elected to so terminate
or because the Corporation elected to terminate his employment for
reasons other than "gross misconduct of duty", the extent to which an LTIP
Unit shall be deemed to have been earned, calculated at the end of the
relevant LTIP Performance Period, shall be determined as if Mr. McGregor's
employment had not terminated and the LTIP Payment Value shall be
multiplied by a fraction, the numerator of which is the number of days he
was employed during the relevant Performance Period and the denominator
of which is the total number of days in such Performance Period.
In the event that Mr. McGregor's employment is terminated as
provided in this Paragraph 6, and Mr. McGregor should, during the balance
of the term of this Agreement accept other gainful employment, the Base
Compensation to be received by Mr. McGregor hereunder shall be reduced
by the amount of compensation received from such other employment, on
a dollar-for-dollar basis. Mr. McGregor shall promptly provide the
Corporation with notice of such other employment and provide timely,
accurate and complete information with respect to such other
compensation.
7. During a period of three (3) years after Mr. McGregor's
termination of employment with the Corporation, Mr. McGregor agrees that
he will not accept employment by, or act as a consultant to, any competitor
of the Corporation or any firm or corporation which, to the knowledge of
Mr. McGregor, intends to become such a competitor, or otherwise engage
in any business competitive with or detrimental to the business of the
Corporation without first obtaining the written consent of the Corporation.
The determination that Mr. McGregor has become employed in any such
manner or in any manner detrimental to the Corporation shall be
determined by a neutral party mutually agreed upon by the Corporation and
Mr. McGregor.
During and following the term of this Agreement or any termination
of his employment as provided herein, Mr. McGregor shall not disclose or
make accessible to any unauthorized individual, or make use of (other than
in the regular course of the business of the Corporation or any of its
subsidiaries) specialized knowledge or information, which he shall have
obtained during his employment by the Corporation and which shall not be
generally known or recognized as standard industry practice, or information
within the public domain. Such "specialized knowledge or information"
comprises any technical, economic, financial, marketing or other
information, whether patented or not, on processes, products, research,
development, operations, and equipment relating to the Corporation or any
of its subsidiaries.
8. Should Mr. McGregor voluntarily resign as President and Chief
Operating Officer of the Corporation, otherwise than by reason of total and
permanent disability or at the request of the Chief Executive Officer and the
Board of Directors of the Corporation, the term of employment under this
Agreement shall thereupon cease and Mr. McGregor shall not thereafter be
entitled to receive any payments under this Agreement, except (a) Base
Compensation through the date on which such termination occurs, (b) the
Incentive Bonus Compensation payable pursuant to Paragraph 5(b) hereof
through the date on which such termination occurs (calculated on a pro
rata basis for the period during which he has been employed).
9. If the employment of Mr. McGregor shall be terminated for
gross misconduct of duty, Mr. McGregor shall not thereafter be entitled to
receive any payments under this Agreement other than Base Compensation
through the date on which such termination occurs. The existence of gross
misconduct of duty shall be determined by a neutral party mutually agreed
upon by the Corporation and Mr. McGregor. For purposes of this
Agreement, "gross misconduct of duty" shall include, but not be limited to,
theft or embezzlement from the Corporation, conviction of the commission
of a felony, wrongful disclosure of the Corporation's specialized knowledge
or information as defined in Paragraph 7 of this Agreement, direct or
indirect employment or engagement in unauthorized activities in competition
with the business of the Corporation, or a willful breach of the restrictions
against insider trading imposed by the Federal securities laws.
10. All notices hereunder shall be in writing and delivered or
mailed by registered or certified mail, return receipt requested, to the
following addresses: If to the Corporation, at its office at 1301 East Ninth
Street, Cleveland, Ohio 44114-1860, Attention: Corporate Secretary; and
if to Mr. McGregor, at 6 Country Lane, Pepper Pike, Ohio 44124, or to such
other address as the Corporation or Mr. McGregor may hereinafter
designate to the other in writing for such purpose.
11. This Agreement shall not be assignable by the Corporation
without the written consent of Mr. McGregor except that if the Corporation
shall merge or consolidate with or into, or transfer substantially all of its
assets to, another corporation or other form of business organization, this
Agreement shall bind and run to the benefit of the successor of the
Corporation resulting from such merger, consolidation, or transfer. Neither
Mr. McGregor nor any person designated by him to receive payments
hereunder may assign, pledge, or encumber such interest in this
Agreement or any part hereof without the express written consent of the
Corporation, this Agreement being personal to Mr. McGregor and the
beneficiaries designated by him.
12. Nothing herein contained shall prohibit or otherwise limit
Mr. McGregor in receiving or participating in any additional benefit
programs in which or pursuant to which the Board of Directors of the
Corporation shall determine that Mr. McGregor is eligible for participation.
13. Any controversy or claim arising out of, or relating to this
Agreement, or its breach, shall be settled by arbitration in the city of
Cleveland, state of Ohio, in accordance with the then governing rules of the
American Arbitration Association. Judgment upon the award rendered may
be entered and enforced in any court of competent jurisdiction.
14. The Corporation shall indemnify Mr. McGregor and hold him
harmless for all acts or decisions made by him in good faith while
performing services for the Corporation. The Corporation shall also use its
best efforts to obtain coverage for him under any insurance policy now in
force or hereinafter obtained during the term of this Agreement covering the
other officers and the directors of the Corporation against lawsuits. The
Corporation shall pay all expenses, including attorney's fees, actually
incurred by Mr. McGregor in connection with the defense of such act, suit,
or proceeding and in connection with any related appeal including the cost
of court settlements.
15. In the event of any claim, suit, or proceeding resulting from or
relating to any dispute, inaccuracy, breach, or failure of performance under
this Agreement is resolved in favor of Mr. McGregor, Mr. McGregor shall be
entitled to all actual attorney's fees and other related costs pertaining
thereto.
16. This Agreement comprises the entire understanding between
the Corporation and Mr. McGregor as to the subject matter hereof and may
not be modified except by a writing signed by both the Corporation and
Mr. McGregor. This Agreement shall be construed under and be governed
by the laws of the State of Ohio.
IN WITNESS WHEREOF, Mr. McGregor and the Corporation, by a
duly authorized officer pursuant to authority of its Board of Directors, have
executed this Employment Agreement as of September 3, 1993 but effective as
of the day and year first above written.
ATTEST: M. A. HANNA COMPANY
/s/ John S. Pyke, Jr. By /s/ Martin D. Walker
Secretary Chairman and Chief
Executive Officer
/s/ Douglas J. McGregor
<TABLE>
<CAPTION>
Item 14 - Exhibit 11
M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
Year Ended December 31
1993 1992 1991
(Dollars in thousands except per share data)
<S> <C> <C> <C>
Primary
Income(loss) from continuing operations
before extraordinary item and cumulative
effect of changes in accounting principles $30,049 $27,927 ($17,381)
Dividends on preferred stock - - 1,031
30,049 27,927 (18,412)
Income(loss) from discontinued operations (28,031) 2,563 25,225
Extraordinary item - - (5,969)
Cumulative effect of changes in
accounting principles - (11,465) -
Net income applicable to common stock $2,018 $19,025 $844
Average common shares outstanding 19,851,779 19,131,148 23,644,232
Net effect of dilutive stock options
and stock warrants - based on treasury
stock method using average market price 701,403 - * - *
Total 20,553,182 19,131,148 23,644,232
Income(loss) per share
Continuing operations $1.46 $1.46 ($0.78)
Discontinued operations (1.36) 0.13 1.07
Extraordinary item - - (0.25)
Cumulative effect of changes in
accounting principles - (0.60) -
Net income $0.10 $0.99 $0.04
* Not significant in 1992 and 1991.
</TABLE>
<TABLE>
<CAPTION>
Item 14 - Exhibit 11
M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
Year Ended December 31
1993 1992 1991
(Dollars in thousands except per share data)
<S> <C> <C> <C>
Fully Diluted
Income(loss) from continuing operations
before extraordinary item and cumulative
effect of changes in accounting principles $30,049 $27,927 ($17,381)
Dividends on preferred stock - - 1,031
30,049 27,927 (18,412)
Income(loss) from discontinued operations (28,031) 2,563 25,225
Extraordinary item - - (5,969)
Cumulative effect of changes in
accounting principles - (11,465) -
Net income applicable to common stock $2,018 $19,025 $844
Average common shares outstanding 19,851,779 19,131,148 23,644,232
Net effect of dilutive stock options
and stock warrants - based on treasury
stock method using the year-end market
price if higher than average market price 929,548 453,573 361,877
Shares reserved under earnout provisions
of purchase agreements - 190,411 206,944
Total 20,781,327 19,775,132 24,213,053
Income(loss) per share
Continuing operations $1.45 $1.41 ($0.78)
Discontinued operations (1.35) 0.13 1.06
Extraordinary item - - (0.25)
Cumulative effect of changes in
accounting principles - (0.58) -
Net income $0.10 $0.96 $0.03
* Not significant in 1992 and 1991.
</TABLE>
Item 14 - Exhibit (13)
M. A. HANNA COMPANY
1993
ANNUAL REPORT
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
M. A. Hanna Company and Consolidated Subsidiaries
(Dollars in thousands except per share data)
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Net Sales $1,519,728 $1,295,646 $1,103,094
Costs and Expenses
Cost of goods sold 1,211,578 1,026,389 856,156
Selling, general and administrative 196,837 171,074 164,570
Provision for doubtful accounts 3,939 2,373 2,790
Other income (5,412) (6,183) (3,220)
Other expense 9,785 9,186 46,431
Interest on debt 32,286 32,509 23,221
Amortization 17,312 16,409 15,486
1,466,325 1,251,757 1,105,434
Income(Loss) from Continuing Operations
Before Income Taxes, Extraordinary Item
and Cumulative Effect of Changes in
Accounting Principles 53,403 43,889 (2,340)
Income taxes 23,354 15,962 15,041
Income(Loss) from Continuing Operations
Before Extraordinary Item and Cumulative
Effect of Changes in Accounting Principles 30,049 27,927 (17,381)
Income(Loss) from Discontinued Operations
(including gain(loss) from disposal of
($27,620,000) in 1993, $9,180,000 in 1992
and $8,469,000 in 1991) (28,031) 2,563 25,225
Income Before Extraordinary Item 2,018 30,490 7,844
Extraordinary item - - (5,969)
Income Before Cumulative Effect
of Changes in Accounting Principles 2,018 30,490 1,875
Cumulative effect of changes in
accounting principles - (11,465) -
Net Income 2,018 19,025 1,875
Dividends on preferred stock - - 1,031
Net Income Applicable to Common Stock $ 2,018 $ 19,025 $ 844
Net Income Per Share of Common Stock
Primary
Continuing operations $ 1.46 $ 1.46 $ (.78)
Discontinued operations (1.36) .13 1.07
Extraordinary - - (.25)
Cumulative effect of changes in
accounting principles - (.60) -
Net income $ .10 $ .99 $ .04
Fully diluted
Continuing operations $ 1.45 $ 1.41 $ (.78)
Discontinued operations (1.35) .13 1.06
Extraordinary - - (.25)
Cumulative effect of changes in
accounting principles $ - (.58) -
Net income $ .10 $ .96 $ .03
See summary of accounting policies and notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
M. A. Hanna Company and Consolidated Subsidiaries
(Dollars in thousands)
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
CASH PROVIDED FROM (USED FOR) OPERATIONS
Net income $ 2,018 $ 19,025 $ 1,875
Discontinued operations 30,041 (1,657) (11,542)
Depreciation and amortization 48,142 45,294 40,477
Companies carried at equity:
Income (4,286) (3,812) (2,194)
Dividends received 5,729 1,355 1,209
Changes in operating assets and liabilities:
Receivables (10,531) (15,605) 7,898
Inventories (9,239) (2,301) 6,894
Prepaid expenses 1,774 (1,881) (184)
Trade payables and other accruals 10,771 21,107 (13,752)
Gain from sales of assets (1,730) (409) -
Restructuring obligations (16,594) (10,367) (20,827)
Other 11,755 2,737 10,784
Cumulative effect of changes in
accounting principles - 11,465 -
Premium associated with share repurchase - - 14,621
Extraordinary item - - 9,627
Net operating transactions 67,850 64,951 44,886
CASH PROVIDED FROM (USED FOR) INVESTMENT
TRANSACTIONS
Expenditures for property, plant and
equipment (23,379) (19,154) (26,766)
Acquisitions of companies, less cash acquired (28,803) (55,354) (5,526)
Acquisition obligations (3,410) (7,268) (3,119)
Sales of assets 7,127 77,427 35,009
Investments in associated and other
companies - (1,200) (16,241)
Purchase of short-term securities (5,061) (25,702) -
Sale of short-term securities 25,702 - -
Other (2,000) (6,581) (2,044)
Net investment transactions (29,824) (37,832) (18,687)
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS--Continued
M. A. Hanna Company and Consolidated Subsidiaries
(Dollars in thousands)
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
CASH PROVIDED FROM (USED FOR) FINANCING
TRANSACTIONS
Purchase of common stock warrants (27,500) - -
Cash dividends paid (14,003) (12,630) (16,298)
Proceeds from the sale of redeemable
preferred and common stock 14,582 3,422 152,087
Increase in debt 12,228 47,367 85,850
Reduction in debt (39,144) (35,974) (191,814)
Proceeds from the sale of senior notes - - 247,930
Purchase of shares for treasury - - (187,994)
Defeasance of debt - - (116,391)
Net financing transactions (53,837) 2,185 (26,630)
Effect of exchange rate changes on cash (821) 495 (547)
CASH AND CASH EQUIVALENTS
Increase(decrease) (16,632) 29,799 (978)
Beginning of year 54,277 24,478 25,456
End of year $ 37,645 $ 54,277 $ 24,478
CASH PAID DURING YEAR
Interest $ 33,001 $ 31,097 $ 18,038
Income taxes 19,165 13,900 21,450
See summary of accounting policies and notes to financial statements.
</TABLE>
CONSOLIDATED BALANCE SHEETS
M. A. Hanna Company and Consolidated Subsidiaries
(Dollars in thousands)
December 31
1993 1992
ASSETS
Current Assets
Cash and cash equivalents $ 37,645 $ 54,277
Short-term securities 5,061 25,702
Receivables:
Trade 202,541 190,978
Other 8,701 10,717
211,242 201,695
Inventories:
Finished products 104,399 93,291
Raw materials and supplies 34,123 32,939
138,522 126,230
Prepaid expenses 4,494 5,514
Deferred taxes 22,922 26,004
Total current assets 419,886 439,422
Property, Plant and Equipment
Land 12,548 11,316
Buildings 83,343 84,802
Machinery and equipment 263,989 246,065
359,880 342,183
Less allowances for depreciation 147,318 117,410
212,562 224,773
Other Assets
Goodwill and other intangibles 382,822 400,389
Investments and other assets 88,736 86,343
Deferred taxes 37,296 27,197
Total other assets 508,854 513,929
$1,141,302 $1,178,124
December 31
1993 1992
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable to banks $ 2,478 $ 2,312
Trade payables and accrued expenses 270,566 248,902
Current portion of long-term debt 740 796
Total current liabilities 273,784 252,010
Other Liabilities 179,959 177,365
Long-term Debt
Senior notes 300,000 300,000
Other 22,103 50,806
322,103 350,806
Stockholders' Equity
Preferred stock, without par value:
authorized 5,000,000 shares; issued 132 shares
in 1993 and 0 shares in 1992 - -
Common stock, par value $1.00 per share:
authorized 50,000,000 shares; issued
28,605,722 shares in 1993 and 28,274,584
shares in 1992 28,606 28,274
Common stock warrants - 14,621
Capital surplus 299,389 288,708
Retained earnings 269,026 280,420
Associates ownership trust (115,214) (111,221)
Cost of treasury stock (4,864,707 shares in 1993
and 4,874,512 shares in 1992) (102,794) (102,379)
Minimum pension liability adjustment (8,577) -
Accumulated translation adjustment (4,980) (480)
Total stockholders' equity 365,456 397,943
$1,141,302 $1,178,124
See summary of accounting policies and notes to financial statements.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
M. A. Hanna Company and Consolidated Subsidiaries
(Dollars in thousands except per share data)
Common Associates
Preferred Common Stock Capital Retained Ownership
Stock Stock Warrants Surplus Earnings Trust
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1991 $ - $27,942 $ - $267,921 $288,448 $ -
Net income for 1991 1,875
Cash dividends:
Common ($.625 per share) (15,267)
Preferred (1,031)
Exercise of stock options 80 928
Purchase of shares for treasury
Sale of stock:
Common (16,850 shares) 17 361
Preferred (1,200,000 shares) 150,000
Payment of incentive compensation awards 204
Establishment of TRASOP 177
Exchange of preferred stock for senior notes (150,000)
Issuance of common stock warrants 14,621
Establishment of Associates Ownership Trust (100,049)
Payment of employee benefits 49
Adjustment to market value (18,905) 18,905
Translation adjustment
Balance December 31, 1991 - 28,039 14,621 250,686 274,025 (81,095)
Net income for 1992 19,025
Cash dividends:
Common ($.6625 per share) (12,630)
Exercise of stock options 221 2,847
Sale of stock:
Common (14,012 shares) 14 340
Payment of incentive compensation awards 95 4,207
Payment of additional consideration of acquisition 407
Adjustment to market value 34,333 (34,333)
Translation adjustment
Balance December 31, 1992 - 28,274 14,621 288,708 280,420 (111,221)
Net income for 1993 2,018
Cash dividends:
Common ($.7125 per share) (14,003)
Exercise of stock options 311 8,813
Sale of stock:
Common (21,273 shares) 21 609
Purchase of common stock warrants (14,621) (12,879)
Payment of incentive compensation awards
and employee benefits 2,525 8,260
Acquisition of business (640) 591
Adjustment to market value 12,253 (12,253)
Minimum pension adjustment
Translation adjustment
Balance December 31, 1993 $ - $28,606 $ - $299,389 $269,026 ($115,214)
See summary of accounting policies and notes to financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
M. A. Hanna Company and Consolidated Subsidiaries
(Dollars in thousands except per share data) Minimum
Pension Accumulated Total
Treasury Liability Translation Stockholders'
Stock Adjustment Adjustment Equity
<S> <C> <C> <C> <C>
Balance January 1, 1991 ($22,738) $ - $6,101 $567,674
Net income for 1991 1,875
Cash dividends:
Common ($.625 per share) (15,267)
Preferred (1,031)
Exercise of stock options 1,008
Purchase of shares for treasury (187,993) (187,993)
Sale of stock:
Common (16,850 shares) 378
Preferred (1,200,000 shares) 150,000
Payment of incentive compensation awards 765 969
Establishment of TRASOP 507 684
Exchange of preferred stock for senior notes (150,000)
Issuance of common stock warrants 14,621
Establishment of Associates Ownership Trust 100,049
Payment of employee benefits 49
Adjustment to market value
Translation adjustment (2,509) (2,509)
Balance December 31, 1991 (109,410) - 3,592 380,458
Net income for 1992 19,025
Cash dividends:
Common ($.6625 per share) (12,630)
Exercise of stock options 3,068
Sale of stock:
Common (14,012 shares) 354
Payment of incentive compensation awards 636 4,938
Payment of additional consideration of acquisition 6,395 6,802
Adjustment to market value
Translation adjustment (4,072) (4,072)
Balance December 31, 1992 (102,379) - (480) 397,943
Net income for 1993 2,018
Cash dividends:
Common ($.7125 per share) (14,003)
Exercise of stock options (1,675) 7,449
Sale of stock:
Common (21,273 shares) 630
Purchase of common stock warrants (27,500)
Payment of incentive compensation awards
and employee benefits 569 11,354
Acquisition of business 691 642
Adjustment to market value
Minimum pension adjustment (8,577) (8,577)
Translation adjustment (4,500) (4,500)
Balance December 31, 1993 ($102,794) ($8,577) ($4,980) $365,456
See summary of accounting policies and notes to financial statements.
</TABLE>
SUMMARY OF ACCOUNTING POLICIES
M. A. Hanna Company and Consolidated Subsidiaries
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the
current year classifications.
PRINCIPLES OF CONSOLIDATION
Majority owned subsidiaries are included in the consolidated financial
statements and all significant intercompany accounts and transactions have
been eliminated.
Interests in certain associated companies and investments are carried at
cost adjusted for earnings and losses since acquisition, less dividends.
NET INCOME PER SHARE OF COMMON STOCK
Primary net income per share of common stock is computed by dividing net
income applicable to common stock by the average number of shares of
common stock outstanding during the year. Shares of common stock held by
the Associates Ownership Trust ("AOT") enter into the determination of the
average number of shares outstanding as the shares are released from the
AOT to fund a portion of the Company's obligations under certain of its
employee compensation and benefit plans. The effect of assuming the
exercise of stock options and stock warrants was not significant in 1992
and 1991.
The number of shares used to compute income per share on a fully diluted
basis is based on the number of shares used for primary net income per
share increased by the common stock equivalents which would arise from the
exercise of stock options and stock warrants and by the number of common
shares reserved under earnout provisions of purchase agreements.
CASH EQUIVALENTS AND SHORT-TERM SECURITIES
Cash equivalents are highly liquid investments with a maturity of three
months or less. Both cash equivalents and short-term securities are
stated at cost.
INVENTORIES
Inventories are stated at the lower of cost or market. Substantially all
domestic inventories are valued by the last-in, first-out (LIFO) cost
method. The excess of current cost over LIFO cost was $6,863,000 at
December 31, 1993 and $7,775,000 at December 31, 1992.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Provisions for
depreciation have been computed principally on the straight-line method at
rates sufficient to depreciate the cost of the assets over their estimated
productive lives.
Property items retired or otherwise disposed of are removed from the
property and related allowances for depreciation accounts. Any profit or
loss is included in operations.
GOODWILL AND OTHER INTANGIBLES
Goodwill is being amortized over 40 years. Goodwill with a net book value
of $26,482,000 was written off in the fourth quarter of 1993 in connection
with the pending sale of the Company's elastomeric membrane roofing
business. Other intangibles are being amortized on a straight-line basis
over 4 to 40 years. Accumulated amortization at December 31, 1993 and
1992 was $92,513,000 and $79,775,000, respectively.
Certain purchase agreements provided that future payments may be made to
former owners based on performance up to the year ending December 31,
1992. Such contingent amounts, representing additional purchase price,
were recorded at the end of the period in which they were earned as an
addition to goodwill and are subsequently amortized. During 1992,
$3,429,000 was recorded under the terms of these agreements.
The carrying value of goodwill will be reviewed if the facts and
circumstances suggest that it may be impaired. If undiscounted cash flows
over the remaining amortization period indicate that goodwill may not be
recoverable, the carrying value of goodwill will be reduced by the
estimated shortfall of cash flows.
INCOME TAXES
Effective January 1, 1992, Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" was adopted. This Statement requires
companies to recognize deferred tax liabilities and assets for the
expected future tax consequences of events that have been recognized in
the Company's financial statements or tax returns. The cumulative effect
of adopting Statement 109 increased net income by $22,096,000 or $1.12 per
share. The impact on 1992 operating results was a decrease of $.24 per
share.
Under Statement 109 deferred tax liabilities and assets are determined
based on the differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rate and
laws that will be in effect when the differences are expected to reverse.
Prior to the adoption of Statement 109, income tax expense was determined
using the liability method prescribed by Statement of Financial Accounting
Standards No. 96. Among other changes, Statement 109 changed the
recognition and measurement criteria for deferred tax assets included in
Statement 96.
Investment tax credits are recorded as a reduction of the current federal
income tax provision.
NOTES TO FINANCIAL STATEMENTS
M. A. Hanna Company and Consolidated Subsidiaries
ACQUISITIONS AND DISPOSITIONS
On June 30, 1993, the Company acquired the stock of Texapol Corporation,
a producer of engineering thermoplastic compounds, and certain assets of
Monmouth Plastics, a producer of flame retardant thermoplastic compounds.
The acquisitions were accounted for using the purchase method of
accounting. Had the acquisitions been made at the beginning of 1992,
reported results of operations would not be materially different.
On November 15, 1993, the Company announced it had reached a preliminary
agreement to sell its elastomeric membrane roofing business to Firestone
Building Products Company, a division of Bridgestone/Firestone, Inc. The
pending sale, which is expected to close in the first quarter of 1994, has
been recorded as a disposal of a segment of a business and the operating
results have been classified as discontinued operations in the
consolidated financial statements. Revenues were $41,042,000,
$38,295,000, and $45,108,000 and operating results were income (loss) of
$487,000, $(1,705,000) and $633,000 in 1993, 1992 and 1991, respectively.
The Company recognized an after-tax charge of $30,000,000 for the write-
off of goodwill and restructuring charges associated with the sale.
INTERESTS IN ASSOCIATED COMPANIES AND INVESTMENTS
Iron Ore Company of Canada:
During February 1992, the Company sold a portion of its interest in Iron
Ore Company of Canada ("IOC") to Mitsubishi Corporation, Tokyo. The
Company sold 20% of the outstanding shares of common stock of IOC and 50%
of the Company's sales agency for IOC, realizing proceeds of $62,000,000.
No gain or loss was recognized as a result of this transaction and the
Company ceased equity accounting for its remaining ownership in IOC.
The Company is Managing Agent for IOC and owns approximately 8% (28% in
1991) of the stock. IOC incurred commission and management expense of
$2,648,000 in 1993 ($2,628,000 in 1992 and $6,157,000 in 1991) payable to
the Company and $3,317,000 in 1993 ($3,294,000 in 1992 and $1,292,000 in
1991) payable to 50% owned affiliated companies carried at equity.
Coal Companies:
On October 18, 1991, the Company sold its 50% partnership interest in
Colowyo Coal Company ("Colowyo"), together with certain other natural
resources assets including Hayden-Gulch West Coal Company and The Axial
Basin Ranch Company in the western United States to Grace Energy
Corporation ("Grace"). Under terms of the agreement, Grace paid the
Company approximately $34,200,000 in cash at closing resulting in a gain
of $8,469,000, and agreed to pay the Company 50% of any amount received by
Colowyo under its $23,000,000 prepetition bankruptcy claim against
Colorado-Ute Electrical Association, Inc. During 1993 and 1992, the
Company received $2,320,000 and $9,180,000, respectively, representing the
recovery of its prepetition claim.
The operating results related to IOC and the Company's western coal
interests have been reported as discontinued operations in the
consolidated statements of income.
DETAIL OF CURRENT AND OTHER LIABILITIES
Included in trade payables and accrued expenses and other liabilities at
December 31 are:
(In thousands) 1993 1992
Trade payables and accrued expenses:
Trade payables $137,178 $134,667
Salaries and wages 12,211 16,445
Employee benefits 29,647 26,901
Restructuring and acquisition costs 16,367 15,953
Other liabilities:
Plant closedown costs 14,318 17,117
Environmental costs 18,449 18,771
Employee benefits 12,045 14,089
Other post-retirement benefits 77,977 75,987
LONG-TERM DEBT
(In thousands) 1993 1992
9% Senior Notes due 1998 $150,000 $150,000
9.375% Senior Notes due 2003 150,000 150,000
Credit agreements 17,787 45,250
Other 5,056 6,352
322,843 351,602
Less current portion 740 796
$322,103 $350,806
Annual maturities on the Company's long-term debt are: 1994--$740,000;
1995--$734,000; 1996--$18,410,000; 1997--$605,000 and 1998--$150,600,000.
The Company's five-year credit agreement provides for borrowings of up to
$150 million. The agreement provides for interest rates to be determined
at the time of borrowing based on a choice of formulas as specified in the
agreement. Beginning March 31, 1994, the bank commitments will be reduced
by 12.5% of the aggregate amount of borrowings outstanding under the
agreement each quarter for eight consecutive quarters. No borrowings were
outstanding under this agreement at December 31, 1993 and 1992.
During 1993, the Company entered into a credit agreement which provides
for borrowings of up to 150 million French francs through November 1996.
The agreement provides for interest rates to be determined at the time of
borrowing based on a choice of formulas as specified in the agreement. At
December 31, 1993, borrowings outstanding under this agreement were 105
million French francs or an equivalent of $17,787,000, at a rate of
7.3125%.
During 1992, the Company entered into a credit agreement which provided
for borrowings of up to 250 million French francs through January 1994.
The agreement provided for interest rates to be determined at the time of
the borrowing. At December 31, 1992, borrowings outstanding under this
agreement were 250 million French francs or an equivalent of $45,250,000,
at a rate of 11.1875%. Borrowings outstanding under this agreement were
repaid in 1993.
Other debt at December 31, 1993 and 1992 consisted primarily of mortgages,
industrial revenue bonds, and notes with differing repayment terms. These
obligations mature in various installments through March 2002 and are at
interest rates ranging from 3% to 12.75%.
The various debt agreements contain certain restrictions and conditions
among which are limitations on cash dividends and other payments. Under
the most restrictive of these agreements, approximately $71,200,000 of
retained earnings was free of such limitations at December 31, 1993.
The Company has entered into an interest rate swap agreement, which
expires in June 1994, that effectively converts $50 million of its fixed
rate borrowings into variable rate obligations. Under the terms of this
agreement, the Company makes payments at variable rates which are based on
LIBOR (3.48% at December 31, 1993) and receives payments at fixed interest
rates (5.04% at December 31, 1993). The differential to be paid or
received is accrued as interest rates change and is recognized over the
life of the agreement.
In September 1991, United States Government securities were purchased at
a cost of $145,900,000 and deposited in an irrevocable trust to satisfy
principal and interest payments on 12.5% Senior Subordinated Notes due
in 1994. On October 16, 1991, the Company called the 1994 Notes for
redemption on October 15, 1992, at 100% of the principal amount thereof.
The Company received approximately $23,686,000 from the Trustee, which
represented the excess of the amount necessary to pay the redemption price
and interest through the redemption date. The debt, accrued interest
thereon and related unamortized debt issuance costs were removed from the
balance sheet in 1991 in an in-substance defeasance transaction resulting
in an extraordinary loss, net of a related tax benefit, of $5,969,000.
The 9% Senior Notes with a principal amount of $100 million and the 9.375%
Senior Notes, with a principal amount of $150 million were sold in
September 1991 at par. In addition, preferred stock sold in 1991 to
Brascan Limited in connection with a repurchase of common stock was
exchanged for $150 million in principal amount of 9% notes due in 1998, of
which $100 million has been subsequently repaid.
STOCKHOLDERS' EQUITY
On August 20, 1991, the Company purchased all 7,736,181 shares of the
Company's common stock held by Brascan Limited. The Company paid $26.12
per share purchased, or approximately $202,069,000, and issued Brascan
seven year warrants to purchase 2,750,000 shares of common stock at a
price of $26.12 per share. On December 13, 1993, the Company purchased
the warrants held by Brascan for $27.5 million in cash. The difference
between the amount paid and the carrying value of the warrants has been
charged to capital surplus.
The Company obtained $150 million of the consideration used to repurchase
the Company's common stock from the concurrent sale to Brascan of
1.2 million shares of redeemable exchangeable preferred stock. The
preferred stock had an initial dividend rate of 6.6875% and was subject to
mandatory redemption on September 1, 1998. During the third quarter of
1991, the Company exchanged the preferred stock for $150 million in
principal amount of 9% notes due in 1998. (See Long-Term Debt Note.)
In September 1991, the Company established a trust (" Associates Ownership
Trust" or "AOT"), which held 4,054,739 shares of the Company's common
stock to fund a portion of the Company's obligations under certain of its
employee compensation and benefit plans for the 15-year term of the AOT.
The AOT acquired the shares of the common stock from the Company for a
promissory note for an aggregate consideration of approximately
$100,049,000.
In December 1991, the Board of Directors adopted a Stock Purchase Rights
Plan and declared a dividend distribution of one stock purchase right
("Right") for each outstanding or subsequently issued share of common
stock. Each Right entitles the holder to buy from the Company one one-
hundredth of a share of Cumulative Series A Preferred Stock, without par
value (the "Preferred Share") for $95 per one one-hundredth of a Preferred
Share, subject to adjustment. The Rights become exercisable if certain
triggering events occur, including the acquisition of 15% or more of the
Company's common stock. The Company is entitled to redeem the Rights at
$.01 per Right at any time until ten days after any person or group has
acquired 20% of the Company's common stock and in certain circumstances
thereafter. If a party owning 20% or more of the Company's common stock
merges with the Company or engages in certain other transactions with the
Company, each Right, other than the Rights held by the acquiring party,
entitles the holder to purchase that number of additional common shares
having a market value of two times the exercise price of the Right. The
Rights expire on December 16, 2001.
STOCK OPTIONS
The Company's stock option plans provide for granting options at prices
equal to the market value at date of grant. Options are exercisable for
ten years.
During 1991, the Company's stockholders approved amendments to the
Company's stock option plan which among other matters provide for the
grant of options to non-associate directors to purchase up to 150,000
shares of common stock at prices equal to the market value at the date of
grant. Options are exercisable for ten years.
The following summarizes the changes in the shares granted under the
Company's plans for the three years ended December 31, 1993.
SHARES PRICE RANGE
Shares under option
Outstanding January 1, 1991 1,107,852 $12.25 - $25.25
Granted 230,550 $21.50 - $24.375
Exercised (79,224) $12.25 - $19.125
Canceled or expired (19,577) $13.33 - $22.00
Outstanding December 31, 1991 1,239,601 $12.25 - $25.25
Granted 114,800 $28.25
Exercised (220,613) $12.25 - $25.25
Canceled or expired (4,287) $13.33 - $25.25
Outstanding December 31, 1992 1,129,501 $12.25 - $28.25
Granted 250,310 $29.75 - $30.75
Exercised (309,865) $12.25 - $25.25
Canceled or expired (16,850) $16.75 - $28.25
Outstanding December 31, 1993 1,053,096 $12.25 - $30.75
At December 31, 1993, options were exercisable for 603,684 shares (767,440
shares at December 31, 1992) at prices from $12.25 to $28.25 and 4,054
shares were reserved for future grants.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating fair value disclosures for financial instruments:
Cash, Cash Equivalents and Short-Term Securities: The carrying amount
reported in the balance sheet approximates fair value.
Long and Short-Term Debt: The carrying amount of the Company's short-term
borrowings approximates fair value. The fair value of the Company's Senior
Notes are based on quoted market prices. The carrying amount of the
Company's borrowings under its long-term revolving credit agreements and
other long-term borrowings approximates fair value.
Off-Balance-Sheet Instruments: Fair values for the Company's off-balance-
sheet instruments (interest rate swaps) are based on pricing models or
formulas using current assumptions.
The carrying amounts and fair values of the Company's financial
instruments at December 31, 1993 and 1992 are as follows:
(In thousands) 1993 1992
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash and cash equivalents $ 37,645 $ 37,645 $ 54,277 $ 54,277
Short-term securities 5,061 5,061 25,702 25,702
Notes payable to banks 2,478 2,478 2,312 2,312
Long-term debt
9% Senior Notes 150,000 172,500 150,000 159,000
9.375% Senior Notes 150,000 180,000 150,000 161,191
Credit agreements 17,787 17,787 45,250 45,250
Other 5,056 5,056 6,352 6,352
Interest rate swaps - 365 - 1,094
BUSINESS SEGMENTS
The Company operates principally in the formulated polymers industry which
consists of three major segments - processing, resin distribution and
polymer products. Processing includes producers of custom compounds for
the plastics and rubber industries and producers of custom formulated
colorants for the plastics industry. Resin distribution includes
distributors of thermoplastic and thermoset resins and fiberglass
materials. Polymer products includes the distributors of engineered
plastic shapes, manufacturer of printing blankets and other consumable
supplies for the printing industry and manufacturer of engineered
consumable supplies for the textile industry.
Other operations include the Company's oil and gas business, marine
operations, insurance operations and management fees. In December 1992
the Company sold Midland SouthWest, its oil and gas business for
$5,290,000. No gain or loss was recognized as a result of this
transaction.
The Company's sales are made through its own organization, distributors
and representatives. Operating profit (expense) in 1993 for processing
includes $1,300,000 for restructuring costs and for other operations a
gain of $1,730,000 from sale of assets and in 1991 for processing and
corporate includes restructuring costs of $2,594,000 and $2,046,000,
respectively, and $35,007,000 for corporate related to the premium
associated with the shares repurchased.
Net sales, operating profit and identifiable assets by geographic area for
the years ended December 31, 1993, 1992 and 1991 are as follows:
Year Ended December 31
(In thousands) 1993 1992 1991
Net sales
Domestic $1,288,502 $1,107,632 $ 955,960
International 231,226 188,014 147,134
$1,519,728 $1,295,646 $1,103,094
Operating profit
Domestic $ 96,504 $ 82,650 $ 67,376
International 13,460 12,483 11,300
$ 109,964 $ 95,133 $ 78,676
Identifiable assets
Domestic $ 970,947 $1,003,614 $ 940,150
International 170,355 174,510 106,232
$1,141,302 $1,178,124 $1,046,382
M. A. Hanna Company and Consolidated Subsidiaries
<TABLE>
<CAPTION>
Operating Depreciation
Profit and Capital Identifiable
(In thousands) Net Sales (Expense) Amortization Expenditures Assets
<S> <C> <C> <C> <C> <C>
1993
Formulated polymers
Processing $784,951 $66,637 $29,842 $15,494 $522,122
Resin distribution 298,727 5,799 2,379 982 115,154
Polymer products 452,945 31,103 15,147 6,575 341,158
Other operations 18,351 6,425 300 79 1,726
Intersegment activity (35,246) - - - -
Corporate - (24,275) 474 38 146,392
Discontinued operations - - - 211 14,750
$1,519,728 $85,689 $48,142 $23,379 $1,141,302
1992
Formulated polymers
Processing $655,584 $54,485 $25,987 $13,088 $489,900
Resin distribution 219,669 4,126 1,900 553 102,899
Polymer products 434,491 29,697 15,265 5,200 406,104
Other operations 22,537 6,825 1,599 313 9,757
Intersegment activity (36,635) - - - -
Corporate - (18,735) 543 - 169,464
Discontinued operations - - - - -
$1,295,646 $76,398 $45,294 $19,154 $1,178,124
1991
Formulated polymers
Processing $556,937 $38,820 $21,149 $20,506 $407,336
Resin distribution 144,867 2,042 1,510 426 71,170
Polymer products 417,402 26,626 15,354 5,333 418,787
Other operations 27,307 11,188 1,840 501 14,025
Intersegment activity (43,419) - - - -
Corporate - (57,795) 624 - 56,530
Discontinued operations - - - - 78,534
$1,103,094 $20,881 $40,477 $26,766 $1,046,382
</TABLE>
<TABLE>
<CAPTION>
OTHER INCOME OTHER EXPENSE
<S> <C> <C> <C> <C> <C> <C> <C>
Other income includes the following: Other expenses includes the following:
(In thousands) 1993 1992 1991 (In thousands) 1993 1992 1991
Interest $ 2,190 $ 3,937 $ 1,966 Expenses of closed facilities $ 7,031 $ 7,091 $ 5,974
Gain on sales of assets 1,730 409 - Restructuring costs 1,300 - 4,640
Other 1,492 1,837 1,254 Other 1,454 2,095 810
$ 5,412 $ 6,183 $ 3,220 Premium associated with share repurchase - - 35,007
$ 9,785 $ 9,186 $46,431
</TABLE>
INCOME TAXES
Income taxes consist of the following:
(In thousands) 1993 1992 1991
Current:
Federal $15,722 $11,512 $ 8,029
State 3,970 3,135 3,422
Foreign 3,454 2,736 2,525
23,146 17,383 13,976
Deferred:
Federal 1,936 (1,041) 800
State (585) (273) -
Foreign (1,143) (107) 265
208 (1,421) 1,065
$23,354 $15,962 $15,041
The provision for income taxes for continuing operations differs from
the amount computed by applying the U.S. statutory federal income tax
rate as follows:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
<S> <C> <C> <C>
Provision at statutory tax rate $18,691 $14,925 $ (796)
State income taxes 2,103 1,886 2,259
Goodwill amortization 3,841 3,139 3,023
Change in income tax rate (578) - -
Utilization of capital loss carryforwards (1,062) - -
Rate differential on foreign earnings - 750 135
Favorable adjustment of income tax liabilities - (4,800) -
Premium associated with share repurchase - - 11,902
Alternative minimum taxes - - 1,916
Utilization of tax credits - - (488)
Other 359 62 (2,910)
$23,354 $15,962 $15,041
</TABLE>
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The
Company has not provided deferred taxes on undistributed earnings of
foreign subsidiaries and joint ventures because it is not practical to
estimate the amount of tax payable upon any future remittance of these
earnings. Significant components of the Company's deferred tax assets
(liabilities) as of December 31, 1993 and 1992 are:
(In thousands) 1993 1992
Other post-retirement benefits $32,748 $30,886
Basis differences from purchase accounting (23,604) (26,703)
Tax over book depreciation (17,488) (14,731)
Environmental costs 8,012 8,072
Employee benefits 19,407 13,600
Restructuring and plant closedown costs 11,967 12,566
Inventory and receivable reserves 8,981 6,727
Operating and capital loss carryforwards 22,689 28,452
Tax credit carryforwards 13,751 10,983
Other 8,517 8,803
Valuation allowance (24,762) (25,454)
$60,218 $53,201
The Company has tax credit carryforwards of $13,751,000 of which
$2,988,000 expire in 1996 through 2000. For financial reporting purposes,
a valuation allowance has been recognized to offset the deferred tax asset
related to capital loss carryforwards. During 1993, the valuation
allowance was increased $370,000 due to the tax law change and was reduced
by $1,062,000 due to the utilization of capital loss carryforwards.
Income before income taxes includes $6,546,000, $5,586,000 and $7,810,000
in 1993, 1992 and 1991, respectively, from foreign operations.
Income taxes related to discontinued operations were $1,938,000 in 1993,
$2,652,000 in 1992 and $2,734,000 in 1991. The income tax benefit related
to the extraordinary item in 1991 was $3,658,000.
PENSION AND OTHER POST-RETIREMENT BENEFITS
The Company has non-contributory defined benefit plans covering certain of
its associates which comply with federal funding requirements. Benefits
for these plans are based primarily on years of service and qualifying
compensation during the final years of employment. Plan assets include
marketable equity securities, money market funds and fixed income
securities.
The Company also sponsors defined contribution plans for certain of its
associates, which provide for Company contributions of a specified
percentage of each associate's total compensation.
A summary of the components of net periodic pension cost for the defined
benefit plans and the total contributions charged to expense for the
defined contribution plans are:
(In thousands) 1993 1992 1991
Defined benefit plans:
Service costs $ 617 $ 650 $ 658
Interest cost on projected
benefit obligation 6,300 8,050 7,959
Return on plan assets (6,258) (8,364) (7,352)
Net amortization and deferral 815 656 301
Net pension costs 1,474 992 1,566
Defined contribution plans 3,844 4,293 3,788
$5,318 $5,285 $5,354
In accordance with the provisions of Financial Accounting Standard No. 87,
the Company recorded a minimum pension liability representing the excess
of the accumulated benefit obligation over the fair value of plan assets
and accrued pension liabilities. The liability has been offset by
intangible assets to the extent possible. Because the asset recognized
may not exceed the amount of unrecognized past service cost, the balance
of the liability at the end of 1993 is reported as a separate reduction of
stockholders' equity, net of applicable deferred income taxes.
The following table sets forth the funded status of the Company's defined
benefit plans:
<TABLE>
<CAPTION>
Accumulated Benefits Assets Exceed
Exceed Assets Accumulated Benefits
(In thousands) 1993 1992 1993 1992
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations
including vested benefits of
$79,793 in 1993 and $88,951 in 1992 $66,528 $70,019 $16,000 $20,970
Projected benefit obligation $68,088 $72,318 $16,386 $21,192
Plan assets at fair value 46,953 61,132 21,199 28,552
Projected benefits in excess of
(less than) plan assets 21,135 11,186 (4,813) (7,360)
Consisting of:
Unrecognized net obligations (asset) 1,969 2,218 (441) (356)
Unrecognized net actuarial (gains) or losses 17,842 5,224 (2,180) (7,219)
Adjustment to recognize minimum liability 18,251 5,143 - -
Accrued(prepaid) pension cost
recognized in balance sheet $19,575 $ 8,887 $(2,192) $ 215
</TABLE>
The projected benefit obligation was determined using an assumed discount
rate of 7.25% (9% in 1992) and an assumed long-term rate of increases in
compensation of 5%. The assumed long-term rate of return on plan assets
is 10%. The change in the discount rate caused the accumulated benefit
obligation to increase approximately $11,300,000.
During 1993, the Company settled a portion of its retirement benefit
obligations to certain of its retirees through the purchase of annuity
contracts.
In addition to providing pension benefits, the Company provides certain
contributory and non-contributory health care and life insurance benefits
for certain retired associates. Certain associates of the Company may
become eligible for those post-retirement benefits if they reach
retirement age while working for the Company.
Effective January 1, 1992, Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other than
Pensions" was adopted using the immediate recognition transition option.
The standard requires recognition of the estimated future costs of
providing health and other post-retirement benefits on an accrual basis.
These benefits have previously been recognized as incurred. The
cumulative effect of this accounting change reduced 1992 net income by
$33,561,000 ($54,131,000 less related deferred income taxes of
$20,570,000) or $1.70 per share. The effect of the change on 1992
earnings was $.12 per share.
The status of the Company's plans at December 31, 1993 and 1992 is as
follows:
(In thousands) 1993 1992
Accumulated post-retirement benefit obligation
Retirees $66,917 $63,745
Fully eligible active plan participants 5,286 4,580
Other active plan participants 15,398
12,955
87,601 81,280
Unrecognized actuarial loss (3,631) -
Accrued post-retirement benefit obligation $83,970 $81,280
Net periodic post-retirement benefit cost includes the following
components:
(In thousands) 1993 1992
Service cost $1,564 $1,464
Interest cost 6,733 6,533
Net periodic post-retirement benefit cost $8,297 $7,997
The weighted-average assumed rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) is assumed to be
14.0% and decreasing gradually to 5.25% in 2009 and remaining at that
level thereafter. A one percentage point increase in the assumed health
care cost trend rate would have increased the accumulated benefit
obligation by $11,514,000 at December 31, 1993 and the aggregate service
and interest costs components of net periodic post-retirement benefit
costs for 1993 by $1,281,000. Post-retirement benefit costs in 1991 were
$3,052,000.
A weighted average discount rate of 7.25% (8.5% in 1992) was used in
determining the accumulated benefit obligation. The change in the
discount rate caused the accumulated benefit obligation to increase
approximately $3,950,000.
LEASE COMMITMENTS
Rental expense for certain manufacturing facilities, warehouses,
transportation equipment and data processing and office equipment was
$16,745,000 in 1993, $14,855,000 in 1992 and $15,369,000 in 1991. Several
manufacturing facilities are leased under industrial development type loan
arrangements. Certain of the Company's leases have options to renew, and
there are no significant contingent rentals in any of the leases.
At December 31, 1993, future minimum lease commitments for noncancelable
operating leases are:
(In thousands)
1994 $11,047
1995 9,195
1996 7,982
1997 7,088
1998 5,142
Thereafter 19,216
$59,670
CONTINGENCIES
The Company is involved in certain legal actions and claims arising in the
ordinary course of business including lawsuits brought by the State of
Idaho in 1983 and the United States government in 1993 seeking
reimbursement from the Company and other defendants for alleged damages to
the environment and clean-up costs for the area around the Blackbird Mine
in Idaho. Claims have been made against a subsidiary of the Company for
the costs of environmental remediation measures taken or to be taken in
connection with operations that have been sold or closed. These include
the clean-up of Superfund sites and participation with other companies in
the clean-up of hazardous waste disposal sites, several of which have been
designated as Superfund sites. Reserves for such liabilities have been
established and no insurance recoveries have been reflected in the
determination of the reserves. In management's opinion, such litigation
and claims will be resolved without material adverse effect on the
financial position of the Company.
SUPPLEMENTAL CASH FLOW DATA
The following is a summary of noncash investing and financing activities.
(In thousands) 1993 1992 1991
Acquisition of businesses
Assets acquired $33,130 $106,447 $ 25,885
Liabilities assumed 4,327 45,030 20,221
Cash paid 28,803 61,417 5,664
Less cash acquired - 6,063 138
$28,803 $ 55,354 $ 5,526
Debt of companies acquired $ 11,084 $ 5,535
Payment of additional purchase
price of acquired business
with treasury stock $ 6,802
Payment of incentive compensation
awards with treasury stock $ 780 $ 731 $ 969
Payment of incentive compensation
awards and employee benefits with stock
held by Associates Ownership Trust $ 8,260 $ 4,207 $ 49
Payment of stock option exercise
with shares of common stock $ 1,675
Formation of TRASOP $ 684
Exchange of preferred stock for
Senior Notes $150,000
Issuance of common stock warrants $ 14,621
<TABLE>
<CAPTION>
Quarterly Financial and Stock Price Data
M.A. Hanna Company and Consolidated Subsidiaries
Summarized unaudited quarterly financial and stock price data for 1993 and 1992 are as follows:
First Second Third Fourth
(In thousands except per share data) Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
1993
Net sales ............................................ $362,465 $384,727 $388,059 $384,477
Gross margin.......................................... 71,774 78,309 77,565 80,502
Income(loss)
Continuing operations............................. 4,496 8,124 8,578 8,851
Discontinued operations........................... 1,344 220 286 (29,881)
Net income(loss)............................ 5,840 8,344 8,864 (21,030)
Income(loss) per common share (fully diluted)
Continuing operations............................. 0.21 0.39 0.42 0.43
Discontinued operations........................... 0.07 0.01 0.01 (1.44)
Net income(loss)............................ 0.28 0.40 0.43 (1.01)
Price range
High........................................ 30 3/4 33 1/4 32 1/8 34
Low......................................... 25 3/4 28 26 28 7/8
Cash dividends paid............................... .175 .175 .175 .1875
1992
Net sales ............................................ $289,290 $322,789 $343,633 $339,934
Gross margin.......................................... 56,971 67,345 71,855 73,086
Income(loss)
Continuing operations............................. 2,549 6,353 7,354 11,671
Discontinued operations........................... (173) 47 3,840 (1,151)
Cumulative effect of changes
in accounting principles...................... (11,465) - - -
Net income(loss)............................ (9,089) 6,400 11,194 10,520
Income(loss) per common share (fully diluted)
Continuing operations............................. 0.13 0.33 0.37 0.59
Discontinued operations........................... (0.01) - 0.19 (0.06)
Cumulative effect of changes
in accounting principles...................... (0.60) - - -
Net income(loss)............................ (0.48) 0.33 0.56 0.53
Price range
High........................................ 26 3/4 26 3/8 30 29 1/8
Low......................................... 19 3/4 24 24 3/4 24 1/8
Cash dividends paid............................... .1625 .1625 .1625 .175
During the fourth quarter of 1993, the Company announced the pending sale of its elastomeric membrane
roofing business. The operating results of this business have been reclassified as discontinued
operations which has increased (decreased) previously reported income from continuing operations in
1993 by $138,000 in the first quarter ($.01 per share), ($220,000) in the second quarter ($(.01)
per share) and ($286,000) in the third quarter ($(.01) per share) and increased (decreased) previously
reported income from continuing operations in 1992 by $173,000 in the first quarter ($.01 per share),
($47,000) in the second quarter (no impact on per share), $428,000 in the third quarter ($.02 per share)
and $1,150,000 in the fourth quarter ($.06 per share).
Income per share calculations for each of the quarters are based on the weighted average number of shares
outstanding for each period, and the sum of the quarters may not necessarily be equal to the full year
income per share amount.
Unusual or infrequently occurring items recognized in net income in the quarter are as follows:
First Second Third Fourth
(In thousands) Quarter Quarter Quarter Quarter
1993
Effect of tax rate change............................. $ - $ - $578 $ -
Sale of assets........................................ - - - 1,300
Miscellaneous restructuring........................... - - - (702)
1992
Sale of assets........................................ $ - $ - $5,692 $ -
Settlement of mineral operation obligation............ - - (1,424) -
Adjustment of accrued tax liability................... - - - 4,800
</TABLE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
M. A. Hanna Company and Consolidated Subsidiaries
(Dollars in thousands except per share data) 1993 1992 1991 1990 1989 1988 (1)
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales ............................................ $1,519,728 $1,295,646 $1,103,094 $1,055,308 $1,010,676 $888,135
Cost of goods sold.................................... 1,211,578 1,026,389 856,156 806,885 773,789 667,588
Selling, general and administrative................... 200,776 173,447 167,360 157,806 155,804 148,758
Amortization expense.................................. 17,312 16,409 15,486 15,044 14,226 11,608
Interest on debt...................................... 32,286 32,509 23,221 18,301 21,286 23,908
Income (loss) from continuing operations before
income taxes, extraordinary item and cumulative
effect of changes in accounting principles ....... 53,403 43,889 (2,340) 56,521 56,811 40,589
Income taxes.......................................... 23,354 15,962 15,041 16,995 9,502 4,987
Income (loss) from continuing operations before
extraordinary item and cumulative effect
of changes in accounting principles............... 30,049 27,927 (17,381) 39,526 47,309 35,602
Net income............................................ 2,018 19,025 1,875 55,871 86,920 83,223
Per share of common stock
Income (loss) from continuing operations.......... 1.46 1.46 (0.78) 1.43 1.78 1.26
Net income........................................ .10 .99 .04 2.03 3.34 3.48
Dividends paid.................................... .71 .66 .62 .55 .45 .33
Cash dividends paid on
Common stock...................................... 14,003 12,630 15,267 15,175 11,812 7,169
Preferred stock................................... - - 1,031 - 2,125 8,501
BALANCE SHEET
Current assets........................................ $419,886 $439,422 $295,759 $292,034 $279,859 $257,882
Current liabilities................................... 273,784 252,010 216,309 196,794 182,359 184,038
Working capital....................................... 146,102 187,412 79,450 95,240 97,500 73,844
Property, plant and equipment - net................... 212,562 224,773 216,717 217,852 209,294 193,168
Other assets.......................................... 508,854 513,929 533,906 554,654 546,569 512,827
Other liabilities..................................... (179,959) (177,365) (118,735) (162,361) (175,913) (173,010)
Long-term debt........................................ (322,103) (350,806) (330,880) (137,711) (134,834) (137,725)
Total stockholders' equity............................ $365,456 $397,943 $380,458 $567,674 $542,616 $469,104
Shares of common stock outstanding.................... 23,741,015 23,400,072 22,830,050 26,625,048 27,788,538 21,554,181
Book value per share of common stock.................. $15.39 $17.01 $16.66 $21.32 $19.53 $17.12
(1) Prior to 1988, the Company was a natural resources company and not in the specialty chemicals business. Results for
1984-1987 are excluded because they are not comparable with results for 1988-1993.
STOCK INFORMATION
M. A. Hanna Company common stock is listed on the New York and Chicago stock exchanges under the symbol MAH. At December 31, 1993,
the number of stockholders of record of the Company's common stock was 3,512.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
M.A. Hanna Company and Consolidated Subsidiaries
RESULTS OF OPERATIONS
Your Company made significant strategic and financial progress in 1993.
Net sales increased 17.3% to a record $1,519.7 million from $1,295.6
million in 1992. Income from continuing operations, excluding non-
recurring events was $28.9 million, a 25.1% improvement over 1992 income
from continuing operations, excluding non-recurring events, of $23.1
million. In 1993, earnings from continuing operations include a one-time
benefit due to the change in tax laws, a gain from the sale of BenePlan
Strategies and a charge for restructuring certain polymer processing
businesses. In 1992, earnings from continuing operations include a
favorable tax adjustment.
1993 Compared with 1992
Net sales increased from $1,295.6 million in 1992 to a record $1,519.7
million in 1993. Sales from polymer processing businesses increased
$129.4 million from 1992 levels due to acquisitions made in both 1993 and
1992 and higher unit volumes. Resin distribution sales increased $79.1
million to $298.7 million in 1993 due to higher unit volumes and an
acquisition made at the end of the third quarter in 1992. Polymer product
sales increased from $434.5 million in 1992 to $452.9 million in 1993 due
to higher unit volumes. Sales from other operations decreased from $22.5
million in 1992 to $18.4 million in 1993 due to the sale of businesses in
both years.
Cost of goods sold increased $185.2 million to $1,211.6 million in 1993
and corresponds with the sales increases. As a percentage of sales, cost
of goods sold was 79.7% in 1993 compared with 79.2% in 1992. The
resultant decrease in gross margin is due to a higher percentage of sales
from resin distribution businesses, which carry a lower gross margin.
Selling, general and administrative expenses increased $27.3 million in
1993 over 1992 levels due to acquisitions in polymer processing and resin
distribution businesses and higher sales activity from existing
businesses. However, as a percentage of sales, selling, general and
administrative expenses fell from 13.4% in 1992 to 13.2% in 1993,
reflecting the Company's ongoing efforts to manage these costs.
Amortization expense increased from $16.4 million in 1992 to $17.3 million
in 1993 due to acquisitions made in both 1993 and 1992.
The Company's effective tax rate in 1993 was 43.7% compared with 36.4% in
1992. The tax rate in both years was impacted by favorable tax
adjustments. Tax expense in 1993 was reduced $.6 million from the
enactment of a change in tax laws and tax expense in 1992 was reduced $4.8
million due to a favorable adjustment of income tax liabilities.
During the fourth quarter of 1993, the Company announced it had reached a
preliminary agreement to sell its elastomeric membrane roofing business.
Accordingly, the operating results of this business have been reclassified
as discontinued operations. In addition, the Company recognized an
after-tax charge of $30.0 million for the writeoff of goodwill and
restructuring charges associated with the sale. Also included in
discontinued operations is $1.5 million from the sale of a former natural
resources affiliate.
1992 Compared with 1991
Net sales increased $192.5 million in 1992 from 1991 levels. Sales from
polymer processing businesses increased from $556.9 million in 1991 to
$655.6 million in 1992 due to higher volume and the acquisition of Wilson
Color in June 1992. Resin distribution sales increased $74.8 million due
to acquisitions in both 1992 and 1991 and higher unit volumes. Sales from
polymer products increased $17.1 million to $434.5 million in 1992 due to
higher unit volumes. Sales from other operations decreased from $27.3
million in 1991 to $22.5 million in 1992 due to lower volume and reduced
prices at oil and gas operations, lower volume at marine operations and
lower management and sales agency fees. The Company's oil and gas
operations were sold in December 1992.
Cost of goods sold increased from $856.2 million in 1991 to $1,026.4
million in 1992 and correspond with the increases in the level of
sales. As a percentage of sales, cost of goods sold was 79.2% in 1992
compared with 77.6% in 1991. The resultant decrease in gross margin
was due to reduced pricing in the Company's polymer products businesses, a
higher percentage of sales from resin distribution businesses, as well as
lower management fee income.
Selling, general and administrative expenses increased $6.1 million in
1992 to $173.4 million and is attributable to acquisitions made in both
1992 and 1991. As a percentage of sales, selling, general and
administrative expenses were 13.4% in 1992 compared with 15.2% in 1991.
Amortization expense increased from $15.5 million in 1991 to $16.4 million
in 1992 due to acquisitions made in both 1992 and 1991.
Other income increased $3.0 million in 1992 due to gains from
miscellaneous asset sales as well as higher interest income from higher
average amounts of invested funds.
Interest on debt increased from $23.2 million in 1991 to $32.5 million in
1992 due to higher average borrowings due to the recapitalization which
occurred in 1991 and additional borrowings incurred in 1992 in connection
with the acquisition of Wilson.
Other costs and expenses decreased from $46.4 million in 1991 to $9.2
million in 1992. Included in 1991 amounts is a non-recurring charge of
$35.0 million related to the repurchase of all the shares of the Company's
common stock held by Brascan Limited. Also included in 1991 amounts is a
charge of $4.6 million related to miscellaneous restructuring activities.
The Company's effective tax rate for 1992 was 36.4%. The rate was
impacted by a favorable adjustment of income tax liabilities of $4.8
million. Without this favorable adjustment, the Company's effective tax
rate was 47.3% which results from the impact nondeductible goodwill
amortization has on pre-tax earnings. The Company's effective tax rate in
1991 was significantly impacted due to the nondeductibility of the
non-recurring charge related to the share repurchase.
Discontinued operations in 1992 includes a $5.7 million gain, representing
a partial payment on a prepetition bankruptcy claim related to Colowyo
Coal Company, offset by a charge of $1.4 million related to the settlement
of a claim of a silicon operation sold in prior years and the operating
results of the Company's elastomeric membrane roofing business.
Discontinued operations in 1991 include the operating results of Iron Ore
Company of Canada, Colowyo Coal Company and other western coal interests
and the operating results of the Company's elastomeric membrane roofing
businesses. The Company sold its interest in Colowyo and other western
coal interests in 1991 realizing a gain of $8.5 million. In February
1992, the Company sold a portion of its interest in IOC. No gain or loss
was recognized as a result of this transaction.
LIQUIDITY AND SOURCES OF CAPITAL
The Company's ability to generate significant cash flows from operations
continued in 1993 with $67.9 million provided from operating activities.
This amount includes the use of $7.2 million for working capital and $16.6
million for the payment of obligations related to prior restructurings.
Investment transactions used $29.8 million and include $28.8 million
related to acquisition of businesses and $23.4 million for capital
expenditures, partially offset by $25.7 million from sales of short-term
securities. Financing activities used $53.8 million and include $27.5
million for the purchase of common stock warrants, $14.0 million for cash
dividends, $26.9 million for reductions in outstanding debt, partially
offset by proceeds from the sale of stock of $14.6 million. In summary,
cash decreased only $16.6 million despite the purchase of common stock
warrants ($27.5 million), acquisitions ($28.8 million) and debt reductions
($26.9 million), which total $83.2 million.
The current ratio at December 31, 1993 was 1.5:1 compared with 1.7:1 at
December 31, 1992. Long-term debt to total capital was 46.8% at December
31, 1993 and 46.9% at December 31, 1992.
The Company has a credit agreement which provides commitments for
borrowings up to $150 million through March 1994. Beginning March 1994,
the bank commitments will be reduced by 12.5% of the aggregate amount of
borrowings outstanding under the agreement each quarter for eight
consecutive quarters. The arrangement provides for interest rates to be
determined at the time of the borrowing based on a choice of formulas
specified in the agreement. No borrowings were outstanding under this
agreement at December 31, 1993.
The Company also has a credit agreement which provides commitments for
borrowings of up to 150 million French francs through November 1996. The
agreement provides for interest rates to be determined at the time of
borrowing. At December 31, 1993, borrowings outstanding under this
commitment were 105 million French francs, or an equivalent of $17.8
million.
The Company believes that its ability to generate cash flows from
operations and the availability of funds under existing credit facilities
will be sufficient to meet anticipated capital expenditure programs,
existing obligations arising from prior restructurings and acquisitions,
dividend requirements and other planned financial commitments in 1994 and
throughout the term of the existing credit facilities.
Environmental Matters
The Company is subject to various laws and regulations concerning
environmental matters. The Company is committed to a long-term
environmental protection program that reduces emissions of hazardous
materials into the environment as well as to the remediation of identified
existing environmental concerns.
The Company is involved in certain legal actions and claims arising in the
ordinary course of business including lawsuits brought by the State of
Idaho in 1983 and the United States government in 1993 seeking
reimbursement from the Company and other defendants for alleged damages to
the environment and clean-up costs for the area around the Blackbird Mine
in Idaho. Claims have been made against a subsidiary of the Company for
the costs of environmental remediation measures taken or to be taken in
connection with operations that have been sold or closed. These include
the clean-up of Superfund sites and participation with other companies in
the clean-up of hazardous waste disposal sites, several of which have been
designated as Superfund sites. Reserves for such liabilities have been
established and no insurance recoveries have been reflected in the
determination of reserves. In management's opinion, such litigation and
claims will be resolved without material adverse effect of the financial
position of the Company.
On behalf of Hanna Management,
/s/Douglas R. Schrank
Douglas R. Schrank
Vice President and Chief Financial Officer
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
Board of Directors
M. A. Hanna Company
Cleveland, Ohio
We have audited the accompanying consolidated balance sheets of
M. A. Hanna Company and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended December 31,
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of
M. A. Hanna Company and subsidiaries at December 31, 1993 and 1992, and
the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles.
/s/Ernst & Young
Cleveland, Ohio
January 31, 1994
Item 14 - Exhibit (21)
SUBSIDIARIES OF THE REGISTRANT:
Where
Incorporated
Name (or formed)
Allied Color Industries, Inc. Ohio
Bruck Plastics Company Delaware
Burton Rubber Compounding , L.P. Delaware
(a limited partnership)
Burton Rubber Processing, Ltd. Ontario
Cadillac Plastic Group, Inc. Michigan
Day International, Inc. Delaware
DH Compounding Company Delaware
(a general partnership)
Erieview Insurance Company Limited Bermuda
Fiberchem, Inc. Washington
Global Processing Company California
Hanac Corp. Delaware
Hanna France SARL France
Hanna Hamilton Holdings Company Delaware
Hanna Holdings Company Delaware
Hanna International Corporation Delaware
Hanna Polimeros, S.A. de C.V. Mexico
M. A. Hanna de Mexico, S.A. de C.V. Mexico
MAH Plastics Company Delaware
Monmouth Plastics Company Delaware
Plastic Distributing Corporation-Southeast North Carolina
Synthecolor, S.A. France
Texapol Corporation Pennsylvania
The Lower Lake Dock Company Ohio
The Ohio & Western Pennsylvania
Dock Company Ohio
The Pennsylvania Tidewater
Dock Company Delaware
Wilson Color S.A. Belgium
Wilson Color GmbH Germany
Wilson Color S.A. France
Wilson Color AB Sweden
The Registrant has other unconsolidated subsidiaries and 50
percent or less owned persons accounted for by the equity method,
which in the aggregate do not constitute a significant subsidiary.
Item 14 - Exhibit (23)
Consent of Independent Auditors
We consent to the use of our report dated January 31, 1994, with
respect to the consolidated financial statements of M.A. Hanna
Company, included in its Annual Report (Form 10-K) for the year
ended December 31, 1993 and the related financial statement
schedules included therein, filed with the Securities and Exchange
Commission.
/s/Ernst & Young
March 17, 1994
Item 14 - Exhibit (23)
Consent of Independent Auditors
We consent to the incorporation by reference in the following
Registration Statements (Exhibit I) of M.A. Hanna Company of our
report dated January 31, 1994, with respect to the consolidated
financial statements and schedules of M.A. Hanna Company
incorporated by reference included in the Annual Report (Form 10-K)
for the year ended December 31, 1993.
/s/Ernst & Young
March 17, 1994
Consent of Independent Auditors
Exhibit I
Form S-8 No. 2-70755 pertaining to the M.A. Hanna Company 1979
Executive Incentive Compensation Plan.
Form S-8 No. 33-29622 pertaining to the M.A. Hanna Company 1988
Long-Term Incentive Plan.
Form S-8 No. 33-35654 pertaining to the M.A. Hanna Company Restated
1979 Executive Compensation Plan and 1988 Long-Term Incentive Plan.
Form S-8 No. 33-38988 pertaining to the M.A. Hanna Company Capital
Accumulation Plan.
Form S-8 No. 33-41461 pertaining to the M.A. Hanna Company Capital
Accumulation and Savings Plan for Salaried Employees of Day
International Corporation.
Form S-8 No. 33-45420 pertaining to the M.A. Hanna Company Pay for
Performance Plans.
Form S-3 No. 33-29624 pertaining to the M.A. Hanna Company Dividend
Reinvestment and Stock Purchase Plan.
Form S-3 No. 33-46522 pertaining to various employee compensation
and benefit plans of M.A. Hanna Company.
Form S-3 No. 33-66128 pertaining to various employee compensation
and benefit plans of M.A. Hanna Company.
Form S-8 No. 33-51517 pertaining to Wilson Color Profit Sharing
Plan.
Form S-8 No. 33-51519 pertaining to Texapol Corporation Employees'
401(k) Savings Plan.
Form S-8 No. 33-51555 pertaining to PMS Profit Sharing and
Retirement Savings Plan.
Form S-8 No. 33-51513 pertaining to Fiberchem, Inc. 401(k) Plan.
Form S-8 No. 33-51497 pertaining to DH Compounding Company Savings
and Retirement Plan.
Form S-8 No. 33-51499 pertaining to Dayton Plastics Profit Sharing
Plan.
Form S-8 No. 33-51491 pertaining to Burton Rubber Processing, Inc.
Savings and Retirement Plan.
Form S-8 No. 33-51507 pertaining to Bruck Plastics Company Profit
Sharing Plan.
Form S-8 No. 33-51503 pertaining to Allied Color Industries, Inc.
Savings and Retirement Plan for Associates of the Vonore, TN,
Kansas City, MO, San Fernando, CA and Vancouver, WA Operations
formerly the Avecor, Inc. Savings and Retirement Plan.
Form S-8 No. 33-51501 pertaining to Allied Color Industries, Inc.
Profit Sharing Plan for Associates of the Broadview Heights, OH,
Greenville, SC, and Phoenix, AZ Operations formerly the Allied
Color Industries, Inc. Profit Sharing Plan.
Item 14 - Exhibit (24)
POWER OF ATTORNEY
The undersigned, Director of the corporation named herein
opposite his signature, hereby appoints T. E. Lindsey,
J. S. Pyke, Jr., and D. R. Schrank, or any of them, his attorney or
attorneys in fact, with full power of substitution, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31,
1993, being filed with the Securities and Exchange Commission by
M. A. Hanna Company, and any and all amendments to such Annual
Report, with full power and authority to take any and all such
action as may be necessary or advisable in the premises.
Capacity in which Annual Report
on Form 10-K is to be signed
Signature Date
/s/ B. C. Ames Director of M. A. Hanna March 2, 1994
B. C. Ames Company
POWER OF ATTORNEY
The undersigned, Director of the corporation named herein
opposite his signature, hereby appoints T. E. Lindsey,
J. S. Pyke, Jr., and D. R. Schrank, or any of them, his attorney or
attorneys in fact, with full power of substitution, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31,
1993, being filed with the Securities and Exchange Commission by
M. A. Hanna Company, and any and all amendments to such Annual
Report, with full power and authority to take any and all such
action as may be necessary or advisable in the premises.
Capacity in which Annual Report
on Form 10-K is to be signed
Signature Date
/s/ W. R. Embry Director of M. A. Hanna March 2, 1994
W. R. Embry Company
POWER OF ATTORNEY
The undersigned, Director of the corporation named herein
opposite his signature, hereby appoints T. E. Lindsey,
J. S. Pyke, Jr., and D. R. Schrank, or any of them, his attorney or
attorneys in fact, with full power of substitution, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31,
1993, being filed with the Securities and Exchange Commission by
M. A. Hanna Company, and any and all amendments to such Annual
Report, with full power and authority to take any and all such
action as may be necessary or advisable in the premises.
Capacity in which Annual Report
on Form 10-K is to be signed
Signature Date
/s/ J. T. Eyton Director of M. A. Hanna March 2, 1994
J. T. Eyton Company
POWER OF ATTORNEY
The undersigned, Director of the corporation named herein
opposite his signature, hereby appoints T. E. Lindsey,
J. S. Pyke, Jr., and D. R. Schrank, or any of them, his attorney or
attorneys in fact, with full power of substitution, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31,
1993, being filed with the Securities and Exchange Commission by
M. A. Hanna Company, and any and all amendments to such Annual
Report, with full power and authority to take any and all such
action as may be necessary or advisable in the premises.
Capacity in which Annual Report
on Form 10-K is to be signed
Signature Date
/s/ G. D. Kirkham Director of M. A. Hanna March 2, 1994
G. D. Kirkham Company
POWER OF ATTORNEY
The undersigned, Director of the corporation named herein
opposite his signature, hereby appoints T. E. Lindsey,
J. S. Pyke, Jr., and D. R. Schrank, or any of them, his attorney or
attorneys in fact, with full power of substitution, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31,
1993, being filed with the Securities and Exchange Commission by
M. A. Hanna Company, and any and all amendments to such Annual
Report, with full power and authority to take any and all such
action as may be necessary or advisable in the premises.
Capacity in which Annual Report
on Form 10-K is to be signed
Signature Date
/s/ M. L. Mann Director of M. A. Hanna March 2, 1994
M. L. Mann Company
POWER OF ATTORNEY
The undersigned, Director of the corporation named herein
opposite his signature, hereby appoints T. E. Lindsey,
J. S. Pyke, Jr., and D. R. Schrank, or any of them, his attorney or
attorneys in fact, with full power of substitution, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31,
1993, being filed with the Securities and Exchange Commission by
M. A. Hanna Company, and any and all amendments to such Annual
Report, with full power and authority to take any and all such
action as may be necessary or advisable in the premises.
Capacity in which Annual Report
on Form 10-K is to be signed
Signature Date
/s/ P. M. Marshall Director of M. A. Hanna March 2, 1994
P. M. Marshall Company
POWER OF ATTORNEY
The undersigned, Director of the corporation named herein
opposite his signature, hereby appoints T. E. Lindsey,
J. S. Pyke, Jr., and D. R. Schrank, or any of them, his attorney or
attorneys in fact, with full power of substitution, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31,
1993, being filed with the Securities and Exchange Commission by
M. A. Hanna Company, and any and all amendments to such Annual
Report, with full power and authority to take any and all such
action as may be necessary or advisable in the premises.
Capacity in which Annual Report
on Form 10-K is to be signed
Signature Date
/s/ R. W. Pogue Director of M. A. Hanna March 2, 1994
R. W. Pogue Company
POWER OF ATTORNEY
The undersigned, Director of the corporation named herein
opposite his signature, hereby appoints T. E. Lindsey,
J. S. Pyke, Jr., and D. R. Schrank, or any of them, his attorney or
attorneys in fact, with full power of substitution, to sign the
Annual Report on Form 10-K for the fiscal year ended December 31,
1993, being filed with the Securities and Exchange Commission by
M. A. Hanna Company, and any and all amendments to such Annual
Report, with full power and authority to take any and all such
action as may be necessary or advisable in the premises.
Capacity in which Annual Report
on Form 10-K is to be signed
Signature Date
/s/ D. J. McGregor Director of M. A. Hanna March 2, 1994
D. J. McGregor Company
